Fundamentals of Management

Dasari.Pandurangarao
Dr.K.Chiranjeevi
Devarpalli.Rajasekhar

Archers and Elevators Publishing

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Fundamentals of Management

Archers and Elevators Publishing

House First Edition 2015.

ISBN: 978-93-83241-91-0.

Price: Rs.250/
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About Authors:
Dasari.Pandurangarao is Assistant professor of
Management and Marketing department,
College of Business and Economics, Eritrea, East
Africa. He has eight yearsteaching
experiences as Assistant professor of the
various colleges: Newtons Institute of
Engineering, Amara Institute of Engineering and
St.Anns Engineering College, Andhra Pradesh,
India. Hisand
teaching
and research
intent are Management
Marketing
management. He has
been serving as editorial board member of IJASR Journal, 12
research articles are published in various national and international
journals. He has written a book Customers Perception on Mutual
funds.
Dr.K.Chiranjeevi holds Masters Degree in Human Resource
Management from Andhra University and Master
of Business Administration in Marketing from
Acharya Nagarjuna University. He was Asst.
Personal Officer in NIPPO Indo National Limited,
Tada, and Nellore Dist for two years during
November, 1995 to December, 1997. He joined the
Department as Lecturer on 23-1-1998. He was
awarded Ph.D. in Commerce and Management
from Acharya Nagarjuna University under the
guidance of Prof.G.N.Brahmanandam, Commerce and Management
studies. His areas of interest are Performance Management, Human
Resource Management, Business Laws, Labour Laws, Human
Resource Planning and Compensation Management, HRD-Strategies
and Systems. He attended good number of seminars and workshops.
He also takes part Associate NCC Officer from 2008 to still date. He
appointed as Research Supervisor in Dept.of Business Management
under the Faculty of Commerce and Management Krishna
University, Machilipatnam.
Deverapalli.Rajasekhar is presently working
as a Guest facultyin the department of MBA
Acharya Nagarjuna University. He finished
his Ph.D from Acharya Nagarjuna University
and masters
in
Management (MBA)
from
JNTU University.
He
has
eight
years
teaching experience as Assistant professor of the
various colleges: JBIET College, Hyderabad, and
faculty in the department of MBA, Acharya
Nagarjuna
University,
Andhra
Pradesh,
intent is Human resource
India.His
management
research and 22 research articles are
published in various national and international journals.

Preface
Thisbook Fundamentals of Management has addressed all
management concepts including evolution of management thoughts,
functions of management, motivating employees, communication
concepts, information systems need for managers and international
management. This text is benefitted to all college students, scholars,
researchers, lecturers, business people and who are intended to
learn management concepts. Easy understandable language and
examples are used by targeting all level of students in India.
We are in the era of high speed technology. People are engaged with
numerous works in a day. The day in and day out is going
with bunch of works. Managing of these works is tough to a
human without well organized management skills. Therefore,
management became an intrinsic part of our life. Everyone
should have the knowledge of management concepts in order to
make life peace and healthy.
In writing this book we have drawn on a vast amount of literature in
management. Naturally, we owe an intellectual debt to the numerous
authors who haveenriched the stream of literature in management by
their contributions. Wehave also benefited from the insights
and experience of a number of academicians in thefield, with whom
we have had many discussions.

Dasari.Pandurangarao
Dr.K.Chiranjeevi
Devarpalli.Rajasekhar

CHAPTER-1
INTRODUCTION TO MANAGEMENT

Learning objectives
After reading this chapter, you will be able to understand:
The nature of the management
Levels and types of managers
Management and its importance
What are the Functions, roles, and skills of management
Skills required to a manger?
Roles of manager in business
Management: science or art
The concept of evolution of management movement

1.1 INTRODUCTION
Many people assume that a manger job is just planning and
organizing resources (Human resources, financial resources, physical
resources and technical resources), problem solving and working
with others. But Technology, changes in the society, competition, and
increased customer service make the job of manger very tough. All
these changes have created new challenges for manger. Managing
human activities is most important to attain organizational goals. In
today's tough and uncertain economy, business needs a strong
manager. The role of manager not ended with managing things; in
addition, he is acts as a problem solvers, cheerleaders, and planners as
well.
1.2 DEFINITIONS
Management may be defined in different ways. The most generic of its
meanings is concerned with goal directed actions and best utilizing
resources. From this perspective the following definitions are developed.
Management is the process of achieving organizational goals through
engaging in the five functions of planning, organizing, staffing, leading
and controlling by utilizing human, financial and material resources.
Management is the process of best using business resources includes
its employees, equipment, and money to produce goods or provide
services.

Page | 1

1.3 LEVELS AND TYPES OF MANAGERS

All organizations, from one person business to giant corporations, need
manager, management applies to any kind of organization and
concerned with productivity. In large organizations need generally more
than one manger to coordinate their resources. Accordingly managers
operate often influences the mixture of important function and skills. In
this section, you will learn about types and levels of managers.
Traditionally management is divided into three categories: first-line,
middle, and top level management. The time spent by the manager
varies at different levels. Top level managers usually spend more time on
planning.
Top level managers
Top level Managers are senior executive of an organization and are
responsible for its overall management; they are top in the hierarchy.
Normally top level managers often referred to as policy and
decision makers, and strategic managers, focus on survival, growth,
and effectiveness of the organization. Instead of focusing in the
companys day to day activities, top management concentrate on
setting the direction that company should follow.
Chief executive officers (CEO), President, Executive vice president, vice
president, executive director, chief operational officer (COO) are common
job titles at top level management in large corporations.
Top level managers are true organizational leaders, treat employees as
valued asset of the enterprise and motivating employees enthusiastically
commit to the work.
Middle level managers
Middle level managers are
tactical
also
called
managers, are located in
the
organizations
hierarchy between top and
front line manager. The
role
of
middle
level
manager is administrative
controller,
bridges
the
gap between higher and
levels.
Middle
level
lower
management working to
meet the goals set by
top management.
In
large organizations several
layers of
middle
level
managers

Figure-1.1: Levels of management

Page | 2

are placed. Particularly specific areas of business goals set by middle

level management. For example, increasing company market share is a
goal set by top management in the next two years; in order to
meet objective, middle managers might develop new product
promotion strategies. Middle level managers include clinic directors in
hospitals; deans in universities; and division managers, plant
managers, and branch sales managers.
First line managers
Lower level or operational managers are responsible to supervise
the operations of the organization. First line managers are often
called supervisors because they supervise only operating employees and
are at the lowest level in the hierarchy. Operational management is
acting as link between management and non-management personnel.
First level managers are responsible for smooth run of day to day
operations of organization, since they are important to the success of the
organization. Job titles for these first-line managers differ greatly, but
include such titles as division head, group leader, and unit leader.
1.4 WHY MANAGEMENT IS IMPORTANT?
To see why mangers are more important, think about the role play by
them in organizations, to answer this question few universal facts
regarding mangers we are discussing here. Managers are universal;
hotels, schools, hospitals, churches, airports, small business and large
corporations, all are required mangers to functioning smoothly and for
effective management. Success or failure of an enterprise relies on the
managing abilities of manager. Managing is common sense; planning for
the organizational future, strategies to grab market share,
choosing right employees to work, motivating and rewarding their
performance all sounds like common sense. Studying management
concepts does not make mangers, applying these concepts on your own
in proper way, at the right time to solve managerial difficulties required
common sense. Management skills by experience;Management can be
learned from only form the school of hard knocks is statement of
on successful entrepreneur. Hence, text books and college course
cannot replace the experience.
1.5 FUNCTIONS, ROLES, AND SKILLS OF
MANAGEMENT Functions of Managers
Activates of manager can be divided in to five categories. Noble
managers determine exactly how to leading five basic functions:
planning, organizing, staffing, leading, and controlling.

Page | 3

Planning
Planning directs managers decides on company goals and how those
goal will be met. Effective planning requires decision making,
allocation of resources, scheduling and establishing controls.
Chapter 2 will explain types of plans and planning process in detail.
For example, that the organization's aim is to improve business
sales, the manager first needs to decide which steps are essential to get
done that goal. These steps may contain increasing advertising,
inventory, and sales staff. These necessary steps are developed into a
plan.
Organizing
Organizing is considered as a subset of planning. It helps to create an
environment for human performance. A manager needs to organize
his team and assigns employees to perform them. Grouping employees
to achieve common goal is vital function of organizing. In chapter 3 a
clear discussion is presented.
Staffing
Selecting right people to right job is tough job to the manager. He
needs to take decision on how many and what kind of
people
required to meet goals of business and recruit, selects, trains the
people and fill the positions in the organization. In large
organizations human resource manager often works this function
and keep filling employees. This subject is dealt with in chapter 4 of this
book.
Leading
A manager needs to do more than just plan, organize, and staff his team.
Leading is motivating and stimulating people to high
performers, so that they will contribute to organization to meet goals.
Most problems arise from people, their attitude and desires will effect on
groups and their performance. Manager must be a good leader to control
and motivate people behavior by his communication, helping to guide
and inspire them. The function leading takes place in all parts of
the organization such as in teams, and division, and at the top level
management. This subject is discussed in chapter 5.
Controlling:
Controlling ensures measuring performance against goals and proper
execution of plans, and if necessary implements changes. In general
things are not working as planned, deviates from the standards exist.
The controlling function makes sure that goals are met. Controlling
ensures progress toward goals, monitor performance, feedback about

Page | 4

progress, identify performance problems and to take actions to

correct problems. Many large enterprises pay close attention towards
controlling and able to change as needed when problems arise. The
concepts of controlling are discussed in chapter 6.
1.6 SKILLS OF MANAGEMENT
Manager required a set of skills to perform management functions.
Gaining competitive advantage, getting desired performance form
employees and to ensure success of organizations manger must
perform a variety of skills. These skills fall under the following
categories:
Conceptual skills
Conceptual skills are related to the managers ability to understand how
complex and problematic issues arise in the organization, cognize
relationship among different parts of a business and to the business as
a whole. As managers assume ever-higher responsibilities in
organizations, they must deal with more ambiguous problems
that have long-term consequences. Again, managers may acquire
these skills initially through formal education and then further develop
them by training and job experience. The higher the management level,
the more important conceptual skills become.
Human relation skills
The day of manger starts with interaction with people. Leading,
managing and communicating are part of his job which is called
people skills. Human relation skills are those that help mangers
working with people. Coordinating employees, execute plans,
motivate people and to exchange information and handling conflicts all
require good human relation skills. It is ability of manger to
interact and get work form the people.
Technical skills
Technical skills assist to perform specialized task and are associated
with a managers ability to work well in a specialized field. For
example, am manger may have technical skills in a specialized such as
training people, accounting, engineering and manufacturing.

Page | 5

1.7 ROLES OF MANAGER

Mangers perform set of behaviors and roles in order to execute
authority and power in many ways. Activities of managers at different
levels vary, not only as a manager, planner, team leader, decision
maker, problem solver, mentor and good organizer. Henry Mintzberg
describes a set of ten roles that a manager fills, most management roles
fall into one of three categories.
Interpersonal: This role involves mangers relationships with
people.
Informational: This role includes receiving and transmitting of
information.

Page | 6

Decisional: This role contains significant decisions of manger that

affect the organization.Table-1.1: contains roles of managers that
help carry out all management functions.

Table-1.1: Mintzbergs Ten Managerial roles

Category
Interpersonal
(Information
provider)

Role
Monitor

Activities
As monitor, manager seeks and receives
information; scan periodicals and reports;
maintain personal contact with stakeholders
key responsibility that manager lookup.
Disseminator This is where manager acting as information
disseminator to organization members via memos,
reports, and phone calls.
Spokesperson outsiders.
Being spokesperson manager representing
Figurehead
organization
legal
to transmit information to
documents.
Leader
motivate
communicate
Manager
Performs
ceremonial
and
with
subordinates.
symbolic duties, such as greeting visitors and
Liaison phone calls,
signing
and
meetings. Entrepreneur
This is where manager lead, direct and
others.
Disturbancesubordinates;
handler
counsel and Manager
must
maintain
environments. Resource
information links both inside and outside
Manager
organization
needs
via mail,
allocator
As manager, you create and control change in
the enterprise to Initiate projects, identify
new ideas and delegate idea responsibility to
When disputes or crises organization and
teams face as manager, you take corrective
action during disputes or crises; resolve
conflicts among subordinates; adapt to
to decide where organizational resources are
best
applied.
Decide
who gets resources; prepare budgets;
Negotiator

set schedules and determine priorities.

Represent department during negotiations of
union contracts, sales, purchases, and
budgets.

Page | 7

1.8 MANAGEMENT: SCIENCE OR ART

To understand whether management is science or an art we
should know the meaning of terms Science" and "Art". In addition an
investigation of the basics of science and art will be helpful in the
understanding of management.
Science is systematized body of facts, its principles are grown on the
basis of continued observation and experimentation and those are
universally applicable. According to Berelson and Steiner science
possess characteristics like; The procedures of science are open and
public, the definitions of science are detailed, clearly delineated and
universally applied, findings of science are explicative in nature,
systematic and cumulative approach can be found in sciences
and Prediction, explanation and understanding are key purposes of
science.
The above facts put a limitation on management as a science;
management will not exactly match the characteristics of science but
more science is being incorporated into management practices. Hence,
management is likely to be called as science.
Art refers to the way of specific things; it is acquired by experience,
study, or observation. Certainly it is true that managers are many times
evaluated on their skill in performance and managers enhance that
skill by experience, study, and observation. This observation makes
management an art
Finally management is both a science as well as an art. The science of
management delivers certain general principles which can direct
the managers in their professional effort. The art of management
comprises in engaging every situation in an effective manner.
1.9 THE EVOLUTION OF MANAGEMENT MOVEMENT
Today management concepts are results of many contributors and
practitioners, the history of management originated way back B.C.
Chinese, Greeks and Romans were early practitioners of management. In
fact, in our earliest civilizations used management concepts like
organizing, coordinating, leading and controlling to buildup
pyramids (from 5,000 to 525 B.C). During world wars rulers and military
men both saw the value of concepts that would allow them to manage.
Although management is seen long history it seems much more
recent. This chapter will reinforce your understanding of the key
relationships among the management approaches and place each
perspective in its historical context and discussed theories starting from
20thc. Up to now different schools of management thought have been
developed.

Page | 8

Classical approach
Prof. Charles Babbage, James Watt Junior and Mathew Robinson
Boulton, Robert Owen, Henry Robinson Towne and Rowntree were
pre-classical contributors. The emphasis of classical approach is finding
ways to manage work and organizations more efficiently and
examining how the work process was actually accomplished and by
scrutinizing the skills of the workforce. During this period, stalwarts like
F.W. Taylor, H.L. Gantt, Emerson, Frank and LillianGilberth etc. it is
made up of three different approaches: Scientific management
Administrative management, Bureaucratic management.
Scientific management
Scientific management concept was arose during industrial revolution
due to heavy demands on managers who were ill prepared to cope with
masses of workers and the technological, financial and physical
resources of mass production industries. As a result scientific
management approach focused on scientific study of work method
in order to improve worker efficiency.
Three major contributors to this production emphasis will be examined
here. There are Frederick Taylor, Henry Gantt, and Frank and Lillian
Gilbreth.
Frederick Winslow Taylor
FW Taylor was started his career as a foreman at Betheleum Midvale
Steel Factory in America later he rose to
be
the chief
engineer
at the Midvale Engineering Works. Then he served with the Bethlehem
steel. Works he experimented at Bethlehem steel company with his
ideas made the contribution to the management theory for which he is
so well known. For his contribution he is often called the father of
scientific management. Taylor believed that organizations should
study tasks and develop precise procedures. As an example, in 1898,
Taylor calculated how much iron from rail cars Bethlehem Steel
plant workers could be unloading if they were using the correct
movements, tools, and steps. The result was an amazing 47.5 tons
per day instead of the mere 12.5 tons each worker had been
averaging. In addition, by redesigning the shovels the workers used,
Taylor was able to increase the length of work time and therefore
decrease the number of people shoveling from 500 to 140. Lastly, he
developed an incentive system that paid workers more money for
meeting the new standard. Productivity at Bethlehem Steel shot up
overnight. As a result, many theorists followed Taylor's philosophy
when developing their own principles of management.

Page | 9

Henry Gantt
Henry Lawrence Gantt an associate of Taylor, worked with Taylor at both
Midvale Steel and Bethlehem steel company. He was worked on scientific
selection of workers and the development of incentive bonus
systems. He highlighted the need for developing a mutuality of interest
between management and labor. He is famous of developed the Gantt
chart, to compare actual to planned performance. Gantt chart was a
daily chart which measures planned and completed work along each
stage of production. This chart was intended to facilitate the completion
stage of various projects, such as procumbent of materials,
manufacturing, and shipping.
Frank and Lillian Gilbreth
Frank and Lillian made an important contribution to the
management. Frank trained as a brick layer because of the
importance of the profession at the time. He noticed the inefficiencies
that were passed down from experienced workers. He watched
bricklayers and saw that some workers were slow and inefficient,
while others were very productive. To streamline the process he
proposed motion studies. The contribution this study is that the one
best way of doing a job is the way which involves the least motions
performed in an accessible area and in the most comfortable
position. The finest way can be found out by the removal of inefficient
and inefficient motions involved in the work. Workers using these
movements raised their production from 1,000 to 2,700 bricks per
day. This was the first motion study designed to isolate the best
possible method of performing a given job. Later, Frank and his wife
Lillian studied job motions using a motion -picture camera and a
split-second clock. When her husband died at the age of 56, Lillian
continued their work.
Max Weber
Weber family had strong political and social connections. He pursued his
career as professor and author. He coined the term
bureaucracy, which emphasizes the need for organizations to
operate in a rational manner rather than relying on the arbitrary
whims of owner and managers.
Weber believed
characteristics:

that

all

bureaucracies

have

the

following

A well-defined hierarchy. All positions within a bureaucracy are

structured in a way that permits the higher positions to supervise
and control the lower positions.

Page | 10

Labor specialization. Jobs are broken down into routine and well
defined tasks, all responsibilities in an organization are specialized so
that each employee has the necessary expertise to do a particular task.
Formal rules and regulations. Standard and written rules and
procedures govern all organizational activities to provide certainty
and facilitate coordination and ensure uniformity.
Impersonal relationships between managers and employees.
Managers should maintain an impersonal relationship with
employees so that favoritism and personal prejudice do not influence
decisions.
Career advancement based on merit
Selection and promotion is based on the qualification and
performance of members.
Records. A bureaucracy needs to maintain complete files
regarding all its activities.
Henri Fayol
Henry Fayol, a French mining engineer and considered the father of
modern theory of general and industrial management. He is a
wellknown contributor to the administrative management approach.
Modern principles of management identified by Fayol were not gain
acceptance in America until the late 1940s, though they are popular in
Europe in the early 1900s.These principles offer present -day
managers with general guidelines on how a supervisor should
organize his/her department and manage his/her staff. They are still
widely used in management theories.
Division of work: concept of specialization of work can result in
better work with the same effort.
Authority and responsibility: Manager have right to give orders and
the power to exact obedience. Delegate authority along with
responsibility.
Discipline: Good discipline requires managers to apply sanctions
whenever violations become apparent.
Unity of command: Each employee should receive orders from only one
superior.
Unity of direction: each department should operate under one
plan to achieve organizational goals.

Page | 11

Subordination of individual interest to general interest: The

interests of one employee or group of employees are subordinate to the
interests and goals of the organization.
Remuneration: Salaries should be fair and provide satisfaction
both to the employee and employer.
Centralization: The objective of centralization is the best
utilization of personnel. The degree of centralization depended on the
dynamics of each organization.
Scalar chain: shows the routing of the line of authority exists
from the highest organizational authority to the lowest ranks.
Order: Organizational order for materials and personnel is
essential so they support the organizations direction.
Equity: Both equity and equality of action should be considered
when dealing with employees.
Stability of tenure of personnel: stable work force is needed to
become effective in new job and promote employee loyalty.
Initiative: Encourage employees to act on their own.
Esprit de corps: Stressed on unity. Harmony and team work is
vitally important to an organization.
Mary Parker Follett
Born in Boston and educated in political science. She stressed the
importance of an organization establishing common goals for its
employees. She discarded command-style hierarchical organizations
where employees were treated like robots and also began to think
somewhat differently than the other theorists of her day. She began to
talk about such things as ethics, power, and leadership,
integration and integrative unity.
Behavioral approach or Human relations Theory
Motivation becomes a key issue in the 20th century within
organizations. Theories and principles developed so far were not
useful to deal with many management situations and also fail to
explain individual behavior in organizations. As a result human
relation approaches or behavioral approaches were introduced aimed at
understanding how psychological and social processes interact with
the work situation to influence performance. It addresses the
human dimension of work. Behavioral theorists believed that a
human relation was the first major approach to emphasize informal work
relationships and worker satisfaction.

Page | 12

In order to improve productivity, avoid conflicts, and group behavior a

better understanding of human behavior at work is necessary.
Elton Mayo
The Hawthorne studies a series of experiments conducted from
19241932 that rigorously applied classical management theory only
to reveal its shortcomings. The first study was conducted to investigate
the influence of physical working condition on worker productivity
and efficacy, particularly the lighting in the factory, when altering in
lighting in the factory no systematic relationship between the factory
lighting and production level found. In other case, illumination was
reduced to the level of moonlight and proportionally productivity
continued to increase until the employees were unable to see what
they were doing, after which performance naturally declined. The
observations of researchers made them surprise and they believe that
productivity is affected more by psychological and social factors
rather than physical or objective influences.
In the second experiment Harvard researchers Mayo and F. J.
Roethlisberger supervised a group of five women in a bank wiring
room. They gave the women special privileges, such as the right to
leave their workstations without permission, take rest periods, enjoy free
lunches, and have variations in pay levels and workdays. This
experiment also resulted in significantly increased rates of
productivity.
The foregoing researches concluded that productivity is increased
due to supervisory conditions rather than the changes in lighting or
other associated worker benefits.
The general conclusion from the Hawthorne studies was that human
relations and the social needs of workers are crucial aspects of
business management. This principle of human motivation helped
revolutionize theories and practices of management.
Abraham Maslow (1908-1970)
Another noted contributor and a practicing psychologist to the field of
human relations was Abraham Maslow. He was an eminent
American psychologist; developed most widely recognized need
theories. He believed motivation based upon a consideration of
human needs. His theory of human needs had three assumptions:
Human needs are forever and never completely satisfied.
Human behavior is purposeful
Needs may be classified according to a hierarchical structure of
importance, from the lowest to highest.

Page | 13

According to Maslow human have five levels of needs: Physiological

needs, such as food water and shelter, these are biological needs
required to peruse human life. After the need is satisfied, however, it is
no longer is a motivator. Next, we concern ourselves with Safety need,
which a person wants protection from physical dangers, economic
security and free from
threats to our existence.

Figure1.2:Maslow
Motivation Theory
safety
needs
reasonably

Once
are

satisfied, people turn their

attention to
Belonging
needs,
needs
that
involve
need
for
belonging,
significant
others. Once
need for acceptance,
need
having
good
relation
with
for
love and
affection,
support
from
belonging
etc. which an individual
needs,
focus
on
strives to we
establish
Esteem needs, which are
related
to self-confidence,
status, reputation, fame, and glory in the
meaningful
relationships
society.
Final
level,
Self-actualization
needs, which are the needs for
with
realizing ones full potential, for continued self-development, for being
creative. Maslows hierarchy of needs theory helped managers
visualize employee motivation.
Douglas McGregor (1906-1964)
McGregor spent most of his career as a professor of industrial
management at Massachusetts Institute of Technology and developed a
well-known dichotomy, Theory X and Theory Y. He believed that
Theory X and Theory Y approach helps managers to understand
nature of workers and new alternatives for interacting with them.
This approach deals with the possible assumption that manager
make about workers.
Theory X managers have a negative view of employees and assume
that they are lazy, untrustworthy, incapable of assuming
responsibility, and are mainly focused on security needs. In contrast, the
Theory Y managers assume that employees are not only reliable and able
of self-control, assuming responsibility, but also have high degree of
motivation.

Page | 14

A central feature of McGregor's idea was his belief that managers

who hold either set of assumptions can make self-fulfilling
prophecies that through their behavior; these managers create
situations where subordinates act in ways that confirm the
manager's original expectations.
Quantitative Management
During World War II, military planners found importance of
mathematical techniques and apply to solve defense and logistic
problems. Later this period many private corporation were used
quantitative techniques to solve complex issues confronting in their
organizations. This approach is termed as Quantitative management,
many management decisions and problems solved through the
application of quantitative analysis. This consists of several
branches, described in the following sections.
Management science
This approach helps a manager make effective decisions by using
mathematical models and specific quantitative methods. These
include statistical decision theory, linear programming, and queuing
theory, simulation, forecasting inventory modeling, network modeling
and break even analysis. Computer models make possible to figure out
the best way to do something saving both money and time.
Hence, managers are using computers in several science
applications.
Operations management
Another branch of quantitative management and function of
expertise focuses on managing the production and delivery of an
organizations products and services. Effective operations
management concerns production planning, work scheduling,
inventory management, facilities and quality assurance. Operations
management today pays close attention to the demands of quality,
customer service, and competition because it is a specialist to apply
quantitative techniques such as inventory analysis, forecasting
methods, quality control techniques, material requirement plans, and
other control techniques.

Page | 15

Management information systems

Management information system is a planned system of collecting,
storing and disseminating data in the form of information needed
to carry out the functions of management, it was an idea to apply
the computer in the business area focused on data then come an
emphasis on information and decision support all levels of
company. In many industries computer based information system
are becoming more powerful. Information systems enable the firm to
increase its revenue or decrease its costs by providing information that
helps managers make better decisions or that improves the execution of
business processes. For example, the information system for
analyzing supermarket checkout data can increase firm profitability by
helping managers make better decisions on which products to stock
and promote in retail supermarkets and as a result increase business
value.
1.10 SUMMARY
Management is the process of achieving organizational goals
through engaging in the five functions of planning, organizing, staffing,
leading and controlling by utilizing human, financial and material
resources. Management applies to any kind of organization and
concerned with productivity.
Levels of management divided into three
categories: first-line, middle, and top level management, it is shown in
Figure-1.1.Top level Managers are senior executive of an organization,
middle level managers are also called tactical managers, and lower level
or operational managers are responsible to supervise the operations of
the organization.
Mangers are more important because success or failure of an enterprise
relies on the managing abilities of manager. Managers carry out
the functions of planning, organizing, staffing, leading and
controlling. Manager should have conceptual, human relation, and
technical skill to perform management functions. Mangers perform set of
behaviors and roles in order to execute authority and power in many
ways it is shown in Table-1.1.
Management is both a science as well as an art. The science of
management delivers certain general principles which can direct
the managers in their professional effort. The art of management
comprises in engaging every situation in an effective manner. There
are many theories about management, and each contributes
something to practices of management growth.

Page | 16

1.11 QUESTIONS FOR DISCUSSION

1. Define management? What are managerial functions?
2. Describe levels of management. What are the basic skills required in
management?
3. Elucidate importance of management and delineate the role of
manager in business.
4. What are the levels of manager?
5. Is management a science or art?
6. What is the contribution of F.W.Taylor to the management? 7. Explain
14 principles of management contributed by Henri foyal. 8. Who made
contributions to behavioral approach? Explain in detail. 9. Discuss the
statement: Management learned through books or through
experience.

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CHAPTER -2
PLANNING AND DECISION MAKING
Learning objectives
After reading this chapter, you will be able to understand:
The nature of planning
What are different types of plans
Planning process
Potential obstacles to planning
Decision making
Decision making process
Types of decisions
Conditions that influencing decisions
2.1 INTRODUCTION
Planning is the process of achieving goals by systematic decision
making of objectives and individual, group, business unit activities that
will perform in future. It is inherent everything what a manger
does perform. This chapter discusses planning fundamentals,
benefits and overall planning process.
Planning is the most basic of all managerial functions, occurs in every
organization, by every manager. It involves systematic procedure of
taking decisions about organizational goals and objectives what will
pursue in the future. Conscious and formal plan enables manger quick
response to crisis, design an environment for the effective performance,
actively accept the future, and organize human and organizational
activities towards goal attainment.
The manager who attempts job without planning can be resulted
in unforeseen failures. For example hiring and firing employees
without plan cause letdown of employee motivation and result in high
employee turnover. Appropriate planning is the heart of the success. It
provides a map to work out function, choosing missions and
objectives and the arrangements to attain them. Planning also implies
strong managerial innovation.

Page | 18

2.2 TYPES OF PLANS

All managers plan to success in achieving objectives, plans can
help managers achieve their organization's goals. Single plan does not be
carried in all areas of organization; manager should go up with a variety
plans for effective managerial performance. Success and failure of plans
lay on managerial innovation and implication of plans. Plans can
be classified as; strategic plans, operational plans, strategic plans
and contingency plans. Table 2.1 has presented types of plans.
Strategic plans
Strategic plans are developed by top management to make long
term goals and strategies. Generally, strategic plans cover a
relatively long tim5 years time period, encompasses some times that
may be extended 3 to 5 years. Senior managers are involved for
development and execution of plans. Strategic plans address issues
such as how to respond to changing market condition, how to
allocate resources and what actions require. For example, at
Automobile Company, strategic planning considers the future 5 years
ahead.
Tactical plans
A set of plans that relevant to distinct department like production and
marketing to achieve strategic goals developed by strategic plans.
Tactical plans developed by middle level managers based on strategic
plans of organization, usually these encompasses 1 to 3 years
time period. Tactical plans are crucial and more specific than strategic
plans; managers may consider possibilities before setting a plan,
because tactical plans are important to the success of strategic
plans. For example, middle level managers at Automobile Company
production develop tactical plans on monthly schedules.
Operational plans
A set of plans developed to support implementation of tactical plans and
achievement of operational goals. Front line mangers or low level
mangers develop plans, very short period of time (less than one year),
such as daily, weekly and monthly requirements of human and physical
resources and delivery schedules. Operational plans are key for
achieving tactical and strategic plans, unless achieving operational
goals, tactical and strategic goals will not be successful. The
organizations plans at all levels must be constant and supportive.
Contingency plans
Contingency plans address alternative course of action what to do when
the original plan does go wrong. Unexpected problems and events
frequently occur, predicting them and preparing solutions for all
assumptions cannot be possible.

Page | 19

What managers should so is find most critical assumption of the current

plans and then generates contingency plans for problems that have a
reasonable chance of occurring.
Table-2.1: Types of plans
Plans
S
Strategic plans

Time period
5 years

Range
Long range

Functions
Address issues such
as how to respond
changing market
condition and how to
allocate resources,
what actions required

Tactical plans

1 to 5 years

Mid-range

Departmental plans to
achieve strategic goals

Operational plans

Less than one

year

Short range

Address daily, weekly

and monthly
requirements

2.3 THE PLANNING PROCESS

A good preparation of planning can be important to the success of an
organization. The important steps followed during planning are shown in
the figure 2.1.
Step one: Preparing objectives
Setting objective is the first step of planning process and once manger
sets organizational objectives (goals) planning process is initiated to
attain these goals. Planning establish objectives for entire organization
and then each department and subordinate work on it. Objectives
preparation to be done for long term and short term, these specify the
expected results. Plans are directed by enterprise objectives.

Page | 20

Step two: Situational analysis

Situational analysis is the study of past events, examines current
condition and tries to predict future trends. It gathers extensive
information from external groups, for example an international
hotel gathered information from external groups such as
consumers, suppliers, government, travel agencies and tour operating
agents. Data from tourism has collected to make projections on number
of pilgrims have been visiting to that city and studying historical data
that pilgrims had been visited so for. Situational analysis allows
manager to evaluate the present situation and analyze the organizations
environment.

Figure-2.1: Planning process

Preparing objectives

Situational analysis

Identify alternative plans

Evalua ting and comparing alternative

plans

Choosing best
plan
Implementa

tion Monitor and

control

Page | 21

Step three: Identify alternative plans

The third step in planning is to find alternative course of action.
Alternative actions may lead to attainment of objective. Alternative plans
are distinct way to reach the objectives. In order to identify alternatives
manager needs to create as many ways as possible.
Step four: Evaluating and comparing alternative plans
In order to evaluate potentiality of alternatives manager need to list out
the advantages and disadvantages. After seeking advantages and
disadvantages decision maker needs to estimate amount of
resources and time each alternative will require. Calculating risk,
profitability, and better suit the company objective are necessary
for evaluating alternatives performance.
Step five: Choosing best plan
At this point, the management team needs the most appropriate
and feasible plan- the point of decision making. Sometimes, manager
face a situation that no one alternative emerges as the best,
analysis and evaluation of alternatives will disclose that two or more are
advisable, and the manager need to select combination of alternatives
rather than one best one. This is a situation rarely appears with
alternative courses.
Step six: Implementation
Implementation is crucial step to achieve the goals. Plans must
implement as they designed unless they are useless. Subordinates are
directed to understand the plan, have the resources to implement it and
be motivated to do so. Participation of managers and employees
will make implementation probably more effective and efficient.
Step seven: Monitor and control
It is essential for each planning process monitoring and
controlling. Sometimes it is ignored, but it is repetitive and ongoing
process, the manager must monitor the progress of the work
according to the objectives and plans. The planning environment
frequently demands changes due to improper implementation. Effective
control systems of organization support to take corrective actions against
implementation failures. The concept of controlling is discussed in detail
in chapter-8.

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2.4 POTENTIAL OBSTACLES TO PLANNING

In order for plans to be effective, manger must identify obstacles
threaten the ability of organizations to develop effective plans. The first
major potential obstacle rapidly changing environment, planning is more
difficult because plans should be alter frequently, the dynamic nature of
present market and completion cause to rapid change in business
environment, obstacle for standard plans at different level of
organizations. Secondly, day to day work pressure of managers, work
pressure keep managerial attention away from doing planning and
results in low involvement of mangers and lack of commitment to
planning process. Another potential obstacle, poor preparation of
line mangers, line level managers are not trained in terms of their
knowledge and skills, as fourth obstacle inferior information, lacking
updated information probably fails planning. At last, low involvement of
mangers, a critical barrier for planning. Concentrating on the things and
events that they can control does not make planning effective.
Failing to consider uncontrollable variables like poor economy and
outside factors are impediment to political plans.
2.5 DECISION MAKING
Decisions directing someone to do something, enterprises need a
direction to achieve their goals. That makes organizations to hire best
decision makers; those are none other than managers. Many
organizations are treating managers as decision maker to keep and
direct organizations in right direction with right phase. Problems are
frequent gusts to organizations, in order to treat them good way
managerial intelligence in decision-making must be required. The
best managers make decisions constantly and make them well. In
fact, mangers decision making typically require all of the basic
management functions: planning, organizing, staffing, leading and
controlling. Each of these functions typically centers crises, all of
them require decisions.
Some authors use the term for manager as problem solvers. In fact,
when problems emerge constant decisions required to solve out.
Managers are seldom encountering problems in the job, taking
constant decisions and make them right. Some other authors use the
term decision makers to mean managers. Although many peo -0ple
are taking best decisions in their daily life, not all are managers.
Managers make decision in many cases to pursuit of organizational
goals. It is the result of intelligence and choice selection of manger.

Page | 23

2.6 The Decision Making Process

The process of decision making involves generating and evaluating
alternatives and making choices among them. Whether a decision
is programmed or none programmed and regardless of managers choice
of the classical, administrative, or political model of decision
making, a decision making has typically have six steps. The following
procedure (figure-2.2) can be helpful in arriving at a correct decision.
Seeking the problem
The first step in decision making is to knowing the problem. Problems
generally arise when accomplishment of goals is not as much of
established goals. Managers are taking decisions bad decisions in many
cases because they does
not seeking a good grasp
Figure-2.2: The Decision Making
of the problem. Hence,
understanding
the
Process
problem before taking
decision making can
Seeking the problem
help in avoiding bad
Step-1
decisions. Seeking
the problem itself does
Generate alternatives
give
not solution, in addition
Step-2
a manager must have
talent in
solving,
problem
decision making
and
implementing
Evaluation
manageria
l
of alternatives
Step-4
Identifying things
causing
and
Step-3
spending sufficient time
and
energy
on skills.
Implementing
Step-5
the
helps
definingproblem trouble

manager to understand
the problem clearly.
Few examples
Choose
the for problems which generally
appeared in organizations are identified here under bellow.

best alternativ

Poor market research

Poor design process; poorly trained

employees

Rate of pay too low; job design not

Lack of communication between management and

suitable
subordinates

Employees believe that they are not valued

Page | 24

Generating alternatives
The next step in the decision making process is generating alternative
courses of action. A problem can typically be solved in number of ways
but to study for quick decisions a manager should think through and
investigate several alternative solutions. However, studying each
alternative performance, success rate, possibilities of implementing
and other constrains which will appears while implementing are
performance indicators of managerial decision skills. At this point in the
decision-making process, however, it is important to consider all
feasible ways by which the problem can be solved.
Evaluation of alternatives
Evaluation of alternatives can be done in several ways. Identifying
advantage and disadvantages of each alternative is one way that
managers usually following. In addition, cost-benefit analysis,
determine pros and cons, and weighing and ranking each alternative are
methods that are provided to managers to fine decision.
Regardless of the methods used, a manager needs to weigh up each
alternative in terms of its Feasibility (Can it be done?), Effectiveness
(How well does it resolve the problem situation?), Consequences
(What will be its costs to the organization?), Risk, Time and
limitations of resources.
Choose the best alternatives
The best alternative is always capable of meeting overall goals and values
of the organization and achieves the desired outputs using the
resources. Certain cases demand manager not to select one alternative
but combinations of few. This is the situation problem is not solved by
selecting alternative due to its critical nature. Selections of choice rely on
managerial efficiency that reflects in managers personality factors and
willingness to accept risk and uncertainty. The abilities of manager such
as managerial, administrative and persuasive skills are ensure that the
chosen alternative is carried out.
Implementing
The job of a manager does not end with choosing the best alternative
further he is responsible to put the alternative into practice, then only
alternative will serve its purpose. The manager is not only paid to
taking a decision, but also with its implementation. Positive results
must follow decisions. He should try to ensure that systematic
steps are taken to implement the decision.

Page | 25

Monitor the chosen solution

Appropriate implementation is necessary for all processes but it does not
make decisions right, it is essential to manager to check the results later
than putting the decision into practice. Monitoring facilitates
performance of ongoing actions, feedback, adjustment required and
corrective measures.
A manager has to evaluate his decision and whether the decision is good
or bad, are problems resolved? And in taking right decisions in the
future monitoring function is necessary.
2.7 TYPES OF DECISIONS
Programmed Versus Non-Programmed Decisions:
According Professor Herbert Simon two types of decisions generally exist
in any organization. First programmed decisions which are routine and
repetitive in nature, designed in advance with standard rules to solve
recurring problems. Programmed decisions are developed for
specific purposes due to this reason these impact is short-run.
Generally operational decisions are come under this category.
Non-programmed decisions are dynamic in nature, which are for
nonrepetitive problems. Managers always do not predict problems and
keep readymade solutions. Unusual problems frequently appear
in organizations for which various alternatives cannot be decided in
advance, non-programmed decisions are used to solve such strange and
odd problems. These are taken at top level so that referred as strategic
decisions.
Strategic Versus Tactical Decisions
Strategic decisions are taken at top level management for which policy
issues, planning of the enterprise and procedural changes. Since these
having crucial importance will affect whole business. CEO, board
of directors, and top management teams concerning of strategic
decisions. Merger with another company, product line, distribution
networks, new products development, and entry of new markets are
examples of strategic decisions. On the other hand tactical decisions are
regular and routine and derived out of strategic decisions. They are
generally concerned with day to day operations to execute policy
decisions and taken place at lower levels of management due to
programmed in nature.
Individual and group decisions:
Individual decisions perform lesser than group decisions. In many cases
group decisions work out better perhaps many people participating to
make decision. Individual decisions are those decisions which are made
by one person - whether owner of the company or by a senior manager.

Page | 26

On the other hand, group-decisions are the decisions taken by a group of

managers - board, team, committee or a sub-committee.
Most
common disadvantage of group decisions is more time consuming.
2.8 CONDITIONS THAT INFLUENCE DECISION MAKING
Under three different conditions generally manager using his/her
decision making skills: certainty, risk, and uncertainty. All managers
make decisions under each condition, but risk and uncertainty are
common to the more complex and unstructured problems faced by
top managers.
Certainty
Certainty environment provides manager perfect knowledge of all the
information needed to make a decision. Certainty is an ideal
condition for problem solving. Choosing the best solution from
alternatives remained as challenge for certainty condition.
Programmed decisions are applied to problems which arise on a
regular basis these are standard and predetermined responses. Past
experience is source to provide solutions. A good example is the
decision to reorder inventory automatically when stock falls below a
determined level. Structured problems are familiar, straightforward, and
clear with respect to the information needed to resolve them. A manager
can often anticipate these problems and plan to prevent or solve them.
Risk
Risk is a condition a manager faces ambiguity of choosing best
alternative. Difficulties arise in risk environment due to lacking
complete information. Understanding the problem and the
alternatives is possible but has no assurance how each solution will
work. A manager should weigh the risks of each course of action
against the expected gains. Risk taking shows the willingness of
manager to take or avoid risk and it is a fairly common decision
condition for managers.
When new and unfamiliar problems arise, non-programmed decisions
are specifically tailored to the situations at hand. The information
requirements for defining and resolving non-routine problems are
typically high. Although computer support may assist in information
processing, the decision will most likely involve human judgment.
Most problems faced by higher-level managers demand
nonprogrammed decisions. This fact explains why the demands on
a manager's conceptual skills increase as he or she moves into higher
levels of managerial responsibility.

Page | 27

Uncertainty
Conditions of poor or zero information make uncertain environment,
changes in organization brings uncertainty. Finding alternatives is
very tough when poor information emerge even manager cant assign
probabilities to the likely outcomes of alternatives finally decisions
are made in uncertain environment. This condition is the most
difficult for a manager. Decision making under conditions of
uncertainty is like being a pioneer entering unexplored territory.
Uncertainty forces managers to rely heavily on creativity in solving
problems: It requires unique and often totally innovative alternatives to
existing processes. Groups are frequently used for problem solving in
such situations. In all cases, the responses to uncertainty depend greatly
on intuition, educated guesses, and hunches all of which leave
considerable room for error.
These unstructured problems involve ambiguities and information
deficiencies and often occur as new or unexpected situations. These
problems are most often unanticipated and are addressed reactively as
they occur. Unstructured problems require novel solutions. Proactive
managers are sometimes able to get a jump on unstructured
problems by realizing that a situation is susceptible to problems and
then making contingency plans.
2.9 SUMMARY
Planning is inherent everything what a manger does perform. It is the
most basic of all managerial functions, occurs in every organization, by
every manager. The manager who attempts job without planning can be
resulted in unforeseen failures. Success and failure of plans lay
on managerial innovation and implication of plans. Plans can be
classified as; strategic plans, operational plans, strategic plans and
contingency plans. A good preparation of planning can be important to
the success of an organization. The steps of planning are presented in
the figure 2.1. A manger must identify obstacles threaten the ability of
organizations to develop effective plans.
Decisions directing someone to do something, enterprises need a
direction to achieve their goals. That makes organizations to hire best
decision makers; those are none other than managers. The process of
decision making involves generating and evaluating alternatives and
making choices among them. Figure-2.2 can be helpful in arriving at a
correct decision. Decisions are classified as programmed versus
nonprogrammed, strategic versus tactical, and individual versus
grouped decisions. . All managers make decisions under each condition,
but risk and uncertainty are common to the more complex and
unstructured problems faced by top managers.

Page | 28

2.10 QUESTIONS FOR DISCUSSIONS

1. Define planning. Why planning is necessary in
organizations? 2. Briefly explain types of plans.
3. What are the key steps of planning process?
4. Explain potential obstacles of planning?
5. Discuss why planning necessary in an organization. Give one
example.
6. What is decision making?
7. What are the stages of decision making process?
8. Explain types of decisions.
9. Discuss the condition that influencing decision making.

Page | 29

CHAPTER -3
ORGANIZING
Learning objectives
After reading this chapter, you will be able to understand:
Define organizing.
The nature of organizing.
Explain Organizing process.
Discuss how Formal and informal organizations are
differentiated.
Why organizing?
Importance of Centralization versus decentralization,
Identify Approaches to organizational design
3.1 Introduction
Manager should be good organizer of organizational functions because a
good organizing structure clearly describes a depiction for reporting
structure and activities that are carried out by different employees.
Organizing is function which grouping necessary activities to attain
objectives, these activities are many in number such as plans
implementing, grouping of activities into jobs, assignment of jobs
to individuals and departments, authority and responsibility delegation
and coordination of activities. Hence, organizing is vital
function of management to make efficient organization, perform
functions smoothly and success the enterprise.
Further Structure of the organization is one which can decide
organizational success, whether authority is centralized or decentralized,
how to handle responsibility, how to get the work done and control and
command structure all rely on organizational structure.
3.2 DEFINITIONS
Organizing connotes different meanings and many authors have
attempted to state the nature of this function. Some of the definitions
are given bellow.
Koontz and ODonnel defined organizing is a function of Grouping of
activities necessary to attain enterprise objectives and the assignment of
each grouping to a manager with authority necessary to supervise it.
According to Louis A. Allen,Organizing is the process of identifying and
grouping the work to be performed, defining and delegating responsibility
and authority and establishing relationship for the purpose of enabling
people to work more effectively together in accomplishing objects.

Page | 30

Joseph L.Massive defined, The structure and process by which a

cooperative group of human beings allocates its tasks among its members,
identifies relationship, and integrates its activities towards common
objectives.
And also it is the process of establishing the orderly use of resources by
assigning and coordinating tasks and deployment of people and
resources.
The above definitions are stating organizing function has many sub
functions such as grouping activities, allocates tasks, managing authority,
delegating responsibility, establishing relationship, and orderly use of
resources
3.3 THE ORGANIZATIONAL PROCESS
Organization is the process of creating structure for the attainment of
goals through establishing relationships, defining authority and
responsibility and division of work. The end result of the organizing
process is an organization a whole consisting of unified parts
acting in harmony to execute tasks to achieve goals, both effectively and
efficiently.
According to Louis A Allen, Organizing 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.
But organizing people is a tough task however to make it easier and
simple organizational process is most useful, it consists of five steps:
1. Identifying objectives
Determining objectives is the preliminary task to setup an
organization. A perfect organizational structure is built upon the
objectives of the enterprise. Objectives will consist in deciding as to
why the proposed organization is to be set up and, therefore, what will
be the nature of the work to be accomplished through the organization.
2. Enumeration of Objectives
Although this task may seem overwhelming to some managers, it
doesnt need to be. Managers simply list and analyze all the tasks
that need to be accomplished in order to reach organizational goals.
3. Classify activities
The next step will be to classify activities according to similarities
and common purposes and functions and taking the human and
material resources into account.

Page | 31

Then, closely related and similar activities are grouped into divisions and
departments and the departmental activities are further divided into
sections.
4. Assign activities and delegate authority.
Managers assign the defined work activities to specific individuals.
Also, they give each individual the authority (right) to carry out the
assigned tasks.
5. Design a hierarchy of relationships.
A manager should determine the vertical (decision -making) and
horizontal (coordinating) relationships of the organization as a whole.
Next, using the organizational chart, a manager should diagram the
relationships.
3.4 WHY ORGANIZING?
Effective organizing depends on the mastery of numerous significant
concepts: work specialization, chain of command, authority,
delegation, span
of
control,
and
centralization
versus
decentralization. Many of these concepts are based on the principles
developed by Henri Fayol.
Work specialization/Division of labor
Dividing labor has many benefits which known from centuries, in fact
the process of organizing is division of labor. Employees can work
more efficiently if theyre allowed to specialize and is the degree to
which organizational tasks are divided into separate jobs. Employees
within each department perform only the tasks related to their
specialized function. To illustrate work specialization considers when
employees are specialized in a single task, jobs tend to be small and
workers can perform efficiently. In contrast, if a single employee
doing large number of unrelated job in a bottling plant, it would not
produce efficient results.
Specially, division of labor can results in many benefits as following. 1.
Person requires few skills to perform the job.
2. Training employees is easy due to limited skills. 3.
Proficiency develops in the jobs
4. Possible to efficient use of skills.
5. Ensures quality in products when each piece is always produced by
the same person.
6. Possibility of concurrent operations.
Despite the apparent advantages of specialization,
organizations are moving away from this principle.

many

Page | 32

The major problem of the principle is that it can result in boredom and
degradation of employees and also if an employee become bored
productivity declines. In addition, when one employee leaves the
company, his specialized knowledge may disappear as well. In order to
face this challenge companies are using techniques such as job
rotation, reexamination of job scope and job simplification with job
depth.
Chain of command
The chain of command is an uninterrupted line of authority that
links all persons in an organization and defines who reports to
whom. This chain has two underlying principles: unity of command and
scalar principle.
Unity of command:
The concept of unity of command is developed by Henry Fayol. The
unity of command principle refers to one employee should be
accountable and answerable to a single superior. It makes a
sense of responsibility to one person for results. Otherwise, if
employee should report to more than one superior he may receive
conflicting demands from many supervisors at a time which cause to
confusion, loss of productivity, conflict and low morale. No man can
serve two master the words of Jesus, a person place in a no -win
situation if he serves two or more. Sometimes, however, an
organization deliberately breaks the chain of command. Unity of
command can develop organizational structure that makes sure
employees clearly understand the line of authority.
Scalar principle: the scalar principle states that a clearly defined
line of authority flow in the organization that links chain of managers
at a time, ranging from the highest to the lowest ranks. This principle is
based on unity of command and need for the communication.
Authority
A manager need Authority for functioning of organization, it
resides in positions rather than in people. Authority in an
organization is defined as the formal and legitimate right of a
manager to take decisions, order subordinates, and allocate
resources to achieve desired outcomes of enterprise. Owner having
ultimate authority in private enterprises, in small business the
owner also acts manager and sometimes he hires employees to
oversee business. Owner is delegating some authority to manager to
organize operations but manger is accountable to report. It is simply
primary means of running organization. A managers authority is
defined in his or her job description.

Page | 33

Organizational authority has three important underlying principles:

Authority is based on the organizational position
accepted by subordinates.

Authority is

Authority flows down the vertical

hierarchy. Levels of authority

Authority comes in three ways in organizations; line authority, staff
authority and functional authority. Line managers are in charge of
essential activities such as sales, and they are authorized to issue
orders to subordinates down the chain of command . Staff authority
supports line authority by advising, servicing, and assisting, but this
type of authority is typically limited. Functional authority is
authority delegated to an individual or department over specific
activities undertaken by personnel in other departments.
Delegation
It is a concept related to authority. Authority is delegated to the lower
levels in the organization which is downward transfer of authority
from superior to subordinate. Delegation grants authority to
subordinates to carry out assigned tasks with responsibility which
may include right to use resources, spend money, engage people, etc.
Managers need to take four steps if they want to successfully
delegate responsibilities to their teams.
1. Specifically assign tasks to individual team members.
2. Give team members the correct amount of authority to
accomplish assignments.
3. Make sure that team members accept responsibility. 4.
Create accountability
Span of control or span of management
Span of control is defined as number of subordinate who report
directly to a manager. Theorist did not found exact rule to determine the
correct span of control and mangers ability to control number of
subordinates, so it is remained as a question for several years. V.A.
Graicunas developed a mathematical expression in 1930s to define
span of control by determining superior and sub ordinate
relationships. The mathematical expression as follows
2

= 2[ 2 + 1
Where

Page | 34

R=the number of relationships

n= the number of subordinates
According to V.A. Graicunasthe expression considers not only the
direct relationship between a superior and their direct subordinates, but
also the relationships with different groupings and the
crossrelationships among subordinates.
Centralization versus decentralization
The structure of authority throughout an organization determines the
degree to which that organization is centralized or decentralized.
A centralized organization systematically works to concentrate
authority at the upper levels. In a decentralized organization,
management consciously attempts to spread authority to the lower
organization levels.
A variety of factors can influence the extent to which a firm is
centralized or decentralized. The following is a list of possible
determinants:
The external environment in which the firm operates
The nature of the decision itself.
The abilities of low-level managers.

The

organizations tradition of management.

In principle, neither philosophy is right or wrong. What works for one
organization may or may not work for another. Kmart Corporation
and McDonalds have both been very successful both practice
centralization. By the same token, decentralization has worked very well
for General Electric and Sears. Every organization must assess its own
situation and then choose the level of centralization or
decentralization that works best
3.5 THE FORMAL AND INFORMAL ORGANIZATION
Formal organization is a clearly defined structure refers to jobs
and positions are clearly defined. It is built to understand
enterprise objectives and is bound by rules, systems and procedures.
Everybody is assigned a certain responsibility for the performance of the
given task and given the required amount of authority for carrying it out.
Informal organization does not appear in any organizations and
supplements the formal organization in achieving organizational goals
effectively and efficiently.

Page | 35

Formal organization
The position, authority, responsibility and accountability of each level
are clearly defined in formal organization, it is laid down by the
management and people relations are clearly prescribed to achieve
organizational goals. Four important principles are considered to build
formal organization. They are structure, division of labor, span of control
and scalar chain.
Informal organization
Organizations are having hidden chats in addition to formal
organizational structure which do not show up on formal organizational
chart.
Theinformal organization is defined by relationship between
people in the organization based on personal attitudes, emotions,
prejudices, likes and dislikes.
In the informal organization, the emphasis is on people and their
relationships; in the formal organization, the emphasis is on
official organizational positions. The leverage, or clout, in the
informal organization is informal power thats attached to a specific
individual. On the other hand, in the formal organization, formal
authority comes directly from the position. An individual retains formal
authority only so long as he or she occupies the position. Informal
power is personal; authority is organizational. Differences between
formal and informal organizations are given table 3.1.

Table-3.1: Differences between formal and informal organization

Formal organization
1.
clear aim

informal organization

Established with

2.
It is bound together by
authority relationships among
members.
3. Tasks and actives are well
defined 4.
Relationships
among people impersonal. 5.
Emphasis is on efficiency,
discipline,
conformity,
consistency and control.
6.
The communication
system in formal organization
follows certain predetermined
patterns

1. Goals are ill defined and

immaterial. 2. It is
characterized by a
generalized sort of
power relationships.
3.
It does not have well
defined
tasks. 4.
People
relationships
interpersonal
5. Emphasis is on relative
freedom,
spontaneity,
homeliness and warmth.
natural.
6. In
informal organization,
the
communication
Page | 36
pattern
is
haphazard,
Intricate and

Firmly embedded within every informal organization are informal groups

and the notorious grapevine; the following list offers descriptions of each:
Informal groups. Workers may create an informal group to go
bowling, form a union, discuss work challenges, or have lunch together
every day. The group may last for several years or only a few hours.
Sometimes employees join these informal groups simply because of its
goals. Other times, they simply want to be with others who are similar to
them. Still others may join informal groups simply because they want to
be accepted by their coworkers.
The grapevine. The grapevine is the informal communications
network within an organization. It is completely separate from and
sometimes much faster than the organizations formal channels
of communication.
Formal communication usually follows a path that parallels the
organizational chain of command. By contrast, information can be
transmitted through the grapevine in any direction up, down,
diagonally, or horizontally across the organizational structure.
Subordinates may pass information to their bosses, an executive may
relay something to a maintenance worker, or employees in different
departments may share tidbits.
Grapevine information may be concerned with topics ranging from the
latest management decisions to the results of todays World Series game
to pure gossip. The information may be important or of little interest. By
the same token, the information on the grapevine may be highly
accurate or totally distorted
3.6 APPROACHES TO ORGANIZATIONAL DESIGN
An organizations structure is pattern of network defined by its
configuration and interrelationships of positions and departments.
Organizational design is the creation or change of an
organizations structure. The organizational design of a company reflects
its efforts to respond to changes, integrate new elements, ensure
collaboration, and allow flexibility.
Managers must make choices about how to group people together to
perform their work. Five common approaches functional,
divisional, matrix, team, and networkinghelp managers determine
departmental groupings (grouping of positions into departments). The
five structures are basic organizational structures, which are then
adapted to an organizations needs.

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Functional structure
The functional structure groups work on similar activities, skills,
expertise, and resources (see figure-3.1for a functional organizational
chart). Production, marketing, finance, and human resources are
common groups within a functional structure. It also called as
Uform organization, means the design of structure often for a single
product strategy.
A functional structure features well-defined channels of
communication and authority/responsibility relationships. Not only
can this structure improve productivity by minimizing duplication of
personnel and equipment, but it also makes employees comfortable and
simplifies training as well.
But the functional structure has many downsides that may make it
inappropriate for some organizations. Here are a few examples:
The functional structure can result in narrowed perspectives
because of the separateness of different department work groups.
Managers may have a hard time relating to marketing, for example,
which is often in an entirely different grouping. As a result,
anticipating or reacting to changing consumer needs may be difficult. In
addition, reduced cooperation and communication may occur.
Decisions and communication are slow to take place because of
the many layers of hierarchy. Authority is more centralized.
The functional structure gives managers experience in only one
fieldstheir own. Managers do not have the opportunity to see how all
the firms departments work together and understand their
interrelationships and interdependence. In the long run, this
specialization results in executives with narrow backgrounds and
little training handling top management duties.

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Figure-3.1: The functional structure

Divisional structure
Grouping of organization is called divisional structure. It is also
known as M-form structure. Large organizations are having
complexity in keeping path of all their companys products and
activities. Therefore specialized departments are developed to
overcome. These departments are divided according to their
organizational outputs. For instance departments created to
distinguish among manufacturing, marketing, customer service,
personnel and geographical categories. These departments allow
managers to better focus their resources and results. Divisional
structure also makes performance easier to supervise. As a result,
this structure is flexible and responsive to change.
However, divisional structure does have its drawbacks. Because
managers are so specialized, they may waste time duplicating each
others activities and resources. In addition, competition among
divisions may develop due to limited resources.
For instance, TATA group of companies are having different division
shown in figure. Each division is headed by specialists and they are
responsible for all activities of division. Divisional heads are trying to
contest each other in order to use limited resources. Figure 3.2
shows an example to divisional structure.

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Figure -3.2: Diviosnal Structure

Matrix structure
The matrix structure also called as project structure which combines
human and non-human resources in a temporary organization to
achieve a specified goal. Since projects have temporary life, matrix
structure method was sought so and it does not disrupt existing
organization structure. Employees in a matrix structure belong to at
least two formal groups at the same timea functional group and a
product, program, or project team. They also report to two bosses one
within the functional group and the other within the team. Figure
3.3 is illustrated matrix structure.
A major advantage of project structure is that the mix of people and
resources can readily be change as project needs change. Other
advantages include Better cooperation of employees, increased
flexibility and performance accountability. On the contrary it has
disadvantages as following.
It can violate the principle of unity of command
among employees due to unclear delineated authority.

Conflicts
Matrix

structures are often costly.

Page | 40

Figure-3.3: Matrix structure.

Product based structure

Product based structure also called H -form structure. Now a days
enterprises involve in several unrelated business these are using
product based structure, a design based on product. Each line of
business headed by company president and operates independently.
Line heads are responsible for all functions of the business. Since all
lines are operating independently poor coordination exists among
business line. Figure 3.4 shows the basic structure of the H -form
organization.

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Figure 3.4: Product based structure

Product based structure enables limited interdependence of the

business, overall organizational flexibility, and reduced risk. It can
adjust its mix of business by buying or selling units without
disrupting the others. Managing different types of business is
difficult to enterprises, because of this performance of the
organization is poor, and boundary less behavior (the sharing of
ideas and expertise across traditional product, functional, and
hierarchical divisions).
Network structure
The network structure relies on other organizations to perform
critical functions on a contractual basis (see figure3.5). In other
words, managers can contract out specific work to specialists.
This approach provides flexibility and reduces overhead because the size
of staff and operations can be reduced. On the other hand, the network
structure may result in unpredictability of supply and lack of control
because managers are relying on contractual workers to perform
important work.

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Figure-3.5: Network Structure

3.7 SUMMARY
Organizing is function which grouping necessary activities to attain
objectives, these activities are many in number such as plans
implementing, grouping of activities into jobs, assignment of jobs
to individuals and departments, authority and responsibility delegation
and coordination of activities. Joseph L.Massive defined, The structure
and process by which a cooperative group of human beings
allocates its tasks among its members, identifies relationship, and
integrates its activities towards common objectives. Organization is
the process of creating structure for the attainment of goals
through establishing relationships, defining authority and responsibility
and division of work.
Effective organizing depends on the mastery of numerous
significant concepts: work specialization, chain of command, authority,
delegation, span of control, and centralization versus decentralization.
The position, authority, responsibility and accountability of each
level are clearly defined in formal organization. The informal
organization is defined by relationship between people in the
organization based on personal attitudes, emotions, prejudices, likes
and dislikes. An organizations structure is pattern of network
defined by its configuration and interrelationships of positions and
departments. Structure of the organization is one which can decide
organizational success, whether authority is centralized or
decentralized.

Page | 43

3.8 QUESTIONS FOR DISCUSSIONS

1. What is organizing? Explain the process of organizing.
2. Explain division of labor.
3. Differentiate between authority and delegation.
4. What are the differences between formal and informal organizational
structures?
5. Discuss pros and cons of centralization and decentralization. 6. What
is the importance of organizational structure in the success of an
enterprise?
7. Explain different approaches of organizational structures.

Page | 44

CHAPTER -4
STAFFING AND HUMAN RESOURCE MANAGEMENT

Learning objectives
After reading this chapter, you will be able to understand:
What is staffing and human resource management
How human resource planning
Importance recruitment and selection
Selection process
Types of interviews
Training and methods
Performance appraisal

4.1 INTRODUTION
Getting the right people in the right jobs is more important function of
management, the right people is source to create opportunities and solve
problemsthe wrong people are problem makers. Once organizations
structural design is in place, it needs people with the right skills,
knowledge, and abilities to fill in that structure. Human resources are
most important resource and asset to any organization and are either
make or wreck enterprise . If the organization getting
continually the best people means it is doesnt by accident, it is a
systematic process that organization following.
Staffing is a function deals with the design of formal systems in
an organization to ensure the effective and efficient use of human talent
to accomplish organizational goals.
Human resource management (HRM), or staffing, is the management
function devoted to acquiring, training, appraising, and
compensating employees. In effect, all managers are human resource
managers, although human resource specialists may perform some of
these activities in large organizations.
Competitive advantage is key domain that all enterprises are looking for,
human resources have become key that can provide a
competitive advantage but getting skilled employees is a key
challenge to the organizations now a days. The most common
challenges in front of HR management are as follows:
Changes in economic and technological environment

Page | 45

Deficiency in work force availability and quality

Demographical issues
Organizational restructuring.
As the importance of human factor in organizational effectiveness is
being increasingly recognized, staffing is gaining acceptance as a
distinct function of management managers must perform the staffing
function with as much concern as any other function. Staffing
comprises several sub-functions as following.
Human resource planning and Analysis.
Recruitment
Selection
Placement, induction and orientation.
Transfers, promotions, termination and layoff.
Training and development
4.2 HUMAN RESOURCE PLANNING
HR planning and analysis is the first step in the staffing process
involves and it has several facets. HR planning facilitates managers
attempt to anticipate forces that will influence the future supply of and
demand for employees.
Human resource planning (HRP)is the process of analyzing and
identifying the need for and availability of human resources so that the
organization can meet its objectives. The function of HRP begins with
job analysis, Job description and job specifications presented figure
4.1.

Figure-4.1: Job Analysis

Page | 46

4.3 JOB ANALYSIS

Job analysis is a systematic way to gather and analyze information
which about the content and the human requirements of jobs, and the
context in which jobs is performed. It contains descriptions of all jobs
(tasks) and the qualifications needed for each position are
developed.
Job description
It is a written statement of what a jobholder does, how its done, and
why its done. Simply, it is Identification of the tasks, duties, and
responsibilities of a job and typically portrays job content,
environment, and conditions of employment.
Job specification
Job specification states the minimum acceptable qualifications an
incumbent must possess to perform a given job successfully. It
identifies the knowledge, skills, and abilities needed to do the job
effectively.
4.4 RECRUITMENT AND SELECTION
Recruiting and selection involves choosing the person with the
right talents and interests for a given job.
Recruiting
Employment rate can decide nature of recruitment either easy or
challenging. Recruiting becomes much more challenging in the past few
years, many reasons we can state to this tough situation such as quality
of labor (knowledge, skills and abilities), rules and legal system,
loyalty and etc.,. Recruitment includes all the activities of an organization
may use to attract a pool of viable candidates and it is the process of
generating a pool of qualified applicants for organizational jobs.
If the number of aspirants equals number of people to be hired it
is not real selection, the real section is done when number of
candidates more than number of jobs. Study of labor market makes
a perfect understanding on recruitment. There are many ways
to identify labor markets, including by geographical area, type of
skill, and educational level. Simply, labor market is an external source
that provides employees to organizations. Keep in mind that recruiting
strategies differ among organizations. Two types of recruitment methods
are in practice in all organizations-external and internal recruiting.

Page | 47

Table-4.1: Sources
Internal
Sources

planning

External Sources

Sources of

Promotion and
Recruiting
Transfer
Current
Employee
Referrals
Recruiting Former
Employees and
Applicants
Internal Recruiting
Database

School Recruiting
College
Recruiting
Labor Unions
Media
Sources
Trade
and
Competitive Sources
Employment Agencies

Executive Search
Firms
Internet
Recruiting
Although one may instantly think of campus recruiting as a typical
recruiting activity, many organizations use internal recruiting, or
promote-from-within policies, to fill their high-level positions. Open
positions are posted, and current employees are given preferences
when these positions become available. Internal recruitment is less
costly than an external search. It also generates higher employee
commitment, development, and satisfaction because it offers
opportunities for career advancement to employees rather than
outsiders.
If internal sources do not produce an acceptable candidate, many
external recruiting strategies are available, including the following
Newspaper advertising, Employment agencies (private, public, or
temporary agencies), Executive recruiters (sometimes called
headhunters), Unions, Employee referrals, Internship programs,
Internet employment sites.
Selection
Having the right people on staff is crucial to the success of an
organization. Selection is the process of choosing best applicants who
have relevant qualifications and skills to fill and perform jobs in
an organization. Figure 4.2explains critical steps involved in
selection process.

Page | 48

4.5 SELECTION PROCESS

Screening
forms

Application

For most employers,

the application form is
the first step in the
selection
proc
Application ess. forms
provide
record
salient

Figure-4.2: selection process

Initial screening of applications

a Testing
of
information

Interview
about
for
applicants data
Interviewers
may use
for
responses from
the
Reference
positions,
application
for follow
check up
andquestions
up
also during an
rese
furnish
interview.
arch. from
requests
These
forms range
personnel
for

Terms and conditions of Job offer

Medical Exam
Traini
ng

information, such as
basic
Placement
names, addresses, and
telephone numbers, to
comprehensive
personal
history
profiles
detailing
applicants
education,
job
experience
accomplishments.
skills, and
Managers should make sure that their application forms do not
ask questions that are irrelevant to job success, or these questions
may create an adverse impact on protected groups. For example,
employers should not ask whether an applicant rents or owns his or her
own home, because an applicants response may adversely affect his or
her chances at the job. Minorities and women may be less likely to own a
home, and home ownership is probably unrelated to job performance.
On the other hand, asking about the CPA exam for an accounting
position is appropriate, even if only one-half of all female or
minority applicants have taken the exam versus nine-tenths of male
applicants.
Testing
Testing is another method of selecting competent future employees.
Although testing use has ebbed and flowed during the past two

Page | 49

decades, recent studies reveal that more than

80 percent of
employers use testing as part of their selection process.
These tests must be valid and reliable; As a result, a manager needs to
make sure that the test measures only job-relevant dimensions of
applicants.
Most tests focus on specific job-related aptitudes and skills, such as
math or motor skills. Typical types of exams include the following:
Integrity tests measure factors such as dependability,
carefulness, responsibility, and honesty. These tests are used to
learn about the attitudes of applicants toward a variety of job -related
subjects. In their place, attitude tests are being used to assess
attitudes about honesty and, presumably, on -the-job behaviors.
Personality tests measure personality or temperament. These
tests are among the least reliable. Personality tests are problematic and
not very valid, because little or no relationship exists between
personality and performance.
Knowledge tests are more reliable than personality tests because
they measure an applicants comprehension or knowledge of a
subject. A math test for an accountant and a weather test for a pilot are
examples. Human relations specialists must be able to
demonstrate that the test reflects the knowledge needed to perform the
job. For example, a teacher hired to teach math should not be given a
keyboarding test.
Performance simulation tests are increasing in popularity.
Based on job analysis data, they more easily meet the requirement of job
relatedness than written tests. Performance simulation tests are made
up of actual job behaviors. The best-known performance simulation
test is known as work sampling, and other credible simulation
processes are performed at assessment centers.
An assessment is a selection technique that examines candidates
handling of simulated job situations and evaluates a candidates
potential by observing his or her performance in experiential
activities designed to simulate daily work.
Assessment centers, where work sampling is often completed,
utilize line executives, supervisors, or trained psychologists to
evaluate candidates as they go through exercises that simulate real
problems that these candidates would confront on their jobs.
Activities may include interviews, problem-solving exercises, group
discussions, and business-decision games. Assessment centers have
consistently demonstrated results that accurately predict later job
performance in managerial positions.

Page | 50

Work sampling is an effort to create a miniature replica of a job,

giving applicants the chance to demonstrate that they possess the
necessary talents by actually doing the tasks.
Interviews
Another widely used selection technique is the interview, a formal,
in-depth conversation conducted to evaluate an applicants
acceptability. In general, the interviewer seeks to answer three broad
questions:
1. Can the applicant do the job?
2. Will the applicant do the job?
3. How does the applicant compare with others who are being
considered for the job?
Interviews are popular because of their flexibility. They can be
adapted to unskilled, skilled, managerial, and staff employees. They also
allow a two-way exchange of information where interviewers can learn
about the applicant and the applicant can learn about the
employer.
Interviews do have some shortcomings, however. The most noticeable
flaws are in the areas of reliability and validity. Good reliability
means that the interpretation of the interview results does not vary from
interviewer to interviewer. Reliability is improved when identical
questions are asked. The validity of interviews is often questionable
because few departments use standardized questions.
Managers can boost the reliability and validity of selection interviews by
planning the interviews, establishing rapport, closing the
interview with time for questions, and reviewing the interview as soon as
possible after its conclusion.
Reference checking allows employers to verify information supplied by
the candidate. However, obtaining information about potential
candidates is often difficult because of privacy laws and employer
concerns about defamation lawsuits.
Medical exams identify health problems that increase absenteeism
and accidents, as well as detecting diseases that may be unknown to the
applicant.
Orientation and Training Programs
Orientation means providing new employees with basic information
about the employer. Training programs are used to ensure that the new
employee has the basic knowledge required to perform the job
satisfactorily.

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Orientation programs not only improve the rate at which employees are
able to perform their jobs but also help employees satisfy their personal
desires to feel they are part of the organizations social fabric. The
HR department generally orients newcomers to broad organizational
issues and fringe benefits. Supervisors complete the orientation
process by introducing new employees to coworkers and others involved
in the job. A buddy or mentor may be assigned to continue the
process.
Training needs
Training programs are used to ensure that the new employee has the
basic knowledge required to perform the job satisfactorily. Simply
hiring and placing employees in jobs does not ensure their success. In
fact, even tenured employees may need training, because of
changes in the business environment. Here are some changes that
may signal that current employees need training:
Introduction of new equipment or processes
A change in the employees job responsibilities
A drop in an employees productivity or in the quality of output
An increase in safety violations or accidents
An increased number of questions
Complaints by customers or coworkers
Training methods
Most training takes place on the job due to the simplicity and lower cost
of on-the-job training methods. Two popular types of on -the-job
training include the following:
Job rotation. By assigning people to different jobs or tasks to
different people on a temporary basis, employers can add variety and
expose people to the dependence that one job has on others. Job
rotation can help stimulate people to higher levels of contributions,
renew peoples interest and enthusiasm, and encourage them to work
more as a team.
Mentoring programs. A new employee frequently learns his or her
job under the guidance of a seasoned veteran. In the trades, this type of
training is usually called an apprenticeship. In white -collar jobs, it is
called a coaching or mentoring relationship. In each, the new
employee works under the observation of an experienced worker.
Sometimes, training goals cannot be met through on-the-job training;
the employer needs to look to other resources.

Page | 52

Off-the-job training can rely on outside consultants, local college

faculty, or in-house personnel. The more popular off-the-job training
methods are classroom lectures, videos, and simulation exercises.
Thanks to new technologies, employers can now facilitate some
training, such as tutorials, on the employees own computers,
reducing the overall costs.
In addition to training, employers should offer development plans,
which include a series of steps that can help employees acquire skills to
reach long-term goals, such as a job promotion. Training, on the other
hand, is immediate and specific to a current job.
Placement
Once training is completed employees are placed in different positions.
Placing the employee in the right job is critical step of placement
process. It is last step of selection process; here after employee
performance is evaluated on daily, weekly, monthly and yearly.
Evaluating Employee Performance
Employee performance should be evaluated regularly. Employees
want feedbackthey want to know what their supervisors think
about their work. Regular performance evaluations not only provide
feedback to employees, but also provide employees with an
opportunity to correct deficiencies. Evaluations or reviews also help in
making key personnel decisions, such as the following:
Justifying promotions, transfers, and terminations
Identifying training needs
Providing feedback to employees on their performance
Determining necessary pay adjustments
Most organizations utilize employee evaluation systems; one such
system is known as a
4.6 PERFORMANCE APPRAISAL
A performance appraisal is a formal, structured system designed to
measure the actual job performance of an employee against
designated performance standards. Although performance appraisals
systems vary by organizations, all employee evaluations should have the
following three components:
Specific, job-related criteria against which performance can be
compared
A rating scale that lets employees know how well theyre meeting the
criteria

Page | 53

Objective methods, forms, and procedures to determine the rating

Traditionally, an employees immediate boss conducts his or her
performance appraisal. However, some organizations use other
devices, such as peer evaluations, self-appraisals, and even customer
evaluations, for conducting this important task.
The latest approach to performance evaluation is the use of
360degree feedback. The 360-degree feedback appraisal provides
performance feedback from the full circle of daily contacts that an
employee may have. This method of performance appraisal fits well into
organizations that have introduced teams, employee
involvement, and TQM programs.
4.7 SUMMARY
Getting the right people in the right jobs is more important function of
management, the right people is source to create opportunities and solve
problemsthe wrong people are problem makers. Staffing is a function
deals with the design of formal systems in an organization to ensure the
effective and efficient use of human talent to accomplish organizational
goals.HR planning and analysis is the first step in the staffing process
involves and it has several facets.
The function of HRP begins with job analysis, Job description and job
specifications presented figure 4.1.Recruiting and selection involves
choosing the person with the right talents and interests for a given job.
Selection is the process of choosing best applicants who have relevant
qualifications and skills to fill and perform jobs in an organization.
Figure 4.2presented critical steps involved in selection process.
Orientation means providing new employees with basic information
about the employer. Training programs are used to ensure that the new
employee has the basic knowledge required to perform the job
satisfactorily. Placing the employee in the right job is critical step of
placement process. A performance appraisal is a formal, structured
system designed to measure the actual job performance of an
employee against designated performance standards
4.8 QUESTIONS FOR DISCUSSION
1. How does staffing relate to human resource management?
2. What is human resource planning?
3. What is job analysis and job specification? 4. Briefly discuss a
model of human resource selection. 5. Describe recruitment and
explain some of sources of requirement. 6. Explain two types of
interviews.
7. What is training and discuss methods of trying.
8. What is performance appraisal?

Page | 54

CHAPTER-5
COMMUNICATION
Learning objectives
After reading this chapter, you will be able to understand:
Nature of Communication
The importance of communication
Communication process
The role of communication in the organization
Communication Methods
Barriers in communication
5.1 INTRODUCTION
Communication is key element of any organization which coordinates all
business activities. The purpose of communication is unique that
it exchanges messages between people to achieve common goals. So
communication is an indispensible activity in business. Simply put
a manager does not manage well in the absence of effective
communication.
Therefore,
when
managers
foster
effective
communication, they strengthen the connections between employees
and build cooperation. Communication serves major functions that are
controlling, motivation and emotional expression. No manager can
handle conflict, negotiate successfully, and succeed at leadership
without being a good communicator.
"Communication may be defined as the process of meaningful
interaction among human beings. It exchange of fact, ideas, opinions or
emotions by persons.
"Communication is essential to all managerial actions and it is the
process of imparting ideas and making oneself understood by
others".Theo Haimann.
"Communication is an intercourse by words, letters symbols or
messages, and is a way that the organization members shares meaning
and understanding with another". - Koontz and O'Donnell
5.2 THE IMPORTANCE OF COMMUNICATION
Enterprises are fully dependent on communication, without
communication, organizations would not function. Organizations are
effective in performance when is accurate and timely, on other side if
communication is inferior organizations would not function.
Communication is vital to the entire management process for four
primary reasons:

Page | 55

Links managerial functions: Communication links all managerial

functions of planning, organizing, staffing, directing, and controlling.
Communication is the heart of all organizations
Effective decisions: Effective decisions are often reliant upon the
quality and quantity of the information received. If the information on
which a decision is based is poor or incomplete, the decision will
often be incorrect.
The most time-consuming activity: Managers spend between
most of their time communicating with employees and other internal and
external customers.
Information and communication represent power in
organizations. An employee cannot do anything constructive in a
work unit unless he or she knows what is to be done, when the task is to
be accomplished, and who else is involved. The staff members who have
this information become centers of power.
5.3 THE COMMUNICATION PROCESS
The aim of communication is transmission of information and
meaning prom one person to other person. This process has three
major components- sender; medium and receiver.Figure-5.1 shows a
general process of communication. A sender sends a message
through a medium to the receiver, in this process the sender first
creates an idea, which is encoded and composed as message and
them transmitted to the targeted party. The sender use appropriate
medium to transmit information to the other party. Once message is
reached to the other party, he/she decodes the message to get
understanding. Developing a message is referred to as encoding and
interpreting the message is called as decoding. Figure 5.1 shows
steps in communication process.

Figure -5.1: Communication process

Sender: Sender is the source of ideas to communicate message. The

source may be an individual, group, corporation, special committee,

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or even a nonhuman speech generator. Each source possesses its

own field of experience.
Message: The message is the content that the speaker communicates. It
contains the thoughts and feelings that the communicator intends to
evoke in the receiver.
Transmission: The transmission is the means by which the message is
carried. It is also called channel. Visual, auditory, written or some
combinations of these three are used to transmit information.
Recipient: Recipient decodes message by interpretation. Decoding is
reliant on the receiver individual ability. The receiver must decode
symbols in order to understand the message.
Receiver: The receiver is the object to whom the message is directed.
Feed back: Feedback is the reply communicated by the receiver to the
sender of the message.
If the receiver does not respond to message it is described only one way
communication. When a person receives a message, the receiver has to
reply to it than sender can understand whether message has reached
accurately or not. Hence, feedback is an important component
of effective communication. Feedback is most important to a manager
to manage his/her daily functions. For example manager has to
know how subordinates respond to plans and directions, how work
is progressing, how they fell about working conditions, and what
their expectations are.
Effective communication, therefore, occurs when the intended
message of the sender and the interpreted message of the receiver are
one and the same. Although this should be the goal in any
communication, it is not always achieved. The most efficient
communication occurs at a minimum cost in terms of resources
expended. Time, in particular, is an important resource in the
communication process.
5.4 THE ROLE OF COMMUNICATION IN THE ORGANIZATION
Effective communication is important in gaining and maintaining
the competitive edge in organizations. Communication between
manager and subordinate is critical to achieve organizational objectives.
Hence, communication is important in the organizations for several
reasons, few of them as following.
To direct employees: Manager is able to direct and
guide subordinate to get the expected work from them, if manger is
fail to communicate properly employees perform poor because they
do not understand what is expected of them.

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To motivate people: Good manager should have effective

communicating abilities to motivate employees.
Convincing customers: Effective communication is the key to
convincing a customer to purchase a product or service.
To absorb
the ideas of subordinates: Managers should intact with all level of
employees and must able to understand and accept subordinates
ideas and viewpoints.
5.5 METHODS OF COMMUNICATION
The process communication includes speaking or writing message by a
sender and listening or reading the receiver which contains
nonverbal, oral and written communication. However, some forms of
communication do not directly involve spoken or written language.
Nonverbal communication
Nonverbal communication consists of actions, gestures, and
behaviors that are not coded into words. Nonverbal communication
includes all elements of communication such as physical appearance,
gestures, and facial expressions that does not make words or
language. It is recognized as a powerful medium of transmitting
messages.
At times, a person's body may be talking even as he or she
maintains silence. And when people do speak, their bodies may
sometimes say different things than their words convey. A mixed
message occurs when a person's words communicate one message,
while non-verbally; he or she is communicating something else.
The actions of management are especially significant because
subordinates place more confidence in what managers do than what
they say. Unless actions are consistent with communication, a feeling of
distrust will undermine the effectiveness of any future social
exchange.
Oral communication
The day of a manager mostly engaged with conversing with other
managers and employees, presentation to large audience, and
meeting with several individuals. Oral communication occurs in face to
face communication, telephone conversation and formal
presentation of speeches. For example, oral communication skills are
used when a Human resource manager must make conduct
interviews, perform employee evaluations, and hold press
conferences.
Oral communication has the advantage of fast, immediate and direct
feedback when compare to written communication.

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Managers prefer oral communication because communication tends to

be more complete and thorough when talking face -to-face. For
example, in face-to-face interactions, manager can notice the other
party reactions, can ask questions and clarify points, and immediate
feedback. Face-to-face communication permits not only the exchange of
words, but also the opportunity to see the nonverbal
communication.
However, oral communicating also has disadvantage. Disadvantages
include face-to-face can be time-consuming and also leads to
spontaneous ill-considered statements.
Written communication
Written communication occurs through variety of means, includes
memos, letters, reports and other written documents. Written
communication has several advantages that are the message can be
received several times, proving records, references, and saves times to
manger and receiver has more time to analyze. Written
communication is an inexpensive means of providing identical
messages to a large number of people. The major disadvantage of
written communication is sender does not receive immediate
feedback and it may take long time to know whether message has
been received and properly understood.
Developing writing skills are often difficult, writing simple, clear, and
direct document is key job of good written communication. And
believe it or not, poorly written documents cost money. For example, a
manager does not prepare letters, memos, sales reports, and other
written documents may spell the failure of communication and
results in huge loss to the company. For effective written
communication following are key points to be mind.
Develop the message with the receivers in mind
Draft should contain simple words and short, clear, sentences and
paragraphs
Avoid flowery language, euphemisms, and trite expressions
Interpersonal Communication
Interpersonal communication is real-time, face-to-face or voice-tovoice
conversation that allows immediate feedback. Interpersonal
communication plays a large role in any manager's daily activities,
but especially in organizations that use teams.
Managers must facilitate interpersonal communication within teams and
reduce barriers to interpersonal communications. Common barriers
to interpersonal communication include the following:

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Expectations of familiarity (or hearing what one is expected to

hear). After hearing the beginning comments, employees may not
listen to the remainder of the communication because they think
they already know what a manager's going to say.
Preconceived notions. Many employees ignore information that
conflicts with what they know. Often referred to as selective
perception, it's the tendency to single out for attention those aspects of a
situation or person that reinforce or appear consistent with one's
existing beliefs, value, or needs. Selective perception can bias a
manager's and employee's view of situations and people.
Source's lack of credibility. Some employees may negatively size
up or evaluate the sender based on stereotypes. Stereotyping is assigning
attributes commonly associated with a category, such as age group,
race, or gender to an individual. Classifying is making assumptions
about an individual based on a group he or she fits into.
Characteristics commonly associated with the group are then
assigned to the individual. Someone who believes that young people
dislike authority figures may assume that a younger colleague is
rebellious.
Differing perceptions caused by social and cultural
backgrounds. The process through which people receive and
interpret information from the environment is called perception.
Perception acts as a screen or filter through which information must
pass before it has an impact on communication. The results of this
screening process vary, because such things as values, cultural
background, and other circumstances influence individual
perceptions. Simply put, people can perceive the same things or
situations very differently. And even more important, people behave
according to their perceptions.
Semantics and diction. The choice and use of words differ
significantly among individuals. A word such as effectiveness may
mean achieving high production to a factory superintendent and
employee satisfaction to a human resources specialist. Many
common English words have an average of 28 definitions, so
communicators must take care to select the words that accurately
communicate their ideas.
Emotions that interfere with reason. Tempers often interfere
with reason and cause the roles of sender and receiver to change to that
of opponent and adversary.
Noise or interference. Noise does not allow for understanding
between sender and receiver.

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5.6 BARRIERS IN COMMUNICATION

Managers frequently find breakdowns in the communications that are
caused by several factors. Communication barriers distort
successful communication. The more prominent communication
barriers that manger should aware are given bellow.
Filtering the message:
Number of levels in the organizational
structure cause filtering of messages. The more vertical levels in
the organization's hierarchy, the more opportunities for filtering.
Sometimes the information is filtered by the sender himself.
Lack of planning: Communication is frequently takes place without
thinking, planning and stating the purpose of the message. Lack
of choosing appropriate medium and time also cause distort of message.
Receiver emotions: The state of mind and emotional conditions are
influence receiver how he interprets the information. Words
ambiguity: Words selection in drafting message should not have
ambiguity. Language must understandable to the receiver.
Language reflects not only the personality of the individual but also the
culture of society in which the individual is living.
Stereotyping: Stereotyping is a barrier to communications because
those who stereotype others use selective perception in their
communication and tend to hear only those things that confirm their
stereotyped images.
Conflicting Signals: A sender is using conflicting signals when he or
she sends inconsistent messages. A vertical message might conflict with
a nonverbal one.
The Halo Effect: The term "halo effect" refers to the process of
forming opinions based on one element from a group of elements and
generalizing that perception to all other elements.
Poorly expressed messages: Poorly expressed messages contain
poorly chosen words, awkward sentence structure and platitudes due to
this message lacks clarity.
5.7 SUMMARY
Communication is key element of any organization which coordinates all
business activities. The purpose of communication is unique that
it exchanges messages between people to achieve common
goals. "Communication may be defined as the process of
meaningful interaction among human beings. It exchange of fact, ideas,
opinions or emotions by persons. Organizations are effective in
performance when is accurate and timely, on other side if
communication is inferior organizations would not function.
Communication process has three major components- sender, medium
and receiver presented figure 5.1.

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Effective communication is important in gaining and maintaining

the competitive edge in organizations. The process communication
includes speaking or writing message by a sender and listening or
reading the receiver which contains nonverbal, oral and written
communication. Managers frequently find breakdowns in the
communications that are caused by several factors. Communication
barriers distort successful communication.
5.8 QUESTIONS FOR DISCUSSION
1. What is communication? Briefly describe the communication
process model.
2. Explain interpersonal communication.
3. Briefly describe the role of communication in the organization. 4.
What are the methods of communication? Discuss the best method of
communication that is used in all organizations.
5. What are the barriers of communication? How can we avoid
communication barriers?
6. What are the advantage and disadvantages of written
communication?

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CHAP
TER-6
MOTIVATIO
Learning objectives
N
After reading this chapter, you will be able to understand:
Define motivation
The nature of the Motivation
Motivation and its importance
Theories of motivation
Managerial problems in motivation
6.1 INTRODUCTION
Since a manager is accountable for the performance of
subordinates, motivation is a vital element of the managers job.
Motivation is the key input to managerial success and encourages people
to give their finest performance and aid in reaching organizational goals.
The manager in general has to get the work done through others. In
order to perform this job, a manager has to modify the behavior of his
subordinates so as to direct it towards enterprise goals. Motivation is an
internal force that energizes, direct and sustains a persons efforts. A
person behavior is the result of motives, we cannot measure it directly.
Every human being has certain needs. These needs prompt him into
action which is observed in his behavior. A strong positive
motivation will allow the increased output of employee but a
negative motivation will lessen their performance. Most successful
managers have awareness of the idea of motivation and are bright to
use that to attain best subordinate performance. This chapter has
discussed on concepts and theories of motivation.
6.2 DEFINITION
The term motivation has been derived from the word
motive. Motive is anything that initiates or sustains activity. It is an
inner state that energizes, activates or moves and that directs or
channels behavior towards goals. Motive is a psychological force within
an individual that sets him in motion.
Behind every human action
there is a motive.
Many authors have given variety of definitions on
motivation; few of them are given in the following.
Motivation is the willingness to exert high levels of effort toward
organizational goals, conditioned by the efforts ability to satisfy some
individual need. - Stephen P. Robbins

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"Motivation is the work a manager performs to inspire, encourage

and impel people to take required action".-Lewis Allen
Motivation means a process of stimulating people to action
to accomplish desired goals.-William G Scott
Motivation is a general term applying to the entire class of drives,
needs, wishes and similar forces.-Koontz and O'Donnell,
6.3 NATURE OF MOTIVATION
Motivation is a personal and internal feeling which generates within
an individual.
Motivation produces goal-directed behavior that directs
people towards certain goals and actions.
Since motivation related to needs we have to understand people need
to satisfy them.
Motivation is a continuous and never ending process because Human
needs are unlimited.
Individuals differ in their motivation that makes motivation complex.
A person cannot be partly motivated as he is a self-contained and
inseparable unit.
Motivation can be either positive or negative because to satisfy
human needs while negative motivation emphasizes penalties, e.g.,
reprimands, threat of demotion, fear of loss of job, etc.
Motivation is different from job satisfaction, since motivation is the
process while satisfaction is the outcome or consequence.
6.4 IMPORTANCE OF MOTIVATION
Manager motivates employees to perform the tasks of the organization so
that motivation is an imperative part of managing process. Motivation
makes people will to work that result in attainment of individual and
organizational goals. Manager cannot inspire employees and create
confidence without using motivation. Motivation is an unavoidable tool
that a manager has to keep to manage workforce. Employees are
motivated because of the following reasons.
Motivated employees make desired actions from the employees and
optimum employ of available resources for achieving enterprise
objectives.
Motivation is directly related to the level of efficiency of employees.

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Motivation makes employees optimum use of their energy and other

abilities to raise the existing level of efficiency.
Motivation develops good industrial relations in the organization and
is the best remedy for resistance to changes.
Motivated makes employees goal-directed behavior.
Motivated employees have sense of belongingness that helps to
reduce absenteeism and labor turnover.
Effectively motivated employees get more job satisfaction.
Motivation helps employees to get ability to work and willingness to
work.
6.5 THEORIES OF MOTIVATION
Understanding motivation and managing humans is very complex job.
Managers, social scientists, behaviorists and psychologists have
been finding new facts and techniques of motivation. Numbers of
theories have been born in this process although none of theory is
universally applicable. Present concept of the chapter has emphasized
few important theories in the following.
6.5.1 EARLY THEORIES OF MOTIVATION
Hierarchy of needs theory
It is discussed in chapter one, the evolution of management movement
concept.
Hygiene Theory of Motivation
This theory was developed by Frederick Hertzberg known as
need based approach and called as Two-factor theory of motivation. In
the late
1950s, the approach has developed by interviewing 200
employees (engineers and accountants) in Pittsburgh. All these
employees are asked to relate elements of their jobs when they had been
dissatisfied and less motivated. Analysis of their answers was discovered
set of factors related to feelings of dissatisfaction and satisfaction of the
job.
The findings of the study found two set of factors: maintenance
and motivational factors are causing either satisfaction or
dissatisfaction among employees. Employees do not get satisfaction
of maintenance factors but their absence will dissatisfy them. Therefore,
these factors are called dissatisfies. These are not inherent parts of a
job but they are related to conditions under which a job is performed.
On the contrary, motivational factors influencing satisfaction and these
are intrinsic parts of the job.

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Any increase of these factors will satisfy the employees and help
to improve performance. But a decrease in these factors will not cause
dissatisfaction. Both these factors are given in the table 6.1.
As conclusion, Hertzberg recommended manger has to take care of
maintenance factors first, since employees are not dissatisfied with
salary, working conditions and security manager can focus on
motivational factors include opportunities for advancement, recognition,
advancement and growth. Exclusively, he recommends job enrichment
as a means of enhancing the availability of motivation factors.
The theory has been criticized by other researchers because it is failed to
differentiate between satisfaction and motivation and adequate focus on
differences between individuals. Other researchers who measured
satisfaction and dissatisfaction based on different aspects reached very
different conclusions

Table-6.1: Hertzberg two factors

Maintenance
factors
1.
Company Policy & Administration
2. Technical Supervision
3. Inter-Personal Relations with
Peers 4. Inter-relationship with
Supervisors 5. Inter-relationship with
Subordinates
6. Salary

Motivatin
g
factors
1.
Achievement
2.
Recognition
3.
Advancement
4. Opportunity for
Growth
5.
Responsibility 6.
Work itself

7. Job Security
8. Personal
Life
9. Working
Conditions
10. Status
Theory X & Theory Y
It is discussed in chapter one the evolution of management movement.
6.5.2 CONTEMPORARY THEORIES OF MOTIVATION
Alderfers ERG Theory
Clayton Alderfer of Yale University has proposed hierarchy of needs by
reworking Maslows need hierarchy theory -called ERG theory of
motivation.
According to Alderfer
ERG stands for Existence,
Relatedness and Growth. Figure 6.1 has presented.

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Existence - Providing our basic material existence requirements.

The existence needs it includes physiological and safety needs.
Relatedness - Interpersonal relationships, Social and status desires
require interaction with others if they are to be satisfied. As per Maslows
it includes Social need and external component of esteem needs.
Growth - An intrinsic desire for personal development.
As per Maslows include intrinsic esteem component and self
actualization.
ERG theory says - More than one need may be operative at the same
time. If the gratification of a higher level needs is stifled the desire to
satisfy a lower-level need increases.
McClellands Theory of Needs
McClelland and his associates have contributed theory of
motivation known as McClellands needs theory. This theory focus on
motivation by identifying three types of motivating needs. These are
classified as need for power, need for affiliation and need for
achievement.
Need for power
According to theory people with a high need for power have great
concern for exercising influence and control. Individuals with high power
enjoy being in charge strive for influence over others, prefer to be
placed into competitive and status oriented situations. Such types of
individuals generally look for positions of leadership, they act
effectively, are have
a
outspoken,
stubborn character and
Figure-6.1: ERG versus Maslows
exert authority.
Need for affiliation

theory

The need for affiliation

means people with desire
for friendly and close
interpersonal
relationships. This people
strive
frie
for
ndship,
prefe
situations
rather
cooperativ
than
r
competitive
one
e
and
desire relationship that
involve a high degree
of mutual understanding.

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Need for achievement

People with a high need for achievement, always feel ambitious to be
successful, have an intense desire for success and an equally fear of
failure. They want face challenging situations and set arduous
goals. They are prone to take calculated risks; and possess a high
sense of personal responsibility in getting jobs done. These people are
concerned with their progress, and feel inclined to put in longer hours of
work" Failures never dishearten them and they are always ready to put
in their best efforts for excellent performance.
Goal Setting Theory:
This approach to motivation has developed by Edwin Locke and
his associates in 1960s and refined in 1980s. The theory suggests
that specific and difficult goals should set for an individual on a
regular basis, as suggested by MBO which lead to higher performance.
Goals tell an employee what need to be done and how much effort will
need to be expended.
The key characteristics of the theory as following:
Goal setting increases performance
result in higher performance

Difficult goals

Participation of

employees in goal has mixed result.

feedback of

results leads to better performances

Employee participation of setting goals can increase goal acceptance
and involvement.
The theory has found tow important factors that influence the
performance: goal commitment and Self-efficiency. The only goal setting
does not ensure higher levels of motivation among employees. In fact,
there seem to be three important criteria that goals must meet if they are
to influence the behavior of organization members. They are goal
specificity, goal difficulty and goal acceptance. Goal SpecificityGoals must be specified to motivate effective performance. Goals must be
set in terms of measurable criteria of work performance.
Goal Difficulty/Challenge - challenging and difficult goals ensure higher
level of performance and motivation. Employees can work beyond the
capacity to meet difficult goals, hence it leads to higher performance.
Setting very difficult goals unable to motivate since it is beyond the
capacity of the concerned individual. Goal Acceptance- an employee
can feel goal ownership when he is accessed to participate goal
setting and it influence motivation and performance, commitment to
achieve it

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Equity theory
It is developed by J. Stacy Adams called as equity theory of motivation.
According to this employee motivations arise out of simple desire to be
treated fairly. Individuals compare their job inputs (effort, experience,
education, competence) and outcomes (salary level, raises, recognition)
with those of others and then respond to eliminate any inequities. Equity
can be defined as an individual's belief that he is being treated fairly
relative to the treatment of others.
Employees generally balance their input and output with others of the
same in such case if rewards are equitable enables continue the same
level of output and performance and inequitable rewards lead to
dissatisfaction, performance is reduced and possibility to leave the
organization.
There is four step process that employees use to compare equity.
Self - inside: an employee evaluates the way he is being treated in a
different position inside his current organization.
Self- outside: An employees experiences in a situation or position outside
his or her current organization.
Other - inside: Another individual or group of individuals inside
the employees organization.
Other- outside: Another individual or group of individuals outside the
employees organization.
Historically equity theory focused on distributive justice - perceived
fairness of the amount and allocation of rewards among individuals.
But, equity should also consider procedural justice -perceived fairness of
the process used to determine the distribution of rewards.
Evidence indicates that distributive justice has a greater influence on
employee satisfaction than procedural justice. But, procedural
justice affect org commitment, OCB, trust on boss and organization
by employees. So managers need to openly share information on
how allocation decisions are made.
Victor Vroom's Expectancy theory
Another approach of motivation expectancy theory was developed
byVictor Vroom. Vroom argued that motivation as a- process of
governing choices. The theory attempts to clarify how and why
people select a particular behavior over an alternative. It suggests
that motivation depends on two things: how much an individual desires
a particular goal and how likely he thinks he can get it.

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It means motivation is the product of strength of an individual to achieve

the goal and expectations to achieve it.
The theory has four assumptions:
First assumption is that the behavior of people is determined by a
blend of forces in the
individual and in the environment.
Secondly people make decisions about their own behavior in
organizations.
Thirdly different people have different types of needs, desires
and goals.
Fourth assumption states that people make choices from among
alternative plans of behavior based on their perceptions of the extent to
which a given behavior will lead to desired outcomes.
The theory has three importance variables: valance- it is the strength of
an individuals preference for an outcome. Zero valance results in an
individual are different about achieving a certain goal, negative valence
occurs when the person would rather not achieve the goal.
Expectancypeople have expectations about their particular actions that
will lead to desired outcome. At zero and negative expectancy people
have no motivation to achieve their goals. Force- can be measured in
strength of a persons motivation. The force an individual applies to
achieve something reliant on both valance and expectancy. For
instance, a commerce graduate looking for a job and find an
advertisement for accounting manager position with a starting salary of
Rs.5,oo,ooo per annum. He is not interested to apply the job because he
though little chance of getting it. Next day he read another advertisement
is for typist for a salary of Rs. 2, 00,000 per year. Even he does not apply
because probably get the job but, he doesn't want it. Next he sees
another advertisement for accountant with a starting salary of Rs.3,
00,000 per year. He chooses to apply for this job because he wants it
and also thinks that he has a reasonable chance of getting it.
Therefore, Outcomes are results of efforts, individual ability,
environmental factors and performance. Finally, an individual develop
some sense of these expectations before they exhibit motivated or nonmotivated behavior.
6.6 PROBLEMS IN MOTIVATION
Manager has difficulties in motivating various levels of employees. He
must be skillful to motivate and manage professional, skilled employees,
contingent workers, diversified workforce, low skilled works and
high respective tasks performing employees. Following section is
presented briefly on these issues.

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1. Motivating Professional
Very tough task motivating profession because they are loyal to their
profession than to their employer. This category is posing low priority on
money and promotions. They like to keep themselves update in
their field- so organization should provide them with challenging
projects. In order to motive professional manger should give them
autonomy & allow them to structure their job. Reward them with
educational opportunity training, workshops, attending conferences that
allow them to update. Reward them with recognition & ask question to
demonstrate that you are sincerely interested in what they are
doing. These are only few techniques useful to motivate professionals.
2. Motivating contingent workers
Few important reasons are coded why contingent works are motivated
very less. First-contingent employees dont have the security or stability
that permanent employees have, secondly-they dont identify themselves
with the organization and thirdly-these workers are provided with little or
no health care, pensions or similar benefits.
Motivation for this category is obviously a complex task to the manager.
The techniques that motivate contingent workers include the job he/she
is doing for can help develop salable skills and temporary
employees based on their performance can be given option to become
permanent
3. Motivating the diversified workforce
Money and promotions are not successful always in motivating
employees. Regard to employees requirement motivational
techniques should be developed. Since motivating diversified
workforce is not motivated by monetary and promotional benefits we
should give them flexibility in the work. For instance, employees who are
attending college, place high value on flexible work schedules and hours,
job sharing and flexible leave policy. There for key for motivating
diversified workforce is FLEXIBLITY.
4. Motivating low-skilled service workers
As low skilled worker having less opportunity to increase their pay
,limited education & skills, and pay levels are little above minimum wage
motivating skills used to other category of employees do not helpful. In
general two approaches can be worked out to motivate this category of
workers. Traditional approach- More flexible work schedules &
filling these jobs with teenagers and retirees who have lesser financial
needs. Non-traditional approach- celebrating employees interest like - to
exhibit their art, read their poetry, explain their volunteer work and
introduce their new babies.

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5. Motivating people doing highly repetitive tasks

It is easy to Motivating people in this job but careful selection should
made work environment and structure. Motivating them include
providing clean and attractive work surroundings ample work
breaks and opportunity to socialize with colleagues during breaks.
6.7 SUMMARY
Motivation is the key input to managerial success and encourages people
to give their finest performance and aid in reaching organizational goals.
The manager in general has to get the work done through others.
According Lewis to Allen Motivation is the work a manager performs to
inspire, encourage and impel people to take required action". Individuals
differ in their motivation that makes motivation complex Managers,
social scientists, behaviorists and psychologists have been finding new
facts and techniques of motivation. Manager has difficulties in
motivating various levels of employees. He must be skillful to motivate
and manage professional, skilled employees, contingent workers,
diversified workforce, low skilled works and high respective tasks
performing employees. Finally, motivation is different from job
satisfaction, since motivation is the process while satisfaction is
the outcome or consequence.
6.8 QUESTIONS FOR DICUSSION
1. What do you mean by Motivation? Why it is important.
2. Bring out the nature of Motivation.
3. In brief explain Maslows need hierarchy theory 4.
Contrast ERG theory and Maslows need hierarchy theory 5.
What are the problems in motivation?
6. Critically examine Maslow's need priority theory. How far up the
hierarchical ladder do most people progress?
7. Distinguish between motivators and hygiene factors. Why is it
important to make this distinction?

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Learning objectives

CHAPTER7
LEA
DING

After reading this chapter, you will be able to understand:

Leading and its importance
Characteristics of leaders
History of leading
Leading theories
Leadership approaches
Models of leadership and management
Leadership in Indian organizations
Leadership
in India in 21st century
Leadership in public
and private sector in India

7.1 INTRODUCTION
Leading one of key functions of management, most of times
managers are failed to be successful leaders. Leader is a one who
influences his follower to attainment of goals. Leadership is the stretch of
changing things that can be changed, of providing new thinking, new
energy, to the current situation. It means facing the reality of
your department, your practice, and deciding to bite that bullet.
Fire the underproductive but well-liked person who has not
responded to reasonable corrective action. Face the issues that
need faced, recurrently, even when it would be easier to delay,
procrastinates or ignores sustained, recurrent action over time. A good
leader creating a positive change; providing the impetus that creates
an atmosphere of change that improves the world, or at least the small
part of the world around us. The concepts of leader and leadership are
elaborately clearly discussed in chapter.
7.2 DEFINITION
Leader should influence his followers, can join up the aid and
support of others in the accomplishment of a common task. Leadership
has different meanings to various authors. Some of them are discussed
in this chapter.

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Leader is defined someone who can visualize a better world in the

future and is able to convince others to join him/her on the journey
Deborah Allen
Leadership is the ability to guide and motivate a group of people
to a common purpose-Bruce Bagley
Leadership means making a difference; leadership is
characterized by sustained action over time (Heroism is for the onetime
event)-Marjorie Bowman.
Leadership is defined as the opportunity to change the
world, hopefully for the better- English H. Gonzalez
Leadership is the act of influencing the behavior of others in an
intended direction-Robert Graham
Leadership is defined as that it is an opportunity for a person to
assume a role in which they can interact with colleagues to achieve a
certain end or goal.-Pat Harr
7.3 HISTORY
The role of leadership in solving both coordination and collective
action problems involving varying degrees of conflict allows us to
speculate about the scale and importance of leadership in human
evolution. Human leaders not only initiate group action but also
motivate, plan, organize, direct, monitor, and punish to achieve group
action. They may lead democratically or despotically, from the front or
from the back, and lead small or very large groups. Although there are
phylogenetic consistencies between human and non-human leadership,
the expansion of the human brain and the associated increase in human
group size has created a unique selection environment for human
leadership.
A review of the human and nonhuman leadership
literatures suggests at least five major transitions in the evolution
of human leadership:
1) Leadership emerged in pre-human species as a mechanism to solve
simple group coordination problems where any individual initiated an
action and others followed.
2) Leadership was co-opted to foster collective action in situations
involving significant conflicts of interest such as internal peacekeeping in
which dominant or socially important individuals emerged as leaders.

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3) Dominance was attenuated in early human egalitarian societies which

paved the way for democratic and prestige-based leadership facilitating
group coordination.
4) The increase in human group size selected for powerful social
cognitive mechanisms, such as theory of mind and language, providing
new opportunities for leaders to attract followers through manipulation
and persuasion.
5) The increase in social complexity of societies that took place after the
agricultural revolution produced the need for more powerful and formal
leaders to manage complex intra- and inter group relations-the chiefs,
kings, presidents, and CEOs-who at best provide important public
services and at worst abuse their position of power to dominate
and exploit followers.
7.4 IMPORTANCE OF LEADERSHIP
As the global economy gathers pace, more public and private
sector organizations are realizing that their main assets are their people
and that remaining, or becoming, competitive depends increasingly on
the development of a highly skilled workforce. This requires trained
and committed leaders but they, in turn, need the leadership of
highly effective managers and the support of other senior and
middle level leaders and managers.
The leadership is widely recognized as having crucial importance
for performance. Indeed, there is a wide range of issues relating to
supporting and promoting the provision of effective leadership in both
public and private sector organizations, including those around
recruitment, roles and responsibilities, retention, succession planning,
governance, continuing professional development and reward.
The way in which successful leaders apply leadership quality practices
will be influenced by a number of factors, including their
judgments about the conditions for working and learning in the
organizations, the confidence and experience of their staff; and the
behavior, aspirations and attainment levels of the employees. There is a
strong association between leadership practices and performance of the
employees in the organizations.
The successful leadership practices improve employees outcomes
through their values, virtues, dispositions, attributes and competences
as well as what they do in terms of the strategies they select and the
ways in which they adapt their leadership practices to their
unique context in order to achieve the excellent performance.

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While there is global interest in leadership and management, because of

its perceived importance in developing and maintaining successful
organizations and business environments systems, there is much less
clarity about which leadership behaviors are most likely to produce the
most favorable outcomes. Awareness of alternative approaches is
essential to provide a set of tools from which discerning leaders
can choose when facing problems and dealing with day-to-day issues.
Leadership is essentially the core and spirit of organizations. As
the people in charge, they not only manage the organization's affairs but
also deal with the general employees face to face. Entrusted with the
task to communicate organizational goals, visions and ideas to
employees, leaders are responsible for maintaining and implementing
organizational rules and systems and even have the final say on
promotion, retention and dismissal. Therefore, in a sense,
leaders at all levels are spokespersons of their own organizations,
serving as the bridge and link connecting employees.
Leadership styles and management methods across the world are diverse
and are influenced by specifications dominant in the environment.
Different studies and researches in different countries have emphasized
compliance of leadership style in terms of success conditions. The
relationship between managers and culture, and leaders and culture is
different. Managers tend to be the people who get things done, and the
corporate culture is the mechanism they use to understand how
to communicate, how to work and what to expect on a day to day basis.
The managerial staff knows what the current culture expects, how to
feed and nurture the existing culture and how strong or weak the
culture is. Managers of transnational organizations should necessarily
show flexibility proportional to culture differences, respect to the
differences, recognize motivates of the people, and select a suitable style
of leadership in accord to situations and then take action with regard to
the individuals under their supervision to realize defined objectives.
7.5 CHARACTERISTICS OF LEADERS
One of the most important characteristics of leaders is to have an insight
with which they can see what occurs in the group, organization
or society and diagnose the way it could be resolved. Such an insight
gives leaders energy and power to work. This energy and power can be
created in them by inspiring their followers and motivating them.
This inspiration defines their beliefs and converts them to reality.

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Leaders inspire their followers to recognize desirable ways and ask them
to recognize their leader and to reach to the desirable state that he has
specified - Zahedi (1999). The key characteristics of the leaders are:
Leaders Have Direction: They are focused on their job and they arent
easily distracted. Leaders work proactively, seeking new ideas and ways
to improve things. They dont get bogged down with smaller problems
and they provide others with direction as well. When people see a good
leader and their dedication to the job, it inspires them to be dedicated
too.
Effective Leaders Inspire and Motivate Others: They help others see
the importance of what they are doing and motivate them to do their
best. A good leader understands that everyone works differently
and takes note of others preferred work methods. They are able to use
this knowledge to get more out of their employees and coworkers and
show that they value them for their contributions.
Leaders Are Good Communicators: They interact well with
others despite different personality types and they know how to
confidently and effectively convey messages to others. In addition,
effective leaders make an effort to remember bits of personal information
about others, take note of their interests, skills and experience. Taking a
personal interest in someone strengthens their working relationship and
encourages them to be more dedicated.
Leaders are positive. They dont focus on the negative, but
inspire others by letting them see how important their contributions are.
This doesnt mean they never have any problems to deal with, but when
they do, they do not get wrapped up in the negative- they look for the
best solution and focus on reaching it.
Successful leaders are solutions-driven. They see the problem
and work for a solution, and they encourage others to help them.
Leaders see the bigger picture and are constantly moving toward a
specific goal.
7.6 THEORIES
Leadership is "organizing a group of people to achieve a common goal".
The leader may or may not have any formal authority. Students
of leadership have produced theories involving traits, situational
interaction, function, behavior, power, vision and values, charisma, and
intelligence, among others. Somebody whom people follow:
somebody who guides or directs others.

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Early Western History

The search for the characteristics or traits of leaders has been ongoing
for centuries. History's greatest philosophical writings from Plato's
Republic to Plutarch's Lives have explored the question "What qualities
distinguish an individual as a leader?" Underlying this search was the
early recognition of the importance of leadership and the
assumption that leadership is rooted in the characteristics that certain
individuals possess. This idea that leadership is based on individual
attributes is known as the "trait theory of leadership".
The trait theory was explored at length in a number of works in the 19th
century. Most notable are the writings of Thomas Carlyle and Francis
Galton, whose works have prompted decades of research. In Heroes and
Hero Worship, Carlyle identified the talents, skills, and physical
characteristics of men who rose to power. In Galton's Hereditary Genius,
he examined leadership qualities in the families of powerful men. After
showing that the numbers of eminent relatives dropped off when moving
from first degree to second degree relatives, Galton concluded that
leadership was inherited. In other words, leaders were born, not
developed. Both of these notable works lent great initial support for the
notion that leadership is rooted in characteristics of the leader.
Rise of Alternative Theories
In the late 1940s and early 1950s, however, a series of qualitative
studies prompted researchers to take a drastically different view of the
driving forces behind leadership. In reviewing the extant literature,
Stogdill and Mann found that while some traits were common across a
number of studies, the overall evidence suggested that persons who are
leaders in one situation may not necessarily be leaders in other
situations. Subsequently, leadership was no longer characterized as an
enduring individual trait, as situational approaches (see alternative
leadership theories below) posited that individuals can be effective
in certain situations, but not others. This approach dominated much of
the leadership theory and research for the next few decades.
Reemergence of Trait Theory
New methods and measurements were developed after these influential
reviews that would ultimately reestablish the trait theory as a
viable approach to the study of leadership. For example,
improvements in researchers' use of the round robin research design
methodology allowed researchers to see that individuals can and do
emerge as leaders across a variety of situations and tasks.
Additionally, during the 1980s statistical advances allowed
researchers to conduct meta-analyses, in which they could
quantitatively analyze and summarize the findings from a wide array
of studies.

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This advent allowed trait theorists to create a comprehensive picture of

previous leadership research rather than rely on the qualitative reviews
of the past.
Attribute Pattern Approach
Considering the criticisms of the trait theory outlined above,
several researchers have begun to adopt a different perspective of
leader individual differencesthe leader attributes pattern
approach. In contrast to the traditional approach, the leader
attribute pattern approach is based on theorists' arguments that
the influence of individual characteristics on outcomes is best
understood by considering the person as an integrated totality rather
than a summation of individual variables. In other words, the
leader attribute pattern approach argues that integrated
constellations or combinations of individual differences may explain
substantial variance in both leader emergence and leader effectiveness
beyond that explained by single attributes, or by additive
combinations of multiple attributes.
Behavioral and Style Theories
In response to the early criticisms of the trait approach, theorists began
to research leadership as a set of behaviors, evaluating the behavior of
successful leaders, determining behavior taxonomy, and identifying
broad leadership styles. David McClelland, for example, posited
that leadership takes a strong personality with a well-developed positive
ego. To lead, self-confidence and high self-esteem are useful, perhaps
even essential.
Kurt Lewin, Ronald Lipitt, and Ralph White developed in 1939 the
seminal work on the influence of leadership styles and performance. The
researchers evaluated the performance of groups of eleven-year-old boys
under different types of work climate. In each, the leader exercised his
influence regarding the type of group decision making, praise and
criticism (feedback), and the management of the group tasks
(project management) according to three styles: authoritarian,
democratic, and laissez-faire.
The managerial grid model is also based on a behavioral theory.
The model was developed by Robert Blake and Jane Mouton in 1964
and suggests five different leadership styles, based on the leaders'
concern for people and their concern for goal achievement.

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Positive Reinforcement
B.F. Skinner is the father of behavior modification and developed the
concept of positive reinforcement. Positive reinforcement occurs when a
positive stimulus is presented in response to a behavior, increasing the
likelihood of that behavior in the future. The following is an example of
how positive reinforcement can be used in a business setting. Assume
praise is a positive reinforce for a particular employee. This employee
does not show up to work on time every day. The manager of
this employee decides to praise the employee for showing up on time
every day the employee actually shows up to work on time. As a result,
the employee comes to work on time more often because the employee
likes to be praised. In this example, praise (the stimulus) is a
positive reinforce for this employee because the employee arrives at work
on time (the behavior) more frequently after being praised for showing up
to work on time.
Situational and Contingency Theories
Situational theory also appeared as a reaction to the trait theory
of leadership. Social scientists argued that history was more than
the result of intervention of great men as Carlyle suggested. This
theory assumes that different situations call for different
characteristics; according to this group of theories, no single
optimal psychographic profile of a leader exists. According to the theory,
"what an individual actually does when acting as a leader is in large part
dependent upon characteristics of the situation in which he functions."
Some theorists started to synthesize the trait and situational
approaches. The authoritarian leadership style, for example, is approved
in periods of crisis but fails to win the "hearts and minds" of followers in
day-to-day management; the democratic leadership style is more
adequate in situations that require consensus building; finally, the
laissez-faire leadership style is appreciated for the degree of freedom it
provides, but as the leaders do not "take charge", they can be perceived
as a failure in protracted or thorny organizational problems. Thus,
theorists defined the style of leadership as contingent to the situation,
which is sometimes, classified as contingency theory. Four contingency
leadership theories appear more prominently in recent years:
Fiedler contingency model, Vroom-Yetton decision model, the path-goal
theory, and the Hersey-Blanchard situational theory.
The Fiedler contingency model bases the leader's effectiveness on what
Fred Fiedler called situational contingency. This results from the
interaction of leadership style and situational favorability (later
called

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situational control). The theory defined two types of leader: those who
tend to accomplish the task by developing good relationships with the
group (relationship-oriented), and those who have as their prime concern
carrying out the task itself (task-oriented). According to Fiedler, there is
no ideal leader. Both task-oriented and relationship-oriented leaders can
be effective if their leadership orientation fits the situation. When there is
a good leader-member relation, a highly structured task, and high leader
position power, the situation is considered a "favorable situation". Fiedler
found that task-oriented leaders are more effective in extremely favorable
or unfavorable situations, whereas relationship-oriented leaders perform
best in situations with intermediate favorability.
Victor Vroom, in collaboration with Phillip Yetton and later with Arthur
Jago, developed a taxonomy for describing leadership situations, which
was used in a normative decision model where leadership styles were
connected to situational variables, defining which approach was more
suitable to which situation. This approach was novel because it
supported the idea that the same manager could rely on different group
decision making approaches depending on the attributes of each
situation. This model was later referred to as situational
contingency theory.
The path-goal theory of leadership was developed by Robert House and
was based on the expectancy theory of Victor Vroom. According to
House, the essence of the theory is "the meta proposition that leaders, to
be effective, engage in behaviors that complement subordinates'
environments and abilities in a manner that compensates for
deficiencies and is instrumental to subordinate satisfaction and
individual and work unit performance". The theory identifies four leader
behaviors, achievement-oriented, directive, participative, and supportive,
that is contingent to the environment factors and follower
characteristics. In contrast to the Fiedler contingency model, the
pathgoal model states that the four leadership behaviors are fluid, and
that leaders can adopt any of the four depending on what the
situation demands. The path-goal model can be classified both as a
contingency theory, as it depends on the circumstances, and as a
transactional leadership theory, as the theory emphasizes the
reciprocity behavior between the leader and the followers
The situational leadership model proposed by Hersey and
Blanchard suggests four leadership-styles and four levels of followerdevelopment. For effectiveness, the model posits that the leadership-style
must match the appropriate level of follower-development. In this model,
leadership behavior becomes a function not only of the characteristics of
the leader, but of the characteristics of followers as well.

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Functional Theory
Functional leadership theory is a particularly useful theory for
addressing specific leader behaviors expected to contribute to
organizational or unit effectiveness. This theory argues that the leader's
main job is to see that whatever is necessary to group needs is taken
care of; thus, a leader can be said to have done their job well when they
have contributed to group effectiveness and cohesion. While functional
leadership theory has most often been applied to team leadership, it has
also been effectively applied to broader organizational leadership as well.
These functions include environmental monitoring, organizing
subordinate activities, teaching and coaching subordinates, motivating
others, and intervening actively in the group's work.
A variety of leadership behaviors are expected to facilitate these
functions. In initial work identifying leader behavior, it is observed that
subordinates perceived their supervisors' behavior in terms of two broad
categories referred to as consideration and initiating structure.
Consideration includes behavior involved in fostering effective
relationships. Examples of such behavior would include showing
concern for a subordinate or acting in a supportive manner
towards others. Initiating structure involves the actions of the
leader focused specifically on task accomplishment. This could include
role clarification, setting performance standards, and holding
subordinates accountable to those standards.
Emotions
Leadership can be perceived as a particularly emotion-laden
process, with emotions entwined with the social influence process.
In an organization, the leader's mood has some effects on his/her
group. These effects can be described in three levels:
1) The mood of individual group members. Group members with leaders
in a positive mood experience more positive mood than do group
members with leaders in a negative mood. The leaders transmit their
moods to other group members through the mechanism of emotional
contagion. Mood contagion may be one of the psychological mechanisms
by which charismatic leaders influence followers.
2) The affective tone of the group. Group affective tone represents the
consistent or homogeneous affective reactions within a group.
Group affective tone is an aggregate of the moods of the individual
members of the group and refers to mood at the group level of analysis.

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Groups with leaders in a positive mood have a more positive affective

tone than do groups with leaders in a negative mood.
3) Group processes like coordination, effort expenditure, and task
strategy. Public expressions of mood impact how group members think
and act. When people experience and express mood, they send signals to
others. Leaders signal their goals, intentions, and attitudes through their
expressions of moods. The expressions of positive moods by
leaders signal that leaders deem progress toward goals to be good. The
group members respond to those signals cognitively and behaviorally in
ways that are reflected in the group processes.
Neo-Emergent Theory
The Neo-emergent leadership theory (from the Oxford school of
leadership) espouses that leadership is created through the emergence of
information by the leader or other stakeholders, not through the true
actions of the leader himself. In other words, the reproduction of
information or stories, form the basis of the perception of leadership by
the majority. It is well known that the great naval hero Lord Nelson often
wrote his own versions of battles he was involved in, so that when he
arrived home in England he would receive a true hero's welcome.
In modern society, the press, blogs and other sources report their
own views of a leader, which may be based on reality, but may also be
based on a political command, a payment, or an inherent interest
of the author, media, or leader. Therefore, it can be contended
that the perception of all leaders is created and in fact does not reflect
their true leadership qualities at all.
7.7 APPROACHES OF LEADERSHIP
The Trait Approach to Leadership
The Trait Approach arose from the Great Man theory as a way
of identifying the key characteristics of successful leaders. It was
believed that through this approach critical leadership traits could be
isolated and that people with such traits could then be recruited,
selected, and installed into leadership positions. This approach was
common in the military and is still used as a set of criteria to
select candidates for commissions.
The table 7.1 below lists the main leadership traits and skills
identified by Stogdill in 1974.

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The Behavioral School

The results of the trait studies were inconclusive. Traits, amongst other
things, were hard to measure. After the publication of the late Douglas
McGregor's classic book The Human Side of Enterprise in 1960,
attention shifted to behavioral theories. McGregor was a teacher,
researcher, and consultant whose work was considered to be "on
the cutting edge" of managing people. He influenced all the
behavioral theories, which emphasize focusing on human relationships,
along with output and performance.

Table -7.1: Leadership traits and skills

Traits
Adaptable to
situations Alert
to
social
environment
- Ambitious
and
achievement
orientated
- Assertive Cooperative Decisive
others) pend
able
- Energetic (high activity
- Dominant
level) - Persistent
(desire
to
influence
- Self-confident -

Clever
Skills
(intelligent)
Conceptually
skilled - Creative Diplomatic
and
tactful - Fluent in
speaking
Knowledgeable
about group task
Organized
(administrative
ability) - Persuasive
- Socially skilled

Tolerant of stress
- Willing to assume responsibility

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Blake and Mouton's Managerial Grid

The Managerial Grid developed by Robert Blake and Jane Mouton
focuses on task (production) and employee (people) orientations of
managers, as well as combinations of concerns between the two
extremes. A grid with concern for production on the horizontal axis and
concern for people, on the vertical axis and plots five basic leadership
styles. The first number refers to a leader's production or task
orientation; the second, to people or employee orientation. Figure 7.1 has
presented different managerial styles.

Figure-7.1: Blake and Moutons Grid

Blake and Mouton propose that Team Management - a

high concern for both employees and production - is the most effective
type of leadership behavior.
The Contingency or Situational School
Whilst behavioral theories may help managers develop particular
leadership behaviors they give little guidance as to what
constitutes effective leadership in different situations. Indeed, most
researchers today conclude that no one leadership style is right for every
manager under all circumstances. Instead, contingency-situational
theories were developed to indicate that the style to be used is contingent
upon such factors as the situation, the people, the task, the
organization, and other environmental variables. The major theories
contributing towards this school of thought are described below.

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Fiedler's Contingency Model

Fiedler's contingency theory postulates that there is no
single best way for managers to lead. Situations will create different
leadership style requirements for a manager. The solution to a
managerial situation is contingent on the factors that impinge on the
situation. For example, in a highly routine (mechanistic) environment
where repetitive tasks are the norm, a relatively directive leadership style
may result in the best performance,
however,
in
a
dynamic
environment a more flexible, participative style may be required.
Fiedler looked at three situations that could define the condition
of a managerial task:
1. Leader member relations: How well do the manager and the
employees get along?
2. Task structure: Is the job highly structured, fairly unstructured, or
somewhere in between?
3. Position power: How much authority does the manager possess?
Managers were rated as to whether they were relationship
oriented or task oriented. Task oriented managers tend to do better in
situations that have good leader-member relationships, structured tasks,
and either weak or strong position power. They do well when the task is
unstructured but position power is strong. Also, they did well at
the other end of the spectrum when the leader member relations
were moderate to poor and the task was unstructured. Relationship
oriented managers do better in all other situations. Thus, a given
situation might call for a manager with a different style or a manager
who could take on a different style for a different situation.
These environmental variables are combined in a weighted sum
that is termed "favorable" at one end and "unfavorable" at the
other. Task oriented style is preferable at the clearly defined
extremes
of "favorable" and "unfavorable" environments, but
relationship orientation excels in the middle ground. Managers could
attempt to reshape the environment variables to match their style.
Another aspect of the contingency model theory is that the leadermember relations, task structure, and position power dictate a
leader's situational control. Leader-member relations are the amount of
loyalty, dependability, and support that the leader receives from
employees. It is a measure of how the manager perceives him or her and
the group of employees is getting along together. In a favorable
relationship the manager has a high task structure and is able to reward

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and or punish employees without any problems. In an unfavorable

relationship the task is usually unstructured and the leader possesses
limited authority. The spelling out in detail (favorable) of what is required
of subordinates affects task structure.
Positioning power measures the amount of power or authority the
manager perceives the organization has given him or her for the purpose
of directing, rewarding, and punishing subordinates. Positioning power
of managers depends on the taking away (favorable) or increasing
(unfavorable) the decision-making power of employees.
The task-motivated style leader experiences pride
and
satisfaction in the task accomplishment for the organization, while the
relationship-motivated style seeks to build interpersonal relations and
extend extra help for the team development in the organization. There is
no good or bad leadership style. Each person has his or her own
preferences for leadership. Task-motivated leaders are at their best when
the group performs successfully such as achieving a new sales record or
outperforming the major competitor. Relationship-oriented leaders are at
their best when greater customer satisfaction is gained and a positive
company image is established.
The Hersey-Blanchard Model of Leadership
The Hersey-Blanchard Leadership Model also takes a situational
perspective of leadership. This model posits that the developmental
levels of a leader's subordinates play the greatest role in determining
which leadership styles (leader behaviors) are most appropriate. Their
theory is based on the amount of direction
(task behavior) and
socioemotional support (relationship behavior) a leader must provide
given the situation and the "level of maturity" of the followers:
Task behavior is the extent to which the leader engages in spelling
out the duties and responsibilities to an individual or group. This
behavior includes telling people what to do, how to do it, when to do it,
where to do it, and who's to do it. In task behavior the leader engages in
one-way communication.
Relationship behavior is the extent to which the leader engages in
two-way or multi-way communications. This includes listening,
facilitating, and supportive behaviors. In relationship behavior the leader
engages in two-way communication by providing socio-emotional
support.

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Maturity is the willingness and ability of a person to take

responsibility for directing his or her own behavior. People tend to have
varying degrees of maturity, depending on the specific task, function, or
objective that a leader is attempting to accomplish through their efforts.
In summary therefore leader behaviors fall along two continua presented
7.2:

Table-7.2: Directive and Supportive Behavior

Directive Behavior

Supportive Behavior

One-Way
Communication
Followers' Roles Clearly
Communicated
Close Supervision of
Performance

Two-Way
Communication
Listening,
providing
support
and
encouragement
Facilitate
interaction
Involve
follower in
decision-making.

For
Blanchard
the
key
situational
variable,
when
determining
the appropriate leadership style, is the readiness or
developmental level of the subordinate(s). As a result, four leadership
styles result:
Directing: The leader provides clear instructions and specific
direction. This style is best matched with a low follower readiness level.
Coaching: The leader encourages two-way communication and helps
build confidence and motivation on the part of the employee, although
the leader still has responsibility and controls decision making. Selling
style is best matched with a moderate follower readiness level.
Supporting: With this style, the leader and followers share decision
making and no longer need or expect the relationship to be directive.
Participating style is best matched with a moderate follower readiness
level.
Delegating: This style is appropriate for leaders whose followers are
ready to accomplish a particular task and are both competent and
motivated to take full responsibility. Delegating style is best
matched with a high follower readiness level.

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To determine the appropriate leadership style to use in a

given situation, the leader must first determine the maturity level
of the followers in relation to the specific task that the leader is
attempting to accomplish through the effort of the followers. As the level
of followers' maturity increases, the leader should begin to reduce his or
her task behavior and increase relationship behavior until the followers
reach a moderate level of maturity. As the followers begin to move into
an above average level of maturity, the leader should decrease not
only task behavior but also relationship behavior. Once the
maturity level is identified, the appropriate leadership style can be
determined.
Tannenbaum and Schmidts Leadership Continuum
One criticism of early work on leadership styles is that they looked at
styles too much in black and white terms. The autocratic and democratic
styles or task-oriented and relationship-oriented styles which they
described are extremes, whereas in practice the behavior of many,
perhaps most, leaders in business will be somewhere between the two.
Contingency theorists Tannenbaum and Schmidt suggested the idea that
leadership behavior varies along a continuum and that as one moves
away from the autocratic extreme the amount of subordinate
participation and involvement in decision taking increases. They
also suggested that the kind of leadership represented by the
democratic extreme of the continuum will be rarely encountered in
formal organizations.
Four main leadership styles can be located at points along such a
continuum:
Autocratic: The leader takes the decisions and announces
them; expecting subordinates to carry them out without question (the
Telling style).
Persuasive: At this point on the scale the leader also takes all the
decisions for the group without discussion or consultation but believes
that people will be better motivated if they are persuaded that the
decisions are good ones. He or she does a lot of explaining and 'selling' in
order to overcome any possible resistance to what he or she wants to do.
The leader also puts a lot of energy into creating enthusiasm for the
goals he or she has set for the group (the Selling style).
Consultative: In this style the leader confers with the group members
before taking decisions and, in fact, considers their advice and
their feelings when framing decisions. He or she may, of course, not
always accept the subordinates' advice but they are likely to feel that
they can

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have some influence. Under this leadership style the decision and the
full responsibility for it remain with the leader but the degree of
involvement by subordinates in decision taking is very much
greater than telling or selling styles (the Consulting style).
Democratic: Using this style the leader would characteristically lay
the problem before his or her subordinates and invite discussion. The
leader's role is that of conference leader, or chair, rather than that of
decision taker. He or she will allow the decision to emerge out of the
process of group discussion, instead of imposing it on the group as its
boss (the Joining style).
What distinguishes this approach from previous discussions of
leadership style is that there will be some situations in which each of the
above styles is likely to be more appropriate than the others.
Telling: In an emergency, a telling style may be most appropriate and
would normally be considered justified by the group (as long as
the general climate of that group is supportive and mature).
Selling: The selling style would tend to fit situations in which the
group leader, and he or she alone, possesses all the information
on which the decision must be based and which at the same time calls
for a very high level of commitment and enthusiasm on the part of
group members if the task is to be carried through successfully.
Consulting: The consulting style is likely to be most
appropriate when there is time in which to reach a considered decision
and when the information on which the decision needs to be based
lies among the members of the group.
Joining: The joining style is appropriate under similar
conditions, with the important exception that this is likely to be
appropriate only in those instances where the nature of the
responsibility associated with the decision is such that group members
are willing to share it with their leader, or alternatively the leader is
willing to accept responsibility for decisions which he or she has not
made personally.
Adairs Action-Centered Leadership Model
John Adair has a long pedigree in the world of leadership. The Adair
model is that the action-centered leader gets the job done through the
work team and relationships with fellow managers and staff. According
to Adair's explanation an action-centered leader must:
Direct the job to be done (task structuring)

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Support and review the individual people doing it

Co-ordinate and foster the work team as a whole
Figure-7.2: Adairs Action-Centered Leadership Model

Figure-7.2: Adairs Action-Centered Leadership

Model

His famous three circle diagram is a simplification of the variability of

human interaction, but is a useful tool for thinking about what
constitutes an effective leader/manager in relation to the job he/she has
to do. The effective leader/manager carries out the functions and
exhibits the behaviors depicted by the three circles. Situational
and contingent elements call for different responses by the leader.
Hence imagine that the various circles may be bigger or smaller as the
situation varies i.e. the leader will give more or less emphasis to the
functionallyoriented behaviors according to what the actual situation
involves. The challenge for the leader is presented in the table 7.3.

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7.8 MODELS OF LEADERSHIP AND

MANAGEMENT Managerial Leadership
Leithwood, et. al., (1999) defines this model as:
Managerial leadership assumes that the focus of leaders ought to be on
functions, tasks and behaviors and that if these functions are carried
out competently the work of others in the organization will be facilitated.
Most approaches to managerial leadership also assume that the behavior
of organizational members is largely rational. Authority and influence are
allocated to formal positions in proportion to the status of those
positions in the organizational hierarchy.
Caldwell (1992) argues that managers and leaders of self-managing
educational institutions must be able to develop and implement a
cyclical process involving seven managerial functions.
Goal setting
Needs identification
Priority-setting
Planning and Budgeting
Implementing
Evaluating
It is significant to note that this type of leadership does not include the
concept of vision, which is central to most leadership models. Managerial
leadership is focused on managing existing activities successfully rather
than visioning a better future for the institution.

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This approach is very suitable for institutional leaders working in

centralized systems as it prioritizes the efficient implementation of
external imperatives, notably those prescribed by higher levels within the
bureaucratic hierarchy.
Bureaucracy and by implication managerial leadership, is the preferred
model for many education systems. This approach is associated
with authoritarian, hierarchical and inaccessible management
styles and that the principals authority is perceived to be god-given
and juridical. This model can be regarded as the starting point
for the study and practice of educational management, in South Africa,
Europe, and North America.
Managerial leadership has certain advantages, notably for bureaucratic
systems, but there are difficulties in applying it too enthusiastically to
schools and colleges because of the professional role of teachers. If
principals and educators do not own innovations but are simply
required to implement externally imposed changes, they are likely to do
so without enthusiasm, leading to possible failure.
Transformational Leadership
Bass, B. M (1990), links three leadership models to his collegial
management model. The first of these is transformational leadership.
This form of leadership assumes that the central focus of
leadership ought to be the commitments and capacities of organizational
members. Higher levels of personal commitment to organizational goals
and greater capacities for accomplishing those goals are assumed to
result in extra effort and greater productivity.
Bass, B. M (1990) conceptualizes transformational leadership along eight
dimensions:
Building vision
Establishing goals
Providing intellectual stimulation
Offering individualized support
Modeling best practices and important organizational values
Demonstrating high performance expectations
Creating a
productive culture
Developing structures to foster participation in decisions
Charbonneau D (2001), argue that transformational leadership is
essential for business organizations. Transformational leaders succeed

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in gaining the commitment of followers to such a degree that

higher levels of accomplishment become virtually a moral imperative.
The powerful capacity for transformational leadership is required for the
successful transition to a system of self managing organizations.
The transformational model is comprehensive in that it provides a
normative approach to leadership, which focuses primarily on the
process by which leaders seek to influence organizations outcomes
rather than on the nature or direction of those outcomes. However, it
may also be criticized as being a vehicle for control over leaders and
more likely to be accepted by the leader than the led Friedman, A. A
(2004)
Allix (2000) goes further and alleges that transformational
leadership has the potential to become despotic because of its strong,
heroic and charismatic features. He believes that the leaders power
ought to raise moral qualms and serious doubts about its
appropriateness for democratic organizations.
The politicians and bureaucrats are inclined to use the language
of transformation to achieve their own policy objectives. The
English system increasingly requires institutional leaders to
adhere to government prescriptions, which affect aims, curriculum
content and pedagogy as well as values. There is a more centralized,
more directed, and more controlled educational system that has
dramatically reduced the possibility of realizing a genuinely
transformational organization and leadership.
However, there is a chasm between the rhetoric and the reality of
transformation. Lemon (2004) is one of several writers who claim that
national policies have been rich in the political symbolism of equity and
redress but with very limited implementation of change on the ground.
The Task Team on Management Development observes that real
transformation will depend on the nature and quality of internal
management. Self-management must be accompanied by an
internal devolution of power within the organization and by
transformational leadership.
A transformational leadership approach has the potential to engage all
stakeholders in the achievement of organizational objectives. The aims of
leaders and followers coalesce to such an extent that it may be realistic
to assume a harmonious relationship and a genuine convergence leading
to agreed decisions. Transformation requires action at all levels
and there are limits to what managers can achieve in the absence
of appropriate physical, human and financial resources.

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Participative Leadership
Participative leadership assumes that the decision-making processes of
the group ought to be the central focus of the group. This model
is underpinned by three assumptions.
Participation will increase effectiveness;
Participation is justified by democratic principles; and
In the
context of site-based management, leadership is potentially available
to any legitimate stakeholder.
Vroom, V. H. and Jago, A. G (1984) points the importance of a
participative approach. This will succeed in bonding employees
together and in easing the pressures on managers. The burdens of
leadership will be less if leadership functions and roles are shared
and if the concept of leadership density were to emerge as a viable
replacement for manager leadership. Ivey G. W., Theresa J.B. and Kline
T (2010) points out the need for co-operation between managers
and General Bodies (GBs), if governance is to be effective.
Political and Transactional Leadership:
Miller, T.W., and Miller, J.M (2003) links the transactional leadership to
his political model. In political models, there is conflict between
stakeholders, with disagreement being resolved in favor of the most
powerful protagonists.
Transactional leadership is leadership in which relationships
with employees are based upon an exchange for some valued resource.
To the employee, interaction between managers and employees is
usually episodic, short-lived and limited to the exchange transaction.
Miller and Millers (2001) definition refers to transactional leadership as
an exchange process. Exchange is an established political strategy for
members of organizations. Leaders possess authority arising from their
positions as the formal leaders of their organizations. However, the head
requires the cooperation of employees to secure the effective
management of the organization.
Political theories have obvious
relevance to the extended period of struggle against the Apartheid
regime.
Harms, P.D., and Marcus Cred (1995) argue that a constant feature of
organizational resistance has been what may be termed the politics of
opposition. Key aspects of this politics have been mass mobilization and
organization and mass action in pursuit of particular policy objectives
and a non-racial and non-sexist democratic social order.

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Trade unions act to protect the perceived interests of their members. The
GB itself is a political forum because it provides for the representation of
sectional interests, creating the conditions for the increasing
fragmentation of the corporate system.
Post-Modern Leadership:
Bush (2003) note that post-modern leadership aligns closely with
his subjective model of management. Similarly, Keough and Tobin
(2001) say that current postmodern culture celebrates the
multiplicity of subjective truths as defined by experience and revels
in the loss of absolute authority.
The post-modern model suggests that leaders should respect, and give
attention to, the diverse and individual perspectives of
stakeholders. They should also avoid reliance on the hierarchy because
this concept has little meaning in such a fluid organization.
Starratt (2001) aligns post modernity with democracy and advocates a
more consultative, participatory, inclusionary stance, an approach
consistent with participative leadership. Managers need to facilitate
participation by employees, executives, social groups and community in
all issues that affect their interests.
Moral Leadership:
This model assumes that the critical focus of leadership ought to be on
the values, beliefs, and ethics of leaders themselves. Authority and
influence are to be derived from defensible conceptions of what is right
or good. Sergiovanni (1984) says that excellent organizations have
central zones composed of values and beliefs that take on sacred
or cultural characteristics. Subsequently, he adds that administering
is a moral craft.
West-Burnham (1997) discusses two approaches to leadership,
which may be categorized as moral. The first he describes as
spiritual and relates to the recognition that many leaders possess
what might be called higher order perspectives. Such leaders have a
set of principles, which provide the basis of self-awareness. The second
category is moral confidence, the capacity to act in a way that is
consistent with an ethical system and is consistent over time.
Both moral and managerial leadership are required to develop a learning
community: In the management the challenge of leadership is to make
peace with two competing imperatives, the managerial and the moral.

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The two imperatives are unavoidable and the neglect of either creates
problems. Business organizations must be run effectively if they are to
survive.
Instructional Leadership:
Instructional leadership differs from the other models reviewed in this
chapter because it focuses on the direction of influence, rather than its
nature and source. The increasing emphasis on managing teaching and
learning as the core activities of educational institutions has led to this
approach being endorsed, notably by the English National College for
School Leadership, which includes it as one of its ten leadership
propositions. Southworth (2002) says that instructional leadership ... is
strongly concerned with motivating and learning as well as organization
growth.
Bush and Glovers (2002) definition stresses the direction of the influence
process: Instructional leadership focuses on motivating and learning and
on the behavior of employees in working places. The emphasis is on the
direction and impact of influence rather than the influence process itself.
Instructional leadership is a very important dimension because it targets
the organizations central activities. However, this paradigm
underestimates other aspects of organizational life, such as socialization,
employees welfare, and self esteem.
Contingent Leadership:
The contingent model provides an alternative approach, recognizing the
diverse nature of business contexts and the advantages of
adapting leadership styles to the particular situation, rather than
adopting a one size fits all stance:
This approach assumes that what is important is how leaders respond to
the unique organizational circumstances or problems. There are wide
variations in the contexts for leadership and that, to be effective, these
contexts require different leadership responses, individuals providing
leadership, typically those in formal positions of authority, are capable of
mastering a large repertoire of leadership practices. Their influence will
depend, in large measure, on such mastery.
India has one of the most diverse business systems in the world.
It ranges from well-endowed large sized organizations, comparable to the
best in developed countries, to tiny and small organizations
without access to the most basic facilities, such as water, power, lighting
and

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sanitation. Given such disparities, it is unwise to prescribe one universal

approach to organizational leadership and management. It is much
better to equip principals with a tool kit of skills and the wisdom to
know which approaches should be applied in the particular
circumstances they are required to manage
Yukl (2002) note that the managerial job is too complex and
unpredictable to rely on a set of standardized responses to events.
Leadership requires effective diagnosis of problems, followed by adopting
the most appropriate response to the issue or situation Morgan, (1997).
This reflexive approach is particularly important in periods of turbulence
when leaders need to be able to assess the situation carefully and react
as appropriate rather than relying on a standard leadership model.
7.9 NATURE OF LEADERSHIP IN INDIAN ORGANIZATIONS
The Indian society is a traditional society and accordingly the
value system of Indian leaders is strongly influenced by the joint family
system and the concept of karta (head of Hindu undivided family)
for many centuries. The head of the family has the control over all other
family members. This importance and respect of power and authority of
karta spread throughout the family including business organizations.
Although this trend of respect for the position of power is
uniformly present throughout India, yet the leadership styles in
the Indian business organizations vary with the form of the
organization. Broadly, the business leadership in the Indian context
has been classified into the following three types:
Leadership in professionally managed organizations: here there is a
significant degree of participative approach is visible in the leadership
style of the managers.
Leadership in public sector organizations: here the bureaucratic style
of leadership is followed as these organizations are led by civil servants.
The implications of this leadership are difference in status, large power
gaps between superiors and subordinates, adherence to procedures and
rules and impersonal relations.
Leadership in family managed organizations: This type of
business organizations have autocratic or benevolent authoritative
style of leadership. These organizations have management by
inheritance or management by chromosomes. As a result the sons and
grandsons of entrepreneurs are automatically promoted without
considering their actual competencies. These organizations are highly
centralized, family

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oriented organizational structure and authoritative in their

approach towards employees.
In the initial stages of organizational evolution an authoritarian
style is suitable but if the successors adopt the same style without
any change or modification even when there is a significant growth in
the organization, the results may not be impressive.
7.10 FACTORS AFFECTING BUSINESS LEADERSHIP IN INDIA IN
21ST CENTURY
The leadership scenario in India has undergone a significant
transformation after liberalization and Privatization. Certain factors
must be borne by the managers leading the Indian organizations in new
millennium are as under:
Employees today are more educated and aware about the things than
in the past.
Employees have more job opportunities available with them than in
the past
Employees have varied expectations from organizations and
leadership and from nature of work than in the past.
There is increased professionalism in employees and they expect
same from their managers and leaders.
The Indian managers believe that the subordinates can work
only with supervision and does not have any sense of responsibility.
Indian managers have a belief in group based participative decision
making and they have little faith in the capacity of their employees for
taking initiative and responsibility.
7.11 DIFFERENCES IN LEADERSHIP IN PUBLIC AND PRIVATE
SECTOR IN INDIA
PUBLIC SECTOR
A public sector organization is assumed to operate in a different way
than a private sector organization. By implication, the attitudes
and behaviors of employees of those two types of organizations have
been contrasted. Differences in culture, structure, interpersonal
relations are highlighted. Leadership is an important and crucial variable
that leads to

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enhanced management capacity, as well as organizational performance.

The leaders in public sector need to achieve several objectives like
reduction in inter-regional disparities, earning a reasonable rate of
return for generating surpluses for further investment, building
infrastructure for development, generation of employment opportunities,
diversification of economy and promotion of rapid economic growth. A
public sector enterprise may be defined as any commercial or industrial
undertaking owned and managed by the government with a view
to maximize social welfare and uphold the public interest.
Characteristics of Public Sector Organizations:
Government Ownership - The ownership and management of the
organization will be with the Central government or state government or
local authority or partly to private players. E.g. NTPC, ONGC
Financed From Government Funds - The public enterprises get
funds from the Government funds and the government has to allocate
funds in its budget.
Public Welfare - These organizations motive is not for profit
but focuses on providing commodity or service at reasonable prices.
E.g. Indian Oil Corporation, Steel Authority of India.
Public Utility Services - These organizations are for providing public
utility services like telecommunications, infrastructure and transport.
PRIVATE SECTOR
In the last two decades there have been remarkable changes in
the world economy as many countries are emphasizing upon the
public sector in the economic domain of their respective economies
found a new mantra of economic progression by giving more
importance to privatization.
Deputy Chairman of the Planning Commission of India Motek
Singh Ahluwalia30 writes about the economic strategy in the preface
of the Eleventh Plan that as in most market economies, the dominant
impulse for growth will come from the private sector. India is fortunate in
having a strong private sector capability ranging from agriculture,
which is entirely dependent on private farmers, most of whom have
modest land holdings, through small and medium entrepreneurs in
industry and services to larger domestic corporate entities, many of
which benefit from FDI to varying degrees. The Eleventh Plan must
ensure a policy environment that is supportive of this vibrant and
globalized private sector which has an important contribution to make
in Indias future development.

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It is found that the private sector is gradually stepping up

its participation in new areas like infrastructure ranging from the
road construction, electricity generation and distribution to the social
sector like health, education and rural development. Anupam Rastogi31
notes that After more than a decade of liberalization, one can witness
some private sector investments in the provisioning of infrastructure
services at varied levels. The sectors such as telecom, roads and sea
ports, oil and gas etc., which were opened to private sector earlier,
are very competitive and service providers are going out of their
way
to
get business. The consumers have shown increased
sophistication over the years. They are price savvy and demanding in
other ways.
The Indian economy is now enjoying the benefit of the
demographic dividend that would help it in being more competitive
in the coming years where the private sector would be bestowed
with the supply of cheap and continuous flow of skilled labor force.
Differences of leadership in public and private enterprises
Public sector organizations are usually as complex as private
sector organizations and it therefore is logical to find that the global
leadership profile in private and public sector are similar to a very large
extent. Leaders from the public and private sectors are indeed equally
firm when it comes to making decisions, persuading interlocutors and
leading and motivating teams. The differences observed are most of the
time small, be it certainly not without some major consequences.
Private sector leaders have a clear tendency to go for short term results,
being prepared to take calculated risks and to be optimistic about the
outcome they can expect. In contrast, public sector leaders take way
more distance from the problems they have to face, look strategically at
the longer term and opt for a thoughtful, innovative and risk-aversive
approach of solving problems.
These differences are clearly linked to the typical contexts in which these
leaders have to operate. The following are the differences in leadership in
Public and private sector32.
Leaders in the public sector are more focused on creating a long term
strategy than on winning in the short term.
Private sector leaders are essentially focused on the short-term and
on quick results.
Public sector leaders are more inclined to 'control'; private sector
leaders to 'believe and trust'.
Public sector leaders are less optimistic about the outcome of their
actions, but they go for a more thoughtful approach.

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In the public sector, women leaders demonstrate a more

outspoken profile.
Younger managers in the private sector get more opportunities and
more room for self-development.
7.12 SUMMARY
Leader is a one who influences his follower to attainment of goals.
Leadership is the stretch of changing things that can be changed,
of providing new thinking, new energy, to the current situation.
According to Deborah Allen Leader is defined someone who can
visualize a better world in the future and is able to convince others to
join him/her on the journey. The leadership is widely recognized
as having crucial importance for performance. One of the most
important characteristics of leaders is to have an insight with which they
can see what occurs in the group, organization or society and
diagnose the way it could be resolved. Such an insight gives leaders
energy and power to work.
The Indian society is a traditional society and accordingly the
value system of Indian leaders is the head of the family has the control
over all other family members Public sector organizations are usually as
complex as private sector organizations and it therefore is logical to find
that the global leadership profile in private and public sector are similar
to a very large extent.
7.13 QUESTIONS FOR DISCUSSION
1. What is the importance of leadership in and organization?
2. Explain characteristics of a leader?
3. Briefly discuss Reemergence of Trait Theory. 4.
Discuss Situational and Contingency Theories.
5. Explain importance in the Hersey-Blanchard Model of Leadership.
6. Discuss any five important models of leadership.
7. What is the nature of leaders in Indian organizations? 8. What are the
key factors differing in public and private organizations leadership
styles?

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CHAPTE
R-8
CONTROLLING
Learning objectives
After reading this chapter, you will be able to understand:
Why Controlling? And definitions
The control process
Types of organizational controls
Requirements for effective control
Controlling techniques
The control
pyramid Strategies
8.1
for achieving organizational control
INTRODUCTION

Simply speaking controlling is key element for every human being for
success, if one not having control means he/she does not meet
desired goals and loss survival. Before you control any human or
machine first you should have proper control on you thank can
provide controlling skills. Either manager or leader controlling people is
very important to meet goals and objectives. It is simply ordering of our
activities in order to meet out desired end by matching actual with
desired.
For organizations controlling is an important function of
management which guiding and managing an organization in repose to
organizational and environmental changes. It measures current
performance and comparing with predetermined standards. However,
controlling function simply facilitate conditions knowing what is
actually happening in comparison to present standards and then
making any necessary corrections. In fact planning and controlling
functions are closely related and these cannot be separated because
plans and strategies can to be carried out in the absence of control.
Hence controlling is the process of measuring progress toward
planned performance and applying corrective measures.
In todays business we cannot step forward business functions
without controlling, for example manager must control their people,
inventories, costs, qualities and etc., these just few responsibilities
and a lot more to do.

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8.2 DEFINITION
Controlling is the process if measuring progress toward planned
performance and applying corrective measures to ensure the
performance
in
line
with
managers
objectives.
Thomas.S.Batemen
is and Scott.A.Snell.
Simply put, controlling is defined as process of ensuring
organizational activities are going according to plan, comparing
actual performance to standards, and then taking corrective actions to
deviations--- Leslie W.Rue and Lloyd L.Byars.
In the words of Koontz and O'Donnell - "Managerial control implies
measurement of accomplishment against the standard and the
correction of deviations to assure attainment of objectives according to
plans."
In the words of Henry Fayol - "Control consists in verifying whether
everything occurs in conformity with the plan adopted, the
instructions issued and the principles established. Its object is to
find out the weakness and errors in order to rectify them and prevent
recurrence. It operates on everything, i.e., things, people and
actions".
It is simple to put few words on control form the above definitions. Many
authors notion is same that controlling is a function that
compares actual performance with standard or planned performance
and taking remedial actions if deviations are found.
8.3 WHY CONTROLLING?
Managers at any level face critical problems. For example top level
manager encounter problems when organizations goals are not being
met, middle and lower level managers are facing problem when the
departmental objective and production standards are not being met. In
order to overcome these problems controlling function is designed to give
the manager information regarding progress. Hence, manager can utilize
to do following:
1. To make plans effective
2. To make organizational actives consistent. 3.
Controlling helps to prevent crises and update planes 4.
Control provides freed back and project status 5. Aids in
decision making
6. Provides standardize outputs and protect the organization s assets.

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8.4 THE CONTROL PROCESS

The process of control has three basic requirements: (1) Setting
standards, (2) Measuring actual performance and Comparing with
standard performance, and (3) Corrective actions for deviations.
Setting standards
Standard is a benchmark to measure performance. A standard
delineates expected performance of the job or individual. Objectives are
sources of setting standards. To meet organizational or individual
objective standards are being established. In many cases standards draw
out from objectives, in some cases objectives are used as standards and
in other cases standards are determined by different methods and
analysts. In any case standard should be flexible to adopt
changing conditions.
Following points should be considered while setting standards: 1.
Standards should be easy to measure and define. 2. Standards
should be accurate, precise, acceptable and workable. 3. Standards
should be flexible.
In general organizations prepare standards in areas like
profitability, productivity, market share, product leadership and etc.,
Measuring actual performance
Developing standards is simple but it is most difficult task for manager
measuring current performance because they are many activities that
are hard to measure, for instance employee attitude. Employee attitude
is associated with nature of the job they are doing, production goals they
are assigned and befits given to them. The main purpose of measuring
performance is to gather data and detect problem areas, finally the type
of checks to be made.
After measuring performance compare actual activities to
performance standards. While comparing the actual performance
with the standards fixed, the manager has to find out not only the
extent of variations but also the causes of variations.
Taking corrective actions for deviations
The third and last step of the control process, taking corrective
actions, without actions there is no control. This step ensures where
significant variances are discovered and where necessary operations to
achieve the initially planned results. When performance deviates from
standards, managers must determine what changes, if any, are
necessary and how to apply them.

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In the productivity and quality-centered environment, workers and

managers are often empowered to evaluate their own work. After the
evaluator determines the cause or causes of deviation, he or she can
take the fourth stepcorrective action. The most effective course may be
prescribed by policies or may be best left up to employees'
judgment and initiative.
8.5 TYPES OF ORGANIZATIONAL CONTROLS
Control can focus on events before, during, or after a process. For
example, a local automobile dealer can focus on activities before,
during, or after sales of new cars. Careful inspection of new cars and
cautious selection of sales employees are ways to ensure high quality or
profitable sales even before those sales take place. Monitoring how
salespeople act with customers is a control during the sales task.
Counting the number of new cars sold during the month and
telephoning buyers about their satisfaction with sales transactions
are controls after sales have occurred. These types of controls are
formally called feed forward, concurrent, and feedback, respectively.
Feed forward controls
Feed forward control is future oriented and aim to prevent problems
before they arise. Sometimes called preliminary or preventive
controls, attempt to identify and prevent deviations in the standards
before they occur. Feed forward controls focus on human, material, and
financial resources within the organization. These controls are
evident in the selection and hiring of new employees. For example,
organizations attempt to improve the likelihood that employees will
perform up to standards by identifying the necessary job skills and by
using tests and other screening devices to hire people with those skills.
Concurrent controls
Concurrent control monitors ongoing employee activity to ensure
consistency with quality standards. These controls rely on
performance standards, rules, and regulations for guiding employee
tasks and behaviors. Their purpose is to ensure that work activities
produce the desired results. As an example, many manufacturing
operations include devices that measure whether the items being
produced meet quality standards. Employees monitor the
measurements; if they see that standards are not being met in some
area, they make a correction themselves or let a manager know that a
problem is occurring.

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Feedback controls
Feedback control involves reviewing information to determine
whether performance meets established standards. For example,
suppose that an organization establishes a goal of increasing its
profit by 12 percent next year. To ensure that this goal is reached, the
organization must monitor its profit on a monthly basis. After
three months, if profit has increased by 3 percent, management
might assume that plans are going according to schedule.
8.6 REQUIREMENTS FOR EFFECTIVE CONTROL
1. Suitable
The control system should be tailored to fit the requirement of the
business. In simple words, the control system should be suitable to the
needs of activity, organizational structure and managerial
practices. It should reflect the plans that the organization designed to
follow.
2. Timeliness
Information is life blood to any system. An effective control system
should ensure timely information to required manager. For example
sales managers preparing sales forecasts on quarterly, monthly and
weekly basis, if the information used in theses forecast many not be
accurate when compared with to accounting records prepared at the
close of the period, the process of forecasting and revising forces the
manager to generate and rely on timely information. Timeless should be
the option for effective control of operations when choice made
between timeliness and accuracy.
3. Ensure flexibility
Changes in plans, unpredicted circumstances and outright failures
generally appear due to changes in business and market but control
system should remain workable to these changes, if control remain
effective it make flexible failures, development and changes of plans.
4. Economy of controls
Economy is key requisite of every control. A manager may faces
intricacy and great deal in ascertaining a particular control system is
worth or what it costs because the benefit organization gets from a
control system should be more than its cost. If control system is
tailored to the enterprise and its job, control will most likely be
economical.

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5. Fit to the organizational culture

An effective control system should fit to the organizational culture. For
example, in free rein management employees are having freedom to take
decisions and a tight control may go so strongly against the grain that
it will be doomed to failure. On the other hand, participative
management style employees are free to participate in decision
making, a generalized and permissive control system will hardly
succeed. Hence, any control technique or system should have
compatibility with organizational structure and culture.
8.7 CONTROLLING TECHNIQUES
Management Audits
Management audit is used to evaluate effectiveness and efficiency of
various systems within an enterprise. Management audits may be
external or internal. External audit is conducted by other
organizations to evaluate companys position. Any company can
conduct external audit to know competitors for strategic decisions.
For example, a) determining strengths and weaknesses of competitor to
find competitive advantage; and b) studying soundness of
suppliers that to be select one as your supplier. Internal Audit related to
assessment of companys management functions; planning,
organizing, leading and controlling. For example, internal audit asses 1)
what company has done to improve customer service, 2) what the
company has done for itself, like wise number of factors may be
evaluated.
Budgetary control
One of most widely recognized and used device of managerial control is
the budget. Budges are statements of anticipated results, either
financial or non-financial. Financial budget deals with revenue and
expenses, non-financial budgets deals with direct labor hours,
materials, and sales volume
Types of budgets may be classified into several types:1) Sales budget, 2)
Production budget, 3)Cost production budget, 4)cash budget, and 5)
Master budget.

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8.8 THE CONTROL PYRAMID

The idea of control pyramid relates to implementation of different
controls in the organization. Controlling is used in all levels of
organization but its nature vary rely upon the job. This concept
describes simple controls first and then move to complex controls.
Controls are divided into five types as presented bellow and shown in
figure 8.1.
1. Foolproof controls: Deals with respective activities and requires
little thought (Example: Switch off lights).
2. Automatic controls: This type of control having machine or
computer based controlling and require monitoring of activities
(Example: Regulation of plant temperature).
3. Operator controls: Operator controls require human response to
make it meaningful for the controller (Example: Accountant checking
records).
4. Supervisory controls: Where in the control deals with the person or
persons implementing the controls (Example: Department manager
checking employee performance).
5. Informational controls: This is the ultimate feedback loop in which the
manager should pool up the information given by the other
controls (Example: Report summaries).

Figure-6.1: The Control Pyramid

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8.9 STRATEGIES FOR ACHIEVING ORGANIZATIONAL CONTROL

According to William Ouchi manager can apply three types of
strategies for achieving organizational control.
a) Bureaucratic Controls: Bureaucratic control approach uses rules,
regulations and legitimate authority aimed at performance standards.
This approach produces best results where tasks are certain and
workers are independent.
b) Market Controls: Studying market, prices, and profits is inevitable for
businesses. Market control approach relies on market
mechanisms and regulates organizational activities such as specified
goods and services. It works out best where tangible output can be
identified and market can be established between parties.
c) Clan Controls: Unlike first two approaches, it does not assume that
the interest of the organization and individuals. It involves the use of
culture, values, tradition, beliefs, trust, expectations and informal
relationships of employees. Works best where there is no best way to
do a job and where employees are empowered to make decisions.
8.10 SUMMARY
Controlling is key element for every human being for success, if one not
having control means he/she does not meet desired goals and loss
survival. For organizations controlling is an important function of
management which guiding and managing an organization in repose
to organizational and environmental changes. In the words of Koontz and
O'Donnell - "Managerial control implies measurement of
accomplishment against the standard and the correction of
deviations to assure attainment of objectives according to plans."The
process of control has three basic requirements: (1) Setting standards,
(2) Measuring actual performance and Comparing with standard
performance, and (3) Corrective actions for deviations. Types of controls
are formally called feed forward, concurrent, and feedback,
respectively. The idea of control pyramid relates to implementation of
different controls in the organization. At the end word we cannot step
forward business functions without controlling.

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8.11 QUESTIONS FOR DISCUSSION

1. Define controlling. Why it is significant?
2. What is the management control? And describe a model of the
controlling process.
3. Describe different categories of control methods. 4. How control
pyramid useful to a manger in controlling? 5. What are the
strategies for achieving organizational control? 6. Discuss
requirements for effective controlling.

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CHAPTER-9
ROLE OF INFORMATION SYSTEMS IN MANAGEMENT
Learning objectives
After reading this chapter, you will be able to understand:
Business perspective on information systems
Companies need of information systems
Information
systems types
How information systems are used in business perspective
Necessity of information security

9.1INTRODUCTION
Information technology and business innovations were swiftly moved the
nature of business in the global business. So, information is considered
as most precious component an enterprise and technology is treated as
driving force of both information and business. Observation of
today business is evidence how business is relying upon
technology. For example, high-speed Internet connections, portable
computers and wireless networks are using in businesses for email, information gathering and instant decision making. In addition,
the rising internet cultures make available goods and services online
and providing communication possibilities any time of the day over the
internet among vendors, customers and employees.
Management information system (MIS) refers to a planned system that
helps to carry out management functions by collecting, storing and
disseminating data.MIS is system approach and need based system, has
multiple objectives such as data capturing processing, Storage, Retrieval
and dissemination.
Management information system also called as Management reporting
system, is designed to produce information needed for successful
management of a process and department.
9.2 INFORMATION SYSTEMS (IS) IN BUSINESS PERSPECTIVE
The applications of information technology integrates information
processed activities, business process, and managerial activities to
achieve strategic position and profitability of firm. As a manager, youll
need to know how information systems can make your business more
competitive, efficient, and profitable. Many of you will work for firms that
are intensively using information systems and making large investments
in information technology.

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Managers and business firms invest in information technology and

systems because they provide real economic value to the business.
Investment in information systems will benefit number of ways as
following.
To raise the ability to implement corporate strategies and
achieve corporate goals
Helps to increase market share
Support to produce high-quality or low-cost
producer
To develop new products
To increase employee productivity
To get timely and quality of information in the
organization.
Increases return on investment
To create value for the firm.
To improve execution of business processes
In addition three activities in an information system produce the
information that organizations need to make decisions, control
operations, analyze problems, and create new products or services. Few
cases are compelling business must invest in information systems
include to cope with governmental regulations or other environmental
demands and to stay in business.
9.3 NEED FOR IS IN COMPANY
Information systems and information technology are two important
components to any enterprise success. Like core functional areas
of business such as marketing, finance, production and operation
and human resources information systems also regarded as major
functional area. Thus it is important to understand the area of
information system just like any other functional area in the business.
MIS is vital because all businesses have a must for information about
the tasks which are to be performed. Information and technology is used
as a tool for solving problems and providing opportunities for
increasing productivity and quality.
To make easy the management decision making at all levels of company,
the MIS must be incorporated. MIS units are companywide. MIS is
available for the Top management. The top management of
company should play an active role in designing, modifying and
maintenance of the total organization wide management information
system. Following are key function that MIS support to the
organizations.
MIS support the Business Process: IS provides various kinds
of information systems for business process and to perform the
daily routine transactions necessary to conduct business

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To support Operation of a Business Organization: Timely

information is most precious to present business world. MIS facilitate
not only timely information but also maintenance and
enhancement which provide flexibility in the operation of organizations.
Support Decision Making: IS helps managers to make decisions
that are unique, rapidly changing, and not easily specified in
advance. Employees and manager are reliant on information
systems for their operations and to meet the goals and objective of the
organization.
Support strategies for an Organization: Today each business
is running in a competitive market. MIS supports the organization to
evolve appropriate strategies for the business to assent in a
competitive environment.
9.4 TYPES OF INFORMATION SYSTEMS
No single system can provide and support all the information an
organization needs. There are different interests, specialties, and levels
in an organization, there are different kinds of systems. Types of
information systems include transaction processing systems, decision
support systems, group decision support systems, and executive support
systems.
Transaction processing systems (TPS)
Transaction processing system is design serve the operational level of the
organization and substitute computer for manual record keeping.
By definition transaction processing requires highly structured
decision because at the operational level, tasks, resources, and
goals are predefined and highly structured TPS performs and
records the daily routine transactions necessary to conduct business.
Examples include payroll, sales order entry, billing, and employee record
keeping.
Decision support systems (DSS)
Decisions are inevitable to any manager of an organization. DSS server
the management to take variety of decisions and it is designed to assist
decisions that are unique, rapidly changing, and not easily specified in
advance. DSS address critical problems where the procedure for arriving
at a solution may not be fully predefined in advance. Decision support
systems have more analytical power than other systems and allow
managers to use computers directly to retrieve information for decisions
on semi-structured problems.
DSS are designed so that users can work with them directly;
these systems explicitly include user-friendly software. DSS are
interactive; the user can change assumptions, ask new questions, and
include new data.

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DSS systems referred to as business intelligence systems because they

focus on helping users make better business decisions.
Group decision support systems (GDSS)
Group decision support system is designed to support decisions on
unstructured problems by a set of decision makers working together as a
group. GDSS use Web-based tools for videoconferencing and electronic
meetings and can support some group decision processes, but
their focus is primarily on removing common communication barriers.
GDSS make meetings more productive by using key elements:
hardware, software and people. Many kinds of GDSS tools are
available in the market for example Electronic questionnaires, Tools for
voting or setting priorities, Idea organizers and etc.
But the underlying problems in group decision making have been the
explosion of decision-maker meetings, the growing length of those
meetings, and the increased number of attendees.
Executive support systems (ESS)
Executive support systems enable senior manager to make decisions at
strategic level of the organization. These are designed to address
nonroutine decisions requiring judgment, evaluation, and insight
because there is no agreed-on procedure for arriving at a solution.
9.5 SYSTEMS FROM A BUSINESS FUNCTIONAL PERSPECTIVE
Information systems can be classified by the specific organizational
function they serve as well as by organizational level. Almost all types of
business organizations have accounting, marketing, finance, and human
resources functions and information system to each function has
developed.
Human resource information system
The human resources information system helps managers manage
human resource of the organization -- identifying potential employees,
recruiting and hiring, maintaining complete records on existing
employees, creating programs to develop employee's talents and skills,
termination, and benefit administration. For example at operational level
it helps to train employees by tracking employee training skills
and performance appraisal. Strategic level management use human
resource information supports to human resource planning and
management level it helps compensation analysis.
Sales and marketing information system
A Sales and marketing information system is a computer-based system
that responsible for selling the organizations products or services
to support the firm's management in solving problems that relate to the

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marketing mix. Sales and marketing system is used in a number

of ways. For example it At the strategic level, sales and marketing
systems monitor trends affecting new products and sales opportunities,
support planning for new products and services, and monitor the
performance of competitors. At the management level, sales and
marketing systems support market research, advertising and
promotional campaigns, and pricing decisions. They analyze sales
performance and the performance of the sales staff. At the operational
level, sales and marketing systems assist in locating and contacting
prospective customers, tracking sales, processing orders, and providing
customer service support.
Finance and accounting information system
The finance information system is capable of managing all finance
related functions includes cash, stocks, bonds, and other investments,
to maximize the return on these financial assets. The accounting
information system performs functions includes financial records
receipts, disbursements, depreciation, payrollto account for the flow of
funds in a firm. The finance and accounting information systems found
in large organizations because at all level of organization: strategic,
management and operational levels finance and accounting information
system are applied.
Manufacturing system
Producing goods and service is core function of manufacturing system.
Manufacturing systems deal with the planning, development, and
maintenance of production facilities; the establishment of
production goals; the acquisition, storage, and availability of production
materials; and the scheduling of equipment, facilities, materials, and
labor required to fashion finished products. Example includes at
operational level it deals with control the actions of machines
and equipment. At management level, production planning and control
and strategic level deal manufacturing goals of the firm.
9.6 INFORMATION SECURITY
Before computer introduced into business organizations were
maintained and secured as paper records dispersed in separate business
or organizational units. When computer has introduced in to business it
is played a critical role in business and large amounts of data are stored
in electronic form to make Information potentially be accessed by large
numbers of people and by groups outside of the organization.
Development of communications networks, information systems in
different locations can be interconnected. This regard in order to make
information secured firms need to make security and control a top
priority.

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Security refers to the policies, procedures, and technical measures used

to prevent unauthorized access, alteration, theft, or physical damage to
information systems.
Information systems are easily vulnerable because in an organizations
technical, organizational, and environmental factors compounded by
poor management decisions. It is possible to access data by
unauthorized ways flowing over techniques includes tapping,
sniffing, message alteration, hacking, virus and worms, theft and
fraud, vandalism and denial of server attacks.
Protection of information resources requires a well-designed set of
controls. Computer systems are controlled by a combination of general
controls and application controls. General controls include software
controls, physical hardware controls, computer operations controls, data
security controls, controls over the systems implementation process, and
administrative controls. Application controls include both automated
and manual procedures that ensure that only authorized data are
completely and accurately processed by that application.
9.7 SUMMARY
Management information system is a planned system that helps to carry
out management functions by collecting, storing and disseminating data.
Information and technology is treated as driving force of both
information and business. Observation of today business is evidence
how business is relying upon technology. The applications of information
technology integrates information processed activities, business process,
and managerial activities to achieve strategic position and profitability of
firm.
Information systems and information technology are two important
components to any enterprise success. To make easy the management
decision making at all levels of company, the MIS must be incorporated.
Types of information systems include transaction processing systems,
decision support systems, group decision support systems, and
executive support systems. Almost all types of business organizations
have accounting, marketing, finance, and human resources
functions and information system to each function has developed. When
computer has introduced in to business it is played a critical role in
business and large amounts of data are stored due to this
Information is easily vulnerable. To protect information resources
requires a well-designed set of controls.

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9.8 QUESTIONS FOR DISCUSSION

1. What is management information system?
2. Briefly describe business perspectives on information system.
3. Distinguish between decision support system and MIS. 4.
What is the need of MIS to a company?
5. Explain several types of information system in business perspective.
6. Compare transaction processing system with MIS.
7. What is information security?

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CHAPTER-10
INTERNATIONAL MANAGEMENT
Learning objectives
After reading this chapter, you will be able to understand:
The nature of international management
Challenges of international manager
What are multinational companies?
Why management practices vary?
Management practices across nations in selected countries

10.1 INTRODUCTION
It is interesting to know international management practices. Previous
chapters have explained all management theories and concepts but
international management practices are varying country to country. This
chapter has emphasized importance of international management, why
management practices vary in countries and management practices of
selected countries.
The structure of the business has seen dramatic growth after World War
II this growth continuous to accelerate and expand business to all
continents of the world. It results in activities exporting goods to other
countries, importing raw materials, selling products or services to
customers abroad, and transfer of funds to subsidiaries in other
countries. Likewise international business operations started. Hence,
international business refers to profit related activities conducted across
national boundaries.
In recent years international management has accelerating its
importance, corporate community become more international. The
underlying reasons are a) Improvements in transportation and
communication b) Low production costs, c) Global markets are
more accessible and d) Availability of cheap labor and technology.
The concept of international management focuses on
international managerial issues related to the flow of people, goods and
money, managing better these in cross national boundaries.
International management is the process of managing business
functions such as planning, organizing, leading and controlling in
international business and pursuing of organizational objectives in more
than one nation.

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10.2 CHALLENGER OF INTERNATIONAL MANAGER

Executing responsibilities is a challenging task for global
manager. Diversity appears in all functions of management du tot
cultural, demographical and social factors. Hence, global managers have
to make many adjustments in order to achieve organizational objectives.
Following are key problems which challenges an international manager.
a) Cultural conflicts
b) Unfavorable political climate c)
Unstable national economy d)
Instable and inefficient government e)
Knowledge and skill of work force f)
Raw material scarcity
g) Unfamiliar legal
system h) Employee
conflicts i) Gender biases
10.3 MULTINATIONAL CORPORATIONS (MNCS)
If an enterprise operating business in many countries and having
headquarter in one country it called as multination corporations
(MNCs).MNCs having three key characteristics; a) Large scale business
units- turnover, assets, and volume of sales are quite large, b) Productive
organizations-They produce goods and sales them in one brand name of
trademark all over the world, and c) Operate globally-MNCs
operate globally.Table10.1 is presented MNCs examples.
So many reasons that assist many companies become MNCs but
the remarkable growth of transportation, communication and
technology particularly during the last two decades made the world
as a global village due to this reason during last two decades
particularly world trade has increased, mutual dependence among the
countries has raised and transportation development made distance
among countries shorter and geographical barriers are wiped out.
MNCs are also called global or international or transnational
corporations. As their names suggest, they have their roots in their down
country, but have branches in many other countries. For example: the
Unilever Company has its branch in Britain, but it has its subsidiary in
Nepal, India, and Pakistan and other many counties. Thus a
multinational company refers to those business organizations which
have their main operation in a country and subsidence operation
in many other countries.
There are four categories of multinational corporations
A. Multinational corporations: A decentralized corporation with strong
home country presence

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B. Global companies: A centralized corporation that acquires cost

advantage through centralized production wherever cheaper resources
are available.
C. International company: A company that builds on the parent
corporations technology.
D. Transnational enterprise: A company which combines the
previous three approaches.

10.4 WHY MANAGEMENT PRACTICES VARY?

Table-10.1: MNCs Examples
Company

Headquarters

Industry

Quintiles

United States

health care/services

Microsoft

United States

information technology and software

Hitachi

Tokyo

Electronics

Diageo

United Kingdom

products, beverages, and tobacco

Liechtenstein

production and building materials

Spain

telecommunications c

Switzerland

pharmaceuticals

Denmark

pharmaceuticals

Atento

Spain

telephone support/sales

Renault

Paris

Motor Vehicles

Hilti
Telefonica
Roche
Novo Nordisk

A simple answer to this question is, a society is not static, and

changes are forever. People in the world having diversified
cultures, behaviors, work attitudes, values and so on, it means human
are one in body feature but many in behaviors. In addition market
conditions, competitive environment and cost management issues
are vary drastically. Like we can add geographic, demographic and
economic, technical, legal and culture reasons to this question. The
following concept has presented management practices in selected
countries.

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10.5 MANAGEMENT PRACTICES ACROSS NATIONS

Culture is the key energy that always influencing and guiding
management practices of a country. None of management practice
is universally applicable because the practices are not unique or
not universal or not without any critics. We have witnessed in the recent
past the introduction of various management theories, techniques,
approaches and management styles. In this chapter the present session
has discussed on management practices of United States, Japan, India
and China.
U.S. Management style
U.S. style of management practices individualistic approach and
Decision making is individual because managers are accountable for the
decisions made within their areas of responsibility. American managers
are more likely to take no notice of the opinions of subordinates which
results in frustrations. Organizations have formal bureaucratic
organizational structure and individual responsibility and accountability
is key preference.
Planning of U.S style emphasis on short term and mangers prefer
individual Decision making, decision initiated at the top and
flowing down, process of decision making swift but implementation
process is slow. Organizations follow formal bureaucratic organizational
structure and individual have responsibility and accountability on
decisions. Staffing of the people out of schools and other companies
and job of employee is not secured; promotion based on short term
performance, primarily based on individual performance, loyalty to
the profession. Leader acting as a decision maker and head of the group
and follows directive style of leadership. Superior is controller of
employees, focus on individual performance, and limited use of quality
control circles.
Japanese Management Style
Japanese management practices are different from the world managerial
practices. Japan has had immense success in the industrialized world. It
is the second largest economy in the world. Companies like
Toyota, Sony, and Honda are multi-billion dollar companies. Japanese
have an eye for quality and usually their management is comprised of
old time technical people. Hence, Japan became leading industrial
nations in this world. Japanese management was reliant on the
philosophy and organization culture that emphasize, Japanese
accepts ambiguity, uncertainty, and imperfection as much more of a
given organization life. Hard work for common goals, consultative
and consensus decision making are key success factors of
Japanese organizations. Characteristics of japans management style
are the following.

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Planning: group decision making with consensus allows many people in

preparing and making the decision. Organizing: collective responsibility
and accountability and informal organization structure. Staffing: young
people hired out of school; hardly any mobility of people among
companies, slow promotion through the ranks and Loyalty to the
company.
Leading: Leader acting as social facilitator and group
member, paternalistic style and common values facilitating cooperation.
Controlling: Control by peers, focus on group performance, and extensive
use of Quality control circles.
Chinese Management Style
China is considered as an emerging tiger in the globalize world among
the truly developed country. Behind the success of the Chinese there
have some management factors which played an important role for
assisting Chinese to be unique one in the modern competitive
world. Management style of Chinese is not characterized as an exclusive
one but the combination of Japanese and American.
Chinese planning is generally a short-term process with strong past and
future orientations and decision-making is extremely centralized
and strongly hierarchical. The Chinese generally believe that an
established system is the best guard against the instability and
conflict that can arise from unforeseen events. The enterprises are well
equipped with a body of formalized regulations and rules about how
things should be done, and tasks are highly structured. Staffing of
employees is often hired because of personal connections. Employees
are clearly assigned their duties and tasks and motivated through
group rather than individual achievement.
Indian management style
In the history there were distinct Indian management dating from the
times of Mauryas and Mughalas. Vidura Neeti from Mahabharata,
Kautilyas Artha Shastra and other texts contain many relevant ideas on
administration, leadership, strategies and system. At present India is a
very young capitalist economy. The country for a long time tried
embracing Soviet socialism. The country started to liberalize the
economy in 1990's.The Indian companies management style now is
based on global models. And since they have been acquiring companies
abroad over the past decade, the management style changes are
inevitable. But old companies were very bureaucratic. The organizations
promoted seniority and not potential and the global focus was missing.
But Indian management style is still being explored and developed. Few
management characteristics written bellow that are commonly found in
Indian business.

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In India, planning both short-term and long-term based on past success

is important. Decisions making by the highest-ranking officials,
since many companies are family run, this often includes only
family members. Structures of Indian corporations are rigidly
organized and hierarchical, and they maintain a highly centralized
power structure. Indian companies are not accustomed to
providing formal job descriptions for their workforce. The style of
delegation varies according to a manager's taste. While some managers
are comfortable delegating duties to select employees, others are not.
Employee performance evaluations are a relatively new concept in
Indian business.
10.6 SUMMARY
The structure of the business has seen dramatic growth after World War
II this growth continuous to accelerate and expand business to all
continents of the world. In recent years international management has
accelerating its importance, corporate community become more
international. International management is the process of managing
business functions such as planning, organizing, leading and controlling
in international business and pursuing of organizational objectives in
more than one nation. Executing responsibilities is a challenging task for
global manager. Diversity appears in all functions of management du tot
cultural, demographical and social factors. Multination corporations are
operating business in many countries and having headquarters in one
country. None of management practice is universally applicable because
the practices are not unique or not universal or not without any critics
Culture is the key energy that always influencing and guiding
management practices of a country.
10.7 QUESTIONS FOR DISCUSSION
1. What are the challenges of international manager?
2. Why management practices vary nation to nation? Explain with
examples.
3. What are the key characteristics of American, Japanese, Chinese and
Indian management practices?
4. Explain the nature of multinational companies.
5. Which county management style do your when become entrepreneur?
Why?

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CASE STUDY -1
Mr.Prajith is an assistant in an insurance company, is in charge of a
group of clerical workers who review changed policies,
endorsements, and riders, calculate commissions, and maintain
records. He is very careful in work, and everything coming out of his
group is perfect. He does not delegate authority and responsibility but
rechecks in detail all the work turned out by his group. Mr.Prajith keeps
turning back to them careless and inaccurate work until it is perfect. As
a result he is busy from early morning until late at night doing detail
work and neglecting his role as supervisor.
His workers have figured him out and are taking it easy. They do
slapdash work and correct it as often as he returns it. The Manager is
afraid that Mr.Prajith is overworking and heading for a nervous
breakdown. Manager has told him in general terms to delegate
authority and responsibility and to discipline his group. He says that
you just cant find people any more who have pride in their work or
concern for the company and that if he fires any of his people or
they quit the replacements would probably be worse.
Questions:
1. What are some of the reasons why people do not delegate authority
and responsibility?
2. What is Mr.Prajith responsibilities as a supervisor?
3. What are some of the leadership characteristics that Mr.Prajith lacks?
CASE STUDY -2
Mr.pal supervise a group of 20 people of various specialists who were
drawn from other groups in the company and brought together
four months ago to work on a project. The work requires steady
interaction between the various specialists in the group. They were
cooperating well until three weeks ago when, on April 1, you brought up
the subject of scheduling their summer vacations. You told them to
decide among themselves when each one should take his vacation,
since they knew which people could be absent at the same time without
troublemaking the work. You gave them sheets listing the amount of
vacation each was entitled to because of length of service. The periods
are two weeks, three weeks, and four weeks. You reminded them that
company policy forbids split vacations, off-season vacations, and
vacation scheduling that disrupts production.

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Although seniority governs vacation scheduling for hourly workers in the

shop, it has never been established as a policy in salaried groups such
as yours. The company has always stated that the requirements of the
word govern the scheduling. Since you turned over the vacation
scheduling to your group, the opportunists are buzzing around making
deals that will fix themselves up with the choice schedules. People are
aligning first with one faction and then with another, whichever will give
them best deal. A few are refusing to deal on the grounds that their
seniority or status should entitle them to first choice. All this political
maneuvering is taking up time and interfering with the cooperation that
is essential to the progress of the work.
Questions:
a. How should a supervisor go about setting up policies in a
newly formed group?
b. What cautions should a supervisor observe in bringing subordinates
into decision making?
c. How can the supervisor ward off problems of conflict between status
and seniority?
CASE STUDY -3
There were five major banks in the city. All of them were affected in
various degrees by a cost squeeze prevalent in the banking industry. Two
of the banks laid-off several hundred employees. Pal Peters Bank
released 320 people, including 120 officers. Alex group released
700 employees, including 100 officers. Best Trust permeated the
industry and many employees were worried about their jobs. The Heavy
Trust, the fourth largest bank in the city, announced the release of 500
employees, 180 of whom were officers. Now the Best trust became really
heavy. The Samuel Trust Company, second largest in the city, had no
intention of releasing any employees. Even in the deep depression of the
1930s, no employee had ever been released because of poor business.
The senior management of Samuel Trust simply planned to let a nohiring rule and normal attrition handle the problem.
They were a conservative group and felt that any announcement of their
decision might appear to be flamboyant in the banking community, so
no mention was made to the press or to the employees of the bank. It
was felt the employees would understand the banks tradition of
no releases due to business conditions, which wasnt a stated policy but
had a long history. Over the next several weeks, many supervisors
reported poor morale, jittery employees, and a drop in productivity. All of
this was traced to retrenchments in competitor banks and the
everpresent worry that Hawthorne would be next.

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Questions:
a. Comment on senior managements decision not to announce
their decision to either employees or the press.
b. If you were employed as a supervisor at Samuel Trust, what would
you do to cope with the problem?
CASE STUDY -4
Henry Johnson is the chief engineer of AP Electric and Power, a large
utility company. AP, a progressive company, had been conducting
research for several years in a search for more effective ways to produce
electricity. Most of the plants used either oil or natural gas to develop
energy, and it was obvious that the other sources had to be explored.
Henry had been with AP Electric for 25 years, and he was considered an
excellent, innovative engineer who was very conservative in his
relationships with peers, superiors, and subordinates. During the last
three years he served on the companys research committee which
monitored both the research efforts and the budget needed to support
them. Among the projects being studied were solar energy, methane gas
derived from garbage and other vegetable waste such as corn stalks and
nuclear energy. The most promising possibility seemed to be
nuclear fuel. Many other utilities were using it and they appeared to
have few problems with its use. Records of other plants around the
country were checked, and after considerable deliberation top
management decided to go ahead and file for a permit with the public
utility commission (PUC). Henry was asked to assemble an
engineering team to work on the project, and he turned to his
brightest people, all of whom he believed would jump at the chance to
work on the project. He was right about the first four he spoke to.
When he asked Cris Kock, a brilliant young engineer, he was met
with a cold stare. If this company wants to go nuclear, Im not going to
help it: Whats more, III testifies against the permit at the PUC hearing.
Questions:
a. What should Henry do about Cris Kock?
b. If an employee is unhappy with his companys plans should he do
more than quit?
c. To what extent is Cris Kock being unreasonable?

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CASE STUDY -5
Mr. Siva was an excellent supervisor of stores in the Dawan Retail Store.
He knew the well, maintains store up to date records and was willing to
work overtime whenever necessary. Owner of the Retail store very much
impressed with overall performance of Siva and was promoted to
manager of the new store which was started in other city of the state.
Almost from his first day in the new position trouble began to occur. Siva
started too complained about his subordinates lack of motivation and
dedication, feeling that they were overpaid and that many should
be fired.
This caused difficulty to Siva in the department to manage employees,
and two of the better employees quit abruptly. Sivas boss
discussed these problems with her, but after several such discussions
Siva Helen still couldnt understand why she should approach her job
differently. Finally his boss offered Siva his old job back as supervisor
with no cut in pay. At first Siva was happy about this switch back to his
old job. No more problems with those lazy employees. . But then he
became worried about his lack of success as a manager, and this
caused his performance to fall. Even though his boss reinforced
him on several occasions, telling him that not everyone can succeed as
a manager and that excellent sales people are very valuable to the store,
nothing seemed to give assurance to Siva.
Questions:
a. Should he have been demoted back to his old position? Why? Why
not?
b. Why was he promoted in the first place?
c. What might her boss have done to help Siva in the managerial
assignment?
CASE STUDY -6
Miss. Sireesha had been with the company three years when she was
promoted to manager of the HR department. Sireesha started with the
company when she graduated from college as an HR major. She entered
the organization as a management trainee, and during the oneyear program she demonstrated considerable leadership ability as an
informal leader her peers. Mary also impressed many senior
managers in the company with her sense of responsibility and her
willingness to work hard. All of her training assignments were
completed on time with considerable skill for an inexperienced person.
After two years she is promoted as HR manager of the company. First
three months of her job was successful and then she started
facing problem of employees overwhelming.

Page | 128

In order to know the roots of the problem she was ordered a team to find
facts. The results were surprising. People are working too hard (40%
of men work more than 50 hours per week and 80% would like to work
fewer hours), they are too distracted (mobile device users check their
phones 150 times per day), and they are flooded with too many emails,
conference calls, meetings, and other distractions. Results also
ravels that
the average office worker can only focus for seven minutes
at a time before them either switch windows or check Face book.
This became a major challenge to the HR manager.
Questions:
1. How Sireesha solve this problem as a less experienced
manager? 2. What are the reasons of employee overwhelming?
CASE STUDY -7
XYZ IT solutions, it is a US based company established in 1999.
Company idea was "having a diversity of perspectives leads to
better decision-making, more relevant products, and makes work a
whole lot more interesting." Mr. Steve was HR manager a fresh
graduate from college directly appointed. Steve did not have
experience in the job. accordance to idea company Steve had done
recruitment and employees were as followed ratios: : 2 percent of
employees were black and 3 percent Hispanic, women account for 37
percent of the workforce and whites make up only 50 percent of
employees. Asians make up more than a third overall workforce.
There appears to be a ceiling in the company that transcends
demography. 23 percent of women, 78 percent of its U.S, only 19
percent of Asians have made it into senior-level positions leadership
positions. But no black and Hispanic were given leadership positions.
Now company had a problem of leadership comparison. Employees
compare that some groups in leadership do match their level of
representation in the rest of the company. And also comparison rose
internally among diversified people.
This problem caused to poor
performance of employees and company, so many projects were pending.
New projects are not started yet. In Board of directors meeting Steve is
asked remedies for the problem but he did not answer any
solution. Finally Steve strongly warned and given 15 days time to
solve the problem.

Page | 129

Questions:
1. Why employees care and compare the top level leadership with rest of
the companies and inside other employees groups?
2. Assume your manager of the XYZ IT solutions, how can u solve the
problem?
3. Is it possible to Mr. Steve solves the problem within 15 days? How?
Case Study-8
Sarada (who works for I-Apparels), and Aruna, (who works for Fashion
Apparels), are employed as production managers. Both attend a
Corporate committee meeting organized by a Production
Management Institute (a professional body), of which they are members.
During the lunch break, Sarada and Aruna discussed the various
leadership styles that they were following in their respective
organizations.
Aruna told Sarada that she had a sociable personality and was
optimistic that she will get on well with the workers in the factory. She
went on to say that a total of 300 workers are employed, with 140 of
them having been employed with the business for over 20 years, 100 are
new trainees and the others, mostly unskilled. Aruna shared her opinion
that she is failed to motivate unskilled workers and they are harder to
motivate. Aruna is aware that new Health & Safety regulations are due
to be implemented and this will require discipline in the workforce. She
is thinking of adopting a more autocratic leadership style. Sarada told
Aruna that she was newly appointed to the role of HR, and was relatively
inexperienced. She pointed out that she manages a team of sixty
workers, grouped into project teams with highly skilled and experienced
staff in each team. Sarada mentioned that her predecessor was
ostracized with the workforce since he adopted an autocratic style
of leadership. In view of this, she had been thinking of adopting a
democratic leadership style.
Questions:
1. Discuss whether or not Sarada and Aruna should adopt
their
proposed new leadership styles within their respective
2. With reference to each organization discuss the role of
organizations.
management in motivation.

Page | 130

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We
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Reengineering
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we receiving
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editor and
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Leadership
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We are indebted to our families, friends and colleagues for
http://www.forbes.com/sites/joshbersin/2014/03/15/whycompaniestheir numerouscomments, ideas and support that they have
fail-to-engage-todays-workforce-the-overwhelmed-employee/ 109.
been provided.
http://www.washingtonpost.com/blogs/the
We express our thanks to all who helped us in writing this
switch/wp/2014/07/24/tech-companies-diversity-problems-arebook successfully.
evenworse-at-the-leadership-level/
We eagerly look forward for suggestions for improvements in
this book.

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