MODULE 1

INTRODUCTION TO BUSINESS AND MANAGEMENT

CONCEPT OF ENTERPRISE

Enterprise is another word for a profit business or company, but it is most often
associated with entrepreneurial ventures. People who have entrepreneurial success
are often referred to as “enterprising”
 Entrepreneur = The Person
 Entrepreneurship = The Process
 Enterprise = The outcome
The concept of enterprise refers to the exchange of goods/services with money for
mutual benefit/ profit.

NATURE OF BUSINESS

Businesses vary in size, as measured by the number of employees or by sales

volume. Usually, when filling out some kind of form, “nature of business” refers to
the type or general category of business or commerce you are describing. For
example, If you worked at McDonald’s, the nature of your business is food services.
The following the nature of business ;
 Regular process
It is an activity which is performed repeatedly to generate profit.
 Economic Activity
The whole sole purpose is maximising wealth.
 Creates Utility
The goods or service must be such that it creates form utility – conversion of
products in a consumable form, time utility – making the goods and services
available when needed; and place utility – availability of goods or services
wherever required, for the consumers.
 Capital Requirement
Any venture requires fund depending on the size and its type.
 Deals in Goods and Services
It is related to manufacturing and offering goods for sale or catering services.
 Risk
All businesses have a risk factor or uncertainties of failure and loss.
 Profit Earning Motive
The initial motive of a businessman is making a profit out of his venture.
 Satisfaction of Consumer’s Need
It is concerned with the fulfilment of the customer’s demands and needs.
  Involves Buyer and Seller
There are majorly two parties involved, the customer and the merchandise.
 Social Obligations
It has some social responsibilities, like creating job opportunities, dealing with
licensed products, etc.

PURPOSE OF BUSINESS

Business purpose differs from mission or vision in that it illustrates the

organization’s impact on customers. The purpose of your company is to provide a
certain service or product to your clients. The statement of purpose should,
therefore, illustrate how you will improve the lives of those you serve.The primary
purpose of a business is to maximize profits for its owners or stakeholders while
maintaining corporate social responsibility. The following are the purpose of
business activity;

 To produce goods or services

 To meet customer needs
 To add value: convenience, branding, quality, design, unique selling points.

BUSINESS STRUCTURE

Business structure refers to the legal structure of an organization that is recognized

in a given jurisdiction. An organization’s legal structure is a key determinant of the
activities that it can undertake, such as raising capital, responsibility for obligations
of the business, as well as the amount of taxes that the organization owes to tax
agencies.
Forms of Business Structure

The different business structures are discussed in detail below:

1. Sole Proprietorship
A sole proprietorship (also known as individual entrepreneurship, sole trader, or
simply proprietorship) is a type of an unincorporated entity that is owned by one
individual only. It is the simplest legal form of a business entity. Note that, unlike
the partnerships or corporations.

2. Partnership
A partnership is an association or relationship between two or more individuals,
corporations, trusts, or partnerships that join together to carry on
a trade or business. Each partner contributes money, labour, property, or skills to
the partnership.

3. Corporation
A corporation is a type of business structure that gives the entity a separate legal
entity from its owners. It is complex and expensive to set up, and it requires the
owners to comply with more tax requirements and regulations. Most corporations
hire attorneys to oversee the registration process and to ensure that the entity
complies with the state laws where it is registered.
The main types of corporations are:

• C-corporation
• S-corporation

A C-corporation exists as a separate legal entity from its owners, whereas an S-

corporation may consist of up to 100 shareholders and functions in the same way as
a partnership.One of the advantages of a corporate structure is the ability to raise
capital.

4. Limited Liability Company (LLC)

A limited liability company (LLC) is a hybrid business structure that combines the
best of both worlds, i.e., it possesses the characteristics of both partnerships and
corporations. It provides personal liability protection to the business owners while
reducing tax and business requirements. The profits and losses of the business are
passed through to the owners, and each business owner is required to include a
share of the profits/losses in their personal tax returns.
 BUSINESS ENVIRONMENT

Meaning of Business Environment

The definition of Business Environment, “The sum total of all individuals, institutions
and other forces that are outside the control of a business enterprise but the business
still depends upon them as they affect the overall performance and sustainability of
the business.”

Features of Business Environment

 Totality of external forces: Business environment is the sum total of all the
forces/factors external to a business firm.
 Specific and general forces: Business environment includes both specific and
general forces. Specific forces include investors, competitors, customers etc.
who influence business firm directly while general forces include social, political,
economic, legal and technological conditions which affect a business firm
indirectly.
 Inter-relatedness: All the forces/factors of a business environment are closely
interrelated.
 Dynamic: Business environment is dynamic in nature which keeps on changing
with the change in technology, consumer's fashion and tastes etc.
 Uncertainty: Business environment is uncertain as it is difficult to predict the
future environmental changes and their impact with full accuracy.
 Complexity: Business environment is complex which is easy to understand in
parts separately but it is difficult to understand in totality.
 Relativity: Business environment is a relative concept whose impact differs from
country to country, region to region and firm to firm.

Importance of Business Environment

 Identification of opportunities to get first mover advantage
 Identification of threats
 Tapping useful resources
 Coping with rapid changes
 Assistance in planning and policy formulation

COMPONENTS OF BUSINESS AND ENVIRONMENT

I. Internal Environment: The factors which exist within the organisation, imparting
strength or causing weakness to the organisation, comes under internal
environment.
It includes:
  Value System
 Vision and Mission
 Objectives
 Corporate Culture
 Human Resources
 Labour Union

II. External Environment: External Environment consists of those factors which

provide an opportunity or pose threats to the business. It is further classified as:

 Micro Environment: The immediate periphery of the business that has a

continuous and direct impact on it is called Micro Environment. It includes
suppliers, customers, competitors, market, intermediaries, etc. Which are
specific to the business.

 Macro Environment: Macro Environment, is one such environment that

influences the functioning and performance of every business organisation, in
general. It comprises of the demographic, socio-cultural, legal, political,
technological, and global environment.

A. Micro Environment

The micro environment is the operating environment of the firm. This is because the
functioning of the micro environment has a direct and immediate bearing on
the company. They are more interlinked with the company than macro environmental
factors.
1] Customers: The main purpose for the existence of most organizations is to satisfy
the needs and wants of the customers. The enterprise aims to please the customer
and earn a profit in return. So the ultimate aim is to provide the
best products/services to the customer at the best prices. Failure to do so may result
in failure of the business.

2] Competitors: There are no pure monopolies in the world. Every organization,

whether big or small, has competition and competitors. So the company has to keep a
constant check on their competitors. The company must ensure that their products
have a USP that makes them different and unique in the market. The products offered
must also be better and cheaper than those of the competition.

3] Employees: Employees or labour is one of the most important factors

of production for a company. Human resources are a significant factor in the success
(or failure) of a firm. Hence employing the correct people, best suited to your firm is of
vital importance. And training and development of these employees is also essential.

4] Shareholders: Shareholders invest in the company, but they are not merely
investors. They own shares of the company, so they are actually owners of the
company in a way. This means they get a say in the running of a company.
Shareholders will also demand a return on their investment. So it is the company’s
duty to earn profits and pass on this benefits to the shareholders. They have to
create wealth for these shareholders.

5] Suppliers: Suppliers provide the firm with the materials and factors of production
they need to run the business. The relation between the company and the suppliers is
a power equation. Both depend on each other for their survival.

6] Media: Every company is going to need media to promote their brand and market
their products. So it is necessary that the company maintain their relationship and
their status quo with the media.

B. Macro Environment

Macro environment is the remote environment of the firm, i.e the external
environment in which it exists. As a rule this environment is not controllable by the
firm, it is to huge and to unpredictable to control.Hence the success of the company,
to a large extent will depend on the company’s ability to adapt and react to the
changes in the macro environment.
1] Socio-Cultural Environment: The social values and culture of an environment play
a huge role in the functioning of the company. So when the social environment
changes it can have a direct or indirect effect on the company. Cultural forces also
have a significant impact on the success of a company in the long run.

2] Technological Environment: In the times we live in, technology is constantly

changing it is important that the business can keep up with the changes. Technology
does not only confine to computers and IT services. It includes products,
manufacturing processes, techniques etc. The technological developments can be a
huge advantage for a firm. But at the same time of the technology used by the firm
becomes obsolete due to such developments, then it can also be a threat to the firm.

3] Economic Conditions of the Market: The economic conditions of the economy

and the performance of a business have a very close relationship. A business depends
on the economy for all its inputs and factors of production. It also sells its products
and services in the same market.

4] Ecology and Physical Environment: Ecology and physical environment play a huge
part in the performance of any business. This is especially true for
manufacturing/production companies. Weather conditions, topographical elements,
geographical location, climate changes and other ecological factors are a very
important element in the macro environment of a business.

5] Political and Legal Factors: The political environment of a country is the

combination of three branches of the government – legislature, executive and the
judiciary. The political environment of a country will mainly depend on the political
beliefs and ideologies of the party in power at the state and central levels. The legal
environment refers to the rules, laws, regulations, and judgments etc. that affect the
functioning of a business.

CONCEPT OF MANAGEMENT

Basically, there are 5 concepts of management. They are:

1.Functional concept

Management basically is the task of planning, coordinating, motivating and

controlling the efforts of other towards the goals and objectives of the organization.
According to this concept, management is what a manager does (planning,
executing, and controlling).

2.Human relation concept

According to this concept, Management is the art o getting things done through and
with people in organized groups. It is the art of creating an environment in which
people can perform and individuals could cooperate towards attaining of group
goals. It is an art of removing blanks to such performance a way of optimizing
efficiency in reaching goals.

3.Leadership and decision-making concept

According to this concept, management is the art and science of preparing,

organizing, directing human efforts applied to control the forces and utilize the
materials of nature for the benefits to man.

4.Productive concept

According to this concept, management may be defined as the art of securing

maximum prosperity with a minimum effort so as to secure maximum prosperity
and happiness for both employer n employee and provide best services thereby.

5.Integration concept

According to this concept, management is the coordination of human and material

resources towards the achievement of organizational objectives as well as the
 organization of the productive functions essential for achieving stated or accepted
economic goal.

EVOLUTION OF MANAGEMENT THOUGHT

The different approaches of management are:

1.THE CLASSICAL APPROACH

The classical approach is the oldest formal approach of management thought. Its
roots pre-date the twentieth century. The classical approach of thought generally
concerns ways to manage work and organizations more efficiently. Three areas of
study that can be grouped under the classical approach are scientific management,
administrative management, and bureaucratic management.

 Scientific Management
Frederick Winslow Taylor is known as the father of scientific management. Scientific
management (also called Taylorism or the Taylor system) is a theory of
management that analyzes and synthesizes workflows, with the objective of
improving labor productivity. In other words, Traditional rules of thumb are
replaced by precise procedures developed after careful study of an individual at
work.

 Administrative Management
Administrative management focuses on the management process and principles of
management. In contrast to scientific management, which deals largely with jobs
and work at the individual level of analysis, administrative management provides a
more general theory of management. Henri Fayol is the major contributor to this
approach of management thought.

 Bureaucratic Management
Bureaucratic management focuses on the ideal form of organization. Max Weber
was the major contributor to bureaucratic management. Based on observation,
Weber concluded that many early organizations were inefficiently managed, with
decisions based on personal relationships and loyalty. He proposed that a form of
organization, called a bureaucracy, characterized by division of labor, hierarchy,
formalized rules, impersonality, and the selection and promotion of employees
based on ability, would lead to more efficient management. Weber also contended
that managers’ authority in an organization should be based not on tradition or
charisma but on the position held by managers in the organizational hierarchy.
 2.THE BEHAVIORAL APPROACH

The behavioral approach of management thought developed, in part, because of

perceived weaknesses in the assumptions of the classical approach. The classical
approach emphasized efficiency, process, and principles. Some felt that this
emphasis disregarded important aspects of organizational life, particularly as it
related to human behavior. Thus, the behavioral approach focused on trying to
understand the factors that affect human behavior at work.

 Human Relations
The Hawthorne Experiments began in 1924 and continued through the early 1930s.
A variety of researchers participated in the studies, including Elton Mayo. One of
the major conclusions of the Hawthorne studies was that workers’ attitudes are
associated with productivity. Another was that the workplace is a social system and
informal group influence could exert a powerful effect on individual behavior. A
third was that the style of supervision is an important factor in increasing workers’
job satisfaction.

 Behavioral Science
Behavioral science and the study of organizational behavior emerged in the 1950s
and 1960s. The behavioral science approach was a natural progression of the
human relations movement. It focused on applying conceptual and analytical tools
to the problem of understanding and predicting behavior in the workplace.The
behavioral science approach has contributed to the study of management through
its focus on personality, attitudes, values, motivation, group behavior, leadership,
communication, and conflict, among other issues.

3.THE QUANTITATIVE APPROACH

The quantitative approach focuses on improving decision making via the application
of quantitative techniques. Its roots can be traced back to scientific management.

 Management Science (Operations Research)

Management science (also called operations research) uses mathematical and
statistical approaches to solve management problems. It developed during World
War II as strategists tried to apply scientific knowledge and methods to the complex
problems of war. Industry began to apply management science after the war. The
advent of the computer made many management science tools and concepts more
practical for industry
 Production And Operations Management
This approach focuses on the operation and control of the production process that
transforms resources into finished goods and services. It has its roots in scientific
management but became an identifiable area of management study after World
War II. It uses many of the tools of management science. Operations management
emphasizes productivity and quality of both manufacturing and service
organizations. W.Edwards Deming exerted a tremendous influence in shaping
modern ideas about improving productivity and quality. Major areas of study within
operations management include capacity planning, facilities location, facilities
layout, materials requirement planning, scheduling, purchasing and inventory
control, quality control, computer integrated manufacturing, just-in-time inventory
systems, and flexible manufacturing systems.

4.SYSTEMS APPROACH

The systems approach focuses on understanding the organization as an open

system that transforms inputs into outputs. The systems approach began to have a
strong impact on management thought in the 1960s as a way of thinking about
managing techniques that would allow managers to relate different specialties and
parts of the company to one another, as well as to external environmental factors.
The systems approach focuses on the organization as a whole, its interaction with
the environment, and its need to achieve equilibrium

5.CONTINGENCY APPROACH

The contingency approach focuses on applying management principles and

processes as dictated by the unique characteristics of each situation. It emphasizes
that there is no one best way to manage and that it depends on various situational
factors, such as the external environment, technology, organizational
characteristics, characteristics of the manager, and characteristics of the
subordinates. Contingency theorists often implicitly or explicitly criticize the
classical approach for its emphasis on the universality of management principles;
however, most classical writers recognized the need to consider aspects of the
situation when applying management principles.

MANAGEMENT
Definition
Management is the process of designing and maintaining an environment in which
individuals working together in groups efficiently and effectively accomplish
selected goals.
According to Peter F. Drucker, "Management is a multi-purpose organ that manages
business and manages managers and manages workers and work."

Objectives of Management

• Organizational Objectives
o Survival
o Profit
o Growth
• Social Objectives
o Use eco-friendly methods
o Generate employment opportunities
• Personal Objectives
o Fair wages and salary
o Good working conditions
o Growth prospects

Importance of Management

• Management helps in achieving group goals.

• Management increases efficiency of the employees.
• Management creates a dynamic organization.
• Management helps in achieving personal objectives.
• Management helps in the development of society.

Features of Management

• Management is goal oriented as it seeks to integrate the efforts of different

individuals towards the accomplishment of both organizational and individual
goals.
• Management is pervasive as it is applicable to all types of organizations
(economic, social and political), all sizes of organization (small, medium and
large) and at all levels of management (top, middle and lower).
• Management is multidimensional as it involves three dimensions namely:

 Management of work i.e. to translate the work in terms of goals to be

achieved and to assign the means to achieve it.
 Management of people, which implies dealing with employees as
individuals with diverse needs and also as a group of people.
  Management of operations, in order to ensure the conversion of inputs
into desired outputs for consumption.

• Management is a continuous process as it is a series of continuous, composite,

but separate functions i.e. planning, organizing, staffing, directing and
controlling to be performed simultaneously all the time till an organization
exists.
• Management is a group activity requiring team work and coordination of the
efforts of the diverse individuals in a common direction.
• Management is a dynamic function as a business operates in an ever changing
environment and this necessitates a constant review and revision of its goals
and operations so as to adapt itself effectively to these changes.
• Management is an intangible force which cannot be seen but the good quality
of management is reflected through various indicators like achievement of
goals, satisfaction among employees etc.

FUNCTIONS OF MANAGEMENT

Managment as a process contains a series of interrelated and interdependent

functions namely, planning, organising, staffing, directing and controlling.

The managerial functions includes:

 Planning
 Organising
 Staffing
 Directing
 Controlling

 Planning relates to determining in advance what is to be done and who is to do

it.
 Organizing is the process of bringing together human, physical and financial
resources and establishing productive relations among them for the purpose of
achieving the desired goals efficiently and effectively.
 Staffing involves manning the organizational structure in order to fill in the roles
designed into the structure.
 Directing involves leading, influencing and motivating employees to perform the
tasks assigned to them.
 Controlling is the management function of ensuring that events conform to
plans.
1. Planning

According to KOONTZ, “Planning is deciding in advance - what to do, when to do &

how to do. It bridges the gap from where we are & where we want to be”.It is the
basic function of management. A plan is a future course of actions. It is an exercise
in problem solving & decision making. Planning is determination of courses of action
to achieve desired goals. Thus, planning is a systematic thinking about ways &
means for accomplishment of pre-determined goals. Planning is necessary to
ensure proper utilization of human & non-human resources.

The process of planning involves:

a. Setting Objectives
b. Developing Planning Premises
c. Identifying Alternative Courses of Action
d. Evaluating Alternative Course of Action
e. Selecting One Best Alternative
f. Implementing the Plan
g. Follow Up Action

2. Organizing

It is the process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of
organizational goals.
According to Henry Fayol, “To organize a business is to provide it with everything
useful or its functioning i.e. raw material, tools, capital and personnel’s”. To
organize a business involves determining & providing human and non-human
resources to the organizational structure.
Organizing as a process involves:
a. Identification of activities.
b. Classification of grouping of activities.
c. Assignment of duties.
d. Delegation of authority and creation of responsibility.
e. Coordinating authority and responsibility relationships.

3. Staffing

It is the function of manning the organization structure and keeping it manned.

Staffing has assumed greater importance in the recent years due to advancement of
technology, increase in size of business, complexity of human behavior etc. The
main purpose of staffing is to put right man on right job.
According to Kootz & O’Donell, “Managerial function of staffing involves manning
the organization structure through proper and effective selection, appraisal and
development of personnel to fill the roles designed un the structure”.

Staffing involves:
a. Manpower Planning (estimating man power in terms of searching, choose the
person and giving the right place).
b. Recruitment, Selection & Placement.
c. Training & Development.
d. Remuneration.
e. Performance Appraisal.
f. Promotions & Transfer.

4. Directing

It is that part of managerial function which actuates the organizational methods to

work efficiently for achievement of organizational purposes. It is considered as life
spark of the enterprise which sets it in motion the action of people because
planning, organizing and staffing are the mere preparations for doing the work.
Direction is that inert-personnel aspect of management which deals directly with
influencing, guiding, supervising, motivating sub-ordinate for the achievement of
organizational goals.

Direction has following elements:

Supervision- implies overseeing the work of subordinates by their superiors. It is the
act of watching & directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal

to work. Positive, negative, monetary, non-monetary incentives may be used for
this purpose.

Leadership- may be defined as a process by which manager guides and influences

the work of subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc

from one person to another. It is a bridge of understanding.

5. Controlling

It implies measurement of accomplishment against the standards and correction of

deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure that everything occurs in conformities with the standards.
An efficient system of control helps to predict deviations before they actually occur.
According to Theo Haimann, “Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if
necessary, to correct any deviation”.

Therefore controlling has following steps:

a. Establishment of standard performance.

b. Measurement of actual performance.
c. Comparison of actual performance with the standards and finding out deviation
if any.
d. Corrective action.

LEVELS OF MANAGEMENT

The term “Levels of Management’ refers to a line of demarcation between various

managerial positions in an organization. The number of levels in management
increases when the size of the business and work force increases and vice versa.
The level of management determines a chain of command, the amount of authority
& status enjoyed by any managerial position. The levels of management can be
classified in three broad categories:
  Top level / Administrative level
 Middle level / Executory
 Low level / Supervisory / Operative / First-line managers

Managers at all these levels perform different functions. The role of managers at all
the three levels is discussed below:

1.Top Level of Management

It consists of board of directors, chief executive or managing director. The top

management is the ultimate source of authority and it manages goals and policies
for an enterprise. It devotes more time on planning and coordinating functions.

The role of the top management can be summarized as follows:

 Top management lays down the objectives and broad policies of the enterprise.
 It issues necessary instructions for preparation of department budgets,
procedures, schedules etc.
 It prepares strategic plans & policies for the enterprise.
 It appoints the executive for middle level i.e. departmental managers.
 It controls & coordinates the activities of all the departments.
 It is also responsible for maintaining a contact with the outside world.
 It provides guidance and direction.
 The top management is also responsible towards the shareholders for the
performance of the enterprise.

2.Middle Level of Management

The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. They
devote more time to organizational and directional functions. In small organization,
there is only one layer of middle level of management but in big enterprises, there
may be senior and junior middle level management.

Their roles can be emphasized as:

 They execute the plans of the organization in accordance with the policies and
directives of the top management.
 They make plans for the sub-units of the organization.
 They participate in employment & training of lower level management.
 They interpret and explain policies from top level management to lower level.
 They are responsible for coordinating the activities within the division or
department.
 It also sends important reports and other important data to top level
management.
 They evaluate performance of junior managers.
 They are also responsible for inspiring lower level managers towards better
performance.

3.Lower Level of Management

Lower level is also known as supervisory / operative level of management. It

consists of supervisors, foreman, section officers, superintendent etc.
According to R.C. Davis, “Supervisory management refers to those executives whose
work has to be largely with personal oversight and direction of operative
employees”. In other words, they are concerned with direction and controlling
function of management.

The activities of lower level management includes:

 Assigning of jobs and tasks to various workers.

 They guide and instruct workers for day to day activities.
 They are responsible for the quality as well as quantity of production.
 They are also entrusted with the responsibility of maintaining good relation in
the organization.
 They communicate workers problems, suggestions, and recommendatory
appeals to the higher level and higher level goals and objectives to the workers.
 They help to solve the grievances of the workers.
 They supervise & guide the sub-ordinates.
 They are responsible for providing training to the workers.
 They arrange necessary materials, machines, tools for getting the things done.
 They prepare periodical reports about the performance of the workers.
 They ensure discipline in the enterprise.
 They motivate workers.
 They are the image builders of the enterprise because they are in direct contact
with the workers.

MANAGEMENT SKILLS

Robert Katz identified three skills; technical, human and conceptual as the basic
personal skills essential for leadership. Technical skills related to the field, human
skills related to communicating with people, and conceptual skills related to setting
the vision.

1. Technical Skills

As defined by Katz in 1955, ‘Technical skill is knowledge about and proficiency in a

specific type of work or activity. It includes competencies in a specialized area,
analytical ability, and the ability to use appropriate tools and techniques’. Technical
skills play an essential role in producing the actual products a company is designed
to produce. Having appropriate technical skills signifies that the person is
competent and knowledgeable with respect to the activities specific to an
organization, the organization’s rules and standard operating procedures, and the
organization’s products and services.
Examples of Technical Skills

For a Software Company the following skills or knowledge areas can be considered
as technical skills; Knowledge of Unix/Linux Operating System, Java/C++/Perl
Programming Language, MySQL/Oracle Database Management, XML - Extensible
Markup Language, HTML Skills, etc.

In an accounting firm, the technical skills might include an understanding of

generally accepted accounting principles, accounting principles, knowledge of
commercial laws, knowledge of tax laws, etc.

Attributes of Technical Skills

 Technical Skills refer to being knowledgeable proficient in a specific type of

work or activity
 It is the ability to work with things
 Technical skill is proficiency, based on specific knowledge, in a particular
area of work
 Technical skills are most important at lower and middle levels of
management
 Technical skills are less important at upper/senior management levels

2. Human Skills

As technical skills relate to the ability to working with things, similarly human skills
relate to the ability to work with people. Human skills are people skills that enable
the leader to work effectively with subordinates, peers, and superiors. It is the
leader's expertise in interacting with others in a way that will enhance the
successful completion of the task at hand. Consequently, leaders with higher levels
of interpersonal skills are better able to adapt their own ideas to other people’s
ideas, especially when this will aid in achieving organizational goals more quickly
and efficiently. These leaders are more sensitive and empathetic to what motivates
others, create an atmosphere of trust for their followers, and take others’ needs
and motivations into account when deciding what to do to achieve organizational
goals.

 Human skills refer to the ability to work with people

  It is being aware of one's own perspective on issues as well as the
openness to hear and appreciate inputs of others on their perspectives
 Leaders adapt their own ideas incorporating good themes from those of
others
 Create an atmosphere of trust where employees/followers can feel
comfortable and empowered to contribute their best
 Human skills are important at all the three levels of management – Lower,
Middle and Senior

Examples of Human Skills

Some human skills that are generally considered important are effective
communication (both verbal and written), motivating others, and creation a positive
attitude, development of cooperation and team spirit, etc.

3. Conceptual Skills

As a leader grows higher in the organizational ladder, the expectations from him are
to provide strategic direction, create the vision, and motivate the folks to
dedicatedly pursue the organizational goals. These are Conceptual skills that allow
the leader to think through and work with ideas. Leaders with higher levels
of conceptual skills are good at thinking through the ideas that form an organization
and its vision for the future.

 It is the ability to work with ideas and concepts

 Creating visions, strategic plans and setting direction
 These are cognitive, business, and strategic skills
 Ability to work easily with abstractions and hypothetical situations
 As leaders climb the career ladder, higher levels of conceptual leadership
skills became necessary
 This skill is most important for top managers
 This skill is comparatively less important for middle managers
 This skill is least important for supervisory managers
 Necessary skill to climb the career ladder

Examples of Conceptual Skills

Some conceptual skills that are generally considered important
are creativity, decision making, wing to wing interconnectedness, thinking as a
whole, strategic thinking, problem-solving, etc.

OTHER MANAGEMENT SKILLS

The other classification on effective management skills can be grouped into four
primary categories: leadership skills, planning and strategy skills, communication
skills and organisational skills. Here is a breakdown of each category with several
examples.

1. Leadership skills

As a manager, you will likely be responsible for overseeing the work of others and
motivating a team towards a common goal. You might also be responsible for
leading meetings, assigning workloads and supporting collaboration across teams
and departments. Well-developed leadership skills will help you coordinate tasks
and direct all parties to ensure work is completed according to plan and finished on
time.
These are also the skills you’ll need to adequately handle leadership duties such as
employee evaluations and professional development.

Leadership skills examples:

 Decisiveness
 Dependability
 Conflict-resolution
 Constructive criticism
 Delegating tasks
 Empathy
 Empowerment
 Integrity
 Mentoring
 Motivating
 Task delegation
 Team building

2. Planning and strategy skills

Whether you’re managing people, projects or a combination of the two, the ability
to prepare a vision for the future and strategize solutions is essential to good
management. Planning skills help when setting goals and determining the most
efficient path to meet objectives. A strategic manager is someone who can spot
inefficiencies and quickly identify solutions to challenges. They can also recognise
the steps each team member should take to overcome obstacles and complete
projects.

Planning and strategy skills examples:

 Adaptability
 Brainstorming
 Business development
 Conflict resolution
 Critical thinking
 Decision-making
 Flexibility
 Logical thinking
 Problem-solving
 Strategic thinking

3. Communication skills

To effectively lead people and projects, you must be able to understand the needs
and goals of the business and convey this information to others through simple and
straightforward instruction. Well-developed communication skills will ensure you’re
able to translate the most accurate information to the right people at the right time.
Great communicators actively listen, retain information well and pass it on
efficiently to others.
Communication skills examples:
 Active listening
 Building relationships
 Interpersonal communication
 Negotiation
 Persuasion
 Public speaking
 Verbal communication
 Written communication

4. Organisational skills
As a manager, you’ll have to balance many tasks at the same time. Often, this
means overseeing multiple project timelines, deadlines and calendar events such as
meetings, conferences and presentations. Excellent organisational skills will help
you stay on top of your work, reduce stress, prevent you and your team from
missing critical dates and ensure you can find information when you need it most.
Staying organised will improve your workflow and ensure you’re able to complete
tasks as efficiently as possible. It will also set a great example for any employees
who may report to you.

Organisational skills examples:

 Deadline management
 Event coordination
 Filing
 Goal setting
 Office management
 Project management
 Record keeping
 Scheduling
 Time management

PLANNING

Meaning and Definition

Planning is the most important and primary function of Management. It precedes all
other functions. All other functions of Management will be of no use without
setting objectives. Therefore every organisation will have to specify in advance what
it wants to achieve. According to Koontz and O’Donnel, “Planning is deciding in
advance what to do it, when to do, and who is to do it. It bridges the gap from
where we are, to where we want to go. It makes it possible for things to occur
which would not otherwise happen”.

Nature of Planning

(i) Planning Focuses on Achieving Objectives: Management begins with planning

and planning begins with the determining of objectives. In the absence of objectives
no organisation can ever be thought about.

(ii) Planning is Primary Function of Management: Planning is the first important

function of management. The other functions, e.g., organising, staffing, directing
and controlling come later. In the absence of planning no other function of
management can be performed.

(iii) Planning is Pervasive: Since the job of planning is performed by the managers
at different levels working in the enterprise, it is appropriate to call it all-pervasive.

(iv) Planning is Continuous: Planning is a continuous process for the following

reasons:
(a) Plans are prepared for a particular period. Hence, there is need for a new plan
after the expiry of that period.
(b) In case of any discrepancy plans are to be revised.
(c) In case of rapid changes in the business environment plans are to be revised.

(v) Planning is Futuristic: Planning decides the plan of action what is to be done,
how is it to be done, when it to be done, by whom is it to be done all these
questions are related to future. Under planning, answers to these questions are
found out.

(vi) Planning Involves Decision Making: Planning becomes a necessity when there
are many alternatives to do a job. A planner chooses the most appropriate
alternative. Therefore, it can be asserted that planning is a process of selecting the
best and rejecting the inappropriate.

(vii) Planning is a Mental Exercise: Planning is known as a mental exercise as it is

related to thinking before doing something. A planner has mainly to think about the
following questions:

 What to do?
 How to do it?
 When to do it?
 Who is to do it?

OBJECTIVES OF PLANNING

The essential objectives can be described as follows:

1.To bring certainty in future events: Planning provides a proper guidance to an

organization how to bring certainty in future events for the achievement of
organizational goals. As we know that future is uncertain & risk-oriented. What will
occur tomorrow we cannot say with certainty, Hence to avoid these future
uncertainties & to bring certainty in future events organization has to make plan.

2.To provide specific direction: Planning provides a specific direction for doing
various activities in an appropriate manner.

3.Forecasting: Forecasting is the essence of planning. The objective of planning is to

predict about the future course of events.

4.To bring economy in managerial operations: It is an important objective of

planning. Planning provides a proper guidance to an organization how to bring
economy in all around operations. So that, organization can easily utilizes all
available resources in the best & cheapest way.

5.To attain predetermined goals: It is one of the most essential objectives of

planning. In fact, in the absence of planning any organization cannot able to
predetermined goals in a proper way.

6.To get victory over competitions: Planning provides a proper guidance to an

organization how to get victory over market competitions.

Limitations of Planning

 Planning leads to rigidity: Once plans are made to decide the future course of
action the manager may not be in a position to change them.

 It reduces creativity: With the planning the managers of the organisation start
working rigidly and they become the blind followers of the plan only.

 Planning may not work in dynamic environment: Business environment is very

dynamic as there are continuously changes taking place in economic, political
and legal environment. It becomes very difficult to forecast these future
changes. Plans may fail if the changes are very frequent.

 Planning involves huge Cost: Planning process involves lot of cost because it is
an intellectual process and companies need to hire the professional experts to
carry on this process.
 It is a time consuming process: Planning process is a time-consuming process
because it takes long time to evaluate the alternatives and select the best one.

 Planning does not guarantee success: Sometimes managers have false sense of
security that plans have worked successfully in past so these will be working in
future also. There is a tendency in managers to rely on pretested plans.

 Lack of accuracy: In planning we are always thinking in advance and planning is

concerned with future only and future is always uncertain. In planning many
assumptions are made to decide about future course of action.

PROCESS OF PLANNING

The process of planning is described below:

 Recognizing Need for Action

An important part of the planning process is to be aware of the business
opportunities in the firm’s external environment as well as within the firm.
Once such opportunities get recognized the managers can recognize the
actions that need to be taken to realize them. A realistic look must be
taken at the prospect of these new opportunities and a SWOT analysis
should be done.

 Setting Objectives
This is the second and perhaps the most important step of the planning
process. Here we establish the objectives for the whole organization and
also individual departments. Organizational objectives provide a general
direction, objectives of departments will be more planned and
detailed.Objectives can be long term and short term as well. They indicate
the end result the company wishes to achieve. So objectives will percolate
down from the managers and will also guide and push the employees in
the correct direction.

 Developing Premises
Planning is always done keeping the future in mind, however, the future is
always uncertain. So in the function of management certain assumptions
will have to be made. These assumptions are the premises. Such
assumptions are made in form of forecasts, existing plans, past policies etc.
These planning premises are also of two types – internal and external.
External assumptions deal with factors such as political environment, social
 environment, advancement of technology, competition, government
policies etc. Internal assumptions deal with policies, availability of
resources, quality of management etc.

 Identifying Alternatives
The fourth step of the planning process is to identify the alternatives
available to the managers. There is no one way to achieve the objectives of
the firm, there is a multitude of choices. All of these alternative courses
should be identified. There must be options available to the manager.
Maybe he chooses an innovative alternative hoping for more efficient
results. If he does not want to experiment he will stick to the more routine
course of action. The problem with this step is not finding the alternatives
but narrowing them down to a reasonable amount of choices so all of them
can be thoroughly evaluated.

 Examining Alternate Course of Action

The next step of the planning process is to evaluate and closely examine
each of the alternative plans. Every option will go through an examination
where all there pros and cons will be weighed. The alternative plans need
to be evaluated in the light of the organizational objectives.
 For example, if it is a financial plan. Then its risk-return evaluation will be
done. Detailed calculation and analysis are done to ensure that the plan is
capable of achieving the objectives in the best and most efficient manner
possible.

 Selecting the Alternative

Finally, we reach the decision making stage of the planning process. Now
the best and most feasible plan will be chosen to be implemented. The
ideal plan is the most profitable one with the least amount of negative
consequences and is also adaptable to dynamic situations.
The choice is obviously based on scientific analysis and mathematical
equations. But a manager intuition and experience should also play a big
part in this decision. Sometimes a few different aspects of different plans
are combined to come up with the one ideal plan.

 Formulating Supporting Plan

Once you have chosen the plan to be implemented, managers will have to
come up with one or more supporting plans. These secondary plans help
with the implementation of the main plan. For example plans to hire more
 people, train personnel, expand the office etc. Are supporting plans for the
main plan of launching a new product
 Implementation of the Plan
And finally, we come to the last step of the planning process,
implementation of the plan. This is when all the other functions of
management come into play and the plan is put into action to achieve the
objectives of the organization. The tools required for such implementation
involve the types of plans- procedures, policies, budgets, rules, standards
etc.

TYPES OF PLANNING

1.Operational Planning

“Operational plans are about how things need to happen,” motivational leadership
speaker Mack Story said at LinkedIn. “Guidelines of how to accomplish the mission
are set.”This type of planning typically describes the day-to-day running of the
company. Operational plans are often described as single use plans or ongoing
plans. Single use plans are created for events and activities with a single occurrence
(such as a single marketing campaign). Ongoing plans include policies for
approaching problems, rules for specific regulations and procedures for a step-by-
step process for accomplishing particular objectives.

2.Strategic Planning

“Strategic plans are all about why things need to happen,” Story said. “It’s big
picture, long-term thinking. It starts at the highest level with defining a mission and
casting a vision.”Strategic planning includes a high-level overview of the entire
business. It’s the foundational basis of the organization and will dictate long-term
decisions. The scope of strategic planning can be anywhere from the next two years
to the next 10 years. Important components of a strategic plan are vision, mission
and values.

3.Tactical Planning

“Tactical plans are about what is going to happen,” Story said. “Basically at the
tactical level, there are many focused, specific, and short-term plans, where the
actual work is being done, that support the high-level strategic plans.”
Tactical planning supports strategic planning. It includes tactics that the
organization plans to use to achieve what’s outlined in the strategic plan. Often, the
scope is less than one year and breaks down the strategic plan into actionable
chunks.

Tactical planning is different from operational planning in that tactical plans ask
specific questions about what needs to happen to accomplish a strategic goal.

4.Contingency Planning

Contingency plans are made when something unexpected happens or when

something needs to be changed. Business experts sometimes refer to these plans as
a special type of planning.
Contingency planning can be helpful in circumstances that call for a change.
Although managers should anticipate changes when engaged in any of the primary
types of planning, contingency planning is essential in moments when changes can’t
be foreseen. As the business world becomes more complicated, contingency
planning becomes more important to engage in and understand.

THREE LEVELS OF STRATEGY

Strategy can be formulated at three levels, namely, the corporate level, the
business level, and the functional level. At the corporate level, strategy is
formulated for your organization as a whole. Corporate strategy deals with
decisions related to various business areas in which the firm operates and
competes. At the business unit level, strategy is formulated to convert the
corporate vision into reality. At the functional level, strategy is formulated to realize
the business unit level goals and objectives using the strengths and capabilities of
your organization. There is a clear hierarchy in levels of strategy, with corporate
level strategy at the top, business level strategy being derived from the corporate
level, and the functional level strategy being formulated out of the business level
strategy.

1.Corporate Level

Corporate level strategy defines the business areas in which your firm will operate.
It deals with aligning the resource deployments across a diverse set of business
areas, related or unrelated. Strategy formulation at this level involves integrating
and managing the diverse businesses and realizing synergy at the corporate level.
The top management team is responsible for formulating the corporate strategy.
The corporate strategy reflects the path toward attaining the vision of your
organization.
For example, your firm may have four distinct lines of business operations, namely,
automobiles, steel, tea, and telecom. The corporate level strategy will outline
whether the organization should compete in or withdraw from each of these lines
of businesses, and in which business unit, investments should be increased, in line
with the vision of your firm.

2.Business Level

Business level strategies are formulated for specific strategic business units and
relate to a distinct product-market area. It involves defining the competitive
position of a strategic business unit. The business level strategy formulation is based
upon the generic strategies of overall cost leadership, differentiation, and focus. For
example, your firm may choose overall cost leadership as a strategy to be pursued
in its steel business, differentiation in its tea business, and focus in its automobile
business.

3.Functional Level

Functional level strategies relate to the different functional areas which a strategic
business unit has, such as marketing, production and operations, finance, and
human resources. These strategies are formulated by the functional heads along
with their teams and are aligned with the business level strategies. The strategies at
the functional level involve setting up short-term functional objectives, the
attainment of which will lead to the realization of the business level strategy.

STRATEGIC PLANNING PROCESS

In today’s highly competitive business environment, budget-oriented planning or

forecast-based planning methods are insufficient for a large corporation to survive
and prosper. The firm must engage in strategic planning that clearly defines
objectives and assesses both the internal and external situation to formulate
strategy, implement the strategy, evaluate the progress, and make adjustments as
necessary to stay on track.

1.Mission and Objectives

The mission statement describes the company’s business vision, including the
unchanging values and purpose of the firm and forward-looking visionary goals that
guide the pursuit of future opportunities. Guided by the business vision, the firm’s
leaders can define measurable financial and strategic objectives.

2.Environmental Scan

The environmental scan includes the following components:

 Internal analysis of the firm Analysis of the firm’s industry (task environment)
 External macro environment (PEST analysis)

The internal analysis can identify the firm’s strengths and weaknesses and the
external analysis reveals opportunities and threats. A profile of the strengths,
weaknesses, opportunities, and threats is generated by means of a SWOT analysis
an industry analysis can be performed using a framework developed by Michael
Porter known as Porter’s five forces. This framework evaluates entry barriers,
suppliers, customers, substitute products, and industry rivalry.

3.Strategy Formulation

Given the information from the environmental scan, the firm should match its
strengths to the opportunities that it has identified, while addressing its weaknesses
and external threats. To attain superior profitability, the firm seeks to develop a
competitive advantage over its rivals.

4.Strategy Implementation

The selected strategy is implemented by means of programs, budgets, and

procedures. Implementation involves organization of the firm’s resources and
motivation of the staff to achieve objectives.

5.Evaluation & Control

The implementation of the strategy must be monitored and adjustments made as

needed.

Evaluation and control consists of the following steps:

 Define parameters to be measure.

 Define target values for those parameters.
 Perform measurements
  Compare measured results to the pre-defined standard.
 Make necessary changes

ORGANISING

Organizing is the establishment of effective authority relationships among selected

work, persons and work places in order for the group to work together efficiently or
the process of dividing work into sections and departments.

DEFINITION OF ORGANISING

According to G.R. Terry, “Establishing the effective authority relationships among

elect works, persons and work-places so as for the cluster to figure along
effectively.

OBJECTIVES OF ORGANIZING

 Helps to achieve organizational goal. Organization is employed to achieve the

overall objectives of business firms. Organization focuses attention of individual’s
objectives towards overall objectives.

 Optimum use of resources. To make optimum use of resources such as men,

material, money, machine and method, it is necessary to design an organization
properly.

 To perform managerial function. Planning, organizing, staffing, directing and

controlling cannot be implemented without proper organization.

 Facilitates growth and diversification. A good organization structure is essential

for expanding business activities. Organization structure determines the input
resources needed for expansion of a business activity; similarly organization is
essential for product diversification such as establishing a new product line.

 Humane treatment of employees. Organization has to operate for the

betterment of employees and must not encourage monotony of work due to
higher degree of specialization. Now, organization has adapted the modern
concept of systems approach based on human relations and it discards the
traditional productivity and specialization approach.

ORGANIZATIONAL STRUCTURE
An organizational structure is a system that outlines how certain activities are
directed in order to achieve the goals of an organization. These activities can
include rules, roles, and responsibilities.

The organizational structure also determines how information flows between levels
within the company or an organizational structure is the group of rules, roles,
relationships and responsibilities that outline how your company’s activities are
directed to meet its goals.

TYPES OF ORGANIZATIONAL STRUCTURE

1.Hierarchical Structure

A hierarchical structure, also known as a line organization, is the most common type
of organizational structure. Its chain of command is the one that likely comes to
mind when you think of any company: Power flows from the board of directors
down to the CEO through the rest of the company from top to bottom. This makes
the hierarchical structure a centralized organizational structure.
In a hierarchical structure, a staff director often supervises all departments and
reports to the CEO. You can use templates and examples of hierarchical structures
to better understand the relationships between the CEO, staff director and
individual teams.

These are some advantages of a hierarchical structure:

 It clearly defines reporting relationships, project organization and division of

authority.
 It details corporate ladder and promotional structure, thereby encouraging
high-quality work.
 It helps to specialize each employee’s work.
 It cultivates stronger relationships among employees within a team.

There are also some drawbacks of choosing a hierarchical structure:

 Bureaucratic hurdles could delay project completion and discourage

employees from taking risks.
 It may encourage employees to prioritize their own department and direct
supervisors instead of the whole company.
 It can make employees feel like they have no say in how to approach their
projects.
2.Functional Structure

The functional structure is a centralized structure that greatly overlaps with the
hierarchical structure. However, the role of a staff director instead falls to each
department head – in other words, each department has its own staff director, who
reports to the CEO. Compare this functional structure template with the hierarchical
structure template to understand the specific differences between these two
organizational structures.
These are some advantages of a functional structure:
 It helps employees develop specific, specialized roles.
 It boosts individual departments’ and employees’ self-sufficiency and innovation.
 It scales easily to work for companies of all sizes.

These are some disadvantages of a functional structure:

 It doesn’t encourage communication and interaction among different
departments.
 It hides key details of departmental processes and strategies from employees
outside that department.

3.Divisional Structure

The centralized structure, known as a divisional organization, is more common in

enterprise companies with many large departments, markets or territories. For
example, a food conglomerate may operate on a divisional structure so that each of
its food lines and products can have full autonomy. In the divisional structure, each
line or product has its own chief commanding executive, as seen in this divisional
structure template.
These are the main advantages of a divisional organization:
 The different departments have some flexibility to operate separately from the
company at large.
 It’s more adaptable to customer needs.
 Individual departments have more autonomy and room for innovation.

These are some disadvantages of a divisional structure:

 It risks accidental duplication of resources.
 It encourages poor communication and low interaction among different
departments.
 It encourages internal competition across departments rather than uniting the
company against outside competitors.
4.Flat Structure

A flat structure is a decentralized organizational structure in which almost all

employees have equal power. At most, executives may have just a bit more
authority than employees, as seen in this flat structure template.

This organizational structure is common in startups that take a modern approach to

work or don’t yet have enough employees to divide into departments.
These are some advantages of a flat structure:
 Employees have more responsibility and independence.
 It improves communication and interaction among employees.
 It’s faster to implement new practices or ideas, with less risk of error.

These are the main disadvantages of a flat structure:

 Employees lack supervision.
 There could be confusion around reporting procedures.
 Employees lack or don’t develop specialized skills.
 It has poor scalability as the company grows.

5.Matrix Structure

The matrix structure is a fluid form of the classic hierarchical structure. This
centralized organization structure allows employees to move from one department
to another as needed, as the horizontal lines in this matrix organization template
indicate.

These are the main advantages of a matrix organization:

 Supervisors have the flexibility to choose the best employees for a project.
 It allows a dynamic org chart with varying responsibilities for employees.
 Employees have the opportunity to learn and foster skills outside their
primary roles.
These are some disadvantages of a matrix organization:
 There could be conflicts of interest between the needs for project
organization and department organization.
 The organizational chart is prone to regular changes.

6.Team Structure

A team structure is a decentralized but formal structure that allows department

heads to collaborate with employees from other departments as needed. It is
similar to a matrix structure, but as this team structure template shows, the focus is
less on employee fluidity than on supervisor fluidity, leading to a decentralized
functional structure.

These are the advantages of a team structure:

 The lack of compartmentalized labor drives productivity, growth and
transparency.
 It prioritizes employee experience over seniority.
 It minimizes employee management tasks.

These are some disadvantages of a team structure:

 It could confuse employees, given the potential subversion of traditional
executive and lower-level roles.
 It obscures the corporate ladder and may disincentive employees from
working harder to be promoted.

7.Network Structure

A network structure is especially suitable for a large, multi-city or even international

company operating in the modern era. It organizes not just the relationships among
departments in one office location, but the relationships among different locations
and each location’s team of freelancers, third-party companies to whom certain
tasks are outsourced, and more.

These are potential advantages of a network structure:

• It improves understanding of how functional roles are distributed among
onsite employees, offsite employees, freelancers and outsourced third
parties.
• It boosts flexibility for one department or location to delegate tasks to
another.
• It drives employee communication, collaboration and innovation.
• It clearly outlines workflows and chains of commands in large businesses.

These are the possible disadvantages of a network structure:

• It’s complex, especially in regard to out-of-office processes.
• It’s vague as to which employee, department or office should make the final
decisions.

8.Projectized Structure
In a projectized structure, the focus is on one project at a time. In this centralized
organizational structure, project managers act as supervisors, not just resource
allocators and decision-makers. Unlike other structure types, a projectized structure
involves the demobilization of teams and resources upon a project’s completion.
But it’s like other types of organizational structures in that an obvious hierarchy
exists, as you can see in this projectized structure template.

These are some advantages of a projectized structure:

• It fosters more efficient decision-making and communication.
• The sense of urgency around project completion increases employee
cooperation.
• It increases employee flexibility and versatility.

These are some disadvantages of a projectized structure:

• The strict deadlines could increase workers’ stress.
• The power might be too strongly centralized with the project manager.
• It lacks the opportunity for long-term skill development among employees.

FORMAL GROUPS

The Formal Groups are formed deliberately and consciously collectively to direct the
efforts of group members, especially the employees towards the accomplishment
of organizational objectives. The formal groups are formed to fulfil any of the
following purposes:
 To capitalize the expertise of each individual towards the accomplishment of
complex tasks.
 To make use of synergy, i.e. collective efforts of group members yields better
results than an individual working separately.
 To facilitate a proper decision-making, as with many people in a group the
conflicting ideas and thoughts arise that could be considered to formulate a
better decision.
 To help others in the group to learn new skills and to know about the details
of the organizational environment.
 To satisfy the personal needs of social affiliations, i.e. need to get accepted by
others.

The several groups are formed to serve the specific needs of the organization and
can be in any of the following forms:
1.Committees: The Committees are the association of organizational people who
come together to analyze, investigate and discuss the issues of concern and reach
to the final conclusion.

2.Task Force: The Task Force is a type of a group, formed temporary, in which
people from different disciplinary backgrounds come together to perform a specific
task or mission.

3.Quality Circle: A quality circle or quality control circle is a group of workers who
do the same or similar work, who meet regularly to identify, analyze and solve
work-related problems. It consists of minimum three and maximum twelve
members in number.

INFORMAL GROUPS

Informal groups are social structures which connect people naturally over a period
of time. In the business place informal groups can be seen as “cliques” of individuals
who come together based on experiences they share in common.

Types of Informal Groups

According to their characteristics, they can be classified into four groups:

 Apathetic groups: Apathetic groups are least active, have fewest grievances and
do not engage in concerted action against management. They are characterized
by dispersal and unaccepted leadership, lack of cohesiveness, internal disunity
and conflict and suppressed dissatisfaction.
 Erratic groups: Erratic groups are characterized by rapid in flammability, poor
control, inconsistent behaviour, centralized autocratic leadership and union
formation activities.

 Strategic groups: Strategic groups are characterized by well-planned and

consistent grievances. They act as shrewd, calculating groups that put
continuous pressure on management in order to attend to their problems.

 Conservative groups: Conservative groups are characterized by moderate

internal unity, limited pressure for highly specific objectives and a sense of self-
assurance.

Dalton has classified informal groups into three categories:

 Horizontal groups comprise of members who belong more or less to the same
rank and are in lateral relationship with one another.

 Vertical groups have members who belong to the one and the same
department and are in superior-subordinate relationship.

 Membership of Mixed groups is drawn from people working in various

departments and at various levels of hierarchy.

Functions of Informal groups

Informal groups help their members in fulfilling the following requirements through
their groups membership:

 Affiliation need
 Needs to establish a sense of identity and enhance self-respect
 Security need
 Need to validate their beliefs and values
 Need for help in solving work problems
 Need to get information
 Need for support for individual innovation and originality.
Advantages of Informal groups

 All the needs and desires of the members are easily satisfied.
 Work performance becomes easier on account of mutual cooperation.
 It establishes group standards of performance.
  Need for close supervision is also minimized.
 It develops group spirit and pride.
 Group cohesiveness reduces employee turnover and absenteeism.

Disadvantages of Informal Groups

 Groups insist on the observation of the groups norms.

 Groups cohesiveness impedes acceptance of new employees.
 Groups often demand a price for co-operation.
 Groups often oppose the management policies and procedures.
 Groups often spread rumours affecting smooth functioning of the
organization.
Difference between Formal and Informal groups

LINE AND STAFF AUTHORITY

In an organization, the line authority flows from top to bottom and the staff
authority is exercised by the specialists over the line managers who advise them on
important matters. These specialists stand ready with their specialty to serve line
mangers as and when their services are called for, to collect information and to give
help which will enable the line officials to carry out their activities better.

The staff officers do not have any power of command in the organization as they
are employed to provide expert advice to the line officers. The 'line' maintains
discipline and stability; the 'staff' provides expert information. The line gets out the
production, the staffs carries on the research, planning, scheduling, establishing of
standards and recording of performance. The authority by which the staff performs
these functions is delegated by the line and the performance must be acceptable to
the line before action is taken. The following figure depicts the line and staff
authority:

Types of Staff

 Personal Staff: Here the staff official is attached as a personal assistant or

adviser to the line manager. For example, Assistant to managing director.

 Specialized Staff: Such staff acts as the fountainhead of expertise in specialized

areas like R & D, personnel, accounting etc.

 General Staff: This category of staff consists of a set of experts in different areas
who are meant to advise and assist the top management on matters called for
expertise. For example, Financial advisor, technical advisor etc.

Functions of Staff Authority

1. Agency of Control

 Organisation
 Cost
 Audit
 Budget
 Personnel
 Accounting

2. Agency of Co-Ordination

 Planning
 Order and distribution
 Production planning
 Communication

3. Agency of Service

 Research and development

 Taxes
 Statistical analysis
  Personnel development

4. Agency of Advice

 Legal advice
 Public relations
 Labour relations
 Economic

The following diagram shows line and staff organisation

Advantages of Line and Staff Organisation

1. Specialization: Line and staff organisation introduces specialization in a

systematic manner. Persons with specialized knowledge are appointed to help line
officers.

2. Better Discipline: The unity of command is maintained in this type of

organisation. The staff personnel do not interfere with the executive work of line
officers.

3. Balanced and Prompt Decisions: The functional managers have the advantage of
expert advice when taking important decisions. The staff can also be used to
investigate and advise on inter-departmental relationships.
4. Growth and Expansion: The line and staff organisation is quite suitable for
growth and expansion.

5. Development of Employees: This organisation provides scope for advancement

of career to able and dedicated employees. There are more openings for those who
have capabilities of going up.

6. Lesser Burden on Line Officers: With the appointment of staff officers the burden
of the officers is greatly reduced. The specialists help line officers in deciding things
regarding their lines of specialization. The line officers are left with routine
administrative work.
7. Quick Actions: The line officers will have sufficient time to take various decisions.
Whenever there is a need for certain a decision, they will be able to devote time
and decide the things.

Disadvantages of Line and Staff Organisation

1. Conflict between Line and Staff Personnel: There is a possibility of conflict

between line and staff personnel. The responsibility for operations lies with line
officers while staff officers only advise.

2. Lack of Responsibility: There is a lack of responsibility for staff officials. They are
not accountable for the actual results of operations. This may tempt them to give
rash or theoretical advice.

3. More Dependence on Staff: The line officers become habituated for advice on
staff. They refer everything to staff for advice. Over-dependence on staff will make
line officers less creative.

4. Lack of Co-Ordination: There will be a lack of co-ordination between line and

staff. The staff advice may be confused with line orders. The staff officers may also
not be clear about their exact role.

5. Ineffective Staff: The staff officers do not wield any power in the organisation.
Without power they will not get prestige in the organisation.

6. Expensive: This type of organisation is very expensive because a large number of

specialists are appointed. The persons being experts in their fields, they demand
higher emoluments.
Line and Staff Conflict

Line and staff structure is based on the assumption that both will help and support
each other. But often there are conflicts between the two and both accuse each
other. There is a lack of understanding and both try to dominate each other.

1.Line managers have the following complaints against staff

 Staff officers claim credit for programmes which are successful but do not
want to share responsibility for their failure.
 Staff officers are more theoretical than practical. They tend to give advice
which has not been tested earlier.
 Staff officers do not remain contended by giving advice only. They try to
persuade the line for implementing whatever they have suggested.

2. Staff personnel have the following complaints

 Line officers do not make proper use of expert knowledge of the staff. They
do not consult staff personnel at the planning level where they can make
practical suggestions.
 Staff people feel that their advice is not properly implemented by the line
personnel. Line officers do not consult staff while implementing the advice.
 Line officers are not generally enthusiastic about the new ideas suggested
by the staff.
 Staff officers do not have authority to implement their ideas.

DEPARTMENTATION

Meaning of Departmentation

Departmentation is the foundation of organisation structure, that is, organisation

structure depends upon departmentation. Departmentation means division of work
into smaller units and their re-grouping into bigger units (departments) on the basis
of similarity of features.As the organisation grows in size, the work is divided into
units and sub-units. Departments are created and activities of similar nature are
grouped in one unit. Each department is headed by a person known as
departmental manager.
According to Louis A. Allen:“ Departmentation is a means of dividing the large and
monolithic functional organisation into smaller, flexible administrative units”.
Importance of Departmentation

1.Organisation structure: Departmentation creates departments, assigns tasks to

people, fixes their responsibility and accountability to their departmental heads,
creates a span of management so that work can be easily supervised. This network
of authority- responsibility relationships is the basis of designing a sound
organisation structure.

2.Flexibility: In large organisations, one person cannot look after all the managerial
functions (planning, organising etc.) for all the departments. He cannot adapt the
organisation to its internal and external environment. Such an organisation would
become an inflexible organisation.

3.Specialisation: Division of work into departments leads to specialisation as people

of one department perform activities related to that department only. They focus
on a narrow set of activities and repeatedly performing the same task increases
their ability to perform more speedily and efficiently.

4. Co-ordination: “The organisation is a system of integrated parts, and to give

undue emphasis to any functional part at the expense of the entire organisation
creates organisational islands, thus, resulting in inefficiency and significant
behavioural problems”.

5. Sharing of resources: If there are no departments, organisational resources;

physical, financial and human, will be commonly shared by different work units.

Basis of Departmentation

The form of organisation structure depends upon the basis of departmentation.

There are two broad forms of departmentation:

a.Functional Departmentation: Functional organisation creates departments along

activities or functions of the undertaking (functions do not refer to managerial
functions of planning, organising , staffing, directing and controlling). It is grouping
of activities on the basis of similarities of functions.

Functional departmentation is, “the grouping of jobs and resources within the
company in such a way that employees who perform the same or similar activities
are in the same department”.
b.Divisional Departmentation: Divisional structures are created on the basis of
smaller divisions where each division has its own functional activities (production,
finance, personnel and marketing).

Major divisions that determine the organisation structure are as follows:

 Product Departmentation: This form of departmentation is suitable for

companies that produce multiple products. Product departmentation is grouping
of jobs and resources around the products or product lines that a company sells.

Merits of Product Departmentation

 Better performance
 Flexibility
 Fast decisions
 Co-ordination
 Responsibility
 Efficiency

Limitations of Product Departmentation

 Co-ordination
 Expensive
 Control

 Process or Equipment Departmentation: In manufacturing organisations where

the product passes through different stages of production, each stage is
designated as a process and department is created for each process. It is called
process departmentation. Since finished product goes through different
processes, each process is assigned to a different department. This form of
departmentation is suitable for medium and large-sized organisations where
goods are produced through a series of operations.

Merits of Process Departmentation

 Specialisation
 Economic considerations
 Technological consideration
 Facilitates training
 Limitations of Process Departmentation

 Co-ordination
 Boredom

 Customer Departmentation: When organisations sell to customers with

different needs, departments are created on the basis of customers. Customer
departmentation is “the organising of jobs and resources in such a way that each
department can carefully understand and respond to different needs of specific
customer groups”. An educational institution which provides academic and non-
academic subjects (vocational subjects), full-time or part-time courses, morning
or evening shifts is a typical case of customer departmentation. Clear
identification of customers and their needs is the basis of customer
departmentation. This method of departmentation can be followed only in
marketing division.

Merits of Customer Departmentation

 Competitive advantage
 Customer orientation
 Specialisation

Limitations of Customer Departmentation

 Co-ordination
 Change in consumer behaviour
 Identification of consumer groups
 Specialised staff

 Territory or Geographic Departmentation

In territorial departmentation, organisation creates departments:

 Close to its customers because they are geographically dispersed over

different areas.
 Near the sources of deposits.

The production, purchase, personnel and marketing activities are looked after by
departmental managers but finance is vested at the headquarters. General
Manager of every department looks after functional activities of his geographical
 area but overall functional managers provide supporting services to the managers
of different areas.

Merits of Geographic Departmentation

 Training and development

 Customer orientation
 Low cost of production
 Communication

Limitations of Geographic Departmentation

 Co-ordination and control

 Expensive
 Managerial skills

 Departmentation by Time

This method of departmentation is used in situations where work is done round

the clock because:

 The machine cannot be stopped before finishing the work.

 The demand is high and the machine has to work overtime.
 The nature of work entrusted to the organisations is such.
 The services are essential in nature (health and fire services).
 Workers work in shifts; morning, afternoon and night, so that work can
progress continuously.

This method of departmentation results in optimum utilisation of machines as they

work continuously which otherwise may remain idle. It is also good for workers who
cannot work during day time.

 Departmentation by Size: This method is followed in army where number of

workers in the unit is important. The company’s performance is judged by the
number of people working with it, and therefore, it adopts departmentation by size.
Departments are created on the basis of number of people who form the
department. Soldiers in army are grouped in numbers to form departments.

 Departmentation by Task Force: When organisation has a number of projects, it

forms task forces which consist of people from different units having different skills
to complete those projects. These groups are formed temporarily till completion of
the project. They are similar to project organisations.

SPAN OF CONTROL

Span of control also called Span of Management, is the term used in business
management, particularly human resource management. Span of control refers to
the number of subordinates a supervisor has. Simply a manager or a supervisor or a
superior who has a group of subordinates, who can directly report him or her were
called a Span of Management.
Factors affecting span of control

The factors affecting span of control are:

 Geographical dispersion, if the branches of a business are widely dispersed,

then the manager will find it difficult to supervise each of them, as such the
span of control will be smaller.
 Capability of employees if employees are highly capable, need little
supervision, and can be left on their own, e.g., Theory Y type of people, they
need not be supervised closely as they are motivated and take initiative to
work; as such, the span of control may be broader.
 Capability of managers, an experienced manager with good understanding of
the tasks, good knowledge of the workers and good relationships with the
workers, will be able to supervise more workers
 Value-add on a manager that is adding value by training and developing new
skills in the workers will need a more narrow span of control than one who is
focused only on performance management (this is the reverse of the
capability of workers point above).
 Similarity of task: if the tasks that the subordinates are performing are
similar, then the span of control can be wider, as the manager can supervise
them all at the same time.
 Volume of other tasks: if the manager has other responsibilities, such as
membership of committees, involvement in other projects, liaising with
stakeholders, the number of direct reports will need to be smaller
 Required administrative tasks: if the manager is required to have regular
face-to-face meetings, complete appraisal and development plans, discuss
remuneration benefits, write job descriptions and employment contracts,
explain employment policy changes, and other administrative task:, span of
control may be reduced.
 Business process streamlining, effectiveness, and efficiency can reduce the
span of control.

CENTRALIZATION

Centralization refers to the process in which activities involving planning and

decision-making within an organization are concentrated to a specific leader or
location. In a centralized organization, the decision-making powers are
retained in the head office, and all other offices receive commands from the
main office. The executives and specialists who make critical decisions are
based in the head office.Similarly, in a centralized government structure, the
decision-making authority is concentrated at the top, and all other lower levels
follow the directions coming from the top of the organization structure.

Advantages of Centralization

1. A clear chain of command: A centralized organization benefits from a clear

chain of command because every person within the organization knows who to
report to. Junior employees know who to approach whenever they have
concerns about the organization.

2. Focused vision: When an organization follows a centralized management

structure, it can focus on the fulfillment of its vision with ease. There are clear
lines of communication and the senior executive can communicate the
organization’s vision to employees and guide them toward the achievement of
the vision.

3. Reduced costs: A centralized organization adheres to standard procedures

and methods that guide the organization, which helps reduce office and
administrative costs. The main decision-makers are housed at the company’s
head office or headquarters, and therefore, there is no need for deploying
more departments and equipment to other branches.

4. Quick implementation of decisions: In a centralized organization, decisions

are made by a small group of people and then communicated to the lower-
level managers. The involvement of only a few people makes the decision-
making process more efficient since they can discuss the details of each
decision in one meeting.

5. Improved quality of work: The standardized procedures and better

supervision in a centralized organization result in improved quality of work.
 There are supervisors in each department who ensure that the outputs are
uniform and of high quality. The use of advanced equipment reduces potential
wastage from manual work and also helps guarantee high-quality work.

Disadvantages of Centralization

1. Bureaucratic leadership: Centralized management resembles a dictatorial

form of leadership where employees are only expected to deliver results
according to what the top executives assign them. Employees are unable to
contribute to the decision-making process of the organization, and they are
merely implementers of decisions made at a higher level.

2. Remote control: The organization’s executives are under tremendous

pressure to formulate decisions for the organization, and they lack control over
the implementation process. The failure of executives to decentralize the
decision-making process adds a lot of work to their desks. The executives
suffer from a lack of time to supervise the implementation of the decisions.

3. Delays in work: Centralization results in delays in work as records are sent

to and from the head office. Employees rely on the information communicated
to them from the top, and there will be a loss in man-hours if there are delays
in relaying the records.

4. Lack of employee loyalty: Employees become loyal to an organization when

they are allowed personal initiatives in the work they do. They can introduce
their creativity and suggest ways of performing certain tasks.

DECENTRALIZATION

Decentralization refers to a specific form of organizational structure where the top

management delegates decision-making responsibilities and daily operations to
middle and lower subordinates. The top management can thus concentrate on
taking major decisions with greater time abundance.

Advantages of Decentralisation

 Reduces the burden on top executives: Decentralisation relieves the top

executives of the burden of performing various functions. Centralisation of
authority puts the whole responsibility on the shoulders of an executive and his
immediate group. This reduces the time at the disposal of top executives who
should concentrate on other important managerial functions. So, the only way to
 lessen their burden is to decentralise the decision-making power to the
subordinates.
 Facilitates diversification: Under decentralization, the diversification of
products, activites and markets etc., is facilitated. A centralised enterprise with
the concentration of authority at the top will find it difficult and complex to
diversify its activities and start the additional lines of manufacture or
distribution.
 To provide product and market emphasis: A product loses its market when new
products appear in the market on account of innovations or changes in the
customers demand. In such cases authority is decentralised to the regional units
to render instant service taking into account the price, quality, delivery, novelty,
etc.
 Executive Development: When the authority is decentralised, executives in the
organisation will get the opportunity to develop their talents by taking initiative
which will also make them ready for managerial positions. The growth of the
company greatly depends on the talented executives.
 It promotes motivation: To quote Louis A. Allen, “Decentralisation stimulates
the formation of small cohesive groups. Since local managers are given a large
degree of authority and local autonomy, they tend to weld their people into
closely knit integrated groups.” This improves the morale of employees as they
get involved in decision-making process.
 Better control and supervision: Decentralisation ensures better control and
supervision as the subordinates at the lowest levels will have the authority to
make independent decisions. As a result they have thorough knowledge of every
assignment under their control and are in a position to make amendments and
take corrective action.
 Quick Decision-Making: Decentralisation brings decision making process closer
to the scene of action. This leads to quicker decision-making of lower level since
decisions do not have to be referred up through the hierarchy.

Disadvantages of Decentralisation

 Decentralisation can be extremely beneficial: But it can be dangerous unless it is

carefully constructed and constantly monitored for the good of the company as a
whole.
 Uniform policies not Followed: Under decentralisation, it is not possible* to
follow uniform policies and standardised procedures. Each manager will work and
frame policies according to his talent.
 Problem of Co-Ordination: Decentralisation of authority creates problems of co-
ordination as authority lies dispersed widely throughout the organisation.
 More Financial Burden: Decentralisation requires the employment of trained
personnel to accept authority, it involves more financial burden and a small
enterprise cannot afford to appoint experts in various fields.
 Require Qualified Personnel: Decentralisation becomes useless when there are
no qualified and competent personnel.
 Conflict: Decentralisation puts more pressure on divisional heads to realize
profits at any cost. Often in meeting their new profit plans, bring conflicts among
managers.

CASELETS

1.Cost Justified?

Characters: Joe, District Manager of Computer Operations Mary, Division Manager - Information
Systems John, President and CEO of a large company

Joe was recently promoted to the position of District Manager of Computer

Operations for a large company. Mary, Joe’s supervisor, calls him to her office. She
has just been informed that the CEO has received an anonymous letter from an
employee. This letter states that a recently installed (and very expensive) system
does not perform as expected and has not achieved the expected results.

Joe has been aware that the system’s actual performance is really as described in
the anonymous letter. Joe had reported this performance problem to Mary before.
Although Mary had listened to Joe, she had been the original supporter of the
system and continually provides only positive feedback to the CEO on its
performance. Mary tells Joe that the CEO expects a reply to the letter. She tells Joe
to draft the reply. It should say that the system is performing as projected and that
all savings portrayed in the original justification documents are being achieved. She
says the documentation provided with his reply should support those statements.

Joe is upset by this directive. He feels that upper management is being misinformed
in the interest of protecting a questionable decision. He approaches Mary with his
concern. She says that if he does not provide the reply as requested, she will have
serious doubts about his ability to perform the functions of a District Manager for
the company. Joe has worked hard to achieve this position and is very worried
about her statement.

2. Sun Power: Focused on the Future of Solar Power

It was December 2006. Tom Werner, CEO of Sun Power, glanced down at his watch
and shook his head in dismay. His run was not going well, despite the sounds of
John Lee Hooker's "Boogie Chillen" coming through his earphones. He blamed the
board meeting later that afternoon.
Given Sun Power's position as the producer of the world's most efficient solar cells,
also known as photovoltaics or PV, and recent forecasts that solar power might be
on the edge of explosive growth, he knew that he'd be asked some tough questions.
Werner wondered how fast the solar power industry was likely to grow and how
long Sun Power's advantage was likely to last. How could Sun Power compete with
much larger companies like Sharp and Q-Cells? Or with the niche "technology play"
firms that were springing up? How could SunPower's current advantage be turned
into an enduring competitive edge?
As the sun began to rise, Werner picked up the pace again, and began jogging
home.
 MODULE – 2
STAFFING & LEADING

STAFFING
After organising the business operations, staffing involves matching the jobs
with people. While organising creates jobs, staffing makes people suitable to jobs.
Staffing deals with appointing people and placing them at the appropriate jobs. It is
“filling, and keeping filled, positions in the organisation structure.”
Staffing is related to performing a set of activities which aim at inviting,
selecting, placing and retaining individuals at various jobs to achieve the
organisational goals. It involves determining the need for people at various
organisational posts, appointing and retaining them at those posts by training and
developing their abilities and skills. This is done by performing a number of functions
like manpower planning, recruitment, selection, training and development,
performance appraisal, compensation and maintenance.
The following features explain the nature of staffing:
1. Management function:
Staffing is a management function that appoints people at different positions
to run the organisation. While organising creates departments and positions, staffing
ensures that people with desired skills and abilities occupy these positions to
contribute to organisational goals.

2. Pervasive function:
People are the most important asset that convert inputs into outputs. People
are appointed at all levels (top, middle, low) in all functional areas (production,
finance, marketing, personnel). Staffing ensures that right persons are appointed at
the right job so that organisation can efficiently achieve its objectives.

3. Part of human resource management:

Staffing is an important part of human resource management. Human
resource management ensures that competent people perform organisational
activities. It deals with the set of organisational activities that attract, develop and
maintain an effective workforce. The requirements of human resource management
are filled through staffing as staffing appoints people at the desired jobs.

4. Deals with active resource:

Staffing deals with the most important resource (people) that converts inactive
resources (raw materials) into productive outputs. It deals with the live resource
(people) without whom resources would remain as resources only. They will not be
converted into outputs.

5. Attached with personnel department:

Functions of staffing; recruitment, selection, training and appraisal of
subordinates of all departments (production, marketing etc.) are performed by
managers at all levels as all departments need people to function. In performing
these functions, managers seek assistance of the personnel department. Personnel
department is a service department that assists line managers in performing the
staffing function.

6. Continuous function:
Staffing is a continuous managerial function. People keep leaving and joining
the organisations. Departments and organisations grow and, therefore, need for
people keeps arising. Hiring, training and compensating people (staffing) are,
therefore, continuously performed by managers.

NEED FOR STAFFING

Staffing provides manpower to the organisation. In the changing, dynamic
environment where organisational size is increasing, technology is developing and
human behaviour is becoming complex, staffing function has become important.
Need for staffing explains the objectives of staffing.

These objectives are as follows:

1. To achieve organisational objectives by recognising it’s most valuable
resource; work force.

2. To increase loyalty and commitment of workers towards individual and

organisational goals.

3. To select people with suitable qualifications to fill organisational posts.

4. To increase skills of people on-the-job by providing training facilities.

5. To develop abilities of the staff to assume jobs of higher skill, competence

and responsibility.

6. To establish equitable and adequate compensation for people by providing

them monetary and non-monetary incentives. This promotes active contribution to
organisational objectives.

7. To reconcile individual, organisational and social interests by maintaining

efficient system of communication in the organisation.

8. To provide physical working conditions (lighting, ventilation, recreation

facilities etc.) to maintain employees’ commitment to jobs.
 9. To maintain record of achievements so that managers can make policies
with respect to transfers, promotions and demotions.

10. To make optimum use of human resource to achieve organisational

objectives.

11. To make people realise their potential at work and develop them for
promotion to higher managerial posts.

12. To maintain an environment of teamwork and innovation.

IMPORTANCE OF STAFFING
Staffing function is important for the following reasons:
1. Emphasis on human element:
Human force is the most important and productive asset of the organisation
which carries out the functions and productive activities of various departments.
People are the primary source of productivity gains. “If you want productivity and
financial reward that goes with it, you must treat your workers as your most important
asset.” — Thomas Peters and Robert Waterman

2. Facilitates leadership:
Well conducted staffing function provides leadership facilities so that
individuals can satisfy their personal goals along with organisational goals.
Employee turnover has become a matter of concern for many companies at higher
levels as talented workforce is always on the look-out for better job opportunities.
Besides filling the organisational posts, thus, the staffing function also ensures that
the posts remain filled. A good leadership role helps in synthesizing individual goals
with organisational goals.

3. Facilitates control:
Well trained staff works according to plans and deviations in performance are
reduced. This helps managers in controlling various organisational functions.

4. Motivation to work:
Financial rewards do not always motivate the employees. Their acceptance
and recognition by managers are also strong forces of motivation. When emphasis is
placed on human element in the organisation, people are motivated to contribute to
goals of the organisation.

5. Increase in efficiency:
Since staffing helps to place the right person, with the right knowledge, at the
right place and the right time to perform the organisational activities, efficiency of the
organisation increases. If people are not competent to do their jobs, organisational
goals will not be fully achieved. Though people are appointed at specific job
positions, there may be changes in their job profile because of changing
environmental conditions.

In order to avoid skills obsolescence and, thus, loss to the organisation, there
should be continuous training and development programmes to develop skills of the
employees. Employees have to be developed for multiple skills and competencies
and not specific skills to increase organisational efficiency.

6. Develops potential managers:

Recruiting and selecting people with the best potential, compensating and
training them to develop future managers facilitates movement of managerial abilities
from lower to higher levels of the organisation.

7. Competitive advantage:
In the era of globalisation, every enterprise faces tough competition from
national and international competitors. A well-staffed organisation provides
management sound policies and procedures for adapting to the environment and
face competition. The fast changing technology can be adopted by organisations
only if the manpower is trained to do so.

Contemporary organisations are learning organisation with knowledge-based

workers who use information at their work place to meet challenges and risks. They
create intangible assets for the organisation and make effective strategic decisions
by using their judgement and innovative abilities. They are duty-conscious and a
product of vision, farsightedness and intuitive skills.

They even subordinate their self-interest in favour of the larger organisational

interest. Knowledge workers create and enhance the competitive advantage by
satisfying customers’ needs through organisation’s knowledge base. Staffing
function, thus, ensures that organisational leaders align knowledge management
with intellectual capital. It combines organisation’s capabilities with needs of the
market.

HUMAN RESOURCE PLANNING

Human resource planning (HRP) is the continuous process of systematic planning

ahead to achieve optimum use of an organization's most valuable asset quality
employees. Human resources planning ensures the best fit between employees and
jobs while avoiding manpower shortages or surpluses.

There are four key steps to the HRP process. They include analyzing present labor
supply, forecasting labor demand, balancing projected labor demand with supply,
and supporting organizational goals. HRP is an important investment for any
business as it allows companies to remain both productive and profitable.

KEY TAKEAWAYS

• Human resource planning (HRP) is a strategy used by a company to maintain

a steady stream of skilled employees while avoiding employee shortages or
surpluses.
• Having a good HRP strategy in place can mean productivity and profitability
for a company.
• There are four general steps in the HRP process: identifying the current
supply of employees, determining the future of the workforce, balancing
 between labor supply and demand, and developing plans that support the
company's goals.

Human Resource Planning – Need and Importance:

I. Assessing Future Personnel Needs:

Whether it is surplus labour or labour shortage, it gives a picture of defective
planning or absence of planning in an organization. A number of organizations,
especially public sector units (PSUs) in India are facing the problem of surplus
labour.
It is the result of surplus labour that the companies later on offer schemes like
Voluntary Retirement Scheme (VRS) to eliminate surplus staff. Thus, it is better to
plan well about employees in advance. Through HRP, one can ensure the
employment of proper number and type of personnel.

II. Foundation for Other HRM Functions:

HRP is the first step in all HRM functions. So, HRP provides the essential
information needed for the other HRM functions like recruitment, selection, training
and development, promotion, etc.

III. Coping with Change:

Changes in the business environment like competition, technology, government
guidelines, global market, etc. bring changes in the nature of the job. This means
changes in the demand of personnel, content of job, qualification and experience
needed. HRP helps the organization in adjusting to new changes.

IV. Investment Perspective:

As a result of change in the mindset of management, investment in human resources
is viewed as a better concept in the long run success of the enterprise. Human
assets can increase in value as opposed to physical assets. Thus, HRP is
considered important for the proper planning of future employees.

V. Expansion and Diversification Plans:

During the expansion and diversification drives, more employees at various levels
are needed. Through proper HRP, an organization comes to know about the exact
requirement of personnel in future plans.

VI. Employee Turnover:

Every organization suffers from the small turnover of labour, sometime or the other.
This is high among young graduates in the private sector. This necessitates again
doing manpower planning for further recruiting and hiring.

VII. Conformity with Government Guidelines:

In order to protect the weaker sections of the society, the Indian Government has
prescribed some norms for organizations to follow. For example, reservations for
SC/ST, BC, physically handicapped, ex-servicemen, etc. in the jobs. While planning
for fresh candidates, HR manager takes into consideration all the Government
guidelines.

VIII. International Expansion Strategies:

International expansion strategies of an organization depend upon HRP. Under
International Human Resource Management (IHRM), HRP becomes more
challenging. An organization may want to fill the foreign subsidiary’s key positions
from its home country employees or from host-country or from a third country. All this
demands very effective HRP.

IX. Having Highly Talented Manpower Inventory:

Due to changing business environment, jobs have become more challenging and
there is an increasing need for dynamic and ambitious employees to fill the positions.
Efficient HRP is needed for attracting and retaining well qualified, highly skilled and
talented employees.

Human Resource Planning – Objectives:

The main objectives of HRP are:

(i) Proper assessment of human resources needs in future.
(ii) Anticipation of deficient or surplus manpower and taking the corrective action.
(iii) To create a highly talented workforce in the organization.
(iv) To protect the weaker sections of the society.
(v) To manage the challenges in the organization due to modernization, restructuring
and re-engineering.
(vi) To facilitate the realization of the organization’s objectives by providing right
number and types of personnel.
(vii) To reduce the costs associated with personnel by proper planning.
(viii) To determine the future skill requirements of the organization.
(ix) To plan careers for individual employee.
(x) Providing a better view of HR dimensions to top management.
(xi) Determining the training and development needs of employees.

Human Resource Planning – Organisation:

Every line manager is responsible for planning manpower of the respective
department and the top management is responsible for the planning of resources for
the entire organisation. The personnel department supplies relevant information and
data to all the line managers and helps those regarding interdepartmental transfers,
promotions, demotions etc. Personnel department also helps in using the techniques
and forecasting the manpower.
Personnel department forecasts internal mobility surplus or deficit of human
resources for the entire organisation, prepares action plans regarding redeployment,
redundancy, employment, development and internal mobility and submits plans to
the management at the top which either by its own or by appointing a committee
reviews departmental plans and overall plans, make necessary adjustments and
finalises the plans. Personnel department in its turn prepares modified plans for the
departments based on finalised overall plan and communicates them to respective
heads of department.
Personnel department may co-ordinate the control activity of human resource plan
and it has to send coordinated reports to the management at the top for actual
review, control and monitor the human resource system. The management at the top
may appoint a committee consisting of heads of department and external
identification of deviations, reasons thereof and steps to be taken to correct the
deviations. The committee further helps the management in executing the
programmes of corrections.

Human Resource Plan – Factors:

Several factors affect HRP. These factors can be classified into external factors and
internal factors.

External Factors:
i. Government Policies – Policies of the government like labour policy, industrial
relations policy, policy towards reserving certain jobs for different communities and
sons-of the soil, etc. affect the HRP.
ii. Level of Economic Development – Level of economic development determines the
level of HRD in the country and thereby the supply of human resources in the future
in the country.
iii. Business Environment – External business environmental factors influence the
volume and mix of production and thereby the future demand for human resources.
iv. Level of Technology – Level of technology determines the kind of human
resources required.
v. International Factors – International factors like the demand for resources and
supply of human resources in various countries.
vi. Outsourcing – Availability of outsourcing facilities with required skills and
knowledge of people reduces the dependency on HRP and vice-versa.

Internal Factors:
i. Company policies and strategies – Company policies and strategies relating to
expansion, diversification, alliances, etc. determines the human resource demand in
terms of quality and quantity.
ii. Human resource policies – Human resources policies of the company regarding
quality of human resource, compensation level, quality of work-life, etc., influences
human resource plan.
iii. Job analysis – Fundamentally, human resource plan is based on job analysis. Job
description and job specification determines the kind of employees required.
iv. Time horizons – Companies with stable competitive environment can plan for the
long run whereas the firms with unstable competitive environment can plan for only
short- term range.
v. Type and quality of information – Any planning process needs qualitative and
accurate information. This is more so with human resource plan; strategic,
organisational and specific information.
vi. Company’s production operations policy – Company’s policy regarding how much
to produce and how much to buy from outside to prepare a final product influence
the number and kind of people required.
vii. Trade unions – Influence of trade unions regarding number of working hours per
week, recruitment sources, etc., affect the HRP.

Human Resource Planning at Different Levels:

Different institutions make HRP at different levels for their own purposes, of which
national level, industry level, unit level, departmental level and job level are
important.

i. National level – Generally, government at the centre plan for human resources at
the national level. It forecasts the demand for and supply of human resource, for the
entire nation.

ii. Sector level – Manpower requirements for a particular sector like agricultural
sector, industrial sector or tertiary sector are projected based on the government
policy, projected output/operations, etc.

iii. Industry level – Manpower needs of a particular industry like cement, textiles,
chemical are predicted taking into account the output/operational level of that
particular industry.

iv. Unit level – This covers the estimation of human resource needs of an
organisation or company based on its corporate/business plan.

v. Departmental level – This covers the manpower needs of a particular department

in a company.

vi. Job level – Manpower needs of a particular job family within department like
Mechanical Engineer is forecast at this level.

vii. Information technology – The impact of information technology on business

activities, human resource requirement and human resource plan is significant. It
requires multi skilled experts, preferably less in number.

Human Resource Planning – Quantitative and Qualitative Dimensions:

Human resources have a dual role to play in the economic development of a country.
On one hand they are the consumers of the products and services produced by the
organizations while on the other hand they are one of the factors of production.
Along with capital and other factors of production, human resources can lead to
increase in production and economic development. The rate of growth of human
resources is determined by two aspects quantitative and qualitative.

Variables Determining the Quantity of Human Resources:

1. Population Policy:
Some population policies operate by influencing the factors responsible for growth
such as fertility, marriage and mortality. These are known as population influencing
policies. Another category of policies known as responsive policies are implemented
to adjust to observed population trends with the help of programmes like health,
nutrition, education, housing, etc. The aim of population policies is to achieve an
optimum population for enhancing the country’s development.

2. Population Structure:
The structure or composition of the population is determined by two factors, sex
composition and age composition.

(i) Sex Composition:

Sex ratio is the ratio of males to females in the population. It is the basic measure of
the sex composition of the population of any area. Higher the number of females,
higher will be the population growth rate in future.

(ii) Age Composition:

It is the distribution of population by age groups. Age composition is the result of past
trends in fertility and mortality. The supply of labour depends on age composition as
economically active population falls in range of 15-65 age groups.

3. Migration:
Net migration is another factor which causes changes in the population. Age and sex
composition determine the natural growth in population, but for calculating the overall
changes in population it is important to consider net migration also.
Net migration = total immigrants – total emigrants
A positive net migration will lead to a rise in population growth rate while negative net
migration will reduce the growth rate of population. Migration can be both inter-
regional and international.

4. Labour Force Participation:

The population of any country consists of workers and non-workers. The workers are
the people, usually in age group of 15-65, who participate in economically productive
activities by their mental or physical presence.
These include:
i. Employers,
ii. Employees,
iii. Self-employed persons, and
iv. Those engaged in family enterprises without pay.
The others in the population are the non-workers such as students, infants, elderly,
beggars, retired people, inmates of jail or mental institutions, unemployed, etc. They
do not contribute to any productive economic activity. It is the changes in the working
population which affect the growth of human resources. The number of people who
are unemployed but available for work also impacts the availability of labour.

Qualitative Aspects of Human Resource Planning:

The quantitative dimensions help to ascertain human resources in numbers while the
productive power of human resources is assessed by the qualitative dimensions. For
example, there may be hundreds of applicants for 20 vacancies, but out of these
only a few may meet the quality standards required for the job.

Factors which determine the quality of human resources are:

1. Education and Training:
The quantity and quality of education and training received by human resources
impacts their knowledge and skills. Education and training are important for the
upliftment of both individual and society. It can be of two types, formal and informal.
Formal education is imparted through schools and colleges while informal education
and training takes place through on-the-job training methods. Formal education
stresses the transfer of theoretical knowledge, while informal education emphasizes
on practical application of knowledge.

2. Health and Nutrition:

Health and nutrition along with education are vital for Human Resource
Development. Health and nutrition impact the quality of life, productivity of labour and
the average life expectancy.

Health status is determined by:

(i) Purchasing power of people.
(ii) Public sanitation, climate and availability of medical facilities.
(iii) People’s understanding and knowledge of health, hygiene and nutrition.

3. Equality of Opportunity:
Not all segments of people comprising human resources get equal employment
opportunities. There is bound to be some discrimination.

The most common forms of discrimination are:

(i) Social discrimination – Discrimination on basis of gender, religion or social
standing.

(ii) Economic discrimination – Discrimination based on financial positions or

possession of wealth by the sections of workforce.

(iii) Regional discrimination – These are in form of discrimination between rural and
urban population or between people belonging to different regions/ states.
Discrimination affects the quality and productivity of the human resources belonging
to different sections of the population. The privileged classes get access to best
education, nutrition and health facilities while underprivileged are deprived of their
right share in the development process. For the overall, well rounded development of
the country’s human resources, effective policies need to be implemented to deal
with the problem of discrimination.

Human Resource Planning – Prerequisites:

i. There should be a proper linkage between HR plan and organizational plan.
ii. Top management support is essential.
iii. Proper balance should be kept between the qualitative and quantitative
approaches to HRP.
iv. Involvement of operating managers is necessary.
v. Proper alignment between short-term HR plans and long-term HR plans should be
there.
vi. HR plan should have in-built flexibility in order to adopt environmental
uncertainties.
vii. Time period of HR plan should be appropriate to needs and circumstances of the
organization.

Human Resource Planning – Benefits:

Human Resource Planning (HRP) anticipates not only the required kind and number
of employees but also determines the action plan for all the functions of personnel
management.

The major benefits of human resource planning are:

i. It checks the corporate plan of the organisation.

ii. HRP offsets uncertainties and changes to the maximum extent possible and
enables the organisation to have right men at right time and in right place.
iii. It provides scope for advancement and development of employees through
training, development, etc.
iv. It helps to anticipate the cost of salary enhancement, better benefits, etc.
v. It helps to anticipate the cost of salary, benefits and all the cost of human
resources facilitating the formulation of budgets in an organisation.
vi. To foresee the need for redundancy and plan to check it or to provide alternative
employment in consultation with trade unions, other organisations and government
through remodeling organisational, industrial and economic plans.
vii. To foresee the changes in values, aptitude and attitude of human resources and
to change the techniques of interpersonal, management, etc.
viii. To plan for physical facilities, working conditions and the volume of fringe
benefits like canteen, schools, hospitals, conveyance, child care centres, quarters,
company stores, etc.
ix. It gives an idea of type of tests to be used and interview techniques in selection
based on the level of skills, qualifications, intelligence, values, etc., of future human
resource.
x. It causes the development of various sources of human resources to meet the
organisational needs.
xi. It helps to take steps to improve human resource contributions in the form of
increased productivity, sales, turnover, etc.
xii. It facilitates the control of all the functions, operations, contribution and cost of
human resources.

Understanding Human Resource Planning (HRP)

Human resource planning allows companies to plan ahead so they can maintain a
steady supply of skilled employees. That's why it is also referred to as workforce
planning. The process is used to help companies evaluate their needs and to plan
ahead to meet those needs.

Human resource planning needs to be flexible enough to meet short-term staffing

challenges while adapting to changing conditions in the business environment over
the longer term. HRP starts by assessing and auditing the current capacity of human
resources.

Challenges of Human Resource Planning

The challenges to HRP include forces that are always changing, such as employees
getting sick, getting promoted, or going on vacation. HRP ensures there is the best fit
between workers and jobs, avoiding shortages and surpluses in the employee pool.

To satisfy their objectives, HR managers have to make plans to do the following:

• Find and attract skilled employees.

• Select, train, and reward the best candidates.
• Cope with absences and deal with conflicts.
• Promote employees or let some of them go.

Investing in HRP is one of the most important decisions a company can make. After
all, a company is only as good as its employees, and a high level of employee
engagement can be essential for a company's success. If a company has the best
employees and the best practices in place, it can mean the difference between
sluggishness and productivity, helping to lead a company to profitability.

Steps to Human Resource Planning

There are four general, broad steps involved in the human resource planning
process. Each step needs to be taken in sequence in order to arrive at the end goal,
which is to develop a strategy that enables the company to successfully find and
retain enough qualified employees to meet the company's needs.

1.Analyzing Labour Supply

The first step of human resource planning is to identify the company's current human
resources supply. In this step, the HR department studies the strength of the
organization based on the number of employees, their skills, qualifications, positions,
benefits, and performance levels.

2.Forecasting Labour Demand

The second step requires the company to outline the future of its workforce. Here,
the HR department can consider certain issues like promotions, retirements, layoffs,
and transfers anything that factors into the future needs of a company. The HR
department can also look at external conditions impacting labor demand, such as
new technology that might increase or decrease the need for workers.
3.Balancing Labour Demand With Supply
The third step in the HRP process is forecasting the employment demand. HR
creates a gap analysis that lays out specific needs to narrow the supply of the
company's labor versus future demand. This analysis will often generate a series of
questions, such as:

• Should employees learn new skills?

• Does the company need more managers?
• Do all employees play to their strengths in their current roles?

4.Developing and Implementing a Plan

The answers to questions from the gap analysis help HR determine how to proceed,
which is the final phase of the HRP process. HR must now take practical steps to
integrate its plan with the rest of the company. The department needs a budget, the
ability to implement the plan, and a collaborative effort with all departments to
execute that plan.

Special Considerations
The goal of HR planning is to have the optimal number of staff to make the most
money for the company. Because the goals and strategies of a company change
over time, human resource planning is a regular occurrence. Additionally,
as globalization increases, HR departments will face the need to implement new
practices to accommodate government labor regulations that vary from country to
country.

The increased use of remote workers by many corporations will also impact human
resource planning and will require HR departments to use new methods and tools to
recruit, train, and retain workers.

RECRUITMENT

In case of need for manpower, managers hire people by inviting applications

from candidates to apply for the post. It is ensured that people applying for specific
posts have skills required for that job. There is need, therefore, to ascertain job
description and job specifications. Managers invite applications only from candidates
qualified for the posts. The process of inviting applications is known as recruitment.

It is the “process of finding and attempting to attract job candidates who are
capable of effectively filling job vacancies.”

After conducting job description and job specification, the required position is
advertised to attract sufficient number of candidates suitable for the job.
The number should neither be too large nor small as:
a. Attracting too many candidates requires sorting out large number of
applications which is time consuming and also costly, and

b. Attracting too few applicants limits the choice for the suitable candidate
 Recruitment is not selection or appointment. It is only application for a job out
of which personnel manager selects the most qualified and suitable person whose
job specifications match the job description.

Sources of Recruitment:
There are two sources of recruitment:
1. Internal sources and

2. External sources

1. Internal Sources of Recruitment:

It invites applications from people within the organisation. Applications are
invited to promote people to higher posts (promotion) or transfer to other
departments at the same level. A senior post in production department, for example,
may be filled by juniors in the production department or surplus staff in the
production department may be shifted to the sales department. Employees assume
responsibilities of the same status in transfers and higher status in promotions.

Merits of internal recruitment:

Internal recruitment has the following merits:
(a) Motivation:
Since employees know that higher positions will be filled from within the
organisation, they work hard to get promotions at higher posts.

(b) Recognition:
When internal candidates are considered for promotion, they gain social
recognition amongst the organisational members.

(c) Familiarity with the organisational set up:

Candidates promoted from within the organisation are familiar with the
organisation structure and know the organisation better than outsiders. Both
organisation and employees know each other and need for orientation does not
arise. It promotes socialisation and familiarity with people and procedures as people
internal to the organisation take less time in socializing with the organisation.

(d) Costs:
Recruitment from within the organisation is less costly than recruitment
through external sources. Organisations save money on inviting applications from
outside through advertisements or other ways.

(e) Loyalty:
If candidates are considered from inside the organisation, it develops positive
attitude amongst employees. They associate with the organisation and work with
dedication and commitment. This promotes loyalty as employees envision a secured
future in the organisation.

Limitations of internal recruitment:

Internal recruitment suffers from the following limitations:
(a) Limitation on the number of employees to be recruited:
 Since recruitment is made from within, the number is restricted only to internal
employees. People outside the organisation who may be more talented are not
considered to serve the organisation.

(b) Promotes complacency:

Rather than employees being motivated to work, they may become
complacent because they are sure of promotions by seniority. They may work
according to old work schedules and not change their way of working.

(c) Conflict amongst workers:

Employees not considered for promotion may develop conflicts with those
who are promoted. This reduces organisational efficiency.

(d) Dynamic organisations:

Organisations working in the dynamic environment where technological and
competitive forces are fast changing, may not find suitable internal candidates to
manage the higher positions. People recruited from outside may be more innovative
and dynamic.

Outside people may bring new ideas to promote growth of the organisation. It
also facilitates diversification as new brains can manage new businesses.
Expenditure on recruiting people from outside may be less than training and
developing expenses on employees who are promoted from within. Internal
recruitment is suitable for organisations operating in a stable environment.

Sources of internal recruitment:

Internal recruitment can be made from the following sources:
(a) Notice boards:
Vacancies are put on the notice board. Candidates can see them and apply
for the posts.

(b) Circulars:
Information about vacancies is circulated through circulars.

(c) Personal contacts and references:

Applications can be invited through personal contacts and references.

2. External Sources of Recruitment:

When organisations recruit people from outside the organisation, it is called
external recruitment. It is the “process of finding potential external candidates and
encouraging them to apply for and/or be willing to accept organisational jobs that are
open.” If internal candidates are not suitable to perform the jobs, external recruitment
helps the organisation take benefit of new, young blood by allowing outsiders to take
up the jobs.

Merits of external recruitment:

External recruitment has the following merits:
(a) Suitable for dynamic organisations:
 Organisations responsive to changing environment get more innovative,
dynamic and experienced employees from outside.

(b) Large pool:

External recruitment offers a large pool of candidates to choose from.
Chances of appointing worthy candidates increase in external recruitment.

(c) Infusion of young blood:

Young, new and dynamic people can be appointed with innovative ideas.
Though existing matured employees are more experienced, young blood is more
challenging. They adopt new ways of learning without following the old routine better
than the matured and experienced.

(d) Spirit of competition:

Recruitment from outside motivates internal candidates to compete with them.
They work to perform better to compete for higher positions.

(e) Realistic job preview:

It is a “technique used during the recruiting process in which the job candidate
is presented with a balanced view of both the positive and the negative aspects of
the job and the organisation.” When employees apply for a job knowing its positive
and negative aspects, they perform their jobs better.

Limitations of external recruitment:

The external recruitment suffers from the following limitations:
(a) Costly:
External recruitment is costlier than internal recruitment as it involves
advertising, tests, interviews etc. Above all, the candidates may not maintain stability
of tenure with the organisation. They leave the organisation when they find better
jobs elsewhere.

(b) Dissatisfaction amongst internal candidates:

Internal candidates who are denied promotions feel dissatisfied which can
affect productivity. This can also raise conflicts as internal employees may not
readily socialize with external candidates.

(c) Orientation:
Organisations have to spend lot of time in orienting the employees towards
the organisation structure. However, time is a constraint if the new employees do not
understand the organisation’s working to contribute to output. Investment in time is
an asset as it tunes employees to understand their job.

Sources of external recruitment:

External recruitment can be made from the following sources:
(a) Advertisements:
This is the most widely used source of external recruitment. Job vacancies
are advertised in the newspapers, specifying the nature of job, type and number of
people required, qualification and experience of applicants, their duties and
responsibilities, method of application etc. Special reference can be made to
provisions for overtime, travelling etc.

A mention can also be made for salaries (whether negotiable or not).

Interested candidates read the advertisement and apply for the post. Companies
have a wide range of advertisement media like magazines, journals, newspapers,
television, radio etc. They can choose a medium they find most appropriate to them.
Advertisement must be appealing as it projects the image of the company.

The contents and presentation of advertisement should enable the candidate

to make a firm decision on whether or not he wants to apply for the job. However,
advertisements bring huge number of applications. It involves lot of time in screening
and taking action.

(b) Educational Institutions:

Many companies approach educational institutions (colleges, universities etc.)
and recruit candidates to suit their requirements. This is known as campus
recruitment. Companies generally hold group discussions and interviews to recruit
candidates from educational institutes. Some institutions have placement cells linked
to companies.

They help the students find jobs suitable to their qualification and knowledge.
Companies get fresh but inexperienced candidates through this source. Some
employers also fund the education of students in schools and colleges on the
agreement that students will work for their companies after completing their studies.

(c) Employment Agencies:

These agencies have list of candidates with different qualifications and
experience. Companies approach these agencies and get information about people
who can fill their vacancies. These can be public employment agencies run by the
Government and private employment agencies managed by private individuals and
institutions. They charge fees for rendering services which may be lump-sump or
percentage of salary of the job attached to the service.

Though this is a costly source of recruitment and also takes place outside the
organisation over which it does not have much control in terms of implementation of
recruitment policies, it has the following advantages:
i. The organisation does not have to advertise the vacant position.

ii. It saves considerable time which organisations can use for other productive
activities.

iii. It provides specialised services to organisations which do not have

specialised human resource/personnel department.

(d) Media:
Television and Radio sometimes announce lists of candidates with specific
qualifications who are in need of jobs. Companies can approach the media and
recruit people of their requirement.
(e) Professional Associations:
Companies that need professionals for top positions can approach
professional associations (Institute of Engineers, All India Management Association
etc.) and get a list of candidates with desired professional qualification. These
associations charge high fees for providing recruitment services but provide
candidates whose qualifications meet the organisation’s requirements. The benefits
usually far outweigh the costs of recruitment paid to these specialised agencies.

(f) Word of mouth:

Sometimes, recruitments are made through word of mouth. Trade unions or
employees give references of people interested in joining the enterprise. Managers
select desired candidates to fill the job vacancy. Employees’ recommendation also
helps in recruiting people at the lower level. Employees satisfied with their jobs also
recommend their friends or relatives for vacant job positions. Employers also have
the advantage of recruiting people through known sources.

(g) Casual applications:

Many candidates submit applications to companies with their resume in the
hope to get a job there. Companies prepare a list of such candidates and recruit
them whenever there arises a job vacancy.

(h) On-the-gate recruitment (Gate hiring):

Generally, for appointing blue collar workers (semi-skilled and unskilled) for
temporary periods, companies put notices on the gate mentioning the period of
vacancies and number of people required. Workers assemble at the gate on the
specified date and time. Managers select suitable candidates out of them.

(i) Trade unions:

Trade unions have a list of workers which can be used for recruiting labour
with varying degrees of skills (skilled, semi-skilled and unskilled). Unions are usually
considered a trust worthy source of recruitment and it is believed they will
recommend people who will be loyal to the company.

(j) Other organisations:

Some organisations have competent, qualified and skilled employees who
may be interested in leaving their jobs to join other organisations which offer them
better compensation packages. Organisations wanting such employees can attract
them by offering suitable incentives.

SELECTION
Under selection the manager compares their qualifications with the requirements of
a job and eliminates all those who do not stand up to this comparison. There is no
standard procedure adopted by all organizations, the following is an example of a
popular sequence of steps:
1. Application blank:Filling of the “application blank” by the candidate is the first
step in the process of selection. In this form, the applicant gives relevant personal
data such as his qualification, specialization, experience, firms in which he has
worked, etc.
2. lnitial interview : Those who are selected for interview on the basis of particulars
furnished in the application blank are called for initial interview by the company. This
interview, according to Mandellis the most important means of evaluating the poise
or appearance of the candidate. It is also used for establishing a friendly relationship
between the candidate and the company and for obtaining additional information or
clarification on the information already on the application blank.
3. Employment tests : For further assessment of candidate’s nature and abilities,
some tests are used in the selection procedure. Psychologists and other experts
have developed certain tests by which a candidate’s particular traits or abilities, his
likes and dislikes, his intelligence, manual dexterity, his capacity to learn and to
benefit from training, his adaptability, etc. can be estimated. There are several types
of tests that are used in selection procedure. The more commonly used are:
(i) Aptitude test
(ii) Interest test
(iii) Intelligence test
(iv) Trade or performance or achievement or job-specific test
(v) Personality test
4. Checking references :If the candidate has been found satisfactory at the
interview and if his performance is good in employment or proficiency tests, the
employer would like to get some important personal details about the candidate,
such as his character, past history, background, etc. verified from the people
mentioned in the application.
5. Physical or medical examination : Physical or medical examination is another
step in the selection procedure. The objectives of this examination are: (i) to check
the physical fitness of the applicant for the job applied for; (ii) to protect the company
against the unwarranted claims for compensation under certain legislative
enactments, such as Workmen’s Compensation Act; and (iii) to prevent
communicable diseases entering the business concern.
6. Final interview : This interview is conducted for those who are ultimately selected
for employment. In this interview, the selected candidates are given an idea about
their future prospects within the organization.

INDUCTION (ORIENTATION)
Induction is the process of acclimatising a new employee to the new social setting of
his work. This should take into account two major objects:(i)familiarising the new
employee with his new surroundings, and company rules and regulations; and
(ii)developing in him a favourable attitude towards the company.
To achieve these twin objects, the complete induction process is generally divided
into two phases. In the first phase, induction is done by the personnel department
which provides the employee all sorts of information relating to the company. This
commonly relates to the following subjects:

• Company history, products and major operations

• Geography of the plant
• Structure of the organisation and functions of various departments
• General company policies and regulations regarding wages and payments,
hours of work and overtime, safety and accidents, discipline and grievances,
uniform and clothing, and parking
• Economic and recreational services available
• Opportunities for promotions and transfer, suggestions system, etc.

In the second phase ,induction is done by the supervisor, or by some senior person
who is known as the mentor. The aim here is to develop in the new employee, a
favorable attitude towards the company. The following ten-step programme is
followed in this phase:

• Greeting the newcomer cordially

• Displaying a personal interest in the newcomer
• Reviewing his terms of appointment
• Showing the newcomer around
• Giving additional information
• Explaining the importance of his job in relation to other jobs
• Introducing the newcomer to the rests of the work-team
• Telling the newcomer his duties
• Selecting a person who can assist the newcomer on the job
• Following up frequently

TRAINING & DEVELOPMENT

Training is an activity leading to skilled behavior, the process of teaching employees

the basic skills they need to perform their jobs. The heart of a continuous effort
designed to improve employee competency and organizational performance.

Training typically focuses on providing employees with specific skills or helping those
correct deficiencies in their performance.

It is a short-term learning process that involves the acquisition of knowledge,

sharpening of skills, concepts, rules, or changing of attitudes and behaviors to
enhance the performance of employees.

After an employee is selected, placed and introduced in an organization he must be

provided with training facilities so that he can perform his job efficiently and
effectively.

So, Training is a social and continuous process of increasing skills, knowledge,

attitudes and efficiency of employees for getting better performance in the
organization.
Definition of Training

Training is the act of increasing the knowledge and skills of an employee for
performing the job assigned to him. Training has been defined by different scholars
of management. Some important definitions of training are as under.

According to Garry Dessler, “Training is the process of teaching new employees the
basic skills they need to perform their jobs”.

According to Jack Halloran, “Training is the process of transmitting and receiving

information related to problem-solving”.

In the words of Dale S. Beach, “Training is the organized procedure by which people
learn knowledge and improve skill for a definite purpose.”

In the words of Michael J. Jucius, “Training is a process by which the aptitudes,

skills, and abilities of employees perform specific jobs are increasing.”

According to Edwin B. Flippo, “Training is the act of increasing the knowledge and
skill of an employee for doing a particular job.”

Objectives of Training:

The objectives of training are as follows:

(i) To provide job related knowledge to the workers.

(ii) To impart skills among the workers systematically so that they may learn quickly.

(iii) To bring about change in the attitudes of the workers towards fellow workers,
supervisor and the organization.

(iv) To improve the productivity of the workers and the organization.

(v) To reduce the number of accidents by providing safety training to the workers,

(vi) To make the workers handle materials, machines and equipment efficiently and
thus to check wastage of time and resources.

(vii) To prepare workers for promotion to higher jobs by imparting them advanced
skills.

Need and Importance of Training:

The need for training of employees arises due to the following factors:

(i) Higher Productivity:

 It is essential to increase productivity and reduce cost of production for meeting
competition in the market. Effective training can help increase productivity of workers
by imparting the required skills.

(ii) Quality Improvement:

The customers have become quality conscious and their requirement keep on
changing. To satisfy the customers, quality of products must be continuously
improved through training of workers.

(iii) Reduction of Learning Time:

Systematic training through trained instructors is essential to reduce the training
period. If the workers learn through trial and error, they will take a longer time and
even may not be able to learn right methods of doing work.

(iv) Industrial Safety:

Trained workers can handle the machines safely. They also know the use of various
safety devices in the factory. Thus, they are less prone to industrial accidents.

(iv) Reduction of Turnover and Absenteeism:

Training creates a feeling of confidence in the minds of the workers. It gives them a
security at the workplace. As a result, labour turnover and absenteeism rates are
reduced.

(vi) Technology Update:

Technology is changing at a fast pace. The workers must learn new techniques to
make use of advance technology. Thus, training should be treated as a continuous
process to update the employees in the new methods and procedures.

(vii) Effective Management:

Training can be used as an effective tool of planning and control. It develops skills among
workers and prepares them for handling present and future jobs. It helps in reducing the
costs of supervision, wastages and industrial accidents. It also helps increase productivity
and quality which are the cherished goals of any modern organization.

Methods of Training:
Methods of Training: On-the-job Training Method and Off-the-Job Methods
A large variety of methods of training are used in business. Even within one
organization different methods are used for training different people. All the methods
are divided into two classifications for:

A. On-the-job Training (OJT) Methods:

Under these methods new or inexperienced employees learn through observing
peers or managers performing the job and trying to imitate their behaviour. These
methods do not cost much and are less disruptive as employees are always on the
job, training is given on the same machines and experience would be on already
approved standards, and above all the trainee is learning while earning. Some of the
commonly used methods are:
1. Coaching

2. Mentoring

3. Job Rotation

4. Job Instruction Technology

5. Apprenticeship

6. Understudy

1. Coaching:
Coaching is a one-to-one training. It helps in quickly identifying the weak areas and
tries to focus on them. It also offers the benefit of transferring theory learning to
practice. The biggest problem is that it perpetrates the existing practices and styles.
In India most of the scooter mechanics are trained only through this method.

2. Mentoring:
The focus in this training is on the development of attitude. It is used for managerial
employees. Mentoring is always done by a senior inside person. It is also one-to-
one interaction, like coaching.

3. Job Rotation:
It is the process of training employees by rotating them through a series of related
jobs. Rotation not only makes a person well acquainted with different jobs, but it also
alleviates boredom and allows to develop rapport with a number of people. Rotation
must be logical.

4. Job Instructional Technique (JIT):

It is a Step by step (structured) on the job training method in which a suitable trainer
(a) prepares a trainee with an overview of the job, its purpose, and the results
desired, (b) demonstrates the task or the skill to the trainee, (c) allows the trainee to
show the demonstration on his or her own, and (d) follows up to provide feedback
and help. The trainees are presented the learning material in written or by learning
machines through a series called ‘frames’. This method is a valuable tool for all
educators (teachers and trainers). It helps us:

a. To deliver step-by-step instruction

b. To know when the learner has learned

c. To be due diligent (in many work-place environments)

5. Apprenticeship:
Apprenticeship is a system of training a new generation of practitioners of a skill.
This method of training is in vogue in those trades, crafts and technical fields in
which a long period is required for gaining proficiency. The trainees serve as
apprentices to experts for long periods. They have to work in direct association with
and also under the direct supervision of their masters.

The object of such training is to make the trainees all-round craftsmen. It is an

expensive method of training. Also, there is no guarantee that the trained worker will
continue to work in the same organisation after securing training. The apprentices
are paid remuneration according the apprenticeship agreements.

6. Understudy:
In this method, a superior gives training to a subordinate as his understudy like an
assistant to a manager or director (in a film). The subordinate learns through
experience and observation by participating in handling day to day problems. Basic
purpose is to prepare subordinate for assuming the full responsibilities and duties.

B. Off-the-Job Training Methods:

Off-the-job training methods are conducted in separate from the job environment,
study material is supplied, there is full concentration on learning rather than
performing, and there is freedom of expression. Important methods include:

1. Lectures and Conferences

2. Vestibule Training

3. Simulation Exercises

4. Sensitivity Training
5. Transactional Training

1. Lectures and Conferences:

Lectures and conferences are the traditional and direct method of instruction. Every
training programme starts with lecture and conference. It’s a verbal presentation for
a large audience. However, the lectures have to be motivating and creating interest
among trainees. The speaker must have considerable depth in the subject. In the
colleges and universities, lectures and seminars are the most common methods
used for training.
2. Vestibule Training:
Vestibule Training is a term for near-the-job training, as it offers access to something
new (learning). In vestibule training, the workers are trained in a prototype
environment on specific jobs in a special part of the plant.

An attempt is made to create working condition similar to the actual workshop

conditions. After training workers in such condition, the trained workers may be put
on similar jobs in the actual workshop.

This enables the workers to secure training in the best methods to work and to get
rid of initial nervousness. During the Second World War II, this method was used to
train a large number of workers in a short period of time. It may also be used as a
preliminary to on-the job training. Duration ranges from few days to few weeks. It
prevents trainees to commit costly mistakes on the actual machines.

3. Simulation Exercises:
Simulation is any artificial environment exactly similar to the actual situation. There
are four basic simulation techniques used for imparting training: management
games, case study, role playing, and in-basket training.

(a) Management Games:

Properly designed games help to ingrain thinking habits, analytical, logical and
reasoning capabilities, importance of team work, time management, to make
decisions lacking complete information, communication and leadership capabilities.
Use of management games can encourage novel, innovative mechanisms for coping
with stress.

Management games orient a candidate with practical applicability of the subject.

These games help to appreciate management concepts in a practical way. Different
games are used for training general managers and the middle management and
functional heads – executive Games and functional heads.

(b) Case Study:

Case studies are complex examples which give an insight into the context of a
problem as well as illustrating the main point. Case Studies are trainee centered
activities based on topics that demonstrate theoretical concepts in an applied setting.

A case study allows the application of theoretical concepts to be demonstrated, thus

bridging the gap between theory and practice, encourage active learning, provides
an opportunity for the development of key skills such as communication, group
working and problem solving, and increases the trainees” enjoyment of the topic and
hence their desire to learn.

(c) Role Playing:

Each trainee takes the role of a person affected by an issue and studies the impacts
of the issues on human life and/or the effects of human activities on the world around
us from the perspective of that person.

It emphasizes the “real- world” side of science and challenges students to deal with
complex problems with no single “right” answer and to use a variety of skills beyond
those employed in a typical research project.

In particular, role-playing presents the student a valuable opportunity to learn not just
the course content, but other perspectives on it. The steps involved in role playing
include defining objectives, choose context & roles, introducing the exercise, trainee
preparation/research, the role-play, concluding discussion, and assessment. Types
of role play may be multiple role play, single role play, role rotation, and spontaneous
role play.

(d) In-basket training:

In-basket exercise, also known as in-tray training, consists of a set of business
papers which may include e-mail SMSs, reports, memos, and other items. Now the
trainer is asked to prioritise the decisions to be made immediately and the ones that
can be delayed.

4. Sensitivity Training:
Sensitivity training is also known as laboratory or T-group training. This training is
about making people understand about themselves and others reasonably, which is
done by developing in them social sensitivity and behavioural flexibility. It is ability of
an individual to sense what others feel and think from their own point of view.

It reveals information about his or her own personal qualities, concerns, emotional
issues, and things that he or she has in common with other members of the group. It
is the ability to behave suitably in light of understanding.

A group’s trainer refrains from acting as a group leader or lecturer, attempting

instead to clarify the group processes using incidents as examples to clarify general
points or provide feedback. The group action, overall, is the goal as well as the
process.

Sensitivity training Program comprises three steps:

5. Transactional Analysis:
It provides trainees with a realistic and useful method for analyzing and
understanding the behaviour of others. In every social interaction, there is a
motivation provided by one person and a reaction to that motivation given by another
person.

This motivation reaction relationship between two persons is known as a transaction.

Transactional analysis can be done by the ego (system of feelings accompanied by
a related set of behaviours states of an individual).

Child:
It is a collection of recordings in the brain of an individual of behaviours, attitudes,
and impulses which come to him/her naturally from his/her own understanding as a
child. The characteristics of this ego are to be spontaneous, intense, unconfident,
reliant, probing, anxious, etc. Verbal clues that a person is operating from its child
state are the use of words like “I guess”, “I suppose”, etc. and non verbal clues like,
giggling, coyness, silent, attention seeking etc.

Parent:
It is a collection of recordings in the brain of an individual of behaviors, attitudes, and
impulses imposed on her in her childhood from various sources such as, social,
parents, friends, etc.

The characteristics of this ego are to be overprotective, isolated, rigid, bossy, etc.
Verbal clues that a person is operating from its parent states are the use of words
like, always, should, never, etc and non-verbal clues such as, raising eyebrows,
pointing an accusing finger at somebody, etc.
Adult:
It is a collection of reality testing, rational behaviour, decision making, etc. A person
in this ego state verifies, updates the reaction which she has received from the other
two states. It is a shift from the taught and felt concepts to tested concepts.

All of us show behaviour from one ego state which is responded to by the other
person from any of these three states.

Executive or Management Development

Development refers to those learning opportunities designed to help employees

grow.

Executive or Management Development consists of all activities by which executives

earn to improve their behaviour and performance. It is designed to improve the
effectiveness of managers in their present jobs and to prepare them for higher jobs
in future.

Definitions

According to Flippo,

Management development includes the process by which managers and executive

acquire not only skills and competency in their present jobs but also capabilities for
future managerial tasks of increasing difficulty and scope.

According to Molanden,

A conscious and systematic process to control the development of managerial

resources in the organisation for the achievement of goals and strategies.

According to Dale S. Beach,

Management development is a systematic process of training and growth by which

individuals gain and apply knowledge, skills, insights and attitudes to manage work
of organization effectively.
Features / Characteristics / Nature

1. Executive development is a planned and organised process of learning rather

than a haphazard or trial and error approach.

2. It is an ongoing or never ending exercise rather than a ‘oneshot’affair. It

continues throughout an executive’s entire professional career because there
is no end to learning.

3. Executive development is a long term process as managerial skills cannot be

developed overnight.

4. Executive development is guided self-development. An organization can

provide opportunities for development of it’s present and potential managers.

5. Executive development aims at preparing managers for better performance

and helping them to realize their full potential.

Objectives

1. To improve the performance of managers at all levels in their present jobs.

2. To sustain good performance of managers throughout their careers by

exploiting their full potential i.e. to prepare managers for higher jobs in future.

3. To increase the overall knowledge and conceptual and decision making skills
of executives.

4. To ensure adequate reserve of capable well trained managers for future

needs.

5. To replace elderly executives who have risen from the ranks by highly
competent and academically qualified professionals.

6. To provide opportunities to executives to fulfill their career aspirations

Importance of Executive Development

Executive development is necessary for the following reasons :

1. The size and complexity of organization, both business and non-business are
increasing. Managers need to be developed to handle the problems of giant
and complex organization’s in the face of increasing competition.

2. The rapid rate of technological and social change in society requires training
of managers so that they are able to cope with these changes. Automation,
cut throat competition, growth of new markets, enlarged labour participation in
 management, growing public and government interest in business activities
are the major problems that have to be handled.

3. Business and industrial leaders are increasingly recognizing their social and
public responsibilities. Executive development is required to broader the
outlook of managers.

4. Labour management relations are becoming increasingly complex. Executives

require new and better skills in union negotiations, collective bargaining,
grievance redressal etc.

5. Executive development programmes are required to train and develop

professional managers.

6. Executives need education and training to understand and adjust to changes

in socio-economic forces. Changes in public policy, concepts of social justice,
industrial democracy, ecology (pollution) ekistics (human settlements),
ergonomics (working environment), cultural anthropology (problems of fitting
machines to men ) are the main socio-economic changes. Without
management development programmes, executives may become obsolete.

7. Management of public utilities, state enterprises and civic bodies is being

professionalized in order to improve operational efficiency. Similarly,
agriculture, rural development and public administration require professional
executives.

In the words of Peter Drucker, “ an institution that cannot produce it’s own
managers will die. From an overall point of view, the ability of an institution to
produce managers is more important than its ability to produce goods
efficiently and cheaply.”

Process of Executive Development

The Executive Development involves the following steps :

1.Analysis of Development Needs

First of all, the present and future developmental needs of the organization
are ascertained. It is necessary to determine how many and what type of
executives are required to meet the present and future needs of the
enterprise. This calls for the organization planning. A critical analysis of the
organization structure in the light of future plans will reveal what the
organization needs in terms of departments, functions and key executive
positions.Then job descriptions and specifications are prepared for all
executive positions to know the type of knowledge, skills, training and
experience required for each positions.

2. Appraisal of Present Managerial Talent

A qualitative assessment of the existing executives is made to determine the
type of executive talent available within the organization. The performance of
every executive is compared with the standard expected of him. His personal
traits are also analyzed to estimate his potential for development.

3. Inventory of Executive Manpower

This inventory is prepared to obtain complete information about each

executive. Data on the age, education, experience, health, test results, and
performance appraisal results is collected. This information is maintained on
cards or replacement tables, one for each executive. An analysis of this
information will show the strengths as well as deficiencies of executives in
certain functions relative to the future needs of the organization.

4. Planning Individual Development Programmes

Each one of us has unique set of physical, intellectual and emotional

characteristics. Therefore development plan should be tailor-made for each
individual. Such tailor-made programmes of development should give due
attention to the subordinates as well as to the training and development
opportunities existing in the organization.

5. EstablishingTraining and Development Programmes

The human resource department prepares comprehensive and well-

conceived programmes. The department identifies development needs and
may launch specific courses in fields of leadership, decision making, human
relations etc. It also recommends specific executive development
programmes organized by well-known institutes of management. On the basis
of its recommendations the top management nominates the executives who
will participate in these programmes at the cost of the company.

6. Evaluating Development Programmes

Considerable money, time and efforts are spent on executive development

programmes. It is, therefore, natural to find out to what extent the programme
objectives have been achieved. Programme evaluation will reveal the
relevance of the development programmes and the changes that should be
made to make these more useful to the organization. Observation of the
trainee's behavior, rating of the training elements, opinion surveys, interviews,
tests and changes in productivity, quality, cost etc. can be used to evaluate
development programmes. General results of development can be measured
in the long run. But some specific results may be assessed during the short
term.

Main Differences between Training and Development

 Points Training Development

1. Definition Training is the process of Management development refers

teaching employees the to teaching managers and
basic skills they need to professionals to increase
perform their jobs knowledge, skills, attitude, needed
for future jobs.

2. Present/Future Training is present-day Development is future day

oriented. oriented.

3. Participant Training programs are Development programs are

arranged for employees. arranged for executives.

4. Level It is the lower level learning It is a higher level learning

program. program.

5. Area Training is imbibed for Development is imbibed for

enhancing much more skills enhancing specific skills and
and knowledge to the knowledge to the executives.
employees.

6. Change Skill level is changed Behavior level is changed through

through Training. Development.

7. Focused Training is a narrower Development is a broader concept

concept focused on job- focused on personality
related skills development.

8. Aimed Training is aimed at The development aims at overall

improving job-related personal effectiveness including
efficiency and performance. job efficiencies.

9. Instruction Training refers only to Development refers to the

instruction in technical and philosophical, theoretical and
mechanical operations. educational concept.

10. Period Training courses are Development involves a broader

typically designed for a education for long term purposes.
short-term period.
PERFORMANCE MANAGEMENT

Performance management system is tool which is used to communicate the

organizational goal to the employees individually, allot individual accountability
towards that goal and tracking of the progress in the achievement of the goals
assigned and evaluating their individual performance. Performance management
system reflects the individual performance or the accomplishment of an employee,
which evaluates and keeps track of all the employees of the organization.

Importance of Performance Management System

Performance Management System is the tool that helps the managers to manage
their resources and eventually result in the success of the organization. Performance
management system is a very broader and complicated function of HR. It includes
activities such as joint goal setting, frequent communications, continuous progress
review, feedback of the performance and rewarding the achievements.

Following are the actions included in performance management systems:

• Providing career development support and promotional guidance to the

employees.
• Performance management system helps in giving regular feedback and
coaching during the period of delivery of performance.
• By proper selection process, selecting the right set of people.
• Making clear a job description and employee performance plan.
• Arranging training and development programs based on the evaluations of the
performance of the employees.
• Conducting the exit interviews in order to know the reason for the
discontentment and from the organization.

Purposes of Performance Management System

Performance Management is often a misunderstood concept most people associate

it with concepts such as: Performance appraisal, Performance-related pay, Targets
and objectives, Motivation and discipline. But, performance management is much
more than this. Performance management is about getting results. It is concerned
with getting the best from people and helping them to achieve their potential. It is an
approach to achieving a shared vision of the purpose and aims of the organization. It
is concerned with helping individuals and teams achieve their potential and
recognize their role in contributing to the goals of the organization.

A performance management system consists of the processes used to identify,

encourage, measure, evaluate, improve, and reward employee performance at work.
Employees’ job performance is an important issue for all employers. However,
satisfactory performance does not happen automatically; therefore, it is more likely
with a good performance management system.

Advantages of Performance Management System

• Performance based conversation- This enables the managers to talk about

the performance of the employees individually. They may help the employees
in case he is not performing well, on the other hand appreciate him in case he
does good work.
• Performance management system can also help to identify the employee
development opportunities, which could be the crucial part of the succession
planning process.
• It rewards the employees who are good performers as employees deserving
the promotions can easily be identified.
• The under performer can be identified and eliminated or helped improving his
performance with various training and development programs.
• Proper maintenance of the past performance records of the employee in a
systematic order, which can be used for future references.
• Employee himself can gauge his performance and work upon it accordingly.

The Disadvantages of Performance Management System

Risk of Internal Competition - Under this system, employees compete with each
other for job status, position and pay. This could amount to backstabbing, failure
among team members to communicate efficiently and strong employee rivalry. It
could lead to dysfunction of the department and/or team, resulting in failure to
achieve performance standards.

Favoritism - Managers and supervisors tend to trust and depend on one employee
more than the others. This employee could be the foreman or the team leader. This
employee is entrusted with responsibility of explaining new job roles and duties to
other employees. It leads to dissension and distrust among the group members. It
causes team fraction and adversely effects employee morale and satisfaction.

Manager's Dilemma - The manager is unable to perform his tasks efficiently

because he spends too much time supervising employees about their job functions.
He is faced with value-based appraisal systems. It becomes challenging and tough
to decide value and performance indicators for measurement. It is not possible to
have common indicators as each job has different job requirements. Managers are
faced with information overload.
Convoluted and Bureaucratic - The company ends up hiring and training new
personnel. Performance management creates new organizational layers. The
employee population increases. Now, instead of one team to do a project, two
teams are doing it. This actually affects the financial structure of the organization.

COMPENSATION

Compensation is the remuneration awarded to an employee in exchange for their

services or individual contributions to your business. The contributions can be their
time, knowledge, skills, abilities and commitment to your company or a project.

In simpler words, compensation is the money received by an employee from an

employer as a salary or wages.

Types of Compensation

Compensation doesn’t mean only paycheck, although that’s part of it. Compensation
comprises of a number of different elements that may be cash and non-cash
payments.

Here’s a list of some of the most common and commonly overlooked types of
compensation:

• Base pay (hourly or salary wages)

• Commissions
• Overtime Pay, shift differentials and longevity pay
• Bonus
• Profit Sharing distributions
• Merit Pay or recognition
• Incentive plan or achievement award
• Tip income
• Benefits including Dental, insurance, medical, vacation, leaves, retirement, etc.
• Stock options
• Travel/Meal/Housing Allowance
• Child care and tuition assistance
• Gym memberships and free lunches
• Employee assistance programs that provide counselling, legal advice, and other
services.
• Health and wellness benefits
• Other non-cash benefits

Importance of Compensation

Compensation is one of the most important aspects of running a business that can
make or break a business. Having a good compensation plan can help organizations
to flourish and compete in their respective markets.

Some of the benefits of providing the right compensation package to your employees
are:

• Attracts top talent

• Increases employee motivation at the workplace
• Boosts employee loyalty
• Increases productivity and profitability
• Improves job satisfaction and employee engagement
• Helps in retaining top employee
• Helps stay in compliance with the Federal and State government agencies

Employee compensation and benefits are divided into four basic categories:

1. Guaranteed pay – a fixed monetary (cash) reward paid by an employer to an

employee. The most common form of guaranteed pay is base salary. Guaranteed
pay also includes cash allowances (housing allowance, transport allowance, etc.),
differentials (shift differentials, holiday differentials) and premiums (night shift, etc.)
2. The Variable pay – a non-fixed monetary (cash) reward paid by an employer to
an employee that is contingent on discretion, performance, or results achieved. The
most common forms of variable pay are bonuses and incentives.
3. Benefits – programs an employer uses to supplement employees’ compensation,
such as paid time off, medical insurance, company car, and more.
4. Equity-based compensation – stock or pseudo stock programs an employer
uses to provide actual or perceived ownership in the company which ties an
employee's compensation to the long-term success of the company. The most
common examples are stock options.

EMPLOYEE WELFARE

Employee welfare means anything done for the comfort and (intellectual or social)
improvement of the employees, over and above the wages paid.

In simple words, it means “the efforts to make life worth living for workmen.” It
includes various services, facilities and amenities provided to employees for their
betterment.

International Labour Organization (ILO) defines welfare as:

According to the ILO, ’employees’ welfare should be understood to mean such
services, facilities, and amenities which may be estab­lished in or in the vicinity of
undertakings to enable the persons employed in them to perform their work in
healthy and congenial surroundings, and provided with amenities conducive to the
good health and morale.

Employee Welfare – Objectives

The objectives of employee welfare are discussed below:

(i) To enhance the level of morale of employees.

(ii) To create a loyal, contented workforce in organization.

(iii) To develop a better image of the company in the minds of the employees.

(iv) To enable the workers to live comfortably and happily.

(v) To develop efficiency of the workers.

(vi) To reduce influence of trade unions over the workers.

(vii) To expose philanthropic and benevolent activities of the company.

(viii) To make the workers know that the company takes care of them.

(ix) To develop positive attitude towards job, company and management.

(x) To reduce tax burden.

(xi) To develop a feeling of satisfaction of employees with the company.

Employee Welfare – 2 Types: Statutory and Voluntary

Employee welfare can be divided into two categories, namely:

(1) Statutory, and

(2) Voluntary

Type # 1. Statutory:
The government has passed a number of legislations in order to set minimum
stan­dards of safety and welfare for the employees at their workplace. Provisions
have been made for the welfare facilities such as washing, storing, first-aid
appliances, hours of work, sanitation, etc.

Type # 2. Voluntary:
The employers voluntarily have provided welfare amenities to the employees
besides the statutory facilities. They are more concerned with the welfare of their
employees. Organizations such as Godrej and L & T provide adequate transport and
similar other facilities to their employ­ees. Facilities for recreation, medical treatment,
free meals or subsidized meals, schooling facilities for children, and sports and
games are provided by many organizations.

Organizations have given opportunities to work with flexible working schedules. It

helps to meet business commitments while at the same time supporting one’s
personal life needs. Organizations also provide medi-claim insurance coverage to
employees for expenses relating to hospitalization due to illness, disease, and injury.
Harassment policies are also made to protect harassment of any kind to employees.

Importance of Employee Welfare

Employee welfare work assumes great importance because of the following reasons:

1. Lack of strong trade union movement – In the absence of strong trade unions and
effective leaders, welfare work helps the workers in the industry to stand on their
own feet, think properly and systematically of their interests, progress hand in hand
and participate in the nation’s development.

2. Poverty – Poverty is one of the main reasons behind the provisions of labour
welfare activities. Indian workers in majority are poor, and are, therefore, unable to
provide a healthy living for their families and good education for their children.

3. Illiteracy – In India, the number of educated workers is low. Being illiterate, they
are unable to receive advanced industrial training, understand the problems in
industries, and understand their own interests and those of nations.

4. Low level of health and nutrition – Due to poverty and illiteracy, the Indian workers
remain unhealthy and ill fed. This reduces their productivity and efficiency.

5. Lack of healthy recreation – Due to lack of healthy recreation, the workers indulge
in crime and other wrong activities. The employer should provide means of healthy
recreation in order to maintain their efficiency.

6. Lack of training – The number of trained workers in India is very low. Thus, it is
necessary to have training facilities for such a vast workforce.

Employee Welfare – Benefits

1) Employees would start working sincerely and honestly.

2) It would improve the productivity and efficiency of the employees.

3) The attachment and belongingness among the employees would be developed.

4) Employees would be healthy and they would be mentally and physically fit to
perform in the best manner. Thus; it promotes a healthy work environment.

5) Employees can enjoy stable, developed, dedicated employees, moreover,

employees will work with interest and with full involvement.

6) Higher Productivity, higher efficiency, promotes health industrial relations,

ultimately in­dustrial peace can be achieved.

7) Absenteeism, labour turnover such problems of the employees would not arise in
the organisation.

8) Employees would come forward to share additional responsibilities of the

company.
9) It will improve the standard of living of the employees.

10) Work environment, work culture will be developed in the organisation.

11) It enhances the goodwill and reputation and thereby image of the company.

12) No chance for industrial dispute in the company. Healthy, harmonious relation
between employer and employees will be developed.

TEAMS

What is a team?

A team is a group of individuals working together to achieve their goal.

A team is defined as a group of people who perform interdependent tasks to work

toward accomplishing a common mission or specific objective.

Some teams have a limited life: for example, a design team developing a new
product, or a continuous process improvement team organized to solve a particular
problem. Others are ongoing, such as a department team that meets regularly to
review goals, activities, and performance.

An organization with many teams requires careful alignment. As teams and

individuals link with other teams, the principles of developing understanding and trust
will apply, but the structure will get more complex. Understanding the many
interrelationships that exist between organizational units and processes, and the
impact of these relationships on quality, productivity, and cost, makes the value of
teams apparent.

Organizational Team Network

TYPES OF TEAMS

Each of these different types of work teams has a specific purpose that justifies their
creation according to each model.

1. Functional work team

In this work team, all the members belong to the same functional area and respond
to a single manager, responsible for the management of the whole group.

It’s very common in companies with rigid hierarchies and you’ll recognize them for
the examples we are going to give: such as Accounting and HR departments or the
Maintenance team and other specialized groups like these.

2. Inter-working team

In this case, the work team is made up of members from different areas of activity,
and its members usually have the same hierarchical level.

This type of work team is usually formed to develop work with a multidisciplinary
view, in which each area represented by team members complements the
knowledge of others, bringing more creative and comprehensive results.

Examples of these types of work teams would be committees and councils, where
members from different areas work together to solve specific problems, such as a
Sustainability Committee, for example; or strategic, as is the case with the Boards of
Directors of companies.
 3.Troubleshooting team

Organizations employ these teams usually to improve processes to find out how to
solve the problems that are harming them.

When determining the options for solving the causes of problems, they are sent to
the departments responsible, as this kind of work team does not implement the
solutions it suggests.

4.Self-managed teams

Groups of employees who work in an extremely integrated and collaborative way

because they don’t have a formal leader.

Members define the division of labor, responsibilities and the distribution of tasks, as
well as make decisions and even control and supervise themselves.

5. Project team

These are work groups an organization creates to implement a specific project until
completion. Afterward, the group dissolves as it achieved its objectives.

Typically, members come from different areas of the company and perform other
tasks related to their home department.

But, as far as the project is concerned, they answer to the project leader.

6.Task Force team

This is one of the most interesting types of work teams. They form only when
emergency situations emerge which the organization needs to solve.

Its members are usually the best of the company in the area. During the resolution of
the emergency, they will dedicate themselves exclusively to this task. Their goal is to
do this in the best way and in the shortest possible time.

Now that you’ve seen what the different types of work teams are, understand how
they form their dynamics.

The value and benefits of teams:

Team processes offer the following benefits to the organization:

• Synergistic process design or problem solving

• Objective analysis of problems or opportunities
• Promotion of cross-functional understanding
• Improved quality and productivity
• Greater innovation
• Reduced operating costs
• Increased commitment to organizational mission
• More flexible response to change
• Increased ownership and stewardship
• Reduced turnover and absenteeism

Individuals can gain the following benefits from teams:

• Enhanced problem-solving skills

• Increased knowledge of interpersonal dynamics
• Broader knowledge of business processes
• New skills for future leadership goals
• Increased quality of work life
• Feelings of satisfaction and commitment
• A sense of being part of something greater than what one could accomplish alone

Reasons why teams fail

Difficulty with teams is often blamed on a cultural emphasis in the United States on
individual accomplishments versus shared responsibility and success. But problems
are also caused by inadequate organizational support structures, reward systems,
for example, often reinforce individual performance.

Numerous reasons have been noted for why teams often fail to reach their full
potential. Among them are:

• Failure to integrate cooperative work methods into the organizational culture

• Lack of organizational systems necessary to support the team process
• Minimal upfront planning of how the organization plans to utilize teams
• Failure to prepare managers for their changing roles
• Failure to prepare team members for their new roles
• Inappropriate reward and compensation systems
• Inadequate training
• Impatience of top management with the time needed for maturation
• Incomplete understanding of group dynamics

Team resources

• Effective White-Collar Teams: The New Imperative

The work of white-collar teams must be aligned with strategic and operational goals,
individual and team responsibilities, protocols, and personal relationships.

• Moving to a Team-Based Structure in Health Care

Voluntary Enterprises, Inc., a subsidiary of Community Hospitals Foundation in

Indianapolis, changed from a traditional reporting structure to a team-based
approach, creating an environment of ownership among the people responsible for
doing the work.
 • Beyond Design: Implementing Effective Production Work Teams

Achieving sustainable performance gains following the introduction of production

work teams depends upon the design and management of the implementation
process.

Formation of Teams

Psychologist Bruce Tuckman first came up with the memorable phrase "forming,
storming, norming, and performing" in his 1965 article, "Developmental Sequence in
Small Groups." He used it to describe the path that most teams follow on their way to
high performance. Later, he added a fifth stage, "adjourning" (which is sometimes
known as "mourning").

1.Forming

In this stage, most team members are positive and polite. Some are anxious, as they
haven't fully understood what work the team will do. Others are simply excited about
the task ahead.

As leader, you play a dominant role at this stage, because team members' roles and
responsibilities aren't clear.
This stage can last for some time, as people start to work together, and as they
make an effort to get to know their new colleagues.

2.Storming

Next, the team moves into the storming phase, where people start to push against
the boundaries established in the forming stage. This is the stage where many teams
fail.

Storming often starts where there is a conflict between team members' natural
working styles. People may work in different ways for all sorts of reasons but, if
differing working styles cause unforeseen problems, they may become frustrated.

Storming can also happen in other situations. For example, team members may
challenge your authority, or jockey for position as their roles are clarified. Or, if you
haven't defined clearly how the team will work, people may feel overwhelmed by
their workload, or they could be uncomfortable with the approach you're using.

Some may question the worth of the team's goal, and they may resist taking on
tasks.

Team members who stick with the task at hand may experience stress, particularly
as they don't have the support of established processes or strong relationships with
their colleagues.

3.Norming

Gradually, the team moves into the norming stage. This is when people start to
resolve their differences, appreciate colleagues' strengths, and respect your authority
as a leader.

Now that your team members know one another better, they may socialize together,
and they are able to ask one another for help and provide constructive feedback.
People develop a stronger commitment to the team goal, and you start to see good
progress towards it.

There is often a prolonged overlap between storming and norming, because, as new
tasks come up, the team may lapse back into behaviour from the storming stage.

4.Performing

The team reaches the performing stage, when hard work leads, without friction, to
the achievement of the team's goal. The structures and processes that you have set
up support this well.

As leader, you can delegate much of your work, and you can concentrate on
developing team members.
It feels easy to be part of the team at this stage, and people who join or leave won't
disrupt performance.

5.Adjourning

Many teams will reach this stage eventually. For example, project teams exist for
only a fixed period, and even permanent teams may be disbanded through
organizational restructuring.

Team members who like routine, or who have developed close working relationships
with colleagues, may find this stage difficult, particularly if their future now looks
uncertain.

Using the tool

As a team leader, your aim is to help your people perform well, as quickly as
possible. To do this, you'll need to change your approach at each stage.

Follow the steps below to ensure that you're doing the right thing at the right time:

1. Identify the stage of team development that your team is at from the descriptions
above.

2. Now consider what you need to do to move towards the performing stage. The
chart below showing will help you understand your role, and think about how you
can move the team forward.

Leadership Activities at Different Group Formation Stages

Stages Activities

Forming • Direct the team, and establish clear objectives, both for
the team as a whole and for individual team members.
Storming • Establish processes and structures.

• Build trust and good relationships between team members.

• Resolve conflicts swiftly if they occur. Provide support,
especially to those team members who are less secure.
• Remain positive and firm in the face of challenges to your
leadership, or to the team's goal.
• Explain the "forming, storming, norming, and performing"
idea, so that people understand why problems are
occurring, and so that they see that things will get better in
the future. Coach team members
in assertiveness and conflict resolution skills, where this is
necessary.
• Use psychometric indicators such as Myers-Briggs and the
Margerison-McCann Team Management Profile to help
 people learn about different work styles and strengths.
Norming • Step back and help team members take responsibility for
progress towards the goal. (This is a good time to arrange
a team-building event.)
Performing • Delegate tasks and projects as far as you can. Once the
team is achieving well, you should aim to have as light a
touch as possible. You will now be able to start focusing on
other goals and areas of work.
Adjourning • Take the time to celebrate the team's achievements you
may work with some of your people again, and this will be
much easier if people view past experiences positively.

3. Schedule regular reviews of where your team is, and adjust your behavior and
leadership approach appropriately.

TEAM PERFORMANCE

Team performance is a component of team effectiveness because teams are

generally considered to “perform well” when they yield superior outputs, which is one
of the metrics of team effectiveness mentioned above. This fits well with Salas and
colleagues, who define team performance as a product of team members working
together towards goals and drawing on their pool of individual and shared resources.

What makes a team effective in practice?

If we conceptualize an effective team as one that yields maximal, measurable output,

then an effective team is one that yields high performance, high team member
satisfaction, and team viability.

Team development interventions (TDIs) can significantly improve team effectiveness

and performance.

Teams vary in terms of their performance, so it is important to identify interventions

that are effective in boosting team effectiveness. Lacerenza et al. (2018) define a
team development intervention (TDI) as “a systematic activity aimed at improving
requisite team competencies, processes, and overall effectiveness.“

There are several types of team development interventions, including:

Team training
Team training is structured in similar ways to formal training programs with team
members gaining a formalized and structured learning experience with learning
objectives that focus on specific team competencies.

Leadership training
Leadership training is a TDI that seeks to increase leader knowledge, skills, and
competencies through formalized and structured programs this training is important
because effective leaders can build strong team processes through motivating and
encouraging team members.

Team building
Team building is a TD that focuses on building strong internal dynamics within a
team including improvements in goal-setting, relationship buildling, role clarification,
and problem solving. Team debriefing occurs when team members reflect on and
discuss a shared experience.

Team debriefing
Team debriefing is useful because it helps improve teamwork processes and team
members are more actively engaged through reflecting on an event, particularly
when there are conflicting viewpoints about an experience.

Simulation training
Researchers and practitioners have also invested in developing and implementing
simulations that attempt to mimic real world phenomena For example, a task can
simulate a crisis in a medical setting. Simulation training can provide team members
with skills that help them to make decisions in complex environments through
providing real-world scenarios.

Crew Resource Management (CRM)-training

The concept of Crew Resource Management (CRM) originated from the field of
aviation and CRM training equips team members with knowledge, skills, and
attitudes across a range of management competencies, including communication,
problem-solving and team work.

Team-based intervention training

Team training incorporates different forms of training that have objectives such as
goal setting and building trust among team members.

What are best practices in implementing team-development interventions?

In their review of team-development interventions (TDIs), Laceranaza and

colleagues (2018) provide recommendations on how best to implement TDIs. The
recommendations are grounded in learning principles that are effective across
individuals, settings, and teams.

Improving team effectiveness and team performance with team development

interventions

Before implementing interventions, gather information on context and needs

It is important in all general training to conduct a needs-analysis at both the

organizational, team, and individual level and to ensure that training objectives are
aligned with the objectives of the firm. The most effective TDIs use a variety of
training methods and techniques to incorporate information, demonstration, hands-
on experience, and feedback sessions.

Teams benefit from leaders who empower team-members

Leadership training needs to focus on equipping team leaders with interpersonal and
intrapersonal skills to enable them to increase teamwork effectiveness.
Organizations can focus on specific types of leadership training such as
transformational or visionary leadership that include a focus on empowering team
members.

Constant evaluation and adaptation is key to ensuring desired outcomes

Evaluation is important with a focus on cognitive and skill-based outcomes to ensure

that leaders have acquired the necessary skills to foster team effectiveness. When
designing team training, it is important to establish goals at the team level, rather
than focus on individual progress. In addition to outcomes such as performance,
professionals can also evaluate team processes such as communication and it is
important to ensure that team members feel psychologically safe during the training
process.

Each team-member has a competency that should be harnessed

For effective management of team building as a TDI, professionals should conduct a

needs-analysis to determine competencies that team members need such as
problem-solving, goal setting etc. It is also important during team building to include
instructional techniques that enhance team self-discovery; this can include
discussions and exercises that focus on self-assessment and plans that guide teams
to establish agreements.

Teams are psychologically safe spaces that encourage expression

Finally, the best practices for effective team debriefing include examining whether
team members are ready to experience debriefing. This includes ensuring that,
within teams, there exists a psychologically safe environment so team members feel
comfortable expressing their viewpoints.

Facilitators can help guide goal-setting and evaluation

Using a trained facilitator who can provide structure to the debriefing process. For
team debriefing to be effective, it is also important to focus on performance and
team-based outcomes rather than discussing events in a chronological order. This
ensures that teams stay focused during a team debriefing.

Effective teams are those that are productive and also have strong team processes
to ensure that they reach their goals. Organizations can enhance team effectiveness
using team development interventions (TDIs) that focus on equipping leaders and
team members with skills and competencies and also foster a beneficial
organizational environment, which allow team members to be effective.

OUTPERFORMING OTHER TEAMS

5 Ways to Motivate a Team into Outperforming Their Best

1) Teams need informal communication

Co-workers need to have good communication outside of the workplace so that they
are more likely to look out for each other as teammates. According to an MIT study
published in Harvard Business Review, researchers discovered "patterns of
communication to be the most important predictor of a team's success."
Encouraging communication outside of work would then be one of the most effective
ways to increase the efficiency of a team because, if team members only
communicate while doing their work, they may start to consider each other as simply
part of a machine. Foster a sense of family among employees. Instead of organizing
often awkward team-building exercises, arrange it so that everyone takes a break at
the same time. This should prompt organic communication instead of forced
interactions.

2) Consistency of team members

People perform better when they've worked together before. They already have an
established group dynamic and are familiar with how the other members work.
They are more sensitive to one another's habits and can easily detect if someone is
frustrated or if there is a problem. This familiarity allows them to take care of those
issues with limited executive consultation. And, since they don't need to take the time
to get to know each other, they will be able to work quicker and more efficiently.

3) A pleasant environment

A negative work environment can put a damper on any worker, and can especially
affect a team of unhappy workers. Negativity can range anywhere from cramped and
unimaginative space to strict bosses or distracting coworkers outside of the team.
If there isn't a great place at the office for a team meeting, and you know that your
team already performs well, suggest a meeting outside of the office like at a
restaurant for lunch. Not only will this boost communication, but team members will
feel more relaxed and therefore more inclined to put forth better ideas.

4) Don't punish mistakes

Even the best teams will make mistakes sometimes, so it is important not to be too
hard on anyone for making a mistake. A fear of being wrong may cause a team or
team member to hold back and participate less or feel afraid to provide input which
could be detrimental to the progress of the entire team. Every member of a team
should feel valued and mistakes should be treated as learning opportunities instead
of punishable failures.
Make sure that your team works under rules that welcome all ideas and don't put
down members for less-than-optimal ideas or work. Discuss an honest mistake with
the member responsible so that he or she can see their error and work better to
avoid more. If a member is consistently making mistakes, it may be best to remove
them from the team completely.

5) Don't micromanage

People don't like working with someone who is constantly looking over their
shoulder. A micromanaging leader could cause team members to be afraid of doing
something wrong under such close watch, which may result in a team that does less
work, or does it less effectively. Team members may also feel like the leader doesn't
trust their work and might become less motivated to put effort into something that will
ultimately be rejected. Even worse, the team may think that a micromanaging leader
will just end up doing the work his or her way. This sometimes causes team
members to slack off on their part of the project.

CASELET
Company A requires new employees. For this the company has started making
efforts. The financial condition of the company is not very good but the requirement
of employees at key positions is required.
Company B doesn’t want too much complication in the process of selection and
placement. It wants to keep the process simple. The targets of production are
already very demanding for the top management. They want a way where their least
efforts are required to form the required taskforce to be involved for special projects.
Company C is struggling with lack of balance in the composition of its workforce.
There are certain departments in which the number of employees is surplus whereas
there are certain departments in which there is shortage of required number of
employees.
How can Company A solve its problem? 1
Which type of recruitment will be good for Company B?
What do you think could be the solution for Company C?
 MODULE 3
COMMUNICATION
Communication

The word communication is derived from the Latin word communis, meaning
‘common’. It refers to a natural activity of all humans, which is to convey opinions,
feelings, information, and ideas to others through words (written or spoken), body
language, or signs.

Communication is neither the transmission of a message nor the message

itself. It is the mutual exchange of understanding, originating with the receiver.
Communication needs to be effective in business. It is the essence of management.
The basic functions of management (planning, organizing, staffing, directing and
controlling) cannot be performed well without effective communication.
Emphasizing the processes of telling, listening, and understanding involved in the
act of communicating with other people, Keith Davis says that communication is
“the transfer of information and understanding from one person to another person.
It is a way of reaching others with facts, ideas, thoughts and values. It is a bridge
of meaning among people so that they can share what they feel and know. By using
this bridge, a person can cross safely the river of misunderstanding that
sometimes separate people”.

What is Business Communication?

Business communication is the process of sharing information between

people within and outside a company. Effective business communication is how
employees and management interact to reach organizational goals. Its purpose is to
improve organizational practices and reduce errors.

Importance
 Presenting options/new business ideas
 Making plans and proposals (business writing)
 Executing decisions
 Reaching agreements
 Sending and fulfilling orders
 Successful selling
 Effective meetings
Classification of Communication
Business Communication can be of two types:
 Oral Communication - An oral communication can be formal or informal.
Generally business communication is a formal means of communication, like:
meetings, interviews, group discussion, speeches etc. An example of
Informal business communication would be - Grapevine.
 Written Communication -Written means of business communication includes
- agenda, reports, manuals etc.

Communication can be classified according to the number of persons who receive

the message:

 Intrapersonal communication: It is talking to oneself in one’s own mind.

Examples are soliloquies or asides in dramatic works.
 Interpersonal communication: The exchange of messages between two
people.

Examples: Letter, conversations, dialogues, or interviews in which two persons

interact.

 Group communication: Communication can be among small or large groups,

such as an organization, club, or classroom, in which all individuals retain
their individual identities.
 Mass communication: When a message is sent to large groups of people. In
this process, each receiver is a faceless individual with almost no opportunity
for response or feedback.

Example: Newspaper, radio, or television.

Communication can also be classified on the basis of the medium employed:

 Verbal communication: Any communication that involves the use of words,

whether it consists of speaking, listening, writing, reading, or thinking.
 Non-verbal communication: It includes the use of pictures, signs, gestures,
and facial expressions for exchanging information between persons. It is
done through sign language, action language, or object language.
 Meta-communication: When the speaker’s choice of words unintentionally
communicates something more than what the words themselves state. For
example, the remark, ‘I’ve never seen you so smartly dressed’ could be a
 compliment, but could also mean that the regular attire of the listener needs
improvement.

Significance of Communication

In business, we communicate to: (1) inform and (2) persuade. These two
goals are usually present in the mind of the person initiating the communication, as
is seen in sales letters and advertisements. However, he or she may at times seek
only to inform, as scientific writings do. Conversely, the person initiating the
communication may aim more to persuade the reader, as journalistic writings and
opinion editorials do. Effective Communication is significant for managers in the
organizations so as to perform the basic functions of management, i.e., Planning,
Organizing, Leading and Controlling. Communication helps managers to perform
their jobs and responsibilities. “Effective communication is a building block of
successful organizations”. In other words, communication acts as organizational
blood.

Communication Process

Communication is a process of exchanging verbal and non verbal

messages. It is a continuous process. Pre-requisite of communication is a message.
This message must be conveyed through some medium to the recipient. It is
essential that this message must be understood by the recipient in same terms as
intended by the sender. He must respond within a time frame. Thus, communication
is a two way process and is incomplete without a feedback from the recipient to
the sender on how well the message is understood by him.
  Sender / Encoder: Sender / Encoder are a person who sends the message.
A sender makes use of symbols (words or graphic or visual aids) to convey
the message and produce the required response.
 Message: Message is a key idea that the sender wants to communicate. It
is a sign that elicits the response of recipient. Communication process
begins with deciding about the message to be conveyed. It must be
ensured that the main objective of the message is clear.
 Medium: Medium is a means used to exchange / transmit the message. The
sender must choose an appropriate medium for transmitting the message
else the message might not be conveyed to the desired recipients. The
choice of appropriate medium of communication is essential for making the
message effective and correctly interpreted by the recipient.
 Recipient / Decoder: Recipient / Decoder is a person for whom the
message is intended / aimed / targeted. The degree to which the decoder
understands the message is dependent upon various factors such as
knowledge of recipient, their responsiveness to the message, and the
reliance of encoder on decoder.
 Feedback: Feedback is the main component of communication process as it
permits the sender to analyze the efficacy of the message. It helps the
sender in confirming the correct interpretation of message by the
decoder. Feedback may be verbal (through words) or non-verbal (in form of
smiles, sighs, etc.). It may take written form also in form of memos,
reports, etc.
 Noise: It refers to any obstruction that is caused by the sender, message
or receiver during the process of communication. For example, bad
telephone connection, faulty encoding, faulty decoding, inattentive
receiver, poor understanding of message due to prejudice or inappropriate
gestures etc.

Communication Flows
In an organization, communication flows in 5 main directions:
 Downward
 Upward
 Lateral
 Diagonal
 External
 Downward Flow of Communication: Communication that flows from a higher
level in an organization to a lower level is a downward communication.
 Downward communication is used by the managers for the following
purposes:
o Providing feedback on employee’s performance.
o Giving job instructions.
o Providing a complete understanding of the employees’ job as well as to
communicate them how their job is related to other jobs in the
organization.
o Communicating the organization’s mission and vision to the employees.
o Highlighting the areas of attention.
Organizational publications, circulars, letter to employees, group meetings etc are
all examples of downward communication. In order to have effective and error-
free downward communication, managers must:
o Specify communication objective.
o Ensure that the message is accurate, specific and unambiguous.
o Utilize the best communication technique to convey the message to
the receiver in right form.

 Upward Flow of Communication: Communication that flows to a higher level

in an organization is called upward communication. It provides feedback on
how well the organization is functioning. The subordinates use upward
communication to convey their problems and performances to their
superiors. The subordinates also use upward communication to tell how well
they have understood the downward communication. It can also be used by
the employees to share their views and ideas and to participate in the
decision-making process.

Grievance Redressal System, Complaint and Suggestion Box, Job

Satisfaction surveys etc all help in improving upward communication. Other
examples of Upward Communication are -performance reports made by low level
management for reviewing by higher level management, employee attitude surveys,
letters from employees, employee-manager discussions etc.

 Lateral / Horizontal Communication: Communication that takes place at

same levels of hierarchy in an organization is called lateral communication,
i.e., communication between peers, between managers at same levels or
between any horizontally equivalent organizational member. The advantages
of horizontal communication are as follows:
 o It is time saving.

o It facilitates co-ordination of the task.

o It facilitates co-operation among team members.

o It provides emotional and social assistance to the organizational

members.

o It helps in solving various organizational problems.

o It is a means of information sharing

o It can also be used for resolving conflicts of a department with other

department or conflicts within a department.

 Diagonal Communication: Communication that takes place between a manager

and employees of other workgroups is called diagonal communication. It
generally does not appear on organizational chart. For instance - To design a
training module a training manager interacts with Operations personnel to
enquire about the way they perform their task.
 External Communication: Communication that takes place between a
manager and external groups such as - suppliers, vendors, banks, financial
institutes etc. For instance - To raise capital the Managing director would
interact with the Bank Manager.

Communication Barriers
Communication is fruitful if and only if the messages sent by the
sender are interpreted with same meaning by the receiver. If any kind of
disturbance blocks any step of communication, the message will be destroyed. Due
to such disturbances, managers in an organization face severe problems. Thus the
managers must locate such barriers and take steps to get rid of them. There are
several barriers that affect the flow of communication in an organization. These
barriers interrupt the flow of communication from the sender to the receiver, thus
making communication ineffective. It is essential for managers to overcome these
barriers.
The main barriers of communication are summarized below:
  Perceptual and Language Differences: Perception is generally how each
individual interprets the world around him. All generally want to receive
messages which are significant to them. But any message which is against
their values is not accepted. A same event may be taken differently by
different individuals. The linguistic differences also lead to communication
breakdown. Same word may mean different to different individuals.
For example: Consider a word “value”.
o What is the value of this Laptop?
o I value our relation?
o What is the value of learning technical skills?
“Value” means different in different sentences. Communication breakdown occurs
if there is wrong perception by the receiver.

 Information Overload: Managers are surrounded with a pool of information.

It is essential to control this information flow else the information is likely
to be misinterpreted or forgotten or overlooked. As a result communication
is less effective.
 Inattention: At times we just not listen, but only hear. For example a
traveller may pay attention to one “NO PARKING” sign, but if such sign is
put all over the city, he no longer listens to it. Thus, repetitive messages
should be ignored for effective communication. Similarly if a superior is
engrossed in his paper work and his subordinate explains him his problem,
the superior may not get what he is saying and it leads to disappointment of
subordinate.
 Time Pressures: Often in organization the targets have to be achieved
within a specified time period, the failure of which has adverse
consequences. In a haste to meet deadlines, the formal channels of
communication are shortened, or messages are partially given, i.e., not
completely transferred. Thus sufficient time should be given for effective
communication.
 Distraction/Noise: Communication is also affected a lot by noise to
distractions. Physical distractions are also there such as, poor lightning,
uncomfortable sitting, unhygienic room also affects communication in a
meeting. Similarly use of loud speakers interferes with communication.
 Emotions: Emotional state at a particular point of time also affects
communication. If the receiver feels that communicator is angry he
interprets that the information being sent is very bad. While he takes it
 differently if the communicator is happy and jovial (in that case the message
is interpreted to be good and interesting).
 Complexity in Organizational Structure: Greater the hierarchy in an
organization (i.e. more the number of managerial levels), more is the chances
of communication getting destroyed. Only the people at the top level can see
the overall picture while the people at low level just have knowledge about
their own area and a little knowledge about other areas.
 Poor retention: Human memory cannot function beyond a limit. One can’t
always retain what is being told specially if he is not interested or not
attentive. This leads to communication breakdown.
How barriers in communication effect business communication?
 Noise acts as a devil in business communication: Any information
downloaded at a noisy place is bound to get distorted and result in a
complete mess.
 Unorganized and Haphazard thoughts also lead to ineffective
communication in organizations: Business communications are bound to
suffer due to ineffective communication. If any individual wants something
from his team members, he first must be himself very clear what actually he
expects from his team.
 During any business meeting, presentation or seminar, the speaker has
to be very careful about his pitch and tone: It has been observed that
during seminars or presentations only the front benchers are attentive, the
last benchers are almost lost in their own sweet world. The person who
chairs the meeting has to speak very clearly, has to be very confident and
must maintain a tone audible to everyone, even to the individuals sitting on
the last row.
 Difference in thought process also results in a poor communication in
business areas: A boss and the employee can never think on the same level.

How to overcome these barriers of communication?

 Eliminating differences in perception: The organization should ensure that
it is recruiting right individuals on the job. It’s the responsibility of the
interviewer to ensure that the interviewee has command over the written
and spoken language. There should be proper Induction program so that the
policies of the company are clear to all the employees. There should be
proper trainings conducted for required employees.
 Use of Simple Language: Use of simple and clear words should be
emphasized. Use of ambiguous words and jargons should be avoided.
 Reduction and elimination of noise levels: Noise is the main communication
barrier which must be overcome on priority basis. It is essential to identify
the source of noise and then eliminate that source.
 Active Listening: Listen attentively and carefully. There is a difference
between “listening” and “hearing”. Active listening means hearing with proper
understanding of the message that is heard. By asking questions the speaker
can ensure whether his/her message is understood or not by the receiver in
the same terms as intended by the speaker.
 Emotional State: During communication one should make effective use of
body language. He/she should not show their emotions while communication
as the receiver might misinterpret the message being delivered. For
example, if the conveyer of the message is in a bad mood then the receiver
might think that the information being delivered is not good.
 Simple Organizational Structure: The organizational structure should not
be complex. The number of hierarchical levels should be optimum. There
should be a ideal span of control within the organization. Simpler the
organizational structure, more effective will be the communication.
 Avoid Information Overload: The managers should know how to prioritize
their work. They should not overload themselves with the work. They should
spend quality time with their subordinates and should listen to their
problems and feedbacks actively.
 Give Constructive Feedback: Avoid giving negative feedback. The contents
of the feedback might be negative, but it should be delivered constructively.
Constructive feedback will lead to effective communication between the
superior and subordinate.
 Proper Media Selection:The managers should properly select the medium of
communication. Simple messages should be conveyed orally, like: face to face
interaction or meetings. Use of written means of communication should be
encouraged for delivering complex messages. For significant messages
reminders can be given by using written means of communication such as :
Memos, Notices etc.
 Flexibility in meeting the targets: For effective communication in an
organization the managers should ensure that the individuals are meeting
their targets timely without skipping the formal channels of communication.
There should not be much pressure on employees to meet their targets.
 ORAL COMMUNICATION

Meaning:

Oral or verbal communication describes any type of interaction between individuals

which makes use of words and involves speaking and listening.

Oral communication implies communication through mouth. It includes individuals

conversing with each other, be it direct conversation or telephonic conversation.
Speeches, presentations, discussions are all forms of oral communication. Oral
communication is generally recommended when the communication matter is of
temporary kind or where a direct interaction is required. Face to face
communication (meetings, lectures, conferences, interviews, etc.) is significant so
as to build a rapport and trust.

PRINCIPLES OF SUCCESSFUL ORAL COMMUNICATION

Successful or effective oral communication requires some principles to existing in

the communication to overcome the defects and eliminate the reasons for the
failure of oral communication. The following 12 principles of effective oral
communication:

 Well-Planned: Before presenting something, there should be proper planning

regarding the audience, topics to be delivered, timing, and other factors

 Clear pronunciation: To make oral messages meaningful to receivers, words

should be clearly and correctly pronounced. There should not be any lack of
clarity; otherwise, the communication would be a confusing one.

 Brevity: Effective oral communication desires that a message should be

brief. If the sender took a long time for talking, his message may not get
the attention of the receiver.

 Precision: There should not be any confusing words rather message to be

delivered should be specific so that there is no misunderstanding.

 Natural voice: Any sort of unnatural voice may distort the message. A
natural voice can do a lot to make oral communication effective.

 Logical sequence: Ideas should be organized in a sequential way to make the

message communicative and attractive. Unorganized ideas do not provide
clear sense while a logical sequence of ideas gives a clear sense.
 Suitable words: Words have different meanings to different people in
different situations in oral communication; a speaker should use the common,
simple, and familiar words so that the receiver can react to the message
without any problem.
 Courteous: Courtesy costs nothing but can earn many things. So, a speaker
should be courteous while addressing listeners. It helps create a good
impression in the mind of listeners regarding the speaker.
  Attractive Presentation:A speaker should deliver his speech in a very nice
and sweet language so that the receiver is attracted to take part in the
communication.
 Avoiding Emotions: Speaker must control his emotions to make oral
communication effective. Too much emotion will take the speaker away from
the main subject.
 Emphasis: The speaker must be knowledgeable regarding the portion of the
speech where he should give emphasis. Giving emphasis on respective points
will help draw the attention of the audience.
 Controlling Gesticulation: Speaker at many occasions, consciously or
unconsciously, gesticulates for expressing his ideas or thoughts. This is a
habit and should be avoided. Otherwise, the application of such a habit may
lead to % disinterest of the audience.

Reflection and Empathy: Two Sides of effective oral Communication:

• Reflection

Reflecting is the process of paraphrasing and restating both the feelings

and words of the speaker. The purposes of reflecting are:

 To allow the speaker to ‘hear’ their own thoughts and to focus on what
they say and feel.

 To show the speaker that you are trying to perceive the world as they
see it and that you are doing your best to understand their messages.

 To encourage them to continue talking.

Reflecting does not involve you asking questions, introducing a new topic or
leading the conversation in another direction. Speakers are helped through
reflecting as it not only allows them to feel understood, but it also gives
them the opportunity to focus their ideas. This in turn helps them to direct
their thoughts and further encourages them to continue speaking.

Two Main Techniques of Reflecting

 Mirroring: Mirroring is a simple form of reflecting and involves repeating

almost exactly what the speaker says.Mirroring should be short and simple.
It is usually enough to just repeat key words or the last few words spoken.
 This shows you are trying to understand the speaker terms of reference and
acts as a prompt for him or her to continue.
 Paraphrasing:Paraphrasing involves using other words to reflect what the
speaker has said. Paraphrasing shows not only that you are listening, but
that you are attempting to understand what the speaker is saying.

• Empathy

Simply stated, empathy is defined as the ability to identify and understand

another’s situation, feelings, and motives. As a naturally empathetic person I
never really paused to consider this personality trait as a professional asset.
However, as I began to reflect on the fabric of my current business
relationships, I realized that my natural, empathetic communication style
has been a major factor in the majority of my most successful, meaningful,
and profitable business relationships.

Here are a few suggestions that may contribute to a more empathetic

approach:

 Develop Your Self-Awareness.

 Smile and Greet Others With Genuine Enthusiasm.
 Lead the Way.
 Remember Other’s Names.
 Listen, and Show Sincere Interest.
 Advocate for Other’s Needs.
 Find Common Ground.
 Withhold Judgment.
 Provide Encouragement.
 Share Professional Resources.

MODES OF ORAL COMMUNICATION

There are two types of oral communication

 Face to Face communication

 Using of mechanical device

Face to Face Communication

 Meetings
  Group Discussion
 Interviews
 Presentations

MEETINGS

• In every organization, besides one to one communication there are occasions

wherepersonnel gather to discuss topics common to the group.

• They may be formal routine meetings, committee meetings, conferences or

informalmeetings.

GROUP DISCUSSION

• Group Discussions are conducted to help organizations select candidates who are
goodteam members and skillful group communicators.

• Group discussion is another method of screening candidates before selecting

them for ajob.

• This is much preferred method because it tests the communication skills,

groupbehavior, IQ, general knowledge and listening skills of the candidates.

INTERVIEWS

• Interviews put into practice the view of communications as a two-way process.

• It is a meeting of two persons which enables them to know more about each other

through dialogue and personal interaction.

• This interaction is particularly useful when it comes to selecting applicants for

jobs,scholarships, admission to courses etc.

PRESENTATIONS

• Presentations are an important component of oral communication in organizations

theycannot be avoided.

• Presentations may be individuals or team efforts.

• Though oral, presentation need both written and audiovisual support.

• As oral presentations are formal in nature it is important to be well prepared, to

knowyour audience and show willingness to interact.

USE OF MECHANICAL DEVICES

 Telephone
 Radiophones
 Loudspeaker system

TELEPHONE

Telephone is a mechanical device meant to reproduce sound at a distance through

the help of cables or wires. It is a convenient and quickest method of
communication.

RADIOPHONES

It is a device where instruments are not connected with wire but facilitate oral
communication.This is otherwise called as wireless system.

LOUDSPEAKER SYSTEM

A loudspeaker is an electroacoustic transducer; a device which converts an

electrical audiosignal into a corresponding sound.

LISTENING AS A COMMUNICATION SKILL

Listening is the ability to accurately receive and interpret messages in the

communication process.Listening is key to all effective communication. Without the
ability to listen effectively, messages are easily misunderstood. As a result,
communication breaks down and the sender of the message can easilybecome
frustrated or irritated.If there is one communication skill you should aim to
master, then listening is it.Listening is so important that many top employers
provide listening skills training for their employees.This is not surprising when you
consider that good listening skills can lead to better customersatisfaction, greater
productivity with fewer mistakes, and increased sharing of information that in
turncan lead to more creative and innovative work.Many successful leaders and
entrepreneurs credit their success to effective listening skills.
 Written Communication:
Purpose and Clarity
Purpose

Written communication aims to inform someone of something in a way that they are
able to read and understand the message, with an intention of responding to it. In
some cases the only way you can communicate certain information is via written
communication. This could be the case in certain aspects of a job, such as a
statement of an incident and so on. You could also consider that story telling in
novels is a way of written communication because even though the words are
fictitious they are still communicating a particular narrative.
• What makes it coherent?

If a form of written communication cannot be understood by the recipient then

the message may well as not exist. In order to write a piece of information that
can be understood clearly you need to have the correct spelling, punctuation and
grammar. In addition, depending on the form of written communication you need to
make sure you use the right format. For example, if you are writing a letter you
need to ensure you are using the appropriate format.

• Why?

Written communication is prevalent in everyday life because it is not simply the

case of writing down a message on a piece of paper. Nowadays we use written
communication constantly in the form of email, text messages, online chats, social
networking and so on. It has become an integral part of communicating with people
around us.

Clarity

Clarity is critical in business communication, where messages are continuously

conveyed over different media to many audiences. Technology and globalization
makes business communication more complex, even for a small business that might
be challenged to control internal and external messaging. A small business might
view communication as a problem only for large corporations with many employees,
but effective communication is vital for success in businesses of every size and
scope. Clarity in business communication requires an intentional approach to
communication in its many forms.

Business Communication

Business communication includes the usual letters, memos and email, but also
includes informative brochures, marketing and advertising materials, websites,
logos, and any type of expression that represents or defines the company. College
courses break down business communications into factors such as audience
assessment, communication objectives, tone and language, negotiation, crisis
management, and nonverbal behaviors. Depending on the message and the medium,
the elements of communication affect clarity.

Importance of Clarity
Lack of clarity in business communication causes misinformation, mistakes, unhappy
customers, frustrated employees, and information lags that make companies look
bad and affect profits. If a supervisor assumes that workers know the proper way
to ship products, the company might discover that it pays more than it should for
shipping. A customer letter that is full of jargon and long, convoluted sentences
will probably not be read completely, and might put the customer off. An occasional
warning to be mindful of safety is not as effective as providing workers with a
detailed manual for achieving zero-tolerance requirements concerning accidents in
the workplace.

The Basics

Business communication that is written with clarity makes the content easy to read
and understand. Readers get what you are trying to say with little work. Sentences
are short, engaging and grammatically correct. Documents display information in
formats that help readers follow along and make sense of the content. Writers
vary the words and phrases in communication that is sent frequently to the same
recipients. Clear statements of intent, along with questions and requests, help
readers zero in on the appropriate response or action.

Best Foot Forward

Clarity in business communication can’t be left to chance. Poorly written documents

that include misspellings and bad grammar send the wrong message about your
business. Company literature such as brochures and website content also create
impressions about your business, so it’s important to pay close attention to what
your documents are saying about your company. Determine the message you wish to
send, and structure any business communication — from an internal memo to
marketing materials to a business proposal — so it clearly and accurately conveys
that message. Control the content and appearance of your business communication
by implementing policies and protocols that ensure the best standards, including
clarity.

Principles of effective Writing

1. Brevity

It is bad manners to waste [the reader’s] time. Therefore brevity first, then,
clarity.

2. Clarity

It is bad manners to give [readers] needless trouble. Therefore clarity And how is
clarity to be achieved? Mainly by taking trouble and by writing to serve people
rather than to impress them.

3. Communication

The social purpose of language is communication—to inform, misinform, or

otherwise influence our fellows. Communication [is] more difficult than we may
think. We are all serving life sentences of solitary confinement within our bodies;
like prisoners, we have, as it were, to tap in awkward code to our fellow men in
their neighboring cells.

In some modern literature there has appeared a tendency to replace

communication by a private maundering to oneself which shall inspire one’s audience
to maunder privately to themselves—rather as if the author handed round a box of
drugged cigarettes.

4. Emphasis

Just as the art of war largely consists of deploying the strongest forces at the
most important points, so the art of writing depends a good deal on putting the
strongest words in the most important places.

One of the most important things, to my mind, in English style is word-order. For
us, the most emphatic place in a clause or sentence is the end. This is the climax;
and, during the momentary pause that follows, that last word continues, as it were,
to reverberate in the reader’s mind. It has, in fact, the last word.

5. Honesty
Most style is not honest enough. Easy to say, but hard to practice. A writer may
take too long words, as young men to beards—to impress. But long words, like long
beards, are often the badge of charlatans. Or a writer may cultivate the obscure,
to seem profound. But even carefully muddied puddles are soon fathomed. Or he
may cultivate eccentricity, to seem original.

But really original people do not have to think about being original—they can no
more help it than they can help breathing. They do not need to dye their hair
green.

6. Passion and Control

This, indeed, is one of the eternal paradoxes of both life and literature—that
without passion little gets done; yet, without control of that passion, its effects
are largely ill or null.

7. Reading

One learns to write by reading good books, as one learns to talk by hearing good
talkers.

8. Revision

Every author’s fairy godmother should provide him not only with a pen but also with
a blue pencil.

9. Sophistication and Simplicity

My point is merely that the sophisticated (ready though they may be to suppose
so) do not necessarily express themselves better than the simple—in fact, may
often have much to learn from them.

10. Sound and Rhythm

Apart from a few simple principles, the sound and rhythm of English prose seem to
me matters where both writers and readers should trust not so much to rules as to
their ears.
 The 3X3 writing process for Business Communication
When composing any document consulting the four basic principles of business
writing is recommended. Another great tool to keep available is the 3-x-3 writing
process. This process takes all of the information presented above and puts it into
a neat package. This is a simple process that encompasses three steps to guarantee
your success.

1. Prewriting: Form the purpose, profile your audience and determine the correct
tone and method.
2. Writing: Research, organize and comprise the message
3. Revising: Proofread, revise and determine if the message will appeal to the
audience.

Electronic Writing Process

Computers, and the electronic writing they have enabled, significantly alter
traditional conceptions of writing. The effects of electronic writing on traditional
text call for a re-examination of the prevailing print metaphor for online writing.
A brief historical overview can help us better understand the effects of
computers on traditional writing. The three great communication revolutions —
symbolic languages, writing, and print — have led to the current revolution of
computers and electronic technologies.

The Impact of Computers on Traditional Writing

The computer, developed in the mid-twentieth century, is undeniably a product of a

literate and technological society. Prominent scholars like Bolter (1996), Heim
(1987), and Ong (1982) consider computers to be late developments of the print
age. Yet to consider computers merely an extension of the printed page is to ignore
their unique nature (Ferris & Montgomery, 1996; Langston, 1986). Electronic
writing is a singular product of the computer age, and the electronic writing
enabled by computers has affected traditional writing significantly.

Business Letter
Business letters are those letters which are used to convey the required message
or information between business houses. They also include the letters written by
the business houses to the government departments on various subjects, such as
making representation, making complaints, requesting for license, etc.

In other words, business letters refer to those letters which facilitate business
transactions. A modern businessman has to write large number of letters and
larger the business, the greater is the volume of correspondence. Letters may
bewhen goods are purchased and sold, when they are shipped and insured, or when
the complaints are received or adjusted, or when accounts are opened and settled.

Essential Characteristics of a Good Business Letter

A good business letter should possess the following essential characteristics:

1. Clarity: Every sentence of a business letter should be clear and unambiguous.

Everything must be said in an easy, simple and direct manner. Use of difficult
words should be ignored. It should say what it wants to convey.

2. Coherence: Clearness of a letter depends to a great extent on its unity or

coherence. One thought should naturally follow another and each sentence must
show proper sequence. The writer must show proper respect to logic. He should
know what he wants to accomplish in the letter. He must be in possession of all the
facts.

3. Simplicity: The business letter should be writ when it is simple and natural. It
must not contain quotations, verses, poetic phrases or rhetoric clauses.

4. Correctness: Facts and figures mentioned in a business practice to distort

facts or to misrepresent them or to give wrong ones.

5. Completeness: The business letter should be completeness: The business letter

should be complete in all respects. It must contain all essential points and should
not be wanting in some information, should not be wanting in some information
which the addressee requires.

6. Conciseness or Brevity: A business letter should be as short as possible.

However, conciseness or brevity should not be achieved at the cost of
completeness or courtesy.

7. Convincing: The letter written should convince the other party that the
correct, in order to convince the letter should contain the correct facts supported
by the convincing language.

8. Courtesy: The tone of a business letter should be polite. The language of the
letter should not hurt the reader. They are people who seem to regard bluntness
as a sign of strength, in reality; it is a sign of bad breeding.

9. Originality: Nothing appeals so much as originality. The writer of business

letter should not try to copy age-long phrases and sentences but be original in his
letter so that he may be able to assert his individuality.

10. Appearance: A business letter should have good, neat and tidy appearance. It
must be written on proper letter paper, should be neatly written or typed,
carefully folded and put in the right sized envelope.

Reports and Proposals

Reports and proposals are documents written for a specific purpose and
audience. A report, generally, consists of an analysis of a situation or problem at
hand and recommends solution for it. Proposals, in the similar manner, explain a
need that is identified and offers a course of action in response to it.

Reports and proposals may have varying lengths, structures, and writing
styles. However, in essence, both are a means of written communication and the
ability to do it effectively is known as one’s skills of writing reports and proposals.

Why are the skills of writing reports and proposals important?

Although verbal communication is the fastest of all methods, organizations

generally have a preference for written communication due to the permanency of
record that it allows as well as their availability for reference whenever required.

The skills of writing reports and proposals, therefore, are extremely important to
ensure that the information conveyed to the reader is exactly how you intended it
to. After all, these written documents are what ultimately lead to action and make
things really happen.

Now that we have begun to understand its importance, it shouldn’t come as a

surprise that poor report or proposal writing skills can cause you to miss
opportunities, lose sales, or lose even your credibility because the reader might fail
to understand or misinterpret the document.

How to improve your skills of writing reports and proposals?

Despite the fact that there is no rigid rule as to how your report or proposal
should be structured, there are numerous useful guides available on the web that
can provide help, if you need any. Following are some suggestions that will help you
improve your overall skills of writing reports and proposals:

Try to meet your readers’ expectations. Never let yourself take the reader for
granted. Whether the reader is a friend, a relative, an acquaintance, or just
someone who highly recommends your service, make sure of the clarity of your
report because nobody like to struggle through a poorly written document. Place
yourself in the readers’ shoes before you begin writing so that you are able to
meet their expectations, without having them lose interest at the first glance or
as they read further into it.
Avoid writing like an amateur. If you wish to improve your skills of writing reports
and proposals, you must develop and retain your credibility with the
readers. Therefore, always check you facts and figures and never let your readers
lose confidence in you for making an incorrect or confusing statement. You must
write with clarity, showing your logical train of thoughts, and ensure the
authenticity of your statements.

LEADERSHIPS COMMUNICATION
Leadership Communication is both relational and goal-driven. Organizations need
two things from leaders:
1) A reason to believe (purpose + destination)
2) The path forward (strategy).

Leadership Communication is about getting things done and keeping others engaged
and connected. It’s about saying the right things, in a powerful way, to mobilize
people and deliver results.

Leadership isn’t about reading creative copy. It’s about communicating priorities
and making goals meaningful.

ELEMENTS OF LEADERSHIP COMMUNICATION

1. Communication
Leadership starts with communication. Effective communication is clear,
transparent and customized to the recipient. A good leader will take the time to
find out which communication style and method (text, e-mail, phone or in-person)
work best for each team member. By communicating with your team, you build
trust, rapport and a culture of shared accountability. Communicate—often, clearly
and honestly.

3 Knowing Your People

A good leader knows his or her team better than anyone else—their strengths,
their weaknesses, what makes them tick and what motivates them. Take the time
to get to know your team and you’ll know how to talk to them—and how to get
things done.
 4. Knowing Yourself

It’s not only important to know your team; it’s important to know yourself. Is this
just a job to you, or do you truly want to be a leader?—Do you want to motivate,
inspire and lead people? If you’re just in it for the money or the prestige, you’re
not a true leader. Your team most likely won’t be happy or engaged, and neither will
you.

5. Democracy

If you’re simply telling people what to do, you’re not going to have engaged workers,
and your results will probably suffer, too. Sure, sometimes you have to make a
tough call and push through an unpopular agenda item, but for the most part you
should try to show your team that they do have choices. Listen to their needs, take
suggestions and implement the democratic process when it comes to projects. Of
course, every company, department and project are different, but, for the most
part, giving people the autonomy, they crave will result in a more engaged
workforce and better results. Gently encouraging a collaborative, democratic work
environment will be more effective than forcing roles and expectations on people.

6. Seeking Out Feedback

It’s hard to do an honest self-assessment so regularly ask for feedback—not only

from your team, but other managers, mentors and other colleagues as well.
Feedback helps you to understand what your strengths and weaknesses are and
how to use them to your advantage. When you grow, your team grows!

Meeting

A meeting is a gathering of two or more people that has been convened for the
purpose of achieving a common goal through verbal interaction, such as sharing
information or reaching agreement. Business meetings are generally conducted in
person in an office, however with the rise of video conferencing technologies,
participants can join a business meeting from anywhere.

Planning meeting
Develop a preliminary agenda Lay out a sequence for the meeting. Plan time for a
brief introduction to provide context, and for a discussion of next steps at the
end. Decide how much time to devote to each item and what order makes sense.
The following are the steps involved in planning a meeting:
Identify the purpose of the meeting :-

A. Make sure you really need a meeting.

B. Develop a preliminary agenda.
C. Select the right participants.
D. Assign roles to participants.
E. Decide where and when to hold the meeting and confirm availability of the
space.
F. Send the invitation and preliminary agenda to key participants and
stakeholders.

Objective of meeting

The Purpose of the meeting is the reason the meeting is being held. The reason
must be acceptable to both the organizing body and the potential attendees.
Meeting objectives, those objectives that affect the planning process, not the
content of the meeting and its various sessions, are important to consider.The
following are the objectives of conducting meeting:
1. To Solve Problems
One of your conference objectives examples is to solve a problem in the workplace.
At some point, your business will run into issues that can affect productivity,
efficiency, and morale.

2. To Provide Status Updates

Many small business owners also hold meetings with the objective of providing
status updates on various projects. This is important not simply as a means of
informing staff, but also as a means of identifying challenges and obstacles that
could prevent teams from achieving milestones.

3. To Brainstorm Ideas
Sometimes the old adage, “two heads are better than one” is a primary objective
of a business meeting. In other words, you may call a meeting to generate ideas
about a new product or service or to create a new marketing campaign
 4. To Build Team Morale
In some instances, you should call a business meeting to maintain and boost team
morale. Team building meetings should include fun activities that break the ice
between management and staff and allow your employees to feel like they’re a
valued part of your company.

Considerations for Effective Meetings

To achieve your meeting objectives, your agenda must be specific. Making an

agenda format is an effective means of achieving your objectives. Making an
agenda format doesn’t have to be difficult. There are templates that you can
download online that provide you with specific details that you can customize for
your own meetings are:

1. PARTICIPANTS IN MEETING
The leader, reporter, timekeeper, and participant are four basic roles any
effective meeting should have. You can assign each to separate participants, or
combine two or more roles into one. Regardless, make sure each person performing
their duties has adequate resources, training and time to do an effective job.

2. TIMING
It can be a challenge to schedule meetings at times that work for
everyone.Following are the few tips to keep in mindwhen scheduling meetings and
sending meeting invitations

3. PROVIDE DETAILS

What's the meeting about?

• Communicate value
What will participants gain from the meeting?
• Determine the meeting type
Will it be in-person, a conference call, or video chat?
• Consider all time zones
Where are your meeting participants located?
• Find the best time
Which date and time will you choose?
 4. VENUE OF MEETING
Ensure the venue you choose is appropriate for your needs. For smaller meetings, a
more intimate venue may be best suited for your needs. For larger events,
a venue that can offer ample meeting space with breakout rooms, restaurants,
accommodation, outside space and leisure facilities, will be better suited.

MEETING DOCUMENTATION

For any meeting to take place in a procedural way, there are a few important and
necessary documents involved without which the meeting will not go smoothly.

1.Agenda
The meeting agenda is the meeting plan. Document created by the PA, secretary or
admin. It is then approved by the chairman and circulated to the other members
who will be attending the meeting. It can be distributed either digitally or as hard
copies. It is always best to have a few spare copies. It lays out the topics that
need to be discussed and the tasks that need to be accomplished in the given
meeting time. The meeting agenda provides structure to the meeting. It is often
written in an outline format with an assigned time for each section and brief notes
under each section.

2.Attendance sheet
In each Meeting an attendance sheet shall be kept including the indications
required by law. This attendance sheet, duly initialed by the shareholders present
and the agents and to which is attached the powers granted to each agent and any
votes by mail, shall be certified true by the officers of the meeting.This document
is a list of all the attendees in the meeting. To have accurate details, a few columns
are included like, Name, Position, Contact number, Email address. This will help the
minute taker with writing down names in minutes and also will help with contacting
them easily when necessary, especially when there are external members attending
the meeting.

3.Glossary of terms and acronyms

If the meeting will include discussion of business where technical terms and
acronyms will be used, and if there are attendees who will not be familiar with
those terms and acronyms, it is always best to give a list of these with a brief
description or meaning. This will help them follow the meeting with ease and stop
too many unnecessary interruptions.
4.Code of ethics/codes of conduct
“Principles, values, standards, or rules of behavior that guide the decisions,
procedures and systems of an organization in a way that (a) contributes to the
welfare of its key stakeholders, and (b) respects the rights of all constituents
affected by its operations.”

5.Previous minute
These are minutes from the previous meeting and are brought in to the meeting to
be read out and confirmed. Also the action points from the previous meeting are
checked to see if they have been actioned, or at what status the actions
are.However, keep in mind that the minutes are a legal document for the
organization. By approving the minutes, the members agree that this is what
happened at the meeting. When a legal action has been brought against the
organization, courts use minutes for evidence/ Therefore, it is important that the
assembly (or a committee named for the purpose of approving the meeting)
approves the minutes. There is no time limit on minute corrections.

6.Taking notes (Minutes)

Taking notes is the step towards preparing the minutes. This is the main document
in a meeting as everything that takes place or is discussed or decided is recorded.
Notes are taken down by secretaries or administrators or a similar office person
and they are written down in an agreed style following organizations policies and
procedures. A template can be used for ease of note-taking.

7.Attachments to minutes
Sometimes in meetings, a policy or procedure or a report may have to be read out
and agreed. In this case, this document will be brought into the meeting read out
to the members and this will have to be attached to the minutes. Details on how
this is done will be discussed in a different section of this unit.

8.Presentation papers
Some meetings will have presentation papers. Although presentations are done on
projectors, it is always good to give all the attendees a copy, so that they have a
record of what was presented, and also it will help them note down important
points that will be useful or helpful for them for future reference as the
presentation goes on.

9.Action sheets
This sheet is not mandatory, but for clarity and for being properly organised, what
you can do is, collect all the action points from the previous meeting and mention
the status across each of them, so that it is easier to go through them during the
meeting.

10.Weekly Progress Report(for team members)

Each team member should complete a weekly progress report at the end of every
week. This report is used to assess the status of each team member in relation to
their assigned tasks. It includes an explanation of the tasks that have been
completed, the tasks that are currently being worked on, and the tasks that will be
worked on over the next week. Weekly status reports facilitate discussion during
team meetings and also facilitate effective project management.

CASELET

Michael Hill is a jewellery company headquartered in Queensland, Australia. How

could they properly disseminate information from their head office down to their
300 retail shops across the globe? While Michael Hill had several attempts at a
SharePoint strategy, they found it challenging to get the stores to engage with it.
They were required a platform that could circulate news and resources with a
user-friendly interface that could win their people over.
MODULE 4

BASICS OF DECISION MAKING

DECISION -Meaning:

A decision is the selection of a course of action (or decision) out of many

available alternatives.

DEFINITION :

Philip Kotler: “A decision may be defined as a conscious choice among

alternative courses of action.”

Peter F. Ducker: “Whatever a manager does he does through making decisions.”

DECISION MAKING-Meaning

Decision-making describes the process by which a course of action is selected as

the way to deal with a specific problem. A decision involves the act of choice and
the alternative chosen out of the available alternatives.Decision-making is an
essential part of modern management. A manager’s life is fi lled with a constant
series of decisions—where to invest profits, what to do about an employee who is
always late, where should the f rm’s new warehouse be built, what subject will
have top priority at the departmental meeting the next morning, and so on.
Hundreds of decisions are made by the manager, consciously and subconsciously
everyday. The actions are usually carried out by others. Decisions which are
relatively minor are taken almost subconsciously, following rules and patterns of
behaviour established over many previous encounters with the problem. All
major decisions, however, are taken very carefully and consciously. Such
decisions usually involve the application of considerable human judgement and
experience before a solution is obtained.
 Decision-making is thus a key part of a manager’s activities. It
permeates through all managerial functions such as planning, organisation,
direction and control. In planning it is through the process of decision-making
that objectives and policies are laid down and the manager decides many things
such as what to produce, what to sell, where, when, how and so on. In organising,
decision-making relates to the choice of structure, nature and form of
organisation, division of work, delegation of authority, fixing of responsibility and
the like. In directing, decision-making relates to determining the course, deciding
the orders and instructions to be given, providing dynamic leadership and similar
other issues. In controlling, the decisions relate to the laying down of
performance standards, strategic control points, procedure for control, and so on.

DEFINITION

According to Koontz and O’Donnel, “Decision-making is the actual selection

from among alternatives of a course of action.”

IMPORTANCE OF DECISION MAKING

Decision making is an important function of the management since it is spread

over to all management activities and is required in every sphere of the
organization.The following are the importance of decision making in
management:

1. Better Utilisation of Resources

Decision making helps to utilise the available resources for achieving the
objectives of the organisation. The available resources are the 6 Ms, i.e. Men,
Money, Materials, Machines, Methods and Markets. The manager has to
make correct decisions for all the 6 Ms. This will result in better utilisation of
these resources.
2. Facing Problems and Challanges

Decision making helps the organisation to face and tackle new problems and
challenges. Quick and correct decisions help to solve problems and to accept new
challenges.

3. Business Growth

Quick and correct decision making results in better utilisation of the resources. It
helps the organisation to face new problems and challenges. It also helps to
achieve its objectives. All this results in quick business growth. However, wrong,
slow or no decisions can result in losses and industrial sickness.

4. Achieving Objectives

Rational decisions help the organisation to achieve all its objectives quickly. This
is because rational decisions are made after analysing and evaluating all the
alternatives.

5. Increases Efficiency

Rational decisions help to increase efficiency. Efficiency is the relation

between returns and cost. If the returns are high and the cost is low, then
there is efficiency and vice versa. Rational decisions result in higher returns at
low cost.

6. Facilitate Innovation

Rational decisions facilitate innovation. This is because it helps to develop new

ideas, new products, new process, etc. This results in innovation. Innovation gives
a competitive advantage to the organisation.
7. Motivates Employees

Rational decision results in motivation for the employees. This is because the
employees are motivated to implement rational decisions. When the rational
decisions are implemented the organisation makes high profits. Therefore, it can
give financial and non-financial benefits to the employees.

CRITICAL THINKING IN DECISION MAKING PROCESS.

The decision making process is a key part of problem solving. Critical thinking is
one of the basic decision making and problem solving techniques. Critical
thinking is the practice of gathering, analyzing, and evaluating information in a
methodical manner. Essentially, this is a process for thinking clearly through
several options and arriving at the best choice.

The ultimate goal of decision making is to arrive at actionable conclusions, and

critical thinking is the process that proves whether the conclusion is sound.

The Critical Thinking Process Involves 5 Steps

1, Identification – Identify the problem and define it accurately.

2. The Solution – Propose a potential solution.

3. Exploration – Create a potential action plan that results in the evaluation of the
potential solution.

4. Action – Take the essential steps to complete and implement the action plan.

5. Reevaluate – Review the action plan to determine if it solved the identified

problem.

As easy as this process appears to be, its underlying concepts that make critical
thinking successful are not understood. Critical thinking is based on four key
elements or concepts:
LOGIC – Logic comes into play in discerning direct relationships between causes
and effects. Logic is one of the most important skills to have when making
decisions because logic enables accurate predictions to be made about the
effects of potential solutions on people and system.

TRUTH – For critical thinking purposes, truth is unbiased data about an event.
Unemotional and unbiased facts are an essential part of the critical thinking
process as it is used for problem solving. Critical thinking sorts out biases and
focuses on documented data that will lend credence to the final conclusion.

CONTEXT – Creating a list of the effects of the final solution means considering
the historical impacts of similar solutions. This list should also include extenuating
pressures and factors that will or could be impacted by the final solution. Outside
elements must be considered; solving one problem but creating other problems
is not useful.

ALTERNATIVES – This means looking at potential solutions not currently being

used. Critical thinking requires the consideration of new ways of approaching
problems that meet current real-world objectives that are based on unbiased
and accurate data.

However, the critical thinking process also depends on asking the right critical
thinking questions. We can call this step critical questioning. It provides the ability
to distinguish biases from facts, observers from stakeholders, and potential
solutions from solutions. The importance of appropriate questions in reaching an
actionable answer cannot be minimized. A question to open the discussion about
critical questions is what does an appropriate question look like? The simple
answer is an appropriate question will provide an actionable answer meaning one
that will provide additional, helpful information. The next question is how is such a
question formulated?
CREATIVITY AND INNOVATION

Often used interchangeably, they should to be considered separate and distinct.

Creativity can be described as problem identification and idea generation and
innovation is considered as idea selection, development and commercialization.

Steps involved in creativity

1) Preparation

This is the first stage at which the base for creativity and innovation is defined; the
mind is prepared for subsequent use in creative thinking. During preparation the
individual is encouraged to appreciate the fact that every opportunity provides
situations that can educate and experiences from which to learn.

2) Investigation

This stage of enhancing entrepreneurial creativity and innovation involves the

business owner taking time to study the problem at hand and what its
various components are.

3) Transformation

The information thus accumulated and acquired should then be subjected to

convergent and divergent thinking which will serve to highlight the inherent
similarities and differences. Convergent thinking will help identify aspects that are
similar and connected while divergent thinking will highlight the differences.

4) Verification

This is where the entrepreneur attempts to ascertain whether the creativity of

thought and the action of innovation are truly effective as anticipated. It may
involve activities like simulation, piloting, prototype building, test marketing, and
various experiments. While the tendency to ignore this stage and plunge
headlong with the breakthrough may be tempting, the transformation stage
should ensure that the new idea is put to the test.
Types Of Creativity

1) Deliberate and Cognitive creativity

People who possess deliberate and cognitive characteristics are purposeful. They
have a great amount of knowledge about a particular subject and combine their
skills and capabilities to prepare a course of action to achieve something. This
type of creativity built when people work for a very long time in a particular
area.

People who fall under this type of category of creativity are usually proficient at
research, problem- solving, investigation and experimentation. This type of
creativity is located in the brain’s prefrontal cortex, which is at the front part of
the brain. These types of creative people spend a great deal of time every
single day testing to develop new solutions.

Thomas Alva Edison is one prominent example of this type of creative people.
He ran experiment after experiment before inventing electricity, the light bulb,
and telecommunication. Hence, deliberate and cognitive creativity requires a
great deal of time, dedication and abundance of knowledge about a particular
subject.

2) Deliberate And Emotional Creativity

People who are categorized as deliberate and emotional let their work
influenced by their state of emotions. These types of creative people are very
emotional and sensitive in nature. These individuals prefer relatively quiet and
personal time to reflect and they usually have a habit of diary writing. However,
they are equally logical and rational in decision making.

Their creativity is always a balanced product of deliberate emotional thinking and

logical actions. This type of creativity is found in the amygdala and cingulate
cortex parts of the human brain. Amygdala is responsible for human emotions
whereas cingulate cortex helps in learning and information processing. This type of
creativity happens to people at random moments. Those moments are usually
referred to as “a-ha!” moments when someone suddenly thinks of a solution to
some problem or think of some innovative idea.
For example, there are situations when you feel low and emotional which
distracts you from your work. In those kinds of situations, you should take 5
minutes and point out the things which are making you sad and keep them
aside and focus on the work in hand. It will help you to get improvised results
and you will get work done easily. One should seek “quiet time” for deliberate
and emotional creativity to happen to them.

3) Spontaneous and Cognitive creativity

There are times when you spend a long time to crack a problem but can’t think of
any solution. For example, when you want to make a schedule for a month to get a
job done, but you can’t seem to think of any possible way and when you are
watching television and having your relaxed time and suddenly you think of a
solution and everything falls in place. The same case happened with the great
scientist Isaac Newton. He got the idea about the law of gravity when an apple hit
his head while he was sitting under a tree and relaxing.
This is the “Eureka!” moments for Newton and an excellent example of a
spontaneous and cognitive person. This type of creativity happens when one has
the knowledge to get a particular job done, but he requires inspiration and a hint to
walk towards the right path. This type of creativity usually happens at the most
inconvenient time, such as, when you are in bed with your partner or having a
shower. Spontaneous and cognitive creativity takes place when the conscious mind
stops working and go to relax and unconscious mind gets a chance to work.

Mostly, this type of creative person stops conscious thinking when they need to do
“out of the box” thinking. By indulging in different and unrelated activities, the
unconscious mind gets a chance to connect information in new ways which
provide solutions to the problems. Therefore, to let this type of creativity happen
one should take a break from the problem and get away to let conscious mind
overtake.
4) Spontaneous And Emotional Creativity

Spontaneous and emotional creativity takes place in the “amygdala” part of the
human brain. Amygdala is responsible for all emotional type of thinking in the
human brain. Spontaneous ideas and creativity happen when conscious and
Prefrontal brain is resting. This type of creativity is mostly found in a great artist
such as musicians, painters, and writers etc. This type of creativity is also
related to “epiphanies”.

Epiphany is a sudden realization of something. Spontaneous and emotional

creativity is responsible for a scientific breakthrough, religious and also
philosophical discoveries. This allows the enlightened person to look at a problem
or situation with a different and deeper viewpoint.

Those moments are defined as rare moments when great discoveries take place.
There is no need to have specific knowledge for “spontaneous and emotional”
creativity to happen but there should be a skill such as writing, musical or artistic.
This type of creativity can’t be obtained by working on it.
TECHNIQUES TO ENHANCE CREATIVITY

Brainstorming and Cooperative Exploration

Organizations can also stimulate creativity by employing the practices

of brainstorming and cooperative exploration.

Brainstorming is a creative process in which individuals generate a large number

of ideas without censorship. No idea is a bad one! If you’re looking to bring new
customers into a retail store, the idea of “training monkeys to ring up
purchases” is on the table until it’s time to review and determine which ideas
are actually viable. The benefit of brainstorming is that a group of people can
build on each other’s ideas, no matter how ridiculous, and perhaps eventually
come up with viable solutions.

Cooperative exploration requires individuals to consider a problem from different

points of view. Individuals taking part in a cooperative exploration might find
themselves arguing for points that they do not believe. But the process requires
that individuals work the problem from all angles to ensure that they received
the best point of view.
In the cooperative exploration, the following positions are taken by
the participants:

• Neutral. Individual does not take sides, and just considers the facts.

• Emotional. Individual only considers the emotional aspects of the

issue— who gets hurt? What emotions may be triggered?

• Negative. Individual only considers the negative—what will go wrong and

what if the solution doesn’t work.

• Positive. Individual only considers the positive aspects of the issue.

• New solution. Individual only considers the new creative possibilities, or the
“what ifs”

• Holistic. Individual considers the entire issue, asking “What’s the

big picture?”
By encouraging participants to consider these different viewpoints, the
model encourages lateral and divergent thinking.

Creative thinking and creative decision making can keep an organization ahead
of its competitors. Now, let’s talk about how different organizations put all these
aspects of decision making together and actually make decisions with them.

MANAGERIAL CREATIVITY

Creativity and Innovation have always been at the heart of every successful
organization. Yet until recently, the responsibility of innovating new ideas
and products was left to the R&D and Creative Teams. Managing creativity
was something of an enigma.

In recent years the role of the Creativity Manager has developed. And as we
start to see creative workers replace knowledge workers, knowing how to
creatively manage teams and inspire diversity, have become essential elements
in the role of today’s team leaders.

Nowadays even the workplaces that are considered most mundane, have the
scope to be creative and innovative in their approach. Take the case of the
instant soup factory, where the Spice Blenders and Production Line Operators
took it upon themselves to increase productivity, by creating their own tempo.

Principles of Managing for Creativity

1) Nurture diversity

When teams connect ideas from entirely different contexts, they innovate. The
role of a Creativity Manager is to build a diverse team and then nurture its
diversity, so the individuals learn to value their originality and gain the
confidence to bring their unique perspectives to the table. A Creativity Manager
always supports the individualism of her team members and is able to facilitate
diverging opinions.
Building a diverse and cross-functional team is easier when you allow team
members to take part in the recruitment process of new team members. It
allows them to pick candidates who fit in with the team culture and share similar
values. Diverse teams take pride in making a positive and joint contribution to
the overall goals of an organization.

2) Create Markets

When you nurture diversity amongst teams and workers and let them explore
new ideas and concepts, you’re cultivating a networked organization. Networked
organizations are structured on the belief, that every individual has the ability
and right to collaborate, innovate and solve the problems of an organization.
Creativity Managers motivate teams and individuals to work together, but also to
succeed on individual merit. Rather like the Tour de France.

When we replace the traditional hierarchal system, we start to create markets,

fostering collaboration and entrepreneurship – or intrapreneurship. In this
environment, job titles make way for work profiles, which allow the individual to
create the role they want, as long as their outcome, continues to feed the
desired objective of the organization.

To sustain motivation and a high level of contribution in a market environment,

Creativity Managers must put regular feedback and employee recognition at
the top of the priority list.

3) Rely on Merits

Creativity Managers use various methods to recognise individual achievements

and offer regular feedback to their teams of intrapreneurs. They understand
that recognition isn’t always the most effective when it flows from the top
down. In fact, we appreciate the recognition from our peers more than we do
from a management team, who has taken little or no part in the project.
Peer-to-peer recognition encourages understanding and appreciation of the role
of individual team players. It empowers innovation and awakens a common
approach to finding solutions. Our Happy Melly team successfully uses Merit
Money to recognize the great efforts of our team players. Each month we get 100
points to distribute amongst the team to show gratitude for great work, kindness,
even just to say thanks for making us smile.

4) Make no predictions

In a world where the only certainty is uncertainty, distributed organizations

must plan for a future without making concrete predictions about what that
future might look like, or how they are going to get there.

Strategy planning should allow for multiple scenarios. Creativity Managers

who nurture diversity, empower teams to explore scenarios and present
multiple solutions to reach the organizational goals.

5) Update the workplace

The work environment has a considerable impact on creativity. Creating a

workspace that doesn’t feel like work, but imitates life outside of the office,
can inspire employees and play a big role in the innovation of new products
and services. The more space, colour and flexibility you introduce in the
workplace, the more likely your creative workers are to feel stimulated and
motivated to succeed.

Some companies spend millions of dollars on reinventing their office spaces. You
don’t have to go crazy, but there are some fundamental design elements that
will go a long way to making your team feel at home:

Open and transparent: Open spaces create a unified experience and support
a transparent culture. Too large a space and you might create the feel of a call
centre – loud, noisy and difficult to concentrate. To eradicate this issue, incorporate
closed off areas for your workers to think, meditate or meet.
Make work colourful: Colour affects your mood and has an impact on behaviour.
Get your team involved in decisions on colour schemes and space
rearrangement, and allow them to add their personal touches.

6) Change constraints

So many constraints to deal with on a daily basis – clock in/clock out, sit at your
desk, eat lunch at 1pm, catch the train at 5.30pm. Why does everything have to
fit into a neat little box? Actually it doesn’t. What if you gave your employees the
freedom to work from where they want? Take unlimited vacation time, or spend
a couple of a days a month working on another team?

Every work environment has to have some constraints. In fact, esearch shows
that creative workers like constraints. The objective of a good Creativity Manager
is to encourage experimentation and workplace flexibility; to identify and
introduce good constraints, and get rid of the ones that do nothing for
productivity and innovation.

Creativity Managers set team guidelines that take into consideration the ‘why’,
‘what’ and ‘how’: Why do we need constraints? What will our team benefit
from the higher purpose?

7) Open Boundaries

The more freedom you allow your employees, the more likely they are to adopt
a learning mindset. Good Creativity Managers believe in the value of knowledge
sharing, networking and collaboration. Those that fear openness will end up
repressing creativity. When organizations open up boundaries, they enjoy an
inflow of great ideas.

Creative workers should be allowed to network with like-minded people and

organizations, attend cross company conferences and create open
innovation networks, sharing ideas and practices. This is a great way to grow
a transparent culture, where employees are not afraid to listen, learn and
share knowledge. Of course, when we open boundaries, we also have to set
constraints to protect product innovation.
Ultimately when we do away with traditional boundaries, we open up
opportunities for creativity and entrepreneurship in teams. When we nurture
diversity, we create teams that can provide us with multiple scenarios for the
future. Through regular feedback and letting our workers invent their own role,
we feed enthusiasm and give them a sense of purpose. And when we give them
regular time to experiment and collaborate, we spark innovation.ese
constraints? How will it help us reach our higher purpose?

BARRIERS OF CREATIVITY

There is a point in the life of organization when change becomes imperative. Not
change for the sake of change, but for the very survival of the organization. A
changing political environment, mission requirements, technological advances,
personnel considerations and a host of other factors can necessitate or exact
change. The organization that does not view change as being inevitable,
embracing and leading it, is destined for demise, marginalization, failure and
eventually extinction. Barriers to creativity and innovation must be identified and
removed to eliminate blockages to potential inventiveness, thus enabling “group
genius” and “awakening the collaborative spirit” of the organization Breaking the
barriers to creativity and innovation is essentially changing “whatone believes
and how one behaves”.

☆ Recognize the Barriers

Case in point, the organization in which I work, has evidenced the

following barriers to creativity:

> Fear

> Poor leadership and commitment to innovation

> Bureaucratic policies and red tape

> Silos and turfs

> Pressure to produce immediate results

> Personal biases: beliefs, attitudes and values

Fear

Fear is the number one barrier to creativity and innovation identified by most of
my colleagues within the organization. Fear of failure. Fear of ridicule. Fear of
decision-making. Fear of making mistakes. Fear of taking risks. Fear of not being
promoted. Fear of change. Fear of senior leadership. Fear of the unknown. Fear
keeps a person from exploring new ways and enjoying an investigative mindset
where failure can be expected and is welcomed as a source of new information
and learning. Creativity and innovation are positively associated with joy and
love, while negatively associated with fear, anger and anxiety.

Poor leadership and commitment to innovation

If an employee is not given time or encouragement to be creative and innovative,

it can almost certainly be guaranteed that new projects and new mechanisms for
their delivery will not be born. Nothing new will happen. Much depends and
hinges on how senior leadership demonstrates their commitment to creativity
and innovation. Too often, the atmosphere becomes poisoned by criticism that
fosters insecurity, anger and personal agendas with very little consensus building,
collaboration or fun. Senior leadership sometimes fails to realize that what they
say and do in this context is more powerful than any speech or policy they may
make.
Bureaucracy, policies and red tape

Bureaucracy, age-old policies and needless red tape can stifle new thinking and
fresh approaches. They promote the status quo as the safest response to
change, and therefore affect the ability to respond to new information and
challenges by devising new responses and procedures. An organization’s mind-
set, culture and procedures can smother inventiveness to the point that fewer
and fewer ideas come forward as the creative mind gives up on navigating
bureaucratic obstacles and numerous standard operating procedures.

Silos and Turfs

Individual freedom and acquisition of power can prevent collaboration and

experimentation, especially if it involves new ways of working. There is
unwillingness on the part of some leaders to share power, responsibility and
reward. Empowerment of others becomes more lip service and there is “no
intellectual acceptance of the benefits of creativity” and innovation. Intrinsically,
those at the top do not believe creativity and innovation will help the organization
or they doubt if it is really needed.

Pressure to produce immediate results

The unrelenting pressure to produce results immediately, as if there is no

tomorrow, often leads to the tyranny of the 'either or.' Either be creative and
innovative or be productive, producing results. Creativity and innovation are not
seen as being relevant unless they can be 'summoned on demand and produce
short-term results'. People are most creative when they are motivated primarily
by the interest, enjoyment, satisfaction and challenge of the work itself (intrinsic
motivators). Creativity and innovation cannot be ordered. It must be inspired and
groomed. It takes time and it must flow from a relaxed atmosphere accentuated
with fun.

Personal biases: Beliefs, attitudes and values

Each employee brings a mix of biases from their own belief system or background.
This often times leads to a lack of collaboration, disproportionate personal
ambition and, in a worse case scenario, sabotage of coworkers’ efforts and the
slandering of their reputations. These biases are subversive and dangerous in
that personal motivation and ambition is colored and warped, hindering one’s
ability to see things differently. Issues tend to be viewed myopically, creating
tunnel vision that fails to see a bigger picture outside of one’s biases.

☆How to overcome the barriers

The right climate is needed for creativity and innovation to flourish within an
organizational culture and system. The key is the human mind. It must be
stimulated, excited and nurtured to produce creative thinking. Equally, the
mind must be free of creativity and innovation barriers that encumber and
impede its ability to fully capitalize on the enormous potential within its grasp
that now lies dormant. Unleash your organization’s creativity by incorporating
thefollowing guidelines:

> Establish a working definition for creativity and innovation.

There are many definitions of creativity, but for the purposes of consistency and
continuity, creativity would be defined as seeing what everyone else has seen,
but thinking what no one else has thought. Creativity is about the generation of
ideas. The quality and/or quantity of the idea(s)is not the issue. The essence of
creativity is to get people to develop ideas, for out of this flow of new ideas
comes great innovations for change. Innovation would be defined as the process
of designing and implementing new ideas. It’s possible to have hundreds of
creative ideas, but they can only be termed “an innovation” once they’ve been
successfully implemented. Given the opportunity to freely express them, leaders,
followers and stakeholders generate ideas that can lead to innovations that will
benefit the organization.

> Passionately promote an atmosphere within the organization where ideas

are valued, considered and, whenever possible, implemented.
Over time, this would infuse the organization with a trust, passion and vision for
creativity andinnovation. Senior leadership must empower all leaders, followers
and stakeholders to be creative, setting them free to create while also
establishing new structures that reward and encourage new ways of thinking and
doing. Time for thinking and being creative must be built into the work schedule.
It’s not enough to promote an atmosphere of creativity and innovation and then
expect employees to do nothing but work. Creativity and innovation must be seen
and prized as a part of an employee’s responsibilities.

> Establish innovative metrics that measure the creative and innovative
capacity of the organization .

What gets measured in the organization gets done. If it is also rewarded, then it is
even more likely to get done.

> Change your attitude toward creativity and innovation.

You must provide leadership and set a positive tone at the top. In most settings,
ideas areborn drowning, already at risk of dying, and leadership can either
stretch out a helping hand to innovative ideas or look the other way. Don’t allow
ideas to be 'still born' for lack of metrics. When senior leadership becomes
creativity and innovation’s biggest cheerleader, the fear expressed by so many
employees will begin to dissipate as they begin to see that new ideas and insight
will not be criticized or ignored, but will genuinely be considered and
implemented when possible.

> Make creativity and innovation an integral part of all strategies and policies.

Ongoing creative thinking and innovation should be strategically programmed

into every meeting in which your staff participates. Define broad parameters in
which your team is allowed to operate, and then get out of the way. This, in
itself allows for true creativity and innovation rather than a regurgitation of what
the team thinks the leader wants.
> Tools and the training needed for unlocking creativity and innovation .

People and learning are fundamental. Courses that provide a few creative tools to
a few employees will not ensure that creativity will magically flourish within the
entire organization. These opportunities must be available to all employees. In
addition to the training, provide a supportive climate that encourages creativity
and innovation. No additional financial resources available for professional
development? Consider redirecting existing training funds or develop a 'how to'
training and development workshop. Use current in-house training departments
or programs to solicit creative and innovative ideas concerning pending or
breaking issues within the organization. This can be done through brainstorming
sessions or any other procedure for encouraging creativity, such as mind
mapping, theme mapping, making combinations, connecting the unconnected.

> Establish a mechanism for the flow of creative ideas up and down the chain of
command; a pipeline for the free flow of ideas between leaders and followers .

This mechanism allows for a systematic process that incorporates lateral

thinking, which in turn speeds up or expands potential ideas that flow from
creativity to innovation, providing the organization with an effective means of
keeping one eye on the present and the other eye on the future. It tracks
promising ideas, while simultaneously spotting emerging trends throughout the
organization as it continues to operate in an ever expanding and changing global
setting. This will help to turn the most innovative and provocative ideas into
reality, while keeping the organization on the cutting edge of innovative business
practices and delivery well into the future.

> Promote and expect an atmosphere of collaboration and cooperation

Organizations are comprised of diverse beliefs, backgrounds, attitudes and

values, which drive behavior. These range from individuals who believe people
who are closed to opposing viewpoints, to those who are willing to cooperate
without compromising their beliefs or values. Therefore, promote and expect an
atmosphere where collaboration and cooperation is central to the life of your
organization. While there will be some who will refuse to be a part of an
creativity and innovation processes, the will of the few should not drive
the creativitymechanisms within the organization.

> Avoid the “quick fix” trap.

Most organizations will acknowledge their need to be more creative, and many
will be tempted to pursue the 'quick fix' option. Some will, no doubt, claim that
they’re satisfied with the degree of success found in the status quo, while failing
to realize the long-term benefits of developing a strategy that will ensure an
ongoing focus on creativity and innovation to sustain their competitive edge and
their very existence. If an organization is to leverage its creative might to help
meet the challenges of remaining a viable and vibrant force within this changing
structure, it must first remove the barriers to creativity and innovation that
encumber and hinder ideas for new and cutting edge organizational practices.
By removing these barriers, the organization will be free to search for
opportunities through innovative methods for change, growth and
improvement. In this day and time where change is the only constant, what we
do is important, but how we do it is even more important.

Decision-making process

a. Define the Problem

Problem definition is the most crucial step in the entire decision-making

process.As the saying goes, “a problem well defined is a problem half-solved,
utmost care has to be exercised in this stage, for wrong definition of the problem
leads to wrong solutions. This is also called diagnostic stage. Jumping to
conclusions on the basis of certain symptoms has to be avoided. The problem
has to be examined from different angles so as to identify the exact causes.
Unless exact causes are identified, right decisions cannot be taken.

b. Analyse the problem

The problem has to be thoroughly analysed. The past events that contributed to
the problem, the present situation and the impact of the problem on the future
have to be examined. Problems do no crop up overnight. The genesis of the
problem and the various contributing factors have to be analysed. In analysing
the problem, personal prejudices have to be avoided. As far as possible, an
objectives assessment of the situation is useful to arrive at right decisions.Proper
analysis of the problem helps the manager to assess the scope and importance of
the problem. If the problem is of minor nature, he can authorize his subordinates
to solve it. If it is a major problem requiring the involvement of many people, he
can initiate the necessary steps. At times, the problem may not warrant any
decision. Leaving the problem as it is could be better.

c. Develop Alternatives

There are hardly few problems for which there are not many alternatives.
Effective decision-making depends on the development of, as many alternative
solutions, as possible. The underlying assumption is that a decision selected from
among many alternatives tends to be a better one. The ability to identify and
develop alternative courses of action depends on the manager’s creativity and
imagination. As the thinking of two people may not be similar, the skills and
liabilities in developing alternatives significantly vary from one manager to the
other.

d. Evaluate Alternatives

The next step in the decision-making process involves evaluation of the

alternative courses or solutions identified to solve the problem.
Evaluation involves a through scruitiny of the relative merits and demerits of
each of the alternatives in relation to the objectives sought to be achieved
by solving the problem.

e. Select and Implement the Decision

Scientific evaluation of the alternatives reveals the acceptability of various

alternatives. After weighing the pros and cons in detail, the best alternative has
to be selected and implemented. It may not always be possible to select the best
alternative for a given problem for want of complete information, time and
resources. In such a case, the manager has to satisfy with limited information and
optimise the yields under a given set of circumstances. Once an alternative is
selected, that becomes the decision and it has to be implemented in a systematic
way. The required resources for the implementation and the necessary
cooperation from the people concerned with or affected by the decision have to
be ensured. Otherwise, however good the decision may be, it may encounter stiff
resistance in the implementation stage.

f. Follow-up and Feed back

Once the decision is implemented, it has to be closely monitored. Adequate

follow-up measures have to be taken. In the course of implementation, so many
unexpected events may render the decision ineffective. The decision may not
yield the desired results. Constant follow-up helps to take corrective measures
as and when necessary. Further, such a follow-up enables to identify the
shortcomings or negative consequences of the decision. It provides valuable
feedback on which the decision may be reviewed or reconsidered.

TYPE OF DECISIONS

Decision taken by managers may be classified under various categories

depending upon the scope, importance and the impact that hey create in the
organization. The following are the different types of decisions that are usually
taken by managers in the organization.

1. Programmed and Non-programmed Decisions

Programmed decisions are normally repetitive in nature. They are the easiest
to make. Usually these decisions are taken in consultation with the existing
policy, rule or procedure which are already laid down in the organisation. For
Example;
Making purchase orders, sanctioning of different types of leave, increments in
salary, settlement of normal disputes, etc. Managers in dealing with such issues
of routine nature, usually follow the established procedures. On the other hand,
non-programmed decisions are different in that they are non-routine in nature.
They are related to some exceptional situations for which there are no
established methods of handling such things. For example: Issues relating to how
to handle a serious industrial relations problem, declining market share,
increasing competition, problems with the collaborater, growing public hostility
towards the organisation fall in this category. Problems like these have to be
handled in a different way. While different managers reach the same solution in
the case of programmed decision, because they are guided by the same policy or
procedure, the solutions may widely differ in the case of non programmed
decisions. As one moves up in the hierarchy, many of the decisions that managers
make are non-programmed in nature. It is important to note that the
effectiveness of a manager lies in handling exceptional situations. Such situations
call for ingenuity and sound judgment. Surprisingly, many managers get bogged
down in the routine issues at the cost of the non-routine issues. The saying that
“routine drives out the non-routine” instead of the other way round in true in
many organizations. Such a tendency results in devoting less time for the
important issues.

2. Operational and Strategic Decisions

Operational or tactical decisions relate to the present. The primary purpose is to

achieve high degree of efficiency in the company’s ongoing operations. Butter
working conditions, effective supervison, prudent use of existing resources,
better maintenance of the equipment, etc. fall in this category. One the other
hand, expanding the scale of operations, entering new markets, changing the
product mix, shifting the manufacturing facility from one place to the other,
striking alliances with other companies, etc. are strategic in nature. Such
decisions will have far reaching impact on the organisation. Usually, routine
decisions do not need intensive deliberations and huge resources and are taken
by managers at the lower levels, while strategic decisions require extensive
deliberations and huge resources and are taken by top level managers. The focus
in the operational decisions is on the short-run or immediate present, while it is
on the long-rum in the cse of strategic decisions.

3. Organisational and Personal Decisions

Decisions taken by managers in the ordinary course of business in their capacity

as managers relating to the organisational issues are organisational decisions.For
example: decisions regarding introducing a new incentive system, transferring an
employee, reallocation or redeployment of employees etc. are taken bymanagers
to achieve certain objectives. As against such decisions, managers do take some
decisions which are purely personal in nature. However, their impact may not
exactly confine to their selves and they may affect the organisation also.For
example: the manager’s decision to quit the organisation, though personal
innature, may create some problems for the organisation.

4. Individual and Group Decisions

It is quite common in organizations that some decisions are taken by a manager

individually while some decisions are taken collectively by a group of managers.
Individual decisions are taken where the problem is of routine nature, whereas
important and strategic decisions which have a bearing on many aspects of the
organisation are generally taken by a group. Group decision making is preferred
these days because it contributes for better coordination among the people
concerned with the implementation the decision. Decisions may also be further
classified under major and minor decisions and simple and complex decisions.
However, a detailed description of these types is not necessary because they
are almost all similar to the already discussed programmed and non-
programmed decisions in respect of importance and impact.
DECISION MAKING TOOLS AND TECHNIQUES
1. BRAINSTORMING : Brainstorming is a group decision making technique of generating
as many ideas as possible , suspending evaluation until the final decision has been taken.
Brainstorming is a group decision making process in which negative feedback on any
suggested alternative by any group member is forbidden until all members have presented
alternatives that they perceive as valuable. Brainstorming is carefully designed to
encourage all group members to contribute as many viable decision alternatives as they
can think of. Its premise is that if the evaluation of alternatives starts before all possible
alternatives have been offered, valuable alternatives may be overlooked. During
brainstorming, group members are encouraged to state their ideas, no matter how wild
they may seem, while an appointed group member records all ideas for discussion. One
company which has immensely benefitted from brainstorming is Toyota, which realized
that it was not catering to the requirements of younger generation, they assembled a team
of young employees who brainstormed to come out with new products like Toyota echo
and scion, an entirely new line of crossover vehicles aimed to suit the taste buds of the
younger generation.
Brainstorming offers the advantage of encouraging the expression of as many useful
ideas as possible, but the disadvantage of wasting the group's time on ideas that are
wildly impractical.
2. NOMINAL GROUP TECHNIQUE (NGT) Nominal Group Technique is a structured
approach to group decision making focusing on generating ideas and choosing one. A
manager who must take a decision about an important issue sometimes needs to know
what alternatives are available and how people would react to them. It restricts verbal
communication among the members during the decision making process. In this a
problem is presented to them, and they write their reactions, ideas, suggestions, and send
views on a sheet of paper without any discussion with other members. It is meant to
resolve differences in group opinion by having individuals generate and the rank series of
ideas. The nominal group technique, with its secret ballot, offers a structure in which
individuals can support or reject an idea without fear of recrimination. Its disadvantage is
that there is no way of knowing why individuals voted the way they did.
It follows the following discreet steps:
Step -1 Silent Generation of Ideas The leads presents questions to the group
Individual responses in written format Group work not allowed
Step – 2 Recorded round-listing of ideas Each member presents an idea in turn All
ideas are listed on a flip chart No discussion takes place until; all the ideas have been
recorded.
Step -3 Brief discussions of ideas on the chart Clarifies the ideas ◊ common
understanding of the problem Evaluates the points
Step – 4 Preliminary vote on priorities Each member ranks 5 to 7 most important
ideas from the flip chart and records them on separate cards. The leader counts the votes
on the cards and writes them on the chart.
Step -5 Discussion of the vote Examination of inconsistent voting patterns.
Step – 6 Listing of agreement on the priorities items. Final decision is determined
by the idea with the highest aggregate ranking. NGT is widely used in health, service,
education and government organization. It helps in encouraging creativity, continued
exploration of the issues.
 3. DELPHI TECHNIQUE : This technique was first developed by N.C. Dalkey and his
associates in 1950 at the Rand Corporation’s Think Tank. In this technique members do
not meet face to face for group decision. All the decision are arrived through written
communication. It is a systematic means to obtain consensus from a group or panel of
experts. The advantage of the Delphi Technique is that ideas can be gathered from group
members who are too geographically separated or busy to meet face to face. Its
disadvantage is that members are unable to ask questions of one another
1. The problem is defined by the delphi leaders or experts.
2. A sample of experts is selected.
3. Questionnaires are developed and sent out to participants.
4. Responses are compiled and summarized into a questionnaire.
5. Each member receives a copy of results.
6. Participants are asked to reevaluate the responses.
7. The new responses are compiled and new questions may be prepared.
8. Cycle stops only when consensus is reached.
9. And ultimately a solution is developed.
This technique helps to evoke each participant’s unbiased opinion by preventing the influences
of group dynamics.
4. DEVIL’S ADVOCACY: It is a technique of group decision making in which group think is
prevented , whereby an individual is appointed as devil’s advocate to critically question the
validity and feasibility of every decision. He is entrusted with the task of bringing up the
potential problems that might arise after taking a particular decision. This saves the organizations
from making costly mistakes by identifying the potential pitfalls well in advance. This individual
keeps all the members on their toes and saves the organization from taking the wrong decisions.
5. DIALECTICAL INQUIRY: This is a group decision making technique where a solid debate
is encouraged and spearheaded between two opposing sets of recommendations. It is a very
constructive approach in the sense that on one hand it leads to conflicting situations, on the other
hand it brings forth the strengths and the weaknesses of both sets of ideas and thus helps in
taking a well informed rational decision.
6. QUALITY CIRCLES : It is a small group of employees in the same work area or doing
similar type of work who voluntarily meet regularly for about an hour every week to identify,
analyse and resolve work- related problems not only to improve quality, productivity and the
total performance of the organisation, but also to enrich the quality of work life of employees.
The number of circle members could vary from 5 to 15 but the ideal size of a circle is 7 or 8
members. The number of members should be such that the circle is effective.

Managers must carefully weigh the advantages and disadvantages of these group decision
making tools and adopt the one or some combination of all these that best suits their unique
organizational requirements.

Factors to be kept in mind while selecting a particular technique

• Brainstorming can be adopted when the objective is to generate as many ideas as possible
• NGT can be adopted when the group members are unwilling to contribute ideas
• Delphi technique can be applied when there is a need for an expert opinion.
• When groupthink is to be avoided, devil’s advocate or dialectical enquiry can be adopted
• When decisions with regard to quality are to be taken, quality circles can be referred to.
• Research has shown that when the teams are made accountable for the decisions they tend to
take well informed decisions.
• When the organization contemplates giving complete empowerment to its employees, the self
managed teams can also be created.

INDIVIDUAL AND GROUP DECISION MAKING

Individual decisions are taken by a single individual. The one-manager decision-

making set up is still prevalent in India as many business units are owned by a
single individual. But when business grows in size and complexity it may not be
possible for one individual to take all the decisions himself. He needs the help
of specialized people and also other individual.

Group decisions are taken by individuals who are identified as a Group for
making a decisions. Group decisions have plus values such as greater
participation of individual and better quality in decisions. They are generally
more effective decisions. They, however, suffer from delay in decision making
process and difficulty in fixing the responsibility for decisions.

Some advantage of group decision making;

● Increased acceptance by those affected: Decision made by group are

mostly accepted by the group members, and they help implement those
decisions more readily.
● Easier coordination: Decisions made by group reduce the amount
of coordination necessary to bring the decision into play

● Easier communication: Decisions made by group reduce the amount

of communication necessary to implement the decision.

● More information processed: Because many individuals are involved, more

data and information can be brought to bear on the decision. This can help improve
the quality of decision and uncover obstacles in the way of its execution.

Disadvantages of group decisions making

● Group decisions take longer: Groups take longer than individuals to

make decisions.
● Groups can be indecisive: Groups can drag on and never take decisions
because they can always blame other members of the group for lack of progress

● Groups can compromise: This can lead to decisions that satisfy the
“lowest common denominator”. It can lead to “group think” or conformity to
peer pressure and neglect of better solutions.

● Groups can be dominated: The highest status individual, if he chooses,

can infl uence the group so that it notices his or her choices. This negates the
advantages of group decision-making.

● Groups may have a prior commitment to a particular solution: This may

be due to ties to persons outside the groups, “empire building” attempts, or
belief that a decision will have sufficient personal impact.

CONFLICT ANG NEGOTIATION

Organizational conflict is a situation of closed or win-loss competition, in which

parties try to keep each other from attaining their goals.

Levels of organisational conflict:

There are mainly three levels of organisational conflict. It may exist:

• Between individuals, or

• Between individuals and groups or

• Between groups in the same organization

Stages of conflict:

According to Pondy, every inter-group conflict passes through five stages,

1. Latent conflict: This is the first stage in which only potential opposition
exists between the parties. This means that all causes of conflict are lying
hidden. Parties are not yet aware of them.
2. Perceived Conflict: In this stage, parties become aware of the causes of
conflict, and they begin perceiving the conflict.

3. Felt Conflict: In this stage, parties become emotionally involved in the

conflict, and start feeling the conflict.

4. Manifest Conflict: In this stage, parties begin to give surface manifestations

or expression to their hostile behaviour. Some expressions of hostile behaviour
are:

• Lack of coordination

• Decreased interaction

• Breakdown in work flow

• Concealment and distortion of information

• Rigidity and formality in decision procedure

• Appeals to superiors for decisions

• Low trust, suspicion and hostility

• Intentional ignoring, neglect or criticism of each other.

5. Conflict Aftermath: Conflicts are not discrete situations, with a clear

beginning and end. Every conflict episode leaves a result that affects the course
of succeeding episodes. If the conflict is genuinely resolved to the satisfaction of
all parties, the basis for a more cooperative relationship may be laid. But, if the
conflict is merely suppressed, the latent conditions of conflict may be aggravated,
and may explode in a more serious form, until they are rectified, or until the
relationship dissolves.

Causes of Inter-Group Conflict:

1. Unequal or one-sided dependence : When any one group of an

organization (any staff) finds itself more duty-bound to understand the
problems of the other group and to get along with it, conflict arises due to
unequal or one-sided dependence.

2. Status Incongruities : When a group finds that the actions of the other
group are not in accordance with its self-perceived status, conflict develops.

“William Whyle, in his research of 8 big restaurants of Chicago, found that the
cooks who perceived themselves higher in status than the waiters and
waitresses resented receiving face-to-face orders from them.”

3. Incompatible Performance Criteria and Rewards : In organizations which

emphasize the performance of individual groups rather than their combined
performance, conflict develops between groups which have mutually
incompatible performance criteria. One can easily see that the sales
departments performance criteria of “increase in sales” and the production
departments performance criterion based on of “reduction in costs" cannot be
simultaneously fulfilled by the two departments without difficulty. It is difficult
for the sales department to increase sales without diversifying production and
increasing costs. Similarly, it is difficult for the production department to reduce
cost without reducing diversification and sales. This incompatibility of
performance criteria creates conflict between the two departments.

4. Difficulty in apportioning Credit or Blame : Difficulty in apportioning

Credit or blame between two groups increase the likelihood of conflict between
them.
5. Dependence on common resource : Inter-group conflict develops when
the two groups fight to get a larger share of some common resources, such as
physical space, equipment, manpower, operating funds, centralized services, etc.

Prevention of inter-group conflict:

• Advance planning and programming of work schedules or making separate
budget allocations of interdependent units.

• Introducing buffers such as inventories or contingency funds.

• Reducing pressure for consensus of joint decision making.

• Reducing goal differentiation by providing for joint pay-offs or incentives.

• Making roles and job-descriptions more clear.

Characteristics of Negotiation
Two or more parties- There are two or more parties involved in the process. They
may be individuals, groups or even organizations.
Conflict of needs and desire –The two parties involved have differed interest due
to which the conflict arose.
Hope to crack a better deal – The parties have faith that they would be able to
crack a better deal with use of influence on the other party.
Expectation to give and take –Initially the parties put forward their demands but
over the time they modify their positions and statements by talking to one
another as they try to strike amicable decision.
Predetermined goals – The agenda is set by the parties beforehand

Prerequisites For Successful Integration/Negotiation:

1. Relationship of trust: Trust should be build between the departments

from early stage by exposing them to each others functioning through informal
interaction seminars workshops, rotation of job assignments, etc.

2. Early attempt to resolve differences: Both parties should try to resolve

their differences as they arise at lower organizational levels.

3. Clarity of roles: The responsibilities of the parties should be clearly

articulated via clear policies and procedures.

4. Physical proximity: The two parties/departments should be physically

located close to each other to facilitate communication, and to build trust
and understanding.
4. Decentralized decision making: Negotiation flourish best where the parties
enjoy freedom to take mutual decisions without waiting for the approval from
their bosses, where there is tolerance for failure and promotion of joint rewards.

5. Support from management: Senior management should value and support

cooperation.

CASELET

A lady by the name of Lata has been working in an insurance company for the last
5 years, joins a fast moving consumer goods company. She is a very bright
prospect and does outstandingly well in her training period of one year and her
colleagues during that period also vouch for that fact. After one year of training,
she is given charge of a small territory in which she does very well and is again
praised by her colleagues and supervisors alike. She is then given charge of a
much larger territory after a few months. Her supervisor after a time complains
to the senior management that Lata has not been good at her job and is finding it
difficult to handle her customers. Even the person in charge of overseeing Lata's
training personally, reports that she is not performing well. Lata in turn complains
that her job is going on perfectly well and if there are any complaints it's because
she is being victimized in the male dominated atmosphere. The matter is then
reported to the head office. What should head office do?
CONTROLING

MEANING OF CONTROLLING:

Controlling is one of the important functions of a manager. In order to seek planned results from
the subordinates, a manager needs to exercise effective control over the activities of the
subordinates. In other words, controlling means ensuring that activities in an organisation are
performed as per the plans. Controlling also ensures that an organisation’s resources are being used
effectively and efficiently for the achievement of predetermined goals. Controlling is, thus, a goal-
oriented function. Controlling function of a manager is a pervasive function. It is a primary function
of every manager. Managers at all levels of management- top, middle and lower-need to perform
controlling functions to keep a control over activities in their areas. Moreover, controlling is as much
required in an educational institution, military, hospital, and a club as in any business organisation.
Controlling should not be misunderstood as the last function of management. It is a function that
brings back the management cycle back to the planning function. The controlling function finds out
how far actual performance deviates from standards, analyses the causes of such deviations and
attempts to take corrective actions based on the same. This process helps in formulation of future
plans in the light of the problems that were identified and, thus, helps in better planning in the
future periods. Thus, controlling only completes one cycle of management process and improves
planning in the next cycle.

Importance of controlling.

1. Accomplishing organisational goals 2. Judging accuracy of standards 3. Making efficient use of

resources. 4. Improving employee motivation 5. Ensuring order and discipline 6. Facilitating
coordination in action

1. Accomplishing organisational goals

Accomplishing organisational goals: The controlling function measures progress towards the
organisational goals and brings to light the deviations, if any, and indicates corrective action. It, thus,
guides the organisation and keeps it on the right track so that organisational goals might be
achieved.

2. Judging accuracy of standards

A good control system enables management to verify whether the standards set are accurate and
objective. An efficient control system keeps a careful check on the changes taking place in the
organisation and in the environment and helps to review and revise the standards in light of such
changes.

3. Making efficient use of resources

By exercising control, a manager seeks to reduce wastage and spoilage of resources. Each activity is
performed in accordance with predetermined standards and norms. This ensures that resources are
used in the most effective and efficient manner.

4. Improving employee motivation

A good control system ensures that employees know well in advance what they are expected to do
and what are the standards of performance on the basis of which they will be appraised. It, thus,
motivates them and helps them to give better performance.

5. Ensuring order and discipline

Controlling creates an atmosphere of order and discipline in the organisation. It helps to minimise
dishonest behaviour on the part of the employees by keeping a close check on their activities. The
box explains how an import- export company was able to track dishonest employees by using
computer monitoring as a part of their control system.

6. Facilitating coordination in action.

Controlling provides direction to all activities and efforts for achieving organisational goals. Each
department and employee is governed by Pre determined standards which are well coordinated
with one another. This ensures that overall organisational objectives are accomplished.

LEVELS OF CONTROLS

In management there are varying levels of controls. They are

1) Strategic control

2) Operational control

3) Tactical control

4) Objective control

5) Normative control

6) Top-down control

STRATEGIC CONTROL

Strategic control involves monitoring a strategy as it is being implemented, evaluating

deviations and making necessary adjustments. Strategic control may involve the reassessment of a
strategy due to an immediate, unforeseen event. Strategic control involves monitoring internal and
external events. Multiple source of information is needed to monitor events.

OPERATIONAL CONTROL

Operational control involves over intermediate term operations and processes but not business
strategies. Operational control system ensures that activities that are consistent with established
plan. Operational control focuses more on internal sources of information and affects smaller units
or aspects organization.

TACTICAL CONTROL

A tactic is a method that meets a specific objective of an overall plan. Tactical control emphasises
the current operations of an organization. Tactical control may involve regularly meeting with the
marketing team the review results and would creating the steps needed to complete agreed upon
processes.

TOP-DOWN CONTROLS/BUREAURATIC CONTROLS

 Top-down control means the use of rules, regulations, and formal authority to guide performance.
Top-down control is the most common process where senior executives make decisions and
establish policies and procedures that implement decisions. Lower level managers may make
recommendations for their departments.

OBJECTIVE CONTROLS

Objective control is based on facts that can be measured and tested. Objective controls measure
observable and behavioural output.

NORMATIVE CONTROLS

Normative controls are governed behaviour through accepted patterns of action. Normative control
uses values and beliefs called norms, which are establish norms.

TYPES OF CONTROL

There are two types of control. They are:-

• Budgetary control
• Non-Budgetary control

BUDGETARY CONTROL

The most widely used device for managerial control is the budget. It is a control device which are
connected with budgets. Budgeting is the formulation of plans for a given future period in numerical
device. Budget is a statement of anticipated results with in financial or non -financial terms. Some
budgetary control programs are so complete detailed that they become unduly expensive.
Budgetary control may also be used for the wrong reasons.

NON-BUDGETARY CONTROL

It is control which is not connected with budgets. The more important of them are the statistical
data of many aspects of the operation, special reports and analyses of specific areas, the operational
audit and independent appraisal by a staff, personal observation.

MAJOR CONTROL SYSTEMS

Financial Control:

Meaning

Control of financial activities carried out in an organization to achieve the desired objectives. They
also provide a set of rules and regulations about the financial management systems followed in an
organization.

All organizations have financial controls to ensure effective financial management. Most
organizations have financial controls to ensure that everyone is aware of procedures to be followed
and to ensure that there is a better understanding of each one’s responsibility.
 The concept of Financial Control:

It is concerned with the policies and procedures framed by an organization for managing,
documenting, evaluating and reporting financial transactions of an organization. In other words,
they indicate those tools and techniques adopted by a concern to control its various financial
matters.

Objectives of Financial Control:

The main objectives of financial control are discussed below:

1] Economic Use of Resources:

They aim to evaluate and coordinate financial activities. This helps prevent leakage of funds and thus
desired returns on investments can be realized.

2] Preparation of Budget:

They help the management prepare the budget for a particu­lar department. Budgets provide a
basis to compare actual performance with standard performance.

3] Maintenance of Adequate Capital:

It shows the way to maintain adequate capital, i.e. proper implementation of financial control
verifies the adequacy of capital and hence the evils of over-capitalization or under-capitalization can
be avoided.

4] Maximization of Profit:

They compel the management to procure funds from cheaper sources and to apply the said funds
efficiently to lead to profit maximization.

5] Survival of Business:

A good financial control system ensures proper utilization of resources, which creates a sound and
strong base for an organization’s existence.

6] Reduction in Cost of Capital:

They aim at raising capital from cheaper sources by maintaining a proper debt-equity mix. So, the
overall cost of capital remains at its lowest.

7] Fair Dividend Payment:

Their system aims to distribute a fair and adequate dividend to the investors thereby creating
satisfaction among the shareholders.

8] Strengthening Liquidity:

One of the important objectives of financial control is to maintain the liquidity of the firm by
exercising proper control over different components of the working capital.

9] Checking that everything is running on the Right Lines:

Sometimes, it just checks that everything is running well and that the levels set and objectives
proposed at the financial level regarding sales, earnings, surpluses, etc., are being met without any
significant alterations.

10] Detecting Errors or Areas for Improvement:

An irregularity in the company finances may jeopardize the achievement of an organization’s general
goals, causing it to lose ground to its competitors and in some cases compromising its very survival.
Therefore, it is important to detect irregularities quickly. Various areas and circuits may also be
identified which while not afflicted by serious flaws or anomalies could be improved for the general
good of the company.

11] Increase in Goodwill:

A sound financial control system increases the productivity and efficiency of a firm. This helps in
increasing the prosperity of the firm in the short run and its goodwill in the long run.

12] Increasing Confidence of Suppliers of Funds:

The proper, they prepare the ground to cre­ate a sound financial base of a firm and thereby
increases the confidence of investors and suppliers.

Importance of Financial Control:

Finance is important for any organization and financial management is the science that deals with
man­aging of finance; however, the objectives of financial management cannot be achieved without
the proper controlling of finance.

The importance of financial control

1] Financial Discipline:

They ensure adequate financial discipline in an organization by efficient use of resources and by
keeping adequate supervision on the inflow and outflow of resources.

2] Coordination of Activities:

They seek to achieve the objectives of an organization by coordinating the activities of different
departments of an organization.

3] Ensuring Fair Return:

Proper financial control increases the earnings of the company, which ulti­mately increases the
earnings per share.

4] Reduction in Wastages:

Adequate financial control ensures optimal utilization of resources leav­ing no room for wastages.

5] Creditworthiness:

They help maintain a proper balance between the debt collection period and the creditors’ payment
period—thereby ensuring proper liquidity exists in a firm that increases the creditworthiness of the
firm.
The Steps of Financial Control:

According to Henry Fayol, “In an undertaking, control consists in verifying whether everything occurs
in conformity with the plan adopted, the instructions issued and principles established”. Thus, as per
the definition of Fayol’s, the steps of financial control are:

1] Setting the Standard:

The first step in financial control is to set up the standard for every financial transaction of the
concern. Standards should be set in respect of cost, revenue, and capital. Standard costs should
determine in respect of goods and services produced by the concern taking into account every
aspect of costs.

Revenue standard should fix taking into account the selling price of a similar product of the
competitor, sales target of the year, etc. While determining capital structure, the various aspects like
production level, returns on investment, cost of capital, etc., should take into account so that over-
capitalization or under-capitalization can avoid. However, while setting up the standard, the basic
objective of a firm, i.e. wealth-maximization, should take into account.

2] Measurement of Actual Performance:

The next step in financial control is to measure the actual per­formance. For keeping records of
actual performance financial statements should systematically prepare periodi­cally.

3] Comparing Actual Performance with Standard:

In the third step, actual performances compare with the pre-determined standard performance. The
comparison should finish regularly.

4] Finding Out Reasons for Deviations:

If there are any deviations in the actual performance with the standard performance, the amount of
variation or deviations should also ascertain along with the causes of the deviations. This should
report to the appropriate authority for necessary action.

5] Taking Remedial Measures:

The last and the final step in financial control is to take appropriate steps so that the gaps between
actual performance and standard performance can be bridged in the future, i.e. so that there is no
deviation between actual and standard performance in the future
BUDGETARY CONTROL

A ‘budget” is an estimate of future need arranged according to an orderly basis covering some
or all of the activities of an enterprise for a definite period of time. In contrast, ‘Budgetary control’ is
a process of comparing the actual results with the corresponding budget data in order to approve
accomplishments or to remedy differences by either adjusting the budget estimates or correcting
the cause of the difference. Budgetary control is defined as the establishment of departmental
objects relating to the responsibilities of the executives to the requirement of a policy and the
continuous comparison of actual with budget results, either to secure by individual action the
objective of their policy or to provide a basis for its revision.

According to George R. Terry, “budgetary control may be described as a process of finding

out what is being done and comparing actual results with the corresponding data in order to
approve accomplishments or to remedy differences by either adjusting the budget estimates or
correcting the cause of the differences”.

Objectives of Budgetary Control

1. To have proper control on all types of business activities for the achievement of specified
goals

2. To trace out the causes of deviations from the set standards and suggest proper methods to adopt
for the future.

3. To give a new look to the plans, budgets, organisational system etc., as per the changing
circumstances and conditions of the organisation.

4. To check actual performance with the figures given in the budget to find out deviations from time
to time.

5. To increase the efficiency of working through modern methods of organisation and scientific
method of control.

6. To ensure the economical use of land, materials, man power, machines and other items through
proper advance planning, organizing coordinating and controlling the activities of various
departments in the organisation.

7. To adopt and generate advance thinking for the anticipation of future operations.

Types of Budgets

The types of budgets are many. Some of the important and commonly used budgets are:
1. Sales Budget: Sales Budget is a detailed expression of the sales forecast. It is the foundation of
budgetary control. The revenue from sales of products or services furnishes the principal income. It
helps to pay operating expenses.

2. Expenditure Budget: Expenditure Budget deals with individual items of expenditure, such a travel,
telephone, advertisement, entertainment etc. Sometimes this budget lump major items together
and other items in one control summary.

3. Time, Space, Material and Product Budgets: All the budgets are not expressed in monetary terms.
Some are better presented in quantities. They are more significant at a certain stage in planning and
control. The more common kinds of this type are budgets for direct-labour-hours, machine hours,
units of materials, square feet allocated and units produced.

4. Capital Expenditure Budgets: These budgets specify capital expenditure the Capital expenditure
involves purchase of machinery, equipment, inventories, and other items. They may be either for a
short term or a long one. They give definite form to plans for spending.

5. Cash Budgets: A cash budget is a forecast of cash receipts and expenditures. It is one of the most
important controls in an organisation. Cash is necessary to meet obligations. It shows the availability
of cash or shortage of funds. The purpose of cash budget is to guarantee that the enterprise is
assured of steady cash flow. It is an effective device for controlling activities involving receipt or
payment of cash.

6. Distribution Cost Budgets: it is based on the sales budget. It forecasts the cost of selling and
distributing products during the budget period. It is jointly prepared by the sales manager, the
advertising manager and the distribution manager.

7. Production Budget: It is an estimate of the quantity of the goods to be produced during the
budget period. It takes into account the stock levels desired to be maintained. It helps to determine
the quantity of the goods to be produced to meet the sales forecast. Production cost budget spells
out the estimated cost of carrying out the production plans. Production overhead budget deals with
production overheads in terms of fixed variable and semi-variable. It contains the forecast of all
production overheads.

8. Labour Budgets: It gives the estimate of labour requirements to meet the production needs. It
may include both direct and indirect labour requirements. It reveals the expected labour
requirements during the budget period. It helps to prepare suitable plans for recruitment and
training of labour.

9. Profit budget: A profit budget combines cost and revenue budgets in one statement. It is
sometimes called as Master budget. It consists of a set of project financial statements and schedules
for the succeeding year. It serves as an annual profit plan. It plans and coordinates overall enterprise
activities. It provides benchmarks that are useful in judging the adequacy of expense budgets. Profit
budget helps to assign responsibility to each manager for his share of the overall organisational
performance.

10. Balance Sheet Budget: The Balance Sheet budget brings together all of the other budgets. It
projects how the balance sheet will look at the end of the budget period, if actual results conform to
anticipated results. This budget is also known as proforma balance sheet. It may be thought of as a
final check on the organisation’s planned programmes and activities.
11. Fixed budget: Budgets tend to become inflexible. They may become inappropriate for changing
situations. When situations are unsteady it would not be fair to expect managers to stick to the
original expense budget. In this sense, every budget is a fixed budget. The estimated revenue and
expenditure are rigidly fixed. The fixed budget, in short, fixes what individual costs should be at one
specified volume.

12. Variable budget: Variable budget is cost schedule. It shows how each cost should vary as the
level of activity or output varies. It combines flexibility with efficiency. It is designed to suit the
variations in the volumes of sales or out-puts. It is based upon an analysis of expense items. It
determines how individual cost should vary with volume of output. It is useful in identifying how
costs are affected by the amount of work being done. Fixed cost, variable costs and semi-variable
costs are taken into consideration while preparing the variable budget.

Budgetary Control Methods

There are three specialised budgetary control methods. They are

1. The Planning Programme Budgetary Systems (PPBS)

2. Zero-Base Budgeting and

3. Human Resource Accounting.

1.They are developed to identify and eliminate costly programmes that tend to duplicate other
programmes. They provide a means of analysing the benefits and costs of each programme or
activity.

1. Features of PPBS:

1. Analysing and specifying the basic objectives in each major activity or programme area.

2. Analysing the output of each programme with reference to the specific objectives.

3. Measuring to total costs of the programme for several years ahead.

4 Determining which alternatives are most effective in achieving the basic objectives at the least
cost and

5. Implementing the systems in systematic manner.

2. Zero-Base Budgeting: it is so called because budget is started from base zero. The task of
individuals preparing the budget is to decide what activities and funds should be dropped and more
often, what activities and funds should be added. Zero-base budgeting enables the organisation to
look at its activities and priorities afresh. The previous year’s resource allocations are not
automatically considered, as the basis of the current year’s allocations. It involves allocating an
organisation’s funds on the basis of cost-benefit analysis of each of the organisation’s major
activities.

3. Human Resource Accounting: Traditional budgets neglect the human resources of the enterprise.
For instance, the costs of recruiting and training personnel are treated simply as operating expenses.
Human resource accounting attempts to treat the significant costs of recruitment, training and
servicing the human element. It treats the human cost as a long term investment in human
resources. It recognizes the human element in the organisation.

Advantages of Budgetary Control

1. The main merit of budgetary control is to maximise profits through effective planning and control
of income and expenditure (i.e.) directing capital and available resources to the best and most
profitable channel.

2. Budgetary control gives the clear definition and also tells the objectives, policies and is a tool of
these policies for periodic examination.

3. There should be proper co-ordination of functions and performance of various branches through
budgetary control which leads to co-operation among the members of staff of the organisation.

4. Budgetary control helps in finding out the deviations for the remedial measures.

5. It gives a force of motivation of work more efficiently and accurately as budgets are prepared for
each and every item of expenditure in all the functional aspects in a department.

6. Budgetary control is a powerful tool of responsibility accounting as it helps in passing authority to

the subordinates.

7. It provides a perfect and proper base for the introduction of the incentive system in the
organisation.

8. The system of budgetary control tells the basis for internal audit as it provides the means of
regular appraisal of departmental performance.

9. It is used to project and determine working capital requirements of the business during the
period of budget.

10. It plays the role of stabiliser particularly with those industries which are affected by the seasonal
or cyclic fluctuations.

Disadvantages of Budgetary Control

1. Owning to the rigid attitude adopted by the people in the organisation, it renders the original
plan useless because they follow the estimates from the budgets without modifying the changes of
attitudes and working conditions etc. This means that the budgetary control system is not flexible
and permits the mangers to change the policies, procedures etc.

2. In case of lack of understanding and absence of competent staff members, it becomes difficult to
exercise the budget effectively.

3. Non-availability of actual data and information from the various departments at the time of
preparing the budget makes it difficult for the planner to give the correct estimates. Hence, a lot
problems and deviations are faced by the managers at the time of execution.

4. Budgetary control requires a lot of time, money and effort to record the performance of each and
every worker in the organisation. Hence it is not economical for a small and average type of business
because it is an expensive device.

5. Budgets can hide inefficiency by allowing expenditure without keeping an eye on them. This
means that a particular department may be inefficient even though expenses are within the limits of
the budget.
Steps for the Successful Implementation of Budgetary Control

1. There should be a clear cut picture showing the responsibilities and duties of various line
executives. While preparing the chart of duties. Proper attention should be taken in advance.

2. In the chart, duties, plans, objectives, policies etc., are to be defined in a simple way and costs
should also be mentioned which are going to be corrected by the budgetary scheme.

3. A budget committee should be formed for proper implementation of the pla 4. A quick and
proper method of communication is adopted to pass on the information among the executives,
which should be based on a two-way system.

5. Budgets should be framed by experienced and talented people who are directly or indirectly
responsible for its performance.

6. Budgets should cover all phases and departments of the organisation and should be continuous in
process.

7. Budgets should be such that, it is accepted by all the members of organization and they extend
their cooperation.

QUALITY CONTROL

MEANING OF QUALITY CONTROL

Quality Control is a systematic control of various factors that affect the quality of the product. The
various factors include material, tools, machines, type of labour, working conditions, measuring
instruments, etc.

DEFINITIONS

Quality Control can be defined as the entire collection of activities which ensures that the operation
will produce the optimum Quality products at minimum cost.

As per A.Y. Feigorbaum Total Quality Control is: “An effective system for integrating the quality

development, Quality maintenance and Quality improvement efforts of the various groups in an

organization, so as to enable production and services at the most economical levels which allow full

customer satisfaction”

In the words of Alford and Beatly, “Quality Control” may be broadly defined as that “Industrial
management technique means of which products of uniform accepted quality are manufactured.”
Quality Control is concerned with making things right rather than discovering and rejecting those
made wrong.

In short, we can say that quality control is a technique of management for achieving required
standards of products.

FACTORS AFFECTING QUALITY

In addition to men, materials, machines and manufacturing conditions there are some other factors
which affect the product quality. These are:

• Market Research i.e. in-depth into demands of purchaser.

• Money i.e. capability to invest.
• Management i.e. Management policies for quality level.
• Production methods and product design.

Modern quality control begins with an evaluation of the customer’s requirements and has a part to
play at every stage from goods manufactured right through sales to a customer, who remains
satisfied.

OBJECTIVES OF QUALITY CONTROL

• To decide about the standard of quality of a product that is easily acceptable to the
customer and at the same time this standard should be economical to maintain.
• To take different measures to improve the standard of quality of product.
• To take various steps to solve any kind of deviations in the quality of the product during
manufacturing.

FUNCTIONS OF QUALITY CONTROL DEPARTMENT

• Only the products of uniform and standard quality are allowed to be sold.
• To suggest method and ways to prevent the manufacturing difficulties.
• To reject the defective goods so that the products of poor quality may not reach to the
customers.
• To find out the points where the control is breaking down and to investigate the causes of it.
• To correct the rejected goods, if it is possible. This procedure is known as rehabilitation of
• defective goods.

ADVANTAGES OF QUALITY CONTROL

• Quality of product is improved which in turn increases sales.

• Scrap rejection and rework are minimized thus reducing wastage. So the cost of
manufacturing
• reduces.
• Good quality product improves reputation.
• Inspection cost reduces to a great extent.
• Uniformity in quality can be achieved.
• Improvement in manufacturer and consumer relations.

INVENTORY CONTROL SYSTEM

MEANING

An inventory control system is a system the encompasses all aspects of managing a company's
inventories; purchasing, shipping, receiving, tracking, warehousing and storage, turnover, and
reordering

Importance:
Inventory accounts for higher proportion of current assets. The term inventory refers to raw
materials, work in progress and finished goods. Maintenance of excessive, inventory implies blocking
of capital in inventories, warehousing cost, insurance of goods stored, rent to the building where it is
stored, spoilage, salaries to staff engaged in storage of goods, risk of obsolescence, etc.

On the other hand maintenance of too low inventory implies the danger of stock out situation and
the stoppage of production process. In this context, maintenance of optimum inventory assumes
significance to strike a balance between too much and too low inventory levels.

Control over inventory is exercised through:

i. ABC analysis

ii. Economic Order Quantity (EOQ)

iii. Just in time

iv. Fixation of stock levels.

i. ABC Analysis:

Under ABC analysis, the inventory items are categorized into three groups. Based on this criterion,
items of high consumption value which are critical to production process come under ‘A’ category;
items of moderate consumption value fall under ‘B’ category and category ‘C’ contains items of low
consumption value. According to this concept, maximum attention should be paid to category A as
they are most critical in terms of monetary value followed by B and C.

Inventory manager has to ensure that they do not remain in stock for long time. The main
advantages of ABC analysis is that huge economy is achieved in inventory carrying cost and
investment in inventory is regulated and kept under control. The criticality of any item is judged not
in terms of its monetary value but in terms of its importance in the production process.

ii. Economic Order Quantity:

This is one of the inventory control methods used to find out the size of the quantity to be ordered
so that cost of carrying the inventory and cost of ordering the inventory are equalized. This is the
optimum quantity to be ordered. There are two costs involved in determining economic order
quantity, namely ordering cost and carrying cost.
They have been tabulated as under:

Ordering Cost:

a. Cost of processing purchase order

b. Transportation

c. Inspection of quality

d. Expediting overdue order

e. Stationery and postage

f. Telephone

Carrying Cost:

a. Store keeper salary

b. Racking & pulverization

c. Heating and lighting

d. Depreciation on racks and furniture

e. Interest capital invested in inventory

f. Obsolescence
g. Deterioration

h. Damage by insects and cost of disinfectant

Where the frequency of order is more, the ordering cost could be higher and the enterprise may lose
volume discount. In short, the smaller the order size the greater the ordering cost. Next important
component is carrying cost. The cost of carrying is proportionate to size of inventory held in stores
and time of storage. These costs are expressed as rate per unit.

Once these two costs are calculated, the economic order quantity is arrived at by the following
formula:

Where:
D = demand per year
Co = cost per order
Ch = cost of holding per unit of inventory
By applying the formula, the economic order quantity is found out. This quantity equalizes the cost
of ordering and cost of storing the materials. In other words, investment in inventory is optimized.

iii. Just in Time (JIT):

This is a Japanese concept which took birth in the mid-1970. In Japanese language it is known as
Kanban. Through this concept, investment in inventory is brought to the barest minimum. The logic
behind the JIT concept is that organizations should manufacture the products only when customers
need it and to the quantity required. This minimizes cost of carrying and cost of ordering.

JIT concept is applicable to concerns manufacturing standardized product which enjoy consistent
demand. This concept is of little application to enterprises which produce seasonal and non-
standardized goods. They face irregular purchase of raw materials, uneven production cycle and
greater accumulation of inventory.
To practice JIT concept, there should be perfect coordination between organization and supply chain
members. Even concerns practicing JIT face the problem when they get a spate of orders and supply
chain is disturbed by disputes with suppliers. Therefore a buffer stock needs to be maintained, to
keep the facility operating.

iv. Fixation of Stock Levels:

Fixation of stock levels like minimum order level, maximum order level and reorder level enable the
store keeper to maintain the optimum size of inventory obviating overstocking and under stocking of
inventory thereby saving inventory cost. Management Information System:

Relevant information is collected and transferred to all the persons who are responsible to take
decisions. A communication system is developed through which all levels of persons are informed
about the growth of the organisation. Whenever the deviation is found, the corrective or control
action is taken by the responsible person.

The management information system emphasises the need for adequate information in time for
taking the best decision. Thus, management information system helps the management in
managerial decision-making by giving the right information at the right time and in the right form.

MANAGEMENT INFORMATION SYSTEM (MIS)

Concept & definition

Management Information Systems (MIS), referred to as Information Management and Systems, is

the discipline covering the application of people, technologies, and procedures collectively called
information systems, to solving business problems.

“'MIS' is a planned system of collecting, storing and disseminating data in the form of information
needed to carry out the functions of management.”

Academically, the term is commonly used to refer to the group of information management
methods tied to the automation or support of human decision making, e.g. Decision Support
Systems, Expert Systems, and Executive Information Systems.

Management : Management is art of getting things done through and with the people in formally
organized groups. The basic functions performed by a manager in an organization are: Planning,
controlling, staffing, organizing, and directing.

Information : Information is considered as valuable component of an organization. Information is

data that is processed and is presented in a form which assists decision maker.

System : A system is defined as a set of elements which are joined together to achieve a common
objective. The elements are interrelated and interdependent. Thus every system is said to be
composed of subsystems. A system has one or multiple inputs, these inputs are processed through a
transformation process to convert these input( s) to output.

MIS DEFINITION:

The Management Information System (MIS) is a concept of the last decade or two. It has been
understood and described in a number ways. It is also known as the Information System, the
Information and Decision System, the Computer- based information System.

The MIS has more than one definition, some of which are give below:

1. The MIS is defined as a system which provides information support for decision making in the
organization.

2. The MIS is defined as an integrated system of man and machine for providing the information to
support the operations, the management and the decision making function in the organization.

3. The MIS is defined as a system based on the database of the organization evolved for the purpose
of providing information to the people in the organization.

4. The MIS is defined as a Computer based Information System.

Thought there are a number of definitions, all of them converge on one single point, i.e., the MIS is a
system to support the decision making function in the organization. The difference lies in defining
the elements of the MIS. However, in today’s world MIS a computerized .business processing system
generating information for the people in the organization to meet the information needs decision
making to achieve the corporate objective of the organization. In any organization, small or big, a
major portion of the time goes in data collection, processing, documenting it to the people.

Hence, a major portion of the overheads goes into this kind of unproductive work in the
organization. Every individual in an organization is continuously looking for some information which
is needed to perform his/her task. Hence, the information is people-oriented and it varies with the
nature of the people in the organization.

The difficulty in handling this multiple requirement of the people is due to a couple of reasons. The
information is a processed product to fulfill an imprecise need of the people. It takes time to search
the data and may require a difficult processing path. It has a time value and unless processed on
time and communicated, it has no value. The scope and the quantum of information is individual
dependent and it is difficult to conceive the information as a well-defined product for the entire
organization. Since the people are instrumental in any business transaction, a human error is
possible in conducting the same. Since a human error is difficult to control, the difficulty arises in
ensuring a hundred per cent quality assurance of information in terms of completeness, accuracy,
validity, timeliness and meeting the decision making needs.
In order to get a better grip on the activity of information processing, it is necessary to have a formal
system which should take care of the following points:

• Handling of a voluminous data.

• Confirmation of the validity of data and transaction.

• Complex processing of data and multidimensional analysis.

• Quick search and retrieval.

• Mass storage.

• Communication of the information system to the user on time.

• Fulfilling the changing needs of the information.

The management information system uses computers and communication technology to deal with
these points of supreme importance.

Objectives of MIS :

1. Data Capturing : MIS capture data from various internal and external sources of organization.
Data capturing may be manual or through computer terminals.

2. Processing of Data : The captured data is processed to convert into required information.
Processing of data is done by such activities as calculating, sorting, classifying, and summarizing.

3. Storage of Information : MIS stores the processed or unprocessed data for future use. If any
information is not immediately required, it is saved as an organization record, for later use.

4. Retrieval of Information : MIS retrieves information from its stores as and when

required by various users.

5. Dissemination of Information : Information, which is a finished product of MIS, is disseminated to

the users in the organization. It is periodic or online through computer terminal.

Characteristics of MIS :

1. Systems Approach : The information system follows a systems approach. Systems approach
means taking a comprehensive view or a complete look at the interlocking sub-systems that operate
within an organization.

2. Management Oriented : Management oriented characteristic of MIS implies that the

management actively directs the system development efforts. For planning of MIS, top-down
approach should be followed. Top down approach suggests that the system development starts
from the determination of management’s needs and overall business objective. To ensure that the
implementation of system’s polices meet the specification of the system, continued review and
participation of the manager is necessary.
3. Need Based : MIS design should be as per the information needs of managers at different levels.

4. Exception Based : MIS should be developed on the exception based also, which means that in an
abnormal situation, there should be immediate reporting about the exceptional situation to the
decision –makers at the required level.

5. Future Oriented : MIS should not merely provide past of historical information; rather it should
provide information, on the basis of future projections on the actions to be initiated.

6. Integrated : Integration is significant because of its ability to produce more meaningful

information. Integration means taking a comprehensive view or looking at the complete picture of
the interlocking subsystems that operate within the company.

7. Common Data Flow : Common data flow includes avoiding duplication, combining similar
functions and simplifying operations wherever possible. The development of common data flow is
an economically sound and logical concept, but it must be viewed from a practical angle.

8. Long Term Planning : MIS is developed over relatively long periods. A heavy element of planning
should be involved.

9. Sub System Concept : The MIS should be viewed as a single entity, but it must be broken down
into digestible sub-systems which are more meaningful.

10. Central database : In the MIS there should be common data base for whole system

ROLE OF THE MANAGEMENT INFORMATION SYSTEM:

The role of the MIS in an organization can be compared to the role of heart in the body. The
information is the blood and MIS is the heart. In the body the heart plays the role of supplying pure
blood to all the elements of the body including the brain. The heart works faster and supplies more
blood when needed. It regulates and controls the incoming impure blood, processes it and sends it
to the destination in the quantity needed. It fulfills the needs of blood supply to human body in
normal course and also in crisis. The MIS plays exactly the same role in the organization.

(1) The system ensures that an appropriate data is collected from the various sources,
processed, and sent further to all the needy destinations. The system is expected to fulfill the
information needs of an individual, a group of individuals, the management functionaries: the
managers and the top management.

(2) The MIS satisfies the diverse needs through a variety of systems such as Query Systems,
Analysis Systems, Modeling Systems and Decision Support Systems the MIS helps in Strategic
Planning, Management Control, Operational Control and Transaction Processing.

(3) The MIS helps the clerical personnel in the transaction processing and answers their queries
on the data pertaining to the transaction, the status of a particular record and references on a
variety of documents. The MIS helps the junior management personnel by providing the operational
data for planning, scheduling and control, and helps them further in decision making at the
operations level to correct an out of control situation.
(4) The MIS helps the middle management in short them planning, target setting and controlling
the business functions. It is supported by the use of the management tools of planning and control.
The MIS helps the top management in goal setting, strategic planning and evolving the business
plans and their implementation.

(5) The MIS plays the role of information generation, communication, problem identification
and helps in the process of decision making. The MIS, therefore, plays a vita role in the
management, administration and operations of an organization.

STRATEGIC MANAGEMENT

Strategic Management is all about identification and description of the strategies that managers can
carry so as to achieve better performance and a competitive advantage for their organization. An
organization is said to have competitive advantage if its profitability is higher than the average
profitability for all companies in its industry.

Strategic management can also be defined as a bundle of decisions and acts which a manager
undertakes and which decides the result of the firm’s performance. The manager must have a
thorough knowledge and analysis of the general and competitive organizational environment so as
to take right decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses,
Opportunities, and Threats), i.e., they should make best possible utilization of strengths, minimize
the organizational weaknesses, make use of arising opportunities from the business environment
and shouldn’t ignore the threats.

Strategic management is nothing but planning for both predictable as well as unfeasible
contingencies. It is applicable to both small as well as large organizations as even the smallest
organization face competition and, by formulating and implementing appropriate strategies, they
can attain sustainable competitive advantage.

It is a way in which strategists set the objectives and proceed about attaining them. It deals with
making and implementing decisions about future direction of an organization. It helps us to identify
the direction in which an organization is moving.

Strategic management is a continuous process that evaluates and controls the business and the
industries in which an organization is involved; evaluates its competitors and sets goals and
strategies to meet all existing and potential competitors; and then reevaluates strategies on a
regular basis to determine how it has been implemented and whether it was successful or does it
needs replacement.

Purpose of strategic management

Competitive advantage
Strategic management gives businesses an advantage over competitors because its
proactive nature means your company will always be aware of the changing market.
Achieving goals
Strategic management helps keep goals achievable by using a clear and dynamic
process for formulating steps and implementation.
Sustainable growth
Strategic management has been shown to lead to more efficient organizational
performance, which leads to manageable growth.
Cohesive organization
Strategic management necessitates communication and goal implementation
company-wide. An organization that is working in unison towards a goal is more
likely to achieve that goal.
Increased managerial awareness
Strategic management means looking toward the company's future. If managers do
this consistently, they will be more aware of industry trends and challenges. By
implementing strategic planning and thinking, they will be better prepared to face
future challenges.

OBJECTIVES OF STRATEGIC MANAGEMENT

In strategic management, there are strategic objectives and financial objectives. Additionally, all
objectives are either short run or long-run types. When planning a firm's strategy, it is important to
have objectives in mind and to understand the differences between the types of objectives.

Strategic Objectives

Strategic objectives deal with the firm's position in the model. You might do this, for example, by
positioning the firm relative to the external forces – bargaining power of customers, bargaining
power of suppliers, threat of new entrants, threat of substitutes, and competition within the
industry – that can

impact a business. Strategic objectives might include expanding market share, changing market
position or under-cutting a competitor's costs.

Financial Objectives

Managers use financial objectives to measure strategic performance. For example, if the firm's
strategic objective is to increase efficiency, the financial objective could be to increase return on
assets or return on capital. Financial objectives, derived from management accounting, are more
concrete.

Short-run Objectives

Financial and strategic objectives can either be short-run or long-run objectives. Short-run objectives
deal with the immediate future. They typically focus on tangible goals that management can realize
in a short time. An example of a shortrun objective might be to increase monthly sales.

Long-run Objectives

Long-run objectives target the firm's long-term position. While short-run objectives focus on a firm's
annual or monthly performance, long-run objectives concern themselves with the firm's
development over several years. Examples of long-term objectives might be to become the market
leader or to attain sustainable growth.

NATURE OF STRATEGY

• Strategy is a contingent plan as it is designed to meet the demands of a difficult situation.

• Strategy provides direction in which human and physical resources will be deployed for achieving
organizational goals in the face of environmental pressure and constraints.

• Strategy relates an organization to its external environment. Strategic decisions are primarily
concerned with expected trends in the market, changes in government policy, technological
developments etc.

Strategy is an interpretative plan formulated to give meaning to other plans in the light of specific
situations.

• Strategy determines the direction in which the organization is going in relation to its environment.
It is the process of defining intentions and allocating or matching resources to opportunities and
needs, thus achieving a strategic fit between them. Business strategy is concerned with achieving
competitive advantage.

• The effective development and implementation of strategy depends on the strategic capability of
the organization, which will include the ability not only to formulate strategic goals but also to
develop and implement strategic plans through the process of strategic management.

• A strategy gives direction to diverse activities, even though the conditions under which the
activities are carried out are rapidly changing.

• The strategy describes the way that the organization will pursue its goals, given the changing
environment and the resource capabilities of the organization.

• It provides an understanding of how the organization plans to compete.

• It is the determination and evaluation of alternatives available to an organization in achieving its

objectives and mission and the selection of appropriate alternatives to be pursued.

• It is the fundamental pattern of present and planned objectives, resource deployments, and
interactions of a firm with markets, competitors and other environmental factors. A good strategy
should specify;

• What is to be accomplished

• Where, i.e., which product/markets it will focus on How i.e., which resources and activities will be
allocated to each product/market to meet environmental opportunities and threats and to gain a
competitive advantage

Strategic business units (SBUs)

A large organization’s activities can be segmented as business units. A business unit is an operating
unit in an organization that sells a distinct set of products to a distinct market in competition with a
well-defined set of competitors. It is normally referred to as an SBU.

An organizational SBU often has the following characteristics; It has its own set of customers.

• It should have a clear set of competitors, which it is trying to surpass.

• It should have its own strategic planning manager responsible for its success.

• Its performance must be measurable in terms of profit and loss, i.e. it must be a true profit center.
e.g. K.B.C.’s SBUs include; K.B.C Kiswahili, K.B.C. English, Metro FM, K.B.C. T.V, Metro TV etc.

Benefits of strategic management

• It provides the organization with consistency of action i.e. helps ensure that all organizational
units are working toward the same objectives (direction).

• The process forces managers to be more proactive and conscious of their environments i.e. to be
future oriented.

• It provides opportunity to involve different levels of management, encourage the commitment of

participating managers and reducing resistance to proposed change.

STRATEGIC MANAGEMENT PROCESS

1) STRATEGIC INTENT

VISION, MISSION, OBJECTIVES, POLICIES

A Mission Statement defines the company's business, its objectives and its approach to reach those
objectives.

A Vision Statement describes the desired future position of the company. Elements of Mission and
Vision Statements are often combined to provide a statement of the company's purposes, goals and
values.

Role played by mission, vision:

2) Strategy formulation involves;

• Defining the organization’s guiding philosophy & purpose or mission.

• Establishing long-term objectives in order to achieve the mission.

• Selecting the strategy to achieve the objectives.

3)Strategy implementation involves;

• Establishing short-range objectives, budgets and functional strategies to achieve the strategy.

4)Strategy evaluation and control involves the following; Establishing standards of performance.

• Monitoring progress in executing the strategy. Initiating corrective actions to ensure commitment
to the implementation of the strategy.

Strategic Analysis

Strategic analysis is a process that involves researching an organization’s business environment

within which it operates. Strategic analysis is essential to formulate strategic planning for decision
making and smooth working of that organization. With the help of strategic planning, the objective
or goals that are set by the organization can be fulfilled.

In a constant strive to improve, organizations must periodically conduct a strategic analysis which
will, in turn, help them

determine what areas need improvement and areas that are already doing well. For an organization
to function efficiently, it is important to think about how positive changes need to be implemented.

Types of Strategic Analysis

Internal strategic analysis: As the name suggests, through this analysis organizations look inwards or
within the organization and identify the positive and negative points, and establish the set of
resources that can be used to improve the company’s image within the market. Internal analysis
starts from evaluating the performance of the organization. This includes evaluating the potential of
an organization and its capacity to grow.

External strategic analysis: Once the organization has successfully completed its internal analysis,
the organization needs to know about external factors that can be a hindrance in their growth. To do
so, they need to know how the market functions and how consumers react or behave to certain
products or services. Measuring customer satisfaction is a common external analysis method.
PESTLE analysis is one of the most widely used external analysis techniques.

Strengths of Strategic Analysis

• Strategic analysis allows you to have clarity of the internal positive attributes of the
organization that are under control. By knowing these positive attributes an organization
can focus on the factors that lead to positive performance and can replicate the strategy
wherever applicable
• It helps identify strength of both internal as well as external resources, such that it leads to
an increasing competitive advantage.
• It offers you the internal components that add value or offer a competitive advantage to
your business. When you have a reasonable competitive advantage over you competitors
 half the game plan is clear. The only aspect that would need clarity is what is not going the
company’s way.

Weaknesses of Strategic Analysis

• Strategic analysis can generate too many ideas, but doesn’t help to choose which one is the
best.
• Sometimes too much time is spent on existential problem solving, such that there is little or
no time left for innovating new products or making service level changes at the
organizational level.

STRATEGIC CHOICE

Strategic choice refers to the decision which determines the future strategy of a firm. It addresses
the question “Where shall we go”.

A SWOT analysis is conducted to examine the strengths and weaknesses of the firm and
opportunities that can be exploited are also determined. Based on the analysis the firm selects a
path among various other alternatives that will successfully achieve the firm`s objectives.

FACTORS AFFECTING SRATEGIC CHOICE

• Environmental constraints
• Internal organizations and management power relationships
• Values and preferences
• Management`s attitude towards risk
• Impact of past strategy
• Time constraints- time pressure, frame horizon, timing of decision
• Information constraints
• Competitors reaction

Process of Strategic choice

1. Focusing on alternatives – The aim of this step is to narrow down the choice to a manageable
number of feasible strategies. It can be done by visualizing a future state and working backwards
from it. Managers generally use GAP analysis for this purpose

2. Analysing the strategic alternatives- The alternatives have to be subjected to a thorough analysis
which rely on certain factors known as selection factors. These selection factors determine the
criteria on the basis of which the evaluation will take place. They are:

Objective factors – These are based on analytical techniques and are hard facts used to facilitate
strategic choice.

Subjective factors – These are based on one`s personal judgment, collective or descriptive factors.
 3. Evaluation of strategies – Each factor is evaluated for its capability to help the organization to
achieve its objectives. This step involves bringing together analysis carried out on the basis of
subjective and objective factors. Successive iterative steps of analyzing different alternatives lie at
the heart of such evaluation.

4. Making a strategic choice– A strategic choice must lead to a clear assessment of alternative
which is the most suitable alternative under the existing conditions. A blueprint has to be made that
will describe the strategies and conditions under which it operates. Contingency strategies must be
also devised.

STRATEGY IMPLEMENTATION

Strategy implementation is the translation of chosen strategy into organizational action so as to

achieve strategic goals and objectives. Strategy implementation is also defined as the manner in
which an organization should develop, utilize, and amalgamate organizational structure, control
systems, and culture to follow strategies that lead to competitive advantage and a better
performance. Organizational structure allocates special value developing tasks and roles to the
employees and states how these tasks and roles can be correlated so as maximize efficiency, quality,
and customer satisfaction-the pillars of competitive advantage. But, organizational structure is not
sufficient in itself to motivate the employees.

An organizational control system is also required. This control system equips managers with
motivational incentives for employees as well as feedback on employees and organizational
performance. Organizational culture refers to the specialized collection of values, attitudes, norms
and beliefs shared by organizational members and groups.

Following are the main steps in implementing a strategy:

• Developing an organization having potential of carrying out strategy successfully.

• Disbursement of abundant resources to strategy-essential activities.
• Creating strategy-encouraging policies.
• Employing best policies and programs for constant improvement.
• Linking reward structure to accomplishment of results.
• Making use of strategic leadership.

CASELET STUDY

1.A software company was entering a new area of MIS. This company had a good reputation
in the software areas. The company won a contract for MIS for a pharmaceutical company.
The project was scheduled for completion in one year. But after 8 months a large part of the
project was incomplete. Not completing the project on schedule will bring loss of face and
litigation for the company. What should be the company do?
2. Chemco is a subsidiary of an engineering company with a turnover of Rs 75 Crores and a
15% bottom line. It initiated implementation of an enterprise wide integrated software and
systems solution and hired the best consultant - Dramco. The scheduled budget was Rs. 2.5
crores and time frame were 2 years. At the end of 2 yrs, a committee was formed to review
the implementation part. The MD found that the project was only 40% complete and facing
serious cost and time overruns. The top management blames the consultant and the plant
level managers and workers for the delay. On the other hand, the consultant blames top
management. Identify the problem and discuss the course of action.