Lecture Notes

on
“SM3201MS: Fundamentals of Management for Engineers”
Submitted by

B.SIRISHA
Assistant Professor

In the department of

Electrical & Electronics Engineering

NARASIMHA REDDY ENGINEERING COLLEGE

(Affiliated to J.N.T.U, HYDERABAD)

MAISAMMGUDA (V), DHULAPALLY (P), MEDCHAL (M)

SECUNDERABAD-14

(2024-2025)

DEPT of EEE, NRCM B.Sirisha Assistant professor

 SYLLABUS
SM3201MS: Fundamentals of Management for Engineers L T P C
3 0 0 3
Course Objectives:
▪ To understand the Management Concepts, applications of Concepts in Practical aspects of business and development
of Managerial Skills for Engineers.

Course Outcomes: Students will be able to

The students understand the significance of Management in their Profession. The various Management Functions like
Planning, Organizing, Staffing, Leading, Motivation and Control aspects are learnt in this course. The students can
explore the Management Practices in their domain area.
UNIT- I:

Introduction to Management: Definition, Nature and Scope, Functions, Managerial Roles, Levels of Management,
Managerial Skills, Challenges of Management; Evolution of Management- Classical Approach- Scientific and
Administrative Management; The Behavioral approach; The Contingency Approach, IT Approach
UNIT – II:
Planning and Decision Making: General Framework for Planning - Planning Process, Typesof Plans, Management by
Objectives; Production Planning and Control. Decision making andProblem Solving - Programmed and Non
Programmed Decisions, Steps in Problem Solving and Decision Making; Bounded Rationality and Influences on
Decision Making; Group Problem Solving and Decision Making, Creativity and Innovation in Managerial Work.

UNIT- III:
Organization and HRM: Principles of Organization: Organizational Design & Organizational Structures;
Departmentalization, Delegation; Empowerment, Centralization, Decentralization, Recentralization; Organizational
Culture; Organizational Climate and Organizational Change. Human Resource Management & Business Strategy: Job
Satisfaction, Job Enrichment, Job Enlargement, Talent Management, Strategic Human Resource Planning;
Recruitment and Selection; Training and Development; Performance Appraisal.

UNIT- IV:
Leading and Motivation: Leadership, Power and Authority, Leadership Styles; Behavioral Leadership,
Situationa Leadership, Leadership Skills, Leader as Mentor and Coach, Leadership during adversity and
Crisis; Handling Employee and Customer Complaints, Team Leadership. Motivation - Types of
Motivation; Relationship between Motivation, Performance and Engagement, Content Motivational Theories –
Needs Hierarchy Theory, Two Factor Theory, Theory X and Theory Y

DEPT of EEE, NRCM B.Sirisha Assistant professor

 .
UNIT- V:
Controlling: Control, Types and Strategies for Control, Steps in Control Process, Budgetaryand Non- Budgetary
Controls. Characteristics of Effective Controls, Establishing controlsystems, Control frequency and Methods.

TEXT BOOKS:
1. Management Essentials, Andrew DuBrin, 9e, Cengage Learning, 2012.
2. Fundamentals of Management, Stephen P. Robbins, Pearson Education, 2009.

REFERENCE BOOKS:
1. Essentials of Management, Koontz Kleihrich, Tata Mc - Graw Hill.
2. Management Fundamentals, Robert N Lussier, 5e, Cengage Learning, 2013.
3. Industrial Engineering and Management: Including Production Management, T.R.Banga, S.C.Sharma, Khanna
Publishers

DEPT of EEE, NRCM B.Sirisha Assistant professor

Fundamental of management for engineers & SM3201MS

UNIT -I

INTRODUCTION TO MANAGEMENT

A business develops in course of time with complexities. With increasing complexities managing
the business has become a difficult task. The need of existence of management has increased
tremendously. Management is essential not only for business concerns but also for banks, schools,
colleges, hospitals, hotels, religious bodies, charitable trusts etc. Every business unit has some
objectives of its own. These objectives can be achieved with the coordinated efforts of several
personnel. The work of a number of persons are properly coordinated to achieve the objectives
through the process of management is not a matter of pressing a button, pulling a lever, issuing
orders, scanning profit and loss statements, promulgating rules and regulations. " Peter F. Drucker
has stated in his famous book "The Practice of Management" that, "the emergence of management
as an essential, a distinct and leading social institution is a pivotal event in social history.

Management is a vital aspect of the economic life of man, which is an organized group activity. It
is considered as the indispensable institution in the modern social organization marked by scientific
thought and technological innovations. One or the other form of management is essential wherever
human efforts are to be undertaken collectively to satisfy wants through some productive activity,
occupation or profession. It is management that regulates man's productive activities through
coordinated use of material resources. Without the leadership provided by management, the
resources of production remain resources and never become production. Management is the
integrating force in all organized activity. Whenever two or more people work together to attain a
common objective, they have to coordinate their activities. They also have to organize and utilize
their resources in such a way as to optimize the results. Not only in business enterprises where costs
and revenues can be ascertained accurately and objectively but also in service organizations such as
government, hospitals, schools, clubs, etc., scarce resources including men, machines, materials and
money have to be integrated in a productive relationship, and utilized efficiently towards the
achievement of their gals. Thus, management is not unique to business organizations but common to
all kinds of social organizations. Management has achieved an enviable importance in recent times.

DEFINITIONS OF MANAGEMENT

Henry Fayol, "To mange is to forecast and plan, to organize, to compound, to co-ordinate and to
Fundamental of management for engineers & SM3201MS
control."

Harold Koontz says, "Management is the art of getting things done through and within formally
organized group."

Peter F. Drucker defines, "management is an organ; organs can be described and defined only
through their functions".

Terry, "Management is not people; it is an activity like walking, reading, swimming or running.
People who perform Management can be designated as members, members of Management or
executive leaders."

Ralph C. Davis has defined Management as, "Management is the function of executive
leadership anywhere."

NATURE OF MANAGEMENT
OR
FEATURES OF MANAGEMENT

1) Management is a social process:- Social process refers to the series of activities that are
performed in the society. These activities are carried out by administrators, politicians,
economists, house wives, businessmen and so on. Management helps everyone to carry out the
activities in the society effectively.

2) Body of people:- Management also denotes a ‗body of people‘ involved in decision-making.

3) Management is omnipresent:- Management principles are applied to every kind of

organization and also to every level in it.

4) It is an inexact science:- Management principles are not like those in sciences or maths where
things are fairly clear or exact. Management deals with people ad it is difficult to predict their
behavior accurately. It falls in area of social science. Its principles are situation bound, so their
applicability does not give same result every time.

5) It is complex:- Management functions call for a fairly professional approach to manage a given
situation. Businesses are operating in complex environments.

6) Management is situational in nature:- The same style of management cannot work for the
Fundamental of management for engineers & SM3201MS
same situation every time.

7) Management is an art and also a science:- An art is personal skill. The management skills are
highly individual oriented and can be sharpened with more training and practice. It is a
systematic body of knowledge, its principles are universally acceptable. Science establishes
cause and effect relationship between variables. It also establishes cause-and-effect relationship
between the given factors. It explains what happens if the employees are not paid salaries on
time.

8) Management is a profession:- Profession refers to vocation or a branch of advanced learning

such as engineering or medicine. Managers are professional in their approach.

9) Management is inter-disciplinary:- The subject of management is heavily dependent on other

disciplines such as economics, operations research, statistics, sociology, Psychology and
mathematics etc.

10) Manager has 4 types of resources:- The 4 M‘s Men, Money, Materials and Machines to
manage.

SCOPE OF MANAGEMENT

Management is an all pervasive function since it is required in all types of organized Endeavour,
Thus, its scope is very large. The following activities are covered under the scope of
management:

1. Production Management:
Production means creation of utilities. This creation of utilities takes place when raw materials are
converted into finished products. Production management, then, is that branch of management
‗which by scientific planning and regulation sets into motion that part of enterprise to which has
been entrusted the task of actual translation of raw material into finished product.‘

Plant location and layout, production policy, type of production, plant facilities, material handling,
production planning and control, repair and maintenance, research and development, simplification
and standardization, quality control and value analysis, etc., are the main problems involved in
production management.
Fundamental of management for engineers & SM3201MS

2. Marketing Management:
Marketing management refers to the planning, organizing, directing and controlling the activities of
the persons working in the market division of a business enterprise with the aim of achieving the
organization objectives. Market analysis, marketing policy, brand name, pricing, channels of
distribution, sales promotion, sale-mix, after sales service, market research, etc. are the problems of
marketing management.

3. Financial Management:
Finance is viewed as one of the most important factors in every enterprise. Financial management
is concerned with the managerial activities pertaining to the procurement and utilization of funds or
finance for business purposes.

The main functions of financial management include:

a. Estimation of capital requirements.

b. Ensuring a fair return to investors.
c. Determining the suitable sources of funds.
d. Laying down the optimum and suitable capital.

4. Personnel Management:
Personnel Management is that phase of management which deals with the effective control and use
of manpower. Effective management of human resources is one of the most crucial factors
associated with the success of an enterprise. Personnel management is concerned with managerial
and operative functions.

Functions of personnel management include:

a) Personnel planning.
b) Organizing by setting up the structure of relationship among jobs, personnel.
c) Directing and controlling the employees
d) Procurement of right kind and number of persons
e) Training and development of employees
f) Determination of adequate and equitable compensation of employees
g) Integration of the interests of the personnel with that of the enterprise
h) Providing good working conditions and welfare services to the employees.
Fundamental of management for engineers & SM3201MS

5. Office Management:
The concept of management when applied to office is called ‗office management‘. Office
management is the technique of planning, coordinating and controlling office activities with a view
to achieve common business objectives. One of the functions of management is to organize the
office work in such a way that it helps the management in attaining its goals. It works as a service
department for other departments. The success of a business depends upon the efficiency of its
administration. The efficiency of the administration depends upon the information supplied to it by
the office.

Harry H. Wylie defines office management as ―the manipulation and control of men, methods,
machines and material to achieve the best possible results—results of the highest possible quality
with the expenditure of least possible effect and expense, in the shortest practicable time, and in a
manner acceptable to the top management.‖

FUNCTIONS OF MANAGEMENT

According to Henry Fayol, ―To manage is to forecast and plan, to organize, to command, & to
control‖. Whereas Luther Gullick has given a keyword ‘POSDCORB‘ where P stands for Planning,
O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting & B for
Budgeting. But the most widely accepted are functions of management given by KOONTZ and
O‘DONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.

1) Planning: Planning is the conscious determination of future course of action. This involves why
an action, what action, how to take action, and when to take action. Thus, planning includes
determination of specific objectives, determining projects and programs, setting policies and
strategies, setting rules and procedures and preparing budgets. Planning involves

essentially four stages: 1. Identifying the goal to be achieved 2. Exploring the courses of action
available to reach this goal 3. Evaluating each course of action 4. Selecting the best course of
action for implementation.

2) Organizing: Organizing is the process of dividing work into convenient tasks or duties,
grouping of such duties in the form of positions, grouping of various positions into departments
and sections, assigning duties to individual positions, and delegating authority to each positions
Fundamental of management for engineers & SM3201MS
so that the work is carried out as planned. It is viewed as a bridge connecting the conceptual
idea developed in creating and planning to the specific means for accomplishment these ideas.

3) Staffing: Ascertain how many positions are there in the organization and at what level. Once
this information is available, the next task is to collect details such as what type of candidates are
required for each level and accordingly fill these positions with right people. Staffing is process
which includes recruitment, selection, training, placement, appraisal, promotion and career
planning.

4) Directing: when people are available in the organization, they must know what they are
expected to do in the organization. Superior managers fulfill this requirement by
communicating to subordinates about their expected behavior. Once subordinates are oriented,
the superiors have continuous responsibility of guiding and leading them for better work
performance and motivating them to work with zeal and enthusiasm. Thus, directing includes
communicating, motivating and leading. Organizing as a process involves: a) Identification of
activities. b) Classification of grouping of activities. c) Assignment of duties.
d) Delegation of authority and creation of responsibility. e) Coordinating authority and
responsibility relationships.

5) Controlling: Controlling involves identification of actual results, comparison of actual results

with expected results as set by planning process, identification of deviations between the two, if
any, and taking of corrective action so that actual results match with expected results.
Fundamental of management for engineers & SM3201MS

6) Reporting: The Managers are the coordinators and leaders of the organization. And the
coordinators hold the responsibility of reporting status and position of the organization before
the interested groups of people, such as shareholders, stakeholders, Top Management,
Administrators, Board of Directors, Employees, Trade unions, Customers, Financiers and so
forth. So, the management informs and inspires the relevant groups about their objectives, status
and reputation.

7) Budgeting: A budget is a financial plan for a defined period of time, usually a year. It may also
include planned sales volume and revenues, resource quantities, costs and expenses, assets,
liabilities and cash flows. Budgeting is a process of preparing estimates of future sales,
expenses, revenues, cash flows, etc. Some authors say the budgeting is include in planning
function, but Luther Gullick considered this as a separate function.

MANAGERIAL ROLES

Like we perform different roles in our family (such as father, son, brother, mother, sister, daughter
and so on), the manager also performs several roles though officially they are given one job title
(such as trainer, monitor, leader, counselor, mentor, coach, advisor, controller etc.). Dr. Henry
Mintzberg has explained ten roles of manager in his report ―Managerial work: Analysis From
Observation‖.

1. Interpersonal Roles

a) Figurehead: Manager as a figurehead, performs all symbolic legal and social duties and
discharges all social, legal and ceremonial obligations. He inspires the employees and
shareholders with vision, mission and action plans. He plans, organizes and controls the
business.
b) Leader : As a leader, every manager must motivate and encourage his employees. He must
also try to reconcile their individual needs with the goals of the organization.
c) Liaison : He forms relationship with outside the department or organization to obtain
information useful for his organization.
Fundamental of management for engineers & SM3201MS

2. Informational Roles

a) Monitor : As a monitor, the manager has to perpetually scan his environment for
information, interrogate his liaison contacts and his subordinates, and receive unsolicited
information, much of it as result of the network of personal contacts he has developed.
b) Disseminator: In the role of a disseminator, the manager passes some of his privileged
information directly to his subordinates who would otherwise have no access to it.
c) Spokesman : In this role, the manager informs and satisfies various groups and people who
influence his organization. Thus, he advises shareholders about financial performance,
assures consumer groups that the organization is fulfilling its social responsibilities and
satisfies government that the origination is abiding by the law.

3. Decisional Roles

a) Entrepreneur : In this role, the manager constantly looks up for new ideas and seeks to
improve his unit by adapting it to changing conditions in the environment.
b) Disturbance Handler (Trouble Shooter) : In this role, the manager has to work like a fire
fighter. He must seek solutions of various unanticipated problems – a strike may loom
large a major customer may go bankrupt; a supplier may renege on his contract, andso on.
c) Resource Allocator : In this role, the manager must divide work and delegate authority
among his subordinates. He must decide who will get what.
d) Negotiator : The manager has to spend considerable time in negotiations. Thus, the
chairman of a company may negotiate with the union leaders a new strike issue, the foreman
may negotiate with the workers a grievance problem, and so on. In addition, managers in
any organization work with each other to establish the organization‘s long- range goals and
to plan how to achieve them. They also work together to provide one another with the
accurate information needed to perform tasks. Thus, managers act as channels of
communication with the organization.

LEVELS OF MANAGEMENT

An enterprise may have different levels of management. Levels of management refer to a line of
demarcation between various managerial positions in an enterprise. The levels of management
depend upon its size, technical facilities, and the range of production. The real significance of
Fundamental of management for engineers & SM3201MS

levels is that they explain authority relationships in an organization. Considering the hierarchy of
authority and responsibility, one can identify three levels of management namely:

1. Top level management: Top level management of a company consists of owners/shareholders,

Board of Directors, its Chairman, Managing Director, or the Chief Executive, or the General
Manager or Executive Committee having key officers.

Top management is the ultimate source of authority and it lays down goals, policies and plans for
the enterprise. It devotes more time on planning and coordinating functions. It is accountable to the
owners of the business of the overall management. It is also described as the policy making group
responsible for the overall direction and success of all company activities. The important functions
of top management include:

a) To establish the objectives or goals of the enterprise.

b) To make policies and frame plans to attain the objectives laid.
c) To set up an organizational frame work to conduct the operations as per plans.
d) To assemble the resources of money, men, materials, machines and methods to put the
plans into action.
e) To exercise effective control of the operations.
f) To provide overall leadership to the enterprise.

2. Middle level management : Middle level management of a company consists of heads of

functional departments viz. Purchase Manager, Production Manager, Marketing Manager, Financial
controller, etc. and Divisional and Sectional Officers working under these Functional Heads.

The job of middle management is to implement the policies and plans framed by the top
management. It serves as an essential link between the top management and the lower level or
operative management. They are responsible to the top management for the functioning of their
departments. They devote more time on the organization and motivation functions of management.
Without them the top management's plans and ambitious expectations will not be fruitfully realized.
The following are the main functions of middle management:

a) To interpret the policies chalked out by top management.

Fundamental of management for engineers & SM3201MS

b) To prepare the organizational set up in their own departments.

c) To recruit and select suitable operative and supervisory staff.
d) To assign activities, duties and responsibilities for timely implementation of the plans.
e) To compile all the instructions and issue them to supervisor under their control.
f) To motivate personnel to attain higher productivity and to reward them properly.
g) To cooperate with the other departments for ensuring a smooth functioning of the entire
organization.
h) To collect reports and information on performance in their departments.
i) To report to top management
j) To make suitable recommendations to the top management for the better execution of
plans and policies.

3. Lower level management: It is placed at the bottom of the hierarchy of management, and actual
operations are the responsibility of this level of management. It consists of foreman, supervisors,
sales officers, accounts officers and so on. They are in direct touch with the rank andfile or workers.
Their authority and responsibility is limited. They pass on the instructions of the middle
management to workers.

They interpret and divide the plans of the management into short-range operating plans. They are
also involved in the process of decisions-making. They have to get the work done through the
workers. They allot various jobs to the workers, evaluate their performance and report to the middle
level management. They are more concerned with direction and control functions of management.
They devote more time in the supervision of the workers.
Fundamental of management for engineers & SM3201MS

MANAGERIAL SKILLS

A skill is an individual's ability to translate knowledge into action. Hence, it is manifested in an

individual's performance. Skill is not necessarily inborn. It can be developed through practice and
through relating learning to one's own personal experience and background. In order to be able to
successfully discharge his roles, a manager should possess three major skills. These are conceptual
skill, human relations skill and technical skill.

1. Conceptual skill: The Conceptual Skill which deals with ideas refers to the ability of a manager
to take a broad and farsighted view of the organization and its future, his ability to think in abstract,
his ability to analyze the forces working in a situation, his creative and innovative ability and his
ability to assess the environment and the changes taking place in it. In short, it is his ability to
conceptualize the environment, the organization, and his own job, so that he can set appropriate
goals for his organization, for himself and for his team. This skill seems to increase in importance
as manager moves up to higher positions of responsibility in the organization.

2. Technical Skill: The technical skill which deals with things is the manager's understanding of
the nature of job that people under him have to perform. It refers to a person's knowledge and
proficiency in any type of process or technique. In a production department this would mean an
understanding of the technicalities of the process of production. Whereas this type of skill and
competence seems to be more important at the lower levels of management, its relative importance
as a part of the managerial role diminishes as the manager moves to higher positions.

3. Human relations skill: The Human Relations Skill which deals with people is the ability to
interact effectively with people at all levels. This skill develops in the manager sufficient ability
(a) to recognize the feelings and sentiments of others; (b) to judge the possible actions to, and
outcomes of various courses of action he may undertake; and (c) to examine his own concepts and
values which may enable him to develop more useful attitudes about himself.
Fundamental of management for engineers & SM3201MS

CHALLENGES OF MANAGEMENT

In the present scenario it is difficult for the organizations to survive. The challenges and the
competition bring organizations more opportunities.

1. Economic Pressure: During difficult economic times, effective management is often at a

premium. Anybody can run a company when business is booming. The difference between a bad
management and a good management reflects the difference between making a lot of money and
making a lot more money. In tough times the difference between a good and a bad management can
be the difference between profit or loss or ultimately between survival and failure.

2. Globalization: Globalization refers to the free movement of goods, services and people across
the world. Today we are living in a global village. We are now not just national citizens but we
have become a global citizen. Globalization in its literal sense is the process or transformation of
local or regional phenomena into global ones. Globalization is often used to refer to economic
globalization, that is, integration of national economies into the international economy through
trade, foreign direct investment, capital flows, migration, and the spread of technology.

Globalization makes it possible for companies to find economies with cheaper costs and buy
component parts at a reduced price. Companies can benefit through outsourcing and off-shoring. It
also means firms would have a global reach thus increasing the potential customers.

3. Change: Businesses should embrace change. Change is important for any organization because,
without change, businesses would likely lose their competitive edge and fail to meet the needs of
what most hope to be a growing base of loyal customers. Today the organizations have to adapt
themselves to the changing business environment. If the organization continues with its old
business methods and do not adopt the new strategies then it is likely that the business might come
to an end. Change can be in view of technology, culture, growth opportunities etc.

4. Innovation: Innovation refers to the process of translating an idea into a good or service tha
creates value for which customer pay money. Innovation differs from invention in that innovation
refers to the use of a better and, as a result, novel idea or method, whereas invention refers more
directly to the creation of the idea or method itself. Organizations are finding
Fundamental of management for engineers & SM3201MS

innovative ways of making their existence in the world, be it the advertisement of their product,
their services, their social message etc.

5. Customer Service: Organizations can‘t exist without customers. Meeting the required needs and
demands of the customers has become a challenge for the organization. In the Internet era, a
challenge has been to maintain and/or enhance the personal experience while making use of the
efficiencies of online commerce. Many organizations are trying to target their customers through
web portals and allowing them a convenient approach to their services at their homes only.

6. Employee Satisfaction: Employee satisfaction is a measure of how happy workers are with their
job and working environment. Keeping morale high among workers can be of tremendous benefit
to any company, as happy workers will be more likely to produce more, take fewer days off, and
stay loyal to the company. Companies are trying new management techniques to keep their
employees satisfied in order to derive maximum productivity from them. Keeping employees
motivated, help improving their skills, providing assistance in case of crisis, are some of the
practices followed by the organizations.

7. Organization Ethics: Simply speaking, ethics means being good and doing good.
Organizational Ethics is the ethics of an organization, and it is how an organization ethically
responds to an internal or external stimulus. Behaving ethically in business is widely regarded as
good business practice.

8. Social Responsibility: Social responsibility includes accountability, transparency, ethical

behavior, respect to stakeholders interest, respect for human rights and respect to law. Social
responsibility is a duty of every individual or organization which has to perform so as to maintain a
balance between the economy and the ecosystem. Businesses can use decision making to secure
their businesses by making decisions that allow for government agencies to minimize their
involvement with the corporation.

9. Pressure from World Organizations: Many world organizations such as WTO, GATT, IMP,
World Bank etc. has a great influence on the working of the multinational organizations as well as
on national organizations. The organizations have to follow the rules, principles and various articles
laid down by these World organizations.
Fundamental of management for engineers & SM3201MS

EVOLUTION OF MANAGEMENT

The origin of management can be traced back to the days when man started living in groups.
History reveals that strong men organized the masses into groups according to their intelligence,
physical and mental capabilities. Evidence of the use of the well recognized principles of
management is to be found in the organization of public life in ancient Greece, the organization of
the Roman Catholic Church and the organization of military forces. Thus management in some
form or the other has been practiced in the various parts of the world since the dawn of civilization.
With the onset of Industrial Revolution, however, the position underwent a radical change. The
structure of industry became extremely complex. At this stage, the development of a formal theory
of management became absolutely necessary. It was against this background that the pioneers of
modern management thought laid the foundations of modern management theory and practice.

The classical development of management thoughts can be divided into- the scientific
management, the administration/organizational management, the behavioral management and the
quantitative management. The first two (scientific management school and organizational)
emerged in late 1800s and early 1900s were based on the management belief that people were
rational, economic creatures choose a course of action that provide the greatest economic gain.
These schools of management thoughts are explained as below:

1. The Scientific Management:

F.W.Taylor (1856-1915): Frederick Winslow Taylor well-known as the founder of scientific
management was the first to recognize and emphasis the need for adopting a scientific approach
to the task of managing an enterprise. He tried to diagnose the causes of lowefficiency in industry
and came to the conclusion that much of waste and inefficiency is due to the lack of order and
system in the methods of management. He therefore, suggested that those responsible for
management should adopt a scientific approach in their work, and make use of "scientific
method" for achieving higher efficiency. The scientific method consists essentially of (a)
Observation (b) Measurement (c) Experimentation and (d) Inference.
Fundamental of management for engineers & SM3201MS

Characteristics of Scientific Management

i. Science, not a rule of thumb
ii. Harmony between management and workers
iii. Monitor workers performance
iv. Wages are paid according to piece rate
Division of work

Elements of Scientific Management:

The techniques which Taylor regarded as its essential elements or features may be classified
as under:

1. Work Study: Work study may be defined as the systematic, objective and critical
examination of all the factors governing the operational efficiency of any specified activity
in order to effect improvement. Work study includes.

a) Methods Study: It is the systematic investigation of the existing method of doing a

job. The management should try to ensure that the plant is laid out in the best
manner and is equipped with the best tools and machinery. The possibilities of
eliminating or combining certain operations may be studied.
b) Motion Study: It is a study of the movement, of an operator (or even of a machine)
in performing an operation with the purpose of eliminating useless motions. It means
examining the necessary time to perform a job.
c) Time Study (work measurement): The basic purpose of time study is to determine
the proper time for performing the operation. Such study may be conducted after the
motion study. Both time study and motion study help in determining the best method
of doing a job and the standard time allowed for it.
d) Fatigue Study: If, a standard task is set without providing for measures to eliminate
fatigue, it may either be beyond the workers or the workers may over strain
themselves to attain it. It is necessary, therefore, to regulate the working hours and
provide for rest pauses at scientifically determined intervals.
e) Rate-setting: Taylor recommended the differential piece wage system, under
which workers performing the standard task within prescribed time are paid a much higher rate per unit
Fundamental of management for engineers & SM3201MS
than inefficient workers who are not able to come up to the standard set.

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

absenteeism.
e) The Gang Boss: To assemble and set up tools and machines and to teach the
workers to make all their personal motions in the quickest and best way.
f) The Speed Boss: To ensure that machines are run at their best speeds and proper
tools are used by the workers.
g) The Repair Boss: To ensure that each worker keeps his machine in good order
and maintains cleanliness around him and his machines.
h) The Inspector: To show to the worker how to do the work.

6. Mental Revolution: At present, industry is divided into two groups – management and
labour. The major problem between these two groups is the division of surplus. The
management wants the maximum possible share of the surplus as profit; the workers want,
as large share in the form of wages. Taylor has in mind the enormous gain that arises from
higher productivity. Such gains can be shared both by the management and workers in the
form of increased profits and increased wages.

Criticism on Scientific Management

a) Speeding up of workers: Scientific Management is only a device to speed up the

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

Advantages of Scientific Management

1. Scientific management improved working methods and brought enormous increase in

productivity.
2. Piece rate wage system was introduced and incentive systems were evolved.
3. It laid down foundation for work study and other related techniques.
4. Scientific selection and training of employees leads to better workforce which ensures
increase in efficiency.
5. Harmonious relationship between the workers and the management.
6. Opportunity for scientific training and development to increase skills knowledge and
competency.
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7. Application of scientific methods and techniques in better working conditions to reduce

fatigue.
8. Higher wages to the workers for higher productivity.

Disadvantages of Scientific Management

1. It is based upon one best way and is applicable for simple organizations than that for
today‘s dynamic and complex organization.
2. It focuses on individual performance than group efforts and divides the workers into
efficient and inefficient categories.
3. It is focused on specialization and repetition of jobs to increase the productivity which
reduces innovation and creativity and promotes monotony.
4. It neglects human factor because it motivates workers to work for monetary benefits
rather than human resource development and resources.
There is no scope for creativity of employees because they are developed by manager
which promotes frustration.

2. The Administrative Management:

Henry Fayol is generally regarded as the founder of administrative management and he
provided the bases for art of management. Fayol found that industrial activities could be
divided into six groups as shown in figure.
1. Technical (Production)
2. Commercial (buying, Selling and exchanging).
3. Financial (Search for, and optimum use of capital).
4. Security (Protection of property and persons).
5. Accounting (including Statistics).
6. Managerial (Planning, organization, command, contribution and control).
Henri Fayol pointed out that these activities exist in every size of business.
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Also, Fayol identified 14 principles of managemnet. They are:

Principles of Management (DAD U SEE USSR ?. O I SEE…)
1. Division of Work: According to this principle, work should be divided into small tasks and
each task is performed by a person who is specialist in that area. This will save the time and
energy needed to complete a task and also increase the speed, accuracy and efficiency of
work. According to Fayol, this principle is applicable to both technical and managerial
work.
2. Authority and Responsibility: Authority is the power or right to give orders. Fayol
proposed that for every authority there should be a corresponding responsibility. Then only,
a person can work effectively and get efficient results. In the same way, if a person is given
a responsibility without an adequate authority, he will not be effective in getting the
required results.
3. Discipline: A good discipline is required at all levels for he smooth functioning of an
organization. It includes respect of authority, obedience, proper conduct, fair clear rules and
regulations careful use of penalties. According to Fayol, a good supervision at all levels
helps to maintain discipline in an organization.
4. Unity of Command: Unity of Command employs that there should only one boss for an
employee i.e., an employee should be answerable to only one superior and receive orders
only from him. This helps to avoid confusion regarding what task is to be done, when it is to
be done how it is to be done.
5. Centralization: It means the extent to which authority should be concentrated in the hands
of top level management. It may be centralized or decentralized. There are limitations of
complete centralization & complete decentralization. Therefore, there should be proper
balance between this two.
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6. Unity of Direction: This principle says that there should be one head and one plan. All
similar activities should be grouped together, be supervised by one and have one plan of
action. The efforts of all the members of a group must be directed towards the achievement
of common goals.
7. Subordination: In an organization individual interest should not be given any importance.
The manager should always keep organizational interest before him & should determine
such policies which will be beneficial to entire group & not just few personnel. It is
responsibility to management to create common understanding between all. Individual
interest is subordinated to organizational interest.
8. Scalar Chain: Under this principle, Fayol emphasized on having a formal chain of
command and communication from the top level management to lower level. The chain
should be strictly followed by all managers and subordinators except in situations of
emergency. Such emergency is referred to by Fayol as Gang Plank. Under Gang Plank ,
Same level managers can talk to each other without following the regular chain of
sequences for any decision making in order to avoid any delay in communication . It shows
the straight line of authority from highest level to lower level for communication.
9. Remuneration: According to this principle, employees should be fairly compensated for
their efforts in achieving organizational objectives. The remuneration should be just and
equitable for both the employees and employer, it should be determined based on the work
allocated, cost of living, market wage rate for similar work and financial position of an
organisation.
10. Order: This principle stresses on the orderliness of everything and everyone. This means
that every one working in an organization should be allocated a particular place of work and
he should be at that place during working hours. It means keeping the right man or right
thing at the right time in the right place.
11. Initiative: Fayol suggested that employees should be allowed to take initiative in work
related matters without being undisciplined.
12. Stability of Tenure of Personnel: Retaining productive employees should always be a high
priority of management. This indicates avoiding frequent transfers of the employees much
before they settle in their jobs.
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13. Equity: According to this principle, everyone in an organization should be equal in the eyes
of management. The managers should neither favour any subordinate nor neglect them; they
should give them a fair treatment without discriminating on the basis of gender, religion,
nationality and language. This will make employees more devoted to work.
14. Esprit De Corps (Unity is strength): This is a French term. It means manager is like a
captain of a team who is responsible to maintain high moral in all workers. It may be
possible by effective communication among all persons in organization. His understanding
& differences in opinions should not be harmful. The best way of taking such situation is to
establish dialogue between parties. Participation of workers in the process of decision
making is important. The principle states that an organization must make every effort to
maintain group cohesion in the organization. This principle emphasizes on team work.
Unity of staff is the foundation of success.

3. Behavioral Approach
Elton Mayo’s Human Relations Approach: Scientific management theory focused on
physical resources rather than human resources. This theory concentrated on economic needs
of workers but not social needs because it concentrated on improvement of the working
methods but not on the working men. The human relations approach is often called the
behavioral management theory. The criticism of the Scientific and Administrative
Management as advocated by Taylor and Fayol, respectively, gave birth to Human Relation
Approach. The behavioural scientists criticized the early management approaches for their
insensitiveness to the human side of organization. The behavioural scientists did not view the
employees mechanically in work situation, but tried to show that the employees not only have
economic needs but also social and psychological needs like need for recognition,
achievement, social contact, freedom, and respect. Human relations school regards business
organization as a psycho-social system.
Professor George Elton Mayo (1880-1949) and his associates conducted a famous study on
human behaviour at the Hawthorne plant of the Western Electric Company from 1924 to 1932
and this study formed the foundation of this school of management thoughts.
Hawthorne Experiments:
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1. Lighting Experiments
These experiments were performed to find out the effect of different levels of lighting on
productivity of labour. The brightness of the light was increased and decreased to find out the
effect on the productivity of the test group. Surprisingly, the productivity increased even
when the level of lighting was decreased. It was concluded that factors other than light were
also important.
2. Relay Assembly Test Room Study
Under this test, two small groups of six female telephone relay assemblers were selected.
Each group was kept in separate rooms. From time to time, changes were made in working
hours, rest periods, lunch breaks, etc. They were allowed to choose their own rest periods and
to give suggestions. Output increased in both the control rooms. It was concluded that social
relationship among workers, participation in decision-making, etc. had a greater effect on
productivity than working conditions.
3. Mass Interviewing Programme
21,000 employees were interviewed over a period of three years to find out reasons for
increased productivity. It was concluded that productivity can be increased if workers are
allowed to talk freely about matters that are important to them.

The basic hypotheses of this study as well as the basic propositions of the Human Relation
Approach are the following:

1. The social and psychological factors are responsible for workers' productivity and job
satisfaction. Only good physical working conditions are not enough to increase productivity.
2. The informal relations among workers influence the workers' behaviour and performance
more than the formal relations in the organisation.
3. Employees will perform better if they are allowed to participate in decision-making affecting
their interests.
4. Employees will also work more efficiently, when they believe that the management is
interested in their welfare.
5. When employees are treated with respect and dignity, their performance will improve.
6. Financial incentives alone cannot increase the performance. Social and Psychological needs
must also be satisfied in order to increase productivity.
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7. Good communication between the superiors and subordinates can improve the relations and
the productivity of the subordinates.
8. Special attention and freedom to express their views will improve the performance of the
workers.

The human relations approach is concerned with recognition of the importance of human
element in organizations. It revealed the importance of social and psychological factors in
determining worker‘s productivity and satisfaction. It is instrumental in creating a new image
of man and the work place. However, this approach also did not go without criticism. It was
criticized that the approach laid heavy emphasis on the human side as against the
organizational needs. However, the contribution of this approach lies in the fact that it advises
managers to attach importance to the human side of an organization.

Criticisms on Human Relations Approach

1. Lacks Validity : The Hawthorne experiments were conducted under controlled situations. These
findings will not work in real setting. The workers under observation knew about the
experiments. Therefore, they may have improved their performance only for the experiments.
2. More Importance to Human Aspects : This approach gives too much importance to human
aspects. Human aspects alone cannot improve production. Production also depends on
technological and other factors.
3. More Emphasis on Group Decision-making : This approach places too much emphasis on
group decision-making. In real situation, individual decision-making cannot be totally neglected
especially when quick decisions are required and there is no time to consult others.
4. Over Importance to Freedom of Workers : This approach gives a lot of importance to
freedom of the workers. It does not give importance to the constructive role of the supervisors.
In reality too much of freedom to the workers can lower down their performance or productivity.

Maslow’s Need Hierarchy Approach:- Abraham. H. Maslow developed a need hierarchy to

explain human bevaviour within an organization. According to his writings, the humans work
attitude depends on their needs. His theory states that the human beings work according to their
needs. One may work for food, while other for status. Thus a good manager will extract the work
form his subordinate by providing and fulfilling the suitable need.
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McGregor’s Theory X and Theory Y:- McGregor classified the people into two categories as
Theory-X type (work avoiders) and Theory –Y type (work acceptors). The essence of management
according to his theory is that the leader should identify the type of behavior of his subordinate and
accordingly. A manager has to use a carrot approach (pat the employees) for theory Y people while
a stick (punish the employees) for theory X people.

4. The Quantitative Approach:

The quantitative approach to management, sometimes known as operations research or

management science, uses quantitative techniques to improve decision making. This approach
includes applications of statistics, optimization models, information models, and computer
simulations. The quantitative approach originated during World War II as mathematical and
statistical solutions to military problems were developed for wartime use. The relevance of
quantitative approach today is that it has contributed most directly to managerial decision making,
particularly in planning and controlling. The availability of sophisticated computer software
programs has made the use of quantitative techniques more feasible for managers. Techniques
such as linear programming, simulation, queuing theory, network analysis, etc. are extensively
use mathematical symbols, relationships and models in analyzing the management problems such
as cost minimization, profit maximization, resource optimization, etc. This approach focuses
attention on the fundamentals of analysis and decision making. The Quantitative School
quantifies the problem; generate solution, tests the solution for their optimality and then it
recommends. The decisions are optimum and perfect as distinguished from the human behavioral
approach, in which decisions are ‗satisfying‘. This approach is devoid of any personal bias,
emotions, sentiments, and intuitiveness. The main postulates of the quantitative approach are as
follows:

a) Management is a series of decision making. The job of a manager is to secure the best
solution out of a series of interrelated variables.
b) These variables can be presented in the form of a mathematical model. It consists of aset
of functional equation which set out the quantitative interrelationship of thevariable.
c) If the model is properly formulated and the equations are correctly solved, one can
secure the best solution to the model.
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d) Organizations exist for the achievement of specific and measurable economic goals.
e) In order to achieve these goals, optimal decisions must be made through scientific
formal reasoning backed by quantification.
f) Decision making models should be evaluated in the light of set criteria like cost
reduction, return on investment, meeting time schedules etc.
g) The quality of management is judged by the quality of decisions made in diverse
situations.

As Harold Koontz observed, mathematics is just a tool and it cannot be viewed as schoolor
a separate approach to management theory.

4. The Systems Approach: A system is a set of interrelated but separate parts working towards
a common purpose. In the 1960s, a new approach to management appeared which attempted
to unify the earlier school of thoughts. This approach is commonly referred to as
‗System Approach‘. This system is one of the modern approaches to understand management.
The system approach is based on the generalization that an organization is a system and its
components (departments) are inter-related and inter-dependent. ―A system is composed of
related and dependent elements (departments) which, when in interactions, form a unitary
whole. On other words, a system may be defined as an organized and purposeful entity of
inter-related, inter-dependent and inter-acting elements. Our human body is system. In human
body, each part of the body is viewed as a sub-system. These sub-systems are functionally
related to each other and to the total system.
The managers must intertwine their department with the total organization and communicate
with all other departments, employees and with each other.

The features of Systems Approach

a. An organization is a system consisting of several subsystems. For example, in a
business enterprise production, sales and other departments are the subsystem.
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b. A system consists of interacting elements. It is set of inter-related and inter-dependent

parts arranged in a manner that produces a unified whole.
c. The various sub-systems should be studied in their inter-relationships rather, than in
isolation from each other.
d. An organizational system has a boundary that determines which parts are internal and
which are external.
e. A system does not exist in a vacuum. It receives information, material and energy from
other systems as inputs. These inputs undergo a transformation process within a system
and leave the system as output to other systems.
f. An organization is a dynamic system as it is responsive to its environment. It is
vulnerable to change in its environment.

Systems can be open or closed. A closed system is not affected by its environment. For
example, a chuck of iron ore is not substantially affected by its environment. An open system
is a system that is affected by its environment. A simple example is a living organism, such as
an animal. Most theorists treat an organization as an open system.

The open system consisting of four basic elements

1. Inputs: These are ingredients required to initiate the transformation process. They
include human, financial, material and information resources.
2. Transformation Process: The inputs are put through a transformation process that
applies technology, operating methodologies, administrative practices and control
techniques in order to produce the output.
3. Outputs: The output may be products and/or services, the sale of which creates profits
or losses. This process also has by-product outputs such as worker behaviour,
information, environmental pollution, community services and so on.
4. Feedback: A feedback loop is used to return the resultant environmental (public or
customers) feedback to the system as inputs. A negative feedback loop indicates a
problem that should be corrected. For example, the failure of product design indicated by
the need to recall the product. A positive feedback loop can identify outputs that have
worked well. For example, a successful marketing campaign that yields high sales.
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If the environment is satisfied with the output, business operations continue. If it is not,
changes are initiated within the business systems so that requirements of the customers are
fully met. This is how an open system responds to the forces of change in the environment.

5. The Contingency or Situational Approach:

Another important approach which has arisen because of the inadequacy of the Quantitative,
Behavioural and System Approach to management is the Contingency Approach. Pigors and
Myers propagated this approach in 1950. Other contributors include Joan Woodward, Tom
Burns, G.W.Stalker, Paul Lawrence, Jay Lorsch and James Thompson. They analyzed the
relationship between organization and environment. They concluded that managers must keep
the functioning of an organization in harmony with the needs of its members and the external
forces. Management is situational and lies in identifying the important variables in a situation.
The basic theme of contingency approach is that organizations have to cope with different
situations in different ways. Organizations behave as situation demands. In other words,
decision making is contingent on situations. As situation changes, the solutions also differ.
Management problems vary with situation and require to be handled differently as situation
demands. No two situations are absolutely identical. Therefore, each situation requires its own
unique situation. For example, you may have chosen to construct building in a certain way
with certain strategies, but that same approach may not work for different buildings because
they require a completely different approach. The functioning of managers is not a manager‘s
choice. It is contingent on external or internal environment or both. There cannot be particular
management action which will be suitable for all situations. The management must keep the
functioning of an organization in harmony with the needs of its members and the external
forces.
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According to Kast and Rosenzweig, ―The contingency view seeks to understand the
interrelationships within and among sub-system as well as between the organization and its
environment and to define patterns of relationships or configurations of variables.
Contingency views are ultimately directed towards suggesting organizational designs and
managerial actions most appropriate for specific situations‖. The approach has been used in
important sub systems of management like organization, design, leadership, behaviour change
and operation.

Features of contingency approach

a) Management is entirely situational. The application and effectiveness of any techniques

is contingent on the situation.
b) Management action is contingent on certain action outside the system or subsystem as
the case may be.
c) Management should, therefore, match or fit its approach to the requirements of the
particular situation. To be effective management policies and practices must respond to
environmental changes.
d) Organizational action should be based on the behaviour of action outside the system so
that organization should be integrated with the environment.
e) Management should understand that there is no one hard way to manage. They must not
consider management principles and techniques universal.

In order to operationalise the contingency approach, managers need to know the alternatives for
different situations. It may be operationalized as a ‗if then‘ approach to management. The
environment (If) is an independent variable where as management (when) is a dependent
variable. In this model, a manager has to take four sequential steps:

a) Analyze and understand the situation,

b) Examine the applicability or validity of different principles and techniques to the
situation at hand,
c) Make the right choice by matching the techniques to the situations,
d) Implement the choice.
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6. The IT Management Approach:

IT managers focuses on the information technology resources in accordance with its needs and
priorities. The resources include tangible investments like computer hardware, or intangible
software, data, networks and data centre facilities, as well as the staff hired to maintain them.

Moreover, the IT manager use the important terminology, facts, concepts, principles, analytic
techniques, and theories to apply when analyzing complex actual situations and integrates when
developing solutions to IT management multifaceted problems of these complex situations.

Of course, the basic management functions, like budgeting, staffing, change management,
organizing and controlling are inherently embedded in this style of management, but the beauty of
this style is that the management uses software design, network, planning, tech support, etc. that
requires little manpower.

Examples:

➢ Business/IT alignment: The businesses maintain the data base of their customers to alert
them as and when a service is required for them.
➢ E-Governance: The government can perform registrations and issue certificates. The
services ofgovernment to the people can be made available at their doorsteps.
➢ IT financial management and service management: The tax management, complaint
resolutions, property dealings, financial services, banking activities are some examples.
➢ Sourcing and IT enabled services: Transport services, insurance services, health services
can bemanaged easily by coupling the source and destination points with IT enabled services.

Features of IT Management Approach

1. To generate value to the through technology.

2. To generate value, business strategies and technology are aligned.
3. The organizational relationship between internal and external environments is networked
throughtechnology to improving the overall value chain of an organization.
4. The technology providers build product-centric infrastructure and management offerings
with converged infrastructure environments.
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INTRODUCTION TO PLANNING

Planning is the most fundamental function of management. An organization can succeed in

effective utilization of its human, financial and material resources. Planning involves determination
of objectives of the business, formation of programs and courses of action for their attainment,
development of schedules and timings of action and assignment of responsibilities for their
implementation. Planning thus precedes all efforts and action, as it is the plans and programs that
determine the kind of decisions and activities required for the attainment of the desired goals. In the
absence of planning, it will be impossible to decide what activities are required, how they should be
combined into jobs and departments, who will be responsible for what kind of decisions and
actions, and how various decisions and activities are to be coordinated.

Definition of Planning

Planning is the process of deciding in advance what is to be done, who is to do it, how it is to be
done and when it is to be done. It is the process of determining a course of action, so as to achieve
the desired results. It helps to bridge the gap from where we are, to where we want to go. It makes it
possible for things to occur which would not otherwise happen. Planning is a higher order mental
process requiring the use of intellectual faculties, imagination, foresight and sound judgment.

According to Koontz O‟Donnell - "Planning is an intellectual process, the conscious determination

of courses of action, the basing of decisions on purpose, acts and considered estimates".

Planning Elements

1. What will be done – what are the objectives of business in the short and in the long run?
2. What resources will be required – This involves estimation of the available and potential
resources, estimation of resources required for the achievement of objectives, and filling the gap
between the two, if any.
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3. How it will be done – This involves two things : (i) determination of tasks, activities, projects,
programs, etc., required for the attainment of objectives, and (ii) formulation of strategies,
policies, procedures, methods, standard and budgets for the above purpose.
4. Who will do it – It involves assignment of responsibilities to various managers relating to
contributions they are expected to make for the attainment of enterprise objectives. This is
preceded by the breaking down of the total enterprise objectives into segmental objectives,
resulting into divisional, departmental, sectional and individual objectives.
5. When it will be done – It involves determination of the timing and sequence, if any, for the
performance of various activities and execution of various projects and their parts.

NATURE/CHARACTERISTICS OF PLANNING

1. Goal oriented: Planning centers around the corporate mission and goals. So planning is said to
be goal oriented. It contributes positively to achievement of mission and goals. It identifies the
measures to be taken to achieve the targeted results efficiently and economically.

2. Intellectual process: Not everybody can be good at planning. Planning is not guessing. One
should be capable of thinking in a systematic manner. It is so because planning demands
intellectual skills such as vision, farsighted outlook, imagination and analytical skills to take
rational decisions.

3. Involves choice: There are alternatives available to achieve a particular target. The manager has
to select the best alternative based on the merits and demerits of each alternative.

4. Basis for other functions: Since planning is first function of the manager, the results of
planning form the basis for all other managerial functions.

5. Pervasive in nature: Planning is essential for all organizations – small or big, domestic or
foreign, profit-making or non-profit making oriented. Managers at the top, middle an d lower
levels in any organization have to systematically plan for the future. Thus, planning is said to be
all pervasive.

6. Continuous and dynamic: Business environment is complex and keeps changing.

Consequently, plans also need to be dynamic. They have to be worked out for a given
Fundamental of management for engineers &SM504MS

timeframe at the end of which they must be reviewed and new plans prepared for the nextyear.
Thus, planning is a continuous process.

7. Flexible in nature: Plans should not be rigid. They should be flexible in nature and
accommodate a change in circumstances.

8. Intends to enhance efficiency: the aim of planning is to achieve the maximum targets at
minimum cost and quickly. So all plans should be cost effective and worth their investments.
The benefits from a plan should be more than its costs.

IMPORTANCE OF PLANNING

1. Helps to achieve targets: Plans are expressed in terms of budgets. Budgets act as targets. Every
manager strives hard to achieve a given target. Thus, planning contributes to target
achievement.

2. Minimizes uncertainty and risk: Business environment is uncertain and risky. Planning is the
only way to move towards certainty and confidence.

3. Guide for action: Plans direct people towards achieving goals. As part of planning,
organizations keep a list of supporting plans, policies, procedures, programs, strategies, rules
and budgets to guide their people towards the goals.

4. Ensures order: Organizations walk into chaos if they don‟t plan properly. The only way to
ensure order is to think of probable problems in advance and create the necessary infrastructure
to sort them out.

5. Improves efficiency: Efficiency means doing things correctly and at minimum cost. Every
department has a budget. It means all possible activities have been considered while framing the
budget. Clear plans leave only one task for mangers – their implementation. Planning is bound
to improve efficiency.

6. Facilitate control: Plan is a means of control. The actual performance of the organization and
also its members can be evaluated based on plans.
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7. Promotes innovation and creativity: Progressive organizations involve their staff in

organizational planning. Planning is considered a means to promote innovation and creativity
among the staff.

8. Coordination made easy: Plans indicate what the employees have to do to attain their goals.
Plans make it easier for mangers to coordinate the efforts of their staff.

GENERAL FRAMEWORK FOR PLANNING

1. Define present situation: Define the present situation (includes examining internal capabilities
and external threats and opportunities).

2. Establish goals and objectives: Establish goals that can continue to focus on what the business
can do best

3. Analyze environment: Analyze the environment in terms of aids and barriers to goals and
objectives: Predict which internal and external factors will foster or hinder attainment of desired
goals

4. Develop action plans: Develop action plans for reaching goals and objectives (without action
plans, goals may not be attained).Develop budgets (most action plans require money, so realistic
budgets have to be developed).Implement the plans (plans are often developed then forgotten).

5. Develop budgets: Among the expenses would be larger advertising and promotion budgets

6. Implement the plans: If the plans developed in the previous five steps are to benefit the firm,
they must be put to use.

7. Control the plans: Control the plans (evaluate progress and make any necessary adjustments for
lack of progress).Make contingency plans (develop an alternative in case the original plan cannot be
implemented successfully or at all; an exit strategy might be part of the contingency plan).
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Fig: General Frame Work for Planning

PLANNING PROCESS

The following eight main steps are involved in the planning process of an organization.

1. Identifying Opportunities: Real planning starts with knowing the availability of different
opportunities. For each opportunity, assess carefully the size of markets, type of markets, type of
customers, degree of competition, needs of customers, finances required and the strengths and
weaknesses of the firm. Then, identify the right opportunity.

2. Defining goals: Once the opportunity is identified, define the goals you want to achieve for the
entire organization. Goals, in turn, will throw light on what objectives, strategies, policies,
procedures, rules, budgets and programs you should follow. This is to be done for the long term as
well as for the short range. Goals specify the expected results and indicate the end points of what is
to be done, where the primary emphasis is to be placed and what is to be accomplished by the
various types of plans.

3. Considering Planning Premises: After determination of organizational goals, the next step is
establishing planning premises that is the conditions under which planning activities will be
undertaken. Planning premises refers to the assumptions about the environment in which plans have
to be carried out. Correct assumptions about markets, completion, product technology, prices,
volume of sales, costs, tax rates etc. are essential for business planning. Government policies,
annual budgets, economic indicators, survey of specific industries etc. provide valuable insights on
the basis of which „premises‟ can be worked out.
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Thus planning premises are external and internal. External premises include total factors in task
environment like political, social, technological, competitors, plans and actions, government
policies. Internal premises include organization‟s policies, resources of various types, and the
ability of the organization to withstand the environmental pressure. The plans are formulated in the
light of both external and internal factors.

4. Identifying Alternatives: The fourth step in planning is to identify the alternatives. Various
alternatives can be identified based on the organizational goals and planning premises. The concept
of various alternatives suggests that a particular goals can be achieved through various actions.

For example, if an organization has set its goals to grow further, it can be achieved in several ways
like expanding in the same Field of business or product line diversifying in other areas, joining
hands with other organizations, or taking over another organization and so on. Within each
category, there may be several alternatives.

5. Evaluating Alternatives: The various alternative courses of action should be analyzed in the
light of premises and goals. There are various techniques available to evaluate alternatives. The
evaluation is to be done in the light of various factors. Example, cash inflow and outflow, risks,
limited resources, expected pay back etc., the alternatives should give us the best chance of meeting
our goals at the lowest cost and highest profit.

6. Choosing the Best Alternative: The best alternative is chosen on the given situation. Normally,
it involves optimum utilization of resources. At times, an analysis and evaluation of alternative
courses will disclose that two or more alternatives are advisable and beneficial. The fit one is
selected.

7. Formulating Supporting Plans: After formulating the basic plan, various plan are derived so as
to support the main plan. In an organization there can be various derivative plans like planning for
buying equipment, buying raw materials, recruiting and training personnel, developing new product
etc. These derivative plans are formulated out of the basic or main plan and almost invariably
required to support the basic plan.
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8. Making Budgets: After formulating basic and derivative plans, the sequence of activities is
determined so those plans are put into action. After decisions are made and plans are set, budgets for
various periods and divisions can be prepared to give plans more concrete meaning for
implementation.

Budget is “numerical expression” of a plan. The overall budgets of an enterprise represent the sum
total of income and expenses, with resultant profit or surplus, and budgets of major balance sheet
items such as cash and capital expenditures. Each department or program of a business or other
enterprise can have its own budgets, usually of expenses and capital expenditures, which tie into
the overall budget.

MANAGEMENT BY OBJECTIVES (MBO)

The term Management By Objectives (MBO) has been popularized by Peter Drucker in his 1954
book “The Practice of Management” and George S. Odiorne gave depth to the meaning and usage
of MBO through his book “Management By Objectives: A System of Managerial Leadership”. It
is the process of defining objectives within an organization so that management and employees
agree collectively to the objectives and understand what they need to do in the organization. It
suggests that objectives should not be imposed on subordinates but should be decided collectively
by a concerned with the management. This provides not only supports but eases and quickness the
achievement of such objectives.

It concentrates on the achievement of objectives through participation of all concerned through

team spirit and trust on one another. This not only supports but also eases and speeds up reaching
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the goals. Thus, MBO has become the most widely accepted philosophy of management today due
to its demanding and rewarding style.

The principle behind Management by Objectives (MBO) is to make sure that everybody within the
organization has a clear understanding of the aims, or objectives of that organization, as well as
awareness of their own roles and responsibilities in achieving those aims.

Definition of MBO

George S. Odiorne defines “MBO is a process whereby superior and subordinate managers of an
organization jointly define its common goals, define each individual‟s major areas of responsibility
in terms of results expected of him and use these measures as guides for operating the unit and
assessing the contribution of each of its members”.

Features of MBO

1. Management by Objectives is a philosophy or a system, and not merely technique.

2. It emphasizes participative goal setting.
3. It clearly defines each individual responsibility in terms of results.
4. It focuses attention on what must be accomplished goals rather than on how it is to be
accomplished.
5. It converts objective needs into personal goals at every level in the organization.
6. It establishes standards or yardsticks (goals) as operation guides and also as basisof
performance evaluation.
7. It is a system intentionally directed toward effective and efficient attainment of organizational
and personal goals.

The Six Steps in MBO Process

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1. Define Organizational Goals: Goals are critical issues to organizational effectiveness, and they
serve a number of purposes. Organizations can also have several different kinds of goals, all of
which must be appropriately managed.

And a number of different kinds of managers must be involved in setting goals. The goals set by the
superiors are preliminary, based on an analysis and judgment as to what can and what should be
accomplished by the organization within a certain period.

2. Define Employees Objectives: After determining the organizational goals, the next thing to do
is to know the individual‟s goals or more clearly employees‟ goals. It is the responsibility of the
manager to ask employees about what goals they can accomplish within a specific timeperiod
and what resources will they use to achieve the goal. Get specific and clear about what you wan to
achieve (I want to be a rich), make your goal measureable-quantify what you want (I want to have
Rs. 10 lakh), Make your goal achievable within your resources (I work hard as hell), make your
goal relevant-is it worthwhile (I want to keep her happy), your goal needs to be timed-set a start and
finish date (One year time)> Also, if needed, then managers and employees can classify the goals
from the most important to the least one in order to make the goal achieving process more
easily and in favor of the organization.
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3. Continuous Monitoring Performance and Progress: The process of MBO is not just set for
providing additional effectiveness to managers across the organization, but it is also equally
important for constantly monitoring the progress and performance of the employees. There are
certain things stated below that can help managers to monitor performance and progress.

• Checking less-effective or ineffective programs by performing a comparison of

performance with already prepared objectives.
• Using ZBB (Zero Based Budgeting)
• Defining short and long term plans and objectives
• Installing efficient and effective controls
• Eventually, composing completely sound structure of the organization with all things at
appropriate places such as responsibilities, decision making and so on.

4. Performance Evaluation: MBO is designed to improve performance at all levels of the

organization. To ensure this happens, you need to put a comprehensive evaluation system in place.
As goals have been defined in a specific, measurable and time-based way, the evaluation aspect of
MBO is relatively straightforward. Employees are evaluated on their performance with respect to
goal achievement (allowing appropriately for changes in the environment.)

5. Providing Feedback: The psychologically influential factor of MBO is constantly providing

feedback to employees regarding their performance and individual goals, so that they can monitor,
correct and extra improve their skills and mistakes. Mostly, the feedback is provided in periodic
meetings where supervisors and their subordinates review the performance and progress towards
achievement of goals. At one point, feedback helps individuals know their weakness. While on the
other hand, it also motivates already potential individuals to enhance and develop their performance
additionally. This continuous feedback is supplemented by periodic formal appraisal meetings
which superiors and subordinates can review progress toward goals, which lead to further feedback.

6. Performance Appraisal: In this step, the worth of employee is examined and judged.
Performance appraisals are a regular review of employee performance within organizations. When
you reward goal achievers you send a clear message to everyone that goal attainment is valued and
that the MBO process is not just an exercise but an essential aspect of performance
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appraisal. The importance of fair and accurate assessment of performance highlights why setting
measurable goals and clear performance indicators are essential to the MBO system.

Merits/Benefits of MBO

1. Goals set up the motivation levels: If achievable, albeit higher, goals are set in
consultation with the subordinates and keeping to mind their strengths and weaknesses,
employees get highly motivated to put in their best.

2. Result oriented management: The management focuses the attention of mangers on the
results to be achieved rather than on activities.

3. Clarity in organizational structures: Everyone in an organization knows the purpose and

mission of the company and is aware of its objectives. This helps managers to perform
better with greater commitment and accountability.

4. Superior subordinates relationships are reinforced: Since mangers at different levels are
consulted and senior mangers counsel the juniors, there is greater understanding between
them. Communication gaps are eliminated and subordinates develop a sense of involvement
which enhances their productivity.

5. Monitoring is made easy: It facilitates self evaluation and feedback which improves the
efficiency of mangers. There is less need for monitoring from above.

6. Improved planning: managers at all levels are compelled to think ahead. Interaction among
managers results in better ideas and , consequently there will be improved planning and
control.

7. More objective appraisal: The element of subjectivity can be minimized. There is no

scope for personal bias, feeling, sentiments and emotions.

8. Self check: MBO is a tool for self control and self direction that helps mangers to turn into
professionals. There is no need for any advice or memo to an employee from the top
management on whether or not he has completed his targets. He can push himself in areas he
lags behind by figuring out the possible correcting measures.
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9. Review of objectives: Business environment is very dynamic. There may be changes in it

which may call for review and resetting of objectives, if necessary.

Demerits/Limitations of MBO

1. Inadequate commitment from top management: MBO could not take off in many
organizations for want of a clear cut policy from the top management. MBO requires a great
deal of appreciation and commitment on the part of mangers who implement it. They should
explain to their subordinates about its operational details and utility. Otherwise, they cannot
win them over and that is vital for the successful implementation of MBO.

2. Goal setters are not given any orientation: Goal setting is the primary task in MBO. Goal
setter should be given a total orientation about corporate goals, planning premises, broad
policies of the company and how these, in turn, are likely to affect their own objectives. Any
failure to give such guidelines may limit the utility of MBO.

3. Setting goals is complex process: Setting realistic and achievable goals for subordinates is
not an easy task. If the objectives are not reasonable, behavioural implications are not
clearly stated, and ethical bevariour is not given high priority, people will use unethical
means to achieve goals.

4. Emphasis on short-term goals: MBO centers the accomplishment of mutual set objectives
which are more short-term in nature. In a majority of the cases, short-term goals are not well
integrated into long-term objectives and consequently, undue emphasis on short-term goals
marginalizes the long-term goals.

5. Inflexibility: Objectives for every manger or subordinate are set after much interaction,
debate, discussion and understanding of individual aspirations. Managers tend to hesitate in
changing the objectives worked out in such a detailed effort even when there is a change in
corporate goals and planning premises.

6. Problems of status and authority: MBO focuses on personal interaction among mangers.
In reality, organizations are characterized more by people conscious of their
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authority and status. They seldom like to interact freely with their subordinates, leave
alone assessing the latter‟s strengths and weaknesses.

7. Lower levels are deprived of freedom and interaction: If MBO philosophy does not
spread right down, it will not be successful. But mangers at lower level have little freedom
to react to even organizational goals, to speak nothing of the freedom to set their own
objectives. In such an environment, setting of objectives jointly is merely a dream.

8. Limited time horizon: MBO may be useful in a limited time horizon. In reality, business
environment is not so stable that objectives once set will hold good till they are achieved.
Objective get revised frequently in view of hostile and volatile environment.

TYPES OF PLANS

Plans commit individuals, departments, organizations, and the resources of each to specific actions
for the future. Effectively designed organizational goals fit into a hierarchy so that the achievement
of goals at low levels permits the attainment of high‐level goals.

Three major types of plans can help managers achieve their organization's goals: strategic, tactical,
and operational. Operational plans lead to the achievement of tactical plans, which in turn lead to
the attainment of strategic plans. In addition to these three types of plans, managers should also
develop a contingency plan in case their original plans fail.

1. Operational plan: Operational plan covers the day-to-day operations of business such as
facilities, inventory management, production plan, supply and distribution etc. An operational plan
is like a map that can help to navigate your business towards specific goals. Operational plan is one
that a manager uses to accomplish his or her job responsibilities. Supervisors, team leaders develop
operational plans to support tactical plans. Operational plans can be a single‐use plan or an ongoing
plan.

a) Single‐use plans apply to activities that do not recur or repeat. A one‐time occurrence, such
as a special sales program, is a single‐use plan because it deals with the who, what, where,
how, and how much of an activity. A budget is also a single‐use plan because it
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predicts sources and amounts of income and how much they are used for a specific project.
b) Continuing or ongoing plans are usually made once and retain their value over a period of
years while undergoing periodic revisions and updates. The following are examples of
ongoing plans:
• Policies: Policies are statements of understanding that specify „what can be done or
what cannot be done‟ to achieve the given objectives. Policies guide the behavior or
thinking of people in an organization. They define the framework within which a
decision is to be made. Policies provide a broad guideline for managers to follow when
dealing with important areas of decision making. For example, address such matters as
employee hiring, terminations, performance appraisals, pay increases, and discipline.
• Procedures: Procedures outline in detail the method of carrying out a task. A
procedure is a set of step‐by‐step directions that explains how activities or tasks are to be
carried out in a given sequence. The employees are trained in organizational procedures.
The top management is concerned with the laying down of procedures and the middle
and the lower levels with their implementation.
Policies and programs are closely related to each other. A company may have a policy
of expansion by 10% every year. To attain this, it has to carefully develop procedures to
raise finances, manpower and production.
• Rules: A rule is an explicit statement that tells an employee what he or she can and
cannot do. Rules are “do” and “don't” statements put into place to promote the safety of
employees and the uniform treatment and behavior of employees. Observe these rules:
No credit, No smoking, Come in queue etc.
• Programs: These specify what is to be done. They reflect goals, policies, procedures
and rules to be followed, steps to be taken, resources to be employed and even minor
details necessary to execute a task. Every program is supported by budget. Programs
may be major or minor based on their purpose, scope and time duration.
• Budgets: When plans are expressed in numbers, they become budgets. A budget may be
expressed in financial terms or any other measurable form such as machine hours., labor
hours, or units of production. It can also be expressed in terms of enterprise
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activities such as sales budget, advertisement budget, purchases budget, cash budget etc.
A budget provides means of controlling the organization‟s performance. While making
budget is a part of planning, controlling employee performance is part of the controlling
function of manager. Budgets are prepared for a clearly defined period, say a week,
month or year.

2. Tactical plan: A tactical plan is concerned with what the lower level units within each division
must do, how they must do it, and who is in charge at each level. Tactics are the means needed to
activate a strategy and make it work. Tactical plans are concerned with shorter time frames and
narrower scopes than are strategic plans. These plans usually span one year or less because they are
considered short‐term goals. The tactics needed to achieve the goals defined ina strategic plan. For
example, if a company‟s strategic plan is to become a market leader, its tactical plan might be to
double the amount spent on advertisement and marketing. 8/Tactical planning involves:

➢ Products or services to be added or deleted.

➢ Size of capital investments required.
➢ Pricing the products and services to be provided.
➢ Withdrawing investments from projects. etc.

3. Strategic plan: Strategic planning includes plans made by the top management to pursue long
term goals with the resources with likely to be available. Strategic plan is an outline of steps
designed with the goals of the entire organization as a whole in mind, rather than with the goals of
specific divisions or departments. Strategic planning begins with an organization's mission.
Strategic plans look ahead over the next two, three, five, or even more years to move the
organization from where it currently is to where it wants to be. Top management's strategic plan for
the entire organization becomes the framework and sets dimensions for the lower level planning.
Strategic planning involves:

➢ Formulating a mission for the entire organization.

➢ Identifying the business that helps to meet a mission.
➢ Determination of financial requirements.
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➢ Allocating resources effectively. etc.

4. Contingency plan: Contingency planning involves identifying alternative courses of action that
can be implemented if and when the original plan proves inadequate because of changing
circumstances. Keep in mind that events beyond a manager's control may cause even the most
carefully prepared alternative future scenarios to go awry. Unexpected problems and events
frequently occur. When they do, managers may need to change their plans. Anticipating change
during the planning process is best in case things don't go as expected. Management can then
develop alternatives to the existing plan and ready them for use when and if circumstances make
these alternatives appropriate.

DEVELOPING A BUSINESS STRATEGY

The process of developing, formulating and implementing the strategy involves the following
stages:

1. Develop a vision statement: This statement should describe the future direction of the
business and its aims in the medium to long term. It‟s about describing the organization‟s purpose
for being and its values. Business gurus have debated long and hard about what comes first – the
vision, or the mission statement. But, in practice, you could develop both at the same time.

2. Develop a mission statement: Like the vision statement, this defines the organization‟s
purpose, but it also outlines its primary objectives. This focuses on what needs to be done in the
short term to realize the long term vision. So, for the vision statement, you may want to answer the
question: “Where do we want to be in 5 years?”. For the mission statement, you‟ll want to ask the
questions:

• What do we do?
• How do we do it?
• Whom do we do it for?
• What value do we bring?
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3. Goals: The first step in the development of any business strategy is the determination of the
goal, its desired endpoint. The goal sets the stage for the development of measures and specific
actions that the company takes to achieve these goals. So, for instance, the goal might be to
"increase market share" or to "improve customer satisfaction."

4. Objectives: Objectives are the measurable element of a strategy. Objectives indicate,

specifically, what outcomes are desired. While goals set a broad direction ("increase market share"),
objectives will provide the detail that ensures the team knows when it achieves success.

5. Situation Analysis: Once a goals and objectives are established and the planning team knows
what to do, information needs to be gathered so that the decisions are based on solid facts and data.
The situation analysis involves a review of information internal to the organization (about
employees, sales, customers) as well as external information (about competitors, the industry, the
economic climate).

6. SWOT Analysis: A SWOT analysis is a brainstorming process used by strategic planning teams
to identify the organization's strengths and weaknesses, which are internal environment; and
opportunities and threats, which are external environment. Based on the data gathered during the
situation analysis and by brainstorming and prioritizing these items, the team gets a better sense of
the most important areas to focus on.

7. Generate Strategy Alternatives: Generic strategy alternatives refer to identifying the

alternatives of strategies. After the nature of business is defined, the next task is to focus on the type
of strategy alternative, in general, the firm will pursue. Given the information from the
environmental scan, the firm should match its strengths to the opportunities that are identified, and
at the same time address its weaknesses and external threats.

8. Strategy Variations: The generic strategy alternatives can have a numerous variations every
strategy can have variations as internal or external, related or unrelated, horizontal or vertical and
active or passive. For example, if we choose expansion, it can be either internal or external
expansions. Internal expansions can be achieved through penetrating existing markets, adding new
products. External expansion can be achieved through mergers and acquisitions, developing
subcontracts, developing subsidiaries, etc.
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9. Strategic Choice: Once the strategy is formulated and variations are evaluated, then the next
step of strategist is to choose the exact strategy. Thus strategic choice involves the decision making
to select the best strategy among the alternatives which can effectively contribute to the business
objectives.

10. Allocation of Resources: The operating strategy of the firm is framed by the resource
allocation decisions (budgeting) – such as, „which department is to be sanctioned how much
money, materials, manpower and other resources‟.

11. Development of Organizational Structure: An appropriate organization structure can

demonstrate an effective co-operation and efficient division of labour. The best organization
structure is one that fits into the organizational environment. Suitable changes may be initiated in
the organization structure to ensure strategic implementation.

12. Formulation of Policies, Plans and Programs: The next step is to see that the resources are
well utilized and properly maintained as desired by the organization. This is possible only if there
is a perfect monitoring mechanism and correct basis for evaluation of effectiveness. This
monitoring mechanism can be built up by suitably formulating its policies, plans and programs.

13. Strategy Implementation: The selected strategy is implemented by means of programs,

budgets and procedures. Implementation involves organizing the resources and motivating the staff
to achieving objectives. The implementation of the strategy must be monitored an d adjusted made
as needed.

14. Strategy Evaluation and Control: Evaluation and control is the final phase of the strategic
management process and consists of these steps: 1) Define parameters to be measured, 2) Define
target values for those parameters, 3) Perform measurements, 4) Compare measured results to
the pre-determined standards and 5) Make necessary corrections.
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DECISION MAKING AND PROBLEM SOLVING

Decision making is one of the most important functions of the management process. In fact, it is the
manager‟s primary duty to take right decisions at right time. Decision making is defined as
„selecting a course of action from among alternatives. At every moment, the management process
needs a manager‟s decision.

Problem solving and decision-making are important skills for business and life. Problem-solving
often involves decision-making, and decision-making is especially important for management and
leadership. Problem solving is a process in which we perceive and resolve a gap between a present
situation and a desired goal, with the path to the goal blocked by known or unknown obstacles. In
general, the situation is one not previously encountered, or where at least a specific solution from
past experiences is not known. In contrast, decision making is a selection process where one of two
or more possible solutions is chosen to reach a desired goal. The steps in both problem solving and
decision making are quite similar. In fact, the terms are sometimes used interchangeably.

Most of the models of problem solving and decision making include at least four phases. 1) an Input
phase in which a problem is perceived and an attempt is made to understand the situation or
problem; 2) a Processing phase in which alternatives are generated and evaluated and a solution is
selected; 3) an Output phase which includes planning for and implementing the solution; and 4) a
Review phase in which the solution is evaluated and modifications are made, if necessary. Most
researchers describe the problem-solving/decision-making process as beginning with the perception
of a gap and ending with the implementation and evaluation of a solution to fill that gap. Each
phase of the process includes specific steps to be completed before moving to the next phase.

Steps in Decision Making and Problem Solving

1. Identification of the Problem: This is the first step of decision making and problem solving to
indentify the problem. A managerial problem may take birth at any level of the organization. But
most of the problems go unidentified till they grow big. If it is still neglected they ultimately
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flare up into emergency. A good manager predicts well in advance to the generation of the
problems and tries to prevent it as he believes that a stitch in time saves nine.

2. Gather Complete Information: In the second step, the manager collects the complete
information regarding the problem. The information should contain the answers to the following
questions:

➢ Where and when did it generate?.

➢ What are the causes and triggers?.
➢ What would be the effects?. Who are most affected?.
➢ Is it recurring problem or one time problem?.
➢ Who is responsible for this problem?.\
➢ Does it belong to programmed decision or non-programmed decision?.

3. Generate Alternative Courses of Action: Third step is concerned with the generation of a set
of alternative courses of action. Based on the relevant information, the manager has to indentify
alternative courses of action that lead to desirable solution. The manager may rely on his own
expertise, may talk to his staff or may even conduct a brains storming with experts. New alternatives
or options have to be generated through creative thinking.

4. Choose the Appropriate Alternative: The manager at this stage selects the best of the
alternatives. Here, the best decision generally infers effectiveness. The best decision means the one
that maximizes the factors such as sales, profits, or units produced. In some other cases, the
effective decision may be one that minimizes the factors as customer complaints, employee
turnover, or operating costs.

5. Implement the Course of Action: After choosing the appropriate alternative, appropriate action
plans must be established and implemented. Often implementation suffers resistance from the work
forces. So it is suggested that the merits of the decision have to be explained to at least some critical
or influencing persons if not all people involved.

5. Evaluate results: The decision making process is not complete until results are evaluated. This
evaluation is a form of managerial control. The feedback is very important aspect to
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determine if the decision is implemented in the desired manner. If the desired results are not
achieved, the process must be renewed to allow for corrective action.

PROGRAMMED AND NON-PROGRAMMED DECISIONS

Programmed Decisions:

Decisions related to structured situations (planned or organized situations), where the problem is
more or less routine and repetitive in nature are known as programmed decisions. Programmed
decisions are those that a manager has encountered and made in the past. The decision the manager
made was correct because he/she used the assistance of company policies, computations or a set of
decision-making guidelines. For example, problems related to leave are solved by policy relating to
leave rules. Employees who take leave according to leave rules are granted leave and those who do
not follow the leave rules may not be granted leave. The routine problems may not always be
simple.

There may be complex routine problems. For example, production department follows a routine
that managers order for inventory when it reaches the re-order point. If there is sudden increase in
demand for the product, managers cannot wait for inventory to reach the re-order point to make
fresh orders. Orders are placed before this level is reached. Ordering inventory is, thus, a problem
of routine nature but ordering inventory before the re-order point is a routine but complex problem.

In either situation, managers depend on pre-established criteria for taking decisions. Various
policies, schedules and procedures guide these decisions and, therefore, policies and procedures
should be as clear as possible. Since decisions are based on pre-defined standards, they do not
require much of brainstorming and are taken normally by middle and lower-level managers.
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Managers do not think of innovative ways to solve the routine problems. Therefore, they can
concentrate on important and crucial activities. These decisions also involve some amount of
certainty, i.e., outcomes of these decisions are, by and large, known.

Various types of programmed decisions are:

(1) Organizational decisions

(2) Operational decisions

(3) Research decisions, and

(4) Opportunity decisions.

Non-Programmed Decisions:

These decisions are taken in unstructured situations (unplanned or unorganized situations) and these
decisions are new and different from situation to situation. The problems are non-recurring or
exceptional in nature. Since they have not occurred before, they require extensive brainstorming.
Managers use skills and subjective judgment to solve the problems through scientific analysis and
logical reasoning. Non-programmed decisions are unique.

Subjective judgment is based on assessment of the situation. In objective judgment (in case of
programmed decisions), past experience forms the basis for decision-making. These decisions
involve fair degree of uncertainty since outcomes of decisions are not always known. These
decisions are based on partial ignorance as the alternatives and their outcomes cannot be known in
advance. They are taken in the context of changing, dynamic environmental conditions.

For example, increase in advertising expenditure, effective salesmanship, upgraded technology,

quality controls, brand image and reasonable prices are expected to increase sales and profits. If, in
spite of all these, profits are declining, it requires immediate decision-making and such
decisions are non-programmed decisions.

These decisions are taken by top-level managers. As we move up the organizational hierarchy, the
need for taking non-programmed decisions increases.
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Different types of non-programmed decisions are:

(1) Personal decisions,

(2) Strategic decisions,

(3) Crisis intuitive decisions, and

(4) Problem-solving decisions.

Differences between programmed and non-programmed decisions

There is no clear line of demarcation between programmed and non-programmed decisions.

Decisions are neither totally programmed nor non-programmed. They are a combination of both
and lie on continuum of decision; between totally programmed decisions at one end of the
continuum and totally non-programmed decisions at the other end.

BOUNDED RATIONALITY AND INFLUENCE ON DECISION MAKING

Decision making is the most important part of administration and the outcome of decisions depend
on the process that is used in making decisions.

There are two primary models or theories for decision-making: the Rationality model (optimizes)
and the Bounded rationality model (satisfices). In the former, a decision-maker attempts to optimize
the decision by selecting the best possible alternative. In the latter, rationality of individuals is
limited by the information they have, cognitive limitations and time constraints.
Fundamental of management for engineers &SM504MS

Bounded rationality

Herbert Simon propounded the bounded rationality model to explain why limits exist to rational
decision within decision – making environment. He defined decision – making as “the alternative
courses of action”. He states that, decision – making pervades the entire organization that is
decisions are made at all level of organizations. Hence, he said an organization as structure of
decision – makers. According to him, decision is an all – embracing activity subsuming all the
administrative functions described as „POCCC‟ by Fayol and „POSDCORB‟ by Gullick. Bounded
rationality is the concept that decision makers (irrespective of their level of intelligence) have to
work under the unavoidable constraints.

The Simon‟s satisfying model states that firms carry out their operations under bounded rationality
and they can only attain a satisfactory level of profit, sales and growth. Simon carried out a research
and found that modern businesses don‟t have adequate information and they are uncertain about
future due to which it is very difficult to optimize their profit, sales and growth.

He argued that in real situations people take decisions on the basis of heuristics (a
method of teaching to learn by discovering things themselves
and learning from their own experiences rather than by telling them things) rather than rule based
optimization methods. He argued that decision-making is bounded by the following limitations.

The decision makers (irrespective of their level of intelligence) have to work under three
unavoidable constraints.
1. Lack of Information: Lack of information or incomplete information leads to sub optimal
decisions as the decision-maker is not fully aware of the pros and cons of a decision due to lack of
information. Hence, lack of information creates a boundary and hinders the rational choice of the
decision-maker.

2. Limited Intellectual Ability/Cognitive Ability/Mental Ability: The capacity of the human

mind to perceive, retain and retrieve complete knowledge and information on past, present and
future events is not unlimited. Human mind has only limited capacity to evaluate and processthe
information that is available. The problem at hand may be so complex that the decision- maker may
not be able to comprehend the true nature and complexity of the problem, leading to
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a sub optimal decision. If the problem would have been comprehensible, the decision-maker would
have made a rational choice. This creates a boundary on the otherwise rational choice of the
decision-maker.

3. Lack of Time to take Decisions: The lack of time may also lead to suboptimal decisions as in
this case the decision-maker does not have time to evaluate all the choices and come to a rational
choice. On the contrary, lack of time leads to improper and sub optimal decisions, as one does
not have the required time to process the information available.

Therefore even individuals who intend to make rational choices/decisions are bound to make
satisficing (rather than maximizing or optimizing) choices/decisions in complex situations. These
limits (bounds) on rationality also make it nearly impossible to draw up contracts that cover every
contingency, necessitating reliance on rules of thumb.

Hence, Bounded rationality (satisfying model) suggests that managers seek alternatives until they
find one that is satisfactory, not optimal. The concept suggests that the ability of decision makers to
be rational is limited by numerous constraints, such as complexity, time and money, and their
cognitive capacity, values, skills, habits, and unconscious reflexes known as bounded rationality.

All the three factors which are illustrated in the diagram will influence the human or organizational
decision by bounded rationality leading to „satisficing decisions‟ as against maximizing decisions
(optimizing decisions).
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GROUP PROBLEM SOLIVING AND DECISION MAKING

A problem may be defined as the difference between the desired situation and actual situation. So,
awareness of the problem means understanding the gap between the two (desired and actual)
situations. Problem solving is the process of identifying and filling the “gap” or finding a
discrepancy and initiating a corrective action. A problem solving is a multi-step procedure in which
a group develops a plan to move from an unsatisfactory state to a desired goal. Group problem
solving is the process of bringing together stakeholders who through their analytical decision
making abilities can influence the outcome of the problem. The use of groups in
problem solving is encouraged as groups tend to evaluate diverse solutions and action plans.

The tasks are becoming more interdisciplinary and interdependent; hence modern business demands
a comprehensive and integrated perspective of the business. Particularly in this context, group
decisions are considered more relevant and worth pursuing. Hence, group problem solving becomes
prominent and is necessary to understand how problem can be solved in groups and thereby
contribute more effectively to decision-making.

Many key problems are solved in groups or teams in organizations. Though high-level interpersonal
skills are important for mangers, more important are the capabilities to work closely with others in
solving problems and making decisions. There are many executive development programs offered
by premier business schools in India and abroad to strengthen problem solving skills in groups.

As a part of leveraging the collective wisdom, the problems are presented to groups and the
group members are advised to arrive at decisions which are more rational and feasible. In group
decision making, the feedback from more than one individual is evaluated logically and
scientifically before an optimum result is identified that is based on an economic view of decision-
making wherein people hope to maximize gain and minimize loss.

Group Problem Solving Process

Typically, the team members hold a discussion about the problem on hand and explore all the ways
and means arise out of business or social situations and develop the ability to generate a
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wide variety of potential solutions to a given problem. The below process involves groupproblem
solving.

1. Define the Problem: Define the problem by considering the three elements shared by every
problem: the current undesirable situation, the goal or more desirable situation, and obstacles in the
way. At this stage, group members share what they know about the current situation, without
proposing solutions or evaluating the information. Here are some good questions to ask during this
stage: What is the current difficulty? How did we come to know that the difficulty exists?
Who/what is involved? Why is it meaningful/urgent/important? What have the effects been so far?
What, if any, elements of the difficulty require clarification? At the end of this stage, the group
should be able to compose a single sentence that summarizes the problem called a problem
statement.

2. Analyze the Problem: During this step a group should analyze the problem and the group‟s
relationship to the problem. Whereas the first step involved exploring the “what” related to the
problem, this step focuses on the “why.” At this stage, group members can discuss the potential
causes of the difficulty.

3. Develop Alternative Solutions: During this step, group members generate possible solutions to
the problem. Again, solutions should not be evaluated at this point, only proposed and clarified.
The question should be what could we do to address this problem, not what should we do to address
it.

4. Evaluate All Solutions: During this step, solutions can be critically evaluated based on their
credibility, completeness, and worth. Solutions can be evaluated based on how well they fit with the
group‟s charge and the abilities of the group. To do this, group members may ask, “Does this
solution live up to the original purpose or mission of the group?” and “Can the solution actually be
implemented with our current resources and connections?” and “How will this solution be
supported, funded, enforced, and assessed?”

5. Implement and Assess the Solution: Implementing the solution requires some advanced
planning, and it should not be rushed unless the group is operating under strict time restraints or
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delay may lead to some kind of harm. Although some solutions can be implemented
immediately, others may take days, months, or years.

Methods of Group Problem Solving

1) Brainstorming: Before groups can make a decision, they need to generate possible solutions to
their problem. The most commonly used method is brainstorming. Brainstorming is a creative
art of generating the greatest number of ideas in the shortest possible time. Here, members in
the group are encouraged to present their ideas that can contribute to problem solving. It is
popular method of finding alternatives to real life problems and for creativity training. The
group size is restricted to five to seven members. Everyone is given reasonable time and
opportunity to present their ideas or alternative solutions. The purpose of brainstorming is to
generate as many as ideas possible and explore different dimensions of the given problem.
The members can combine some of the ideas and offer improved version of their earlier ideas.
2) Nominal Group Technique: The Nominal Group Technique is a form of brainstorming, wherein a
structured meeting is held among the group members where they are required to find solutions
to the problem identified for the discussion. The objective of nominal group technique is to
resolve the opinion conflicts among the group members by enabling each individual to pen
down his/her thoughts about the problem and later discuss it with the entire group to reach the
consensus solution. Generally, the nominal group training is comprised of the following steps:

1. First of all, the facilitator welcomes all the participants and then briefs about the
problem requiring decision.
2. The participants are given time to pen down their ideas that come to their minds in
reference to the problem being discussed. During this period, each member writes
his/her ideas silently without discussing anything with each other.
3. Once all the members have written, their ideas are required to share them in front of all
the group members. At this stage, the facilitator chalks down the ideas of each group
member on the flip chart, thereby giving all the members equal opportunity to share
what they feel.
Fundamental of management for engineers &SM504MS

4. Once the key points are written on the chart, the members are asked to discuss the points
which they feel requires an explanation. Each member explains his/her mind to the other
members and in the meanwhile, the facilitator tries to maintain the discussion as neutral
as possible, thereby avoiding the criticism and judgment.
5. Once all points are explained, the members are asked to give vote or rank various ideas
by prioritizing these in relation to the basic problem, for which the meeting is held.

If the group does not reach a consensus decision, then again the ranks are assigned to the
recorded ideas and this process continues till the final decision is arrived.

3) Stand-up Meetings: Considering that sitting posture will make members less alert and
involved. Meetings are conducted while standing up instead of sitting down to solve the
problems and make decisions. It is considered that people are more alert when standing, and
don‟t want to stand for too long so they reach a decision quickly.

4) Majority rule: It is a commonly used decision-making technique in which a majority (one- half
plus one) must agree before a decision is made.

5) Consensus rule: This is a decision-making technique in which all members of the group must
agree on the same decision.

CREATIVITY AND INNOVATION IN MANAGERIAL WORK

The growth and survival of the business in the dynamic environment as of today depends upon the
development of new products. Organizations must be always in the lookout for new opportunities
and exploiting them by creating new products and services. Therefore, it is needless to say that
new product development holds the key for the survival of an organization. New products do not
come about on their own. They are the result of the ingenuity of creativity people in the
organization. As such, it is obvious that new product development is the function of organizational
creativity. In other words, it depends upon how creative an organization is in respect of new ideas.
It may be understood that any organization can be as creative as its people.
Fundamental of management for engineers &SM504MS

Having understood the importance of creativity in the organizational context, let us understand the
meaning and process of creativity.

Creativity and Innovation

Creativity is an essential part of problem solving and decision making. To be creative is to see new
relationships and produce imaginative solutions. Creativity can be defined simply as the process of
developing novel ideas that can be put into action. By emphasizing the application of ideas,
creativity is closely linked to innovation. To be innovative, a person must produce a new product,
service, process, or procedure. Innovation can be regarded as the commercialization or
implementation of creative ideas.

Creativity involves a departure from conventional thinking to non-conventional thinking. A close

examination of many products enables us to understand how apparently unrelated things are related
to produce a new product. The ubiquitous wet grinder found in many of the kitchens may be cited
as a best example where a relationship is established between the electric motor and the
conventional stone used in the Indian homes for grinding purposes since times immemorial. Similar
is the case with the electric bulb and the lens that are combined to develop the overhead projector
used in the classrooms. The same logic holds good for many products that we see around.

Though, at times creativity and innovation are used interchangeably, it is appropriate to know that
both are different. Creativity and innovation go hand in hand. While creativity is the generation of a
new idea, innovation is the translation of such an idea into a product, service or method of
production. According to Lawrence B. Mohr “creativity implies bringing something new into
being while innovation implies bringing something new into use”. According to Rosabeth
Kanter, “Innovation is the generation, acceptance and implementation of new ideas, processes,
products or services”. Such a distinction is necessary because the skills required to generate new
ideas (creativity) are not the same as those required to make the ideas take the shape of products or
services. Since both creativity and innovation are two different functions, organizations need
people good at both the functions. Further, creativity alone does not contribute for organizational
effectiveness unless the creative ideas can in some way be used
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or implemented. A new idea, however good it is, must be capable of implementation and must
actually be implemented for the organization to benefit from it.

Conditions Necessary for Creativity

Certain individual and organizational conditions are necessary for, or at least enhance the
production of, creative ideas. The most consistent of these conditions are described here. Creativity
takes place when these components join together.

1. Expertise: Expertise refers to the necessary knowledge/skills in a particular field to put facts
together. The more ideas floating around in your mind, the more likely you are to combine them
in some useful way.

2. Creative Thinking Skills: Thinking how to make solutions differently leads to creativity. If
you know how to keep digging for alternatives and how to avoid getting stuck in the status quo,
your chances of being creative multiply. Preserving, or sticking with a problem to a conclusion,
is essential for finding creative solution. A few rest breaks to gain a fresh perspective may be
helpful, but the creative person keeps coming back until a solution emerges.

3. Internal Motivation: The right type of motivation is the third essential ingredient for creative
thought. A fascination with the task or passion for the task is more important than searching for
external rewards.

4. Environmental Need: In addition to the internal conditions that foster creativity, the factors
outside the person have a significant effect. An environmental need must stimulate the setting of
a goal, which is another way of saying. “Necessity is the mother of invention”.

5. Conflict and Tension: Enough conflict and tension to put people on edge also foster creativity.
A practical way to create this conflict is for people to challenge each other‟s thinking, such as
saying, “Offering construction workers rents as temporary housing won‟t attract enough of
them to come down here. Let‟s try harder for a housing solution.”

6. Encouragement from Others: Another external factor in creativity is encouragement,

including a permissive atmosphere that welcomes new ideas. A manager who encourages
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imaginative and original thinking, and does not punish people for making honest mistakes, is
likely to receive creative ideas form employees.

The Creativity Process

In business jargon, creative people can think outside of the box, or get beyond the usual constraints
when solving problems. Yet another way of characterizing creative thinkers is that they break the
rules. As such, creative people are often mavericks. They are unconventional and off-the-wall. A
key part of being creative is to think laterally. Lateral thinking spreads out to find many alternative
solutions to a problem. Lateral thinking is thus divergent, while vertical thinking is convergent.
Creative people think divergently and they can expand the number of alternatives to a problem, thus
moving away from a single solution. Let us acquaint with the process of creativity.

1. Idea generation: The individual selects a problem to work on or more likely become aware that
a problem or need exists. This is the starting point for the new product development indeed.
This refers to the awareness about the „gaps‟ in the market.
2. Preparation: The individual becomes obsessed with the idea/ problem, recalling and collecting
information that seems relevant and dreaming up hypothesis without evaluating them. Openness
to experience, tolerance for ambiguity and willingness and courage to redefine the existing
concepts, beliefs are the important psychological attributes required at the stage.
3. Incubation: After assembling the available information, the individual relaxes and the
subconscious mind becomes active. In this not much understood but crucial step, the individual
often appears to be idle or day dreaming, but the subconscious is in fact trying to arrange the
facts into a pattern. Psychological freedom and safety are important at this stage.
4. Illumination: This is something which we experience quite often. Often, when least expected
– while eating, falling asleep or walking- the new integrative idea will flash into the individual‟s
mind. Such insights must be recorded quickly, because the conscious mind may forget them in
the course of other activities.
5. Verification and Application: The individual sets out to prove by logic or experiment that the
idea can solve the problem and can be implemented. Tenacity may be required at this
Fundamental of management for engineers &SM504MS

point. It is at this state the individual switches over to the logical, analytical or convergent
thinking. The practical implications are examined what is known as feasibility assessment- both
technical and economic for commercialization of the idea/concept. This is also known as
assessing the scalability.

Organizational Programs for Improving Creativity and Innovation

1. Creativity Training: A standard approach to enhancing individual and organizational

creativity is to offer creativity training to many workers throughout the organization. Much of
creativity training encompasses the ideas such as learning to overcome traditional thinking and
engaging in some type of brainstorming.
2. Brainstorming: the best-known method of improving creativity is brainstorming. This
technique is a method of problem solving carried out by a group. Brainstorming is standard
practice for solving real problems facing a company, and is also a creative training technique.
Group members spontaneously generate numerous solutions to a problem, without being
discouraged or controlled. By brainstorming, people improve their ability to think creativity.
Brainstorming produces many ideas; it is not a technique for working out details during the first
meeting. Some types of businesses problems are well suited to brainstorming, such as
identifying ways to attract new customers and making cost-cutting suggestions, etc.
3. Systematically Gathering Ideas: The major new thrust in developing an innovative
organizations is to systematically gather ideas from people inside and outside the firm.
4. Appropriate Physical Surroundings: creativity is facilitated when the physical environment
allows for the flow of ideas, including the room with natural lighting and conducive
atmosphere.
Fundamental of management for Engineers & SM504MS

ORGANIZING AND ORGANIZATION

Organizing: Organizing is one of the functions of management. Organizing is the means to achieve
the plans. If planning involves making a road map for the chosen destination, then organization is
the means by which you reach your chosen destination. Organizing is a process of;

➢ Determining, grouping and structuring the activities

➢ Creating roles for effective performance at work

➢ Allocating necessary authority and responsibility for results

➢ Determining detailed procedures and systems for different problems areas such as
coordination, communication, decision-making, motivation, conflict resolution, and so on.

Organizing function ends with creating a structure of relationships. It explains who is responsible
for a given task.

Organization: Organization refers to the institution wherein the management functions are
performed. A social unit of people that is structured and managed to meet a need or to pursue
collective goals. All organizations have a management structure that determines relationships
between the different activities and the members, and subdivides and assigns roles, responsibilities,
and authority to carry out different tasks. Organizations are open systems--they affect and are
affected by their environment.

Organization may be formal, informal, or both.

The formal organization is basically goal oriented entity that exists to accurate the efforts of
individuals and it refers to the structure of jobs and positions with clearly defined functions,
responsibilities and authorities.

According to Chester Bernard, an organization is formal when the activities are coordinated
towards a common objective.
Fundamental of management for Engineers & SM504MS

Informal organization refers to network of personal and social relationships (alliances,

friendships) that arise as people associate with others people in a work environment.

The chief executive calls his staff for a meeting at a given time and when the staff meets, it is
formal organization.

On the other hand, after the meeting is called off, when some staff stay back to discuss their
personal problems with the chief executive, it is said to be an informal organization.

BASIC CONCEPTS OF ORGANIZATION

Organizational Hierarchy: Hierarchy is system/structure in which members in an organization are

ranked according to their status and authority. The hierarchy in a business refers to the layers of
management from the top management down to managers or superiors of the lowest rank. Number
of layers depend upon the size of the organization.

Employees in a hierarchy have varying degrees of authority. Higher levels in the hierarchy are
characterized by higher responsibility and authority.

Authority and Responsibility:

Authority is the power or right to give orders/commands and to use discretion vested in that
particular position or job. If the person is removed from the job, he or she loses the authority.

Responsibility is the obligation/duty on the part of subordinates to complete the given ob. If a
manager has only authority, he may misuse it. As a control measure, the employee is held
responsible for the results also. Authority can be transferred to lower positions but not
responsibility.

Delegation of Authority: The process of transferring authority from the top to the lower levels in
the organization is called delegation. Although a task maybe delegated or passed down the chain of
command form a manager to a subordinate, the manager continues to be responsible for making
sure that his/her instructions are carried out. The organization is said to be centralized when the
authority to take decisions is held by the corporate office. If the authority is delegated to the
regional offices, then the organization is said to be decentralized.
Fundamental of management for Engineers & SM504MS

Span of Management: It is also called span of control. It refers to the number of subordinates that
can be effectively controlled by the manager at a given point of time. If the production manager
has, say, five employees under his direct control, it means his span is five.

V.A. Graicunas mentioned three types of Superior-Subordinate relationships, viz.,

1. Direct Single Relationships,

2. Direct Group Relationships, and

3. Cross Relationships.

According to V.A. Graicunas, as the number of subordinates increases arithmetically (like 1, 2, 3,

4, 5, 6, etc.) the number of relationships which the superior has to control also increases almost
geometrically (like 1, 6, 18, 44, 100, 222, etc.). Therefore, a superior can only control a limited
number of subordinates, and anything beyond this limit is very hard to control.

V.A. Graicunas Theory can be explained with the help of this simple example.

For example, consider Gaurav (G) is a superior (boss) and Manoj (M) and Sameer (S) are his
subordinates (juniors or lower-grade employees).

According to V.A. Graicunas, Gaurav (G) has to control following three types of relationships, with
or among Manoj (M) and Sameer (S):-

(a) Direct Single Relationships :-

G with M, and G with S, i.e. a total of 2 direct single relationships.

(b) Direct Group Relationship :-

Fundamental of management for Engineers & SM504MS

G with M in presence of S, and G with S in presence of M, i.e. a total of 2 direct group

relationships.

(c) Cross Relationships :-

M with S, and S with M, i.e. again a total of 2 cross relationships.

Therefore, total number of relationships which Gaurav (G) has to control are:- 2 + 2 + 2 = 6
relationships.

Thus, when the number of subordinates is 2, the number of relationships, which the superior (boss)
has to control is 6. Similarly, when the number of subordinates is 3, the number of relationships to
control will be 18.

V.A. Graicunas has explained his principle with the help of the this formula:-

Here, r = No. of relations

n = No. of subordinates

Flat and Tall Organizations:

Flat Organizational Structure (Horizontal Organizational Structure)

Flat structures have fewer management levels. Flat organizations are known by their wider span of
control. In other words, each manager controls more number of employees at a given point of time.
These organizations focus on empowering employees in greater decision making rather than
adhering to the chain of command. By encouraging autonomy and self-direction, flat structures
attempt to tap into employees‘ creative talents and to solve problems by collaboration.
Fundamental of management for Engineers & SM504MS

In this structure, there are few or no levels of management between staff and executives. Top
management has direct contact with frontline employees. It is useful to small organizations.

Tall Organizational Structure (Vertical Organizational Structure)

Large, complex organizations often require a taller hierarchy. In its simplest form, a tall structure
results in one long chain of command similar to the military. As an organization grows, the number
of management levels increases and the structure grows taller. In a tall structure, managers form
many ranks and each has a small area of control. Generally, the greater the height of the
organization chart, the smaller is the span of control, and vice versa.
Fundamental of management for Engineers & SM504MS

Tall organizations have many levels of hierarchy. Span of control is narrow. Lines of
communication are long. There are many level of middle management between top management
and employees.

PRINCIPLES OF ORGANIZATION

1. Principle of Objective: The enterprise should set up certain aims for the achievement of which
various departments should work. A common goal so devised for the business as a whole and the
organization is set up to achieve that goal. In the absence of a common aim, various departments
will set up their own goals and there is a possibility of conflicting objectives for different
departments. So there must be an objective for the organization.

2. Principle of Specialization: The organization should be set up in such a way that every
individual should be assigned a duty according to his skill and qualification. The person should
continue the same work so that he specializes in his work. This helps in increasing production in the
concern.

3. Principles of Co-ordination: The co-ordination of different activities is an important principle

of the organization. There should be some agency to co-ordinate the activities of various
departments. In the absence of co-ordination there is a possibility of setting up different goals by
different departments. .

4. Principle of Authority and Responsibility: The authority flows downward in the line. Every
individual is given authority to get the work done. Though authority can be delegated but
responsibility lies with the man who has been given the work. If a superior delegates his authority
to his subordinate, the superior is not absolved of his responsibility, though the
Fundamental of management for Engineers & SM504MS

subordinate becomes liable to his superior. The responsibility cannot be delegated under any
circumstances.

5. Principle of Definition: The scope of authority and responsibility should be clearly defined.
Every person should know his work with definiteness. If the duties are not clearly assigned, then it
will not be possible to fix responsibility also. The relationship between different departments
should also be clearly defined to make the work efficient and smooth.

6. Span of Control: Span of control means how many subordinates can be supervised by a
supervisor. The number of subordinates should be such that the supervisor should be able to control
their work effectively. If the span of control is disproportionate, it is bound to affect the efficiency
of the workers because of slow communication with the supervisors.

7. Principle of Balance: The principle means that assignment of work should be such that every
person should be given only that much work which he can perform well. Some person is over
worked and the other is under-worked, then the work will suffer in both the situations. The work
should be divided in such a way that everybody should be able to give his maximum.

8. Principle of Continuity: The organization should be amendable according to the changing

situations. Everyday there are changes in methods of production and marketing systems. The
organization should be dynamic and not static. There should always be a possibility of making
necessary adjustments.

9. Principle of Uniformity: The organization should provide for the distribution of work in such a
manner that the uniformity is maintained. Each officer should be in-charge of his respective area so
as to avoid dual subordination and conflicts.

10. Principle of Unity of Command: There should be a unity of command in the organization. A
person should be answerable to one boss only. If a person is under the control of more than one
person then there may be confusion and conflict. He gets contradictory orders from different
superiors. This principle creates a sense of responsibility to one person.

11. Principle of Exception: This principle states that top management should interfere only when
something goes wrong. If the things are done as per plans then there is no need for the
Fundamental of management for Engineers & SM504MS

interference of top management. The management should leave routine things to be supervised by
lower cadres. Principle of exception allows top management to concentrate on planning and policy
formulation. Important time of management is not wasted on avoidable supervision.

12. Principle of Simplicity: The organizational structure should be simple so that it is easily
understood by each and every person. The authority, responsibility and position of every person
should be made clear so that there is no confusion about these things. A complex organizational
structure will create doubts and conflicts among persons. There may also be over-lapping and
duplication of efforts which may otherwise be avoided.

13. Principle of Efficiency: The organization should be able to achieve enterprise objectives at a
minimum cost. The standards of costs and revenue are pre-determined and performance should be
according to these goals. The organization should also enable the attainment of job satisfaction to
various employees.

14. Scalar Principle: This principle refers to the vertical placement of supervisors starting from top
and going to the lower level. The scalar chain is a pre-requisite for effective and efficient
organization.

ORGANIZATION DESIGN AND STRUCTURES

An organization can be classified on the basis of authority relationship or on the basis of its
departments.

I. Organization structures based on authority relationships

1. Line Organization: Line organization is the simple and oldest type of organization
followed in an organization. Under line organization, each department is generally a
complete self-contained unit. A separate person will look after the activities of the
department and he has full control over the department. The same level executives do not
give or receive orders amongst themselves. But they receive orders from their immediate
boss and give orders to their subordinates. Hence, all the heads are responsible to the
general manager, the general manager, in turn, is responsible to the shareholders who are the
owners. This type of organization is followed in the army on the same pattern. So, it
Fundamental of management for Engineers & SM504MS

is called military organization. Under this type of organization, the line of authority flows
from the top to bottom vertically. So it is called line organization

2. Line and Staff organization: In this organization, we have both the line managers and the
staff managers. The staff managers are specially appointed to advise, suggest, or assist
the line managers in their day to day matters. The word ‗staff‘ means a stick for support.
The line officers have authority to take decisions and implement them to achieve the
objectives of the organization. The line officers may be assisted, advised, suggested in their
day to day matters by the staff officers while framing the policies and plans and taking
decisions organization. The authority flows from top level to the lower level of the
organization through the line officers while the staff officers attached to the various
Fundamental of management for Engineers & SM504MS

departments advise the departments. The staff officers are not in a position to compel the
line officers to follow the advice by them. Each department is headed by a line officer who
exercises full authority regarding the planning.

3. Functional organization: Under line organization, a single person is in charge of all the
activities of the concerned department. The person in charge finds it difficult to supervise all
the activities efficiently. Taylor observed that one single foreman was overburdened with
all the operations such as task setting, time recording, quality inspection,
Fundamental of management for Engineers & SM504MS

disciplinary jobs and so on. He divided this job into eight functional foremen-four dealing
with the planning task and four dealing with the implementation task.

The foremen involved in the planning task are:

➢ Route clerk (identify the route for materials to pass on)
➢ Instruction clerk
➢ Time and cost clerk
➢ Shop disciplinarian

The foremen involved in the implementation task are:

➢ Gang Boss (Assembles the machinery needed for work)

➢ Speed Boss

➢ Repair Boss

➢ Quality inspector

Under functional organization, various specialists are for various functions performed in an
organization. These specialists will attend to the work which is common to different
functions of various departments. Workers, under functional organization, receive
instructions from various specialists. From this, it can be noted that the functional type of
organization violates the principle of one employee, one superior.
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4. Committee organization: A committee may be defined as a group of people performing

some aspects of Managerial functions.

Definitions:

―A committee consists of a group of people specifically designated to perform some

administrative work‖ - W.H. Newman

― A committee is a body of persons appointed or elected to meet on an organized basis for

the consideration of matters brought before it‖. - Allen

A committee is formed when two or more persons are appointed to work as a team to arrive
at a decision on the matters referred to it. It is intended to utilize the knowledge, skills, and
experiences of all the concerned parties. Particularly, in large organizations, problems are
too high to be handled by one single expert. The committee studies the nature of the
problem by carefully scrutinizing the office records, rule position, analysis of precedence
(how such cases have been dealt with in the past), and so on.
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5. Matrix organization: This is also called as project organization. Matrix organization

structure is essentially a violation of unity of command A matrix organization is defined as
an organization where people have to report to more than one boss. The first boss will be
their functional manager and the other can be a project manager. Personnel are drawn from
their respective functional departments. Each functional staff has two bosses his
administrative head and his project manager.

The main objective of matrix organization is to secure higher degree of coordination than
what is possible from the conventional organization structures such as the line and staff. In
matrix organization there are two chain of command one along functional lines (vertically)
and the other along the project line (horizontally). The figure shows that the president has
three vice presidents for various departments and two project managers for two locations A
and B. The figure reveals that both functional manager and project manager exercise
authority over the workers.
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6. Virtual organization: Virtual organizations facilitate competitiveness particularly when

these organizations are part of the global economy. Here, there can be alliances and
partnerships with other organizations almost all over world. It is a flexible Organization
structure that removes the traditional boundaries. It allows easy reassignment and
reallocation of resources to take quick advantage of shifting opportunities in global markets.
The virtual Organization is a temporary network of companies that come together quickly to
exploit fast changing opportunities. Virtual Organizations appear to be bigger than
traditional organizations. As virtual organizing requires a strong
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information technology (IT) platform. The boundaries that traditionally separate a firm from
its suppliers, customers and even competitors are largely eliminated, temporarily and in
respect to a given transaction or business purpose. Virtual Organizations come into being 'as
needed' when alliances are called into action to meet specific operating needs and
objectives. When the task is complete, the alliance rests until next called into action. Each
partner in the alliance contributes to the virtual Organization what it is best at-its core
competence
7. Cellular Organization: Organization structured around the units/cells that complete the
entire assembly processes are called cellular organizations. In the modem organizations,
cellular Organizations have been replacing the continuous line or linear production process
systems. In cellular organizations, workers manufacture total product or subassemblies in
teams (cells). Every team (cell) of workers has the responsibility to improve or maintain the
quality and quantity of its products. Each team is free to reorganize itself to improve
performance and product quality. These cells comprise self- managed teams. They monitor
themselves and also correct where necessary on their own. Cellular Organizations are
characterized by much smaller staff all over the Organization with middle management
positions reduced and lean management members at the top. It is both a lean and flat
structure.

II. Organization structures based on its departments

1. Functional departmentation: The process of classifying the organization on the basis of

departments or similar activities in it is called departmentation. This is similar to the
modern view of functional structure of organizations. Marketing, Production, Finance, Sales
etc. are the basic functions of manufacturing organization. It follows the specialization
principle. Every department is viewed as a separate entity by itself.
Fundamental of management for Engineers & SM504MS

2. Product organization: The process of classifying the organization on the basis of products
is called product organization. The grouping of the production and sales efforts of a business
according to a particular line of goods or services. The departments are based on the
products manufactured or services rendered. The product - based organization offers scope
to strengthen the manufacturing facilities, skills and knowledge for every product or service.
It can be used for growth and diversification.
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3. Regional or Geographical organization: The process of classifying the organization on

the basis of regions is called geographical organization. Organization is divided into
territories or regions commonly used for the decentralization of responsibility over certain
areas. This method is popularly used in sales and production function. This type of structure
allows an organization's offices to operate individually while adhering to company policies
and values. Office locations can be local, national or international. Geographic
organizational structure allows for each business unit or office to operate as its own entity
based on where it's located.
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4. Customer organization: The process of classifying the organization on the basis of

customer profile is called customer organization. All the activities of the enterprise are
grouped on the basis of the profile of its customers. Each group is managed by one
department head. This type of organization is designed to cater to the requirements of
clearly defined customer groups.
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MODERN TRENDS IN ORGANIZATIONAL STRUCTURES DESIGNS

VIRTUAL ORGANIZATION STRUCTURE

This new form of organization, i.e., ‗virtual organization‘ emerged in 1990 and is also known as
digital organization, network organization or modular organization. Simply speaking, a virtual
organization is a network of cooperation made possible by, what is called ICT, i.e. Information and
Communication Technology, which is flexible and comes to meet the dynamics of the
Fundamental of management for Engineers & SM504MS

market. Virtual Organization: A virtual organization is one whose employees are spread
geographically and communicate via phone, email, and the internet. The concept explores
technologies and issues surrounding virtual organizations from a knowledge management
perspective. Virtual organizations facilitate competitiveness particularly when these organizations
are part of the global economy. Virtual organization structure does not physically exist, but its
effect is felt.

Virtual organization is one that it

(1) does not have a physical (bricks and mortar) presence but exists electronically (virtually) on
the internet.

(2) is not constrained by the legal definition of a company, or

(3) is formed in an informal manner as an alliance of independent legal entities.

CELLULAR ORGANIZATION STRUCTURE

Organizations structured around the units/cells that complete the entire assembly process are called
cellular organizations. In cellular organizations, workers manufacture total product or sub-
assemblies in teams (cells). Every team (cell) of workers has the responsibility to improve or
maintain the quality and quantity of its products. These cells comprise self-managed teams. They
monitor themselves and also correct where necessary on their own.

Example: A system of hyper market such as BIGBAZAR is composed of many diversified sub-
systems, say, electronic goods, good court, grocery etc. all these will be located and operated under
one roof under the control of one coordinator, while each subsystem will report to its mother
concern also. For example, an electronic goods (say a PHILIPS TV) seller has to abide by the
regulations of Big Bazaar for selling function and reports to his company (Philips India) for other
aspects.

BOUNDARYLES ORGANIZATION STRUCTURE

An organization has external boundaries that separate it from its suppliers and customers, and
internal boundaries that provide demarcation to departments. This rigidity is removed in
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boundary less organizations, where the goal is to develop greater flexibility and responsiveness to
change and to facilitate the free exchange of information and ideas. It is made up of self- managing
and cross-functional teams that are organized around core business processes. The teams include
employees from different functional areas as well as customers and suppliers.

TEAM ORGANIZATION STRUCTURE

A structure in which the entire organization is made up of work groups or teams is known as
team structure. Team structures are both permanent and temporary in nature as situation demands.
‗We report to each other‘ is the main feature of team structure. A cross functional team comprises
members from different functional departments such as marketing, finance, HR, production etc.
Project teams are convened for a particular task or project and these get dissolved once task is
completed.

DEPARTMENTATION

The first task in designing an organization structure is the identification of activities and to group
them properly. The process of grouping the activities is known as Departmentation. The process of
grouping of activities into units for the purpose of administration is called departmentation. It can
be defined "as the process by which activities or functions of enterprise are grouped
homogeneously into different groups." The administrative units are called divisions, units or
departments.

The followings are the basis of departmentation:

a) When departmentation is done on the back of functions the departments created are
Production, marketing, accounting, and finance and personnel departments.
b) When departmentation is done on the basis of geographical area, the departments are
known as eastern department, western department, northern and southern department.
c) Departmentation can be done on the basis of customers.
d) Departmentation can be done on the basis of product handled.
Fundamental of management for Engineers & SM504MS

DELEGATION OF AUTHORITY

The process of transferring authority form the top to the lower levels in the organization is called
delegation. Although a task maybe delegated or passed down the chain of command form a
manager to a subordinate, the manager continues to be responsible for making sure that his/her
instructions are carried out. The organization is said to be centralized when the authority to take
decisions is held by the corporate office. If the authority is delegated to the regional offices, then
the organization is said to be decentralized.

EMPOWERMENT

Empowerment means authority or power given to someone to do something. A management

practice of sharing information, rewards, and power with employees so that they can take initiative
and make decisions to solve problems and improve service and performance.
Empowerment is based on the idea that giving employees skills, resources, authority, opportunity,
motivation, as well holding them responsible and accountable for outcomes of their actions, will
contribute to their competence and satisfaction.

Strategies to empower:

1. Foster open communication: bottom-up open communication is much powerful when

compared to top-down communication. In open communication, employees can present their
thoughts, feelings and observations known easily and regularly. Use the feedback effectively and
constructively. Never thing of antagonizing employees for their criticism. Appreciate and reward the
new ideas. Focus on creativity and innovation so that the organization becomes a buoyant one
with higher degree of new thinking and different perspectives.

2. Reward self-improvement: To overcome complacency and stagnation among the employees,

encourage and reward them for self-improvement, have budget and time in place for personal
development and training. Motivate employees to set a plan for growth and reward them as they
advance. This is one sure way of creating leadership opportunities.

3. Let the employees experiment ion on a continuous basis. Even if they fail, keep on
encouraging them to move forward. They should not feel that failure will cost their future. This
Fundamental of management for Engineers & SM504MS

makes them more risk averse. Promote an environment where they can try new things while
protecting the interests of the organization. Develop laboratory environment to test new ideas
and learn from the failures, if any. Unless the employees will gain understanding and feel
comfortable, they cannot focus on testing their new ideas on the field and bring innovation in the
organizational perspectives. Exhibit high degree of trust and support in the employees‘ ability to
accomplish a work assignment.

4. Provide sufficient authority: Delegate adequate authority so that the employees can develop the
feeling of ― I can do my job‖ and then address every problem in their work front. Further, give
them ideas to experiment. Give them every opportunity to clearly understand the core values,
purpose and direction of the company so that they can easily make consistent decisions and take
appropriate action at any junction. Promote share vision to develop leadership across cadres.

5. Encourage to work beyond the given role: the vision of each job needs to be articulated. The
employees need to think beyond their job roles and description within their functional areas so that
they bring dynamism into their own well defined roles. Also support their independence in the job
roles by providing necessary skills and resources.

6. Fix accountability for results: To understand the consequences of failures and need for making
an extra effort, every employee need to be held accountable for results. Also keep appreciating and
reward their efforts through consistent and diligent measurement of performance for their high
morale.

CENTRALIZATION

Centralization is the degree to which decision-making is concentrated at upper levels of the

organization. Centralization is a process where the concentration of decision making is in a few
hands; All the important decisions and actions at the lower level, are subject to the approval of top
management.

Benefits:

1. Centralization offers a simple, easier-to-manage system.

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2. It improves efficiency by taking advantage of potential economies of scale.

3. It brings groups together to create order and enforce uniformity in the policies, practices,
procedures and process.
4. It avoids the waste of money on duplicate systems, extra work, and manual processes.
5. Direct and close control on operations.

DECENTRALIZATION

Decentralization is the degree to which lower-level employees are given authority to make
decisions except that which can only be exercised at central points. Decentralization is simply a
matter of dividing up the managerial work and assigning specific duties to the various executive
skills. Decentralization is a systematic delegation of authority at all levels of management and
throughout the organization. Authority is retained by the top management for taking major
decisions and framing policies concerning the whole concern. ―Everything that increasing the
role of subordinates is decentralization and that decreases the role is centralization‖.

Benefits:

1. It promotes efficiency as a result of faster decision making. The branches are empoweredto
take decisions within the given framework.
2. It improves speed and flexibility by reorganizing to increase local control and executionof
a service.
3. It breaks away from frustrating bureaucratic ways of traditional systems.
4. In case of adversity or crisis, the damage can be confined to a given zone. The operationsof
other zones are not affected.
5. Improves scope for customization.

RECENTRALIZATION

Recentralization is the process of taking back the authority from the divisions or departments where
the purpose of decentralization is not achieved. If the situation so demands, the top management
may hold back the power or authority from the lower level managers which were earlier
decentralized. Since business conditions are volatile and uncertain, the process of decentralization
may not yield the expected results. In cases where there are many complaints
Fundamental of management for Engineers & SM504MS

from the customers or vendors, the head office may roll back the authority delegated to the branch
offices. Where decentralization has failed, the head office institutes a detailed enquiry, call for al
the reasons of failure, analyze how it can be corrected and identify who has to be trained further to
improve the service quality. Once the corporate office feels that situation is under control and the
divisional office is fully geared up to handle the situation competently, then the authority can be
delegated back.

Benefits:

1. It offers scope for the mangers to correct the situation instantly.

2. It improves the confidence level of the stakeholders.
3. The head office can take stock of the situation and decide the next best course of action.
4. It is quick response tool to uphold service quality by improving leadership competence, staff
motivation, improve service delivery by addressing the delays and increased bureaucracy.

ORGANIZATIONAL CULTURE

To understand the meaning of organizational culture, we must first understand the meaning of
culture. ―Culture is the set of important understandings that members of a community share in
common‖. It consist of a basic set of values, ideas, perceptions, preferences, concept of morality,
code of conduct etc, which create a distinctiveness among human groups. In simple words, we can
say that ―culture is a combination of factors that are learned through our interaction with the
environment during our developmental and growth years‖.

Organizational culture is the set of assumptions, beliefs, values, customs, traditions and norms that
are shared by the members of an organization. It may be consciously created by its key members, or
it may have simply evolved over time. It represents a key element of the work environment in
which employees perform their jobs. A culture may exist across an entire organization, or it may
refer to the environment within a single division, branch, plant, or department. The idea of
organizational culture is somewhat intangible, for we cannot see it or touch it, but it is present and
pervasive. Like the air in a room, it surrounds and affects everything that happens in an
organization. Because it is a dynamic systems concept, culture is
Fundamental of management for Engineers & SM504MS

also affected by almost everything that occurs within an organization. They give an organizational
identity to employees – a defining vision of what the organization represents. They are also an
important source of stability and continuity to the organization which provides a sense of security to
its members. Also called corporate culture, it's shown in:

1) The ways the organization conducts its business, treats its employees, customers, and the
wider community,
2) The extent to which freedom is allowed in decision making, developing new ideas, and
personal expression,
3) How power and information flow through its hierarchy, and
4) How committed employees are towards collective objectives.

It affects the organization's productivity and performance, and provides guidelines on customer care
and service, product quality and safety, attendance and punctuality, and concern for the
environment.

Characteristics of Organizational Culture

1. Individual Autonomy: The degree of responsibility, freedom and opportunities of exercising

initiative that individuals have in the organisation.

2. Structure: The degree to which the organisation creates clear objectives and performance
expectations. It also includes the degree of direct supervision that is used to control employee
behaviour.

3. Management Support: The degree to which, managers provide clear communication,

assistance; warmth and support to their subordinates.

4. Identity: The degree to which, members identify with the organisation as a whole rather than
with their particular work group or field of professional expertise.

5. Performance Reward System: The degree to which reward system in the organisation like
increase in salary, promotions etc. is based on employee performance rather than on seniority,
favouritism and so on.
Fundamental of management for Engineers & SM504MS

6. Conflict Tolerance: The degree of conflict present in relationships between colleagues and work
groups as well as the degree to which employees are encouraged to air conflict and criticisms
openly.

7. Risk Tolerance: The degree to which, employees are encouraged to be innovative, aggressive
and risk taking.

8. Communication Patterns: The degree to which, organisational communications are restricted to

the formal hierarchy of authority.

9. Outcome Orientation: The degree to which, management focuses on results or outcomes rather
than on the techniques and processes used to achieve these outcomes.

10. People Orientation: The degree to which, management decisions take into consideration the
impact of outcomes on people within the organisation.

ORGANIZATIONAL CLIMATE

Before understanding the meaning of organizational climate, we must first understand the concept
of climate. Climate in natural sense is referred to as the condition of the weather at a place in a
particular period of time and it consists of temperature, wind, velocity and precipitation‖.

The concept of organisational climate was formally introduced by the human relationists in the late
1940s. Some persons have used organisational culture and organisational climate interchangeably.
But there are some basic differences between these two terms. According to Bowditch and Buono,
―Organisational culture is connected with the nature of beliefs and expectations about
organisational life, while climate is an indicator of whether these beliefs and expectations are being
fulfilled.‖ Climate of an organisation is somewhat like the personality of a person. Just as every
individual has a personality that makes him unique and different from other persons. Each
organisation has an organisational climate that clearly distinguishes it from other organisations.
Fundamental of management for Engineers & SM504MS

Basically, the organisational climate reflects a person‘s perception of the organisation to which he
belongs. It is a set of unique characteristics and features that are perceived by the employees about
their organisations which serves as a major force in influencing their behaviour.

The term, ‗Organisational climate‘ is defined as a relatively enduring quality of the internal
environment of an organisation as perceived and experienced by its members, which can be
described in terms of specific dimensions or characteristics and which influences the patterns of
behavior and work performance of members. Organisation climate evolves over a fairly long period
of time and is relatively stable. Since the dimensions of climate are internal, they can be measured,
controlled and changed by the organisation, if it so decides. Organisational climate is the major
frame of reference for the member‘s interpretation of organisational decisions and actions as also
their own attitudes, behaviour and performance.

According to Forehand and Gilmer, ―Climate consists of a set of characteristics that describe an
organisation, distinguish it from other organisations are relatively enduring over time and influence
the behaviour of people in it.‖

Characteristics

a) Organisational values, goals and priorities which are pursued in practice as against those
which are professed.
b) Managerial value systems and life styles.
c) Competence, character, commitment and dynamism of management.
d) The complexion of organisational policies and practices and the consistency.
e) The power structure - The extent of concentration or dispersal of authority.
f) General organisational structure-hierarchy, rigidity vs. flexibility, clarity of the structure,
communication and control systems, superior-subordinate relations, informal social
relationships, etc.
g) Nature of jobs – degree of skill required, relation between effort and productivity, variety in
the tasks, perceived importance of the job, rewards associated with the job, relation with
other jobs, security and so on.
h) Degree of freedom and control – requirements of conformity and compliance to
organisational norms and the extent to which behaviour of employees is structured.
Fundamental of management for Engineers & SM504MS

i) Supervisory style – attitudes and behaviour of supervisors and managers towards their
subordinates and towards performance requirements.
j) Reward structure – reward levels and interrelations, equity in reward structures, monetary
and non-monetary rewards.
k) Organisational approach to conflict and dissent, amicable resolution or suppression of
conflict.
l) The physical working conditions in the organisation.

Factors Affecting Organisational Climate

Factors affecting organizational climate differ from organization to organization. In some

organizations certain factors like structure, or process plays a major role and in some other
organizations, technology might be the major factor influencing the climate. However the major
factors, according to Lawrence James and Allan Jones affecting the organizational climate can be
grouped under the following heads:

1. Organizational content: The reactions of the employees and the degree to which they welcome
and accept the managerial philosophy is very crucial to the development of sound and favorable
organizational climate.

2. Structure: Structure is the framework that establishes formal relationship and delineates
authority and functional responsibility. It is generally believed that decentralized structure results in
sound climate.

3. Process: In every organization certain processes are vital so that it functions. Communication,
decision making, motivation and leadership are some of the important processes through which
management achieves the tasks. For instance, if we consider leader-follower relationship,
leadership process, it is leader‘s choice whether to allow subordinates in decision-making, give
assignments, etc. A leader has to be aware of the possible influence of his actions on the climate
while deciding about the most appropriate supervisory technique for a given situation.

4. Physical Environment: the external conditions of environment, the size, location of the work
place etc., will also affect organizational climate. An employee performing his job in relatively
Fundamental of management for Engineers & SM504MS

clean, quiet, safe environment will undoubtedly have a favorable perception of the organizational
climate.

5. System Values and Norms: Every organization has discernible and fairly formal value system
where certain kinds of behaviors are rewarded and encouraged and certain kinds of behavior forces
an individual to formal sanctions. The formal value system is communicated to employees through
rules, regulations and policies. But informal value system is very difficult to ascertain. But both
exert influence on organizational climate.

ORGANIZATIONAL CHANGE

Changes are taking place all around without exception. It is but natural that everything changes over
time. What remains constant is change itself? Therefore, it‘s the responsibility of the manager to
appreciate the change, assess its impact on the organization and prepare to adopt it, if necessary.
Depending on the magnitude of change, it may impact an individual, a group, structure, process and
subsystems. By scanning the environment and deciphering how changes in the environment are
likely to widen the gap between desired and actual state of affairs of organization such as
productivity, customer and employer satisfactions ,the degree and impact of change could be
gauged. Manager can be a change agent by introducing planned changes in the organization.

Meaning

The term change in the organization context refers to any alteration that occurs in the work
environment. Planned changes mean those changes which are effected in a planned manner after
assessing the need for change and working out the details as to when and how they will be
carried out. A planned change is also called proactive change. In contrast, reactive change is the
one which takes place in random fashion as a crisis situation develops. For proactive or planned
change to be initiated, manager shall be sensitive to the environmental changes affecting the
organization so that organizational crisis situations can be averted.

Organizational change is the process by which organization move from their present state to some
desired future state to increase effectiveness. When an organization system is disturbed by
Fundamental of management for Engineers & SM504MS

some internal or external forces, change frequently occur or any alteration which occur in the
overall work environment of an organization.

Organizational change is both the process in which an organization changes its structure, strategies,
operational methods, technologies, or organizational culture to affect change within the
organization and the effects of these changes on the organization. Organizational change can be
continuous or occur for distinct periods of time.

Characteristics

a) Change happen for the pressure or both internal and external forces in the organization.
b) Change in any part of the organization affect the whole organization.
c) Change may affect people, structure, technology and other elements of the organization.
d) Change also affects the rate of speed and degree of effectiveness of the organization.
e) Change may be reactive or proactive.

Steps to Organizational Change management

1) Clearly define the change and align it to business goals: It is one thing to articulate the
change required and entirely another to conduct a critical review against organizational
objectives and performance goals to ensure the change will carry your business in the right
direction strategically, financially, and ethically. Here key questions are: What do we need to
change?. Why is this change required?.
2) Determine impacts and those affected: Once you know exactly what you wish to achieve and
why, you should then determine the impacts of the change at various levels. Review the effect
of change on each business unit and how it cascades through the organizational structure to the
individual. Here key questions are: What are the impacts of the change?. Who will the change
affect most?. How will the change be received?.
3) Develop a communication strategy: Determine the most effective means of communication for
the group or individual that will bring them on board. The communication strategy should
include a timeline for how the change will be incrementally communicated, key messages, and
the communication channels and mediums you to use. Here key questions are: How will
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the change be communicated?. How will feedback be managed?. Who are to be most
communicated?. What is the communication process?.
4) Provide effective training: With change message out in the open, it is important to provide
training to the employees regarding the changes made in the organization. Training may be for
skills and behavior. Here key questions are: What behaviors and skills are required to achieve
business results?. What training delivery methods will be most effective?.
5) Implement a support structure: Providing a support structure is essential to assist employees
to emotionally and practically adjust to the change and to build proficiency of behaviors and
technical skills needed to achieve desired business results. Here key questions are: Where is
support most required?. What types of support will be most effective?.
6) Measure the change process: Throughout the change management process, a structure should
be put in place to measure the business impact of the changes and ensure that continued
reinforcement opportunities exist to build proficiencies. Here key questions are: Did the change
assist in achieving business goals?. Was the change management process successful? What
could have been done differently?.

Pressures for Change

The need for change exists when the manager finds that the goals are not being achieved. Thus,
tension points in the organization are identified when the gap between the desired and the actual
results is noticed. Such gaps could occur due to certain changes. In other words, these changes
are precursors for organizational change, which are explained in below.

1. Labor market Environment: The work force composition is fast changing with increasing
proportion of the woman, minorities, physically challenged. For instance, in India the work force
diversity, of late is something unseen before. Human resource management policies will have to
change to attract, maintain a diverse work force. Increasing participation of woman means dual-
career couples. So organizations have to change their transfer and promotional policies as well as
provide child and elder care facilities.

2. Technological developments: Changes in technology bring in their wake corresponding

changes in the nature of the work. Computers, telecommunication systems, robotics, and flexible
manufacturing systems are some of the 21st century changes that have brought unimaginable
Fundamental of management for Engineers & SM504MS

changes at work place with respect to the time, comfort required for the execution of tasks. With
changing technologies employees skills become obsolete.

3. Economic conditions: This is an age of discontinuity. To mention a few, oil shocks, accelerated
inflation and interest rates, the stock market crashes, currency devaluation, etc., hit some industries
and firms much harder than others. Globalization of markets is yet another significant change. The
problem with these shocks is that it is impossible to predict what the future shocks will be and from
where they come from.

5. Work place diversity: Emergence of global markets, mobility of factors of production across
the globe, integration of economic systems imposes certain demands on employees who have to
interact with people in other countries and work with persons brought up in different cultures.
Business organizations, therefore, have to prepare the work force which could perform and feel at
home regardless of the place of work and the composition of work teams.

6. Competition: Competition is intensifying by the day in every product category. Businesses also
in line with the changed realities and compulsions need to address themselves to the global context.

HUMAN RESOURCE MANAGEMENT

Human resources are the people who work for the organization. It is an asset to the organization
like factory, machinery and cash. HRM is concerned with management of people from recruitment
to retirement. Human Resource management is the body of knowledge and a set of practices that
define the nature of work and regulate the employment relationship. HRM is the function within an
organization that focuses on recruitment, management and providing direction for the people who
work in the Organization.

HRM refers to the process of acquiring, training, appraising and compensating employees and of
attending to their labour relations, health and safety and faireness concerns. The HRM process
consists of planning, attracting, developing, and retaining the human resources (employees) of an
organization.
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According to Flippo ― ―Personnel management is the planning, organizing, compensation,

integration and maintainance of people for the purpose of contributing to organizational, individual
and societal goals.‖

Objectives:

1) To help the organisation to attain its goals effectively and efficiently by providing
competent and motivated employees.
2) To utilize the available human resources effectively.
3) To increase to the fullest the employee‗s job satisfaction and selfactualization.
4) To develop and maintain the quality of work life (QWL) which makes employment in the
organization a desirable personal and social situation.
5) To help maintain ethical policies and behavior inside and outside the organization.
6) To establish and maintain cordial relations between employees and management.
7) To reconcile individual/group goals with organizational goals.
Fundamental of management for Engineers & SM504MS

TALENT MANAGEMENT

What is talent?: According to Mckinsey, talent is the sum of person‘s ability, intrinsic gifts, skills,
knowledge, experience, intelligence, judgment, attitude, character, ability to learn and grow.

Talent Management, as the name itself suggests is managing the ability, competency and power of
employees within an organization. The concept is not restricted to recruiting the right candidate at
the right time but it extends to exploring the hidden and unusual qualities of your employees and
developing and nurturing them to get the desired results. Hiring the best talent from the industry
may be a big concern for the organizations today but retaining them and most importantly,
transitioning them according to the culture of the organization and getting the best out of them is a
much bigger concern.

Talent Management in organizations is not just limited to attracting the best people from the
industry but it is a continuous process that involves sourcing, hiring, developing, retaining and
promoting them while meeting the organization‘s requirements simultaneously. For instance, if an
organization wants the best talent of its competitor to work with it, it needs to attract that person
and offer him something that is far beyond his imagination to come and join and then stick to
the organization. Only hiring him does not solve the purpose but getting the things done from him
is the main task. Therefore, it can be said that talent management is a full-fledged process that not
only controls the entry of an employee but also his or her exit.

We all know that it‘s people who take the organization to the next level. To achieve success in
business, the most important thing is to recognize the talent that can accompany you in achieving
your goal. Attracting them to work for you and strategically fitting them at a right place in your
organization is the next step. It is to be remembered that placing a candidate at a wrong place can
multiply your problems regardless of the qualifications, skills, abilities and competency of that
person. How brilliant he or she may be, but placing them at a wrong place defeats your sole
purpose. The process of talent management is incomplete if you‘re unable to fit the best talent of
the industry at the place where he or she should be.
Fundamental of management for Engineers & SM504MS

The concept, Talent Management (TM) refers to the forecasting and planning of required human
capital for an organization. The term was coined by McKinsey & Company. TM is an
organization‘s ability to recruit, retain, and produce the most talented employees available in the job
market. Talent consistently uncovers benefits in the critical areas such as revenue, customer
satisfaction, quality, productivity, cost, cycle time, and market capitalization.

Talent Management is the process of creating a high quality, highly engaged workforce by hiring,
retaining, deploying, and engaging talent at all cadres and it has been the source of generating
inimitable competitive advantage for the organization. Since the talent is a scarce resource, it must
be managed effectively and efficiently.

According to Bersin, TM is defined as the implementation of integrated strategies or systems

designed to improve processes for recruiting, developing, and retaining people with the required
skills and aptitude to meet current and future organizational needs.

Merits of Talent Management

1) Employee Motivation: A survey conducted by Chandler and Macleod revealed that about 90%
of employees wanted more than just money to feel engaged and motivated. And TM can
motivate such people as it recognized the talent.
2) Higher level business performance as it attracts top talent: The very reason of existence of
TM is attracting the top talent. So it is obvious to result in higher level of business performance.
3) No problem in critical roles: An organization will have a continuous flow of employees to fill
critical roles if TM is adapted. This ensures smooth running of operations and clients and
stakeholders are satisfied.
4) No burden to employees: Since the roles are fixed, the employees are not overburdened, which
eventually lead to happy employment.
5) Increased employee performance: Identified ‗good fit‘ employees, exhibition of talents are
embedded in organizational strategy. This reduces performance management issues and
grievances.
6) Less employee turnover: As long as talent is recognized, the top talent within the organization
tends to stay longer. Thence, it will ensure less employee turnover.
Fundamental of management for Engineers & SM504MS

7) Engaged employees: As there is fair process for development, employees feel more engaged
which in turn increases retention rates and there will not be any fear of employee
retrenchments.
8) Reduced cost of recruitment: The employee retention leads to reduced requirements so, an
organization saves on recruitment and performance management costs in the long run.
9) Higher client satisfaction: When systems are more integrated, client satisfaction rates are
usually higher, since they are dealing with less people and their needs are met faster.
10) Strong and trusted organization culture: The successful organizations like Apple, Google
have a strong organization cultures whose employees do not just work for a pay-cheque, but for
sharing and caring of their talents.

TALENT MANAGEMENT MODEL

Talent management can include; talent acquisition (and recruitment), learning and development,
organizational values and vision, performance management, career pathways and succession
planning.

While there are many talent management models, the elements of talent management can generally
be categorized into five areas; planning, attracting, developing, retaining and transitioning.
Fundamental of management for Engineers & SM504MS

1. Planning: Prior to developing the workforce plan, an evaluation of previous initiatives, an

assessment of the workforce profile and talent performance and the behaviors to date, are carried
out. A workforce plan is then developed based on the current workforce situation and the future
desired state. The workforce plan ensures that the right people, at the right time and with the right
skills are employed and working towards the strategy. In other words, the workforce plan translates
business strategy into organisational talent needs. The planning stage of talent management is
comprised of 3 key areas.

1. Understanding the organisational/business strategy

2. Evaluation and measurement/analytics
3. Developing a Workforce Plan

2. Attracting: Organizations that understand what their value is to potential employees, will often
develop an Employee Value Proposition (EVP). The EVP articulates to employees a realistic, yet
aspirational statement of the value the organisation can offer to an employee. An example EVP
from Hubspot is:

―We‘re building a company people love. A company that will stand the test of time. So we invest in
our people, and optimize for your long term happiness‖. Attracting Involves:

1. Employee Value Proposition

2. Marketing
3. Talent acquisition
4. Consultants/Freelancers

3. Developing: Development of talent can include; leadership development, emerging leaders,

technical development, team building or team development days, project work and on the job
development. Developing Involves:

1. On-boarding
2. Performance Appraisals/Management
3. Learning and Development
4. Capability frameworks
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5. Career pathways

4. Retaining: Culture is a continuous commitment and can be changed over time. This then ties
into how attractive an organisation is to potential candidates, and retention rates of current
employees as well as to how well the organization‘s clients are dealt with and therefore business
performance overall.

Based on the workforce plan, an organisation can identify what their remuneration strategy must be,
in order to attract and retain the talent they require to achieve business goals. Talent management
involves the strategic use of recognition and rewards and is usually tied to identification of high
performers and high potentials, as well as critical and highly specialized roles.

The importance of retaining top talent is critical because it can save on additional recruitment costs
associated with hiring new employees, it can also save on the time it takes for a new employee to
learn the job and start performing. Retaining Involves:

1. Culture
2. Remuneration strategy

5. Transitioning: Succession planning is part of the workforce plan, and can take place prior to
talent acquisition, however it can also be done when there have been unexpected changes in the
workforce. Succession planning is a proactive measure and takes into account the amount of time
required to develop talent for a particular role, or to bring someone in externally. It will usually
involve the assumption that a particular role will become vacant within the next few years, either
because of retirement, the nature of the role having high turnover, or it being a stepping stone type
of role.

During the analysis of the workforce profile, if an ageing workforce is identified, appropriate
measures would be put in place to plan ahead for retirement of such talent. This could be in the
form of transition contracts, such as working part-time for several years, or taking on different
responsibilities for health reasons (if required). Again, having this knowledge in advance to talent
retiring, means that as an employer, an organisation can be proactive and plan ahead for
Fundamental of management for Engineers & SM504MS

gaps in critical roles that will become available and can also support their employees in planning
ahead for their future. Transitioning Involves:

1. Succession planning

2. Internal mobility

3. Retirement

4. Knowledge management

5. Exit interviews

STRATEGIC HUMAN RESOURCE PLANNING

In order to improve the strategic alignment of staff and other resources, it‘s essential to understand
how a strategic HR planning process works. At its most basic level, strategic human resources
planning ensures adequate staffing to meet your organization‘s operational goals, matching the right
people with the right skills at the right time.

It‘s important to ask where your organization stands currently and where it is going in order to
remain flexible. Each company‘s plan will look slightly different depending on its current and
future needs, but there is a basic structure that you can follow to ensure you‘re on the right track.
Fundamental of management for Engineers & SM504MS

1. Mission: A mission statement defines what business the organization is in, including why it
exists and who its customers are.
2. Strategic goals/objectives: Set by senior management to establish targets for the
organization to achieve. Generally defined for the next 5-20 years.
3. Assess current HR: Gap or SWOT (Strengths-Weaknesses-Opportunities-Threats) analysis
determines what is needed to meet objectives. HRM determines what knowledge, skills and
abilities are needed by the organization‘s human resources.
4. Determining the Demand for Labor: A human resource inventory can be developed to
project year-by-year estimates of future HRM needs for every significant job level and type.
Forecasts must be made of the need for specific knowledge, skills and abilities.
5. Predicting the Future Labor Supply: A unit‘s supply of human resources comes from
new hires - contingent workers transfers - individuals returning from leaves.
6. Matching Labor Demand and Supply: For employment planning, compare forecastsfor
demand and supply of workers.
7. Recruitment or Removal: if demand exceeds supply, recruit the employees. If supply
exceeds demand, remove the employees.

RECRUITMENT

It is the process of finding and attracting capable applicants for employment. The process begins
when new recruits are sought and ends when their applications are submitted. The result is pool of
applicants from which new employees are selected.

Prior to initiating a recruitment procedure, the following matters should be considered:

1. Clarification of the scope and skill sets required to successfully perform the duties of the
position

2. Review of the Job Fact Sheet or Position Description to ensure that the skills and abilities
required coincide with the current expectations of the position. If they do not, then a
position evaluation should be undertaken.

3. Review of the compensation available to the position (i.e. salary and benefit plans, etc.)
Fundamental of management for Engineers & SM504MS

4. Analysis of the impact that the hiring will have on the budget.

SELECTION

The process of identifying the most suitable persons for the organization is called selection. The
main purpose of selection is to choose the right person for the right job. The job analysis, job
description, and job specifications are carried out before the position is advertised. These provide
adequate insight about nature of the job, its description, and its specifications, and further focus on
what type of person is to be selected for a given position.The selection of a candidate with the right
combination of education, work experience, attitude, and creativity will not only increase the
quality and stability of the workforce, it will also play a large role in bringing management
strategies and planning to fruition.

Selection process involves the following stages:

1. Initial screening/Short listing

2. Comprehensive application/bio data screening
3. Aptitude or written rests
4. Group discussion
5. Personal interviews
6. Medical examination
7. Employment offer letter
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TRAINING AND DEVELOPMENT

Meaning of Training: Training is short-term process of utilizing systematic and organized

procedure by which the staff acquires specific technical knowledge and functional skills for a
definite purpose. The focus of training is the job or task. Training means organized activity aimed
at imparting information/instructions to improve the recipients‘ performance.

Methods of Training:

A) On-the job training methods: It is learning by physically doing the work. The focus
here is to provide specific skills in a real situation. These methods include:

1) Job instruction training: This is a method used for such jobs which can be performed with
relatively low skill. Here, the trainees systematically acquire skills by following routine
instructions in key processes from a qualified instructor.

2) Experiential learning (Learning By Doing): This is a modern approach to the learning

process. This method is more used for training the senior executives. It is a technique, which
empowers the manager-trainee with the freedom of choice to act upon and the capacity to
initiate, rather than simply respond, to circumstances.

3) Demonstration: Here, the work procedures are demonstrated to the trainees. Each of the
trainees is asked to carry out the work, on a sample basis, based on his/her observation and
understanding of the demonstration.

4) Apprentice training: It is a combination of on the job and class-room training wherein the
workers get the knowledge about job in the class-room and then they are required to perform
the same in the work place for a brief period ranging from three months to one year, depending
upon the complexity of the training.

B) Off-the job training methods: provide a relatively broad idea relating to a given job or task.
These are meant for developing an understanding of general principles, providing background
knowledge, or generating an awareness of comparative ideas and practice. These methods include:
Fundamental of management for Engineers & SM504MS

1) Lectures/talks and class room instructions: These techniques are designed to

communicate specific interpersonal, technical, or problem-solving skills. Here, the trainer
can maintain a tight control over learning. However, this method restricts the trainee's freedom
to develop his/her own approaches to learning.

2) Conferences: Conferences refer to get-together of the experts from different areas of a given
topic. These experts present their views based on their work experience and research results.
When employees participate in such events they get a feel of the real world.

3) Seminars: Seminars are held periodically by the professional organisations for the benefit of
all the practicing managers by taking into consideration the recent advances in a specialized
area.

4) Team discussions: This technique develops team spirit among the executives from different
departments. It also enables them to understand and appreciate each other's problems.

5) Case study: This technique helps to provide an understanding of what has gone wrong in a
particular case, such as Kingfisher Airlines(Vijay Malya) case. Similarly, what are the factors
responsible for the success of organizations such as Reliance or Hindustan Lever. Case study
technique is a very good method of learning the principles and concepts.

6) Role-playing: The participants are assigned roles and are asked to react to one another, as
they would do in their managerial jobs. These roles are eventually exchanged.

7) Programmed instruction: It is a system of instruction within which pre-established subject

matter is broken into small, discrete steps and carefully organized into logical sequence in
which, it can be learned by the trainee. Each step is built upon the previous one. The
programmed instruction techniques can be in the form of programmed tests and manuals, or
video displays.

For instance, withdrawal of money through automatic teller machines (ATMs) involves
responding to programmed instructions; working on a personal computer or internet involves
responding to a series of programmed instructions.
Fundamental of management for Engineers & SM504MS

8) Simulation exercises: Simulate means to do or make something that looks real but is not
real. Simulation is the process of designing a model of a real system and conducting a series of
repeated trial and error experiments with this model for the purpose of understanding the
system. These exercises include interactive exercises in which trainees practice their skills on
working models or in mock situations based on real-life situations.

9) Group decision-making: Group decision-making refers to the process of making decisions

based on the opinions expressed by all the concerned — may be subordinates, peers, or outside
consultants.

Meaning of Development: Lot of time, training is confused with development; both are different
in certain respects yet components of the same system. Development implies opportunities created
to help employees grow. It is more of long term or futuristic in nature as opposed to training, which
focus on the current job. It also is not limited to the job avenues in the current organisation but may
focus on other development aspects also. Many organisations choose certain employees
preferentially for programs to develop them for future positions. This is done on the basis of
existing attitude, skills and abilities, knowledge and performance of the employee. Most of the
leadership programs tend to be of this nature with a vision of creating and nurturing leaders for
tomorrow.

The major difference between training and development therefore is that while training focuses
often on the current employee needs or competency gaps, development concerns itself with
preparing people for future assignments and responsibilities.

PERFORMANCE APPRAISAL

Performance appraisal is the process of measuring and evaluating the performance or

accomplishments."Performance appraisal is the systematic description of an employee's job relevant
strengths and weaknesses.―

In a Performance appraisal, the employee's merits such as initiative, regularity, loyalty, personality,
etc., are compared with others. Then each employee is rated or ranked. That is, he is given a
particular rank such as First Rank, Second Rank, etc. So if an employee has the best attendance then
he is given First Rank in attendance and so on.
Fundamental of management for Engineers & SM504MS

Why should we appraise the performance?.-

1. To assess the employee's present level of performance

2. To identify the strengths or weaknesses of individual employee

3. To provide feedback to the employee so that he can improve his/her performance

4. To provide an objective basis for rewarding the employees for their performance

5. To motivate those employees who perform

6. To check and punish those employees who fail to perform

7. To identify the gaps in performance, and thus, assess training and development needs

8. To provide a basis for many other decisions such as fixation of incentives or increment,
regularization or confirmation of the services of the employee, promotion, transfer or demotion.

Methods of Performance Appraisal

1. Ranking method: Ranking Method is simplest, oldest and most conventional method of merit
rating. In this method, a list is prepared for ranking the workers in order of their performance so that
an excellent employee is at the top and the worst at the bottom. This technique is used in enterprises
where there are few workers.

Example: If there are ten workers in the working group, the most efficient worker is ranked as
number one and the least efficient worker is ranked as number ten.

2. Paired comparison method: Here, every employee is compared with all others in a particular
cadre in the department. By comparing each pair of employees, the rater can decide which of the
employees is more valuable/better to the organization. The maximum number of pairs is obtained by
the below formula:

Where N = Total No. of employees to be evaluated.

Fundamental of management for Engineers & SM504MS

For example, if there are 4 employees, the total number of pairs will be 4(4-1)/2 = 6.

Example: If there are 4 employees to be compared, A‘s

performance is first compared with B to determine who has better
performance, then, A is compared with C and D and performance is
recorded. Later, B is compared to C and D since he has been
already compared with A. Afterwards, C is
compared with D. These comparison results are tabled and rank is assigned to each employee.
There are 6 comparisons (or pairs) among A,B,C,D employees.

3. Rating scale: A rating scale is a set of factors designed to elicit information about a
quantitative or a qualitative attribute. Under rating scale, certain features like analytical ability,
cooperativeness, dependability, job knowledge etc are selected for evaluation. The employees are
given grades according to the judgment of the rater. The grades may be such as A-Outstanding, B-
Very good, C- Good, D-Average etc. The actual performance of every employee is rated with
various grades in the mind of the rater.

4. Forced distribution method: Some evaluators suffer from a constant error i.e., either they rate
all workers as good, average are poor. They don‘t evaluate the employees properly. This system
minimises rater‘s bias so that all employees are not equally rated. This system is based on the
presumption that all employees can be divided into 5 categories i.e., Poor, Below average, Average,
Good and Excellent. The main aim in this system is to spread ratings in a number of grades. It is
useful only when the group of employees is large. The rater may be asked to rate all the employees
as follows:

Poor 10%, Below average 20%, Average 40%, Good 20%, Excellent 10%.

5. Narrative or essay method: In this method, the supervisor writes a detailed description about the
employee‘s performance, output, behaviours and traits etc. according to his perception. He may
include in his report the strengths, weaknesses, and potential of the employee.
Fundamental of management for Engineers & SM504MS

6. Management by objectives (MBO): Management by objectives (MBO) is a tool for

performance management. The MBO technique requires the supervisor and the employee to
develop and agree on realistic, achievable and measurable objectives; to determine how those
objectives will be met; and to agree on how results will be measured. In a true MBO plan, strategic
objectives are established for the organization and are then broken into divisional and departmental
objectives, and finally into individual objectives. In this method, actual performance is evaluated.

JOB EVALUATION

Job evaluation is an assessment of the value of various jobs on the basis of qualifications and skills
required. It is the process of establishing the value/worth of jobs in a job hierarchy. The objective of
job evaluation is to determine which jobs should get more pay than others. Job evaluation begins
with job analysis and ends at that point where the worth of a job is ascertained for achieving pay
equity between jobs.

The process of job evaluation may be divided into the following stages:

1. Job Analysis: What is a job?:- A job is described as a collection of tasks assigned to a position
in an organization structure.

What is Job Analysis?:- Job Analysis is the process of studying and collecting information
relating to the operations and responsibilities of a specific job. The immediate products of this
analysis are job description and job specification.

Job analysis is the systematic study of jobs to determine what activities and responsibilities they
include, their relative importance in comparison with other jobs. The personal qualifications
necessary for performance of the jobs and the conditions under which the work is performed.

2. Job Description: Job Description is a list of job‘s duties, responsibilities, reporting relationship,
working conditions, and supervisory responsibilities.
Fundamental of management for Engineers & SM504MS

Job Description contents:

➢ Job Title
➢ Location
➢ Job summary
➢ Duties
➢ Machine tools etc
➢ Material etc
➢ Supervision
➢ Working condition
➢ Hazards

3. What is Job Specification: Job specification is a list of job‘s ―human requirements‖ that is,
the requisite education, skills, personality and so on.
Job Specification contents:
➢ Education
➢ Experience
➢ Training
➢ Initiative
➢ Physical effort
➢ Responsibilities
➢ Communication skills
➢ Emotional characteristics
➢ Attitude

LABOUR TURNOVER

What is Labour Turnover?:- It refers to the number of employees leaving the organization as
against the total number of employees on the pay roll per year. It is measured in terms of percentage
as follows:
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INDUCTION (ORIENTATION)

The main idea of this function is to share the information about the facts of the company with the
new employee so that they feel proud of their association with the company. At the time of getting
inducted into the organization, the personnel manager provides orientation to the new employees
about the profile of the organization, its business, its departments, and their job. This process is also
called orientation or indoctrination because the new recruits are taught a particular belief or attitude
with the aim that they would only accept that belief or attitude exclusively.

PLACEMENT

What is Placement?:- After training, the employee is placed in his/her position under the charge of
a manager. Placement is a process of assigning a specific job to each of the selected candidates. It
involves assigning a specific rank and responsibility to an individual. It implies matching the
requirements of a job with the qualifications of the candidate.

The personnel manager is to administer promotion/demotion or transfer among the workforce as per
the needs of the organization.
Fundamental of management for Engineers & SM504MS

LEADERSHIP

Leadership is a process of influencing, encouraging, motivating and helping an individual or a

group towards organizational goals. Effective leadership is necessary for inspiring the people to
work for the accomplishment of objectives. It provides a cohesive force which holds the group
intact and develops a spirit of cooperation. Chester Bernard viewed leadership as the quality of
behavior of individuals whereby they guide people and their activities. A leader interprets the
objectives of the people working under him and guides them towards achievement of those
objectives. He also creates and sustains enthusiasm among them for superior performance.
Leadership is a group phenomenon which means an interaction between two or more people.

In the words of Louis A. Allen, ―A leader is one who guides and directs other people. He gives
the efforts of his followers a direction and purpose by influencing their behavior‖.

John C.Maxwell defines ― a leader is one who knows the way, goes the way, and shows the way‖.

Leadership is the process of influencing the subordinates so that they cooperate enthusiastically in
the achievement of group goals. In other words, leadership is the process by which an executive
imaginatively directs, guides, and influences the work of others in choosing and attaining specified
goals by mediating between the individuals and the organization in such a manner that both will
obtain maximum satisfaction.

Characteristics of Leadership

An analysis of the above definitions reveals that leadership as a managerial process has the
following characteristics:

1. Leadership is a process of influence: Leadership is a process whose important ingredient is the

influence exercised by the leader on the group members. A person is said to have an influence over
others when they are willing to carry out his wishes and accept his advice, guidance and direction.
Successful leaders are able to influence the behavior, attitudes andbeliefs of their followers.

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2. Leadership is related to a situation: When we talk to leadership, it is always related to a

particular situation at a given point of time and under a specific set of circumstances. That means
leadership styles will be different under different circumstances.

3. Leadership is the function of stimulation: Leadership is the function of motivating people to

strive willingly to attain organizational objectives.

LEADERSHIP STYLES

Leaders can be differentiated into good or bad based on the styles they adopt or how they choose to
influence their followers. A leader is not only to plan, organize, lead and control but also consider
human element in the followers. A good leader has to adopt such a style of working that takes care
of people around him. There are also some leaders who do not care for people and who care more
for the task completion. Based on use of authority the leadership styles can be classified as follows:

1. Autocratic or Authoritarian Leadership Style: Under the autocratic leadership style, all
decision-making powers are centralized in the leader, as with dictator leaders. They do not
entertain any suggestions or initiatives from subordinates and almost top-down approach is
seen.

➢ Leaders are more dogmatic and positive.

➢ They don‘t allow any participation.
➢ They are authoritarian in their approach.
➢ They are concerned with the task and tell followers what to do and how to do it.
➢ High degree of dependency on the leader.
➢ There is one way communication.
➢ May be valuable in some types of business where decisions need to be made quickly
and decisively.

Advantages Disadvantages
1. It provides strong motivation and reward 1. People in the organization dislike it
to manager. especially when it is strict and the
motivational style is negative.
2. Employees lack motivation frustration,
2. It permits very quick decisions. low morale and conflict develops in the
organization.

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3. Less competent subordinates also have 3. There is more dependence and less
scope to work in the organization. individuality in the organization.

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2. Democratic or Participative Leadership Style: It is also called as democratic, consultative or

idiographic leadership style. In this style the manager decentralizes his decision-making
process. Instead of taking unilateral decision he emphasizes consultation and participation of his
subordinates. He can win the cooperation of his group and can motivate them effectively and
positively.
➢ Leaders consult subordinates and involve them in decision making.
➢ They encourage discussion with group.
➢ They believe in two-way communication.
➢ They listen to followers
➢ Followers are involved in the process of planning and execution of the work.

Advantages Disadvantages
1. Complex nature of organization requires as
1. Employees are highly motivated. through understanding of its problems
which lower-level employees may not be
able to do.
2. The productivity of employees is very 2. Some people in the organization want
high. minimum interaction with their
3. Subordinates share the responsibility 3. Some leaders may use this style as a way
with the superior and try to of avoiding responsibility.

3. Free-rein Leadership: A free-rein leader does not lead, but leaves the group entirely to itself as
shown in the following figure. In this style, manager once determines policy, programmes, and
limitations for action and the entire process is left to subordinates group members perform
everything and the manager usually maintains contacts with outside persons to bring the
information and materials which the group needs.
The following figure shows the spectrum of a wide variety of leadership styles moving from a
very authoritarian style at one end to a very democratic style at the other end, as suggested by
Tannenbaum and warren H.schmidt.
➢ Also called Laissez-Fair leadership style.
➢ These leaders exercise little authority and give maximum freedom to subordinates
while making decisions.
➢ It is bottom-up approach.
➢ They give high freedom of independence to the subordinates in their operations.
➢ Suggestions from the followers are encouraged and rewarded.
➢ Here, the role of the leader is to aid the operations of the followers.

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THEORIES OF LEADERSHIP

Trait Leadership

According to this theory, people are either born or are made with certain qualities that make them
excel in leadership roles. Traits such as vision, confidence, resilience, agility, hard work, physical
and mental endurance, empathy, creativity, intelligence, accountability, sense of responsibility,
values, flexibility and adjustment, extraversion, conscientiousness, openness to experience, self-
efficacy (confidence to excel) etc, determine who is a leader. Since personality trait measurement
was not reliable across studies, there was always search for better and measureable approach to
leadership. This gave rise to behavioral theory of leadership.

Bevioural Leadership

The study of the actions, or behaviors, that define a leader is known as behavioral leadership. First
developed by Robert Blake and Jane Mouton in 1964, this theoretical approach to understanding
leaders creates categories of styles, which are aligned with the actions the leader may take, or the
methods they use to reach their goals.

In this approach, the emphasis is on the actual behaviour and action of the leaders and not on their
traits or characteristics. In other words, this approach emphasises that strong leadership is the result
of effective role behaviour.

This approach states that the leader uses three skills to lead his followers. These skills are: technical
(refers to a person's knowledge of the process of technique), human (refers to ability to

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interact with people and conceptual (refers to manager's ideas which enable a manager to set up
models and design plans).

This approach assumes that a particular behaviour of a manager will make him a good leader while
its opposite would discard him as a leader. Determining goals, motivating employees for achieving
the goals, effective communication ability to interact effectively, building team spirit, etc. are the
functional behaviour of a successful leader.

This theory emphasises the point that the favourable behaviour of a leader provides greater
satisfaction to the followers and they recognise him as their leader. However, one limitations of this
approach is that a particular behaviour and action of a leader may be relevant and effective at a
particular point of time while at another, it may be irrelevant and ineffective. Thus, in this
approach, the 'time' factor which is a vital element has not been considered.

Several attempts have been made to identify the dimensions of leader behavior. The mostsystematic
and comprehensive studies in this direction were conducted in USA at Ohio State University and
University of Michigan during 1945-47.

Ohio State Studies: In 1945 the Bureau of Business Research at Ohio State University initiated a
series of studies on leadership. The main objective of the studies was to identify the major
dimensions of leadership and to investigate the effect of leader‘s behavior on employee behavior
and satisfaction.

Michigan Studies: These empirical studies were conducted slightly after WORLD WAR II by the
institute of Social Research at the university of Michigan. The purpose of these studies was to
identify styles of leadership behavior that results in higher performance and satisfaction of a group.

Situational Leadership

According to this theory, leadership is affected by a situation from which a leader emerges and in
which he works. In other words, the situation — the group, the problem and its environment — will
affect the type of leadership. An important aspect of this theory is the interaction between

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the group and its leader and the people tend to follow the person who is capable of fulfilling their
desires.

The leader recognizes his followers' desires and follows such methods (depending on the situation)
which satisfy them. The main trust of the situational theory is that the leadership style may be
effective under one situation and ineffective under the other. In other words, situational theory
emphasizes that there is no one best style of leadership universally applicable to all situations and
that the leader has to change his style of leadership from situation to situation. If the leader adopts
the same style under all situations, he may not be successful. For example, Winston Churchill was
the most effective and successful Prime Minister of Britain during the period of the Second World
War, but he was a flop afterwards when the situation changed.

Though this theory states leadership ability of an individual in a given situation and measures his
leadership potentialities, it is silent on the point whether this individual will fit in another situation.

LEADERSHIP SKILLS

1. Communication: As a leader, you need to be able to clearly and succinctly explain to your
employees everything from organizational goals to specific tasks. Leaders must master all forms of
communication, including one-on-one, departmental, and full-staff conversations, as well as
communication via the phone, email, and social media.

2. Motivation: Leaders need to inspire their workers to go the extra mile for their organization; just
paying a fair salary to employees is typically not enough inspiration (although it is important too).
There are a number of ways to motivate your workers: you may build employee self-esteemthrough
recognition and rewards, or by giving employees new responsibilities to increase their investment in
the company.

3. Delegating: Leaders who try to take on too many tasks by themselves will struggle to get
anything done. These leaders often fear that delegating tasks is a sign of weakness, when in fact it
is a sign of a strong leader. Therefore, you need to identify the skills of each of your employees,
and assign duties to each employee based on his or her skill set. By delegating tasks to staff
members, he can focus on other important tasks.

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4. Positivity: A positive attitude can go a long way in an office. You should be able to laugh at
yourself when something doesn't go quite as planned; this helps create a happy and healthy work
environment, even during busy, stressful periods. Simple acts like asking employees about their
vacation plans will develop a positive atmosphere in the office, and raise morale among staff
members. If employees feel that they work in a positive environment, they will be more likely to
want to be at work, and will therefore be more willing to put in the long hours when needed.

5. Trustworthiness: Employees need to be able to feel comfortable coming to their manager or

leader with questions and concerns. It is important for you to demonstrate your integrity —
employees will only trust leaders they respect. By being open and honest, you will encourage the
same sort of honesty in your employees.

6. Creativity: As a leader, you have to make a number of decisions that do not have a clear
answer; you therefore need to be able to think outside of the box.

Learning to try nontraditional solutions, or approaching problems in nontraditional ways, will help
you to solve an otherwise unsolvable problem. Most employees will also be impressed and inspired
by a leader who doesn't always choose the safe, conventional path.

7. Feedback: Leaders should constantly look for opportunities to deliver useful information to
team members about their performance. However, there is a fine line between offering employees
advice and assistance, and micromanaging. By teaching employees how to improve their work and
make their own decisions, you will feel more confident delegating tasks to your staff.

8. Responsibility: A leader is responsible for both the successes and failures of his or her team.
Therefore, you need to be willing to accept blame when something does not go correctly. If your
employees see their leader pointing fingers and blaming others, they will lose respect for you.
Accept mistakes and failures, and then devise clear solutions for improvement.

9. Commitment: It is important for leaders to follow through with what they agree to do. You
should be willing to put in the extra hours to complete an assignment; employees will see this
commitment and follow your example. Similarly, when you promise your staff a reward, such as

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an office party, you should always follow through. A leader cannot expect employees to commit to
their job and their tasks if he or she cannot do the same.

10. Flexibility: Mishaps and last-minute changes always occur at work. Leaders need to be
flexible, accepting whatever changes come their way. Employees will appreciate your ability to
accept changes in stride and creatively problem-solve.

LEADER AS A MENTOR AND COACH

Mentoring is most often defined as a professional relationship in which an experienced person (the
mentor) assists another (the mentee) in developing specific skills and knowledge that will enhance
the less-experienced person‘s professional and personal growth.

Coaching is a form of development in which a person called a coach supports a learner in

achieving a specific personal or professional goal by providing training and guidance. The learner
is sometimes called a coachee.

In today‘s fast-changing world a command and control leadership style will not sustain the
adaptable, fast-developing and creative workforce needed for success. Instead, the leader who
mentors and coaches, both on-the-job and formally, empowers, develops and supports others to
succeed. Everyone deserves a great leader. And great leaders are great mentors and coaches.
Without great leader (mentor & coaches), employee performance and therefore organizational
performance fails. It‘s true on any scale, from individual employees, to high-performance teams, to
business units or functions, even entire organizations. All rely on mentoring and coaching to
optimize performance. Leaders have a vastly influential role to play in optimizing employees‘
performance. To a very large extent, leaders‘ mentoring and coaching skills can help employees‘
performance flourish or erode.

A leader‘s role as a mentor and a coach is as below:

1. Mentor helps protégé through tutoring, coaching, guidance, emotional support.

2. Coaching helps improve performance.
3. Many people can play role of mentor.

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4. Mentor can be informal relationship or with mentor assigned by the company.

5. Shadowing (following around) can be good for mentoring.
6. A Mentor will openly share personal experiences that contributed to their growth and
development.
7. Invest the time to listen to the plans of the Mentee.
8. Develop a plan to work together during a set period of time.
9. Mentor often assumes the role of Advocate for the Mentee as Mentoring can helpimprove
career development.
10. Coaching helps employees make the most of their potential and performance capabilitiesby
developing skills competence

LEADERSHIP DURING ADVERSITY AND CRISIS

An important role of the leader is to help the group deal with adversity and crisis. Adversity and
crises may take such forms as a downturn in business, a sudden surge in workload that workers
perceive as overwhelming, hurricanes, fire damage, a massive product recall, and workplace
violence.

The accompanying management in action gives an example of leading during crisis created by a
natural disaster. Almost all the principles and techniques of leadership would be helpful during
difficult times, but here I am pinpointing ten behaviors and actions that are particularly relevant for
a leader dealing with adversity and crisis.

1. Make tough decisions quickly: the best accepted principle of crisis leaderships that the leaders
should take decisive actions to remedy the situation. Ran Sargent became CEO of office
supplies retailer Staples one week before the September 11, 2001, terrorist attacks and in the
midst of a recession.

2. Serve as a model by being resilient: Effective managerial leaders are resilient. They bounce
back quickly from setbacks such as budget cuts, demotions, and terminations. Leadership
resiliency serves as a positive model for employees at all levels when the organization confronts
difficult times. During such times, effective leaders sprinkle their speech with clichés such as
―Tough times don‘t last, but tough people do‖ or ―when times get tough, the

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tough get going‖. Delivered with sincerity, such messages are inspirational to manyemployees
and may help stabilize morale.

3. Present a plan for dealing with adversity or crisis: a key part of managing a crisis well is to
present a plan for dealing with the crisis while at the same time behaving in a calm and
reassuring manner.

4. Appear confident and trustworthy: Group members must trust that the leader or leaders
can deal with the crisis. Trust can be attained by communicating openly, honestly, and often
about the crisis. In dealing with a crisis, it is helpful for the leader to project confident body
language, such as appearing relaxed while delivering the crisis plan.

5. Focus on the future: Part of being visionary is focusing on the future when the present is filled
with difficulty. The leader of a software company might tell the group that technology
investment has dipped for the present but that companies will soon recognize that they cannot
compete well in the long run if they don‘t upgrade their information technology soon. A bold
move to focus on the future is to get into the scavenger mode.

6. Communicate widely about the problem: when tough times hit, it pays to increase
communication about the problems facing the company or unit and discuss what might be done
to improve the situation. Communicating with workers throughout the organization gives them
an opportunity to provide leadership. In one company, a technician suggested focusing more on
servicing existing equipment than on attempting to sell news equipment during the recession.
Communicating with customers and their customers can bring forth useful information about
how long the tough times will remain. The business can be reconfigured to meet the new reality,
such as finding the least painful ways to cut costs.

7. Change to meet changing circumstances: A bold leadership move is to change the thrust of a
company‘s activities to adapt to changing circumstances.

8. Stick with constructive core values: leaders who keep their company or division focused on
core values are likely to endure difficult times. Neglecting core values to help overcome
adversity can create permanent damage. For example, A well known underwear company

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decided to cope with lower sales volume by cutting costs on the manufacturing of men‘s

The lower cost briefs looked fine but they tore apart at the waistband after several washings. Word
spread quickly about the defective briefs, and company lost accountable with several major retail
chains. The core value compromised here was offering only high quality goods to the public.

9. Divide major problem into smaller chunks: Giver workers bits of the major problem to work
on so they feel less overwhelmed by the adversity facing them and the company. For example,
if the company is hurting for cash, one group of employees might search for items in the office
or factory that could be sold on an auction website. Another group of workers might search for
ways to reduce shipping costs by 10%. Other groups would be assigned different adversity-
fighting tasks.

10. Lead with compassion: crises can take a heavy emotional toll on workers. Compassionate
leadership encompasses two related sets of actions. The first is to create an environment in
which affected workers can freely discuss how they feel, such as group meeting to talk about
the adversity, crisis, or disaster. The second is to create an environment in which the workers
who experience or witness pain can find a method to alleviate their own suffering or that of
others.

TEAM LEADERSHIP

A team is a small number of people with complementary skills who are committed to a common
purpose, performance goals, and approach for which they are mutually accountable.

Leadership is a process whereby an individual influences a group of individuals to achieve a

common goal.

A team leader is someone who provides guidance, instruction, direction and leadership to a group
of individuals (the team) for the purpose of achieving a key result or group of aligned results. The
team leader reports to a manager (overseeing several teams). The team leader monitors the
quantitative and qualitative result that is to be achieved. The leader often works within the team, as
a member, carrying out the same roles but with the additional 'leader' responsibilities - as
opposed to higher level management who often have a separate job role altogether. In order for
a team to function successfully, the team leader must also motivate
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the team to "use their knowledge and skills to achieve the shared goals.". When a team leader
motivates a team, group members can function in a goal oriented manner.[1] A "team leader" is also
someone who has the capability to drive performance within a group of people. Team leaders
utilize their expertise, their peers, influence, and/or creativeness to formulate an effective team.

Skills for Team Leader

1. Ability to lead: The leaders should be trained on understanding salient issues related to
organizational vision, how to share it with this team members, inspire them to work in that
direction and there by achieve the same. They should be also be trained on how to motivate
their workforce so as to achieve the given targets. Since employees contribute better if they are
aware of their job responsibilities, instilling these insights among the employees is the primary
responsibility of the team leader.

2. Effective communication: Leaders need to be very strong and effective at communication.

They need to learn how to put their points across, share the company vision to their employees,
ensure that the daily targets are completed, see that office related issues are duly focused,
conduct meetings as per schedule.

3. Create and foster networking and interpersonal relationships: Today, the network is
often viewed as real strength of a team leader. Building and maintaining good relationships with
employees and other stakeholders including clients, investing time, emotion and effort to
maintain everlasting relationships is important.

4. Industry expertise: The team leaders trained to be a voice of authority that every stakeholder
expects. This expertise drives all key decisions. The team leaders should be good at evaluating
the given alternatives and analyze the feasibility and which alternative is a better solution.

5. Understanding the team needs: The team leader should be clear about the vital skills which the
team members need to perform at their best. Empower them to depute for training on these
skills. If necessary, the leaders should undergo training and certifications as required and also
encourage every member of the team to learn on a continuing basis.

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6. Trustworthiness: The team leaders should be trained to display integrity, honesty and fairness.
This is the only way of gaining the trust and respect from every stakeholder of the organization.
In turn, every member of the team should be very serious and display high degree of
commitment.

7. Adherence to schedules: The team leaders need to adhere to time schedules and this is oneof
the parameters to judge the efficiency of the team leaders. The team leaders should know their
how and where they are spending time, and to eliminate wasting time. They also need to guide
their team members where to invest the time and resources and contribute to profitability.

8. Commitment: Team leaders with high sense of commitment to business philosophy,

organizational vision can inspire their team members to perform better and demonstrate high
degree of commitment to customer service. Empathy and patience are two milestones to
show whether the team members and team leaders are committed or not. Successful team
leaders are those who often interact with their stakeholders, listen to customers, note their
complaints and suggestions and contribute to innovation and higher levels of customer
satisfaction.

9. Confidence and trust: Confidence begets trust and helps team leaders present themselves and
their company well. The team leaders should be trained to be decisive and confidence on the
task they take up particularly when there is high degree of uncertainty. If not, experimentation
at every stage may pull down the confidence levels among the team leaders.

10. Problem solving: The team leader must know how to solve problems for their team and
organization. The team leaders should focus more of their time to solve the problems and
inspire their members to involve themselves in handling issues of higher complexity and
quality.

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POWER

Power

There is no universally accepted meaning of power. Power has more diverse meanings than any
other concept in organizational behavior. In general, it refers to a capacity that one has to influence
the behavior of another so that the other person does something which would not be done
otherwise. Power is social trait that impacts everyone in an organization or society. Power is a
special kind of ability to make others to do what one wants them to do. Power enables one to do
something which one otherwise cannot do.

Max Weber, the famous Sociologist, defines power as ―the probability that one actor within a
social relationship will be in a position to carry out his own will despite resistance‖.

Sources of Powers

1. Legitimate Power : Legitimate power comes from position in an organizational hierarchy.

Legitimate power empowers the managers to reward or punish. The managers direct employees
as to what tasks they should perform, whom to work with, what resources can be made use of,
etc. like managers, the employees also have a legitimate power over their boss and co-workers
through legal and administrative rights. The employee may say no to hs boss if he perceives that
the work given is outside of the official responsibilities.
2. Reward Power : Senior managers have power to dispense organizational rewards such as pay,
promotion, time off, vacation, schedules, work assignments or benefits to those who achieve
targets and comply with organizational rules and regulations.
3. Coercive Power : This comes from ability to punish others who fail to reach targets, who fail
to comply with organizational rules and regulations. The managers at higher levels have power
to punish those who violate organizational norms. At times, this punishment may even extend to
dismissal. The poor performers will be weeded out.
4. Referent Power : Role model possesses this type of power. It is based on the charishma,
virtues, values, ethics and interpersonal skills of the power holder. They can influence the
people. Example: Soldiers fight in wars to defend the honour of the country; cinema stars,
politicians, etc.

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5. Expert Power : Because of the expertise one possesses, one can exercise expert power. One
can suggest solutions to the given problems. This type of power comes from knowledge, skills,
experience and information one possesses and accumulate over a long period of time. For
example a doctor has expert power on his patients.

HANDLING EMPLOYEE COMPLAINTS

When a complaint is made, a manager should follow these five steps:

1. Ask the employee to detail the complaint: Listen to the complaint carefully and objectively.
Get as much specific detail as possible. For example, if the employee is complaining about
sexual harassment, you would need to know exactly what happened, who was involved, the date
and time of the occurrence, where it occurred, under what circumstances, and if were there any
witnesses. If the employee is very vague, the problem may be different from what is initially
stated. Active listening and probing will often get at the real concerns.

2. Get agreement on the substance of the complaint: An employee‘s complaints may contain
both facts and opinions. Try to separate the facts (what actually occurred) from opinions (the
person‘s belief about what happened). For example, John may complain that he is unfairly being
assigned a disagreeable task; that‘s his opinion. To determine the facts, you will haveto review
the work assignments to find out how many times John was given that assignment and how
many times others were. Make as clear and simple a statement of the problem as possible and
have the employee agree that you understand his concern.

3. Ask the employee for suggested solutions: When it is clear exactly what the problem really is,
ask the employee how he or she thinks the problem could be resolved. The remedy suggested
may not be realistic or appropriate, but you need to be clear about what the employee wants.

4. Agree on a solution, or set up a schedule for further investigation: Sometimes a solution

will be obvious. In other cases, you will need to check on the facts and on your company
policies. You may need to check on company records, schedules, union contracts, personnel
rules and policies, previous decisions, and conduct further fact-finding conversations.

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5. Schedule a follow-up meeting: Agree to meet after a suitable interval to check on the
employee‘s satisfaction with the solution. Once an agreement has been made, follow through on
corrective action promptly and see that the employee carries out his or her part of the bargain,
too. If you delay in taking action, you may lose all the goodwill you've built in settling the
complaint or grievance.

HANDLING CUSTOMER COMPLAINTS

Complaints happen every day. When a customer complains, it is usually for a good reason or
genuine concern. They usually have made a purchase that did not meet their expectation—a
product, service, or maybe a combination of the two. In the customer service industry, we cannot
avoid complaints. We must take care of the customer by listening to the complaint, and resolving it,
to ensure a happy customer.

Here are few strategies that will help you handle a customer complaint in a smooth and professional
manner:

1. Listen to the customer: The customer complaints must be properly listened in order to
understand what makes the customer upset. The policies of the company with which the
customer is not comfortable should be analyzed. Listening should be done to understand the
problem before exploring how to sort out the problem.

2. Understand from the customer perspective: See from the customer point of view and look
into the problem with empathy.

3. Involve the senior manager: At times, the complaint could be that the frontline sales executive
has not responded correctly. In such a case, the senior managers need to interfere and examine
how the complaint can be sorted out.

4. Never fight with customer: Fighting with the customer may worsen the issue. So, discuss with
the customer in a calm and friendly manner and conduct an open discussion regarding the issues
complained of an d how they will be responded to. Defend your policies calmly and see that
never allow the conversation erode into an argument.

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5. Reach a solution: Some suggestions can be offered to solve the problem such as refund or
partial refund, discount coupons or offering an amicable solution so that the customer is fully
happy with the outcome. Most of the complaining customers will be loyal customers and hence
deal with the problem and offer them some compensation for their trouble.

6. Improve the service quality: Ensure that the complaints become a source of learning to
improve the service quality. Draft the terms and conditions more professionally and train the
employees to comply with all these provisions. Keep track of customer complaints and how
these are resolved over a period of time. If the complaints are less, it is an indication that the
quality of goods and services is satisfactory.

7. Thank the customer for complaining: Customers with complaints are always seen as trouble
makers and in reality this is not so. In fact, organizations should thank such customers for
giving you valuable insight into how to better serve all customers in the future.

8. Institute complaint handling teams: Keep complaint handling teams in place, discuss the
details of complaints in team meetings and make changes or adjustments in company policies or
customer service where needed. Institute a formal mechanism such as complaint handling teams
so that employees learn from the experience and further improve the service quality.

MOTIVATION

The word ‗motivation‘ has been derived from the word ‗motive‘ which means any idea, need or
emotion that prompts a man into action. Whatever may be the behavior of a man, there is some
stimulus behind it. Stimulus is dependent upon the motive of the person concerned. Motive can be
known by studying his needs and desires. Generally, different motives operate at different times
among different people and influence their behavior. The management should try to understand the
motives of individuals which cause different types of behavior.

Motivation is an effective instrument in the hands of a manager for inspiring the workforce and
creating a confidence in doing things effectively. By motivating the workforce, management creates
‘will to work’ which is necessary for the achievement of organizational goals. Motivation involves
getting the members of the group to perform effectively, to give their loyalty to the group and to
carry out properly the purpose of the organization.
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The following results may be expected if the employees are properly motivated:

1) The employees will cooperate voluntarily with the management and will contribute their
maximum towards the goals of the enterprise.
2) They will improve the skills and knowledge so that they are able to contribute to the growthof
the organisation. This will also result in increased productivity.
3) The rates of labor turnover and absenteeism among the workers will be low.
4) There will be good human relations in the organisation as friction among the workers and the
management will decrease.
5) The number of complaints and grievances will come down. Accident rate will also be low.
6) Contributes for the improvements in quality of products.

Definitions

McFarland has defined motivation as, ―Motivation refers to the way in which urges, drives,
aspirations, strivings or needs will direct, control or explain the behaviour of human beings‖.

Dubin has defined motivation as ―the complex of forces starting and keeping a person at work in an
organisation. Motivation is something that moves the person to action, and continues him in the
course of action already initiated‖.

TYPES OF MOTIVATION

1. Achievement Motivation: This motivation is driven by a desire to attain certain goals. An

individual with achievement motivation wishes to achieve objectives and advance up on the ladder
of success. Here, accomplishment is important for its own sake and not for the rewards that
accompany it. It is similar to ‗Kaizen‘ approach of Japanese Management. This motivation is more
important for professionals.

2. Affiliation Motivation: It is a drive to relate to people on a social basis. Persons with affiliation
motivation perform work better when they are appreciated and complimented for their favorable
attitudes and co-operation. This motivation is of greater use where money cannot be used to
motivate, especially minimum-wage employees and contingent professionals.

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3. Competence Motivation: It is the drive to be good at something, allowing the individual to

perform high quality work. Competence motivated people seek job mastery, take pride in
developing and using their problem-solving skills and strive to be creative when confronted with
obstacles. They learn from their experience. Specialists, like heart surgeons would feel motivated if
they get chances to operate upon unique cases.

4. Power Motivation: Some people are motivated by power. It is the drive to influence people and
change situations. Power motivated people create an impact on their organization and are willing to
take risk to do so. Oxygen may not keep them alive, but power can.

5. Attitude Motivation: Attitude motivation is how people think and feel. It is their self-
confidence, their belief in themselves, and their attitude to life. It is how they feel about the
future and how they react to the past. Good words and appreciation may motivate positive attitude
people but these may not motivate negative attitude people.

6. Incentive Motivation: It is where a person or a team reaps a reward from an activity. It is

―you do this and you get that‖, attitude. It is the type of rewards and prizes that drive people to
work a little harder. Most of the unorganized job workers get motivated when they are offered more
money. Ex: A father sys to his son, ―If you get first rank, I will buy a bike for you‖. A
manager says to his workmen, ―If you achieve your target, you would be rewarded with an
incentive‖.

7. Fear Motivation: This motivation is driven by fear. Fear motivation coercions a person to act
against will. It is instantaneous and gets the job done quickly. It is helpful in the short run.
Managers following Theory x come into this category. In Indian army, this kind of motivation is
very popular.

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RELATIONSHIP BETWEEN MOTIVATION AND PERFORMANCE

Motivated employees are the need of any organization for our changing work place. Motivated
employees are more productive so they always help organization to survive in every field. For a
effective managers it must to understand what type of motivates employees within the context
the perform in role. Motivating employees is most complex for example research suggested that as
employees‘ income increases money becomes less of a motivate also as employees get older
exciting work become more of a motivator.

Most of the organization believes to motivate their employees because it influences the employee‘s
performance by following way:-

1. Higher Productivity Levels

2. Lower Labour Turnover

3. Lower Absenteeism

4. Improve Quality with lees wastage

5. Greater Willingness to accept rather than resist change

6. Greater Willingness to contribute idea and take on responsibility

7. Employees Loyalty

It is seen that a employees performance has an impact on the organization's objective. And it is thus
imperative that every employee‘s performance should be managed. This process of performance
management includes group assessments and peer reviews. In recent time performance
management systems have become more essential because managers are under constant pressure to
get better progress and performance of their organization by motivating theiremployee.

Despite the motivation, it is necessary to briefly highlight the barriers that might affect the
performance of employee. These barriers may be improper estimation of competencies,
inappropriate performance goals, or lack of feedback about performance. There are some factors
which affect overall employees‘ performance.

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1. Internal Factors:- Those factors which are controlled and influenced by any organization are
called internal factors like job description and selection.

2. External Factors:-In external factors, an organization has little control or no control such as
demand for job or grading systems.

RELATIONSHIP BETWEEN MOTIVATION AND ENGAGEMENT

In general, motivation describes the force that compels people to act, or decide to take a specific
course of action. Motivation is an internal state that instigates, describes and maintains behaviour.
However, according to a University of Rochester study published in American Psychologist, not all
motivation is the same. For example, when employees are intrinsically motivated, they‘re
passionate about their work because they either really enjoy doing it , or they enjoy the pride and
satisfaction that comes from a job well done.

On the other hand, when employees are extrinsically motivated (Intrinsic motivation is the motive
that keeps individuals at tasks through its own inherent qualities), they‘re spurred to action by
external forces, which can be either positive or negative in nature. These employees typically act in
order to gain certain rewards (like time off or a bonus) or to avoid unpleasant circumstances (like an
angry boss or being terminated).

An ―engaged employee‖ is one who is fully absorbed by and enthusiastic about their work and so
takes positive action to further the organization‘s reputation and interests.

Employee engagement is actually the level of enthusiasm and dedication an employee feels toward
his or her job. To these engaged employees, it is far more than a pay cheque – it is the eagerness
towards their task that makes them passionate in their work, and this passion is often reflected in
their individual outcomes.

An engaged employee cares about their work and about the performance of the company, and they
want to feel that their efforts could make a difference. It is generally seen as an internal state of
mind; physically, mentally and emotionally that binds together the work effort, commitment and
satisfaction in an employee.

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Typically, engaged employees are intrinsically motivated (Extrinsic motivation is created by

external factors such as rewards and punishment, etc). They love what they do, strive to master new
skills and are enthusiastic about applying their talents. And there is a lot to be said for how an
engaged workforce can boost any company‘s bottom line.

Conversely, if your employees are extrinsically motivated, they more than likely need constant
prodding in order to produce. This approach may work for a short time, but it‘s unsustainable in the
long run. Not every task or project can be rewarded with cash or perks. In addition, if employees‘
sole source of motivation is fear-based – like fear of displeasing their manager or losing their jobs –
they can burn out quickly. In that case, what‘s left is a group of disillusioned, disengaged
employees who can impact the bottom line, too, but negatively.

THEORIES OF MOTIVATION

1. Elton Mayo’s Human Relations Theory

The behavioural scientists did not view the employees mechanically in work situation, but tried to
show that the employees not only have economic needs but also social and psychological needs
like need for recognition, achievement, social contact, freedom, and respect. Humanrelations school
regards business organization as a psycho-social system.

Professor George Elton Mayo (1880-1949) and his associates conducted a famous study on human
behaviour at the Hawthorne plant of the Western Electric Company from 1924 to 1932 and this
study formed the foundation of this school of management thoughts.

Hawthorne Experiments:

1. Lighting Experiments: These experiments were performed to find out the effect of different
levels of lighting on productivity of labour. The brightness of the light was increased and
decreased to find out the effect on the productivity of the test group. Surprisingly, the
productivity increased even when the level of lighting was decreased. It was concluded that
factors other than light were also important.
2. Relay Assembly Test Room Study: Under this test, two small groups of six female
telephone relay assemblers were selected. Each group was kept in separate rooms. From time
to time, changes were made in working hours, rest periods, lunch breaks, etc. They

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were allowed to choose their own rest periods and to give suggestions. Output increased in
both the control rooms. It was concluded that social relationship among workers, participation
in decision-making, etc. had a greater effect on productivity than working conditions.
3. Mass Interviewing Program: 21,000 employees were interviewed over a period of three
years to find out reasons for increased productivity. It was concluded that productivity can be
increased if workers are allowed to talk freely about matters that are important to them.

The basic hypotheses of this study as well as the basic propositions of the Human Relation
Approach are the following:

1. The social and psychological factors are responsible for workers' productivity and job
satisfaction. Only good physical working conditions are not enough to increase
productivity.
2. The informal relations among workers influence the workers' behaviour and
performance more than the formal relations in the organisation.
3. Employees will perform better if they are allowed to participate in decision-making
affecting their interests.
4. Employees will also work more efficiently, when they believe that the management is
interested in their welfare.
5. When employees are treated with respect and dignity, their performance will improve.
6. Financial incentives alone cannot increase the performance. Social and Psychological
needs must also be satisfied in order to increase productivity.
7. Good communication between the superiors and subordinates can improve the
relations and the productivity of the subordinates.
8. Special attention and freedom to express their views will improve the performance of
the workers.

The human relations approach is concerned with recognition of the importance of human
element in organizations. It revealed the importance of social and psychological factors in
determining worker‘s productivity and satisfaction. It is instrumental in creating a new image
of man and the work place. However, this approach also did not go without criticism. It was
criticized that the approach laid heavy emphasis on the human side as against the
organizational needs. However, the contribution of this approach lies in the fact that it advises
managers to attach importance to the human side of an organization.

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2. Needs Hierarchy Theory

This is the most widely known theory of motivation and was proposed by American psychologist
Abraham Maslow in his 1943 paper "A Theory of Human Motivation" and his subsequent book
"Motivation and Personality‖. Maslow put forward the idea that there existed a hierarchy of needs
consisting of five levels in the hierarchy. These needs progressed from lower order needs through to
higher level needs. People will try to satisfy their most important needs first. When a person
succeeds in satisfying an important need, he will then try to satisfy the next important need. Human
behavior is motivated in order to achieve certain needs.

A. Physiological Needs: Physiological needs are those required to sustain life, such as:
Air, Water, Food, Sleep, Clothing, Fire, etc.
According to Maslow's theory, if these fundamental needs are not satisfied then one will
surely be motivated to satisfy them. Higher needs such as social needs and esteem are not
recognized until one satisfies the needs basic to existence.
B. Safety Needs: Once physiological needs are satisfied, one's attention turns to safety and
security in order to be free from the threat of physical and emotional harm. Such needs
might be fulfilled by:
➢ Living in a safe area
➢ Medical insurance
➢ Job security
➢ Personal security
➢ Financial reserves

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According to the Maslow hierarchy, if a person feels threatened, needs further up the
pyramid will not receive attention until that need has been resolved.
C. Social Needs: These are also known as affiliation needs. Once a person has met the lower
level physiological and safety needs, higher level needs awaken. The first level of higher
level needs are social needs. Social needs are those related to interaction with others and
may include:
➢ Friendship
➢ Affection
➢ Family
➢ Intimacy
➢ Belongingness
➢ Belonging to a group
➢ Giving and receiving love
D. Esteem Needs: Once a person feels a sense of "belonging", the need to feel important
arises. Esteem needs may be classified as internal or external. Internal esteem needs are
those related to self-esteem such as self respect and achievement. External esteem needs are
those such as social status and recognition. Some esteem needs are:
➢ Self-respect
➢ Respect from others
➢ Achievement
➢ Attention
➢ Recognition
➢ Reputation
➢ Independence
➢ Status
➢ Dominance
➢ prestige
E. Self-actualization Needs: Self-actualization is the summit of Maslow's hierarchy of needs.
These needs indicate strong desire to achieve something. Suppose your desire is to become
an engineer in Google Company. This desire works as motivator to achieve your goal. It is
the quest of reaching one's full potential as a person. Unlike lower level needs,

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this need is never fully satisfied; as one grows psychologically there are always new
opportunities to continue to grow. Self-actualized people tend to have needs such as:
➢ Self-fulfillment
➢ Peak experiences
➢ Reaching full potential
➢ Seeking personal growth
3. Two - Factor Theory

Frederick Herzberg was a psychologist interested in the correlation between employee attitude and
workplace motivation. He wanted to find out what made people feel satisfied and unsatisfied when it
came to the workplace. After spending countless hours interviewing employees about what made
them feel both good and bad about their jobs, Herzberg developed a theory of workplace motivation
called the two-factor theory. The two-factor theory is based on the assumption that there are two
sets of factors that influence motivation in the workplace by either enhancing employee satisfaction
or hindering it. He identified two factors. Such as 1) Hygiene Factors 2) Motivators.

1) Hygiene Factors (Dissatisfiers):- No, I am not talking about the personal hygiene of
your co-workers, though that can certainly be questionable at times. Rather, Herzberg used
the term 'hygiene' to describe factors that cause dissatisfaction in the workplace, are
extrinsic (or independent of the work itself), and are linked to things such as

➢ Compensation/Salary – should be reasonable

➢ Job security
➢ Organizational/company policies – should be flexible
➢ Working conditions(breaks, hours, vacation)
➢ Quality of leadership
➢ Relationships between supervisors subordinates and peers (no conflict, no
humiliation)
➢ Fringe benefits (medical reimbursement etc.)

According to Herzberg, these factors do not motivate employees. However, when they are
missing or inadequate, hygiene factors can cause serious dissatisfaction. Just think about
how unhappy you would be in a job where you were underpaid, were in fear of

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losing your job, dealt constantly with gossip, lacked effective leadership, and were
surrounded by co-workers whom you despised. Hygiene factors are all about making an
employee feel comfortable, secure, and happy. When hygiene factors are not fulfilled, it
feels like something is missing or not quite right, kind of how you would feel if you couldn't
shower, brush your teeth, or wash your hands after using the bathroom.

2) Motivators (Satisfiers):- These are linked to employee motivation and arise from
intrinsic, or dependent, conditions of the job itself. Factors for satisfaction include

➢ Responsibility of work

➢ Job satisfaction

➢ Recognition

➢ Achievement

➢ Opportunities for growth

➢ Advancement/Improvement

➢ Awards and Rewards

Look at this scenario.

Imagine that you are working in an organization where you are provided poor working conditions
like a computer is not working properly, no ventilation, no AC, roof is leaking constantly etc. when
the working conditions are like this, you never seem to be able to catch up on your work because of
these conditions. You may feel dissatisfied with these conditions. These conditions will de-motivate
you towards work. Meanwhile, you are informed that you have been
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selected for an award for your best performance which you will be receiving in the annual day
meeting. However, you might be happy for a short a moment with this award which is a satisfier but
when you return to your office, these working conditions will demotivate you and you are unhappy.
According to Herzberg, hygiene factors are important to employees.

A manager must be sure to provide sufficient hygiene factors while at the same time building
satisfiers or motivators into employee jobs. In essence, hygiene factors are necessary to be sure a
subordinate is not dissatisfied, and satisfiers are needed to motivate an employee to work
towards higher level of performance.

4. Theory X and Theory Y

Theory X and Theory Y were first explained by McGregor in his book, 'The Human Side of
Enterprise,' and they refer to two styles of management – authoritarian (Theory X) and
participative (Theory Y).

If you believe that your team members dislike their work and have little motivation, then,
according to McGregor, you'll likely use an authoritarian style of management. This approach is
very "hands-on" and usually involves micromanaging people's work to ensure that it gets done
properly. McGregor called this Theory X.

On the other hand, if you believe that your people take pride in their work and see it as
a challenge , then you'll more likely adopt a participative management style. Managers who use
this approach trust their people to take ownership of their work and do it effectively by
themselves. McGregor called this Theory Y.

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The approach that you take will have a significant impact on your ability to motivate your team
members. So, it's important to understand how your perceptions of what motivates them can
shape your management style.

Douglas McGregor classified employees into two types.

1. X type of employees

2. Y type of employees

Theory X

Theory X (Labeled as Negative Theory) assumes that employees are naturally unmotivated and
dislike working, and this encourages an authoritarian style of management. According to this view,
management must actively intervene to get things done. This style of management assumes that
workers:

➢ Employees are inherently lazy. Dislike working.

➢ Avoid responsibility and need to be directed.

➢ Have to be controlled, coerced, forced, and threatened to deliver what's needed.

➢ Need to be supervised at every step, with controls put in place.

➢ Need to be enticed to produce results; otherwise they have no ambition or motivation to

work.

➢ prefer to be led

➢ Are self centered and does not care about organizational goals.

Theory Y

Theory Y (Labeled as Positive Theory) shows a participation style of management that is de-
centralized. It assumes that employees are happy to work, are self-motivated and creative, and
enjoy working with greater responsibility. It assumes that workers:

➢ People are willing to work; work can be as natural as play and rest

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➢ Take responsibility and are motivated to fulfill the goals they are given.

➢ Seek and accept responsibility and do not need much direction.

➢ are capable of self-direction and creativity

➢ Are committed to the objectives of the organization

➢ Consider work as a natural part of life and solve work problems imaginatively.

5. Vroom’s Expectancy Theory

Victor Vroom developed the expectancy theory of motivation. This has been an alternative
approach to the above needs theory disapproves the need-based behaviour of individuals. On the
other hand, it suggests that individuals are motivated to act in a certain way because they strongly
expect that particular action will lead to a desirable result. According to this theory,

Motivation = Valence x Expectancy

Where,

Valence is strength of an individual‘s desire for a particular outcome. Valence may vary from -1 to
+1. Valence is negative if the individual has no strong preference to the outcome. Valence is
positive, if the individual has the strong preference to the outcome. Valence is zero, if the individual
is indifferent to the outcome. The valence of the individual must be positive, if motivation were to
take place.

Expectancy is the probability that a particular action will lead to a desired result. Expectancy refers
to the belief that an effort will lead to completion of a task. The value of expectancy varies between
0 to 1. If an employee sees no chance that effort will lead to the desired performance, the
expectancy is zero. On the other hand, if the employee is confident that the task will be completed,
the expectancy has a value of 1.

6. Alderfer’s ERG Theory

Clayton Alderfer proposed an extension of Maslow‘s theory of hierarchical needs called the ERG
theory. The five types of needs given by Maslow are merged into three groups of core needs whose
first letters are abbreviated to form an acronym ERG. The three types of core need are:

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a) Existence Needs: Existence needs are concerned with basic material existence requirements.
The physical and safety needs of Maslow‘s theory are grouped up and considered as existence
needs. These needs are most essential that every human being requires. Alderfer considers both
the fundamental needs such as food water, shelter and the safety needs such s safety of assets,
personal safety, job security etc. Are essential needs for existence.
a) Relation Needs: Relation needs, the second group of need are concerned with behavioural
needs such as the desires, relationships, friendships and affiliations etc. The social and status
(ego) needs of Maslow‘s theory are considered as relational needs. People need to interact with
others if they are to be satisfied. According to Alderfer, these have alignment with Maslow‘s
theory with internal component of social needs and external component esteem needs.
b) Growth Needs: Alderfer considers growth needs as an intrinsic desire and are directed to
personal development. To describe these needs he broke down Maslow‘s need into different
parts and generated lot of needs. These need include the intrinsic component from Maslow‘s
esteem needs and the self-actualization needs.

According to Alderfer, as a person grows, the existence, relatedness, and growth for all desires also
continue to grow. All these needs should be fulfilled to greater wholeness as a human being.

FINANCIAL AND NON-FINANCIAL INCENTIVES

The personal manager has to formulate rewards or incentives which adequately satisfy the
employees, these rewards can be of two types:

Financial Incentives

1) Compensation based on performance: When the performance exceeds the given standard, the
employee is said to be better in terms of piece rate, sharing profits, or bonus. The incentives the
individual employee receives from time to time reflect some performance measures such as
individual productivity, team or group productivity or overall organization profit for given
period.

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2) Compensation based on competency: Under this method, the pay and rewards are designed based on the
competency of the employees. Competency is judged based on one‘s leadership skills, trouble-shooting
strategies etc.
3) Stock options: Under this method, employees are given shares in the company in which they work. The
potential growth in the market price of the share is the incentive to keep employees working in the
company. This practice is perceived to develop, among the employees, a sense of loyalty to their
organization.
4) Rewards: Rewards are individual incentives intended to reward individual performance. These include
merit pay, time saving bonus, and commission.
5) Group bonus: Where the employees tasks are interdependent and thus require cooperation, group
incentives such as group bonus make a lot of difference.

Non - Financial Incentives

1) Consultation: Today, most of the successful companies are those which invite participation from their
employees on strategic issues such as working environment, introduction of changes, and so on. When
management consults the employees for their opinions, the employees feel motivated.
2) Team work: Here the work force is organized into small groups or teams who work together. A line
manager may have one or more such groups and brief them regularly. There is a spirit of competition
among the groups. Each group tries to outperform the other. In the process, the employees feel highly
motivated.
3) Quality circles: Quality circle is a body of employees who meet from time to time under the guidance of
a supervisor to discuss way and means to improve the quality of the product and services of the
organization.
4) Job security: When the employee is assured of the security of his job, he feels safer and this provides him
adequate incentive to perform better.
5) Job enrichment: Here, the employees are given grater scope in deciding how the tasks should be
performed. In other words, they are allowed to assume increased responsibility for planning and self-
evaluation.
6) Job rotation: Doing the same job for year together may create boredom for the employee. To overcome
this problem, the employee is given a different job, may be in the same department or in a different one.
7) Flexi-time: Flex-time is a method of organizing the working hours for the employees in such a way so
as to provide greater flexibility in choosing their own working hours.
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INTRODUCTION TO CONTROL

Control is any process that guides activity towards some predetermined goals. Thus control can be applied in
any field such as price control, distribution control, pollution control, etc. However, control as an element of
management process can be defined as the process of analyzing whether actions are being taken place as
planned and taking corrective actions to make these to conform to planning. Thus control process tries to find
out deviations between planned performance and actual performance and to suggest corrective actions
wherever these are needed.

Definitions:

Terry defines control as “Controlling is determining what is being accomplished, that is evaluating the
performance and, if necessary, applying corrected measures so that the performance takes place according to
plan.”

Koontz and O’Donnel define control as “Control is measurement and correction of the performance of
activities of subordinates in order to make sure those enterprise objectives and plans devised to attain them
are being accomplished”.

CHARACTERISTICS OF EFFECTIVE CONTROL SYSTEM

1. Accuracy: Effective controls generate accurate data and information. Accurate information is essential for
effective managerial decisions. Inaccurate controls would divert management efforts and energies on
problems that do not exist or have a low priority and would fail to alert managers to serious problems that do
require attention.

2. Timeliness: There are many problems that require immediate attention. If information about such
problems does not reach management in a timely manner, then such information may become useless and
damage may occur. Accordingly controls must ensure that information reaches the decision makers when
they need it so that a meaningful response can follow.

3. Flexibility: The business and economic environment is highly dynamic in nature. Technological changes
occur very fast. A rigid control system would not be suitable for a changing environment. These changes
highlight the need for flexibility in planning as well as in

control. Strategic planning must allow for adjustments for unanticipated threats and opportunities. Similarly,
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managers must make modifications in controlling methods, techniques and systems as they become
necessary. An effective control system is one that can be updated quickly as the need arises.

4. Acceptability: Controls should be such that all people who are affected by it are able to understand them
fully and accept them. A control system that is difficult to understand can cause unnecessary mistakes and
frustration and may be resented by workers. Accordingly, employees must agree that such controls are
necessary and appropriate and will not have any negative effects on their efforts to achieve their personal as
well as organizational goals.

5. Ease of understanding: Guidelines, standards and information systems must be simple to comprehend so
that they are easily understood by one and all. This ease of understanding helps the concerned employees to
follow guidelines and standards without difficulty and ambiguity.

6. Economic feasibility: The cost of a control system must be balanced against its benefits. The system must
be economically feasible and reasonable to operate. For example, a high security system to safeguard nuclear
secrets may be justified but the same system to safeguard office supplies in a store would not be
economically justified. Accordingly the benefits received must outweigh the cost of implementing a control
system.

7. Strategic placement: Effective controls should be placed and emphasized at such critical and strategic
control points where failures cannot be tolerated and where time and money costs of failures are greatest. The
objective is to apply controls to the essential aspect of a business where a deviation from the expected
standards will do the greatest harm. These control areas include production, sales, finance and customer
service.

8. Corrective action: An effective control system not only checks for and identifies deviation but also is
programmed to suggest solutions to correct such a deviation. For example, a computer keeping a record of
inventories can be programmed to establish ―if-then guidelines. For example, if inventory of a particular
item drops below five percent of maximum inventory at hand, then the computer will signal for
replenishment for such items.

9. Emphasis on exception: A good system of control should work on the exception principle, so that only
important deviations are brought to the attention of management, In other words, management does not have
to bother with activities that are running smoothly. This will ensure that managerial attention is directed
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towards error and not towards conformity. This would eliminate unnecessary and uneconomic supervision,
marginally beneficial reporting and a waste of managerial time.

10. Forward looking: Control system should provide early information regarding the future changes and
should forecast what would happen in the coming month or year.

TYPES AND STRATEGIES FOR CONTROL

1. Feed Forward Controls: Feed forward controls, sometimes called preliminary or preventive controls,
attempt to identify and prevent deviations in the standards before they occur.

➢ Feed forward controls focus on human, material, and financial resources within theorganization.
➢ These controls are evident in the selection and hiring of new employees. For example, organizations
attempt to improve the likelihood that employees will perform up to standards by identifying the
necessary job skills and by using tests and other screening devices to hire people with those skills.

2. Concurrent Controls: Concurrent controls monitor ongoing employee activity to ensure consistency with
quality standards. These controls rely on performance standards, rules, and regulations for guiding employee
tasks and behaviors. Their purpose is to ensure that work activities produce the desired results.

➢ As an example, many manufacturing operations include devices that measure whether the items being
produced meet quality standards. Employees monitor the measurements; if they see that standards are
not being met in some area, they make a correction themselves or let a manager know that a problem
is occurring.

3. Feedback Controls: Feedback controls involve reviewing information to determine whether performance
meets established standards.

➢ For example, suppose that an organization establishes a goal of increasing its profit by 12 percent next
year. To ensure that this goal is reached, the organization must monitor its profit on a monthly basis.
After three months, if profit has increased by 3 percent, management might assume that plans are
going according to schedule.

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Fig: Types of control STEPS IN

CONTROL PROCESS

Control is a continuous process. It is not applied when be everything else is done. There may be some in-built
controls in the exercise of managerial techniques. In spite of this, there may be a difference in standards to be
achieved and actual performance. This may be due to human limitations. Some control methods may have to
be applied to improve performance.

There are four steps in control process:

1. Setting of Control Standards: Every enterprise plans its activities in advance. On the basis of plans,
the objectives and goals of every department, branch, etc. are fixed. These, goals are converted into quantity,
value, man hour etc. These are to be/achieved in future. There may also be qualitative goals. The
achievement of various targets is made the responsibility of specific persons. The levels of achievement are
also decided in advance. Whether a particular result is to be taken as satisfactory, average or poor should be
pre determined so that the persons responsible for that work should be able to assess their performance.

2. Measurement of Performance: The second step in controlling process is the measurement of

performance. The actual performance is measured against the standards set. This will enable management to
determine whether the work is being done according to plans or not. The measurement of quantitative
objectives is easy since figures of work done will be available. The qualitative performance such as human
relations, employee morale, etc. can only be measured

through psychological tests and surveys. If measurement is such that deviation is detected at the earliest then
it will enable appropriate action well in time. If that is not possible then deviations should be detected as early
as possible.

3. Comparing Actual and Standard Performance: The next step in control process is the comparison of
actual performance with the standards set.

The purpose of this comparison is:

(a) To find out deviations if any, and

(b) To determine the reasons for such deviation.

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While comparing actual performance with the standard, some permissible limits are also fixed. When the
deviations are within the prescribed limits then there is no cause for worry. But if the deviations are more
than the allowable limits then it calls for urgent action. This is also known as
„management by exception.‟ When things are going as per plans or within the allowable limits then top
management is not required to take any note of it. But on the other hand if performance is not up to the level
then it is brought to the notice of top management for taking corrective action. If the manager gives attention
to every deviation then he will not be able to give enough time for important things.

When the actual performance is not up to the level then causes for it should be pin-pointed. Necessary steps
are taken so that performance is not adversely affected once again. If no efforts are made to rectify the weak
areas then the whole control process will be futile. Whenever the performance is low than the standards, the
reasons for it should immediately be found.

4. Taking Corrective Action: The last but most important step in controlling process is of taking corrective
action. Whenever the performance is less than the standards, efforts should be made to rectify it. Whatever
the reasons for low performance, efforts are made to achieve organizational goals. No control process can
automatically rectify the mistakes in a system. It is the action which is required to set the things right,
sometimes the targets are not achievable even with more efforts then these will have to be revised. The
control action may involve review of plans and goals, change in the methods of work, change in the
assignment of task, change in

existing techniques of direction and change in organization structure. The corrective action generally involves
top management.

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Fig: Steps in control process BUDGETARY AND

NON-BUDGETARY CONTROLS

Budget

A budget is a plan expressed in quantitative and money terms. Budgets need to be prepared and approved in
advance of the period in which they are to be used. Budgets can include some or all of income, expenditure,
and the capital to be employed. Moreover, a budget can be drawn up for an entire organization, any segment
of the organization such as a department or sales territory or division, or for a significant activity such as the
production and sale of a specific product. In most cases budgets are prepared for the forthcoming financial
year and further for the convenience these are usually divided into shorter intervals (mostly in months). This
facilitates to check the actual results with the prepared budget, and any deviations between the two can be
evaluated and corrected.

BUDGETARY CONTROL

Budgeting is the process of preparing budgets and „budgetary control‟ is the technique of managerial

control through budgets. Budgetary control is the process of determining various actual results with budgeted

figures for the enterprise for the future period and standards set then

comparing the budgeted figures with the actual performance for calculating variances, if any. First of all,
budgets are prepared and then actual results are recorded.

The comparison of budgeted and actual figures will enable the management to find out discrepancies and
take remedial measures at a proper time. The budgetary control is a continuous process which helps in
planning and co-ordination. It provides a method of control too. A budget is a means and budgetary control is
the end-result.

Budgetary control involves the follows:

(a) The objectives are set by preparing budgets.

(b) The business is divided into various responsibility centers for preparing various budgets.

(c) The actual figures are recorded.

(d) The budgeted and actual figures are compared for studying the performance of differentcost centers.
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(e) If actual performance is less than the budgeted norms, a remedial action is takenimmediately.

Types of Budgets

There are many types of budgets. Budgets are formulated based on the purpose and what we want to plan
and control. Here are the types of budgets.

1) Production Budget: This budget explains how much volume of each type of product is produced for the
given period. This becomes the base for the production manager to plan his operations.

2) Sales Budget: The organization may have sales mix of different products and how much will be the sales
for each product or service is outlined here.

3) Advertisement Budget: This budget speaks about the funds allotted for print media, electronic media,
sales promotions through hoardings, direct sales, etc. The marketing manager has to plan his sales
promotion activities within the framework set by this budget.

4) Labour Hours Budget: How may labour hours are required for a product to be finished?. How may
hours are required from skilled labour, unskilled labour and semi-skilled labour?. This budget is a bible
for the production manager and he plans his production schedules accordingly.

5) Machine Hours Budget: Different machines may be required to be coordinated to produce a finished
product. This budget specifies the number of hours required to be utilized from each machine. This
budget is a bible for the production manager and he plans his production schedules accordingly.

6) Overhead Budget: Fixed overheads and variable overheads are planned for different departments here.

7) Space Budget: The space is a costly issue and it is necessary to use the limited space in an optimum way.
Which department requires what space, which facility requires what area are outlined here.

8) Materials Budget: There could be different types of materials used in the factory. This budget specifies
the requirements of different materials and it is purchase manager‟s responsibility to provide for the
quantities as outlined in this budget.

9) Cash Budget: This is a statement of receipts and payments for a given future period. It shows clearly
during what period there is deficit or surplus. Accordingly, the manager can plan for investing the surplus
DEPT of EEE, NRCM B.Sirisha Assistant professor
Fundamental of management for Engineers & SM504MS

funds or borrowing from bank when there is a deficit.

10) Capital Expenditure Budget: This shows how much funds are allocated for acquiring different long
term investment proposals such as purchase of plant and machinery, land and buildings etc.

11) Master Budget: This is an overall budget which summarizes and integrates different individual budgets
within the organization.

12) Flexible Budget: For different levels of capacity of production, the flexible budget shows what expenses
change in proportion to the volume of production and what expenses remain fixed throughout. This
budget is also called variable budget.

13) Zero Based Budgeting: Budgets are more or less a marginally to moderately to significantly revised
version of the last year budgets and more often there is tendency to take forward the previous years‟
assumptions and presumptions. In zero based budgeting, the current year‟s requirements are seen from
the fresh perspective. If they are important, they will be considered or otherwise, they are dropped. In
other words, the budget for each item starts from zero, costs are calculated afresh based on the
requirements for the budget period. It avoids the tendency of taking the previous data as base to work for
the future. If there is requirement, then only provisions are made otherwise, they are not considered. This
makes the managers to plan each program package afresh. The mistakes, if any, in the previous budgets
are not brought forward here.

NON-BUDGETARY CONTROL

Non-budgetary control devices support the successful functioning of the budgetary controlsystem. These
include the following:

1) Statistical data: Statistical analyses of innumerable aspects of a business operation and the clear
presentation of statistical data, whether of a historical or forecast nature are, of course, important to
control. Some managers can readily interpret tabular statistical data, but most managers prefer
presentation of the data on charts.
2) Special reports and analysis: Analytical reports and industry trends and patterns need to be prepared in
advance to provide a direction and guidance with the help of industry experts and specialists engaged for
the specific task.

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Fundamental of management for Engineers & SM504MS

3) Break- even point analysis: An interesting control device is the break even chart. This chart depicts the
relationship of sales and expenses in such a way as to show at what volume revenues exactly cover
expenses.
4) Internal audit: Another effective tool of managerial control is the internal audit or, as it is now coming
to be called, the operational audit. Operational auditing, in its broadest sense, is the regular and
independent appraisal, by a staff of internal auditors, of the accounting, financial, and other operations of
a business.
5) Network analysis: The Program (or Project) Evaluation and Review Technique, commonly abbreviated
PERT, is a is a method to analyze the involved tasks in completing a given

project, especially the time needed to complete each task, and identifying the minimum time needed to
complete the total project.
6) Standard costing and variance analysis: Standard costing is process of formulating material standards,
labour standards and overheads standards and verifying whether the actual expenses are within the given
standard are not. Where there is difference between the actual and standard expenses, it is called variance.
The manager‟s job is to ensure that the variances are reduced to minimum.
7) Ratio analysis: Ration analysis shows the relationship between two factors. Ratio analysis is a financial
analysis tool used to examine whether the liquidity, solvency or profitability of the enterprise are within
the acceptable standards or not.
8) Personal observation: Managers need to spend time by going around the department, speaking to the
employees so that they can get first-hand information about what is happening around. By going around
the departments, senior managers may come across many issues which cannot be put on paper but critical
in nature can be sorted out on time.

ESTABLISHING CONTROL SYSTEMS

The purpose of control systems is to achieve the goals and objectives of an organization with ease and at
least cost. The ultimate purpose of any system is that it should be „in control‟ instead of controlling people. It
also aims at assisting management in the coordination of the parts of an organization and the steering of those
parts toward the achievement of its overall purposes, goals and objectives.

1. Well-defined Objectives and Goals: The objectives and goals of the organisation should be crystal clear
and well-defined in the process of control. The organisational goals should be split into sub-goals at
departmental level. The operation of the various functions and their coordination should be vested in the

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Fundamental of management for Engineers & SM504MS

hands of the executives who are armed with sufficient authority or power to fulfill their responsibility. The
planned goals of the enterprise or of a particular department serve as a standard for performance
measurement.

2. Determination of Strategic Point of Control: The responsibility centers and strategic points of control
should be selected and fixed. To make the control process effective, the management should concentrate upon
strategic points only.

3. Establishment of Control Standards: These standards are established criteria against which actual
performance can be compared and measured in terms of money, time, physical units or some other index. The
object of predetermined standards is that comparison between actual performance and targets performance is
made possible.

4. Determination of Controllable Costs and Control Period: Optimum control does not mean excessive
control. Sometimes good results are achieved only if critical points are identified. Secret of good control is to
establish strategic points where corrective actions will be thecheapest and most effective.

5. Strengthening the Organisation: The complete framework of control is aimed at strengthening the
organisation. Planning is a prerequisite. Control should be tailored to fit the organisation. There should be a
system of checks on the managerial activity of subordinates. The organisation should be strengthened first to
overcome the weaknesses of deviations. Controls should incorporate sufficient flexibility in them so as to
remain effective despite the failure of plan.

6. Measurement of Performance: The evaluation of performance is very necessary. It involves the

measurement of performance in respect of work and in terms of control standards. In the opinion of Peter F.
Drucker, the measurement of performance must be clear, simple, rational, relevant and reliable. The
effectiveness of a control system depends upon the prompt reporting of past results to the persons who have
power to produce changes. The next step is to compare the performance with the planned standards. It is
important to determine the limits within which the variations can be held and still to be regarded within
control when performance is measured accurately. To assess whether actual performance is in accordance
with the target comparison with the standard has to be made and the variation is properly analysed to
understand the reason for the variation. The comparison should be done at frequent intervals so that
immediate corrective action could be taken.

DEPT of EEE, NRCM B.Sirisha Assistant professor

Fundamental of management for Engineers & SM504MS

7. Control Period: The proper control period is the shortest period of time in which management can
usefully intervene and in which significant changes in performance are likely. The period is different for
different responsibility centres and for different items within responsibility centres. Spoilage rates in a
production operation may be measured hourly or often.

The key cost element of the centre may be measured daily. Reports on overall performance, particularly those
going to the levels of management are often on a monthly basis and sometimes for quarterly or longer
intervals, since top management does not have either the time or the inclination to explore the local
temporary problems.

CONTROL FREQUENCY AND METHODS

It is understood that the organizational objectives are accomplished with the help of controls. But, now
the question is:

How frequently, these controls are to be employed?.

To answer this question, the manager should understand the controlling frequency and various techniques
based the frequency. With reference to control frequency, the control methods may be classified into three
categories as constant, periodic and sporadic control, which can be further divided as shown in the following
figure.

I. Constant Controls

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Fundamental of management for Engineers & SM504MS

Constant controls are continuous controls which are found to be three ways as follows:
1) Self-control: Employees take the advantage if the management is not observing andmonitoring
the performance. So, there is chance that employee may not perform their

job to the desired level. But, if a culture of self-control is established, then the controller‟s job
becomes a cakewalk. The management controlling techniques such as CC cameras, programmed
instructions, and strict imposition of the rules and regulations or fines/penalties/disciplinary
action, etc. may inculcate the self-control inthe employees.
2) Clan control: Clan control also referred to as group control is a form of human resources control
in which firms will depend largely on their norms and culture to ensure specific hehaviour.
Organizations that have teams depend on clan control.
3) Standing plans: Under this control, the organizations will develop and frame, rules, procedures
and policies in order to influence the employee behavior continual and predictable situations.
Standards are similar to standing plans that are in constant use.
II. Periodic Control
Periodic controls are used on a regular schedule basis such as once in a day, week or every fortnight or at
the end of the month or a quarter or year. Periodic control includes regular meetings and reports, budgets
and audits.
1) Regular meeting and reports: These can be in the form of written or oral. All organizations will
have regularly scheduled meetings with one or more workers in the organization to address and
discuss various issues like problems and progress. The frequency of these meetings may be daily,
weekly, or monthly.
2) Budgets: At the end of the every year, it is reworked for the next year. If any changes occur such
as overspending due to an increase in final cost, then a budget may require damage control.
3) Audits: There are two major types of audits: accounting auditing and management auditing. The
accounts department is supposed to maintain records of the organization‟s transactions and assets.
Internal auditors will check the accounting records periodically. The management audit examines
the organization‟s planning, organizing, leading and controlling functions for improvement.
III. Sporadic Control
Sporadic control means occasional control. Occasional controls are used on intermittent basis wherever
required.

1) Observation: In this control, mangers personally observe and interact with the employees as they
perform their jobs. Management by walking around is a proven method of personal observation to
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Fundamental of management for Engineers & SM504MS

improve performance.
2) Control by exception: In this principle, the control is left to the employees. If the employees
found any problems, they approach the manager for help. In order to reach the performance as per
the schedule, corrective actions are taken.
3) Special reports: If any problems are identified, then special reports are compiled by a committee
within the department/organization, or outside consultants who are specialized in that area. Such
reports are designed to identify the cause of a problemas well as solution.
4) Project controls: These controls are applied to unique and non-recurring projects. in this
controlling method, the manager develops a control system in order to make sure that the project
is completed on time. The planning tools such as PERT and Gantt Charts can be used as project
control method.

DEPT of EEE, NRCM B.Sirisha Assistant professor