A.

ANANDA KUMAR / INDUSTRIAL MANAGEMENT / UNIT-1

INDUSTRIAL MANAGEMENT
UNIT 1
INTRODUCTION
Management is as an art and science of getting work done through people. It is the
process of giving directing and controlling the various activities of the people to achieve the
objectives of an organization.
DEFINITION
Management is the process of designing and maintaining of an environment in which
individuals working together in groups efficiently accomplish selected aims.
- Koontz & Weihrich
Management is the art of knowing what do you want to do and then seeing that it is done
in the best and cheapest way.
- F. W. Taylor
Management is the coordination of all resources through the process of planning,
organizing, directing and controlling in order to attain stated goals.
- Henry L. Sisk
MANAGERIAL SKILLS
or analysis, skills re!uired of any manager are classified under three different heads
technical, human and conceptual skill.
1. Technical Skill:
It refers to the ability to the tools, e!uipment, procedures and techni!ues.
"ffective supervision and coordinating of the work of the subordinates. #herefore
depends on the technical possessed by the lower level market.
2. Huan Skill:
$uman skill refers to the ability of the manager to work effectively as a group
member and to build cooperative effort in the team he leads.
$uman skills are concerned with understanding of %people&.
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Manager&s skill in working with others is natural and conditions.
3. C!nce"#ual Skill$:
#his skill also called design and problem. 'olving skill involves the ability.
#o see the organisation and the various components of it as a whole.
#o understand how its various parts and functions mesh together.
#o foresee how changes in any one of these may affect all the others.
( higher degree of conceptual skill helps in analyzing the environment and in
identifying the opportunities.
MANAGEMENT LE%ELS
#he three levels of management that are commonly found in any organisation are top,
middle and lower management.

#op
level
Management
Middle level
Management

)ower level Management
T!" Le&el Mana'een#:
#he main functions of top management are
1. #o formulate goals and policies of the company.
2. #o formulate budgets.
3. #o appoint top e*ecutives.
4. #o provide overall direction and leadership of the company.
5. #o decide the distribution of profits etc.
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Mi((le Le&el Mana'een#:
#he important functions of middle level management.
1. #o monitor and control the operating performance.
2. #o train, motivate and develop supervisory level.
3. #o co+ordinate among themselves so as to integrate the various activities
of a department.
L!)e* Le&el !* Su"e*&i$!*+ Mana'een#:
#he main functions of lower level management
1. #o train and develop the efficiency of the workers.
2. #o assign jobs to workers
3. #o give orders and instructions.
4. #o maintain discipline and good human relations among workers.
5. #o report feedback information about workers.
FUNCTIONS OF MANAGEMENT
1. Planning:
,lanning is simple is looking ahead. It is preparing for the future. "ffective
planning leads to efficient management. "ffective planning provides answers to !uestions like -
what to do. /hen to do. $ow to do. /ho is to do.
#he planning process involves the following activities.
(i) 0etermination of the goal of the organization.
(ii) ormulating policies, rules, procedures etc. for the organization.
(iii) orecasting the future based on past and present activities.
2. Organising:
1rganizing establishes harmonious relationship among all the workers of an
organization by providing them with suitable authority and responsibility.
(ccording to )ouis (. (llen 1rganisation involves identification and grouping the
activities to be performed and dividing them among the individuals and creating authority and
responsibility relationships among them for the accomplishment of organizational objectives.
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1rganisation process involves the following activities2
(i) Identification and analysis of activities re!uired. or the attainment
organizational objectives.
(ii) (ssignment of duties to the individuals concerned.
(iii) ollow+up the activities.
3. Staffing:
'taffing process involves selecting candidates for positions, fi*ing salary, training
and developing them for effective organizational functions. #he manager performs the duties of
job analysis, job description etc. which come under the staffing function.
4. Directing:
1ne plans are made and the organisation is created ne*t step is to achievement of
objectives of the organisation.
0irecting is involves activities like guiding, supervising and motivating the
subordinates in their jobs. Motivation, leadership and communication are three important sub
function of directing. Motivation helps to increase the performance of the workers.
3ommunication provides with proper information to improve the effective management.
)eadership the process by which a manager guide and influences the work of his subordinates.
5. ontrolling:
3ontrolling as a function of management deals with checking and verifying the
activities against the predetermined standards. #he process of ensuring that actual activities
conform to planned activities. 3ontrolling process involves the following steps.
(i) "stablishing standards
(ii) Measuring current performance.
(iii) 3omparing this performance to the established standards.
(iv) #aking corrective actions of deviation are detected.
HENR, FA,OL-S CONTRI.UTION / 01121 3 14256
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ayol was a contemporary of #aylor. $e started his career as a junior engineer in a coal
mining company in rance in 4567 and became its general manager in 4557. /e published his
famous book (dministration Industrielle et 8enerale in 4946 which was published in "nglish in
49:9 under the title %8eneral and Industrial Management&. #his book is now considered to be
one of the best classics in management.
$e concerned with the fourteen principles of management. #hey are
7*inci"le$ !8 Mana'een#:
!. Di"ision of Work: /ork should be divided in proper way with reference to the
available time. In general worker on the same job and the managers on the same duty ac!uire
ability sureness and accuracy which increase theory output.
#. $%thority & &es'onsi(ility: (uthority means power given to a person to get work
from his subordinates. ;esponsibility means kind and amount of work e*pected of from a man
by his superior. 1ne of the essential elements of a good management delegation of authority to
the lower levels of management and fi*ing responsibility on town.
). Disci'line: 0iscipline is very essential for the smooth running of organisation. #o
ayol, discipline will result from good leadership at all levels of the organisation, fair agreements
and judiciously enforced penalties for infractions.
*. +nity of o,,an-: (n employee must receive orders and instructions from one
supervisor only. Multiple commands will cause conflicts and confusions. ( sound management
should avoid dual commands.
.. +nity of Direction: <nity of direction signifies each group of activities having the
same objective must have one head and one plan. (ll the groups should coordinate and work
together to achieve the common goal.
/. S%(or-ination of 0n-i"i-%al interest to 1eneral interest: "very employee is
working in an organisation and his interest earn money to meet his personal needs. #he general
interest of organisation is development and the progress of the organisation. #he employees
should give importance first to the general interest than his individual interest. It will lead to
effective management of organisation.
2. &e,%neration of 'ersonnel: ;emuneration should be fair for both the employees
and employers. #he wage payment systems should satisfy the employees.
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3. entralization: #he 1rganisation is centralized when the power is concentrated
with one person. If the power is fully distributes to the subordinates of the organisation is fully
decentralized. or effective management of people decentralization is necessary.
0ecentralization helps to take a !uick decision on all important problems.
4. Scalar hain: 'calar chain principle states that instructions and orders should be
sent from the top management to the lower management.
!5. Or-er: #wo types of order 4= Materials order >= 'ocial order. In any
organisation materials and for men are correct places provided. 'o that materials can be easily
taken out and men easily located and also save time.
Material Order: A place for everything and everything in its place.
Social Order: A place for everyone and everyone in place.
!!. 67%ity: "!uity refers to the treatment of employees e!ually. "!ual treatment of
the employees helps to achieve organizational goals.
!#. Sta(ility of Staff: ( high employee turnover rate is not good for the efficient
functioning of any organisation.
!). 0nitiati"e: It is concerned with thinking and e*ecution of a plan. /hen
employees come forward with new ideas, they must be encouraged by the superiors. It will
create the morale of the employees.
!*. 6s'rit--e-cor's: #his means union is strength. In organisation employees
should be harmony and unity. It improves employee moral.
SCIENTIFIC MANAGEMENT
./. #aylor was born in 45?6. $e started his career as an apprentice in ,hiladephia in
45@?. In 45@5, #aylor joined Midvale 'teel 3ompany in <.'.(., as a machine shop labourer and
became a supervisor. inally, he became the 3hief engineering in 455: after gaining e*perience
as time clerk, lathe gang boss, assistant foreman, master mechanic and chief draftsman. $e had
got M.". degree AMaster of "ngineering= through evening course in 455B.
In the 45th century, the production was affected by industrial revolution, when the
management people wanted to increase their production. #heir ambitions were fulfilled by the
invention of the concept of 'cientific Management by ./ #aylor in the 49
th
century. #aylor is
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the first person to find the concept of 'cientific Management and develop it so, he is called as the
father of 'cientific Management.
(ccording to ./. #aylor, 'cientific Management consists of a certain philosophy of
scientific selection and training of right workers for the right job, providing ade!uate working
conditions, providing a system of monetary incentives to efficient workers and assumption of
responsibilities by managers and supervisors. #he workers are selected scientifically and
training is provided to both new and e*isting workers. #he workers are selected scientifically
and training is provided to both new and e*isting workers. #he workers are placed according to
their !ualifications and e*perience. #he effective doing of any work depends upon physical
working conditions, lighting, ventilation, rest rooms, rest periods, drinking water, canteen,
recreation, sanitation and the like are some of the physical working conditions. #he system of
monetary incentives should motivate the workers to work well. Managers and supervisors
should accept responsibility for planning, scheduling, guiding and controlling. It means that
planning and e*ecution are different functions.
7*inci"le$ !8 Scien#i8ic Mana'een#
./. #aylor has given the principles of 'cientific Management. #hey are briefly
e*plained below2
1. Science n!# *ule !8 #hu9: It means the replacement of old method of doing
work scientifically. #he nature of work performed by each worker should be clearly determined.
It includes the allotment of fair work to each worker, standardization in work, adoption of
differential piece rate of payment system and the like.
2. Ha*!n+ in '*!u" ac#i!n: ./. #aylor has emphasized peace and friendship in
group action. In other words, dissatisfaction of any worker is to be avoided in the group action.
#he dissatisfaction is eliminated through scientific selection, training and strategic placing of
workers.
:. C!3!"e*a#i!n: #here should be a co+operation between management and workers
and vice versa. /orkers should help the management to get larger profits, better !uality products
and lower cost of production. Management should give fair wages to workers, recognize the
performance of work and acknowledge the indispensability of workers in raising productivity.
#hen, better co+operation will be achieved. (ccording to #aylor, substitution of war for peace,
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hearty and brotherly cooperation for discontentment and strife, replacement of suspicious
watchfulness with mutual confidence of becoming friends instead of enemies result in co+
operation.
2. Ma;iu Ou#"u#: Ma*imum output is achieved through division of work and
assumption of responsibility by the management and workers jointly. Ma*imum output results in
the increasing profit to the management and wages and bonus to the workers. Management
should provide standard materials, tools and working conditions to perform the work
economically and efficiently.
5. I"*!&een# !8 )!*ke*$: <nder 'cientific Management, all the workers
should be given opportunity to improve to the fullest e*tent possible. It is necessary for the
development of the company. /orkers are scientifically selected and provided with the job
training, so, the management should find out the physical, educational and psychological
re!uirements of each job and find suitable persons to each job. 'ystematic training can shape the
workers in relations to the job assigned to them.
Eleen#$ !* Fea#u*e$ !8 Scien#i8ic Mana'een#
./. #aylor had conducted many e*periments to find out how the workers could be made
more efficient. #hese e*periments help to improve the very essence of 'cientific Management.
'cientific Management has the following features2
1. Se"a*a#i!n !8 "lannin' 8*! e;ecu#i&e 8unc#i!n: ./. #aylor separated the
planning function from the e*ecutive function. Cefore #aylor&s period, both planning function
and e*ecutive function were performed by one and the same worker. ( worker himself plans the
work and the instruments necessary to perform the work. #he same workers do the job under the
supervision of a supervisor. It results in disagreement on many issues between workers and
supervisors. 'o, ./. #aylor emphasized upon the separation of planning from e*ecution. #he
planning function should be performed by the supervisors and e*ecutive function alone be
assigned to the workers.
2. Scien#i8ic #a$k $e##in': It means allotment of work to each worker on the basis
of the capacity of an average worker functioning in normal working conditions. $e should be
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able to complete the work in a working day. If there is no scientific task setting, the workers will
work below their capacity. #aylor called it as %a fair day&s work&.
:. Func#i!nal 8!*ean$hi": /hen there is a development of a supervision
system, planning is separated from e*ecution, as e*plained earlier. #aylor had found out the
concept of functional foremanship. #his is based on the specialisation of functions performed at
supervision level. <nder the functional foremanship system, there are eight persons. 1ut of
eight persons, four persons are concerned with planning. #hey are ;oute clerk, Instruction card
clerk, #ime and cost clerk and 0isciplinarian. #he remaining four persons are concerned with
the e*ecutive function. #hey are 'peed boss, Inspector, Maintenance foreman and 8ang boss.
2. <!*k $#u(+: /ork study refers to the systematic critical assessment of
efficiency re!uired to do the job. It varies from one job to another job.
5. Me#h!($ $#u(+: #he entire process of production is taken into account under
this study. "fforts are made to reduce the distance passed by materials and improvement in
handling transportation, inspection and storage of raw materials and finished goods. Cest tools
and machinery are provided to ensure best possible results.
=. M!#i!n (u#+: ( study relating to the movement of a machine operator and his
machine while performing the job is called motion study. #he very purpose of conducting this
study is elimination of unnecessary movements of machine operator and machine. If these
movements are eliminated, time re!uired to perform the job is reduced to the optimum e*tent and
the job is performed more efficiently.
>. Tie $#u(+: #ime study refers to the act of measuring the time re!uired to
perform a particular job. ( standard time is fi*ed by conducting the time study. If the standard
time is fi*ed, all the work is performed in the fi*ed time and control over it becomes easy.
1. Fa#i'ue $#u(+: ( study relating to the fi*ing of the working hours with rest
periods to enable the workers to recoup the energy lost while performing the job is called atigue
study. #he fatigue may be mental or physical. In certain cases, both sap the energy of a worker.
$ealth and efficiency of workers are well preserved by providing ade!uate rest to them.
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(ccording to #aylor, Methods of 'tudy, Motion 'tudy, #ime 'tudy and atigue 'tudy are parts
of /ork 'tudy.
4. Ra#e $e##in': ./. #aylor emphasized upon fair wages to workers, and had
recommended differential piece rate age system. #he reason is that differential piece rate wage
system may act as an incentive to lazy and less efficient workers.
1?. S#an(a*(i$a#i!n: 'tandardisation is made in respect of tools and instruments,
working hours, volume of work, working conditions or atmosphere, cost of production etc.
#hese are fi*ed on the basis of job analysis.
11. Scien#i8ic $elec#i!n an( #*ainin': #he workers should be selected
scientifically. De*t, the appointment should be given to each worker according to the nature of
the job re!uirement and his !ualifications. (de!uate training should be given to new as well as
e*isting workers in order to update their knowledge. ( job is assigned to a worker to suit his
capacity best.
12. Financial incen#i&e$: inancial incentives can motivate the workers to show
their efficiency. ,rovisions should be made in such a way that increase in efficiency should go
with increase in wage structure. (s per the differential piece rate wage system, the efficient
workers get higher wages and vice versa. #he differential piece rate wage system was charted
out by ./. #aylor.
1:. Men#al *e&!lu#i!n: Mental revolution refers to change in thinking both on the
part of the management and workers. If not, all the measures suggested in 'cientific
Management 'ystem would be useless. #he success of implementation of 'cientific
Management depends on the mental revolution of Management and workers. (ccording to
#aylor, #he success of scientific management rests primarily on a fundamental change in the
attitude of management and workers both as to their duty to co+operate in producing the largest
possible surplus and to the necessity for substituting e*act scientific knowledge for opinions or
the old rule of thumb of individual knowledge.
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12. Ec!n!+: #he techni!ues of cost estimates and control should be considered
in order to obtain economy. #he available resources are used to the fullest possible ma*imum
e*tent to eliminate wastage. Ma*imum profit is earned through this process. Earious ways are
given in 'cientific Management to get economy in production and for ma*imizing profits.
IM7ORTANCE OF MANAGEMENT
Management is must for every organisation. Management can plan the activities to attain
the objectives.
!. $ttain,ent of gro%' goals: #he achievement of objectives of business depends
upon various factors. #he management theory gives direction of achievement of goals.
#. 6ffecti"e f%nctioning of (%siness: (bility, understanding, communication,
motivation, coordination and supervision are some of the factors responsible for the effective
functioning of business. Management is vital tool to help for effective functioning of business.
). &eso%rce -e"elo',ent: #he resources of any enterprise may be identified and
developed by the management. 8enerally the term resources are men, money, material and
machines.
*. 8anage,ent control the organisation: #he management controls the activities
of an enterprise. 3ontrol process is used to eliminate the unnecessary activities.
.. 0ntegrates in-i"i-%al efforts: Management takes necessary steps to integrate
various efforts to attain the objectives of an organisation.
/. 8oti"ation: Motivation is vital tool to achieve organisation goal. ,roperly
motivate the workers increasing the speed of performance of a work. Motivation is in the form
of monetary or non+monetary incentive.
2. o,,%nication: 3ommunication is important role for effective management.
"ffective communication leads to efficient management.
3. oor-ination: (ll the activities of enterprises are department+wise. Management
coordinates the activities of different departments to attain the objectives of the organisation.
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4. Decision-,aking: #here are a number of decisions taken by the management
every day. #he management gives guides the managers to take correct decisions.
!5. Lea-ershi' 7%ality: )eadership !uality is developed in the persons who are
working in the top level management.
T,7ES OF MANAGEMENT
1. De&el!"en# Mana'een#: It includes research into materials, machines,
processes, etc.
2. Di$#*i9u#i!n Mana'een#: It includes marketing, merchandising
advertising, sales, etc.
:. Financial Mana'een#: It includes economic forecasting, costing, accounting,
budgetary control, insurance and actuarial work, etc.
2. Main#enance Mana'een#: It includes upkeep of buildings, e!uipment, estate
work, etc.
5. 7u*cha$e Mana'een#: It includes tendering, buying, contract work, store
keeping, store and stock control.
=. 7*!(uc#i!n Mana'een#: In includes work analysis, planning, scheduling,
routing, !uality control and work study.
>. T*an$"!*# Mana'een#: In includes transportation by rail, road, air and water,
packing, warehousing, etc.
1. 7e*$!nnel Mana'een#: It includes employee selection, placement, training,
transfer, promotion, discharge, industrial relations, safety, health and welfare services, etc.
4. O88ice Mana'een#: It includes planning and control of offices, keeping
records, etc.
7LANNING
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,lanning is the most basic of all management functions. #here is no choice between
planning and no planning. #he choice is only with regard to the method and techni!ues used to
plan. Most of us are planning many things in our day+to+day lives. re!uently, we plan to do
official work, improve our careers, plan our investment, built own houses, do business and so on.
1rganizations are no e*ception and lots of planning activities are done by the management
people at all levels. ,lanning is the process of selecting objectives and determining the course of
action re!uired to achieve these objectives. )ot of information has to be gathered and processed
before planning is formulated.
,lanning bridges the gap from where we are and where we want to go. It makes the
things possible to occur which would not otherwise happen. )et us look at what the following
observations suggest about planning.
,lanning is outlining a future course of action in order to achieve on objective.
,lanning is looking ahead.
,lanning is getting ready to do something tomorrow.
,lan is a trap laid down to capture the future.
STE7S IN 7LANNING 7ROCESS
,lanning is a processF therefore, it contains number of steps within it. It is not necessary
that a particular planning process or steps are valid for all organizations and for all types of
plans. ( planning process is suitable for large scale organization which may not be suitable for
small organizations. 'ince, various factor that go into planning process may differ from plan to
plan or from organization to organization. #he planning process or steps given here is mostly
applicable for major programmes. Cut with minor modifications, the process is applicable for all
types of plans.
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#he general planning steps is given below
14
Identification of opportunities
"stablishment of objectives
0eveloping planning premises
Identification of alternatives
"valuation of alternatives
ormulating derivative plans
'electing an alternative
"stablishing se!uence of activities
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1. I(en#i8ica#i!n !8 !""!*#uni#ie$: Identification of awareness of the opportunity is the
starting point of planning. irst of all, we should identify the possible future opportunities and
analyze them clearly and completely. rom that, we should know2
/here we stand,
/hat is our strength and weakness,
/hat problem we wish to solve and why, and
/hat we e*pect to gain.
1nce, the opportunities are perceived from availability, the other steps of planning are
undertaken.
2. E$#a9li$hen# !8 !9@ec#i&e$ !* '!al$: #he ne*t step in planning is to establish
objectives for the entire organization and then for each subordinate units. 1bjectives specify and
indicate the results e*pected.
/hat is to be done.
/here is the primary emphasis to be placed.
/hat is to be accomplished by the various types of plans.
1rganisational objectives should be specified in all key result areas. Gey result areas are
those which are important for organization in achieving its objective. #he key result areas may
be profitability, sales, research and development, manufacturing and so on.
:. De&el!"in' "lannin' "*ei$e$: ,lanning premises are the assumptions that
should be made about the various elements of the environment. It provides the basic framework
in which plans operate. #hese premises may be internal or e*ternal.
Internal premises include organizational, policies, resources of various types, sales
forecasts and the ability of the organisation to withstand the environmental pressure. "*ternal
premises include the total factors in task environment like political, social, technological,
competitors, plans and actions, and government policies etc.
#he plans are formulated on the basis of both internal and e*ternal premises. #he nature
of planning premises differs at different levels of planning. (t the top level, it is mostly
e*ternally focused where as the bottom level is internally focused.
2. I(en#i8ica#i!n !8 al#e*na#i&e$: #he ne*t step in planning is to search for and
designs the alternative courses of action. Cased on organizational objectives and planning
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premises, various alternatives of plans can be identified. ( particular objective can be achieved
through a number of ways. #he entire alternative cannot be analysed. 'ome alternative can be
rejected at its preliminary stage itself by considering preliminary criteria such as minimum
investment re!uired, matching with the present business, market conditions government control,
skilled workers, techni!ue available etc. 1nly the alternatives which meet the preliminary
criteria may be chosen for further detailed analysis.
5. E&alua#i!n !8 al#e*na#i&e$: #he alternatives considered for the analysis
according to preliminary criteria may be taken for further evaluation. "ach alternative course of
action is evaluated on the basis of profitability, capital investment, rish involved, gestation period
etc. It presents a problem because each of these alternatives may have certain advantages and
disadvantages. or instance, an alternative may appear to be must profitable. Cut, it re!uires a
large cash outlet with slow paybackF another may be less profitable but involves less risk factors.
=. Selec#in' al#e*na#i&e$: (fter the evaluation of various alternatives, the most
appropriate course of action is selected. If more than one alternative is suitable, then any are
alternative may be chosen for e*ecution. /hen the situation changes and the selected plan do
not provide to be the best, the other alternative may be tried.
>. F!*ula#i!n !8 (e*i&a#i&e "lan$: #he derivative plans are formulated on the
basis of the major plans. #here are several minor plans re!uired to support and e*ecute the
major plans. #hese plans are known as derivative plans. #he various derivative plans are
planning for buying e!uipment, buying raw materials, recruiting and training personal,
developing new product etc.
1. E$#a9li$hin' $eAuence !8 ac#i&i#ie$: (fter formulating basic and derivative
plans, the se!uence of activities is determined so that plans are put into action while formulating
derivative plans, a built in mechanism should be created for periodic review and updating of
various plans whenever necessary. #he starting and finishing times are fi*ed for each piece of
work so as to indicate when and within what time that work is to be commenced and completed.
7UR7OSE !* O.BECTI%ES OF 7LANNING
,lanning has great importance in all type of organization. 1rganisation often fails not
because of lack of resources, but because of poor planning. ,lanning has become a re!uisite for
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the survival and growth of business organization. It is necessary to plan due to the following
reasons.
1. 7*ia*+ !8 7lannin': ,lanning is a primary function of an organization which
proceeds all other functions. (ll other functions such as organizing, staffing, directing and
controlling are performed to achieve the objectives already set by the planning process.
2. T! achie&e !9@ec#i&e$: ,lanning is directed towards the attainment of
organization objectives. /hile planning, we should be clear about few !uestions.
/hy am I making this plan.
/hat am I trying to accomplish.
/hat resources do I need to e*ecute the plan.
If we prepare answers for the above !uestions, it provides lot of clarity to the objectives.
,lanning serves as a bridge between present and future.
:. T! c!"e )i#h unce*#ain#+ an( chan'e: #here is a continuous change in the
environment. ( good organisation has to work in accelerating change. #his change is reflected
in both tangible and intangible forms. #angible changes are in the form of changes in
technology, market forces, government regulations etc. Intangible changes are in the form of
changes in attitudes, values, cultures etc. ,lanning enables the identification of future problems
and meeting such contingencies. ,lanning helps to minimize risk while taking advantages of
opportunities.
2. T! 8acili#a#e c!n#*!l: 3ontrol involves the measurement of accomplishment of
events against plans and correction of deviations to assure the achievement of objectives as set
by plans. ,lanning provides the standards with which actual performance can be measured and
corrective actions taken wherever necessary. /ithout planning, we do not know what to control.
5. T! hel" in c!!*(ina#i!n: (ll the managerial functions lead to coordination in the
organization. Cut real coordination begins with the planning stage. 'ince, all the departments
work in accordance with the overall plan, the harmony and coordination is achieved.
3oordination is the essence of management and planning is the base for it.
=. T! inc*ea$e !*'aniCa#i!nal e88ec#i&ene$$: #he term effectives mean that the
organization is able to achieve its objectives within the given resources. ( better planning
ensures organizational effectiveness in many ways. In better planning, all the resources are put
in a way that ensures their ma*imum efficiency and contribution to organizational objectives.
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,lanning states the objectives of the organization in the conte*t of given resources. #herefore,
each resources of the organization has a specific use at a particular time. #hus, planning ensures
that resources are put in action in a way in which these have been specified.
>. T! 'ui(e (eci$i!n akin': ,lanning provides a basis for future oriented
decisions. /ithout planning, business decisions may become random. ,lanning creates better
relation among various decisions. It serves as a framework for making rational decision.
AD%ANTAGES OF 7LANNING
#he following are the advantages of planning2
1. Hel"$ in achie&in' !9@ec#i&e$: ,lanning concentrates attention on setting goals
or objectives of an organization. It gives effective direction to the control of employees of the
organization towards achieving organizational goals.
2. .e##e* u#iliCa#i!n !8 *e$!u*ce$: ,lanning gives clear cut direction on what to
produce and how to produce. #herefore, there is a possibility of utilizing the resources
effectively.
:. Ec!n!+ in !"e*a#i!n: Cetter utilization of resources leads to economy in
operation.
2. Re(uce$ unce*#ain#+ an( *i$k: <ncertain and changes are inevitable and
planning cannot eliminate them. ,lanning enables the enterprise to make ade!uate adjustment to
adopt to future changes.
5. I"*!&e$ c!"e#i#i&e $#*en'#h: ,lanning enables a firm to remain in
competition. ,lanning helps management to adopt modern methods of operation and to improve
the !uality of the product to attract the customer. 3ompetitive strength is improved by adding
these changes.
=. E88ec#i&e c!n#*!l: ,lanning serves as a base for control. ,lanning determines
the time for starting and completing the projects, set standards of performance. It enables the
managers to control the activities.
>. C!!*(ina#i!n: ,lanning enables effective coordination of all managerial
function. Cy providing well+defined objectives, unity of direction, well established policies,
procedures and programmes, planning facilitates to get effective coordination.
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1. Enc!u*a'e$ M!#i&a#i!n: ( well+prepared plan encourages the employee&s moral
and confidence of the managers and gives them a sense of effective participation.
LIMITATIONS OF 7LANNING
Inspite of various advantages of planning, it suffers from the following limitations2
1. Lack !8 accu*a#e in8!*a#i!n: ,lanning is done for future. #he accuracy and
reliability of forecasts is doubtful if the forecasting period increases, because future is !uite
uncertain. ,lanning cannot insure against future perfectly.
2. Tie an( C!$#: ,lanning is a time consuming process. #he various steps in
planning may consume a lot of time because there is no limit of precision in planning tools.
'ince, the planning is proceeded with many course of action such as collection of
necessary information, careful analysis and interpretation etc., it is a costly affair.
:. In8le;i9ili#+: ,lanning may result in integral rigidity in managerial work. 'uch
rigidity leads to delay in work performance. Many times, changes are not accepted even though
they are unavoidable.
2. Dela+ (u*in' ee*'enc+ "e*i!(: 0uring emergencies, immediate and on the
spot actions are necessary which are not possible under planning. 'o, planning leads to delay in
action.
5. Fal$e $en$e !8 $ecu*i#+: #he management people may think that once the plans
are formulated, action will automatically be efficient forever. It makes the management having a
false sense of security unless the plans are reviewed and revised periodically.
ORGANISING ORGANISING
1rganising is the process of identifying and grouping of activities re!uired to attain the
objectives, delegating authority, creating responsibility and establishing relationships for the
people to work effectively. (s a process, organisation refers to the process of determining,
arranging, grouping and assigning the activities to be performed for the attainment of objectives.
#hus, the organisation is a mechanism or structure which helps the activities to be performed
effectively. #he organisation is established for the purpose of achieving the business objectives.
(n organisation structure should be designed to clarify who is to do what task and who is
responsible for what results. #he organisation structure is designed both from mechanistic and
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humanistic point of view. It is not only a mechanical structure of duties, activities and
relationships, but also web of human interactions within social group with attitudes and
aspirations.
De8ini#i!n:
(ccording to Haimann, 1rganising is the process of defining and grouping the activities
of the enterprise and establishing the authority relationships among them.
Koontz and ODonnel define organizing as the grouping of activities necessary to attain
objectives, the assignment of each grouping to a manager with authority necessary to supervise
it, and the provision for co+ordination horizontally and vertically in the enterprise structure.
(ccording to Terry, 1rganising is the establishment of effective behavioural
relationships among
NATURE OF ORGANIDATION
#he main characteristics of an organization are as follows2
1. C!!n O9@ec#i&e$: "very organization e*ists to achieve some common objectives.
(ll efforts of the organisation are directed towards this goal.
2. S"ecialiCa#i!n !* Di&i$i!n !8 La9!u*: #he total work of an organization is divided
into functions and sub+functions to get the benefits of specialization.
:. Au#h!*i#+ !8 $#*uc#u*e: #here is an arrangement of positions into a graded series.
#he authority and responsibility of each position is defined in the structure. #he chain of
superior and subordinate relationships is known as chain of command.
2. G*!u" !8 "e*$!n$: (n organization is basically a group of persons. #herefore,
activity groupings and authority provisions must take into account the limitations and customs of
people. ,eople constitute the dynamic human element of an organization.
5. C!3!*(ina#i!n: #here is a mechanism for coordinating different activities and parts
of an organizations so that it functions as an integrated whole.
=. C!unica#i!n: "very organization has its own channels of communication.
#hese channels are necessary for mutual understanding and cooperation among members of an
organization.
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>. En&i*!nen#: (n organization functions in an environment comprising economic,
social, political and legal factors. #herefore, it must be desired to work efficiently in a changing
environment.
1. Rule an( Re'ula#i!n$: or effective functioning of an organization, it should have
some rules and regulations. 'uch rules and regulations may be in writing or implied form
customary behaviour.
FORMAL ORGANISATION
( formal organisation typically consists of a classical hierarchical structure in which
positions, responsibility, authority, accountability and the line of command are clearly defined
and established. It is a system of well defined jobs with a prescribed pattern of communication,
coordination and delegation of authority.
(ccording to (llen, #he formal organisation is a system of well+defined jobs, each
bearing a definite measure of authority, responsibility and accountability.
ormal organisation must be fle*ible. "ach and every person is assigned the duties and
given the re!uired amount of authority and responsibility to carryout the job. It creates co+
ordination between workers to achieve common goal. #he inter relationship of staff members
can be shown in the organisation chart and manuals
$-"antages of for,al organisation
'ince the definite boundary of each worker is clearly defined, the conflict among the
workers is automatically reduced.
1verlapping of responsibility is easily avoided.
More stable organization can be ensured. It makes the organization less dependent on
one man.
( sense of security arises from classification of the task.
It motivates the employees.
INFORMAL ORANISATION
Informal organisation is an organisation which establishes the relationship on the basis of
member&s interaction, communication, personal likings and disliking, and social contacts within
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as well as outside the organisation. It arises naturally on the basis of friendship or some common
interest which may or may not be related with work. or e*ample, the typists working in
different departments may form informal group due to similarity of work. 3ommon language,
common hobby, common habits may also lead to informal organisation.
#he informal organisation relationship e*ists under the formal organisation also. #he
informal organisation gives a greater job satisfaction to the individuals and result in ma*imum
production.
$-"antages of infor,al organisation
'ince informal organisation gives satisfaction to the workers, it motivates workers and
also maintains the stability of the work.
It fills up the gaps and deficiency of the formal organisation.
It fills up the gaps among the abilities of the managers.
#he presence of informal organisation encourages the e*ecutives to plan the work
correctly and act accordingly.
It is one of the useful channel of communication.
Disa-"antages of infor,al organisation
Informal organisation may function in ways that are counter productive. #hey may stand
in the way of organisation achieving the objectives.
It indirectly reduces the effort of management to promote greater productivity.
It spreads rumor among the workers regarding the functioning of the organistion
unnecessarily.
ORGANISATIONAL CHARTS
1rganisational charts are prepared for the purpose of describing the organisational
structure clearly. (n organisation chart is a graphical portrayal of the various positions in the
enterprise and the formal relationships among them. It shows the organisational relationships
and activities within an organisation.
eorge !. Terry defines" #An organisation chart is a diagrammatical form $hich sho$s
the important aspects of an organisation incl%ding the ma&or f%nctions and their respective
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relationships" the channels of s%pervision and the relative a%thority of each employee $ho is
incharge of each respective f%nction'.
H. Catty has defined, (n organisation chart is diagrammatic representation of the
framework or structure of an organisation.
KINDS OF ORGANISATION CHARTS
#here are several kinds of organisation charts. 'ome of them are described below2
1. %e*#ical Cha*#
23
3hairmen
Managing 0irector
,ersonnel
Manager
Marketing
Manager
,roduction
Manager
'upervisor for
operation (
/orkman I
'upervisor for
operation 3
'upervisor for
operation C
/orkman III /orkman II
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It shows the organisation structure in the form of a pyramid, the lines of communication
flow from top level to the bottom in vertical lines. #his vertical chart is in the form of a graph.
In this chart, the highest position is placed at the top after that the ne*t highest is shown in the
table. It is also known as Top(Do$n chart.
1 H!*iC!n#al cha*# !* Le8# #! *i'h# cha*#
#he chart in which the line of command is flowing horizontally instead of vertical is
known as horizontal chart. #here is no much difference between vertical and horizontal chart.
In this chart, highest position is shown at the e*treme left and the lowest position at the e*treme
right.
2 Ci*cula* cha*# !* c!ncen#*ic cha*#
24
,resident
Managing
0irector
Managing
0irector
Managing
0irector
Managing
0irector
Cranch
Manager I
Cranch
Manager II
Cranch
ManagerIII
'alesman I
'alesman III
'alesman II
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'upervisor III

'upervisor II
'upervisor I ,eo
In this chart, the position of the top e*ecutive is shown in the centre of the chart. #he
subordinates of these top e*ecutives are shown in all directions outward from the centre. 'uch a
chart is a better representation of the personnel relationships as it eliminates the status
implications.
STAFFING
'taffing is defined as filling and keeping filled, positions in the organization structure. It
includes identifying work force re!uirements, inventorying the people available and recruiting,
selecting, placing promoting, appraising and training developing both candidates and current
jobholders to accomplish their tasks effectively and efficiently. 'taffing is the part of the
management process which is concerned with the procurement, utilization, maintenance and
development of a large satisfied work force in the organization.
Na#u*e !8 S#a88in'
1 S#a88in' i$ an i"!*#an# ana'e*ial 8unc#i!n3 'taffing function is the most important
mangerial act along with planning, organizing, directing and controlling. #he operations
25
,roduction Marketing
Manager manager
,ersonnel inance
Manager manager
chairman
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of these four functions depend upon the manpower which is available through staffing
function.
2 S#a88in' i$ a "e*&a$i&e ac#i&i#+3 (s staffing function is carried out by all mangers and in
all types of concerns where business activities are carried out.
1 S#a88in' i$ a c!n#inu!u$ ac#i&i#+3 #his is because staffing function continues throughout
the life of an organization due to the transfers and promotions that take place.
2 The 9a$i$ !8 $#a88in' 8unc#i!n i$ e88icien# ana'een# !8 "e*$!nnel$3 $uman
resources can be efficiently managed by a system or proper procedure, that is,
recruitment, selection, placement, training and development, providing remuneration, etc.
3 S#a88in' hel"$ in "lacin' *i'h# en a# #he *i'h# @!9. It can be done effectively through
proper recruitment procedures and then finally selecting the most suitable candidate as
per the job re!uirements.
4 S#a88in' i$ "e*8!*e( 9+ all ana'e*$ depending upon the nature of business, size of
the company, !ualifications and skills of managers,etc. In small companies, the top
management generally performs this function. In medium and small scale enterprise, it is
performed especially by the personnel department of that concern.
S#a88in' 7*!ce$$ 3 S#e"$ in&!l&e( in S#a88in'
1 Man"!)e* *eAui*een#$3 #he very first step in staffing is to plan the manpower
inventory re!uired by a concern in order to match them with the job re!uirements and
demands. #herefore, it involves forecasting and determining the future manpower needs
of the concern.
2 Rec*ui#en#3 1nce the re!uirements are notified, the concern invites and solicits
applications according to the invitations made to the desirable candidates.
3 Selec#i!n3 #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.
1 O*ien#a#i!n an( 7laceen#3 1nce 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 job.
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2 T*ainin' an( De&el!"en#3 #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. (long with it, the workers are
developed by providing them e*tra benefits of indepth knowledge of their functional
areas. 0evelopment also includes giving them key and important jobsas a test or
e*amination in order to analyse their performances.
3 Reune*a#i!n3 It is a kind of compensation provided monetarily to the employees for
their work performances. #his is given according to the nature of job+ skilled or
unskilled, physical or mental, etc. ;emuneration forms an important monetary incentive
for the employees.
4 7e*8!*ance E&alua#i!n3 In order to keep a track or record of the behaviour, attitudes as
well as opinions of the workers towards their jobs. or this regular assessment is done to
evaluate and supervise different work units in a concern. It is basically concerning to
know the development cycle and growth patterns of the employees in a concern.
5 7*!!#i!n an( #*an$8e*3 ,romotion is said to be a non+ monetary incentive in which the
worker is shifted from a higher job demanding bigger responsibilities as well as shifting
the workers and transferring them to different work units and branches of the same
organization.
CONTROLLING
3ontrolling consists of verifying whether everything occurs in confirmities with the plans
adopted, instructions issued and principles established. 3ontrolling ensures that there is effective
and efficient utilization of organizational resources so as to achieve the planned goals.
3ontrolling measures the deviation of actual performance from the standard performance,
discovers the causes of such deviations and helps in taking corrective actions
(ccording to Crech, 3ontrolling is a systematic e*ercise which is called as a process of
checking actual performance against the standards or plans with a view to ensure ade!uate
progress and also recording such e*perience as is gained as a contribution to possible future
needs.
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(ccording to 0onnell, Hust as a navigator continually takes reading to ensure whether he
is relative to a planned action, so should a business manager continually take reading to assure
himself that his enterprise is on right course.
3ontrolling has got two basic purposes
1 It facilitates co+ordination
2 It helps in planning
Fea#u*e$ !8 C!n#*!llin' Func#i!n
ollowing are the characteristics of controlling function of management+
1 C!n#*!llin' i$ an en( 8unc#i!n3 ( function which comes once the performances are
made in confirmities with plans.
2 C!n#*!llin' i$ a "e*&a$i&e 8unc#i!n3 which means it is performed by managers at all
levels and in all type of concerns.
3 C!n#*!llin' i$ 8!*)a*( l!!kin'3 because effective control is not possible without past
being controlled. 3ontrolling always look to future so that follow+up can be made
whenever re!uired.
4 C!n#*!llin' i$ a (+naic "*!ce$$3 since controlling re!uires taking reviewal methods,
changes have to be made wherever possible.
5 C!n#*!llin' i$ *ela#e( )i#h "lannin'3 ,lanning and 3ontrolling are two inseperable
functions of management. /ithout planning, controlling is a meaningless e*ercise and
without controlling, planning is useless. )lanning pres%pposes controlling and
controlling s%cceeds planning.
7*!ce$$ !8 C!n#*!llin'
3ontrolling as a management function involves following steps2
1 E$#a9li$hen# !8 $#an(a*($3 'tandards are the plans or the targets which have to be
achieved in the course of business function. #hey can also be called as the criterions for
judging the performance. 'tandards generally are classified into two+
a. Measurable or tangible + #hose standards which can be measured and e*pressed
are called as measurable standards. #hey can be in form of cost, output,
e*penditure, time, profit, etc.
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b. Don+measurable or intangible+ #here are standards which cannot be measured
monetarily. or e*ample+ performance of a manager, deviation of workers, their
attitudes towards a concern. #hese are called as intangible standards.
3ontrolling becomes easy through establishment of these standards because controlling
is e*ercised on the basis of these standards.
1 Mea$u*een# !8 "e*8!*ance3 #he second major step in controlling is to measure the
performance. inding out deviations becomes easy through measuring the actual
performance. ,erformance levels are sometimes easy to measure and sometimes difficult.
Measurement of tangible standards is easy as it can be e*pressed in units, cost, money
terms, etc. Iuantitative measurement becomes difficult when performance of manager
has to be measured. ,erformance of a manager cannot be measured in !uantities. It can
be measured only by+
a. (ttitude of the workers,
b. #heir morale to work,
c. #he development in the attitudes regarding the physical environment, and
d. #heir communication with the superiors.
It is also sometimes done through various reports like weekly, monthly, !uarterly, yearly
reports.
2 C!"a*i$!n !8 ac#ual an( $#an(a*( "e*8!*ance3 3omparison of actual performance
with the planned targets is very important. 0eviation can be defined as the gap between
actual performance and the planned targets. #he manager has to find out two things here+
e*tent of deviation and cause of deviation. "*tent of deviation means that the manager
has to find out whether the deviation is positive or negative or whether the actual
performance is in conformity with the planned performance. #he managers have to
e*ercise control by e*ception. $e has to find out those deviations which are critical and
important for business. Minor deviations have to be ignored. Major deviations like
replacement of machinery, appointment of workers, !uality of raw material, rate of
profits, etc. should be looked upon consciously. #herefore it is said, If a manager
controls everything, he ends up controlling nothing. or e*ample, if stationery charges
increase by a minor ? to 47J, it can be called as a minor deviation. 1n the other hand, if
monthly production decreases continuously, it is called as major deviation.
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1nce the deviation is identified, a manager has to think about various cause which has led
to deviation. #he causes can be+
a. "rroneous planning,
b. 3o+ordination loosens,
c. Implementation of plans is defective, and
d. 'upervision and communication is ineffective, etc.
3 Takin' *ee(ial ac#i!n$3 1nce the causes and e*tent of deviations are known, the
manager has to detect those errors and take remedial measures for it. #here are two
alternatives here+
a. #aking corrective measures for deviations which have occurredF and
b. (fter taking the corrective measures, if the actual performance is not in
conformity with plans, the manager can revise the targets. It is here the controlling
process comes to an end. ollow up is an important step because it is only through
taking corrective measures, a manager can e*ercise controlling.
T,7ES OF O<NERSHI7
1. 'ole proprietorship K 'ingle ownership
2. ,artnership
3. Hoint 'tock 3ompanies
4. 3ooperative organisation
5. 'tate and central 8overnment owned
SINGLE O<NERSHI7
( S!le 7*!"*ie#!*$hi" is a business with one owner who operates the business on his or
her own or employ employees. It is the simplest and the most numerous form of business
organization in the <nited 'tates, however it is dangerous as the sole proprietor has total and
unlimited liability. 'elf+contractor is one e*ample of a sole proprietorship.
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In this type, the single ownership where an individual e*ercises and enjoys these rights in
his own interest. It does well for those enterprises which re!uire little capital and lend
themselves readily to control by one person.
A(&an#a'e$ !8 a $!le "*!"*ie#!*$hi"
1 'implest and least e*pensive form of business to establish and to dissolve.
2 #he owner is making all the decisions and controlling the whole operations.
3 (ll profit flows directly to the owner.
4 It is subject to fewer regulations.
5 It has ta* advantage2 any income is declared as the owner&s personal income ta* return,
therefore there are no corporate income ta*es.
Di$a(&an#a'e$ !8 a $!le "*!"*ie#!*$hi"
1 #he owner is responsible for all the obligations of the business.
2 It is difficult to raise capital2 it can only use the owner&s personal saving and consumer
loans.
7ARTNERSHI7
( single owner becomes inade!uate as the size of the business enterprise grows. $e may
not be in a position to do away with all the duties and responsibilities of the grown business. (t
this stage, the individual owner may wish to associate with him more persons who have either
capital to invest, or possess special skill and knowledge to make the e*isting business still more
profitable. 'uch a combination of individual traders is called ,artnership.
,artnership may be defined as the relation between persons who have agreed to share the
profits of a business carried on by all or any of them acting for all. Individuals with common
purposes join as partners and they put together their property ability, skill, knowledge, etc., for
the purpose of making profits
A(&an#a'e$ !8 a "a*#ne*$hi"
1 It is relatively easy to form but considerable amount of time should be invested in
developing the partnership agreement.
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2 It is easier to raise capital compared to a sole proprietorship as there are more than one
investor.
3 (ny income is declared as the partners& personal income ta* returns, therefore there are
no corporate income ta*es.
4 "mployees may be motivated and attracted to the business by the inventive to become a
partner
Di$a(&an#a'e$ !8 a "a*#ne*$hi"
1 ,artners are jointly responsible for all the obligations of the business.
2 ,artners must make decision together therefore disputes or conflicts may occur. It may
eventually lead to dissolving the partnership.
COR7ORATION
It is a form of private ownership which contains features of large partnership as well as
some features of the corporation. ( corporation is a limited liability entity doing business owned
by multiple shareholders and is overseen by a board of directors elected by the shareholders. It is
distinct from its owners and can borrow money, enter into contracts, pay ta*es and be sued. #he
shareholders gain from the profit through dividend or appreciation of the stocks but are not
responsible for the company&s debts.
A(&an#a'e$ !8 a c!*"!*a#i!n
1 It can raise additional funds through the sale of stock.
2 'hareholders can easily transfer the ownership by selling their stock.
3 Individual owner& liability is limited to the value of stock they are holding in the
corporation.
Di$a(&an#a'e$ !8 a c!*"!*a#i!n
1 It is restricted by more regulations, more closely monitored by governmental agencies
and are more costly to incorporate than other forms of the organizations.
2 ,rofit of the business is ta*ed by the corporate ta* rate. 0ividends paid to shareholders
are not deductible from corporate income, so this part of income is ta*ed twice as the
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shareholders must declare dividends as their personal income and pay personal income
ta*es too.
7U.LIC LIMITED COM7AN,
( public enterprise is one that is A4= 1wned by the state, A>= Managed by the state or AB=
1wned and managed by the state.
,ublic enterprises are controlled and operated by the 8overnment either solely or in
association with private enterprises. It is controlled and operated by the 8overnment to produce
and supply goods and services re!uired by the society. )imited companies which can sell share
on the stock e*change are ,ublic )imited companies. #hese companies usually write ,)3 after
their names.
A(&an#a'e$
#here is lii#e( lia9ili#+ for the shareholders.
#he business has $e"a*a#e le'al en#i#+. #here is continuity even if any of the
shareholders die.
#hese businesses can *ai$e la*'e ca"i#al sum as there is no limit to the number of
shareholders.
#he shares of the business are 8*eel+ #*an$8e*a9le providing more li!uidity to its
shareholders .
Di$a(&an#a'e$
#here are lot of le'al 8!*ali#ie$ re!uired for forming a public limited company. It is
costly and time consuming.
In order to protect the interest of the ordinary investor there are $#*ic# c!n#*!l$ an(
*e'ula#i!n$ to comply. #hese companies have to publish their accounts.
#he original owners may l!$e c!n#*!l.
,ublic )imited companies are huge in size and may face ana'een# "*!9le$ such as
slow decision making and industrial relations problems.
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7RI%ATE LIMITED COM7ANIES
#hese are closely held businesses usually by family, friends and relatives.
,rivate companies may issue stock and have shareholders. $owever, their shares do not trade on
public e*changes and are not issued through an initial public offering.
'hareholders may not be able to sell their shares without the agreement of the other shareholders.
A(&an#a'e$
Lii#e( Lia9ili#+: It means that if the company e*perience financial distress because of
normal business activity, the personal assets of shareholders will not be at risk of being
seized by creditors.
C!n#inui#+ !8 e;i$#ence: business not affected by the status of the owner.
Minimum number of shareholders need to start the business are only>.
More capital can be raised as the ma*imum number of shareholders allowed is ?7.
Sc!"e !8 e;"an$i!n is higher because easy to raise capital from financial institutions and
the advantage of limited liability.
Di$a(&an#a'e$
8rowth may be limited because a;iu $ha*eh!l(e*$ allowed are only ?7.
#he shares in a private limited company cann!# 9e $!l( !* #*an$8e**e( to anyone else
without the agreement of other shareholders.
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