FOM Lecture Notes

FUNDAMENTALS OF MANAGEMENT
UNIT – 1
Introduction to Management: Definition, Nature and Scope, Functions,
Managerial Roles, Levels of Management, Managerial Skills, Challenges of
Management; Evolution of Management- Classical Approach- Scientific and
Administrative Management; The Behavioural approach; The Quantitative
approach; The Systems Approach; Contingency Approach, IT Approach.
UNIT - 2
Planning and Decision Making: General Framework for Planning - Planning
Process, Types of Plans, Management by Objectives; Development of
Business Strategy. Decision making and Problem Solving - Programmed and
Non Programmed Decisions, Steps in Problem Solving and Decision Making;
Bounded Rationality and Influences on Decision Making; Group Problem
Solving and Decision Making, Creativity and Innovation in Managerial Work.
UNIT - 3
Organization and HRM: Principles of Organization: Organizational Design &
Organizational Structures; Departmentalization, Delegation; Empowerment,
Centralization, Decentralization, Recentralization; Organizational Culture;
Organizational Climate and Organizational Change. Human Resource
Management & Business Strategy: Talent Management, Talent Management
Models and Strategic Human Resource Planning; Recruitment and
Selection; Training and Development; Performance Appraisal.
UNIT - 4
Leading and Motivation: Leadership, Power and Authority, Leadership
Styles; Behavioural Leadership, Situational Leadership, Leadership Skills,
Leader as Mentor and Coach, Leadership during adversity and Crisis;
Handling Employee and Customer Complaints, Team Leadership. Motivation
- Types of Motivation; Relationship between Motivation, Performance and
Engagement, Content Motivational Theories - Needs Hierarchy Theory, Two
Factor Theory, Theory X and Theory Y.
UNIT - 5
Controlling: Control, Types and Strategies for Control, Steps in Control
Process, Budgetary and Non- Budgetary Controls. Characteristics of
Effective Controls, Establishing control systems, Control frequency and
Methods.
TEXT BOOKS:
1. Management Fundamentals, Robert N Lussier, 5e, Cengage Learning,
2013.
2. Fundamentals of Management, Stephen P. Robbins, Pearson Education,
2009.
REFERENCES:
1. Essentials of Management, Koontz Kleihrich, Tata McGraw HilL.
2. Management Essentials, Andrew DuBrin, 9e, Cengage Learning, 2012.
Fundamentals of Management Page | 1

UNIT – 1: INTRODUCTION TO MANAGEMENT
1.1. Introduction to Management
1.2. Definitions of Management
1.3. Nature of Management
1.4. Scope of Management
1.5. Functions of Management
1.6. Managerial Roles
1.7. Levels of Management
1.8. Managerial Skills
1.9. Challenges of Management
1.10. Evolution of Management
1.11. Classical Approach
1.12. Scientific and Administrative Management
1.13. Behavioural approach
1.14. Quantitative approach
1.15. Systems Approach
1.16. Contingency Approach
*****
1.1. Introduction to Management
The practice of management is as old as human civilization. However,
the study of management in a systematic and scientific way as a distinct
body of knowledge is only of recent origin.
The concept of management is as old as the human race itself. The concept
of ‘family’ itself required that life be organized and resources of food be
apportioned in a manner so as to maximize the utility of such resources.
Taking proper steps to safeguard the family from attacks by wild
animals, planning on where to go fishing and hunting and whom to go with,
organizing these groups into chiefs and hunting and fishing bands where
chiefs gave directions, and so on, are all subtle ingredients of management
and organization.
Management in some form or another is an integral part of living and is
essential wherever human efforts are to be undertaken to achieve desired
objectives. The basic ingredients of management are always at play, whether
we manage our lives or our business.
1.2. Definitions of Management

Many management thinkers have defined management in their own ways.
According to F.W. Taylor, “Management is an art of knowing what to do,
when to do and see that it is done in the best and cheapest way”.
According to Harold Koontz, “Management is an art of getting things done
through and with the people in formally organized groups. It is an art of
creating an environment in which people can perform and individuals and
can co-operate towards attainment of group goals”
For example, let us look at the managerial role of a simple housewife
and how she uses the managerial ingredients in managing the home. First,
she appraises her household and its needs. She forecasts the needs of the
household for a period of a week or a month or longer. She takes stock of
her resources and any constraints on these resources.

She plans and organizes her resources to obtain the maximum
benefits out of these resources. She monitors and controls the household
budget and expenses and other activities. In a large household, she divides
the work among other members and coordinates their activities. She
encourages and motivates them to do their best in completing their
activities. She is always in search for improve, mention goals, resources and
in means to attain these goals. These ingredients, generally, are the
basic functions of management.
1.3. Nature of Management

The nature of management can be better appreciated by looking at it
• As a process
• As a discipline
• As a group of individuals
• As a profession, and
• As a science as well as an art.
Management as a Process: Management consists of a series of inter-related
activities of planning, organising and controlling. All activities are
undertaken in a proper sequence with a systematic approach so as to
ensure that all actions are directed towards achievement of common goals.
Thus, it is regarded as a process of organising and employing resources to
accomplish the predetermined objectives.
Management as a Discipline: Management is a systematised body of
knowledge that has developed, grown and evolved over the years through
practice and research. The knowledge so cumulated is disseminated to
successive generations of managers and used by them in performing their
jobs. Thus, it has become a separate field of study with its own principles
and practices and thus, evolved as an independent discipline with its own
techniques and approaches.
Management as a Group: Management normally refers to a group of
managers working in an organisation. It includes the top executive as well
as the first line supervisors. These managers perform their functions jointly
as a group. The success of business does not depend on the efficiency of
one, but of all manages taken together. Managers work as a team so that
objectives of the business are fully achieved.
However, in every organisation there are certain levels of management with
varying degree of the nature of authority and responsibilities.
Management as a Science as well as an Art: Management is regarded as a
science as well as an art. Science refers to a systematic body of knowledge
with reference to understanding of some phenomenon or subject or object of
study. It establishes a cause and effect relationship between variables. It is
based on systematic explanation, experimental analysis, critical evaluation
and logical consistency.
In art we learn about the ‘how’ of a phenomenon. For example, take
the case of painting. There is nothing called the best way of painting. More
one paints, the more he improves and learns how to paint. Now look at
management. Here also we apply a lot of skill (like technical, conceptual,
human etc.) and it is also creative in nature. Nobody can say that this is the
best way of managing. It varies from one manager to another.

The more one manages, the more experienced and expert he becomes. Thus,
management is a combination of both science and art.
Management as Profession: Though management may not meet all the
requirements of a profession in strict sense of the term, but it meets most of
the above requirements and is, now a days, regarded a full-fledged
profession. A number of institutions have come up to teach management in
a formal way and train future managers. Various associations like American
Management Association in USA, All India Management Association in India
have been functioning as representative bodies of managers and have duly
devised codes of conduct for managers. Many more organisations have come
up in the specialised fields of management.
1.4. Scope of Management

Although it is difficult to precisely define the scope of management, yet the
following areas are included in it:
1. Subject-Matter of Management: Planning, organizing, directing,
coordinating and controlling are the activities included in the subject matter
of management.
2. Functional Areas of Management: It includes accounting, budgetary
control, quality control, financial planning and managing the overall
finances of an organization.
3. Personnel Management includes recruitment, training, transfer
promotion, demotion, retirement, termination, labour-welfare and social
security industrial relations.
4. Purchasing management includes inviting tenders for raw materials,
placing orders, entering into contracts and materials control.
5. Production Management includes production planning, production
control techniques, quality control and inspection and time and motion
studies.
6. Maintenance Management involves proper care and maintenance of the
buildings, plant and machinery.
7. Transport Management includes packing, warehousing and
transportation by rail, road and air.
8. Distribution Management includes marketing, market research, price-
determination, taking market risk and advertising, publicity and sales
promotion.
9. Office Management includes activities to properly manage the layout,
staffing and equipment of the office.
10. Development Management involves experimentation and research of
production techniques, markets, etc.
1.5. Functions of Management

In every organisation, the managers perform certain basic functions.
These are broadly divided into six categories viz., planning, organising,
staffing, directing, coordinating and controlling. These are discussed
basically hereunder.
Planning: Planning is deciding in advance what is to be done, when it is to
be done, how it is to be done.

It is basically concerned with the selection of goals to be achieved and
determining the effective course of action from among the various
alternatives. This involves forecasting, establishing targets, developing the
policies and programming and scheduling the action, procedure, etc., Thus,
planning requires decisions to be made on what should be done, how it
should be done, who will do it, where it will be done, and why it is to be
done. The essential part of planning consists of setting goals and
programmes of activities.
Organising: After the plans have been drawn, management has to organise
the activities, and physical resources of the firm to carry out the selected
programmes successfully. It also involves determining the authority and
responsibility relationships among functions, departments and personnel at
various levels to ensure smooth and effective function together in
accomplishing the objective. Thus, the organising function of management is
primarily concerned with identifying the tasks involved and grouping them
into units and departments, and defining the duties and responsibilities of
people in different positions within each department for well coordinated
and cooperative effort in the organisation.
Staffing: It is concerned with employing people for the various activities to
be performed. The objective of staffing is to ensure that suitable people have
been appointed for different positions.
It includes the functions of recruitment, training and development,
placement and remuneration, and performance appraisal of the employees.
Directing: The directing function of management includes guiding the
subordinates, supervising their performance, communicating effectively and
motivating them. A manager should be a good leader. He should be able to
command and issue instruction without arousing any resentment among
the subordinates. He should keep a watch on the performance of his
subordinates and help them out whenever they come across any difficulty.
The communication system, i.e., exchange of information should take place
regularly for building common understanding and clarity. The managers
should also understand the needs of subordinates and inspire them to do
their best and encourage initiative and creativity.
Controlling: This function of management consists of the steps taken to
ensure that the performance of work is in accordance with the plans. It
involves establishing performance standards and measuring the actual
performance with the standards set. If differences are noticed, corrective
steps are taken which may include revision of standards, regulate
operations, remove deficiencies and improve performance.
Co-ordinating: Management has to ensure that all the activities contribute
to the achievement of the objectives of the business as a whole. This
requires integration of activities and synchronisation of efforts. The heads of
different departments should not treat each other as competitors but should
work as organs of one body. As the proper functioning of every organ of a
human body is important for a healthy body, the work of every department
is important for the organisation as a whole. Managers should, therefore,
see that everybody in the organisation understands its objectives and works
in co-operation with others to achieve these objectives.

1.6. Managerial Roles
A lot of studies have gone behind describing the behaviour of a manager
in an organization. Traditionally, most employees believed that a manager was
certainly someone who sat comfortably in his office thinking and planning and
giving instructions to employees. However, over time a manager’s behaviour
was divided into functions and managerial roles. These are as follows:
Interpersonal Roles
Figurehead – includes symbolic duties which are legal or social in nature.
Leader – includes all aspects of being a good leader. This involves building a
team, coaching the members, motivating them, and developing strong
relationships.
Liaison – includes developing and maintaining a network outside the office
for information and assistance.
Informational Roles
Monitor – includes seeking information regarding the issues that are
affecting the organization. Also, this includes internal as well as external
information.
Disseminator – On receiving any important information from internal or
external sources, the same needs to be disseminated or transmitted within
the organization.
Spokesperson – includes representing the organization and providing
information about the organization to outsiders.
Decisional Roles
Entrepreneur – involves all aspects associated with acting as an initiator,
designer, and also an encourager of innovation and change.
Disturbance handler – taking corrective action when the organization faces
unexpected difficulties which are important in nature.
Resource Allocator – being responsible for the optimum allocation of
resources like time, equipment, funds, and also human resources, etc.
Negotiator – includes representing the organization in negotiations which
affect the manager’s scope of responsibility.

1.7. Levels of Management
The term “Levels of Management’ refers to a line of demarcation between
various managerial positions in an organization. The number of levels in
management increases when the size of the business and work force
increases and vice versa. The level of management determines a chain of
command, the amount of authority & status enjoyed by any managerial
position. The levels of management can be classified in three broad
categories:
1. Top level / Administrative level
2. Middle level / Executory
3. Low level / Supervisory / Operative / First-line managers
Managers at all these levels perform different functions. The role of
managers at all the three levels is discussed below:
Top Level of Management
It consists of board of directors, chief executive or managing director. The
top management is the ultimate source of authority and it manages goals
and policies for an enterprise. It devotes more time on planning and
coordinating functions.
The role of the top management can be summarized as follows -
 Top management lays down the objectives and broad policies of the
enterprise.
 It issues necessary instructions for preparation of department
budgets, procedures, schedules etc.
 It prepares strategic plans & policies for the enterprise.
 It appoints the executive for middle level i.e. departmental managers.
 It controls & coordinates the activities of all the departments.
 It is also responsible for maintaining a contact with the outside world.
 It provides guidance and direction.
 The top management is also responsible towards the shareholders for
the performance of the enterprise.
Middle Level of Management
The branch managers and departmental managers constitute middle level.
They are responsible to the top management for the functioning of their
department. They devote more time to organizational and directional
functions. In small organization, there is only one layer of middle level of
management but in big enterprises, there may be senior and junior middle
level management. Their role can be emphasized as -
 They execute the plans of the organization in accordance with the
policies and directives of the top management.
 They make plans for the sub-units of the organization.
 They participate in employment & training of lower level management.
 They interpret and explain policies from top level management to
lower level.
 They are responsible for coordinating the activities within the division
or department.
 It also sends important reports and other important data to top level
management.
 They evaluate performance of junior managers.

 They are also responsible for inspiring lower level managers towards
better performance.
Lower Level of Management
Lower level is also known as supervisory / operative level of management. It
consists of supervisors, foreman, section officers, superintendent etc.
According to R.C. Davis, “Supervisory management refers to those
executives whose work has to be largely with personal oversight and
direction of operative employees”. In other words, they are concerned with
direction and controlling function of management. Their activities include -
 Assigning of jobs and tasks to various workers.
 They guide and instruct workers for day to day activities.
 They are responsible for the quality as well as quantity of production.
 They are also entrusted with the responsibility of maintaining good
relation in the organization.
 They communicate workers problems, suggestions, and
recommendatory appeals etc to the higher level and higher level goals
and objectives to the workers.
 They help to solve the grievances of the workers.
 They supervise & guide the sub-ordinates.
 They are responsible for providing training to the workers.
 They arrange necessary materials, machines, tools etc for getting the
things done.
 They prepare periodical reports about the performance of the workers.
 They ensure discipline in the enterprise.
 They motivate workers.
 They are the image builders of the enterprise because they are in
direct contact with the workers.
1.8. Managerial Skills

Robert Katz identifies three types of skills that are essential for a successful
management process:
1) Technical skills,
2) Conceptual skills and
3) Human or interpersonal management skills.
Technical Skills as One Part of Management Skills
 As the name of these skills tells us, they give the manager’s knowledge
and ability to use different techniques to achieve what they want to
achieve. Technical skills are not related only for machines, production
tools or other equipment, but also they are skills that will be required
to increase sales, design different types of products and services,
market the products and services, etc.
 For example, let’s take an individual who works in the sales
department and has highly developed sales skills achieved through
education and experience in his department or the same departments
in different organizations. Because of these skills that he possesses,
this person can be a perfect solution to become a sales manager. This
is the best solution because he has excellent technical skills related to
the sales department.

 On the other hand, the person who becomes sales manager will start to
build his next type of required skills. It is because if his task until now
was only to work with the customers as a sales representative, now
he will need to work with employees in the sales department in
addition to the work with customers.
 Technical skills are most important for first-level managers. Whet it
comes to the top managers, these skills are not something with high
significance level. As we go through a hierarchy from the bottom to
higher levels, the technical skills lose their importance.
Conceptual Skills
 Conceptual skills present knowledge or ability of a manager for more
abstract thinking. That means he can easily see the whole through
analysis and diagnosis of different states. In such a way they
can predict the future of the business or department as a whole.
 Why managers need these skills?
 As a first, a company includes more business elements or functions as
selling, marketing, finance, production, etc. All these business
elements have different goals even completely opposed goals. Think
about marketing and production as a business function and their
specific goals. You’ll see the essential difference. The conceptual skills
will help managers to look outside their department’s goals. So, they
will make decisions that will satisfy overall business goals.
 Conceptual skills are vital for top managers, less critical for mid-level
managers, and not required for first-level managers. As we go from the
bottom of the managerial hierarchy to the top, the importance of these
skills will rise.
Human or Interpersonal Managerial Skills
 Human or interpersonal management skills present a manager’s
knowledge and ability to work with people. One of the most
critical management tasks is to work with people. Without people,
there will not be a need for the existence of management and
managers.
 These skills will enable managers to become leaders and motivate
employees for better accomplishments. Also, they will help them to
make more effective use of human potential in the company. Simply,
they are the essential skills for managers.
 Interpersonal management skills are essential for all hierarchical
levels in the company.
1.9. Challenges of Management

The changing economic world is throwing new challenges to the
managers. The management concepts and practices are shaping ‘tomorrow’s
history’. A number of changes are taking place which are influencing the
work of managers. Some of these changes are globalisation, total quality
management, work force diversity, innovation and change, empowerment
and teams, downsizing, contingent workers etc.
1.9.1. Globalisation
Most of the countries are opening their borders to foreign products as
well as foreign producers.

The companies of developed countries are entering foreign countries
by opening manufacturing facilities there. The companies like Siemens,
Remington, Singer, for instance, were selling their products in foreign
markets during nineteenth century. The companies like Fiat, Unilever and
Royal Dutch had become multinationals by 1920. Since 1960 multinational
companies have become a common sight.
These companies first go to foreign countries just by exporting their
products. The orders are fulfilled when received. In the second stage,
companies make commitment to sell these products in foreign countries or
have them made in foreign factories. It involves an active international
involvement. The next stage is of pursuing international markets
aggressively. Management can license or franchise to another firm the right
to use its brand name, technology or product specifications.
Managements of global companies are adjusting their organisational
structures as per the requirements of situations. The managers are being
taught to be global in approach. Generally, the executives from concerned
countries are given the responsibilities for running the subsidiaries.
1.9.2. Work Force Diversity
The composition of work force is fast changing. Earlier work force
consisted mainly of male persons who had to support a non-working wife
and children. At present, women have joined almost every type of job.
In some professions their number is exceeding that of men folk. In
India women are entering education and medical professions in large
number and are also cornering most of the office jobs. This is already there
in America and other developed countries. Workers are now more
heterogeneous in terms of gender, race, ethnicity, age and other
characteristics that reflect differences.
The challenge for management is to make their organisations more
accommodating to diverse groups of people addressing different lifestyles,
family needs and work styles. Managers will have to shift their philosophy
from treating everyone alike to recognizing difference and responding to
those differences in ways that will ensure employee retention and greater
productivity.
1.9.3. Stimulating Innovation and Change
The times are changing fast. Earlier the change was slow and
managers were working in stable environment. The organisational world
which existed in those companies who set up manufacturing facilities in
foreign countries had to send technical experts at initial times. Normally,
only a few persons come from the parent company and other managerial
personnel are employed from the host country. The managements of
multinational and transnational companies have to study the legal-political
and cultural environment of the host country and device managerial
practices and policies accordingly.
1.9.4. Total Quality Management
There is a new awareness about quality in industry. The developed
countries gave proper emphasis to the quality of gods produced.
Underdeveloped and developing countries concentrated more on quantum of
production than on quality of products.

The goods produced by under-developed countries could not find a
place in world markets due to their lower quality standards. India has
suffered on this account due to its own policies.
Total quality management is the mobilisation of the whole organisation to
achieve quality continuously, economically and in entirety. Quality cannot
be improved through production process only. It is possible through an
improvement in purchasing, marketing, after sale service and many other
factors. Total quality can be achieved with the co-ordination of various
aspects related to purchase, production, sales etc.
1.9.5. Empowerment and Teams
The earlier thinking of Frederick Taylor where division of work was done in
such a way that thinking process was assigned to managers while doing
part was left for workers. The workers were supposed to do the repetitive
work again and again this division of work may be valid during Taylor’s
times but this is not valid at present. The workers at present are considered
more knowledgeable and are relied to complete their work in a better way.
Sometimes workers are considered to be performing better than even their
managers. Managers now recognise that they can often improve quality,
productivity and employee commitment by redesigning jobs and letting
individual workers and work teams make job- related decisions. This is
called empowering employees. Many organisations have achieved better
results by empowering employees and allowing them to plan and execute
their work. Human resource theorists have been criticising over specialising
of employees and stifling their capabilities. Hallmark, AT & T, Motorola have
successfully tried this method.
1.9.6. Downsizing
The downsizing or reduction in force has been going on in the last
some years. Every company is restructuring its organisation and laying off
those employees who are no more required. About 85 per cent of Fortune
1000 companies have downsized their white collar force in recent years. Not
only white collar jobs, blue collar jobs are also been reduced.
Most of the commercial banks in India have offered VRS (Voluntary
Retirement Scheme) to their employees and employees in large number have
accepted this offer.
Maruti Udyog has recently repeated its VRS and many employees have
vacated their jobs voluntarily. Downsizing does not mean that work has
been reduced in the organisation. In fact work has increased and reduced
number of work force is doing up this work. Managerial layoffs create
problems for the organisation.
Those who leave do not feel good and have resentment against the
management; those who remain in service also become a worried lot. They
are uncertain about their future and do not involve themselves whole
heartedly in the work. The work productivity and quality may suffer until
employees again feel secure about their jobs.
1.9.7. Contingent Workers
Another trend in management practices is the use of contingent workers.
These are part-time, temporary or freelance employees. Some labour experts
contend that contingent workers make up 13 percent of the work force,
while others say that the figure is as high as 30 per cent.

The percentage of contingent workers is increasing every day. The
companies have started downsizing their work force; some of these
employees try to get part-time jobs to earn their living.
The corporations are also of the view that the employment of a contingent
employee does not bring much of financial liabilities as compared to regular
permanent employees. Managers have an additional responsibility to see
that contingent workers are treated properly at work place. The managers
have to keep the whole work force motivated and creatively involved in work.
1.10. Evolution of Management

The evolution of management thought is a process that started in the
early days of man. It began since the period man saw the need to live in
groups. Mighty men were able to organize the masses, share them into
various groups. The sharing was done accord to the masses’ strength,
mental capacities and intelligence.
The point is that management has been practiced in one way or the
other since civilization began. If you want a good example where advance
management principles where applied, consider the organization of the
olden days Roman Catholic Church, military forces as well as ancient
Greece.
These are all excellent examples. But the industrial revolution brought
drastic change. And suddenly, the need to develop a more holistic and
formal management theory became a necessity.
1.11. Classical Approach
The classical school represented the first major systematic approach to
management thought. It was distinguished by its emphasis on finding way
to get the work of each employee done faster. It is primarily based upon the
economic rationality of all employees.
This evolved that people are motivated by economic incentives and that they
will rationally consider opportunities that provide for them the greatest
economic gain. The classical school can be broken down into three historical
philosophies of management.
These are:
A. Scientific management,
B. Administrative management approach, and
C. Bureaucratic model.
1.12. Scientific and Administrative Management
The growth of factory system led to numerous problems in production and
in labour control. Managers could not solve the problems by trail and error
methods. The results could not be predicted. So the need arose for better
management techniques.
The use of method of science for solving management problems was thought
of. The scientific management concept was first developed by F.W. Taylor in
between 1895 and 1911.
F.W. Taylor is being called as the Father of scientific, management. In 1878
he joined as a labourer at Midvale steel company in the USA. From that
position he progressed to become Chief Engineer in 1884. He published
papers on “piece rate system”, “the art of cutting metals” and “shop
management”.
He published a book on “The Principles of Management” in 1911. F.W.
Taylor discovered the application of method of science for solving industrial
problems.
Application of scientific methods means adopting the following
procedures to solve problems:
 Observation,
 Measurement,
 Experimental comparison, and
 Formulation of procedure.
He applied the scientific approach to technical and behavioural human
problems.
The main features of Taylor’s scientific management are:
 Science and not rule of thumb.
 Harmony and not discord.
 Maximum output and not restricted output.
 Specialization-Division of work between management and workers.
 Training and development of workers.
1.12.1. Administrative Management Approach
Scientific management focused primarily on the efficiency of production,
but administrative management focused on formal organisation structure
and the delineation of the basic process of general management. This
approach is also known as functional or process approach and is based
primarily on the ideas of Henry Fayol (1841-1925).
Henry Fayol is recognised as the first person to systematize the
administrative approach activities into six groups, all of which are closely
dependent on one another.
He broke down the managerial function into five steps including planning,
organizing, commanding, coordinating and controlling. Further, he
developed fourteen management principles that have been widely circulated
as guide for management thought.
These are:
(i) Division of work,
(ii) Authority,
(iii) Discipline,
(iv) Unity of command,
(v) Unity of direction,
(vi) Subordination of individual interest to the common goal,
(vii) Remuneration of staff,
(viii) Centralisation,
(ix) Scalar chain,
(x) Order,
(xi) Equity,
(xii) Stability of staff,
(xiii) Initiative, and
(xiv) Esprit de corps

1.13. Behavioural Approach
The behavioural approach on the human relations approach is based
upon the premise of increase in production and managerial efficiency
through an understanding of the people.
The human relations approach of management involves with the human
behaviour and focused attention on the human beings in the organisation.
The growth and popularity of this approach is attributable to Elton Mayo
(1880- 1949) and his Hawthorne experiments.
The Hawthorne experiments were carried out at the Hawthorne plant
of the western electric company. These experiments were carried out by
Elton Mayo and the staffs of the Harvard Business School, main researchers
were Elton Mayo, White Head, Roethlisberger and Dickson. The first of
Mayo’s four studies took place at a Philadelphia textile mill.
The problem he investigated was excessive labour turnover in a
department where work was particularly monotonous and fatiguing. The
workers tended to sink into a dejected, disconsolate mood soon after being
assigned there eventually they would lose their tempers for no apparent
reason and impulsively quit.
At first Mayo thought the reason for the worker’s behaviour must be
physical fatigue. So, he instituted a series of rest periods, during the
workday. In course of trying to schedule these periods in the most efficient
manner, management experimented with allowing the workers to do the
scheduling themselves.
The effect was dramatic. Turnover fell sharply to about the same level
as that for the rest of the plant, productivity shot upward and the
melancholy moods disappeared.
Similar results were obtained at the Hawthorne plant of the western electric
company.
Mayo’s another studies made at the Bank hiring room and at an aircraft
factory. Hence the Mayo’s study showed that the role played by social needs
is more responsive to the social forces operating at work than the economic
rewards.
1.14. Quantitative Approach
This approach involves the application of modern quantitative or
mathematical techniques for solving managerial problems. This approach is
also known as decision theory approach, mathematical approach,
quantitative approach, operational approach etc. These quantitative tools
and methodologies are designed to add in decision-making relating to
operations and production.
According to Lindsay, these techniques assist the management for

improving their decisions by:
(i) Increasing the number of alternatives that can be considered.
(ii) Assisting in faster decision-making based upon objective analysis
of available information.
(iii) Helping management in evaluating the risks and results of
different courses of action.
(iv) Helping to bring into optimum balance the many diverse elements
of a modern enterprise.

The technique generally involves the following 4 steps:
(i) A mathematical model is constructed with variables reflecting the
important factors in the situation to be analysed.
(ii) The decision rules are established and some standards are set for
the purpose of comparing the relative merits of possible courses of
actions.
(iii) The empirical data is gathered which would relate parameters in
the goal utility.
(iv) The mathematical calculations are executed so as to find a course
of action that will maximize the objective function or the goal utility.
The following are some of the areas where these techniques are
extensively used:
(i) Linear programming.
(ii) Queuing theory.
(iii) Inventory modelling.
(iv) Regression analysis.
(v) Simulation.
(vi) Preventive Control and replacement problems.
(vii) Competitive problems and problems of Game Theory.
The major features of this approach are as follows:
a. Rational decision-making.
b. Mathematical models.
c. Computer applications.
d. Evaluation criteria.
Uses of Quantitative Approach:
(i) The methods and techniques developed under it are being
increasingly used for managerial decision-making.
(ii) There is orderly thinking in management leading to more
exactness.
(iii) This approach has given effective tools to solve problems of
planning and control.
Limitations of Quantitative Approach:

(i) It has made little contribution in the areas of organising, staffing,
motivation and leadership.
(ii) It over stresses decisional rules of a manager at the cost of inter-
personal and informational rules.
(iii) Models and techniques are many times far from the realities of the
management situation.
(iv) It covers only a part of the manager’s job as it cannot effectively
deal with inter-personal and group relationships-decision making is
only a part of management.
1.15.System Approach
In the 1960, an approach to management appeared which try to unify the
prior schools of thought. This approach is commonly known as ‘Systems
Approach’. Its early contributors include Ludwing Von Bertalanfty, Lawrence
J. Henderson, W.G. Scott, Deniel Katz, Robert L. Kahn, W. Buckley and J.D.
Thompson.

They viewed organisation as an organic and open system, which is
composed of interacting and interdependent parts, called subsystems. The
system approach is top took upon management as a system or as “an
organised whole” made up of subsystems integrated into a unity or orderly
totality.
Systems approach is based on the generalization that everything is inter-
related and interdependent. A system is composed of related and dependent
element which when in interaction, forms a unitary whole. A system is
simply an assemblage or combination of things or parts forming a complex
whole.
One its most important characteristic is that it is composed of hierarchy of
sub-systems. That is the parts forming the major system and so on. For
example, the world can be considered-to be a system in which various
national economies are sub-systems.
In turn, each national economy is composed of its various industries, each
industry is composed of firms’ and of course a firm can be considered a
system composed of sub-systems such as production, marketing, finance,
accounting and so on.
1.16. Contingency Approach

The ‘Contingency Approach to Management’ is relatively a new approach to
management.
It is an extension of the system approach. The basic idea of the contingency
approach is that the organisation has to come up with different situations in
different ways.
There is no single best way of managing applicable to all situations.
In order to be effective, the internal functioning of an organisation must be
consistent with the demands of the external environment. The managers
must keep the functioning of an organisation in harmony with the needs of
its members and the external forces.
The main characteristics of the Contingency Approach to management
are pointed out below:
1. Management is entirely situational. The application and effectiveness of
any technique is contingent on the situation.
2. Management should match its approach to the requirements of the
particular situation. To be effective, management policies and practices
must respond to environmental changes. The organisation structure, the
leadership style, the control system—all should be designed to fit the
particular situation.
3. As management’s success depends on its ability to cope with its
environment, it should sharpen its diagnostic skills so as to anticipate and
comprehend environmental changes.
4. The managers should understand that there is no one best way to
manage.
5. Because of the specific organisation-environment relationship, no action
can be universal. It varies from situation to situation.
Contingency approach is pragmatic in nature. It avoids vague judgements
and widens the horizons of practising managers.

UNIT - 2
2.1. General Framework for Planning
2.2. Planning Process
2.3. Types of Plans
2.4. Management by Objectives
2.5. Development of Business Strategy
2.6. Decision making and Problem Solving
2.7. Programmed and Non Programmed Decisions
2.8. Steps in Problem Solving and Decision Making
2.9. Bounded Rationality and Influences on Decision Making
2.10. Group Problem Solving and Decision Making
2.11. Creativity and Innovation in Managerial Work
*******
2.1. General Framework for Planning

The following points need to be addressed to improve the results from
planning activities. They are:
1. Create and cultivate a planning culture that values rational, systematic
planning. Too often managers focus only on day-to-day management and
forget about the long-term direction of the business. This short-sighted
approach can lead to an anti-planning culture.
2. In the planning process involve people who have a stake in the future of
the business/organization. Planning should be a team effort and not the role
solely of planning staff or a "planner".
3. Focus on current and future customer needs. Businesses are rewarded
for satisfying customer wants and needs so keep the customer at the centre
of planning activities.
4. Reward those who implement a plan. Results come from action and
planning only serves to direct action. The doers are more important than the
planners.
5. Document the plan, but change plans as frequently as seems needed.
Make sure the plan is a "dynamic" document. Plans can be changed as
deficiencies are discovered in the plan. Regular planning is appropriate and
desirable, but events create change that must be incorporated into plans.
6. A plan is not intended to solve problems, rather a plan is intended to help
reach goals and to help anticipate and minimize problems associated with
striving for goals. A great plan won't necessarily lead to success. Remember
success is a function of plans, intentions, effort, actions and responses of
the environment.
2.2. Planning Process

Planning can be viewed as an approach to problem solving. It provides a
systematic way of viewing problems and developing short- and long-term
solutions. It can also be viewed as a decision-making process used to help
guide decisions concerning future needs.
Creating Effective Plan involves a comprehensive and systematic cycle of 8
steps that must be maintained for establishing effective goals and plans for
organization’s employees.
To create an effective plan you need to enquirers about organizational
strengths and weaknesses and involves decision making about desired
ways and means to achieve them. Usually, the same steps are followed by
managers in all the cases of planning. All of these steps taken serially result
in a planning process. An effective planning process appears future-
oriented, comprehensive, systematic, integrated and negotiated. Minor plans
are normally simpler in nature and therefore, some of the steps can be
easily taken.
8 Steps of Effective Planning Process are;
1. Being aware of the opportunity
2. Setting objective or goals
3. Considering planning premises
4. Identifying alternative
5. Comparing alternatives in light of goals sought
6. Choosing an alternative
7. Formulating supporting plans
8. Numbering plans by making budgets
These steps are described below;
Being Aware of Opportunities

Awareness of opportunities in the environment both external to and
internal in the organization is the real beginning point for planning.
At this stage, managers tend to create a foundation from which they will
develop their plans for the next planning period.
This awareness stage is considered by some managers as a precursor to the
actual planning process instead of taking it as an actual part of the process.
Establishing Objectives
Establishing specific objectives is the second step of planning. This involves
determining goals or objectives for enterprise as a whole and then for each
subordinate tier and unit.

An awareness of opportunities in the context of strengths and weaknesses
helps one establish a reasonable goal and draw up an action statement.
Establishment of objectives involves determining the same for the enterprise
as a whole and for each subordinate level or unit.
Many organizations, for example, consist of divisions, each of which is
divided into departments which, in turn, may contain additional sub-
systems such as committees and workgroups.
Managers are, therefore, required to develop an elaborate network of
organizational plans to achieve the overall goals of their organization.
Comprehensive planning to be effective requires that managers in each sub-
system of their organization; involved in the planning process.
Objectives which are going to guide the course of the organization in future
years to come must be clear, concise and specific.
Objectives of enterprise act as a direction to the major plans, which, by
reflecting these objectives define the objective of every major department.
Major department objectives, in turn, control the objectives of the
subordinate department and so on down the line
In other words, objectives form a hierarchy.
Developing Premises
The third step in the logical sequence of planning is the establishment of the
premises or assumptions on which action statements are built. The equality
and success of any plan depend on the equality of the assumptions on
which it is based. Even one wrong assumption can produce a poor or
unrealistic decision.
These assumptions are, in fact, about the environment in which the plan is
to be carried out. That all the managers involved in planning tend to agree
on the premises is very important.
The major principle of planning premises is the more thoroughly individuals
charged with planning understand and agree to utilize consistent planning
premises the more coordinated enterprise planning will be.
Forecasting plays an important role in promising. By means of forecasting,
organizations try to answer various questions about future expectations and
action statements.
Forecasting may be made on personal experience and expectation or
systematic empirical research.
Managers base their forecasts in both cases on assumptions. “Premising”
according to Dunham and Pierce,” therefore, involves forecasting what is
likely to happen inside and outside an organization.
The forecasts go into the formulation of action statement to guide the
organization in the future.”
There are two types of forecasts. One type involves predicting the
consequence of a planned course of action. This type helps managers
understand what an organization might expect to achieve as a result of a
planned course of action.
The second type of forecast helps managers to make predictions about
environmental events likely to affect an organization’s movement towards
achieving its objectives.
These forecasts are made to generate information for developing their action
statements. Premising is based on this second kind of forecasting.

Determining Alternative Courses
The fourth step is to search for and find out alternative courses of action,
especially those not immediately apparent. At this stage, managers decide
how to move from their current position towards their decided future
position.
There is hardly a plan for which reasonable alternatives are not available. It
is also found quite often that an alternative not considered as obvious,
proves to be the best.
Finding alternative is not the problem normally. Reducing the number of
alternatives in order to analyze and find out the best one is the problem.
There is a limit to the number of alternatives that can be examined
thoroughly, even with mathematical techniques and computer.
At this, a manager usually draws upon research, experimentation, and
experience to identify and develop a number of possible courses of action.
Evaluating Alternative Courses
Once alternative courses of action have been identified after seeking out
alternative courses and examining their strong and weak points, they must
be evaluated in light of how well each would help the organization reach its
goals.
Evaluating alternatives also includes determining the costs and expected
effects of each.
One course may appear to be the most profitable but it may require a large
cash involvement with a slow payback. Another course may look less
profitable but that may be less risky.
Still, another course may better serve the long-range objectives of the
company.
Evaluation can be difficult because of uncertainty about the future, various
intangible factors and inaccurate premises behind plans. Several techniques
can be used by managers at this step.
In fact, it is at this step in the planning process that operations research
and mathematical as well as computing techniques can be primarily
applied.
Selecting a Course
After identifying the alternatives and considering the merits of each
carefully, managers now shall have to adopt a plan and select one course of
action.
A plan is adopted at this point and is, therefore, the real point of decision
making. Two or more courses may appear to be advisable on occasional
analyses and evaluation of alternative courses.
Managers may decide to follow several courses instead of one best course.
Formulating Derivative Plans
Planning is not completed when a decision is made with the adoption of a
general plan. Therefore, a seventh step is involved.
Managers often still need to develop one or more supportive plans to bolster
their basic plan and to explain the many details involved in reaching a broad
major plan.
It is clear, therefore, that derivative plans are essentially required to support
the basic or general plan. Usually, there are two kinds of derivative or
supportive plans.

The first one involves changes in existing supportive plans. These are
derivative plans that have been in use, but now need modification to
support a new plan.
“The second kind of subsidiary plan involves the creation of a new
supportive plan.
If, for example, an organization converted a plant from a traditional
assembly line to one using a fully automated, computer-integrated
manufacturing system, managers would need a new support plan for
training employees to use the new equipment.
They would need another new supportive plan for maintaining the new
equipment.
Numbering Plans by Budgeting
When decisions are made and plans are set, the final step to give meaning to
them is to quantify them with numbers converting them into budgets.
Budgets are sometimes called enumerated programs which are most
commonly expressed in terms of money. But they may also be expressed as
hours worked, as units sold, or in any other measurable unit.
An enterprise usually has overall budgets representing the sum total of
income and expenses, with .consequent profit or surplus.
Each department of the enterprise or organization can have its own budgets,
commonly of expenses and capital expenditures, which make up the overall
budget.
2.3. Types of Plans

`Plans commit the various resources in an organization to specific outcomes
for the fulfilment of future goals. Many different types of plans are adopted
by management to monitor and control organizational activities. Three such
most commonly used plans are hierarchical, frequency-of-use
(repetitiveness) and contingency plans.
Strategic Plans
Strategic plans define the framework of the organization’s vision and how
the organization intends to make its vision a reality.
 It is the determination of the long-term objectives of an enterprise, the
action plan to be adopted and the resources to be mobilized to
achieve these goals.
 Since it is planning the direction of the company’s progress, it is done
by the top management of an organization.
 It essentially focuses on planning for the coming years to take the
organization from where it stands today to where it intends to be.
 The strategic plan must be forward looking, effective and flexible, with
a focus on accommodating future growth.
 These plans provide the framework and direction for lower level
planning.
Tactical Plans
Tactical plans describe the tactics that the managers plan to adopt to
achieve the objectives set in the strategic plan.
 Tactical plans span a short time frame (usually less than 3 years) and
are usually developed by middle level managers.

 It details specific means or action plans to implement the strategic
plan by units within each division.
 Tactical plans entail detailing resource and work allocation among the
subunits within each division.
Operational Plans
Operational plans are short-term (less than a year) plans developed to
create specific action steps that support the strategic and tactical plans.
 They are usually developed by the manager to fulfil his or her job
responsibilities.
 They are developed by supervisors, team leaders, and facilitators to
support tactical plans.
 They govern the day-to-day operations of an organization.
 Operational plans can be −
o Standing plans − Drawn to cover issues that managers face
repeatedly, e.g. policies, procedures, rules.
o Ongoing plans − Prepared for single or exceptional situations
or problems and are normally discarded or replaced after one
use, e.g. programs, projects, and budgets.
2.4. Management by Objectives (MBO)

An effective management goes a long way in extracting the best out of
employees and make them work as a single unit towards a common goal.
The term Management by Objectives was coined by Peter Drucker in 1954.
The process of setting objectives in the organization to give a sense of
direction to the employees is called as Management by Objectives.
It refers to the process of setting goals for the employees so that they know
what they are supposed to do at the workplace.
Management by Objectives defines roles and responsibilities for the
employees and help them chalk out their future course of action in the
organization.
Management by objectives guides the employees to deliver their level best
and achieve the targets within the stipulated time frame.
Need for Management by Objectives (MBO)
 The Management by Objectives process helps the employees to
understand their duties at the workplace.
 KRAs are designed for each employee as per their interest,
specialization and educational qualification.
 The employees are clear as to what is expected out of them.
 Management by Objectives process leads to satisfied employees. It
avoids job mismatch and unnecessary confusions later on.
 Employees in their own way contribute to the achievement of the goals
and objectives of the organization. Every employee has his own role at
the workplace. Each one feels indispensable for the organization and
eventually develops a feeling of loyalty towards the organization. They
tend to stick to the organization for a longer span of time and
contribute effectively. They enjoy at the workplace and do not treat
work as a burden.
 Management by Objectives ensures effective communication amongst
the employees. It leads to a positive ambience at the workplace.

 Management by Objectives leads to well defined hierarchies at the
workplace. It ensures transparency at all levels. A supervisor of any
organization would never directly interact with the Managing Director
in case of queries. He would first meet his reporting boss who would
then pass on the message to his senior and so on. Every one is clear
about his position in the organization.
 The MBO Process leads to highly motivated and committed employees.
 The MBO Process sets a benchmark for every employee. The superiors
set targets for each of the team members. Each employee is given a
list of specific tasks.
Limitations of Management by objectives Process
 It sometimes ignores the prevailing culture and working conditions of
the organization.
 More emphasis is being laid on targets and objectives. It just expects
the employees to achieve their targets and meet the objectives of the
organization without bothering much about the existing
circumstances at the workplace. Employees are just expected to
perform and meet the deadlines. The MBO Process sometimes do treat
individuals as mere machines.
 The MBO process increases comparisons between individuals at the
workplace. Employees tend to depend on nasty politics and other
unproductive tasks to outshine their fellow workers. Employees do
only what their superiors ask them to do. Their work lacks innovation,
creativity and sometimes also becomes monotonous.
2.5. Development of Business Strategies
The development of business strategies doesn't have to be a long-term,
labour- or staff-intensive process that results in a plan that sits on a shelf
gathering dust. Business strategies can be developed very efficiently by
following a standard process focusing on the development of goals,
objectives, strategies and tactics based on factual data
Goals
The first step in the development of any business strategy is the
determination of the goal, its desired endpoint. The goal sets the stage for
the development of measures and specific actions that the company takes to
achieve these goals. So, for instance, the goal might be to "increase market
share" or to "improve customer satisfaction."
Situation Analysis
Once a goal has been established and the planning team knows what to do,
information needs to be gathered so that the decisions are based on solid
facts and data.
The situation analysis involves a review of information internal to the
organization (about employees, sales, customers) as well as external
information (about competitors, the industry and the economic climate).
SWOT Analysis
A SWOT analysis is a brainstorming process used by strategic planning
teams to identify the organization's strengths and weaknesses, which are
internal; and opportunities and threats, which are external. Based on the
data gathered during the situation analysis and by brainstorming and

prioritising these items, the team gets a better sense of the most important
areas to focus on.
Objectives
Objectives are the measurable element of a strategy. Objectives indicate,
specifically, what outcomes are desired. While goals set a broad direction
("increase market share"), objectives will provide the detail that ensures the
team knows when it achieves success, says Linda Pophal, a strategic
planning consultant with Strategic Communications. An objective related to
"increase market share" might be: "Grow market share in XYZ city by 25
percent among women age 25-55 by the end of the year." That's an objective
that the entire team can agree upon.
Strategies and Tactics
Strategies and tactics indicate how and what a company will do to achieve
its goals and objectives. Strategies provide general guidance, such as
"engage in social media activities," while tactics outline specific tasks that
will be done, such as "set up Face book fan page, set up Twitter account."
Ultimately all of the strategies and tactics work together for planning
success.
Steps to Create an Effective Business Strategy
whenever you set off across new territory you’ll want to consult a map,
otherwise you’ll get lost. Stepping forward into the unknown (also known as
‘the future’) is what companies do every day.
And what do they need to make sure they don’t get lost? A strategy, of
course, which some may also call a roadmap?
Whether you’re looking to set new business priorities, outline plans for
growth, determine a product roadmap or plan your investment decisions,
you’ll need a strategy. Coming to the realisation that your organisation
needs one is easy. Actually creating a strategy is a little trickier.
Here are six simple steps to help you deliver an effective business strategy:
1. Gather the facts
To know where you’re heading, you have to know where you are right now.
So before you start looking ahead, you should review the past performance,
or the current situation. Look at each area of the business and determine
what worked well, what could have been better and what opportunities lie
ahead. There are many tools and techniques available to help with this
process, such as SWOT (Strength, Weakness, Opportunities and Threats)
analysis.
You should look internally at your strengths and weaknesses. And for the
opportunities and threats you should look at external factors. A great
framework for looking at external factors is PESTLE (Political, Economic,
Social, Technological, Legal and Environmental).
So, for your big idea or plan you would ask: what threats and opportunities
could arise under each category?
The most important part of this process is involving the right people to make
sure you’re collecting the most relevant information.
2. Develop a vision statement
This statement should describe the future direction of the business and its
aims in the medium to long term. It’s about describing the organisation’s
purpose and values. Business gurus have debated long and hard about

what comes first – the vision or the mission statement (see step 3). But, in
practice, you could develop both at the same time.
3. Develop a mission statement
Like the vision statement, this defines the organisation’s purpose, but it also
outlines its primary objectives. This focuses on what needs done in the short
term to realise the long term vision. So, for the vision statement, you may
want to answer the question: “Where do we want to be in 5 years?”. For the
mission statement, you’ll want to ask the questions:
 What do we do?
 How do we do it?
 Whom do we do it for?
 What value do we bring?
4. Identify strategic objectives
At this stage, the aim is to develop a set of high-level objectives for all areas
of the business. They need to highlight the priorities and inform the plans
that will ensure delivery of the company’s vision and mission.
By taking a look back at your review in step one, in particular the SWOT
and PESTLE analysis, you can incorporate any identified strengths and
weaknesses into your objectives.
Crucially, your objectives must be SMART (Specific, Measurable, Achievable,
Realistic and Time-related). Your objectives must also include factors such
as KPI’s, resource allocation and budget requirements.
5. Tactical Plans
Now is the time to put some meat on the bones of your strategy by
translating the strategic objectives into more detailed short-term plans.
These plans will contain actions for departments and functions in your
organisation. You may even want to include suppliers.
You’re now focusing on measurable results and communicating to
stakeholders what they need to do and when. You can even think of these
tactical plans as short sprints to execute the strategy in practice.
6. Performance Management
All the planning and hard work may have been done, but it’s vital to
continually review all objectives and action plans to make sure you’re still
on track to achieve that overall goal. Managing and monitoring a whole
strategy is a complex task, which is why many directors, managers and
business leaders are looking to alternative methods of handling strategies.
Creating, managing and reviewing a strategy requires you to capture the
relevant information, break down large chunks of information, plan,
prioritise, capture the relevant information and have a clear strategic vision.
2.6. Decision-Making and Problem-Solving

Problem solving and decision-making are important skills for business
and life. Problem-solving often involves decision-making, and decision-
making is especially important for management and leadership.
Problem solving and decision-making are important skills for business and
life. Problem-solving often involves decision-making, and decision-making is
especially important for management and leadership. There are processes
and techniques to improve decision-making and the quality of decisions.

Decision-making is more natural to certain personalities, so these people
should focus more on improving the quality of their decisions. People that
are less natural decision-makers are often able to make quality
assessments, but then need to be more decisive in acting upon the
assessments made.
Problem-solving and decision-making are closely linked, and each
requires creativity in identifying and developing options, for which
the brainstorming technique is particularly useful. See also the free SWOT
analysis template and examples, and PEST analysis template, which help
decision-making and problem-solving. SWOT analysis helps assess the
strength of a company, a business proposition or idea; PEST analysis helps
to assess the potential and suitability of a market.
Good decision-making requires a mixture of skills: creative
development and identification of options, clarity of judgement, firmness of
decision, and effective implementation. For group problem-solving and
decision-making, or when a consensus is required, workshops help, within
which you can incorporate these tools and process as appropriate.
Here are some useful methods for effective decision-making and
problem-solving: First a simple step-by-step process for effective decision-
making and problem-solving.
Decision-making process
1. Define and clarify the issue - does it warrant action? If so, now? Is the
matter urgent, important or both.
2. Gather all the facts and understand their causes.
3. Think about or brainstorm possible options and solutions.
(See brainstorming process)
4. Consider and compare the 'pros and cons' of each option - consult
others if necessary or useful - and for bigger complex decisions where
there are several options, create a template which enables
measurements according to different strategic factors
(SWOT, PEST, Porter).
5. Select the best option - avoid vagueness and weak compromises in
trying to please everyone.
6. Explain your decision to those involved and affected, and follow up to
ensure proper and effective implementation.
Decision-making maxims will help to reinforce the above decision-making

process whether related to problem-solving or not, for example:
"We know what happens to people who stay in the middle of the road. They
get run down." (Aneurin Bevan)
"In any moment of decision the best thing you can do is the right thing, the
next best thing is the wrong thing, and the worst thing you can do is
nothing." (Theodore Roosevelt)
There is often more than one good answer when you are faced with a
complex decision. When you've found the best solution you can find, involve
others in making it work, and it probably will.

2.7. Programmed and Non-Programmed Decisions
2.7.1. Programmed Decisions
Decisions related to structured situations, where the problem is more or less
routine and repetitive in nature are known as programmed decisions. For
example, problems related to leave are solved by policy relating to leave
rules. Employees who take leave according to leave rules Eire granted leave
and those who do not follow the leave rules may not be granted leave. The
routine problems may not always be simple.
There may be complex routine problems. For example, production
department follows a routine that managers order for inventory when it
reaches the re-order point. If there is sudden increase in demand for the
product, managers cannot wait for inventory to reach the re-order point to
make fresh orders. Orders are placed before this level is reached. Ordering
inventory is, thus, a problem of routine nature but ordering inventory before
the re-order point is a routine but complex problem.
In either situation, managers depend on pre-established criteria for taking
decisions. Various policies, schedules and procedures guide these decisions
and, therefore, policies and procedures should be as clear as possible.
Since decisions are based on pre-defined standards, they do not require
much of brainstorming and are taken normally by middle and lower-level
managers.
Managers do not think of innovative ways to solve the routine problems.
Therefore, they can concentrate on important and crucial activities. These
decisions also involve some amount of certainty, i.e., outcomes of these
decisions are, by and large, known.
Various types of programmed decisions are:
(1) Organisational decisions
(2) Operational decisions
(3) Research decisions, and
(4) Opportunity decisions.
2.7.2. Non-Programmed Decisions

These decisions are taken in unstructured situations which reflect novel, ill-
defined and complex problems. The problems are non-recurring or
exceptional in nature. Since they have not occurred before, they require
extensive brainstorming. Managers use skills and subjective judgment to
solve the problems through scientific analysis and logical reasoning.
Subjective judgment is based on assessment of the situation. In objective
judgment (in case of programmed decisions), past experience forms the
basis for decision-making. These decisions involve fair degree of uncertainty
since outcomes of decisions are not always known.
These decisions are based on partial ignorance as the alternatives and their
outcomes cannot be known in advance. They are taken in the context of
changing, dynamic environmental conditions. For example, increase in
advertising expenditure, effective salesmanship, upgraded technology,
quality controls, brand image and reasonable prices are expected to increase
sales and profits. If, despite all this, profits are declining, it requires

immediate decision-making and such decisions are non-programmed
decisions.
These decisions are taken by top-level managers. As we move up the
organisational hierarchy, the need for taking non-programmed decisions
increases.
Different types of non-programmed decisions are:
(1) Personal decisions,
(2) Strategic decisions,
(3) Crisis intuitive decisions, and
(4) Problem-solving decisions.
There is no clear line of demarcation between programmed and non-
programmed decisions. Decisions are neither totally programmed nor non-
programmed.
They are a combination of both and lie on continuum of decision; between
totally programmed decisions at one end of the continuum and totally non-
programmed decisions at the other end.
A brief description of different types of programmed and non-
programmed decisions is given below:
1. Organisational and personal decisions:
These decisions reflect use of authority. Decisions taken in interest of the
organisation are organisational decisions and decisions taken for personal
interests are personal decisions. Organisational decisions can be delegated
but personal decisions cannot.
Managers are officially authorised to make organisational decisions but they
do not have authority to make personal decisions. They are based on
personal biases. For example, firing an employee because he does not
conform to rules is an organisational decision but firing due to personal
enmity is a personal decision.
2. Operational and strategic decisions:
These decisions reflect scope of decision-making processes. Operational
decisions are taken as a matter of routine. They relate to daily operations
and aim to achieve short-term objectives of the firm. They are taken by
middle and lower- level managers within the framework of policies and
procedures and allow limited use of discretion by managers. Their impact is
also limited and short-range in nature.
These decisions affect part of the organisation and are based on pre-defined
policies and procedures. For instance, purchase of stationery and raw
material are day-to-day decisions which affect only the purchase department
and are taken according to pre-defined procedures defined for the purchase
department.
Decisions related to important and non-recurring problems are called
strategic decisions. Managerial skill and judgment are used to make these
decisions.
They relate to long-term goals of the company, define relationship of the
organisation with the environment and are risky in nature. They are taken
by top-level managers. Decisions to update the technology, launch a new
plant or change the policies are strategic decisions.
These decisions affect the whole or major part of the organisation and
contribute directly to organisational objectives. They are usually not based

on past experience and involve a major departure from earlier business
practices regarding various business decisions like expansion of business in
international markets, diversification and change in marketing mix etc.
Strategic decisions involve three important elements:
(a) Result element
It specifies the result (objective) to be achieved through the decision.
(b) Action element
It specifies the action to be taken to achieve the result.
(c) Commitment element
It specifies the dedication, loyalty and commitment with which people who
are responsible for taking action to achieve results are involved in making
the decisions.
3. Research and crisis—intuitive decisions
These decisions reflect urgency of decision-making. Decisions which involve
regular survey of the market are research decisions and decisions made
under situations of crisis or emergency are crisis — intuitive decisions. For
example, decision to allocate funds to Research and Development for
product designing is a research decision; decision to increase production of
medicines because of earthquake or war is a crisis-intuitive decision.
4. Opportunity and problem-solving decisions
These decisions reflect foresightedness. Managers forecast opportunities to
promote organisational growth. The decision to grow and diversify (market
penetration and market development) is an opportunity decision.
Problem-solving decision solves a specific problem. For example, decision to
enter into new markets even when the company is making profits in the
existing market is an opportunity decision and decision to drop a product
line because it is unprofitable is a problem-solving decision.
2.8. Steps in Problem Solving and Decision Making

Much of what people do is solve problems and make decisions. Often,
they are "under the gun", stressed and very short for time.
Consequently, when they encounter a new problem or decision they
must make, they react with a decision that seemed to work before. It's easy
with this approach to get stuck in a circle of solving the same problem over
and over again.
Therefore, it's often useful to get used to an organized approach to
problem solving and decision making. Not all problems can be solved and
decisions made by the following, rather rational approach. However, the
following basic guidelines will get you started.
Don't be intimidated by the length of the list of guidelines. After you've
practiced them a few times, they'll become second nature to you -- enough
that you can deepen and enrich them to suit your own needs and nature.
Note that it might be more your nature to view a "problem" as an
"opportunity". Therefore, you might substitute "problem" for "opportunity" in
the following guidelines.
1. Define the problem
This is often where people struggle. They react to what they think the
problem is. Instead, seek to understand more about why you think there's a
problem.

Define the problem: (with input from yourself and others).
Ask yourself and others, the following questions:
1. What can you see that causes you to think there's a problem?
2. Where is it happening?
3. How is it happening?
4. When is it happening?
5. With whom is it happening? (HINT: Don't jump to "Who is causing the
problem?" When we're stressed, blaming is often one of our first
reactions. To be an effective manager, you need to address issues
more than people.)
6. Why is it happening?
7. Write down a five-sentence description of the problem in terms of "The
following should be happening, but isn't ..." or "The following is
happening and should be: ..." As much as possible, be specific in your
description, including what is happening, where, how, with whom and
why. (It may be helpful at this point to use a variety of research
methods.
Defining complex problems:
If the problem still seems overwhelming, break it down by repeating steps 1-
7 until you have descriptions of several related problems.
Verifying your understanding of the problems:
It helps a great deal to verify your problem analysis for conferring with a
peer or someone else.
Prioritize the problems:
If you discover that you are looking at several related problems, then
prioritize which ones you should address first.
Note the difference between "important" and "urgent" problems. Often, what
we consider to be important problems to consider are really just urgent
problems. Important problems deserve more attention.
For example, if you're continually answering "urgent" phone calls,
then you've probably got a more "important" problem and that's to design a
system that screens and prioritizes your phone calls.
Understand your role in the problem:
Your role in the problem can greatly influence how you perceive the role of
others. For example, if you're very stressed out, it'll probably look like others
are, too, or, you may resort too quickly to blaming and reprimanding others.
Or, you are feel very guilty about your role in the problem, you may ignore
the accountabilities of others.
2. Look at potential causes for the problem
 It's amazing how much you don't know about what you don't know.
Therefore, in this phase, it's critical to get input from other people who
notice the problem and who are affected by it.
 It's often useful to collect input from other individuals one at a time
(at least at first). Otherwise, people tend to be inhibited about offering
their impressions of the real causes of problems.
 Write down what your opinions and what you've heard from others.
 Regarding what you think might be performance problems associated
with an employee; it's often useful to seek advice from a peer or your
supervisor in order to verify your impression of the problem.

 Write down a description of the cause of the problem and in terms of
what is happening, where, when, how, with whom and why.
3. Identify alternatives for approaches to resolve the problem
At this point, it's useful to keep others involved (unless you're facing a
personal and/or employee performance problem). Brainstorm for solutions
to the problem. Very simply put, brainstorming is collecting as many ideas
as possible and then screening them to find the best idea. It's critical when
collecting the ideas to not pass any judgment on the ideas -- just write them
down as you hear them. (A wonderful set of skills used to identify the
underlying cause of issues is Systems Thinking.)
4. Select an approach to resolve the problem
 When selecting the best approach, consider:
 Which approach is the most likely to solve the problem for the long
term?
 Which approach is the most realistic to accomplish for now? Do you
have the resources? Are they affordable? Do you have enough time to
implement the approach?
 What is the extent of risk associated with each alternative?
(The nature of this step, in particular, in the problem solving process is why
problem solving and decision making are highly integrated.)
5. Plan the implementation of the best alternative (action plan)
1. Carefully consider "What will the situation look like when the problem
is solved?"
2. What steps should be taken to implement the best alternative to
solving the problem? What systems or processes should be changed in
your organization, for example, a new policy or procedure? Don't
resort to solutions where someone is "just going to try harder".
3. How will you know if the steps are being followed or not? (these are
your indicators of the success of your plan)
4. What resources will you need in terms of people, money and facilities?
5. How much time will you need to implement the solution? Write a
schedule that includes the start and stop times, and when you expect
to see certain indicators of success.
6. Who will primarily be responsible for ensuring implementation of the
plan?
7. Write down the answers to the above questions and consider this as
your action plan.
8. Communicate the plan to those who will involved in implementing it
and, at least, to your immediate supervisor.
(An important aspect of this step in the problem-solving process is
continually observation and feedback.)
6. Monitor implementation of the plan
Monitor the indicators of success:
1. Are you seeing what you would expect from the indicators?
2. Will the plan be done according to schedule?
3. If the plan is not being followed as expected, then consider: Was the
plan realistic? Are there sufficient resources to accomplish the plan on
schedule? Should more priority be placed on various aspects of the
plan? Should the plan be changed?

7. Verify if the problem has been resolved or not
One of the best ways to verify if a problem has been solved or not is to
resume normal operations in the organization. Still, you should consider:
1. What changes should be made to avoid this type of problem in the
future? Consider changes to policies and procedures, training, etc.
2. Lastly, consider "What did you learn from this problem solving?"
Consider new knowledge, understanding and/or skills.
3. Consider writing a brief memo that highlights the success of the
problem solving effort, and what you learned as a result. Share it with
your supervisor, peers and subordinates.
2.9. Bounded Rationality and influences on decision making

Corporate management is a responsibility that comes with a lot of
challenges. Managers are often required to attend to issues and difficulties
that need resolutions, clarity and decisions. A significant portion of these
matters is paltry while others are exceptionally vital to the prosperity of the
organisation, particularly concerning strategic performance and the
organisation’s bottom line.
If you have been in this position before, you will attest that the
managerial environment can be quite complex and dynamic especially in the
current competitive world. Effective management today requires one to be
rational both in thinking and decision making. Managers are expected to not
just rely on heuristics in decision-making, but to also be rational in making
these decisions.
While rational decision making is often perceived to be the best in
organisations, at times certain factors as mentioned above, need to be put
into consideration. In other words, rationality is not always the best
regarding organisational decision making.
Bounded Rationality about decision making proposes that people don’t
utilise ideal decision-making approaches as a result of cognitive limitations
in the capacity to understand and oversee complex information and also a
consequence of difficulties related with impediments in information
accessibility. Rather, the idea proposes that people embrace approaches that
are more constrained and which depend upon heuristics to make the
decision-making process manageable, which incorporates the way toward
generating and assessing options for conceivable activity.
The above concept presumes that managers, who are for sure leaders, are
halfway discerning and thus would dependably consider the encompassing
condition to guarantee that they settle on the best decisions that will suffice
at the moment.
The concept prescribes a decision-making process that involves identifying a
problem and choosing the best alternative decision for the moment. For
example, when the organisation is undergoing an economic crisis, managers
are often tasked with the responsibility of laying off employees as a solution
to cutting operational costs. In such a situation, a manager will have to
think of who to lay off. The first name that comes up regarding poor
performance is often of the person that is laid off first. In this case, the
decision is made in respect of the time constraints as there is no time to
analyse the situation and assess employee’s performance for a week

Effective decisions fundamentally require effective problem recognition
and opportunity. Without these elements, identifying a problem or an
opportunity that requires resolutions can be a problem. When alternatives
are being considered, benefits and limitations for the same also ought to be
considered.
Marketers on the other hand also need to realise that bounded
rationality is a concept that is far reaching and has a greater influence on
both marketing and consumer decision making processes.
Therefore, it is of the great essence for them to understand better the
process used in making decisions by the firm to be able also to understand
how this concept influences consumer decision making regarding
their products and services.
In most cases, managers do not take part in partially rational decision
making for fear that it is not always the best practice. As a result, mistakes
are made and resources wasted on solutions that in as much as they appear
rational they tend to realise next to no extreme value for the organisation.
Sometimes as a manager, you have to focus more on maximising rather
than satisfying.
All in all bounded rationality as a concept is something that has to be given
deep thought as part of the decision-making process in an organisation.
In a case where rational thinking is not applicable, this concept will serve as
a guide for developing solutions to problems that arise within the
organisation.
2.10. Decision Making and Problem Solving in Groups
Organizational challenges are many times disruptive to productivity.
Group problem solving is the process of bringing together stakeholders
who through their analytical decision making abilities can influence the
outcome of the problem. The use of groups in problem solving is
encouraged as groups tend to evaluate diverse solutions and action
plans. The core objectives of the group are identifying the problem and
developing solutions. This five-step systematic group problem solving
process provides a defined strategy for a teamwork approach to
generating creative and workable resolutions.
Process Description
Have you ever tried to get a group of people to agree on one answer to a
problem? It's nearly impossible. However, there are positive approaches
to this issue that anyone can employ with some minimal training and
review. This project outlines a one-hour group problem solving technique
that you can use with your organization. It helps clarify issues and
provides an outline of actionable solutions.
Group Problem Solving Process
Provide history relevant to the problem. Make a comparison: how
are things now versus the way you would like them to be? How long has
the problem existed? How frequently does it occur? Who is affected by
the problem?
2. Determine Causes
Look for the cause of the gap between the present (what's now) and
the desired (future) state or resolution.

3. Develop Alternative Approaches
Brainstorm. (Write exactly what is said. Capturing specific words can be
powerful.) Make a list of as many possible solutions as you can. Do NOT
judge correctness or feasibility here. Just list everything.
4. Assess the consequences
Ask what possible results may come from each alternative. Who is
affected? Who pays? Are there uncontrollable challenges?
5. Develop Action Plans
Identify what you want success to look like. Use the Action Planning
Worksheet to choose feasible alternatives that are acceptable to the
group. Note: This is where most of the work is done.
Questioning Approach
Below are some additional, specific questions that you may use to
help guide the process. As you move through each section, allow your
group to take sufficient time to think critically before moving on
This portion of the exercise by asking people to write individually on an
index card what they think the problem is. This may seem redundant or
simplistic for some seemingly obvious problems (e.g., budget shortfall).
However, individual responses may point to confounding issues, related
problems, or causative items.
After writing individually, ask everyone to share. (If it's a very sensitive
issue, collect the cards, shuffle the cards, and then ask one person to
read them
 How are things now versus the way you should like them to be?
 How long has the problem existed
 How frequently does it occur?
 Who is affected by the problem?
2. Determine Causes
 Why the problem does exists
 What needs to be changed in both the immediate future and for
the long term?
3. Develop Alternative Approaches
 Based on the outlined causes, what could be the first step?
 What else we could do?
 Can the problem be handled by internal sources or do we need
outside or expert assistance?
 Does the data is sufficient to make a plan?
 Can we collect the data in needed time?
 Does the issue involve large costs or major consequences for the
organization?
4. Assess the consequences
Who and what will be affected by the solution?
What are the possible side effects? (Immediate or Long-term)
What could be the likely consequences of the solutions?
What could be reaction of interested parties?
Who could complain?
Who would be glad? Why?
5. Develop Action Plans
Use the action planning worksheet to choose feasible alternatives that
are acceptable to the group.
What would be accepted as evidence of its success?
2.11. Creativity & Innovation
Creativity is imagining. Innovation is doing. There’s no doubt that no
matter what the size, your business needs to foster creativity and innovation
together to stay competitive and to retain awesome teammates.
Creative workers replace knowledge workers and managers must learn to
nurture creativity
Seven Rules for Creativity Managers
What is a creativity manager? They are the natural leaders in any setting
who want to nurture diversity, break boundaries and be the innovators in
their industry. Here’s the common formula they all follow, knowingly or not:
1. Nurture diversity
Dislike brains being the same.
2. Create markets
Favour competition in networks
3. Rely on merits
Embrace networks and game play.
4. Make no predictions
Keep many options open.
5. Update the workplace
Work the environment.
6. Change constraints
Optimize for exploration.
7. Open boundaries
Connect instead of protect.
Optimize for exploration.
The goal is to look at your organization with the diversity and beauty of a
coral reef, where you recognize there needs to be freedom for creativity and
innovation.
But you don’t have to reinvent the wheel. While we as a society have a long
way to go, there are amazing examples for us to follow, so start fostering an
atmosphere of open conversation and ask your teammates to do the same.
UNIT – 3: ORGANIZATION AND HRM

3.1. Organizational Design
3.2. Organizational Structures
3.3. Departmentalization
3.4. Delegation
3.5. Empowerment
3.6. Centralization
3.7. Decentralization
3.8. Recentralization
3.9. Organizational Culture

3.10. Organizational Climate
3.11. Organizational Change
3.12. Human Resource Management
3.13. Business Strategy
3.14. Talent Management
3.15. Talent Management Models
3.16. Strategic Human Resource Planning
3.17. Recruitment and Selection
3.18. Training and Development
3.19. Performance Appraisal
**********
3.1. Organizational Design
Organizational design is a step-by-step methodology which identifies
dysfunctional aspects of work flow, procedures, structures and systems,
realigns them to fit current business realities/goals and then develops plans
to implement the new changes.
The process focuses on improving both the technical and people side
of the business. For most companies, the design process leads to a more
effective organization design, significantly improved results (profitability,
customer service, internal operations), and employees who are empowered
and committed to the business.
The hallmark of the design process is a comprehensive and holistic
approach to organizational improvement that touches all aspects of
organizational life, so you can achieve:
 Excellent customer service
 Increased profitability
 Reduced operating costs
 Improved efficiency and cycle time
 A culture of committed and engaged employees
 A clear strategy for managing and growing your business
By design we’re talking about the integration of people with core business
processes, technology and systems. A well-designed organization ensures
that the form of the organization matches its purpose or strategy, meets the
challenges posed by business realities and significantly increases the
likelihood that the collective efforts of people will be successful.
As companies grow and the challenges in the external environment become

more complex, businesses processes, structures and systems that once
worked become barriers to efficiency, customer service, employee morale
and financial profitability. Organizations that don’t periodically renew
themselves suffer from such symptoms as:
 Inefficient workflow with breakdowns and non value-added steps
 Redundancies in effort (“we don’t have time to do things right, but do
have time to do them over”)
 Fragmented work with little regard for good of the whole (Production
ships bad parts to meet their quotas)
 Lack of knowledge and focus on the customer
 Silo mentality and turf battles
 Lack of ownership (“It’s not my job”)
 Cover up and blame rather than identifying and solving problems
 Delays in decision-making
 People don’t have information or authority to solve problems when
and where they occur
 Management, rather than the front line, is responsible for solving
problems when things go wrong
 It takes a long time to get something done
 Systems are ill-defined or reinforce wrong behaviours
 Mistrust between workers and management
3.2. Organizational Structure

An organizational structure is a system that outlines how certain
activities are directed in order to achieve the goals of an organization. These
activities can include rules, roles, and responsibilities.
The organizational structure also determines how information flows between
levels within the company. For example, in a centralized structure, decisions
flow from the top down, while in a decentralized structure, decision-making
power is distributed among various levels of the organization.
Having an organizational structure in place allows companies to remain
efficient and focused.
Businesses of all shapes and sizes use organizational structures heavily.
They define a specific hierarchy within an organization. A successful
organizational structure defines each employee's job and how it fits within
the overall system. Put simply, the organizational structure lays out who
does what so the company can meet its objectives.
This structuring provides a company with a visual representation of how it
is shaped and how it can best move forward in achieving its goals.
Organizational structures are normally illustrated in some sort of chart or
diagram like a pyramid, where the most powerful members of the
organization sit at the top, while those with the least amount are at the
bottom.
Not having a formal structure in place may prove difficult for certain
organizations. For instance, employees may have difficulty knowing to whom
they should report. That can lead to uncertainty as to who is responsible for
what in the organization.
Having a structure in place can help improve efficiency and provide clarity
for everyone at every level. That also means each and every department can
be more productive, as they are likely to be more focused on energy and
time.
An organizational structure is either centralized or decentralized.
Traditionally, organizations have been structured with centralized leadership
and a defined chain of command. The military is an organization famous for
its highly centralized structure, with a long and specific hierarchy of
superiors and subordinates.
There has been a rise in decentralized organizations, as is the case with
many technology start-ups. This allows companies to remain fast, agile, and
adaptable, with almost every employee receiving a high level of personal
agency.
3.2.1. Types of Organizational Structures
Four types of common organizational structures are implemented in the real
world.
The first and most common is a functional structure. This is also referred to
as a bureaucratic organizational structure and breaks up a company based
on the specialization of its workforce.
Most small-to-medium sized businesses implement a functional structure.
Dividing the firm into departments consisting of marketing, sales, and
operations is the act of using a bureaucratic organizational structure.
The second type is common among large companies with many business
units. Called the divisional or multidivisional structure, a company that
uses this method structures its leadership team based on the products,
projects, or subsidiaries they operate. A good example of this structure is
Johnson & Johnson. With thousands of products and lines of business, the
company structures itself so each business unit operates as its own
company with its own president.

Flatarchy, a newer structure, is the third type and is used among many
startups. As the name alludes, it flattens the hierarchy and chain of
command and gives its employees a lot of autonomy. Companies that use
this type of structure have a high speed of implementation.
The fourth and final organizational structure is a matrix structure. It is also

the most confusing and the least used. This structure matrixes employee
across different superiors, divisions, or departments. An employee working
for a matrixed company, for example, may have duties in both sales
and customer service.

3.3. Departmentalization
Departmentalization means grouping activities and people into departments,
making it possible to expand organizations, at least in theory, to an
indefinite degree. Departmentalization refers to the formal structure of the
organization, composed of various departments and managerial positions
and their relationships with each other. As an organization grows, its
departments grow and more sub-units are created, which in turn add more
levels of management. This often creates less flexibility, adaptability, and
units of action within the firm.
Departmentalization is the efficient and effective grouping of jobs into
meaningful work units to coordinate numerous jobs—all for the expeditious
accomplishment of the organization’s objectives. Two particular things need
to consider before setting the formal structure of the organization or the
Departmentalization. They are; basic organizational units and coordinating
structure.
3.3.1. Types of Departmentalization
Departmentalization results from the division of work and the desire to
obtain organization units of manageable size and to utilize managerial
ability.
An organization structure and design are shaped significantly by the
Departmentalization followed.
The means of Departmentalization are by
1. Functional Departmentalization.
2. Departmentalization by Territory.
3. Departmentalization of organization by customer group.
4. Matrix departmentalization.
5. Planning Task Force.
An organizer is free to use any means of departmentalization in constructing
an organization structure. In fact, in any given structure several means are
typically used.

1. Functional Departmentalization
Functional departmentalization groups together jobs which are involving the
same or similar activities. It allows the organization to staff all important
positions with functional experts and facilitates coordination and
integration.
2. Departmentalization by Territory
Departmentalization by Territory method is followed where; unless to local
conditions appears to offer advantages, such as low cost of operation and
opportunities to capitalize on attractive local conditions as they arise.
Territorial departmentalization is especially popular for sales where division
appears feasible according to some geographic market segregation.
3. Departmentalization of organization by customer group.
Customer departmentalization is where the organization’s activities are
ready to respond to and interact with specific customers or customer
groups.
This organizational form is used when great emphasis is placed on
effectively serving different customer types.
4. Matrix departmentalization
Matrix departmentalization attempts to combine functional and task force
(project) departmentalization designs to improve the synchronization of
multiple components for a single activity (i.e., a moon launch), to improve
the economics of scale, and to better serve the customer and company.
5. Planning Task Force
Planning task force is most often formed when the organization requires
addressing special circumstances. It is more preferable, and efficient than
maintaining a different planning staff or department.
3.4. Delegation
A manager alone cannot perform all the tasks assigned to him. In
order to meet the targets, the manager should delegate authority. Delegation
of Authority means division of authority and powers downwards to the
subordinate.
Delegation is about entrusting someone else to do parts of your job.
Delegation of authority can be defined as subdivision and sub-allocation of
powers to the subordinates in order to achieve effective results.
Elements of Delegation
Authority - in context of a business organization, authority can be defined
as the power and right of a person to use and allocate the resources
efficiently, to take decisions and to give orders so as to achieve the
organizational objectives. Authority must be well- defined. All people who
have the authority should know what is the scope of their authority is and
they shouldn’t misutilise it. Authority is the right to give commands, orders
and get the things done. The top level management has greatest authority.
Authority always flows from top to bottom. It explains how a superior gets
work done from his subordinate by clearly explaining what is expected of
him and how he should go about it. Authority should be accompanied with
an equal amount of responsibility. Delegating the authority to someone else
doesn’t imply escaping from accountability. Accountability still rest with the
person having the utmost authority.

Responsibility - is the duty of the person to complete the task assigned to
him. A person who is given the responsibility should ensure that he
accomplishes the tasks assigned to him. If the tasks for which he was held
responsible are not completed, then he should not give explanations or
excuses. Responsibility without adequate authority leads to discontent and
dissatisfaction among the person. Responsibility flows from bottom to top.
The middle level and lower level management holds more responsibility. The
person held responsible for a job is answerable for it. If he performs the
tasks assigned as expected, he is bound for praises. While if he doesn’t
accomplish tasks assigned as expected, then also he is answerable for that.
Accountability - means giving explanations for any variance in the actual
performance from the expectations set. Accountability cannot be delegated.
For example, if ’A’ is given a task with sufficient authority, and ’A’ delegates
this task to B and asks him to ensure that task is done well, responsibility
rest with ’B’, but accountability still rest with ’A’. The top level management
is most accountable. Being accountable means being innovative as the
person will think beyond his scope of job. Accountability, in short, means
being answerable for the end result. Accountability can’t be escaped. It
arises from responsibility.
For achieving delegation, a manager has to work in a system and has to
perform following steps: -
1. Assignment of tasks and duties
2. Granting of authority
3. Creating responsibility and accountability
3.5. Empowerment
The term empowerment has different meanings in different socio cultural
and political contexts, and does not translate easily into all languages.
Empowerment is the concept in management that if employees are given
information, resources, and opportunity at the same time as being held
responsible for their job outcomes, then they will be more productive and
have higher job satisfaction. It is important to understand that a company
cannot implement empowerment itself - instead, management creates the
right environment so that empowerment can take place.
So how does a manager set up this kind of environment where employees
feel empowered?
3.5.1. How to Empower Employees
Let's look at this process, through the example of a company called Widget
Co. Widget Co.'s manager would first begin his project with the goal of
creating empowered employees would start by determining what resources
employees need in order to make good decisions about their own work.
When doing this, he would take into consideration the company's vision and
mission and the organizational and departmental goals.
He would need to be sure to understand the work other departments do and
have access to financial and operational reports for the company. He'd
benefit from a clear understanding of company processes and what happens
to the company's work once it's completed.

He would finally need to determine if there's any necessary skills training to
help employees better understand their work and perform better. And to
make sure employees have clear expectations about what they need to
accomplish.
Once employees have the information and skills they need, Widget Co.'s
manager would give them some amount of decision-making responsibility.
The reason for this is that along with the ability to make decisions, comes
accountability for their results. The underlying idea is that employees are in
a unique position to determine the best way to produce their work
outcomes.
With this additional responsibility in place, the role of Widget Co.'s manager
changes to more of a coaching role - he should help employees make good
decisions, discuss the outcomes of decisions with them, and help coordinate
employees among multiple groups.
3.6. Centralization and Decentralization

Centralization is said to be a process where the concentration of decision
making is in a few hands. All the important decision and actions at the
lower level, all subjects and actions at the lower level are subject to the
approval of top management.
According to Allen, “Centralization” is the systematic and consistent
reservation of authority at central points in the organization. The implication
of centralization can be :-
1. Reservation of decision making power at top level.
2. Reservation of operating authority with the middle level managers.
3. Reservation of operation at lower level at the directions of the top level.
Under centralization, the important and key decisions are taken by the top
management and the other levels are into implementations as per the
directions of top level. For example, in a business concern, the father & son
being the owners decide about the important matters and all the rest of
functions like product, finance, marketing, personnel, are carried out by the
department heads and they have to act as per instruction and orders of the
two people. Therefore in this case, decision making power remain in the
hands of father & son.
On the other hand, Decentralization is a systematic delegation of authority
at all levels of management and in all of the organization. In a
decentralization concern, authority in retained by the top management for
taking major decisions and framing policies concerning the whole concern.
Rest of the authority may be delegated to the middle level and lower level of
management.
The degree of centralization and decentralization will depend upon the
amount of authority delegated to the lowest level. According to Allen,
“Decentralization refers to the systematic effort to delegate to the lowest level
of authority except that which can be controlled and exercised at central
points. Decentralization is not the same as delegation. In fact,
decentralization is all extension of delegation. Decentralization pattern is
wider is scope and the authorities are diffused to the lowest most level of
management. Delegation of authority is a complete process and takes place
from one person to another.

While decentralization is complete only when fullest possible delegation has
taken place. For example, the general manager of a company is responsible
for receiving the leave application for the whole of the concern. The general
manager delegates this work to the personnel manager who is now
responsible for receiving the leave applicants. In this situation delegation of
authority has taken place. On the other hand, on the request of the
personnel manager, if the general manager delegates this power to all the
departmental heads at all level, in this situation decentralization has taken
place. There is a saying that “Everything that increasing the role of
subordinates is decentralization and that decreases the role is
centralization”. Decentralization is wider in scope and the subordinate’s
responsibility increase in this case. On the other hand, in delegation the
managers remain answerable even for the acts of subordinates to their
superiors.
Implications of Decentralization
1. There are fewer burdens on the Chief Executive as in the case of
centralization.
2. In decentralization, the subordinates get a chance to decide and act
independently which develops skills and capabilities. This way the
organization is able to process reserve of talents in it.
3. In decentralization, diversification and horizontal can be easily
implanted.
4. In decentralization, concern diversification of activities can place
effectively since there is more scope for creating new departments.
Therefore, diversification growth is of a degree.
5. In decentralization structure, operations can be coordinated at
divisional level which is not possible in the centralization set up.
6. In the case of decentralization structure, there is greater motivation
and morale of the employees since they get more independence to act
and decide.
7. In a decentralization structure, co-ordination to some extent is
difficult to maintain as there are lot many department divisions and
authority is delegated to maximum possible extent, i.e., to the bottom
most level delegation reaches. Centralization and decentralization are
the categories by which the pattern of authority relationships became
clear. The degree of centralization and de-centralization can be
affected by many factors like nature of operation, volume of profits,
number of departments, size of a concern, etc. The larger the size of a
concern, a decentralization set up is suitable in it.
3.7. Recentralization
Recentralization depend s on many factors and so the degree of
centralization and decentralization also changes with the changing
situation. It should not be supposed that authority once decentralized is
decentralized forever. Recentralization means back to centralization. If the
situation so demands, the top management may hold back the power or
authority from the lower level managers which were earlier decentralized.
3.8. ORGANISATIONAL CULTURE

Culture deals with past and current assumptions, experiences,
values, attitudes, beliefs, expectations, customs etc. Culture relates to the
informal aspects of organisations rather than their official elements. They
focus on the values, beliefs and norms of individuals in the organization
Culture is manifested by symbols and rituals rather than through the formal
structure of the organization.
The values and behaviour that contribute to the unique social and
psychological environment of an organization is called organizational
culture. It refers to the system of shared meaning held by the members that
distinguishes one organization from other organization.
3.8.1. Features of Organisational Culture
Shared meaning Values and Norms Behavioural Consistency
Descriptive Organisational Philosophy Clear Guidelines Sense of
Belongingness Factors
 Determining org. Culture, Org. Founder: Whatever impression
founders create about the organization, it continues and develops for
a long period of time.
 Corporate success & shared Experiences: Corporate success for a
long period develops a strong culture. If the members share common
experience, it remains in their mind forever.
 Innovation & risk taking: Innovative and risk taking employees
develop a strong culture.
 Outcome rather than technique: Organisations whose managers
focus on outcome rather than technique, they develop strong culture.
Competitiveness: Organisations whose employees are competitive are
actually stronger than non-competitive.
 Shared interpretation: Organisations whose members have common
perception and thinking about organizational values, norms, they can
develop a strong culture.
3.8.2. Functions of Organisational Culture
 It distinguishes one organization from another organization. That
means it creates brand name for the organization.
 It develops a sense of identity amongst its members.
 It promotes commitment amongst employees to achieve organisational
goals.
 It develops appropriate standards for employees & holds them
together to achieve those standards.
 It provides a control mechanism for shaping the attitude & behaviour
of employees.
3.8.3. Transmission of organizational Culture/How is culture learnt
Stories: The stories may be true or false told to the organizational members
can have a profound impact on organizational culture.
Symbols: Examples of symbols include the size of offices, the elegance of
office furnishing etc for certain employees. The value of these symbols is
that they communicate important cultural values.
Language: Organisations use a language in terms of specific slogan,
metaphor to convey special meaning to employees. It symbolizes what the
company stands for to both employees and society.

Rituals: Rituals such as annual function, award ceremonies etc reinforce
the key values of the organization, which goal is imp, which people is
important. The annual function is an example of ritual performed in an
educational institution.
3.9. Organisational Climate

The concept of organisational climate was formally introduced by the
human relationists in the late 1940s. Now it has become a very useful
metaphor for thinking about and describing the social system.
Organisational climate is also referred to as the “situational determinants”
or “Environmental determinants” which affect the human behaviour.
Some persons have used organisational culture and organisational climate
interchangeably. But there are some basic differences between these two
terms.
According to Bowditch and Buono, “Organisational culture is connected
with the nature of beliefs and expectations about organisational life, while
climate is an indicator of whether these beliefs and expectations are being
fulfilled.”
Climate of an organisation is somewhat like the personality of a person. Just
as every individual has a personality that makes him unique and different
from other persons. Each organisation has an organisational climate that
clearly distinguishes it from other organisations.
Basically, the organisational climate reflects a person’s perception of the
organisation to which he belongs. It is a set of unique characteristics and
features that are perceived by the employees about their organisations
which serves as a major force in influencing their behaviour. Thus,
organisational climate in a broad sense can be understood as the social
setting of the organisation.
3.9.1. Meaning and Definition

Before understanding the meaning of organisational climate, we must first
understand the concept of climate.
“Climate in natural sense is referred to as the average course or condition of
the weather at a place over a period of years as exhibited by temperature,
wind, velocity and precipitation.”
However, it is quite difficult to define organisational climate incorporating
the characteristics of natural climate. This is so because the most
frustrating feature of an attempt to deal with situational variables in a
model of management performance is the enormous complexity of the
management itself. People have defined organisational climate on the basis
of its potential properties. A few important definitions are as given below.
According to Forehand and Gilmer, “Climate consists of a set of
characteristics that describe an organisation, distinguish it from other
organisations are relatively enduring over time and influence the behaviour
of people in it.”
According to Campbell, “Organisational climate can be defined as a set of
attributes specific to a particular organisation that may be induced from the
way that organisation deals with its members and its environment. For the
individual members within the organisation, climate takes the form of a set

of attitudes and experiences which describe the organisation in terms of
both static characteristics (such as degree of autonomy) and behaviour
outcome and outcome- outcome contingencies.”
Thus, organisational climate is a relatively enduring quality of the internal
environment that is experienced by its members, influences their behaviour
and can be described in terms of the value of a particular set of
characteristics of the organisation. It may be possible to have as many
climates as there are people in the organisation when considered
collectively, the actions of the individuals become more meaningful for
viewing the total impact upon the climate and determining the stability of
the work environment. The climate should be viewed from a total system
perspective. While there may be differences in climates within departments
these will be integrated to a certain extent to denote overall organisational
climate.
3.9.2. Characteristics of Organisational Climate
The nature of organisational climate will be clear from the following
characteristics:
1. General Perception:
Organisational climate is a general expression of what the organisation is. It
is the summary perception which people have about the organisation. It
conveys the impressions people have of the organisational internal
environment within which they work.
2. Abstract and Intangible Concept:
Organisational climate is a qualitative concept. It is very difficult to explain
the components of organisational climate in quantitative or measurable
units.
3. Unique and District Identity:
Organisational climate gives a distinct identity to the organisation. It
explains how one organisation is different from other organisations.
4. Enduring Quality:
Organisational climate built up over a period of time. It represents a
relatively enduring quality of the internal environment that is experienced by
the organisational members.
5. Multi-Dimensional Concept:
Organisational climate is a multi- dimensional concept. The various
dimensions of the organisational climate are individual autonomy, authority
structure, leadership style, pattern of communication, degree of conflicts
and cooperation etc.
3.9.3. Factors Influencing Organisational Climate
Organisational climate is a manifestation of the attitudes of organisational
members towards the organisation.
Researchers have used the data relating to individual perception of
organisational properties in identifying organisational climate. Even in this
context, there is a great amount of diversity.
Litwin and Stringer have included six factors which affect organisational
climate. These factors are:
 Organisational Structure: Perceptions of the extent of organisational
constraints, rules, regulations, red tape,

 Individual Responsibility: Feeling of autonomy of being one’s own
boss,
 Rewards: Feelings related to being confident of adequate and
appropriate rewards,
 Risk and Risk Taking: Perceptions of the degree of challenge and risk
in the work situation,
 Warmth and Support: Feeling of general good fellowship and
helpfulness prevailing in the work setting.
 Tolerance and Conflict: Degree of confidence that the climate can
tolerate, differing opinions.
3.10. ORGANISATIONAL CHANGE

The way we individuals change due to age, education, change of job,
illness, change in geographical area, organizations also change due to
several reasons over a period of time. Change is necessary for survival and
growth. Changes are constantly taking place in our environment. Changes
occur outside organization that requires internal adaptation. The manager
has to ensure that individual and groups in organizations, and structures,
process and behaviours of subsystems must adapt to the changing external
and internal environments. In effect, the manager is a change agent who
facilitates changes to occur in the various subsystems of the organization
needed. Any alteration which occurs in the overall work environment of an
organization is called organizational change.
3.10.1. Factors affecting Change
There are both external and internal forces that result in pressure for
change.
3.10.1.1. External Factors: The external forces that create the need for
change come from various sources. Some of them are as follows:
Competitive Market Force: Competition is changing. The global economy
means that competitors are as likely to come from across the ocean as from
across town. Heightened competition also means the established
organizations need to defend themselves against both traditional
competitors that develop new products and services and small, entrepreneur
in recent times, the work force composition is varied and is not very static.
Its composition changes in terms of age, education, sex and so forth.
In a stable organization with a large pool of seasoned executives, there might
be a need to restructure jobs in order to retain younger managers who
occupy lower ranks. The compensation and benefit system might also need
to be adapted to reflect the needs of an older work force.
Technology: It creates the need for change. For example, technological
developments in sophisticated and extremely expensive diagnostic
equipment have created significant economy of scale for hospitals and
medical centres. Assembly-line technology is undergoing dramatic change as
organizations replace human labour with robots.
Even in the greetings card industry, electronic mail and internet have
influenced the way people send greetings.
Labour Markets: The fluctuation in labour markets forces managers to
change. For instance, the demand for webpage designers and website
managers made it necessary for organizations that need those kinds of
employees to change their human resources management activities to
attract and retain skilled employees in the areas of greatest need.
Introduction of new technology: The introduction of new equipment
represents another internal force for change. Employees may manufacturing
industries. More foreign automobile industries are setting up manufacturing
plants and generating more employment opportunities in India.
Economic Changes: Economic changes affect almost all organization. The
appreciation of rupee value against the US dollar affects the export
prospects of knitwear products from India to America as those products cost
more to Americans. But even in strong economy, uncertainties about
interest rates, government budgets deficits and current exchange rates
create conditions that may force organizations to change.
3.10.1.2. Internal Factors: Internal forces can also stimulate the need for
change. These internal forces tend to originate primarily from the internal
operations of the organizations or from the impact of external changes.
Structural factors: A structural force would be the inability to transmit
important information from the top of the organization to the lower level
cadre. Because of numerous layers in the hierarchy, information moves
slowly from one level to the next. This could be viewed as a process or a
behavioural problem involving a failure to communicate effectively.
Strategy: A redefinition or modification of an organization’s strategy often
introduces a host of change. The strategic move of Reliance Industries in
getting into retail business in urban and rural markets made them to
introduce a change in the managerial approach as well as the human
relations approach to gain acceptance from the different cross section of the
customers.
Organizations Workforce: In recent times, the work force composition is
varied and is not very static. Its composition changes in terms of age,
education, sex and so forth.
In a stable organization with a large pool of seasoned executives, there might
be a need to restructure jobs in order to retain younger managers who
occupy lower ranks. The compensation and benefit system might also need
to be adapted to reflect the needs of an older work force.
Introduction of new technology: The introduction of new equipment
represents another internal force for change. Employees may have their jobs
redesigned, they need to undergo training on how to operate the new
equipment or they may be required to establish new interactions patterns
with their work group.
Employee Attitudes: Employee attitudes such as increased job satisfaction
may lead to increased absenteeism, more voluntary resignations, and even
labour strikes. Such events will often lead to changes in management
policies and practices.
3.11. HUMAN RESOURCE MANAGEMENT

HRM is the study of activities regarding people working in an
organization. It is a managerial function that tries to match an
organization’s needs to the skills and abilities of its employees.

Human resources management (HRM) is a management function
concerned with hiring, motivating and maintaining people in an
organization. It focuses on people in organizations. Human resource
management is designing management systems to ensure that human talent
is used effectively and efficiently to accomplish organizational goals.
According to D. A. Decenzo and P.Robbins, “Human resource
management is a process consisting of four function: - acquisition,
development, motivation and maintenance of human resources.
3.11.1. Nature of HRM
HRM is a management function that helps manager’s to recruit, select, train
and develop members for an organization. HRM is concerned with people’s
dimension in organizations.
The following constitute the core of HRM
1. HRM Involves the Application of Management Functions and Principles.
The functions and principles are applied to acquiring, developing,
maintaining and providing remuneration to employees in organization.
2. Decision Relating to Employees must be integrated. Decisions on different
aspects of employees must be consistent with other human resource (HR)
decisions.
3. Decisions Made Influence the Effectiveness of an Organization.
Effectiveness of an organization will result in betterment of services to
customers in the form of high quality products supplied at reasonable costs.
4. HRM Functions are not confined to Business Establishments Only but
applicable to non business organizations such as education, health care,
recreation and like.
HRM refers to a set of programmes, functions and activities designed
and carried out in order to maximize both employee as well as organizational
effectiveness.
3.11.2. Scope of HRM

The scope of HRM is indeed vast. All major activities in the working life of a
worker – from the time of his or her entry into an organization until he or
she leaves the organizations comes under the purview of HRM. The major
HRM activities include HR planning, job analysis, job design, employee
hiring, employee and executive remuneration, employee motivation,
employee maintenance, industrial relations and prospects of HRM.
The scope of Human Resources Management extends to:
 All the decisions, strategies, factors, principles, operations, practices,
functions, activities and methods related to the management of people
as employees in any type of organization.
 All the dimensions related to people in their employment
relationships, and all the dynamics that flow from it. American Society
for Training and Development (ASTD) conducted fairly an exhaustive
study in this field and identified nine broad areas of activities of HRM.
These are given below:
 Human Resource Planning
 Design of the Organization and Job
 Selection and Staffing
 Training and Development

 Organizational Development
 Compensation and Benefits
 Employee Assistance
 Union/Labour Relations
 Personnel Research and Information System
3.11.3. Objectives of HRM
1. Societal Objectives: seek to ensure that the organization becomes
socially responsible to the needs and challenges of the society while
minimizing the negative impact of such demands upon the organization.
2. Organizational Objectives: it recognizes the role of HRM in bringing
about organizational effectiveness. It makes sure that HRM is not a
standalone department, but rather a means to assist the organization with
its primary objectives.
3. Functional Objectives: is to maintain the department’s contribution at a
level appropriate to the organization’s needs.
4. Personnel Objectives: it is to assist employees in achieving their
personal goals, at least as far as these goals enhance the individual’s
contribution to the organization. Personal objectives of employees must be
met if they are to be maintained, retained and motivated.
Otherwise employee performance and satisfaction may decline giving rise to
employee turnover.
3.11.4. Functions of Human Resource Management
Human resource management has two functions. The first one is managerial
function and the second one is staffing function. Managerial Function
 Planning
 Organising
 Directing
 Coordinating
 Controlling Staffing/Operating Function
 Acquisition & Absorption
 Development & Utilisation
 Maintenance & Retention
 Motivation & Empowerment
3.12. TALENT MANAGEMENT

Attracting high-worth individuals from the competitors is not
everyone’s cup of tea. Targeting them and finally hiring them is the test of
your competencies experience, personal traits and brain application. This is
where the strategic approach plays an important role.
A full-fledged department, precisely Talent Management (a part of
HRD), especially dedicated to the purpose is required to recognize, source
and poach them. However the process doesn’t finish here. It is a never-
ending course of action that requires continuous effort. Let’s read further to
explore and understand the concept.
Talent Management, as the name itself suggests is managing the
ability, competency and power of employees within an organization.
Talent Management in organizations is not just limited to attracting the best
people from the industry but it is a continuous process that involves

sourcing, hiring, developing, retaining and promoting them while meeting
the organization’s requirements simultaneously.
Only hiring him does not solve the purpose but getting the things
done from him is the main task.
Therefore, it can be said that talent management is a full-fledged
process that not only controls the entry of an employee but also his or her
exit.
Talent is the most important factor that drives an organization and takes it
to a higher level, and therefore, cannot be compromised at all.
It won’t be exaggerating saying talent management as a never-ending war
for talent!
3.12.1. Talent Management Model - The AARRR model
The AARRR model shows how customers first get in touch with an
organization and eventually end up buying something from that
organization. This happens in five phases.
1. Acquisition: This is all about driving visitors to the organization.
2. Activation: The first value experience that is exchanged between the
organization and the customer. This can be a customer that leaves
their email address in exchange for a monthly newsletter for example.

3. Revenue: The first and most important of the R’s. Revenue is about
getting customers to make a purchasing decision. Needless to say,
this is the lifeblood of the company.
4. Referral: How do you get customers to tell others about you so you
get even more customers?
5. Retention: How do you retain those buying customers so they come
back and buy again?
Of course, now I could tell you a lot about how useful this model is and how
you can use different media channels to acquire and activate customers,
encourage them to make purchasing decisions, et cetera.
3.13. STRATEGIC HUMAN RESOURCE PLANNING

A very common term in business is strategic planning. The strategic plan
serves as a guide for businesses to achieve their mission. The standard
strategic plan presents an organization's strengths and weaknesses, the
environment in which the organization operates, and the goals the
organization desires to achieve within a specific time frame. In order to
achieve the desired goals that are presented in a strategic plan, it is
important that the organization take a strategic approach to human
resource management.
Human resource planning is the ongoing process of systematic planning to

achieve optimum use of an organization's human resources. To develop a
strategic HR plan, human resource professionals must forecast labour
demand, analyze present labour supply, and balance projected labour
demand and supply. This is the standard model of strategic human resource
planning. Strategic human resource planning goes hand-in-hand with an
organization's overall strategic plan. As a human resource director, it is
imperative that you have the strategic vision, when it comes to human
resource needs, necessary for your organization to achieve its goals that
were set forth in its strategic plan.
In order to improve the strategic alignment of staff and other resources, it’s
essential to understand how a strategic HR planning process works. At its
most basic level, strategic human resources planning ensures adequate
staffing to meet your organization’s operational goals, matching the right
people with the right skills at the right time.
It’s important to ask where your organization stands currently and where it
is going in order to remain flexible. Each company’s plan will look slightly
different depending on its current and future needs, but there is a basic
structure that you can follow to ensure you’re on the right track.
The strategic human resource planning process begins with an assessment
of current staffing, including whether it fits the organization’s needs, and
then moves on to forecasting future staffing needs based on business goals.
From there, you’ll need to align your organization’s strategy with

employment planning and implement the plan not only to hire new
employees but also to retain and properly train the new hires—and your
current employees—based on business changes.

Read on to learn more about each of the steps of the process in detail to
understand the strategic human resource management planning process in
its entirety.
1. Assess current HR capacity
The first step in the human resources planning process is to assess your
current staff. Before making any moves to hire new employees for your
organization, it’s important to understand the talent you already have at
your disposal. Develop a skills inventory for each of your current employees.
You can do this in a number of ways, such as asking employees to self-
evaluate with a questionnaire, looking over past performance reviews, or
using an approach that combines the two. Use a Lucidchart template to
visualize the skills inventory.
2. Forecast HR requirements
Once you have a full inventory of the resources you already have at your
disposal, it’s time to begin forecasting future needs. Will your company need
to grow its human resources in number? Will you need to stick to your
current staff but improve their productivity through efficiency or new skills
training? Are there potential employees available in the marketplace?
It is important to assess both your company’s demand for qualified
employees and the supply of those employees either within the organization
or outside of it. You’ll need to carefully manage that supply and demand.
Demand forecasting
Demand forecasting is the detailed process of determining future human
resources needs in terms of quantity—the number of employees needed—
and quality—the calibre of talent required to meet the company's current
and future needs.
Supply forecasting
Supply forecasting determines the current resources available to meet the
demands. With your previous skills inventory, you’ll know which employees
in your organization are available to meet your current demand. You’ll also
want to look outside of the organization for potential hires that can meet the
needs not fulfilled by employees already present in the organization.
Matching demand and supply
Matching the demand and supply is where the hiring process gets tricky—
and where the rest of the human resources management planning process
comes into place. You’ll develop a plan to link your organization’s demand
for quality staff with the supply available in the market. You can achieve
this by training current employees, hiring new employees, or combining the
two approaches.
3. Develop talent strategies
After determining your company’s staffing needs by assessing your current
HR capacity and forecasting supply and demand, it’s time to begin the
process of developing and adding talent. Talent development is a crucial part
of the strategic human resources management process.
Recruitment
In the recruitment phase of the talent development process, you begin the
search for applicants that match the skills your company needs. This phase
can involve posting on job websites, searching social networks like LinkedIn

for qualified potential employees, and encouraging current employees to
recommend people they know who might be a good fit.
Selection
Once you have connected with a pool of qualified applicants, conduct
interviews and skills evaluations to determine the best fit for your
organization. If you have properly forecasted supply and demand, you
should have no trouble finding the right people for the right roles.
Hiring
Decide the final candidates for the open positions and extend offers.
Training and development
After hiring your new employees, bring them on board. Organize training to
get them up to speed on your company’s procedures. Encourage them to
continue to develop their skills to fit your company’s needs as they change.
Employee remuneration and benefits administration
Keep your current employees and new hires happy by offering competitive
salary and benefit packages and by properly rewarding employees who go
above and beyond. Retaining good employees will save your company a lot of
time and money in the long run.
Performance management
Institute regular performance reviews for all employees. Identify successes
and areas of improvement. Keep employees performing well with incentives
for good performance?
Employee relations
A strong company culture is integral in attracting top talent. Beyond that,
make sure your company is maintaining a safe work environment for all,
focusing on employee health, safety, and quality of work life.
4. Review and evaluation
Once your human resource management process plan has been in place for
a set amount of time, you can evaluate whether the plan has helped the
company to achieve its goals in factors like production, profit, employee
retention, and employee satisfaction. If everything is running smoothly,
continue with the plan, but if there are roadblocks along the way, you can
always change up different aspects to better suit your company’s needs.
3.14. RECRUITMENT & SELECTION

Recruitment and Selection is an important operation in HRM, designed to
maximize employee strength in order to meet the employer's strategic goals
and objectives. It is a process of sourcing, screening, short listing and
selecting the right candidates for the required vacant positions.
The scope of Recruitment and Selection is very wide and it consists of a
variety of operations. Resources are considered as most important asset to
any organization. Hence, hiring right resources is the most important aspect
of Recruitment. Every company has its own pattern of recruitment as per
their recruitment policies and procedures.
3.14.1. The scope of Recruitment and Selection includes the following

operations
 Dealing with the excess or shortage of resources
 Preparing the Recruitment policy for different categories of employees

 Analyzing the recruitment policies, processes, and procedures of the
organization
 Identifying the areas, where there could be a scope of improvement
 Streamlining the hiring process with suitable recommendations
 Choosing the best suitable process of recruitment for effective hiring
of resources
Any organization wants it future to be in good and safe hands. Hence,
hiring the right resource is a very important task for any organization.
Recruitment is a process of identifying, screening, short listing and hiring
potential resource for filling up the vacant positions in an organization. It is
a core function of Human Resource Management.
Recruitment is the process of choosing the right person for the right
position and at the right time. Recruitment also refers to the process of
attracting, selecting, and appointing potential candidates to meet the
organization’s resource requirements.
The hiring of the candidates can be done internally i.e., within the
organization, or from external sources. And the process should be
performed within a time constraint and it should be cost effective.
3.14.2. Importance of Recruitment
Recruitment is one of the most fundamental activities of the HR team. If the
recruitment process is efficient, then
 The organization gets happier and more productive employees
 Attrition rate reduces.
 It builds a good workplace environment with good employee
relationships.
 It results in overall growth of the organization.
Here is a list that shows the purpose and importance of Recruitment in an
organization −
 It determines the current and future job requirement.
 It increases the pool of job at the minimal cost.
 It helps in increasing the success rate of selecting the right
candidates.
 It helps in reducing the probability of short term employments.
 It meets the organization’s social and legal obligations with regards to
the work force.
 It helps in identifying the job applicants and selecting the appropriate
resources.
 It helps in increasing organizational effectives for a short and long
term.
 It helps in evaluating the effectiveness of the various recruitment
techniques.
 It attracts and encourages the applicants to apply for the vacancies in
an organization.
 It determines the present futures requirements of the organization
and plan according.
 It links the potential employees with the employers.
 It helps in increasing the success ratio of the selection process of
prospective candidates.

 It helps in creating a talent pool of prospective candidates, which
enables in selecting the right candidates for the right job as per the
organizational needs.
3.14.3. Factors that influence the recruitment process.
Internal Factors
Organizations have control over the internal factors that affect their
recruitment functions. The internal factors are −
 Size of organization
 Recruiting policy
 Image of organization
 Image of job
Size of Organization
The size of the organization is one of the most important factors affecting
the recruitment process. To expand the business, recruitment planning is
mandatory for hiring more resources, which will be handling the future
operations.
Recruiting Policy
Recruitment policy of an organization, i.e., hiring from internal or external
sources of organization is also a factor, which affects the recruitment
process. It specifies the objectives of the recruitment and provides a
framework for the implementation of recruitment programs.
Image of Organization
Organizations having a good positive image in the market can easily attract
competent resources. Maintaining good public relations, providing public
services, etc., definitely helps an organization in enhancing its reputation in
the market, and thereby attract the best possible resources.
Image of Job
Just like the image of organization, the image of a job plays a critical role in
recruitment. Jobs having a positive image in terms of better remuneration,
promotions, recognition, good work environment with career development
opportunities are considered to be the characteristics to attract qualified
candidates.
External Factors
External factors are those that cannot be controlled by an organization. The
external factors that affect the recruitment process include the following −
 Demographic factors − Demographic factors are related to the
attributes of potential employees such as their age, religion, literacy
level, gender, occupation, economic status, etc.
 Labour market − Labour market controls the demand and supply of
labour. For example, if the supply of people having a specific skill is
less than the demand, then the hiring will need more efforts. On the
other hand, if the demand is less than the supply, the hiring will be
relative easier.
 Unemployment rate − If the unemployment rate is high in a specific
area, hiring of resources will be simple and easier, as the number of
applicants is very high. In contrast, if the unemployment rate is low,
then recruiting tends to be very difficult due to less number of
resources.

 Labour laws − Labour laws reflect the social and political
environment of a market, which are created by the central and state
governments. These laws dictate the compensation, working
environment, safety and health regulations, etc., for different types of
employments. As the government changes, the laws too change.
 Legal considerations − Job reservations for different castes such as
STs, SCs, OBCs are best examples of legal considerations. These
considerations, passed by government, will have a positive or
negative impact on the recruitment policies of the organizations.
 Competitors − When organizations in the same industry are
competing for the best qualified resources, there is a need to analyze
the competition and offer the resources packages that are best in
terms of industry standards.
Recruitment is a process of finding and attracting the potential resources
for filling up the vacant positions in an organization. It sources the
candidates with the abilities and attitude, which are required for achieving
the objectives of an organization.
3.14.4. Recruitment process is a process of identifying the jobs vacancy,
analyzing the job requirements, reviewing applications, screening, short
listing and selecting the right candidate.
To increase the efficiency of hiring, it is recommended that the HR team of
an organization follows the five best practices (as shown in the following
image). These five practices ensure successful recruitment without any
interruptions. In addition, these practices also ensure consistency and
compliance in the recruitment process.
Recruitment process is the first step in creating a powerful resource base.
The process undergoes a systematic procedure starting from sourcing the
resources to arranging and conducting interviews and finally selecting the
right candidates.
Recruitment Planning
Recruitment planning is the first step of the recruitment process, where the
vacant positions are analyzed and described. It includes job specifications
and its nature, experience, qualifications and skills required for the job, etc.
A structured recruitment plan is mandatory to attract potential candidates
from a pool of candidates. The potential candidates should be qualified,
experienced with a capability to take the responsibilities required to achieve
the objectives of the organization.
Identifying Vacancy
The first and foremost process of recruitment plan is identifying the
vacancy. This process begins with receiving the requisition for recruitments
from different department of the organization to the HR Department, which
contains −
 Number of posts to be filled
 Number of positions
 Duties and responsibilities to be performed
 Qualification and experience required
When a vacancy is identified, it the responsibility of the sourcing manager
to ascertain whether the position is required or not, permanent or
temporary, full-time or part-time, etc. These parameters should be

evaluated before commencing recruitment. Proper identifying, planning and
evaluating leads to hiring of the right resource for the team and the
organization.
Job Analysis
Job analysis is a process of identifying, analyzing, and determining the
duties, responsibilities, skills, abilities, and work environment of a specific
job. These factors help in identifying what a job demands and what an
employee must possess in performing a job productively.
Job analysis helps in understanding what tasks are important and how to
perform them. Its purpose is to establish and document the job
relatedness of employment procedures such as selection, training,
compensation, and performance appraisal.
The following steps are important in analyzing a job −
 Recording and collecting job information
 Accuracy in checking the job information
 Generating job description based on the information
 Determining the skills, knowledge and skills, which are required for
the job
The immediate products of job analysis are job descriptions and job
specifications.
Job Description
Job description is an important document, which is descriptive in nature
and contains the final statement of the job analysis. This description is very
important for a successful recruitment process.
Job description provides information about the scope of job roles,
responsibilities and the positioning of the job in the organization. And this
data gives the employer and the organization a clear idea of what an
employee must do to meet the requirement of his job responsibilities.
Job description is generated for fulfilling the following processes −
 Classification and ranking of jobs
 Placing and orientation of new resources
 Promotions and transfers
 Describing the career path
 Future development of work standards
A job description provides information on the following elements −
 Job Title / Job Identification / Organization Position
 Job Location
 Summary of Job
 Job Duties
 Machines, Materials and Equipment
 Process of Supervision
 Working Conditions
 Health Hazards
Job Specification
Job specification focuses on the specifications of the candidate, whom the
HR team is going to hire. The first step in job specification is preparing the
list of all jobs in the organization and its locations. The second step is to
generate the information of each job.
This information about each job in an organization is as follows −

 Physical specifications
 Mental specifications
 Physical features
 Emotional specifications
 Behavioral specifications
A job specification document provides information on the following
elements −
 Qualification
 Experiences
 Training and development
 Skills requirements
 Work responsibilities
 Emotional characteristics
 Planning of career
Job Evaluation
Job evaluation is a comparative process of analyzing, assessing, and
determining the relative value/worth of a job in relation to the other jobs in
an organization.
The main objective of job evaluation is to analyze and determine which job
commands how much pay. There are several methods such as job
grading, job classifications, job ranking, etc., which are involved in job
evaluation. Job evaluation forms the basis for salary and wage negotiations.
Recruitment Strategy
Recruitment strategy is the second step of the recruitment process, where a
strategy is prepared for hiring the resources. After completing the
preparation of job descriptions and job specifications, the next step is to
decide which strategy to adopt for recruiting the potential candidates for
the organization.
While preparing a recruitment strategy, the HR team considers the
following points −
 Make or buy employees
 Types of recruitment
 Geographical area
 Recruitment sources
The development of a recruitment strategy is a long process, but having a
right strategy is mandatory to attract the right candidates. The steps
involved in developing a recruitment strategy include −
 Setting up a board team
 Analyzing HR strategy
 Collection of available data
 Analyzing the collected data
 Setting the recruitment strategy
Searching the Right Candidates
Searching is the process of recruitment where the resources are sourced
depending upon the requirement of the job. After the recruitment strategy
is done, the searching of candidates will be initialized. This process consists
of two steps −
 Source activation − Once the line manager verifies and permits the
existence of the vacancy, the search for candidates starts.

 Selling − Here, the organization selects the media through which the
communication of vacancies reaches the prospective candidates.
Searching involves attracting the job seekers to the vacancies. The sources
are broadly divided into two categories: Internal Sources and External
Sources.
Internal Sources
Internal sources of recruitment refer to hiring employees within the
organization through −
 Promotions
 Transfers
 Former Employees
 Internal Advertisements (Job Posting)
 Employee Referrals
 Previous Applicants
External Sources
External sources of recruitment refer to hiring employees outside the
organization through −
 Direct Recruitment
 Employment Exchanges
 Employment Agencies
 Advertisements
 Professional Associations
 Campus Recruitment
 Word of Mouth
Screening / Short listing
Screening starts after completion of the process of sourcing the candidates.
Screening is the process of filtering the applications of the candidates for
further selection process.
Screening is an integral part of recruitment process that helps in removing
unqualified or irrelevant candidates, which were received through sourcing.
The screening process of recruitment consists of three steps −
Reviewing of Resumes and Cover Letters
Reviewing is the first step of screening candidates. In this process, the
resumes of the candidates are reviewed and checked for the candidates’
education, work experience, and overall background matching the
requirement of the job
While reviewing the resumes, an HR executive must keep the following
points in mind, to ensure better screening of the potential candidates −
 Reason for change of job
 Longevity with each organization
 Long gaps in employment
 Job-hopping
 Lack of career progression
Conducting Telephonic or Video Interview
Conducting telephonic or video interviews is the second step of screening
candidates. In this process, after the resumes are screened, the candidates
are contacted through phone or video by the hiring manager. This
screening process has two outcomes −

 It helps in verifying the candidates, whether they are active and
available.
 It also helps in giving a quick insight about the candidate’s attitude,
ability to answer interview questions, and communication skills.
Identifying the top candidates
Identifying the top candidates is the final step of screening the
resumes/candidates. In this process, the cream/top layer of resumes are
shortlisted, which makes it easy for the hiring manager to take a decision.
This process has the following three outcomes −
 Short listing 5 to 10 resumes for review by the hiring managers
 Providing insights and recommendations to the hiring manager
 Helps the hiring managers to take a decision in hiring the right
candidate
Evaluation and Control
Evaluation and control is the last stage in the process of recruitment. In
this process, the effectiveness and the validity of the process and methods
are assessed. Recruitment is a costly process, hence it is important that the
performance of the recruitment process is thoroughly evaluated.
The costs incurred in the recruitment process are to be evaluated and
controlled effectively. These include the following −
 Salaries to the Recruiters
 Advertisements cost and other costs incurred in recruitment
methods, i.e., agency fees.
 Administrative expenses and Recruitment overheads
 Overtime and Outstanding costs, while the vacancies remain unfilled
 Cost incurred in recruiting suitable candidates for the final selection
process
 Time spent by the Management and the Professionals in preparing job
description, job specifications, and conducting interviews.
Finally, the question that is to be asked is, whether the recruitment
methods used are valid or not? And whether the recruitment process itself
is effective or not? Statistical information on the costs incurred for the
process of recruitment should be effective.
3.14.5. Difference between Recruitment and Selection
Basis Recruitment Selection
Meaning It is an activity of establishing It is a process of picking up

contact between employers more competent and
and applicants. suitable employees.
Objective It encourages large number of It attempts at rejecting

Candidates for a job. unsuitable candidates.
Process It is a simple process. It is a complicated process.
Hurdles The candidates have not to Many hurdles have to be

cross over many hurdles. crossed.

Approach It is a positive approach. It is a negative approach.
Sequence It precedes selection. It follows recruitment.
Economy It is an economical method. It is an expensive method.
Time Less time is required. More time is required.

Consuming
3.15. TRAINING AND DEVELOPMENT

Training is a process that tries to improve skills or add to the
existing level of knowledge so that the employee is better equipped to do his
present job or to mould him to be fit for a higher job involving higher
responsibilities. It bridges the gap between what the employee has & what
the job demands. Training refers to a planned effort by a company to
facilitate employees’ learning of job related competencies. These
competencies include knowledge, skills, or behaviours that are critical for
successful job performance.
The goal of training is for employees to master the knowledge, skill, and
behaviours emphasized in training programs and to apply them to their day
to day activities. Training refers to the process of imparting specific skill
whereas Development refers to the learning opportunities designed to help
employees grow The term training refers to the acquisition of knowledge,
skills, and competencies as a result of the teaching of vocational or practical
skills and knowledge that relate to specific useful competencies. It forms the
core of apprenticeships and provides the backbone of content at institutes of
technology (also known as technical colleges or polytechnics).
Training usually refers to some kind of organized (and finite it time)
event — a seminar, workshop that has a specific beginning data and end
date. It’s often a group activity, but the word training is also used to refer to
specific instruction done one on one. Employee development, however, is a
much bigger, inclusive “thing”. For example, if a manager pairs up a
relatively new employee with a more experienced employee to help the new
employee learns about the job, that’s really employee development. If a
manager coaches and employee in an ongoing way, that’s employee
development. Or, employees may rotate job responsibilities to learn about
the jobs of their colleagues and gain experience so they might eventually
have more promotion opportunities. That’s employee development. In other
words employee development is a broader term that includes training as
one, and only one of its methods for encouraging employee learning.
The important point here is that different activities are better for the ach
Functional Objectives – maintain the department’s contribution at a level
suitable to the organization’s needs. Societal Objectives – ensure that an
organization is ethically and socially responsible to the needs and challenges
of the society. The quality of employees and their development through
training and education are major factors in determining long-term
profitability of a small business. If you hire and keep good employees, it is
good policy to invest in the development of their skills, so they can increase
their productivity.
Training often is considered for new employees only. This is a mistake
because ongoing training for current employees helps them adjust to rapidly
changing job requirements.
Reasons for emphasizing the growth and development of personnel
include
 Creating a pool of readily available and adequate replacements for
personnel who may leave or move up in the organization.
 Enhancing the company’s ability to adopt and use advances in
technology because of a sufficiently knowledgeable staff.
 Building a more efficient, effective and highly motivated team,
which enhances the company’s competitive position and improves
employee morale.
 Ensuring adequate human resources for expansion into new
programs.
Research has shown specific benefits that a small business receives from
training and developing its workers, including:
 Increased productivity.
 Reduced employee turnover.
 Increased efficiency resulting in financial gains.
 Decreased need for supervision.
Employees frequently develop a greater sense of self-worth, dignity and well-
being as they become more valuable to the firm and to society. Generally
they will receive a greater share of the material gains that result from their
increased productivity. These factors give them a sense of satisfaction
through the achievement of personal and company goals.
3.15.1. Importance Training is crucial for organizational development and
success. It is fruitful to both employers and employees of an organization.
An employee will become more efficient and productive if he is trained well.
The benefits of training can be summed up as:
1. Improves Morale of Employees- Training helps the employee to get job
security and job satisfaction. The more satisfied the employee is and the
greater is his morale, the more he will contribute to organizational success
and the lesser will be employee absenteeism and turnover.
2. Less Supervision- A well trained employee will be well acquainted with
the job and will need less of supervision. Thus, there will be less wastage of
time and efforts.
3. Fewer Accidents- Errors are likely to occur if the employees lack
knowledge and skills required for doing a particular job. The more trained
an employee is, the less are the chances of committing accidents in job and
the more proficient the employee becomes.
4. Chances of Promotion- Employees acquire skills and efficiency during
training. They become more eligible for promotion. They become an asset for
the organization.
5. Increased Productivity- Training improves efficiency and productivity of
employees. Well trained employees show both quantity and quality

performance. There is less wastage of time, money and resources if
employees are properly trained.
3.15.2. Types of Employee Training Some commentator use a similar
term for workplace learning to improve performance: “Training and
development”. One can generally categorize such training as on-the-job or
off-the-job: On-the-job training takes place in a normal working situation,
using the actual tools, equipment, documents or materials that trainees will
use when fully trained.
On-the-job training has a general reputation as most effective for vocational
work.
The four techniques for on the job training are:
 COACHING
 MENTORING
 JOB ROTATION
 JOB INSTRUCTION TECHNIQUE (JIT)
Off-the-job training takes place away from normal work situations —
implying that the employee does not count as a directly productive worker
while such training takes place. Off the-job training has the advantage that
it allows people to get away from work and concentrate more thoroughly on
the training itself. This type of training has proven more effective in
inculcating concepts and ideas.
There are many management development techniques that an employee can
take in off the job. The few popular methods are:
 SENSITIVITY TRAINING
 TRANSACTIONAL ANALYSIS
 STRAIGHT LECTURES/ LECTURES
 SIMULATION EXERCISES
3.16. PERFORMANCE APPRAISAL

It is the systematic assessment of an individual with respect to his
or her performance on the job and his or her potential for development in
that job. Thus, performance appraisal is a systematic and objective way of
evaluating the relative worth or ability of an employee in performing his job.
Performance appraisal is an objective assessment of an individual
performance against well defined benchmark.
According to Flippo, a prominent personality in the field of Human
resources, “performance appraisal is the systematic, periodic and an
impartial rating of an employee’s excellence in the matters pertaining to his
present job and his potential for a better job.”
3.16.1. Need and Importance
Performance is always measured in terms of outcome and not efforts.
Performance Appraisal is needed in most of the organizations in order:
(1) To give information about the performance of employees on the job and
give ranks on the basis of which decisions regarding salary fixation,
demotion, promotion, transfer and confirmation are taken.
(2) To provide information about amount of achievement and behaviour of
subordinate in their job. This kind of information helps to evaluate the
performance of the subordinate, by correcting loopholes in performances
and to set new standards of work, if required.
(3) To provide information about an employee’s job-relevant strengths and &
weaknesses.
(4) To provide information so as to identify shortage in employee regarding
ability, awareness and find out training and developmental needs.
(5) To avoid grievances and in disciplinary activities in the organization.
(6) It is an ongoing process in every large scale organization. Performance
appraisals in an organization provide employees and managers with an
opportunity to converse in the areas in which employees do extremely well
and those in which employees need improvement.
Performance appraisals should be conducted on a frequent basis,
and they need not be directly attached to promotion opportunities only. It is
important because of several reason s such as:
1. Personal Attention: Performance appraisal evaluation, gives employee to
draw personal concern from supervisor and talk about their own strengths
and weaknesses.
2. Feedback: Employees on a regular basis get feedback of their
performances and issues in which they lack, which needs to be resolved on
a regular basis.
3. Career Path: It allows employees and supervisors to converse goals that
must be met to grow within the company. This may encompass recognizing
skills that must be acquired, areas in which improvement is required, and
additional qualification that must be acquired.
4. Employee Accountability: Employees are acquainted that their
evaluation will take place on a regular basis and therefore they are
accountable for their job performance.
5. Communicate Divisional and Company Goals: It not only
communicates employees’ individual goals but provides an opportunity for
managers to explain organizational goals and in the manner in which
employees can contribute in the achievement of those goals.
PAST ORIENTED METHODS: Performance appraisal methods are
categorized in two ways past oriented and future oriented methods.
1. Ranking Method: It is the oldest and simplest method of performance
appraisal in which employees’ are ranked on certain criteria such as trait or
characteristic. The employee is ranked from highest to lowest or from worst
to best in an organization. Thus if there are seven employees to be ranked
then there will be seven ranks from 1 to 7. Rating scales offer the
advantages of flexibility comparatively easy use and low cost. Nearly every
type of job can be evaluated with the rating scale, the only condition being
that the Job performance criteria should he changed’ .In such a way, a large
number of employees can be evaluated in a shorter time period.
Thus, the greatest limitation of this method is that differences in ranks do
not indicate how much an employee of rank 1 is better than the employee
whose rank is last.
2. Paired Comparison: In method is comparatively simpler as compared to
ranking method. In this method, the evaluator ranks employees by
comparing one employee with all other employees in the group. The rater is
given slips where, each slip has a pair of names, the rater puts a tick mark
next those employee whom he considers to be the better of the two. This
employee is compared number of times so as to determine the final ranking.

This method provides comparison of persons in a better way. However, this
increases the work as the large number of comparisons has to be made. For
example, to rank 50 persons through paired comparison, there will be 1,225
comparisons. Paired comparison method could be employed easily where the
numbers of employees to be compared are less. This may be calculated by a
formula N (N — 1)12 where N is the total number of persons to be compared.
Where N is the total number of persons to be evaluated.
3. Grading Method: In this method, certain categories are defined well in
advance and employees are put in particular category depending on their
traits and characteristics. Such categories may be defined as outstanding,
good, average, poor, very poor, or may be in terms of alphabet like A, B, C,
D, etc. where A may indicate the best and D indicating the worst. This type
of grading method is applied during Semester pattern of examinations. One
of the major limitations of this method is that the rater may rate many
employees on the better side of their performance.
4. Forced Distribution Method: This method was evolved to abolish the
trend of rating most of the employees at a higher end of the scale. The
fundamental assumption in this method is that employees’ performance
level conforms to a normal statistical distribution. For example, 10 per cent
employees may be rated as excellent, 40 per cent as above average, 20 per
cent as average, 10 per cent below average, and 20 per cent as poor. It
eliminates or minimizes the favouritism of rating many employees on a
higher side. It is simple and easy method to appraise employees. It becomes
difficult when the rater has to explain why an employee is placed in a
particular grouping as compared to others.
5. Forced-choice Method: The forced-choice rating method contains a
sequence of question in a statement form with which the rater checks how
effectively the statement describes each individual being evaluated in the
organization. There may be some variations in the methods and statements
used, but the most common method of forced choice contains two
statements both of which may be positive or negative. It may be both the
statement describes the characteristics of an employee, but the rater is
forced to tick only one i.e the most appropriate statement which may be
more descriptive of the employee.
6. Check-list Method: The main reason for using this method is to reduce
the burden of evaluator. In this method of evaluation the evaluator is
provided with the appraisal report which consist of series of questions which
is related to the appraise. Such questions are prepared in a manner that
reflects the behaviour of the concerned appraise.
Every question has two alternatives, yes or no, as given below:
1. Is he/she respected by his/her subordinates? Yes/No
2. Is he/she ready to help other employees? Yes/No
3. Does her behaviour remain same for everyone in the organization?
Yes/No
The concerned rater/evaluator has to tick appropriate answers relevant to
the appraises. When the check-list is finished, it is sent to the personnel
department to prepare the final scores for all appraises based on all
questions based on yes or no. While preparing question effort is made to
establish the level of consistency of the rater by asking the same question

twice but in a different manner. This method is considered to be easy if
questions are framed properly for different categories of employees. However,
one of the disadvantages of the check-list method is that it is very difficult to
accumulate, analyze and evaluate a number of statements about employee
characteristics and contributions. It is even costly method with lot of time
and efforts required by the organization.
7. Critical Incidents Method: This method is very useful for finding out
those employees who have the highest potential to work in a critical
situation. Such an incidence is very important for organization as they get a
sense, how a supervisor has handled a situation in the case of sudden
trouble in an organization, which gives an idea about his leadership
qualities and handling of situation. It is also said to be a continuous
appraisal method where employees are appraised continuously by keeping
in mind the critical situation. In this method, only the case of sudden
trouble and behaviour associated with these incidents or trouble are taken
for evaluation. This method is categorized in three steps. First, a list of
notable (good or bad) on-the-job behaviour of specific incidents or sudden
trouble is prepared. Second, selected experts would then assign weight age
or score to these incidents according to how serious a particular incident is
and their degree of willingness to perform a job. Third, finally a check-list
indicating incidents that illustrate workers as good or “bad” is formed. Then,
the checklist is given to the rater for evaluating the workers. The strong
point of critical incident method is that it focuses on behaviours and, thus,
judge’s performance rather than personalities. Its drawbacks are that too
frequently they need to write down the critical incidents which is very time
consuming and burdensome for evaluators, i.e., managers. Generally,
negative incidents are more noticeable than positives.
8. Graphic Scale Method: It is one of the simplest and most popular
techniques for appraising performances of employee. It is also known as
linear rating scale. In graphic rating scale the printed appraisal form is used
to appraise each employee.
Such forms contain a number of objectives, and trait qualities and
characters to be rated like quality of work and amount of work, job
knowhow dependability, initiative, attitude, leadership quality and emotional
stability. The rater gives an estimate the extent to which subordinates
possess each quality. The extent to which quality is possessed is measured
on a scale which can vary from three points to several points. In general
practice five-point scales is used. Some organizations use numbers in order
to avoid the propensity of the rater to tick mark central points. It may be
numbered or defined.
Thus numbers like 5, 4, 3, 2 and 1 may denote points for various degrees of
excellent-poor, high-low, or good-bad, and so on. Such numbers may be
expressed in terms like excellent, very good, average, poor and very poor; or
very high, high, average, low and very low. Graphic scale method is good for
measuring various job behaviours of an employee. But, it is bound to
limitations of rater’s bias while rating employee’s behaviour at job.
9. Essay Method: In this method, the rater writes a detailed description on
an employee’s characteristics and behaviour, Knowledge about
organizational policies, procedures and rules, Knowledge about the job,

Training and development needs of the employee, strengths, weakness, past
performance, potential and suggestions for improvement. It is said to be the
encouraging and simple method to use. It does not need difficult formats
and specific training to complete it.
10. Field Review Method: In this method of appraisal direct superior is not
going to appraise an employee but appraised by another person, usually,
from personnel department .The rater, in such a case, appraises the
employee on the basis of his past records of productivity and other
information such as absenteeism, late corning, etc. It is more suitable in a
situation where an organization wants to provide promotion to an employee.
It also gives information for comparing employees from different locations
and units. It reduces partiality to some extent as personnel department
person is supposed to be trained in appraisal mechanism.
This method suffers from two limitations:
1. As employees are not rated by immediate boss, the rater from other
department may not be familiar with the conditions in an employee’s work
environment which may hamper his ability and work motivation to perform.
2. The rater from other department do not get a chance to scrutinize the
employee’s behaviour or performance with different time interval and in a
variety of situations, but only in an unnaturally structured interview
situation which is for a very short period of time.
11. Behaviourally Anchored Rating Scales: This method is a combination
of traditional rating scales and critical incidents methods. It consists of
preset critical areas of job performance or sets of behavioural statements
which describes the important job performance qualities as good or bad
(for e.g. the qualities like inter personal relationships, flexibility and
consistency, job knowledge etc). These statements are developed from
critical incidents. These behavioural examples are then again translated into
appropriate performance dimensions. Those that are selected into the
dimension are retained. The final groups of behaviour incidents are then
scaled numerically to a level of performance that is perceived to represent. A
rater must indicate which behaviour on each scale best describes an
employee’s performance. The results of the above processes are behavioural
descriptions, such as anticipate, plan, executes, solves immediate problems,
carries out orders, and handles urgent situation situations. This method has
following advantages: a) It reduces rating errors) Behaviour is assessed over
traits. c) It gives an idea about the behaviour to the employee and the rater
about which behaviours bring good Performance and which bring bad
performance.
FUTURE ORIENTED METHODS
1. Management by Objectives (MB0): The concept of ‘Management by
Objectives’ (MBO) was coined by Peter Drucker in 1954. It is a process
where the employees and the superiors come together to identify some goals
which are common to them, the employees set their own goals to be
achieved, the benchmark is taken as the criteria for measuring their
performances and their involvement is there in deciding the course of action
to be followed. The basic nature of MBO is participative, setting their goals,
selecting a course of actions to achieve goals and then taking decision. The
most important aspect of MBO is measuring the actual performances of the

employee with the standards set by them. It is also said to be a process that
integrates organizational objectives into individual objectives. Entire
program me of MBO is divided in four major steps i.e setting up of goal,
action planning, comparison and timely review. Setting up of goal-In goal
setting superior and subordinate together set certain goals, i.e the expected
outcome that each employee is supposed to achieve. In action planning, the
manner in which goals could be achieved is determined i.e. identifying the
activities which are necessary to perform; to achieve pr determined goals or
standards. When the employees start with their activities, they come to
know what is to be done, what has been done, and what remains to be done
and it also gives an idea about the resources to be achieved. In the third
step, the goals set by the individual employee are compared with the actual
goals achieved. It gives an idea to the evaluator as why there is a variation in
desired outcome and actual outcome .Such a comparison helps create need
for training so as to enhance employees’ performance. Finally, in the timely
review step, corrective actions are taken so that actual performances do not
deviates from standards established in beginning. The main reason for
conducting reviews is not to humiliate the performer but to assist him in
better performances in future.
2. Assessment Centres: It is a method which was first implemented in
German Army in 1930. With the passage of time industrial houses and
business started using this method. This is a system of assessment where
individual employee is assessed by many experts by using different
technique of performance appraisal. The techniques which may be used are
role playing, case studies, simulation exercises, transactional analysis etc.
In this method employees from different departments are brought together
for an assignment which they are supposed to perform in a group, as if they
are working for a higher post or promoted. Each employee is ranked by the
observer on the basis of merit .The basic purpose behind assessment is to
recognize whether a particular employee can be promoted, or is there any
need for training or development. This method has certain advantages such
as it helps the observer in making correct decision in terms of which
employee has the capability of getting promoted, but it has certain
disadvantages also it is costly and time consuming, discourages the poor
performers etc.
The Performance Appraisal Process The performance appraisal system of
one organization may vary from other organizations, though some of the
specific steps that an organization may follow are as follows:
1. Establish Performance Standards: It begins by establishing performance
standards i.e. what they expect from their employee in terms of outputs,
accomplishments and skills that they will evaluate with the passage of time.
The standards set should be clear and objective enough to be understood
and measured. The standards which are set are evolved out of job analysis
and job descriptions. Standards set should be clear and not the vague one.
The expectation of the manager from his employee should be clear so that it
could be communicated to the subordinates that they will be appraised
against the standards set for them.
2. Communicating the Standards Set for an Employee: Once the
standards for performance are set it should be communicated to the

concerned employee, about what it expected from them in terms of
performance. It should not be part of the employees’ job to estimate what
they are expected do. Communication is said to be two ways street, mere
passing of information to subordinate does not mean that the work is done.
Communication only takes place when the information given has taken
place and has been received and understood by subordinate. . If necessary,
the standards may be tailored or revised in the light of feedback obtained
from the employees.
3. Measuring of the Actual Performances: It is one of the most crucial
steps of performance appraisal process. It is very important to know as how
the performance will be measured and what should be measured, thus four
important sources frequently used by managers are personal observation,
statistical reports, oral reports, and written reports. However, combination
of all these resources gives more reliable information. What we measure is
probably more critical to the evaluation process than how we measure. The
selection of the incorrect criteria can result in serious consequences. What
we measure gives an idea about what people in an organization will attempt
to achieve. The criteria which are considered must represent performance as
stated in the first two steps of the appraisal process.
4. Comparing Actual Performance with Standards Set in the Beginning:
In this step of performance appraisal the actual performance is compared
with the expected or desired standard set. A comparison between actual or
desired standard may disclose the deviation between standard performance
and actual performance and will allow the evaluator to carry on with the
discussion of the appraisal with the concerned employees.
5. Discussion with the Concerned Employee: In this step performance of
the employee is communicated and discussed. It gives an idea to the
employee regarding their strengths and weaknesses. The impact of this
discussion may be positive or negative. The impression that subordinates
receive from their assessment has a very strong impact on their self-esteem
and, is very important, for their future performances.
6. Initiate Corrective Action: Corrective action can be of two types; one is
instant and deals primarily with symptoms. The other is basic and deals
with the causes. Instant corrective action is often described as “putting out
fires”, whereas basic corrective action gets to the source from where
deviation has taken place and seeks to adjust the differences permanently.
Instant action corrects something right at a particular point and gets things
back on track. Basic action asks how and why performance deviated. In
some instances, managers may feel that they do not have the time to take
basic corrective action and thus may go for “perpetually put out fires.
Thus the appraisal system of each organization may differ as per the
requirement of that Organization. Problems of Performance Appraisal
Performance appraisal technique is very beneficial for an organization for
taking decisions regarding salary fixation, demotion, promotion, transfer
and confirmation etc. But it is not freed from problem In spite of recognition
that a completely error-free performance appraisal can only be idealized a
number of errors that extensively hinder objective evaluation.

Some of these problems are as follows: Biasness in rating employee: It is the
problem with subjective measure i.e. the rating which will not be verified by
others. Biasness of rater may include:
(a) Halo Effect: It is the propensity of the raters to rate on the basis of one
trait or behavioural consideration in rating all other traits or behavioural
considerations. One way of minimizing the halo effect is appraising all the
employees by one trait before going to rate on the basis of another trait.
(b) The Central Tendency Error: It is the error when rater tries to rate each
and every person on the middle point of the rating scale and tries not to rate
the people on both ends of the scale that is rating too high or too low. They
want to be on the safer side as they are answerable to the management.
(c) The Leniency and Strictness Biases: The leniency biasness exists when
some raters have a tendency to be generous in their rating by assigning
higher rates constantly. Such ratings do not serve any purpose.
(d) Personal prejudice: If the raters do not like any employee or any group,
in such circumstances he may rate him on the lower side of the scale, the
very purpose of rating is distorted which might affect the career of
employees also.
(e) The Recent Effect: The raters usually retain information about the
recent actions of the employee at the time of rating and rate on the basis of
recent action taken place which may be favourable or unfavourable at that
point of time.
UNIT – 4: LEADING AND MOTIVATION

4.1. Leadership
4.2. Power and Authority
4.3. Leadership Styles
4.4. Behavioural Leadership
4.5. Situational Leadership
4.6. Leadership Skills
4.7. Leader as Mentor and Coach
4.8. Leadership during adversity and Crisis
4.9. Handling Employee and Customer Complaints
4.10. Team Leadership
4.11. Motivation
4.12. Types of Motivation
4.13. Relationship between Motivation, Performance and Engagement
4.14. Needs Hierarchy Theory
4.15. Two Factor Theory
4.16. Theory X and Theory Y
*********
4.1. LEADERSHIP
Leadership is a process by which an executive can direct, guide and
influence the behaviour and work of others towards accomplishment of
specific goals in a given situation.
Leadership is the ability of a manager to induce the subordinates to
work with confidence and zeal.
Leadership is the potential to influence behaviour of others. It is also defined
as the capacity to influence a group towards the realization of a goal.
Leaders are required to develop future visions, and to motivate the
organizational members to want to achieve the visions.
Leadership is a process whereby an individual influences a group of
individuals to achieve a common goal. Leadership is defined as the process
of influencing others to get the job done more effectively over a sustained
period of time. Leaders play a critical role in influencing the work behaviour
of others in the system.
According to Keith Davis, “Leadership is the ability to persuade others to
seek defined objectives enthusiastically. It is the human factor which binds
a group together and motivates it towards goals.”
According to Pearce & Robbinson, “Leadership is the process of
influencing others to work towards the attainment of specific goals.”
4.1.1. Characteristics of Leadership
1. It is an inter-personal process in which a manager is into influencing
and guiding workers towards attainment of goals.
2. It denotes a few qualities to be present in a person which includes
intelligence, maturity and personality.
3. It is a group process. It involves two or more people interacting with
each other.
4. A leader is involved in shaping and moulding the behaviour of the
group towards accomplishment of organizational goals.
5. Leadership is situation bound. There is no best style of leadership. It
all depends upon tackling with the situations.
4.1.2. Importance of Leadership
Leadership is an important function of management which helps to
maximize efficiency and to achieve organizational goals. The following points
justify the importance of leadership in a concern.
1. Initiates action- Leader is a person who starts the work by
communicating the policies and plans to the subordinates from where
the work actually starts.

2. Motivation- A leader proves to be playing an incentive role in the
concern’s working. He motivates the employees with economic and
non-economic rewards and thereby gets the work from the
subordinates.
3. Providing guidance- A leader has to not only supervise but also play
a guiding role for the subordinates. Guidance here means instructing
the subordinates the way they have to perform their work effectively
and efficiently.
4. Creating confidence- Confidence is an important factor which can be
achieved through expressing the work efforts to the subordinates,
explaining them clearly their role and giving them guidelines to
achieve the goals effectively. It is also important to hear the employees
with regards to their complaints and problems.
5. Building morale- Morale denotes willing co-operation of the
employees towards their work and getting them into confidence and
winning their trust. A leader can be a morale booster by achieving full
co-operation so that they perform with best of their abilities as they
work to achieve goals.
6. Builds work environment- Management is getting things done from
people. An efficient work environment helps in sound and stable
growth.
Therefore, human relations should be kept into mind by a leader. He
should have personal contacts with employees and should listen to
their problems and solve them. He should treat employees on
humanitarian terms.
7. Co-ordination- Co-ordination can be achieved through reconciling
personal interests with organizational goals. This synchronization can
be achieved through proper and effective co-ordination which should
be primary motive of a leader.
4.2. Authority and Power
The authority exercised is a kind of legitimate power and people follow
figures exercising it, because their positions demand so irrespective of the
person holding the position. Leaders in organizations and elsewhere may
have formal authorities but they mostly rely on the informal authority
that they exercise on people to influence them.
Leaders are trusted for their judgment and respected for their
expertise, integrity etc and hence followed and not because they hold a
certain position. For e.g. M.K. Gandhi for most part did not hold any official
position to lead the Indian freedom struggle.
It is also important to understand that a formal authority and power
emerging from it, might not always be able to influence people in the desired
manner as; in times of crisis and difficulties people view it as coercion. On
the other hand leadership tends to create followers out of free will and
choice without forcing them to accept anything thrown their way.
Authority rarely provides a scope for feedback, constructive criticism
or opinions of the people on whom it is exercised however leaders provide
ample platform to their followers to voice their thoughts and feedback.
When dealing with adults, the sole use of authority to direct and discipline
them hardly works, leadership provides a better approach of sharing and

involving thus building rapports with followers and creating long term
relationships.
Authority can hardly make people change their attitudes and
behaviours with lasting effects and results however a leader inspires
followers through self modelled ways and hence leadership displays greater
effectiveness in addressing attitudes and behaviours of people.
Exercising authority sometimes limits the approaches to arrive at solutions
for issues and problems while leadership encourages people to look beyond
the obvious and think innovatively and sometimes emerge with radical
solutions.
Apart from it, the biggest difference between the two as cited by Stephen R
Covey is the moral authority held by leaders over the followers which is
absent in the case of power from authority. Within the organizational setup
when leaders also have moral authority on their subordinates by
establishing a synchrony in their words and actions; the rest of the
structure and processes of the organization also get aligned to it, thus
creating a robust and transparent culture.
Authoritative way of working also encourages individuals to work in silos
while in the organizations of today; the leaders need to have a complete
picture and coordinate with other functions and departments as and when
required. It is indeed difficult for mangers and leaders to move out of their
circle of authority and coordinate and interact with external people. However
the need of the hour and the more effective approach to leadership and
management is when leaders come out of their comfort zone and move from
exercising authority on a small group to leading the entire organization.
Individuals, who do not rely on authority but lead people, are the ones
who enjoy the privilege of their ideologies and thoughts practiced by
later generations long after they are gone. Even with individuals who
held positions of responsibilities, the ones who actually led their people are
the ones remembered and followed.
4.3. Leadership Styles

All leaders do not possess same attitude or same perspective. As
discussed earlier, few leaders adopt the carrot approach and a few adopt the
stick approach. Thus, all of the leaders do not get the things done in the
same manner. Their style varies. The leadership style varies with the kind of
people the leader interacts and deals with. A perfect/standard leadership
style is one which assists a leader in getting the best out of the people who
follow him.
Some of the important leadership styles are as follows:
Autocratic leadership style: In this style of leadership, a leader has
complete command and hold over their employees/team. The team cannot
put forward their views even if they are best for the teams or organizational
interests. They cannot criticize or question the leader’s way of getting things
done. The leader himself gets the things done. The advantage of this style is
that it leads to speedy decision-making and greater productivity under
leader’s supervision. Drawbacks of this leadership style are that it leads to
greater employee absenteeism and turnover.

This leadership style works only when the leader is the best in performing or
when the job is monotonous, unskilled and routine in nature or where the
project is short-term and risky.
The Laissez Faire Leadership Style: Here, the leader totally trusts their
employees/team to perform the job themselves. He just concentrates on the
intellectual/rational aspect of his work and does not focus on the
management aspect of his work. The team/employees are welcomed to share
their views and provide suggestions which are best for organizational
interests. This leadership style works only when the employees are skilled,
loyal, experienced and intellectual.
Democratic/Participative leadership style: The leaders invite and
encourage the team members to play an important role in decision-making
process, though the ultimate decision-making power rests with the leader.
The leader guides the employees on what to perform and how to perform,
while the employees communicate to the leader their experience and the
suggestions if any. The advantages of this leadership style are that it leads
to satisfied, motivated and more skilled employees. It leads to an optimistic
work environment and also encourages creativity. This leadership style has
the only drawback that it is time-consuming.
Bureaucratic leadership: Here the leaders strictly adhere to the
organizational rules and policies. Also, they make sure that the
employees/team also strictly follows the rules and procedures. Promotions
take place on the basis of employees’ ability to adhere to organizational
rules. This leadership style gradually develops over time. This leadership
style is more suitable when safe work conditions and quality are required.
But this leadership style discourages creativity and does not make
employees self-contented.
4.4. Behavioural Leadership:

The foundation for the style of leadership approach was the belief that
effective leaders utilized a particular style to lead individuals and groups to
achieving certain goals, resulting in high productivity and morale. Unlike
trait theories, the behavioural approach focused on leader effectiveness, not
the emergence of an individual as a leader. There are two prominent styles
of leadership such as task orientation, and employee orientation. Task
orientation is the emphasis the leader place on getting the job done by such
actions as assigning and organizing the work, making decision, and
evaluating performance.
Employee orientation is the openness and friendless exhibited by the
leader and his concern for the needs of subordinates.Two major research
studies directed toward investigating the behavioural approach to
leaderships is
i) Ohio State University Studies and
ii) University of Michigan Studies.
Ohio State Studies: Initiating Structures and Consideration: They identified
two independent leadership dimensions.
Initiating Structure: This concerned the degree to which the leader
organized and defined the task, assigned the work to be done, established
communication networks and evaluated workgroup performance.

Consideration: which was defined as behaviour that involves trust, mutual
respect, friendship; support and concern for the welfare of the employee?
Consideration refers to an emphasis on an employee orientation leadership
style. Their findings indicated that a mixture of initiating structure and
consideration leader behaviour, which are achieved the highest
effectiveness, depends largely on situational factors.
Michigan State Studies: Two distinct styles of leadership were developed
from their studies:
Job-centred leaderships style, which focused on the use of close
supervision, legitimate and coercive power, meeting schedules and
evaluating work performance.
Employee-centred style, which is people oriented and emphasis delegation of
responsibility and a concern for employee welfare, needs, advancement and
personal growth.
Their findings reported that employee centred and job centred styles
result in productivity increase. However, job centred behaviour created
tension and pressure and resulted in lower satisfaction and increased
turnover and absenteeism.
Employee centred style is the best leadership style. -Leadership’s style
is too complex to be viewed as unidimensional, but more than two
dimensions may complicate the interpretation of leadership behaviour. The
measurement of leadership style for each of the approaches was
accomplished through the use of questionnaire.
This method of measurement is both limited and controversial.
Further, in search of the most effective leadership’s style, the research
findings suggested that a universally accepted best style was inappropriate
to the complexities of modern organizations.
4.5. Situational Leadership
Leaders are essentially people who know their goals and have the
power to influence the thoughts and actions of others to garner their
support and cooperation to achieve these goals. In-case of leaders these
goals are rarely personal and generally to serve the larger good.
Ever since man was a hunter gatherer and lived in closely knit groups, they
had leaders who led the hunting expeditions and took greater risk than the
rest of the group members. In turn they were bestowed with larger share of
hunting, respect and a higher position in the group. With changing times,
how leadership is perceived has also changed, but, it remains an important
aspect of social fabric nevertheless.
The initial theories proposed that leaders are born and cannot be created,
there are certain distinct characteristics possessed by few men which make
them leaders. However, for the current discussion we would try and take a
closer look at another interesting theory which was proposed called
Situational Leadership Theory. This theory says that the same leadership
style cannot be practiced in all situations, depending upon the circumstance
and environmental context the leadership style also changes. The pioneers
of this theory were Kenneth Blanchard and Paul Hersey.
The model encourages the leaders to analyze a particular situation in
depth and then lead in the most appropriate manner, suitable for that

situation. The three aspects that need could be considered in a situation
are:
 Employees’ competences
 Maturity of the employees
 Complexity of the task
 Leadership style
In the Situational Leadership model, the leadership style has been
divided into 4 types:
S1: Telling - Telling style is associated with leaders who minutely supervise
their followers, constantly instructing them about why, how and when of the
tasks that need to be performed.
S2: Selling - Selling style is when a leader provide controlled direction and
is a little more open and allows two way communication between
him/herself and the followers thus ensuring that the followers buy in the
process and work towards the desired goals.
S3: Participating - This style is characterized when the leaders seeks
opinion and participation of the followers to establish how a task should be
performed. The leader in this case tries creating relationship with the
followers.
S4: Delegating - In this case, the leader plays a role in decisions that are
taken but passes on or delegates the responsibilities of carrying out tasks to
his followers. The leader however monitors and reviews the process.
The developmental level of follower is an important indication for a leader to
decide the most appropriate leadership style for them:
D4 - High Competence, High Commitment - The followers who are
identified in this category are the ones who have high competence and high
commitment towards tasks to be performed. It might happen so that they
turn out better than their leaders in performing these tasks. (For e.g.
cricketing legend Sachin Tendulkar playing in the Indian cricket team under
the captainship of Mahendra Singh Dhoni)
D3 - High Competence, Variable Commitment - This category consists of
followers who have the competence to do the job but their commitment level
is inconsistent. They also tend to lack the confidence to go out and perform
task alone. (E.g. President Barack Obama)
D2 - Some Competence, Low Commitment - In this case, the followers
have a certain level of competence which might be sufficient to do the job
but they are low on commitment towards the tasks. Despite of having
relevant skills to perform the task they seek external help when faced with
new situations. (A team member made the trainer for new joiners)

D1 - Low Competence, High Commitment - This category of followers may
not have the specific skill required but they display a high level of
commitment towards the task they have to perform, with confidence and
motivation, they figure out ways to complete the tasks. (E.g. Mohandas
Karamchand Gandhi, a lawyer by profession who spearheaded the Indian
Freedom Struggle). The above information regarding the style of leadership
and the type of followers sure has a correlation to each other which forms
the basis of situational leadership. So, a situational leader would try to
accommodate his leadership style as per the situation and the level of
competence and commitment of his followers. This information is also an
important aspect to consider when senior leaders act as coaches for their
subordinates in the organizations.

4.6. Leadership Skills
Who is a leader - A strong leader is one who thinks and plans ahead. He is
ready with solutions and he understands the pulse of his employees.
However, what are the skills which a leader must possess to be able to do
his job well. You can be an effective leader if you have following traits...
Master Your Time: Effective leaders will always be in a position to manage
their time well. They would know how to prioritize list of activities / pending
tasks. Most important - they would know the different between ’urgent’ and
‘important’. Remember, not everything that is urgent is important. Also, not
everything that is important is urgent.
Ask Questions: Leaders will ask questions that help them assess
employees’ contribution to the organization and also help employees
understand how better they can contribute towards organizational goals. A
Leader must ask his / her employees - the task they perform, do they feel
their task is linked to the big picture, and is there anything that comes in
the way of their performance.
Provide Work-Life Balance: In today’s world where working hours are on a
rise, an effective leader must ensure that his / her workers are able to
maintain a balance between their personal and professional lives. Effective
leaders should always lead by example by leaving on time, avoiding meetings
during Fridays or end of the business days, not calling employees on their
day off. Remember, an effective leader will have effective followers only if
they are not burnt out or feel they are over worked.
Manage Employee’s Professional growth: An effective leader will always
chart out a personal development plan [PDP] along with his / her employee.
He would identify the training the employee will need to go through keeping
in mind his personal development plan. The employees will feel encouraged
and valued.
Let your employees speak: An effective leader has to be a good listener.
Have an "open hour" with your employees and let them speak their heart
out. You will be surprised to know the number of ideas they have. Always
follow and believe in the mantra "Silence is Golden". Your employees will feel
they are being heard and they also have a way to express their thoughts.
Facilitate Brainstorming... Generate ideas: Effective leaders will always
encourage people to get together in a room and brainstorm on ideas to solve
a particular problem. Remember, discussions are always healthy and almost
all the times they also help creating solutions which are mutually agreed
upon.
Create Talent Pool: Smart leaders will always be ready for any shortage in
staff. They will have their talent pool ready in case of any crisis situation.
They will ensure that every employee has a trained / trainable back-up.
Be Courageous: As per Peter Drucker, “whenever you see a successful
business, someone once made a courageous decision”. An effective leader
will always be ready to take difficult / courageous decisions when required.
Be Competent: The art of “tooting your own horn without blowing it” is a
delicate balance of demonstrating your “expertise” and “taking credit” in a
way that people notice their success. And one of the safest ways to do it is to
celebrate and bring attention to team achievements. Praise people for good
work, and when you do so, be specific on what exactly you liked.

Shaking hands is a gesture that will show them that you are actually happy
about their contribution and their success. And thus, you will prove out
your competence as a leader.
Be Visionary: What’s lying ahead in future is a topic of fascination and has
mystic charm. This is a trait of absolute confidence and should be handled
with care. It is important to make goals specific, with possible outcomes and
benefits, without making promises that you may not be able to keep. A
successful leader knows his goals and checks if performance and goals are
in symmetry.
4.7. Leader as Mentor and Coach
Leaders are naturals in developing people around them, because
they aim to serve others. They do that by investing the time to get to
know their people and understanding their strengths and weaknesses.
Leaders are good listeners. They spend more time listening than talking.
By listening, they have a deeper understanding of their people’s
capabilities.
There are a couple of ways in which leaders can develop their people. The
two most common ways are mentoring and coaching. In order for a leader
to use each of these methods, they need to have experience and
background. It is important that they are competent. When does a leader
use one over the other? A leader uses experience and knowledge to help
or guide a less experienced or knowledgeable individual. The mentor will
use his/her expertise to get the person up to speed and share their
experience, while coaching is used with qualified people who have
experience. Done right, coaching can help improve the effectiveness and
performance of the coachee. The coach uses his/her ability to ask the
right questions that make the coachee think through the situation help
them come up with the answer. A coach asks pointed questions that
hold the coachee accountable for their actions. In coaching, the person
being coached is challenged with questions that make them dig deep and
come up with the answer that can help them move forward.
While a leader coaches and mentors others, they themselves also have
mentors and coaches that help them continue to help them develop. A
leader believes in continuous improvement and dedicates time to develop
them. Leaders always give back to others. It is this commitment that
makes them special. To raise others we must equip ourselves with the
skills that make us capable to help others. Remember that leadership is
about giving.
4.8. Leadership in the Face of Adversity

The best leaders are those who can face adversity and turnaround
their companies from times of trouble to positions of strength. Throughout
history, the leaders who were feted and achieved fame are those who took
charge during times of crisis and managed to actualize victory. Similarly, in
recent decades, the business world has seen a surfeit of leaders who stepped
in when their companies were going through a rough patch and with their
leadership ensured that they could revive and rejuvenate their companies.

For instance, the legendary Lee Iacocca who was at the helm in Ford Motors
took over the leadership of another auto major, Chrysler when the company
was going through troubled times and in a matter of a few years ensured
that it turned the corner. The case of the late Steve Jobs is another example
of how he was recalled to Apple when the company was facing adversity and
shrinking market share and with his game changing approach to business
ensured that Apple is the most profitable company in the world. In recent
weeks, the respected founder of Infosys, NR Narayana Murthy, has been
recalled from retirement and tasked with the job of restoring the company to
its previous dominant position.
The Elements of Leadership in Adversity
What these examples tell us is that true leadership is a phenomenon that
thrives on challenges and the authentic leaders are those who can turn
adversity into opportunity. These leaders follow the maxim that when the
going gets tough, the tough get going. More often than not, they lead by
example and from the front, which means that they set a benchmark for the
employees to follow which often motivates the employees to perform better
and actualize their potential. In many cases, leadership in times of adversity
works by rejuvenating the company through stirring words and actions and
the latter are more important as the nuts and bolts of leadership lies in
execution. The example of how Ratan Tata turned the TATA group around is
a case in point as to how leaders need to work more and talk less and
ensure that execution is as important as or more important than planning
and conceptualization. When one considers businesses that are moribund or
near to failure, we find that bringing in leaders who can inspire and
actualize success helps a lot in reviving the fortunes of these companies. For
instance, the example of how the public sector enterprises in India have
been made profitable and that too worthy of high market capitalization from
a situation where they were close to being shut tells us that collective
leadership in the face of adversity is as important as charismatic and
visionary leadership.
The Characteristics of Leadership in Adversity
The key point to be noted here is that anyone can ride the success of
companies but it takes a real leader with vision, mission, and hard work to
turn around companies that are struggling. One of the important aspects of
such leadership is that they must have a team of peers and managers who
are as committed to the revival of the company as the leader. This is critical
and necessary for leaders tor turnaround the companies. Another aspect
about such leadership is that they must be given time to succeed as
transformations do not happen overnight unless one expects miracles,
which is something most business leaders discount. Therefore, time,
patience, effort, and cooperation are all factors that play a crucial role in
determining whether the leader succeeds in his or her mission. The case of
the former Defence Secretaries, Robert McNamara in the 1960s, and Robert
Gates in recent years illustrates that for deep changes to actualize; the
leaders need time, patience, and energy as well as a single-minded devotion
to their tasks.

4.9. Dealing with Customer Complaints
At some point, everyone in business has to deal with an upset customer.
The challenge is to handle the situation in a way that leaves the customer
thinking you operate a great company. If you’re lucky, you can even
encourage him or her to serve as a passionate advocate for your brand.
When it comes down to it, many customers don't even bother to complain.
They simply leave and buy from your competitors. Research suggests that
up to 80 percent of customers who leave were, in fact, "satisfied" with the
original company. Obviously, customer satisfaction is not enough.
Businesses nowadays need to positively delight customers if they want to
earn their loyalty.
It may seem counter-intuitive, but a business owner’s ability to effectively
deal with customer complaints provides a great opportunity to turn
dissatisfied customers into active promoters of the business. Here are some
customer-oriented tips I’ve learned while working in the business coaching
business:
1. Listen carefully to what the customer has to say, and let them
finish. Don't get defensive. The customer is not attacking you personally; he
or she has a problem and is upset. Repeat back what you are hearing to
show that you have listened.
2. Ask questions in a caring and concerned manner.
The more information you can get from the customer, the better you will
understand his or her perspective. I’ve learned it’s easier to ask questions
than to jump to conclusions.
3. Put yourself in their shoes.
As a business owner, your goal is to solve the problem, not argue. The
customer needs to feel like you’re on his or her side and that you empathize
with the situation.
4. Apologize without blaming.
When a customer senses that you are sincerely sorry, it usually diffuses the
situation. Don't blame another person or department. Just say, "I'm sorry
about that.”
5. Ask the customer, "What would be an acceptable solution to you?"
Whether or not the customer knows what a good solution would be, I’ve
found it’s best to propose one or more solutions to alleviate his or her pain.
Become a partner with the customer in solving the problem.
6. Solve the problem, or find someone who can solve it— quickly!
Research indicates that customers prefer the person they are speaking with
to instantly solve their problem. When complaints are moved up the chain of
command, they become more expensive to handle and only add to the
customer's frustration.
There is no getting around customer complaints, regardless of your
industry. However, by employing these steps and taking the time to review
the issue with the customer, you can turn challenges into something
constructive.
4.9.1. Handle Employee Complaints
As a human resources professional, you may wonder how to respond to
employee complaints, especially if you get one or two every day either in
person or delivered on an employee complaint form.

Depending on the gravity of the situation, you may be able to address the
complaint then and there or you may find it necessary to get others
involved.
Examples of Common Complaints
Employee complaints run the gamut between serious allegations that
require official action and perceived wrongs with little or no substance. They
often stem from employee perceptions, though, and are relatively easy to
resolve.
"My manager is mean to me. He yells at me in front of other co workers and
tells me to do my job."
"My boss is always looking over my shoulder. I don't like it. She times my
breaks and stands behind me watching what I do."
"At our last department meeting, they told us to follow the chain of
command instead of going to HR to complain.”
The thing about employee complaints like this is that they're subjective. For
instance, take the example “My manager is mean to me. He yells at me in
front of other co workers and tells me to do my job.”
 Is the supervisor actually mean? Some supervisors are, of course.
Others are not mean; they're just dealing with problem employees.
 Is the supervisor yelling or just speaking? People have very different
perceptions of yelling. Some people take any form of criticism as
yelling. But sometimes supervisors do yell, and it's not appropriate
behaviour.
 What about telling the employee to do her job? Is she slacking off? Or
is the manager nitpicking or giving unclear instructions? Is the
command “do your jobs” about the employee playing on her phone, or
is it a response to the employee's complaint about a safety violation?
It's critical that you don't become too hardened to employee complaints,
because your most important job is to help the business. If you ignore a
complaint that a manager is yelling and it turns out that the manager truly
is yelling, turnover may increase or customers might overhear and that's
damaging to the business.
 Be careful about telling people that they always have to go through
the chain of command before complaining. For example, a sexually
harassed female may not feel comfortable going to her male
supervisor's boss to complain about the harassment. In this case, the
policy of always following the chain may result in continued
harassment and legal liability for the company.
4.10. Team Leadership
A lack of leadership is often seen as a roadblock to a team's
performance. According to Stewart and Manz “More specifically, work
team management or supervision is often identified as a primary
reason why self-management teams fail to properly develop and yield
improvements in productivity, quality, and quality of life for American
workers.” Rather than focusing on ineffective teams, Larson and
LaFasto (1989) looked in the opposite direction by interviewing
excellent teams to gain insights as to what enables them to function
to a high degree. They came away with the following conclusions:
o A clear elevating goal — they have a vision

o Results driven structure — visions have a business goal
o Competent team members — with right number and mix of diversity
o Unified commitment — they are a team, not a group
o A collaborative climate — aligned towards a common purpose
o High standards of excellence — they have group norms
o Principled leadership — the central driver of excellence
o External support — they have adequate resources
Team Leadership Model
While there are several Team Leadership models, Hill's Team model is
perhaps one of the best known ones as it provides the leader or a
designated team member with a mental road map to help diagnose
team problems, and then take appropriate action to correct team
problems (Northouse, 2007). This Team Leadership model is built on a
number of research projects:
Hill's Team Leadership Model
The Four Layers or Steps in the Team Leadership

Model
1. Top layer: Effective team performance begins with leader’s mental
model of the situation and then determining if the situation
requires Action or Monitoring?
2. Second Layer: Is it at an Internal or External leadership level?

3. Third layer: Is it Task, Relational, or an Environmental
intervention? Select a function depending on the type of intervention.
4. Bottom layer: Correctly performing the above three steps create
high Performance through Development and Maintenance functions
Team Leadership Function Interventions
Internal Task Functions:
o Focus on goals by clarifying and/or getting agreement
o Restructure plans, processes, roles, etc. in order to gain desired
results (process improvement)
o Guide the decision-making process so that better information is
obtained, coordination is better, focusing on issues, etc.
o Train members through both formal and informal means
o Assess performance an confront when necessary
Internal Relationship Functions
o Coach team members
o Use more collaborative methods to involve all team members
(this survey includes questions to determine if the environment
is collaborative)
o Manage conflict
o Build commitment and esprit de corps through the use
of ethos leadership
o Satisfy team members' needs
o Model what you expect from your team members
External Environmental Functions
o Network to increase influence and gather information
o Advocate by representing your team so that it shows them at
their best
o Get support for your team by gathering resources and
recognition for your team
o Buffer the team from environmental distractions
o Assess the environment through surveys and other performance
indicators to determine its impact on the organization
o Share information with the team
4.11. Motivation
It is an important factor which encourages persons to give their best
performance and help in reaching enterprise goals. A strong positive
motivation will enable the increased output of employees but a negative
motivation will reduce their performance. A key element in personnel
management is motivation.
Motivation has been variously defined by scholars.
According to Likert, “It is the core of management which shows that every
human being gives him a sense of worth in face-to face groups which are
most important to him….A supervisor should strive to treat individuals with
dignity and a recognition of their personal worth.”
According to Berelson and Steiner:
“A motive is an inner state that energizes, activates, or moves and directs or
channels behaviour goals.

According to Lillis:
“It is the stimulation of any emotion or desire operating upon one’s will and
promoting or driving it to action.”
According to The Encyclopedia of Management:
“Motivation refers to degree of readiness of an organism to pursue some
designated goal and implies the determination of the nature and locus of the
forces, including the degree of readiness.”
According to Dubin:
“Motivation is the complex of forces starting and keeping a person at work in
an organization.”
According to Vance:
“Motivation implies any emotion or desire which so conditions one’s will that
the individual is properly led into action.”
According to Vitiles:
“Motivation represents an unsatisfied need which creates a state of tension
or disequilibrium, causing the individual to make in a goal-directed pattern
towards restoring a state of equilibrium by satisfying the need.”
According to Memoria:
“A willingness to expend energy to achieve a goal or reward. It is a force that
activates dormant energies and sets in motion the action of the people. It is
the function that kindles a burning passion for action among the human
beings of an organisation.”
4.11.1. Nature of Motivation
Motivation is a psychological phenomenon which generates within an
individual.
A person feels the lack of certain needs, to satisfy which he feels working
more. The need satisfying ego motivates a person to do better than he
normally does.
From definitions given earlier the following inferences can be derived:
1. Motivation is an inner feeling which energizes a person to work more.
2. The emotions or desires of a person prompt him for doing a particular
work.
3. There are unsatisfied needs of a person which disturb his equilibrium.
4. A person moves to fulfill his unsatisfied needs by conditioning his
energies.
5. There are dormant energies in a person which are activated by
channelizing them into actions.
4.11.2. Types of Motivation
There are two types of motivation, Intrinsic and Extrinsic motivation.
It's important to understand that we are not all the same; thus effectively
motivating your employees requires that you gain an understanding of the
different types of motivation. Such an understanding will enable you to
better categorize your team members and apply the appropriate type of
motivation. You will find each member different and each member's
motivational needs will be varied as well. Some people respond best to
intrinsic which means "from within" and will meet any obligation of an area
of their passion.

Quite the reverse, others will respond better to extrinsic motivation
which, in their world, provides that difficult tasks can be dealt with provided
there is a reward upon completion of that task. Become an expert in
determining which type will work best with which team members.
4.11.2.1. Intrinsic Motivation
Intrinsic motivation means that the individual's motivational stimuli
are coming from within. The individual has the desire to perform a specific
task, because its results are in accordance with his belief system or fulfills a
desire and therefore importance is attached to it.
Our deep-rooted desires have the highest motivational power. Below are
some examples:
Acceptance: We all need to feel that we, as well as our decisions, are
accepted by our co-workers.
Curiosity: We all have the desire to be in the know.
Honor: We all need to respect the rules and to be ethical.
Independence: We all need to feel we are unique.
Order: We all need to be organized.
Power: We all have the desire to be able to have influence.
Social contact: We all need to have some social interactions.
Social Status: We all have the desire to feel important.
4.11.2.2. Extrinsic Motivation
Extrinsic motivation means that the individual's motivational stimuli
are coming from outside. In other words, our desires to perform a task are
controlled by an outside source. Note that even though the stimuli are
coming from outside, the result of performing the task will still be rewarding
for the individual performing the task.
Extrinsic motivation is external in nature. The most well-known and the
most debated motivation is money. Below are some other examples:
Employee of the month award
Benefit package
Bonuses
Organized activities
4.11.2.3. Other types of Motivation
Positive Motivation:
Positive motivation or incentive motivation is based on reward. The workers
are offered incentives for achieving the desired goals. The incentives may be
in the shape of more pay, promotion, recognition of work, etc. The
employees are offered the incentives and try to improve their performance
willingly. According to Peter Drucker, the real and positive motivators are
responsible for placement, high standard of performance, information
adequate for self- control and the participation of the worker as a
responsible citizen in the plant community. Positive motivation is achieved
by the co-operation of employees and they have a feeling of happiness.
Negative Motivation:
Negative or fear motivation is based on force or fear. Fear causes employees
to act in a certain way. In case, they do not act accordingly then they may
be punished with demotions or lay-offs. The fear acts as a push mechanism.
The employees do not willingly co-operate, rather they want to avoid the
punishment.

Though employees work up-to a level where punishment is avoided but this
type of motivation causes anger and frustration. This type of motivation
generally becomes a cause of industrial unrest. In spite of the drawbacks of
negative motivation, this method is commonly used to achieve desired
results. There may be hardly any management which has not used negative
motivation at one or the other time.
Achievement Motivation:
It is the drive to pursue and attain goals. An individual with achievement
motivation wishes to achieve objectives and advance up on the ladder of
success.Here, accomplishment is important for its own sake and not for the
rewards that accompany it. It is similar to ‘Kaizen’ approach of Japanese
Management. This motivation is more important for professionals.
Affiliation Motivation:
It is a drive to relate to people on a social basis. Persons with affiliation
motivation perform work better when they are complimented for their
favourable attitudes and co-operation. This motivation is of greater use
where money cannot be used to motivate, especially minimum-wage
employees and contingent professionals.
Competence Motivation:
It is the drive to be good at something, allowing the individual to perform
high quality work. Competence motivated people seek job mastery, take
pride in developing and using their problem-solving skills and strive to be
creative when confronted with obstacles. They learn from their experience.
Specialists, like heart surgeons would feel motivated if they get chances to
operate upon unique cases.
Power Motivation
It is the drive to influence people and change situations. Power motivated
people create an impact on their organization and are willing to take risk to
do so. Ms Mayawati, Chief Minister of UP, is power motivated.
Attitude Motivation:
Attitude motivation is how people think and feel. It is their self- confidence,
their belief in themselves, and their attitude to life. It is how they feel about
the future and how they react to the past.
Incentive Motivation:
It is where a person or a team reaps a reward from an activity. It is “you do
this and you get that”, attitude. It is the type of rewards and prizes that
drive people to work a little harder. Most of the unorganized job workers get
motivated when they are offered more money.
Fear Motivation:
Fear motivation coercions a person to act against will. It is instantaneous
and gets the job done quickly. It is helpful in the short run. Managers
following Theory x come into this category. In Indian army, this kind of
motivation is very popular.
4.12. Motivation Theories
From the very beginning, when the human organisations were established,
various thinkers have tried to find out the answer to what motivates people
to work. Different approaches applied by them have resulted in a number of
theories concerning motivation.
These are discussed in brief in that order.

4.13. Abraham Maslow’s Need Hierarchy Theory
It is probably safe to say that the most well-known theory of
motivation is Maslow’s need hierarchy theory Maslow’s theory is based on
the human needs. Drawing chiefly on his clinical experience, he classified all
human needs into a hierarchical manner from the lower to the higher order.
In essence, he believed that once a given level of need is satisfied, it no
longer serves to motivate man. Then, the next higher level of need has to be
activated in order to motivate the man.
1. Physiological Needs:
These needs are basic to human life and, hence, include food, clothing,
shelter, air, water and necessities of life. These needs relate to the survival
and maintenance of human life. They exert tremendous influence on human
behaviour. These needs are to be met first at least partly before higher level
needs emerge. Once physiological needs are satisfied, they no longer
motivate the man.
2. Safety Needs:
After satisfying the physiological needs, the next needs felt are called safety
and security needs. These needs find expression in such desires as
economic security and protection from physical dangers. Meeting these
needs requires more money and, hence, the individual is prompted to work
more. Like physiological needs, these become inactive once they are
satisfied.
3. Social Needs:
Man is a social being. He is, therefore, interested in social interaction,
companionship, belongingness, etc. It is this socialising and belongingness
why individuals prefer to work in groups and especially older people go to
work.

4. Esteem Needs:
These needs refer to self-esteem and self-respect. They include such needs
which indicate self-confidence, achievement, competence, knowledge and
independence. The fulfilment of esteem needs leads to self-confidence,
strength and capability of being useful in the organisation. However,
inability to fulfil these needs results in feeling like inferiority, weakness and
helplessness.
5. Self-Actualisation Needs
This level represents the culmination of all the lower, intermediate, and
higher needs of human beings. In other words, the final step under the need
hierarchy model is the need for self-actualization. This refers to fulfilment.
The term self-actualization was coined by Kurt Goldstein and means to
become actualized in what one is potentially good at. In effect, self-
actualization is the person’s motivation to transform perception of self into
reality.
4.14. Herzberg’s Two Factor Theory

The psychologist Frederick Herzberg extended the work of Maslow and
propsed a new motivation theory popularly known as Herzberg’s Motivation
Hygiene (Two-Factor) Theory. Herzberg conducted a widely reported
motivational study on 200 accountants and engineers employed by firms in
and around Western Pennsylvania.
He asked these people to describe two important incidents at their
jobs:
(1) When did you feel particularly good about your job, and
(2) When did you feel exceptionally bad about your job? He used the critical
incident method of obtaining data.
The responses when analysed were found quite interesting and fairly
consistent. The replies respondents gave when they felt good about their
jobs were significantly different from the replies given when they felt bad.
Reported good feelings were generally associated with job satisfaction,
whereas bad feeling with job dissatisfaction.

Herzberg labelled the job satisfiers motivators, and he called job dissatisfies
hygiene or maintenance factors. Taken together, the motivators and hygiene
factors have become known as Herzberg’s two-factor theory of motivation
According to Herzberg, the opposite of satisfaction is not dissatisfaction. The
underlying reason, he says, is that removal of dissatisfying characteristics
from a job does not necessarily make the job satisfying. He believes in the
existence of a dual continuum.
The opposite of ‘satisfaction’ is ‘no satisfaction’ and the opposite of
‘dissatisfaction’ is ‘no dissatisfaction.
According to Herzberg, today’s motivators are tomorrow’s hygiene because
the latter stop influencing the behaviour of persons when they get them.
Accordingly, one’s hygiene may be the motivator of another.
4.15. Theory X and Theory Y

In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting
two aspects of human behaviour at work, or in other words, two different
views of individuals (employees): one of which is negative, called as Theory X
and the other is positive, so called as Theory Y. According to McGregor, the
perception of managers on the nature of individuals is based on various
assumptions.
Assumptions of Theory X
 An average employee intrinsically does not like work and tries to
escape it whenever possible.
 Since the employee does not want to work, he must be persuaded,
compelled, or warned with punishment so as to achieve organizational

goals. A close supervision is required on part of managers. The
managers adopt a more dictatorial style.
 Many employees rank job security on top, and they have little or no
aspiration/ ambition.
 Employees generally dislike responsibilities.
 Employees resist change.
 An average employee needs formal direction.
Assumptions of Theory Y
 Employees can perceive their job as relaxing and normal. They
exercise their physical and mental efforts in an inherent manner in
their jobs.
 Employees may not require only threat, external control and coercion
to work, but they can use self-direction and self-control if they are
dedicated and sincere to achieve the organizational objectives.
 If the job is rewarding and satisfying, then it will result in employees’
loyalty and commitment to organization.
 An average employee can learn to admit and recognize the
responsibility. In fact, he can even learn to obtain responsibility.
 The employees have skills and capabilities. Their logical capabilities
should be fully utilized. In other words, the creativity, resourcefulness
and innovative potentiality of the employees can be utilized to solve
organizational problems.
Thus, we can say that Theory X presents a pessimistic view of employees’
nature and behaviour at work, while Theory Y presents an optimistic view of
the employees’ nature and behaviour at work. If correlate it with Maslow’s
theory, we can say that Theory X is based on the assumption that the
employees emphasize on the physiological needs and the safety needs; while
Theory X is based on the assumption that the social needs, esteem needs
and the self-actualization needs dominate the employees.
McGregor views Theory Y to be more valid and reasonable than Theory X.
Thus, he encouraged cordial team relations, responsible and stimulating
jobs, and participation of all in decision-making process.

UNIT – 5: CONTROLLING
5.1. Control
5.2. Types and Strategies for Control
5.3. Steps in Control Process
5.4. Budgetary and Non- Budgetary Controls
5.5. Characteristics of Effective Controls
5.6. Establishing control systems
5.7. Control frequency and Methods
*******
5.1. Control
The function of control consists of those activities that are undertaken
to ensure that the events do not deviate from the per-arranged plans. The
activities consist of establishing standards for work performance, measuring
performance and comparing it to these set standards and taking corrective
actions as and when needed, to correct any deviations.
According to Koontz & O’Donnell, “Controlling is the measurement &
correction of performance activities of subordinates in order to make sure
that the enterprise objectives and plans desired to obtain them as being
accomplished”.
The controlling function involves:
a. Establishment of standard performance.
b. Measurement of actual performance.
c. Measuring actual performance with the pre-determined standard
and finding out the deviations.
d. Taking corrective action.
5.1.1. Features of Controlling
Following are the characteristics of controlling function of management-
Controlling is an end function- A function which comes once the
performances are made in conformities with plans.
Controlling is a pervasive function- which means it is performed by
managers at all levels and in all type of concerns.
Controlling is forward looking- because effective control is not possible
without past being controlled. Controlling always looks to future so that
follow-up can be made whenever required.
Controlling is a dynamic process- since controlling requires taking
reviewable methods; changes have to be made wherever possible.
Controlling is related with planning- Planning and Controlling are two
inseparable functions of management. Without planning, controlling is a
meaningless exercise and without controlling, planning is useless. Planning
presupposes controlling and controlling succeeds planning.
5.1.2. Steps in Control Process
Controlling as a management function involves following steps:
Establishment of standards- Standards are the plans or the targets which
have to be achieved in the course of business function. They can also be
called as the criterions for judging the performance. Standards generally are
classified into two-
Measurable or tangible - Those standards which can be measured and
expressed are called as measurable standards. They can be in form of cost,
output, expenditure, time, profit, etc.
Non-measurable or intangible- There are standards which cannot be
measured monetarily. For example- performance of a manager, deviation of
workers, their attitudes towards a concern. These are called as intangible
standards.
Controlling becomes easy through establishment of these standards because
controlling is exercised on the basis of these standards.
Measurement of performance- The second major step in controlling is to
measure the performance. Finding out deviations becomes easy through
measuring the actual performance. Performance levels are sometimes easy
to measure and sometimes difficult. Measurement of tangible standards is
easy as it can be expressed in units, cost, money terms, etc. Quantitative
measurement becomes difficult when performance of manager has to be
measured. Performance of a manager cannot be measured in quantities. It
can be measured only by-
 Attitude of the workers,
 Their morale to work,
 The development in the attitudes regarding the physical
environment, and
 Their communication with the superiors.
It is also sometimes done through various reports like weekly, monthly,
quarterly, yearly reports.
Comparison of actual and standard performance- Comparison of actual
performance with the planned targets is very important. Deviation can be
defined as the gap between actual performance and the planned targets. The
manager has to find out two things here- extent of deviation and cause of
deviation. Extent of deviation means that the manager has to find out
whether the deviation is positive or negative or whether the actual
performance is in conformity with the planned performance.
The managers have to exercise control by exception. He has to find out those
deviations which are critical and important for business. Minor deviations
have to be ignored. Major deviations like replacement of machinery,
appointment of workers, quality of raw material, rate of profits, etc. should
be looked upon consciously. Therefore it is said, “ If a manager controls
everything, he ends up controlling nothing.” For example, if stationery
charges increase by a minor 5 to 10%, it can be called as a minor deviation.
On the other hand, if monthly production decreases continuously, it is
called as major deviation. Once the deviation is identified, a manager has to
think about various causes which has led to deviation. The causes can be-
 Erroneous planning,
 Co-ordination loosens,
 Implementation of plans is defective, and
 Supervision and communication is ineffective, etc.
Taking remedial actions- Once the causes and extent of deviations are
known, the manager has to detect those errors and take remedial measures
for it. There are two alternatives here-
1. Taking corrective measures for deviations which have occurred; and
2. After taking the corrective measures, if the actual performance is not in
conformity with plans, the manager can revise the targets. It is here the
controlling process comes to an end. Follow up is an important step

because it is only through taking corrective measures, a manager can
exercise controlling.
5.2. Types of the Controls
1. Direct controls
a. Called as the direct controls as the people here get so well tuned to the
job that there are very less chances for the deviations to take place.
b. Also called as the preventive controls.
c. Aims at the saving on the cost of the control.
d. Also aims at the zero defects from the initiation.
e. Great emphasis is given on the prevention of the need of the controls; to
build the systems, the procedures, the culture, the discipline etc.
f. But with time these types of the controls also get older and outdated.
g. For the proper functioning of the direct controls, assistance of the indirect
controls is very much needed.
2. Feed forward controls
a. Whenever a process is performed, two factors are very critical namely the
inputs and the outputs.
b. Here we take into account the various deficiencies of a process well in
advance, so that these can be cured or controlled at the initial stages.
c. The shape of the feedback controls is taken by almost all the controls.
d. It is advised by the various experts to have the both feed forward and the
feed backward controls on the process.
e. Helps in the establishment of a right direction and control right from the
beginning.
3. Feed backward controls

a. Here the controls are put at the output end as the deviations that occur
are not known to us till the moment of the output.
b. Very heavy cost is involved.
c. Results into the customer dissatisfaction.
4. Real time controls
a. Involve the instantaneous feedback almost in the real time, (real time can
defined as the time when both the creation of a report and its transmission
is done almost with no gap that one can almost read it at the time it is being
sent) for e.g. the fax or the telephone.
5. Automation in the controls
a. Here, mainly for the development of the control systems involving very
less human power, building of the instrumentation takes place.
b. Computers are used for the feedback systems and for the automatic
corrections.
Management can implement controls before an activity commences, while
the activity is going on, or after the activity has been completed. The three
respective types of control based on timing are feed forward, concurrent, and
feedback.
Feed forward Control
Feed forward control focuses on the regulation of inputs (human, material,
and financial resources that flow into the organization) to ensure that they
meet the standards necessary for the transformation process.

Feed forward controls are desirable because they allow management to
prevent problems rather than having to cure them later. Unfortunately,
these controls require timely and accurate information that is often difficult
to develop. Feed forward control also is sometimes called preliminary
control, pre control, preventive control, or steering control.
However, some authors use term "steering control" as separate types of
control. These types of controls are designed to detect deviation some
standard or goal to allow correction to be made before a particular sequence
of actions is completed.
Concurrent control takes place while an activity is in progress. It involves
the regulation of ongoing activities that are part of transformation process to
ensure that they conform to organizational standards. Concurrent control is
designed to ensure that employee work activities produce the correct results.
Since concurrent control involves regulating ongoing tasks, it requires a
thorough understanding of the specific tasks involved and their relationship
to the desired and product.
Concurrent control sometimes is called screening or yes-no control,
because it often involves checkpoints at which determinations are made
about whether to continue progress, take corrective action, or stop work
altogether on products or services.
Feedback Control
This type of control focuses on the outputs of the organization after
transformation is complete. Sometimes called post action or output
control, fulfils a number of important functions. For one thing, it often is
used when feed forward and concurrent controls are not feasible or are too
costly.
Sometimes, feedback is the only viable type of control available. Moreover,
feedback has two advantages over feed forward and concurrent
control. First, feedback provides managers with meaningful information on
how effective its planning effort was. If feedback indicates little variance
between standard and actual performance, this is evidence that planning
was generally on target.
If the deviation is great, a manager can use this information when
formulating new plans to make them more effective. Second, feedback
control can enhance employee’s motivation.
The major drawback of this type of control is that, the time the manager has
the information and if there is significant problem the damage is already
done. But for many activities, feedback control fulfils number important
functions.
Multiple Controls
Feed forward, concurrent, and feedback control methods are not mutually
exclusive. Rather, they usually are combined into an multiple control
systems. Managers design control systems to define standards of
performance and acquire information feedback at strategic control points.
Strategic control points are those activities that are especially important
for achieving strategic objectives. When organizations do not have multiple
control systems that focus on strategic control points, they often can
experience difficulties that cause managers to re-evaluate their control
processes.

5.3. Budgetary Control
Budgetary control is the process of determining various actual results with
budgeted figures for the enterprise for the future period and standards set
then comparing the budgeted figures with the actual performance for
calculating variances, if any. First of all, budgets are prepared and then
actual results are recorded.
The comparison of budgeted and actual figures will enable the management
to find out discrepancies and take remedial measures at a proper time. The
budgetary control is a continuous process which helps in planning and co-
ordination. It provides a method of control too. A budget is a means and
budgetary control is the end-result.
Definitions:
“According to Brown and Howard, “Budgetary control is a system of
controlling costs which includes the preparation of budgets, coordinating
the departments and establishing responsibilities, comparing actual
performance with the budgeted and acting upon results to achieve
maximum profitability.” Weldon characterizes budgetary control as planning
in advance of the various functions of a business so that the business as a
whole is controlled.
J. Batty defines it as, “A system which uses budgets as a means of planning
and controlling all aspects of producing and/or selling commodities and
services. Welsch relates budgetary control with day-to-day control process.”
According to him, “Budgetary control involves the use of budget and
budgetary reports, throughout the period to co-ordinate, evaluate and
control day-to-day operations in accordance with the goals specified by the
budget.”
From the above given definitions it is clear that budgetary control
involves the follows:
(a) The objects are set by preparing budgets.
(b) The business is divided into various responsibility centres for preparing
various budgets.
(c) The actual figures are recorded.
(d) The budgeted and actual figures are compared for studying the
performance of different cost centres.
(e) If actual performance is less than the budgeted norms, a remedial action
is taken immediately.
Objectives of Budgetary Control:
Budgetary control is essential for policy planning and control. It also acts an
instrument of co-ordination.
The main objectives of budgetary control are the follows:
1. To ensure planning for future by setting up various budgets, the
requirements and expected performance of the enterprise are anticipated.
3. To operate various cost centres and departments with efficiency and
economy.
4. Elimination of wastes and increase in profitability.
5. To anticipate capital expenditure for future.
6. To centralise the control system.
7. Correction of deviations from the established standards.
8. Fixation of responsibility of various individuals in the organization.

5.4. Non Budgetary Control
Non-Budgetary control is laying control on your non-budgeted expenses i.e
those expenses which are not defined in normal budgeted expenses. The
techniques for these non-budgetary controls are:
Statistical data:
Statistical analyses of innumerable aspects of a business operation
and the clear presentation of statistical data, whether of a historical or
forecast nature are, of course, important to control. Some managers can
readily interpret tabular statistical data, but most managers prefer
presentation of the data on charts.
Break- even point analysis:
An interesting control device is the break even chart. This chart depicts the
relationship of sales and expenses in such a way as to show at what volume
revenues exactly cover expenses.
Operational audit
Another effective tool of managerial control is the internal audit or,
as it is now coming to be called, the operational audit. Operational
auditing, in its broadest sense, is the regular and independent appraisal, by
a staff of internal auditors, of the accounting, financial, and other operations
of a business.
Personal observation
In any preoccupation with the devices of managerial control, one
should never overlook the importance of control through personal
observation.
5.5. Characteristics of an Effective Control System

Controls at every level focus on inputs, processes and outputs. It is very
important to have effective controls at each of these three stages.
Effective control systems tend to have certain common characteristics. The
importance of these characteristics varies with the situation, but in general
effective control systems have following characteristics.
1. Accuracy:
Effective controls generate accurate data and information. Accurate
information is essential for effective managerial decisions. Inaccurate
controls would divert management efforts and energies on problems that do
not exist or have a low priority and would fail to alert managers to serious
problems that do require attention.
2. Timeliness:
There are many problems that require immediate attention. If information
about such problems does not reach management in a timely manner, then
such information may become useless and damage may occur. Accordingly
controls must ensure that information reaches the decision makers when
they need it so that a meaningful response can follow.
3. Flexibility:
The business and economic environment is highly dynamic in nature.
Technological changes occur very fast. A rigid control system would not be
suitable for a changing environment. These changes highlight the need for
flexibility in planning as well as in control.

Strategic planning must allow for adjustments for unanticipated threats and
opportunities. Similarly, managers must make modifications in controlling
methods, techniques and systems as they become necessary. An effective
control system is one that can be updated quickly as the need arises.
4. Acceptability:
Controls should be such that all people who are affected by it are able to
understand them fully and accept them. A control system that is difficult to
understand can cause unnecessary mistakes and frustration and may be
resented by workers.
Accordingly, employees must agree that such controls are necessary and
appropriate and will not have any negative effects on their efforts to achieve
their personal as well as organizational goals.
5. Integration:
When the controls are consistent with corporate values and culture, they
work in harmony with organizational policies and hence are easier to
enforce. These controls become an integrated part of the organizational
environment and thus become effective.
6. Economic feasibility:
The cost of a control system must be balanced against its benefits. The
system must be economically feasible and reasonable to operate. For
example, a high security system to safeguard nuclear secrets may be
justified but the same system to safeguard office supplies in a store would
not be economically justified. Accordingly the benefits received must
outweigh the cost of implementing a control system.
7. Strategic placement:
Effective controls should be placed and emphasized at such critical and
strategic control points where failures cannot be tolerated and where time
and money costs of failures are greatest.
The objective is to apply controls to the essential aspect of a business where
a deviation from the expected standards will do the greatest harm. These
control areas include production, sales, finance and customer service.
8. Corrective action:
An effective control system not only checks for and identifies deviation but
also is programmed to suggest solutions to correct such a deviation. For
example, a computer keeping a record of inventories can be programmed to
establish “if-then” guidelines. For example, if inventory of a particular item
drops below five percent of maximum inventory at hand, then the computer
will signal for replenishment for such items.
9. Emphasis on exception:
A good system of control should work on the exception principle, so that
only important deviations are brought to the attention of management, In
other words, management does not have to bother with activities that are
running smoothly. This will ensure that managerial attention is directed
towards error and not towards conformity.

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FUNDAMENTALS OF MANAGEMENT

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1.2. Definitions of Management

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1.3. Nature of Management

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1.4. Scope of Management

1.5. Functions of Management

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Fundamentals of Management Page | 6

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1.8. Managerial Skills

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1.9. Challenges of Management

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1.10. Evolution of Management

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According to Lindsay, these techniques assist the management for

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Limitations of Quantitative Approach:

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1.16. Contingency Approach

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2.1. General Framework for Planning

2.2. Planning Process

Being Aware of Opportunities

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2.3. Types of Plans

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2.4. Management by Objectives (MBO)

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2.6. Decision-Making and Problem-Solving

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Decision-making maxims will help to reinforce the above decision-making

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2.7.2. Non-Programmed Decisions

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2.8. Steps in Problem Solving and Decision Making

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2.9. Bounded Rationality and influences on decision making

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UNIT – 3: ORGANIZATION AND HRM

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As companies grow and the challenges in the external environment become

3.2. Organizational Structure

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The fourth and final organizational structure is a matrix structure. It is also

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3.6. Centralization and Decentralization