Principles of Manangement and Organization

Module 1
MANAGEMENT: FUNCTIONS,
ROLES AND STYLES
Learning Objectives:
Upon completion of this module, students are expected to:
1. Understand the functions of management.

2. Explain the three basic leadership styles.
3. Explain the three basic levels of management.
4. Understand the management skills that are important for a successful small
business.
What is Management?
There is no universally accepted definition for management. The definitions run the gamut from
very simple to very complex. For our purposes, we define management as “the application of
planning, organizing, staffing, directing, and controlling functions in the most efficient manner
possible to accomplish meaningful organizational objectives.” Put more simply, management is
all about achieving organizational objectives through people and other resources. (Kurtz, 2011).
Management principles apply to all organizations—large or small, for-profit or not-for-profit.

Even one-person small businesses need to be concerned about management principles
because without a fundamental understanding of how businesses are managed, there can be
no realistic expectation of success. Remember that the most common reason attributed to small
business failure is failure on the part of management.
1|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

Management Functions
On any given day, small business owners and managers will engage in a mix of many different
kinds of activities—for example, deal with crises as they arise, read, think, write, talk to people,
arrange for things to be done, have meetings, send e-mails, conduct performance evaluations,
and plan. Although the amount of time that is spent on each activity will vary, all the activities
can be assigned to one or more of the five management functions: planning, organizing,
staffing, directing, and controlling.
Figure 1.1 The Management Functions
1. Planning. “It is the process of anticipating future events and conditions and determining
courses of action for achieving organizational objectives.” (Kurtz, 2011). It is the one
step in running a small business that is most commonly skipped, but it is the one thing
that can keep a business on track and keep it there. Planning helps a business realize
its vision, get things done, show when things cannot get done and why they may not
have been done right, avoid costly mistakes, and determine the resources that will be
needed to get things done. (Ivancevich and Duening, 2007)

2. Organizing. “It is consists of grouping people and assigning activities so that job tasks
and the mission can be properly carried out.”( Ivancevich and Duening,
2007). Establishing a management hierarchy is the foundation for carrying out the
organizing function.
3. Staffing. The staffing function involves selecting, placing, training, developing,

compensating, and evaluating (the performance appraisal) employees (Ivancevich and
Duening, 2007). Small businesses need to be staffed with competent people who can do
the work that is necessary to make the business a success. It would also be extremely
helpful if these people could be retained.
4. Directing. It is the managerial function that initiates action: issuing directives,

assignments, and instructions; building an effective group of subordinates who are
motivated to do what must be done; explaining procedures; issuing orders; and making
sure that mistakes are corrected (Ivancevich and Duening, 2007). Directing is part of the
job for every small business owner or manager. Leading and motivating work together in
the directing function. Leading “is the process of influencing people to work toward a
common goal [and] motivating is the process of providing reasons for people to work in
the best interests of an organization. (Pride, Hughes and Kapoor, 2008)
5. Controlling. It is about keeping an eye on things. It is “the process of evaluating and

regulating ongoing activities to ensure that goals are achieved (Pride, Hughes and
Kapoor, 2008).Controlling provides feedback for future planning activities and aims to
modify behavior and performance when deviations from plans are discovered
(Ivancevich and Duening, 2007). Setting performance standards is the first step.
Standards let employees know what to expect in terms of time, quality, quantity, and so
forth. The second step is measuring performance, where the actual performance or
results are determined. Comparing performance is step three. This is when the actual
performance is compared to the standard. The fourth and last step, taking corrective
action, involves making whatever actions are necessary to get things back on track. The
controlling functions should be circular in motion, so all the steps will be repeated
periodically until the goal is achieved.
Leadership Styles
Different situations call for different leadership styles. In a very influential research study, Kurt
Lewin established three major leadership styles: autocratic, democratic, and laissez-faire.
Although good leaders will use all three styles depending on the situation, with one style
normally dominant, bad leaders tend to stick with only one style (Don Clark, 2010).

1. Autocratic Leadership. It occurs when a leader makes decisions without involving
others; the leader tells the employees what is to be done and how it should be
accomplished. It is found that this style creates the most discontent (Don Clark, 2010).
However, this style works when all the information needed for a decision is present,
there is little time to make a decision, the decision would not change as a result of the
participation of others, the employees are well motivated, and the motivation of the
people who will carry out subsequent actions would not be affected by whether they are
involved in the decision or not. This leadership style should not be used very often.
2. Democratic Leadership. It involves other people in the decision making—for example,

subordinates, peers, superiors, and other stakeholders—but the leader makes the final
decision. Rather than being a sign of weakness, this participative form of leadership is a
sign of strength because it demonstrates respect for the opinions of others. The extent of
participation will vary depending on the leader’s strengths, preferences, beliefs, and the
decision to be made, but it can be as extreme as fully delegating a decision to the team.
This leadership style works well when the leader has only part of the information and the
employees have the other part. The participation is a win-win situation, where the
benefits are mutual. Others usually appreciate this leadership style, but it can be
problematic if there is a wide range of opinions and no clear path for making an
equitable, final decision (Lewin, 2012).
In experiments that Lewin et al. conducted with others, the democratic leadership style
was revealed as the most effective.
3. Laissez-faire leadership (or delegative or free-reign leadership). It minimizes the

leader’s involvement in decision making. Employees are allowed to make decisions, but
the leader still has responsibility for the decisions that are made. The leader’s role is that
of a contact person who provides helpful guidance to accomplish objectives (Ivancevich
and Duening, 2007). This style works best when employees are self-motivated and
competent in making their own decisions, and there is no need for central coordination; it
presumes full trust and confidence in the people below the leader in the hierarchy
(Lewin, 2012). However, this is not the style to use if the leader wants to blame others
when things go wrong. This style can be problematic because people may tend not to be
coherent in their work and not inclined to put in the energy they did when having more
visible and active leadership.
Good leadership is necessary for all small businesses. Employees need someone to
look up to, inspire and motivate them to do their best, and perhaps emulate. In the final
analysis, leadership is necessary for success. Without leadership, “the ship that is your
small business will aimlessly circle and eventually run out of power or run aground
(Ward, 2012).

Levels of Management
As a small business grows, it should be concerned about the levels or the layers of
management. Also referred to as the management hierarchy, there are typically three levels of
management: top or executive, middle, and first-line or supervisory. To meet a company’s
goals, there should be coordination of all three levels.
Figure 1.2 The Management Hierarchy
1. Top Management. It is also referred to as the executive level, guides and controls the
overall fortunes of a business (Pride, Hughes and Kappor, 2008). This level includes
such positions as the president or CEO, the chief financial officer, the chief marketing
officer, and executive vice presidents. Top managers devote most of their time to
developing the mission, long-range plans, and strategy of a business—thus setting its
direction. They are often asked to represent the business in events at educational
institutions, community activities, dealings with the government, and seminars and
sometimes as a spokesperson for the business in advertisements. It has been estimated
that top managers spend 55 percent of their time planning (Ivancevich and Duening,
2007).
2. Middle Management. It is probably the largest group of managers. This level includes
such positions as regional manager, plant manager, division head, branch manager,
marketing manager, and project director. Middle managers, a conduit between top

management and first-line management, focus on specific operations, products, or
customer groups within a business. They have responsibility for developing detailed
plans and procedures to implement a firm’s strategic plans (Kurtz, 2011).
3. First-line or supervisory management. It is the group that works directly with the
people who produce and sell the goods and/or the services of a business; they
implement the plans of middle management (Kurtz, 2011). They coordinate and
supervise the activities of operating employees, spending most of their time working with
and motivating their employees, answering questions, and solving day-to-day problems
(Pride, Hughes and Kappor, 2008). Examples of first-line positions include supervisor,
section chief, office manager, foreman, and team leader.
In many small businesses, people often wear multiple hats. This happens with management as
well. One person may wear hats at each management level, and this can be confusing for both
the person wearing the different hats and other employees. It is common for the small business
owner to do mostly first-level management work, with middle or top management performed
only in response to a problem or a crisis, and top-level strategic work rarely performed (Seiffer,
2006). This is not a good situation. If the small business is large enough to have three levels of
management, it is important that there be clear distinctions among them—and among the
people who are in those positions. The small business owner should be top management only.
This will eliminate confusion about responsibilities and accountabilities.
Management Skills
It “is the ability to carry out the process of reaching organizational goals by working with and
through people and other organizational resources (Certo and Certo, 2012)..Possessing
management skill is generally considered a requirement for success (Cooper, 2001). An
effective manager is the manager who is able to master four basic types of skills: technical,
conceptual, interpersonal, and decision making.
1. Technical skills. Is the manager’s ability to understand and use the techniques,
knowledge, and tools and equipment of a specific discipline or department (Kurtz, 2011).
These skills are mostly related to working with processes or physical objects.
Engineering, accounting, and computer programming are examples of technical skills.
Technical skills are particularly important for first-line managers and are much less
important at the top management level. The need for technical skills by the small
business owner will depend on the nature and the size of the business.
2. Conceptual skills. Is the manager’s ability to see the organization as a unified whole
and to understand how each part of the overall organization interacts with other parts
(Kurtz, 2011). These skills are of greatest importance to top management because it is

this level that must develop long-range plans for the future direction of a business.
Conceptual skills are not of much relevance to the first-line manager but are of great
importance to the middle manager. All small business owners need such skills.
3. Interpersonal skills. Is the ability to communicate with, motivate, and lead employees
to complete assigned activities (Kurtz, 2011). Hopefully building cooperation within the
manager’s team. Managers without these skills will have a tough time succeeding.
Interpersonal skills are of greatest importance to middle managers and are somewhat
less important for first-line managers. They are of least importance to top management,
but they are still very important. They are critical for all small business owners.
4. Decision making. Is the ability to identify a problem or an opportunity, creatively

develop alternative solutions, select an alternative, delegate authority to implement a
solution, and evaluate the solution (Ivancevich and Duening, 2007).

Review Questions:
1. From your point of view, what is management? Explain.

2. The management has five functions: a) planning, b) organizing, c) staffing, d) directing,
and e) controlling. Discuss each thoroughly.
3. One leadership style is democratic leadership. Explain this concept.
References:
John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and

Practices (Mason, OH: Atomic Dog Publishing, 2007)
David L. Kurtz, Contemporary Business (Hoboken, NJ: John Wiley & Sons, 2011)
William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin,
2008)
Kurt Lewin, Ronald Lippitt, and Ralph K. White, “Patterns of Aggressive Behavior in
Experimentally Created ‘Social Climates,’” Journal of Social Psychology 10, no. 2 (1939)
Samuel C. Certo and S. Trevis Certo, Modern Management: Concepts and Skills (Upper Saddle
River, NJ: Prentice Hall, 2012)

Module 2
ORGANIZATION: STRUCTURE,
FUNCTIONS, AND OBJECTIVES
1. Explain the nature and elements of an organization;

2. Classify the organization and elements of an organization;
3. Compare the different types of business; and
4. Identify the environment.
Nature of Organization
An organization is a group of people who work together to achieve some specific purpose. The
purpose for which an organization would accomplish would be either be for profit or for non-
profit.
People in an organization may have different characteristics, beliefs and personalities, yet they
are harmonize to have a certain objective and each of them plays an important role in achieving
wide variety of goals or desired outcome.
Elements of Organization
Organization embraces some of the crucial elements as follows:
1. Objectives- are defined goals to accomplish as a group. Common goal or purpose is the
primary reason why people coordinate their mental and/or physical efforts.
2. Relationships- organization involves interaction among the people to achieve the goal.

Effective organization requires stable relationship in working with and through others to
sustain enthusiasm in achieving organizational objectives.
3. Systems- the methods or plan of procedure combined with resources and people to
achieve the objective. This is well-planned and designed to get the most out of limited
resources.
It includes coordination of efforts and division of labor which must be defined to permit
individuals to know what must be done and how particular jobs relate to one another.
4. Authority- the key to a management job since without authority organized action will be
unattainable. Managers need authority not only to direct and coordinate activities of
subordinates.
The authority in an organization balances effectiveness and efficiency in achieving

organizational goals.
Classification of Organization
As to purpose, organization may be classified as commercial or non-commercial organization.
Business is any economic activity conducted primarily for profit. To engage in business is to
supply goods and services to earn profit or income. This is the purpose of a commercial
organization.
The common classifications of commercial or business organizations according to ownership

are single proprietors, partnership, and corporations.
1. Single Proprietorship- When a business is owned (and usually managed) by one

person, it is a Single (Sole) Proprietorship. The person is called a “single proprietor.”
A sole proprietor may be engaged in the practice of profession (like Medical Doctor,
Lawyer or CPA) or small commercial activities other than a practice of profession (like
the owner of a sari-sari store or a beauty parlor).
Advantages Disadvantages
 Easiest to start and set up; only few  Unlimited liability- Owner is
legal requirements legally liable for all business
debts.
 Only one (owner) decides for the  Limited resources (capital,
business. managerial skills, etc.)
 All profits are for the owner.  All losses are borne by owner.
10 | P R I N C I P L E S O F O R G A N I Z A T I O N A N D M A N A G E M E N T
 The owner, not the business is taxed.  Limited life- Business is
automatically terminated due to
owner’s death, insanity or
imprisonment.
 Easy to dissolve.
Table 2.1 The Advantages and Disadvantages of Single Proprietorship
2. Partnership- When two or more persons bind themselves to contribute resources to a

common fund in their co-owned business for a profit, it is called a Partnership. The
owners of a partnership are called “partners.”
A partnership may be formed for the practice of a common profession like CPAs,
Lawyers, Medical Doctors or Engineers. This partnership is called “general professional
partnership.” A partnership that is formed for commercial purposes other than a practice
of profession is called “general co-partnership”.
 Easiest to form- Mere agreement  Unlimited liability- A general
organizes a partnership. partner is legally liable for the
unpaid debts of the partnership.
 Joint resources of resources (capital,  All partners may be held liable for
skills, etc.) the action of one partner.
 Lesser government supervision.  Consensual and restricted
transfer of ownership.
 Tax exempt if professional  Limited life- Disagreement or
partnership, but subject to tax change of partner may dissolve
corporate tax if commercial the partnership. Incapacity,
partnership. insanity, or death of a partner
terminates the partnership.
Table 2.2 The Advantages and Disadvantages of Partnership
3. Corporation. A Corporation is a more formal business organization than a partnership.

It is composed of five or more owners generally called “incorporators”, “corporators”,
and/or “stockholders.”
A corporation is a business registered as an artificial person under the operation of the

law. Its existence is evidenced by its Articles of Incorporation and Corporate By-Laws
registered with the Securities and Exchange Commission (SEC).
A corporation that issues shares equity to shareholders is called profit organization. A
corporation that does not issue share equity is a non-profit corporation.
 Limited liability- Shareholders are not  Mostly costly and difficult to
legally liable for the corporate unpaid organize.
liabilities.
 Power of succession- It can continue  Only the Board of Directors and
to exist in spite of death, withdrawal other authorized officers can bind
or changes of officers and the corporation in contracts.
shareholders.
Unrestricted transfer of ownership.

 Greater source of resources  Shareholders have limited access
(capitalization, skills, etc.) and control over management
and operations.
 Renewable and perpetual life- A  More stringent government
corporation may renew its registered supervision and restrictions.
life every 50 years.
 Corporations are taxed at flat
30% income tax rate (effective
2009). If a corporation incurred
loss in its 4th year of operation, it
should still be taxed of 2% based
on its gross income.
Table 2.3 The Advantages and Disadvantages of Corporation
Primary Activities of Business
A business may be classified based on its primary activities. The most common types of
businesses as to their nature or main activities are as follows:
1. Servicing. To earn revenue, this business renders services to clients in exchange for a fee.
Therefore, the primary “product” of this business is “service.”
2. Merchandising. This business engages in the “buying” and “selling” of goods. Its earnings
are primarily derived from the markup (profit) it adds to the cost of goods it sells to the
customers.
3. Manufacturing. This business converts raw materials into finished goods that are to be sold
at selling price.
Non-Commercial Organizations
Non-commercial organizations are organized primarily not for profit. These organizations are
formed for service to its members or to the public.
The common classifications of non-commercial organizations are:
1. Public Sector Organization. This refers to a tax-funded government organization, including

their agencies engage in governmental functions.
Government is the most examined organization by the public because it uses public money
for public service. It faces sheer size, huge budget deficits, and mounting pressure for
greater efficiency in government.
Basically, government officials and employees are called “bureaucrat”, which carries a
strong negative connotation of inefficiency, waste, and red tape. As a consequence, the
public longed for leaders in the government that are efficient, effective and honest to make
sure the public funds are used as intended.
2. Nonprofit Organization. As a group, they are called foundations, associations, not-for-

profits, or tax exempts.
They are considered to be those business that do not directly seek to financially enrich
members, management, or associations. Typically, they promote education, health care,
religion, or other benevolent goals.
While profit-making organizations exist under the premise of earning and distributing taxable
business earnings to shareholders, the non-profit organization exists primarily to provide
programs and services that are benefit to others and might not be provided by local, and
national government.
While nonprofit organizations are able to earn a profit, more accurately called a surplus such
earnings are retained by the organization for its future provision of programs and services,
and are not owned by nor distributed to individuals or stake-holders.
Key Personnel
The key personnel in an organization refer to the top level management group.
For sole proprietorship business, it refers to the owner and /or the manager of the small
business- the person involve in the day-to-day economic decisions in achieving business goals.
It has a simple organization structure because owner/manager has direct contact with the work
and the workers. Most of the time, the owner of this small business is the one directly working to
achieve business goals.
For partnership form of business, the key person is the managing partner. He is appointed to
run the partnership business. Also, the other partners of the business are considered key
personnel because they may act to present the business in any contract within the normal
business activities.
Partnership form of business greatly encourages management participation among the partners.
Basically, partners are assigned to a specific task as contribution to achieve business goals.
The corporate form of business plays a more complex key personnel structure because not all
owners who are called shareholders can directly participate in managing the affairs of the
business.
In a profit oriented corporate business, to become a shareholder (part owner of the corporation),
an investor would simply purchase capital shares. Because of the huge number of
shareholders, their corporate ownership is represented by a certificate of stock. Most of the time
minor shareholders are represented by proxy for corporate meeting.
Figure 2.1 The Key personnel of a corporate organization
The Shareholders (Stockholders) are the owners of the business from which the BOD are
elected. The members of the BOD are the policy makers and vested with the power to exercise
the powers of the corporation. The BOD is headed by the Chairman of the Board.
Below the BOD are the Operations and Managers of the corporation:
 The Corporate President must be a member of the BOD according to law.

 Other Officers of the corporation need not to be members of the BOD unless stated in the
Corporate By-Laws.
 The corporation may employ several Vice-Presidents who may be assigned to the
operation, finance, marketing, production, etc.
 The Corporate Secretary is responsible to keep the corporate records such as minutes of
the meeting, entries of stockholders votes, directors and stockholder’s resolutions in
directing the affairs of the corporation.
 The Corporate Treasurer is authorized to receive and keep the money of the corporation.
He may disburse the funds of the corporation based on the authorization given to him.
Structuring Organizations
An organizational structure resembles the framework of a building or skeleton of the body.

Works are subdivided through it to accomplish organizational goals.
Structuring an organization is simply means that the organization’s components- its

departments, divisions, boards, committees, or any subunit- are designed, arranged and
interrelated in achieving organizational objectives.
An important aspect of structuring an organization is defining the degree of formalization- the

extent to which the units of the organization are explicitly defined and its policies, procedures,
and goals are clearly stated. It is also includes such factors as technology, spans of control, the
number of levels in the hierarchy (layers) of management.
In the sense, these structural variables of an organization make up its anatomy (organization
chart). The organization chart identifies the division of labor, the reporting relationships, and the
levels of management in the formal organization.
The organization chart springs to life when the organization’s position are filled by people whose
behavior is guided by management variables such as objectives, policies, procedures, rules,
performance standards, controls, and systems of motivation, communication, and conflict
resolution.
Functions within Organizations
The numerous affairs in an organization can be classified into three major functions as follows:
1. Administration- responsible for the welfare of personnel and safeguarding of physical

resources. This function is headed by the Vice president for Administration.
2. Finance- responsible of safeguarding corporate funds including cash flows and

budgeting. This function is headed by the Vice President for Finance.
3. Operation- concern with activities, work, productivity and production of product. This
function is headed by the Vice President for Operations.
Organizational Environment
An organization operates in an internal and an external environment.
The Internal Environment
The organization's internal environment includes factors that affect performance from within its
boundaries. They are called the internal factors because they are within the organization's
control which may include:
1. Management. Managers are responsible for the organization's performance. They perform
the task of planning, organizing, leading and controlling.
Top managers usually receive credit for the success and failure of the company because
they regulate its affairs. They made decisions to direct the organization in the attainment of
its objectives. The leadership style used in an organization may either create a healthy or
unhealthy working environment affecting employee's performance.
2. Employees. They are the workers managed by the managers to accomplish the
organizational objectives.
The educational background, trainings, skills, belief, values, and attitude of employees affect
greatly the nature of organizational environment.
3. Organizational culture. It consists of shared values, beliefs and assumptions of how the
members of organization should behave. It is the organization's personality that reflects its
image within and outside its boundaries. It gives meaning to the organization's way of doing
things.
Managers are also responsible for linking employees to the organizational culture.
4. Mission. The organization's mission is its purpose or being. It guides the direction and
behavior of the individuals within the organization towards its goal. Managers with vision
changes organization's mission by offering products in demanded by customers.
The organizational mission should be relevant to all stakeholders. Stakeholders are people
whose interests are affected by organizational behavior. Some of the stakeholders include
employees, shareholders, customers, suppliers, creditors, and the government.
5. Resources. These include human, financial, physical, and informational possessions that an
organization uses to achieve its goals. Human resources are responsible for achieving the
organization's mission and objectives. Physical resources include the organizations facilities
that are used to aid workers' in performing their jobs easier. Financial resources are
necessary to purchase and maintain the physical resources and to pay employees.
Informational resources include data processing system to facilitate preparation of reports
and communication within the organization.
6. Systems process. This factor refers to the methods or procedures an organization used in
producing its products or rendering its services to satisfy customers' needs.
Quality is an internal factor within a system process because it is within the control of the
organization- that is embodied in its inputs, transformation, and outputs. Customers
determine quality by comparing actual use to determine value of products or service.
Customer value is the purchasing benefits used by customer to determine whether or not to
buy a product or service.
The system process has four components:
a. Inputs. Inputs are the start-up forces that provide the organization with operating necessities.
The inputs are the organization's resources (human, physical, financial and informational).
b. Transformation. it is the conversion of inputs into outputs. It is the production process that
combines the required resources to bring out the needed product or service.
C. Outputs. It refers to the product or services offered to customers.
d. Feedback. It Provides a means of control to ensure that the inputs and transformation
process are producing the desired results.
7. Structure. It refers to the manner in which the organization classifies its resources to
accomplish its mission.
The External Environment
The external environment is a set of forces and conditions outside the organization's boundaries
that have the potential to affect the way an organization operates.
These forces change overtime and thus present the organization with opportunities and treats.
Changes in the environment such as the introduction of new technology or the opening of global
markets create opportunities for organizations to obtain resources or enter new markets.
On the other hand, the new competitors, global economic recession, or new governmental
sanctions are critical factors affecting organization performance.
The external environment of an organization may be classified into task environment and
general environment.
Figure 2.2 The external environment
Task Environment
Forces and conditions on task environment have immediate an.ci direct effect on management
decision because they affect the day to day business operations.
These forces are:
1. Suppliers. They provide an organization with the needed input resources (such as raw
materials, operating supplies, component parts or manpower) that are used to make
products or render services.
Global outsourcing is the process by which organizations purchase inputs from other
companies or produce inputs themselves throughout the world to lower their production
costs and improve the quality or design of their products.
2. Distributors. These are organizations that help other organizations sell their goods or
services to customers.
The changing nature of distributors and distribution methods can bring opportunities and
threats for managers. If distributors become so large and powerful, they can threaten the
organization by demanding that it reduce the prices of its goods and services.
3. Customers. They are individuals and groups that buy the goods and services that are
being produced by an organization.
Changes in the number and types of customers or changes in customers' tastes and needs
result in opportunities and threats. A manager's ability to identify an organization's main
customers and produce the goods and services they want is a crucial factor affecting
organizational and managerial success.
4. Competitors. These are organizations that produce goods or services similar to a particular
organization's goods or services. Rivalry between competitors is Potentially the most
threatening force that managers must deal with. A high level of rivalry often results in price
competition, and falling prices reduce access to resources and lower profits.
General Environment
Opportunities and threats resulting from changes in the general environment are often more
difficult to identify and respond to. Changes in these forces can have major impacts on
managers and their organizations.
Forces included in the general environment are:
1. Economic forces. They affect the general condition of a country or world region. These
forces include interest rates, inflation, unemployment and economic growth.
Economic forces bring many opportunities and threats to managers. For example, low
levels of unemployment and falling interest rates mean a change in the customer base.
More people have more money to spend, and as a result organizations have an
opportunity to sell more goods and services.
2. Technological forces. A technology is a combination of tools, machines, computers,

skills, information, and knowledge that managers use in the design, production, and
distribution of goods and services. Technological forces are outcomes of changes in
technology use by an organization.
Technological forces can have profound implications for managers and organizations.
They can make established products obsolete. They can also create a host of new
opportunities for designing, making or distributing new and better kinds of goods and
services.
3. Sociocultural forces. These refer to pressures deriving from the social structure of a
country or society or from the national culture.
Social structure is the arrangement of relationships between individuals and groups in a

society.
National culture is the set of values that a society considers important and the norms of
behavior that are approve or sanctioned in that society.
Managers and organizations must be responsive to changes in, and differences among
the social structures and national cultures of all the countries in which they operate". In
today's increasing and work abroad integrated global economy, managers live ad
Effective managers are sensitive to differences between societies and adjust their
behaviors accordingly.
4. Demographic forces. These forces are results of changes in, or changing attitudes
toward the characteristics of a population such as age, gender, ethnic origin, race,
sexual, orientation, and social class. Demographic forces present organizations with
opportunities and threats and can have major implications' for organizations.
For instance, the aging of population has several implications for the workplace. Most
significant are a relative decline in the young people joining the workforce and an
increase in the number of active employees willing to postpone retirement.
5. Political and legal forces. These are the offshoot of changes in laws and regulations
resulting from the political and legal developments within a society. Laws and regulations
constrain the operations of organizations and managers, and thus create both
opportunities and threats.
Throughout much of the industrialized world there has been a strong trend toward
deregulation of industries previously controlled by the State and privatization of
organizations once owned by the State.
Other examples of political and legal forces that can challenge organizations are
increased emphasis on environmental protection and the preservation of endangered
species, increased emphasis on safety in the workplace, and legal constraints against
discrimination on the basis of race, gender, or age.
6. Global forces. These are outcomes of changes in international relationships, changes

in nations' economic, political and legal systems and changes in technology. The most
important global force affecting managers and organizations is the increasing economic
integration of countries around the world such as the General Agreement on Tariffs and
Trade (GAIT), World Trade Organization (WTO) and the growth of European Union (EU)
have led to a lowering of barriers to the free flow of goods and services between nations.
Falling trade barriers have created enormous opportunities for companies in one country
to sell goods and services in other countries. By allowing companies from other
countries to compete for domestic customers, however, falling trade barriers also pose a
serious threat because they increase competition in their task environment.
Review Questions:
1. What is organization? Explain.

2. Discuss the elements of organization.
3. Compare the different types of organization.
References:
Valencia, Arguelles, Areola et. al., Principles of Management and Organization, Fifth Edition
(Mandaluyong, 2009)
Module 3
MANAGEMENT THEORIES AND

MODELS
1. Explain and differentiate management theories and models.

2. Describe recent development theories.
Why study Management Theories?
Theories  are  perspectives  with  which  people  make  sense  of  their  world  experie
nces.  Formally,  a  theory  is  a  coherent  group  of  assumptions  put  forth  to  expl
ain  the  relationship
between  two  or  more  observable  facts.  John  Clancy  calls  such  perspectives  "in
visible
powers"  to  emphasize  several  crucial  uses  of  theories,  the  "unseen"  ways  in 
which  we approach  our  world.
First,  theories  provide  a  stable  focus  for  understanding  what  we  experience.  A
  theory 
provides  criteria  for  determining  what  is  relevant.  For example to Henry Ford, founder
of Ford Motor Company in 1903, a  large  and  compliant work force was on relevant factor as
he theorized about his business. In  other  words, his theory of management included, among
other things, this assumption about the supply of labor.
Second,  theories  enable  us  to  communicate  efficiently  and  thus  move  into  more
  and more complex relationships with other people. Imagine the frustration you would
encounter if, in
dealing  with  other  people,  you  always  had  to  define  even  the  most  basic  ass
umptions you make about the world which you live! Because Ford and his managers fully
understood Ford’s theory about manufacturing automobiles, they could interact easily as they
faced day-to-day challenges.
Third,  theories  make  it  possible—indeed, challenge us—to keep learning about the world.
By definition, theories have boundaries; there is only so much that can be covered by any one
theory. Once we are aware of this, we are better able to ask ourselves if there are alternative
ways of looking at the world (especially when our theories no longer seem to “fit” our
experience) and to consider the consequences of adopting alternative beliefs.
Four well-established schools of management thought
1. Scientific Management School

Scientific  Management  theory  arose  in  part  from  the  need  to  increase  pr
oductivity.  In  the  United  States  especially,  skilled  labor  was  in  short  sup
ply  at  the  beginning  of  the  twentieth  century.  The  only  way  to  expand
  productivity  was  to  raise  the efficiency of workers.
Therefore,  Frederick  W.  Taylor,  Henry L. Gantt, and Frank and Lilian Gilbreth
devised the body of principles known as scientific management theory.
Frederick W. Taylor
Frederick  W.  Taylor  (1856-

1915)  rested  his  philosophy  on  four  basic  principles:
- The  development  of  a  true  science  of  management,  so  that  the  b
est  method for performing each task could be determined. 
- The  scientific  selection  of  workers,  so  that  each  worker  would  be 
given  responsibility for the task for which he or she was best suited.
- The  scientific  education  and  development  of  the  worker.
- Intimate,  friendly  cooperation  between  management  and  labor
Taylor  contended  that  the  success  of  these  principles  required  "a  complet
e  mental  revolution"  on  the  part  of  management  and  labor.  Rather  than
  quarrel  over  profits,  both  sides  should  try  to  increase  production;  by  s
o  doing,  he  believed,  profits 
would  rise  to  such  an  extent  that  labor  and  management  would  no  lon
ger  have  to
fight  over  them.  In  short,  Taylor  believed  that  management  and  labor  ha
d  a  common  interest  in  increasing  productivity.
Taylor  based  his  management  system  on  production

line  time  studies.  Instead  of 
relying  on  traditional  work  methods,  he  analyzed  and  timed  steel  workers'
 
movements  on  a  series  of  jobs.  Using  time  study  as  his  base,  he  bro
ke  each  job  down  into  its  components  and  designed  the  quickest  and 
best  methods  of 
performing  each  component.  In  this  way  he  established  how  much  worker
s  should 
be  able  to  do  with  the  equipment  and  materials  at  hand.  He  also  enc
ouraged 
employers  to  pay  more productive workers at a higher rate than others, using a
“scientifically correct: that would benefit both company ad worker. Thus, workers were
urged to surpass their previous performance standards to earn more pay Taylor called
his plan the differential rate system.
Henry L. Gantt
Henry  L.  Gantt  (1861-1919 worked with Taylor on several projects. But when he
went out on his own as a consulting industrial engineer, Gantt began to reconsider
Taylor’s incentive system.
Abandoning  the  differential  rate  system  as  having  too  little  motivational  im
pact, Gantt came up with a new idea. Every worker who finished a day’s assigned work
load would win a 50-cent bonus. Then he added second motivation. The supervisor
would earn a bonus for each worker who reached the daily standard, plus an extra
bonus if all the workers reached it. This,  Gantt  reasoned,  would  spur supervisors
to train their workers to do a better job.
Every  worker's  progress  was  rated  publicly  and  recorded  on  individual  ba
r  charts,
in  black  on  days  the  worker  made  the  standard,  in  red  when  he  or  s
he  fell  below
it.  Going  beyond  this,  Gantt  originated  a  charting  system  for  production 
scheduling;the  "Gantt  chart"  is  still  in  use  today.  In  fact,  the  Gantt  Char
t  was  translated  into  eight  languages  and  used  throughout  the  world.  St
arting  in  the  1920s,  it  was  in
use  in  Japan,  Spain,  and  the  Soviet  Union.  It  also  formed  the  basis  f
or  two  chartingdevices  which  were  developed  to  assist  in  planning,  mana
ging,  and  controlling  complex  organizations: the Critical Path Method (CPM),
originated by Du Pont, and Program Evaluation and Review Technique (PERT),
developed by the Navy. Lotus 1-2-3 is a creative application of the Gantt Chart.
The Gilbreths
Frank  B.  and  Lillian  M.  Gilbreth  (1868‐1924  and  1878-1972) made their
contribution to the scientific management movement as a husband-and-wife team. Lilian
and Frank collaborated fatigue and motion studies and focused on ways of promoting
the individual worker’s welfare. To them, the ultimate aim of scientific management was
to help workers reach their full potential as human beings.
2. Classical Organization Theory School
Scientific  management  was  concerned  with  increasing  the  productivity  of  th

e  shop  and  the  individual  worker.  Classical  organization  theory  grew  o
ut  of  the  need  to  find  guidelines  for  managing  such 
complex  organizations  as  factories.   
Henri Fayol
Henri  Fayol  (1841-1925) is generally hailed as the founder of the classical
management school- not because he was the first to investigate managerial behavior,
but because he was the first to systematize it. Fayol believed that sound management
practice falls into certain patterns that can be identified and analyze. From this basic
insight, he drew up a blueprint for a cohesive doctrine managers- one that retains much
of its force to this day.
With  his  faith  in  scientific  methods,  Fayol  was  like  Taylor,  his  contempor
ary.  WhileTaylor  was basically concerned with organizational functions, however
Fayol was interested in the total organization and focused on management, which he felt
had been the most neglected of business operations.
Fayol’s  14  Principles  of  management
 Division  of  Labor.  The  more  people  specialize,  the  more  efficiently 
they  can
perform  their  work.
This  principle  is  epitomized  by  the  modern  assembly  line.
 Authority.  Managers  must  give  orders  so  that  they  can  get  things 
done. While their formal authority gives them the right to command, managers will
not always compel obedience unless they have personal authority (such as
relevant expertise) as well.
 Discipline.  Members  in  an  organization  need  to  respect  the  rules  a
nd  agreements  that  govern  the  organization.  To  Fayol,  discipline  res
ults  from  good  leadership  at  all  levels  of  the  organization,  fair  agr
eements  (such  as  provisionsfor  rewarding  superior  performance),  and
  judiciously  enforced  penalties  for  infractions.
 Unity  of  Command.  Each  employee  must  receive  instructions  from  o
nly  one  person.  Fayol  believed  that  when  an  employee  reported  to
  more  than  one  manager,  conflicts  in  instructions  and 
confusion  of  authority  would  result.
 Unity  of  Direction.Those  operations  within  the  organization  that  have
  the same objective  should  be directive by only one manager using one plan.
For example, the personnel department in a company should not have two
directors, each with  a  different  hiring  policy.
 Subordination  of  Individual  Interest  to  the  Common  Good.  In  any  u
ndertaking, the  interests  of  employees should not take precedence over the
interests of the organization as a whole.
 Remuneration.  Compensation  for  work  done  should  be  fair  to  both
employees and employers. 
 Centralization.  Decreasing  the  role  of  subordinates  in  decision  making
  is  centralization;  increasing  their  role  in  decentralization.  Fayol  belie
ved  that managers should retain final responsibility, but should at the same time
give their subordinates enough authority to do their jobs properly. The problem is
to find the proper degree of centralization in each case.
 The  Hierarchy.  The  line  of  authority  in  an  organization- often
represented today by the neat boxes and lines of the organization chart— runs in
order of rank from top management to the lowest level of the enterprise.
 Order.  Materials  and  people  should  be  in  the  right  place  at  the  ri
ght  time.  People,  in  particular,  should  be  in  the  jobs  or  positions 
they  are  most  suited to.
 Equity.  Managers  should  be  both  friendly  and  fair  to  subordinates.
 Stability  of  Staff.  A  high  employee  turnover  rate  undermines  the  effi
cient  functioning  of  an  organization.
 Initiative.  Subordinates  should  be  given  the  freedom  to  conceive  and
  carry  out  their  plans,  even  though  some  mistakes  may  result.
 Espirit  de  Corps.  Promoting  team  spirit  will  give  the  organization  a
  sense  of  unity.  To  Fayol,  even  small  factors  should  help  to  dev
elop  the  spirit.  He  suggested,  for  example,  the  use  of  verbal  com
munications  instead  of  formal,  written  communication  whenever  possibl
e.
Max Weber
Reasoning  that  any  goal-oriented  organization  consisting  of  thousands  of
individuals would require the carefully controlled regulation of its activities, the German
sociologist Max Weber (1864-1920) developed a theory of bureaucratic management
that stressed the need for a strictly defined hierarchy governed by clearly defined
regulations and lines of authority. He considered the ideal organization to be
bureaucracy whose activities and objectives were rationally thought and whose divisions
of labor were explicitly spelled out. Weber also believed that technical competence
should be emphasized and that performance evaluations should be made entirely on the
basis of merit.
Today  we  often  think  of  bureaucracies  as  vast,  impersonal  organizations  t
hat  put impersonal efficiency ahead of human needs. We should be careful, though,
not to apply our negative  connotations of the word bureaucracy to the term as Weber
use it.
Like  the  scientific  management  theorists,  Weber  sought  to  improve  the
performance of socially important organizations by making their operations predictable
and productive. Although we now value innovation and flexibility as much as efficiency
and predictability, Weber’s model of bureaucratic management clearly advanced the
formation of huge corporations such as Ford. Bureaucracy was a particular pattern of
relationships for which Weber saw great promise.
Although  bureaucracy  has  been  successful  for  many  companies,  in  the  c
ompetitiveglobal  market  of  the  1990s  organizations  such  as  General  Electri
c  and  Xerox  have
become  "bureaucracy  busters,"  throwing  away  the  organization  chart  and  r
eplacing  it  with  ever-changing  constellations  of  teams,  projects, and alliances
with the goal of unleashing employee creativity.
Mary Parker Follett
Mary  Parker  Follett  (1868‐ 1933)  was  among  those  who  built  on  classic 
frameworkof  the  classical  school.  However,  she  introduced  many  new  ele
ments  especially  in  the  area  of  human  relations  and  organizational  struct
ure.  In  this,  she  initiated trends that would be further developed by the emerging
behavioral and management science schools.
Follett  was  convinced  that  no  one  could  become  a  whole  person  except
  as  a  member  of  a  group;  human  beings  grew  through  their  relationshi
ps  with  others  in  organizations.  In  fact,  she  called  management  "the  art
  of  getting  things  done  through  people."  She  took  for  granted  Taylor's 
assertion  that  labor  and  management shared a common purpose as members of
the same organization, but she believed that the artificial distinction managers (order
givers) and sub-ordinates (order takers) obscured this natural partnership. She was a
great believer in the power of the group, where 
individuals  could  combine  their  diverse  talents  into  something  bigger.  More
over, Follett’s “holistic” model of control took into account not just individuals and groups,
but the effect of such environmental factors as politics, economics, and biology.
Follett’s  model  was  an  important  forerunner  of  the  idea  that  management
  meant  more  than  just  what  was  happening  inside  a  particular  organizati
on.  By  explicitly adding the organizational environment to her story, Follett paved the
way for management theory to include a broader set of relationships, some inside the
organization and some across the organization’s borders. A diverse set of model
management theories pays homage to Follett on this point.
Chester I. Barnard
Chester  Barnard  (1886‐1961),  like  Follett,  introduced  elements  to  classical 

theory that would be further developed in later schools. Barnard, who became president
of New Jersey Bell  in  1927,  used his work experience and his extensive reading in
sociology and philosophy to formulate theories about organizations. According to
Barnard, people come together in formal organizations to achieve ends they cannot
accomplish working alone. But as they pursue the organization’s goals, they  must also
satisfy their individual needs. And so Barnard arrived at his central thesis: An
enterprise  can operate efficiently and survive only when the organization’s goals are
kept in balance with the aims and needs of the individuals working for it. What Barnard
was doing was specifying a principle by which people can work in stable and mutually
beneficial relationship over time. 
3. Behavioral School
The Organization is People
The  behavioral  school  emerged  partly  because  the  classical  approach  did
  not achieve sufficient production efficiency and workplace harmony. To managers
frustration, people did not always follow predicted or expected patterns of behavior.
Thus, there was increased interest in helping managers deal more effectively with the
“people side” of their organizations. Several theorists tried to strengthen classical
organization theory with the insights  of  sociology  and  psychology.   
The Human Relations Movement
Human  relations  is  frequently  used  as  a  general  term  to  describe  the 
ways  in which managers interact with their employees. When ‘employee management”
stimulates more and better work, the organization has effective human relations; when
morale and efficiency deteriorate, its human relations are said to be ineffective. The
human relations movement arose from early attempts to systematically discover the
social and psychological factors that would create effective human relations.
4. Management Science School
At  the  beginning  of  World  War  II,  Great  Britain  desperately  needed  to 
solve  a number of new, complex problems in Warfare. With their survival at stake,
British formed the first operational research (OR) teams. By pooling, the expertise of
mathematicians, physicists, and other scientist in OR teams, the British were able to
achieve significant technological and tactical breakthroughs. When the Americans
entered the war, they formed what they called operations research teams, based on
the successful British model, to solve similar problems. The teams used early computers
to perform the thousands of calculations involved in mathematical modeling.
When  the  war  was  over,  the  applicability  of  operations  research  to  probl
ems  in industry gradually became apparent. New industrial technologies were being
put into use and transportation and communication were becoming more complicated.
These developments brought with them a host of problems that could not be solved
easily by conventional means. Increasingly, OR specialists were called on to help
managers come up with answers to these new problems. Over the years, OR
procedures were formalized into what is now more generally called management
science school.
Recent Development in Management Theory
Theories  are  powerful  influences.  The  longer  we  use  a  given  theory,  the  more
comfortable we become with it and the more we tend to not seek out alternative theories unless
events force us to change. This helps explain why “modern” management theory is really a rich
mosaic of many theories that have endured over at least the past century. One benefit of
understanding this concurrent popularity of many points of view about organizations is that it
prepares you for your own organizational experiences.
While  it  is  impossible  to  predict  what  future  generations  will  be  studying,  at  t
his  point  we  can  identify  at  least  three  additional  perspectives  on  management
  theory  that  can  grow  inimportance:  the  systems  approach,  the  contingency  app
roach,  and  what  we  call  the dynamic engagement approach.
1. The Systems Approach
Rather  than  dealing  separately  with  the  various  segments  of  an  organization,
  the 
systems  approach to management views the organization as a unified, purposeful
system composed of interrelated parts. This approach gives managers a way of looking at
the organization as a whole and as part of the larger, external environment. Systems theory
tells
us  that  the  activity  of  any  segment  of  an  organization  affects,  in  varying 
degrees,  the  activity  of  every  other  segment.
Some Key Concepts
Many  of  the  concepts  of  general  systems  theory  are  finding  their  way  into
  the language of management. Managers need to be familiar with the systems vocabulary
so they can keep pace with current developments.
Subsystems. The  parts  that  make  up  the  whole  of  a  system  are  called  s
ubsystems. And each system in turn may be a subsystem of a still larger whole. Thus a
department is a subsystem of a plant, which be a subsystem of a company, which may be a
subsystem of a conglomerate or an industry, which is a subsystem of the national economy,
which is a subsystem of the world system.
Synergy.  Synergy  means  that  the  whole  is  greater  than  the  sum  of  its  p
arts.  In  organizational  terms,  synergy  means  that  as  separate  departments 
within  an  organization  cooperate  and  interact,  they  become  more  productive  t
han  if  each  were  to  act  in  isolation.  For  example,  in  a  small  firm,  it  is
  more  efficient  for  each  department  to  deal  with
one  finance  department  than  for  each  department  to  have  a  separate  financ
e department of its own.
Open and closed system. A system is considered an open system if it interacts with its
environment; it is considered a closed system if it does not. All organizations interact with
their environment, but the extent to which they do so varies. An automobile plant for
example, is a far more open system than a monastery or a prison.
System Boundary. Each system has a boundary that separates it from its environment. In a
closed system, the system boundary is rigid; in an open system, the boundary is more
flexible. The system boundaries of many organizations have become increasingly flexible in
recent years. For example, managers at oil companies wishing to engage in offshore drilling
now must consider public concern for the environment. A trend is that American
communities are demanding more and more environmental responsibility from companies.
For example, Santa Rosa, California, a city of 125,000 treats environmental violations such
as “off-gassing” a waste product, that is allowing it to evaporate into the atmosphere, as a
potential criminal offense.
FLOW.  A  system  has  flows  of  information,  materials,  and  energy  (including 
human  energy).  These  enter  the  system  from  the  environment  as  inputs  (ra
w  materials,  for example), undergo transformation processes within the system
(operations that alter them), and exit the system as outputs (goods and services).
FEEDBACK.  Feedback  is  the  key  to  system  controls.  As  operations  of  the
  system proceed, information is fed back to the appropriate people, and perhaps to a
computer, so that the work can be assessed and, if necessary, corrected.
System  theory  calls  attention  to  the  dynamic  and  interrelated  nature  of  orga
nizations and the management task. Thus, it provides a framework within which we can plan
actions and anticipate both immediate and far-reaching consequences while allowing us to
understand unanticipated consequences as they develop. With a systems, perspective,
general managers can move easily maintain a balance between the needs of the various
parts of the enterprise and the needs and goals the whole firm.
2. The Contingency Approach
The  well-known international economist Charles Kmdleberger was fond of telling his
student at MIT that the answer to any really engrossing question in economics: It depends. “
The
task  of  the economist, Kmdleberger would continue, is to specify upon what it depends,
and in what ways.
"It  depends"  is  an  appropriate  response  to  the  important  questions  in  mana
gement  aswell.  Management  theory  attempts  to  determine  the  predictable  relat
ionships  between  situations, actions, and outcomes. So it is not surprising that a recent
approach seeks to integrate the various schools of management thought by focusing on the
interdependence of the many factors involved in the managerial situation.
The  contingency  approach  (sometimes  called  the  situational  approach)  was

  developed  by  managers,  consultants,  and  researchers  who  tried  to  apply  t
he  concepts  of  the  major  schools  to  real-life situations. When methods highly
effective in one situation failed to work in other situations. When methods highly effective in
one situation failed to work in other situations, they sought an explanation. Why, for
example, did an organizational development program work brilliantly in one situation and fail
miserably in another. Advocates of the contingency approach had a logical answer to all
such questions:
Results  differ  because  situations  differ;  a  technique  that  works  in  one  case
will not necessarily work in all cases.
According  to  the  contingency  approach  the  manager's  task  is  to  Identify  whi
ch  technique  will,  in  a  particular  situation,  under  particular  circumstances,  an
d  at  particular  time,  best  contribute  to  the  attainment  of  management  goals.
  Where  workers  need  to  be  encouraged  to  increase  productivity,  for  exampl
e,  the  classical  theorist  may  prescribe  a  new  work-
simplification  scheme.  The  behavioral  scientist may instead seek to create a
psychologically motivating climate and recommend some approach like job enrichment—
combination of tasks that are different in scope and responsibility and allow the worker
greater autonomy in making decisions. But the manager trained in the
contingency  approach  will  ask,  "Which  method  will  work  best  here?"  If  the 
workers  areunskilled  and  training  opportunities  and  resources  are  limited,  work
  simplification  wouldbe  the  best  solution.  However,  with  skilled  workers  drive
n  by  pride  in  their  abilities,  a  job‐enrichment  program  might  be  more  effect
ive.  The  contingency  approach  representsan  important  turn  in  modern  manage
ment  theory,  because  it  portrays  each  set  of  organizational  relationships  in  i
ts  unique  circumstances.
Review Questions:
1. What we must study Management Theories? Explain.

2. Explain the 14 management principles identified by Henri Fayol.
3. Differentiate the four (4) well-established schools management.
4. Discuss the recent development theories in Management Theory.
References:
History of Management Thought. (2017, October 23). Retrieved from

http://faculty.wwu.edu/dunnc3/rprnts.historyofmanagementthought.pdf
Module 4
PLANNING: STRATEGIC, TACTICAL

AND OPERATIONAL
1. Explore the nature of planning in an organization.
Planning
Planning means looking ahead. It is deciding in advance what is to be done. Planning includes
forecasting. According to Henry Fayol- “purveyance, which is an essential element of planning,
covers not merely looking into the future but making provisions for it. A plan is then a projected
course of action”. All planning involves anticipation of the future course of events and therefore
bears an element of uncertainty in respect of its success. Planning is concerned with the
determination of the objectives to be achieved and course of action to be follows to achieve
them. Before any operative action takes place it is necessary to decide what, where, when and
who shall do things. Decision-making is also important element of planning. Planning determine
both long-term and short-term objectives and also of the individual departments as well as the
entire organization. According to Fayol- “The plan of action is, at one and the same time, the
result envisaged, the line of action to be followed, the stages to go through, and the methods to
use. It is a kind of future picture wherein proximate events are outlined with some distinctness.
“Planning is a mental process requiring the use of intellectual faculties’ imagination, foresight,
sound judgment, etc.
Planning is deciding in advance what is to be done. It involves the selection of objectives,

policies, procedures and programmes from among alternatives. A plan is a predetermined
course of action to achieve a specified goal. It is a statement of objectives to be achieved by
certain means in the future. In short, it is a blueprint for action.
According to Louis A. Allen- “Management planning involves the development of forecasts,

objectives, policies, programmes, procedures, schedules and budgets”.
According to Theo Haimann, “Planning is deciding in advance what is to be done. When a

manager plans, he projects a course of action, for the future, attempting to achieve a consistent,
coordinated structure of operations aimed at the desired results”.
According to Koontz O’Donnel, “Planning is an intellectual process, the conscious determination

of courses action, the basing of decisions on purpose, acts and considered estimates”.
Nature of Planning
1. Planning is goal-oriented. Every plan must contribute in some positive way towards
the accomplishment of group objectives. Planning has no meaning without being related
to goals.
2. Primacy of planning. Planning is the first of the managerial functions. It precedes all
other management functions.
3. Pervasiveness of planning. Planning is found at all levels of management. Top
management looks after strategic planning. Middle management is in charge of
administrative planning. Lower management has to concentrate on operational
planning.
4. Efficiency, economy and accuracy. Efficiency of a plan is measured by its contribution
to the objectives as economically as possible. Planning also focuses on accurate
forecasts.
5. Coordination. Planning coordinates the what, who, how, where and why of planning.
Without coordination of all activities, we cannot have unified efforts.
6. Limiting factors. A planner must recognize the limiting factors (money, manpower,etc.)
and formulate plans in the light of these critical factors.
7. Flexibility. The process of planning should be adaptable to changing environmental
conditions.
8. Planning is an intellectual process. The quality of planning will vary according to the
quality of the mind of manager.
Importance of Planning
As a managerial function, planning is importance due to the following reasons:
1. To manage by objectives. All the activities of an organization are designed to achieve

certain specified objectives. However, planning makes the objective more concrete by
focusing attention on them.
2. To offset uncertainty and change. Future is always full of uncertainties and changes.
Planning foresees the future and makes the necessary provisions for it.
3. To secure economy in operation. Planning involves, the selection of most profitable
course of action that would lead to the best result at the minimum costs.
4. To help in coordination. Coordination is indeed, the essence of management, the
planning is the base of it. Without planning it is not possible to coordinate the different
activities of an organization.
5. To make control effective. The controlling function of management relates to the
comparison of the planned performance with the actual performance. In the absence of
plans, a management will have no standards for controlling other’s performance.
6. To increase organizational effectiveness. Mere efficiency in the organization is not
important, it should also lead to productivity and effectiveness. Planning enables the
manager to measure the organizational effectiveness in the context of the stated
objectives and take further actions in this direction.
Advantages of Planning
 All efforts are directed toward desired objects or results. Unproductive work and waste of
resources can be minimized.
 Planning enables a company to remain competitive with other rivals in the industry.
 Through careful planning, crisis can be anticipated and mistakes or delays avoided.
 Planning can point out the need for future change and the enterprise can manage the
change effectively.
 Planning enables the systematic and thorough investigation of alternative methods or
alternative solutions to a problem. Thus we can select the best alternative to solve any
business problem.
 Planning maximizes the utilization of available resources and ensures optimum
productivity and profits.
 Planning provide the ground work for laying down control standards.
 Planning enables management to relate the whole enterprise to its complex
environment profitably.
Disadvantages of Planning
 Environmental factors are uncontrollable and unpredictable to a large extent. Therefore

planning cannot give perfect insurance against uncertainty.
 Planning is many times very costly.
 Tendency towards inflexibility to change is another limitation to planning .
 Planning delays action.
 Planning encourages a false sense of security against risk or uncertainty.
Planning Process
The planning process involves the following steps:
1. Analysis of External Environment. The external environment covers uncontrollable

and unpredictable factors such as technology, market, socio-economic climate, political
conditions etc., within which our plans will have to operate.
2. Analysis of Internal Environment. The internal environment covers relatively
controllable factors such as personnel resources, finance, facilities, etc., at the disposal
of the firm. Such an analysis will give an exact idea about the strength and weakness of
the enterprise.
3. Determination of Mission. The “mission” should describe the fundamental reason for
the existence of organization. It will give firm direction and make out activities meaningful
and interesting.
4. Determination of Objectives. The organizational objectives must spelled out in key
areas of operation and should be divided according to various departments and sections
The objectives must clearly specified and measurable as far as possible. Every member
of the organization should be familiar with its objectives.
5. Forecasting. Forecasting is a systematic attempt to probe into the future by inference
from known facts relating to the past and the present. Intelligent forecasting is essential
for planning. The management should have no stone unturned in reducing the element
of guesswork in preparing forecasts by collecting relevant data using the scientific
techniques of analysis and inference.
6. Determining Alternative course of Action. It is a common experience of all thinkers
that an action can be performed in several ways, but there is a particular way which is
the most suitable for the organization. The management should try to find out these
alternatives and examine them carefully in the light of planning premises.
7. Evaluating Alternative Courses. Having sought out alternative courses and examined
their strong and weak points, the next step is to evaluate them by weighing the various
factors.
8. Selecting the Best. The next step- selecting the source of action is the point at which
the plan is adopted. It is the real point of decision-making.
9. Establishing the sequence of activities. After the best programme is decided upon,
the next task is to work out its detail and formulate the steps in full sequences.
10. Formulation of Action Programmes. There are three important constituents of an
action plan:
 The time-limit of performance.
 The allocation of tasks to individual employees.
 The time-table or schedule of work so that the functional objectives are
achieved within the pre-determined period.
11. Reviewing the planning process. Through feedback mechanism, an attempt is made
to secure that which was originally planned. To do this we have to compare the actual
performance with the plan and then we have to take necessary corrective action to
ensure that actual performance is as per plan.
Objectives
Objectives may be defined as the goals which an organization tries to achieve. Objectives are
described as the end-points of planning. According to Koontz and O’Donnell, “an objective is a
term commonly used to indicate the end point of a management programme.” Objectives
constitute the purpose of the enterprise and without them no intelligent planning can take place.
Objectives are, therefore, the end towards which the activities of the enterprise are aimed. They
are present not only the end-point of planning but also the end towards which organizing,
directing and controlling are aimed. Objectives provide direction to various activities. They also
served as a benchmark of measuring the efficiency and effective of the enterprise. Objectives
make every human activity purposeful. Planning has no meaning if it is not related to certain
objectives.
Features of Objectives
 The object must be predetermined.

 A clearly defined objective provides the clear direction for managerial effort.
 Objectives must be realistic.
 Objectives must be measurable.
 Objectives must have social sanction
 All objectives are interconnected and mutually supportive.
 Objectives maybe short-range, medium-range and long-range.
 Objectives may be constructed into a hierarchy.
Advantages of Objectives
 Clear definition of objectives encourages unified planning.

 Objectives provide motivation to people in the organization.
 When the work is goal, unproductive tasks can be avoided.
 Objectives provides standards which aid in the control of human efforts in an
organization.
 Objectives serve to identify the organization and to link it to the groups upon which its
existence depends.
 Objectives act as a sound basis for developing administrative controls.
 Objectives contribute to the management process: they influence the purpose of the
organization, policies, personnel, leadership as well as managerial control.
Process of Setting Objectives
Objectives are the keystone of management planning. It is the most important task of
management. Objectives are required to be set in every area which directly and vitally effects
the survival and prosperity of the business. In the setting objectives, the following points should
be borne in mind.
1. Objectives are required to be set by the management in every area which directly and
vitally affects the survival and prosperity of the business.
2. The objectives to be set in various areas have to be identified.
3. While setting the objectives, the past performance must be reviewed, since past
performance indicates what the organization will be able to accomplish in future.
4. The objectives should be set in realistic terms i.e., the objectives to be set should be
reasonable and capable of attainment.
5. Objectives must be consistent with one and other.
6. Objectives must be set in clear-cut terms.
7. For the successful accomplishment of the objectives, there should be effective
communication.
Strategies
The term “strategy” has been adapted from war and is being increasingly used in business to
reflect broad overall objectives and policies of an enterprise. Literally speaking, the term
“strategy” stands for the war-art of the military general, compelling the enemy to fight as per out
chosen terms and conditions. A strategy is a special kind of plan formulated in order to meet the
challenge of the policies of the competitors. This type of plan uses the competitor’s plan as the
background. It may also be shaped by the general forces operating in a industry and the
economy.
Edmund P. Learned has defines defined strategies as “the pattern of objectives, purposes or
goals and major policies and plans for achieving these goals, stated in such a way as to define
what business the company is in or is to be and the kind of company it is or is to be”.
Haynes and Massier have defined strategy as “the planning for unpredictable contingencies
about which fragmentary information is available”.
According to David I. Cleland and William R. King, “Strategy is a complex plans for bringing the
organization from a given posture to a desired position in a further period of time”.
In the words of Haimann, “Strategy is a policy that has been formulated by the top management
for the purpose of interpreting and shaping the meaning of other policies”.
According to C. T. Hardwick and B.F. Landuyt, “The word strategy is used to signify the general
concept and salient aspect of gamesmanship as an administrative course designed to bring
success”.
According to Koontz and O’Donnell, “Strategies must often denote a general programme of
action and deployment of emphasis and resources to attain comprehensive objectives”.
Strategies are plans made in the light if the plans of the competitors because a modern
business institution operates in competitive environment. They are a useful framework for
guiding enterprise thinking and action. A perfect strategy can be built only on perfect knowledge
of the plans of others in the industry. This may be done by the management of the firm putting
itself in the place of a rival firm and trying to estimate their plans.
Characteristics of Strategy
1. It is the right combination of different factors.

2. It relates the business organization to the environment.
3. It is an action to meet a particular challenge, to solve particular problems or to attain
desired objectives.
4. Strategy is a means to an end and in itself.
5. It is formulated at the top management level. It involves assumption of certain calculated
risks.
Strategy Formulation
There are three phases in strategy formation:
 Determination of objectives
 Ascertaining the specific areas of strengths and weakness in the total environment.
 Preparing the action plan to achieve the objectives in the light of environmental forces.
Business Strategy
Seymour Tiles offers six criteria for evaluating an appropriate strategy.
Internal consistency. The strategy of an organization must be consistent with its other
strategies, goals, policies and plans.
Consistency with the environment. The strategy must be consistent with the external
environment. The strategy collected should enhance the confidence and capability of the
enterprise to manage and adapt with or give command over the environmental forces.
Realistic Assessment. Strategy needs realistic assessment of the resources of the enterprise-
men, money, materials- both existing resources as also the resources, the enterprise can
command.
Acceptable degree of risk. Any major strategy carries with it certain elements of risk and
uncertainty. The amount of risk inherent in a strategy should be within the bearable capacity of
the enterprise.
Appropriate time. Time is the essence of any strategy. A good strategy not only provides the
objectives to be achieved but also indicates when those objectives could be achieved.
Workability. Strategy must be feasible and should produce the desired results.
Review Questions:
1. What are the importance of planning?

2. Explain the steps in the process of planning.
3. Explain the phases in the formulation of strategies.
4. What are the six criteria for evaluating an appropriate strategy?
References:
Management Principles and Practice. (2017, October 23). Retrieved from

http://www.dphu.org/uploads/attachements/books/books_5284_0.pdf
Module 5
ORGANIZING AND DELEGATING

WORK
1. Describe meaning and process of organizing.

2. Describe the significance of organization structure.
3. Know principles of organization.
4. Understand and meaning of features of organizational charts and manuals.
5. Describe elements, importance and principles of delegation.
Definition of Organization
The term “Organization’ connotes different things to different people. Many writer have
attempted to state the nature, characteristics and principles of organization in their own way. It
can be used as a group of persons working together or as a structure of relationships or as a
process of management. Now, let us analyze some of the important definition of organizing or
organization, and understand the meaning of organization.
According to Sheldon, “Organization is a process of so combining the work which individuals or

groups have to perform with facilities necessary for its execution, that the duties so performed
provide the best channels for efficient, systematic, positive and coordinated application of
available effort.”
In the words of Chester I Bernard, “Organization is a system of cooperative activities of two or

more persons.”
Mc Ferland has defined the organization as an “identifiable group of people contributing their
efforts towards the attainment of goals”.
According to Louis A. Allen, “Organization is the process of identifying and grouping the work to
be performed, defining and delegating responsibility and authority, and establishing
relationships for the purpose of enabling people to work most effectively together in
accomplishing objectives”.
According to North Whitehead, “Organization is the adjustment of diverse elements, so that their
mutual relationship may exhibit more pre-determined quality”.
In the word of Theo Haimann, “Organizing is the process of defining and grouping the activities
of the enterprise and establishing the authority relationships among them. In the performing of
the organizing function, the manager defines, departmentalizes and assigns activities so that
they can be most effectively executed”.
In the words of Koontz and O’Donnell, “Organization involves the grouping of activities
necessary to accomplish goals and plans, the assignment of these activities to appropriate
departments and the provision of authority, delegation and coordination”.
Organization as a Process
Organization is the process of establishing relationship among the members of the enterprise.
The relationship are created in terms of authority and responsibility. To organize is to
harmonize, coordinate or arrange in a logical and orderly manner. Each member in the
organization is assigned a specific responsibility or duty to perform and is granted the
corresponding authority to perform his duty. The managerial function of organizing consists in
making a rational division of work into groups of activities and trying together the positions
representing grouping of activities so as to achieve a rational well-coordinated and orderly
structure for the accomplishment of work . According to Louis A. Allen, “Organizing involves
identification and grouping the activities to be performed and dividing them among the
individuals and creating authority and responsibility among them for the accomplishment of
organizational objectives. The various steps involved in this process are:
1. Determination of Objectives
It is the first step in building up an organization. Organization is always related to certain

objectives. Therefore it is essential for the management to identify the objectives before
starting any activity. Organization structure is built on the basis of objectives of the
enterprise. That means, the structure of the organization can be determined by the
management only after knowing the objectives to be accomplished through the
organization. This step helps the management not only in the framing the organization
structure but also in achieving the enterprise objectives with minimum cost and efforts.
Determination of objectives will consists in deciding as to why the proposed organization
is to be set up and, therefore, what will be the nature of the work to be accomplished
through the organization.
2. Enumeration of Objectives
If the member of the group are to pool their efforts effectively, there must be proper
division of the major activities. The first step in organizing group effort is the division of
the total job into essential activities. Each job should be properly classified and grouped.
This will enable the people to know what is expected of them as members of the group
and will help in avoiding duplication of efforts. For example, the work of an industrial
concern may be divided into the following major functions- production, financing,
personnel, sales, purchase, etc.
3. Classification of Activities
The next step will be to classify activities according to similarities and common purposes
and functions and taking the human and material resources into account. Then, closely
related and similar activities are grouped into divisions and departments and the
departmental activities are further divided into sections.
4. Assignment of Duties
Here, specific job assignments are made to different subordinates for ensuring a
certainty of work performance. Each individual should be given a specific job to do
according to his ability and made responsible for that. He should also be given the
adequate authority to do the job assigned to him. In the words of Kimball and Kimball-
“Organization embraces the duties of designating the departments and the personnel
that are to exist between department and individuals.”
5. Delegation of Authority
Since so many individual works in the same organization, it is the responsibility of the
management to lay down structure of relationship in the organization. Authority without
responsibility is a dangerous thing and similarly responsibility without authority is an
empty vessel. Everybody should clearly know to whom he is accountable ;
corresponding to the responsibility authority is delegated to the subordinates for enabling
them to show work performance. This will help in the smooth working of the enterprise
by facilitating delegation of responsibility and authority.
Organization Structure
An organization structure shows the authority and responsibility relationship between the
various position in the organization by showing who reports to whom. Organization involves
establishing an appropriate structure for the goal seeking activities. It is an established pattern
of relationship among the components of organization. March and Simon have stated that
“Organization structure consists simply of those aspects of pattern of behavior in the
organization that are relatively stable and change only slowly.” The structure of an organization
is generally shown on an organization chart. It shows the authority and responsibility between
various positions in the organization while designing the organization structure, due attention
should be given to the principles of sound organization.
Significance of Organization Structure
1. Properly designed organization can help improve teamwork and productivity by

providing a framework within which the people can work together most effectively.
2. Organization structure determines the location of decision-making in the
organization.
3. Sound organization structure stimulates creative thinking and initiative among
organizational members by providing well defined patterns of authority.
4. A sound organization structure facilitates growth of enterprise by increasing its
capacity to handle increased level of authority.
5. Organization structure provides the pattern of communication and coordination.
6. The organization structure helps a member to know what his role is and how it
relates to other roles.
Principles of Organization
1. Consideration of unity of objectives. The objective of the undertaking influences the

organization structure. There must be unity of objective so that all efforts can be concentrated
on the set goals.
2. Specialization. Effective organization must include specialization. Precise division of work
facilities specialization.
3. Coordination. Organization involves division of work among people whose efforts must be
coordinated to achieve common goals. Coordination is the orderly arrangement of group
effort to provide unity of action in the pursuit of common purpose.
4. Clear unbroken line of Authority. It points out the scalar principle or the chain of command.
The lie of authority flows from the highest executive to the lowest managerial level and the
chain of command should not be broken.
5. Responsibility. Authority should be equal to responsibility i.e., each manager should have
enough authority to accomplish the task.
6. Efficiency. The organization structure should enable the enterprise to attain objectives with
the lowest possible cost.
7. Delegation. Decision should be made at the lowest competent level. Authority and
responsibility should be delegated as far down in the organization as possible.
8. Unity of Command. Each person should be accountable to a single superior. If an individual
has to report to only one supervisor there is a sense of personal responsibility to one person
for results.
9. Span of Management. No superior at a higher level should have more than six immediate
subordinates. The average human brain can effectively direct three to six brains (i.e.,
subordinates).
10.Flexibility. The organization is expected to provide built in devices to facilitate growth and
expansion without dislocation. It should not be rigid or inelastic.
Organization Charts and Manual
The pattern of network of relations between the various positions in an organization as well as
between the persons who hold those positions is referred to as “organization chart”.
Organization data are often shown in the form of graphic chart. Organization charts are the
important tool for providing information on managerial positions and relationships in an
organization.
Advantages of Organization Chart
1. Organization chart gives a clear picture of the organization structure and the
relationships that exist in an organization.
2. It shows at a glance the lines of authority and responsibility. From it, the individuals can
see who their associates are, to whom they report and from whom they get instructions.
3. By providing a detailed and clear picture of the authority relationships existing in an
organization, they help to avoid misunderstanding of jurisdictional problems and
minimize organizational conflicts.
4. It plays a significant part in organization improvement by pointing out inconsistencies
and deficiencies in certain relationships. When management sees how its organization
structure actually looks, it may discover some unintended relationship.
5. With the help of an organization chart, outsiders can easily know the persons whom they
have to approach in connection with their work. This help the outsiders to save their time
and also to form a better opinion of the concern.
6. By providing a clear picture of the lines of authority and responsibilities, they help to
avoid overlapping and duplication of authority and secure unity of command.
7. It serve as a valuable guide to the new personnel in understanding the new organization
and for their training.
8. It provides a framework of personnel classification and evaluation systems. They show
to the personnel what promotions they can expect , and what extra training is required
for promotion to a higher position.
Disadvantages or Limitations of Organization Chart
1. Organization chart shows only the formal relationships and fails to show the informal
relations within the organization. Informal relationship are also important in any
organization.
2. Organization charts, no doubt show the line of authority but they do not show the
quantum of authority vested in different managerial positions. Thus, it is not bale to
answer the questions like how much authority can be exercised by a particular
executive, how far he is responsible for his functions and to what extent he is
accountable.
3. An organization chart is incomplete. It is not possible to include all information affecting
the organization.
4. It shows a static state of affairs and does not represent flexibility which usually exists in
the structure of a dynamic organization.
5. When there is an organization chart, the personnel in the organization become too
conscious of their responsibilities and boundary line. This injects rigidity and inflexibility
into the organization structure. Updating is not possible without disturbing the entire set-
up.
6. Organization chart gives rise to a feeling of superiority or inferiority which causes
conflicts in the organization and affects team-spirit adversely.
7. It does not show the relationships that actually exist in the organization but shows only
the “supposed to be” relationships.
8. The organization charts just display the organization structure. They neither guarantee a
good organization structure nor good management.
Types of Organization Chart
An organization chart can be drawn in different forms. They are:
 Top-to-down chart or vertical chart

 Left-to-right chart or horizontal chart
 Circular chart
Top-to-down chart or vertical chart. Most organization used this type which presents the
different levels of organization in the form of a pyramid with senior executive at the top of
the chart and successive levels of management depicted vertically below that. The
following diagram illustrates this type of chart.
Figure 5.1 Top-to-down organization chart
Left-to-right chart or horizontal chart. Horizontal charts which read from left to right are
occasionally used. The pyramid lies horizontally instead on standing in the vertical position.
The line of command proceeds horizontally from left to right showing top level at the left
and each successive level extending to the right. The following diagram illustrated this type
of chart.
Figure 5.2 Horizontal organization chart
Circular chart. In this chart, top positions are located in the center of the concentric circle.
Positions of successive echelons extend in all directions outward from the center. Positions
of equal status lie at the same distance from the center on the same concentric circle. The
following diagram illustrates the circular chart.
Figure 5.3 Circular organizational chart
Delegation
Delegation occurs when someone with authority confers upon another person the power to do a
particular task. Delegation is usually a one-way street - superiors delegate authority to
subordinates. However, ultimate responsibility for task completion usually remains the
responsibility of the person who delegated the authority to complete it. For example, if your boss
delegates a task to you, she is likely still ultimately responsible for making sure that task is
accomplished.
Delegation of 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
1. 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 misutilize 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.
2. 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.
3. Accountability. Means giving explanations for any variance in the actual performance
from the expectations set. Accountability can not 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.
Importance of Delegation
Delegation of authority is a process in which the authority and powers are divided and shared
amongst the subordinates. When the work of a manager gets beyond his capacity, there should
be some system of sharing the work. This is how delegation of authority becomes an important
tool in organization function. Through delegation, a manager, in fact, is multiplying himself by
dividing/multiplying his work with the subordinates. The importance of delegation can be justified
by:
1. Through delegation, a manager is able to divide the work and allocate it to the
subordinates. This helps in reducing his work load so that he can work on important
areas such as - planning, business analysis etc.
2. With the reduction of load on superior, he can concentrate his energy on important and
critical issues of concern. This way he is able to bring effectiveness in his work as well in
the work unit. This effectivity helps a manager to prove his ability and skills in the best
manner.
3. Delegation of authority is the ground on which the superior-subordinate relationship

stands. An organization functions as the authority flows from top level to bottom. This in
fact shows that through delegation, the superior-subordinate relationship become
meaningful. The flow of authority is from top to bottom which is a way of achieving
results.
4. Delegation of authority in a way gives enough room and space to the subordinates to
flourish their abilities and skill. Through delegating powers, the subordinates get a
feeling of importance. They get motivated to work and this motivation provides
appropriate results to a concern. Job satisfaction is an important criterion to bring
stability and soundness in the relationship between superior and subordinates.
Delegation also helps in breaking the monotony of the subordinates so that they can be
more creative and efficient.
Delegation of authority is not only helpful to the subordinates but it also helps the
managers to develop their talents and skills. Since the manager get enough time through
delegation to concentrate on important issues, their decision-making gets strong and in a
way they can flourish the talents which are required in a manager. Through granting
powers and getting the work done, helps the manager to attain communication skills,
supervision and guidance, effective motivation and the leadership traits are flourished.
Therefore it is only through delegation, a manager can be tested on his traits.
5. Delegation of authority is help to both superior and subordinates. This, in a way, gives
stability to a concern’s working. With effective results, a concern can think of creating
more departments and divisions flow working. This will require creation of more
managers which can be fulfilled by shifting the experienced, skilled managers to these
positions. This helps in both virtual as well as horizontal growth which is very important
for a concern’s stability.
Principles of Delegation
1. Principle of result excepted. Suggests that every manager before delegating the
powers to the subordinate should be able to clearly define the goals as well as results
expected from them. The goals and targets should be completely and clearly defined
and the standards of performance should also be notified clearly. For example, a
marketing manager explains the salesmen regarding the units of sale to take place in a
particular day, say ten units a day have to be the target sales. While a marketing manger
provides these guidelines of sales, mentioning the target sales is very important so that
the salesman can perform his duty efficiently with a clear set of mind.
2. Principle of Parity of Authority and Responsibility. According to this principle, the

manager should keep a balance between authority and responsibility. Both of them
should go hand in hand.
According to this principle, if a subordinate is given a responsibility to perform a task,

then at the same time he should be given enough independence and power to carry out
that task effectively. This principle also does not provide excessive authority to the
subordinate which at times can be misused by him. The authority should be given in
such a way which matches the task given to him. Therefore, there should be no degree
of disparity between the two.
3. Principle of absolute responsibility. This says that the authority can be delegated but
responsibility cannot be delegated by managers to his subordinates which means
responsibility is fixed. The manager at every level, no matter what is his authority, is
always responsible to his superior for carrying out his task by delegating the powers. It
does not means that he can escape from his responsibility. He will always remain
responsible till the completion of task.
Every superior is responsible for the acts of their subordinates and are accountable to
their superior therefore the superiors cannot pass the blame to the subordinates even if
he has delegated certain powers to subordinates example if the production manager has
been given a work and the machine breaks down. If repairmen is not able to get repair
work done, production manager will be responsible to CEO if their production is not
completed.
4. Principle of Authority level. This principle suggests that a manager should exercise his
authority within the jurisdiction/framework given. The manager should be forced to
consult their superiors with those matters of which the authority is not given that means
before a manager takes any important decision, he should make sure that he has the
authority to do that on the other hand, subordinate should also not frequently go with
regards to their complaints as well as suggestions to their superior if they are not asked
to do. This principle emphasizes on the degree of authority and the level upto which it
has to be maintained.
Review Questions:
1. Define organization.
2. What is the significance of organization structure?
3. State the principles of organization.
4. Explain with a neat diagram the different types of organization charts.
5. Discuss the principles of delegation.
References:

Module 6
DIRECTING AND LEADING
1. Appreciate the role of direction.

2. Understand the importance, principles, types and techniques of direction.
3. Know meaning and nature of leadership.
4. Describe leadership styles and patterns.
5. Know kinds of leadership skill.
6. Describe the importance of leadership in an organization.
Directing
According to G. R. Terry, “Directing means moving to action and supplying simulative
power to a group of persons”. Thus, the plan into operation through the organization by
the process of direction. Another term used to describe this function is “activating”. In
the words of G. R. Terry, “activating means moving into action- supplying simulative
power to the group”.
According to Dale, “Direction is telling people what to do and seeing that they do it the
best of their ability. It is through directing that managers get the work done through
people. It consists of:
 Issuing orders and instructions by a superior to his sub-ordinates.

 Guiding, advising, helping sub-ordinates in the proper methods of work.
 Motivating them to achieve goals by providing incentives, good working
environment etc.
 Supervising sub-ordinates to ensure compliance with plans”
To carry out physically the activities resulting from the planning and organizing steps, it is
necessary for the manager to take measures that will start and continue action as long
as they are needed in order to accomplish the task by the members of the group. The
process of directing or activating involves:
1. Providing effective leadership.
2. Integrating people and tasks and convincing them to assist in the achievement of the
overall objectives.
3. Effective communication.
4. Providing climate for ‘subordinate’ development.
Characteristics of Directing
Directing has the following characteristics features:
1. It is the function of the superior manager and runs from the top to down in the
organization structure.. A sub-ordinate has to receive instructions for doing his job from
his superior.
2. Direction implies issuing orders and instruction. Besides issuing orders and instruction a
superior also guides and counsels his sub-ordinates to do his job properly.
3. The top management gives board direction to the level manager who in turn give specific
direction to the lower level management.
4. The four important aspects of directing are supervision, motivation, leadership, and
communication. All these functions are interconnected and mutually dependent.
Scope of Directing
The function of directing is concerned with employee orientation, issuing instruction,
supervision, motivation, communication and leadership.
1. Employee orientation. An employee must be properly oriented to the enterprise in

which they are working. This orientation is necessary for them to accomplish the
objectives of the enterprise.
2. Instructions. An instruction is an order or command by a senior directing a sub-ordinate
to act or refrain from acting under a given situation. The right to issue orders should be
with the superior by virtue of his position.
3. Supervision. In order to see that the work is done according to the instructions to the
superior must observe the activities of the sub-ordinates. Supervision is done at all
levels of management. However, supervision is more important at lower levels.
4. Motivation. One of the most challenging problems for management is to motivate
people. Management has to induce the employee to utilize his talent and skills to
contribute to the organizational goal.
Importance of Direction
The importance of direction in an organization can be viewed by the fact that every action is
initiated through direction. It is the human element which handles the other resources of the
organization. Each individual in the organization is related with others and his functioning affects
others and, in turn, is affected by others. This makes me the functioning or direction all the
more important. The importance of the direction function is given below:
1. Direction integrates employees’ efforts. The individual efforts needs to be integrated

so that the organization achieves it objectives. No organizational objectives can be
achieved without the function of direction.
2. Direction initiates action. It is through direction that the management makes individual
function in a particular way to get organizational objectives.
3. Direction gets output from individuals. Every individual in the organization has some
potentials and capabilities which can be properly utilized through the function of
direction.
4. Direction facilitates change. To manage change management must motivate
individuals to accept these changes which can be accomplished through motivation.
Principles of Direction
For effective direction, following principles may be used:
i. Principles of leadership. Ability to lead effectively is essential to effective direction.

ii. Principle of informed communication. The management should recognize and utilize
informal organization constructively.
iii. Principle of direct supervision. The manager should supplement objective methods of
supervision and control with direct personal supervision to ensure personal contact.
iv. Principle of direct objectives. The manager should communicate effectively and
motivate the subordinates for most effective performance.
v. Principle of harmony of objectives. The manager should guide the subordinated so
that their individual interest harmonizes with group interests.
vi. Principle of unity of command. For most effective direction, subordinates should be
responsible to one superior.
vii. Principle of managerial communication. The manager being the principle medium of
communication, should keep lines of communication open.
viii. Principle of comprehension. The communication should ensure that the recipients of
information actually comprehend it.
ix. Principle of direct communication. The direct flow of information is most effective for
communications.
Types of Direction
Directions may be either oral or written. Some of the advantage of written directions are as
follows:
i. Written directions are more clear, comprehensive and clarity of thought and better
quality of direction maintained.
ii. Written orders are comparatively more intelligible and the chances for misunderstanding
and duplication of efforts will be minimized.
iii. The subordinates also get an ample opportunity to study the directive carefully.
iv. It also makes it possible to communicate to all interested parties simultaneously.
v. A written order can be consulted readily to maintain accuracy.
vi. It helps in accountability and smooth carrying out of orders.
Techniques of Direction
A manager has at his disposal three broad techniques of direction.
1. Consultative direction. In this method executive consult with his sub-ordinates

concerning the feasibility, the workability and extent and content of a problem before the
superior makes a decision and issues a directive:
The following advantages are claimed in this type of method:
a) Participation occurs on every level of organization.

b) Better communication.
c) Least resistance from sub-ordinates, experience and knowledge of sub-ordinate
also can be used to arrive at right directives.
d) It induces better motivation and morale.
e) It leads to better coordination and effective results.
This method has the following disadvantages:

a) It is time consuming.
b) Sub-ordinates may consider it their right and prerogative to be consulted before a
directive is given to them by their superiors.
c) Sometimes unnecessary arguments arise leading to wastage of time.
2. Free rein direction. The free rein technique encourages and enables the sub-ordinate
to contribute his own initiative, independent thought, drive, perspicacity and ingenuity to
the of the problem. The free rein technique of direction will probably show the best and
quickest results, if the subordinate is highly educated, brilliant young man a sole
performer, who has a sincere desire to become a top level manager.
3. Automatic direction. In this method the manager gives direct, clear, precise orders to
his sub-ordinate, with detailed instructions as how and what is to be done allowing no
room for the initiative of the sub-ordinate.
Leadership
Leadership is a great quality and it can create and convert anything. There are many definitions
of leadership. Some of the definitions of leadership are reproduced below:
“Leadership” according to Alford and Betty “is the ability to secure desirable actions from a
group of followers voluntarily, without the use of coercion”.
According to Chester I Bernard, “It (leadership) refers to the quality of behavior of the individual
whereby they guide people on their activities in organized efforts”.
According to Terry, “a leader shows the way by his own example. He is not a pusher, he pulls
rather than pushes.”
According to Koontz O’Donnell- Managerial leadership is “the ability to exert interpersonal

influence by means of communication, toward the achievement of a goal. Since managers get
things done through people, their success depends, to considerable extent upon their ability to
provide leadership.”
Nature or Characteristics Features of Leadership
1. Leadership implies the existence of followers. We appraised the qualities of
leadership by studying his followers. In an organization leaders are also followers for
e.g., Supervisor works under a branch head. Thus, in a formal organization a leader has
to be able both a leader as well as a follower, and be able to relate himself both upward
and downward.
2. Leadership involves a community of interest between the leader and his follower.
In other words, the objectives between the leader and his men are one and the same. If
the leader strives for one purpose and his team of workers wk for some other purpose, it
is no leadership.
3. Leadership involves an unequal distribution of authority among leaders and group

members. Leaders can direct some of the activities of group members, ie., the group
members are compelled or are willing to obey most of the leader’s directions. The group
members cannot similarly direct the leader’s activities, though they will obviously affect
those activities in a number of ways.
4. Leadership is a process of influence. Leadership that leaders can influence their

followers or subordinates in addition to being able to give their followers or subordinates
legitimate directions.
5. Leadership is the function of their stimulation. Leadership is the function of

motivating people to strive willingly to attain organizational objectives. A successful
leader allow his subordinates (followers) to have their individual goals set up by
themselves in such a way that they do not conflict with other organizational objectives.
6. A leader must be exemplary. In the words of George Terry- “A leader shows the way
by his own example. He is not a pusher, he pulls rather than pushes”. According to L.G.
Urwick- “it does not what a leader says, still less what he writes, that influences
subordinates. It is what he is. And they judge what he is by what he does and how he
behaves.”. From the above explanation it is clear that a leader must set an ideal before
his followers. He must stimulate his followers for hard and sincere work by his personal
behavior. In other words, a leader must set an exemplary standard before his followers.
7. A leader ensures absolute justice. A leader must be objective and impartial. He

should not follow unfair practices like favourtism and nepotism. He must show fair play
and absolute justice in all his decisions and actions.
Leadership Styles and Patterns
Tannenbaum and Schmidt have described the range of possible leadership behavior available
to a manager. Each type of action is related to the degree of authority used by the boss and to
the degree of freedom available to his subordinates in reaching decisions. The figure below
shows the different leadership styles and patterns.
Figure 6.1 Range of leadership styles
Leadership Styles
1. The Manager makes decision and announces it. It is an extreme form of autocratic
leadership whereby decisions are made by the boss who identifies the problem,
considers alternative solutions, selects one of them and then reports his decision to his
subordinates for implementation.
2. The Manager sells his decision. It is as a slightly improved forms of leadership wherein
the manager takes the additional step of persuading the subordinates to accept his
decision.
3. The Manager presents his ideas and invites questions. There is greater involvement of
the employees in this pattern. The boss arrives at the decision, but provides a full
opportunity to his subordinates to get fuller explanation of his thinking and intentions.
4. The manager presents a tentative decision subject to change. Herein the decision is
tentatively taken by the manager but he is amenable to change and influence from the
employees.
5. The Manager may present the problem, get the suggestions and then take his own
decision. Herein sufficient opportunity is given to the employees to make suggestions
that are cooly considered by the Manager.
6. The Manager may define the limits and request the group to make decision. A manager
of this style of management lets the group have the right to make the decision. The sub-
ordinates are able to take the decision to the limits defined by the manager.
7. The Manager may permit full involvement of the subordinates in the decision-making
process. It is often designated as “Democratic” leadership.
Leadership style refers to the behavior pattern adopted by a leader to influence the behavior of
his subordinates for attaining the organizational goals. As different leadership styles have their
own merits and demerits, it is difficult to prefer one leadership styles to another. The selection of
a leadership style will depend on the consideration of a number of factors. Tannenbaum and
Schmidt have pointed out the important factors that affect the choice of style of leadership.
They are:
 Forces in the manager i.e., the manager’s personality, experience and value system.
 Forces in the subordinates i.e., the subordinates readiness for making decisions,
knowledge, interest, need for independence etc.
 Forces in the situation i.e. complexity of the problem, pressure of time etc.
Leadership Skill
The leader is expected to play many roles and therefore, must be qualified to guide others to
organizational achievement. Although no set absolute traits or skills may be identified, the
individuals who possess abilities to lead others must have certain attributes to help them in
performing their leadership rolls. In a broad way the skills which are necessary for an industrial
leader may be summarized under four heads;
a) Human skill
A good leader is considerate towards his followers because his success largely
depends on the cooperation of his followers. He approaches various problems in terms
of people involved more than in terms of technical aspects involved. A leader should
have an understanding of human behavior. He should know people; know their needs,
sentiments, emotions, as also their actions and reactions to particular decisions, their
motivation, etc. Thus, a successful leader possess the human relations attitude. He
always tries to develop social understanding with other people. The human skills
involves the following:
 Empathy. A leader should be able to look at things objectively. He should
respect the rights, belief and sentiments of others. He should equip himself to
meet the challenges emanating from the actions and reactions of other people.
The leader should be empathetic towards his followers so that he can carefully
judge their strengths, weaknesses, and ambitions and give them the attention
they deserve.
 Objectivity. A good leader is fair and objective in dealing with subordinates. He

must be free from bias and prejudice while becoming emotionally involved with
the followers. His approach to any issue or problem should be objective and not
based on any pressure, prejudiced or preconceived notions. Objectivity is a vital
aspect of analytical decision making . Honesty, fairplay, justice and integrity of
character are expected of any good leader.
 Communication skill. A leader should have the ability to persuade, to inform,

stimulate, direct, and convince his subordinates. To achieve this, the leader
should have good communication skill. Good communication seems to find all
responsibilities easier to perform because they relate to others more easily and
can better utilize the available resources.
 Teaching skill. A leader should have the ability to demonstrate how to accomplish
a particular task.
 Social skill. A leader should understand his followers. He should be helpful,

sympathetic and friendly. He should have the ability to win his followers
confidence and loyalty.
b) Conceptual skill
In the word of Chester Barnard, “the essential aspect of the executive process is the
sensing of the organization as a whole and the total situation relevant to it”. Conceptual
skills include:
 The understanding of the organization behavior,

 Understanding the competitors of the firm, and
 Knowing the financial status of the firm.
A leader should have the ability to look at the enterprise as a whole, to recognize that
the various function of an organization depend upon one another and are interrelated,
that changes in one affect all others. The leader should have skill to run the firm in such
a way that overall performance of the firm in the long run will be sound.
c) Technical skill
A leader should have a thorough knowledge of, and competence in, the principles,
procedure and operations of a job. Technical skills involves specialized knowledge,
analytical skill and a facility in the use of the tools and techniques of a specific discipline.
Technical competence is an essential quality of leadership.
d) Personal skill
The most important of task of the leader is to get the best from others. This is possible
only if he possess certain qualities. These personal skills include:
 Intelligence. Intellectual capacity is an essential quality of leadership. Leaders

generally have somewhat higher level of intelligence than the average of their
followers.
 Emotional maturity. A leader should act with self-confidence, avoid anger, take
decisions on rational basis and think clearly and maturely. A leader should also
have high frustration tolerance. According to Koontz and O’Donnell, “Leaders
cannot afford to become panicky, unsure of themselves in the face of conflicting
forces, doubt of their principles when challenged, or amenable to influence”.
 Personal motivation. This involves the creation of enthusiasm within the leader
himself to get a job done. It is only through enthusiasm that one can achieve
what one wants. Leaders have relatively intense achievement type of
motivational drive. He should work hard more for the satisfaction of inner drives
than for extrinsic material rewards.
 Integrity. In the words of F.W. Taylor, “integrity is the straight forward honesty of
purpose which makes a man truthful, not only to others but to himself, which
makes a man high-minded, and gives him high aspiration and high deals.
 Flexibility of mind. A leader must be prepared to accommodate other’s viewpoint

and modify his decisions, if need be. A leader should have a flexible mind, so
that he may change in obedience to the change in circumstances. Thomas Carle
has sad, “A foolish consistency is the hobgoblin of a little mind”.
In sum, leader must have a dynamic personality, intellectual attainment, amiable

disposition, unassuming temperament and knowledge of how to deal with his followers.
Difference between Leadership and Management
Leadership is different from management. The main difference between these two terms are;
1. A manager is required to plan, organize, direct and control. But a leader is one who gets
others to follow him.
2. A manager depend on his authority. But a leader depends on his confidence and
goodwill. He inspires enthusiasm.
3. Management is concerned with the formulation of broad policies to guide the operations
of an enterprise. But leadership is concerned with the initiation of action for the
accomplishment of goals.
4. An individual is a leader in the true sense if he is accepted as a leader by the group. A
manager is appointed and he derives his authority by virtue of his office.
5. Management is associate with the organized structure. But leadership may be
associated with unorganized groups.
Importance of Leadership
The importance of leadership in an organization cannot be denied. People working in an

organization need individuals (leaders) who could be instrumental in guiding the efforts of
groups of workers to achieve goals and objectives of both the individuals and the organization.
The leader guides the action of others in accomplishing this tasks. A good leader motivates his
subordinates, creates confidence and increase the morale of the workers. In the words of Peter
F Drucker- “Goof leadership is a must for the success of a business but the business leaders
are the scarcest resources of any enterprise”. The following points highlight the importance of
leadership.
1. Leadership is the process of influencing the activities of an individual or a group

towards the achievement of a goal.
2. An effective leader motivates the subordinates for a higher level of performance.
3. Leadership promotes team spirit and teamwork which is quite essential for the success
of any organization.
4. Leadership is an aid to authority. A leadership helps in the effective use if formal
authority.
5. Leadership creates confidence in the subordinates by giving them proper guidance and
advice.
The history of business is full of instances where good leaders led their business concerns to
unprecedented peaks of success. To quote George R. Terry, “The will to do is triggered by
leadership and lukewarm desires for achievement are transformed into burning passé.. for
successful accomplishment by the skillful use of leadership.”
Review Questions:
1. Define direction.
2. Explain the principles of direction.
3. Define leadership.
4. Explain the characteristics of leadership.
5. What are different leadership style.
References:

Module 7
CONTROLLING
1. Understand the meaning and characteristics of management control

2. Identify the steps involved in the control process.
3. Describe requirements of control.
Controlling
Controlling is an important function of management. It is the process that measures current

performance and guides it towards some predetermined objectives. Under primitive
management, control was undertaken only when something went wrong and the objective of
control was to reprimand the person responsible for these events and take action against him.
The modern concept of control envisages a system that not only provides a historical record of
what has happened to the business as a whole but also pinpoints the reasons why it has
happened and provides data that enable the manager to take corrective steps, if he finds he is
on the wrong track. Therefore, there is no intention to punish the person for wrongdoing, but to
find out the deviations between the actual performance and the standard performance and to
take steps to prevent such variances in the future.
The concept of control is often confused with lack of freedom. The opposite of control is not
freedom but chaos or anarchy. Control is fully consistent with freedom. In fact, they are inter-
dependent. Without control, freedom cannot be sustained for so long. Without freedom, control
becomes ineffective. Both freedom and accountability are embedded in the concept of control.
Definitions of Control
Control is the process through which managers assure that actual activities conform to planned
activities. According to Breach, “Control is checking current performance against predetermined
standards contained in the plans, with a view to ensuring adequate progress and satisfactory
performance.”
According to George R. Terry, “Controlling is determining what is being accomplish i.e.,

evaluating the performance and if necessary, applying corrective measures so that the
performance takes place according to plans.”
According to Billy E. Goetz , “Management control seeks to compel events to conform plans”.
According to Robert N. Anthony, “Management control is the process by which managers

assure that resources are obtained and used effectively and efficiently.”
In the words of Koontz and O’Donnell, “Managerial control implies measurement of

accomplishment against the standard and the correction of deviations to assure attainment of
objectives according to plans.”
From the above definitions it is clear that the managerial function of control consists in a
comparison of the actual performance with the planned performance with the object of
discovering whether all is going on well according to plans and make suitable changes.
Controlling is the nature of follow-up to the other free fundamental functions of management.
There can, in fact, be not controlling without previous planning, organizing and directing.
Controlling cannot take place in vacuum.
Characteristics of Control
Managerial control has certain characteristics feature. They are:
1. Control is the function of every manager. Managers at all levels have to perform this
function to contribute to the achievement of organizational objectives.
2. Control leads to appraisal of pass activities. The deviations in the past are revealed by
the control process. Corrective actions can be initiated accordingly.
3. Control is linked with future, as pass cannot be controlled. It should anticipate possible
deviations and to think of corrective action for the control of such deviations in the future.
It is usually preventive as presence of control system tends to minimize wastages,
losses and deviations from standards.
4. Control is concerned with setting standards, measurement of actual performance,
comparison of actual performance with predetermined standards and bringing to light the
variations between the actual performance and the standard performance.
5. Control implies taking corrective measures. The object in checking the variations and
deviations is to rectify them and prevent there recurrence. It is only action which adjusts
performance to predetermined standards whenever deviations occur.
6. Control can be exercised only with reference to and or the basis of plans. To quote Mary
Cushing Niles, “Whereas planning sets the course, control observes deviations from the
course or to an appropriately changed one.”
7. To some people, control is opposite of freedom. This is not true. Control is based on
facts and figures. Its purpose is to achieve and maintain acceptable productivity from all
resources of an enterprise. Therefore, control aims at result and not at the persons. It is
correcting a situation, and not for reprimanding persons.
8. Information and feedback is the guide. The feedback is helpful to the manager to
determine how far the operations are proceeding in conformity with plans and
standards, and where remedial action is called for.
9. Control involves continuous review of performance and results in corrective action which
may led to change in the performance of other functions of management. This makes
control a dynamic and flexible process.
10. Control is a continuous activity. It involves constant analysis of validity of standards,
policies, procedures, etc.
Steps in Control Process
There are three basic steps in control process:
 Establishing standards
 Measuring and comparing actual results against standards
 Taking corrective action
1. Establishing Standards
The first step in control process is to establish standards against which results
can be measured. The standards the managers desire to obtain in each key area
should be defined as far as possible in quantitative terms. Standards expressed
in general terms should be avoided. Standards needs to be flexible in order to
adapt to changing conditions. The standards should emphasis the achievement
of results of more than the conformity to rules and methods. If they do not so,
then people will start giving more importance to rules and methods than the final
results.
While setting standards, the following points have to be borne in mind:
a) The standards must be clear and intelligible. If the standards are clear and
are understood by the persons concerned, they themselves will be able to
check their performance .
b) Standards should be accurate, precise, acceptable and workable.
c) Standards are used as the criteria or benchmarks by which performance is
measured in the control process. It should not be either too high or too low.
They should be realistic and attainable.
d) Standards should be flexible i.e., capable of being changed when the
circumstances require so.
2. Measuring and Comparing actual Results against Standards
The second step in the control process is to measure the performance and compare
it with the predetermined standards. Measurement of performance can be done by
personal observation, by reports, charts and statements. If the control system is well
organized, quick comparison of these with the standard figure is possible. This will
reveal variations.
After the measurement of the actual performance, the actual performance should be
compared with the standards fixed quickly . A quick comparison of actual
performance with the standards performance is possible, if the control system is well
organized. While comparing the actual performance with the standards fixed, the
manager has to find out not only the extent of variations but also the causes of
variations. This is necessary, because some of the variations may be unimportant,
while others may be important and need immediate corrective action by the
manager.
3. Taking Corrective Action
After comparing the actual performance with the prescribed standards and finding
the deviations, the next step that should be taken by the manager is to correct these
deviations. Corrective actions should be taken without wasting of time so that the
normal position can be restored quickly. The manager should also determine the
correct cause of deviation.
Taking corrective action can be achieved in the following way:
a) The manager should try to influence environmental conditions and external

situations in such a way as to facilitate the achievement of goals
b) He should review with his subordinates the instructions given earlier so that he
may be able to give clear, complete and reasonable instructions in the future.
c) There are many external forces which cannot be adjusted by the Manager. They
have to be accepted as the facts of the situation, and the executives should
revise their plans in the light of these changing forces.
Types of Control
Most control methods can be grouped into one of the two basic types:
1. Future-oriented controls
These are also known as steering controls or feed-forwards controls and are
designed to measure results during the process so that action can be taken before
the job is done or the period is over. They serve as warning-posts principally to direct
attention rather than to evaluate e.g., Cash flow analysis, fund flow analysis, network
planning etc.
2. Past-oriented controls
These are also known as post-action controls and measure results after the process.
They examine what has happened in a particular period in the past. These control
can be used to plan future behavior in the light of past errors and successes.
Essentials of Effective Control Systems
1. Suitable. The control system should be appropriate to the nature and needs of the
activity. A large firm calls for controls different from those needed for a small firm. In
other words, control should be tailored to fit the needs of organization. The flow of
information concerning current performance should correspond with the
organizational structure employed. If a superior is to be able to control overall
operations, he must find a pattern that will provide control for individual parts.
Budget, quotas and other techniques may be useful in controlling separate
departments.
2. Timely and forward looking. The control system should be such as to enable the
subordinates to inform their superiors expeditiously about the threatened deviations
and failures. The feedback system should be as short and quick as possible. If the
control reports are not directed at future, they are of no use as they will not be able
to suggest the types of measures to be taken to rectify the past deviations. A proper
system of control should be enable the manager concerned to think of plan for
future also.
3. Objective and Comprehensive. The control system should be both objective, and
understandable. Objective controls specify the expected results in clear and definite
terms and leave little room for argument by the employees. This is necessary both
for the smooth working and the effectiveness of the system.
4. Flexible. The control system should be flexible so that it can be adjusted to suit the
needs of any change in the environment. A sound control system will remain
workable even when the plans change or fail outright. It must be responsive to
changing conditions. It should be adaptable to new developments including the
failure to control system itself. Plans may call for an automatic system to be backed
up by a human system that would operate in an emergency.
5. Economical. Economy is another requirement of every control. The benefit derived
from a control system should be more than the cost involved in implementing it. A
small company cannot afford the elaborate control system used by large company.
A control system is justifiable if the savings anticipated from it and exceed the
expected costs in working.
6. Acceptable to Organization Members. The system should be acceptable to
organization members. When standards are set unilaterally by upper level
managers, there is a danger that employees will regard those standards as
unreasonable or unrealistic.
7. Motivate people to high performance. A control system is most effective when it
motivates people to high performance. Since most people respond to a challenge,
successfully meeting to tough standard . However, if a target is so tough that that it
seems impossible to meet, it will be more likely to discourage than to motivate effort.
8. Corrective Action. Merely pointing of deviations is not sufficient in a good control
system. It must lead to corrective action to be taken to check deviations from
standard through appropriate planning, organizing and directing. In the words of
Koontz and O’Donnell, “An adequate control system should disclose where failure is
occurring, who is responsible for them and what should be done about them.” A
control system will be of little use unless it can generate the solution to the problem
responsible for deviations from standards.
9. Reflection of Organization Pattern. Organization is not merely a structure of duties
and function, it is also an important vehicle of control. In enforcing control the
efficiency and the effectiveness of the organization must clearly brought out.
10. Human Factor. A good system of control should find the persons accountable for
results, whenever large deviations takes place. They must be guided and directed if
necessary.
11. Direct control. Any control system should be designed to maintain direct contact
between the controller and controlled. Even when there are a number of control
systems provided by staff specialists, the foreman at the first level is still important
because he has direct knowledge of performance.
12. Focus on Strategic Points. A good system of control not only point out the
deviations or exceptions but also pinpoints them where they are important or
strategic to his operations.
Scope of Control
The scope of control is very wide. A well designed plan of control (or control system) covers
almost all management activities. According to Holden, Fish and Smith, the main areas of
control are as follows:
1. Control over policies. The success of any business organization to a large extent,
depends upon, how far its policies are implemented. Hence the need of control over
policies is self-evident. In many enterprises, policies are controlled through policy
manuals.
2. Control over organization. Control over organization is accomplished through the
development of organization chart and organizational manual. Organizational
manual attempts at solving organizational problems and conflicts making long-range
organization planning possible, enabling the rationalization of organization structure,
helping in proper designing of organization and department/
3. Control over personnel. The statement that ‘Management is getting the work done
through people’ underlies sufficiently the importance of control of personnel. All
employees working at different levels must perform their assigned duties well and
direct their efforts in controlling their behavior. Personal Director or Personnel
Managers control plan for having control over personnel.
4. Control over wages and salaries. Such type of control is done by having
programme of job evaluation and wage and salary analysis. This work is either done
by personnel department or industrial engineering department. Often a wage and
salary committee is constituted to help these departments in the task of controlling
wages and salaries.
5. Control over costs. Control cost is exercised by the cost accountant, by setting cost
standards for material , labour and overheads and making comparison of actual cost
data with standard cost. Cost control is supplemented by budgetary control
systems.
6. Control over methods. Control over methods is accomplished by conducting
periodic analysis of each department. The function is performed, methods adopted
and time devoted by every employee is studied with a view to eliminate non-
essential motions, functions and methods.
7. Control over capital expenditures. It is exercised through a system of evaluation
of projects, ranking of projects in terms of their rank power and appropriate capital to
various projects. A capital budget is prepared for the whole firm. A capital budgeting
committee reviews the project proposes and approves the projects of advantages to
firm. Capital budgeting, project analysis, break-even analysis, study of cost capital,
etc. are some popular techniques of control over capital expenditures.
8. Control over research and development. Such activities are highly technical in
nature so no direct control is possible over them. By improving the ability and
judgment of research staff through training programmes and other devices, an
indirect control is exercised on them. Control is also exercised by having a research
on the business.
9. Control over external relations. Public relations department is responsible for
controlling the external relations of the enterprise. It may prescribe certain measures
for other operating departments which are instrumental in improving external
relations.
10. Overall control. It is effected through budgetary control. Master plan is prepared for
overall control and all the departments are made involved in this procedure. For
effective control through the master plan, active support of the top management is
essential.
Review Questions:
1. Define control. What are the elements of control? How do managers exercise control?
2. Discuss the concept and process of control. State the requirements of an effective
control system.
3. Why is control a must in business management? What are the requirements of an
effective control system?
4. “The essence of control is action”. Comment.
5. “The controlling function of management is similar to the function of the thermostat in a
refrigerator”. Comment.
References:

Module 8
STAFFING
1. Explain the meaning and importance of staffing.

2. Discuss the staffing process.
Staffing
Staffing refers to the managerial function of employing and developing human resources for
carrying out the various managerial and non-managerial activities in an organization. This
involves determining the manpower requirement, and the methods of recruiting, selecting,
training and developing the people for various positions created in the organization.
This, in fact happens to be a continuous process because the organization’s need to retain and
update its personnel is a never ending exercise. The managers have to keep a regular watch on
the number and composition of the personnel needed by the organization, because the
requirement of manpower keeps on changing and expanding with the expansion of activities
and additions of new departments and work units. Not only that, at any point of time, some
people will be leaving, retiring, getting promotion or transferred. The vacancies thus created
have to be filled up.
It may be noted that staffing function is an integral part of human resource management and, in
its wider sense, also includes the activities of determining the remuneration of workers,
appraising their performance, and deciding on their promotion, transfers, etc. The managerial
function of staffing involves manning the organization structure through proper and effective
selection, appraisal and development of the personnel to fill the roles assigned to the
employers/workforce.
Importance of Staffing
All of us know that it is the people in every organization who run the show successfully. For
example, if you do not have good salesman you cannot sell well even if your product is
good. Similarly, you may have the best quality raw materials, machines etc. but the quality
of the product is not assured unless, you have good workers engaged in the production
process. Staffing thus, as a function, is very important as it is through this process that we
get right persons for the organization and ensure that they stick to the organization. The
benefits of good staffing are as follows.
(a) It helps in getting right people for the right job at the right time. The function of staffing
enables the manager to find out as to how many workers are required and with what
qualifications and experience.
(b) Staffing contributes to improved organizational productivity. Through proper selection the
organization gets quality workers, and through proper training the performances level of the
workers can be improved.
(c) It helps in providing job satisfaction to the employees keeping their morale high. With
proper training and development programmes their efficiency improves and they feel
assured of their career advancements.
(d) Staffing maintains harmony in the organization. Through proper staffing, individuals are
not just recruited and selected but their performance is regularly appraised and promotions
made on merit. For all these, certain rules are made and are duly communicated to all
concerned. This fosters harmony and peace in the organization.
Staffing Process
1. Manpower requirements- The very first step in staffing is to plan the manpower
inventory required by a concern in order to match them with the job requirements and
demands. Therefore, it involves forecasting and determining the future manpower needs
of the concern.
2. Recruitment- Once the requirements are notified, the concern invites and solicits
applications according to the invitations made to the desirable candidates.
3. Selection- This is the screening step of staffing in which the solicited applications are
screened out and suitable candidates are appointed as per the requirements.
4. Orientation and Placement- Once screening takes place, the appointed candidates are
made familiar to the work units and work environment through the orientation
programmes. placement takes place by putting right man on the right job.
5. Training and Development- Training is a part of incentives given to the workers in
order to develop and grow them within the concern. Training is generally given according
to the nature of activities and scope of expansion in it. Along with it, the workers are
developed by providing them extra benefits of in-depth knowledge of their functional
areas. Development also includes giving them key and important jobs as a test or
examination in order to analyze their performances.
6. Remuneration- It is a kind of compensation provided monetarily to the employees for
their work performances. This is given according to the nature of job- skilled or unskilled,
physical or mental, etc. Remuneration forms an important monetary incentive for the
employees.
7. Performance Evaluation- In order to keep a track or record of the behavior, attitudes as
well as opinions of the workers towards their jobs. For this regular assessment is done to
evaluate and supervise different work units in a concern. It is basically concerning to
know the development cycle and growth patterns of the employees in a concern.
8. Promotion and transfer- Promotion is said to be a non- monetary incentive in which the
worker is shifted from a higher job demanding bigger responsibilities as well as shifting
the workers and transferring them to different work units and branches of the same
organization.
Review Questions:
1. Explain the meaning of the term “Staffing”.

2. Describe the importance of staffing.
3. Discuss the staffing process.
References:
Business Management. (2017, October 23). Retrieved from

http://download.nos.org/srsec319new/319EL12.pdf
Module 9
WORKING ENVIRONMENT AND

MANAGEMENT PRACTICES
1. Understand the relation between organizational culture and corporate context.

2. Distribution of organizational culture to the management change.
3. Analyze elements of organizational culture.
Introduction
When we talk about culture, we are typically referring to the pattern of development
reflected in a society’s system of knowledge, ideology, values, laws social norms and day-
to-day rituals. Accordingly, culture varies from one society to another. The word ”culture”
has been derived metaphorically from the idea of “cultivation” the process of tilling and
developing land. Thus, culture can be considered as a constellation of factors that are
learned through are interaction with the environment.
Culture
The organizational system is a system of shared beliefs and attitude that develop within an
organization and guides the behavior of its members. There are clear-cut guidelines as to
how employees are to behave generally within organization. The employee need to learn
how the particular enterprise does things.
A few definitions on the term organizational culture are given below:
According to Lary Senn, the corporate culture “consists of the norms, values and unwritten
rules of conduct of an organization as well as management styles, priorities, beliefs and
inter-personal behavior that prevail. Together they create a climate that influences how well
people communicate, plan and make decisions.”
Joanne Martin defines culture in organization in the following words, “As individuals come
into contact with organizations, they come into contact with dress norms, the organizational
formal rules and procedures, its formal codes of behavior rituals and so on. These elements
are some of the manifestations of organizational culture.”
Edgar Schein defines organizational culture as “a pattern of basic assumptions- invented,

discover or develop by a given group as it learns to cope with its problem of external
adaptation and internal integration- that has worked well enough to be considered valuable
and, therefore to be taught to new members as the correct way to perceive, think and fell in
relation to those problems”.
From the above definitions, culture may be considered as the general pattern of behavior,
shared beliefs, and values that organizational members have in common. Culture involves
the learning an transmitting of knowledge, beliefs and patterns of behavior over a period of
time. Culture can be inferred from what people say, do and think within an organizational
setting. It often sets tight tone for the organization and establishes implied rules for the way
people should behave. It is important to recognize that culture is learned and helps people
in their efforts to interact and communicate with others in the society. When placed in a
culture where values and beliefs are different, some people have a great deal of difficulty in
adjusting.
Basic Elements of Culture
From the above definitions it is clear that culture is how an organization has learned to deal
with its environment. It is a complex mixture of assumptions, behavior, myths and other
ideas that fit together to define what it means to work in a particular organization. Edgar H.
Schein suggest that culture exists in three levels: artefacts, espoused values and underlying
assumptions.
Organizational Culture
Research conducted by D.R. Denison and A.K. Mishra, show that organizational culture is
related to organizational success. Organizational culture is a framework that guides day-ti-
day behavior and decision making for employees and directs their actions towards
completion of organizational goals. Culture must be aligned with the other parts of the
organizational actions, such as planning, organizing, leading and controlling; indeed, if
culture is not aligned with these tasks, then the organization is in for difficult times.
The figure below shows that culture based on adaptability; involvement, a clear mission and
consistency can help companies achieve higher sales growth, return on assets, profits,
quality and employee satisfaction.
Source: Edgar H. Schein, “Organizational Culture and Leadrship” (2 nd Edition) Jossey-Bass
Publishers, San Francisco (1992) page 17
Figure 9.1 Schein’s Level of Culture
1. Artefacts. According to Schein, Artefacts are the first level of organizational culture.
Artefacts are the things that come together to define a culture and reveal what the
culture is about to those who pay attention to them. They include products, services, and
even behavior patterns of the members of an organization. Schein has defined Artefacts
as things that “one sees, hear, and feels when one encounters a new group with an
unfamiliar culture”.
2. Espoused Values. Espoused values are the second level of organizational culture.
Values are things worth doing, or the reasons for doing what we do. Values are the
answers to the “why” questions. For examples, why are you reading this book? To know
more about organization behavior. Why is that important? To be a better HR Manager.
Why do you need more money? To fulfill my wife’s desire to own a farm house. Such
questions go on and on, until you reach the point where you no longer want something
for the sake of something else. At this point, we have arrived at a value. Corporations
have values, such as size, profitability or making a quality product.
3. Basic Assumptions. The third level of organizational culture, are the beliefs that
organization members take for granted. Culture prescribes “the right way to do things” at
an organization, often through unspoken assumptions.
Characteristics of Organizational Culture
Organizational culture has a number of important characteristics. Fred Luthans has given
six characteristics which is given below:
1. Observed behavioral regularities. When organizational participants interact with

one another, they use common language, terminology, and rituals related to
deference and demeanor.
2. Norms. Standards of behavior exist, including guidelines on how much work to do,
which in many organizations some down to “Do not do too much; do not do too little.”
3. Dominant values. There are major values that the organization advocated and
expects the participants to share. Typical examples are high product quality, low
absenteeism, and high efficiency.
4. Philosophy. There are policies that set forth the organization’s belief about how
employees and/or customers are to be treated.
5. Rules. There are strict guidelines related to getting along in the organization.
Newcomers must learn “ropes” in order to be accepted as full-fledged members of
the group.
6. Organizational climate. This is an overall “feeling” that is conveyed by the physical
layout, they way participants interact, and the way members of the organization
conduct themselves with customers or other outsiders.
Successful Organizational Culture
Source: D.R Denison and A.K. Mishra, “Toward a Theory of Organizational Culture and
Effectiveness”, Organization Science Vol. 6 (1195) Pages 204-223.
Figure 9.2 Successful Organizational Cultures
Note:
 Adaptability: Is the ability to notice and respond to changes in the organization’s

environment.
 Involvement: in culture that promotes higher level of employment in decision-making
employees feel a greater sense of ownership and responsibility.
 Clear mission: Mission is a company’s purpose or reason for existing. In organizational
cultures in which there are is a clear organizational vision, the organization’s strategic
purpose and direction are apparent to everyone in the company.
 Consistency: In consistent organizational cultures, the company actively defines and
teaches organizational values, beliefs and attitudes. Consistent organizational cultures
are also called strong cultures, because the core beliefs and widely shared and strongly
held.
Organizational cultures are important to a firm’s success for several reasons.
1. They give an organizational identity to employees- a defining vision of what the

organizational represents. When managers are uncertain about their business
environments, the vision helps guide the discussions, decisions, and behavior of the
people in the company.
2. Organizational culture are an important source of stability and continuity to the
organization, which provide a sense of security to its members.
3. Knowledge of the organizational culture helps newer employees interpret what goes on
inside the organization, by providing the important context for events that would
otherwise seems confusing.
4. Culture helps to stimulate employees enthusiasm for their tasks by recognizing and
rewarding high-producing ad creative individuals, thereby identifying them as role
models to emulate.
Corporate Culture and Organizational Success
Artefacts, espoused values, and basic assumptions form the basics of understanding
organizational culture. Organizational culture is a framework that guides day-to-day to
behavior of employees. Culture is what gives birth to and defines the organizational goals.
John Kotter and James Heskett, researchers of Harvard Business School, tried to determine
which factors make some organizational cultures more successful than others.
Source: John P. Kotter and James L. Heskett, “Corporate Culture and Performance” The Free Press,
New York (1992) page 5
Figure 9.2 Corporate Culture and Performance
Kotter and Heskett identified two levels of culture.
1. Visible Level: are the behavior patterns and styles of employees.

2. Invisible Level: are the shared values and assumptions that are held over a long period
of time.
Kotter and Heskett, argue that changes in the visible level (i.e., in behavior patterns and styles)
overtime can lead to change in the invisible level (i.e., more deeply held beliefs). The study had
four main conclusions:
1. Corporate culture can have a significant impact on a firm’s long-term economic

performance.
2. Corporate culture will probably be an even more important factor in determining the
success or failure of firms in the next decade.
3. Corporate culture that inhibits strong long-term financial performance are not rare; they
develop easily, even in firms that are full of reasonable and intelligent people.
4. Although tough can change, corporate cultures can be made more performance
enhancing.
The Harvard Researchers, Kotter and Heskett discovered in their research that some corporate
cultures are good at adapting to changes and preserving the performance of the organization,
while others are not. They distinguished between “adaptive” and “un-adaptive” corporate
cultures, which is summarized in the figure below:
Figure 9.3 Adaptive vs Un-adaptive Corporate Cultures
Changing Organizational Culture
If organizations are to consciously create and manage their cultures they must be able to
take their employees into consideration. There are problems that managers face when they
go about the business of changing organizational culture. Changing organizational cultures
takes patience, vigilance, and a focus on changing the parts of an organizational culture that
managers can control:
1. Behaviors: one way of changing corporate culture is to use behavioral addition or

behavioral substitution to establish new patterns of an organizational culture that
managers can control:
a) Behavioral Addition: Behavioral Addition is the process of having managers

and performer new behaviors that are central to and symbolic if the new
organizational culture that a company wants to create.
b) Behavioral Substitution: Behavioral Substitution is the process having

managers and employees perform new behavior central to the “new”
organizational culture in place of behaviors that were central; to the “old”
organizational culture.
2. Visible Artefacts: Another way in which managers can begin to change corporate
culture is to change visible artefacts of their old culture. Visible artefacts are visible
signs of an organization’s culture, such as the office design and lay-out, company
dress codes, and company benefits and perks like stock options, personal parking
spaces, etc. These need to change keeping the new corporate culture in mind.
Review Questions:
1. Define culture.
2. What are the basic elements of culture.
3. Explain the influence of a leader in organization culture
4. Explain the characteristics of organizational culture.
References:

Module 10
HUMAN RESOURCE MANAGEMENT
1. Describe what is meant by Human Resource Management.
2. Discuss the core elements, objectives, scope and role of Human Resource
Management.
3. Describe Strategic Human Resource Management.
4. Discuss Human Relation Planning.
5. Differentiate Recruitment and Selection.
Introduction
Human Resource Management is management function that helps managers to recruit,

select, train and develop members for an organization. Obviously HRM is concerned with
the people’s dimensions in organizations. HRM refers to set of programs, functions, and
activities designed and carried out.
Core elements of HRM
 People: Organizations mean people. It is the people who staff and manage
organizations.
 Management: HRM involves application of management functions and principles
for acquisitioning, developing, maintaining and remunerating employees in
organizations.
 Integration & Consistency: Decisions regarding people must be integrated and
consistent.
 Influence: Decisions must influence the effectiveness of organization resulting into
betterment of services to customers in the form of high quality products supplied at
reasonable cost.
 Applicability: HRM principles are applicable to business as well as non-business
organizations too, such as education, health, recreation and the like.
Objectives of HRM:
1. Societal Objectives: To be ethically and socially responsible to the needs and

challenges of the society while minimizing the negative impact of such demands
upon the organization.
2. Organizational Objectives: To recognize the role of HRM in bringing about

organizational effectiveness. HRM is only means to achieve to assist the
organization with its primary objectives.
3. Functional Objectives: To maintain department’s contribution and level of
services at a level appropriate to the organization’s needs.
4. Personal Objectives: To assist employees in achieving their personal goals, at

least in so far as these goals enhance the individual’s contribution to the
organization. This is necessary to maintain employee performance and
satisfaction for the purpose of maintaining, retaining and motivating the
employees in the organization.
Scope of HRM:
From Entry to the Exit of an employee in the organization. Scope of HRM can be described
based on the following activities of HRM. Based on these activities we can summarize the
scope of HRM into 7 different categories as mentioned below after the activities.
HRM Activities
1. HR Planning
2. Job Analysis
3. Job Design
4. Recruitment & Selection
5. Orientation & Placement
6. Training & Development
7. Performance Appraisals
8. Job Evaluation
9. Employee and Executive Remuneration
10. Motivation
11. Communication
12. Welfare
13. Safety & Health
14. Industrial Relations
7 Categories of Scope of HRM
1. Introduction to HRM
2. Employee Hiring
3. Employee and Executive Remuneration
4. Employee Motivation
5. Employee Maintenance
6. Industrial Relations
7. Prospects of HRM
Role of HRM
1. Advisory Role: HRM advises management on the solutions to any problems

affecting people, personnel policies and procedures.
a) Personnel Policies: Organization Structure, Social Responsibility,

Employment Terms & Conditions, Compensation, Career & Promotion,
Training & Development and Industrial Relations.
b) Personnel Procedures: Relating to manpower planning procedures,

recruitment and selection procedures, and employment procedures,
training procedures, management development procedures,
performance appraisal procedures, compensation procedures,
industrial relations procedures and health and safety procedures.
2. Functional Role: The personnel function interprets and helps to communicate

personnel policies. It provides guidance to managers, which will ensure that
agreed policies are implemented.
3. Service Role: Personnel function provides services that need to be carried out
by full time specialists. These services constitute the main activities carried out
by personnel departments and involve the implementation of the policies and
procedures described above.
Role of HR Managers (Today)
1. Humanitarian Role: Reminding moral and ethical obligations to employees.
2. Counselor: Consultations to employees about marital, health, mental, physical

and career problems.
3. Mediator: Playing the role of a peacemaker during disputes, conflicts between

individuals and groups and management.
4. Spokesman: To represent of the company because he has better overall picture

of his company’s operations.
5. Problem Solver: Solving problems of overall human resource management and
long-term organizational planning.
6. Change Agent: Introducing and implementing institutional changes and installing

organizational development programs.
7. Management of Manpower Resources: Broadly concerned with leadership

both in the group and individual relationships and labor-management relations.
Role of HR Managers (Future)
1. Protection and enhancement of human and non-human resources

2. Finding the best way of using people to accomplish organizational goals
3. Improve organizational performance
4. Integration of techniques of information technology with the human resources
5. Utilizing behavioral scientists in the best way for his people
6. Meeting challenges of increasing organizational effectiveness
7. Managing diverse workforce
Strategic Human Resource Management
Strategy
“Strategy is a way of doing something. It includes the formulation of goals and set of action
plans for accomplishment of that goal.”
Strategic Management
“A Process of formulating, implementing and evaluating business strategies to achieve
organizational objectives is called Strategic Management”
Definition of Strategic Management
“Strategic Management is that set of managerial decisions and actions that determine the
long-term performance of a corporation. It includes environmental scanning, strategy
formulation, strategy implementation and evaluation and control.”
The study of strategic management therefore emphasizes monitoring and evaluating

environmental opportunities and threats in the light of a corporation’s strengths and
weaknesses.
Steps in Strategic Management
1. Environmental Scanning: Analyze the opportunities and threats in external
environment.
2. Strategy Formulation: Formulate strategies to match strengths and

weaknesses. It can be done at corporate level, business unit Level and functional
level.
3. Strategy Implementation: Implement the strategies.
4. Evaluation & Control: Ensure the organizational objectives are met.
Importance and Benefits of Strategic Management
 Allows identification, prioritization and exploration of opportunities.

 Provides an objective view of management problems.
 Represents framework for improved co-ordination and control
 Minimizes the effects of adverse conditions and changes
 Allows major decisions to better support established objectives
 Allows more effective allocation of time and resources
 Allows fewer resources and lesser time devoted to correcting ad hoc decisions
 Creates framework for internal communication
 Helps to integrate the individual behaviors
 Provides basis for the clarification of responsibilities
 Encourages forward thinking
 Encourages favorable attitude towards change.
Human Resource Planning
Human Resource Planning is a process, by which an organization ensures that it has the
right number and kind of people at the right place, at the right time, capable of effectively
and efficiently completing those tasks that will help the organization achieve its overall
objectives.
Needs and Importance of Human Resource Planning
 Forecast future personnel needs: To avoid the situations of surplus or deficiency

of manpower in future, it is important to plan your manpower in advance. For this
purpose a proper forecasting of futures business needs helps you to ascertain our
future manpower needs. From this angle, HRP plays an important role to predict the
right size of manpower in the organization.
 Cope with change: HRP enables an enterprise to cope with changes in competitive
forces, markets, technology, products and government regulations. Such changes
generate changes in job content, skills demands and number of human resources
required.
 Creating highly talented personnel: Since jobs are becoming highly intellectual
and incumbents getting vastly professionalized, HRP helps prevent shortages of
labor caused by attritions. Further technology changes would further upgrade or
degrade jobs and create manpower shortages. In these situations only accurate
human resource planning can help to meet the resource requirements. Further HRP
is also an answer to the problems of succession planning.
 Protection of weaker sections: A well-conceived personnel planning would also

help to protect the interests of the SC/ST, physically handicapped, children of
socially oppressed and backward classes who enjoy a certain percentage of
employments notwithstanding the constitutional provisions of equal opportunity for
all.
 International strategies: International expansion strategies largely depend upon

effective HRP. With growing trends towards global operations, the need for HRP
further becomes more important as the need to integrate HRP more closely into the
organization keeps growing. This is also because the process of meeting staffing
needs from foreign countries grows in a complex manner. Foundation of personnel
functions: HRP provides essential information for designing and implementing
personnel functions such as recruitment, selection, personnel development, training
and development etc.
 Increasing investments in HR: Another importance is the investment that an

organization makes in human capital. It is important that employees are used
effectively throughout their careers. Because human assets can increase the
organization value tremendously as opposed to physical assets.
 Resistance to change & move: The growing resistance towards change and move,
self evaluation, loyalty and dedication making it more difficult to assume that
organization can move its employees everywhere. Here HRP becomes very
important and needs the resources to be planned carefully.
Recruitment and Selection
Employees are hired against the job vacancies. Based on the manpower
demand and supply forecasts made, hiring of employees is initiated based on supply
forecasts. For this internal and external sources of manpower are utilized. A formal selection
board is established to interview and select the best of the candidates for the required
vacancies. Finally the selected employees also need to be placed on proper jobs. Here
some companies recruit employees for specific jobs while others recruit fresh trainees in
large number and train them for future manpower needs.
Types of Recruitment
1. Internal Recruitment - is a recruitment which takes place within the concern or

organization. Internal sources of recruitment are readily available to an organization.
Internal sources are primarily three - Transfers, promotions and Re-employment of ex-
employees.
Internal recruitment may lead to increase in employee’s productivity as their motivation

level increases. It also saves time, money and efforts. But a drawback of internal
recruitment is that it refrains the organization from new blood. Also, not all the manpower
requirements can be met through internal recruitment. Hiring from outside has to be
done.
Internal sources are primarily 3
a. Transfers
b. Promotions (through Internal Job Postings) and
c. Re-employment of ex-employees - Re-employment of ex-employees is one of
the internal sources of recruitment in which employees can be invited and
appointed to fill vacancies in the concern. There are situations when ex-
employees provide unsolicited applications also.
2. External Recruitment - External sources of recruitment have to be solicited from

outside the organization. External sources are external to a concern. But it involves lot of
time and money. The external sources of recruitment include - Employment at factory
gate, advertisements, employment exchanges, employment agencies, educational
institutes, labour contractors, recommendations etc.
a. Employment at Factory Level - This a source of external recruitment in which
the applications for vacancies are presented on bulletin boards outside the
Factory or at the Gate. This kind of recruitment is applicable generally where
factory workers are to be appointed. There are people who keep on soliciting
jobs from one place to another. These applicants are called as unsolicited
applicants. These types of workers apply on their own for their job. For this kind
of recruitment workers have a tendency to shift from one factory to another and
therefore they are called as “badli” workers.
b. Advertisement - It is an external source which has got an important place in
recruitment procedure. The biggest advantage of advertisement is that it covers a
wide area of market and scattered applicants can get information from
advertisements. Medium used is Newspapers and Television.
c. Employment Exchanges - There are certain Employment exchanges which are
run by government. Most of the government undertakings and concerns employ
people through such exchanges. Now-a-days recruitment in government
agencies has become compulsory through employment exchange.
d. Employment Agencies - There are certain professional organizations which
look towards recruitment and employment of people, i.e. these private agencies
run by private individuals supply required manpower to needy concerns.
e. Educational Institutions - There are certain professional Institutions which
serves as an external source for recruiting fresh graduates from these institutes.
This kind of recruitment done through such educational institutions, is called as
Campus Recruitment. They have special recruitment cells which helps in
providing jobs to fresh candidates.
f. Recommendations - There are certain people who have experience in a
particular area. They enjoy goodwill and a stand in the company. There are
certain vacancies which are filled by recommendations of such people. The
biggest drawback of this source is that the company has to rely totally on such
people which can later on prove to be inefficient.
g. Labour Contractors - These are the specialist people who supply manpower to
the Factory or Manufacturing plants. Through these contractors, workers are
appointed on contract basis, i.e. for a particular time period. Under conditions
when these contractors leave the organization, such people who are appointed
have to also leave the concern.
Employee Selection
Employee Selection is the process of putting right men on right job. It is a procedure of
matching organizational requirements with the skills and qualifications of people. Effective
selection can be done only when there is effective matching. By selecting best candidate for
the required job, the organization will get quality performance of employees. Moreover,
organization will face less of absenteeism and employee turnover problems. By selecting
right candidate for the required job, organization will also save time and money. Proper
screening of candidates takes place during selection procedure. All the potential candidates
who apply for the given job are tested.
But selection must be differentiated from recruitment, though these are two phases of
employment process. Recruitment is considered to be a positive process as it motivates
more of candidates to apply for the job. It creates a pool of applicants. It is just sourcing of
data. While selection is a negative process as the inappropriate candidates are rejected
here. Recruitment precedes selection in staffing process. Selection involves choosing the
best candidate with best abilities, skills and knowledge for the required job.
The Employee selection Process takes place in following order:
1. Preliminary Interviews- It is used to eliminate those candidates who do not meet

the minimum eligiblity criteria laid down by the organization. The skills, academic
and family background, competencies and interests of the candidate are examined
during preliminary interview. Preliminary interviews are less formalized and planned
than the final interviews. The candidates are given a brief up about the company and
the job profile; and it is also examined how much the candidate knows about the
company. Preliminary interviews are also called screening interviews.
2. Application blanks- The candidates who clear the preliminary interview are
required to fill application blank. It contains data record of the candidates such as
details about age, qualifications, reason for leaving previous job, experience, etc.
3. Written Tests- Various written tests conducted during selection procedure are
aptitude test, intelligence test, reasoning test, personality test, etc. These tests are
used to objectively assess the potential candidate. They should not be biased.
4. Employment Interviews- It is a one to one interaction between the interviewer and

the potential candidate. It is used to find whether the candidate is best suited for the
required job or not. But such interviews consume time and money both. Moreover
the competencies of the candidate cannot be judged. Such interviews may be biased
at times. Such interviews should be conducted properly. No distractions should be
there in room. There should be an honest communication between candidate and
interviewer.
5. Medical examination- Medical tests are conducted to ensure physical fitness of the
potential employee. It will decrease chances of employee absenteeism.
6. Appointment Letter- A reference check is made about the candidate selected and
then finally he is appointed by giving a formal appointment letter.
Orientation and Placement
Once the candidates are selected for the required job, they have to be fitted as per the
qualifications. Placement is said to be the process of fitting the selected person at the right
job or place, i.e. fitting square pegs in square holes and round pegs in round holes. Once he
is fitted into the job, he is given the activities he has to perform and also told about his
duties. The freshly appointed candidates are then given orientation in order to familiarize
and introduce the company to him. Generally the information given during the orientation
programme includes:
Employee’s layout
Type of organizational structure
Departmental goals
Organizational layout
General rules and regulations
Standing Orders
Grievance system or procedure
In short, during Orientation employees are made aware about the mission and vision of the
organization, the nature of operation of the organization, policies and programmes of the
organization.
The main aim of conducting Orientation is to build up confidence, morale and trust of the
employee in the new organization, so that he becomes a productive and an efficient
employee of the organization and contributes to the organizational success.
Training of Employees
Training of employees takes place after orientation takes place. Training is the process of
enhancing the skills, capabilities and knowledge of employees for doing a particular job.
Training process moulds the thinking of employees and leads to quality performance of
employees. It is continuous and never ending in nature.
Importance of Training
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.
Training is given on four basic grounds:
1. New candidates who join an organization are given training. This training familiarize
them with the organizational mission, vision, rules and regulations and the working
conditions.
2. The existing employees are trained to refresh and enhance their knowledge.
3. If any updations and amendments take place in technology, training is given to cope
up with those changes. For instance, purchasing a new equipment, changes in
technique of production, computer implantment. The employees are trained about
use of new equipments and work methods.
4. When promotion and career growth becomes important. Training is given so that
employees are prepared to share the responsibilities of the higher level job.
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.
Review Questions:
1. Define culture.
2. What are the basic elements of culture.
3. Explain the influence of a leader in organization culture
4. Explain the characteristics of organizational culture.
References:

Module 11
HUMAN RELATIONS
1. Learn about the human relations approach.
2. Learn about the key people in the human relations approach.
3. Learn about the implication of the human relations approach.
Introduction
Not all human relations problems involve life-or-death decisions, but some do. The
importance of human relations in our personal and work lives cannot be exaggerated. The
skills that are necessary for good relations with others are the most important skills anyone
can learn in life.
Human relations is the skill or ability to work effectively through and with other people.
Human relations includes a desire to understand others, their needs and weaknesses, and
their talents and abilities. For anyone in a workplace setting, human relations also involves
an understanding of how people work together in groups, satisfying both individual needs
and group objectives. If an organization is to succeed, the relationships among the people in
that organization must be monitored and maintained.
In all aspects of life, you will deal with other people. No matter what you do for a living or
how well you do it, your relationship with others is the key to your success or failure. Even
when someone is otherwise only average at a job, good human relations skills can usually
make that person seem better to others. Sadly, the opposite is also true: poor human
relations skills can make an otherwise able person seem like a poor performer. A doctor
who respects patients, a lawyer who listens carefully to clients, a manager who gets along
well with others in the workplace: all of these people will most likely be thought of by others
as successful.
Key People in Human Relations
a) Elton Mayo
Elton Mayo was a Harvard Professor who had a huge interest in Federick Taylor’s work. He
was interested in learning about ways to increase productivity. In 1924, Elton Mayo and his
protégé Fritz Roethlisberger were awarded a grant by the National Research Council (NRC)
of the National Academy of Science to study productivity and lighting at the Hawthorne
Works of the Western Electric Company. The Hawthorne experiments, as Elton Mayo’s
body of work became known as, are a series of experiments in human relations conducted
between 1924 and 1932 at Western Electric Company's Hawthorne Works in Cicero, Illinois.
Illumination Study
The first study at Hawthorne Works was designed to explicitly test various lighting levels and
how the lighting levels affected worker productivity. The original hypothesis of the
illumination study was the as lighting increased worker productivity would increase. The
opposite was also predicted, as lighting decreased, worker productivity would decrease. The
original push behind the study was the electric power industry who believed that if they
could demonstrate the importance of artificial lighting, organizations around the country
would adopt artificial lighting in place of natural lighting to ensure worker productivity.
The research began in the fall of 1924 and continued through the spring of 1927 as three
different groups of workers were put through the experiment: relay assembly workers, coil
winding workers, and inspectors. Roethlisberger, F. J., & Dickson, W. J. (1939).
Management and the worker. Cambridge, MA: Harvard University Press. After three
different testing conditions were concluded, the researchers were perplexed by their
findings. It did not matter if the researchers increased or decreased light in the company; the
workers’ productivity increased. This finding was even true when the researchers turned
down the lights to wear the workers could barely see. The researchers later realized that
lighting did not affect worker productivity, rather the researchers’ presence had an impact.
That's why, production outcomes were similar to the lighting study because workers were
influenced by the attention they got by the researchers.Roethlisberger, F. J., & Dickson, W.
J. (1939). Management and the worker. Cambridge, MA: Harvard University Press. This
incident was labeled the Hawthorne Effect.
Relay Assembly Study
In order to further clarify the impact of a variety of factors on productivity, a second set of
tests were designed to evaluate rest periods and work hours on productivity. The goal of this
study was really to determine how fatigue impacted worker productivity. Six women
operators volunteered to participate in the relay assembly study. The women were given
physical examinations at the beginning of the study and then every six weeks in order to
ensure that the experiment was not adversely affecting their health.
The six women were isolated in a separate room away from other Hawthorne workers
where it was easier to measure experimental conditions like output and quality of work,
temperature, humidity, etc.The specific task in the relay assembly test was an
electromagnetic switch that consisted of 35 parts that had to be put together by hand.
The experimenters introduced a variety of changes to the workers’ environment: pay rates,
bonuses, lighting, shortened workdays/weeks, rest periods, etc. Surprisingly, as the test
period quickly spanned from an original testing period of a couple of months to more than
two years, no matter what the experimenters did, productivity increased. In fact, productivity
increased over 30 percent during the first two and a half years of the study and then
plateaued during the duration of the tests. The physicals the workers received every six
weeks also showed that the women had improved physical health and their absenteeism
decreased during the study period. Even more important, the women regularly expressed
increased job satisfaction.
Once again the researchers were stumped. The researchers quickly tried to determine what
was causing the increased productivity. The researchers quickly ruled out all of the
manipulated conditions and settled on something considerably more intangible, employee
attitudes.
Employee Interview Study
During the middle of the relay assembly studies, a group of Harvard researchers led by
Elton Mayo and F. J. Roethlisberger joined the team of engineers at Hawthorne Works to
add further expertise and explanation to the studies underhand. One of the most important
contributions Mayo makes is during the follow-up to the illumination and relay studies when
they interviewed workers at Hawthorne Works.
From 1928 to 1931 the Harvard researchers interviewed over 21,000 workers in attempt to
gage worker morale and determine what job factors impacted both morale and job
satisfaction. The researchers predicted, based on the illumination and relay studies, that if
they could increase worker morale and satisfaction then the workers would be more efficient
and productive as well. The interview study definitely posed some new challenges for the
researchers. Mayo not that the “experience itself was unusual; there are few people in this
world who have had the experience of finding someone intelligent, attentive, and eager to
listen without interruption to all that he or she has to say.”Mayo, E. (1945). The social
problems of an industrial civilization. Boston, MA: Harvard Business School, pg. 163. To this
end, Mayo trained a series of interviewers to listen and not give advice as they took
descriptive notes of what was being told to them by the workers.
After the interviewing study was completed, the researchers attempted to make sense of the
mounds of data they had accumulated. One interesting side effect was noted. After being
interviewed by a researcher about the employee’s working conditions, the employee
reported increased satisfaction. Ultimately, the vary act of being asked about their working
conditions made the employees more satisfied workers and more ultimately more
productive. One of the interesting outcomes of this study is the practice of employee
reaction surveys, which are still widely used in organizations today.
Bank Wiring Observation Study
One of the findings of the interview study was that workers had a tendency of creating an
informal standard for output that was predetermined by the group but never clearly stated.
These productivity standards were never really in-line with the ones communicated by either
efficiency engineers or managers. To examine the influence that informal group rules had
on worker productivity, Mayo and his team created the bank wiring observation study.
Fourteen bank wiremen (nine wirers, three solderers, and two inspectors) were placed in a
separate room and told to complete their individual tasks. The men in the room were putting
together automatic telephone exchange components that consisted of 3,000 to 6,000
individuals terminals that had to be wired. The workers spent a lot of time on their feet. To
ensure that the men were not affected by the Hawthorne effect, the researchers never let
the men know they were being studied. However, a researcher named W. Lloyd Warner, a
trained anthropologist with an interest in group behavior, was present in the room, but he
acted like a disinterested spectator and had little direct interaction with the wiremen. In the
experimental condition, pay incentives and productivity measures were removed to see how
the workers would react. Over time, the workers started to artificially restrict their output and
an average output level was established for the group that was below company targets.
Interestingly enough, the man who was considered the most admired of the group also
demonstrated the most resentment towards management and slowed his productivity the
most, which led to the cascading productivity of all of the other men in the group.
The researchers ultimately concluded that the wiremen created their own productivity norms
without ever verbally communicating them to each other. For the first time, the researchers
clearly had evidence that within any organization there exists an informal organization that
often constrains individual employee behavior. The bank wiring observation study was
stopped in spring of 1932 as layoffs occurred at Hawthorne Works because of the
worsening Great Depression.
b) Kurt Lewin
Kurt Lewin was another person who explored the human relations side to organizational
communication. Lewin was a refugee from Nazi Germany. He adored democracy and had a
passion for applying psychology to improving the world. Tannenbaum, A. S. (1966). Social
psychology of the work organization. Belmont, CA: Wadsworth, p. 86. During World War II,
Lewin was at the University of Iowa. The U.S. government asked him to research ways to
advise against housewives from purchasing meat, because there was such a short supply.
Lewin, K. (1958). Group decision and social change. In E. F. Maccoby, T. M. Newcomb, and
E. L. Hartley (Eds.), Readings in social psychology (pp. 197–211). New York, NY: Holt,
Rinehart, & Winston. Lewin felt that there was a huge barrier because housewives were
expected to buy meat because of their families, friends, and parents, who anticipated to be
served meat. Lewin hypothesized that if housewives were able to talk with other housewives
about their meat buying tendencies, that they would be able to overcome this barrier. Lewin
and his cohorts performed the experiments and found support for his hypothesis.
Housewives who were able to talk about their meat purchasing with other housewises were
ten times more likely to change their behavior.
Lewin felt like he could analyze these same principles in an organization. Lester Coch and
John R.P. FrenchCoch, L., & French, J. R. P., Jr. (1948). Overcoming resistance to change.
Human Relations, 1, 512–532. found that workers in a pajama factory were more likely to
espouse new work methods if they were given the opportunity to discuss them and exercise
some influence on the decisions that affected their jobs. These new findings helped
organizations realize the benefits of group formation, development, and attitudes. Lewin’s
ideas helped influence future organizational communication theorists by emphasizing the
importance of communication. Lewin helped identify the fact that workers want to have a
voice and provide input in their tasks.
Review Questions:
1. Define the advantages and disadvantages of the human relations approach.

2. Discuss how group dynamics impacts behavior outcomes. Is this true from your
experience?
3. Do you believe that group dynamics are important in an organization? Why or why not?
References:
Human Relation Theories. (2017, October 23). Retrieved from

https://2012books.lardbucket.org/books/an-introduction-to-organizational-
communication/s05-02-human-relations-theories.html
Module 12
INTERNATIONAL AND GLOBAL

MANAGEMENT
1. Describe what is International Business.

2. Discuss the feature of International Business.
3. Differentiate the approaches of International Management.
Introduction
There are two ways of looking at the term ‘international business’. One is the ‘action’ and the
other is the ‘actor’. As an ‘action’, ‘international business’ refers to the types, process, scale,
governance and other aspects of carrying out international business. As referring to actor, the
term ‘international business’ refers to ‘the entity carrying out the international business.
The management of business operations for an organization that conducts business in more
than one country. International management requires knowledge and skills above and beyond
normal business expertise, such as familiarity with the business regulations of the nations in
which the organization operates, understanding of local customs and laws, and the capability to
conduct transactions that may involve multiple currencies.
International Business conducts business transactions all over the world. These transactions
include the transfer of goods, services, technology, managerial knowledge, and capital to other
countries. International business involves exports and imports.
International Business is also known, called or referred as a Global Business or an International

Marketing.
Features of International Business
1. Large Scale operation
International business, all the operations are conducted on a very huge scale.
Production and marketing activities are conducted on a large scale. It first sells its goods
in the local market. Then the surplus goods are exported.
2. Integration of economies
International business integrates (combines) the economies of many countries. This is

because it uses finance from one country, labour from another country, and
infrastructure from another country. It designs the product in one country, produces its
parts in many different countries and assembles the product in another country. It sells
the product in many countries, i.e. in the international market.
3. Dominated by developed countries and MNCs
International business is dominated by developed countries and their multinational

corporations (MNCs). At present, MNCs from USA, Europe and Japan dominate (fully
control) foreign trade. This is because they have large financial and other resources.
They also have the best technology and research and development (R & D). They have
highly skilled employees and managers because they give very high salaries and other
benefits. Therefore, they produce good quality goods and services at low prices. This
helps them to capture and dominate the world market.
4. Benefits to participating countries
International business gives benefits to all participating countries. However, the

developed (rich) countries get the maximum benefits. The developing (poor) countries
also get benefits. They get foreign capital and technology. They get rapid industrial
development. They get more employment opportunities. All this results in economic
development of the developing countries. Therefore, developing countries open up their
economies through liberal economic policies.
5. Keen competition
International business has to face keen (too much) competition in the world market. The
competition is between unequal partners i.e. developed and developing countries. In this
keen competition, developed countries and their MNCs are in a favourable position
because they produce superior quality goods and services at very low prices. Developed
countries also have many contacts in the world market. So, developing countries find it
very difficult to face competition from developed countries.
6. Special role of science and technology
International business gives a lot of importance to science and technology. Science and
Technology (S & T) help the business to have large-scale production. Developed
countries use high technologies. Therefore, they dominate global business. International
business helps them to transfer such top high-end technologies to the developing
countries.
7. International restrictions
International business faces many restrictions on the inflow and outflow of capital,
technology and goods. Many governments do not allow international businesses to enter
their countries. They have many trade blocks, tariff barriers, foreign exchange
restrictions, etc. All this is harmful to international business.
8. Sensitive nature
The international business is very sensitive in nature. Any changes in the economic
policies, technology, political environment, etc. has a huge impact on it. Therefore,
international business must conduct marketing research to find out and study these
changes. They must adjust their business activities and adapt accordingly to survive
changes.
Approaches to International Management
There are three approaches to international management: ethnocentric, polycentric, and

geocentric. Each has its advantages and disadvantages. None of these theories can be
successful, however, unless managers understand completely the nuances involved in their
applications.
a) Ethnocentric approach
The ethnocentric approach is one in which management uses the same style and
practices that work in their own headquarters or home country. Such an approach may
leave managers open to devastating mistakes, because what works in the United States,
for example, may not necessarily work in Japan. There are many cases in which
companies made grievous errors when they attempted to transfer their management
styles to foreign countries. For example, Procter & Gamble Co. lost $25 million in Japan
between 1973 and 1986 because its managers would not listen to Japanese advisors.
The company ran ads for its Camay soap in which a Japanese man meeting a Japanese
woman for the first time compared her skin to that of a porcelain doll. That would never
happen in Japan, which is exactly what an advertising adviser told Procter & Gamble's
managers. Procter & Gamble, however, ignored the advice. They assumed that if a
similar ad worked well in the United States and other countries (which it did), it would
also be successful in Japan, but it was not. In fact, the ad infuriated the Japanese
people, who refused to buy Camay. The Procter & Gamble executives learned a lesson,
but at a high cost.
b) Polycentric approach
In contrast to ethnocentric management is the polycentric management theory. In this

approach, management staffs its workforce in foreign countries with as many local
people as possible. The theory is simple: local people know best the host country's
culture, language, and work ethic. Thus, they are the ideal candidates for management.
This approach works well in some countries. However, in countries without well-
developed economies, it may not be the best approach because the workers may not
always have the necessary business acumen or management skill.
c) Geocentric approach
The third style of international management is the geocentric approach. This theory
holds that the best individuals, regardless country origin, should be placed in
management positions. This philosophy maintains that business problems are the
same regardless of where in the world they occur. Therefore, competent managers
who are able to apply logic and common sense to resolve them will be successful;
specific cultural knowledge is not necessary. This is the most difficult of the three
approaches to apply, since managers must be able to understand the local and
global ramifications of the business.
The Boeing Corporation provides evidence that the geocentric approach can be
successful. When sales of its 737 plane dropped precipitously in the early 1970s,
Boeing's senior management asked a group of engineers to bolster sales of the
plane. Management indicated that if they were unable to increase sales, production
would be discontinued. The engineers seized the opportunity.
Their first step was to examine foreign markets for the aircraft. They recognized that
what attracted buyers in the United States may not necessarily lure foreign buyers.
So, they visited different countries to determine which characteristics might be useful
to incorporate into the redesign of the 737. They found many differences in flight
operations. For example, many foreign airports, especially those in developing
countries, had shorter runways than those in the United States. Moreover, many
were constructed of softer materials than concrete, the standard material used in the
United States. As a result of their study, the engineers redesigned the plane's wings
to allow for shorter landings on asphalt runways and altered the engines so takeoffs
would be quicker. Finally, they designed new landing gears and switched to low-
pressure tires. Shortly after they made the changes, 737 sales rose dramatically,
and so did sales of Boing's other models. In fact, the 737 eventually became the
largest selling commercial jet in aviation history. The key to the engineers' success
lay in their ability to think globally and assess the business environment in different
parts of the world.
Review Questions:
1. Define International Management.

2. Discuss the features of International Business.
3. Discuss the approaches of International Management.
References:
International Business Management. (2017, October 23). Retrieved from

http://www.simplynotes.in/mbabba/meaning-defination-and-features-of-international-
business-management/
International Management. (2017, October 23). Retrieved from
http://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-
Management.html#ixzz4zAAyoyul

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Module 1

Upon completion of this module, students are expected to:

1. Understand the functions of management.

Management principles apply to all organizations—large or small, for-profit or not-for-profit.

1|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

Figure 1.1 The Management Functions

2|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

3. Staffing. The staffing function involves selecting, placing, training, developing,

4. Directing. It is the managerial function that initiates action: issuing directives,

5. Controlling. It is about keeping an eye on things. It is “the process of evaluating and

3|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

2. Democratic Leadership. It involves other people in the decision making—for example,

3. Laissez-faire leadership (or delegative or free-reign leadership). It minimizes the

4|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

Figure 1.2 The Management Hierarchy

5|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

6|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

4. Decision making. Is the ability to identify a problem or an opportunity, creatively

7|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

1. From your point of view, what is management? Explain.

John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and

8|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

Upon completion of this module, students are expected to:

1. Explain the nature and elements of an organization;

Organization embraces some of the crucial elements as follows:

9|PRINCIPLES OF ORGANIZATION AND MANAGEMENT

The authority in an organization balances effectiveness and efficiency in achieving

As to purpose, organization may be classified as commercial or non-commercial organization.

The common classifications of commercial or business organizations according to ownership

1. Single Proprietorship- When a business is owned (and usually managed) by one

Table 2.1 The Advantages and Disadvantages of Single Proprietorship

2. Partnership- When two or more persons bind themselves to contribute resources to a

Table 2.2 The Advantages and Disadvantages of Partnership

3. Corporation. A Corporation is a more formal business organization than a partnership.

A corporation is a business registered as an artificial person under the operation of the

Unrestricted transfer of ownership.

Table 2.3 The Advantages and Disadvantages of Corporation

Primary Activities of Business

The common classifications of non-commercial organizations are:

1. Public Sector Organization. This refers to a tax-funded government organization, including

2. Nonprofit Organization. As a group, they are called foundations, associations, not-for-

Figure 2.1 The Key personnel of a corporate organization

 The Corporate President must be a member of the BOD according to law.

An organizational structure resembles the framework of a building or skeleton of the body.

Structuring an organization is simply means that the organization’s components- its

An important aspect of structuring an organization is defining the degree of formalization- the

1. Administration- responsible for the welfare of personnel and safeguarding of physical

2. Finance- responsible of safeguarding corporate funds including cash flows and

An organization operates in an internal and an external environment.

The Internal Environment

The system process has four components:

C. Outputs. It refers to the product or services offered to customers.

The External Environment

Figure 2.2 The external environment

These forces are:

2. Technological forces. A technology is a combination of tools, machines, computers,

Social structure is the arrangement of relationships between individuals and groups in a

6. Global forces. These are outcomes of changes in international relationships, changes

1. What is organization? Explain.

MANAGEMENT THEORIES AND

Upon completion of this module, students are expected to:

1. Explain and differentiate management theories and models.

Why study Management Theories?

Four well-established schools of management thought

Frederick  W.  Taylor  (1856-

Taylor  based  his  management  system  on  production

Scientific  management  was  concerned  with  increasing  the  productivity  of  th

Fayol’s  14  Principles  of  management

Chester  Barnard  (1886‐1961),  like  Follett,  introduced  elements  to  classical 

The  contingency  approach  (sometimes  called  the  situational  approach)  was