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TRIBHUVAN UNIVERSITY
1ST SEMESTER
MGT 231 FOUNDATION OF BUSINESS MANAGEMENT
(BBA/BBM/BIM)

- Anurag Paudel

UNIT 1: INTRODUCTION

1.Concept of management and business management

1.1 Management

“Management is a distinct process, consisting of planning, organizing, actuating

and controlling, performed to determine and accomplish stated goals by the use of
human beings and other resources.”

George R Terry (1877 - 1955)

"Management is the art of getting things done through others and with formally
organized groups."

Harold Koontz (1909-1984)

"Management may be defined as the process by means of which the purpose and
objectives of a particular human group are determined, clarified and effectuated"

Peter Ferdinand Drucker (1909 –2005)

"Management is the art of knowing what you want to do and then seeing that they
do it in the best and the cheapest way."

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Frederick Winslow Taylor (1856 –1915)

Management is the art and science of managing people by planning, organizing,

directing and controlling utilizing the human, financial and technical resources
effectively and efficiently. The key principle of management are as follows:
 planning
 organizing
 directing and
 controlling

1.2 Business Management

Business management is the process of planning, organizing, directing, and
controlling the activities of a business or organization to achieve its goals and
objectives.
The concept of business management involves the systematic planning, organizing,
directing, and controlling of various resources, including human, financial, and
operational, to achieve the goals and objectives of a business efficiently and
effectively.

"Business Management is the art of knowing what you want to do and than seeing
that it is done in the best and cheapest way."

-By Taylor.

"Business Management means to manage is to forecast and to plan, toorganise,to

co- ordinate, to control."

-By HenryFayol.

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2. The management process

The concept of management refers to the systematic process of planning, organizing,
directing, and controlling resources (human, financial, technological, and
informational) to achieve organizational goals efficiently and effectively.
The management process is mentioned below:
i. Planning
Planning is making plans in advance on what is to be done and how it is to be
done. Managers must proactively address the challenges by developing
strategic approaches, ensuring a proactive stance in navigating obstacles and
maintaining alignment with the overarching organizational objectives.

ii. Organizing
Organizing is the process of combining together all organizational resources
and establishing relations among them to achieve planned goals. Additionally,
organizing entails the establishment of coordination mechanisms, ensuring a
seamless workflow and collaborative synergy among different components of
the organization.

iii. Directing
Directing means giving instructions, guiding, counselling, motivating and
leading the staff in an organisation in doing work to achieve organisational
goals.Moreover, effective directing involves the facilitation of seamless
communication within the organization, ensuring that information flows
efficiently and that teams are well-informed, promoting collaboration and a
shared understanding of objectives.

iv. Controlling
Controlling is the process of measuring the actual performance achieved with
that of planned performance and taking corrective action if necessary. The
controlling process extends further to the comprehensive evaluation of results,
providing insights for informed decision-making.

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3. Types of Managers

Types of Managers

on the basis of level of on the basis of nature or area of managerial

management job

Top-level managers General managers

Middle level managers Function managers

Lower level managers Line/staff managers

3.1On the basis of level of management

a. Top level managers
Top-level managers are those who represent the highest level of executive
management. Top-level managers often have the word “chief” in their job
titles, such as chief executive officer, chief financial officer, and so on. These
managers help sustain the company's growth and execute plans over the long
term. e.g. CEO (Chief Executive Officer), CFO (Chief Financial Officer), CIO
(Chief Information Officer), etc.

b. Middle level managers

Middle-level managers report and are accountable to top-level managers and,
at the same time, are responsible for leading lower-level managers..Middle
managers are in charge of facilitating any changes needed in an organization
and creating an effective working environment. e.g. General Manager,
Regional Manager, Director, etc.

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c. Lower level managers

Lower-level management refers to the managers who supervise their
employees directly and must coordinate and delegate tasks to ensure processes
are efficient. They may also be referred to as first-line managers and are
typically entry-level managers. e.g. Supervisor, Team Leader, Shift Manager,
etc.

3.2On the basis of level of management

a. General managers
A general manager (GM) is an executive who has overall responsibility for
managing both the revenue and cost elements of a company's income
statement, known as profit & loss (P&L) responsibility. A general manager
holds a broad oversight role, responsible for managing the overall operations
of a business or a specific location. For instance, a Retail General Manager
could oversee the entire operation of a retail store, ensuring that sales targets
are met, customer service is maintained, and overall profitability is achieved.
Their responsibilities often span various functions, and they play a key role in
decision-making and strategic planning.

b. Function managers
A functional manager is focused on overseeing a specific business function or
department within an organization. An example is a Marketing Manager in a
technology company. The Marketing Manager is responsible for planning and
executing marketing strategies, coordinating with the sales team, and ensuring
that the marketing department's activities align with the overall business
objectives. Their expertise lies in the specific function they manage.

c. Staff/line managers
A line manager is typically a front-line supervisor directly responsible for
overseeing the work of non-managerial employees in day-to-day operations.
Consider a Production Line Manager in a manufacturing plant. This manager
is responsible for supervising the production line workers, ensuring that
production targets are met, and addressing any issues that may arise during

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the manufacturing process. Line managers play a critical role in implementing

organizational plans at the operational level.

In summary, general managers provide overall leadership, functional managers

oversee specific business functions, and line managers supervise the day-to-day
activities of non-managerial staff in a particular operational context. Each level of
management contributes to the effective functioning of the organization.

4.Basic managerial skills and roles

4.1 Managerial skills

A manager is a person who is responsible for a part of a business or organization,
this may include supervising and managing a group of people.
The skills of managers are mentioned below:

Levels of Managerial Skills/Management

Top level management Conceptual
skills
Middle level management Human
Skills
Lower level management Technical
skills

a. Conceptual skills
Conceptual skills are the abilities that allow an individual to better understand
complex scenarios and develop creative solutions. From a management
perspective, these skills offer the ability to approach complicated workplace
situations in a variety of different ways. An example of conceptual skills is
demonstrated by a CEO who can envision the long-term direction of the
company, identify opportunities in the market, and develop strategies for
sustainable growth.

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b. Human skills
Human skills, also known as interpersonal skills, involve the ability to work
effectively with people, understand their needs, and communicate well. A
middle manager with strong human skills might be adept at resolving conflicts
within a team, fostering collaboration, and motivating employees to achieve
common goals. This skill is crucial for all levels of management, as building
positive relationships is fundamental to successful leadership.

c. Technical skills
Technical skills involve the proficiency in specific tools, techniques, or
specialized knowledge related to a particular field or industry. For instance,
an IT manager with strong technical skills would possess expertise in
programming languages, network administration, and software development.
These skills are particularly important for lower-level managers who often
have a more hands-on role in the execution of tasks within their functional
areas.

In conclusion, effective managers often possess a combination of these three types

of skills. The relative importance of each skill may vary depending on the managerial
level and the specific requirements of the role. Successful managers continuously
develop and refine these skills throughout their careers to adapt to changing
organizational needs and industry trends.

4.2 Managerial roles

Managers are responsible for achieving the goals and objectives of an organisation
through managing its resources (human, financial, and operational).

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Interpersonal Informational Decisional

Roles Roles Roles
Figurehead Monitor Entrepreneur

Disturbance
handler
Leader Disseminator
Resource allocator

Liasion Spokesperson Negotiator

a) Interpersonal roles
 Figurehead – includes symbolic duties which are legal or social in
nature.

 Leader – includes all aspects of being a good leader. This involves

building a team, coaching the members, motivating them, and
developing strong relationships.

 Liaison – includes developing and maintaining a network outside the

office for information and assistance.

b) Informational roles
 Monitor – includes seeking information regarding the issues that are
affecting the organization. Also, this includes internal as well as external
information.

 Disseminator – On receiving any important information from internal or

external sources, the same needs to be disseminated or transmitted
within the organization.

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 Spokesperson – includes representing the organization and providing

information about the organization to outsiders.

c) Decisional Roles
 Entrepreneur – involves all aspects associated with acting as an initiator,
designer, and also an encourager of innovation and change.

 Disturbance handler – taking corrective action when the organization

faces unexpected difficulties which are important in nature.

 Resource Allocator – being responsible for the optimum allocation

of resources like time, equipment, funds, and also human resources, etc.

 Negotiator – includes representing the organization in negotiations

which affect the manager’s scope of responsibility.

5. Changing job of managers

Business is changing quickly these days, and with it, the job of managers. No longer
just bosses who tell people what to do, managers today must build relationships,
guide teams through uncertainty, coordinate virtual collaboration and connections,
spark new ideas and lead impactful outcomes. Here are five key shifts managers
must make to be effective today and in the future. They are:
a) From Administrators to Relationship Builders
The manager role has evolved from a focus on oversight to one centered on
developing and facilitating relationships across the workplace ecosystem. It
starts with a new level of care and connection to each of their employees,
which has become increasingly important post-pandemic. Great managers
help their teams navigate the organization by creating connections between
departments, regions and functions.

b) From Boss to Guide for Uncertain and Disruptive Times

Businesses often operate under the illusion of control and certainty, believing
they can predict and manage all outcomes. Successful managers recognize
they can’t control everything. They let go of the old comfort system where the
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past predicted the future and instead focus on adaptability. They empower
their team members to think for themselves and make good decisions. The
key is moving from a command-and-control style to one of delegation and
trust.

c) From Staff Leader to Virtual Team Facilitator

People are increasingly working flexible hours across multiple time zones and
different locations. Given this, it is essential for managers to build strong
teams that coordinate and collaborate despite the added obstacles of not
working in the same place at the same time and without the benefit of
spontaneous interactions. Facilitating asynchronous collaboration by
leveraging tools and practices that enable team members to consume content
and contribute when the time is right for them.

d) From Rule Maker to Innovation Catalyst

As automation and artificial intelligence disrupt critical jobs, it will be up to
the managers to create an environment that welcomes new ideas and adapts to
change. Great managers encourage people to take risks and learn from their
mistakes rather than supporting the status quo. In addition, managers of the
future will lead the way to a new era of augmenting the work people do with
machines and technology to get the job done. They will drive new practices
and operating systems to optimize productivity and results.

e) From Performance Monitor to High-Impact Team Leader

The highest-impact teams are aligned around a shared purpose. High impact
team leaders build synergy among members to make a big impact instead of
just checking the boxes on individual evaluation forms. The best teams work
well together, trust each other and work towards collective results. Building a
cohesive team culture and fostering engagement becomes more complex in a
virtual environment.

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6. Management challenges
The meaning of MANAGEMENT is the act or art of managing, the conducting or
supervising of something (such as a business). The challenges of management are
mentioned below:
1. Change Management:
Adapting to change is a perennial challenge for management, whether it
involves the implementation of new technologies, organizational
restructuring, or responding to shifts in market demands. Successfully
managing change requires effective communication, strategic planning, and a
commitment to guiding teams through transitions. Example: Implementing
new technologies, restructuring, or shifts in market demands.

2. Globalization:
In an increasingly interconnected world, managing global operations presents
challenges such as coordinating diverse teams across different time zones,
navigating varied cultural nuances, and addressing international market
complexities. Successful management in a global context demands cultural
sensitivity, adaptability, and a strategic understanding of diverse markets.
Example: Managing diverse teams across different time zones and cultural
backgrounds.

3. Technological Advances:
Keeping pace with rapid technological changes is a perpetual challenge for
management. This involves integrating new systems, ensuring cybersecurity,
and fostering a culture of innovation. Managers must stay informed about
emerging technologies relevant to their industry and strategically implement
those that enhance organizational efficiency and competitiveness.
Example: Addressing skill gaps, fostering a positive workplace culture.

4. Talent Management:
Attracting, retaining, and developing skilled employees is a critical challenge
for management. This involves addressing skill gaps, providing continuous
learning opportunities, and fostering a positive workplace culture that

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promotes employee engagement and satisfaction. Example: Addressing skill

gaps, fostering a positive workplace culture.

5. Diversity and Inclusion:

Managing diverse workforces and fostering inclusivity are contemporary
challenges in management. Effective leaders strive to create environments
where employees of diverse backgrounds feel valued and included. This
entails addressing biases, promoting equal opportunities, and cultivating a
culture of respect. Example: Promoting equal opportunities, addressing
biases.

6. Ethical Decision-Making:
Balancing ethical considerations in decision-making is an ongoing challenge
for management. Leaders must navigate ethical dilemmas, uphold integrity,
and ensure transparency in their actions, contributing to the establishment of
a principled organizational culture. Example: Navigating ethical dilemmas,
ensuring transparency.

7. Risk Management:
Identifying and mitigating various types of risks, including financial risks,
regulatory compliance, and geopolitical uncertainties, is a critical
management challenge. Successful risk management involves strategic
planning, continuous monitoring, and the development of contingency plans
to address potential threats. Example: Financial risks, regulatory compliance,
geopolitical uncertainties.

7. Acquaintance to task and general environment of business and analysis of

task environment using Porter model
Porter's Five Forces is a model that identifies and analyzes five competitive forces
that shape every industry. It is used to help determine an industry's weaknesses and
strengths. Five Forces analysis is frequently used to identify an industry's structure
and to determine corporate strategy for that industry.

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i. Competition in the Industry

The first of the Five Forces refers to the number of competitors and their
ability to undercut a company. The larger the number of competitors, along
with the number of equivalent products and services they offer, the lesser the
power of a company. Suppliers and buyers seek out a
company's competition if they are able to offer a better deal or lower prices.
Conversely, when competitive rivalry is low, a company has greater power to
charge higher prices and set the terms of deals to achieve higher sales and
profits.

ii. Potential of New Entrants into an Industry

A company's power is also affected by the force of new entrants into its
market. The less time and money it costs for a competitor to enter a company's
market and be an effective competitor, the more an established company's
position could be significantly weakened. An industry with strong barriers to
entry is ideal for existing companies within that industry since the company
would be able to charge higher prices and negotiate better terms.

iii. Power of Supplier

The next factor in the Porter model addresses how easily suppliers can drive
up the cost of inputs. It is affected by the number of suppliers of key inputs of
a good or service, how unique these inputs are, and how much it would cost a
company to switch to another supplier. The fewer suppliers to an industry, the
more a company would depend on a supplier. As a result, the supplier has
more power and can drive up input costs and push for other advantages in
trade. On the other hand, when there are many suppliers or low switching costs
between rival suppliers, a company can keep its input costs lower and enhance
its profits.

v. Power of Customers
The ability that customers have to drive prices lower or their level of power is
one of the Five Forces. It is affected by how many buyers or customers a
company has, how significant each customer is, and how much it would cost
a company to find new customers or markets for its output. A smaller and
more powerful client base means that each customer has more power to
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negotiate for lower prices and better deals. A company that has many, smaller,
independent customers will have an easier time charging higher prices to
increase profitability.

vi. Threat of Substitutes

The last of the Five Forces focuses on substitutes. Substitute goods or services
that can be used in place of a company's products or services pose a threat.
Companies that produce goods or services for which there are no close
substitutes will have more power to increase prices and lock in favorable
terms. When close substitutes are available, customers will have the option to
forgo buying a company's product, and a company's power can be weakened.
In conclusion, understanding Porter's Five Forces and how they apply to an industry,
can enable a company to adjust its business strategy to better use its resources to
generate higher earnings for its investors.

Multiple choice questions (MCQS)

Here are multiple-choice questions (MCQs) based on the concepts:

1. Concept of Management:
a. What is management?
i. The process of controlling employees
ii. The process of achieving organizational goals through planning, organizing,
leading, and controlling resources
iii. The process of hiring and firing employees
iv. The process of maximizing individual profits

Answer: ii. The process of achieving organizational goals through planning,

organizing, leading, and controlling resources

2. Management Process:
b. Which of the following is not a part of the management process?

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i. Planning
ii. Monitoring
iii. Selling
iv. Controlling

Answer: iii. Selling

3. Types of Managers:
c. Who is responsible for the overall performance and effectiveness of the
organization?
i. General Manager
ii. Functional Manager
iii. Line Manager
iv. Team Leader

Answer: i. General Manager

4. Basic Managerial Roles and Skills:

d. Which managerial role involves resolving conflicts and facilitating
communication within the organization?
i. Interpersonal
ii. Decisional
iii. Informational
iv. Liaison

Answer:i. Interpersonal

5. Changing Job of Managers:

e. In the context of changing managerial roles, what is a key characteristic of a
modern manager?
i. Micro-management
ii. Flexibility and adaptability
iii. Strict hierarchy
iv. Autocratic decision-making

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Answer: ii. Flexibility and adaptability

6. Management Challenges:
f. What is a common challenge faced by managers in the dynamic business
environment?
i. Status quo maintenance
ii. Resistance to change
iii. Limited competition
iv. Isolation from external factors

Answer: ii. Resistance to change

7. Acquaintance to Task and General Environment:

g. The task environment of a business includes:
i. Macro-economic factors
ii. Internal factors
iii. Political stability
iv. Global trends

Answer: ii. Internal factors

8. Analysis of Task Environment using Porter Model:

h. According to Porter's Five Forces model, which force assesses the bargaining
power of customers?
i. Threat of new entrants
ii. Bargaining power of buyers
iii. Threat of substitute products
iv. Intensity of competitive rivalry

Answer: ii. Bargaining power of buyers

BRIEF ANSWER QUESTIONS

1. What is the concept of management?
2. Define business management.

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3. Identify the three types of managers.

4. Differentiate between general, functional, and line managers.
5. List the basic managerial roles.
6. Name essential managerial skills.
7. Explain the changing job of managers.
8. What are common management challenges?
9. Define the task environment of business.
10. How does Porter's model analyze the task environment?

SHORT ANSWER QUESTIONS

1. What is the core concept of management in business?
2. Define the management process and its key components.
3. Differentiate between general, functional, and line managers.
4. Identify and explain the basic managerial roles that managers play.
5. What skills are essential for effective business management?
6. How has the job of managers evolved over time?
7. Highlight the main challenges faced by modern managers.
8. Explain the concept of the task environment in business.
9. Provide an overview of the general environment in the business context.
10. How can the Porter model be used to analyze the task environment in business?

LONG ANSWER QUESTIONS

1. What is the fundamental concept of management, and how does it relate to
business management?
2. Can you elaborate on the management process and its key components in the
context of organizational management?
3. Differentiate between general managers, functional managers, and line managers,
highlighting their respective roles and responsibilities within an organization.
4. Explain the basic managerial roles that individuals play in organizational settings,
emphasizing the importance of these roles.
5. What are the essential managerial skills that contribute to effective leadership and
decision-making in the business environment?

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6. Explain the evolving nature of managerial jobs and how they have changed over
time, considering factors such as technology, globalization, and organizational
structures.
7. Explain the challenges faced by managers in today's dynamic business landscape,
discussing the implications for decision-making and strategic planning.
8. Basis of Porter's model, analyze the task environment of a business, exploring
how competitive forces shape the industry and impact managerial decision-making.
9. How does an understanding of the general environment of business contribute to
effective strategic management, and what factors should managers consider when
assessing the broader business environment?

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UNIT 2: PHILOSOPHICAL ASPECTS OF MANAGEMENT

The philosophical aspects of management refer to the underlying principles, beliefs,

and values that guide and shape the way individuals and organizations approach the
practice of management. This perspective emphasizes the broader, conceptual
foundations of management beyond the practical and technical aspects.

Philosophical Aspects of Management

Behavioural
The classical System Contingency
management
philosophy philosophy philosophy
philosophy

scientific human relation

management movement

administrative hawthrone
management studies

bureauricratic
management

1. The classical philosophy

The classical philosophy of management refers to the early theories and
principles that laid the groundwork for the field of management. It
encompasses the contributions of several prominent thinkers from the late
19th to the early 20th centuries. The classical philosophy of management
encompasses three main schools of thought that emerged during the Industrial
Revolution and early 20th century: Scientific Management, Administrative
Management, and Bureaucratic Management. These philosophies focused on
increasing efficiency, productivity, and order within organizations, often at
the expense of individual worker needs and satisfaction.

1.1Scientific Management: Building Efficiency Brick by Brick

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Scientific Management, also known as Taylorism, is a theory of

management that originated in the late 19th and early 20th centuries,
primarily associated with the work of Frederick W. Taylor. Scientific
management, pioneered by Frederick Taylor and Frank Gilbreth in the late
19th and early 20th centuries, revolutionized the way work was analyzed
and optimized. It aimed to maximize efficiency and output by applying
scientific principles to every aspect of work processes. The key principles
of scientific management include:

1. Time and Motion Studies:

Taylor conducted time and motion studies to analyze and standardize
work processes. This involved breaking down tasks into smaller,
repetitive motions to identify the most efficient way of performing
them. The goal was to eliminate unnecessary movements and optimize
productivity.

2. Scientific Selection and Training:

Taylor emphasized the scientific selection of workers based on their
abilities and aptitudes for specific tasks. He argued that individuals
should be trained to perform their jobs in the most efficient manner.
This approach aimed to match the right person with the right job to
maximize efficiency.

3. Piece-Rate Incentive System:

Taylor advocated for a piece-rate incentive system, where workers were
paid based on their level of output or the number of pieces produced.
The idea was to provide financial incentives for higher productivity,
aligning the interests of workers with those of the organization.

4. Functional Foremanship:
Taylor proposed the concept of functional foremanship, where
specialized supervisors, known as functional foremen, would oversee
specific aspects of the production process. These foremen would be

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responsible for planning, organizing, training, and supporting workers

in their specialized areas.

5. Standardization of Tools and Equipment:

Standardization of tools and equipment was a crucial aspect of
scientific management. Taylor believed that using standardized tools
and equipment would contribute to efficiency and eliminate
unnecessary variations in work processes.

6. Task Specialization and Division of Labor:

Taylor advocated for the division of labor and specialization, where
each worker focused on a specific task. This division aimed to increase
efficiency by allowing workers to become highly skilled at their
particular jobs.

7. Functional Harmony:
Taylor argued for a close collaboration and harmony between workers
and management. He believed that through scientific management,
conflicts between labor and management could be minimized, and both
parties could benefit from increased efficiency and productivity.

While scientific management significantly contributed to the understanding of

organizational efficiency and productivity, it has been criticized for its overly
mechanistic view of workers and neglect of human factors such as motivation and
job satisfaction. Over time, subsequent management theories, including the human
relations and behavioral approaches, emerged to address these shortcomings and
provide a more holistic view of organizational management.

1.2Administrative Management
Administrative management is a theory of management that focuses on the
organization and coordination of activities within an enterprise. Henri
Fayol, a French mining engineer and management theorist, is widely
regarded as the founder of administrative management. Fayol's work,

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primarily outlined in his book "General and Industrial Management"

(1916), introduced several key principles of administrative management:

1. Division of Work:
Specialization and division of labor should be applied to improve
efficiency and effectiveness. According to Fayol, dividing work into
specialized tasks allows employees to develop expertise and skills in
specific areas, leading to increased productivity.

2. Authority and Responsibility:

Authority and responsibility should go hand in hand. Managers should
have the authority to give orders, but they should also bear the
responsibility for the outcomes. This principle ensures a balance of
power and accountability within the organization.

3. Discipline:
Employees should obey and respect organizational rules and
agreements. Discipline is essential for maintaining order in the
workplace. It involves adherence to rules and norms to create a
harmonious and productive working environment.

4. Unity of Command:
Each employee should receive orders from only one superior. This
principle aims to prevent conflicts arising from multiple sources of
authority, ensuring clear lines of communication and accountability.

5. Unity of Direction:
The organization should have a single plan of action to achieve a
common goal. To avoid confusion and conflicting objectives, all
activities in an organization should align with a unified direction and
purpose.

6. Subordination of Individual Interests to the General Interest:

Individual interests should not take precedence over the interests of the
organization. This principle emphasizes the importance of aligning
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individual and group interests with the overall objectives of the

organization.

7. Remuneration:
Employees' remuneration should be fair and provide satisfaction to both
the employees and the organization. Fayol believed that fair
compensation is crucial for maintaining a motivated and content
workforce.

8. Centralization and Decentralization:

The degree of centralization or decentralization should depend on the
nature of the organizational tasks and the capabilities of personnel. The
distribution of decision-making authority should be determined by the
nature of tasks and the competence of individuals at various levels of
the organization.

9. Scalar Chain:
There should be a clear and unbroken line of communication and
authority from the top of the organization to the bottom. The scalar
chain ensures that information and instructions flow through the
organizational hierarchy without gaps or disruptions.

10.Order:
Materials and people should be in the right place at the right time.
Organizing resources and activities in a systematic manner contributes
to efficiency and minimizes disruptions.

11.Equity:
Managers should treat employees with kindness and justice. Fair
treatment fosters a positive work environment and contributes to
employee satisfaction and loyalty.

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12.Stability of Personnel:
High employee turnover is inefficient and disrupts the continuity of work.
Ensuring stability in the workforce promotes organizational efficiency and
allows employees to develop expertise in their roles.

Henri Fayol's principles of administrative management have been influential in

shaping organizational management practices, and many of these principles continue
to be relevant in modern management theory. However, like any theory, they are not
without criticism, and some aspects may need adaptation to suit contemporary
organizational contexts.

1.3 Bureaucratic management

Bureaucratic management theory, developed by Max Weber, is
characterized by a rational and systematic approach to organizing and
managing large, complex organizations. Weber outlined several key
principles of bureaucratic management:

1. Hierarchy of Authority:
Bureaucratic organizations have a clear hierarchy of authority, with
each level of the hierarchy having authority over the levels below. This
ensures a well-defined chain of command.

2. Division of Labor:
Work is divided based on specialization, where individuals have
specific roles and responsibilities. This specialization contributes to
efficiency and expertise in tasks.

3. Formal Rules and Procedures:

Bureaucracies operate according to established and formal rules and
procedures. These rules are designed to ensure consistency,
predictability, and fairness in decision-making and operations.

4. Impersonality:

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Bureaucracies maintain an impersonal and objective approach to

decision-making and interactions. Personal biases and favoritism are
minimized, and decisions are based on rules and merit.

5. Employment Based on Merit:

Personnel selection and advancement are based on merit, qualifications,
and competence rather than favoritism or personal connections. This
principle ensures that individuals with the right skills and abilities are
placed in positions.

6. Career Orientation:
Bureaucratic organizations emphasize a career orientation, with
employees viewing their positions as part of a long-term career path.
This contributes to stability and expertise within the organization.

7. Centralized Authority:
Decision-making authority is concentrated at the top of the
organizational hierarchy. Centralized authority ensures consistency and
uniformity in decision-making across the organization.

8. Formal Record Keeping:

Bureaucracies maintain detailed and formal records of organizational
activities, decisions, and transactions. This contributes to transparency,
accountability, and the availability of information for decision-making.

9. Specialization of Duties:
Each position in a bureaucratic organization has a specific and clearly
defined set of duties. Specialization allows individuals to focus on their
areas of expertise, contributing to efficiency.

10.Predictability and Stability:

Bureaucracies aim for predictability and stability by following
established rules and procedures. This reduces uncertainty and
promotes a consistent organizational environment.

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Bureaucratic management principles were developed as a response to the need for

efficient organization and coordination in large, complex organizations. While the
bureaucratic model has been criticized for its potential to stifle innovation and
flexibility, its principles have had a significant impact on organizational theory and
continue to influence the design and structure of many modern organizations.
2. Behavioural management philosophy
Behavioral management, a reaction to earlier theories, prioritizes understanding
human behavior in organizations. It emphasizes social and psychological factors,
individual differences, and motivation theories. Key elements include recognizing
the impact of informal groups, effective communication, and collaborative
leadership. It values employee development, participation in decision-making, and
fair performance appraisal. This human-centric approach has shaped contemporary
practices by emphasizing employee well-being, motivation, and engagement for
organizational success.

2.1 Human relation movement

The Human Relations Movement, emerging in the early to mid-20th century,
marked a shift in management thinking. Led by figures like Elton Mayo, it
emphasized social and psychological factors in the workplace. The
Hawthorne Studies conducted at Western Electric highlighted the influence of
group dynamics and management attention on employee morale and
productivity. This movement challenged earlier mechanistic views of workers
and contributed to the development of more empathetic and people-centric
management practices.
Bureaucratic management is a system of organization that emphasizes
rationality, efficiency, and order. It is based on the ideas of sociologist Max
Weber, who believed that bureaucracy was the most effective way to manage
large organizations.

Here are some of the key principles of bureaucratic management:

 Formal hierarchy and chain of command:
There is a clear chain of authority, with each level of the hierarchy
reporting to the one above it. This ensures that everyone knows who is
responsible for what and that decisions can be made quickly.

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 Rules and regulations:

Bureaucracies are governed by a set of written rules and procedures that
cover all aspects of the organization's operations. This helps to ensure
that everyone is treated fairly and that decisions are made objectively.

 Division of labor:
Work is divided into specialized tasks, which are then assigned to
individual employees or teams. This allows employees to become
experts in their particular area of work, which can improve efficiency
and productivity.

 Meritocratic selection:
Employees are hired and promoted based on their qualifications and
experience, rather than on personal relationships or nepotism. This
helps to ensure that the organization is staffed by the most competent
people possible.

 Impersonality:
Bureaucratic relationships are supposed to be impersonal, meaning that
decisions are made based on objective criteria rather than on personal
feelings or relationships. This helps to avoid favoritism and corruption.

Bureaucratic management can be effective in large organizations that need to be

efficient and predictable. However, it can also be criticized for being slow,
inflexible, and impersonal. In some cases, bureaucracy can lead to red tape and
bureaucratic inertia, which can hinder the organization's ability to adapt to change.

2.2 HAWTHORNE STUDIES

The Hawthorne studies were a series of experiments and investigations conducted at
the Western Electric Hawthorne Works in Chicago between 1924 and 1932. These
studies, initially intended to examine the relationship between lighting conditions
and worker productivity, evolved into a broader exploration of various factors
influencing employee behavior and performance. The key points related to the
Hawthorne studies include:

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Origins:
The studies began with the objective of investigating how changes in lighting
conditions would impact worker productivity, particularly in tasks involving
assembly line work.

Discovery of the Hawthorne Effect:

The researchers, led by Elton Mayo, observed that regardless of changes in
lighting (increased or decreased illumination), worker productivity tended to
improve. This unanticipated improvement became known as the Hawthorne
effect, suggesting that the mere act of being observed and involved in an
experiment positively influenced workers' performance.

Social and Psychological Factors:

The focus of the studies shifted from physical working conditions to the
impact of social and psychological factors on employee productivity.
Researchers found that factors such as group dynamics, employee morale, and
the quality of interpersonal relationships played significant roles.

Importance of Informal Groups:

The studies highlighted the influence of informal groups within the
workplace. These informal social structures, formed by employees, had a
substantial impact on attitudes, behaviors, and productivity.

Role of Leadership and Communication:

Researchers identified the crucial role of leadership and effective
communication in influencing employee behavior. Supportive and
participative management styles were found to enhance productivity and
morale.

Recognition of Human Factors:

The Hawthorne studies contributed to a shift in management thinking,
recognizing the importance of human factors in the workplace. This
recognition laid the groundwork for the Human Relations Movement in
management theory.

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Legacy:
While the studies themselves had some methodological limitations and
interpretations, their legacy lies in shaping subsequent research and
discussions around the social and psychological aspects of work,
organizational behavior, and the importance of considering human factors in
management practices.
Overall, the Hawthorne studies played a pivotal role in expanding the understanding
of workplace dynamics and laid the foundation for the Human Relations Movement,
influencing management theories and practices for decades to come.

3. SYSTEM PHILOSOPHY
System philosophy, also known as systems thinking or the systems approach, is a
holistic and interdisciplinary approach to understanding and managing
organizations. It views an organization as a complex and interconnected system
composed of various elements that work together to achieve common goals. Here
are key aspects of system philosophy:
1. Interconnectedness:
The core idea of system philosophy is that the components within an
organization are interconnected. Changes or actions in one part of the system
can have consequences and implications throughout the entire organization.
Understanding these interconnections is crucial for effective management.

2. Holistic View:
System philosophy encourages taking a holistic view of an organization.
Instead of analyzing isolated components or departments, it advocates
examining the organization as a whole, considering the interactions and
relationships among different parts.

3. Input-Output Dynamics:
Organizations are seen as dynamic systems with inputs, processes, and
outputs. Inputs include resources such as people, materials, and information,
which undergo processes within the organization to produce outputs, such as
products or services.

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4. Feedback Mechanisms:
Feedback loops play a crucial role in system philosophy. Feedback
mechanisms allow organizations to adapt and adjust to changes in their
environment. Positive feedback reinforces and amplifies changes, while
negative feedback helps maintain stability and balance.

5. Boundary and Environment:

System philosophy acknowledges the boundary that separates an organization
from its external environment. Organizations interact with and are influenced
by their environment, and understanding these interactions is essential for
effective management.

6. Emergent Properties:
System philosophy recognizes that organizations exhibit emergent
properties—characteristics or behaviors that arise from the interactions of
individual components but are not explicitly programmed. These emergent
properties contribute to the uniqueness and complexity of organizations.

7. Hierarchy of Systems:
Organizations are often viewed as nested systems within larger systems. For
example, a department is a subsystem within the larger system of the entire
organization. This hierarchical perspective allows for the examination of
systems at different levels.

8. Complexity and Non-linearity:

System philosophy acknowledges the complexity and non-linearity of
organizational systems. Changes in one part of the system may not have linear
and predictable effects on the whole, and managing complexity requires a
systemic perspective.

System philosophy provides a framework for understanding the intricate

relationships and dynamics within organizations. It has applications in various fields,
including management, engineering, ecology, and social sciences. By adopting a

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systemic perspective, organizations can better navigate complexity, identify

patterns, and make more informed decisions.

4. CONTINGENCY PHILOSOPHY
Contingency philosophy, often associated with contingency theory, is an approach
to management that rejects the idea of a one-size-fits-all solution. Instead, it posits
that the effectiveness of managerial actions depends on the specific circumstances
or contingencies facing an organization.
Here are key aspects of contingency philosophy:
1. Situational Analysis:
Contingency philosophy emphasizes the need for a careful analysis of the
specific situations and environments in which an organization operates. It
argues that managerial practices should be contingent upon the unique
characteristics and challenges faced by the organization.

2. Adaptability:
The philosophy underscores the importance of adaptability in management.
There is no universal formula or best practice applicable to all situations, so
managers must be flexible and capable of adjusting strategies based on the
evolving needs and circumstances of the organization.

3. No Universal Solutions:
Contingency philosophy challenges the notion of universal principles or
management solutions. What works in one organization or context may not be
effective in another. Instead, managers must consider various factors,
including the organization's size, industry, culture, and external environment.

4. Contingency Factors:
Contingency theory identifies contingency factors that influence managerial
decisions, such as the complexity of tasks, technology, organizational size,
and environmental uncertainty. The interaction of these factors determines the
most suitable management approach.

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5. Continuous Assessment:
Effective management requires continuous assessment and monitoring of both
internal and external factors. Managers need to stay vigilant to changes in the
organization and its environment and adjust their strategies accordingly.

6. Flexibility in Leadership Style:

Contingency philosophy suggests that leadership styles should be adapted to
fit the situation. For example, a participative leadership style might be more
effective in certain situations, while a directive style might be more
appropriate in others.

7. Contingency Models:
Contingency theory has given rise to various contingency models, each
offering insights into different aspects of organizational management. These
models provide frameworks for understanding how different factors influence
managerial decisions and organizational effectiveness.

8. Risk and Uncertainty:

Contingency philosophy acknowledges the presence of risk and uncertainty
in organizational environments. Managers must be prepared to handle
unforeseen challenges and make adjustments in response to changing
conditions.

In summary, contingency philosophy challenges the idea of a universally applicable

management approach and encourages managers to tailor their strategies to the
specific circumstances they face. By recognizing the importance of situational
analysis, adaptability, and continuous assessment, organizations can enhance their
ability to navigate complex and dynamic environments. Contingency theory has
been influential in shaping management thought, providing a framework for
understanding the relationship between organizational structure, strategy, and the
external environment.
Emerging issues and challenges in Nepalese business
Here are some general areas where businesses might face challenges:
1. Economic Factors:

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Inflation and Currency Fluctuations: Economic instability, inflation, and

fluctuations in currency exchange rates can impact the cost of doing business
and affect profit margins.

2. Political and Regulatory Environment:

 Political Instability: Periods of political uncertainty or instability can
create challenges for businesses, affecting investment decisions and
overall business confidence.
 Regulatory Changes: Frequent changes in regulations or unclear
regulatory frameworks can pose challenges for businesses in terms of
compliance and planning.

3. Infrastructure Development:
Infrastructure Deficiencies: Inadequate infrastructure, including
transportation, energy, and technology, may hinder business operations and
growth.

4. Technology Adoption:
Digital Transformation: While technology presents opportunities, businesses
may face challenges in adopting and integrating new technologies into their
operations effectively.

5. Global Economic Trends:

Global Market Access: Businesses may need to adapt to global economic
trends, such as changes in international trade policies, to explore opportunities
and navigate challenges in the global market.

6. Workforce Challenges:
 Skills Gap: The gap between the skills demanded by businesses and
those possessed by the workforce can be a challenge for productivity
and growth.
 Talent Retention: Attracting and retaining skilled talent can be a
challenge, especially if there's competition for skilled workers.

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7. Environmental Sustainability:
Climate Change Impact: Businesses may face challenges related to climate
change impacts, sustainability expectations, and environmental regulations.

8. Consumer Behavior:
Changing Consumer Preferences: Rapid changes in consumer preferences and
behaviors may require businesses to adapt their products and services.

9. Access to Finance:
Credit Availability: Limited access to credit or financial resources may hinder
business expansion and investment.

10.Social and Cultural Dynamics:

 Diversity and Inclusion: Adapting to diverse workforce expectations
and embracing inclusive practices can be crucial for business success.
 Consumer Ethics: Increasing consumer awareness of ethical practices
may influence business reputation and customer loyalty.

11.Health and Pandemic Challenges:

Public Health Concerns: Events like the COVID-19 pandemic can impact
businesses, affecting supply chains, customer demand, and overall economic
activity.

It's essential for businesses in Nepal to stay informed about the local and global
business environment, monitor changes in regulations, and continuously adapt to
emerging trends. Consulting local business associations, government reports, and
industry-specific sources can provide more accurate and up-to-date insights into the
current challenges and opportunities in the Nepalese business landscape.

Multiple Choice Questions (MCQs)

1. Scientific Management is associated with:
a) Max Weber
b) Elton Mayo
c) Frederick Taylor
d) Douglas McGregor
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2. The focus of Administrative Management is on:

a) Human relations
b) Bureaucracy and formal structure
c) System and contingency
d) Organizational behavior

3. The Hawthorne Studies are related to:

a) Scientific Management
b) Administrative Management
c) Bureaucratic Management
d) Human Relation Movement

4. Which philosophy emphasizes the importance of understanding human behavior

in organizations?
a) Scientific Management
b) Administrative Management
c) Behavioural Management Philosophy
d) Bureaucratic Management

5. Max Weber is associated with:

a) Scientific Management
b) Administrative Management
c) Bureaucratic Management
d) Human Relation Movement

6. The study of how organizational systems interact with their external environment
is part of:
a) Scientific Management
b) Administrative Management
c) System and Contingency Philosophy
d) Bureaucratic Management

7. Emerging issues and challenges in Nepalese business are associated with:

a) Scientific Management
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b) Administrative Management
c) System and Contingency Philosophy
d) Human Relation Movement

8. The Human Relation Movement emphasizes:

a) Bureaucracy
b) Formal structure
c) Employee satisfaction and social needs
d) System and Contingency

9. Contingency Philosophy suggests that:

a) There is one best way to organize
b) Organizational structure depends on the situation
c) Bureaucracy is the most effective form of management
d) Human behavior can be predicted and controlled

10. Which of the following is NOT a part of the classical management philosophy?
a) Scientific Management
b) Bureaucratic Management
c) Human Relation Movement
d) Administrative Management

11. The key principles of Scientific Management include:

a) Unity of command, scalar chain, division of labor
b) Hierarchy of needs, self-actualization, motivation
c) Time and motion studies, standardization, scientific selection of workers
d) Employee empowerment, teamwork, job enrichment

12. Which management philosophy emphasizes a hierarchical structure and strict

rules and regulations?
a) Scientific Management
b) Administrative Management
c) Bureaucratic Management
d) Human Relation Movement

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13. The Hawthorne Effect suggests that:

a) People are motivated by social needs
b) Employees work harder when they are being observed
c) Time and motion studies are essential for productivity
d) Bureaucracy leads to organizational efficiency

14. A key concept in System and Contingency Philosophy is:

a) Division of labor
b) Unity of command
c) Universal principles of management
d) Adaptation to the environment

15. In the context of emerging issues in Nepalese business, which factor is NOT
commonly considered?
a) Technological advancements
b) Globalization
c) Traditional management practices
d) Environmental sustainability

16. The focus of the Human Relation Movement is on:

a) Task efficiency
b) Employee satisfaction and social needs
c) Hierarchy and authority
d) Formal structure

17. Contingency theory suggests that there is no one-size-fits-all approach to

management because
a) Employees have diverse needs
b) Organizations must adapt to their environment
c) Bureaucracy is the most efficient form of management
d) Human behavior is predictable

18.One of the challenges in Nepalese business may be related to:

a) Lack of technology adoption
b) Overemphasis on individual achievement
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c) Rigidity in organizational structure

d) Strict adherence to scientific principles

19. Which management philosophy emphasizes the importance of informal

relationships in the workplace?
a) Scientific Management
b) Administrative Management
c) Bureaucratic Management
d) Human Relation Movement

20. The classical management philosophies were developed during the:

a) 18th century
b) 19th century
c) Early 20th century
d) Late 20th century

Answers:
1. c) Frederick Taylor
2. b) Bureaucracy and formal structure
3. d) Human Relation Movement
4. c) Behavioural Management Philosophy
5. c) Bureaucratic Management
6. c) System and Contingency Philosophy
7. c) System and Contingency Philosophy
8. c) Employee satisfaction and social needs
9. b) Organizational structure depends on the situation
10. c) Human Relation Movement
11. c) Time and motion studies, standardization, scientific selection of workers
12. c) Bureaucratic Management
13. b) Employees work harder when they are being observed
14. d) Adaptation to the environment
15. c) Traditional management practices
16. b) Employee satisfaction and social needs
17. b) Organizations must adapt to their environment
18. c) Rigidity in organizational structure
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19. d) Human Relation Movement

20. c) Early 20th century

VERY SHORT QUESTIONS

1. Name one principle of scientific management.
2. Which movement is associated with the human relations philosophy?
3. What is the primary focus of bureaucratic management?
4. What did the Hawthorne studies reveal about employee productivity?
5. Define the system and contingency philosophy in management.
6. Mention one key element of administrative management.
7. Identify a challenge currently faced by Nepalese businesses.
8. What is the essence of the human relations movement?
9. Name a proponent of scientific management.
10. What does the behavioral management philosophy emphasize?
11. Explain one aspect of the emerging issues in Nepalese business.
12. What is the role of contingency factors in management?
13. Define a characteristic of bureaucratic organizations.
14. How does administrative management differ from scientific management?
15. What is a common feature of the classical management philosophies?

SHORT QUESTIONS
1. How does efficiency play a role in classical management philosophies?
2. What are the primary principles of administrative management?
3. In the context of management, what is the emphasis of the human relations
movement?
4. How did the Hawthorne studies contribute to the understanding of organizational
behavior?
5. What is the significance of a bureaucratic management approach in organizational
structure?
6. Explain the core concepts of systems thinking in management.
7. According to contingency theory, why is there no universal management
approach?

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8. What role does communication play in the success of an organization, as per the
human relations movement?
9. How do time and motion studies contribute to scientific management principles?
10. What challenges do businesses in Nepal currently face in terms of their
operational environment?
11. How does the concept of hierarchy feature in bureaucratic management
principles?
12. Discuss the impact of group dynamics on productivity, as highlighted by the
Hawthorne studies.
13. In what ways does the human relations movement advocate for employee
satisfaction in the workplace?
14. What are the key components of an organizational structure based on
administrative management principles?
15. How can businesses address the challenges posed by the dynamic and contingent
nature of their environments?

LONG QUESTIONS
1. What are the fundamental principles of classical management, and how might they
be applied to address challenges in Nepalese businesses?
2. Explain the impact of the human relations movement and Hawthorne studies on
management practices. How do these theories relate to the management of
businesses in Nepal?
3. How do system and contingency philosophies in management address complexity
and uncertainty? Discuss their potential application in the context of Nepalese
businesses without specifying the topic.
4. Identify and discuss current challenges in Nepalese businesses. How do these
challenges influence management practices, and what strategies can be considered
for sustainable growth?

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UNIT 3: BUSINESS ETHICS AND SOCIAL RESPONSIBILITY

Business ethics refers to the moral principles, values, and standards of conduct that
guide the behavior of individuals and organizations in the business world. It involves
making decisions and actions that are ethical, fair, and in accordance with principles
of integrity. Business ethics encompasses a wide range of issues, including honesty,
transparency, corporate social responsibility, fair competition, and respect for
stakeholders such as customers, employees, suppliers, and the broader community.

In essence, business ethics aims to ensure that businesses operate in a manner that is
not only legally compliant but also morally and socially responsible. Ethical business
practices contribute to building trust, maintaining a positive reputation, and fostering
long-term relationships with stakeholders. These practices often go beyond legal
requirements, reflecting a commitment to doing what is right rather than merely what
is allowed by law.

3.1 Ethical issues in management

Ethical issues in management encompass a broad range of challenges that arise in

the workplace and involve moral principles and values. Here are some common
ethical issues faced by managers:
1. Employee Treatment:
 Fair Treatment: Ensuring fair and equitable treatment of employees in areas
such as hiring, promotion, and compensation.
 Discrimination and Harassment: Addressing issues related to
discrimination, harassment, and creating a workplace free from any form of
prejudice.

2. Decision-Making:
 Transparency: Providing clear and honest information to stakeholders in
decision-making processes.

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 Conflicts of Interest: Managing situations where personal interests of

managers may conflict with the interests of the organization.

3. Corporate Social Responsibility (CSR):

 Environmental Impact: Balancing business activities with environmental
sustainability and minimizing negative ecological effects.
 Social Responsibility: Addressing the social impact of business activities,
including community engagement and philanthropy.

4. Supply Chain Management:

 Supplier Relations: Ensuring fair and ethical treatment of suppliers, avoiding
exploitation and promoting responsible sourcing.
 Labor Practices: Monitoring and addressing ethical concerns in the supply
chain, such as child labor and unsafe working conditions.

5. Financial Integrity:
 Fraud and Embezzlement: Maintaining financial integrity and preventing
fraudulent activities within the organization.
 Bribery and Corruption: Resisting and preventing unethical practices, such
as bribery and corruption, both internally and externally.

6. Privacy and Data Security:

 Data Protection: Ensuring the responsible collection, use, and protection of
customer and employee data.
 Privacy: Respecting individual privacy rights in the workplace, including
the use of surveillance and monitoring tools.

7. Leadership Integrity:
 Ethical Leadership: Leading by example and fostering a culture of integrity,
trust, and accountability.

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 Whistleblower Protection: Establishing mechanisms to protect employees

who report unethical behavior within the organization.

8. Global Business Practices:

 Cultural Sensitivity: Navigating cultural differences and ensuring that
business practices respect diverse cultural norms.
 Exploitation: Avoiding exploitative practices in international operations,
such as unfair labor conditions or disregard for local customs.

9. Technological Ethics:
 Artificial Intelligence (AI) Ethics: Ensuring responsible use of AI
technologies, considering implications for job displacement and privacy.
 Cyber security: Protecting against unethical hacking and data breaches,
safeguarding both organizational and customer information.

Addressing these ethical issues is crucial for maintaining a positive organizational

culture, fostering employee trust, and sustaining long-term success. Organizations
often establish a code of ethics and conduct to guide employees and managers in
navigating these challenges.

3.3The roots of unethical behavior

Unethical behavior in the business context can often be traced back to various root
causes. Here are some common roots of unethical behavior in organizations:

1. Lack of Ethical Leadership:

Unethical behavior may stem from leadership that fails to prioritize and model
ethical conduct. When leaders do not set a clear ethical tone or engage in
unethical practices themselves, it can create a permissive environment for
such behavior among employees.

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2. Inadequate Organizational Culture:

A corporate culture that does not emphasize ethical values and conduct can
contribute to unethical behavior. When the organizational culture prioritizes
profit over ethical considerations or does not foster an atmosphere of integrity,
employees may be more prone to engage in unethical actions.

3. Pressure to Achieve Targets:

Excessive pressure to meet performance targets or financial goals can drive
individuals to compromise their ethical standards. When success is measured
solely by outcomes without regard for ethical means, employees may feel
compelled to cut corners or engage in unethical practices to meet expectations.

4. Lack of Accountability:
When there is a lack of accountability for unethical behavior, individuals may
perceive that they can act with impunity. In organizations where there are no
consequences or inconsistent enforcement of ethical standards, employees
may be more inclined to engage in unethical conduct.

5. Unrealistic Expectations:
Unrealistic expectations from superiors or the organization can lead to
unethical behavior. If employees believe they cannot meet expectations
through legitimate means, they may resort to unethical practices to avoid
negative consequences or job loss.

6. Competitive Pressures:
Intense competition within the industry can create an environment where
organizations feel compelled to engage in unethical practices to gain a
competitive edge. This could include actions such as corporate espionage,
spreading false information, or unfair business practices.

7. Lack of Ethical Training and Awareness:

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Employees may engage in unethical behavior due to a lack of understanding

of ethical standards or insufficient training on ethical decision-making.
Organizations that do not prioritize ethical education may find their
employees ill-equipped to navigate complex ethical dilemmas.

8. Groupthink and Conformity:

In situations where there is strong group pressure to conform, individuals may
set aside their personal ethical beliefs to align with the group. This can lead to
unethical behavior when the group as a whole adopts questionable practices.

Addressing unethical behavior requires a holistic approach that includes promoting

ethical leadership, fostering a strong ethical culture, providing ethical training, and
establishing clear consequences for misconduct.

3.3 Philosophical approaches to ethics

Philosophical approaches to ethics involve the study of fundamental principles and
theories that guide human behavior in moral decision-making. Several major
philosophical perspectives provide frameworks for understanding and evaluating
ethical issues. Here are some key philosophical approaches to ethics:
1. Deontology:
Deontology, associated with philosophers like Immanuel Kant, asserts
that certain actions are inherently right or wrong, regardless of their
consequences. It emphasizes moral duties, obligations, and principles
that individuals are obligated to follow, regardless of the outcomes. For
example, the principle of universalizability, where an action is morally
acceptable if it can be consistently applied to everyone, is a key aspect
of deontological ethics.

2. Consequentialism/ teleological ethics:

Consequentialist ethics, epitomized by utilitarianism, evaluates the
morality of actions based on their outcomes. Utilitarianism, developed
by philosophers like Jeremy Bentham and John Stuart Mill, posits that
the right action is the one that maximizes overall happiness or pleasure

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and minimizes suffering. Consequentialist theories focus on the

consequences as the primary determinant of ethical value.

3. Virtue Ethics:
Virtue ethics, associated with Aristotle, centers on the development of
virtuous character traits. It suggests that individuals should strive to
cultivate virtues, such as honesty, courage, and compassion, and make
decisions based on these virtues. Unlike deontology and
consequentialism, virtue ethics is more concerned with the character of
the individual than with specific rules or outcomes.

4. Ethical Relativism:
Ethical relativism posits that ethical principles are subjective and vary
across cultures, societies, or individuals. This perspective
acknowledges the diversity of moral values and rejects the idea of
universal moral truths. Cultural relativism is a form of ethical relativism
that contends that moral standards are culturally determined.

5. Social Contract Theory:

Social contract theories, advocated by philosophers like Thomas
Hobbes, John Locke, and Jean-Jacques Rousseau, explore the idea that
moral and political rules are the result of a social agreement among
individuals. Individuals consent to abide by certain rules in exchange
for the benefits of living in a society. This approach examines the moral
implications of social structures and institutions.

6. Feminist Ethics:
Feminist ethics examines ethical issues through the lens of gender and
emphasizes the importance of inclusivity, care, and interconnectedness.
Feminist philosophers, such as Carol Gilligan, critique traditional
ethical theories for their perceived male-centric perspectives and
advocate for ethical frameworks that embrace diverse voices and
experiences.
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7. Existentialist Ethics:
Existentialist ethics, associated with thinkers like Jean-Paul Sartre,
focuses on individual freedom, responsibility, and the creation of one's
own values. Existentialists argue that individuals are condemned to be
free and must take responsibility for their choices, even in the absence
of predetermined moral principles.

These philosophical approaches offer distinct perspectives on the nature of ethics

and provide frameworks for analyzing and understanding ethical issues in various
contexts. Often, individuals may draw upon multiple approaches to navigate
complex moral dilemmas.

3.4 Social responsibility of business

The social responsibility of business, often referred to as Corporate Social
Responsibility (CSR), is a concept that emphasizes the ethical and voluntary
commitment of businesses to contribute to the overall well-being of society. Beyond
the traditional goal of profit maximization, socially responsible businesses recognize
their impact on various stakeholders, including employees, customers, communities,
and the environment. Here are key aspects of the social responsibility of business:
1. Ethical Conduct:
Socially responsible businesses prioritize ethical conduct in all aspects
of their operations. This includes treating employees, customers, and
stakeholders fairly, and making decisions that align with moral
principles and societal expectations.

2. Environmental Sustainability:
Social responsibility extends to the environmental impact of business
activities. Businesses are increasingly expected to adopt sustainable
practices, reduce their carbon footprint, and contribute to
environmental conservation.

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3. Community Engagement:
Businesses are encouraged to actively engage with and support the
communities in which they operate. This involvement may include
philanthropy, supporting local initiatives, and contributing to
community development projects.

4. Employee Well-being:
Socially responsible businesses prioritize the well-being of their
employees. This involves providing fair wages, ensuring a safe and
healthy work environment, offering opportunities for professional
development, and promoting work-life balance.

5. Consumer Protection:
Ensuring the safety and well-being of consumers is a crucial aspect of
social responsibility. This includes providing accurate product
information, ensuring product safety, and addressing consumer
concerns transparently.

6. Legal Compliance:
Socially responsible businesses operate within the framework of laws
and regulations. Compliance with legal requirements is a fundamental
aspect of responsible business conduct.

7. Diversity and Inclusion:

Socially responsible businesses promote diversity and inclusion within
their workforce. They create environments that value and respect
individual differences, fostering a culture of equality and fairness.

8. Transparency and Accountability:

Socially responsible businesses prioritize transparency in their
operations. They communicate openly about their practices, values, and

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impact on society, and they hold themselves accountable for their

actions.

9. Supply Chain Responsibility:

Businesses are encouraged to ensure that their supply chains adhere to
ethical standards. This includes fair labor practices, responsible
sourcing, and efforts to eliminate any form of exploitation in the supply
chain.

10. Philanthropy and Social Investments:

Many socially responsible businesses engage in philanthropy and social
investments. This involves dedicating resources to charitable causes,
supporting educational initiatives, healthcare programs, and other
activities that contribute to the betterment of society.

In summary, the social responsibility of business reflects a holistic approach to

conducting business that goes beyond profit-making. It involves considering the
broader impact of business activities on society and proactively working towards
contributing positively to the well-being of stakeholders and the community.

3.5 Arguments for social responsibility

Corporate Social Responsibility (CSR) has emerged as a pivotal concept,
underscoring the idea that businesses are not only economic entities but also have a
broader responsibility to society. This perspective reflects a growing recognition that
the impact of business activities extends beyond financial metrics, influencing
various stakeholders, including employees, customers, communities, and the
environment. As businesses run the complexities of a dynamic global landscape, the
question of social responsibility has garnered increasing attention.
Arguments for Social Responsibility:
1. Ethical Imperative:
Embracing social responsibility aligns with the ethical obligation businesses
have to positively contribute to the well-being of the communities in which
they operate. It reflects a sense of moral duty and societal citizenship.
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2. Long-Term Sustainability:
Socially responsible practices contribute to the long-term sustainability of
businesses by fostering positive relationships with stakeholders, building
trust, and mitigating risks associated with environmental, social, or
governance issues.

3. Enhanced Corporate Reputation:

Socially responsible businesses often enjoy an enhanced corporate reputation.
This positive perception can lead to increased customer loyalty, attract
talented employees, and foster stronger relationships with investors, creating
a more favorable overall business environment.

4. Competitive Advantage:
Integrating social responsibility into business practices can provide a
competitive advantage in the marketplace. Consumers increasingly value
businesses that prioritize ethical and sustainable practices.

5. Employee Morale and Productivity:

Social responsibility positively impacts employee morale and productivity.
Employees are often more engaged and motivated when working for a
company that demonstrates a commitment to ethical and socially responsible
practices.

6. Risk Management:
Social responsibility can help manage risks associated with legal,
environmental, and social issues. Proactive measures can prevent or mitigate
potential legal and reputational risks, safeguarding the long-term interests of
the business.

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7. Community Development:
Businesses play a vital role in community development by investing in local
communities through job creation, infrastructure development, and
philanthropy. This involvement contributes to the overall well-being and
prosperity of the societies in which they operate.

8. Global Expectations and Standards:

In an era of globalization, businesses are increasingly expected to adhere to
global ethical and sustainability standards. Doing so helps them meet the
expectations of diverse stakeholders, including consumers, investors, and
regulatory bodies, on an international scale.
In conclusion, the arguments for social responsibility underscore the multifaceted
benefits that businesses can derive from integrating ethical and sustainable practices
into their operations. They also foster positive relationships with employees,
mitigate risks, contribute to community development, and align with global ethical
standards.

3.6 Friedman doctrine

The Friedman Doctrine, named after economist and Nobel laureate Milton
Friedman, articulates a perspective on the social responsibility of business that
emphasizes the primacy of shareholder value and profit maximization. This doctrine
is outlined in Friedman's seminal essay titled "The Social Responsibility of Business
is to Increase its Profits," published in The New York Times Magazine in 1970.

Key doctrine of the Friedman Doctrine:

1. Primacy of Shareholder Value:
Friedman asserted that the primary responsibility of businesses is to their
shareholders. According to this perspective, the goal of business is to generate
profits and maximize shareholder wealth.

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2. Economic Efficiency:
Friedman argued that businesses should focus on economic efficiency and
effectiveness in their operations. By pursuing profits, businesses contribute to
the efficient allocation of resources in the economy.

3. Limited Social Responsibility:

The Friedman Doctrine contends that businesses should not actively engage
in social or political issues beyond what is required by law. Friedman argued
that such endeavors are a misuse of corporate resources and could undermine
the economic system.

4. Free-market Capitalism:
Friedman was a staunch advocate of free-market capitalism. He believed that
the pursuit of self-interest within a competitive market framework leads to the
most efficient and socially beneficial outcomes.

5. Legal Compliance:
According to the Friedman Doctrine, businesses should operate within the
legal framework and comply with laws and regulations. Beyond legal
requirements, any additional social initiatives are considered discretionary
and potentially detrimental to shareholder interests.

Critiques of the Friedman Doctrine:

1. Narrow Focus:
Critics argue that the exclusive focus on shareholder value is too narrow and
neglects the broader impacts of business on society, including the well-being of
employees, communities, and the environment.

1. Long-term Sustainability:
The Friedman Doctrine has been criticized for potentially sacrificing long-
term sustainability for short-term profit gains. Critics argue that sustainable
business practices can enhance long-term shareholder value.

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2. Changing Business Landscape:

Some argue that the business landscape has evolved since Friedman's time,
and there is an increasing expectation for businesses to address social and
environmental concerns, with stakeholders demanding a more comprehensive
view of corporate responsibility.

3. Stakeholder Theory:
An alternative perspective, known as stakeholder theory, posits that
businesses should consider the interests of all stakeholders, including
employees, customers, communities, and the environment, rather than
prioritizing shareholder value exclusively.

The Friedman Doctrine remains influential in shaping discussions on corporate

responsibility, with ongoing debates about the appropriate balance between profit-
seeking and broader societal contributions. While some argue for a more expansive
view of corporate social responsibility, others continue to advocate for the principles
outlined in the Friedman Doctrine.

Multiple Choice Questions (MCQs)

1. What is a key concern in ethical issues in management?
a. Maximizing profits
b. Fair treatment of employees
c. Exploiting market competition
d. Ignoring legal regulations

2. What is a common root cause of unethical behavior in organizations?

a. Ethical leadership
b. Transparent decision-making
c. Lack of accountability
d. Inclusive corporate culture
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3. Which philosophical approach emphasizes moral duties and principles?

a. Consequentialism
b. Deontology
c. Virtue ethics
d. Feminist ethics

4. What does corporate social responsibility (CSR) emphasize?

a. Primacy of shareholder value
b. Maximizing short-term profits
c. Contribution to society beyond profits
d. Ignoring legal compliance

5. What is one argument for social responsibility based on enhanced corporate

reputation?
a. Increased shareholder value
b. Greater competitive advantage
c. Improved employee morale
d. Enhanced public perception

6. According to the Friedman Doctrine, what is the primary responsibility of

businesses?
a. Maximizing shareholder value
b. Contributing to social initiatives
c. Prioritizing employee satisfaction
d. Focusing on environmental sustainability

7. What is the emphasis of deontological ethics in decision-making?

a. Maximizing profits

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b. Ethical duties and principles

c. Enhancing corporate reputation
d. Utilitarian outcomes

8. In which approach does the moral worth of an action depend on its consequences?
a. Deontology
b. Virtue ethics
c. Consequentialism
d. Ethical relativism

9. What does virtue ethics primarily focus on in ethical decision-making?

a. Consequences of actions
b. Adherence to ethical duties
c. Development of virtuous character traits
d. Cultural relativism

10. Which factor is NOT typically considered a stakeholder in discussions of

corporate social responsibility?
a. Employees
b. Customers
c. Competitors
d. Communities

11. What is a potential criticism of the Friedman Doctrine?

a. Overemphasis on shareholder value
b. Ignoring legal compliance
c. Prioritizing employee satisfaction
d. Focusing on short-term profits

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12. Which philosophical approach emphasizes that ethical standards are culturally
determined?
a. Ethical relativism
b. Consequentialism
c. Deontology
d. Virtue ethics

Answers:
1. b
2. c
3. b
4. c
5. d
6. a
7. b
8. c
9. c
10. c
11. a
12. a

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VERY SHORT QUESTIONS

1. What are common ethical issues in management?
2. Why do unethical behaviors occur in management?
3. Name one philosophical approach to ethics.
4. Define the social responsibility of business.
5. Give a brief argument for social responsibility.
6. What does the Friedman Doctrine emphasize?
7. Identify a key root cause of unethical behavior.
8. How many philosophical approaches to ethics are mentioned?
9. What is the focus of social responsibility in business?
10. Provide a concise argument supporting social responsibility.
11. What does the Friedman Doctrine prioritize in business?
12. Name another ethical issue in management.
13. What does one philosophical approach emphasize in decision-making?
14. Briefly explain social responsibility in a business context.
15. What is the primary concern of the Friedman Doctrine?

SHORT QUESTIONS
1. What are some common ethical challenges that managers face, and how do these
impact the way organizations operate?
2. Why do people sometimes engage in unethical behavior in the workplace, and
what are the underlying factors contributing to such behavior?
3. Can you explain the main ways philosophers approach ethics, and how these
perspectives influence decision-making in management?
4. In simple terms, what does social responsibility in business mean, and how can it
positively affect communities, employees, and the environment?
5. What are a few reasons why businesses should consider being socially
responsible, and how does it contribute to long-term success?
6. Briefly describe the Friedman Doctrine and its main idea regarding the role and
responsibilities of businesses.

LONG QUESTIONS
1. How do ethical challenges impact decision-making for managers? Provide
examples of common ethical dilemmas in the workplace.

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2. What factors contribute to unethical behavior in business management? Offer real-

world examples and discuss potential strategies for addressing these root causes.
3. How do philosophical approaches guide ethical decision-making in business
management? Provide simple examples.
4. Discuss the importance of social responsibility in business. How does it extend
beyond profit-making? Share examples of socially responsible practices and their
impact.
5. Explain the reasons supporting the integration of social responsibility into
business practices. Discuss the potential benefits for businesses, stakeholders, and
the community.
6. State the principles of a doctrine emphasizing shareholder value and profit
maximization. Explore criticisms and ongoing debates about the role of businesses
in society.

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UNIT 4: PLANNING AND DECISION MAKING

4.1Planning
Planning is the process of thinking about and organizing the activities required to
achieve a desired goal. It involves setting objectives, identifying resources,
determining timelines, and outlining the steps needed to reach the desired outcome.
Planning can be applied to various aspects of life, including personal goals, business
strategies, projects, events, and more.Planning is the fundamental management
function, which involves deciding beforehand, what is to be done, when is it to be
done, how it is to be done and who is going to do it. It is an intellectual
process which lays down an organisation’s objectives and develops various courses
of action, by which the organisation can achieve those objectives. It chalks out
exactly, how to attain a specific goal.

Characteristics of Planning

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1. Managerial function:
Planning is a first and foremost managerial function provides the base for
other functions of the management, i.e. organising, staffing, directing and
controlling, as they are performed within the periphery of the plans made.

2. Goal oriented:
It focuses on defining the goals of the organisation, identifying alternative
courses of action and deciding the appropriate action plan, which is to be
undertaken for reaching the goals.

3. Pervasive:
It is pervasive in the sense that it is present in all the segments and is required
at all the levels of the organisation. Although the scope of planning varies at
different levels and departments.

4. Continuous Process:
Plans are made for a specific term, say for a month, quarter, year and so on.
Once that period is over, new plans are drawn, considering the organisation’s
present and future requirements and conditions. Therefore, it is an ongoing
process, as the plans are framed, executed and followed by another plan.

5. Intellectual Process:
It is a mental exercise at it involves the application of mind, to think, forecast,
imagine intelligently and innovate etc.

6. Futuristic:
In the process of planning we take a sneak peek of the future. It encompasses
looking into the future, to analyse and predict it so that the organisation can
face future challenges effectively.

7. Decision making:
Decisions are made regarding the choice of alternative courses of action that
can be undertaken to reach the goal. The alternative chosen should be best
among all, with the least number of the negative and highest number of
positive outcomes.
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Planning is concerned with setting objectives, targets, and formulating plan to

accomplish them. The activity helps managers analyse the present condition to
identify the ways of attaining the desired position in future. It is both, the need of the
organisation and the responsibility of managers.

4.21 LEVELS OF PLANNING IN RELATION TO ORGANIZATIONAL

STRUCTURE

In a corporate structure, the levels of planning can be related to different functional

areas and levels of management. These can include:

 Corporate-level planning: This involves setting overall strategic goals and

objectives for the entire organization, and determining the best course of action
to achieve them.
 Business-unit level planning: This involves developing specific plans and
actions for individual business units or divisions within the organization to
implement the corporate-level strategic goals.
 Functional-level planning: This involves developing plans and actions for
individual functional areas within the organization, such as finance, marketing,
or operations, to support the business-unit level goals.
 Operational-level planning: This involves the day-to-day management and
execution of plans and actions to achieve the functional and business-unit level
goals.
 Contingency and emergency planning: This involves developing plans and
procedures to respond to unexpected events or emergencies that could disrupt
operations, both at the corporate and functional levels.

4.22 LEVELS OF PLANNING IN RELATION TO TIME HORIZON

The levels of planning can also be related to different time horizons, such as:

 Long-term planning: This involves setting goals and objectives for a time
horizon of several years or more, and determining the best course of action to
achieve them.

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 Medium-term planning: This involves developing specific plans and actions

for a time horizon of one to three years to implement the long-term goals.
 Short-term planning: This involves developing specific plans and actions for a
time horizon of one year or less to implement the medium-term goals.
 Operational planning: This involves the day-to-day management and execution
of plans and actions to achieve the short-term goals.
 Contingency and emergency planning: This involves developing plans and
procedures to respond to unexpected events or emergencies that could disrupt
operations, regardless of the time horizon.

4.23 LEVEL OF PLANNING

Strategic, tactical, and operational planning are three hierarchical levels of planning
that organizations use to achieve their goals and objectives. Each level of planning
serves a specific purpose and involves different scopes, timeframes, and levels of
detail.

1. STRATEGIC PLANNING:

Strategic planning is the highest level of planning and focuses on long-term goals
and objectives. It involves making decisions that will shape the overall direction of
the organization.

 Timeframe: Typically covers a period of three to five years or even longer.

 Scope: Broad and comprehensive, addressing the organization as a whole.

Key Components:

 Mission and vision development.

 Setting long-term goals and objectives.
 Identifying opportunities and threats in the external environment.
 Allocating resources and defining the organization's competitive
position.
 Stakeholder analysis.

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2. Tactical Planning:
Tactical planning is the intermediate level of planning that translates the strategic
plans into specific actions to achieve defined objectives.
 Timeframe: Short to medium term, usually one to three years.
 Scope: More specific and focused than strategic planning, dealing with
specific departments, units, or functions.

Key Components:
Developing detailed plans for implementing the strategies set at the strategic level.
Allocating resources to various departments.
Setting performance targets and key performance indicators (KPIs).
Coordinating activities across different departments.
Monitoring progress and making adjustments as needed.

3. Operational Planning:
Operational planning is the lowest level of planning that deals with day-to-day
activities and processes necessary to implement tactical plans.
 Timeframe: Short term, typically covering weeks or months.
 Scope: Highly specific, addressing the routine tasks and processes within
departments or teams.
Key Components:
 Detailed plans for daily operations.
 Resource allocation at a granular level.
 Task assignment and scheduling.
 Monitoring and controlling day-to-day activities.
 Ensuring efficiency and effectiveness in the execution of tasks.

In summary, strategic planning sets the overall direction of the organization, tactical
planning translates the strategic plans into specific actions for different units, and
operational planning focuses on the day-to-day tasks and processes necessary to

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implement the tactical plans. These three levels of planning are interconnected and
work together to ensure that an organization is moving in the right direction and
efficiently achieving its goals.

4.3 PLANNING PROCESS

Figure: Steps of Planning Process

Analyzing Opportunities

Setting Objectives

Developing Premises

Determining and Evaluating Alternatives

Selecting the Best Alternative Course

Formulating Action Plan

Preparing Budget

1. Analyzing Opportunity:
Before doing the actual planning, the management must carefully analyze
opportunities in light of the internal and external environment. The management has
to analyze the strengths, weaknesses, opportunities, and threats (SWOT) of changing
environment of the business. Here, strengths and weaknesses are the internal
environments of the business organization like manpower, machines, technological
know-how, finance, etc.

2. Setting Objectives:
Objectives or goals specify what the organization wants to achieve. It could mean
an increase in sales by 20% which could be the objective of the entire organization.
How all departments would contribute to the organizational goals is the plan that is
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to be drawn up. Objectives should be stated clearly for all departments, units, and
employees.

3. Developing Premises:
Planning is concerned with the future which is uncertain and every planner is using
conjecture about what might happen inthe future. There mese assumptions required
to make certain assumptions about the futural upon which plans are called premises.
Forecasts can be made about the demand for a particular product, policy change,
interest rates, prices of capital goods, tax rates, etc. Accurate forecasts, therefore,
become essential for successful plans.

4. Determining and Evaluating Alternatives:

Once objectives are set, assumptions are made. Then the next step would be to act
upon them. There may be many ways to act and achieve objectives. All the
alternative courses of action should be identified. The course of action which may
be taken could be either routine or innovative. An innovative course may be adopted
by involving more people and sharing their ideas. If the project is important, then
more alternatives should be generated and thoroughly discussed amongst the
members of the organization.

5. Selecting the Best Alternative Course:

This is the real point of decision- making. The best plan has to be adopted and
implemented. The ideal plan, of course, would be the most feasible, profitable, and
with the least negative consequences. Most plans may not always be subjected to
mathematical analysis. In such cases, subjectivity and the manager's experience,
judgment, and at times, intuition play an important part in selecting the most viable
alternative

7. Preparing Budget:
After plans are set, the final step is to prepare budgets for each action plan. A budget
is a financial plan. The overall budgets of the organization represent the total income

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and expenses. If done well budgets become an important standard against which the
planning process can be measured.

4.4 MEANING AND USE OF SINGLE-USE, STANDING, CONTINGENCY

AND DERIVATIVE PLANNING

4.41 Single-use Planning

Also known as one-time plans, the single-use plans are set to meet the needs of a
unique situation. They are either discarded or revised after use. Single- use plans are
only valid for a limited time, or until their intended purpose is fulfilled. For example,
to increase the sale of a new model motorbike, the Bajaj Co. offers program of a free
refrigerator for customers in every sale of its motorbikeThe single-use plans include
programs, projects, and budgets.

a) Programs:
They are precise plans or definite steps in proper sequence which need to be taken
to discharge a given task. They are given a step-by-step approach to guide the action
necessary to reach pre-determined goals. They are drawn in conformity with the
objectives and are made up of policies, procedures, budgets, etc.

b) Projects:
They are detailed action plans designed to complete various aspects of the programs.
They combine objectives and activities in order to achieve a goal. They are, however,
generally of a narrower scope. For example, if a company wants to introduce a new
brand of its product to the market, its development will be a program, whereas
creating its package will be a project.

c) Budgets:
Budgets are plans for a future period containing statements of expected results in
numerical terms, i.e. rupees, man-hours, product units, and so forth. The important
budgets are the Sales budget, Production budget, Cash budget, Revenue budget, etc.
Being expressed in numerical terms, budgets facilitate the comparison of actual
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results with the planned ones and thus, serve as a control device and standard for
measuring performance.

4.42 Standing Planning

Standing plans are also known as repeated-use plans. These plans are formulated by
the managers at different levels and meant for repeated use as and when the
occasione in the flache basic differences between standing plans and single-use plans
lie in the fact that standing plans are used over a long period of time whereas single-
use plans are used only for specific periods Standing plans are set to guide
managerial decisions and actions on recurring problems. Policies, rules and
procedures are examples of standing plans.

 Policies: Policies are general guidelines for decision-making. They provide a

broad guideline as to how the objectives of an organization are to be achieved.

 Rules: Rules are detailed and recorded instructions that a specific action must
or must not be performed in a given situation. Rules are almost like
commandments seeking to discipline, structure, and restrain behavior and task
performance of people in formal organizational settings. Rules are definite
and rigid; they allow no deviation or discretion to subordinates Generally, the
break of rules carries a penalty.

 Procedures: Policies are carried out using more detailed guidelines called
procedures. A procedure provides a detailed set of instructions for performing
a sequence of actions involved in doing a certain piece of work. The same
steps are followed each time that activity is performed.

4.43 Contingency Planning

A contingency plan is an action plan used to respond to future events that may or
may not affect a company. In most cases, a contingency plan is developed in
response to a negative event that may affect a company's reputation or even its ability

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to conduct business. Positive contingency plans, on the other hand, including what
to do if the organization receives an unexpected sum of money or other resources³.

The contingency plan is a proactive strategy. This plan is also known as "Plan B
because it can be used as an alternative course of action if expected results do not
materialize. Business continuity, disaster recovery, and risk management all include
contingency planning. Smart managers use contingency plans because they are
aware that there are always risks that can derail business.

4.44 Derivative Planning

Derivative plans are sub-plans or secondary plans that support the achievement of
the basic plan. These plans will be derived from the basic plan. These are intended
to supplement and help facilitate the implementation of basic plans. Policies,
procedures, rules, programs, budgets, and schedules are examples of derivative
plans. For example, if the primary goal of the company is profit maximization,
derivative plans will include sales maximization, production maximization, and cost
minimization. Derivative plans specify the timetable and sequence in which various
tasks must be completed. Some other examples are derivative plans include:
 Buying equipment and raw materials
 Recruiting and training personnel
 Developing new products
 Sales promotion activities, etc.

4.5 Pitfalls/Limitations of Planning

Planning cannot guarantee success. It has some pitfalls and limitations. Some of the
pitfalls and limitations of the planning are as follows:

a) Costly Process:
Costs involved in the planning are also a limiting factor. Planning is a costly process.
A good deal of time, energy, and money are involved in the gathering of facts and
testing of various alternatives.

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b) Time Consuming:
Planning is time consuming. Sometimes it causes a delay in taking action.
Emergencies in business require prompt action and allow little time for thinking and
planning.

c) Inaccurate Assumptions:
The assumptions on which planning is based may not hold good and the conditions
under which plans are being implemented may differ from the assumed conditions.

d) Uncertain Nature:
The element of uncertainty cannot be totally eliminated in planning. Plans are meant
for future use but future happenings cannot be accurately foreseen. For example, a
sudden change in the policy of the Government, loss due to natural calamities like
earthquakes, floods, etc., can destroy even carefully prepared plans.

e) Obstacle:
Procedural and policy rigidities also prove to be an obstacle to planning. Planning
tends to make administration rigid and inflexible. Procedure, rules, and policies once
established are difficult to change. This limitation curbs initiative as it forces the
manager to operate within the limits of planning.

f) Mental Attitude:
Mental attitude of management can be a serious limiting factor to planning. Some
persons are psychologically opposed to planning as they consider the present more
important than the future. They think that the future cannot be predicted with
certainty and that present is certain. These people have a natural resistance to change.
It is a psychological barrier to planning.

g) Rigidity:
Planning suffers from rigidity. It is difficult to change the plan with the changes in
the environment. It restricts individual freedom, initiative, and desire for creativity.

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However, business is a dynamic activity. It requires changes and adjustments in

plans according to the change in the environment. But planning tries to implement
the plans which were fixed in the past. This kind of rigidity in plans may create
difficulty.

h) Picking the Wrong Person as Planner:

The planner's position is one of the most crucial elements in making a good plan.
Placing the right person in this position with the right skills is paramount to the
success of the plan. Planners without proper managerial skills and capabilities cannot
plan properly.

i) Planning from the Desk:

Planners may have little knowledge about the reality of the field. They seldom visit
where there are issues, information, and problems. This is one of the pitfalls in the
planning process. Just sitting at the desk one cannot plan for the future.

j) Lack of Cooperation and Coordination in the Organization:

A good plan needs ownership. For this, a planner needs to take the opinions of
concerned managers and subordinates. This certainly enhances cooperation and
coordination in the organization.

4.6 IMPROVEMENT IN PLANNING

Planning is required to raise organizational performance. Effective planning made
at on right time helps to minimize costs and maximize profits. For this, we should
work out to minimize its pitfalls. The following considerations are required for
improvement in planning.

a) Communication and Participation:

The concerned people need to know about the goals and objectives the organization
strives to achieve through planning, and people from all departments should be given
an opportunity to participate in setting and implementing planning. Thus, for

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example, manufacturing managers should be involved in a planning process that

looks at how manufacturing processes might be reorganized to drive down unit costs

b) Support from All Around:

All levels of management need to be supportive to achieve the planning goals. A
feeling of ownership is required to develop such support from all rounds.

c) Timely Corrections:
To avoid difficulty at the time of implementation, a mechanism for timely correction
is required. It will certainly circumvent loopholes and confusion.

d) Regular Meetings and Discussions:

Planning is not a one-time activity. There should be regular meetings and discussions
while implementing the plans. Planners and persons responsible for implementing
planning should sit together to monitor and evaluate the planning through meetings
and discussions.

e) Feedback:
Any deviation in planning and implementation should be timely informed to the
concerned persons or departments. Feedback is also essential to improve future
planning.

f) Realistic Assumptions:
Plans are required to be based on realistic assumptions. The planning area should be
properly set up. The planning premises provide the basis for designing a plan. They
are predictions of what is going to happen in the future. At the time of premising,
the related factors should be given sufficient weighting.

g) Be Mission Centric:
The planners must know the core value of the business, and keep the organization's
missions and goals in front of the employees. They need to encourage the employees
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to look for an opportunity to link operational and personal goals to items on the unit
plan.

h) Planning Must Start at the Top:

Top management must set the standard for planning. When top management
performs a comprehensive analysis of results, the organization's planning process is
naturally simulated.

i) Clear Goals:
Clear goals are required for successful planning. The goals should be realistic and
understandable. The overall goal should be defined first, followed by departmental
and unit goals that are in line with the overall goal.

j) Flexibility:
Since modern business operates in an environment that is constantly changing, there
should always be some flexibility in the plan to make appropriate changes,
alterations, or alternatives as required to achieve successful results.

4.7 DECISION MAKING

Ricky W. Griffin: "Decision making is the act of choosing one alternative from
among a set of alternatives."

Stephen P. Robbins: 'Decision making is defined as selection of preferred course of

action from two or more alternatives."

John R. Schermerhorn: 'A decision is a choice among alternative course of action

for dealing with a problem."

Joseph L. Massie: 'Decision problem is presented as a choice between status quo

and some alternatives. A decision is, therefore, a course of action consciously
chosen from the relevant alternatives for the purpose of achieving desired goals."
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George R. Terry: 'Decision making is the selection based on some criteria from two
or more possible alternatives."

Singh and Chhabra: "Managerial decision making involves establishing goals,

defining tasks, searching for alternatives and developing plans in order to find the
best answer to the decision problem."

Harold Koontz and Heinz Weihrich: "Decision making is selection of a course of

action from among alternatives."

4.8 Rational Decision Making Process

Identifying the Problems

Developing Appropriate
Alternatives

Evaluating Selected Alternatives

Choosing the Best Alternatives

Implementing the Selected

Alternative

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a) Identifying the Problem: The first stage of decision making process is

identifying and diagnosing a problem or opportunity. When a manager makes
a decision it is in effect the organization's response to a problem. Hence it is
necessary to search the environment for the existence of a problem. A problem
occurs when performance is below expected or desired levels of performance.

b) Developing Appropriate Alternatives: Novel situations require non-

programmed decisions because there are no policies or procedures available
to provide direction. In the case of non-programmed decision making, it is
important to come up with creative alternative solutions and to suspend
judgment of their worth until all possible alternatives have been developed.
Consequently, group decision making is often used to develop continuous
improvements in customer service to generate novel solutions to customer
needs.

c) Evaluating Selected Alternatives:

Once various alternatives are developed, the next step is to measure and
compare the consequences of alternatives using quality and acceptability. The
quality of a decision must be determined considering both tangible and
intangible consequences. Tangible consequences are those which can be
quantitatively measured or mathematically demonstrated. For instance, one
can calculate the installing and running costs of two types of air conditioners.
Intangible consequences cannot be measured quantitatively. For example, the
effect of a good labor relations in one location cannot be compared with the
relationship in another location.

d) Choosing the Best Alternative:

The next stage of decision making is the selection of the best alternative.
Choosing alternatives is the most crucial step in the process of decision
making. Choosing consists of selecting the alternative with the highest
possible payoff, based on the benefits, costs, risks, and uncertainties of all
alternatives. While choosing the alternative the decision-maker also has to
think about "what if something unexpected happens during the

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implementation of this statement?" The contingency plan provides alternative

actions to take if the primary course of action is unexpectedly disrupted.

e) Implementing the Selected Alternative:

Implementation is the process of putting the decision into action. The
decision-makers are happy to involve in the implementing process and will
show their motivation and commitment. To make the successful
implementation of a decision it is essential to use management skills, train
manpower, use resources without wastage, proper leadership, the reward
structure, communication system, and the like.

f) Feedback:
The final stage in the decision-making process is to provide feedback that is
concerned with evaluating the results. Decision-makers gather information
and try to learn if the implemented decision achieved its goals. The
availability of accurate and timely information and feedback permits the
decision-maker to make a thorough evaluation and to determine whether
modifications are needed.

4.9 CONCEPT OF PROBLEMS AND PROBLEM SOLVING

Robbins and Coulter: "A problem is discrepancy between an existing state and a
desired state. Decision making is problem solving."

4.10 Types of Problems

Problems can be of different types. They are as follows.

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Types of
Problems

According to
According to According to According to
Nature/Freque
Urgency Impact Source
ncy

Routine Urgent Overall Impact Technical

Non- • Partial
Exceptional • Human
urgent/Simple Impact

1. According to Nature and Frequency

a) Routine Problems:
Mostly, routine problems are of repetitive nature. They occur on a regular basis.
Some of the examples of routine problems are machine breakdown, absenteeism,
order cancellations, problem related to power supply, etc. These problems are also
known as well structure problems.

b) Exceptional Problems:
Many situations faced by managers, however, are, exceptional problems. They are
new or unusual. Information about such problems is ambiguous or incomplete. The
decision to enter a new market segment such as e-commerce or hire an architect to
design a new office park is an example of exceptional problems. So, too, is the
decision to invest in new, unproven technology

2. According to Urgency
a) Urgent Problem:

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They are the problems that must be resolved immediately and they deserve the
immediate attention of management. If these problems are not solved immediately,
they would affect the whole organization.

b) Non-urgent Problem:
They are problems that need not be resolved immediately. Managers can take a little
more time to think about such problems.

3. According to Impact
a) Overall Impact Problem:
These problems affect the whole organization, its goals and objectives. These
problems are of serious nature and injure the entire organization.

b) Partial Impact Problems:

These problems affect only a division, unit or section of the organization rather than
the whole organization.

4. According to Source

a) Technical Problems:
They are the problems related to the machines, equipment, materials, supplies, etc.,
used in the production process of goods and services.

b) Human Problems:
They are the problems related to employee motivation, dissatisfaction, conflict,
discipline, grievances, etc. They are of serious nature and are not visible. So, they
deserve the immediate attention of management.

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As mentioned above, managers will face different types of problems and make
decisions to solve the problems as they do their jobs. The type of problems a manager
faces in a decision making situation often determines how that problem is treated.

4.11 TYPES OF DECISION MAKING

The major types of decisions are as follows:
A. Programmed and Non-programmed Decisions
1. Programmed Decisions:
They are normally repetitive and are taken within the broad policy structure.
Programmed decision is fairly structured and routine. They are made following
policy, rule, or procedure so that they do not have to be handled each time they occur.

2. Non-programmed Decisions:
They are non-repetitive. Their need arises because of some specific circumstances,
such as the opening of a new branch, introducing a new product in the market, etc.
They involve judgment, intuition, and creativity. Such decisions are taken by top
management.

B. Major and Minor Decisions

1. Major Decisions:
The decisions which have an impact for a long period or which have an impact on
other departments are known as major decisions Diversification of existing product
lines, adopting new technology, etc. are some examples of the major decisions. Such
decisions are made at the higher level of the organization.

2. Minor Decisions:
On the other hand decisions which do not have a long-term effect or affect one
department are known as minor decisions. The decision to procure raw materials is
a minor decision. Minor decisions are taken at the lower level in the organizational
hierarchy.

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C. Routine and Strategic Decisions

1. Routine Decisions:
They are also known as tactical decisions. They are taken in the context of the day-
to-day operations of the organization. They are not very important.

2. Strategic Decisions:
They relate to policy matters and usually involve large investments or expenditure
of funds. These decisions are mostly non- repetitive in nature. These decisions are
taken by top level management after careful analysis and evaluation of various
alternatives.

D. Policy and Operative Decisions

1. Policy Decisions:
They are taken by top management and they mostly relate to basic policies. Such
decisions are very important and they have a long-term impact.

2. Operative Decisions:
They relate to the day-to-day operations of the enterprise. They are generally taken
by middle and lower level management who are more closely related to the
supervision of actual operations.

E. Organizational and Personal Decisions

1. Organizational Decisions:
The executive makes these decisions when he acts formally as a company officer.
Such decisions reflect the basic policy of the company. They can be delegated to
others.

2. Personal Decisions:
They relate decisions that are taken based on the personal skill, knowledge, and
capacity of the individuals. Such decisions cannot be delegated.

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F. Individual and Group Decisions

1. Individual Decisions:
As is apparent, individual decisions are taken by a single individual in the context of
routine or programmed decisions where the analysis of variables is simple and for
which broad policies are already provided.

2. Group Decisions:
These decisions are taken by a group or a standing committee constituted for this
specific purpose. Such decisions are very important for the organization because
they involve the participation of a large number of persons.

4.12 Decision making conditions

The conditions may be of three types as follows:
1. Certainty:
By conditions of certainty, we mean that the decision-maker can specify the
consequences of a particular decision, or act. Of course, certainty about future events
is difficult and managerial decisions must be made in awareness that future
conditions may vary widely from those contemplated when the decision is being
made. Nevertheless, many managerial decisions may be made in conditions
approaching certainty. For example, when a company has to make shipments to a
number of customers from a number of warehouses, it is possible to obtain the
relevant facts for the problem, e.g, the types of transport available, the costs per unit
for each type from each source to each destination and so forth, and to develop a
least -ost distribution pattern.

2. Risk:
In decision-making under conditions of risk, the consequences of a particular
decision cannot be specified with certainty but can be specified with known
probability values. The value of the probability associated with the event is a
measure of the likelihood of the occurrence of that event. Evaluation of alternatives
is done by calculating the expected value of the pay-off associated with each
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alternative. The expected pay-off associated with an alternative is the sum of the
value of each possible outcome times its associated probability. Statistical analysis
can be applied to the calculation of probabilities for success or failure.

3. Uncertainty:
More prevalent than either condition of certainty or risk are conditions of
uncertainty. Uncertainty exists when the decision-maker does not know the
probabilities associated with the possible outcomes, though he has been able to
identify the possible outcomes and their related pay-offs. This is not the same as
decision-making under conditions of complete ignorance, in which even the possible
outcomes and their pay-offs cannot be identified. Since pay-offs are identified but
probabilities are unknown under conditions of uncertainty, the criterion of
maximizing the expected payoff cannot be used in evaluating the decision
alternatives, are acts.

4.13 DECISION MAKING STYLES

Decision making style Decision making styles may vary according to decision-
makers, situations and depends on managers' different circumstances. The tolerance
for ambiguity orientation measures how much the decision-maker needs structure
and control (a desire for low ambiguity) as opposed to being able to thrive in
uncertain situations (a desire for high ambiguity). These two orientations with their
low and high dimensions are portrayed in the matrix shown in the following figure
with four styles of decision making: directive, analytical,

1. Directive Style:
Decision-makers with a directive style have a low tolerance for ambiguity and are
oriented toward tasks and technical concerns. These decision-makers tend to be
efficient, logical, pragmatic, and systematic in their approach to problem solving.
Directive decision-makers also like to focus on facts and get things done quickly.
They also are action-oriented, tend to have a very short-run focus, like to exercise
power, want to be in control, and, in general, display an autocratic leadership style.

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2. Analytical Style:
Analytical decision-makers have a high tolerance for ambiguity and a strong task
and technical orientation. These types like to analyze the situation; in fact, they often
tend to overanalyze things. They evaluate more information and alternatives than do
directive decision-makers. They also take a long time to make decisions, but they do
respond well to new or uncertain situations. They also tend to have an autocratic
leadership style.

3. Conceptual Style:
Decision-makers with a conceptual style have a high tolerance for ambiguity and
strong people and social concerns. They take a broad perspective in solving
problems and like to consider many options and future possibilities. These decision-
makers discuss things with as many people as possible in order to gather a great deal
of information and then rely on intuition in making their decisions. Conceptual
decision-makers are also willing to take risks and tend to be good at discovering
creative solutions to problems. At the same time, however, they can foster an
idealistic and indecisive approach to decision making.

4. Behavioral Style:
The behavioral style decision-maker is characterized by a low tolerance for
ambiguity and strong people and social concerns. These decision-makers tend to
work well with others and like situations in which opinions are openly exchanged.
They tend to be receptive to suggestions, are supportive and warm, and prefer verbal
to written information. They also tend to avoid conflict and be overly concerned with
keeping everyone happy. As a result, these decision-makers often have a difficult
time saying no to people, and they do not like making tough decisions, especially
when it will result in someone being upset with the outcome.

Multiple choices questions (MCQs)

1. What is the primary purpose of planning in an organizational context?
A. Implementation of tasks
B. Achieving organizational goals

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C. Daily routine management

D. Employee evaluations

2. At what levels does planning typically occur within an organization?

A. Only at the executive level
B. Strategic, tactical, and operational levels
C. Operational and middle management levels
D. Tactical and operational levels

3. What is the planning horizon in organizational planning?

A. The time frame during which plans are implemented
B. The time period within which planning occurs
C. The duration of the decision-making process
D. The lifespan of a single-use plan

4. Which type of planning is designed to handle unforeseen events and emergencies?

A. Single-use planning
B. Contingency planning
C. Standing planning
D. Derivative planning

5. What is the primary focus of standing plans?

A. Addressing specific, one-time issues
B. Handling unforeseen emergencies
C. Providing guidance for routine tasks
D. Responding to contingent situations

6. In the context of decision making, what is a rational decision-making process

based on?
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A. Instinct and intuition

B. Emotional responses
C. Logic and reasoning
D. Coin flips and chance

7. What are the types of problems typically encountered in decision making?

A. Routine and exceptional
B. Personal and professional
C. Immediate and long-term
D. Complex and simple

8. Under what conditions is decision making most effective?

A. High pressure and time constraints
B. Limited information and uncertainty
C. Structured problems and known outcomes
D. No specific conditions, it depends on the situation

9. What is the primary characteristic of derivative planning?

A. Long-term strategic focus
B. Developed as a backup to contingency plans
C. Derived from other existing plans
D. Only used for one-time events

10. What is a common pitfall in the planning process that organizations may face?
A. Overplanning
B. Lack of employee involvement
C. Sticking strictly to contingency plans
D. Ignoring strategic planning

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11. What is the primary aim of single-use planning?

A. Long-term organizational goals
B. Handling routine tasks and operations
C. Dealing with specific, one-time events
D. Addressing standing issues

12. What is the focus of contingency planning?

A. Routine, day-to-day operations
B. Unforeseen emergencies and disruptions
C. Long-term strategic goals
D. Single-use events

13. What defines the concept of planning horizons in organizational planning?

A. The range of possible outcomes
B. The time frame over which plans are developed and implemented
C. The variety of planning levels
D. The contingency factors considered in planning

14. In decision making, what is the significance of decision-making styles?

A. The way decisions are communicated
B. The personal preferences of decision-makers
C. The speed at which decisions are made
D. The hierarchy within decision-making teams

15. Which level of planning focuses on day-to-day operations and tasks?

A. Strategic planning
B. Tactical planning
C. Operational planning
D. Single-use planning
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16. What does the process of rational decision making involve?

A. Intuitive judgments
B. Emotional reactions
C. Systematic analysis and logic
D. Random selection

17. When does standing planning come into play within an organization?
A. During specific, one-time events
B. In response to unforeseen emergencies
C. For routine and repetitive tasks
D. As a backup for contingency plans

18. What characterizes a derivative planning approach?

A. Developed independently of other plans
B. Adaptive and flexible to changes
C. Derived from existing plans and strategies
D. Focused on long-term goals

19. What is the primary focus of standing plans in an organization?

A. Adapting to unforeseen changes
B. Handling specific, one-time events
C. Providing guidance for routine tasks
D. Developing long-term strategies

20. How can organizations improve decision-making processes?

A. By avoiding contingency planning
B. Ignoring employee input
C. Recognizing and addressing planning pitfalls
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D. Limiting the use of standing plans

Answers:
1. B. Achieving organizational goals
2. B. Strategic, tactical, and operational levels
3. B. The time period within which planning occurs
4. B. Contingency planning
5. C. Providing guidance for routine tasks
6. C. Logic and reasoning
7. D. Complex and simple
8. C. Structured problems and known outcomes
9. C. Derived from other existing plans
10. B. Lack of employee involvement
11. C. Dealing with specific, one-time events
12. B. Unforeseen emergencies and disruptions
13. B. The time frame over which plans are developed and implemented
14. B. The personal preferences of decision-makers
15. C. Operational planning
16. C. Systematic analysis and logic
17. C. For routine and repetitive tasks
18. C. Derived from existing plans and strategies
19. C. Providing guidance for routine tasks
20. C. Recognizing and addressing planning pitfalls

VERY SHORT QUESTIONS

1. Define planning.
2. State types of plan on the basis of time frames.
3. Mention four characteristics of planning.
4. Outline the different types of plans on the basis of hierarchy.
5. What is strategic plan?

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6. Briefly describe top-down methods of planning.

7. Write two pitfalls of planning.
8. State planning premises.
9. Make a list of classification of planning premises.
10. Make a list of tools for planning.
11. What is planning horizons?
12. What is single use planning?
13. What is contingency planning?
14. What is derivative planning?
15. Mention any five pitfalls of planning.
16. Mention any five ways for improvement in planning.
17. What is the full form of CPM and PERT?
18. Define decision-making.
19. State any four characteristics of decision making.
20. Outline two basic types of decision making.
21. Mention two features of classical approach to decision making.
22. What is programmed decision?
23. List different styles of decision making.
24. What is problem?
25. What is problem solving?
26. Mention major types of problems.
27. Mention common problem solving strategies.
28. State the two different conditions decision making.
29. Write major decision making process.
30. Mention any four tools of decision making.
31. Write some accounting tools facilitate in decision making.
32. What do mean by queuing model of decision making.

SHORT ANSWER QUESTIONS

1. What is planning? Is it important in the organization? Explain.
2. What is planning? Explain the nature of planning.
3. What is planning? Explain the different types of management plans.
4. What is panning? Describe the methods of planning.
5. Highlight the importance of planning for a business.
6. What is panning? Describe the pitfalls of planning.
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7. Define planning. Describe the major steps involved in the planning process.
8. What are planning premises? Discuss major types of planning premises.
9. What is decision making? Explain the importance of decision making in an
organization.
10. Define decision making? Enumerate different types of decisions.
11. Describe the different styles of decision making and also explain the
circumstances where such styles fit.
12. What is decision making? Explain the rational process of decision making.
13. What is problem solving? Explain the various types of problems and strategies
to solve them.
14. What are the conditions of decision making? Explain.
15. What do you mean by programmed and non-programmed decision?

LONG ANSWER QUESTIONS

1. "Failing to plan is planning to fail". Discuss this statement to highlight the
importance of planning in organization.
2. The success of the organization depends on proper formulation and
implementation of planning. In the light of this statement explain the instruments
which help managers to implement planning.
3. What is planning? Discuss the importance and steps involved in planning.
4. "Decision making is a cardinal factor for every manager in which each
management activity is linked together to achieve the results." Do you agree or
disagree with this statement? Justify.
5. What do you mean by decision making? Explain the importance of decision
making for successful functioning of a business organization.
6. "Whatever a manager does, s/he does through decisions." In the light of this
statement, discuss the types of problems and important problem solving strategies.

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UNIT 5: ORGANIZATIONAL ARCHITECTURE

5.1Organizational structure
Organizational structure refers to the framework or arrangement of tasks,
responsibilities, roles, and relationships within an organization. It outlines how
various components, such as departments, teams, and individuals, are organized and
how they interact to achieve the organization's goals. The organizational structure
provides a blueprint for the hierarchy, reporting lines, and communication channels
within the organization.

5.2 Organizational Architecture

Organizational architecture is a comprehensive framework that encompasses the
various elements and components of an organization, designed to align its structure,
processes, systems, and culture with its strategic objectives. It serves as a blueprint
for the organization, providing a systematic approach to organizing and managing
its resources to achieve desired outcomes.

structure

controls people incentives

culture

5.3Key elements of organizational architecture:

1. Structure:

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The formal arrangement of roles, responsibilities, and reporting relationships within

an organization. This includes decisions about centralization or decentralization,
departmentalization, and the overall hierarchy.
2. Processes:
The set of activities, workflows, and procedures that define how work is done within
the organization. This involves designing efficient and effective processes to achieve
organizational goals.
3. Systems:
The information systems, technologies, and tools that support organizational
processes. This includes both internal and external systems, such as communication
tools, project management software, and customer relationship management
systems.
4. Culture:
The shared values, beliefs, and behaviors that shape the organization's identity and
guide the actions of its members. Organizational culture plays a crucial role in
shaping employee behavior, decision-making, and overall performance.
5. People:
The human resources of the organization, encompassing aspects such as talent
acquisition, training and development, performance management, and employee
engagement. The right people, with the right skills, contribute significantly to the
success of the organization.
6. Strategy:
The overall direction and long-term plans of the organization. Organizational
architecture ensures that the structure, processes, and systems are aligned with the
strategic objectives to facilitate successful implementation.
7. Metrics and Measurement:
The identification and tracking of key performance indicators (KPIs) to assess the
organization's performance. This includes monitoring progress toward goals and
making data-driven decisions.
8. Incentives and Rewards:

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The design of reward systems, compensation structures, and performance incentives

to motivate and align the behaviors of individuals and teams with the organization's
objectives.

The goal of organizational architecture is to create a cohesive and integrated system

that enhances the organization's ability to adapt to change, innovate, and achieve its
strategic goals. It provides a holistic view of how different components work
together, promoting efficiency, effectiveness, and agility. Organizational
architecture is a dynamic concept that requires periodic reassessment and adjustment
to align with the evolving needs of the organization and its external environment.

5.4 Designing structure

Designing an organizational structure involves creating a framework that outlines
how various elements such as roles, responsibilities, and reporting relationships are
arranged to achieve the organization's goals. The choice of structure should align
with the organization's strategy, culture, and external environment.

5.41 Vertical Differentiation(Tall Vs Flat)

Vertical differentiation in organizational structures refers to the way authority and
decision-making responsibilities are distributed within the hierarchy of the
organization. It involves the arrangement of levels of management and the reporting
relationships between these levels. There are two primary types of vertical
differentiation: tall structures and flat structures.

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a
a

Tall Hierarchy Flat Hierarchy

1. Tall Organizational Structure:

Characteristics:
- Multiple hierarchical levels of management.
- Clear and distinct chain of command.
- Each manager has a small span of control (few subordinates).
- Decision-making authority is centralized at the top.
Advantages:
- Clear lines of authority and reporting.
- More opportunities for career advancement.
- Close supervision and control.
- Well-defined specialization and expertise.
Disadvantages:
- Communication may be slower due to multiple levels.
- Hierarchical layers can lead to bureaucracy.
- Decision-making can be centralized and slow.
- May result in higher costs due to additional management levels.
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2. Flat Organizational Structure:

Characteristics:
- Few hierarchical levels of management.
- Broader spans of control for managers (more subordinates).
- Decentralized decision-making authority.
- Emphasis on employee empowerment and autonomy.
Advantages:
- Faster communication and decision-making.
- Reduced bureaucracy and faster response to changes.
- Increased employee involvement and empowerment.
- Lower administrative costs.
Disadvantages:
- Limited opportunities for career advancement.
- Potential for role ambiguity and confusion.
- Managers may be overburdened with a large span of control.
- Less specialization and expertise in roles.

The choice between a tall or flat structure depends on various factors, including the
organization's size, nature of operations, culture, and management philosophy. Some
organizations may adopt a hybrid or matrix structure, combining elements of both
tall and flat structures to balance the advantages and disadvantages.

5.42Horizontal differentiation(Functional, multidivisional, geographical and

matrix)
Vertical differentiation refers to the hierarchical arrangement of tasks,
responsibilities, and authority levels within an organization. It involves the
establishment of a clear chain of command and the division of labor into different
levels or ranks. In simpler terms, it is the way in which authority and responsibility
are distributed vertically from the top management to the lower levels in the
organizational hierarchy.
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A. Functional Organizational Structure

A functional organizational structure is a type of organizational design that
arranges employees based on their specific skills, expertise, and functions. In this
structure, individuals with similar roles and responsibilities are grouped together into
functional departments, often headed by a functional manager. Each department is
dedicated to a specific organizational function, such as marketing, finance,
operations, or human resources.

Chief Executive

Production Finance Marketing Human rresource

department department depsartment department
manager manager manager manager

Features of a Functional Organizational Structure:

1. Functional Departments:
The organization is divided into functional areas or departments, each
specializing in a specific function.

2. Functional Managers: Each functional area is overseen by a functional

manager who is an expert in that particular field.

3. Specialization: Employees within each department have specialized skills

and expertise related to their specific function.

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4. Clear Hierarchy: The structure typically has a clear hierarchy, with e

mployees reporting to functional managers and functional managers reporting
to top management.

5. Efficiency: The structure is designed to promote efficiency within each

functional area as employees focus on tasks aligned with their expertise.

6. Centralized Decision-Making: Decision-making authority is often

centralized at the top, with top management making strategic decisions for the
entire organization.

7. Standardization: Processes and procedures within each functional area are

often standardized to ensure consistency.

Advantages of a Functional Organizational Structure:

1. Expertise: Employees develop deep expertise within their functional area,
leading to high-quality work and specialized knowledge.

2. Efficiency: Tasks are performed efficiently as employees concentrate on

specific functions, reducing duplication of efforts.

3. Career Development: Employees can follow a clear career path within

their specialized field, leading to enhanced skill development and career
advancement.

4. Cost Savings: Resources are allocated based on functions, optimizing the

use of resources and potentially reducing costs.

5. Clear Reporting Lines: The hierarchical structure provides clear reporting

lines, making it easier to manage and supervise employees.

6. Specialization: The organization can benefit from the specialized

knowledge and skills of employees within each functional area.

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Disadvantages of a Functional Organizational Structure:

1. Communication Barriers: Communication can become challenging
between different functional areas, leading to silos and information
bottlenecks.

2. Coordination Issues: Coordinating activities across functions may be

difficult, potentially leading to delays or inefficiencies.

3. Limited Innovation: The focus on specialization may hinder cross-

functional collaboration and innovation.

4. Slow Response to Change: The centralized decision-making process can

slow down the organization's response to rapidly changing external factors.

5. Departmental Conflicts: Conflicts may arise between departments,

especially if they have conflicting goals or priorities.

6. Rigidity: The structure may become rigid and resistant to change, hindering
adaptability in dynamic environments.

In summary, the functional organizational structure is well-suited for organizations

with stable environments and a need for deep expertise in specific functions.
However, it may face challenges in terms of flexibility and interdepartmental
collaboration, especially in rapidly changing industries.

B. Multi-Divisional Structure
A multi-divisional structure, also known as a divisional structure or M-form (Multi-
divisional form), is an organizational design that groups the activities of a company
into separate, semi-autonomous units called divisions. Each division functions as a
self-contained entity with its own functional areas, such as marketing, finance, and
operations, and has its own divisional head or manager.

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Features:
1. Divisions: The organization is divided into semi-autonomous divisions,
each responsible for specific products, services, or geographic regions.

2. Autonomy: Divisions have a significant degree of autonomy in decision-

making, allowing for adaptability to local conditions.

3. Functional Areas: Each division typically has its own functional areas,
including marketing, finance, operations, and human resources.

4. Divisional Heads: Each division is headed by a divisional manager who is

responsible for the division's performance.

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5. Centralized Support: While divisions operate semi-autonomously, certain

support functions, such as finance and legal services, may be centralized at
the corporate level.

6. Strategic Business Units (SBUs): Divisions often function as strategic

business units, focusing on specific markets or products.

7. Clear Profit and Loss Accountability: Divisions are often accountable for
their own profit and loss, providing clarity in financial performance.

Advantages:
1. Adaptability: Divisions can adapt to local market conditions, leading to
better responsiveness.

2. Focus on Products/Markets: Each division can focus on specific products,

services, or markets, enhancing specialization.

3. Clear Accountability: Divisions have clear accountability for their own

performance, fostering responsibility.

4. Enhanced Decision-Making: Decentralized decision-making allows for

faster and more responsive decisions at the divisional level.

5. Improved Customer Responsiveness: Divisions can tailor their strategies

to specific customer needs and preferences.

6. Promotes Innovation: Divisions can innovate independently, fostering

creativity within each unit.

Disadvantages:
1. Coordination Challenges: Coordinating activities and standardizing
processes across divisions can be challenging.

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2. Duplication of Functions: Divisions may duplicate certain functions,

leading to inefficiencies.

3. Inter-Divisional Rivalry: Competition or conflicts between divisions may

arise, impacting overall organizational cohesion.

4. Resource Allocation Issues: Allocating resources among divisions

requires careful consideration and may lead to resource imbalances.

5. Limited Economies of Scale: The organization may miss out on some

economies of scale due to decentralized operations.

6. Potential for Divergent Cultures: Divisions may develop distinct

cultures, potentially hindering organizational unity.

The multi-divisional structure is suitable for large, diversified organizations

operating in different markets or industries. While it offers advantages in terms of
adaptability and focus, managing coordination and fostering a unified organizational
culture can be ongoing challenges.

C. Geographic Structure
A geographic structure is an organizational design that arranges and manages a
company's activities based on different geographic regions or locations. In this
structure, the organization is divided into distinct regions, each with its own set of
responsibilities, resources, and decision-making authority. This type of structure is
particularly suitable for companies that operate in multiple locations or have diverse
market needs in various geographical areas.
Features:
1. Geographic Regions: The organization is divided into separate regions,
often based on countries, continents, or other geographical boundaries.

2. Local Decision-Making: Each geographic region operates with a degree of

autonomy, allowing for local decision-making based on regional needs and
conditions.

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3. Regional Managers: Each region is typically led by a regional manager or

director who oversees operations within that specific geographic area.

4. Tailored Strategies: Regions can develop strategies tailored to local

market conditions, cultural factors, and customer preferences.

5. Centralized Support Functions: Certain functions, such as finance,

marketing, and human resources, may be centralized at the corporate level to
ensure consistency and efficiency.

6. Global Coordination: While regions have autonomy, there is a need for

coordination at the global level to ensure alignment with overall
organizational goals.

Advantages:
1. Localized Decision-Making: Enables decision-making that is responsive
to specific regional needs and opportunities.

2. Cultural Sensitivity: Allows the organization to adapt to diverse cultural

nuances and preferences in different regions.

3. Market Customization: Facilitates the customization of products,

services, and marketing strategies to suit regional demands.

4. Efficient Resource Allocation: Resources can be allocated more

efficiently based on the unique requirements of each geographic region.

5. Enhanced Customer Service: The organization can provide more

personalized and region-specific customer service.

6. Market Expansion: Supports effective expansion into new markets by

tailoring strategies to local conditions.

Disadvantages:

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1. Coordination Challenges: Coordinating activities and maintaining

consistency across regions can be challenging.

2. Potential Duplication: There may be duplication of certain functions or

efforts across regions, leading to inefficiencies.

3. Communication Barrier:Geographic distances may result in

communication challenges and hinder information flow.

4. Global Integration Difficulty: Striking a balance between regional

autonomy and global integration requires careful management.

5. Cultural Differences: Managing diverse cultural differences and ensuring

a consistent organizational culture can be complex.

6. Risk of Regionalism: There is a risk of developing a "regionalism"

mentality, where regional units prioritize their interests over the overall
organization.

The geographic structure is commonly adopted by multinational corporations or

organizations with a significant presence in diverse regions. While it allows for
flexibility and adaptation, effective coordination and communication are essential to
overcome challenges associated with decentralization.

D. Matrix organization structure

A matrix organizational structure is a hybrid form that combines elements of
both functional and project-based organizational structures. In a matrix structure,
individuals report to both functional managers and project managers simultaneously.
This type of structure is often used in complex and dynamic environments where
organizations need to be agile and responsive to both functional and project
requirements. Here are some features, advantages, and disadvantages of a matrix
organizational structure:

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Features:
1. Dual Reporting Relationships: Employees in a matrix structure report to
both a functional manager (based on their expertise or department) and a
project manager (based on the project they are working on).

2. Cross-Functional Teams: Matrix structures encourage the formation of

cross-functional teams, allowing employees from different departments to
collaborate on projects.

3. Flexibility: Matrix structures are known for their flexibility and

adaptability to changing conditions. They can respond more effectively to
dynamic environments and shifting priorities.

4. Specialization: Employees can develop specialized skills in their

functional area while also gaining experience in working on various projects,
leading to a well-rounded skill set.

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Advantages:
1. Enhanced Communication: With constant interaction between functional
and project teams, communication is improved, leading to better coordination
and understanding of goals.

2. Resource Optimization:Matrix structures allow for efficient use of

resources, as individuals can be shared across different projects based on the
organization's needs.

3. Increased Project Focus: Project managers can focus on project goals and
timelines without having to worry about managing the entire organization,
leading to better project outcomes.

4. Better Decision-Making: Since decisions are made collectively by both

functional and project managers, there is often a broader perspective, which
can result in better-informed decisions.

Disadvantages:
1. Role Ambiguity: Employees may experience confusion or conflict
due to dual reporting relationships, leading to role ambiguity and a lack
of clarity about their responsibilities.

2. Power Struggles: Matrix structures can create power struggles between

functional and project managers, as each may have different priorities and
perspectives.

3. Increased Overhead: The dual reporting relationships and the need for
coordination can lead to increased administrative overhead and complexity.

4. Potential for Conflict: Conflicts may arise between functional managers

and project managers over resource allocation, priorities, and decision-
making authority.

In summary, a matrix organizational structure has its merits in terms of

flexibility and resource optimization, but it also comes with challenges related
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to role ambiguity, power struggles, and potential conflicts. Organizations

adopting this structure need to manage these challenges effectively to reap the
benefits of both functional expertise and project focus.

5.5 INTEGRATING MECHANISM

Integrating mechanisms are the mechanisms used to coordinate organization's
subunits. They help in the improvement of communication coordination, allowing
different divisions to collaborate to solve problem mechanisms are essential for
larger companies because communication can be lost between departments. When
this occurs, managers look integrate mechanisms, both formal and informal, to
support in coordination. The major integrating mechanisms that managers can use
are as follows:
 Formal Integrating Mechanisms

 Knowledge Networks

 Strategy, Coordination, and Integrating Mechanisms

5.51 Formal Integrating Mechanisms

The formal integrating mechanisms used to coordinate subunits vary in complexity
from simple direct contact and liaison roles, to teams, to a matrim structure. In
general, the greater the need for coordination between subunits, the more complex
formal integrating mechanisms need to be.

Formal integrating mechanisms are organizational structures, processes, or systems

designed to facilitate communication, coordination, and collaboration among
different parts of an organization. These mechanisms help ensure that various
functions or departments work together seamlessly to achieve common goals. Here
are some common formal integrating mechanisms:

1. Cross-Functional Teams:
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Cross-functional teams consist of members from different functional areas working

together on a specific project or task. Promotes collaboration and coordination across
functional boundaries, allowing individuals with diverse skills to contribute to a
common goal.

2. Project Management Offices (PMOs):

PMOs are centralized units within an organization responsible for defining and
maintaining project management standards, practices, and methodologies. Provides
a standardized approach to project management, ensuring consistency and
coordination across different projects and departments.

3. Matrix Organizational Structure:

An organizational structure that combines elements of both functional and project-
based structures, with employees reporting to both functional and project managers.
Facilitates coordination between functional units and project teams, enabling
efficient use of resources and expertise.

4. Integrated Information Systems:

Information systems that connect and integrate data and processes across different
functional areas within an organization. Enhances communication and information
flow, allowing real-time access to relevant data and supporting decision-making
across departments.

5. Regular Meetings and Committees:

Scheduled meetings or committees that bring together representatives from various
departments to discuss common issues, share information, and make decisions.
Fosters communication, coordination, and collaboration by providing a forum for
discussion and decision-making among different functional units.

6. Task Forces and Special Projects:

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Temporary groups or teams formed to address specific organizational challenges or

opportunities. Brings together individuals with diverse skills to tackle specific issues
or projects, promoting collaboration and problem-solving.

7. Inter-Departmental Liaison Roles:

Designated individuals or roles responsible for facilitating communication and
collaboration between different departments. Acts as a bridge between functional
areas, helping to resolve conflicts, share information, and ensure alignment of goals.

8. Formalized Communication Channels:

Established channels for formal communication, such as newsletters, intranet
platforms, or regular reports.mEnsures that important information is disseminated
consistently across the organization, promoting transparency and alignment.
These formal integrating mechanisms are crucial for large and complex
organizations to overcome silos, enhance communication, and achieve synergy
among different parts of the business. Implementing these mechanisms helps
organizations operate cohesively and respond effectively to challenges and
opportunities.

5.52 Knowledge Networks

Knowledge networks are dynamic and interconnected systems that enable the flow
of information, expertise, and insights among individuals, teams, and departments
within an organization. These networks are designed to foster a culture of knowledge
sharing, collaboration, and continuous learning.

Purpose of Knowledge Networks:

1. Facilitating Information Exchange: Knowledge networks provide a platform
for the seamless exchange of information and insights among employees. This helps
in avoiding information silos and ensures that valuable knowledge is accessible to
those who need it.

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2. Stimulating Innovation: By connecting individuals with diverse skills and

expertise, knowledge networks create an environment conducive to innovation.
Cross-functional collaboration allows for the exploration of new ideas and the
development of creative solutions to challenges.

3. Accelerating Learning: Knowledge networks promote a culture of continuous

learning by providing a mechanism for sharing best practices, lessons learned, and
expertise. This accelerates the learning curve for individuals and teams.

4. Enhancing Decision-Making: Access to a diverse range of knowledge sources

within the network empowers decision-makers with a more comprehensive
understanding of issues. This, in turn, leads to more informed and strategic decision-
making.

5. Building a Knowledge Repository: Knowledge networks contribute to the

creation of a collective knowledge repository. This repository contains not only
explicit knowledge but also tacit knowledge embedded in the experiences and
expertise of the organization's members.

6. Improving Problem-Solving: When faced with complex challenges, knowledge

networks enable collaborative problem-solving. Individuals can tap into the
expertise of others, leading to more effective and efficient resolution of issues.

7. Supporting Change Management: During periods of organizational change,

knowledge networks play a vital role in disseminating information, addressing
concerns, and fostering a sense of collective understanding and commitment among
employees.

8. Promoting Collaboration: Knowledge networks encourage collaboration by

breaking down communication barriers and facilitating interaction between
individuals who may not typically work closely together. This promotes a sense of
interconnectedness within the organization.

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In summary, knowledge networks are instrumental in harnessing the intellectual

capital within an organization, fostering collaboration, and creating an environment
where knowledge flows freely, ultimately contributing to the organization's
adaptability and competitiveness.

5.53 STRATEGY,COORDINATION, AND INTEGRATING MECHANISM

Strategy:
In the organizational context, a strategy is a comprehensive plan or approach
designed to achieve specific goals and objectives. It involves making choices and
allocating resources to position the organization favorably in its external
environment. Strategic planning encompasses defining the organization's mission,
setting goals, analyzing internal and external factors, and outlining the steps needed
to achieve success. Effective strategies provide a roadmap for the organization and
guide decision-making across various levels.

Coordination:
Coordination in an organizational context refers to the process of harmonizing and
aligning activities and efforts to ensure they work together seamlessly towards
common objectives. It involves integrating tasks, resources, and information across
different functions or departments. Effective coordination prevents redundancy,
reduces conflicts, and enhances overall efficiency. Coordination mechanisms can
include regular communication, collaboration tools, cross-functional teams, and
other processes that facilitate synergy among various organizational components.

Integrating Mechanism:
Integrating mechanisms are formal structures, processes, or systems implemented
within an organization to foster coordination and collaboration across different
functions or units. These mechanisms help break down silos and ensure that
information, resources, and efforts are shared efficiently. Examples of integrating
mechanisms include cross-functional teams, matrix organizational structures,
project management offices, and information systems that connect different parts of

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the organization. The purpose of these mechanisms is to create a cohesive and

interconnected organizational environment that supports the implementation of the
overall strategy.

Interrelation:
The interrelation between strategy, coordination, and integrating mechanisms is
critical for organizational success. A well-crafted strategy provides a clear direction
and purpose, guiding the organization's actions. Coordination ensures that these
actions are synchronized and aligned, preventing inefficiencies and conflicts.
Integrating mechanisms play a key role in operationalizing coordination by
providing the structures and processes needed to connect diverse functions and
facilitate collaboration, thereby supporting the execution of the chosen strategy.

In summary, an effective strategy sets the direction, coordination ensures

harmonious execution, and integrating mechanisms provide the organizational
infrastructure necessary to align efforts and resources. Together, they form a
cohesive framework that enables organizations to navigate challenges, pursue
opportunities, and achieve their long-term goals.

5.6 Authority
Henry Fayol: "Authority is the right to order or command and is delegated from the
superior to the subordinate to discharge his responsibilities."

F.G. Moore: "Authority is the right to decide and the power to act and carry out
decisions."

S.P. Robbins: "Authority is the right to act or command others to act toward the
attainment of organizational goals."

5.61 Features of Authority

Some special features of authority are as follows:
 It is a legitimate right to command and control subordinates.
 It has social, legal and biological limits.
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 It is granted to achieve the valued goal of the organization.

 It is the right to direct others to get things done.
 It is also a commanding force binding different individuals.
 It is delegated downward.
 It is exercised through persuasion and sanctions.

5.62 Types of Authority

Authority can be classified as follows.
1. Line Authority: It is the most fundamental authority within an organization,
reflects existing superior-subordinate relationships. It consists of the right to make
decisions and to give orders concerning the production, sales, or finance-related
behavior of subordinates. People, directly responsible for these areas within the
organization, are delegated line authority to assist them in performing their
obligatory activities.

2. Staff Authority: Staff authority consists of the right to advise or assist those who
possess line authority as well as other staff personnel. This authority enables those
responsible for improving the effectiveness of line personnel to perform their
required tasks.

3. Functional Authority: Functional authority consists of the right to give orders

within a segment of the organization in which this right is normally nonexistent. This
authority is usually assigned to individuals to complement the line or staff authority
they already possess. Functional authority generally covers only specific task areas
and is operational only for designated amounts of time. It is given to individuals
who, in order to meet responsibilities in their own areas, must be able to exercise
some control over organization members in other areas.

5.7 Responsibility
Koontz O'Donnel: "Responsibility may be defined as the obligation of a subordinate
to whom aduty has been assigned to perform the duty."

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George R. Terry: "Responsibility is the obligation to carry out assigned activities to

the best of his abilities."

S.P. Robbins: "Responsibility is the obligation to perform delegated duties and

tasks."

5.71 Features of Responsibility

Some special features of responsibility are as follows:
 It is the result of the duty assigned.
 It is assigning the duty to human beings only.
 It always flows upward from juniors to seniors.
 It is the obligation to complete the job as per instruction.
 It can never be delegated.
 It is an obligation and absolute also. The manager remains responsible to his
superiors for the job even after its delegation.

5.72 Types of Responsibility

Responsibility is divided into two parts namely operating responsibility and ultimate
responsibility.

1. Operating responsibility: It is the responsibility that is assumed only by the

subordinates in an organization.

2. Ultimate responsibility: This type of responsibility is retained by the superior. If

the subordinate fails to perform the job (operating responsibilities) the superior is
held responsible for this failure. It is called ultimate responsibility.

5.8 Accountability
L. Allen: "Accountability is the obligation to carry out responsibility and exercise
authority in terms of performance standards established."

McFarland: "Accountability is the obligation of an individual to report formally to

his superior about the work he has done to discharge the responsibility."

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5.81 Features of Accountability

Some special features of accountability are as follows:
 It can neither be shared nor delegated.
 It is a legal responsibility.
 It is unitary.
 It relates to assigned duties.
 It always flows from downward to upward.
 It is different from responsibility. Responsibility relates to the work to be
done, whereas accountability is the obligation to do the work satisfactorily.

5.9 Creating accountability in business organizations

Creating accountability in business organizations is crucial for fostering a culture of
responsibility, transparency, and high performance. Accountability ensures that
individuals and teams take ownership of their actions, meet their commitments, and
contribute to the overall success of the organization. Here are some strategies to
establish and promote accountability in a business setting:
1. Clearly Defined Roles and Responsibilities:
Clearly articulate the roles and responsibilities of each individual and team within
the organization. This clarity helps employees understand what is expected of them
and establishes a foundation for accountability.

2. Set Clear and Measurable Goals:

Establish specific, measurable, achievable, relevant, and time-bound (SMART)
goals for individuals and teams. Clear goals provide a benchmark for performance
and make it easier to hold people accountable for their contributions.

3. Regular Performance Reviews:

Implement regular performance reviews to assess individual and team performance
against established goals. These reviews provide an opportunity for constructive
feedback, recognition of achievements, and identification of areas for improvement.

4. Key Performance Indicators (KPIs):

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Define and communicate key performance indicators that align with organizational
objectives. Monitoring KPIs allows for objective measurement of performance and
helps in identifying areas that may require attention.

5. Accountability Agreements:
Encourage the creation of accountability agreements within teams. These
agreements outline specific commitments, deadlines, and expected outcomes,
fostering a collective sense of responsibility.

6. Empowerment and Autonomy:

Empower employees by providing them with the autonomy to make decisions within
their areas of responsibility. When individuals have a sense of ownership, they are
more likely to be accountable for the outcomes.

7. Communication and Transparency: Foster open communication and

transparency throughout the organization. When employees understand the broader
context of their work and are informed about organizational goals, they are more
likely to feel a sense of responsibility.

8. Recognition and Rewards:

Recognize and reward individuals and teams for their achievements and
contributions. Positive reinforcement reinforces a culture of accountability and
encourages continuous improvement.

9. Training and Development:

Invest in training and development programs to enhance employees' skills and
capabilities. A well-equipped workforce is more likely to meet their responsibilities
and contribute positively to organizational goals.

10. Lead by Example:

Leadership plays a pivotal role in establishing accountability. Leaders should model
the behavior they expect from others, demonstrating accountability in their actions,
decisions, and commitments.

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11. Feedback Loops: Establish regular feedback loops where employees receive
constructive feedback on their performance. This iterative process helps individuals
understand where they stand and how they can improve.

12. Consequences for Non-Performance:

Clearly communicate the consequences of not meeting expectations. While positive
reinforcement is essential, there should be a fair system of consequences for
persistent non-performance to maintain accountability.

By incorporating these strategies, organizations can create a culture of accountability

that permeates through all levels, fostering a sense of ownership and responsibility
among employees.

5.10 Emerging issues in organization design and architecture

Over the years a number of issues/concepts related to organizational design and
architecture have emerged. Some of these issues are briefly discussed below:

1. Information Management: Because of the increasing use of information

technology in an organization, managers need to administer and process a large
quantity of information at a time. The capacity of a manager to process such
information will influence the organizational design. Information technology also
has an impact on a span of management and the number of levels in the organization.
With the use of technology, a manager can work with a larger number of
subordinates.

2. Global Organizations: Because of the increase of internationalization of business

organizations, business houses have to interact with suppliers, customers, or
competitors from other countries. In such a situation, designing an organization
means structuring the organization most effectively so that it becomes comfortable
to deal with these international forces and to compete in the global markets.

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3. Adapting Organizations: Since the environment is changing it is essential to

design our organization adaptive to such changes. Managers nowadays normally try
to make organizations more adaptive than before. They prefer a flexible type of
design such as project-type design with little or no underlying functional hierarchy.

4. Self-managed Teams: Self-managed work teams-also known as self- directed

work teams or empowered teams or autonomous work groups-refer to work groups
empowered to make decisions about planning, implementing and evaluating their
daily work. Team members are allowed to make decisions on the selection of inputs,
scheduling and allocating tasks among members, training and development,
performance evaluation and controlling. The self-managed team is free to decide:
 Which working methods will be used;
 Who shall belong to the group;
 Who shall take charge of directive duties if they come into prominence
(leadership); and
 Who shall perform which duties (internal task allocation).
 The team is free to decide on individual production methods, internal
leadership, recruitment, and internal distribution of tasks.

5. The Boundaryless Organizations: A boundaryless organization is one in which the

widespread use of teams, networks, and similar structural mechanisms mean that the
boundaries that typically separate organizational functions and hierarchical levels
are reduced and made more permeable. The boundaryless organizations cannot be
defined in terms of horizontal (specialization and departmentation), vertical
(separates employees in organizational levels and hierarchies), or external
boundaries (separates an organization from its customers and suppliers) as like in
line and line-and-staff structures. Organization structures remain more flexible and
dynamic so that it is easy to fit in organization.

6. Learning Organizations: The concept of a learning organization is essential

nowadays as a process of continuous change and adaptation. Continuous
improvement is important to a learning organization because it is the foundation of
the learning organization and the basis of organizational capacity People are
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encouraged to share information and knowledge so that they can easily contribute to
a changed goal in a learning organization. The seven features of learning
organizations are:
 create continuous learning opportunities (Continuous Learning);
 promote inquiry and dialogue (Dialogue and Inquiry); encourage
collaboration and team learning (Team Learning);
 empower people toward a collective vision (Empowerment);
 establish systems to capture and share learning (Embedded System);
 connect the organization to its environment (System Connection); and
 provide strategic leadership for learning (Strategic Leadership).

5.11 Nepalese Practices in Organizational Structure

In the case of Nepal, different types of organizations have been practicing different
organizational structures based on their philosophy, mission, vision, goals, policies,
strategies, and rules and regulations. Organizational structure helps to define roles
and responsibilities of the employees to work on given philosophy mission, vision,
goals, policies, and strategies. With the help of organizational structure, employees
understand how to put the organization together and work properly. Nepalese
practices are as follows:
1. Practicing Governance in Structure: Banks, government hold public
enterprises, and private sector organizations have their own governing structure
defined by their rules and regulations. For example, the board of directors has the
role to make policy-level decisions following certain board meeting manuals and
guidelines. In the case of government ministries, decision making roles are divided
into different levels of administrative units from the central ministry to the local
levels units.

2. Purpose, Policy and Strategy-driven Practices: Every organization, especially

in the formal sector has certain written purpose, policy, and strategies. In order to
implement these policies and strategies, organizational leaders define the roles and
responsibilities of departments, divisions, and functional units. Many organizations
have developed job descriptions and specifications to define the roles and
responsibilities of the employees.
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3. Organizational Culture and Practices: Organizational practices are different

from the organizational culture. Culture plays a vital role to produce employee
behavior that converts vision, mission, and objectives into practice. In private sector
organizations, the family value system and board of directors determine behavioral
requirements to implement the practices. Whereas in government ministries act,
rules and regulations guide the behavior of bureaucrats.

4. Internal Practices aligned to the Core Culture: In Nepalese organizations, the

process of making decisions about recruitment, development, promotion, employee
goals/objective and key results, performance evaluation, recognition, appreciation,
celebrations, employment of technology, collective bargaining, further investment,
etc. are all guided by the core culture of the organizations. Some organizations are
performance-based where decisions are made to apply meritocracy practices.

5. External Practices aligned to the Core Culture: External practices clarify the
way how organizations interact with outsiders. Nepalese organizations interact with
customers with the help of email, the internet, public relations, and the promotion of
products and services. Similarly, they interact frequently with suppliers, vendors,
and other business partners with different processes. Whatever the process they
follow to develop relations with external stakeholders is always based on their core
culture.

6. Organizational Structure: Tall organizational structures are common in

Nepalese organizations. In most cases, power is concentrated at the top. The
positions are organized in a hierarchical order. The organizational structure of the
Nepalese Army is based on line and staff. Business organizations, in general, use
functional organizational designs. Donor-assisted development projects have used
matrix organizational design. Committees are common in Nepalese organizations.
There is a lack of team-based design. Managers do not like working in groups.

7. Authority Delegation and Responsibility: Authority in Nepalese organizations

is centralized to the top-management. Resources are allocated in the direction of
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powerful managers. Since organizations were structured in a bureaucratic design,

delegation of authority and responsibility are done at the whim of top level managers
rather than in a way to solve organizational goals.

8. Autonomy for Planning and Decision Making: Organizations are set planning
to decide the future direction. Generally, managers from the top management level
are engaged in making planning, while middle and lower level decide their
objectives and policies to work for their own 'levels. Managers from all levels are
engaged in decision making process. However, in Nepalese organizations top level
managers are very powerful and highly authorized, middle and lower level managers
have to be dependent on top level managers in making decisions. Middle and lower
level managers have to wait for the order to impart their duties.

Multiple Choice Questions (MCQs)

1. What is organizational structure?
- A. The physical layout of an office space
- B. The arrangement of tasks and responsibilities within an organization
- C. The company's logo and branding
- D. The financial structure of a company

2. What does organizational architecture encompass?

- A. Building design
- B. Communication patterns
- C. Employee attire
- D. Project management tools

3. Which of the following is an element of organizational architecture?

- A. Product pricing
- B. Corporate culture
- C. Advertising strategy

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- D. Customer feedback

4. In organizational design, what is vertical differentiation concerned with?

- A. Departmentalization
- B. Collaboration
- C. Customer segmentation
- D. Marketing strategies

5. Which term describes a Tall organizational structure?

- A. Horizontal
- B. Flat
- C. Hierarchical
- D. Matrix

6. What does horizontal differentiation involve?

- A. Decision-making processes
- B. Grouping tasks into functions
- C. Employee motivation
- D. Employee training programs

7. Which is an example of horizontal differentiation?

- A. Geographical divisions
- B. Cross-functional teams
- C. Centralized decision-making
- D. Single-tier management

8. What is a key feature of a matrix organizational structure?

- A. Centralized decision-making
- B. Dual reporting relationships
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- C. Strict hierarchy
- D. Singular project focus

9. What is a formal integrating mechanism in organizations?

- A. Employee social events
- B. Cross-functional teams
- C. Casual communication
- D. Unplanned collaborations

10. What is a knowledge network in organizational architecture?

- A. Social gatherings
- B. Information systems
- C. Team-building activities
- D. Employee grievances

11. Where does authority typically come from in an organization?

- A. Employees
- B. Job titles
- C. Organizational chart
- D. Seniority

12. Responsibility in an organization is best defined as:

- A. Job tasks assigned to an employee
- B. The authority to make decisions
- C. The reporting structure
- D. The company's financial status

13. What is the primary purpose of accountability in business organizations?

- A. Encourage blame culture
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- B. Foster collaboration
- C. Promote transparency and responsibility
- D. Discourage innovation

14. Which of the following is an emerging issue in organization design?

- A. Traditional hierarchical structures
- B. Remote work and hybrid models
- C. Rigid job roles
- D. Lack of diversity

15. How has the concept of remote work impacted organizational design?
- A. Reinforced traditional structures
- B. Shifted towards more hierarchical models
- C. Accelerated the adoption of flexible and hybrid structures
- D. Eliminated the need for organizational structures

16. What is the role of ESG in organizational design?

- A. Enhancing organizational hierarchy
- B. Aligning with sustainability goals
- C. Fostering a blame culture
- D. Eliminating diversity

17. Which Nepalese practice is commonly observed in organizational structure?

- A. Strict adherence to traditional hierarchical models
- B. Embracing flat organizational structures
- C. Overemphasis on individual contributions
- D. Resistance to technological advancements

18. What does the term "functional differentiation" refer to in organizational design?
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- A. Dividing tasks based on functions like marketing or finance

- B. Creating complex hierarchies
- C. Ignoring employee feedback
- D. Prioritizing individual contributions over teamwork

19. How does a matrix organizational structure differ from a traditional hierarchical
structure?
- A. It has dual reporting relationships
- B. It eliminates vertical differentiation
- C. It promotes a strict hierarchy
- D. It discourages collaboration

20. What is a crucial aspect of accountability in business organizations?

- A. Lack of transparency
- B. Blaming individuals for failures
- C. Recognition and rewards
- D. Ignoring performance reviews

21. What role does knowledge play in a knowledge network?

- A. It restricts information flow
- B. It fosters a blame culture
- C. It facilitates information exchange
- D. It promotes silos

22. What is a primary challenge in implementing a hybrid work model?

- A. Enhanced collaboration
- B. Maintaining organizational hierarchy
- C. Reducing employee autonomy
- D. Integrating technology
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23. How does a flat organizational structure differ from a tall structure?
- A. It has a shorter decision-making chain
- B. It promotes a rigid hierarchy
- C. It discourages cross-functional collaboration
- D. It eliminates the need for accountability

24. What does a focus on employee well-being mean for organizational design?
- A. Ignoring mental health concerns
- B. Promoting long working hours
- C. Creating structures that support work-life balance
- D. Eliminating performance reviews

25. What is a characteristic of a resilient organization in terms of architecture?

- A. Rigid structures
- B. Lack of coordination mechanisms
- C. Adaptability to unforeseen disruptions
- D. Hierarchical decision-making

Answers:
1. B. The arrangement of tasks and responsibilities within an organization
2. B. Communication patterns
3. B. Corporate culture
4. A. Departmentalization
5. C. Hierarchical
6. B. Grouping tasks into functions
7. B. Cross-functional teams
8. B. Dual reporting relationships
9. B. Cross-functional teams
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10. B. Information systems

11. C. Organizational chart
12. A. Job tasks assigned to an employee
13. C. Promote transparency and responsibility
14. B. Remote work and hybrid models
15. C. Accelerated the adoption of flexible and hybrid structures
16. B. Aligning with sustainability goals
17. A. Strict adherence to traditional hierarchical models
18. A. Dividing tasks based on functions like marketing or finance
19. A. It has dual reporting relationships
20. C. Recognition and rewards
21. C. It facilitates information exchange
22. B. Maintaining organizational hierarchy
23. A. It has a shorter decision-making chain
24. C. Creating structures that support work-life balance
25. C. Adaptability to unforeseen disruptions

VERY SHORT QUESTIONS

1. Define organizational structure.
2. Define organizational architecture.
3. What is vertical differentiation?
4 What is horizontal differentiation?
5. Define Tall and Flat structures.
6. What are integrating mechanisms?
7. Mention the key aspects of integrating mechanisms.
8. Write any four advantages of functional organizational structure.
9. Mention the advantages of multidivisional organizational structure.
10. Write any two points of difference between authority and power.
11. State any four advantages of geographical organizational structure.
12. What do you mean by matrix organization structure?
13. Define the term authority.
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14. What is meant by responsibility?

15. What is accountability?
16. Name any four emerging issues in organization design and architecture.
17. Mention any three Nepalese practices in organizational structure.

SHORT ANSWER QUESTIONS

1. What is organizational structure? Give some examples of organizational
structures.
2 What is organization architecture? Discuss about vertical and horizontal
differentiation.
3. What is tall structure? Discuss its advantages and disadvantages.
4. Flat is tall structure? Discuss its advantages and disadvantages.
5. Discuss about 360 degree structure.
6. In the light of emerging new approaches to organizing discuss the emerging issues
in organization design and architecture.
7. What are the management standards that must be strictly followed in order to
establish effective reporting relationship in an organization?
8. Discuss the ways for creating accountability culture in organization.
9. What do you mean by integrating mechanisms? Explain the key aspects of
integrating mechanisms.
10. What is functional organizational structure? Explain advantages of functional
organizational structure.
11. What is multidivisional structure? Explain advantages of multidivisional
organizational structure.
12. What is geographical organizational structure? Explain its advantages.
13. What do you mean by matrix organization structure? Explain advantages of
matrix organizational structure.
14. Explain the Nepalese practices in organizational structure.

Long Answer Questions

1. "Structure is most essential element for allocating duties, responsibilities and
authorities. But long hierarchy keeps a distance between managers and

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subordinates." In the light of this statement give your opinion how the organization
should be designed in a relatively small pharmaceutical company?
2. It is often considered that decentralization become a need and tends to increase
when the organization grows in size and complexity. In light of this, discuss the
concept, advantages and constraints of decentralization of authority.
3. "Organizing structuring is the process of designing jobs, grouping jobs into
manageable units, and establishing patterns of authority among jobs and groups of
jobs." In line of this statement state the aspects of designing structure.
4. "The matrix organization integrates two vertical and horizontal work authority
relationships." Discuss with examples.
5. New forms of organizations are emerging in the 21st century. What do you know
about these new forms of organizations?
6. What is organizational structure and architecture? Explain the Nepalese practices
in organizational structure.

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UNIT 6: ORGANIZATIONAL CULTURE

6.1 Defination
David A. Decenzo and S. P. Robbins - "Organizational culture has been described
as the shared values, principles, traditions, and ways of doing things that influence
the way organizational members act. In most organizations, these shared values
and practices have evolved over time and determine, to a large extent, how "things
are done around here."

Charles W.L. Hill and Steven L. McShane: "Organizational culture involves the
values and assumptions shared within an organization."

Harold Koontz and Heinz Weihrich: 'Organizational culture is the general pattern
of behavior, shared beliefs, and values that members have in common. It can be
inferred from what people say, do, and think within an organizational setting."

Richard Perrin: "Organizational culture is the sum of values and rituals that serve
as a glue to integrate the organization's members."

6.2 characteristics
1. Values and Beliefs: The fundamental principles that guide the organization's
decisions and actions, representing its ethical and moral compass.

2. Norms and Behaviors: The unwritten rules that shape how individuals within the
organization interact with one another, influencing their work habits and conduct.

3. Symbols and Artifacts: The use of language, symbols, and physical items to
convey and reinforce the cultural values and identity of the organization.

4. Rituals and Ceremonies: Special events and routine activities that serve to
celebrate, strengthen, and perpetuate the organization's cultural norms and values.

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5. Socialization and Onboarding: The processes and programs designed to

integrate new members into the existing organizational culture, helping them
understand and adopt its values and practices.

6. Leadership Style: The behavior and actions of leaders, which play a pivotal role
in setting the tone for the organization's culture and influencing the attitudes and
behaviors of its members.

7. Adaptability: The organization's ability to embrace change, foster innovation,

and respond effectively to external challenges, reflecting its overall flexibility.

8. Employee Engagement: The level of emotional commitment, motivation, and

satisfaction that employees have within the organization, often influenced by the
prevailing culture.

9. Communication Style: The openness, transparency, and effectiveness of

communication within the organization, impacting how information is shared and
received.

10. Customer Orientation: The organization's focus on understanding and meeting

customer needs, ensuring high levels of satisfaction, and maintaining a reputation
for service excellence.

11. Risk Tolerance: The organization's willingness to take risks in pursuit of goals,
or conversely, its aversion to risk and preference for stability and predictability.

12. Conflict Resolution: The methods and approaches used to address conflicts
within the organization, as well as the organization's tolerance for constructive
disagreement as a means of driving positive change.

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6.3Importance of organizational culture

The importance of organizational culture lies in its profound impact on various
aspects of an organization, influencing its performance, employee engagement, and
overall effectiveness. Here are key reasons why organizational culture is crucial:

1. Employee Engagement and Satisfaction:

A positive organizational culture fosters a sense of belonging and purpose, leading
to higher levels of employee engagement and job satisfaction. Employees are more
likely to be motivated and committed when they identify with and embrace the
organization's values.

2. Performance and Productivity:

A strong culture aligns individuals with the organization's goals, leading to improved
performance and increased productivity. A culture that encourages innovation and
collaboration can enhance overall efficiency and effectiveness.

3. Retention and Recruitment:

Positive cultures attract and retain top talent, as individuals are drawn to
organizations where they feel a cultural fit. Employees are more likely to stay with
an organization that aligns with their values and provides a positive work
environment.

4. Adaptability and Innovation:

Organizational cultures that value adaptability and innovation are better equipped to
navigate and thrive in a rapidly changing business environment. A culture that
encourages risk-taking and creativity fosters a dynamic and innovative workplace.

5. Decision-Making and Behavior:

Culture influences decision-making processes and guides behavior within the
organization. Shared values and norms create a framework for decision-making,
ensuring consistency and coherence across the organization.

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6. Communication and Collaboration:

A healthy organizational culture promotes open communication and collaboration
among team members. Employees are more likely to share information, ideas, and
feedback when communication is encouraged and valued.

7. Customer Relations:
Organizational culture extends to customer interactions, influencing the quality of
service and customer relations. A customer-centric culture ensures a focus on
meeting customer needs and building positive relationships.

8. Brand Image and Reputation:

Culture shapes the external perception of the organization, contributing to its brand
image and reputation. A positive culture can enhance the organization's
attractiveness to customers, partners, and the broader community.

9. Ethical Standards and Compliance:

Organizational culture establishes ethical standards and influences the adherence to
legal and regulatory requirements. A strong ethical culture promotes integrity and
ensures compliance with ethical guidelines.

10. Leadership Effectiveness:

The culture set by leaders strongly influences their effectiveness in leading and
managing teams. Leaders who understand and embody the organization's culture are
more likely to inspire and guide their teams effectively.

In summary, organizational culture is a foundational element that shapes the

behavior, attitudes, and performance of individuals within an organization. It
contributes significantly to the overall success and sustainability of the organization
in a competitive and dynamic business environment.

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6.5 CHANGE AND STRENGTHENING ORGANIZATIONAL CULTURE

Here are some points with explanations:
1. Assessment:
Organizations should conduct a thorough assessment of their existing culture to
identify areas that require change or improvement. This involves gathering insights
from employees at various levels to understand their perspectives on the current
organizational culture. This initial evaluation sets the stage for targeted
interventions.

2. Leadership Alignment:
Achieving a change in organizational culture requires strong leadership
commitment. Top leadership must be fully aligned with the desired cultural changes,
acting as role models for the rest of the organization. Their consistent support and
engagement are crucial for driving and sustaining the cultural transformation.

3. Communication:
Clear and transparent communication is essential when initiating cultural change.
Organizations need to develop a compelling narrative explaining the reasons for the
change, the vision for the future culture, and the expected behaviors. Regular and
consistent communication helps build understanding and buy-in from all
stakeholders.

4. Role Modeling:
Leaders play a pivotal role in shaping organizational culture. They should exemplify
the desired behaviors and values, serving as role models for employees. Recognizing
and rewarding individuals who embody the new cultural norms reinforces the
importance of the desired behaviors throughout the organization.

5. Training and Development:

To ensure successful cultural change, organizations should implement training
programs that equip employees with the necessary skills and knowledge for the
cultural shift. Ongoing education is crucial to reinforcing the importance of the new
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culture and providing tools for employees to embrace and embody it in their daily
work.

6. Employee Involvement:
Involving employees in the change process is key to building ownership and
empowerment. Organizations should encourage participation and input from
employees at all levels. This inclusivity fosters a sense of commitment and ensures
that the cultural change reflects the collective values of the organization.

7. Feedback Mechanisms:
Establishing continuous feedback mechanisms is essential for monitoring the
progress of cultural change. Organizations should create channels for employees to
share their thoughts, concerns, and suggestions. This feedback loop helps leadership
make informed decisions and adapt strategies based on the evolving needs of the
organization.

8. Rewards and Recognition:

Aligning reward systems with the desired cultural traits reinforces the importance
of the cultural change. Recognizing and celebrating achievements related to cultural
transformation not only motivates employees but also signals that the organization
values and prioritizes the newly established cultural norms.

6.6 Managing organizational culture during merger

Managing organizational culture during a merger is a critical aspect of ensuring a
smooth integration and the long-term success of the combined entities. Here are
several key strategies for effectively managing organizational culture during a
merger:
1. Culture Assessment:
Begin with a comprehensive assessment of the cultures of both organizations.
Understand the similarities, differences, and potential areas of conflict. This

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assessment serves as a foundation for developing a strategic plan for cultural

integration.

2. Leadership Alignment:
Ensure that leadership from both organizations is aligned on the vision and values
of the merged entity. Leaders play a crucial role in setting the tone for the new
culture, and their alignment is essential for a successful transition.

3. Communication Strategy:
Develop a robust and transparent communication strategy that addresses the
changes resulting from the merger. Clearly articulate the reasons behind the merger,
the shared vision, and the cultural expectations moving forward. Consistent and open
communication helps mitigate uncertainty and resistance.

4. Integration Teams:
Form cross-functional integration teams that include representatives from both
organizations. These teams can work on aligning processes, systems, and,
importantly, cultural elements. Involving employees from various levels fosters a
sense of ownership and inclusion.

5. Cultural Integration Plan:

Develop a detailed cultural integration plan that outlines specific actions and
timelines. This plan should address key cultural components, such as values,
communication styles, and work norms. Having a structured approach helps in
managing the complexity of merging different cultures.

6. Retain Key Cultural Elements:

Identify and retain key cultural elements from both organizations that contribute
positively to the new entity. This could include aspects such as unique traditions,
successful work practices, or specific values that resonate with employees.

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7. Training and Development:

Implement training programs to prepare employees for the cultural changes resulting
from the merger. Provide resources and support to help them understand and adapt
to the new culture. Training can include workshops, online modules, or facilitated
discussions.

8. Employee Involvement:
Involve employees in the cultural integration process by seeking their input and
feedback. Solicit ideas for preserving positive aspects of the existing cultures and
encourage a sense of shared ownership in creating the new organizational identity.

9. Addressing Resistance:
Anticipate and address resistance to cultural change proactively. Establish channels
for employees to express concerns and provide feedback. Leaders should actively
listen, acknowledge concerns, and communicate the benefits of the merged culture.

10. Monitoring and Adjustment:

Continuously monitor the progress of cultural integration and be prepared to make
adjustments as needed. Regularly assess employee sentiment, and be agile in
adapting strategies based on feedback and evolving circumstances.

11. Cultural Integration Metrics:

Define key metrics to measure the success of cultural integration. This could include
employee satisfaction surveys, retention rates, and indicators of collaboration and
teamwork. Regularly assess these metrics to gauge the effectiveness of the cultural
integration efforts.

12. Celebrate Milestones:

Celebrate cultural integration milestones and achievements. Recognize and reward
teams and individuals who contribute positively to the process. Celebrations create
a positive atmosphere and reinforce the desired cultural behaviors.

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By carefully managing organizational culture during a merger, companies can

facilitate a smoother transition, minimize disruptions, and build a unified culture that
supports the long-term success of the newly formed entity.

6.7 Organizational culture in Nepalese organization

In Nepal mainly three types of organizations are in existence such as private, public,
and non- government organizations. Culture in these organizations differs widely in
terms of rules and regulations, attitude, values and belief systems, customs, and
habits. Some major observations in organizational culture in Nepalese organizations
are explained below:

1. Rules and Regulations: Private organizations are more autonomous to run their
organizations making different rules and regulations. However, they are less
transparent in comparison to the public sector organizations. In government
organizations, bureaucratic rules and regulations are guiding the attitude and
behavior of employees.

2. Hierarchy System and Discrimination: The system of hierarchy extends to the

family, the civil service, and even to the informal sector in Nepal. For example, in
the past, most posts in the civil service, the army, and the police were held by
members of the two highest Hindu castes, and these castes also dominated the
political parties. In many organizations, the hierarchic system still prevails in making
decisions. In the informal sector, there are instances of discrimination based on
gender, caste, disability, religion, sexual orientation, and gender identity; from 2007
an inclusive approach of appointment is followed.

3. Increasing Inclusiveness: According to the civil service rule, "33% of the

position holds for women, and 27% for indigenous nationalities. Similarly, for
Madhesis, the Dalits, downtrodden persons with disabilities and candidates from
backward regions, 22%, 9%, 5%, and 4% positions were held for the appointment,
respectively." Organizations partially or fully owned by the government,
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universities, and schools are also following the inclusive system of appointment at
the entry-level of the job. With the principle of inclusiveness in public sector jobs,
women's participation increased in the last ten years. Their participation rises from
8% a decade ago to 23% in 201724. This rule of inclusiveness, somehow, provides
justice to women workforce participation since their population size is larger than
males.

4. Less Power Sharing: Nepalese decision-makers still prefer to hold power rather
than to delegate and devolve it. The overwhelming belief among them is that the
more power you hold, the more you are recognized in society. In the Geert Hofstede
cultural dimensions, Nepal scores high (65) in power distance, has a medium-low
preference for avoiding uncertainty and is considered a collective and feminine
society 2. According to Hofstede Insight, Nepalese organizations are hierarchic that
reflect inherent inequalities, centralization of power, subordinates expect to be told
what to do and the ideal boss is a benevolent autocrat.

5. Short-term Orientation and Increasing Corruption: In both public and private

organizations, there is short-term orientation and they are just seeking short-term
profit-making. Organizations are engaged in making a short-term profit by hook or
crook. Even in government organizations, corruption is widely reported in public
media. Public companies lack an appropriate corporate culture. In a recent survey
by Transparency International in 17 Asian countries, it was revealed that 58% of
Nepalese citizens think that corruption increased in the past 12 months. The report
also states that "People's growing frustrations with government and apathy towards
corruption have spurred the "Enough is Enough" campaign, COVID-19 street
protests and support for Dr. Govinda K.C.'s medical-sector reform agenda" 28,

6. Lack of Performance-based System: With the exception of a few commercial

banks no performance-based system is used in the public sector and family. owned
organizations. In public enterprises, a link between the result of performance
evaluation and other human resource management (HRM) activities such as training
and development, reward management, etc. are less established. The system of
reward and punishment based on performance evaluation is less practiced. Employee

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promotion, development, and career development are based on connections and

favoritism. Although the merit-based system is adopted in the appointment of chief
executive officers (CEOs), the influence of the ruling party cannot be ignored even
today. In particular, to be recruited at the top position of organizations, getting
promotions, and being selected for overseas training participation, political
affiliations, and connections are the important determinants.

7. Low Motivation at Work: In many organizations, problems are emerging

relating to employee motivation, declining morale, deteriorating corporate culture,
poor staff empowerment, lack of harmonious relations between management and
employees and fewer initiatives in the development and implementation of equal
employment opportunities. It is widely believed that jobs are for earning money
rather than delivering services. Employees who have less monetary advantages at
work are found to be less motivated and even frustrated at their jobs.

Strong organizational culture is expected to become more important in Nepal in the

coming days as a result of the tough competitive business environment. Nepalese
organizations, as a result, must be culturally sensitive. They must be proactive in
their responses to cross-cultural changes brought about by globalization and the
information technology revolution. Communication, negotiation, and decision
making in business should all take place within a cultural context.

Multiple Choice Questions (MCQs)

1. What is organizational culture?
- a) A legal framework for organizations
- b) Shared values, beliefs, and practices within an organization
- c) A financial statement of an organization
- d) The organizational hierarchy

2. Why is understanding organizational culture important?

- a) It helps in legal compliance only

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- b) It impacts employee engagement and satisfaction

- c) It has no relevance in organizational success
- d) It is only relevant for large organizations

3. How does organizational culture influence decision-making?

- a) It has no impact on decision-making
- b) It provides a legal framework for decisions
- c) It sets expectations and guides behavior
- d) It only affects individual decisions, not organizational ones

4. What is a key characteristic of organizational culture related to leadership?

- a) Hierarchical structure
- b) Employee engagement
- c) Leadership behavior
- d) Legal compliance

5. Why is employee engagement important for organizational culture?

- a) It has no impact on culture
- b) Engaged employees lead to a positive culture
- c) It only affects individual employees, not the organization
- d) Engaged employees are less productive

6. What is the primary goal of changing organizational culture?

- a) To increase legal compliance
- b) To align with the organization's core values and goals
- c) To decrease employee satisfaction
- d) To enforce a rigid structure

7. What is a crucial aspect of leadership during cultural change?

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- a) Maintaining the status quo

- b) Exemplifying desired behaviors
- c) Avoiding communication
- d) Ignoring employee feedback

8. Why is communication important during cultural change?

- a) It is not relevant to cultural change
- b) It helps maintain secrecy
- c) It mitigates uncertainty and resistance
- d) It creates confusion among employees

9. What is a common challenge in managing organizational culture during a merger?

- a) Lack of leadership involvement
- b) Consistent communication
- c) Employee engagement
- d) Similar organizational values

10. How can organizations address resistance during cultural change?

- a) Ignore resistance
- b) Establish channels for employee feedback
- c) Promote rigid structures
- d) Discourage employee involvement

11. What does a cultural integration plan focus on during a merger?

- a) Ignoring existing cultures
- b) Retaining all cultural elements
- c) Aligning processes, systems, and cultural aspects
- d) Exclusively favoring one organization's culture

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12. What role does training play in cultural change?

- a) It is not relevant to cultural change
- b) Equips employees with skills for the shift
- c) Creates confusion among employees
- d) Only benefits leadership, not employees

13. What should leaders do to manage organizational culture during a merger?

- a) Ignore existing cultures
- b) Demonstrate alignment with the new culture
- c) Avoid communication
- d) Discourage employee involvement

14. How can organizations measure the success of cultural integration?

- a) Ignore metrics
- b) Establish cultural integration metrics
- c) Rely solely on employee satisfaction
- d) Focus on legal compliance metrics

15. Why is celebrating milestones important during cultural integration?

- a) It has no impact on organizational success
- b) Reinforces positive behaviors and achievements
- c) Creates a negative atmosphere
- d) Only benefits leadership, not employees

16. What is the significance of organizational culture in Nepalese organizations?

- a) It is not relevant to Nepalese organizations
- b) It influences employee engagement and satisfaction
- c) Nepalese organizations don't have a distinct culture
- d) It is solely determined by legal compliance
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17. How does organizational culture contribute to decision-making in Nepalese

organizations?
- a) It has no impact on decision-making
- b) It provides a legal framework for decisions
- c) It sets expectations and guides behavior
- d) It only affects individual decisions, not organizational ones

18. Why is leadership alignment crucial in managing organizational culture during

a merger in Nepalese organizations?
- a) It has no impact on cultural change
- b) Leaders don't influence culture in Nepalese organizations
- c) Leadership sets the tone for the new cultural identity
- d) Nepalese organizations don't experience mergers

19. How can Nepalese organizations address resistance during cultural change?
- a) Ignore resistance
- b) Establish channels for employee feedback
- c) Promote rigid structures
- d) Discourage employee involvement

20. Why is employee engagement important for organizational culture in Nepalese

organizations?
- a) It has no impact on culture
- b) Engaged employees lead to a positive culture
- c) Nepalese organizations don't prioritize employee engagement
- d) Engaged employees are less productive

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21. What role does communication play in managing organizational culture during
a merger in Nepalese organizations?
- a) It is not relevant to cultural change
- b) It helps maintain secrecy
- c) It mitigates uncertainty and resistance
- d) Nepalese organizations don't need communication during mergers

22. What is a common challenge in managing organizational culture during a merger

in Nepalese organizations?
- a) Lack of leadership involvement
- b) Consistent communication
- c) Employee engagement
- d) Similar organizational values

23. How do Nepalese organizations measure the success of cultural integration?

- a) Ignore metrics
- b) Establish cultural integration metrics
- c) Rely solely on employee satisfaction
- d) Focus on legal compliance metrics

24. Why is training crucial for cultural change in Nepalese organizations?

- a) It is not relevant to Nepalese organizations
- b) Equips employees with skills for the shift
- c) Creates confusion among employees
- d) Only benefits leadership, not employees

25. What does a cultural integration plan focus on during a merger in Nepalese
organizations?
- a) Ignoring existing cultures

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- b) Retaining all cultural elements

- c) Aligning processes, systems, and cultural aspects
- d) Exclusively favoring one organization's culture

Answers
1. b) Shared values, beliefs, and practices within an organization
2. b) It impacts employee engagement and satisfaction
3. c) It sets expectations and guides behavior
4. c) Leadership behavior
5. b) Engaged employees lead to a positive culture
6. b) To align with the organization's core values and goals
7. b) Exemplifying desired behaviors
8. c) It mitigates uncertainty and resistance
9. a) Lack of leadership involvement
10. b) Establish channels for employee feedback
11. c) Aligning processes, systems, and cultural aspects
12. b) Equips employees with skills for the shift
13. b) Demonstrate alignment with the new culture
14. b) Establish cultural integration metrics
15. b) Reinforces positive behaviors and achievements
16. b) It influences employee engagement and satisfaction
17. c) It sets expectations and guides behavior
18. c) Leadership sets the tone for the new cultural identity
19. b) Establish channels for employee feedback
20. b) Engaged employees lead to a positive culture
21. c) It mitigates uncertainty and resistance
22. a) Lack of leadership involvement
23. b) Establish cultural integration metrics
24. b) Equips employees with skills for the shift
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25. c) Aligning processes, systems, and cultural aspects

Very Short Questions

1. Define organizational culture.
2. State some features of organizational culture.
3. Mention the importance of organizational culture.
4. What is social glue?
5. What is sense-making?
6. How organizational culture could enhance brand identity?
7. Mention any three strategies for changing and strengthening organizational
culture.
8. How the actions of founders and leaders could change and strengthen
organizational culture in an organization?
9. Mention some strategies for merging different corporate cultures.
10. What is assimilation?
11. What is deculturation?
12. What is integration?
13. What is separation?
14. What is ASA theory?
15. Write any five organizational culture practices in Nepalese organizations.

Short Answer Questions

1. What is organizational culture? Discuss key features of organizational culture.
2. Define organizational culture. Explain the importance of organizational culture.
3. What are the key strategies for changing and strengthening organizational culture?
4. What is the attraction-selection-attrition (ASA) theory? Justify, how this theory
could change and strengthen organizational culture in an organization?
5. Discuss the major strategies for merging different corporate cultures.

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6. What kinds of organizational culture are practiced in Nepalese organizations?

Explain.

Long Answer Questions

1."Organizational culture plays a dominant to increase performance, enhancing
employees' commitment and satisfaction, promoting innovative activities, regulating
personal behavioral dimensions, and for the sustainable growth of organizations."
Justify this statement.
2. Justify, how the actions of founders and leaders, aligning artifacts with the desired
culture, and support workforce stability and communication could change and
strengthen organizational culture in an organization?
3. "During times of transition, it is especially important to focus on people and
culture." In the light of this statement give your opinion what kinds of strategies
could be used for merging different corporate cultures.

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UNIT 7: GROUP AND TEAM

7.1 Concept of team
Robbins and Coulter: "Work teams are formal groups made up of interdependent
individuals, who are responsible for the attainment of a goal."

Ricky W. Griffin: 'Team is a group of workers that functions as a unit, often with
little or no supervision, to carry out organizational functions."

7.2 Characteristics of team

1. Clear Purpose and Goals:
Effective teams have a well-defined purpose and clear goals, providing a shared
direction for all members.

2. Open Communication:
Team members communicate openly and effectively, sharing information and ideas
to foster collaboration.

3. Defined Roles and Responsibilities:

Each team member has a clear understanding of their role and responsibilities,
ensuring effective task distribution.

4. Mutual Trust:
Trust is a foundational element, where team members rely on each other's abilities,
judgment, and commitment.

5. Effective Leadership:
Strong leadership provides guidance, support, and direction, facilitating decision-
making and maintaining focus.

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6. Collaborative Decision-Making:
Successful teams involve members in decision-making, promoting a sense of
ownership and commitment.

7. Adaptability:
Teams that can adapt to changing circumstances and challenges are more likely to
succeed.

8. Accountability:
Each team member takes responsibility for their actions and commitments,
ensuring reliability and task completion.

7.3 CONCEPT OF GROUP

Arnold and Feldman: 'A work group is a collection of two or more people who
interact with each other, share similar interests, and come together to accomplish
some work activity."

Ricky W. Griffin: "A group is two or more persons interact regularly to accomplish
a common purpose or goal."

7.4 Characteristics of group

Groups, like teams, are collections of individuals who come together for a common
purpose or objective. However, there are some distinct characteristics of groups that
may differ from those of teams. Here are key characteristics of groups:

1. Shared Interest or Purpose:

Groups are formed around a shared interest, goal, or purpose. Members join together
because they have something in common or a reason to collaborate.

2. Informal Structure:
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Unlike teams that often have a formal structure with defined roles, groups may have
a more informal structure where roles and responsibilities are not as clearly defined.

3. Loose or Flexible Interaction:

Interaction within a group can be more casual and less structured than in a team.
Members may not have specific tasks or assignments, and communication is often
more relaxed.

4. Individual Accountability:
While teams emphasize collective responsibility, groups may focus more on
individual accountability. Members may contribute independently rather than
relying heavily on each other.

5. Short-Term Focus:
Groups often come together for a specific, short-term purpose. Once the goal is
achieved or the interest diminishes, the group may dissolve or members may
disperse.

6. Less Formal Communication:

Communication within groups may be less formal than in teams. Members may use
casual language and interactions, and there might be fewer structured
communication channels.

7. Limited Interdependence:
Unlike teams, where interdependence is often a key feature, groups may have limited
interdependence among members. Each individual's contribution may be less
connected to the contributions of others.

8. Informal Leadership:
Leadership in groups is often more informal, with individuals naturally emerging
as leaders based on their expertise, experience, or influence.
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7.5 IMPORTANCE OF TEAM IN ORGANIZATION

Teams play a crucial role in organizations, contributing significantly to overall
effectiveness, productivity, and success. Here are key reasons highlighting the
importance of teams in organizations:

1. Synergy and Collaboration:

Teams bring together diverse skills, knowledge, and perspectives, fostering
collaboration and synergy. By combining the strengths of individual members, teams
can achieve more collectively than the sum of individual efforts.

2. Enhanced Creativity and Innovation:

The collaborative nature of teams encourages the exchange of ideas and creative
thinking. Interactions within a team can spark innovation, leading to the
development of new solutions and approaches to challenges.

3. Improved Problem-Solving:
Teams provide a platform for collective problem-solving. Different team members
bring unique expertise and viewpoints, enhancing the team's ability to analyze and
address complex issues.

4. Increased Employee Engagement:

Being part of a team can boost employee engagement and satisfaction. Team
members often feel a sense of belonging and camaraderie, leading to higher levels
of motivation and commitment.

5. Efficient Task Execution:

Teams allow for the distribution of tasks based on individual strengths and expertise.
This leads to more efficient task execution, as members can focus on areas where
they excel.

6. Shared Responsibility and Accountability:

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Teams promote shared responsibility and accountability. Members collaborate to

achieve common goals, and individual accountability is reinforced through peer
support and feedback.

7. Learning and Development:

Working in a team provides opportunities for continuous learning and skill
development. Team members can share knowledge, mentor each other, and
collectively enhance their capabilities.

8. Effective Communication:
Teams facilitate effective communication through regular meetings, discussions,
and feedback sessions. Clear communication channels within a team contribute to
better understanding and alignment.

9. Adaptability and Resilience:

Teams are more adaptable to change and resilient in the face of challenges. The
collective effort allows for a quicker response to changing circumstances, promoting
organizational agility.

10. Employee Well-being:

Teams contribute to a positive work environment, promoting social interactions and
support among members. This can enhance overall employee well-being and job
satisfaction.

11. Encourages Employee Retention:

Employees who feel a sense of belonging and engagement within a team are more
likely to stay with the organization. Teams contribute to a positive organizational
culture that fosters loyalty.

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7.6 Creating effective team

Creating an effective team is essential for organizations to maximize collaboration
and achieve collective goals. Here are ten key points for creating an effective team:
1. Clear Purpose and Goals:
Clearly define the purpose and goals of the team. A shared understanding of the
team's objectives provides a unifying focus and direction for all members.

2. Diverse Skill Sets:

Assemble a team with diverse skills and expertise. Different perspectives contribute
to creative problem-solving and a well-rounded approach to tasks.

3. Defined Roles and Responsibilities:

Establish clear roles and responsibilities for each team member. Clearly defined
roles minimize confusion, promote accountability, and ensure efficient task
execution.

4. Open Communication:
Foster a culture of open communication where team members feel comfortable
expressing ideas, concerns, and feedback. Effective communication is crucial for
collaboration and problem-solving.

5. Team Building Activities:

Conduct team-building activities to build trust and camaraderie among team
members. Activities that promote collaboration and understanding can strengthen
team dynamics.

6. Effective Leadership:
Appoint a leader who can provide guidance, support, and direction. Effective
leadership is crucial for maintaining focus, resolving conflicts, and ensuring the team
stays on track.

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7. Goal Alignment with Organizational Objectives:

Ensure that the team's goals align with the broader objectives of the organization.
This alignment helps maintain a sense of purpose and relevance within the
organizational context.

8. Regular Feedback Mechanisms:

Establish regular feedback mechanisms to assess progress and address challenges.
Constructive feedback promotes continuous improvement and ensures that the team
remains adaptive.

9. Conflict Resolution Strategies:

Equip the team with strategies for resolving conflicts constructively. Addressing
conflicts early prevents them from escalating and negatively impacting team
dynamics.

10. Recognition and Celebration:

Recognize and celebrate achievements and milestones. Acknowledging individual
and collective successes fosters a positive team culture and motivates members to
continue working collaboratively.

By incorporating these principles, organizations can create teams that are not only
efficient in achieving their goals but also resilient, adaptable, and conducive to a
positive working environment.

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7.7 Types of group

Groups

Formal Informal
Groups Groups

Command Interest
groups groups

Task Friendship
groups groups
1. Formal Groups: A formal group is a designated work group defined by the
organizational structure. It is a collection of employees who work together to
contribute towards the achievement of organizational objectives. It is formed based
on the work and human resources required by skill, knowledge, and experience to
achieve an organizational task. In a manufacturing unit, the organizational task is
sub-divided into groups and teams. Each group is composed of various members
based on human resource requirements. The members of the group report to a
designated leader. They interact with each other on an official level. In formal
groups, the behaviors that one should engage in are stipulated by and directed toward
organizational goals. Examples include a bookkeeping department, an executive
committee, and a product development team. The formal group may be command
groups or task groups.

a. Command Group: A command group consists of a manager and the

employees who report to him or her. Thus, it is defined in terms of the
organization's hierarchy. Membership in the group arises from each
employee's position on the organizational chart. For example, in the Ministry
of Finance, the secretary and his four joint secretaries from a command group.

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b. Task Group: A task group is made up of employees who work together to

complete a particular task or project. A task group's boundaries are not limited
to its immediate hierarchical superior. It can cross command relationships. An
employee's membership in the group arises from the responsibilities delegated
to the employee that is, the employee's responsibility to carry out particular
activities. Task groups may be temporary with an established life span, or they
may be open-ended.

2. Informal Groups: An organization's informal groups are groups that evolve to

meet social or affiliation needs by bringing people together based on shared interests
or friendship. Thus, informal groups are alliances that are neither formally structured
nor organizationally determined. These groups are natural formations in the work
environment that appear in response to the need for social contact. Many factors
explain why people are attracted to one another. One explanation is simply
proximity; when people work near one another every day, they are likely to form
friendships. That likelihood is even greater when people also share similar attitudes,
personalities, or economic status. Informal groups can be classified as:

a. Interest Groups: People who may or may not be aligned into a common
command or task group may affiliate to attain a specific objective with which
each is concerned. This is an interest group. An example is a group of
employees pressing management for better pay and working conditions.

b. Friendship Groups: Groups often develop because individual members

have one or more common characteristics. We call these formations of
friendship groups. Social alliances, which frequently extend outside the work
situation, can be based on similar age, hold the same political view, attended
the same college, etc. Examples of friendship groups are groups of people
coming from a particular region (such as Gandakisamaj, Palpalisamaj, etc.),
or groups of people speaking the same language or holding similar political
viewpoints.

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7.8 TYPES OF TEAM

A team is a group of individuals who come together to collaborate and work towards
a common goal or objective. In a team, members typically have complementary
skills, diverse backgrounds, and distinct roles that contribute to the overall success
of the group.
The types of team are:

Virtual Teams

Cross-
Self-managed
functional
Teams
Teams

Types
of team

Management Problem-
Team solving Teams

Quality Circle

1. Problem-solving Teams: Problem-solving teams are temporary teams

established to solve specific problems in the workplace. These teams are typically
composed of 5 to 12 employees from the same department who meet quality,
efficiency, and eachronment. In problem-solving teams, members share ideas or off
suggestions on how work processes and methods can be improved. An example of a
problem-solving team is the 'quality circle'. The quality circle is team of 8 to 10
employees and supervisors who share an area of responsibility They meet regularly
to discuss their quality problems, investigate the causes of the problems, recommend
solutions, and take corrective actions.

2. Cross-functional Teams: Cross-functional teams are made up of employees from

about the same hierarchical level, but from different work areas, who come together
to accomplish a task. Such teams are an effective way to allow people from diverse
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areas within an organization (or even between organizations) to exchange

information, develop new ideas, solve problems and coordinate complex projects.
These teams are not easy to manage. Their early stages of development are often
very time-consuming as members learn to work with diversity and complexity. It
takes time to build trust and teamwork, especially among people from different
backgrounds, with different experiences and perspectives. There are two types of
cross-functional teams. They are: -
 Taskforce: It is nothing other than a temporary cross-functional team.
 Committees: Composed of groups made up of members from across
department lines.

3. Virtual Teams: Until recently, team work was confined in concept and practice
to those circumstances in which members could meet face-to-face. Now, the advent
of new technologies and sophisticated computer programs has changed all that.
Virtual teams, as ones whose members meet at least part of the time electronically
and with computer support. Such teams operate across space, time and
organizational boundaries with members who communicate mainly through
electronic technologies. Through communication technology, team members can
participate in important decisions, yet on their home turf. Recent evidence suggests
that effective virtual teams creatively combine e-mail, video conferencing, intranets,
and other communication channels to suit their needs.

4. Self-managed Teams: Another type of team commonly being used in

organizations is the self-directed or self-managed team. The self-managed teams
(SMTs), which are sometimes called process teams, are responsible for producing
an entire product, component, or service. These teams are formalized as part of the
organization's structure. Employees are assigned to them on a full-time basis and
they have a longer duration. SMTs utilize employees whose jobs are similar but who
may have different levels of skill. Team members combine skills to produce an
important organizational outcome, such as an automobile engine (production
process) or the installation of a computer system for a customer (customer service
process).

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5. Management Team: A team is formed by the functional managers and the head
of departments. Team members consist mainly of managers from various functions
like sales and production; coordinates work among teams.

6. Quality Circle: It comprises workers and supervisors, who meet intermittently to

discuss workplace and product-related problems.

7.9 MANAGING TEAM CONFLICT

Team conflict is a common occurrence in organizations. It is the behavioral outcome
and an integral part of work life. Conflict has both negative and positive
consequences in an organization. Thus, managers need to manage it. The major
approaches or styles to managing team conflict are as follows:
 Task Vs. Relationship Conflict Management Style
 Interpersonal Conflict Management Style
 Structural Conflict Management Style

7.91 Task Vs. Relationship Conflict Management Style

a) Task-related Conflict
This conflict is also known as a constructive conflict that occurs when team members
believe the conflict is with the task or problem rather than with one another.
Employees are merely messengers in this discussion, as team members see the
problem as something "out there" that needs to be resolved .

b) Relationship Conflict
Relationship conflict occurs when team members perceive differences as personal
attacks on their self-esteem and resources. The opposing parties see others (their
attitudes, biases, and decisions) as the source of their disagreement.

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c) Minimizing Relationship Conflict

Managers should encourage task-related conflict and use the four strategies listed
below to minimize relationship conflict:
1. Emotional Intelligence: Relationship conflict is less likely to occur or raise
when team members have high levels of emotional intelligence. When team
members are aware of their own and others' emotions and are able to manage
emotions in themselves and others, they have high emotional intelligence.
Employees with high emotional intelligence can better regulate their emotions
during the debate, lowering the risk of perceptions of interpersonal hostility
rising.

2. Cohesive Team: Relationship conflict is suppressed when the conflict

occurs within a highly cohesive team. The more time people spend working
together, getting to know each other, and developing mutual trust, the more
freedom they give each other to express emotions without being personally
offended. Cohesive team members are also motivated to stay with the team,
which motivates them to avoid escalating relationship conflict during
otherwise emotionally turbulent discussions.

3. Supportive Team Norms: Various team norms can keep relationship

conflict to a minimum during a constructive debate. When team norms
promote openness, for example, team members learn to value honest dialogue
rather than reacting personally to any emotional display during disagreements.
Other social norms may discourage members of a team from expressing
negative emotions toward coworkers.

4. Problem-solving Conflict Management Style: The problem-solving

approach is also regarded as an effective method of resolving relationship
conflicts among team members. Team members who take such an approach,
in particular, are less likely to provoke strong emotions than those who
assertively force their preferences on others.

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7.92 Interpersonal Conflict Management Style

Employees deal with conflict in a variety of ways, therefore management needs
different conflict resolution strategies. Mainly, the following five strategies can be
useful for the management of interpersonal conflict:
1. Problem-solving: Problem-solving seeks a solution that is beneficial to
both parties. Information sharing is an important feature of this style because
both parties collaborate to identify common ground and potential solutions
that satisfy both (or all) of them. This style is frequently preferred because it
reduces the likelihood of relationship conflict. However, it will not work well
if team members lack trust and the sides have perfectly opposing interests.

2. Avoiding: It is a lose-lose conflict management strategy. It occurs when

conflicting parties show a low level of cooperation and assertiveness to solve
problems. This strategy tries to smooth over or avoid conflict situations
altogether. It represents a low concern for both self and the other party; in
Team other words, avoiders try to suppress thinking about the conflict. For
example, some employees will rearrange their work areas or tasks to minimize
interaction with certain co-workers.

3. Forcing: It tries to win the conflict at the expense of the other. This
approach is based on assertive influence tactics. The forcing style increases
the likelihood of relationship conflict, but it may be necessary when the
dispute requires a quick resolution or the opposing party's viewpoints are
unethical.

4. Yielding: Yielding involves giving in completely to the other side's wishes

or at least cooperating with little or no attention to own interests. This style
may be necessary when the opponent has substantially more power or the
issue is not as important to one party as to the other party. In the long run,
however, yielding may produce more conflict because it raises the other
party's expectations of an easy win in disputes.

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5. Compromising: Another strategy is compromising, where conflicting

parties are partially assertive and cooperative. It occurs when each party in
conflict will be ready to give up something of value to another party. As a
result, no one gets their full desire. The concept is that everyone gives up a
little bit of what they want, and no one gets everything they want. In
compromising situations interactions are moderately important to goal
attainment and the goals are neither fully compatible nor completely
incompatible. Compromise strategy can be used for the temporary settlement
of complex issues or to arrive at expedient solutions when time is limited.

7.93 Structural Conflict Management Style

Conflict in organizations emerges as a result of structural causes such as
incompatible goals, differentiation, interdependence, scarce resources,
ambiguous rules, and communication problems. These types of conflicts can
be managed by adopting the following strategies:
1. Emphasizing Superordinate Goals: One of the oldest recommendations
for resolving conflict is to refocus the parties' attention around superordinate
goals and away from the conflicting subordinate goals. Superordinate goals
are goals that the conflicting employees or departments value and whose
attainment requires the joint resources and effort of those parties. Examples
of superordinate goals are maximizing the welfare of employees, focusing on
fulfilling customers' needs, competitiveness, etc.

2. Reducing Differentiation: When diversity in organizations increases, it

will cause differences in the application of company policies and practices.
Many organizations have differences in salary and incentive policies for and
temporary or able and unable workers. This will also widen differences and
cause conflict in organizations. In such a case, when an organization adopts a
uniform policy of incentives, it can reduce differentiation and minimize
conflict

3. Improving Communication and Mutual Understanding: Another

strategy to resolve dysfunctional conflict is to give conflicting parties more
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opportunities to communicate and understand each other. Increasing

participation and dialogue between the conflicting parties help to manage and
resolve conflict. Some organizations follow the policy of relationship
restructuring program in order to find underlying causes of workplace conflict
and implement a long-term solution that will address the sources of conflict.

4. Reducing Interdependence: Conflict occurs when people are dependent

on each other. Therefore, minimizing the level of interdependence among
individuals or departments would naturally reduce conflict. If cost-effective,
instead of designing the job in an interdependent way, these can be created
separate and independent job units. Thus, employing individuals to handle
customer service and cash register, one individual may be assigned the task
of the entire customer handling operation. These can help to reduce
interdependence among employees.

5. Increasing Resources: Many conflicts arise due to increasing pressure in

the division of scarce resources between people and departments in
organizations. When the amount of resources increases, it can minimize
conflict. Thus, when people and departments depend on the same types of
quality of resources for the completion of their tasks, even a small increase in
the amount can minimize their tension. This might not be a feasible strategy
for minimizing dysfunctional conflict due to the costs involved. However,
these costs need to be compared against the costs of dysfunctional conflict due
to resource scarcity.

6. Clarifying Rules and Procedures: Conflicts can arise from ambiguous

and unclear rules, procedures, manuals, etc. Such unclear rules and procedures
create problems in effective communication and decision-making. Thus, by
making employees clear about their roles and responsibilities, chances of role
ambiguity and conflicts can be minimized. For instance, if two departments
are fighting over the use of a new vehicle, a schedule might be established that
allocates the vehicle exclusively to each team at certain times of the day or
week

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7.10 Position of Team Work in Nepalese Organizations

Team work is in practice in different types of organizations in Nepal. In
Nepalese organizations, team heads are the head of departments, divisions and
different working units. In project work, the project manager leads the team
to achieve project objectives. According to a survey, the following
information are available about team positions in Nepalese organizations:
1. Team Practices: Almost 40 percent of Nepalese organizations apply team
based work system in Nepal. Team work is highly recognized in these
organizations. Employees are trained and develop to contribute to the team
objectives.

2. Team Briefing: Teams are briefed by the project or department heads.

During briefing team members share their views and inputs to strengthen team
contribution in the given responsibilities. In Nepal about 39 percent of
organizations are practicing team briefing.

3. Team Incentives: Organizations are providing incentives for the

achievement of team performance. About 39 percent of organizations are
offering team based incentives in Nepalese organizations. Team incentives
motivate and encourage team members to take active participation to achieve
the given target.

4. Professional Contributions: A large number of teams in Nepalese

organizations comprises professional employees. They are working together
in the matter of software and hardware development, to make a decision
related to the deployment of production technology and information
technology.

5. Team at Different Levels of Organization Structure: Top level managers

have a strategic team that contributes to environment scanning, strategy

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development, and implementation. Such a team is developed comprising all

department heads and divisional heads. Whereas middle-level managers work
in a team to implement strategy and make functional contributions for the
achievement of strategic objectives.

6. Team Challenges: While practicing team, Nepalese managers face some

severe challenges. These challenges are lack of resources, social loafing, the
skill of employees to work in a team, team conflicts, and feeling of senior-
junior. Normally, senior managers have a kind of dominating attitude towards
junior employees.

7. Task and Project Team: Most of the teams are formed in and around the
task or to accomplish the project. When the company plans to establish or
expand a production units' team comprising production engineers, managers,
and production in-charge. Similarly, a project team is formed to develop a
project implementation strategy. Both task and project teams adjourn when
the given task and project is completed.

8. Divisional/Department Teams: In Nepalese organizations, most team

work has been positioned or practiced within line departments or divisions.
Departmental heads work as team leaders and motivate employees of his/her
department to undertake their activities. Department heads are accountable to
practice in their departments.

Multiple choice Questions (MCQs)

1. What is a team?
- a) A collection of individuals working independently
- b) A group of people with complementary skills working towards a common goal
- c) A set of tasks assigned to individuals
- d) An individual working in isolation

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2. How is a team different from a group?

- a) Teams have clear roles, groups do not
- b) Teams work collaboratively towards a common goal, groups may not have a
shared goal
- c) There is no difference between a team and a group
- d) Teams have more members than groups

3. Why is teamwork important in an organization?

- a) It promotes competition
- b) It hinders productivity
- c) It enhances communication and collaboration
- d) It isolates individuals

4. What is a key factor in creating an effective team?

- a) Encouraging competition
- b) Ignoring conflicts
- c) Clear communication and defined roles
- d) Limiting collaboration

5. How can conflicts within a team be managed effectively?

- a) Ignoring conflicts
- b) Encouraging open communication
- c) Avoiding team-building activities
- d) Punishing team members for conflicts

6. Which is not a type of group or team?

- a) Cross-functional team
- b) Virtual team
- c) Independent group
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- d) Self-directed team

7. What is a characteristic of an effective team?

- a) Lack of communication
- b) Trust among team members
- c) Ambiguous roles
- d) Strict hierarchy

8. Which technique involves a neutral third party to resolve conflicts?

- a) Avoidance
- b) Collaboration
- c) Mediation
- d) Competition

9. What is the importance of defining clear roles and responsibilities in a team?

- a) It leads to conflict
- b) It fosters ambiguity
- c) It helps prevent conflicts and misunderstandings
- d) It discourages collaboration

10. Which term is synonymous with "joint problem-solving"?

- a) Competition
- b) Collaboration
- c) Avoidance
- d) Accommodation

11. Which is not a type of team?

- a) Project team
- b) Functional team
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- c) Informal group
- d) Strategic team

12. What is the role of team-building activities?

- a) Isolate team members
- b) Create conflicts
- c) Build trust and strengthen relationships
- d) Encourage competition

13. What is the primary goal of conflict resolution techniques?

- a) Escalate conflicts
- b) Find win-win solutions
- c) Ignore conflicts
- d) Punish team members

14. What does "MCQ" stand for?

- a) Multiple-Choice Question
- b) Main Communication Quotient
- c) Managing Conflict Quickly
- d) Making Collaborative Queries

15. Which is not a characteristic of effective teams?

- a) Open communication
- b) Lack of collaboration
- c) Shared responsibility
- d) Trust among team members

16. What is the position of teamwork in Nepalese organizations?

- a) Irrelevant
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- b) Limited importance
- c) Crucial for success
- d) Only applicable in large organizations

17. What does a self-directed team have the authority to do?

- a) Follow strict hierarchy
- b) Make decisions and manage tasks
- c) Avoid communication
- d) Depend on a leader for all actions

18. What is the purpose of establishing team norms?

- a) Encourage conflicts
- b) Create ambiguity
- c) Define acceptable behavior
- d) Isolate team members

19. In conflict resolution, what does "compromise" involve?

- a) Winning at all costs
- b) Finding a middle ground
- c) Ignoring conflicts
- d) Encouraging competition

20. What is a benefit of promoting active listening within a team?

- a) Increased conflicts
- b) Improved understanding
- c) Isolation of team members
- d) Lack of communication

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21. Which term refers to a group of people with complementary skills working
towards a common goal?
- a) Organization
- b) Team
- c) Committee
- d) Assembly

22. What is the outcome of unresolved conflicts within a team?

- a) Improved teamwork
- b) Strengthened relationships
- c) Negative impact on team performance
- d) Increased collaboration

23. What is the role of a mediator in conflict resolution?

- a) Participate in conflicts
- b) Escalate conflicts
- c) Facilitate discussions and find common ground
- d) Avoid conflicts

24. Why is trust among team members important?

- a) It promotes isolation
- b) It encourages conflicts
- c) It enhances collaboration and teamwork
- d) It hinders communication

25. Which term refers to a group of individuals working independently?

- a) Committee
- b) Team
- c) Organization
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- d) Independent group

Answers
1. b) A group of people with complementary skills working towards a common goal
2. b) Teams work collaboratively towards a common goal, groups may not have a
shared goal
3. c) It enhances communication and collaboration
4. c) Clear communication and defined roles
5. b) Encouraging open communication
6. c) Independent group
7. b) Trust among team members
8. c) Mediation
9. c) It helps prevent conflicts and misunderstandings
10. b) Collaboration
11. c) Informal group
12. c) Build trust and strengthen relationships
13. b) Find win-win solutions
14. a) Multiple-Choice Question
15. b) Lack of collaboration
16. c) Crucial for success
17. b) Make decisions and manage tasks
18. c) Define acceptable behavior
19. b) Finding a middle ground
20. b) Improved understanding
21. b) Team
22. c) Negative impact on team performance
23. c) Facilitate discussions and find common ground
24. c) It enhances collaboration and teamwork
25. d) Independent group
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VERY SHORT ANSWER QUESTIONS

1. Define a team.
2. Mention the characteristics of team.
3. Define group.
4. Mention the characteristics of group.
5. Present the importance of team in organization.
6. Write any five elements of team management.
7. Write any five key factors or characteristics of effective teams.
8. Mention different types of group.
9. Mention different types of team.
10. Write two differences between group and team.
11. Write any four reasons of group formation from employees' perspective.
12. Write any four reasons of group formation from organizational perspective.
13. How group is formed?
14. Present the stages of group development.
15. What is self-managed work team?
16. Introduce virtual team.
17. What do mean by cross-functional team?
18. What is task-related conflict?
19. What is relationship conflict?
20. Highlight the ways for minimizing relationship conflict.
21. What is interpersonal conflict?
22. What is structural conflict
23. State the position of team work in Nepalese organization.

SHORT ANSWER QUESTIONS

1. What is team? Discuss key features of team.
2. What is group? Discuss key features of group.
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3. Define team. Explain the importance of teams in an organization.

4. What team management? Discuss the elements of team management.
5. What are the differences between group and team?
6. Explain the reasons of group formation from employees' perspective.
7. What is team? Explain the key factors or characteristics of effective teams.
8. How are groups classified and formed in organization?
9. How are teams classified and formed in organization?
10. What are the reasons for joining groups? Explain.
11. What steps are followed for groups' development? Discuss.
12. What is relationship conflict? Explain the strategies for minimizing relationship
conflict.
13. Discuss the strategies for managing interpersonal conflict and structural conflict.
14. Discuss the position of team work in Nepalese organization.

LONG ANSWER QUESTIONS

1. What do mean by team? Explain the differences between a team and a group.
2. Define team and group? Explain the reasons of group formation.
3. How are groups classified and formed in organization? What steps are followed
for groups' development? Discuss.
4. What is group? Explain the different types of groups performing activities in the
organization.
5. What strategies could be used for managing interpersonal conflict and structural
conflict in an organization? Explain.

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UNIT 8: COMMUNICATION AND CONTROL

8.1 Meaning of business communication

Ricky W. Griffin: "Communication is the process of transmitting information from
one person to another Stephen P. Robbins: 'Communication is the transference and
understanding of meaning."

Theo Haiman: 'Communication is the process of passing information and

understanding from one person to another......is the process of imparting ideas and
making oneself understand by others.

C.A. Brown: "Communication is a process of transmitting ideas or thoughts from

one person to another to create understanding on the thinking of the person
receiving the communication."

Leonard J. Kazmier. 'Communication is the transfer of some information and

understanding from one person to another."

Louis A. Allen: 'Communication is the sum of all the things one person does when
he wants tocreate understanding in the mind of another. It is a bridge of meaning. It
involves a systematicand continuous process of telling, listening and
understanding."

Newman and Summer: "Communication means an exchange of facts, ideas,

opinions, information or emotions by two or more persons."

Keith Davis: "Communication is the process of passing information and

understanding from one person to another. It is essentially a bridge of meaning
between people. By using this bridge of meaning a person can safely cross the river
of misunderstanding."

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John V. Thill and Courtland L. Bovee - "Business communication is an exchange of

messages aiming at the understanding of their meanings and is realized through its
two major functions: the first one is to help members of the organization achieve
their goals, and the second one is to work towards bonding the group".

8.2 Nature/characteristics of Communication

Communication is a complex and dynamic process that involves the exchange of
information, ideas, thoughts, and feelings between individuals or groups. The nature
or characteristics of communication can be understood through various key aspects:

1. Two-Way Process:
Communication involves both a sender and a receiver. It is an interactive process
where information is transmitted and received, and feedback may be provided.

2. Continuous Process:
Communication is ongoing and continuous. It doesn't occur as a one-time event but
is part of an ongoing cycle in various forms.

3. Dynamic:
Communication is dynamic, meaning it evolves and changes over time. As
circumstances change, the nature and content of communication may also change.

4. Transactional:
Communication is a two-way street where both parties are actively involved in the
process. Each participant plays a role as a sender and receiver, and the roles can
switch rapidly.

5. Contextual:

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Communication is influenced by the context in which it occurs. The setting,

environment, and the surrounding circumstances impact the interpretation and
understanding of the message.

6. Intentional or Unintentional:
Communication can be deliberate and purposeful (intentional) or may occur
unintentionally through non-verbal cues, body language, or other non-explicit forms.

7. Inevitable:
Human beings are constantly communicating, even when they are not using words.
Silence, gestures, and expressions also convey messages.

8. Verbal and Non-verbal:

Communication can take place through words (verbal communication) or through
non-verbal means such as body language, facial expressions, and gestures.

9. Cultural Influence:
Communication is influenced by cultural factors, including language, customs, and
social norms. Different cultures may interpret messages in unique ways.

10. Purposeful:
Communication serves a purpose, whether it's to inform, persuade, instruct,
entertain, or build relationships. Understanding the purpose helps in effective
communication.

11. Feedback:
Feedback is an integral part of communication. It allows the sender to gauge the
effectiveness of the message and adjust accordingly. Feedback can be verbal or non-
verbal.

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12. Selective:
Individuals filter and interpret messages based on their perceptions, experiences, and
personal biases. This selectivity can affect the understanding of the communicated
information.

13. Channel:
Communication can occur through various channels, including face-to-face
interactions, written documents, electronic media, and more. The choice of channel
can impact the effectiveness of the communication.

Understanding these characteristics helps individuals and organizations enhance

their communication skills, fostering more effective and meaningful interactions.
Effective communication is vital for building relationships, resolving conflicts, and
achieving common goals.

8.3 COMMUNICATION PROCESS

The communication process is a complex and dynamic interaction involving the
exchange of messages between a sender and a receiver. It is a fundamental aspect of
human interaction and is crucial in various contexts, including personal,
professional, and organizational communication. The communication process
typically involves the following key elements:

1. Sender:

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The sender is the person or entity initiating the communication. This individual has
a message or information to convey to the recipient. The sender encodes the
message, translating thoughts or ideas into a format that can be transmitted.

2. Message:
The message is the information, idea, or content that the sender wishes to
communicate. It can be conveyed through various channels, including verbal
(spoken or written words) or non-verbal (body language, gestures, symbols) means.

3. Encoding:
Encoding is the process of translating the sender's thoughts or ideas into a form that
can be communicated. This involves selecting words, symbols, or other means to
represent the intended message.

4. Channel:
The channel is the medium or method used to transmit the message from the sender
to the receiver. Channels can include face-to-face communication, written
communication (letters, emails), electronic communication (phone calls, video
conferencing), and more.

5. Decoding:
Decoding is the process by which the receiver interprets and understands the
message. The receiver translates the encoded message back into thoughts or ideas
based on their own understanding and experiences.

6. Receiver:
The receiver is the individual or group for whom the message is intended. The
receiver plays a crucial role in the communication process by decoding the message
and providing feedback.

7. Feedback:
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Feedback is the response or reaction provided by the receiver to the sender's

message. It helps the sender gauge the effectiveness of the communication and
ensures that the intended message is accurately understood.

8. Noise:
Noise refers to any interference or factors that can disrupt the communication
process. It may include physical noise (background sounds), semantic noise
(language barriers, misunderstandings), or psychological noise (preconceived
notions, biases).

Understanding the communication process is essential for effective communication.

Clear encoding, transmission through appropriate channels, accurate decoding by
the receiver, and timely feedback contribute to successful communication
exchanges. The presence of noise and the impact of context highlight the need for
careful consideration and adaptation in the communication process.

8.3 Parties involved in communication

All organizations communicate. They communicate internally with their employees
and externally with their stakeholders, customers, and communities. The major
parties involved in a communication of an organization can be as follows:

1. Sender: A sender is also known as an encoder. S/he is one of the key parties
involves in an organization's communication. The sender is the person who sends
the message. S/he employs symbols (words, graphics, or visual aids) to convey the
message and induce the desired response. For example, a training manager might be
in charge of training a new group of employees. The sender could be an individual,
a group, or an organization. The sender's perspectives, background, approach, skills,
competencies, and knowledge all have a significant impact on the message.

2. Recipient: A recipient is also known as a decoder. S/he is also an important party

in an organization's communication. A recipient is a person for whom the message
is intended, aimed, or targeted. The degree to which the decoder understands the

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message is determined by a variety of factors, including the encoder's knowledge of

the recipient, their responsiveness to the message, and the encoder's reliance on the
decoder. Message recipients can include both internal parties such as employees,
directors, and managers, as well as external parties such as customers, the local
community, suppliers, shareholders, government, banks and financial institutions,
etc.

3. Communication Channels: Communication channels are also major participants

in an organization's communication. Messages are sent via a variety of channels,
including face-to-face meetings, e-mail and online discussions, written letters or
memoranda, and telephone communications or voice mail, among others. The
channel chosen can have a significant impact on the communication process. When
the team leader communicates with the division manager, it can make a big
difference whether the message is delivered face to face, in a written memo, via
voice mail, or via e-mailto.

8.4 Communication barriers

Several obstacles tend to distort the flow of the messages. Such distortion leads to
misunderstanding and friction among the members of the organization, These
barriers do not permit healthy human relationships and they are injurious to
teamwork and morale. Therefore, it is necessary to analyze and remove the barriers
to communication. The various barriers to effective communication are as follows:

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Communication
barriers

Physical Psychological Organizational Semantic Technological

Barriers Barriers Barriers Barriers Barriers

A. Physical Barriers
Physical barriers are those barriers that are emerged due to weak physical
arrangement of communication. They include the following factors:

1. Distance: It refers to the distance or gap between the message sender and
receiver. Long-distance obstructs communication. It makes the transfer of
messages difficult. Similarly, communication cannot be made between places
where no modern means of communication have been reached. For example,
communication from Kathmandu to Jumla in Nepal.

2. Noise: It is also a physical element to disturb the communication. It arises

due to external forces. It interferes with successful communication. It
adversely affects business communication. It hampers in both sending and
receiving messages.

3. Physical Arrangement: It is also the main physical element to disturb the

communication. It blocks communication. For example, a wall or partition
between people in the office designs.
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4. Organizational Structure: Complex structure in tall organizations serves

as barriers to communication. Distortion happens when the communication
flows through multiple layers of organizational structure.

B. Psychological Barriers
Psychological factors are the prime barriers to interpersonal communication. They
are also known as emotional factors. The meaning described to a message depends
upon the emotional or psychological status of both the parties involved in
communication. The following are important examples of psychological barriers:

1. Selective Perception: It is a process by which individuals organize and

interpret their sensory impressions in order to give meaning to anything. It
may be different from person to person. Different people understand the same
message differently and explain it differently. The sender's unique perception
creates difficulty for the receiver in catching the intended meaning of the signs
used.

2. Emotion: The emotional factors, such as anger, fear, terror, hate, mistrust,
jealousy, embarrassment, love, etc., of a receiver, also influence the
understanding of the message sent by the sender.

3. Distrust: It is the negative feeling of the receiver. If the message and

message sender is distrusted by the receiver, communication is obstructed.

4. Filtering: It is a process when the sender deliberately wants to withhold

information from reaching the receiver. It is done by manipulating the
information either because the sender believes that all the information is not
required or that the receiver is better off not knowing certain aspects of the
information.

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5. Behavior: Human behavior is also a psychological factor to obstructs

communication. If the receivers do not care about the message, the sender's
trust in them may fall down.

C. Organizational Barriers
Organizational barriers arise due to inadequate or improper policies, rules, and
organization facilities regarding communication. Such organizational barriers are:

1. Poor Planning: For effective communication, the planning should be

proper in terms of message design, encoding, and channel selection. The
channel should be proper according to the size and nature of the message. If
there is poor planning about these, the message may not be effective.

2. Complex Structure: In a complex organizational surpass are several

Levels of authority. Formal communication has to pass through this chain
(proper channel). As a result, there are delays and distortions in
Communication. At every level, the message may be twisted or altered
intentionally. Such filtering is more common in the case of upward
communication.

3. Status Differences: The placing of people in superior-subordinate capacity

in the formal organization structure also blocks the flow of communication
and more particularity in an upward direction. The greater the difference
between hierarchical positions in terms of their status, the greater would be
the possibility of communication breakdown.

4. Time and Technology: A person must evaluate the timing of sending a

message. The receiver must get adequate time to implement the instruction
given in the communication. If the action on the message is required to be
taken in the distant future, there is a possibility that the receiver may forget
the content of the message. Inadequacy of timing and last-minute
communication is likely to put too much pressure on the receiver. The

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message, therefore, should be sent at an appropriate time. On the other hand,

the lack of information technology facilities also serves as a barrier to
communication.

5. Lack of Feedback: Feedback completes the total communication process.

Feedback is important to ascertain if the message is understood and acted upon
correctly. Lack of it or wrong feedback is counterproductive to effective
communication.

D. Semantic Barriers
Semantic barriers refer to the interpretation of words, abbreviations, and symbols
used by the sender and perceived by the receiver. These barriers arise from the
linguistic capacity of the parties involved in communication. If a receiver is likely
to misunderstand the symbol of a dollar, ($) it is better than "dollar" is written in the
script. Universally accepted symbols should generally be used in written
communication. The following are some common forms of semantic barriers:
1. Ironical Language: It refers to satirical language. Ironical language
becomes difficult to understand. The message sent by the sender in difficult
language cannot be easily understood by its receiver due to which the
communication becomes ineffective.

2. Complex Words: It is often found that technical personnel and special

groups tend to develop special, peculiar, technical, and complex words and
language of their own. This increases their isolation from others and builds a
communication barrier.

3. Sign and Symbols: Many kinds of signs and symbols are used in
communication. The sign and symbols should be carefully used deeply
considering their meaning whether the receiver can understand them or not. If
the receiver does not understand the message sent, it becomes meaningless.
Thus, the wrong use of signs and symbols is also a barrier to effective
communication.

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E. Technological Barriers
They consist of defects in the technology used and overload in the information. ad
Some of the technological barriers are as follows:

1. Information Overload: Information may be passed to concerning

individuals as it is needed. Excessive information causes information
overload. Though, a lot of information now can be handled by the individual
due to computers. Excessive information confuses and may not be required.
Network breakdown may also take place due to information overload.

2. Mechanical Barriers: Such barriers are concerned with mechanical

devices used in the communication process. Technical faults in the telephone
lines, defects in computer software, internet network problems, etc. are some
examples of mechanical barriers that create a barrier in communication.

3. Loss of Transmission: Mainly a verbal message, when it is in course of

transmission, may lose some of its main contents. Likewise, due to the limited
memory power of the receiver, there is also a possibility of a loss of content
of the message. They obstruct communication.

4. Insufficient Period Allowed: Lack of sufficient time also causes a barrier

to ineffective communication. Some messages need a quick response.
However, due to a lack of sufficient time, managers may not be able to analyze
information in detail and its formal channel of communication. In such a
situation, he may respond to a message without considering the subject
matters and their importance. This also creates a problem with effective
communication.

8.5 Improvement of communication barriers

Some improvement techniques are as follow:

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1. Two-way Communication: Communication. More transmission of facts

transmitter and the receiver of the message. More transmission of facts, ideas,
information, etc., does not make any communication effective and meaningful. It is
essential to keep the channel open for sending the receiver's views understanding,
and opinion about the communication. Therefore, an effective communication
system should be like two-way traffic. For these, the following techniques can be
used:

 Open Door Policy: Employees are given an open invitation to walk in and
talk about anything that concerns them. The superior's door is always open to
the subordinates.

 Participative Decision Techniques: Participative approach is essential in

every organization to make communication more effective. Regular
interaction, employee involvement in a quality circle, committees, task force,
teams, and suggestion boxes are useful techniques for promoting effective
communication.

 Employee Empowerment: Employees should be empowered to make the

effective communication. They should be given autonomy in work- related
matters and control over resources and information to improve
communication.

 Training: To make communication effective, there should be the provision of

communication training. The training should be provided to both employees
and managers. Such training promotes the effectiveness of communication.

 Appropriate Network Setting: The network or channel should be designed to

facilitate a smooth flow of information in an organization. The network can
be face-to-face conversations, written words, telephone conversations,
television, newspapers, etc.

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2.Improvement in Listening Stills An individual must be a good listener. Listening

is half of the whole communication. When one listens he also carries out concurrent
mental interpretation of what he is hearing. A positive outlook goes a long way to
ensure effective communication. Important points for the good listener are as under:
 Do not have preconceived ideas about a subject matter.
 Pay full attention to what the sender is saying.
 Think as the sender thinks.
 Check back as to what you have received.
 Give time to take feedback on action taken on the message received.
 Do not jump to conclusions.
 Keep the principle of "need to know" in mind to avoid information overload.
 Do not have a prejudiced mind and take every message independently.

3. Clear Goals and Target Audiences: In order to make communication effective,

it needs to determine clear goals. The goals are desired outcomes of communication.
They should be specific, measurable, agreed upon, realistic, and time-bound.
Similarly, the target audience is the key part of communication. Employees and
many stakeholders are target audiences. They should be clearly identified.

4. Climate of Trust: Effective communication requires an atmosphere of trust and

confidence between the superiors and subordinates. Only then any message will be
sent and received with a feeling of goodwill.

5. Avoid Physical Barriers: If there are physical barriers like distance, noise,
physical arrangement, and organizational structure, the management should avoid
them by improving physical arrangement, overcoming noise and restructuring the
organization.

6. Avoid Psychological Barriers: Psychological barriers such as selective

perception, emotion, distrust, filtering, and behavior obstruct communication. Such
psychological barriers should be avoided by management. They can be avoided
through the creation of trust and confidence. For this, there should be a mutual

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relationship and trust between the sender and receiver of the messages. Likewise,
training programs can be used to reduce psychological barriers.

7. Avoid Organizational Barriers: Organizational barriers arise due to inadequate

or improper policies, rules, and facilities regarding communication. The
organizational barriers consist of poor planning, information overload, complex
structure, status differences, time and technology, and lack of feedback.

8. Avoid Semantic Barriers: The semantic barriers such as ironical language,

complex words, and signs and symbols have to be overcome by management by
improving employees' vocabulary power and fluency, gaining self- confidence, and
so on. For this, they can even undergo a short-term course in communication.

9. Avoid Information Overload: Information overload may be a problem when the

receiver is sent more information than s/he can effectively handle and process
effectively. So, such information overload should be avoided. For this, management
needs to regulate information flow by providing timely, appropriate, and up-to-date
information. Likewise, the use of information communication technology will be
helpful to avoid such information overload.

10. Encouraging Feedback: Feedback is a technique used in communication to

ensure that the message has been correctly received. The person sending the message
can, for example, ask the receiver certain questions about the message conveyed to
make sure that the receiver has clearly understood the message.

8.6 Meaning of control

Harold Koontz and Heinz Weihrich: 'Controlling is the measurement and correction
of performance in order to make sure that enterprise objectives and the plans
devised to attain them accomplished."

Theo Haiman: "Control is the process of checking to determine whether or not plans
are being

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adhered to, whether or not proper progress is being made towards the objectives
and goals and acting, if necessary, to correct deviations."

Joseph L. Massie: "Control is the process that measures current performance and
guides it towards some predetermined goals."

Ricky W. Griffin: "Control is monitoring organizational progress toward goal

achievement."

Stephen P. Robbins: 'Control can be defined as the process of monitoring activities

to determine whether individual units and the organization itself are obtaining and
utilizing their resources effectively and efficiently so as to accomplish their
objectives and where they are not being achieved, implementing corrective action."

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8.7 NATURE OF CONTROL

Control is a process to measure the actual performance achieved with that of planned
performance and take corrective action if there is any deviation between actual and
planned performance. The following are the basic nature and characteristics of the
control function:

1. Basic Function of Management: Control or controlling is one of the basic

functions of management. It is the measurement function of management. All other
managerial functions are meaningless without the provision of adequate control.

2. Continuous Activity: As long as there is planning there will be control. As

planning is an endless activity, control should also be endless. The managers of all
levels have to see that the subordinates perform according to plans at all times. Thus,
control is continuous as long as the organization exists.

3. Dynamic Process: Controlling is not static but a dynamic process. The technique
and system of control should be flexible to meet the demand and requirements of
changing environment of the organization.

4. Forward Looking: Control is forward looking activity. By comparing actual

performance with the expected level of performance, deviations can be detected.
Once the causes for the deviations are found, corrective measures must be employed
to prevent the occurrence of the faults in the future. Thus, the control provides the
necessary safeguards for future uncertainties.

5. Related to Planning: Planning and controlling are interrelated and inseparable

because both are management functions. In a practical sense, planning is not possible
without controlling, and similarly, controlling is not possible without planning.
Planning is the primary function of management, which defines the standard of work
and organizational objectives. Similarly, controlling is the function, which guides
the management to check whether work is done under standard or not. Thus,

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planning is the basis of control. It means planning supports controlling and

controlling supports planning.

8.8 Process of control

The process of control refers to the systematic and continuous activities that
organizations undertake to ensure that their objectives are achieved effectively and
efficiently. Control is a crucial function in management and is essential for
monitoring, measuring, and correcting performance to ensure that organizational
goals are met. The control process typically involves several key steps:
1. Establishing Goals and Standards: Control process in management starts with
fixing goals and performance standards. Goals and performance standards are the
expected level of performance or plan targeted to achieve in a given budget and time.
They are normally expressed in terms of profitability and profit growth. For
example, 15 percent return on invested capital (ROIC) in the coming year. These
goals are typically translated into sub-goals that can be applied to individuals and
units within the organization.

2. Measuring of Performance: The manager has to measure the actual performance

in units similar in which standards are expressed. For example, if the production
standard of a particular machine for some period is fixed at 1,000 units, then it is
easy to compare the actual production during that period. But where the standards
are intangible, the actual performance may be measured in terms of costs, profits,
time, etc. In any case, whether the targets are fixed in tangible or intangible terms,
they must be expressed in a manner that people concerned understand them.

3. Comparing Performance against Goals and Standards: Once the actual

performance is measured directly or indirectly, it is to be compared with the goals
and standards established. The comparison may reveal some deviations from the
standards established as it is rare that standards are achieved perfectly. The manager
has to fix a range of tolerance within which normal performance should lie.

4. Taking Corrective Actions: Corrective action includes curative as well as

preventive control measures such as re-planning or redrawing of objectives or
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targets, reallocation or classification of duties, changing the organization structure,

improving upon the current techniques, proper selection and training of employees,
providing positive motivation and incentives, etc.

5. Providing Reinforcement: If the goals and standards are met or exceeded,

managers need to provide timely positive reinforcement to those responsible
congratulations for a job well done, awards, pay increases, bonuses, or enhanced
career prospects. It is believed that positive reinforcement increases the probability
that those being acknowledged will continue to pursue such behavior in the future.
So, the managers should provide positive reinforcement to the employees who do a
better job.

Thus, above-mentioned steps are the major parts of the control process. The study
about these steps is necessary to make a controlling efficient, effective and
productive.

8.9 Types of control system

Control systems can be of Three different types of control system methods are given
below:
 Pre-control
 Concurrent Control
 Post-control

1. Pre-control: It is sometimes called "feed-forward" control and is preventive It

takes place before operations start. It includes the development of policies,
procedures, and rules that are designed to ensure that planned activities will be
carried out properly. It attempts to monitor the quality and quantity of financial,
human and information resources before they actually become part of the system. It
anticipates problems and permits actions to be taken before a problem actually
arises.

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2. Concurrent Control: This is used in the operating control system. Concurrent

control takes place during the 'action' phase of carrying out the plans and includes
direction, monitoring, and fine-tuning of activities as they occur. It is based on the
proverb 'prevention is better than cure.' It assists in guaranteeing that the plan will
be carried out at the specified time and under required conditions. It is also called
steering control because it allows people to act on a process or activity while it is
proceeding, not after it is completed.

3. Post-control: It is also known as post-action control or historical control and

measures results after the process. It examines what has happened in a particular
period in the past. Examples of post controls are most accounting records, an
inspection of goods and services and school grade reports. These controls can be
used to plan future behavior in the light of past errors or successes.

8.9 Essentials of Effective Control System

Every organization needs to design its unique control system in terms of its
philosophy, culture, work environment, socio-technical system, objectives and
external environment. The following essentials and characteristics are suggested as
guidelines for developing an effective control system:
1. Link with Planning: Control is aimed at ensuring that strategies, policies, and
plans are being implemented properly, and the desired objectives are being achieved.
It should, therefore, be based on organizational planning. Planning consisting of
objectives, policies, strategies, procedures, methods and budgets provide standards
of performance, and actual operational results should be measured against these
standards. So, control should be linked with planning.

2. Flexibility: Control system should be flexible so that it can be adjusted to suit the
needs of any change in the environment. It should be adaptable to new developments
including the failure of the control system itself.

3. Accurate Information: An effective control system is reliable and produces valid

data. It should be based on accurate information. Managers make a number of
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decisions based on available data. In case of inaccurate information, inappropriate

decisions will be made.

4. Timeliness: The control system should be directed towards the future. It should
report all the deviations from the standards quickly in order to safeguard the future.
The feedback system should be as short and as quick as possible. If the control
reports are not directed at the future, they are of no use as they will not be able to
suggest the types of measures to be taken to rectify the past deviations.

5. Objectivity: Controlling instead of being subjective must be objective. It should

discover deficiencies in the work, instead of finding fault with the individuals. The
standard of performance should be clear and definite.

6. Economy: The control system should be within the means of the organization. It
should be economical as regards time, money, and energy. The system should prove
to be an advantage rather than being a burden over the business.

7. User-Friendly: Control system should be simplified as far as possible so that it

can be effectively applied. It should be user-friendly. Employees should know and
understand the criteria against which their performance would be measured, how it
would be measured, who would receive the control reports, and to whom they are
accountable.

8. Critical Point Focus: Since it is neither possible nor necessary to control all the
aspects of employees' activities and operations, control should be established at a
strategic point or critical point that vitally affects the results. The selection of critical
success points is essential for minimizing the number of controls and yet measuring
effectively what should be measured. It will also focus the attention of managers and
their subordinates on the adequate performance of these critical points, operations
and activities.

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9. Corrective Action: Control should not be used as an end in itself but as a means
to the end of improving performance. Effective control should disclose the exact
magnitude and location of deviations, and also point out who is responsible for them.
It should also ensure that corrective action is taken promptly to bring the actual
results in line with the desired objectives.

10.Forward-Looking: The past activities cannot be controlled. So, control is related

to the future. The controller should have a forward-looking ability. What to do in the
future to achieve the organizational goals should be thought in advance and
accordingly, the means of control should be used.

8.10 Control Tools and Techniques

Controlling means setting a target, measuring performance, and taking corrective
action as required. However, the effectiveness of the controlling system depends on
the following tools and techniques:

1. Information Systems: All managers need the information to control various

organizational areas efficiently and effectively. Without information, it is difficult
for them to control deviations in targeted activities and functions. Managers also
need information about the standards used to be able to compare actual performance
with the standard. Information can be used as a tool to determine acceptable ranges
of variation within these comparisons.

2. Financial Control: It is the control of financial resources as they flow into the
organization (revenues, shareholder investments), are held by the organization
(working capital, retained earnings), and flow out of the organization (pay tax, salary
and other expenses). Financial control system helps to reduce costs and make the
best use of the organization's resources. Two specific financial control tools widely
used in management control are budgetary control and ratio analysis.

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3. Operations Control: The efficiency and appropriateness of an organization's

transformation processes largely depend on operations control. Operations control
includes the activities, such as monitoring production activities to ensure that they
are on schedule, assessing purchasing ability to provide the proper quantity and
quality of supplies needed at the lowest possible cost, monitoring the quality of the
organization's products or services to ensure that they meet pre-established
standards, and making sure that equipment is well maintained.

4. Control chart: Control charts are the management control tools show the result
and lower limits such period of time with statistically determined upper and lower
limits. Such charts clearly show whether a specific process is staying within
predefined limits. If a specific process exceeds the limit a corrective action is
required. Control charts also help to identify the causes of variations.

5. Economic Order Quantity (EOQ) Model: This model is used to control the level
of inventory and determine the most economic quantity to order. This model helps
to balance costs associated with order carrying inventory: the purchase costs, the
ordering costs, carrying costs and stock out costs. The specific formula to calculate
EQO is presented below:
EOQ = √2𝐴𝑂𝐶
Where, EOQ is the economic order quantity (the most economical quantity to order,
A is the annual usage of the item, O is the ordering costs, and C is the carrying cost
per unit per year.

6. Behavior Control: Every organization has to ensure that its employees have met
the expected level of performance. For this managers need to work with people and
depend on employees. They supervise and monitor employees' work and correct
problems that occur in their work. Regular appraisal of performance is also
necessary to control employees' behavior. Performance appraisal is necessary to
know about the strengths and weaknesses of the employees. There are several
methods for appraising employees' performance. A recently developed method of
appraising the performance of employees is based on feedback from supervisors,
subordinates, and co-workers.
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7. Disciplinary Control: This controlling technique is normally used to enforce the

organization's standards and regulations. There is a rule called "hot stove", which is
used to discipline employees. According to this rule, discipline should immediately
follow a violation, provide ample warning, be consistent treating everyone equally,
without any personal biases (penalty should be connected with violation committed,
not with the personality of an individual). Managers should have enough skills to
tackle disciplinary problems.

Multiple Choice Questions (MCQs)

1. What is the primary purpose of business communication?
- A) Entertainment
- B) Information exchange
- C) Socialization
- D) Personal expression

2. In the communication process, what is the role of encoding?

- A) Receiving the message
- B) Transmitting the message
- C) Decoding the message
- D) Creating the message

3. Who are the parties involved in communication?

- A) Sender and receiver
- B) Encoder and decoder
- C) Encoder and sender
- D) Receiver and decoder

4. What is a common barrier to effective communication?

- A) Clarity
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- B) Feedback
- C) Noise
- D) Encoding

5. How can communication barriers be improved?

- A) Increase noise levels
- B) Reduce feedback
- C) Clarify messages
- D) Ignore encoding issues

6. What is the meaning of control in management?

- A) Chaos management
- B) Quality assurance
- C) Goal achievement
- D) Cost reduction

7. Which control type involves making adjustments before an activity takes place?
- A) Feedback control
- B) Concurrent control
- C) Feedforward control
- D) Preventive control

8. What is the focus of strategic controls?

- A) Day-to-day activities
- B) Long-term objectives
- C) Financial resources
- D) Real-time monitoring

9. Which is a financial control measure?

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- A) Budgeting
- B) Job descriptions
- C) Bureaucratic controls
- D) Cultural controls

10. What is a characteristic of bureaucratic controls?

- A) Decentralized decision-making
- B) Shared beliefs and values
- C) Formalized rules and procedures
- D) Real-time adjustments

11. What is a key element of an effective control system?

- A) Lack of feedback
- B) Rigidity
- C) Flexibility
- D) Isolation

12. Which term refers to the continuous repetition of the control process?
- A) Cyclical control
- B) Static control
- C) Linear control
- D) Periodic control

13. What role does learning play in the control process?

- A) Continuous improvement
- B) Resistance to change
- C) Rigid structures
- D) Lack of adjustment

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14. What is a control tool commonly used for financial monitoring?

- A) Benchmarking
- B) Balanced scorecard
- C) Budget
- D) MIS

15. Which technique involves distributing decision-making authority throughout the

organization?
- A) Centralized control
- B) Decentralized control
- C) Bureaucratic control
- D) Cultural control

16. What is the purpose of using MIS as a control tool?

- A) Cultural development
- B) Information exchange
- C) Financial monitoring
- D) Quality assurance

17. What is a characteristic of bureaucratic controls?

- A) Decentralized decision-making
- B) Shared beliefs and values
- C) Formalized rules and procedures
- D) Real-time adjustments

18. Which control tool is associated with setting and monitoring performance against
specific standards?
- A) Balanced scorecard
- B) Benchmarking

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- C) Budget
- D) Bureaucratic controls

19. What is a common example of a communication barrier?

- A) Clarity
- B) Feedback
- C) Noise
- D) Encoding

20. How can communication barriers be improved?

- A) Increase noise levels
- B) Reduce feedback
- C) Clarify messages
- D) Ignore encoding issues

21. In the communication process, what is the role of decoding?

- A) Receiving the message
- B) Transmitting the message
- C) Decoding the message
- D) Creating the message

22. What is a preventive control measure?

- A) Adjusting after the activity
- B) Making adjustments before an activity
- C) Monitoring in real-time
- D) Clarifying messages

23. Which type of control involves adjustments made while an activity is ongoing?
- A) Feedback control
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- B) Concurrent control
- C) Feedforward control
- D) Preventive control

24. What is the focus of operational controls?

- A) Long-term objectives
- B) Day-to-day activities
- C) Financial resources
- D) Real-time monitoring

25. Which term refers to the proactive measures taken before an activity to ensure
it proceeds as planned?
- A) Feedback control
- B) Concurrent control
- C) Feedforward control
- D) Preventive control

Answers
Certainly, here are the answers in 1-25 format:

1. B
2. D
3. A
4. C
5. C
6. C
7. C
8. B
9. A

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10. C
11. C
12. A
13. A
14. C
15. B
16. C
17. C
18. A
19. C
20. C
21. C
22. B
23. B
24. B
25. C

VERY ANSWER QUESTIONS

1. What is communication?
2. What is business communication?
3. Mention any four characteristics of communication.
4. Write the different structures of communication.
5. State the process of communication.
6. Write purpose of communication.
7. What is after the 'sender' and 'message' in the communication?
8. Define 'decode' in the communication.
9.. Make a figurative presentation of communication process.
10. Point out the difference between formal and informal communication.
11. List three examples of written communication.
12. Mention any four barriers for effective communication.
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13. Write any four techniques for improving communication.

14. What do you mean by 'noise' in the communication process?
15. What is control?
16. Mention any four characteristics of control.
17. State the process of control.
18. Name the types of control system.

SHORT ANSWER QUESTIONS

1. Define communication. Discuss the need and importance of communication.
2. What is communication structure? What barriers do you see in making effective
communication?
3. What is business communication? Explain the parties involved in communication.
4. What is communication structure? Explain the process of communication.
5. What is communication? Discuss the structure of communication.
6. How can you enhance effective communication? Explain.
7. What are the differences between formal and informal communication?
8. What are the differences between oral and written communication?
9. What do you mean by 'noise' in the communication process?
10. Define control. What are the major types of control?
11. Define control. Explain the process of control.
12. What are the characteristics of effective control system? Explain.
13. What are the objectives and benefits of budget as a control tools?

LONG ANSWER QUESTIONS

1. "The ability to influence others is a primary determinant of how successful a
manager will be." Based on this statement give the meaning of influencing and
discuss the key elements of the influencing subsystem.
2 . "Communication is the process by which a person, group, or organization (the
sender) transmits some type of information (the message) to another person, group,
or organization (the receiver)." Describe the process of communication.
3. What do you mean by communication? Explain the forms and process of
communication.
4. "Effective communication occurs when intended meaning is equal to the
perceived meaning." List some of the clues for making communication effective.

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5. Control is a management function that focuses on the process of monitoring

activities to ensure that they are being accomplished as planned. As a manager of an
organization, what types of control system would you recommend to achieve
planned results?
6. What do you mean by controlling? Explain the process and importance of
controlling.
7. "Management control is the process of ensuring that actual activities conform to
planned activities." Discuss the process of controlling.

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UNIT 9: BUSINESS MANAGEMENT TRENDS AND SCENARIO IN NEPAL

9.1 Growth of Business Sector in Nepal

Business sector plays a key role in the development and progress of any country.
The growth of the business and industries sector is important for the prosperity
development of the national economy, utilization of local resources, generating
employment opportunities, increasing government revenue, increasing the standard
of living of people, earning foreign currency, as well as maintaining good
international relations. Therefore, the business sector is essential for the economic
prosperity of the nation.

The major items of export Businesses were tremendously grown during the golden
era of Lichchhavi rule. The golden era were major items of export in that era were
wool, musk, metal-wares, etc. Kathmandu wool, musk, metal-wares, had a trade link
with India and Tibet. A trade treaty was signed by Pratap Malla etc. (1661-1674
B.S.) with India and Tibet. According to this treaty, Tibet had to make Kathmandu
the centre of its trade with India. Besides this, trade messengers from Nepal had to
be stationed at Lhasa. After the unification of Nepal, the flow of trade increased due
to various reasons. During those days, Nepal used to export various agro-based and
forest-based goods.

The growth of the business sector in Nepal had started only after the was established
as a joint establishment of the Council of Industry in 1936. Biratnagar Jute Mill
established B.S., is considered the first by some of the Indian entrepreneurs is
Nepal's first modern industry. The Nepal. established in 1940. Only after that
cigarette, match, cloth, paper industries were gradually established. At that time
industries had flourished in Nepal due to the significant rise in price and scarcity of
goods on account of the Second World War.

Juddha Match Factory was established in 1938, whereas Morang Cotton Mills was
established in 1942, Nepal Plywood and Bobin Industry in 1943, Morang Sugar
Mills in 1944, and Ragupati Jute Mills in 1946. In addition to this, many other

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industries were also established. However, after the end of the Second World War,
many industries were closed.

A planned effort for the growth of the business sector and industrialization in the
country was made after launching economic planning in Nepal. Many industrial
policies were formulated to encourage industrialists to establish a number of
manufacturing industries in the country. Many import substitution and export-
promoting industries were established in the public sector with the financial and
technical assistance of China and then Russia. During the same period, many
industries were also established under private investment like sugar, textile, jute,
paper, soap, rice mill industries, etc.

After the fall of the 'Panchayati regime' and restoration of democracy in 2046 B.S.
Nepal Government revised the Industrial policy. The policy was revised to adopt an
open, liberal and competitive economic framework. Similarly, Industrial Enterprises
Act was enacted in 2049 B.S. Foreign investment and Technology Transfer Act
(2050 B.S.) was enacted. Similarly, Nepal Security Board was established in 2050
B.S. During that period many prominent public industries were privatized and Nepal
witnessed relatively fast development in the business sector. Many industries and
companies were established under the joint venture of Nepalese entrepreneurs and
foreign investors in different sectors like banking and finance, cigarette, cement,
textile, hotel, tourism, etc.

From 2052 B.S., the overall business development and growth is not encouraging
mainly because of political instability and associated risk factors and poor law and
order situation in the country. A decade-long political conflict greatly affected the
Nepalese business sector. Frequent bandhs such as Kathmandu Bandh, Nepal Bandh,
Tarai Bandh, and 'strikes' created blockages in transportation much needed for
accelerated growth in business activities. However, the "Jan-Andolan-II" in 2062/63
B.S., the Government-Maoist peace agreement, and the election of the constituent
assembly in 2064 B.S. have paved the way for future growth of the business sector
in Nepal. But the elected constituent assembly ended without bringing a new
constitution. This has created some problems in politics and the business sector too.

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The second Constituent Assembly promulgated the new constitution on 3rd Asoj,
2072 (September 20, 2015). The new constitution, 2072 has defined "Nepal is an
independent, indivisible, sovereign, secular, inclusive democratic, socialism-
oriented federal democratic republican state." It has a positive impact on the business
sector. Now, the Nepalese business sector, particularly the private sector, is
optimistic to bring some changes in the country through business development.
Telecommunication, banking, travel & tourism, hotel, education, hydropower, etc.
are gaining drive despite much insecurity and difficulties.

9.2 Majorindustries in Nepal

Major industries
in Nepal

Import
Manufacturing Export-oriented
Substitution Service Sector
Industries Industries
Industries

Manufacturing industries involve converting or transforming raw materials, semi-

processed materials into finished goods. They create form utility of goods and
services. Normally, they obtain raw materials from suppliers and add value to them
after completing some manufacturing process. The manufacturing industry in Nepal
is small but growing steadily. Biratnagar Jute Mill is the first modern industry of
Nepal that was established in 1993 B.S.

Based on the nature of production and revenue collected by the Nepal Government,
the major manufacturing industries of Nepal can be classified as under:

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A) . Manufacturing Industries:

1. Food Manufacturing Industries

They consist of the following manufacturing industries:
 Noodles Industries
 Biscuit Industries
 Squash Industries
 Sugar Industries
 Tea Industries
 Animal Feed Industries
 Vegetable Ghee Industries

2. Beverage Manufacturing Industries: They consist of the following

manufacturing industries:
 Soft drink Industries
 Beer Industries
 Liquor Industries

3. Tobacco Manufacturing Industries: They consist of the following

manufacturing industries:
 Cigarette Industries
 Bidi Industries

4. Carpet and Textile Manufacturing Industries: They consist of the

following manufacturing industries:
 Woolen Industries
 Cotton Clothes Industries
 Synthetic Clothes Industries
 Jute Goods Industries

5. Leather and Leather Product: It consists of different processed leather

industries.

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6. Footwear Manufacturing: It consists of different shoes manufacturing

industries.

7. Wood and Wood Product Manufacturing Industries: They consist of

the following industries:
 Plywood Industries
 Straw Board Industries

8. Paper and Paper Product Manufacturing Industries: They consist of

different paper industries.

9. Other Chemical Product Manufacturing Industries: They consist of the

following industries:
 Soap Industries
 Detergent powder Industries
 Matches Industries

10. Rubber Product Manufacturing Industries: They consist of different

types of slipper industries.

11. Plastic Product Manufacturing Industries: They consist of plastic

goods industries.

12. Other Non-Metallic Mineral Product Manufacturing Industries: They

consist of following industries:
 Cement Industries
 Bricks and Tiles Industries

13. Iron and Steel Product Manufacturing Industries: They consist of iron,
rod, angles industries.

14. Cutlery, Hand-tools except Machinery Equipment Manufacturing

Industries: They consist of the following industries:
 Steel Utensil's Industries

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 Agriculture Tools Industries

15. Electrics and Industrial Machinery Apparatus Appliances

Manufacturing Industries: They consist of the following industries:
 Wire/Cable Industries
 Dry Cell Battery Industries

2. Public Sector Manufacturing Enterprises

Public enterprises are industrial, agricultural, and or commercial undertakings,
etc. financed, controlled, and managed by the government. They build
infrastructure, secure balanced regional development, provide employment,
provide a model to and compete with the private sector, provide specific schemes,
enhance the production of essential goods and services, ensure scientific
utilization of national resources, conserve foreign exchange, and secure
economies of scale. In these views, many public sector manufacturing enterprises
were established in Nepal. However, few public enterprises were merged with
others and some were liquidated and some were privatized. Still, some of the
public sector manufacturing enterprises are in operation and some are closed. The
important industries are as follows:
■ Janakpur Cigarette Factory Limited
■ Lumbini Sugar Factory Limited
■ Udaypur Cement Company Limited
■ Hetauda Cement Industry Limited
■ Nepal Drugs Limited
■ Dairy Development Corporation
■ Agricultural Lime Industry Limited
■ Herbs Production and Processing Limited
■ Nepal Orind and Magnesite Private Limited
■ Almost all enterprises are incurring losses. Overall, the performance has
been unsatisfactory for public sector manufacturing enterprises.

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B). Export-oriented industries

Export-oriented industries are those industries, which produce goods to be sold in
the international market. These industries play an important role in maintaining a
balance of trade. They are the major source of foreign currency. The following are
the major export-oriented industries of Nepal:
 Woolen Carpet Industry
 Readymade Garment Industry
 Leather Industry
 Handicraft Industry
 Agro-based Industry
 Forest-based Industry

1. Woolen Carpet Industry

Carpets are woven by hand or machine. Nepal is famous for hand-knotted woolen
carpets. It is a major export-oriented product of Nepal. Hand-knotted woolen carpet
prepared from hand-spun pure wool. This has been used in decorating floors and
walls from ancient times. Nepalese woolen carpet has been popular in developed
countries such as Germany, Switzerland, United Kingdom, France, Turkey, Spain,
Canada, Italy, Belgium, Japan, and so on. Despite the lack of systematic marketing
woolen carpets have been a major export-oriented product and a source of foreign
exchange for Nepal.

The wool used in carpets is imported from New Zealand and China. Some producers
also use vegetable dyes. In Nepal carpet is produced mainly in Kathmandu,
Bhaktapur, Lalitpur, and Kaski districts. It is estimated that woolen carpet industries
have provided employment to a large number of people. Besides, carpet has been a
major source of foreign exchange earnings.

Problems of Woolen Carpet Industry

Some of the major problems of the woolen carpet industry are as follows:
1. Increasing Competition: Nepalese carpet industry is facing tough
competition from other countries such as China, India, Iran, Turkey, Pakistan,
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Morocco, Tunisia and Afghanistan. Dependence is high on the German

market. Market diversification for carpet exports is also lacking Government
incentive mechanism is also lacking for this industry.

2. Poor Quality: Nepal lacks a mechanism to test, verify and implement

quality standards for carpets. Unscrupulous producers are using inferior wool
and poor-quality hazardous dyes. Illegal imports of poor-quality carpets from
India for exports from Nepal have further damaged images of Nepalese
carpets. Due to this, the market of Nepalese carpets is in decreasing trend.
There is a lack of quality control mechanisms in the carpet industry.

3. Use of Child Labour: Nepalese carpet industry is accused of using child

labour. The negative publicity about the widespread use of child labour has
adversely affected the sales of carpets in global markets.

4. Lack of Training: Training for the employees is lacking in the carpet

industry. There are no training institutions to provide skills to the employees.
Skillful human resources are in short supply.

5. Lack of Research: There is a lack of research and development support for

new product development, design creation, consumer needs identification and
new technology. There is no strategic thinking for the development of this
industry. Reliable information is lacking about the world carpet industry.

6. Pollution: Carpet factories are polluting the environment. The lack of

actions by carpet manufacturers to control pollution has created public
sentiments against the carpet industry. The government has decided to
relocate all the carpet factories outside the Kathmandu valley.

2. Readymade Garment Industry

Readymade garment industry is also a major export-oriented industry of Nepal.
At present readymade garment industry occupies the first place among export-
oriented industries. This industry is a great source of foreign exchange earnings.

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This industry has provided employment to thousands of people, including both

skilled and semi-skilled persons.

Main readymade garments exported are shirts, trousers, jumpsuits, skirts,

blouses, children's wear, industrial garment, domestic garment, and so on.
Clothes for preparing readymade garments are imported from India, Taiwan,
South Korea, and Hong Kong. Readymade garments are produced in different
sizes, colors, and styles.

In Nepal, the Main readymade garments in Kathmandu, Sunsari, Morang, and

United States of American markets for Nepalese readymade garments are was
the key import Canada, United Kingdom, France and Germany. USA was the of
Nepalese garments. But exports to were subject to quota application till 2004.
Nepal's membership in the WTOSA done away with mentuota system. This has
adversely affected exports of Nepalese readymade garments.

The trend of readymade garment export is decreasing. Many garment factories

are closed. It has a negative impact on employment."

Problems of Readymade Garment Industry

Some of the major problems of the readymade garment industry are as
follows:
1. Quota Dependency
2. High Costs
3. Labour Problem
4. Market Dependency
5. Poor Logistics Support:
6. Poor Research and Development

3 . Leather Industry
Leather industry is both an import-substituting and export-promoting industry for
Nepal. The production of leather shoes has helped in import substitution and
saving of foreign exchange to a greater extent. The amount of foreign exchange

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earnings from the export of leather and leather products. Since a few years
onwards leather has been one of the items exported to overseas countries, but the
export of leather has been declining as compared to the past.

Bansbari Leather and Shoe Factory had been established in 2022 B.5 in the public
sector under Chinese assistance. Shoe production and leather procession were its
main functions. It used to supply shoes in the domestic market and export leather
in foreign markets. The annual production capacity of this factory was 50,000
pairs of shoes and 18 lakh square feet of semi-processed and processed leather.
After the privatization of this factory in 2049 B.S., its very existence has
disappeared. Hetauda Leather industry is another leather industry established in
the public sector under Chinese assistance in 2035 B.S. there had been a contract
to export 75 percent leather produced in this factory. However, after being handed
over to the private sector the existence of this factory had also disappeared.

Leather is used in the products such as shoes, jackets, handbags, purses, belts,
etc. The leather of buffalo and sheep and leather products are exported from
Nepal. Leather is produced in different colors, sizes, and styles. Cattle, sheep,
goats for leather production are found all over the country. Leather processing
and producing industries have been located mainly in Kathmandu, Birgunj,
Hetauda, Lahan, and Biratnagar.

The main markets for Nepalese leather are Belgium, Germany, United States of
America, France, Japan, Netherlands, Spain, Switzerland, Canada, Italy, and
United Kingdom.

Problems of Leather Industry

Some of the major problems that are faced by the Nepalese leather industry are
as follows:
 Raw Material Scarcity
 Out-dated Technology:
 Lack of Skilled Manpower
 Weak Institutional Supports

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4. Handicraft Industry
Since many years back handicraft industry has been one of the main export- Sriented
industries of Nepal. Most of the handicraft goods of Nepal are based on metal, wood,
stone, leather, cotton and woolen yarn. Cotton cloth is produced mainly in
Kathmandu, Lalitpur, and Bhaktapur districts.
Nepal exports handicrafts to more than 50 countries. The main markets for Nepalese
handicraft goods are the European community, United States, Canada, Japan,
Sweden, and Australia.

Problems of Handicraft Industry

The following are some of the major problems confronting the Nepalese handicraft
industry:
 Lack of quality control system
 Competition from machine-made handicrafts
 Shortage of raw materials. Import content is high.
 Lack of institutional support.
 Dependency on the limited market.
 Declining number of skilled artisans in handicraft manufacturing.

5. Agro-based Industry
Nepal is an agricultural country. The majority people of the population of the country
depend on agriculture for their livelihood. Agriculture contributes a nearly one-third
portion to the gross domestic product. Paddy, maize, millet, and wheat are the major
cereal crops of Nepal.

Jute and paddy are major traditional agro-based export-oriented goods of Nepal. At
present, due to various reasons, their importance as export-oriented goods is almost
nil. However, agricultural products have dominance on the exports to India.

Tea is another export-oriented agro-based product. The tea produced in Ilam is

famous for its taste and flavour. Different varieties of tea such as orthodox, CTC tea
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are produced in Nepal which is of exportable grade. Tea is mainly produced in Ilam
and Jhapa districts.

Problems of Agro-based Industry

The following are some of the major problems confronting the Nepalese agro- based
industry:
 Low Productivity
 Lack of Institutional Support
 Poor Quality Control
 Inefficient Use of Land
 Lack of Skilled Manpower

6 . Forest-based Industry
Since Nepal is rich in forest resources there is a good prospect of developing forest-
based export-oriented industries. Nepal is known as a bio-diversity zone. Therefore,
different varieties of herbs, plants, and birds are found here. Forest area in Nepal
was reported at 41.59% in 2020, according to the World Bank collection of
development indicators.

Due to rapid deforestation, the export of timber has been banned at present.
Therefore, at present non-timber forest products have been a main natural resource
of the country. In Nepal, about 7000 species of herb plants have been identified.
Among them, about 100 species of medicinal and aromatic plants are traded. Plants
produced in Nepal are used as raw materials for food, spice, herbs, dyestuff, tanning,
gum and resin, incense, oil, fibre, and paper, and in the form of construction
materials. Due to the lack of processing facilities in the country and the use of old
techniques medicinal herbs and aromatic plants are exported in raw forms. Most of
the plants are exported to India in raw forms. Although the government has banned
the export of many plants, they are being exported to India illegally. The precious
plants like jatamasi, Yarsagumba, and Paanchaule are exported illegally to India in
large quantities. Thus, the government has not been able to raise revenue from these
precious plants.
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The government has established Herb Production and Processing Centre for the
cultivation and marketing of medicinal herbs and aromatic plants. A French
organization is known as the 'Centre for International Development has been
working with Nepalese partners for the development of medicine of these herbs.
Many donor countries have also been assisting in the promotion and strengthening
of healthcare facilities based on herbs and for the research and development of
medicinal and aromatic plants.

Problems of Forest-based Industry

Some of the major problems of the forest-based industry are as follows:
 Lack of quality control system.
 Lack of professionalism and commercialization.
 Low productivity.
 Lack of institutional support.
 Lack of processing technology.
 Substantial smuggling, etc.

C). Import substitution industries

Import substitution can be defined as the substitution of a foreign product by
domestic supply. It is the expansion of domestic production and protection of
domestic industries against foreign companies. Nepal adopted the policy of import
substitution in 1961. The 1992 Trade policy has also emphasized the reduction of
trade imbalance. It has given priority to developing import substitute industries in
Nepal. However, the introduction of the Open General Licensing System in July
1993 abolished all quantitative restrictions and licensing for overseas imports.
Import substitution industries are essential for reducing the adverse trade balance of
Nepal. They are also required to accelerate economic growth, build foreign reserves,
build domestic capacity, and utilize different resources available in the country.

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The major import-substituting industries of Nepal are pharmaceuticals, food,

beverage, chemical, iron and steel, tobacco, electrical, electronic, cement, paper, and
sugar industries, etc. Brief descriptions of these industries are given below:
1. Pharmaceutical Industry: It is one of the import substitution industries of Nepal.
Nepal depends on Indian pharmaceutical industry for pharmaceutical products. At
present, Nepalese pharmaceutical products cover about 31 percent of the total
consumption. Nepal Drugs Ltd and Herbs Production and Processing Company Ltd.
are two government- owned pharmaceutical companies in the country. Besides,
about three dozen private pharmaceutical companies are operating in Nepal. The
demand for medicine is increasing. So, Nepalese pharmaceutical industries should
increase their capacity.

2. Food and Beverage Industry: There are many food and beverage companies are
operating in Nepal. To some extent, Nepal is self-sufficient in food and beverage
products. Food products include vegetable ghee, noodles, biscuit, flour, animal feed,
etc. Beverage products include cold drinks, soft drinks, and hard drinks.

3. Chemical Industry: Chemical industry of Nepal also helps to minimize the

import volume. The companies include soap, detergent powder, paints, fertilizer,
match industry, etc.

4. Iron and Steel Industry: Nepal is self-dependent on iron and steel products. It
imports only raw materials necessary for the industry. Iron and steel industrial
products include iron rods, tin, steel pipe, wire net, belting wire, steel plate, grill, etc.
All iron and steel manufacturing factories are situated in the Terai region.

5. Tobacco Industry: Nepal is self-reliant in tobacco products. Tobacco products

include cigarettes and bidi. There were five cigarette-producing factories in Nepal.
The only one in the public sector was the Janakpur Cigarette Factory which has
remained closed since 2011. The four private sector companies are Surya Tobacco
Company Pvt. Ltd., Perfect Blended Pvt. Ltd., Nepal Tobacco Pvt. Ltd., and Seti
Cigarette Factory.

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6. Electrical Industry: Electrical industry includes companies producing electric

ware, bulb, battery, plug/switch, cables, etc. Urbanization and expansion of
electricity to villages have increased the demand for these products in recent years.
This industry also supports minimizing the import of electrical goods.

7. Electronic Industry: Nepalese electronic manufacturing companies import parts

of electronic products from foreign countries and assemble them in the country.
These companies include TV, computer, refrigerator, transistor, tape recorder, and
watch assembling companies. This industry is thriving in Nepal due to low labor
costs and the ever-growing demand.

8. Cement Industry: The development of economic activities increases the demand

for cement products. In Nepal, the Hetauda Cement Industry and Udaypur Cement
Industry are two government-owned cement companies. Besides, many private
cement companies are operating in Nepal. However, the domestic cement industry
meets only 20 percent of the total demand.

9. Paper Industry: Paper production is a traditional industry of Nepal. At present,

there are many paper industries in the country. Among them, the Bhrikuti Pulp and
Paper Nepal Ltd and Everest paper mill are two big industries. This industry has
helped in minimizing the import of paper products.

10.Sugar Industry: Production of sugarcane is the traditional agricultural

occupation of the people of Nepal. The huge production of sugarcane in the Terai
region helps in promoting the sugar industry in Nepal. Lumbini Sugar Mill, Maha
Laxmi Sugar Mill, Birgunj Sugar Mill, Eastern Sugar Mill, etc. are major sugar-
producing companies in Nepal. The establishment of these companies has helped
minimize the import of sugar products in Nepal.

Problems of Import Substitution Industry

Some of the major problems of the import substitution industry are as follows:

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1. Raw Materials Shortages: There are shortages of raw materials for the
import substitution industry. Nepalese industries are based on imported raw
materials.

2. Low Capacity Utilization: The average capacity utilization has been poor.
Low capacity utilization has increased inefficiency. Technology is outdated.

3. Tax-related Problems: Tax policies are not industry-friendly. The industry

suffers from taxation hassles for paying tax.

4. Labour Problems: The industry suffers from labour problems. Labour

indiscipline is a threat to the import substitution industry. A multiplicity of
labour unions in this industry has led to frequent employer-employee
conflicts. This has adversely affected the performance of the industry.

5. Competition: Nepalese import substitution industry is facing tough

competition due to the smuggling of cheap products from China and India and
overseas.

D). Service Sector

There has been rapid development of the service industry after the government
adopted the economic liberalization policy. Businesspersons have been attracted
to this sector due to the fact that this sector needs a relatively low amount of
capital, has low risk, yields quick return is more profitable on account of being a
new area, and has low competition. Service sector industries provide support for
the promotion of trade and industries. The major service sector industries of
Nepal include the tourism industry, transport industry, construction industry,
financial & consultancy service industry, entertainment industries, and
information & communication.

1). Tourism Industry

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Tourism is one of the major service sector industries of Nepal. It consists of

different businesses such as hotels, motels, lodges, restaurants, travel agencies,
resorts, horse-riding, rafting, trekking, cable car, polo, golf, sight-seeing, etc.
Nepal has been a unique tourist destination in the South Asian region. Nepal is
called a tourists' paradise or Shangri-La. It is a country with live culture, snow-
capped mountains, unique beauty of nature, and hospitable people. It is compared
with Switzerland of Europe and Kashmir of Asia in terms of natural beauty.
Besides, Nepal is world-famous for its rich cultural heritage and history.

Nepal has been earning a large amount of foreign exchange from the tourism
industry even at present. This is a sector having a comparative advantage for
Nepal. Hence, the prospect of the tourism industry is immense in Nepal. It may
be established as an important economic activity and a dynamic industry.

Problems of Tourism Industry

Some of the major problems of the tourism industry are as follows:

1. Inadequate Infrastructure: Air transport, airports, trekking trails,

accommodation, communication facilities, security, etc., are the essential
infrastructures for the tourism industry. But, there is a lack of proper transport
and communication facilities in the remote hilly areas. Tourism has not been
integrated into other social and economic sectors of the country. Hence
tourism is limited to a few tourist destinations. Its economic return is also
limited to some geographical areas and groups of the country.

2. Decreasing Numbers of Tourists: There is a decreasing trend of tourists'

arrivals due to political instability and international terrorism, and worsening
quality of the environment. Economic benefits from tourism are decreasing.
Dollar spending by tourists is declining in recent years. The opportunities for
tourist spending are also limited.

3. Ineffective Marketing: Nepal's tourism has been dependent on traditional

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markets. New market development has been poor. Market promotion is

largely based on "word of mouth." Nepal as an attractive tourist destination
has not been well publicized in foreign countries.

4. Environmental Damage: The lack of conservation and rehabilitation of

tourist spots, the problem of solid waste management, increasing pollution,
environmental deterioration of Kathmandu and Pokhara valley are the major
formidable challenges of the development of this sector. The tourists visit
Nepal to observe its scenic beauty. But deforestation has caused
environmental degradation. The carpet industry and unsystematic
urbanization have caused water, air, and land pollution.

2). Transport Industry

Since the last few decades, there has been rapid development of transport. This
industry includes road transport, air transport, water transport, and pipeline. The
development of transportation is the basis for the development of industry, trade,
and other auxiliaries of commerce in the nation. Since Nepal is a landlocked
country, it has no direct water transportation system.

Growth of Transport Services

a) Road Transport: According to Economic Survey (2021), as of mid-March of

2021, the total length of the road has reached 33,528 kilometers including 15,974
kilometers blacktop (including strategic and local road networks), 8,582
kilometers graveled and 9,972 kilometers fair-weather. By mid-July 2020, there
were 33,244 kilometers of roads including 15,424 kilometers blacktop, 8,622
kilometers graveled and 9,198 kilometers of fair weather.

b). Transport Vehicles: Including all types, the total number of vehicles
registered was 3,836,502 as of mid -July 2020, whereas with an addition of
150,765 vehicles during the mid-March of the current fiscal year the registered
vehicles, including of all types, has reached 3987,267. 11.19 Of the total

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registered vehicles, bus, an important medium of public transportation is 1.4

percent and the share of two-wheeler motorcycles is 79.3 percent.

c). Air Transport: The number of international airlines operating in Nepal was
29 in the last fiscal year whereas it has remained 27 as of mid-March of the
current fiscal year. The number of countries having bilateral airline services
agreements has reached 40. The annual two-way airlines' seats have reached
nearly 7.8 million. The number of domestic airlines in operation (Fixed wing +
Rotor wing) has reached 20. All over the country, there are 54 airports. Of the
total airports, 37 airports are feasible to operate in all weathers. The regular air
services are being carried out in 35 airports in all weather. One domestic and 3
international airports are under construction.

d). Railways Transport: The construction of the railway is expedited with

priority. Out of the 70 kilometers of railway track of Jayanagar - Janakpur -
Kurtha- Bijalapura- Bardiwas, 56 kilometers have been completed as of mid- July
of 2020. Two sets of trains have been purchased for the operation from Jayanagar
to Kurth in the current fiscal year is in the final stage.

3). Entertainment Industries

Entertainment sector is also becoming an important industry in Nepal.
Entertainment industries consist of cinema halls, high vision halls, radio stations,
cinematography, song recording, acting training centers, theaters, advertising
agencies, CDs, VCDs, and audio cassettes production, etc.

Previously, foreign artists and technicians were used to production of cinemas.

Nowadays, all facilities concerning the production of cinemas are available in
Nepal. Many song-music recording studios are established in Nepal. Many FM
radio and TV channels are also established in Nepal. They are promoting the
entertainment industry. This industry also provides employment opportunities.

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4). Information and Communication

Information and communication sector has also become one of the major service
industries in Nepal. This industry consists of postal service, telecommunication
service, print media (information dissemination), electronic communication, and
cinema as well as radio stations.

Postal service is the oldest and most used service by the public, which has
extended its institutional network up to the remotest villages of Nepal. Besides
delivery of letters and parcels, various other services like issuance of postage
stamps, conducting Postal Saving Bank, Money Order Services, E-DV Form
service, Express Mail Service, and E-post service are rendered through the
Department of Postal Services and the offices under it.

The number of telecommunication service providers and their service users has
increased. Telecommunications service has gained both quantitative and
qualitative growths due to the availability of modern and sophisticated
technological telecommunication facilities.

Department of Information, Gorakhapatra Corporation, Rastriya Samachar

Samiti, (RSS), and Nepal Press Council under the Ministry of Information and
Communications have been disseminating information through the print media.
Gorkhapatra Corporation has been publishing Gorakhapatra National Daily, The
Rising Nepal Daily, Friday Weekly, Madhuparka Monthly, Yuvamanch Monthly
and informing Nepali citizens as the country's major news agency. Likewise,
many private media houses are also in the information and communication
business in Nepal. Online media are also increasing.

9.3 Existing management and business practices in Nepalese business

Nepalese business practices based on the traditional managerial functions:

planning, organizing, leading, and controlling.

1. Planning:

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 Long-Term Vision: Many Nepalese businesses, especially family-owned

enterprises, may have a long-term vision that extends beyond immediate
profitability. Planning often involves considering the impact on the
community and sustainable practices.
 Adaptation to External Factors: Due to Nepal's geographical and political
factors, businesses often need robust contingency plans to adapt to external
challenges, such as natural disasters or political changes.

2. Organizing:
 Hierarchical Structures: Nepalese businesses, particularly traditional ones,
may have hierarchical organizational structures. Decisions may be
centralized, with authority flowing from the top down.
 Family-Based Organizations: Family businesses are prevalent, and
organizing structures may involve family members taking on various roles
within the organization.

3. Leading:
 Relationship-Centric Leadership: Leadership often emphasizes building
strong relationships within the organization and with external
stakeholders. Personal relationships and trust play a significant role in
decision-making.
 Respect for Hierarchy: Leadership in Nepalese businesses often respects
traditional hierarchies, with leaders expecting a certain level of deference
from subordinates.

4. Controlling:
 Financial Oversight: Controlling functions may involve a strong
emphasis on financial oversight, especially in family businesses.
Managing expenses and ensuring financial stability are critical
aspects.
 Compliance with Regulations: Given the regulatory environment,
controlling functions include ensuring compliance with government
regulations. This is crucial for avoiding legal issues and maintaining
the business's reputation.

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5. Overall Observations:
 Adaptability: Nepalese businesses may exhibit a high degree of
adaptability due to the need to navigate challenging conditions, both
natural and political.
 Community Engagement: Successful businesses often engage with and
contribute to the local community, recognizing the interconnectedness
between business success and community well-being.
 Cross-Cultural Management: With the diverse ethnic and cultural
landscape in Nepal, effective cross-cultural management is essential for
businesses to navigate and succeed.

It's important to note that these observations are generalizations and may not
apply universally to all businesses in Nepal. The business environment is
dynamic, and factors such as globalization, technological advancements, and
changing demographics can influence managerial practices over time.

9.4 Major problems of Nepalese business

The major problems are as follows:
1. Government Policies:
A sound government policy is a prerequisite for creating a sound industrial
environment. But the government policy in Nepal is neither sound nor consistent,
nor are they effectively implemented. There are repeated changes and revisions in
industrial policies. Due to such unstable policies and unavailability of stated
facilities, even those people having capital hesitate to take risks and uncertainties
and are unwilling to make investment in industries. This is also the reason for the
diversion of capital by the people on the riskless and quick-yielding business.

2. Marketing Problem:
Nepalese industries are suffering from marketing problems. The domestic market
for Nepalese products is very limited due to the size, population, and geographical
topography of the country. The topography results in high transportation network

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costs. This is attributed to still to be developed a transportation network in all parts

of the country, particularly the north-south portion of the country; products cannot
be marketed easily throughout the country at low cost. The purchasing power of the
people is low due to the low level of income.

3. Financial Problems:
One of the major problems in industrial development in Nepal is the lack of
necessary financial resources. Finance is essential to establish and operate an
industry. It is difficult to get loans from banks for the industry in Nepal. The high
rate of interest and demand for collateral by the banks are major difficulties in
securing loans for business. Similarly, unnecessary and time-consuming
administrative procedures are responsible for not getting bank loans easily.
Therefore, Nepalese industries are not able to invest huge capital to operate large
industries of international standard.

4. Lack of Entrepreneurship:
Huge capital is essential to establishing an industry. Industrial investment is full of
risks. However, Nepal lacks dashing entrepreneurs to establish industries. Capital
flow in unproductive sectors is the reality of Nepal. The problem of access to
technology and technical know-how is also a major problem.

5. Raw Materials Problems:

Supply of raw materials at competitive and reasonable prices constitutes an
important basis for the development of industries. Nepal imports raw materials even
for agro-based industries Scarcity of raw materials, frequent interruption in regular
supply, transit duties and high transportation cost, etc. put Nepalese industries far
behind in the race to competition. In addition, Nepal relies on foreign technology,
chemicals and intermediate products for most of the industries. Major export
industries such as carpets, readymade garments and handicrafts are also dependent
on imported raw materials and intermediate products.

6. Lack of Skilled Technician and Managers:

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Many Nepalese industries are suffering from a shortage of skilled technicians and
managers. Technical knowledge is important for performing jobs effectively. On the
other hand, managers are weak in leadership capabilities, employees are weak in
communication, and interpersonal skills and workers lack vocational knowledge. In
the absence of these skills management change and organizational growth and
development is in problem.

7. Low Facility of Transport and Communication:

Many areas of the country are still lacking transportation, communication, and
power facilities. It is one of the major reasons for the concentration of industries in
urban specially Kathmandu and some Terai areas. This has led to the waste of raw
materials and labour in hilly areas. This is also responsible for the increase in costs
of both raw materials and finished goods.

8. Power Problems:
Besides, despite Nepal's huge potential for hydroelectricity, the continuous power
shedding is the major cause of the fall in industrial outputs in Nepal. However, in
recent times, the Nepal government is managing and controlling load-shedding
gradually. The charge for electricity is also high as compared to other countries. In
addition to this, the industries are also suffering from an inadequate supply of water
due to their own concentration, rapid urbanization, and deforestation.

9. Lack of Basic Industries:

There is no development of the basic industries such as iron, steel, and chemicals in
Nepal. All materials should be imported from foreign countries for establishing
industries. Due to this, it becomes difficult to spend a large amount of scarce foreign
exchange. Therefore, it is difficult to import the materials in adequate quantity.

10. Tough Competition:

Imports in the country have tremendously increased due to the open door policy
adopted by the government. Due to this Nepalese products based on foreign raw
materials, materials and low level of technology have not been able to compete in

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their own market. Nepalese products cannot compete at all in the foreign markets
due to high prices and low quality.

11. Poor Investment Climate:

The investment climate of the country is not good enough to attract domestic and
foreign investment. In the present situation, lack of skilled labour force and improper
institutional arrangements it is difficult to attract foreign investment in Nepal. The
country still needs to formulate and revise laws, rules, and regulations the favor of
building the investment climate.

12. No Proper Business Environment:

Government bureaucracy and its policy are regarded as the most inhibiting factors
for the growth and development of the business sector in Nepal. Similarly, other
environmental factors are, for example, poor demand for goods and services, lack of
infrastructure, and unstable political environment.

Nepal has an open border of 550 miles with India. Unrestricted and illegal imports
and exports are perceived as a natural phenomenon. New developments, for
example, liberalization policy, WTO membership, agreement of South Asian Free
Trade Area (SAFTA) and BIMSTEC, etc. will result in more challenges.

Multiple choice Questions (MCQs)

1. What is a key factor contributing to the growth of the business sector in Nepal?
a) Government regulations
b) Technological stagnation
c) Economic recession
d) Social unrest

2. In Nepal, which sector focuses on producing goods for domestic consumption to

reduce reliance on imports?

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a) Manufacturing
b) Export-oriented
c) Import-substitution
d) Service

3. Which industry in Nepal primarily targets foreign markets for its products?
a) Manufacturing
b) Export-oriented
c) Import-substitution
d) Service

4. What characterizes import-substitution industries in Nepal?

a) Relying on foreign markets
b) Focusing on domestic production
c) Exporting products extensively
d) Ignoring technological advancements

5. Which sector in Nepal involves activities related to providing intangible goods

and services?
a) Manufacturing
b) Export-oriented
c) Import-substitution
d) Service

6. What are the prevailing management and business practices in Nepal?

a) Constant innovation
b) Strict adherence to traditional methods
c) Quick adoption of global trends
d) Minimal government intervention
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7. What is a major challenge faced by businesses in Nepal?

a) Excessive government intervention
b) Lack of skilled workforce
c) Overabundance of technological advancements
d) Strong support from the international market

8. In Nepalese business, what contributes to the existing challenges?

a) High level of government support
b) Rapid technological advancements
c) Strict adherence to global standards
d) Lack of infrastructure development

9. Which factor is crucial for the sustained growth of the business sector in Nepal?
a) Limited access to international markets
b) Technological stagnation
c) Diversification of industries
d) Dependency on import-oriented industries

10. What is a characteristic of the service sector in Nepal?

a) Emphasis on tangible goods production
b) Focus on export-oriented activities
c) Involvement in intangible service provision
d) Strict import-substitution practices

11. What does the manufacturing sector in Nepal primarily aim to do?
a) Increase reliance on imports
b) Boost domestic production
c) Reduce exports to foreign markets
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d) Neglect technological advancements

12. In Nepalese business, what is a common trend regarding technology adoption?

a) Resistance to technological advancements
b) Rapid adoption of global trends
c) Minimal reliance on technology
d) Ignoring the impact of technology

13. Which industry in Nepal is likely to focus on creating products for international
markets?
a) Manufacturing
b) Export-oriented
c) Import-substitution
d) Service

14. What role does the government play in Nepalese business practices?
a) Minimal intervention
b) Strict control and regulation
c) Promotion of innovation
d) Complete neglect of business activities

15. What is a significant problem faced by Nepalese businesses?

a) Abundance of skilled workforce
b) Lack of infrastructure development
c) Overreliance on international markets
d) Strong government support

16. How do import-substitution industries contribute to the Nepalese economy?

a) By relying on foreign markets
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b) By promoting domestic production

c) By minimizing technological advancements
d) By focusing on service provision

17. What factor is crucial for the success of export-oriented industries in Nepal?
a) Strict import-substitution practices
b) Strong reliance on domestic markets
c) Access to international markets
d) Minimal technological innovation

18. What is a common characteristic of management practices in Nepalese

businesses?
a) Quick adaptation to global standards
b) Strict adherence to traditional methods
c) Minimal government regulation
d) Emphasis on technological innovation

19. What is a key consideration for businesses operating in Nepal?

a) Ignoring the international market
b) Overreliance on government support
c) Diversifying industries
d) Resisting technological advancements

20. In Nepalese businesses, what is a notable trend in terms of global market

integration?
a) Strong reliance on international markets
b) Limited access to foreign markets
c) Overemphasis on import substitution
d) Neglect of global trade practices

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21. What is a significant challenge for the manufacturing sector in Nepal?

a) Lack of skilled workforce
b) Strict import-substitution practices
c) Rapid technological advancements
d) Strong government support

22. What contributes to the growth of the service sector in Nepal?

a) Focus on tangible goods production
b) Technological stagnation
c) Involvement in intangible service provision
d) Ignoring global market trends

23. What is a common characteristic of existing business practices in Nepal?

a) Strict adherence to global standards
b) Resistance to technological advancements
c) High level of government intervention
d) Quick adoption of international trends

24. What does the export-oriented industry in Nepal primarily target?

a) Domestic markets
b) Global markets
c) Import substitution
d) Technological stagnation

25. What is a major issue faced by businesses operating in Nepal?

a) Abundance of skilled workforce
b) Lack of infrastructure development
c) Overreliance on international markets
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d) Strong government support

Answers
1. a) Government regulations
2. c) Import-substitution
3. b) Export-oriented
4. b) Focusing on domestic production
5. d) Service
6. b) Strict adherence to traditional methods
7. b) Lack of skilled workforce
8. d) Lack of infrastructure development
9. c) Diversification of industries
10. c) Involvement in intangible service provision
11. b) Boost domestic production
12. a) Resistance to technological advancements
13. b) Export-oriented
14. b) Strict control and regulation
15. b) Lack of infrastructure development
16. b) By promoting domestic production
17. c) Access to international markets
18. b) Strict adherence to traditional methods
19. c) Diversifying industries
20. b) Limited access to foreign markets
21. c) Rapid technological advancements
22. c) Involvement in intangible service provision
23. c) High level of government intervention
24. b) Global markets
25. b) Lack of infrastructure development

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VERY SHORT QUESTIONS

1. Name the major industries of Nepal.
2. Write any four reasons for failure of public enterprises in Nepal.
3. Mention the export-oriented industries of Nepal.
4. Name three types of import-substitution industries in Nepal.
5. Make list service sector industries in Nepal.
6. Mention the existing management and business practices in Nepalese business.

SHORT ANSWER QUESTIONS

1. Write about growth of business sector in Nepal.
2. Explain the major import substituting industries of Nepal. Explain.
3. Explain about major export oriented industries in Nepal.
4. What are the main service sector industries of Nepal? Explain their contribution
in Nepalese economy.
5. Give your assessment on the existing management and business practices in the
Nepalese business organizations.
6. Identify the major constraints and problems facing Nepalese industries sector.

LONG QUESTIONS
1. Give your assessment on the existing management and business practices in the
Nepalese business organizations.
2. Discuss in brief present management practices in Nepal.
3. State and explain major problems facing business in Nepal.
4. List the major problems associated with public sector manufacturing enterprises.
5. What are the major export industries of Nepal? Explain the major problems faced
by these industries.

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