Fundamental of Management For

Engineers For B. Tech. 5th Semester

(3rd Year) Packaging Department
Unit 3
Organisational Design and Structure
Concept of Organisation

Organisation is the backbone of management. Without efficient organisations, no management can

perform its functions smoothly. It means different things to different people. Cuurently, the following
uses of the term are popular:

• A group of people who are united by a common purpose

• An entity, an ongoing business unit engaged in utilising resources to create a result

• A structure of relationship between various positions in an enterprise

• A process by which employees, facilities and task are related to each other with a view to achieve
specific goals
Definition of Organisation
• According to Koontz and O Donnel: It is grouping of activities necessary to attain enterprise
objectives and the assignment of each grouping to a manager with authority necessary to supervise
it.

• Louis A. Allen: The process of identifying and grouping the work to be performed, defining and
delegating responsibility and authority and establishing relationship for the purpose of enabling
people to work more effectively together in accomplishing objects.

• Joseph L. Massive: The structure and process by which a cooperatives group of human being
allocates its tasks among its members, identifies, relationships and integrates its activities towards
common objectives.
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From the definitions, it is clear that

• organising is the process of determining the total activities to achieve a given objectives.

• Grouping and Assigning of activities to individuals

• Delegating them authority necessary to perform the activities assigned

• Establishing authority relationships among different positions in the organisation

Nature of Organisation
The term organisation is used in different senses. The ist sense is used to denote the process of
organising. In the second sense, it is used to denote the results of that process, namely organisational
structure. So the nature of organisation can be viewed in two ways:
• Organisation as a process
• Organisation as a structure or framework of relationship

Organisation as a process: It is an executive or managerial functions involving following activities:

• Determining activities necessary for accomplishment of the business objectives
• Grouping of interrelated activities
• Assigning duties to person with requisite competence
• Delegating authority
• Coordinating the efforts of different persons and groups
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Organisation as a structure:

As a structure organisation is a network of internal authority, responsibility relationships. It is

framework of relationship of persons operating at various levels to accomplish common objectives. It is
systematic combination of people, functions and physical facilities. Features of Organisation as a structure:
• Two or more person
• Common goals
• Cooperative efforts
• Division of work
• Communication
• Rules and regulation
• Paramedial shape
• People
• Resources
• Environment
Process of Organisation

• Clear definition of objectives

• Determining activities

• Assigning duties

• Delegating authority

• Coordinating activities

• Providing physical facilities and right environment

• Establishment of structural relationship for overall control

Objectives of Organisation
• Effective Management of the enterprise
• Maximum production at minimum cost
• Sustained growth and diversification
• Cooperation of employees
• Discharging social responsibility
• Enhance abilities
• Facilitate administration
• Stimulates creativity
• Facilitates coordination
Principles of Organisation
• Division of work
• Attention to objectives
• Span of Management
• Unity of command
• Flexibility
• Proper balance
• Management by exception
• Decentralisation
• Departmentation
• Efficiency
• Scaler principle
• Unity of direction
• Continuity
• Coordination
• Authority and responsibility
Organisational Structure

Organizational structure refers to the way that an organization arranges people and jobs so that its work can be performed
and its goals can be met. When a work group is very small and face-to-face communication is frequent, formal structure may be
unnecessary, but in a larger organization decisions have to be made about the delegation of various tasks. Thus, procedures are
established that assign responsibilities for various functions. It is these decisions that determine the organizational structure.

An organizational structure is a visual diagram of a company that describes what employees do, whom they report to, and how
decisions are made across the business. Organizational structures can use functions, markets, products, geographies, or processes
as their guide, and cater to businesses of specific sizes and industries.
Types of Organisational Structure
• Functional Organisational Structure: One of the most common types of organizational structures, the functional
structure departmentalizes an organization based on common job functions. An organization with a functional org
structure, for instance, would group all of the marketers together in one department, group all of the salespeople
together in a separate department, and group all of the customer service people together in a third department.

• The functional structure allows for a high degree of specialization for employees, and is easily scalable should the
organization grow. Also this structure is mechanistic in nature -- which has the potential to inhibit an employee's
growth -- putting staff in skill-based departments can still allow them to delve deep into their field and find out what
they're good at.

• Functional structure also has the potential to create barriers between different functions -- and it can be inefficient if
the organization has a variety of different products or target markets. The barriers created between departments can
also limit peoples' knowledge of and communication with other departments, especially those that depend on other
departments to succeed.
Product based divisional structure
A divisional organizational structure is comprised of multiple, smaller functional structures (i.e. each
division within a divisional structure can have its own marketing team, its own sales team, and so
on). In this case -- a product-based divisional structure -- each division within the organization is
dedicated to a particular product line.

This type of structure is ideal for organizations with multiple products and can help shorten product
development cycles. This allows small businesses to go to market with new offerings fast.

It can be difficult to scale under a product-based divisional structure, and the organization could end
up with duplicate resources as different divisions strive to develop new offerings.
Market based Divisional Structure
• Another variety of the divisional organizational structure is the market-based structure, wherein
the divisions of an organization are based around markets, industries, or customer types.

• The market-based structure is ideal for an organization that has products or services that are
unique to specific market segments, and is particularly effective if that organization has advanced
knowledge of those segments. This organizational structure also keeps the business constantly
aware of demand changes among its different audience segments.

• Too much autonomy within each market-based team can lead to divisions developing systems that
are incompatible with one another. Divisions might also end up inadvertently duplicating activities
that other divisions are already handling.
Geographical divisional structure
• The geographical organizational structure establishes its divisions based on -- you guessed it -- geography.
More specifically, the divisions of a geographical structure can include territories, regions, or districts.

• This type of structure is best-suited to organizations that need to be near sources of supply and/or
customers (e.g. for deliveries or for on-site support). It also brings together many forms of business
expertise, allowing each geographical division to make decisions from more diverse points of view.

• The main downside of a geographical org structure: It can be easy for decision- making to become
decentralized, as geographic divisions (which can be hundreds, if not thousands of miles away from
corporate headquarters) often have a great deal of autonomy. And when you have more than one marketing
department -- one for each region -- you run the risk of creating campaigns that compete with (and weaken)
other divisions across your digital channels.
Process based structure
• Process-based organizational structures are designed around the end-to-end flow of different processes, such as
"Research & Development," "Customer Acquisition," and "Order Fulfillment." Unlike a strictly functional structure,
a process-based structure considers not only the activities employees perform, but also how those different activities
interact with one another.

• In order to fully understand the diagram below, you need to look at it from left to right: The customer acquisition
process can't start until you have a fully developed product to sell. By the same token, the order fulfillment process
can't start until customers have been acquired and there are product orders to fill.

• Process-based organizational structure is ideal for improving the speed and efficiency of a business, and is best-
suited for those in rapidly changing industries, as it is easily adaptable.

• Similar to a few other structures on this list, process-based structure can erect barriers between the different process
groups. This leads to problems communicating and handing off work to other teams and employees.
Matrix Structure
Unlike the other structures we've looked at so far, a matrix organizational structure doesn't follow the traditional, hierarchical model.

Instead, all employees (represented by the green boxes) have dual reporting relationships. Typically, there is a functional reporting line

(shown in blue) as well as a product- based reporting line (shown in yellow).

When looking at a matrix structure org chart, solid lines represent strong, direct-reporting relationships, whereas dotted lines indicate

that the relationship is secondary, or not as strong. In our example below, it's clear that functional reporting takes precedence over

product-based reporting.

The main appeal of the matrix structure is that it can provide both flexibility and more balanced decision-making (as there are two

chains of command instead of just one). Having a single project overseen by more than one business line also creates opportunities for

these business lines to share resources and communicate more openly with each other -- things they might not otherwise be able to do

regularly.

The primary pitfall of the matrix organizational structure? Complexity. The more layers of approval employees have to go through, the

more confused they can be about who they're supposed to answer to. This confusion can ultimately cause frustration over who has

authority over which decisions and products -- and who's responsible for those decisions when things go wrong.
Circular structure
• While it might appear drastically different from the other organizational structures highlighted in this section, the
circular structure still relies on hierarchy, with higher-level employees occupying the inner rings of the circle and
lower-level employees occupying the outer rings. That being said, the leaders or executives in a circular
organization aren't seen as sitting atop the organization, sending directives down the chain of command. Instead,
they're at the center of the organization, spreading their vision outward.

• From an ideological perspective, a circular structure is meant to promote communication and the free flow of
information between different parts of the organization. Whereas a traditional structure shows different departments
or divisions as occupying individual, semi-autonomous branches, the circular structure depicts all divisions as
being part of the same whole.

• From a practical perspective, the circular structure can be confusing, especially for new employees. Unlike with a
more traditional, top-down structure, a circular structure can make it difficult for employees to figure out who they
report to and how they're meant to fit into the organization.
Flat or Organic Structure
• While a more traditional organizational structure might look more like a pyramid -- with multiple tiers of
supervisors, managers and directors between staff and leadership, the flat structure limits the levels of management
so all staff are only a few steps away from leadership. It also might not always take the form or a pyramid, or any
shape for that matter. As we mentioned earlier, It's also a form of the "Organic Structure“.

• This structure is probably one of the most detailed, It's also thought that employees can be more productive in an
environment where there's less hierarchy-related pressures. This structure might also make staff feel like the
managers they do have are more like equals or team members rather than intimidating superiors.

• If there's a time when teams in a flat organization disagree on something, such as a project, it can be hard to get
aligned and back on track without executive decisions from a leader or manager. Because of how complicated the
structure's design is, it can be tricky to determine which manager an employee should go to if they need approval or
an executive decision for something. So if you do choose to have a flat organization, you should have a clearly

marked tier of management or path that employers can refer to when they run into these scenarios .
Delegation, Authority and Responsibility
Authority is a king of right and power through which it guides and directs the actions of other so that
organisational goals can be achieved. The authority is vested in particular position, not to the person
because the authority is given by an institution. Authority is a legal power which is possessed by a
person from his superior officers and with the help of which he succeeds in getting the things done by his
sub-ordinates.

• “Authority is the right to give order and the power to exact obedience” (Henry Fayol).

• “Authority is the power to command, to act or not to act in a manner deemed by the possessor of the
authority to further enterprise or departmental performance” (Koontz and O’ Donnell).

In conclusion, authority empowers an individual to take decsions. He is given a right to command and to
exercise control over those who are responsible for the execution of policies and programmes of enterprise.
Factors for successful use of Authority
• Favourable Atmosphere
• Justified Behaviour
• Mutual Cooperation and faith
• Interest in the work
• Respect to superior

Sources of Authority:
Formal Authority Theory
Acceptance Theory
Competence Theory
Sources of power
It is a method of operating in order to influence the behaviour of others. It ma be defined as ability to
exert influence. If a person has power, it means that he is able to change the attitude of other
individuals.

John French and Berhram Raven have written five sources of power which are found at all levels of
the organisation. They are as follows:
• Legitimate power

• Reward Power

• Corrective power

• Referent power

• Expert power
Difference between ‘Authority and Power

• Right to Command

• Right to Exercise

• Positional and Legitimate

• Authority increases

• Authority relationship

• Authority a downward concept

• Delegation of authority
Delegation of Authority
Delegation means devolution of authority on subordinates to make them to perform the assigned
duties or tasks. Delegation consists of granting authority or right to decision making in certain defined
areas and charging the subordinate with responsibility for carrying through the assigned tasks.

F.G. Moore- Delegation means assigning work to others and gives them authority to do it.

Methods of Delegation:

• Administrative delegation

• Geographical delegation

• Functional delegation

• Technical delegation
Elements of delegation and its types
It involves three steps:

Authority: The superior grants authority to the subordinates to carry out the assigned task or duty.
It may includes right to use resources, spend money, engage people etc.

Responsibility: The superior entrust some responsibility or duty to a subordinate. It represent the
works or duties assigned to a person by virtue of his position in the organisation. It can be divided
into two parts: Operating responsibility can be delegated and Ultimate Responsibility can not be delegated.

Accountability: The last step in delegation is concerned with creating an obligation to carry out duty or
responsibility and render an account of the results achieved through the use of delegated authority. The
subordinate must be held accountable for the exercise of authority granted to him. By accepting the
duties and authority a subordinate becomes responsible to his superior.
Types of delegation
• General delegation

• Specific delegation

• Formal delegation

• Informal delegation

• Written delegation

• Unwritten delegation

• Downward delegation

• Upward delegation
Principles of delegation

• Proper planning

• Select appropriate subordinate of delegation

• Maintain purity of authority and responsibility

• Ensure unity of command

• Maintain adequate communication

• Reward effective delegation

• Establish a climate of confidence

• Establish a strong beliefs in delegation

• Proper selection and training of personnel

Centralisation and Decentralisation
• Centralization refers to the process in which activities involving planning and decision-
making within an organization are concentrated to a specific leader or location. In a
centralized organization, the decision-making powers are retained in the head office, and all other
offices receive commands from the main office. The executives and specialists who make critical
decisions are based in the head office.

• According to Allen, centralization is the systematic and consistent reservation of authority at

central points within the organization. In centralization, little delegation of authority is the
rule. Power and discretion are concentrated at the top levels. Control and decision making is
reside at the top levels of management.
 Advantages of Centralisation

A Clear Chain of Command: A centralized organization benefits from a clear chain of command
because every person within the organization knows who to report to. Junior employees know who
to approach whenever they have concerns about the organization. On the other hand, senior
executives follow a clear plan of delegating authority to employees who excel in specific functions.

Focused Vision: When an organization follows a centralized management structure, it can focus on
the fulfillment of its vision with ease. There are clear lines of communication and the senior
executive can communicate the organization’s vision to employees and guide them toward the
achievement of the vision. In the absence of centralized management, there will be inconsistencies in
relaying the message to employees because there are no clear lines of authority.
• Reduced Cost: A centralized organization adheres to standard procedures and methods that guide
the organization, which helps reduce office and administrative costs. The main decision-makers
are housed at the company’s head office or headquarters, and therefore, there is no need for
deploying more departments and equipment to other branches.

• Quick Implementation of Decision: In a centralized organization, decisions are made by a small

group of people and then communicated to the lower-level managers. The involvement of only a
few people makes the decision-making process more efficient since they can discuss the details of
each decision in one meeting. The decisions are then communicated to the lower levels of the
organization for implementation. If lower-level managers are involved in the decision-making
process, the process will take longer and conflicts will arise.
• Improved Quality of work: The standardized procedures and better supervision in a centralized
organization result in improved quality of work. There are supervisors in each department who
ensure that the outputs are uniform and of high quality. The use of advanced equipment reduces
potential wastage from manual work and also helps guarantee high-quality work. Standardization
of work also reduces the replication of tasks that may result in high labor costs.
Disadvantages of Centralisation
• Bureaucratic Leadership: Centralized management resembles a dictatorial form of leadership where
employees are only expected to deliver results according to what the top executives assign them.
Employees are unable to contribute to the decision-making process of the organization, and they are
merely implementers of decisions made at a higher level. When the employees face difficulties in
implementing some of the decisions, the executives will not understand because they are only decision-
makers and not implementers of the decisions.

• Remote Control: The organization’s executives are under tremendous pressure to formulate decisions
for the organization, and they lack control over the implementation process. The failure of executives to
decentralize the decision-making process adds a lot of work to their desks. The executives suffer from a
lack of time to supervise the implementation of the decisions. This leads to reluctance on the part of
employees. Therefore, the executives may end up making too many decisions that are either poorly
implemented or ignored by the employees.
• Delays in work: Centralization results in delays in work as records are sent to and from the head
office. Employees rely on the information communicated to them from the top, and there will be a
loss in man-hours if there are delays in relaying the records. This means that the employees will be
less productive if they need to wait long periods to get guidance on their next projects.

• Lack of employee loyalty: Employees become loyal to an organization when they are allowed
personal initiatives in the work they do. They can introduce their creativity and suggest ways of
performing certain tasks. However, in centralization, there is no initiative in work because
employees perform tasks conceptualized by top executives. This limits their creativity and loyalty
to the organization due to the rigidity of the work.
Decentralisation:

• Decentralisation is the systematic effort to delegate to the lowest levels all authority except
that which can be exercised at centre points. It is the pushing down of authority and power
of decision making to the lower levels of organisation. The centres of decision making are
dispersed throughout the organisation. Decentralisation is extension of concept of delegation and
can not exist unless authority is delegated. In decentralisation a great deal of authority is delegated
and more decision are made at lower level. It gives added responsibility to managers at all levels
below the top.

• As per Fayol, “Everything which goes to increase the subordinate role is decentralisation,
everything which goes to reduce it is centralisation”.
Types of Decentralisation
• Profit centres: Under profit centre decentralisation also known as responsibility centre, the organisation
is first divisionalised on a product basis, each division given the management and physical tools and
facilitate it needed to operate as an integrated and self-contained unit. Each division operates on a
competitive basis and order its own materials, schedules its operation and negotiate the sale of its finished
products. It is accountable for the profit it earns or loss it sustain.

• Cost/Expense Centres: Where it difficult to find out revenue with a unit but is relatively easy to
determine cost of operations cost centres are established.

• Investment Centres: It is common in multiproduct industries. In order to measure product performance,

decentralisation by investment centres is usually advocated and the managerial response-obligations
would include responsibilities for the acquisition, use, and disposition of fixed use resources.
Advantages of Decentralisation
• Reduce the workload

• Facilitates product diversification

• Individuals an opportunity to learn by doing

• Improved controls and performance measurement

• Quick decision making at lower levels

• Provide positive work climate

• Provide future executives

• Improvement of Morale

• Better utilisation of management

• Flexibility
Disadvantages of decentralisation

• Problem of coordination

• Increase the administrative expenses

• Increase the operational cost

• Lack of uniformity

• Unsuitable for small firms

• Reliance on managers

• Self centred attitude

• Problem of conflict
Organisational Culture
• Organizational culture is defined as the underlying beliefs, assumptions, values and ways of
interacting that contribute to the unique social and psychological environment of an organization.

• Organizational culture includes an organization’s expectations, experiences, philosophy, as well as

the values that guide member behavior, and is expressed in member self-image, inner workings,
interactions with the outside world, and future expectations.

• Organizational culture affects the way people and groups interact with each other, with clients, and
with stakeholders. Also, organizational culture may influence how much employees identify with
their organization.
• Organizational culture is the collection of values, expectations, and practices that guide and
inform the actions of all team members. Think of it as the collection of traits that make your
company what it is. A great culture shows positive traits that lead to improved performance, while
a dysfunctional company culture brings out qualities that can hinder even the most successful
organizations.

• Culture is created through consistent and authentic behaviors, not press releases or policy
documents. You can watch company culture in action when you see how a CEO responds to a
crisis, how a team adapts to new customer demands, or how a manager corrects an employee who
makes a mistake.
Types of Culture
• Organizational culture affects all aspects of your business, from punctuality and tone to contract
terms and employee benefits. When workplace culture aligns with your employees, they’re more
likely to feel more comfortable, supported, and valued. Companies that prioritize culture can
also weather difficult times and changes in the business environment and come out stronger.

Clan Culture: It is a "family-like" culture. People are friendly and respectful towards one
another, and leaders are seen as mentors. There's an emphasis on team-building and employee
involvement. Clan Culture organizations prioritize their Human Resources department, and
implement long-term HR approaches to encourage teamwork and inclusion. There's also a strong
emphasis on loyalty and tradition.
• Adhocracy Culture: This is an innovative, dynamic, and creative work environment. Above
all else, a Adhocracy Culture promotes freedom and individual innovation. Employees are
encouraged to experiment and offer new ideas, and leaders are seen as risk-takers. Ultimately, the
organization aims to grow and create new products. Their metric of success is whether they are
able to anticipate market needs and develop new solutions to meet that demand.

Apple is a good example of Adhocracy Culture -- Steve Jobs, Apple's founder, once said, "We hire
people who want to make the best things in the world." Apple puts an emphasis on invention and
creativity.
• Market Culture: A Market Culture emphasizes getting things done. There's a competitive nature
both among employees and even between leaders. Employees are motivated by rivalry and
reaching goals, and there's a steadfast focus on winning. Leaders are both hard drivers and rivals.
Ultimately, success is measured by market penetration and stock.

Oracle is a good example of Market Culture. Oracle's executive chairman and co-founder Larry
Ellison has said, “I’m addicted to winning. The more you win, the more you want to win.”
• The Hierarchy Culture: Strict institutional procedures are adhered to closely in a Hierarchy
Culture. A leader's job is primarily to ensure employees follow procedures correctly. In a
Hierarchy Culture, there's a strong emphasis on efficiency and uniformity. Ultimately, the
organization's goals revolve around smooth execution, results, and low costs. A Hierarchy Culture
relies on systematic problem-solving and process control to operate effectively.

Bureaucratic organizations like the Department of Motor Vehicles, or Burger King, are good
examples of a Hierarchy Culture. These organizations follow corporate procedures to ensure
consistency and results.
Elements of Organisational Culture
• Corporate culture is the collection of values, beliefs, ethics and attitudes that characterize an
organization and guide its practices. To some extent, an organization's culture can be articulated in its mission
statement or vision statement. Elements of corporate culture include:

• Organization Physical Environment

• Human Resource Management practices

• Staff work habits

• Corporate culture is also reflected in the degree of emphasis placed on various defining elements
such as hierarchy, process, innovation, collaboration, competition, community involvement and
social engagement.
Importance of Organisational Culture
• It defines your company’s internal and external
identity
• Organizational culture is about living your company’s
core values
• Your culture can transform employees into advocates
(or critics)
• A strong organizational culture helps you keep your
best people
• A well-functioning culture assists with onboarding
• Your culture transforms your company into a team
• Culture impacts performance and employee wellbeing
Organisational Climate
The concept of organizational climate was formally introduced by the human relationists in the late 1940s.
Now it has become a very useful metaphor for thinking about and describing the social system.
Organizational climate is also referred to as the “situational determinants” or “Environmental
determinants” which affect the human behavior.

Climate of an organization is somewhat like the personality of person. Just as every person has a personality
that makes him unique and different from others. Each organization has an organizational climate that clearly
distinguish it from other organization.

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. Thus, organisational
climate in a broad sense, can be understood as the social setting of the organisation.
Definition of organisational Climate
• “Climate in natural sense is referred to as the average course or condition of the weather at a place
over a period of years as exhibited by temperature, wind, velocity and precipitation.”

• However, it is quite difficult to define organizational climate incorporating the characteristics of

natural climate. This is so because the most frustrating feature of an attempt to deal with
situational variables in a model of management performance is the enormous complexity of the
management itself. People have defined organizational climate on the basis of its potential
properties. A few important definitions are as follows:

• 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.”
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• According to Campbell, “Organizational climate can be defined as a set of attributes specific to a
particular organization that may be induced from the way that organisation deals with its members
and its environment.

• Thus, organizational climate is a relatively enduring quality of the internal environment that is
experienced by its members, influences their behavior and can be described in terms of the
value of a particular set of characteristics of the organization. It may be possible to have as many
climates as there are people in the organization when considered collectively, the actions of the
individuals become more meaningful for viewing the total impact upon the climate and determining
the stability of the work environment. The climate should be viewed from a total system perspective.
While there may be differences in climates within departments these will be integrated to a certain
extent to denote overall organizational climate.
Features of Organisational Climate
• General Perception: Organizational climate is a general expression of what the organization is. It is the summary
perception which people have about the organization. It conveys the impressions people have of the organizational internal
environment within which they work.

• Abstract and Intangible concept: Organisational climate is a qualitative concept. It is very difficult to explain the
components of organisational climate in quantitative or measurable units.

• Unique and District identity: Organisational climate gives a distinct identity to the organisation. It explains how one
organisation is different from other organisations.

• Enduring quality: Organisational climate built up over a period of time. It represents a relatively enduring quality of the
internal environment that is experienced by the organisational members.

• Multi-dimensional concept: Organisational climate is a multi- dimensional concept. The various dimensions of

the organisational climate are individual autonomy, authority structure, leadership style, pattern of
communication, degree of conflicts and cooperation etc.
Dimension of Organisational climate
• Dominant Orientation: Dominant orientation of the organisation is an important determinant of climate and it
is the major concern of its members. If the dominant orientation is to adhere to established rules and
regulations, the climate is characterised by control. If the orientation is to produce excellence the climate will
be characterised by achievement.

• Inter-personal Relationship: The interpersonal relationships in the organisations are reflected in the way
informal groups are formed and operated. The informal groups may benefit the organisation also, but in some
cases it may displace the goals of the organisation.

• Conflict Management: In the organisation, there can always be inter-group as well as intra group conflicts.
The organisational climate will depend upon how effectively these conflicts are managed. If they are managed
effectively, there will be an atmosphere of cooperation in the organisation. If they are not managed properly
there will be an atmosphere of distrust and non-cooperation.
• Individual autonomy: If the individual employees are given sufficient freedom to work and
exercises authority, it will result in efficiency in operations. The autonomy will lighten the burden
of higher level executives.

• Organizational Control System: The control system of the organisation can be either rigid or
flexible. Rigid control will lead to impersonal or bureaucratic atmosphere in the organisation.
There will be minimum scope for self regulation.

• Organizational Structure: The organisational structure serves the basis of inter personal relations
between superiors and subordinates. It clarifies as to who is responsible to whom and who is to
direct whom. If there is centralisation of authority, the participation in decision making by the
subordinates will be very less. On the other hand, if there is decentralisation of authority, there will
be an atmosphere of participative decision making.
• Task Oriented or Relation Oriented Management: The dominant style of managers will also affect the
organisational climate. Task oriented approach means that the leadership style will be autocratic. The
employees will have to show results or face the punishment. The employee morale will be low in the long
run. If the managers are relations oriented, the climate will be considerate and supportive. There will be
team spirit in the organisation because the needs and aspirations of the workers will be given due
importance.

• Rewards and Punishment: The system of rewards and punishments is also an important component of
organisational climate if the reward system is directly related to performance and productivity, there will
be an atmosphere of competition among the employees. Everybody will like to work hard and earn more
reward in the form of promotions and pay rise. If there is biasedness in the distribution of rewards, the
meritorious employees will be discouraged.
• Communication: The communication system of the organisation will also affect the
organisational climate. The flow of information, its direction, its dispersement and its type are all
important determinants. Proper communication system means that the subordinates are in a
position to express their ideas, suggestions and reactions, otherwise they will feel frustrated.

• Risk Taking: How members respond to risks and whose help is sought in situations involving
risks are important in any organisation. If individuals feel free to try out new ideas without any
fear they will not hesitate in taking risks. Such an atmosphere will be conducive to innovative
ideas.
Developing a sound organisational climate

To develop a sound organisational climate is a long term proposition. Organisational climate depends
upon the organisational behaviour system. The organisational climate should represent the goals and
philosophies of those who join together to create the organisation. The type of climate that an
organisation seeks is contingent upon the type of people it has, the type of technology, level of
education and expect actions of people in it.
• Effective Communication System
• Concern for people
• Participative decision making
• Changes in policies, rules, and procedures
• Technological changes
Organisational Change
• Organizational change is a requirement for any business that wants to survive and thrive. Change is
something that should be embraced rather than feared. Only with change will businesses be able to lay
the foundations for long-term success.

• According to Cambridge Dictionary, organizational change is: “A process in which a large company
or organization changes its working methods or aims, for example in order to develop and deal with
new situations or markets.”

• Organizational change refers to any alteration that occurs in total work environment.
Organisational change is an important characteristic of most organisations. An organisation must
develop adaptability to change otherwise it will either be left behind or be swept away by the forces of
change. Organisational change is inevitable in a progressive culture. Modern organizations are highly
dynamic, versatile and adaptive to the multiplicity of changes.
• Organizational change refers to the alteration of structural relationships and roles of people in the
organization. It is largely structural in nature. An enterprise can be changed in several ways. Its
technology can be changed, its structure, its people and other elements can be changed.
Organizational change calls for a change in the individual behaviors of the employees.

• Organizations survive, grow or decay depending upon the changing behaviour of the employees.
Most changes disturb the equilibrium of situation and environment in which the individuals or
groups exist. If a change is detrimental to the interests of individuals or groups, they will resist the
change.
Causes of Organisational Change
Change is constant, and change is inevitable. Change happens in every organization, and every organization is required to adapt to that
change to maintain its position in the market. There are various factors which cause a change in the organization. Effective business
management requires to have an awareness of the factors which can cause a change in the organization. Knowing the factors which
cause change helps a manager to take decisions accordingly, which helps the organization grow and reduces the chances of loss.

• Change in Governmental Policies: No matter whether your organization is a public organization or a private
organization government has control on it; however, the percentage of control varies. Government policies
decide the way an organization operates and what it can produce and not. For example, recently in India
government has banned the use of certain types of plastic and because of this policy. The operations of many
organizations have changed as they are needed to make changes in the plastic. Similarly, there are various
policies like employment hire policy, wages policy, and rights of employees and workers are controlled by the
organization and the organizations are required to abide by these policies to be able to operate freely.
• Change in Market Demand: Another important factor which causes a change in an organization
is the changing demand of the market. Gone are the days when people are required to accustom
themselves because of the products provided by the companies because, at that time, they did not
have many options to choose from. In modern times, there are several options available for
one product in the market, and people have the freedom to choose from any of the product, and
they have become less loyal for brands. They buy products from an organization which provides
them a good quality of products at the lowest prices. Because of this reason, companies are
required to stay on their toes and change fast in order to facilitate the changing requirements of
their customers. For examples, in the era of the internet, people prefer to shop online rather than
shopping from a physical store. Therefore, organizations are required to take their businesses
online so that they can fulfill the changing demand of their customers.
• Changed Technology: Technology is one of the most important factors which force change in the
organization, and organizations are required to adapt to these changing technologies in order to keep
up with the competition. For example, in the past times, all works like record keeping, order
placement, etc. were being done manually, but in the present time with the help of computers, there is
no need to perform these works manually. Similarly, in the production process, there were many
tasks which workers were supposed to perform with hands, but at present, with automation, all of
these works are performed using machines, and this has not only reduced the man-error but also
speed up the production process. Now customers have a platform to reach to the organization, and
companies can respond to the queries made by customers quickly because of the presence of
advanced technology. Therefore, companies are required to stay focused and make changes in
technology whenever they require to stay relevant in the market.
• Social Changes: Social change is also a crucial factor which causes a change in an organization.
Companies are required to change their production process with the changes in the needs and
aspirations of people. Demands of people on the basis of social environment and status of people-
factors like level of education, international influence, urbanization cause social changes. For
example, the demands of people living in an urban area will be different from the demands of
people living in rural areas. People living in an urban area don’t much care about the price of the
product, but they care about the quality and services provided by the organization. Whereas, on the
other hand, people living in rural areas are more concerned about the price of the product and care
less about the quality of the product and they usually choose products cheapest among all
available alternatives.
• Failure: Failure is a factor which puts an end on the operations of some organization as these organizations take with shame
and stops from taking risks with innovation ideas. However, there are some organizations which rather than sitting back and
thinking about bankruptcy has taken failure as a challenge and worked hard to change the failure into success by analyzing
their weak operations and the operations which were not working well for them and changed them in order to proceed
towards success.

• Competitive Innovation: Competitive innovation forces companies to change. When a competitive company

innovate something or do something which can be dangerous for your product then to meet the competition you
need to make changes in your strategies and produce a product which is either equivalent to the product of your
competitors or has something new which can attract customers. Competitive innovation has been seen in the
present times in smartphones companies. Apple is considered a leader of smartphones company, and it has been
known for introducing the most innovative products in the market.
• Cost cutting: Cost-cutting is also a factor that causes a change in an organization. Companies are forced to cut
the cost of its products when a competitor company introduces a product with similar features but at lower prices.
Price is a factor which influences the buying decision of customers. Either you are too confident of your products
like Apple, or you are required to cut cost according to your competitors in order to stay in the market.

• Merger and Acquisition: Merger and acquisition also a factor that causes a change in an organization. The
merger means when two companies come together to work. When a merger happens, companies are required to
change their structures to adapt to the work environment of one another. Similarly, when a company acquires a
new company, it is required to cut cost from some of its operations in order to invest in new products and services
or for the development of the acquired company. This is an internal change that an organization makes on its own
and not forced by any external changes like we have discussed before. The organization might reduce staff to
keep employees acquired with a new organization or changes the nature of jobs of some employees to manage
both the companies effectively.
• Change in Business Structure: Another internal factor which causes a change in an organization is the change in
the business structure. Management is required to change in the business structure to adapt to new technologies or in
order to enhance the productivity of the organization. Think of times when computers were introduced in the
organization and organizations are required to change from bookkeeping to maintaining accounts in computers.
Employees were provided with training and hiring was made to acquire employees to meet the requirements of new
technologies. Similarly, in the present times, too, the structure of the organization changed when they were needed
to take their business online to meet the current demand of the customers.

• End of Life of Products: Market changes, and with that, the need for products also changes. There are some
products which stay in demand up to a certain time, and slowly their need diminishes from the market. At that point,
the company is required to think of some innovative ideas to produce new products so that they can stay relevant in
the market. For example, a few years ago mobile companies were producing mobile phones with keypad, but when
touch screen mobile phones were introduced in the market, the value of keypad phones reduced drastically, and
companies were required to change in their production process and start producing touch screen phones rather than
producing touch screen phones.
Response to Organisational Change

Every change is responded by the people working in the organization. These responses may be
positive or negative depending upon the fact as how they affect people.
Process of Organisational Change

• Clearly define the change and align it to business goals

What do we need to change?
Why is this change required?

• Determine the impact and those effected

What are the impacts of the change?
Who will the change affect the most?
How will the change be received?

• Develop a Communication Strategy

How will the change be communicated?
How will feedback be managed?

• Provide Effective Training

What behaviors and skills are required to achieve business results?
What training delivery methods will be most effective?

• Implement a support culture

Where is support most required?
What types of support will be most effective?

• Measure the change Process

Did the change assist in achieving business goals?
Was the change management process successful?
What could have been done differently?
Management of resistance to Change
• Education and Communication

• Participation and Involvement

• Support

• Incentive

• Manipulation

• Coercion or by force

• Help of Trade Union

Talent Management
• Talent management is the full scope of HR processes to attract, develop, motivate and retain high-
performing employees. It refers to the anticipation of required human capital for an organization and the
planning to meet those needs.

• Talent management is the science of using strategic human resource planning to improve business
value and to make it possible for companies and organizations to reach their goals. Everything done to
recruit, retain, develop, reward and make people perform forms a part of talent management as well
as strategic workforce planning. A talent-management strategy should link to business strategy and to
local context to function more appropriately (Tyskbo, 2019).
• Talent management comes down to building and retaining a workforce of great employees to achieve
organizational goals.

• Talent management is a constant process that involves attracting and retaining high-quality employees, developing their skills, and continuously
motivating them to improve their performance.
Importance of Talent Management

• It helps business to improve performance

• It allows companies to stay competitive

• It drives innovation

• It helps form productive teams

• It decreases turnover

• It leads to strong employer branding

• It motivates other to grow

Activities in Talent Management
• Think of talent management as a business strategy that will help you retain exceptional employees.
For effective talent management, every aspect of recruiting, hiring, and developing employees is
affected positively. The goal of talent management is a superior workforce. Talent management
includes the following activities and work processes:
• Develop clear job descriptions, so you know the skills, abilities, and experience needed from a
new employee.
• Select appropriate employees who have superior potential and fit your organization's culture, with
an appropriate selection process.
• Negotiate requirements and accomplishment-based performance standards, outcomes, and
measures within a performance development planning system.
• Provide effective employee onboarding and ongoing training and development opportunities that
reflect both the employee's and the organization's needs.
Continue
• Provide on-going coaching, mentoring, and feedback, so the employee feels valued and important.
• Conduct quarterly performance development planning discussions that focus on the employee's
interests for career development.
• Design effective compensation and recognition systems that reward people for their contributions.
Even if all of the rest of your employment processes are employee-oriented, people still work for
money. Employers of choice aim to pay above market for talented employees.

• Provide promotional and career development opportunities for employees within a system that
includes career paths, succession planning, and on-the-job training opportunities.

• Hold exit interviews to understand why a valued employee decided to leave the organization. If
the reasons provide information about company systems that you can improve, make the changes
that will better retain talented employees.
Talent Management Process
Components of Talent Management
• Planning according to needs: Plan on defining vision, values and goals that support your business
objectives. Moreover, planning also involves identifying human capital recruitment, developing job
description and proposal for top recruitment. This will serve as a framework for the whole program, which
will look beyond filling up positions and focus more on objectives.

• Attracting top talent: When it comes down to recruitment you need to be prompt whether it will be internal
or external recruitment. It is important to pick out the right candidates to fill up the vacant positions.

• Selecting the right candidate: The selection process can be done through scheduling written
tests, interviews and scrutinizing the most suitable candidates. Experience matters when you are on the verge
of selecting candidates for your vacant positions. But at the same time do keep in mind that being dynamic
and having creative capabilities are important aspects as well. Bringing in individuals with expertise who can
help drive your work to success while you are still assessing your organization’s talent.
• Developing the candidate: This is a make or breaks step involved in developing a talent
management program. During this stage, the employees are prepared according to the
organization's profile and goals. It is important to enhance your employee's skills with time so that
you can have the advantage of flexibility. With the correct development, you can transfer your
employees from one job to the other within the organization. This will also increase their chances
of developing their career as well.

• Retaining your valued employees: We all know that retaining is important for every
organization. It not only helps you in keeping hold of your assets but it also helps in
reduced employee turnover. One thing you need to make sure is that you align the right person for
the right job which will provide them with successful goals and supports their development.
• Assessment: An HR software and talent assessment tool helps you to assess your organization's
internal capability to execute and maintain your talent management goals. Once you have built a
program and started to execute it, it becomes important to keep in check that your teams and
employees are doing well towards your objectives. Make sure you keep everything on track so that
you are ready for whatever the future brings.
Methods of Recruitment
• Direct Advertising
• Talent pool database
• Employee referrals
• Boomerang employees
• Promotions and transfer
• Employment exchange
• Recruitment agencies
• Professional organisation
• Internships and Apprenticeships
• Recruitment events
• Word of mouth
• Bulletin Boards
Selection Process
Methods of Training and Development of HR
• Job Training Methods
• Job rotation
• Coaching
• Job Instruction
• Committee Assignment
• Off the Job Training Method
• Vestibule Training
• Role Playing
• Lecture Method
• Conference
• Programmed Instruction
• Simulation Training
Performance Appraisal
Performance is defined as the application of knowledge, skills, and abilities at one’s disposal to
finish off a particular work. The way an individual scores at the end on the basis of the job
responsibilities that s/he is into. Job performances are of two types: contextual and task. Task
performance relates to the sense of cognitive ability while contextual performance is related to
personality. Williams and Krane identified certain features that define the state of an ideal
performance.
• Risk-taking ability
• Not being performance-oriented
• Focusing on work
• A sense of self-confidence
• A sense of adapting to various situations
• A sense of time and space management without affecting the work
Techniques of Performance Appraisal
Traditional Method
• Ranking Methods: In this method, the employee is compared with all others for placing the order of worth. The employees are
ranked from the highest to lowest or from the best to worst.

• Paired Comparison: In this method, each employee is compared with other employees on one to one basis based on one trait only.

• Grading Method: In this method certain categories of worth are established in advance like outstanding, satisfactory, and
unsatisfactory. Employee performance is compared with grade definitions. The employee allocated the grade that describes his/her
performance.

• Forced Distribution Method: This method is evolved by Tiffen to eliminate the central tendency of rating at a higher end of the
scale. The method assume that emplyees performance level confirm to normal statistical distribution 10, 20, 40, and 10% .

• Check List Method: In this method, a series of statements questions with their answer in yes or no are prepared by HR department.
The checklist is presented to the rater to tick appropriate answer relevant to appraisee.

• Essay method: In this method the rater writes a narrative description of on an employee strength, weakness, past performance,
potential and suggestions for improvements.
Modern Method:
• Management by Objectives: Management by objectives (MBO) is the appraisal method where managers and employees together
identify, plan, organize, and communicate objectives to focus on during a specific appraisal period. After setting clear goals,
managers and subordinates periodically discuss the progress made to control and debate on the feasibility of achieving those set
objectives.
• Behaviourally Anchored Rating Scale: It bring out both the qualitative and quantitative benefits in a performance appraisal
process. BARS compares employee performance with specific behavioral examples that are anchored to numerical ratings. Each
performance level on a BAR scale is anchored by multiple BARS statements which describe common behaviors that an employee
routinely exhibits. These statements act as a yardstick to measure an individual’s performance against predetermined standards that
are applicable to their role and job level.
• Assessment centre: During the assessment, employees are asked to take part in social-simulation exercises like in-basket exercises,
informal discussions, fact-finding exercises, decision-making problems, role-play, and other exercises that ensure success in a role.
The major drawback of this approach is that it is a time and cost intensive process that is difficult to manage.
• 360 Degree Appraisal: It is a multidimensional performance appraisal method that evaluates an employee using feedback collected
from the employee’s circle of influence namely managers, peers, customers, and direct reports. This method will not only eliminate
bias in performance reviews but also offer a clear understanding of an individual’s competence.
• Cost Accounting Method: Human resource (cost) accounting method analyses an employee’s performance through the monetary
benefits he/she yields to the company. It is obtained by comparing the cost of retaining an employee (cost to company) and the
monetary benefits (contributions) an organization has ascertained from that specific employee.
Controlling Function of Management
• Controlling means validating if the activities occurring are in confirmation with the actual plans prepared
and accepted, instructions issued and principles established. The controlling function also helps in the
effective and efficient application of enterprise resources in order to accomplish the planned goals.
Controlling gauges the deviation of actual performance from the planned performance, establish the causes
of such aberrations and helps in adopting corrective actions.

• Controlling as a managerial process is associated with ensuring that all the functioning of the business are
as per the plans formulated and gives meaning and effect to all other processes of management. Controlling
as a function is pervasive and is continuous. The function starts the moment a plan is finalized and
formulated and is done across the entire business entity in different ways from the lower levels to the top
most one. Being plan based controlling is a function that is inherently goal oriented and clearly involves the
understanding of what you want.
• According to Brech, “Controlling is a systematic exercise which is called as a
process of checking actual performance against the standards or plans with a view
to ensure adequate progress and also recording such experience as is gained as a
contribution to possible future needs.”

• According to Donnell, “Just as a navigator continually takes reading to ensure

whether he is relative to a planned action, so should a business manager
continually take reading to assure himself that his enterprise is on right course.”
Importance and Process of Controlling
Importance
• Strengthening the goal oriented nature
• Achieving goals
• Optimum use of resources
• Facilitates a system of motivation
• Maintaining Discipline
Process of Controlling
• Establishment of Standard
• Ascertainment of Output
• Identification of Deviation
• Taking Remedial Action
• Review or Followup
Types of Control

• Feedback Control: This process involves collecting information about a finished

task, assessing that information and improvising the same type of tasks in the
future.

• Concurrent control: It is also called real-time control. It checks any problem and
examines it to take action before any loss is incurred. Example: control chart.

• Predictive/Feedforward control: This type of control helps to foresee problem

ahead of occurrence. Therefore action can be taken before such a circumstance
arises.
Techniques of Controlling

• Personal Observation: The simplest way to control organisational activities is that managers take round at the work place and
observe the progress of the work. Any defect in performance can be spotted and corrected immediately.

• Budgeting: A budget is a statement which reflects future incomes, expenditures and profits that can be earned by a firm. It is a
future projection of the firm’s financial position. Budget is “the process of stating in quantitative terms, planned organisational
activities for a given period of time.” Budgeting control refers to comparison of actual performance with planned or budgeted
performance. It is a basic technique of control and is used at every level of organisation. Budgets are prepared for the organisation
as a whole and for each departmental unit.

• Break even analysis: Break-even analysis or cost-volume-profit analysis defines the relationship between sales volume, costs and
profits to arrive at a figure of sales at which sales revenue is equal to cost. The point at which sales revenue is equal to cost (fixed
cost plus variable cost) is the break-even point. Sales beyond the break-even point will earn profits for the organisation and sales
below the break-even point is a situation of loss. As a technique of control, managers compare actual output with the break-even
point of sales and if they are not able to sell beyond this point, they should improve their performance by increasing the sales or
reducing the costs.
• Financial Statements: Financial statements depict financial position of the firm over a period of time, generally one year. The
statements are prepared along with last year’s statements so that firm can compare present performance with last year’s performance
and take action to improve its future performance. As these statements are prepared at the end of the financial year, as a measure of
control, they guide managers to improve future performance.

• Statistical Data and Reports: Data helps in applying statistical techniques of averages, regression, correlation etc. to predict
financial performance. Data can be used for diagrammatic representations like trend charts, histograms, pie charts, and bar graphs
etc. which assess the company’s performance. Deviations can be pointed out and corrected. Report is a statement that represents
data in the form of information for carrying out the controlling function. Statistical data and regular reporting system provide
information about company’s financial and non-financial performance. A supervisor, for example, prepares a special report on how
the salesmen are dealing with customers. This report helps managers to control the behavioural attitudes of salesmen to develop a
good clientele
Modern Techniques of Controlling

• Management Information System: To carry out managerial functions of planning through controlling for various functional areas
and integrate them with the external environment managers need different types of information. Earlier, this information was
provided by the accounting system which was limited and quantitative in nature. With computers, managers have access to huge
quantity of data at very high speed. Computers help to create the data base and manipulate the information as desired for taking
various managerial decisions. This system of obtaining timely, relevant and accurate information based on computer technology is
known as management information system. The system helps managers in preparing reports for effectively carrying out planning
and controlling functions.

• Management Audit: Audit means periodic inspection of financial statements and verifying that the statements are honestly and
fairly prepared according to accounting principles. An audit, thus, provides a basis for control. Two types of audit can be
conducted by a firm:

(a) External audit

(b) Internal audit

• Responsibility Accounting: It divides the organisation into smaller units where each unit is headed by a manager who is
responsible for achieving the targets of his unit. These units are called responsibility centres and the head of each responsibility
centre is responsible for controlling the activities of his centre. Performance of each responsibility centre is judged by the extent to
which targets of that centre are achieved.

• Network Techniques (PERT and CPM): When a complex project is undertaken which involves a series of inter-related or inter-
dependent activities, the network models or techniques help in planning, coordinating and controlling the network of activities.
Various sequences of activities are scheduled with reference to time and cost and managers execute the project within the
constraints of time and cost.

Programme Evaluation and Review Technique: PERT is also called time-event network. It is a technique used to plan and
control a complex project that is represented as a network of events and activities, with time estimates given to complete each activity.
It is a network of events and activities on a project with estimated time for completion of each activity. An event is the beginning or the
ending of the activity. It is represented by a circle in the network. An event by itself does not use time or resources. An activity is the
time taken by an operation between two events. It represents time taken to complete an event. It is represented by an arrow.
 Critical Path Method: CPM determines critical activities for completing the project, assumes expected time as the time taken to
complete the project and concentrates on this critical sequence of activities to optimise the use of time and resources. It concentrates only on the
critical path and not the whole project.

• Balanced Score Card: Balanced score card is “a performance measurement tool that looks at four areas — financial, customer, internal
processes and people/innovation/growth assets — that contribute to a company’s performance.” It evaluates organisational performance in
terms of financial and non-financial parameters. It is a performance appraisal and reporting system that maintains balance between financial
and non-financial measures. It links performance to rewards and recognises the diversity of organisational goals.

• Ratio Analysis: Financial statements show financial performance in absolute figures. The statements, for example, may represent profit of
Rs.50 lakh or Rs.40 lakh for a year. The figure of profit has no meaning unless it is related to capital employed by the firm. Profit of Rs.50
lakh may have been earned over a capital base of Rs.1 crore giving a return of 50% while Rs.40 lakh may have been earned on a capital base
of Rs.60 lakh giving a return of 66.796. Ratio is a numerical relationship between two numbers. Ratio analysis draws comparison between
selected items from the financial statements in percentages or fractions and assesses financial performance of the firm.
• Economic Value Added: Value added is an important tool to measure financial performance of a company. It indicates net wealth
or value created by the company. Its major goal is to maximise shareholders’ wealth. Companies must generate wealth to survive
and grow. A company may survive without profits in the short-run but it cannot survive without adding value to its wealth. It covers
financial management functions that result in wealth creation.

• Market Value Added: Market value added is “a financial tool that measures the stock market’s estimate of the value of a firm’s
past and expected investment projects.” Thus, it measures market value of the firm’s stock. If company’s market value is more than
the capital invested (share capital, debentures and retained earnings), the company will have positive MVA. It means managers have
created wealth. If, on the other hand, market value is less than capital invested in the firm, MVA will be negative which means
managers have destroyed wealth.