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MG2351

PRINCIPLES OF MANAGEMENT UNIT I OVERVIEW OF MANAGEMENT

MEANING OF ORGANISATION 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. DEFINITION According to Harold Koontz, !anagement is an art of getting things done through and with the people in formally organized groups. "t is an art of creating an environment in which people can perform and individuals and can co-operate towards attainment of group goals#. NATURE OF MANAGEMENT $arious contributions to the field of management have changed its nature. %he nature of management can be described as follows& Multidiscipli !"#$ !anagement is multidisciplinary because it includes knowledge'information from various disciplines- economics, statistics, maths, psychology, sociology, ecology, operations research, history, etc. !anagement integrates the ideas and concepts taken from these disciplines and presents newer concepts which can be put into practice for managing the organizations. M! !%&'& t is d# !'ic$ !anagement has framed certain principles, which are fle(ible in nature and change with the changes in the environment in which an organization e(its. R&l!ti(&) N*t A+s*lut& P"i cipl&s$ !anagement principles are relative, not absolute, and they should be applied according to the need of the organization. A particular management principle has different strengths in different conditions. %herefore, principles should be applied according to the prevailing conditions. M! !%&'& t$ )cience or Art& !anagement like other practices- whether medicine, music composition, or even accountancy- is an art. "t is know-how. *et managers can work better by using the organized knowledge about management. "t is this knowledge that constitutes science. %hus, managing as practice is an art+ the organized knowledge underlying the practice may be referred to as science. M! !%&'& t !s P"*,&ssi* $ !anagement has been regarded as a profession by many while many have suggested that it has not achieved the status of a profession. )chein concluded that by some criteria management is indeed a profession, but by other criteria it is not. %oday we can see many signs that management is working towards increased professionalism.
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M! !%&'& t is U i(&"s!l$ !anagement is a universal phenomenon. However, management principles are not universally applicable but are to be modified according to the needs of the situation. SCOPE OF MANAGEMENT According to P&t&" D"uc-&", ,!anagement is what the modern world is all about.,%his statement means that all the development that has taken place in the world is due to efficient management.%he points below bring out the si% i,ic! c& or importance of management. 1. E c*u"!%&s I iti!ti(& !anagement encourages initiative. I iti!ti(& means to do the right thing at the right time without being told or influenced by the superior. %he employees should be encouraged to make their own plans and also to implement these plans. "nitiative gives satisfaction to employees and success to organisation 2. E c*u"!%&s I *(!ti*

!anagement also encourages innovation in the organisation. I *(!ti* brings new ideas, new technology, new methods, new products, new services, etc. %his makes the organisation more competitive and efficient. 3. F!cilit!t&s %"*/t0 ! d &1p! si* !anagement makes optimum utilisation of available resources. "t reduces wastage and increase efficiency. "t encourages team work and motivates employees. "t also reduces absenteeism and labour turnover. All this results in growth, e(pansion and diversification of the organisation. 2. I'p"*(&s li,& *, /*"-&"s !anagement shares some of its profits with the workers. "t provides the workers with good working environment and conditions. "t also gives the workers many financial and non-financial incentives. All this improves the -uality of life of the workers. 5. I'p"*(&s c*"p*"!t& i'!%& "f the management is good, then the organisation will produce good -uality goods and services. %his will improve the goodwill and corporate image of the organisation. A good corporate image brings many added benefits to the organisation. 3. M*ti(!t&s &'pl*#&&s

!anagement motivates employees by providing financial and non-financial incentives. %hese incentives increase the willingness and efficiency of the employees. %his results in boosting productivity and profitability of the organisation. 4. Opti'u' us& *, "&s*u"c&s !anagement brings together the available resources. "t makes optimum .best/ use of these resources. %his brings best results to the organisation. 5. R&duc&s /!st!%& !anagement reduces the wastage of human, material and financial resources. 0astage is reduced by proper production planning and control. "f wastage is reduced then productivity will increase. 6. I c"&!s&s &,,ici& c# 1fficiency is the relationship between returns and cost. !anagement uses many techni-ues to increase returns and to reduce costs. Higher efficiency brings many benefits to the organisation. 17. I'p"*(&s "&l!ti* s !anagement improves relations between individuals, groups, departments and between levels of management. 2etter relations lead to better team work. 2etter team work brings success to the organisation. 11. R&duc&s !+s& t&&is' ! d l!+*u" tu" *(&" A+s& t&&is' means the employee is absent without permission.L!+*u" Tu" *(&" means the employee leaves the organisation.3abour absenteeism and turnover increases the cost and causes many problems in the smooth functioning of the organisation. !anagement uses different techni-ues to reduce absenteeism and labour turnover in the organisation. FUNCTIONS OF MANAGEMENT !anagement has been described as a social process involving responsibility for economical and effective planning 4 regulation of operation of an enterprise in the fulfillment of given purposes. "t is a dynamic process consisting of various elements and activities. %hese activities are different from operative functions like marketing, finance, purchase etc. 5ather these activities are common to each and every manger irrespective of his level or status. 6ifferent e(perts have classified functions of management. According to 7eorge 4 8erry, %here are four fundamental functions of management i.e. planning, organizing, actuating and controlling#. According to Henry 9ayol, %o manage is to forecast and plan, to organize, to command, 4 to control#. 0hereas 3uther 7ullick has given a keyword :POSDCOR8; where < stands for <lanning, O for Organizing, ) for )taffing, 6 for 6irecting, =o for =o3

ordination, 5 for reporting 4 2 for 2udgeting. 2ut the most widely accepted are functions of management given by KOO>%? and O;6O>>13 i.e. Pl! i %, O"%! i9i %, St!,,i %, Di"&cti % and C* t"*lli %. 9or theoretical purposes, it may be convenient to separate the function of management but practically these functions are overlapping in nature i.e. they are highly inseparabl

1. Pl!

i %

"t is the basic function of management. "t deals with chalking out a future course of action 4 deciding in advance the most appropriate course of actions for achievement of pre-determined goals. According to KOO>%?, <lanning is deciding in advance @ what to do, when to do 4 how to do. "t bridges the gap from where we are 4 where we want to be#. A plan is a future course of actions. "t is an e(ercise in problem solving 4 decision making. <lanning is determination of courses of action to achieve desired goals. %hus, planning is a systematic thinking about ways 4 means for accomplishment of pre- determined goals. <lanning is necessary to ensure proper utilization of human 4 non- human resources. "t is all pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties, risks, wastages

2. O"%! i9i % "t is the process of bringing together physical, financial and human resources and developing productive relationship amongst them for achievement of organizational goals. According to Henry 9ayol, %o organize a business is to provide it with everything useful or its functioning i.e. raw material, tools, capital and personnel;s#. %o organize a business involves determining 4 providing human and non-human resources to the organizational structure. Organizing as a process involves& A "dentification of activities. A A A A =lassification of grouping of activities. Assignment of duties. 6elegation of authority and creation of responsibility. =oordinating authority and responsibility relationships.

3. St!,,i % "t is the function of manning the organization structure and keeping it manned. )taffing has assumed greater importance in the recent years due to advancement of technology, increase in size of business, comple(ity of human behavior etc. %he main purpose o staffing is to put right man on right Bob i.e. s-uare pegs in s-uare holes and round pegs in round holes. According to Kootz 4 O;6onell, !anagerial function of staffing involves manning the organization structure through proper and effective selection, appraisal 4 development of personnel to fill the roles designed un the structure#. )taffing involves& A !anpower <lanning .estimating man power in terms of searching, choose the person and giving the right place/. A 5ecruitment, selection 4 placement. A %raining 4 development. A 5emuneration. A <erformance appraisal. A <romotions 4 transfer

2. Di"&cti %
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"t is that part of managerial function which actuates the organizational methods to work efficiently for achievement of organizational purposes. "t is considered life-spark of the enterprise which sets it in motion the action of people because planning, organizing and staffing are the mere preparations for doing the work. 6irection is that inertpersonnel aspect of management which deals directly with influencing, guiding, supervising, motivating sub-ordinate for the achievement of organizational goals. 6irection has following elements& A )upervision A !otivation A 3eadership A =ommunication :i; Sup&"(isi* < implies overseeing the work of subordinates by their superiors. "t is the act of watching 4 directing work 4 workers. :ii; M*ti(!ti* < means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. <ositive, negative, monetary, non-monetary incentives may be used for this purpose. :iii; L&!d&"s0ip< may be defined as a process by which manager guides and influences the work of subordinates in desired direction. :i(; C*''u ic!ti* s< is the process of passing information, e(perience, opinion etc from one person to another. "t is a bridge of understanding. 5. C* t"*lli % "t implies measurement of accomplishment against the standards and correction of deviation if any to ensure achievement of organizational goals. %he purpose of controlling is to ensure that everything occurs in conformities with the standards. An efficient system of control helps to predict deviations before they actually occur. According to %heo Haimann, =ontrolling is the process of checking whether or not proper progress is being made towards the obBectives and goals and acting if necessary, to correct any deviation#.According to Koontz 4 O;6onell =ontrolling is the measurement 4 correction of performance activities of subordinates in order to make sure that the enterprise obBectives and plans desired to obtain them as being accomplished#. ROLES OF MANAGER Henry !intzberg identified ten different roles, separated into three categories. %he categories he defined are as follows !; I t&"p&"s* !l R*l&s %he ones that, like the name suggests, involve people and other ceremonial duties. "t can be further classified as follows A 3eader @ 5esponsible for staffing, training, and associated duties.
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A A

9igurehead @ %he symbolic head of the organization.

3iaison @ !aintains the communication between all contacts and informers that compose the organizational network. +; I ,*"'!ti* !l R*l&s 5elated to collecting, receiving, and disseminating information. !onitor @ <ersonally seek and receive information, to be able to understand the organization. A 6isseminator @ %ransmits all import information received from outsiders to the members of the organization. A )pokesperson @ On the contrary to the above role, here the manager transmits the organization;s plans, policies and actions to outsiders. c; D&cisi* !l R*l&s 5oles that revolve around making choices. A A A A 1ntrepreneur @ )eeks opportunities. 2asically they search for change, respond to it, and e(ploit it. >egotiator @ 5epresents the organization at maBor negotiations. 5esource Allocator @ !akes or approves all significant decisions related to the allocation of resources. 6isturbance Handler @ 5esponsible for corrective action when the organization faces disturbances. A

EVOLUTION OF MANAGEMENT T=OUG=T %he practice of management is as old as human civilization. %he ancient civilizations of 1gypt .the great pyramids/, 7reece .leadership and war tactics of Ale(ander the great/ and 5ome displayed the marvelous results of good management practices.%he origin of management as a discipline was developed in the late CDth century. Over time, management thinkers have sought ways to organize and classify the voluminous information about management that has been collected and disseminated. %hese attempts at classification have resulted in the identification of management approaches. %he approaches of management are theoretical frameworks for the study of management. 1ach of the approaches of management are based on somewhat different assumptions about human beings and the organizations for which they work. %he different approaches of management are a/ =lassical approach, b/ 2ehavioral approach, c/ Euantitative approach, d/ )ystems approach, e/=ontingency approach. %he formal study of management is largely a twentieth-century phenomenon, and to some degree the relatively large number of management approaches reflects a lack of consensus among management scholars about basic -uestions of theory and practice. !; CLASSICAL APPROAC= %he classical approach is the oldest formal approach of management thought. "ts roots pre-date the twentieth century. %he classical approach of thought generally concerns ways to manage work and organizations more efficiently. %hree areas of study that can be grouped under the classical approach are scientific management, administrative management, and bureaucratic management. .i/ )cientific !anagement. 9rederick 0inslow %aylor is known as the father of scientific management. )cientific management .also called %aylorism or the %aylor system/ is a theory of management that analyzes and synthesizes workflows, with the obBective of improving labor productivity. "n other words, %raditional rules of thumb are replaced by precise procedures developed after careful study of an individual at work. .ii/Administrative !anagement. Administrative management focuses on the management process and principles of management. "n contrast to scientific management, which deals largely with Bobs and work at the individual level of analysis, administrative management provides a more general theory of management. Henri 9ayol is the maBor contributor to this approach of management thought. .iii/ !anagement. 2ureaucratic
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2ureaucratic management focuses on the ideal form of organization. !a( 0eber was the maBor contributor to bureaucratic management. 2ased on observation, 0eber concluded that many early organizations were inefficiently managed, with decisions based on personal relationships and loyalty. He proposed that a form of organization, called a bureaucracy, characterized by division of labor, hierarchy, formalized rules, impersonality, and the selection and promotion of employees based on ability, would lead to more efficient management. 0eber also contended that managersF authority in an organization should be based not on tradition or charisma but on the position held by managers in the organizational hierarchy. +; 8E=AVIORAL APPROAC=$ %he behavioral approach of management thought developed, in part, because of perceived weaknesses in the assumptions of the classical approach. %he classical approach emphasized efficiency, process, and principles. )ome felt that this emphasis disregarded important aspects of organizational life, particularly as it related to human behavior. %hus, the behavioral approach focused on trying to understand the factors that affect human behavior at work. .i/ Human 5elations. %he Hawthorne 1(periments began in CDGH and continued through the early CDIJs. A variety of researchers participated in the studies, including 1lton !ayo. One of the maBor conclusions of the Hawthorne studies was that workersF attitudes are associated with productivity. Another was that the workplace is a social system and informal group influence could e(ert a powerful effect on individual behavior. A third was that the style of supervision is an important factor in increasing workersF Bob satisfaction. .ii/ 2ehavioral )cience. 2ehavioral science and the study of organizational behavior emerged in the CDKJs and CDLJs. %he behavioral science approach was a natural progression of the human relations movement. "t focused on applying conceptual and analytical tools to the problem of understanding and predicting behavior in the workplace. %he behavioral science approach has contributed to the study of management through its focus on personality, attitudes, values, motivation, group behavior, leadership, communication, and conflict, among other issues. c; >UANTITATIVE APPROAC=$ %he -uantitative approach focuses on improving decision making via the application of -uantitative techni-ues. "ts roots can be traced back to scientific management. .i/ !anagement )cience .Operations 5esearch/ !anagement science .also called operations research/ uses mathematical and statistical approaches to solve management problems. "t developed during 0orld 0ar "" as strategists tried to apply scientific knowledge and methods to the comple( problems of war. "ndustry began to apply management science after the war. %he advent of the computer made many management science tools and concepts more practical for industry. .ii/ <roduction And Operations !anagement. %his approach focuses on the operation and control of the production process that transforms resources into finished goods and services. "t has its roots in scientific management but became an identifiable area of management study after 0orld 0ar "". "t uses many of the tools of management science.
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Operations management emphasizes productivity and -uality of both manufacturing and service organizations. 0. 1dwards 6eming e(erted a tremendous influence in shaping modern ideas about improving productivity and -uality. !aBor areas of study within operations management include capacity planning, facilities location, facilities layout, materials re-uirement planning, scheduling, purchasing and inventory control, -uality control, computer integrated manufacturing, Bust-in-time inventory systems, and fle(ible manufacturing systems. d; S?STEMS APPROAC=$ %he simplified block diagram of the systems approach is given below.

%he systems approach focuses on understanding the organization as an open system that transforms inputs into outputs. %he systems approach began to have a strong impact on management thought in the CDLJs as a way of thinking about managing techni-ues that would allow managers to relate different specialties and parts of the company to one another, as well as to e(ternal environmental factors. %he systems approach focuses on the organization as a whole, its interaction with the environment, and its need to achieve e-uilibrium. &; CONTINGENC? APPROAC=$ %he contingency approach focuses on applying management principles and processes as dictated by the uni-ue characteristics of each situation. "t emphasizes that there is no one best way to manage and that it depends on various situational factors, such as the e(ternal environment, technology, organizational characteristics, characteristics of the manager, and characteristics of the subordinates. =ontingency theorists often implicitly or e(plicitly criticize the classical approach for its emphasis on the universality of management principles+ however, most classical writers recognized the need to consider aspects of the situation when applying management principles.

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!A>A71!1> % A<<5OA=H)

2eginning 6ates

1mphasis

=3A))"=A3 A<<5OA=H %raditional rules of thumb are replaced by precise procedures developed after careful study of an individual at work.

)cientific CMMJs !anagement

Administrative CDHJs !anagement

7ives idea about the primary functions of management and %he CH <rinciples of Administration

2ureaucratic CDGJs !anagement

5eplaces traditional leadership and charismatic leadership with legal leadership

21HA$"O5A3 A<<5OA=H

Human CDIJs 5elations workersF attitudes are associated with productivity

2ehavioral CDKJs )cience

7ives idea to understand human behavior in the organization.

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ENA>%"%A%"$1 A<<5OA=H

!anagement )cience .Operation research/ CDHJs Nses mathematical and statistical approaches to solve management problems.

<roduction and Operations !anagement CDHJs

%his approach focuses on the operation and control of the production process that transforms resources into finished goods and services

51=1>% 61$13O<1!1>%)

)*)%1!) A<<5OA=H

CDKJs

=onsiders the organization as a system that transforms inputs into outputs while in constant interaction with itsF environment.

Applies management principles and processes as =O>%">71>=* A<<5OA=H CDLJs dictated by the uni-ue characteristics of each situation.

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CONTRI8UTION OF FA?OL AND TA?LOR 9.0. %aylor and Henry 9ayol are generally regarded as the founders of scientific management and administrative management and both provided the bases for science and art of management. T!#l*"@s Sci& ti,ic M! !%&'& t 9rederick 0inslow %aylor 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 low efficiency 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 found that the management was usually ignorant of the amount of work that could be done by a worker in a day as also the best method of doing the Bob. As a result, it remained largely at the mercy of the workers who deliberately shirked work. 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. %he scientific method consists essentially of Observation !easurement 1(perimentation and "nference. He advocated a thorough planning of the Bob by the management and emphasized the necessity of perfect understanding and co-operation between the management and the workers both for the enlargement of profits and the use of scientific investigation and knowledge in industrial work. He summed up his approach in these words& A )cience, not rule of thumb A A A A Harmony, not discord =o-operation, not individualism !a(imum output, in place of restricted output %he development of each man to his greatest efficiency and prosperity.

El&'& ts *, Sci& ti,ic M! !%&'& t$ %he techni-ues which %aylor regarded as its essential elements or features may be classified as under& C. Sci& ti,ic T!s- ! d R!t&<S&tti % :/*"- stud#;$ 0ork study may be defined as the systematic, obBective and critical e(amination of all the factors governing the operational efficiency of any specified activity in order to effect improvement. .a/ M&t0*ds Stud#$ %he management should try to ensure that the plant is laid out in the best manner and is e-uipped with the best tools and machinery. %he possibilities of eliminating or combining certain operations may be studied. .b/ M*ti* Stud#$ "t is a study of the movement, of an operator .or even of a
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machine/ in performing an operation with the purpose of eliminating useless motions. .c/ Ti'& Stud# :/*"- '&!su"&'& t;$ %he basic purpose of time study is to determine the proper time for performing the operation. )uch study may be conducted after the motion study. 2oth time study and motion study help in determining the best method of doing a Bob and the standard time allowed for it. .d/ F!ti%u& Stud#$ "f, 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. "t is necessary, therefore, to regulate the working hours and provide for rest pauses at scientifically determined intervals. .e/ R!t&<s&tti %$ %aylor recommended the differential piece wage system, under which workers performing the standard task within prescribed time are paid a much higher rate per unit than inefficient workers who are not able to come up to the standard set. G. Pl! i % t0& T!s-$ 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 bottlenecks and the work goes on systematically. I. S&l&cti* ! d T"!i i %$ )cientific !anagement re-uires a radical change in the methods and procedures of selecting workers. "t is therefore necessary to entrust the task of selection to a central personnel department. %he procedure of selection will also have to be systematised. <roper attention has also to be devoted to the training of the workers in the correct methods of work. H. St! d!"di9!ti* $ )tandardization may be introduced in respect of the following. .a/ T**ls ! d &Auip'& t$ 2y standardization is meant the process of bringing about uniformity. %he management must select and store standard tools and implements which will be nearly the best or the best of their kind. .b/ Sp&&d$ %here is usually an optimum speed for every machine. "f it is e(ceeded, it is likely to result in damage to machinery. .c/ C* diti* s *, W*"-$ %o attain standard performance, the maintenance of standard conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very essential. .d/ M!t&"i!ls$ %he efficiency of a worker depends on the -uality of materials and the method of handling materials K. Sp&ci!li9!ti* $ )cientific management will not be complete without the introduction of specialization. Nnder this plan, the two functions of FplanningF and FdoingF are separated in the organization of the plant. %he Ofunctional foremenF are specialists who Boin their heads to give thought to the planning of the performance of operations in the workshop.. .a/ T0& R*ut& Cl&"-$ %o lay down the se-uence of operations and instruct the workers concerned about it. .b/ T0& I st"ucti* C!"d Cl&"-$ %o prepare detailed instructions regarding different aspects of work .c/ T0& Ti'& ! d C*st Cl&"-$ %o send all information relating to their pay to the workers and to secure proper returns of work from them. .d/ T0& S0*p Discipli !"i! & %o deal with cases of breach of discipline and absenteeism. .e/ T0& G! % 8*ss$ %o assemble and set up tools and machines and to teach the workers to make all their personal motions in the -uickest and best way.
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.f/ T0& Sp&&d 8*ss$ %o ensure that machines are run at their best speeds and proper tools are used by the workers. .g/ T0& R&p!i" 8*ss$ %o ensure that each worker keeps his machine in good order and maintains cleanliness around him and his machines. .h/ T0& I sp&ct*"$ %o show to the worker how to do the work. L. M& t!l R&(*luti* $ At present, industry is divided into two groups @ management and labour. %he maBor problem between these two groups is the division of surplus. %he management wants the ma(imum possible share of the surplus as profit+ the workers want, as large share in the form of wages. %aylor has in mind the enormous gain that arises from higher productivity. )uch gains can be shared both by the management and workers in the form of increased profits and increased wages. =& "#F!#*lBs12P"i cipl&s*,M! !%&'& t$ %he principles of management are given& C. Di(isi* *, /*"-$ 6ivision of work or specialization alone can give ma(imum productivity and efficiency. 2oth technical and managerial activities can be performed in the best manner only through division of labour and specialization. G. Aut0*"it# ! d R&sp* si+ilit#$ %he right to give order is called authority. %he obligation to accomplish is called responsibility. Authority and 5esponsibility are the two sides of the management coin. %hey e(ist together. %hey are complementary and mutually interdependent. I. Discipli &$ %he obBectives, rules and regulations, the policies and procedures must be honoured by each member of an organization. %here must be clear and fair agreement on the rules and obBectives, on the policies and procedures. %here must be penalties .punishment/ for non-obedience or indiscipline. >o organization can work smoothly without discipline - preferably voluntary discipline. H. U it# *, C*''! d$ "n order to avoid any possible confusion and conflict, each member of an organization must received orders and instructions only from one superior .boss/. K. U it# *, Di"&cti* $ All members of an organization must work together to accomplish common obBectives. L. E'p0!sis * Su+*"di !ti* *, P&"s* !l I t&"&st t* G& &"!l *" C*''* I t&"&st$ %his is also called principle of co-operation. 1ach shall work for all and all for each. 7eneral or common interest must be supreme in any Boint enterprise. P. R&'u &"!ti* $ 9air pay with non-financial rewards can act as the best incentive or motivator for good performance. 1(ploitation of employees in any manner must be eliminated. M. C& t"!li9!ti* $ %here must be a good balance between centralization and decentralization of authority and power. 1(treme centralization and decentralization must be avoided. D. Sc!l!" C0!i $ %he unity of command brings about a chain or hierarchy of command linking all members of the organization from the top to the bottom. )calar denotes steps. CJ. O"d&"$ 9ayol suggested that there is a place for everything. Order or system alone can create a sound organization and efficient management. CC. EAuit#$ An organization consists of a group of people involved in Boint effort. Hence, e-uity .i.e., Bustice/ must be there. 0ithout e-uity, we cannot have sustained and ade-uate Boint collaboration.
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CG. St!+ilit# *, T& u"&$ A person needs time to adBust himself with the new work and demonstrate efficiency in due course. Hence, employees and managers must have Bob security. )ecurity of income and employment is a pre-re-uisite of sound organization and management. CI. Esp"it *, C*<*p&"!ti* $ 1sprit de corps is the foundation of a sound organization. Nnion is strength. 2ut unity demands co-operation. <ride, loyalty and sense of belonging are responsible for good performance. CH. I iti!ti(&$ =reative thinking and capacity to take initiative can give us sound managerial planning and e(ecution of predetermined plans. ORGANISATION AND ENVIRONMENTAL FACTORS An organization is a group of people intentionally organized to accomplish a common or set of goals. T#p&s *, 8usi &ss O"%! i9!ti* s 0hen organizing a new business, one of the most important decisions to be made is choosingthe structure of a business. !; S*l& P"*p"i&t*"s0ips %he vast maBority of small business starts out as sole proprietorships . . . very dangerous. %hesefirms are owned by one person, usually the individual who has day-to-day responsibility for running the business. )ole proprietors own all the assets of the business and the profitsgenerated by it. %hey also assume ,complete personal, responsibility for all of its liabilities or debts. "n the eyes of the law, you are one in the same with the business. M&"its$ 1asiest and least e(pensive form of ownership to organize. )ole proprietors are in complete control, within the law, to make all decisions. )ole proprietors receive all income generated by the business to keep or reinvest. <rofits from the business flow-through directly to the ownerFs personal ta( return. %he business is easy to dissolve, if desired. D&'&"its$ Nnlimited liability and are legally responsible for all debts against the business. %heir business and personal assets are CJJQ at risk. Has almost been ability to raise investment funds. Are limited to using funds from personal savings or consumer loans. Have a hard time attracting high-caliber employees, or those that are motivated by the opportunity to own a part of the business.
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1mployee benefits such as ownerFs medical insurance premiums are not directly deductible from business income .partially deductible as an adBustment to income/. +; P!"t &"s0ips "n a <artnership, two or more people share ownership of a single business. 3ike proprietorships, the law does not distinguish between the business and its owners. %he <artners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed. *es, its hard to think about a ,break-up, when the business is Bust getting started, but many partnerships split up at crisis times and unless there is a defined process, there will be even greater problems. %hey also must decide up front how much time and capital each will contribute, etc. M&"its$ <artnerships are relatively easy to establish+ however time should be invested in developing the partnership agreement. 0ith more than one owner, the ability to raise funds may be increased. %he profits from the business flow directly through to the partnersF personal ta(es. <rospective employees may be attracted to the business if given the incentive to become apartner. D&'&"its$ <artners are Bointly and individually liable for the actions of the other partners. <rofits must be shared with others. )ince decisions are shared, disagreements can occur. )ome employee benefits are not deductible from business income on ta( returns. %he partnerships have a limited life+ it may end upon a partner withdrawal or death. c; C*"p*"!ti* s A corporation, chartered by the state in which it is head-uartered, is considered by law to be a uni-ue ,entity,, separate and apart from those who own it. A corporation can be ta(ed+ it can beside+ it can enter into contractual agreements. %he owners of a corporation are itsshareholders. %he shareholders elect a board of directors to oversee the maBor policies anddecisions. %he corporation has a life of its own and does not dissolve when ownership changes. M&"its$ )hareholders have limited liability for the corporationFs debts or Budgments against the corporations.

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7enerally, shareholders can only be held accountable for their investment in stock of the company. .>ote however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment ta(es./ =orporations can raise additional funds through the sale of stock. A corporation may deduct the cost of benefits it provides to officers and employees. =an elect ) corporation status if certain re-uirements are met. %his election enablescompany to be ta(ed similar to a partnership. D&'&"its& %he process of incorporation re-uires more time and money than other forms of organization. =orporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations. "ncorporating may result in higher overall ta(es. 6ividends paid to shareholders are nondeductible form business income, thus this income can be ta(ed twice. d; C*i t St*c- C*'p! #$ 3imited financial resources 4 heavy burden of risk involved in both of the previous forms of organization has led to the formation of Boint stock companies these have limited dilutives. %he capital is raised by selling shares of different values. <ersons who purchase the shares are called shareholder. %he managing body known as+ 2oard of 6irectors+ is responsible for policymaking important financial 4 technical decisions. %here are two main types of Boint stock =ompanies..i/ <rivate limited company..ii/ <ublic limited company.i/ <rivate limited company& %his type company can be formed by two or more persons. %ema(imum number of member ship is limited to KJ. "n this transfer of shares is limited to members only. %he government also does not interfere in the working of the company..ii/ <ublic 3imited =ompany& "ts is one whose membership is open to general public. %he minimum number re-uired to form such company is seven, but there is no upper limit. )uch company;s can advertise to offer its share to genera public through a prospectus. %hese public limited companies are subBected to greater control 4 supervision of control. M&"its$ %he liability being limited the shareholder bear no 5ick4 therefore more as make personsare encouraged to invest capital. 2ecause of large numbers of investors, the risk of loss is divided. 8oint stock companies are not affected by the death or the retirement of the shareholders. Dis!d(! t!%&s$ "t is difficult to preserve secrecy in these companies. "t re-uires a large number of legal formalities to be observed.
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3ack of personal interest. &; Pu+lic C*"p*"!ti* s$ A public corporation is wholly owned by the 7overnment centre to state. "t is established usuallyby a )pecial Act of the parliament. )pecial statute also prescribes its management patternpower duties 4 Burisdictions. %hough the total capital is provided by the 7overnment, they haveseparate entity 4 enBoy independence in matters related to appointments, promotions etc. M&"its$ %hese are e(pected to provide better working conditions to the employees 4 supported tobe better managed. Euick decisions can be possible, because of absence of bureaucratic control. !ore He(ibility as compared to departmental organization. )ince the management is in the hands of e(perienced 4 capable directors 4 managers,these ate managed more efficiently than that of government departments. D&'&"its$ Any alteration in the power 4 =onstitution of =orporation re-uires an amendment in theparticular Act, which is difficult 4 time consuming. <ublic =orporations possess monopoly 4 in the absence of competition, these are notinterested in adopting new techni-ues 4 in making improvement in their working. ,; G*(&" '& t C*'p! i&s$ A state enterprise can also be organized in the form of a 8oint stock company+ A governmentcompany is any company in which of the share capital is held by the central government or partly by central government 4 party by one to more state governments. "t is managed b theelected board of directors which may include private individuals. %hese are accountable for its working to the concerned ministry or department 4 its annual report is re-uired to be placed ever year on the table of the parliament or state legislatures along with the comments of the government to concerned department. M&"its$ "t is easy to form. %he directors of a government company are free to take decisions 4 are not bound bycertain rigid rules 4 regulations. D&'&"its$ !isuse of e(cessive freedom cannot be ruled out %he directors are appointed by the government so they spend more time in pleasing their political masters 4 top government officials, which results in inefficient management.
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CLASSIFICATION OF ENVIRONMENTAL FACTORS On the basis of the e(tent of intimacy with the firm, the environmental factors may be classified into different types namely internal and e(ternal.

1; INTERNAL ENVIRONMENTAL FACTORS %he internal environment is the environment that has a direct impact on the business. %heinternal factors are generally controllable because the company has control over these factors."t can alter or modify these factors. %he internal environmental factors are resources,capabilities and culture. i; R&s*u"c&s$ A good starting point to identify company resources is to look at tangible, intangible and humanresources.%angible resources are the easiest to identify and evaluate& financial resources and physicalassets are identifies and valued in the firm;s financial statements."ntangible resources are largely invisible, but over time become more important to the firm thantangible assets because they can be a main source for a competitive advantage. )uchintangible recourses include reputational assets .brands, image, etc./ and technological assets.proprietary technology and know-how/ Human resources or human capital are the productive services human beings offer the firm inters of their skills, knowledge, reasoning, and decision-making abilities. ii; C!p!+iliti&s$ 5esources are not productive on their own. %he most productive tasks re-uire that resources collaborate closely together within teams. %he term organizational capabilities are used to refer to a firm;s capacity for undertaking a particular productive activity. Our interest is not in capabilities
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per se, but in capabilities relative to other firms. %o identify the firm;s capabilities we will use the functional classification approach. A functional classification identifies organizational capabilities in relation to each of the principal functional areas. iii; Cultu"&$ "t is the specific collection of values and norms that are shared by people and groups in an organization and that helps in achieving the organizational goals. 2; EDTERNAL ENVIRONMENT FACTORS "t refers to the environment that has an indirect influence on the business. %he factors are uncontrollable by the business. %he two types of e(ternal environment are micro environment and macro environment. !; MICRO ENVIRONMENTAL FACTORS %hese are e(ternal factors close to the company that have a direct impact on the organizations process. %hese factors include& i; S0!"&0*ld&"s Any person or company that owns at least one share .a percentage of ownership/ in a companyis known as shareholder. A shareholder may also be referred to as a ,stockholder,. Asorganization re-uires greater inward investment for growth they face increasing pressure tomove from private ownership to public. However this movement unleashes the forces of shareholder pressure on the strategy of organizations.

ii; Suppli&"s An individual or an organization involved in the process of making a product or service available for use or consumption by a consumer or business user is known as supplier. "ncrease in raw material prices will have a knock on affect on the marketing mi( strategy of an organization. <rices may be forced up as a result. A closer supplier relationship is one way of ensuring competitive and -uality products for an organization. i(; Cust*'&"s A person, company, or other entitywhichbuysgoodsandservicesproduced by another person, company, or other entity is known as customer. Organizations survive on the basis of meeting the needs, wants and providing benefits for their customers. 9ailure to do so will result in a failed business strategy. (; C*'p&tit*"s A company in the same industry or a similar industry whichoffersa similar product or services known as competitor. %he presence of one or more competitors can reduce thepricesof goods
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andservicesas thecompaniesattempt togging larger market share. =ompetition also re-uires companies to become more efficient in orderto reducecosts.9ast-food restaurants !c6onaldFs and 2urger King are competitors, as are =oca-=ola and <epsi, and0al-!artand%arget. (i; M&di! <ositive or adverse media attention on an organizations product or service can in some casesmake or break an organization.. =onsumer programmers with a wider and more direct audiencecan also have a very powerful and positive impact, forcing organizations to change their tactics. +; MACRO ENVIRONMENTAL FACTORS An organizationFs macro environment consists of nonspecific aspects in the organization;s surroundings that have the potential to affect the organizationFs strategies. 0hen compared to affirm task environment, the impact of macro environmental variables is less direct and the organization has a more limited impact on these elements of the environment. %he macro environment consists of forces that originate outside of an organization and generally cannot be altered by actions of the organization. "n other words, a firm may be influenced by changes within this element of its environment, but cannot itself influence the environment. %he curved lines in 9igure C indicate the indirect influence of the environment on the organization. !acro environment includes political, economic, social and technological factors. A firm considers these as part of its environmental scanning to better understand the threats and opportunities created by the variables and how strategic plans need to be adBusted so the firm can obtain and retain competitive advantage.

i;

P*litic!l F!ct*"s <olitical factors include government regulations and legal issues and define both formal andinformal rules under which the firm must operate. )ome e(amples include&

ta( policy employment laws environmental regulations trade restrictions and tariffs political stability ii; Ec* *'ic F!ct*"s 1conomic factors affect the purchasing power of potential customers and the firmFs cost of capital. %he following are e(amples of factors in the macroeconomy& economic growth
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interest rates e(change rates inflation rate iii; S*ci!l F!ct*"s )ocial factors include the demographic and cultural aspects of the e(ternal macro environment.%hese factors affect customer needs and the size of potential markets. )ome social factorsinclude& health consciousness population growth rate age distribution career attitudes emphasis on safety i(; T&c0 *l*%ic!l F!ct*"s %echnological factors can lower barriers to entry, reduce minimum efficient production levels,and influence outsourcing decisions. )ome technological factors include& 546 activity automation technology incentives rate of technological change MANAGING GLO8ALL? 2uilding an internationally competent workforce whose members know the business and are fle(ible and openminded can take years. !ultinational organizations can no longer rely on Bust a few managers with multicultural e(perience or a few e(perts on a particular country to succeed. "n short, all employees must have some minimal level of international e(pertise and be able to recognize cultural differences that may affect daily business communications and working relationships. "n general, overseas managers share common traits with their domestic counterparts. 0herever a manager is hired, he or she needs the technical knowledge and skills to do the Bob, and the intelligence and people skills to be a successful manager. )electing managers for e(patriate assignments means screening them for traits that predict success in adapting to what may be dramatically new environments.

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2eyond the obvious Bobspecific -ualifications, an organization needs to consider the following -ualities and circumstances when selecting e(patriates for positions in foreign countries&

A willingness to communicate, form relationships with others, and try new things 7ood crosscultural communication and language skills 9le(ibility and openmindedness about other cultures %he ability to cope with the stress of new situations %he spouseFs career situation and personal attributes %he e(istence of -uality educational facilities for the candidateFs children 1nthusiasm for the foreign assignment and a good track record in previous foreign and domestic moves

Of course, the factors that predict a successful e(patriate assignment are not identical for everyone. %hese differencesRwhich reflect variations in the e(patriateFs home culture, his or her companyFs human resource management practices, and the labor laws specific to the foreign countryRmust also be factored into the selection process. 1ven if these comple(ities are taken into account in the selection process, a person chosen for a foreign assignment may decide not to accept the Bob offer. %he financial package needs to be reasonably attractive. "n addition, family issues may be a concern. !ost candidates, after a position is offered, also want information about how the foreign posting will impact their careers. "f a potential candidate accepts the Bob offer, he or she should be aware of the potential for cultural shockRthe confusion and discomfort a person e(periences when in an unfamiliar culture. "n addition, ethnocentrism, or the tendency to view oneFs culture as superior to others, should be understood and avoided. STRATEGIES FOR INTERNATIONAL 8USINESS "nternational business strategies are a normal part of doing business no matter where your business is located in the world. 7lobal businesses will compete with you, do business with you, and even put you out of business if you arenFt careful. *ou no longer have a choice to do or not to do global business. 2usinesses, large and small, must formulate international business strategies to function in the global economy. 7lobal business activity is Bust as normal today as doing business in your local community was KJ years ago. 6oing business globally has a number of appealing factors. )ome of them are,
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2uild a broader customer base. <revent adverse effects of seasonal business swings in your domestic market. Ntilize e(cess manufacturing capacity sitting idle at home. 3ower production costs by using lower priced labor abroad.

!ost successful global businesses have some things in common such as,

%hey have a strong international vision. %hey either have or ac-uire international management e(perience. %hey develop strong working partnerships with foreign business people. %hey offer differentiated technology or know-how not available in foreign markets.

9iguring out when to go global is easy. %he time is now. 1ven local businesses such as barber shops, health clubs, and ta( preparation services need to be aware of what is happening globally in their respective fields. >ew ways of doing business and newly created products can affect the way local businesses do their work. 9iguring out which foreign countries to do business in isnFt as complicated as you might think. *ou need to know four basic things in formulating your international business strategies, C. 0ho will use the product or serviceS G. How do those consumers define valueS I. How will you keep up with market trends thereS H. How can you increase your productFs market shareS A country analysis of possible choices is the ne(t step. )ome of the things you need to consider are,

<olitical stability. =urrency stability and value. =ultural values and ethics. 3anguage familiarity. 5eceptiveness to foreign intervention in foreign local markets. %rade restrictions and tarrifs. 3egal barriers. )tandard of living. 1ase of travel to foreign locations. And,
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"nfrastructure of foreign communities.

%he Nnited >ations )tatistics 6ivision has an online website at, http&''unstats.un.org'unsd'trade. %his website contains the )tandard "ndustrial %rade =lassification .)"%=/ codes established by the Nnited >ations that will help you to find information on demand for a specific product or service in your country of interest. %he >orth American "ndustry =lassification )ystem .>A"=)/ at, www.census.gov'epcd'www'naics.html, which replaced the )tandard "ndustrial =lassification system provides business statistics about >orth American industries. %he >A"=) and )"%= codes are keys to a tremendous amount of useful information. *ou can calculate the demand for your product by obtaining information on the following.

%he value of global imports of the product measured in dollars. "mport records historically reveal the amount of growth a particular product has in a foreign market. *ou are looking for the level of demand. %he amount of N.). imports into a country.

9oreign agents can be of great assistance in your foreign marketing efforts. %he following are some differences among them.

A%& ts purchase your companyFs products at a huge discount off your list price, and then sell them in their countries, and take responsibilities for collections. %hey can save you time and money. 5emember though that you donFt have full control over an agentFs activities or pricing. E1p*"ti % T"!di % C*'p! i&s :ETC; typically specialize in certain countries or regions, and maintain a large sales force. %he 1%= locates a manufacturer, buys the product, and sells it to the foreign country after identifying foreign market desire for your products. S!l&s "&p"&s& t!ti(&s work on commission, and donFt buy or warehouse your products, but find outlets for selling your products by operating as independent representatives or as reps for e(port trading companies. )ales reps usually re-uire little or no training, and are familiar with local foreign markets.

%hree things to consider in finding a good intermediary are,


7et a -ualified referral from satisfied customers such as foreign businesses that have worked with a respective intermediary. =heck with the N.). 6epartment of =ommerce to obtain a list of -ualified intermediaries in your countries of interest. %rade shows can be of great benefit in finding foreign business partners and marketing support.

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*ou may desire to set up manufacturing operations or foreign subsidiaries in other countries. %his decision making process is a little more involved than merely selling abroad or importing. *ou will have to do your ,homework, to work through this strategy effectively. 8oint venture .8$/ partnerships are another strategic option to go global. %his is where two or more parties team up to e(ecute a proBect, in this case foreign. 1ach 8$ member brings some special know how and -ualifications to the proBect. 8$ proBects are normally for relatively short durations .one to three years/. %he N.). government provides support for international business activity. %he following are some of the resources you may access conveniently online. %he O(&"s&!s P"i(!t& I (&st'& t C*"p*"!ti* provides financing for foreign business ventures. 7o to, www.opic.gov. %he N.). 6epartment of =ommerce can help you find trade specialists in CJP N.). cities and more than MJ countries all over the world with the purpose of helping you secure sales in global markets. 7o to, www.ita.doc.gov'cs. Other helpful N.). government websites are the following.

www.commerce.gov www.trade.gov www.e(port.gov www.bea.gov

%he above list isnFt e(haustive, but rather Bust some of the many helpful resources you may access online. %hese sites can stimulate your thinking with regard to international business strategies, and help you get the wheels turning on doing global business. "nternational business strategies should be merged into your overall strategic plans. )trategic planning isnFt complete without international business strategies.

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UNIT II PLANNING DEFINITION According to Koontz O;6onnell - ,<lanning is an intellectual process, the conscious determination of courses of action, the basing of decisions on purpose, acts and considered estimates,. NATURE AND PURPOSE OF PLANNING Pl! i % is %*!l<*"i& t&d$ 1very plan must contribute in some positive way towards the accomplishment of group obBectives. <lanning has no meaning without being related to goals. P"i'!c# *, Pl! i %$ <lanning is the first of the managerial functions. "t precedes all other management functions. P&"(!si(& &ss *, Pl! i %$ <lanning is found at all levels of management. %op management looks after strategic planning. !iddle management is in charge of administrative planning. 3ower management has to concentrate on operational planning. E,,ici& c#) Ec* *'# ! d Accu"!c#$ 1fficiency of plan is measured by its contribution to the obBectives as economically as possible. <lanning also focuses on accurate forecasts. C*<*"di !ti* $ <lanning co-ordinates the what, who, how, where and why of planning. 0ithout co-ordination of all activities, we cannot have united efforts. Li'iti % F!ct*"s$ A planner must recognize the limiting factors .money, manpower etc/ and formulate plans in the light of these critical factors. Fl&1i+ilit#$ %he process of planning should be adaptable to changing environmental conditions. Pl! i % is ! i t&ll&ctu!l p"*c&ss$ %he -uality of planning will vary according to the -uality of the mind of the manager. IMPORTANCE OF PLANNING :i; F*cus&s !tt& ti* * *+E&cti(&s ! d "&sults$ 1very organisation e(ists to achieve certain obBectives&.<lanning concentrates attention on the dominant goals of the organisation. "t forces the members of the organisation not to get lost in the maze of routine activities and lose sightF of the broad obBectives for which the organisation was established.,<lans alone cannot make an enterprise successful. Action is re-uired+ the enterprise must operate. <lans can, however, focus attention on purposes.
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:ii; R&duc&s u c&"t!i t# ! d c0! %&$ Nncertainly and risks are inevitable and planning cannot eliminate them. 2ut planning enables an organisation to cope with uncertainty and change.Although the e(act future can seldom be predicted and factors beyond control may interfere with the best-laid plans, without planning events are left to chance.

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:iii; P"*(id&s s& s& *, di"&cti* $ <lanning saves an organisation from drifting and avoids aimless activities. "t directs human efforts into endeavors that contribute to the accomplishment of goals. ,"f you donFt know where you are going ,any road will get you there. FT<lanning makes work more meaningful and activities more orderly."t bridges the gap between where we are and where we want to go. 0ithout planning action is likely to become random activity, producing nothing bad chaos. <lanning replace random and haphazard operation by orderly and meaningful action. :i(; E c*u"!%&s i *(!ti* ! d c"&!ti(it#$

"nnovation and creativity are prere-uisites to continuous growth and )teady prosperity of business. )ound planning encourages innovative thought and creativity of a manager.According to 6.1. Hussey, ,a good planning process will provide avenues for individual participation, will throw up more ideas about the company and its environment, will encourage an atmosphere of frankness and appropriate self-criticism and will stimulate managers to achieve more., :(; =&lps i c**"di !ti* $ <lanning is the best stage for the integration of diverse forces at work. )ound planning interrelates all the activities and resources of an organisation. "t also helps to relate internal conditions and processes to e(ternal events and forces. :(i; Guid&s d&cisi* '!-i %$ <lanned targets serve as the criteria for the evaluation of different alternatives so that the best course of action may be chosen. ,0ithout planning, business decisions would become random ad hoc choices, as though a pilot set out without knowing whether he wished to fly to 3ondon, Hong Kong or 8ohannesburg.,Pplanning eliminates the need for trial and error in decision-making/ :(ii; P"*(id&s ! +!sis ,*" d&c& t"!li9!ti* $ <lanning helps in the dispersal of decision-making power among the lower levels of management. 0ell-established plans serve as guides to subordinates and reduce the risk involved in delegation of authority. <lanning also helps to improve the motivation and morale of employees by providing targets of performance. :(iii; P"*(id&s &c* *'# i *p&"!ti* $ <lanning facilitates optimum utilization of available resources. "t makes at possible for things to occur which would not otherwise happen. "t improves the competitive strength of an organization by helping it to discover and e(ploit opportunities a rational solution to problems, planning results in the use of most efficient methods of work.

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:i1; F!cilit!t&s c* t"*l$ <lanning provides the basis for control. <lans serve as standards or benchmarks for the evaluation of actual performance. )ound planning enables management to control the events rather than be controlled by them. PLANNING PROCESS %he various steps involved in planning are given below

!; P&"c&pti* *, Opp*"tu iti&s$ Although preceding actual planning and therefore not strictly a part of the planning process, awareness of an opportunity is the real starting point for planning. "t includes a preliminary look at possible future opportunities and the ability to see them clearly and completely, knowledge of where we stand in the light of our strengths and weaknesses, an understanding of why we wish to solve uncertainties, and a vision of what we e(pect to gain. )etting realistic obBectives depends on this awareness. <lanning re-uires realistic diagnosis of the opportunity situation. +; Est!+lis0i % O+E&cti(&s$ %he first step in planning itself is to establish obBectives for the entire enterprise and then for each subordinate unit. ObBectives specifying the results e(pected 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 network of strategies, policies, procedures, rules, budgets and programs.1nterprise obBectives should give direction to the nature of all maBor plans which, by reflecting these obBectives, define the obBectives of maBor departments. !aBor department obBectives, in turn, control the obBectives of subordinate departments, and so on down the line. %he obBectives of lesser departments will be better framed, however, if subdivision managers
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understand the overall enterprise obBectives and the implied derivative goals and if they are given an opportunity to contribute their ideas to them and to the setting of their own goals. c; C* sid&"i % t0& Pl! i % P"&'is&s$

Another logical step in planning is to establish, obtain agreement to utilize and disseminate critical planning premises. %hese are forecast data of a factual nature, applicable basic policies, and e(isting company plans. <remises, then, are planning assumptions @ in other words, the e(pected environment of plans in operation. %his step leads to one of the maBor principles of planning.%he more individuals charged with planning understand and agree to utilize consistent planning premises, the more coordinated enterprise planning will be. <lanning premises include far more than the usual basic forecasts of population, prices, costs, production, markets, and similar matters.2ecause the future environment of plans is so comple(, it would not be profitable or realistic to make assumptions about every detail of the future environment of a plan.)ince agreement to utilize a given set of premises is important to coordinate planning, it becomes a maBor responsibility of managers, starting with those at the top, to make sure that subordinate managers understand the premises upon which they are e(pected to plan. "t is not unusual for chief e(ecutives in well- managed companies to force top managers with differing views, through group deliberation, to arrive at a set of maBor premises that all can accept. d; Id& ti,ic!ti* *, !lt&" !ti(&s$ Once the organizational obBectives have been clearly stated and the planning premises have been developed, the manager should list as many available alternatives as possible for reaching those obBectives.%he focus of this step is to search for and e(amine alternative courses of action, especially those not immediately apparent. %here is seldom a plan for which reasonable alternatives do not e(ist, and -uite often an alternative that is not obvious proves to be the best.%he more common problem is not finding alternatives, but reducing the number of alternatives so that the most promising may be analyzed. 1ven with mathematical techni-ues and the computer, there is a limit to the number of alternatives that may be e(amined. "t is therefore usually necessary for the planner to reduce by preliminary e(amination the number of alternatives to those promising the most fruitful possibilities or by mathematically eliminating, through the process of appro(imation, the least promising ones. &; E(!lu!ti* *, !lt&" !ti(&s Having sought out alternative courses and e(amined their strong and weak points, the following step is to evaluate them by weighing the various factors in the light of premises and goals. One course may appear to be the most profitable but re-uire a large cash outlay and a slow payback+ another may be less profitable but involve less risk+ still another may better suit the company in long@range obBectives."f the only obBective were to e(amine profits in a certain business immediately, if the future were not uncertain, if cash position and capital availability were not worrisome, and if most factors could be reduced to definite data, this evaluation should be relatively easy. 2ut typical planning is replete with uncertainties, problems of capital shortages, and intangible factors, and so evaluation is usually very difficult, even with
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relatively simple problems. A company may wish to enter a new product line primarily for purposes of prestige+ the forecast of e(pected results may show a clear financial loss, but the -uestion is still open as to whether the loss is worth the gain. ,; C0*ic& *, !lt&" !ti(& pl! s An evaluation of alternatives must include an evaluation of the premises on which the alternatives are based. A manager usually finds that some premises are unreasonable and can therefore be e(cluded from further consideration. %his elimination process helps the manager determine which alternative would best accomplish organizational obBectives. %; F*"'ul!ti % *, Supp*"ti % Pl! s After decisions are made and plans are set, the final step to give them meaning is to numberize them by converting them to budgets. %he overall budgets of an enterprise represent the sum total of income and e(penses with resultant profit or surplus and budgets of maBor balance@ sheet items such as cash and capital e(penditures. 1ach department or program of a business or other enterprise can have its own budgets, usually of e(penses and capital e(penditures, which tie into the overall budget. "f this process is done well, budgets become a means of adding together the various plans and also important standards against which planning progress can be measured. 0; Est!+lis0i % s&Au& c& *, !cti(iti&s Once plans that furnish the organization with both long-range and short-range direction have been developed, they must be implemented. Obviously, the organization can not directly benefit from planning process until this step is performed. T?PES OF PLANS F COMPONENTS OF PLANNING "n the process of planning, several plans are prepared which are known as components of planning.

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<lans can be broadly classified as !; St"!t&%ic pl! s +; T!ctic!l pl! s c; Op&"!ti* !l pl! s Operational plans lead to the achievement of tactical plans, which in turn lead to the attainment of strategic plans. "n addition to these three types of plans, managers should also develop a contingency plan in case their original plans fail. !; St"!t&%ic pl! s$ A 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. "t is further classified as i; Missi* $ . %he mission is a statement that reflects the basic purpose and focus of the organization which normally remain unchanged. %he mission of the company is the answer of the -uestion & why does the organization e(istsS<roperly crafted mission statements serve as filters to separate what is important from what is not, clearly state which markets will be served and how, and communicate a sense of intended direction to the entire organization. !ission of 9ord& we are a global, diverse family with a proud inheritance, providing e(ceptional products and services#. ii; O+E&cti(&s *" %*!ls$ 2oth goal and obBective can be defined as statements that reflect the end towards which the organization is aiming to achieve. However, there are significant differences between the two. A goal is an abstract and general umbrella statement, under which specific obBectives can be clustered. ObBectives are statements that describeRin precise, measurable, and obtainable terms which reflect the desired organization;s outcomes. iii; St"!t&%i&s$ )trategy is the determination of the basic long term obBectives of an organization and the adoption of action and collection of action and allocation of resources necessary to achieve these goals.)trategic planning begins with an organizationFs mission. )trategic plans look ahead over the ne(t two, three, five, or even more years to move the organization from where it currently is to where it wants to be. 5e-uiring multilevel involvement, these plans demand harmony among all levels of management within the organization. %op-level management develops the directional obBectives for the entire organization, while lower levels of management develop compatible obBectives and plans to achieve them. %op managementFs strategic plan for the entire organization becomes the framework and sets dimensions for the lower level planning.
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+; T!ctic!l pl! s$ 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. %actics are the means needed to activate a strategy and make it work.%actical plans are concerned with shorter time frames and narrower scopes than are strategic plans. %hese plans usually span one year or less because they are considered short-term goals. 3ong-term goals, on the other hand, can take several years or more to accomplish. >ormally, it is the middle managerFs responsibility to take the broad strategic plan and identify specific tactical actions. c; Op&"!ti* !l pl! s %he specific results e(pected from departments, work groups, and individuals are the operational goals. %hese goals are precise and measurable. <rocess CKJ sales applications each week# or <ublish GJ books this -uarter# are e(amples of operational goals. An operational plan is one that a manager uses to accomplish his or her Bob responsibilities. )upervisors, team leaders, and facilitators develop operational plans to support tactical plans .see the ne(t section/. Operational plans can be a single-use plan or a standing plan. i; Si %l&<us& pl! s 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. P"*%"!''&& <rogramme consists of an ordered list of events to be followed to e(ecute a proBect. 8ud%&t& A budget predicts sources and amounts of income and how much they are used for a specific proBect. ii; St! di % pl! s are usually made once and retain their value over a period of years while undergoing periodic revisions and updates. %he following are e(amples of ongoing plans& P*lic#& A policy provides a broad guideline for managers to follow when dealing with important areas of decision making. <olicies are general statements that e(plain how a manager should attempt to handle routine management responsibilities. %ypical human resources policies, for e(ample, address such matters as employee hiring, terminations, performance appraisals, pay increases, and discipline. P"*c&du"&& A procedure is a set of step-by-step directions that e(plains how activities or tasks are to be carried out. !ost organizations have procedures for purchasing supplies and e-uipment, for e(ample. %his procedure usually begins with a supervisor completing a purchasing re-uisition. %he re-uisition is then sent to the ne(t level of management for approval. %he approved re-uisition is forwarded to the purchasing department. 6epending on the amount of the re-uest, the purchasing department may place an order, or they may need to secure -uotations and'or bids for several vendors before placing the order. Rul&& A rule is an e(plicit statement that tells an employee what he or she can and cannot do. 5ules are do# and donFt# statements put into place to promote the safety of employees and the uniform treatment and behavior of employees. 9or e(ample, rules about tardiness and absenteeism permit supervisors to make discipline decisions rapidly and with a high degree of fairness.
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d; C* ti %& c# pl! s "ntelligent and successful management depends upon a constant pursuit of adaptation, fle(ibility, and mastery of changing conditions. )trong management re-uires a keeping all options open# approach at all times R thatFs where contingency planning comes in. =ontingency planning involves identifying alternative courses of action that can be implemented if and when the original plan proves inade-uate because of changing circumstances. Keep in mind that events beyond a managerFs control may cause even the most carefully prepared alternative future scenarios to go awry. Nne(pected problems and events fre-uently occur. 0hen they do, managers may need to change their plans. Anticipating change during the planning process is best in case things donFt go as e(pected. !anagement can then develop alternatives to the e(isting plan and ready them for use when and if circumstances make these alternatives appropriate. O8CECTIVES ObBectives may be defined as the goals which an organisation tries to achieve. ObBectives are described as the end- points of planning. According to Koontz and OF6onnell, ,an obBective is a term commonly used to indicate the end point of a management programme., ObBectives constitute the purpose of the enterprise and without them no intelligent planning can take place. ObBectives are, therefore, the ends towards which the activities of the enterprise are aimed. %hey are present not only the end-point of planning but also the end towards which organizing, directing and controlling are aimed. ObBectives provide direction to various activities. %hey also serve as the benchmark of measuring the efficiency and effectiveness of the enterprise. ObBectives make every human activity purposeful. <lanning has no meaning if it is not related to certain obBectives. MANAGEMENT 8? O8CECTIVES :M8O; !2O was first popularized by <eter 6rucker in CDKH in his book F%he practice of !anagement;. "t is a process of agreeing within an organization so that management and employees buy into the obBectives and understand what they are. "t has a precise and written description obBectives ahead, timelines for their motoring and achievement. %he employees and manager agree to what the employee will attempt to achieve in a period ahead and the employee will accept and buy into the obBectives. D&,i iti* !2O is a process whereby the superior and the mangers of an organization Bointly identify its common goals, define each individual;s maBor area of responsibility in terms of results e(pected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members.# F&!tu"&s *, M8O C. !2O is concerned with goal setting and planning for individual managers and their units. G. %he essence of !2O is a process of Boint goal setting between a supervisor and a subordinate. I. !anagers work with their subordinates to establish the performance goals that are
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consistent with their higher organizational obBectives. H. !2O focuses attention on appropriate goals and plans. K. !2O facilitates control through the periodic development and subse-uent evaluation of individual goals and plans. St&ps i M8O$

%he typical !2O process consists of& C/ 1stablishing a clear and precisely defined statement of obBectives for the employee G/ 6eveloping an action plan indicating how these obBectives are to be achieved I/ 5eviewing the performance of the employees H/ Appraising performance based on obBective achievement 1; S&tti % *+E&cti(&s$ 9or !anagement by ObBectives .!2O/ to be effective, individual managers must understand the specific obBectives of their Bob and how those obBectives fit in with the overall company obBectives set by the board of directors.%he managers of the various units or sub-units, or sections of an organization should know not only the obBectives of their unit but should also actively participate in setting these obBectives and make responsibility for them. !anagement by ObBective .!2O/ systems, obBectives are written down for each level of the organization, and individuals are given specific aims and targets. !anagers need to identify and set obBectives both for themselves, their units, and their organizations. 2; D&(&l*pi % !cti* pl! s Actions plans specify the actions needed to address each of the top organizational issues and to reach each of the associated goals, who will complete each action and according to what timeline. An overall, top-level action plan that depicts how each strategic goal will be reached is developed by the top level management. %he format of the action plan depends on the obBective of the organization.
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3; R&(i&/i % P"*%"&ss$ <erformance is measured in terms of results. 8ob performance is the net effect of an employeeFs effort as modified by abilities, role perceptions and results produced. 1ffort refers to the amount of energy an employee uses in performing a Bob. Abilities are personal characteristics used in performing a Bob and usually do not fluctuate widely over short periods of time. 5ole perception refers to the direction in which employees believe they should channel their efforts on their Bobs, and they are defined by the activities and behaviors they believe are necessary. 2; P&",*"'! c& !pp"!is!l$ <erformance appraisals communicate to employees how they are performing their Bobs, and they establish a plan for improvement. <erformance appraisals are e(tremely important to both employee and employer, as they are often used to provide predictive information related to possible promotion. Appraisals can also provide input for determining both individual and organizational training and development needs. <erformance appraisals encourage performance improvement. 9eedback on behavior, attitude, skill or knowledge clarifies for employees the Bob e(pectations their managers hold for them. "n order to be effective, performance appraisals must be supported by documentation and management commitment.

Ad(! t!%&s A A A A !otivation @ "nvolving employees in the whole process of goal setting and increasing employee empowerment. %his increases employee Bob satisfaction and commitment. 2etter communication and =oordination @ 9re-uent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the organization and also to solve many problems. )ubordinates have a higher commitment to obBectives they set themselves than those imposed on them by another person. !anagers can ensure that obBectives of the subordinates are linked to the organizationFs obBectives.

Li'it!ti* s %here are several limitations to the assumptive base underlying the impact of managing by obBectives, including& A "t over-emphasizes the setting of goals over the working of a plan as a driver of outcomes. A "t underemphasizes the importance of the environment or conte(t in which the goals are set. %hat conte(t includes everything from the availability and -uality of resources, to relative buy-in by leadership and stake-holders. A =ompanies evaluated their employees by comparing them with the ,ideal, employee. %rait appraisal only looks at what employees should be, not at what they should do. 0hen this approach is not properly set, agreed and managed by organizations, self-centered
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employees might be prone to distort results, falsely representing achievement of targets that were set in a short-term, narrow fashion. "n this case, managing by obBectives would be counterproductive. STRATEGIES %he term F)trategyF has been adapted from war and is being increasingly used in business to reflect broad overall obBectives and policies of an enterprise. 3iterally speaking, the term F)trategyF stands for the war-art of the military general, compelling the enemy to fight as per out chosen terms and conditions. According to Koontz and OF 6onnell, ,)trategies must often denote a general programme of action and deployment of emphasis and resources to attain comprehensive obBectives,. )trategies are plans made in the light of the plans of the competitors because a modern business institution operates in a competitive environment. %hey are a useful framework for guiding enterprise thinking and action. A perfect strategy can be built only on perfect knowledge of the plans of others in the industry. %his may be done by the management of a firm putting itself in the place of a rival firm and trying to estimate their plans. C0!"!ct&"istics *, St"!t&%# "t is the right combination of different factors. "t relates the business organization to the environment. "t is an action to meet a particular challenge, to solve particular problems or to attain desired obBectives. A )trategy is a means to an end and not an end in itself. A "t is formulated at the top management level. A "t involves assumption of certain calculated risks. St"!t&%ic Pl! i % P"*c&ss F St"!t&%ic F*"'ul!ti* P"*c&ss C. I put t* t0& O"%! i9!ti* & $arious "nputs .<eople, =apital, !anagement and %echnical skills, others/ including goals input of claimants .1mployees, =onsumers, )uppliers, )tockholders, 7overnment, =ommunity and others/need to be elaborated. G. I dust"# A !l#sis& 9ormulation of strategy re-uires the evaluation of the attractiveness of an industry by analyzing the e(ternal environment. %he focus should be on the kind of compaction within an industry, the possibility of new firms entering the market, the availability of substitute products or services, the bargaining positions of the suppliers, and buyers or customers. I. E t&"p"is& P"*,il&& 1nterprise profile is usually the starting point for determining where the company is and where it should go. %op managers determine the basic purpose of the enterprise and clarify the firm;s geographic orientation. H. O"i& t!ti* ) V!lu&s) ! d Visi* *, E1&cuti(&s& %he enterprise profile is shaped by people, especially e(ecutives, and their orientation and values are important for formulation the strategy. %hey set the organizational climate, and they determine the direction of the firm though their vision. =onse-uently, their values, their preferences, and their attitudes toward risk have to be carefully e(amined because they have an impact on the strategy. K. Missi* :Pu"p*s&;) M!E*" O+E&cti(&s) ! d St"!t&%ic I t& t& !ission or <urpose is the
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A A A

answer to the -uestion& 0hat is our businessS %he maBor ObBectives are the end points towards which the activates of the enterprise are directed. )trategic intent is the commitment .obsession/ to win in the competitive environment, not only at the toplevel but also throughout the organization. L. P"&s& t ! d Futu"& E1t&" !l E (i"* '& t& %he present and future e(ternal environment must be assessed in terms of threats and opportunities. P. I t&" !l E (i"* '& t& "nternal 1nvironment should be audited and evaluated with respect to its resources and its weaknesses, and strengths in research and development, production, operation, procurement, marketing and products and services. Other internal factors include, human resources and financial resources as well as the company image, the organization structure and climate, the planning and control system, and relations with customers. M. D&(&l*p'& t *, Alt&" !ti(& St"!t&%i&s& )trategic alternatives are developed on the basis of an analysis of the e(ternal and internal environment. )trategies may be specialize or concentrate. Alternatively, a firm may diversify, e(tending the operation into new and profitable markets. Other e(amples of possible strategies are Boint ventures, and strategic alliances which may be an appropriate strategy for some firms. D. E(!lu!ti* ! d C0*ic& *, St"!t&%i&s& )trategic choices must be considered in the light of the risk involved in a particular decision. )ome profitable opportunities may not be pursued because a failure in a risky venture could result in bankruptcy of the firm. Another critical element in choosing a strategy is timing. 1ven the best product may fail if it is introduced to the market at an inappropriate time. CJ. M&diu'FS0*"t R! %& Pl! i %) I'pl&'& t!ti* t0"*u%0 R&& %i &&"i % t0& O"%! i9!ti* St"uctu"&) L&!d&"s0ip ! d C* t"*l& "mplementation of the )trategy often re-uires reengineering the organization, staffing the organization structure and providing leadership. =ontrols must also be installed monitoring performance against plans. CC. C* sist& c# T&sti % ! d C* ti %& c# Pl! i %& %he last key aspect of the strategic planning process is the testing for consistency and preparing for contingency plans.

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T?PES OF STRATEGIES According to !ichel <orter, the strategies can be classified into three types. %hey are a/ =ost leadership strategy b/ 6ifferentiation strategy c/ 9ocus strategy %he following table illustrates <orterFs generic strategies&

!; C*st L&!d&"s0ip St"!t&%# %his generic strategy calls for being the low cost producer in an industry for a given level of -uality. %he firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. "n the event of a price war, the firm can maintain some profitability while the competition suffers losses. 1ven without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time. %he cost leadership strategy usually targets a broad market.)ome of the ways that firms ac-uire cost advantages
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are by improving process efficiencies, gaining uni-ue access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether. "f competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership. 9irms that succeed in cost leadership often have the following internal strengths& A A A A Access to the capital re-uired to make a significant investment in production assets+ this investment represents a barrier to entry that many firms may not overcome. )kill in designing products for efficient manufacturing, for e(ample, having a small component count to shorten the assembly process. High level of e(pertise in manufacturing process engineering. 1fficient distribution channels.

1ach generic strategy has its risks, including the low-cost strategy. 9or e(ample, other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage. Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share. +; Di,,&"& ti!ti* St"!t&%# A differentiation strategy calls for the development of a product or service that offers uni-ue attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. %he value added by the uni-ueness of the product may allow the firm to charge a premium price for it. %he firm hopes that the higher price will more than cover the e(tra costs incurred in offering the uni-ue product. 2ecause of the productFs uni-ue attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily. 9irms that succeed in a differentiation strategy often have the following internal strengths& A A A A Access to leading scientific research. Highly skilled and creative product development team. )trong sales team with the ability to successfully communicate the perceived strengths of the product. =orporate reputation for -uality and innovation.

%he risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments. c; F*cus St"!t&%#
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%he focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. %he premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enBoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly.2ecause of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiation- focused strategy may be able to pass higher costs on to customers since close substitute products do not e(ist.9irms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well.)ome risks of focus strategies include imitation and changes in the target segments. 9urthermore, it may be fairly easy for a broad-market cost leader to adapt its product in order to compete directly. 9inally, other focusers may be able to carve out sub-segments that they can serve even better. A C*'+i !ti* *, G& &"ic St"!t&%i&s %hese generic strategies are not necessarily compatible with one another. "f a firm attempts to achieve an advantage on all fronts, in this attempt it may achieve no advantage at all. 9or e(ample, if a firm differentiates itself by supplying very high -uality products, it risks undermining that -uality if it seeks to become a cost leader. 1ven if the -uality did not suffer, the firm would risk proBecting a confusing image. 9or this reason, !ichael <orter argued that to be successful over the long-term, a firm must select only one of these three generic strategies. Otherwise, with more than one single generic strategy the firm will be ,stuck in the middle, and will not achieve a competitive advantage.<orter argued that firms that are able to succeed at multiple strategies often do so by creating separate business units for each strategy. 2y separating the strategies into different units having different policies and even different cultures, a corporation is less likely to become ,stuck in the middle.,However, there e(ists a viewpoint that a single generic strategy is not always best because within the same product customers often seek multi-dimensional satisfactions such as a combination of -uality, style, convenience, and price. %here have been cases in which high -uality producers faithfully followed a single strategy and then suffered greatly when anotherfirm entered the market with a lower--uality product that better met the overall needs of the customers. POLICIES P*lici&s are general statements or understandings that guide managers; thinking in decision making. %hey usually do not re-uire action but are intended to guide managers in their commitment to the decision they ultimately make.

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%he first step in the process of policy formulation, as shown in the diagram below, is to capture the values or principles that will guide the rest of the process and form the basis on which to produce a statement of issues. %he statement of issues involves identifying the opportunities and constraints affecting the local housing market, and is to be produced by thoroughly analyzing the housing market. %he kit provides the user with access to a housing data base to facilitate this analysis.%he statement of issues will provide the basis for the formulation of a set of housing goals and obBectives, designed to address the problems identified and to e(ploit the opportunities which present themselves.%he ne(t step is to identify and analyze the various policy options which can be applied to achieve the set of goals and obBectives. %he options available to each local government will depend on local circumstances as much as the broader conte(t and each local authority will have to develop its own uni-ue approach to addressing the housing needs of its residents.An implementation program for realizing the policy recommendations must then be prepared, addressing budgetary and programming re-uirements, and allocating roles and responsibilities. 9inally, the implementation of the housing strategy needs to be systematically monitored and evaluated against the stated goals and obBectives, and the various components of the strategy modified or strengthened, as re-uired.At each step of the way, each component of the strategy needs to be discussed and debated, and a public consultation process engaged in. %he e(tent of
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consultation and the participants involved will vary with each step. Ess& ti!ls *, P*lic# F*"'ul!ti* %he essentials of policy formation may be listed as below& A A policy should be definite, positive and clear. "t should be understood by everyone in the organization. A A policy should be translatable into the practices. A A policy should be fle(ible and at the same time have a high degree of permanency. A A policy should be formulated to cover all reasonable anticipatable conditions. A A policy should be founded upon facts and sound Budgment. A A policy should conform to economic principles, statutes and regulations. A A policy should be a general statement of the established rule. I'p*"t! c& *, P*lici&s <olicies are useful for the following reasons& A A A A %hey provide guides to thinking and action and provide support to the subordinates. %hey delimit the area within which a decision is to be made. %hey save time and effort by pre-deciding problems and %hey permit delegation of authority to mangers at the lower levels.

DECISION MAGING PROCESS %he decision making process is presented in the figure below&

1. Sp&ci,ic O+E&cti(&$ %he need for decision making arises in order to achieve certain specific obBectives. %he starting point in any analysis of decision making involves the determination of whether a decision needs to be made. 2. P"*+l&' Id& ti,ic!ti* $ A problem is a felt need, a -uestion which needs a solution. "n the words of 8oseph 3 !assie ,A good decision is dependent upon the recognition
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of the right problem,. %he obBective of problem identification is that if the problem is precisely and specifically identifies, it will provide a clue in finding a possible solution. A problem can be identified clearly, if managers go through diagnosis and analysis of the problem. Di!% *sis$ 6iagnosis is the process of identifying a problem from its signs and symptoms. A symptom is a condition or set of conditions that indicates the e(istence of a problem. 6iagnosing the real problem implies knowing the gap between what is and what ought to be, identifying the reasons for the gap and understanding the problem in relation to higher obBectives of the organization. A !l#sis$ 6iagnosis gives rise to analysis. Analysis of a problem re-uires& A 0ho would make decisionS A 0hat information would be neededS A 9rom where the information is availableS Analysis helps managers to gain an insight into the problem. I. S&!"c0 ,*" Alt&" !ti(&s$ A problem can be solved in several ways+ however, all the ways cannot be e-ually satisfying. %herefore, the decision maker must try to find out the various alternatives available in order to get the most satisfactory result of a decision. A decision maker can use several sources for identifying alternatives& A His own past e(periences A <ractices followed by others and A Nsing creative techni-ues. H. E(!lu!ti* *, Alt&" !ti(&s$ After the various alternatives are identified, the ne(t step is to evaluate them and select the one that will meet the choice criteria. 'the decision maker must check proposed alternatives against limits, and if an alternative does not meet them, he can discard it. Having narrowed down the alternatives which re-uire serious consideration, the decision maker will go for evaluating how each alternative may contribute towards the obBective supposed to be achieved by implementing the decision. K. C0*ic& *, Alt&" !ti(&$ %he evaluation of various alternatives presents a clear picture as to how each one of them contribute to the obBectives under -uestion. A comparison is made among the likely outcomes of various alternatives and the best one is chosen. L. Acti* $ Once the alternative is selected, it is put into action. %he actual process of decision making ends with the choice of an alternative through which the obBectives can be achieved. P. R&sults$ 0hen the decision is put into action, it brings certain results. %hese results must correspond with obBectives, the starting point of decision process, if good decision has been made and implemented properly. %hus, results provide indication whether decision making and its implementation is proper. C0!"!ct&"istics *, E,,&cti(& D&cisi* s An effective decision is one which should contain three aspects. %hese aspects are given below& A Acti* O"i& t!ti* $ 6ecisions are action-oriented and are directed towards relevant and controllable aspects of the environment. 6ecisions should ultimately find their utility in implementation. A G*!l Di"&cti* $ 6ecision making should be goal-directed to enable the organization to meet its obBectives. A E,,&cti(& i I'pl&'& t!ti* $ 6ecision making should take into account all the possible factors not only in terms of e(ternal conte(t but also in internal conte(t so that a decision
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can be implemented properly. RATIONAL DECISION MAGING MODEL %he 5ational 6ecision !aking !odel is a model which emerges from Organizational 2ehavior. %he process is one that is logical and follows the orderly path from problem identification through solution. "t provides a structured and se-uenced approach to decision making. Nsing such an approach can help to ensure discipline and consistency is built into your decision making process. T0& Si1<St&p R!ti* !l D&cisi* <M!-i % M*d&l C. 6efine the problem. G. "dentifydecision criteria I. 0eight the criteria H. 7enerate alternatives K. 5ate each alternative on each criterion L. =ompute the optimal decision

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1; D&,i i % t0& p"*+l&' %his is the initial step of the rational decision making process. 9irst the problem is identied and then defined to get a clear view of the situation. 2; Id& ti,# d&cisi* c"it&"i! Once a decision maker has defined the problem, he or she needs to identify the decision criteria that will be important in solving the problem. "n this step, the decision maker is determining what;s relevant in making the decision. %his step brings the decision maker;s interests, values, and personal preferences into the process. "dentifying criteria is important because what one person thinks is relevant, another may not. Also keep in mind that any factors not identified in this step are considered as irrelevant to the decision maker. 3; W&i%0t t0& c"it&"i! %he decision-maker weights the previously identified criteria in order to give them correct priority in the decision. 2; G& &"!t& !lt&" !ti(&s %he decision maker generates possible alternatives that could succeed in resolving the problem. >o attempt is made in this step to appraise these alternatives, only to list them. 5; R!t& &!c0 !lt&" !ti(& * &!c0 c"it&"i* %he decision maker must critically analyze and evaluate each one. %he strengths and weakness of each alternative become evident as they compared with the criteria and weights established in second and third steps. 3; C*'put& t0& *pti'!l d&cisi* 1valuating each alternative against the weighted criteria and selecting the alternative with the highest total score. DECISION MAGING UNDER VARIOUS CONDITIONS %he conditions for making decisions can be divided into three types. >amely a/ =ertainty, b/ Nncertainty and c/ 5isk $irtually all decisions are made in an environment to at least some uncertainty However+ the degree will vary from relative certainty to great uncertainty. %here are certain risks involved in making decisions. !;C&"t!i t#$ "n a situation involving certainty, people are reasonably sure about what will happen when they make a decision. %he information is available and is considered to be reliable, and the cause and effect relationships are known. +; U c&"t!i t# "n a situation of uncertainty, on the other hand, people have only a meager database, they do not know whether or not the data are reliable, and they are very unsure about whether or not the situation may change. !oreover, they cannot evaluate the interactions of the different variables. 9or e(ample, a corporation that decides to e(pand its Operation to an unfamiliar country may know little about the country, culture, laws, economic environment, and politics. %he political situation may be volatile that even e(perts cannot predict a possible change in government. c; Ris"n a situation with risks, factual information may e(ist, but it may be incomplete. Co improve decision making One may estimate the obBective probability of an outcome by using, for
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e(ample, mathematical models On the other hand, subBective probability, based on Budgment and e(perience may be used.All intelligent decision makers dealing with uncertainty like to know the degree and nature of the risk they are taking in choosing a course of action. One of the deficiencies in using the traditional approaches of operations research for problem solving is that many of the data used in model are merely estimates and others are based on probabilities. %he ordinary practice is to have staff specialists conic up with best estimates $irtually every decision is based on the interaction of a number of important variables, many of which has an element of uncertainty but, perhaps, a fairly high degree of probability. %hus, the wisdom of launching a new product might depend on a number of critical variables& the cost of introducing the product, the cost of producing it, the capital investment that will he re-uired, the price that can be set for the product, the size of the potential market

UNIT III ORGANIHING DEFINITION According to Koontz and OF6onnell, ,Organization involves the grouping of activities necessary to accomplish goals and plans, the assignment of these activities to appropriate departments and the provision of authority, delegation and co-ordination., Organization involves division of work among people whose efforts must be co-ordinated to achieve specific obBectives and to implement pre-determined strategies.
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NATURE OR C=ARACTERISTICS OF ORGANIHING 9rom the study of the various definitions given by different management e(perts we get the following information about the characteristics or nature of organization, :1; Di(isi* *, W*"-$ 6ivision of work is the basis of an organization. "n other words, there can be no organization without division of work. Nnder division of work the entire work of business is divided into many departments .%he work of every department is further subdivided into sub- works. "n this way each individual has to do the saran work repeatedly which gradually makes that person an e(pert. :2; C**"di !ti* $ Nnder organizing different persons are assigned different works but the aim of all these persons happens to be the some - the attainment of the obBectives of the enterprise. Organization ensures that the work of all the persons depends on each other;s work even though it happens to be different. %he work of one person starts from where the work of another person ends. %he non-completion of the work of one person affects the work of everybody. %herefore, everybody completes his work in time and does not hinder the work of others. "t is thus, clear that it is in the nature of an organization to establish coordination among different works, departments and posts in the enterprise. :3; Plu"!lit# *, P&"s* s$ Organization is a group of many persons who assemble to fulfill a common purpose. A single individual cannot create an organization. :2; C*''* O+E&cti(&s$ %here are various parts of an organization with different functions to perform but all move in the direction of achieving a general obBective. :5; W&ll<d&,i &d Aut0*"it# ! d R&sp* si+ilit#$ Nnder organization a chain is established between different posts right from the top to the bottom. "t is clearly specified as to what will bethe authority and responsibility of every post. "n other words, every individual working in the organization is given some authority for the efficient work performance and it is also decided simultaneously as to what will be the responsibility of that individual in case of unsatisfactory work performance. :3; O"%! i9!ti* is ! St"uctu"& *, R&l!ti* s0ip$ 5elationship between persons working on different posts in the organization is decided. "n other words, it is decided as to who will be the superior and who will be the subordinate. 3eaving the top level post and the lowest level post everybody is somebodyFs superior and somebodyFs subordinate. %he person working on the top level post has no superior and the person working on the lowest level post has no subordinate.

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:4; O"%! i9!ti* is ! M!c0i & *, M! !%&'& t$ Organization is considered to be a machine of management because the efficiency of all the functions depends on an effective organization. "n the absence of organization no function can be performed in a planned manner. "t is appropriate to call organization a machine of management from another point of view. "t is that machine in which no part can afford tube ill-fitting or non-functional. "n other words, if the division of work is not done properly or posts are not created correctly the whole system of management collapses. :5; O"%! i9!ti* is ! U i(&"s!l P"*c&ss$ Organization is needed both in business and nonbusiness organizations. >ot only this, organization will be needed where two or mom than two people work Bointly. %herefore, organization has the -uality of universality. .D/ Organization is a 6ynamic <rocess& Organization is related to people and the knowledge and e(perience of the people undergo a change. %he impact of this change affects the various functions of the organizations. %hus, organization is not a process that can be decided for all times to come but it undergoes changes according to the needs. %he e(ample in this case can be the creation or abolition of a new post according to the need. PURPOSE OF ORGANIHING Organization is an instrument that defines relations among different people which helps them to understand as in who happens to be their superior and who is their subordinate. %his information helps in fi(ing responsibility and developing coordination. "n such circumstances the obBectives of the organization can be easily achieved. %hat is why, it is said that Organization "s a mechanism of management. "n addition to that it helps in the other functions of management like planning, staffing, leading, controlling, etc. %he importance of organization or its merits becomes clear from the following facts. :1; I c"&!s& I M! !%&"i!l E,,ici& c#$ A good and balanced organization helps the managers to increase their efficiency. !anagers, through the medium of organization, make a proper distribution of the whole work among different people according to their ability. :2; P"*p&" Utili9!ti* *, R&s*u"c&s$ %hrough the medium of organization optimum utilization of all the available human and material resources of an enterprise becomes possible. 0ork is allotted to every individual according to his ability and capacity and conditions ant created to enable him to utilize his ability to the ma(imum e(tent. 9or e(ample, if an employee possesses the knowledge of modem machinery but the modem machinery is not available in the organization, in that case, efforts are made to make available the modem machinery. :3; S*u d C*''u ic!ti* P*ssi+l&$ =ommunication is essential for taking the right decision at the right time. However, the establishment of a good communication system is possible only through an organization. "n an organization the time of communication is decided so that all the useful information reaches the officers concerned which. in turn, helps the decision-making. :2; F!cilit!t&s C**"di !ti* $ "n order to attain successfully the obBectives of the organization, coordination among various activities in the organization is essential. Organization is the only medium which makes coordination possible. Nnder organization the division of work is made in such a manner as to make all the activities complementary to each other increasing their inter- dependence. "nter-dependence gives rise to the establishment of relations which, in turn, increases coordination.
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:5; I c"&!s& i Sp&ci!li9!ti* $ Nnder organization the whole work is divided into different parts. =ompetent persons are appointed to handle all the sub-works and by handling a particular work repeatedly they become specialists. %his enables them to have ma(imum work performance in the minimum time while the organization gets the benefit of specialization. :3; =&lp,ul i E1p! si* $ A good organization helps the enterprise in facing competition. 0hen an enterprise starts making available good -uality product at cheap rates, it increases the demand for its products. "n order to meet the increasing demand for its products an organization has to e(pand its business. On the other hand, a good organization has an element of fle(ibility which far from impeding the e(pansion work encourages it. ORGANIHATION STRUCTURE An organization structure is a framework that allots a particular space for a particular department or an individual and shows its relationship to the other. An organization structure shows the authority and responsibility relationships between the various positions in the organization by showing who reports to whom. "t is an established pattern of relationship among the components of the organization.!arch and )imon have stated that-,Organization structure consists simply of those aspects of pattern of behavior in the organization that are relatively stable and change only slowly., %he structure of an organization is generally shown on an organization chart. "t shows the authority and responsibility relationships between various positions in the organization while designing the organization structure, due attention should be given to the principles of sound organization. Si% i,ic! c& *, O"%! i9!ti* St"uctu"& A <roperly designed organization can help improve teamwork and productivity by providing a framework within which the people can work together most effectively. A Organization structure determines the location of decision-making in the organization. A )ound organization structure stimulates creative thinking and initiative among organizational members by providing well defined patterns of authority. A A sound organization structure facilitates growth of enterprise by increasing its capacity to handle increased level of authority. A Organization structure provides the pattern of communication and coordination. A %he organization structure helps a member to know what his role is and how it relates to other roles.

ORGANIHATIONSTRUCTURE !odern organizational structures have evolved from several organizational theories, which have identified certain principles as basic to any organization structure. !; Li & ! d St!,, R&l!ti* s0ips& 3ine authority refers to the scalar chain, or to the superior-subordinate linkages, that e(tend throughout the hierarchy .Koontz, OF6onnell and 0eihrich/. 3ine employees are responsible for achieving the basic or strategic obBectives of the organization, while staff plays a supporting role to line employees and provides services. %he relationship between line and
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staffis crucial in organizational structure, design and efficiency. "t is also an important aid to information processing and coordination. +; D&p!"t'& t!li9!ti* & 6epartmentalization is a process of horizontal clustering of different types of functions and activities on any one level of the hierarchy. 6epartmentalization is conventionally based on purpose, product, process, function, personal things and place. c; Sp! *, C* t"*l& %his refers to the number of specialized activities or individuals supervised by one person. 6eciding the span of control is important for coordinating different types of activities effectively. d; D&<c& t"!li9!ti* ! d C& t"!li9!ti* & 6e-centralization refers to decision making at lower levels in the hierarchy of authority. "n contrast, decision making in a centralized type of organizational structure is at higher levels. %he degree of centralization and de-centralization depends on the number of levels of hierarchy, degree of coordination, specialization and span of control. 1very organizational structure contains both centralization and de-centralization, but to varying degrees. %he e(tent of this can be determined by identifying how much of the decision making is concentrated at the top and how much is delegated to lower levels. !odern organizational structures show a strong tendency towards de-centralization. F*"'!l G"*ups An group is formal when it is purposely designed to accomplish an organizational obBective or task. "t is created via formal authority for some defined purpose. A formal group can be a command group or a functional group that is relatively permanent is composed of managers and their subordinates who meet regularly to discuss general and specific ideas to improve product or service. %he formal groups usually work under a single supervisor, even though the structure of these groups may vary. 9or e(ample, in one form of group such as in production, the members of the work group depend on each other as well as on the supervisor and in another form of group, such as sales force, the members of the group work fairly independently and their common contact may be the district sales manager. Other types of formal groups include task forces and committees. %he task forces are temporary in nature and are set up for some special proBects. %he committees can be permanent, such as a planning committee, a finance committee or a budget committee and may become an integral part of the organizational structure. A committee can also be temporary such as a special task force that is set up for a particular purpose and is then disbanded when the purpose is achieved. 9or e(ample, the committee to reelect the <resident is temporary in nature and is disbanded after the election. I ,*"'!l G"*ups 0hereas formal groups are established by organizations to achieve some specific obBectives, informal groups are formed by the members of such groups by themselves. %hey emerge naturally, in response to the common interests of organizational members. %hey are formed spontaneously, without any formal designation, and with common interests such as self-defense, work assistance and social interaction. %hey e(ist outside the formal authority system and without any set rigid rules. %hough officially unrecognized, they e(ist in the shadow of the formal structure as a network of personal and social
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relations that must be understood and respected by the management. "nformal work groups are based upon socio-psychological support and reasoning and depend upon member;s interaction, communication, personal likings and dislikings and social contacts within as well as outside the organization. How powerful these informal groups can be seen from the fact that if one member of the group is fired, sometimes all workers go on strike in support of that member of the group. %he bonds between members are very strong and bring in a sense of belonging and togetherness. %his togetherness can have a powerful influence on productivity and Bob satisfaction, since employees motivate each other and share each others burden by training those who are new and by looking up to old timers for guidance, advice and assistance. "nformal groups may have their own leaders and followers, group goals, social roles and working patterns. %hey have their own unwritten rules and a code of conduct that every member implicitly accepts. %he leadership of the informal groups develops from within rather than a formal election. An individual, who is working in a group for a long time and has a good rapport with other members, may emerge as a leader due to his technical e(pertise and his seniority. 9or any problem within the group, either technical or social, the members would go to this leader rather than the formally assigned supervisor. LINE AND STAFF AUT=ORIT? "n an organization, the line authority flows from top to bottom and the staff authority is e(ercised by the specialists over the line managers who advise them on important matters. %hese specialists stand ready with their specialty to serve line mangers as and when their services are called for, to collect information and to give help which will enable the line officials to carry out their activities better. %he staff officers do not have any power of command in the organization as they are employed to provide e(pert advice to the line officers.%he FlineF maintains discipline and stability+ the FstaffF provides e(pert information. %he line gets out the production, the staffs carries on the research, planning, scheduling, establishing of standards and recording of performance. %he authority by which the staff performs these functions is delegated by the line and the performance must be acceptable to the line before action is taken. %he following figure depicts the line and staff authority& T#p&s *, St!,, %he staff position established as a measure of support for the line managers may take the following forms& C. <ersonal )taff& Here the staff official is attached as a personal assistant or adviser to the line manager. 9or e(ample, Assistant to managing director. G. )pecialized )taff& )uch staff acts as the fountainhead of e(pertise in specialized areas like 5 4 6, personnel, accounting etc. I. 7eneral )taff& %his category of staff consists of a set of e(perts in different areas who are meant to advise and assist the top management on matters called for e(pertise. 9or e(ample, 9inancial advisor, technical advisor etc. F&!tu"&s *, li & ! d st!,, *"%! i9!ti* A Nnder this system, there are line officers who have authority and command over the
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A A

subordinates and are accountable for the tasks entrusted to them. %he staff officers are specialists who offer e(pert advice to the line officers to perform their tasks efficiently. Nnder this system, the staff officers prepare the plans and give advice to the line officers and the line officers e(ecute the plan with the help of workers. %he line and staff organization is based on the principle of specialization.

Ad(! t!%&s A "t brings e(pert knowledge to bear upon management and operating problems. %hus, the line managers get the benefit of specialized knowledge of staff specialists at various levels. A %he e(pert advice and guidance given by the staff officers to the line officers benefit the entire organization.As the staff officers look after the detailed analysis of each important managerial activity, it relieves the line managers of the botheration of concentrating on specialized functions. A )taff specialists help the line managers in taking better decisions by providing e(pert advice. %herefore, there will be sound managerial decisions under this system.

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A A A

"t makes possible the principle of undivided responsibility and authority, and at the same time permits staff specialization. %hus, the organization takes advantage of functional organization while maintaining the unity of command. "t is based upon planned specialization. 3ine and staff organization has greater fle(ibility, in the sense that new specialized activities can be added to the line activities without disturbing the line procedure.

Dis!d(! t!%&s A Nnless the duties and responsibilities of the staff members are clearly indicated by charts and manuals, there may be considerable confusion throughout the organization as to the functions and positions of staff members with relation to the line supervisors. A %here is generally a conflict between the line and staff e(ecutives. %he line managers feel that staff specialists do not always give right type of advice, and staff officials generally complain that their advice is not properly attended to. A 3ine managers sometimes may resent the activities of staff members, feeling that prestige and influence of line managers suffer from the presence of the specialists. A %he staff e(perts may be ineffective because they do not get the authority to implement their recommendations. A %his type of organization re-uires the appointment of large number of staff officers or e(perts in addition to the line officers. As a result, this system becomes -uite e(pensive. A Although e(pert information and advice are available, they reach the workers through the officers and thus run the risk of misunderstanding and misinterpretation. A )ince staff managers are not accountable for the results, they may not be performing their duties well. A 3ine mangers deal with problems in a more practical manner. 2ut staff officials who are specialists in their fields tend to be more theoretical. %his may hamper coordination in the organization. DEPARTMENTATION Organization involves the dividing and grouping of the works to be performed in the enterprise on some logical basis so that team spirit can be developed. %his grouping of activities and employees into various units for the purpose of administration is called departmentation. CONCEPT AND IMPORTANCE OF DEPARTMENTATION 6epartmentation is a means of dividing the large functional organisation into smaller, fle(ible administrative units. "t makes grouping of activities into units and sub-units created through departmentation which are known as department, division, section, branch etc. %he process of departmentation takes place at all levels in the organisation. At the top level, the break up of functions into activities is called <rimary 6epartmentation#. 7rouping activities into separate units at the middle level is called "ntermediate 6epartmentation# and at the lower level it is called Nltimate 6epartmentation# or )econdary 6epartmentation#. 3et us discuss some definitions of 6epartments. C. According to 3ouis Allen, 6epartmentation is a means of dividing the large and monolithic
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functional organisation into smaller fle(ible administrative units.# G. According to koonts and O;6onnell & A department is a distinct area, division or branch of an enterprise over which a manager has authority for the performance of specified activities.# "n short, we need departmentation in an enterprise to divide the activities along with authority, responsibility and accountability with sole obBective to get the work done smoothly and in the best possible way. IMPORTANCE %he importance of departmentation is to facilitate successful operation and to create an environment for effective performance. 7rouping of activities and employees into departments makes it possible to e(pand an organisation to a large e(tent. "t enables the organisation to recapture some of the advantages of the small functional organisation while minimising the disadvantages of that which comes with increasing size, diversity and dispersion. %he importance of departmentation may be stated in the following way& )pecification & 6epartmentation helps to grow specification in various activities which leads to improving the efficiency of operation. 9eeling of autonomy & 6epartmentation gives independent charges to managers. %he feeling of independence provides satisfaction and in turn increases their responsibilities and efficiency. 9i(ation of responsibility & %hrough departmentation, responsibilities of the work can be precisely and accurately fi(ed. %he authority and responsibility of each department is defined precisely. 6evelopment of !anagement & %he managers of each department perform specialised functions. %hey take independent decision and develop themselves for higher positions. 6epartmentation facilitates the development of managerial personnel by providing them opportunities for e(ercising initiatives. 9acility in Appraisal & )ince the managers perform specified Bobs, their performance appraisals become easier. 6epartmentation facilitates administrative control as standards of performance are laid down separately for each department. 2udget <reparation & "t makes the preparation of budget for departments easier as well as for the organisation as a whole easier. <roper )upervision & As the authority for making decisions is diffused to the managers of the departments and works are assigned to each individual department wise, supervision and control become easier. PRINCIPLES C. <rinciple of attainment of organisational obBectives & "t implies that departments are designed or created to provide all the facilities to achieve organisational obBectives in an effective and efficient manner.
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G. <rinciple of comprehensive departmentation & "t implies that the entire functions of the enterprise are to be covered while creating the departments. I. <rinciple of inter-departmental co-operation & "t implies that departments should be designed in such a way that ma(imum inter-departmental co-operation is possible. H. <rinciple of promotion of specialisation & "t should help in enhancing both managerial and operational specialisation so that organisational efficiency can be achieved. K. <rinciples of cost-benefit analysis & "t should be designed and developed in a manner to get the ma(imum benefit with minimum possible costs. L. <rinciple of special attention to key-result areas & Key-result areas are those areas which determine the long term growth and survival of an organisation. "t may include profitability, market standing, public relation etc. According to this principle while creating departments the key-result areas should be given special attention. P. <rinciple of fle(ibility & "t implies that there should be sufficient scope to change the design or set of departments as per the re-uirements of changing situation. M. <rinciple of human consideration & Human consideration such as needs, values, attitudes, e(pectation, feelings etc. must be taken into consideration while creating departments along with technical or financial considerations. 8ASES OF DEPARTMENTATION l 6epartmentation by 9unction l 6epartmentation by <roduct l 6epartmentation by %erritory or 7eographic Area l 6epartmentation by =ustomer or !arket l 6epartmentation by <rocess or 1-uipment l =omposite or =ombined 6epartmentation. l 6epartmentation by function & 0hen departmentation is done on the basis of functions, all the activities of the organisation are classified into different departments like production, marketing, finance, personnel, purchasing, engineering, accounting etc. !oreover, a single department may be sub-divided on the basis of the functions they perform. 9or e(ample, the marketing department may be sub-divided into advertising, marketing research, sales, sales promotion, product planning etc. %he following chart depicts clearly the departmentation on the basis of function

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Advantages & %he main advantages of this basis of departmentations are 2enefits of specialisation. =oordination among departments. )imple organisation structure. 6isadvantages & %he main disadvantages of this basis of departmentation are "solation of the departments. 3ack of coordination. Hindered development of individuals. 6epartmentation by product & 3arge organisations with number of products can follow the departmentations on the basis of products. All the activities related to each product are grouped separately. %hat is, each department becomes autonomous, dealing in a particular product. 9or e(ample, an organisation manufacturing a number of products like soaps, tooth paste, cosmetics, blades, milk powder, etc. groups all the activities from manufacturing to distribution independently for each product. 3et us have a look at the following chart that depicts departmentation by product&-

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Advantages & %he main advantages of 6epartmention by product are l <rofitability of each product can be assessed. l 2etter service to consumers can be provided as the salesmen have thorough knowledge about the product. l "t is suitable for undertakings manufacturing varied and comple( product lines. l 9le(ibility in product lines can be attained as the addition or dropping of product lines is easy. l )pecilisation is made possible. 6isadvantages & %he main disadvantages of departmentation by product are l =onfusion in the customers; mind. l 6uplication and wastages of resources. l "ncreased costs. l 6epartmentation by %erritory & Nnder this system the activities of the organisations are grouped into different departments on the basis of the geographical area. 9or e(ample, a company can carry out its activities by grouping them into regions like eastern region, western region, southern region, northern region, etc. %his type of departmentation is suitable for large organisations which are geographically spread over to different areas %he following chart depicts the territorial departmentation &

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Advantages & %he advantages of territorial departmentations are C/ 9amiliarity with customers in the particular region. G/ 1nBoying advantages of local situations. I/ 2enefits from geographical market segmentation. H/ %raining for development. 6isadvantages & %he disadvantages of territorial departmentations are C/ "ncrease in costs. G/ 6ifficulty in coordination and control. l 6epartmentaion by =ustomer & An organisations can divide its activities into departments on the basis of different customer groups served by the organisation, such as industrial users, consumers, wholesalers, retailers etc. %he following chart depicts the customer-wise departmentation.

Advantages & %he advantages of developmentations by customer are l )pecialised service to customers. l )upply of goods according to customer;s re-uirements. 6isadvantages & %he disadvantages of departmentation by customer are l 6ifficulty in cordination l High cost. l Nnder utilisation of human resources. l 6epartmentation by <rocess & 6epartmentation by process implies the grouping of the activities into different departments on the basis of the processes involved in production. 9or e(ample, in a te(tile unit, departmentation can be done on the basis of process i.e. spinning, weaving, dyeings, bleaching etc.
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%he following chart shows the departmentation by process &-

Advantages & %he advantages of departmentation by process arel High operational efficiency. l 2enefits of specialisation. l 5eduction in manufacturing time and unnecessary movements in the process. 6isadvantage & %he disadvantages of departmentations by process are l High =osts. l 5e-uiring continuous training. l =ombined %ype & =ombined type departmentation is a hybrid type of departmentation which tries to combine the advantages of different types of departmentation. 9or e(ample, there may be a combination of 9unctional and <roduct departmentation. SPAN OF CONTROL )pan of =ontrol means the number of subordinates that can be managed efficiently and effectively by a superior in an organization. "t suggests how the relations are designed between a superior and a subordinate in an organization. F!ct*"s A,,&cti % Sp! *, c* t"*l$ a/ C!p!cit# *, Sup&"i*"$ 6ifferent ability and capacity of leadership, communication affect management of subordinates. b/ C!p!cit# *, Su+*"di !t&s$ 1fficient and trained subordinates affects the degree of span of management. c/ N!tu"& *, W*"-$ 6ifferent types of work re-uire different patterns of management. d; D&%"&& *, C& t"!li9!ti* *" D&c& t"!li9!ti* $ 6egree of centralization or decentralization affects the span of management by affecting the degree of involvement of the superior in decision making. e/ D&%"&& *, Pl! i %$ <lans which can provide rules, procedures in doing the work higher would be the degree of span of management. f/ C*''u ic!ti* T&c0 iAu&s$ <attern of communication, its means, and media affect the time re-uirement in managing subordinates and conse-uently span of management. g/ Us& *, St!,, Assist! c&$ Nse of )taff assistance in reducing the work load of managers enables them to manage
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more number of subordinates. h/ Sup&"(isi* *, *t0&"s$ "f subordinate receives supervision form several other personnel besides his direct supervisor. "n such a case, the work load of direct superior is reduced and he can supervise more number of persons. Sp! *, c* t"*l is *, t/* t#p&s$ 1. N!""*/ sp! *, c* t"*l$ >arrow )pan of control means a single manager or supervisor oversees few subordinates. %his gives rise to a tall organizational structure.

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Ad(! A A A

t!%&s$ =lose supervision =lose control of subordinates 9ast communication

Dis!d(! t!%&s$ A %oo much control A !any levels of management A High costs A 1(cessive distance between lowest level and highest level 2. Wid& sp! *, c* t"*l$ 0ide span of control means a single manager or supervisor oversees a large number of subordinates. %his gives rise to a flat organizational structure.

Ad(! A A A

t!%&s$ !ore 6elegation of Authority 6evelopment of !anagers =lear policies

Dis!d(! t!%&s$ A Overloaded supervisors A 6anger of superiors loss of control A 5e-uirement of highly trained managerial personnel A 2lock in decision making

CENTRALIHATION AND DECENTRALIHATION CENTRALIHATION$ "t is the process of transferring and assigning decision-making authority to higher levels of an organizational hierarchy. %he span of control of top managers is relatively broad, and there are relatively many tiers in the organization.
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C0!"!ct&"istics A <hilosophy ' emphasis on& top-down control, leadership, vision, strategy. A 6ecision-making& strong, authoritarian, visionary, charismatic. A Organizational change& shaped by top, vision of leader. A 1(ecution& decisive, fast, coordinated. Able to respond -uickly to maBor issues and changes. A Nniformity. 3ow risk of dissent or conflicts between parts of the organization.

Ad(! t!%&s *, C& t"!li9!ti* A <rovide <ower and prestige for manager A <romote uniformity of policies, practices and decisions A !inimal e(tensive controlling procedures and practices A !inimize duplication of function Dis!d(! t!%&s *, C& t"!li9!ti* A >eglected functions for mid. 3evel, and less motivated beside personnel. A >ursing supervisor functions as a link officer between nursing director and firstline management. DECENTRALIHATION$ "t is the process of transferring and assigning decision-making authority to lower levels of an organizational hierarchy. %he span of control of top managers is relatively small, and there are relatively few tears in the organization, because there is more autonomy in the lower ranks. C0!"!ct&"istics A <hilosophy ' emphasis on& bottom-up, political, cultural and learning dynamics. A 6ecision-making& democratic, participative, detailed. A Organizational change& emerging from interactions, organizational dynamics. A 1(ecution& evolutionary, emergent. 9le(ible to adapt to minor issues and changes. A <articipation, accountability. 3ow risk of not-invented-here behavior. T0"&& F*"'s *, d&c& t"!li9!ti* A D&<c* c& t"!ti* . %he weakest form of decentralization. 6ecision making authority is redistributed to lower or regional levels of the same central organization. A D&l&%!ti* . A more e(tensive form of decentralization. %hrough delegation the responsibility for decision-making are transferred to semi-autonomous organizations not wholly controlled by the central organization, but ultimately accountable to it. A D&(*luti* . A third type of decentralization is devolution. %he authority for decision- making is transferred completely to autonomous organizational units. Ad(! t!%&s *, D&c& t"!li9!ti* A 5aise morale and promote interpersonal relationships A 5elieve from the daily administration A 2ring decision-making close to action A 6evelop )econd-line managers
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A A

<romote employee;s enthusiasm and coordination 9acilitate actions by lower-level managers

Dis!d(! t!%&s *, D&c& t"!li9!ti* A A A A %op-level administration may feel it would decrease their status !anagers may not permit full and ma(imum utilization of highly -ualified personnel "ncreased costs. "t re-uires more managers and large staff "t may lead to overlapping and duplication of effort

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DELEGATION OF AUT=ORIT? A manager alone cannot perform all the tasks assigned to him. "n order to meet the targets, the manager should delegate authority. 6elegation of Authority means division of authority and powers downwards to the subordinate. 6elegation is about entrusting someone else to do parts of your Bob. 6elegation of authority can be defined as subdivision and sub- allocation of powers to the subordinates in order to achieve effective results. El&'& ts *, D&l&%!ti* C. Aut0*"it# - in conte(t of a business organization, authority can be defined as the power and right of a person to use and allocate the resources efficiently, to take decisions and to give orders so as to achieve the organizational obBectives. Authority must be welldefined. All people who have the authority should know what is the scope of their authority is and they shouldn;t misutilize it. Authority is the right to give commands, orders and get the things done. %he top level management has greatest authority. Authority always flows from top to bottom. "t e(plains how a superior gets work done from his subordinate by clearly e(plaining what is e(pected of him and how he should go about it. Authority should be accompanied with an e-ual amount of responsibility. 6elegating the authority to someone else doesn;t imply escaping from accountability. Accountability still rest with the person having the utmost authority. G. R&sp* si+ilit# - is the duty of the person to complete the task assigned to him. A person who is given the responsibility should ensure that he accomplishes the tasks assigned to him. "f the tasks for which he was held responsible are not completed, then he should not give e(planations or e(cuses. 5esponsibility without ade-uate authority leads to discontent and dissatisfaction among the person. 5esponsibility flows from bottom to top. %he middle level and lower level management holds more responsibility. %he person held responsible for a Bob is answerable for it. "f he performs the tasks assigned as e(pected, he is bound for praises. 0hile if he doesn;t accomplish tasks assigned as e(pected, then also he is answerable for that. I. Acc*u t!+ilit# - means giving e(planations for any variance in the actual performance from the e(pectations set. Accountability cannot be delegated. 9or e(ample, if ;A; is given a task with sufficient authority, and ;A; delegates this task to 2 and asks him to ensure that task is done well, responsibility rest with ;2;, but accountability still rest with ;A;. %he top level management is most accountable. 2eing accountable means being innovative as the person will think beyond his scope of Bob. Accountability ,in short, means being answerable for the end result. Accountability can;t be escaped. "t arises from responsibility. DELEGATION PROCESS& %he steps involved in delegation are given below

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C. All*c!ti* *, duti&s I %he delegator first tries to define the task and duties to the subordinate. He also has to define the result e(pected from the subordinates. =larity of duty as well as result e(pected has to be the first step in delegation. G. G"! ti % *, !ut0*"it# I )ubdivision of authority takes place when a superior divides and shares his authority with the subordinate. "t is for this reason+ every subordinate should be given enough independence to carry the task given to him by his superiors. %he managers at all levels delegate authority and power which is attached to their Bob positions. %he subdivision of powers is very important to get effective results. I. Assi% i % *, R&sp* si+ilit# ! d Acc*u t!+ilit# I %he delegation process does not end once powers are granted to the subordinates. %hey at the same time have to be obligatory towards the duties assigned to them. 5esponsibility is said to be the factor or obligation of an individual to carry out his duties in best of his ability as per the directions of superior. %herefore, it is that which gives effectiveness to authority. At the same time, responsibility is absolute and cannot be shifted. H. C"&!ti* *, !cc*u t!+ilit# I Accountability, on the others hand, is the obligation of the individual to carry out his duties as per the standards of performance. %herefore, it is said that authority is delegated, responsibility is created and accountability is imposed. Accountability arises out of responsibility and responsibility arises out of authority. %herefore, it becomes important that with every authority position an e-ual and opposite responsibility should be attached. %herefore every manager, i.e., the delegator has to follow a system to finish up the delegation process. 1-ually important is the delegatee;s role which means his responsibility and accountability is attached with the authority over to here.

STAFFING
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)taffing is that part of the process of management which is concerned with ac-uiring, developing, employing, appraising, renumerating and retaining people so that right type of people are available at right positions and at right time in the organisation. "n the simplest terms, staffing is :putting people to Bobs;. DEFINITION ,)taffing is the function by which managers build an organisation through the recruitment, selection, and development of individuals as capable employees, - !c9arland IMPORTANCE OF STAFFING

9illing the Organisational positions 6eveloping competencies to challanges 5etaining personnel - professionalism Optimum utilisation of the human resources

STAFFING PROCESS C. M! p*/&" "&Aui"&'& ts< %he very first step in staffing is to plan the manpower inventory re-uired by a concern in order to match them with the Bob re-uirements and demands. %herefore, it involves forecasting and determining the future manpower needs of the concern. G. R&c"uit'& t< Once the re-uirements are notified, the concern invites and solicits applications according to the invitations made to the desirable candidates. I. S&l&cti* < %his is the screening step of staffing in which the solicited applications are screened out and suitable candidates are appointed as per the re-uirements. H. O"i& t!ti* ! d Pl!c&'& t< Once screening takes place, the appointed candidates are made familiar to the work units and work environment through the orientation programmes. placement takes place by putting right man on the right Bob. K. T"!i i % ! d D&(&l*p'& t< %raining is a part of incentives given to the workers in order to develop and grow them within the concern. %raining is generally given according to the nature of activities and scope of e(pansion in it. Along with it, the workers are developed by providing them e(tra benefits of indepth knowledge of their functional areas. 6evelopment also includes giving them key and important Bobsas a test or e(amination in order to analyse their performances. L. R&'u &"!ti* < "t is a kind of compensation provided monetarily to the employees for their work performances. %his is given according to the nature of Bob- skilled or unskilled, physical or mental, etc. 5emuneration forms an important monetary incentive for the employees.
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P. P&",*"'! c& E(!lu!ti* < "n order to keep a track or record of the behaviour, attitudes as well as opinions of the workers towards their Bobs. 9or this regular assessment is done to evaluate and supervise different work units in a concern. "t is basically concerning to know the development cycle and growth patterns of the employeesin a concern. M. P"*'*ti* ! d t"! s,&"< <romotion is said to be a non- monetary incentive in which the worker is shifted from a higher Bob demanding bigger responsibilities as well as shifting the workers and transferring them to different work units and branches of the same organization.

RECRUITMENT %he process of finding and hiring the best--ualified candidate .from within or outside of an organization/ for a Bob opening, in a timely and cost effective manner. %he recruitment process includes analyzing the re-uirements of a Bob, attracting employees to that Bob, screening and selecting applicants, hiring, and integrating the new employee to the organization. T?PES C. I t&" !l R&c"uit'& t < is a recruitment which takes place within the concern or organization. "nternal sources of recruitment are readily available to an organization. "nternal sources are primarily three - %ransfers, promotions and 5e-employment of e(employees. 5e-employment of e(-employees is one of the internal sources of recruitment in which employees can be invited and appointed to fill vacancies in the concern. %here are situations when e(-employees provide unsolicited applications also. "nternal recruitment may lead to increase in employee;s productivity as their motivation level increases. "t also saves time, money and efforts. 2ut a drawback of internal recruitment is that it refrains the organization from new blood. Also, not all the manpower re-uirements can be met through internal recruitment. Hiring from outside has to be done. "nternal sources are primarily I a. T"! s,&"s b. P"*'*ti* s :t0"*u%0 I t&" !l C*+ P*sti %s; and c. R&<&'pl*#'& t *, &1<&'pl*#&&s < 5e-employment of e(-employees is one of the internal sources of recruitment in which employees can be invited and appointed to fill vacancies in the concern. %here are situations when e(-employees provide unsolicited applications also. G. E1t&" !l R&c"uit'& t < 1(ternal sources of recruitment have to be solicited from outside the organization. 1(ternal sources are e(ternal to a concern. 2ut it involves lot of time and money. %he e(ternal sources of recruitment include - 1mployment at factory gate, advertisements, employment e(changes, employment agencies, educational institutes, labour contractors, recommendations etc.
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a. E'pl*#'& t !t F!ct*"# L&(&l < %his a source of e(ternal recruitment in which the applications for vacancies are presented on bulletin boards outside the 9actory or at the 7ate. %his kind of recruitment is applicable generally where factory workers are to be appointed. %here are people who keep on soliciting Bobs from one place to another. %hese applicants are called as unsolicited applicants. %hese types of workers apply on their own for their Bob. 9or this kind of recruitment workers have a tendency to shift from one factory to another and therefore they are called as badli# workers. b. Ad(&"tis&'& t < "t is an e(ternal source which has got an important place in recruitment procedure. %he biggest advantage of advertisement is that it covers a wide area of market and scattered applicants can get information from advertisements. !edium used is >ewspapers and %elevision. c. E'pl*#'& t E1c0! %&s < %here are certain 1mployment e(changes which are run by government. !ost of the government undertakings and concerns employ people through such e(changes. >ow-a-days recruitment in government agencies has become compulsory through employment e(change. d. E'pl*#'& t A%& ci&s < %here are certain professional organizations which look towards recruitment and employment of people, i.e. these private agencies run by private individuals supply re-uired manpower to needy concerns. e. Educ!ti* !l I stituti* s < %here are certain professional "nstitutions which serves as an e(ternal source for recruiting fresh graduates from these institutes. %his kind of recruitment done through such educational institutions, is called as =ampus 5ecruitment. %hey have special recruitment cells which helps in providing Bobs to fresh candidates. f. R&c*''& d!ti* s < %here are certain people who have e(perience in a particular area. %hey enBoy goodwill and a stand in the company. %here are certain vacancies which are filled by recommendations of such people. %he biggest drawback of this source is that the company has to rely totally on such people which can later on prove to be inefficient. g. L!+*u" C* t"!ct*"s < %hese are the specialist people who supply manpower to the 9actory or !anufacturing plants. %hrough these contractors, workers are appointed on contract basis, i.e. for a particular time period. Nnder conditions when these contractors leave the organization, such people who are appointed have to also leave the concern. SELECTION 1mployee )election is the process of putting right men on right Bob. "t is a procedure of matching organizational re-uirements with the skills and -ualifications of people. 1ffective selection can be done only when there is effective matching. 2y selecting best candidate for the re-uired Bob, the organization will get -uality performance of employees. !oreover, organization will face less of absenteeism and employee turnover problems. 2y selecting right candidate for the
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re-uired Bob, organization will also save time and money. <roper screening of candidates takes place during selection procedure. All the potential candidates who apply for the given Bob are tested. %he E'pl*#&& s&l&cti* P"*c&ss takes place in following orderC. P"&li'i !"# I t&"(i&/s< "t is used to eliminate those candidates who do not meet the minimum eligiblity criteria laid down by the organization. %he skills, academic and family background, competencies and interests of the candidate are e(amined during preliminary interview. <reliminary interviews are less formalized and planned than the final interviews. %he candidates are given a brief up about the company and the Bob profile+ and it is also e(amined how much the candidate knows about the company. <reliminary interviews are also called screening interviews. G. Applic!ti* +l! -s< %he candidates who clear the preliminary interview are re-uired to fill application blank. "t contains data record of the candidates such as details about age, -ualifications, reason for leaving previous Bob, e(perience, etc. I. W"itt& T&sts< $arious written tests conducted during selection procedure are aptitude test, intelligence test, reasoning test, personality test, etc. %hese tests are used to obBectively assess the potential candidate. %hey should not be biased. H. E'pl*#'& t I t&"(i&/s< "t is a one to one interaction between the interviewer and the potential candidate. "t is used to find whether the candidate is best suited for the re-uired Bob or not. 2ut such interviews consume time and money both. !oreover the competencies of the candidate cannot be Budged. )uch interviews may be biased at times. )uch interviews should be conducted properly. >o distractions should be there in room. %here should be an honest communication between candidate and interviewer. K. M&dic!l &1!'i !ti* < !edical tests are conducted to ensure physical fitness of the potential employee. "t will decrease chances of employee absenteeism. L. App*i t'& t L&tt&"< A reference check is made about the candidate selected and then finally he is appointed by giving a formal appointment letter. ORIENTATION Once the candidates are selected for the re-uired Bob, they have to be fitted as per the -ualifications. <lacement is said to be the process of fitting the selected person at the right Bob or place, i.e. fitting s-uare pegs in s-uare holes and round pegs in round holes. Once he is fitted into the Bob, he is given the activities he has to perform and also told about his duties. %he freshly appointed candidates are then given orientation in order to familiarize and introduce the company to him. 7enerally the information given during the orientation programme includes

1mployee;s layout %ype of organizational structure 6epartmental goals


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Organizational layout 7eneral rules and regulations )tanding Orders 7rievance system or procedure

"n short, during Orientation employees are made aware about the mission and vision of the organization, the nature of operation of the organization, policies and programmes of the organization. %he main aim of conducting Orientation is to build up confidence, morale and trust of the employee in the new organization, so that he becomes a productive and an efficient employee of the organization and contributes to the organizational success. %he nature of Orientation program varies with the organizational size, i.e., smaller the organization the more informal is the Orientation and larger the organization more formalized is the Orientation programme. <roper <lacement of employees will lower the chances of employee;s absenteeism. %he employees will be more satisfied and contended with their work. CAREER DEVELOPMENT STAGES OF CAREER DEVELOPMENT =areer development starts in the early years of schooling and allows young people to discover their potential, e(plore their career interests and link their learning to future success in life. %he goals of the $ictorian =areers =urriculum 9ramework are to assist young people to&

Nnderstand and manage influences relating to career planning and lifelong learning+ 6evelop skills, knowledge and capabilities to make career decisions+ Apply their learning to achieve educational and career aspirations+ and 2uild resilience in their capacity to manage change throughout their lives.

%hese goals are organised into three )tages of =areer 6evelopment&


S&l, D&(&l*p'& t& young people understand themselves and the influences on them, build their e(periences and achievements and develop their capabilities. C!"&&" E1pl*"!ti* & young people locate, investigate and consider opportunities in learning and future work options. C!"&&" M! !%&'& t& young people make and adBust =areer Action <lans and manage their life choices, changes and transitions.
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%hese stages are reflected through si( steps in a young personFs ac-uisition of skills for career development, and form the structure of the 9ramework. *oung people complete all si( steps at each year level. %hrough planned career development learning, young people discover their strengths and talents, e(plore the world of work and their place in it, focus on their values and interests, use decision-making skills to plan their learning and career programs, decide on their best options and opportunities, and apply their skills and knowledge to their learning and career planning. %hese steps provide the skills and knowledge for lifelong career self-management. CAREER STAGES "dentifiable periods in oneFs work life which are distinguished by oneFs changing activities, concerns, motives, and needs. %he main stages in a career cycle include& development stage, e(ploration stage, establishment stage, ageing stage and declination stage. 1. D&(&l*p'& t st!%&$ %his stage begins from birth and normally lasts until CH years old. %his is the period in which children want to affirm themselves and have been affected very much by the relationship with family, school and society. "n the beginning of this stage, 7ames play an important role in developing children;s recognition. "n the end of this stage, children have developed ideas about their own hobbies and abilities, maybe with some practical ideas about their future careers. 2. E1pl*"!ti* st!%&$ %his stage often lasts from CK years old to GH years old. "n this period, people have many different career choices and they often tend to choose Bob careers they have been counseled, tutored or the Bobs they think will fit their abilities and wishes. %he most important in this stage is that people need to develop a broad knowledge and a variety of Bob skills. 3. Est!+lis0'& t st!%&$ %his stage is from the age of GK to HH. %his is the main stage in the career of a person. "n the beginning of the stage, some people have found their suitable Bobs and these helped them have long and settled standings in their career lines. As usual, people pursue their original career choices, but there are still many people considering that this stage is only a trial period to continually test their skills and incentives for advancement in career. 1stablishment stage includes I periods&
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3.1. Trial period: 9rom the age of GK to about IJ, in this period, people work primarily to find out whether the career choice they made is suitable or not. 3.2. Stable period: >ormally from the age of IJ to HJ, in this period, people often have identified their own career goals and have specific plans to decide what should continually be done to reach those goals. %here are two tendencies, continuing the path chosen or turning to another Bob career. 3.3. Mid I C!"&&" c"isis p&"i*d$ %his period lasts from mid thirties to mid forties. 6uring this period, people often compare what they have tried to pursue, the difficulties in career they have, what they have to sacrifice, the loss they have endured to follow their career path as well as their career ambitions with the achievements they have got in career such as position, salary and so on. 2. A%&i % st!%&$ %his period continues from the age of HK to LJ. %here are many people who Bump directly from stable period to this stage without having e(perienced all the difficulties and failures in mid @ career crisis period. 5. D&cli !ti* st!%&$ 6eclination stage is the final stage when people are old, less healthy and clairvoyant. "n this period, the sense of responsibilities toward the Bob has decreased and they must accept the new role of the young generation. TRAINING %raining of employees takes place after orientation takes place. %raining is the process of enhancing the skills, capabilities and knowledge of employees for doing a particular Bob. %raining process moulds the thinking of employees and leads to -uality performance of employees. "t is continuous and never ending in nature.

I'p*"t! c& *, T"!i i %


%raining is crucial for organizational development and success. "t is fruitful to both employers and employees of an organization. An employee will become more efficient and productive if he is trained well. %raining is given on four basic grounds&
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C. >ew candidates who Boin an organization are given training. %his training familiarize them with the organizational mission, vision, rules and regulations and the working conditions. G. %he e(isting employees are trained to refresh and enhance their knowledge. I. "f any updations and amendments take place in technology, training is given to cope up with those changes. 9or instance, purchasing a new e-uipment, changes in techni-ue of production, computer implantment. %he employees are trained about use of new e-uipments and work methods. H. 0hen promotion and career growth becomes important. %raining is given so that employees are prepared to share the responsibilities of the higher level Bob. %he benefits of training can be summed up as& C. I'p"*(&s '*"!l& *, &'pl*#&&s< %raining helps the employee to get Bob security and Bob satisfaction. %he more satisfied the employee is and the greater is his morale, the more he will contribute to organizational success and the lesser will be employee absenteeism and turnover. G. L&ss sup&"(isi* < A well trained employee will be well ac-uainted with the Bob and will need less of supervision. %hus, there will be less wastage of time and efforts. I. F&/&" !ccid& ts< 1rrors are likely to occur if the employees lack knowledge and skills re-uired for doing a particular Bob. %he more trained an employee is, the less are the chances of committing accidents in Bob and the more proficient the employee becomes. H. C0! c&s *, p"*'*ti* < 1mployees ac-uire skills and efficiency during training. %hey become more eligible for promotion. %hey become an asset for the organization. K. I c"&!s&d p"*ducti(it#< %raining improves efficiency and productivity of employees. 0ell trained employees show both -uantity and -uality performance. %here is less wastage of time, money and resources if employees are properly trained MET=ODS OF TRAINING :A; O t0& C*+ T"!i i % M&t0*ds On the Bob training methods are by far the most commonly used in training for all levels of personnel. %he obBect of on the Bob training is to bring the employees to at least a minimum acceptable standard of performance in the shortest possible lime. %he worker by these methods learns to master the operations involved on the actual Bob situation under the supervision of his immediate loss who has to carry the primary burden of conducting this training. $arious methods of on the Bob training are as follows&.C/ On specific 8obR%he most common or formal on the Bob training programme is training for specific Bob. =urrent practice in Bob training has been strongly influenced by the war time training within industry which was first designed to improve the Bob performance through Bob instruction training. %here are following methods of training&
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.A/ 1(perienceR%his is the oldest method of on-the- Bob training. 2ut as a sole approach, it is wasteful, time consuming and inefficient. "t has been observed that it should be followed by other training methods to make it more effective. "n a survey, it was found that they kept up to date through a variety of activities which were largely unrelated to formal continuing education courses. On the Bob, problem-solving and colleague interactions were prompted as being most important for professional growth by LG per cent respondents. .2/ =oaching-On-the-Bob coaching by a superior is an important and potentially effective approach if superior is properly trained and oriented. %he techni-ue involves direct personnel instruction and guidance, usually, with e(tensive demonstration and continuous critical evaluation and correction. %he advantage is increased motivation for the trainee and the minimisation of the problem of learning transfer from theory to practice. %he danger in this method lies in the possible neglect of coaching by superior. U NnderstudyR%he understudy method is considered a somewhat different approach from those described above, that a certain person is specifically designated as the heir-apparent. %he understudy method makes the trainee an assistant to the current Bob holder. %he trainee learns by e(perience, observation and imitation. "f decisions are discussed with the under study, he can become informed the policies and theories involved. %he advantage of this method is that training is conducted in a practical and realistic situation. However disadvantages are many. %he method tends to perpetuate mistakes and deficiencies of e(isting managereial practices. !orever, the understudies are fre-uently neglected by those they assist. .G/ <osition 5otationR%he maBor obBective of Bob rotation training is the broadening of the background of trainee in the organisation. "f trainee is rotated periodically from one Bob to another Bob, he ac-uires a general background. %he main advantages are& it provides a general background to the trainee, training takes place in actual situation, competition can be stimulated among the rotating trainees, and it stimulates a more co-operative attitude by e(posing a man to other fellowFs problems and viewpoints. %here are certain disadvantages of this method. %he productive work can suffer because of the obvious disruption caused by such changes. 5otations become less useful as specialisation proceeds, for few people have the breadth of technical knowledge and skills to move from one functional area to another. .I/ )pecial <roBectsR%his is a very fle(ible training device. )uch special proBect assignments grow ordinarily out of an individual analysis of weaknesses. %he trainee may be asked to perform special assignment+ thereby he learns the work procedure. )ometime a task force is created consisting of a number of trainees representing different functions in the organisation. %rainees not only ac-uire knowledge about the assigned activities, but also learn how to work with others. .H/ )elective 5eadingR"ndividuals in the organisation can gather and advance their knowledge and background through selective reading. %he reading may include professional Bournals and books. $arious business organisations maintain libraries for their own e(ecutives. !any e(ecutives become members of professional associations and they e(change their ideas with others. %his is a good method for assimilating knowledge+ however, some e(ecutives claim that
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it is very difficult to find time to do much reading other than absolutely re-uired in the performance of their Bobs. .K/ ApprenticeshipRApprentice training can be traced back to medieval times when those intended on learning trade skill bound themselves to a master craftsman to learn by doing the work under his guidance. "n earlier periods, apprenticeship was not restricted to artisans, but was used in training for the professions, including medicine, law, dentistry, and teaching. %odayFs industrial organisations re-uire large number of skilled craftsmen who can be trained by this system. )uch training is either provided by the organisations or it is also imparted by governmental agencies. !ost )tates now have apprenticeship laws with supervised plans for such training. Arrangements usually provide a mi(ed programme of classroom and Bob e(perience. .L/ $estibule )choolsR3arge organisations fre-uently provided what are described as vestibule schools, a preliminary to actual shop e(perience. As far as possible, shop conditions are duplicated, but instructive, not output, are maBor obBective, with special instructors provided. $estibule schools are widely used in training for clerical and office Bobs as well as for factory production Bobs. )uch training is usually shorter and less comple( than that adaptable to the apprenticeship system. $estibule training is relatively e(pensive, but these costs are Bustified if the volume of training is large, or if uniform, high-standard results are important. O,,<t0&<E*+ T"!i i % M&t0*ds "n these methods, trainees have to leave their workplace and devote their entire time to the development obBective. "n these methods development of trainees is primary and any usable work produced during training is secondary. 9ollowing training techni-ues are used off-the-Bob& C. )pecial course and lecturesR3ecturing is the most traditional form of formal training method. )pecial courses and lectures can be established by business organisations in numerous ways as a part of their development programmes. 9irst, there are courses which the organisations themselves establish to be taught by members of the organisation. )ome organisations have regular instructors assigned to their training and development departments such as %ata and Hindustan 3ever in private sector, 3ife "nsurance =orporation, )tate 2ank of "ndia and other nationalised commercial banks, 5eserve 2ank, Hindustan )teel, 9ertilizer =orporation and many others in public sector. A second approach to special courses and lectures is for organisations to work with universities or institutes in establishing a course or series of Q courses to be taught by instructors of these institutes. A third approach is for the organisations to send personnel to programmes established by the universities, institutes and other bodies, )uch courses are organised for a short period ranging from G-I days to a few weeks. %he first such programme was the )loan 9ellowship <rogramme, established in CDIC at !assachusetts "nstitute of %echnology, N.).A. "n "ndia, such courses are organised fre-uently by the "nstitute of !anagement, Administrative )taff =ollege of "ndia, >ational <roductivity =ouncil, >"%"1, All "ndia !anagement Association and some other organisations and universities. , G. =onferences -%his is also an old method, but still a favourite training method. "n order to escape the limitations of straight lecturing many organisations have adopted guided-discussion
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type of conferences in their training programmes "n this method, the participants pool their ideas and e(perience in attempting to arrive at improved methods of dealing with the problems which are common subBect of discussion/ =onferences may include buzz sessions that divide conferences into small groups of four or five for intensive discussion. %hese small groups then report back to the whole conference with their conclusions or -uestions. =onference method allows the trainees to look at the problem from a broader angle. %hese conferences, however, have certain limitations. Nnless the discussion is directed to the fell needs of the participants that may well feel that the whole session is useless. I. =ase studiesR%his techni-ue, which has been developed and popularised by the Harvard 2usiness )chool, N.).A. is one of the most common form of training. Acase is a written account of a trained reporter or analyst seeking to describe an actual situation. )ome cases are merely illustrative, others are detailed and comprehensive demanding e(tensive and intensive analytical ability. =ases are widely used in a variety of programmes/ %his method increases the traineeFs power of observation, helping him to ask better -uestions and to look for a broader range of problems. A well chosen case may promote obBective discussion, but the lack of emotional involvement may make it difficult to effect any basic change in the behaviour and attitude of trainees. H. 2rainstormingR%his is the method of stimulating trainees to creative thinking. %his approach developed by Ale( Osborn seeks to reduce inhibiting forces by providing for a ma(imum of group participation and a minimum of criticism, A problem is posed and ideas are invited. Euantity rather than -uality is the primary obBective+ "deas are encouraged and criticism of any idea is discouraged. =hain reactions from idea to idea often develop. 3ater, these ideas are critically e(amined. %here is no trainer in brainstorming and it has been found that the introduction of known e(perts into it will reduce the originality and practicability of the group contributions. 2rainstorming frankly favours divergence, and this fact may be sufficient to e(plain why brainstorming is so little used as yet in developing countries where new solutions ought to carry the highest premium. "t is virtually untried even though its immediate use is limited to new ideas only, not change in behaviour. K. 3aboratory %raining-3aboratory training adds to conventional training by providing situations in which the trainees themselves e(perience through their own interaction some of the conditions they are talking about. "n this way, they more or less e(periment on themselves. 3aboratory training is more concerned about changing individual behaviour and attitude. "t is generally more successful in changing Bob performance than conventional training methods. %here are two methods of laboratory trainingRsimulation and sensitivity training. A. )imulationRAn increasingly popular techni-ue of management development is simulation of performance. "n this method, instead of taking participants into the field can be simulated in the training session itself. )imulation is the presentation of real situation of organisations in the training session. "t covers situations of varying comple(ities and roles for the participants. "t creates a whole field organisation, relates participants through key roles in it, and has them deal with specific situations of a kind they encounter in real life. %here are two common simulation methods of training& role-playing is one and business game is the other.
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.i/ 5ole-<layingR5ole-<laying is laboratory method which can be used rather easily as a supplement to conventional training methods. "ts purpose is to increase the traineeFs skill in dealing with other people. One of its greatest uses is in connection with human relations training but it is also used in sales training as well. "t is spontaneous acting of a realistic situation involving two or more persons under class room situations. 6ialogue spontaneously grows out of the situation, as it is developed by the trainees assigned to it. Other trainees in the group serve as observers or critics. )ince people lake roles every day, they are somewhat e(perienced in the art, and with a certain amount of imagination they can proBect themselves into roles other than their own. )ince a manager is regularly acting roles in his relationship with others, it is essential for him to have role awareness and to do role thinking so that he can size up each relationship and develop the most effective interaction possible. 5ole-playing has many advantages. 2y this method, a trainee can broaden his e(perience by trying different approaches, while in actual situation+ he often has only one chance. "n evaluation of role-playing in sue firms, it was found that such sessions resulted in an increase in sensitivity and improved -uality of actions of a work sample involving a human relations difficulty. 5ole-playing also has weaknesses which partly offset its values. "t is time consuming and e(pensive. "t re-uires e(perienced trainers because it can easily turn sour without effective direction. .ii/ 7amingR7aming has been devised to simulate the problems of running a company or even a particular department. "t has been used for a variety of training obBectives, from investment strategy, collective bargaining techni-ues, to the morale of clerical personnel. "t has been used at all levels, from the lop e(ecutives to the production supervisors. 7aming is a laboratory method in which role-playing e(ists but its difference is that it focuses attention on administrative problems, while role-playing tends to emphasise mostly feeling and tone between people in interaction. 7aming involves several teams, each of which is given a firm to operate for a number of periods. Nsually the period is a short one, one year or so. "n each period, each team makes decisions on various matters such as fi(ation of price, level of production, inventory level, and so forthF. )ince each team is competing with others, each firmFs decisions will affect the results of all others. All the firmFs decisions are fed into a computer which is programmed to behave somewhat like a real market. %he computer provides the results, and the winner is the team which has accumulated largest profit. "n the light of such results, strengths and weaknesses of decisions are analysed. 2. )ensitivity %rainingR)ensitivity training is the most controversial laboratory training method. !any of its advocates have an almost religious zeal in their enhancement with the training group e(perience. As a result of criticism and e(perience, a somewhat revised approach, often described as Fteam developmentF training, has appeared. "t was first used by >ational %raining 3aboratories at 2ethel, N.).A. %he training groups themselves called F% 7roupF. )ince then its use has been e(tended to other organisations,universites, and institutes. )ensitivity training is a small-group interaction under stress in an unstructured encounter group which re-uires people to become sensitive to one anotherFs feelings in order to develop reasonable group activity.%-group has several characteristic features& .i/ the %-group is generally small, from ten to twenty members+ .ii/ the group begins its activity with no formal agenda+ .iii/
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the role of trainer is primarily to call attention from time to time to the on going process within the group+ .iv/ the procedure tends to develop interspection and self-e(amination, with emotional levels of involvement and behaviour and the possibility of colleagues and some breakdown of established insulation and self-defence on the part of individuals. %he obBectives of such training are increased openness with others, more concern for others, increased tolerance for individual differences, less ethnic preBudice, understanding of a group process, enhanced listening skills, and increased trust and support. PERFORMANCE APPRAISAL "t is a systematic evaluation of an individual with respect to performance on the Bob and individual;s potential for development.# <erformance Appraisals is the assessment of individual;s performance in a systematic way. "t is a developmental tool used for all round development of the employee and the organization. %he performance is measured against such factors as Bob knowledge, -uality and -uantity of output, initiative, leadership abilities, supervision, dependability, co-operation, Budgment, versatility and health. Assessment should be confined to past as well as potential performance also. %he second definition is more focused on behaviors as a part of assessment because behaviors do affect Bob results. O+E&cti(&s *, P&",*"'! c& App"!is!ls C. G. I. H. K. L. P. M. <romotions =onfirmations %raining and 6evelopment =ompensation reviews =ompetency building "mprove communication 1valuation of H5 <rograms 9eedback 4 7rievances

<erformance Appraisal <rocess C. G. I. ObBectives definition of appraisal 8ob e(pectations establishment 6esign an appraisal program
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H. K. L. P. M.

Appraise the performance <erformance "nterviews Nse data for appropriate purposes "dentify opportunities variables Nsing social processes, physical processes, human and computer assistance

TEC=NI>UES F MET=ODS OF PERFORMANCE APPRAISALS >umerous methods have been devised to measure the -uantity and -uality of performance appraisals. 1ach of the methods is effective for some purposes for some organizations only. >one should be dismissed or accepted as appropriate e(cept as they relate to the particular needs of the organization or an employee. 2roadly all methods of appraisals can be divided into two different categories.

<ast Oriented !ethods 9uture Oriented !ethods

P!st O"i& t&d M&t0*ds C. R!ti % Sc!l&s$ 5ating scales consists of several numerical scales representing Bob related performance criterions such as dependability, initiative, output, attendance, attitude etc. 1ach scales ranges from e(cellent to poor. %he total numerical scores are computed and final conclusions are derived. Advantages @ Adaptability, easy to use, low cost, every type of Bob can be evaluated, large number of employees covered, no formal training re-uired. 6isadvantages @ 5ater;s biases G. C0&c-list$ Nnder this method, checklist of statements of traits of employee in the form of *es or >o based -uestions is prepared. Here the rater only does the reporting or checking and H5 department does the actual evaluation. Advantages @ economy, ease of administration, limited training re-uired, standardization. 6isadvantages @ 5aters biases, use of improper weighs by H5, does not allow rater to give relative ratings I. F*"c&d C0*ic& M&t0*d$ %he series of statements arranged in the blocks of two or more are given and the rater indicates which statement is true or false. %he rater is forced to make a choice. H5 department does actual assessment. Advantages @ Absence of personal biases because of forced choice. 6isadvantages @ )tatements may be wrongly framed. H. F*"c&d Dist"i+uti* M&t0*d$ here employees are clustered around a high point on a rating scale. 5ater is compelled to distribute the employees on all points on the scale. "t is assumed that
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the performance is conformed to normal distribution. Advantages @ 1liminates 6isadvantages @ Assumption of normal distribution, unrealistic, errors of central tendency. K. C"itic!l I cid& ts M&t0*d$ %he approach is focused on certain critical behaviors of employee that makes all the difference in the performance. )upervisors as and when they occur record such incidents. Advantages @ 1valuations are based on actual Bob behaviors, ratings are supported by descriptions, feedback is easy, reduces recency biases, chances of subordinate improvement are high. 6isadvantages @ >egative incidents can be prioritized, forgetting incidents, overly close supervision+ feedback may be too much and may appear to be punishment. L. 8&0!(i*"!ll# A c0*"&d R!ti % Sc!l&s$ statements of effective and ineffective behaviors determine the points. %hey are said to be behaviorally anchored. %he rater is supposed to say, which behavior describes the employee performance. Advantages @ helps overcome rating errors. 6isadvantages @ )uffers from distortions inherent in most rating techni-ues. P. Fi&ld R&(i&/ M&t0*d$ %his is an appraisal done by someone outside employees; own department usually from corporate or H5 department. Advantages @ Nseful for managerial level promotions, when comparable information is needed, 6isadvantages @ Outsider is generally not familiar with employees work environment, Observation of actual behaviors not possible. M. P&",*"'! c& T&sts J O+s&"(!ti* s$ %his is based on the test of knowledge or skills. %he tests may be written or an actual presentation of skills. %ests must be reliable and validated to be useful. Advantage @ %ests may be apt to measure potential more than actual performance. 6isadvantages @ %ests may suffer if costs of test development or administration are high. D. C* ,id& ti!l R&c*"ds$ !ostly used by government departments, however its application in industry is not ruled out. Here the report is given in the form of Annual =onfidentiality 5eport .A=5/ and may record ratings with respect to following items+ attendance, self e(pression, team work, leadership, initiative, technical ability, reasoning ability, originality and resourcefulness etc. %he system is highly secretive and confidential. 9eedback to the assessee is given only in case of an adverse entry. 6isadvantage is that it is highly subBective and ratings can be manipulated because the evaluations are linked to H5 actions like promotions etc. CJ. Ess!# M&t0*d$ "n this method the rater writes down the employee description in detail within a number of broad categories like, overall impression of performance, promoteability of employee, e(isting capabilities and -ualifications of performing Bobs, strengths and weaknesses and training needs of the employee. Advantage @ "t is e(tremely useful in filing information gaps about the employees that often occur in a better-structured checklist. 6isadvantages @ "t its highly dependent upon the writing skills of rater and most of them are not good writers. %hey may get confused success depends on the memory power of raters. CC. C*st Acc*u ti % M&t0*d$ Here performance is evaluated from the monetary returns yields to his or her organization. =ost to keep employee, and benefit the organization derives is ascertained. Hence it is more dependent upon cost and benefit analysis.
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CG. C*'p!"!ti(& E(!lu!ti* M&t0*d :R! -i % J P!i"&d C*'p!"is* s;$ %hese are collection of different methods that compare performance with that of other co-workers. %he usual techni-ues used may be ranking methods and paired comparison method.

R! -i % M&t0*ds$ )uperior ranks his worker based on merit, from best to worst. However how best and why best are not elaborated in this method. "t is easy to administer and e(planation. P!i"&d C*'p!"is* M&t0*ds$ "n this method each employee is rated with another employee in the form of pairs. %he number of comparisons may be calculated with the help of a formula as under.

> ( .>-C/ ' G Futu"& O"i& t&d M&t0*ds C. M! !%&'& t 8# O+E&cti(&s$ "t means management by obBectives and the performance is rated against the achievement of obBectives stated by the management. !2O process goes as under.

1stablish goals and desired outcomes for each subordinate )etting performance standards =omparison of actual goals with goals attained by the employee 1stablish new goals and new strategies for goals not achieved in previous year.

Advantage @ "t is more useful for managerial positions. 6isadvantages @ >ot applicable to all Bobs, allocation of merit pay may result in setting shortterm goals rather than important and long-term goals etc. G. Ps#c0*l*%ic!l App"!is!ls$ %hese appraisals are more directed to assess employees potential for future performance rather than the past one. "t is done in the form of in-depth interviews, psychological tests, and discussion with supervisors and review of other evaluations. "t is more focused on employees emotional, intellectual, and motivational and other personal characteristics affecting his performance. %his approach is slow and costly and may be useful for bright young members who may have considerable potential. However -uality of these appraisals largely depend upon the skills of psychologists who perform the evaluation. I. Ass&ss'& t C& t&"s$ %his techni-ue was first developed in N)A and NK in CDHI. An assessment center is a central location where managers may come together to have their participation in Bob related e(ercises evaluated by trained observers. "t is more focused on observation of behaviors across a series of select e(ercises or work samples. Assessees are re-uested to participate in in-basket e(ercises, work groups, computer simulations, role playing
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and other similar activities which re-uire same attributes for successful performance in actual Bob. %he characteristics assessed in assessment center can be assertiveness, persuasive ability, communicating ability, planning and organizational ability, self confidence, resistance to stress, energy level, decision making, sensitivity to feelings, administrative ability, creativity and mental alertness etc. 6isadvantages @ =osts of employees traveling and lodging, psychologists, ratings strongly influenced by assessee;s inter-personal skills. )olid performers may feel suffocated in simulated situations. %hose who are not selected for this also may get affected. Ad(! t!%&s @ well-conducted assessment center can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in assessment centers. %he tests also make sure that the wrong people are not hired or promoted. 9inally it clearly defines the criteria for selection and promotion. H. 337<D&%"&& F&&d+!c-$ "t is a techni-ue which is systematic collection of performance data on an individual group, derived from a number of stakeholders like immediate supervisors, team members, customers, peers and self. "n fact anyone who has useful information on how an employee does a Bob may be one of the appraisers. %his techni-ue is highly useful in terms of broader perspective, greater self-development and multi-source feedback is useful. ILJ-degree appraisals are useful to measure inter-personal skills, customer satisfaction and team building skills. However on the negative side, receiving feedback from multiple sources can be intimidating, threatening etc. !ultiple raters may be less adept at providing balanced and obBective feedback.

UNIT IV
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DIRECTING DEFINITION KActi(!ti % d&!ls /it0 t0& st&ps ! '! !%&" t!-&s t* %&t su+<*"di !t&s ! d *t0&"s t* c!""# *ut pl! sK < N&/'! ! d W!""& . 6irecting concerns the total manner in which a manager influences the actions of subordinates. "t is the final action of a manager in getting others to act after all preparations have been completed. CREATIVIT? AND INNOVATION

STEPS INVOLVED IN CREATIVIT?$

!; P"&p!"!ti* $ %his is the first stage at which the base for creativity and innovation is defined+ the mind is prepared for subse-uent use in creative thinking. 6uring preparation the individual is encouraged to appreciate the fact that every opportunity provides situations that can educate and e(periences from which to learn.%he creativity aspect is kindled through a -uest to become more knowledgeable. %his can be done through reading about various topics and'or subBects and engaging in discussions with others. %aking part in brainstorming sessions in various forums like professional and trade association seminars, and taking time to study other countries and cultures to identify viable opportunities is also part of preparation. Of importance is the need to cultivate a personal ability to listen and learn from others. +; I (&sti%!ti* $ %his stage of enhancing entrepreneurial creativity and innovation involves
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the business owner taking time to study the problem at hand and what its various components are. c; T"! s,*"'!ti* $ %he information thus accumulated and ac-uired should then be subBected to convergent and divergent thinking which will serve to highlight the inherent similarities and differences. =onvergent thinking will help identify aspects that are similar and connected while divergent thinking will highlight the differences. %his twin manner of thinking is of particular importance in realizing creativity and innovation for the following reasons& V One will be able to skim the details and see what the bigger picture is the situation'problemFs components can be reordered and in doing so new patterns can be identified. V "t will help visualize a number of approaches that can be used to simultaneously tackle the problem and the opportunity. V OneFs decision-making abilities will be bettered such that the urge to make snap decisions will be resisted. d; I cu+!ti* $ At this stage in the -uest for creativity and innovation it is imperative that the subconscious reflect on the accumulated information, i.e. through incubation, and this can be improved or augmented when the entrepreneur& V 1ngages in an activity completely unrelated to the problem'opportunity under scrutiny. V %akes time to daydream i.e. letting the mind roam beyond any restrictions selfimposed or otherwise. V 5ela( and play V )tudy the problem'opportunity in a wholly different environment &; Illu'i !ti* $ %his happens during the incubation stage and will often be spontaneous. %he realizations from the past stages combine at this instance to form a breakthrough. ,; V&"i,ic!ti* $ %his is where the entrepreneur attempts to ascertain whether the creativity of thought and the action of innovation are truly effective as anticipated. "t may involve activities like simulation, piloting, prototype building, test marketing, and various e(periments. 0hile the tendency to ignore this stage and plunge headlong with the breakthrough may be tempting, the transformation stage should ensure that the new idea is put to the test. INNOVATION PROCESS

MOTIVATION AND SATISFACTION ,!otivation, is a 3atin word, meaning ,to move,. Human motives are internalized goals within individuals. !otivation may be defined as those forces that cause people to behave in certain ways. !otivation encompasses all those pressures and influences that
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trigger, channel, and sustain human behavior. !ost successful managers have learned to understand the concept of human motivation and are able to use that understanding to achieve higher standards of subordinate work performance. According to Koontz and OF6onnell, ,!otivation is a class of drives, needs, wishes and similar forces,. NATURE AND C=ARACTERISTICS$ <sychologists generally agree that all behavior is motivated, and that people have reasons for doing the things they do or for behaving in the manner that they do. !otivating is the work a manager performs to inspire, encourage and impel people to take re-uired action. %he characteristics of motivation are given below& M*ti(!ti* is ! I t&" !l F&&li % !otivation is a psychological phenomenon which generates in the mind of an individual the feeling that he lacks certain things and needs those things. !otivation is a force within an individual that drives him to behave in a certain way. M*ti(!ti* is R&l!t&d t* N&&ds >eeds are deficiencies which are created whenever there is a physiological or psychological imbalance. "n order to motivate a person, we have to understand his needs that call for satisfaction. M*ti(!ti* P"*duc&s G*!l<Di"&ct&d 8&0!(i*u" 7oals are anything which will alleviate a need and reduce a drive. An individualFs behavior is directed towards a goal. M*ti(!ti* c! +& &it0&" P*siti(& *" N&%!ti(& <ositive or incentive motivation is generally based on reward. According to 9lippo ,positive motivation is a process of attempting to influence others to do your will through the possibility of gain or reward,.>egative or fear motivation is based on force and fear. 9ear causes persons to act in a certain way because they are afraid of the conse-uences if they donFt. IMPORTANCE$ A managerFs primary task is to motivate others to perform the tasks of the organization. %herefore, the manager must find the keys to get subordinates to come to work regularly and on time, to work hard, and to make positive contributions towards the effective and efficient achievement of organizational obBectives. !otivation is an effective instrument in the hands of a manager for inspiring the work force and creating confidence in it. 2y motivating the work force, management creates ,will to work, which is necessary for the achievement of organizational goals. %he various benefits of motivation are&A !otivation is one of the important elements in the directing process. 2y motivating the workers, a manager directs or guides the workersF actions in the desired direction for accomplishing the goals of the organization. A 0orkers will tend to be as efficient as possible by improving upon their skills and knowledge so that they are able to contribute to the progress of the organization thereby increasing productivity. A 9or performing any tasks, two things are necessary. %hey are& .a/ ability to work and .b/ willingness to work. 0ithout willingness to work, ability to work is of no use. %he willingness to work can be created only by motivation.
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A A A

A A A

Organizational effectiveness becomes, to some degree, a -uestion of managementFs ability to motivate its employees, to direct at least a reasonable effort towards the goals of the organization. !otivation contributes to good industrial relations in the organization. 0hen the workers are motivated, contented and disciplined, the frictions between the workers and the management will be reduced. !otivation is the best remedy for resistance to changes. 0hen changes are introduced in an organization, generally, there will be resistance from the workers. 2ut if the workers of anorganization are motivated, they will accept, introduce and implement the changes whole heartily and help to keep the organization on the right track of progress. !otivation facilitates the ma(imum utilization of all factors of production, human, physical and financial resources and thereby contributes to higher production. !otivation promotes a sense of belonging among the workers. %he workers feel that the enterprise belongs to them and the interest of the enterprise is their interests. !any organizations are now beginning to pay increasing attention to developing their employees as future resources upon which they can draw as they grow and develop.

SATISFACTION 1mployee satisfaction .8ob satisfaction/ is the terminology used to describe whether employees are happy and contented and fulfilling their desires and needs at work. !any measures purport that employee satisfaction is a factor in employee motivation, employee goal achievement, and positive employee morale in the workplace.1mployee satisfaction, while generally a positive in your organization, can also be a downer if mediocre employees stay because they are satisfied with your work environment. 9actors contributing to employee satisfaction include treating employees with respect, providing regular employee recognition, empowering employees, offering above industryaverage benefits and compensation, providing employee perks and company activities, and positive management within a success framework of goals, measurements, and e(pectations. 1mployee satisfaction is often measured by anonymous employee satisfaction surveys administered periodically that gauge employee satisfaction in areas such as& A management, A understanding of mission and vision, A empowerment, A teamwork, A communication, and A =oworker interaction. %he facts of employee satisfaction measured vary from company to company. A second method used to measure employee satisfaction is meeting with small groups of employees and asking the same -uestions verbally. 6epending on the culture of the company, either method can contribute knowledge about employee satisfaction to managers and employee. MOTIVATION T=EORIES )ome of the motivation theories are discussed below !;McG"&%*"@s T0&*"# D ! d T0&*"#
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?$ !c7regor states that people inside the organization can be managed in two ways. %he first is basically negative, which falls under the category W and the other is basically positive, which falls under the category *. After viewing the way in which the manager dealt with employees, !c7regor concluded that a manager;s view of the nature of human beings is based on a certain grouping of assumptions and that he or she tends to mold his or her behavior towards subordinates according to these assumptions. Nnder the assumptions of theory W& A 1mployees inherently do not like work and whenever possible, will attempt to avoid it. A 2ecause employees dislike work, they have to be forced, coerced or threatened with punishment to achieve goals. A 1mployees avoid responsibilities and do not work fill formal directions are issued. A !ost workers place a greater importance on security over all other factors and display little ambition. "n contrast under the assumptions of theory *& A <hysical and mental effort at work is as natural as rest or play. A <eople do e(ercise self-control and self-direction goals. A Average human beings are willing to take responsibility and e(ercise imagination, ingenuity and creativity in solving the problems of the organization. A %hat the way the things are organized, the average human being;s brainpower is only partly used. On analysis of the assumptions it can be detected that theory W assumes that lower-order needs dominate individuals and theory * assumes that higher-order needs dominate individuals. An organization that is run on %heory W lines tends to be authoritarian in nature, the word authoritarian# suggests such ideas as the power to enforce obedience# and the right to command.# "n contrast %heory * organizations can be described as participative#, where the aims of the organization and of the individuals in it are integrated+ individuals can achieve their own goals best by directing their efforts towards the success of the organization. +;A+"!0!' M!sl*/@s LN&&d =i&"!"c0# T0&*"#M$ One of the most widely mentioned theories of motivation is the hierarchy of needs theory put forth by psychologist Abraham !aslow. !aslow saw human needs in the form of a hierarchy, ascending from the lowest to the highest, and he concluded that when one set of needs is satisfied, this kind of need ceases to be a motivator. As per his theory these needs are& :i; P0#si*l*%ic!l &&ds$ %hese are important needs for sustaining the human life. 9ood, water, warmth, shelter, sleep, medicine and education are the basic physiological needs which fall in the primary list of need satisfaction. !aslow was of an opinion that until these needs were satisfied to a degree to maintain life, no other motivating factors can work. :ii; S&cu"it# *" S!,&t#
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&&ds$ %hese are the needs to be free of physical danger and of the fear of losing a Bob, property, food or shelter. "t also includes protection against any emotional harm. :iii; S*ci!l &&ds$ )ince people are social beings, they need to belong and be accepted by others. <eople try to satisfy their need for affection, acceptance and friendship. :i(; Est&&' &&ds$ According to !aslow, once people begin to satisfy their need to belong, they tend to want to be held in esteem both by themselves and by others. %his kind of need produces such satisfaction as power, prestige status and self-confidence. "t includes both internal esteem factors like self- respect, autonomy and achievements and e(ternal esteem factors such as states, recognition and attention. :(; N&&d ,*" s&l,< !ctu!li9!ti* $ !aslow regards this as the highest need in his hierarchy. "t is the drive to become what one is capable of becoming+ it includes growth, achieving one;s potential and selffulfillment. "t is to ma(imize one;s potential and to accomplish something.

All of the needs are structured into a hierarchy and only once a lower level of need has been fully met, would a worker be motivated by the opportunity of having the ne(t need up in the hierarchy satisfied. 9or e(ample a person who is dying of hunger will be motivated to achieve a basic wage in order to buy food before worrying about having a secure Bob contract or the respect of others.A business should therefore offer different incentives to workers in order to help them fulfill each need in turn and progress up the hierarchy. !anagers should also recognize that workers are not all motivated in the same way and do not all move up the hierarchy at the same pace. %hey may therefore have to offer a slightly different set of incentives from worker to worker. c; F"&d&"ic- =&"9+&"%@s '*ti(!ti* <0#%i& & t0&*"#$
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9rederick has tried to modify !aslow;s need Hierarchy theory. His theory is also known as two-factor theory or Hygiene theory. He stated that there are certain satisfiers and dissatisfiers for employees at work. "ntrinsic factors are related to Bob satisfaction, while e(trinsic factors are associated with dissatisfaction. He devised his theory on the -uestion& 0hat do people want from their BobsS# He asked people to describe in detail, such situations when they felt e(ceptionally good or e(ceptionally bad. 9rom the responses that he received, he concluded that opposite of satisfaction is not dissatisfaction. 5emoving dissatisfying characteristics from a Bob does not necessarily make the Bob satisfying. He states that presence of certain factors in the organization is natural and the presence of the same does not lead to motivation. However, their non-presence leads to de-motivation. "n similar manner there are certain factors, the absence of which causes no dissatisfaction, but their presence has motivational impact. 1(amples of Hygiene factors are&)ecurity, status, relationship with subordinates, personal life, salary, work conditions, relationship with supervisor and company policy and administration.1(amples of !otivational factors are&7rowth prospectus Bob advancement, responsibility, challenges, recognition and achievements. d; Vict*" V"**'@s E1p&ct! c# t0&*"#$ %he most widely accepted e(planations of motivation have been propounded by $ictor $room. His theory is commonly known as e(pectancy theory. %he theory argues that the strength of a tendency to act in a specific way depends on the strength of an e(pectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual to make this simple, e(pectancy theory says that an employee can be motivated to perform better when there is a belief that the better performance will lead to good performance appraisal and that this shall result into realization of personal goal in form of some reward. %herefore an employee is& !otivation X $alence ( 1(pectancy. %he theory focuses on three things& A 1fforts and performance relationship A <erformance and reward relationship A 5ewards and personal goal relationship &; Cl!#t* Ald&",&"@s ERG T0&*"#$

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Alderfer has tried to rebuild the hierarchy of needs of !aslow into another model named 157 i.e. 1(istence @ 5elatedness @ 7rowth. According to him there are I groups of core needs as mentioned above. %he e(istence group is concerned mainly with providing basic material e(istence. %he second group is the individuals need to maintain interpersonal relationship with other members in the group. %he final group is the intrinsic desire to grow and develop personally. %he maBor conclusions of this theory are & A "n an individual, more than one need may be operative at the same time. A "f a higher need goes unsatisfied than the desire to satisfy a lower need intensifies. A "t also contains the frustration-regression dimension. ,; McCl&ll! d@s T0&*"# *, N&&ds$ 6avid !c=lelland has developed a theory on three types of motivating needs & .i/ >eed for <ower .ii/>eedfor Affiliation .iii/>eed for Achievement 2asically people for high need for power are inclined towards influence and control. %hey like to be at the center and are good orators. %hey are demanding in nature, forceful in manners and ambitious in life. %hey can be motivated to perform if they are given key positions or power positions."n the second category are the people who are social in nature. %hey try to affiliate themselves with individuals and groups. %hey are driven by love and faith. %hey like to build a friendly environment around themselves. )ocial recognition and affiliation
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with others provides them motivation.<eople in the third area are driven by the challenge of success and the fear of failure. %heir need for achievement is moderate and they set for themselves moderately difficult tasks. %hey are analytical in nature and take calculated risks. )uch people are motivated to perform when they see at least some chances of success. !c=lelland observed that with the advancement in hierarchy the need for power and achievement increased rather than Affiliation. He also observed that people who were at the top, later ceased to be motivated by this drives. %; St!c&# Ad!'s@ EAuit# T0&*"#$ As per the e-uity theory of 8. )tacey Adams, people are motivated by their beliefs about the reward structure as being fair or unfair, relative to the inputs. <eople have a tendency to use subBective Budgment to balance the outcomes and inputs in the relationship for comparisons between different individuals. Accordingly&

"f people feel that they are not e-ually rewarded they either reduce the -uantity or -uality of work or migrate to some other organization. However, if people perceive that they are rewarded higher, they may be motivated to work harder. 0; S-i &"@s R&i ,*"c&'& t T0&*"#$ 2.9. )kinner, who propounded the reinforcement theory, holds that by designing the environment properly, individuals can be motivated. "nstead of considering internal factors like impressions, feelings, attitudes and other cognitive behavior, individuals are directed by what happens in the environment e(ternal to them. )kinner states that work environment should be made suitable to the individuals and that punishment actually leads to frustration and de- motivation. Hence, the only way to motivate is to keep on making positive changes in the e(ternal environment of the organization. LEADERS=IP D&,i iti * 3eadership is defined as influence, the art or process of influencing people so that they will strive willingly and enthusiastically toward the achievement of group goals. - 3eaders act to help a group attain obBectives through the ma(imum application of its capabilities. - 3eaders must instill values @ whether it be concern for -uality, honesty and calculated risk taking or for employees and customers. "mportance of 3eadership C. Aid to authority G. !otive power to group efforts I. 2asis for co operation H. "ntegration of 9ormal and "nformal Organization.
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LEADERS=IP ST?LES %he leadership style we will discuss here are& a/ Autocratic style b/ 6emocratic )tyle c/ 3aissez 9aire )tyle !; Aut*c"!tic st#l& !anager retains as much power and decision-making authority as possible. %he manager does not consult employees, nor are they allowed to give any input. 1mployees are e(pected to obey orders without receiving any e(planations. %he motivation environment is produced by creating a structured set of rewards and punishments. Autocratic leadership is a classical leadership style with the following characteristics& A !anager seeks to make as many decisions as possible A !anager seeks to have the most authority and control in decision making A !anager seeks to retain responsibility rather than utilize complete delegation A =onsultation with other colleagues in minimal and decision making becomes a solitary process A !anagers are less concerned with investing their own leadership development, and prefer to simply work on the task at hand. Ad(! t!%&s 5educed stress due to increased control A more productive group :while the leader is watching; "mproved logistics of operations 9aster decision making Dis!d(! t!%&s )hort-termistic approach to management. !anager perceived as having poor leadership skills "ncreased workload for the manager <eople dislike being ordered around %eams become dependent upon their leader +; D&'*c"!tic St#l& 6emocratic 3eadership is the leadership style that promotes the sharing of responsibility, the e(ercise of delegation and continual consultation. %he style has the following characteristics& A !anager seeks consultation on all maBor issues and decisions. A !anager effectively delegate tasks to subordinates and give them full control and responsibility for those tasks. A !anager welcomes feedback on the results of intiatives and the work environment. A !anager encourages others to become leaders and be involved in leadership development.
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Ad(! t!%&s <ositive work environment )uccessful initiatives =reative thinking 5eduction of friction and office politics 5educed employee turnover Dis!d(! t!%&s %akes long time to take decisions 6anger of pseudo participation 3ike the other styles, the democratic style is not always appropriate. "t is most successful when used with highly skilled or e(perienced employees or when implementing operational changes or resolving individual or group problems. c; L!iss&9<F!i"& St#l& %his 9rench phrase means leave it be# and is used to describe a leader who leaves his'her colleagues to get on with their work. %he style is largely a ,hands off, view that tends to minimize the amount of direction and face time re-uired. Ad(! t!%&s A >o work for the leader A 9rustration may force others into leadership roles A Allows the visionary worker the opportunity to do what they want, free from interference A 1mpowers the group Dis!d(! t!%&s "t makes employees feel insecure at the unavailability of a manager. %he manager cannot provide regular feedback to let employees know how well they are doing. !anagers are unable to thank employees for their good work. %he manager doesn;t understand his or her responsibilities and is hoping the employees can cover for him or her. LEADERS=IP T=EORIES %he various leadership theories are !; G"&!t M! T0&*"#$ Assu'pti* s A 3eaders are born and not made. A 7reat leaders will arise when there is a great need. D&sc"ipti * 1arly research on leadership was based on the study of people who were already great leaders. %hese people were often from the aristocracy, as few from lower classes had the opportunity to lead. %his contributed to the notion that leadership had something to do with breeding.%he idea of the 7reat !an also strayed into the mythic domain, with notions that in times of need, a 7reat !an would arise, almost by magic. %his was easy to verify, by pointing to people such as 1isenhower and =hurchill, let alone those further back along
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the timeline, even to 8esus, !oses, !ohammed and the 2uddah. Discussi* 7ender issues were not on the table when the F7reat !anF theory was proposed. !ost leaders were male and the thought of a 7reat 0oman was generally in areas other than leadership. !ost researchers were also male, and concerns about androcentric bias were a long way from being realized. +; T"!itT0&*"#$ Assu'pti* s A <eople are born with inherited traits. A )ome traits are particularly suited to leadership. A <eople who make good leaders have the right .or sufficient/ combination of traits. D&sc"ipti * 1arly research on leadership was based on the psychological focus of the day, which was of people having inherited characteristics or traits. Attention was thus put on discovering these traits, often by studying successful leaders, but with the underlying assumption that if other people could also be found with these traits, then they, too, could also become great leaders. !c=all and 3ombardo .CDMI/ researched both success and failure identified four primary traits by which leaders could succeed or FderailF&1motional stability and composure& =alm, confident and predictable, particularly when under stress.Admitting error& Owning up to mistakes, rather than putting energy into covering up.7ood interpersonal skills& able to communicate and persuade others without resort to negative or coercive tactics."ntellectual breadth& Able to understand a wide range of areas, rather than having a narrow .and narrowminded/ area of e(pertise. c; 8&0!(i*"!l T0&*"#$ Assu'pti* s A 3eaders can be made, rather than are born. A )uccessful leadership is based in definable, learnable behavior. D&sc"ipti * 2ehavioral theories of leadership do not seek inborn traits or capabilities. 5ather, they look at what leaders actually do. "f success can be defined in terms of describable actions, then it should be relatively easy for other people to act in the same way. %his is easier to teach and learn then to adopt the more ephemeral FtraitsF or FcapabilitiesF. d; P!"ticip!ti(& L&!d&"s0ip$ Assu'pti* s A "nvolvement in decision-making improves the understanding of the issues involved by those who must carry out the decisions. A <eople are more committed to actions where they have involved in the relevant decision- making. A <eople are less competitive and more collaborative when they are working on Boint
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goals A 0hen people make decisions together, the social commitment to one another is greater and thus increases their commitment to the decision. A )everal people deciding together make better decisions than one person alone. D&sc"ipti * A <articipative 3eader, rather than taking autocratic decisions, seeks to involve other people in the process, possibly including subordinates, peers, superiors and other stakeholders. Often, however, as it is within the managersF whim to give or deny control to his or her subordinates, most participative activity is within the immediate team. %he -uestion of how much influence others are given thus may vary on the managerFs preferences and beliefs, and a whole spectrum of participation is possible &; Situ!ti* !l L&!d&"s0ip$ Assu'pti* s A %he best action of the leader depends on a range of situational factors. D&sc"ipti * 0hen a decision is needed, an effective leader does not Bust fall into a single preferred style. "n practice, as they say, things are not that simple. 9actors that affect situational decisions include motivation and capability of followers. %his, in turn, is affected by factors within the particular situation. %he relationship between followers and the leader may be another factor that affects leader behavior as much as it does follower behavior.%he leadersF perception of the follower and the situation will affect what they do rather than the truth of the situation. %he leaderFs perception of themselves and other factors such as stress and mood will also modify the leadersF behavior. ,; C* ti %& c# T0&*"#$ Assu'pti* s A %he leaderFs ability to lead is contingent upon various situational factors, including the leaderFs preferred style, the capabilities and behaviors of followers and also various other situational factors. D&sc"ipti * =ontingency theories are a class of behavioral theory that contend that there is no one best way of leading and that a leadership style that is effective in some situations may not be successful in others.An effect of this is that leaders who are very effective at one place and time may become unsuccessful either when transplanted to another situation or when the factors around them change.=ontingency theory is similar to situational theory in that there is an assumption of no simple one right way. %he main difference is that situational theory tends to focus more on the behaviors that the leader should adopt, given situational factors .often about follower behavior/, whereas contingency theory takes a broader view that includes contingent factors about leader capability and other variables within the situation. %; T"! s!cti* !l
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L&!d&"s0ip$ Assu'pti* s A <eople are motivated by reward and punishment. A )ocial systems work best with a clear chain of command. A 0hen people have agreed to do a Bob, a part of the deal is that they cede all authority to their manager. A %he prime purpose of a subordinate is to do what their manager tells them to do. D&sc"ipti * %he transactional leader works through creating clear structures whereby it is clear what is re-uired of their subordinates, and the rewards that they get for following orders. <unishments are not always mentioned, but they are also well-understood and formal systems of discipline are usually in place.%he early stage of %ransactional 3eadership is in negotiating the contract whereby the subordinate is given a salary and other benefits, and the company .and by implication the subordinateFs manager/ gets authority over the subordinate.0hen the %ransactional 3eader allocates work to a subordinate, they are considered to be fully responsible for it, whether or not they have the resources or capability to carry it out. 0hen things go wrong, then the subordinate is considered to be personally at fault, and is punished for their failure .Bust as they are rewarded for succeeding/. 0;T"! s,*"'!ti* !l L&!d&"s0ip$ Assu'pti* s A <eople will follow a person

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