UNIT - I

CONCEPT OF MANAGEMENT
In order to satisfy his/her wants a person hs to perform numerous activities. An individual
alone cannot perform all the necessary activities. Therefore, human beings join or cooperate together in the form of groups and organizations. Every organization (e.g., a family,
a college, a business enterprise, an army, a government, a church) is basically a group of
people seeking to attain some common objectives. A central organ or agency is required to
coordinate the activities and efforts of various individuals working together in an
organization so that they can work collectively as a team. Such an organ is called
management.
The study of a discipline should start with its definition delineating properly its contents and
characteristics, defining its scope and boundary, and prescribing the objectives for which it
stands. From this point of view, we can proceed only when we define management.
However, a precise definition of management is not so simple because the term
management is used in a variety of ways. Being a new discipline, it has drawn concepts and
principles from a number of disciplines such as economics, sociology, psychology,
anthropology, statistics, and so on. The results is that each group of contributors has treated
management differently. For example, economists have treated management as a factor of
production; sociologists have treated it as a class or group of persons; practitioners have
treated it as a process comprising different activities. Naturally, all these divergent groups
view the nature and scope of management from their own points of view. Thus, taking all
these points of view together, it becomes difficult to define management in a comprehensive
way. In the present context, the term management is used in three alternative ways;
1. Management as a discipline.
2. Management as a group of people, and
3. Management as a process.
Management as a Discipline
Discipline refers to a field of study having well-defined concepts and principles. When we
refer to management as a discipline, we include in it the various relevant concepts and
principles, the knowledge of which aids in managing. From this point of view, management
can be treated either as an art or science, the two basic and broad disciplines. However,
since management prescribes various principles and how these principles can be applied in
managing an organization, it has the orientation of both, science and art, a phenomenon
which will be discussed later in this chapter.
Management As A Group of People
Sometimes, we refer to management as a group of people in which we include all those
personnel who perform managerial functions in organizations. For example, when we talk
about relationship between management and labour in an organization, we refer to two
distinct classes or groups of personnel in the organization. In the first category, we include
all those persons who are responsible for managerial functions and in the second category,
we include non-managerial personnel. This approach of using management is quite popular;
however, it does not serve our purpose of defining the term management.

Management As A Process
In studying management discipline, we generally refer to management as a process. A
process can simply be defined as systematic method of handling activities. However, the
management process can be treated as a complex one which can be refered to as an
identifiable flow of information through interrelated stages of analysis directed towards the
achievement of an objective or set of objectives.
Historically, four such orientations have been adopted in defining management process:
1. Production- or efficiency-oriented,
2. Decision-oriented
3. People-oriented, and
4. Function-oriented.

Production-or Efficiency-oriented Definition. Those who have put forward the concept
of management as a source of efficiency in organizations have viewed that management is
concerned with generating efficiency in organizational settings. For example, in an early
stage of development of management, Taylor has defined management as follows:
Management is the art of knowing what you want to do and then seeing that it is done in
the best and cheapest way.
This definition emphasizes relationship between efforts and results as the objectives of
management but do not specify how these objectives can be achieved. To that extent, this
definition does not offer exact explanation of the nature of management.
Decision-oriented Definition. Decision-oriented definition of management has been
provided by decision theorists who have seen management process in terms of decision
making. For example, Peter Drucker, a noted management thinker, has viewed that the life
of a manager is a perpetual decision-making activity. Whatever a manager does, he does
only through decision making.
Decision-making power provides a dynamic force for
managers to transform the resources of business organizations into a productive,
cooperative concern. These decision theorists have emphasized the role of decision making
in management to such an extent that one of them has viewed that management means
decision making. A more formal decision oriented definition of management has been
provided by Stanley Vance as follows:
Management is simply the process of decision making and control over the action of
human beings for the expressed purpose of attaining pre-determined goals.
The decision-oriented definition of management indicates that the basic activity of a
manager is to make decisions and enforce these decisions. However, this does not provide
the processes in which context decision making is applied.
People-oriented Definition. In this group of definition, management is defined as a
process of coordinative efforts of people in organizations. Various authors have emphasized
the role of people in the organizations. They have viewed that management is the direction
of people and not of things; management is personnel management; and so on. Lawrence
Appley has called management as personnel management and has defined it as follows:

Management is the accomplishment of results through the efforts of other people.

Koontz has defined management in similar way when he says that:
Management is the art of getting things done through and with people in formally organized
groups.
These definitions, no doubt, offer better explanations of the nature of management though
these do not specify the functions or activities involved in the process of getting things done
by or with the cooperation of other people.
Function-oriented Definition. This definition puts emphasis on the various functions
performed by managers in organizations though there is no uniformity in these functions in
different definitions. For example, McFarland states that:
Management is defined for conceptual, theoretical, and analytical purposes as that process
by which managers create, direct, maintain, and operate purposive organizations through
systematic, coordinated, cooperative human efforts.
Function-oriented definitions of management are more relevant for understanding the exact
nature and scope of management in spite of the fact that there is no unanimity over various
functions. From this point of view, we can define management as follows:
Management is a process involving planning, organizing, staffing, directing, and controlling
human efforts to achieve stated objectives in an organization.
Features of Management
In the light of the above discussion and definitions, basic features of management can be
identified which are as follows:
1. Organized Activities. Management is a process of organized activities. Without
organized activities, two groups of people cannot be involved in the performance of
activities. Where a group of people are involved in working towards a common objective,
management comes into existence. The organized activities may take a variety of forms
ranging from a tightly structured organization to a very loosely-knit organization. It can be a
company like Tata Iron and Steel Company or a local social club. But all organizations have
one thing in common; they want to progress efficiently towards the achievement process.
Therefore, where a single individual pursues his personal objectives, management has no
operational meaning. However, when an attempt is made to channel the individuals quest
for personal objectives along the lines that contribute to the overall objectives of the group,
management becomes the means by which the random action is controlled.
2. Existence of Objectives. An objective or set of objectives should exist towards which
the organized group activities are directed. Without objectives, it becomes difficult to define
the direction where organized group activities would lead to.
3. Relationship among Resources. Organized activities meant to achieve common goals
are brought about to establish certain relationships among the available resources.
Resources include money, machine, materials, and people. All these resources are made

available to those who manage; they apply knowledge, experience, principles for getting the
desired results. Thus, the essence of management is integration of various organizational
resources.
4. Working with and through People. Management involves working with people and
getting organizational objectives achieved through them. The idea of working through
people is interpreted in terms of assigning activities to subordinates.
The superiorsubordinate relationships are created because of organized activities.
5. Decision Making. Management process involves decision making at various levels for
getting things done by others. Decision making basically involves selecting the most
appropriate alternative out of the several. If there is only one alternative, the question of
decision making does not araise. The quality of alternative which a manager selects
determines the organizations performance, and the entire future of the organization rests on
the degree to which the right decisions are made by mangers.

IMPORTANCE OF MANAGEMENT
Management has been important to the daily lives of people in groups since long. Therefore,
a question is raised that if the management has been so important for human lives. Why it
has assumed added importance in the present-day society. The possible answer of this
question can be traced in the context of emergence of large-sized organizations. The
management of these organizations has become much more complex than what it used to
be earlier. Along with the size, another dimension which has added to the complexity of
managing is the changing nature of society and its various constituents. Therefore, the issue
before the present-day managers is how to take care of these changes so that organizations
achieve their objectives.
Thus, management has become crucial not only for the
organizations but for the society too. Even classical writers on management have recognized
its importance long back. For example, Urwick has commented that:
No ideology, no ism, or political theory can win greater output with less efforts from a given
complex of human and material resources, only sound management. And it is on such
greater output that a higher standard of life, more leisure, more amenities for all must
necessarily be found.
The importance of management may be traced in the following contexts:
1. Effective Utilization of Resources. Management tries to make effective utilization of
various resources. The resources are scarce in nature and to meet the demand of the
society, their contribution should be maximum for the general interests of the society.
Management not only decides in which particular alternative a particular resource should be
used, but also takes actions to utilize it in that particular alternative in the best way.
2. Development of Resources. Management develops various resources. This is true
with human as well as non-human factors.
Lawrence Appley has emphasized that
management is the development of people. However, most of the researches for resource
development are carried on in an organized way and management is involved in these
organized activities. Thus, through the development of resources, management improves
the quality of lives of people in the society.
3. To Incorporate Innovations. Today, changes are occurring at a very fast rate in both
technology and social process and structure. These changes need to be incorporated to
keep the organizations alive and efficient. Business organizations are moving from primitive
to sophistication. Therefore, they require high degree of specialization, high level of
competence, and complex technology. All these require efficient management so that
organizations work in the most efficiently way.
4. Integrating Various Interest Groups. In the orgainised efforts, are various interest
groups and they pressure over other groups for maximum share in the combined output. For
example, in the case of a business organization, there are various pressure groups such as
shareholders, employees, government, etc. These interest groups have pressure on an
organization. In a more advanced and complex society, more such pressure is on the
organization. Management has to balance these pressures from various interest groups.

5. Stability in the Society. Management provides stability in the society by changing and
modifying the resources in accordance with the changing environment of the society. In the
modern age, more emphasis is on new inventions for the betterment of human beings.
These inventions make old systems and factors mostly obsolete and inefficient.
Management provides integration between traditions and new inventions, and safeguards
society from the unfavourable impact of these inventions so that continuity in social process
is maintained.

Functional Areas (Scope) of Management

The scope of management is very wide. The various functional areas of
management may be classified into the following categories:
1.
Production Management. Production or operations management is the
management of production function so as to produce the right goods, in right
quantity, at the right time and at the right cost. It consists of the following activities:
a)
b)
c)
d)
e)
f)
g)

designing the product,

location and layout of plant and buildings,
operation of purchase and storage of materials,
planning and control of factory operations,
repairs and maintenance,
inventory control and quality control, and
research and development, etc.

2. Marketing Management. Marketing management refers to the identification of

consumers needs and supplying them the goods and services which can satisfy
those wants. Fit involves the following activities:
Marketing research to determine the needs and expectations of consumers,
Planning and developing suitable products,
Setting appropriate prices,
Selecting the right channels of istribution, and
Promotional activities like advertising and salesmanship to communicate with
the customers.
3. Financial Management. Financial management seeks to ensure the right
amount and type of funds to business at the right time and at reasonable cost. It
comprises the following activities:
a) Estimating the volume of funds required for both long-term and shortterm needs of business,
b) Selecting the appropriate sources of funds,
c) Raising the required funds at the right time,
d) Ensuring proper utilization and allocation of raised funds so as to
maintain safely and liquidity of funds and the creditworthiness and
profitability of business, and
e) Administration of earnings.

Thus financial management involves the planning, organizing and controlling of

the financial resources.
Personnel Management. Personnel management involves planning, organizing directing
and controlling the procurement, development, compensation, maintenance, etc., of the
human resources in an enterprise. It consists of the following activities:
Manpower planning
Recruitment,
Selection,
Training and development,
Appraisal,
Compensation and promotion,
Employee services and benefits, and
Personnel records and research, etc.

NATURE OF MANAGEMENT
The study and application of management techniques in managing the affairs of the
organization have changed its nature over the period of time. Though management as a
practice came long ago, in fact, with the existence of time. Though management as a
practice came long ago, in fact, with the existence of human groups themselves, its impact
as a formal body of knowledge has been felt much later, particularly during the last five-six
decades. Various contributions to the field of management have changed its nature, for
example, from merely a practice to science also. Similarly, other changes have also
occurred. Thus, the nature of management can be described as follows:
1.
Multidisciplinary.
Management is basically multidisciplinary. This implies that,
although management has been developed as a separate discipline, it draws knowledge and
concepts from various disciplines. It freely draws ideas and concepts from such disciplines
as psychology, sociology, anthropology, economics, ecology, statistics, operations research,
history, etc. Management integrates the ideas and concepts taken from these disciplines
and presents newer concepts which can be put into for managing the organizations. In fact,
the integration of knowledge of various disciplines is the major contribution of management
and this integrated discipline is known as management. Therefore, the contributions in the
field can be expected from any discipline which deals with some aspects of human beings.
2. Dynamic Nature of Principles. Principle is a fundamental truth which establishes
cause and effect relationships of a function. Based on integration and supported by practical
evidences, management has framed certain principles. However, these principles are
flexible in nature and change with the changes in the environment in which an organization
exists. Because of the continuous development in the field, many older principles are being
changed by new principles. Continuous researches are being carried on to establish
principles in changing society and no principle can be regarded as a final truth. In fact, there
is nothing permanent in the landslide of management.
3. Relative, not Absolute Principles. Management principles are relative, not absolute,
and they should be applied according to the need of the organization. Each organization
may be different from others. The difference may exist because of time, place, socio-cultural
factors, etc. However, individuals working within the same organization may also differ.

Thus, a particular management principle has different strengths in different conditions.

Therefore, principles of management should be applied in the light of prevailing conditions.
Allowance must be made for different changing environment.
4. Management: Science or Art. There is a controversy whether management is science
or art. However, management is both a science and an art.
5. Management as Profession. Management has been regarded as a profession by many
while many have suggested that it has not achieved the status of a profession. This aspect
will be discussed later in this chapter.
6. Universality of Management. Management is a universal phenomenon. However,
management principles are not universally applicable but are to be modified according to the
needs of the situation. Universality of management will be discussed later is this chapter.
The nature of management suggests that it is a multidisciplinary phenomenon; its
principles are flexible, relative and not absolute. It is both science and art; it can be taken as
a profession and finally it is universal. However, the last three aspects need further
elaboration because of differing views over these aspects of management.

Management as an Art
Art involves the practical application of personal skills and knowledge to
achieve concrete results. It is the practical way of doing specific things. The function
of the art is to effect change and to achieve desired results. Art represents how of
human behaviour or the know-how to do work. Art is a personalized process and
every artist has his own style. Art is essentially creative and the success of an artist
is measured by the results he achieves. Art is practice-based and perfection in it
requires continuous practice over a long period of time. A carpenter making furniture
out of wood and a goldsmith shaping gold into ornaments are examples of art.
Music, dancing and painting are also arts.
Thus, the main elements of an art are:
a. Personal skills,
b. Practical know-how,
c. Result-orientation,
d. Creativity, and
e. Constant practice aimed at perfection.
Management is basically an art because of the following reasons:
i. Like any other artist, a manager applies his knowledge and skills to coordinate
the efforts of his people.
ii.
Management seeks to achieve concrete practical results, e.g., profits, growth,
social service, etc., in a given situation.
iii.
Like any other art, management is creative. It brings out new situations and
converts resources into output.
iv.
Management is a personalized process. Every manager adopts his own
approach towards problems depending upon his perception and the
environmental conditions.
v. Effective management leads to realization of organizational and other goals.
The success of a manger is measured by the results he achieves. It is very
much like the saying that the proof of the pudding lies in eating. Mastery in

management requires a sufficiently long period of experience in managing.

The managerial art can be refined through continuous practice.
Management as a Science
The essential elements of science are as follows:
1) Science is a systematized body of knowledge pertaining to a particular field
of inquiry. It is systematized in the sense that it establishes cause and
effect relationship between different variables.
2) It contains underlying principles and theories developed through continuous
observation, experimentation and research.
3) The principles have universal applicability. They can be applied under
different situation barring a few exceptions which can be logically explained.
The principles are verifiable and lead to predictable results.
4) The organized body of knowledge can be taught and learnt in the classroom
and outside. Physics, Chemistry, Mathematics and Economics are some
examples of science.
Management is a science because it contains all the essentials of science.
First, there is now a systematized body of knowledge. Principles and
theories are now available in every area of management. For instance, there
are several principles to serve as guidelines for effective delegation of
authority. Secondly, principles of management have been evolved through
practical experience and theoretical research over several decades. Thirdly,
managerial principles have a wide and repetitive range of application.
Application of management theory can be demonstrated through the quasilaboratory method of case studies. Lastly, management theory and principles
can be taught in classrooms and in industry.
Nature of science of management. Management is a social science like
economics because it involves the study of human behaviour. Its principles are
not hard and fast laws like those of Physics or Chemistry. Rather, they are
flexible guidelines to be modified in different situations. These cannot predict
with certainty future behaviour. This is because living and complex human
beings in dynamic situations cannot be studied under controlled laboratory
conditions. Validity of the principles cannot be tested through experiments.
This is true not only of management but of all social sciences. Moreover,
management is a comparatively young and growing science which developed
in the 20th century. It is not fully mature and management scientists cannot
explain clearly why and how a human being behaves in a particular way and
will he behave in the same way in future. Therefore, management is called an
inexact science or soft science. The human element and environmental
dynamics in management make it an imperfect science. Management is an
applied science as a manager has to apply the principles just like a medical or
legal practitioner. Management is also an inter-disciplinary science as it draws
freely on the knowledge from several other sciences like Economics,
Mathematics, Sociology, Psychology and Anthropology.
Thus, management is neither exclusively an art nor exclusively a science
but a combination of both. Essentially, managing is the art of doing and
management is the body of knowledge which underlies the art. Management

is said to be the oldest of arts and the youngest of sciences. It must, however,
be noted that science and art are not mutually exclusive but complementary to
each other. Science without art is sterile and art without science is blind.
Every art is based on an underlying body of knowledge and with every
advancement in science art is free from dependence on intuition and judgment.
For example, a physician without the science of medicine becomes a witch
doctor, with science an artful manager. Similarly, a manager without any
knowledge of underlying theory has to depend on luck, precedents and
intuition which are highly unreliable.
Management theory helps him to
understand the problems correctly. It provides insight to diagnose problems
and opportunities. It encourages systematic thinking and right perspective.
Therefore, management theory is a foundation to management practice.
Thus, the theory (science) and practice (art) of management go side by
side for the efficient functioning of an organization.
Management: Both Science and Art
Thus, to be a successful manager, a person requires the knowledge of management
principles and also the skills of how the knowledge can be utilized. Absence of either
will result in inefficiency. A comparison between science and art is presented in Table
1.2 which suggests that a manager requires both aspects of management to be
successful.
TABLE 1.2: Comparison between science and art as used in management
Science
Advances by knowledge
Proves
Predicts
Defines
Measures
Impresses

Art
Advances by practice
Feels
Guesses
Describes
Opines
Expresses

It can be seen that management uses both scientific knowledge and art in managing
an organization. As the science of management increases so should the art of management.
A balance between the two is needed. Neither should be overweighed or slighted. Some
feel that further gains in science of management will restrict art more and more. This is true
to a limited extent only. The fact remains that to be useful. Knowledge of science must be
applied, that is, art must be present. Therefore, the old saying that knowledge is power is
partially true. The correct saying should be applied knowledge is power. People having
abundant knowledge may have little use if they do not know how to use knowledge. This is
particularly true for management which is a situational phenomen

Management as a Profession
The development of management theory, separation of ownership from
management in large corporations and growing administrative complexities have led
to the demand for giving management the status of a distinct profession. An
occupation must satisfy certain criteria in order to claim the status of a profession.
This criteria refers to the essential attributes of a profession which are given below.

1. A well-defined and organized body of knowledge. There is an organized

body of specialized knowledge pertaining to a particular field. Such a systematized
body of theoretical knowledge contains principles, theories and techniques. These
principles establish cause and effect relationships and are capable of universal
application. They must be evolved through scientific methods of observation,
experiment and experience.
2.
Learning and experience.
There must be satisfactory formalized
arrangements for imparting theoretical knowledge and practical training to those
desiring to enter the profession. A professional is a person who has undergone
certain vigorous training to acquire certain knowledge and skills. The knowledge
must be transferable through the medium of formal teaching, training and practice.
There must be competent application of knowledge to problems.
3. Entry restricted by qualifications. Anybody who wants to enter the profession
must pass the prescribed examinations and obtain the degree or diploma. Minimum
educational qualifications and training are laid down to ensure that a professional is
proficient in the specialized body of knowledge. Nobody can enter the profession
without acquiring the prescribed qualifications. For example, nobody can become a
lawyer without being a law graduate.
4. Recognised national body. There must be an institute, association or similar
well-accepted authority. Such a representative body is needed to prescribe minimum
qualifications for entry, to impart education and training, to conduct examinations, to
award diplomas and degrees and to enforce discipline among the professionals. It
regulates and develops the professional activities and enjoys legal powers as a
statutory body.
5. Ethical code of conduct. There must be a suitable code of conduct or ethics.
Such a code lays down the norms which the members must observe while dealing
with their clients. It must be fairly homogeneous over all members of the profession
wherever they function. Every member of the profession is expected to observe the
ethical standards laid down for that profession. The code requires self-control.
Members who violate the code can be derecognized and disqualified from the
profession. Professionals, derive their social status from success in their work not
from birth or political power.
6. Dominance of service motive. A professional is expected to give priority to
service in preference to selfish gain. Financial gain is subsidiary. A profession and its
aim must be in tune with the objectives and changing needs of the society. A
profession, however, provides full-time occupation and means of livelihood with
reasonable remuneration (fee) for its members.

Classification of Managerial Functions (or) Management Process (or)

Functions of Management:
The elements of management process are known as functions of management.
There is, however, no single list of functions acceptable to all. Various authors have
classified these functions differently. Henri Fayol has classified them into planning,
organizing, commanding, coordinating and controlling. R.C.Davis identified planning,
organizing and coordination as parts of control. Luther Gullick has given keyword
POSDCORB which stands for Planning (P), Organising (O), Staffing (S), Directing (D),
Controlling (Co), Reporting and Budgeting (B). Koontz and O Donnel have
suggested planning, organizing, staffing, directing and controlling. Ernest Dale has in
addition mentioned innovation and representation.
Almost all authorities agree on the basic functions of planning, organizing and
controlling. Modern writers treat staffing as a separate function whereas the classical
writers considered staffing as a part of organizing.
In view of the growing
significance of human resource management staffing should be considered a
separate function. In order to get things done, a manager has to guide, motivate,
lead and communicate with his subordinates. Therefore, directing becomes an
essential function.
Directing is known by different names, e.g., executing,
commanding, actuating, etc. Thus, the functions of management may be classified
into five categories as given in the following table:
Functions
Planning

Sub-functions
Forecasting, decision-making, strategy
formulation, policy-making, programming,
scheduling, budgeting, problem-solving,
innovation, investigation and research
Organising
Functionalisation,
divisionalisation,
departmentalization,
delegation,
decentralization, activity analysis, task
allocation
Staffing
Manpower
planning,
recruitment,
selection,
training,
placement,
compensation, promotion, appraisal, etc.
Directing
Supervision, motivation, communication,
leadership, activating, etc.
Conrolling
Fixation
of
standards,
recording,
measurement, reporting, corrective action.
Innovation implies creative thinking designed for change and improvement. It is a
part of the broader function of planning because planning is carried out not only to
ensure survival but progress of the enterprise too. Budgeting is also a sub-function
of planning as it includes allocation of resources. Representation implies acting as a
spokesperson of the company. It cannot be considered as a managerial function
because only the chief executive has the authority to represent the company.

Determining the Nature of Work of a Manager in terms of the Process of

Management
Management is a distinct process consisting of planning, organizing, staffing,
directing and controlling. The job of a manager is to coordinate and utilize human
and other resources (inputs) to achieve certain objectives (outputs) like profits,
growth, stability, etc. The process of management involves the determination of
goals and converting these goals into results. It is that process by which managers
create, direct, maintain and operate purposive organizations through systematic,
coordinated and co-operative human effort. It is a never ending and dynamic
process.
The work a manager performs is of special nature. It involves certain activities
or functions by which inputs are converted into outputs. A manager combines and
integrates men, money, materials, machinery and methods to achieve several end
results as shown in Fig.1.6
INPUTS
Men

FUNCTIONS
Planning

Organising

Money
Materials

Goods &
services
Productivity

Process of management

Growth

Machinery
Methods

OUTPUTS

Staffing

Directing

Controlling

Taxes
Employment

Fig.1.6. The Management Process.

The work of a manager can be compared with the job of an orchestra conductor. The
conductor of an orchestra harmonises and blends together the efforts of different
members of the orchestra team so that the team produces good music and
entertainment. Similarly, a manager synchronises and integrates the efforts of his
subordinates so that they work co-operatively and achieve their goals efficiently.
Managerial and Operative Functions
Managerial functions should be differentiated from operative functions of
business. Operative functions include production, marketing, financing, personnel,
etc. Operative functions are also known as the functional areas of business.
Operative functions differ according to the nature and size of business. For instance,
there is no production function in a retail store. On the other hand, managerial
functions are essential in all organizations irrespective of their nature and size. Every
operative function of business requires planning, organizing, staffing, directing and
controlling.
Table 1.5

Managerial Functions
1. Planning
2. Organising
3. Staffing
4. Directing
5. Controlling

Operative Functions
1. Production
2. Marketing
3. Purchasing
4. Financing
5. Personnel

The relationship between various functions of management may be described by an

analogy.
If management is a human body, planning constitutes its brain,
organization is its nervous system, direction makes up the respiratory organ, and
control stands for the eyes.

Managerial Functions and Managerial Levels

Though the managerial functions are necessary at all levels of organization, the
relative significance of different functions may not be the same at all levels of
management. The time spent on planning and control is more significant at higher
levels of management. Lower level executives spend comparatively a greater part of
their time on direction and controlling functions. A middle level manager is likely to
divide his time more evenly among the different functions. At higher levels, planning
is long term and strategic while at lower-levels it tends to be short term and
operational planning.
The mix of managerial functions at different levels of
management is shown in Fig.1.7.

Top Management

Plannin
g

Organising
Staffing

Middle Management
Supervisory
Management

Directing
Controlli
ng

Fig.1.7. Proportion of Managerial Functions at Different Levels.

A brief description of different functions of management is given below:
Planning
Planning is the most basic or primary function of management. It precedes
other functions because a manager plans before he acts.
Planning involves
determining the objectives and selecting a course of action to achieve them. It

implies looking ahead and deciding in advance what is to be done, when and where it
is to be done, how and by whom it is to be done. Planning is a mental process
requiring the use of intellectual faculties, foresight, imagination and sound judgment.
It consists of forecasting, decision-making and problem-solving.
A plan is a
predetermined future course of action. It is todays design for tomorrow and an
outline of steps to be taken in future.
The process of planning consists of; (a) determination of objectives, (b)
forecasting and choice of a course of action, (c) formulation of policies, programmes,
budgets, schedules, etc., to achieve the objectives, and (d) laying down of procedures
and standards of performance. Planning may be long term or short term. Planning is
a pervasive function and managers at all levels have to prepare plans. Planning is
also a continuous or on-going process. Planning enables us to do things in an orderly
and efficient manner. It is helpful in more effective achievement of goals. Planning
enables an organization to face uncertainty and change.
Organizing
Once plans are formulated, the next step is that of organizing. Organizing is
the process of establishing harmonious authority-responsibility relationships among
the members of the enterprise. It is the function of creating a structure of duties and
responsibilities. The network of authority-responsibility relationships is known as
orgnisation structure. Such a structure serves as the framework within which people
can work together effectively for the accomplishment of common objectives.
Organizing is an important element of management because it is through organizing
that a manager brings together the matrial and human resources required for
achievement of desired goals. According to Fayol, to organize a business is to
provide it with everything useful to its functioning raw materials, tools, capital and
personnel. A sound organization helps to avoid duplication of work and overlapping
of effort. However, an organization structure is not an end in itself. It should,
therefore, be designed to fit into the needs and objectives of the particular enterprise.
It should ensure material and human order.
The process of organizing consists of the following steps:
a) Determining and defining the activities required for the achievement of planned
goals;
b) Grouping the activities into logical and convenient untis;
c) Assigning the duties and activities to specific positions and people;
d) Delegating authority to these positions and people;
e) Defining and fixing responsibility for performance; and
f) Establishing horizontal and vertical authority-responsibility relationships
throughout the organization.
Staffing
Staffing is the process of filling all positions in the organization with adequate and
qualified personnel. According to koontz and ODonnell, The managerial function
of staffing involves manning the organizational structure through proper and

effective selection, training, compensation, integration and maintenance of

employees.
Staffing function has become important with growing size of
organization, technological advancement and recognition of the human factor in
indusry. Lawrence Appley remarked, managers would be more skilled and
more competent if they were carefully selected, specifically trained, continually
kept up-to-date in their field of activity, guided in their development for the
assumption of greater responsibility and adequately rewarded.
Directing
Directing is the managerial function of guiding , supervising, motivating and
leading people towards the attainment of planned targets of performance. In the
process of directing his subordinates, a manager takes active steps to ensure that
the employees accomplish their tasks according to the established plans.
Directing is the executive function of management because it is concerned with
the execution of plans and policies. Direction initiates organized action and sets
the whole organizational machinery into action. It is, therefore, the life spark of an
organization.
a)
b)
c)
d)
e)

Directing function of management embraces the following activities:

Issuing orders and instructions,
Supervising (overseeing) people at work,
Motivation, i.e., creating the willingness to work for certain objectives,
Communication, i.e., establishing understanding with employees regarding
plans and their implementation, and
Leadership or influencing the behaviour of employees.

Controlling
Controlling is the process of ensuring that the organization is moving in the
desired direction and that progress is being made towards the achievement of
goals. The process of controlling involves the following steps:
a) Establishing standards for measuring work performance;
b) Measurement of actual performance and comparing it with the standards;
c) Finding variances between the two and the reasons there for; and
d) Taking corrective action for correcting deviations so as to ensure attainment
of objectives.

Roles of a Manager
The job of a modern manager is very complex and multi-dimensional. Mint berg has
identified ten roles of a manager which are grouped into three categories. There is some
arbitrariness in this classification but it is a useful framework for analyzing and
understanding the managerial job. These roles are inseparable and should, therefore, be

viewed as an integrated whole. For example, status, as manifested in the interpersonal

roles, brings information to the manager, and it is this information (together with the status)
that enables him to perform the decision-making role effectively.
A brief description of the ten roles is given below:
1. Figurehead. In this role a manager performs symbolic duties required by the status of
his office. Making speeches, bestowing honours, welcoming official visitors, distributing gifts
to retiring employees are examples of such ceremonial and social duties.
2. Leader. This role defines the managers relationship with his own subordinates. The
manager sets an example, legitimizes the power of subordinates and brings their needs in
accord with those of his organization.
3. Liaison. It describes a managers relationships with the outsiders. A manager maintains
mutually beneficial relations with other organizations, governments, industry groups, etc.
4. Monitor. It implies seeking and receiving information about his organization and
external events. An example is picking up a rumour about his organization.
5. Disseminator. It involves transmitting information and judgments to the members of
the organization.
The information relates to internal operations and the external
environment. A manager calling a staff meeting after a business trip is an example of such a
role.
6. Spokesman. In this role, a manager speaks for his organization. He lobbies and
defends his enterprise. A manager addressing the trade union is an example.
7. Entrepreneur. It involves initiating change or acting as a change agent. For example, a
manager decides to launch a feasibility study for setting up a new plant.
8. Disturbance handler. This refers to taking charge when the organization faces a
problem or crisis, e.g., a strike, feud between subordinates, loss of an important customer. A
manager handles conflicts, complaints and competitive actions.
9. Resource allocator. In this role a manager approves budgets and schedules, sets
priorities and distributes resources.
10. Negotiator. As a negotiator, a manager bargains with suppliers, dealers, trade union,
agents, etc.

Ten Managerial Work Roles

Role
INTERPERSONAL ROLES
Figurehead

Leader

Liaison

Description

Typical Activities

Symbolic
head;
performs routine duties
of a legal or social
nature
Responsible
for
motivation
of
subordinates and for
staffing and training
Maintains network of

Ceremony,
requests

staus

Almost all managerial

activities
involving
subordinates
Handling mail, external

outside
contacts
to Board work, telephone
obtain
favours
and calls
information
INFORMATIONAL ROLES
Monitor

Dissemmator

Spokesman

DECISIONAL ROLES
Entrepreneur

Disturbance handler

Resource
allocator

Negotiator

Seeks
and
receives
information to obtain
thorough understanding
of
organization
and
environment
Transmits
information
received from outsiders
or insiders to other
organization members
Transmits information to
outsiders
on
organization
plans,
policies, actions

Reading
periodicals,
observational tours

Initiates and supervises

design of organizational
improvement
projects
as opportunities arise
Responsible
for
corrective action when
organization
faces
unexpected crises
Responsible
for
allocation of human,
monetary, and material
resources
Responsible
for
representing
the
organization
in
bargaining
and
negotiations

Strategy and review

sessions
regarding
change efforts

Forwarding mail, review

sessions
with
subordinates
Board
meetings,
handling mail.

Strategy and review

session
regarding
disturbances
Scheduling, requests for
authorization, budgeting

Collective
bargaining,
purchasing.

In the present context, managing has become one of the most important areas of human
activity because of increasing role of large and complex organizations in the society.
Because of their increasing role, the organizations have attracted the attention of both
practitioners and academicians to find out the answer of the question how these
organizations can be made more effective. This has led to the development of a new field of
study known as management. It has grown over the period of time and in todays context, it
has emerged as one of the most important disciplines of study and research.

STEPS IN SCIENTIFIC DECISION-MAKING PROCESS

Decision-making is a systematic process consisting of the following elements:
1. Identify the problem. The decision-making process begins with the
recognition of a problem that requires a decision. The problem may arise due to
gap between present and desired state of affairs. The threats and opportunities
created by environmental changes may also create decision problems. At this
stage, a manager should identify and define the real problem. A problem well
defined is half solved. In order to recognize the problem quickly, a manager
must continuously monitor the decision-making environment,. Imagination,
experience and judgement are required for detection of problems that require
managerial decisions.
2. Diagnose the Problem. Diagnosing the real problem implies analyzing it
in terms of its elements, its magnitude, its urgency, its courses, and its relation
with other problems. In order to diagnose the problem correctly, a manager
must obtain all pertinent facts and analyse them carefully. The most important
part of diagnosing the problem is finding out the real causes or sources of the
problem. Symptoms must not be mistaken for real problems. For example,
management may see a problem of manufacturing costs and may start a cost
reduction drive when the real problem is poor engineering design.

Identify the
Problem

Diagnose
the
Problem

Discuss
Alternative
courses of
Action

Evaluate
the
Alternative

Feed Back
Implement
and Follow
up

Choose the
Best
Alternative

Fig.2.8.Decision-making Process.

The problem may be analysed in terms of the following:

a.
b.
c.
d.
e.

Nature of the decision-routine or strategic,

Impact of the decision,
Futurity of the decision,
Periodicity of the decision, and
Limiting or strategic factor relevant to the decision.

3. Discover Alternatives. The next step is to search for the various possible
alternatives. An executives should not jump on the first feasible alternative to solve
the problem quickly. The courses of action open to decision-maker are not always
evident. A decision-maker has to use his ingenuity and creativity to spot and
interrelate them. A reasonably wide range of alternatives increases the managers
freedom of choice. But it is wise for management to limit itself to the discovery of
those alternatives which are critical or strategic to the problem. The principle of the
limiting factor should be followed for this purpose. According to Barnard, Strategic
factors refer to those that are most important in determining the action to be taken

in solving a given problems. For example, in a decision to expand operations,

capital or government control or size may be the limiting factors. In choosing from
among alternatives, the more an individual can recognize and solve those factors
which are limiting or critical to the alternatives within a manageable limit. Time and
cost constraints should be kept in mind. Development of alternatives is a creative
process requiring research and imagination. Management must ensure that the best
alternatives are considered before a course of action is selected.
Relevant
information must be collected and analysed for this purpose.
4. Evaluate Alternatives. Once the alternatives are discovered, the next stage is
to evaluate or screen each feasible alternative. Evaluation is the process of
measuring the positive and negative consequences of each alternative.
Management must balance the costs against possible benefits.
Considerable
knowledge and judgement are required to measure the plus and minus points and to
find out the net benefit of each alternative. Both quantitative and qualitative
evaluation is needed to ensure that all tangible and intangible factors are taken into
account. The element of risk involved in each alternative and the resources available
for its implementation should also be considered. Management must set some
criteria against which the alternatives can be evaluated.
Peter Drucker has
suggested the following criteria to weigh the alternative courses of action:
a)
b)
c)
d)

Risk. Degree of risk involved in each alternative.

Economy of effort. Cost, time and effort involved in each alternative.
Timing. Whether the problem is urgent.
Limitation of resources. Physical, financial and human resources available
with the organization.

5. Select the Best Alternative. After evaluation, the optimum alternative is

selected. Optimum alternative is the alternative that will maximize the results under
given conditions. Choice of the best alternative is the most critical point in decisionmaking. The ability to select the best course of action from several possible
alternatives separates the successful managers from the unsuccessful ones. Past
experience, experimentation, research and analysis are useful in selecting the best
alternative.
6. Implementation and Follow up. Once a decision is made it needs to be
implemented. Implementation involves several steps. First, the decision should be
communicated to those responsible for its implementation. Secondly, acceptance of
the decision should be obtained. Thirdly, procedures and time sequence should be
established for implementation. Necessary resources should be allocated and
responsibility for specific tasks should be assigned to individuals.
The implementation of the decision should be constantly monitored. The
effects of the decision should be judged through periodic progress reports. In case
the feedback indicates that the decision is not yielding the desired results, necessary
changes should be made in the decision or in its implementation.
Herbert Simon has identified three phases in the decision-making process:
i.
ii.

Intelligence activity involves a search for the conditions underlying the

decision. In includes identification and diagnosis of the problem, definition of
objectives and collection of information.
Decision activity is concerned with the generation and evaluation of alternative
courses of action.

iii.

Choice activity implies selection of the best course of action.

activity involves implementation of the decision.

Post choice

NATURE AND PRINCIPLES OF ORGANIZATION

Organisation as a Structure
Organisation structure refers to the network of relationships among individuals
and positions in an organization. It is the skeleton framework of an enterprise, just
like the architectural plan of a building, designed to achieve its common goal.
According to McFarland, organization is an identifiable group of people contributing
their efforts towards the attainment of goals. It is a group of interacting and
interdependent individuals working toward a common goal. Thus, as a structure
organization is the structural framework within which the efforts of different people
are co-ordinated and related to each other. It is a blue-print of how the management
will like the various activities and functions to be performed. It is a structure manned
by group of individuals who are working together towards a common goal. In this
sense, organization is a static mechanical entity.
Steps in Designing Organisation Structure
The process of designing organization structure involves the following steps:
1. Identification of Activities. Organisation structure is developed to
achieve objectives.
Therefore, first of all, the activities necessary for the
accomplishment of objectives are determined. The total work is classified or divided
systematically because no one can handle the total work alone. Identification and
classification of work enables managers to concentrate alternation on important
activities, to avoid duplication of work and to avoid overlapping or wastage of effort.
While identifying and classifying activities, management must ensure that (a) all the
necessary activities are performed, (b) the different activities are performed in a coordinated manner.
2. Grouping of Activities. Closely related and similar activities are grouped
together to form departments, divisions or sections. Grouping may be done on
several bases depending on the requirements of the situation. Such grouping of
activities is called departmentation.
3. Assignment of Duties. Each group of related activities is assigned a
position most suited for it. Every position is occupied by an individual. While
assigning duties, the requirements of the job and the competence of the individual
should be properly matched together. The process of assigning duties goes on till the
last level of the organization. It creates responsibility and ensures certainty of work
performance.
4. Delegation of Authority. Appropriate amount of authority is delegated to
people to enable them to perform the assigned duties with confidence. Authority and
responsibility are properly balanced. Delegation of authority creates superior-

subordinate relationships between various positions in the organization.

Such
relationships and channels of communication should be clearly defined. Each and
every individual should know clearly from whom he is to take orders and to whom he
is accountable for his performance.
Peter Drucker has suggested three specific ways to find out what kind of
structure is needed to attain the objectives of an enterprise. While desigining the
structure of an organization, the activities to be performed, the decisions to be made
and the relations to be established must be analysed keeping in view the objectives
of the organization.
(i) Activities Analysis. The first stage in designing an organization structure
is to identify and analyse the activities needed to achieve the objectives of the
organization. Activities provide the building blocks of organization design. Once the
activities have been identified and listed in order of their importance, the next step is
to divide and sub-divide them into smaller homogeneous and manageable units so
that they can be assigned to different individuals. For example, the chief executive
may divide the total work into departments and may delegate authority to
departmental managers. Each departmental manager may sub-divide his work into
sections and appoint a manager in charge of each section.
(ii) Decisions Analysis. The next stage in developing an organization is to
identify the decisions needed to achieve the objectives and to classify these
decisions according to their kind and character. Drucker has suggested four criteria
to determine the nature of decisions:
(a) Degree of futurity. A decision which commits the ogranisation for a long
period in future (e.g., a decision to set up a new factory) is a major decision and
should be taken by top management.
(b) Impact. If the decision affects several functions (e.g., a decision to change
the product design), it is of high order and should be taken at a higher level of
authority. If the decision affects only one function, it may be taken at a lower level.
(c) Qualitative factors. A major decision involves several qualitative or
intangible factors, e.g., basic principles of conduct, ethical values, social and political
beliefs, etc. Such an important decisions are unique and are taken infrequently.
In short, it is necessary to analyse all the decisions and to establish their
relative importance so as to determine the levels at which different decisions should
be taken.
(iii) Relations Analysis. Activities and decisions create an interlocking
system of relations both vertically and horizontally. Analysis of relations involves
study of what contributions a manager has to make and what contributions he will
require from other managers. Traditionally, a mangers job is defined only in terms of
the activity he is heading, i.e., in relation with lower level upward relationship. It
means defining a managers job in terms of the contribution it has to make to the
larger unit of which it is a part. It is also necessary to analyse sideways relations,

i.e., analysis of the contribution, a manager has to make to other managers of the
organization.
PRINCIPLES OF ORGANISATION (FEATURES OF A GOOD ORGANISATION STRUCTURE
The basic principles of organization are as follows:
1. Unity of Objective. An organization structure is sound when it facilitates the
accomplishment of objectives. Therefore, the organization as a whole and every part of it
must be geared to the basic objectives of the enterprise.
2. Specialisation or Division of Work. The activities of every member of the
organization should be confined, as far as possible, to the performance of a single function.
3. Span of Control. Every manager should have a limited number of subordinates
reporting to him directly. Generally, the span should be narrow for complex work and wide
for simple and routine work. Span should be neither too wide nor too narrow.
4. Scalar principle. There should be a clear chain of command extending from top
to the bottom of the organization. Every subordinate should know who his superior is and
who his subordinates are.
5. Functional Definition. The duties (functions), authority and responsibility of
every position should be clearly defined so as to avoid duplication of work and overlapping of
functions.
6. Exception Principle. Only exceptional matters which are beyond the authority of
lower level persons should be referred to higher levels. Routine matters should be dealt with
by executives at lower levels. This is also known as authority level principle
7. Unity of Command. Each subordinate should have only one superior whose
command he has to obey. This is necessary to ensure discipline and to fix responsibility for
results.
8. Balance. A proper balance between centralization and decentralization should be
kept. Each function in the organization should be developed to the point at which the value
received is at least equal to costs.
9. Efficiency. The organization structure should facilitate the achievement of
objectives at minimum possible cost. It should permit the optimum use of resources.
10.
Flexibility.
The organization structure should be adaptable enough to
accommodate technical and other changes in the environment. Therefore, complicated
procedures, red tape and complexity of control should be avoided. At the same time, the
organization structure should be reasonably stable so as to withstand changes.
11.
Continuity.
Proper arrangements should be made for the training and
development of executives.
12. Facilitation of Leadership. Organisation structure should be so devised that
there is enough opportunity for the management to give effective leadership to the
enterprise.

13. Parity of Authority and Responsibility. In every position, the authority and
responsibility should correspond. Adequate authority should be delegated to all levels and
wherever authority is delegated the person should be held responsible.
14. Coordination. The organization structure should facilitate unity of effort and coordination among different individuals and groups. Channels of communication should be
open and clear.
Formal and Informal Organisation
Formal Organisation. It refers to the organization structure deliberately created by
management for achieving the objectives of the enterprise. It is a pattern of activities,
processes, human relationships and roles planned and structured in order to accomplish
organizational goals. It is a network of official authority responsibility relationships and
communication follows. It is an official and rational structure. According to Chester Barnard,
Formal organization is a system of consciously coordinated activities of two or more persons
toward a common objective. The essence of formal organization is conscious common
purpose and formal organization comes into existence when persons (a) are able to
communicate with each other, (b) are willing to act, and (c) share a purpose. In the words
of Allen, The formal organization is a system of well-defined jobs, each bearing a definite
measure of authority, responsibility and accountability. It consists of those relationships
that are relatively stable and change only slowly.

Informal Organisation. It refers to the pattern of activities, interactions and human

relationships which emerge spontaneously due to social and psychological forces operating
at the work place. It arises naturally on the basis of friendship or some common interest
which may or may not be related with work. It is an unintended and non-planned network of
unofficial and social patterns of human relationships. Informal organization represents the
pattern of interpersonal and intergroup relations that develop within the formal organization,
e.g., friendship groups and cliques.
For example, the typists working in different
departments may form an informal group due to similarity of work. Common language,
common habits, common hobby may also lead to informal groups. It is an unofficial and
social pattern of human interactions. According to Chester Barnard, Informal organization is
joint personal activity without conscious common purpose though contributing to joint
results.

FORMS OF ORGANIZATION STRUCTURE

Organisation structure is primarily concerned with the allocation of tasks and
delegation of authority. There are several ways of division of work and distribution of
authority. As a result, several types of organization structure have been evolved.
The six main types of organization structure are given below:
1.
2.
3.
4.
5.
6.

Line organization.
Functional organization
Line and staff organization
Project organization
Matrix organization
Committee organization

6.1 Line Organisation

Meaning. Line organization is the oldest type of organization structure. It is
also known as military or scalar organization because it originated in the army. In
line organization there is an unbroken vertical line through which authority flows from
the top to the bottom of organization. Every manager exercises a direct authority
over his subordinates who are in turn directly responsible to their superior. There is
thus a hierarchical arrangement of authority. There are no separate supportive or
service units for accounting, labour, etc. Every manager is required to incorporate
these activities in his department. For example, the manufacturing manager himself
has to arrange for the recruitment, selection and training of workers for the
production department. Each department is self-contained and works independently
of other departments. All departmental heads are supreme in their respective areas.
Line organization may be of two types. In pure line organization, all individuals at a
given level perform the same type of work and departments are created only to
facilitate supervision and control. But in departmental line organization work
performed in each department is of a different nature.
Managing
Directior

Production
Manager

Plant
Superintendent

Foreman
Shop A

Foreman
Shop B

Foreman
Shop C

Workers
Fig. 6.1. Line Organisation.
Features. Line organization has the following characteristics:
i.
ii.
iii.
iv.
v.

Lines of authority are vertical flowing from top to the bottom.

The command is through a straight and unbroken line. Each subordinate
receives orders from
one superior and is responsible to him alone.
All persons at the same level are independent of each other.
The authority and responsibility of each position is clearly specified.
There are no staff specialists.

Advantages. Line organization has the following merits:

i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.

Simplicity.
Prompt Decision.
Effective discipline.
Orderly Communication.
Unified control.
Economical.
Fixed responsibility.
Executive development.
Co-ordination.

Disadvantages. Line organization suffers from the following drawbacks:

i. Lack of specialization.
ii.
Overloading.
iii.
Autocratic approach.
iv.
Law morale.
v. Instability.
vi.
Rigidity.
Functional Organisation
As organization grows in size, line organization proves inadequate and it
becomes necessary to introduce specialization. The functional organization is based
on the concept of functional foremanship suggested by F.W. Taylor.
Under functional organization the organization is divided into a number of
functional areas. Each function is managed by functional expert in that area. Every
functional area serves all other areas in the organization. For example, the purchase
department handles purchases for all departments. The executive in charge of a
particular function issues orders throughout the organization with respect to his
function only. For example, the personnel manager will decide the questions relating
to salary, promotions, transfers, etc., for every employee in the organization whether
he is in production, sales or any other department. Thus, an individual in the
organization receives instructions from several functional heads. Every functional
expert enjoys functional authority over subordinates in other departments. Within a
functional department every operating executive receives orders from several

functional specialists. For example, each foreman in the factory receives orders from
factory superintendent, chief engineer, chemist, etc.

Features. The main characteristics of functional organization are as follows:

The whole task of the enterprise is divided into specialized functions.

Each function is performed by a specialist.
The specialist incharge of a functional department has the authority over all
other employees for his function
Specialists operate with considerable independence.
Managing
Director
Production
Manager
Supdt. Of
Production

Engineer

Foremen

Foremen

Foremen

Chemist

Foreme

Foremen

Foremen

Foremen

Fig. 6.2. Functional Organisation.

Advantages.
1.
2.
3.
4.
5.
6.

Specialisation.
Reduction of workload.
Better control.
Easier staffing.
Higher efficiency.
Scope for expansion.

Disadvantages. Functional organization suffers from the following weaknesses:

1. Double command.
2. Complexity.
3. Delay in decision-making.
4. Problem of succession.
5. Lack of co-ordination.
6. Expensive.

Functional organization is generally suitable for large and medium-sized concerns.

But it should be applied at higher levels because it does not work well at the lower
levels.
6.3 Line and Staff Organisation
Line and staff organization is a combination of line and functional structures.
Under it, line authority flows in a vertical line in the same manner as in the line
organization. In addition staff specialists are attached to line positions to advise
them on important matters. These specialists do not have power of command over
subordinates in other departments. They are purely of advisory nature. When the
work of line executives increases, they need advice, information and help of staff
specialists. Therefore, staff positions are created to support the line managers.
Every staff specialist, however, has line authority over the subordinates in his own
department. For example, the chief accountant has command authority over
accountants and clerks in the accounts department. But he has only advisory
relationship with other departments like production, sales, etc.
Managing
Director

------------ Personnel Assistant

Personnel
Manager

Works
Manager

Chief
Accountant

Plant
Superintende
nt

------------------------------------------------------------------------------Quality Control

Repairs and
Inspector

Maintenance officer
Foreman
Shop A

Foreman
Shop B

Foreman
Shop C

Workers

Line
--- Staff

Fig.6.3. Line and Staff Organisation.

Advantages. Line and staff organization offers the following advantages:

1. Expert advice.
2. Executives.
3. Quality decisions.
4. Training of personnel.

5. Flexibility.
Disadvantages. Line and staff organization suffers from the following drawbacks:
1. Line staff conflicts.
2. Confusion.
3. Ineffective staff.
4. Expensive.
Despite these limitations, line and staff organization is very suitable for large
organizations. It provides ample scope for specialization without violating the unity
of command. Its success depends upon the degree of harmony that is maintained
among the line and staff. However, it may not be useful for small organizations
which cannot take full advantage of staff experts.
Project Organisation Structure
Project and matrix structures are of recent origin, developed after World War II.
When an organization has to execute large projects of long duration, it may adopt a
project organization. Under project organization each project is organized as a semiautonomous project division. A project is a unique and complex cluster of activities
designed around a distinct mission and a specific time frame. A project team
consists of specialists in different fields. The activities of project team members are
coordinated by a project manager who is ultimately responsible for the successful
completion of the project. Once a project is complete, the regular project division
undertakes a new project. A simple project organization is given in Fig.6.4.
Managing
Director

Manager
Project Division I
Engineer R and D
Accounts
Personnel
Manager
Officer
Officer
Officer
Clerks

Manager
Project Division - II
Personnel

Engineer

Officer

R and DAccounts
Manager

Clerks
Fig. 6.4.Project Organization.

Project organization can be effectively applied under the following situations:

a)
b)
c)
d)
e)

The project offers a unique or unfamiliar challenge.

The project has definite goals and well-defined specializations.
Successful completion of the projects is critical to the organization.
The project is complex with interdependent tasks.
The assignment is to be completed within the given time limit.

Advantages. Project organization offers the following advantages:

1) Project organization facilitates concentrated attention that a complex

project requires. It can be tailored to meet the specific requirements of a
particular project.
2) It allows maximum use of specialized knowledge and skills.
3) It provides greater flexibility in handling specialized projects. It also
provides better co-ordination of organizational resources.
4) Project organization provides greater check over the projects work and
facilitates fixation of individual responsibility for results. It makes for
meaningful control.
5) Unity of command is maintained.

Disadvantages. Project organization suffers from the following weaknesses:

1) There is greater uncertainty because the project manager has to deal with
specialists from a number of diverse fields. These specialists often have
different approaches and interests.
2) The job of the project manager becomes very difficult due to lack of clearly
defined responsibility, lack of clear communication lines and lack of
performance standards for various professionals.
3) The project manager has to devise a decision process where information could
be monitored quickly and without much delay in decisions. Decision-making is
very difficult due to unusual pressures from specialists and time limits for
completion of the project.
4) The project manager cannot apply the traditional approach for motivating and
controlling the professionals. Lack of awareness of project problems, personal
prejudices and different orientations of professionals create serious problems.
Matrix Organisation
Matrix organization is hybrid grid structure wherein pure project
organization is superimposed on a functional structure. It is two-dimensional
pattern developed to meet the problems of growing size and complexity of
undertakings. Such undertakings require an organization structure more flexible
and technically oriented than the traditional line and staff structures. Matrix
structure has been defined as any organization that employes a multiple
command system that includes not only the multiple command structure but also
related support mechanism and an associated organizational culture and
behaviour pattern. The essence of matrix organization is the combining of
functional and product forms of departmentation. Thus, a matrix organization is
characterized by overlapping of command, control and behaviour patterns. It
represents a compromise between functional and product structures.
Managing
Director

Production
Project
Manager
I
Project
Manager
II

Personal

Engineering

Prod.Group
I

Pers .Group Eng. Group

I
I

Prod.Group
II

Pers .Group
II

Finance
Finance
Group
I

Eng. Group
II

Finance
Group
II

Fig. 6.5. Matrix Organization

Advantages. The main benefits of matrix organization are as follows:
1. It effectively focuses attention and resources on a single project. This leads to
better planning and control which, in turn, help in completion of projects in
time. Project manager can draw on the specialist services of functional
departments.
2. It is more flexible than the traditional functional organization. It can be more
easily adapted to changes in technology. As individual projects are completed
functional services are released with ease and flexibility. It produces economy
of efforts and expenses. It helps speed and flexibility in organizing projects and
consultancy services.
3. It stresses authority of knowledge rater than status. Therefore, services of
professional can be better utilized. They can test their professional,
competence and widen their scope to contribute maximum towards the
achievement of objectives.
4. Matrix structure provides motivation to personnel engaged in project. It
manager and functional groups.
5. More efficient utilization of resources is possible as functional and project
manager and functional groups.
6. High technical standards can be maintained.
7. Decision-making can be delegated to lower levels which helps in employee
development and relieves burden of top managers.
Disadvantages. Matrix organization is subject to the following liminations:
1. It violates the principle of unity of command as functional groups receive
orders from both functional bosses and project manager. This may give rise to
power struggle and jurisdictional conflicts in the organization.
2. The organizational relationships become very complex and there is great
confusion among personnel. They fail to identify their respective superiors as
there are both formal and informal relationships.
3. Coordination of people drawn temporarily from different functional
departments becomes very difficult. It is not a homogeneous group and in the
absence of the line authority, the project manager cannot its functioning.

Morale of such a heterogeneous group is likely to be low. Dysfunctional

conflicts may arise between functional managers and project managers.
4. Joint decision-making and sharing of resources are required. In the absence of
spirit of understanding and accommodation, vital decisions get delayed. Each
executive may emphasise his own area at the cost of the success of the
organization. This will result into conflicts and projects might not be completed
in time. There may be competition for scarce resources.