19599461 Management Principles

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Management Principle Unit 1 Introduction to Management Groups of people working in an organization to develop or appraise or attain the common goal of the organization by utilizing the available resources are called Management. In simple terms it means managing the work done by the people. Just as the mind coordinates and regulates the various activities of the person, the management coordinates and regulates the activities of various members of an organization. Definition of Management The definitions by some of leading management thinkers and practitioners are as follows: (i) “Management is the art of getting things done through the people.” - Mary Park Flott (ii) “To manage is to forecast and to plan, to organize to command to coordinate and to control.” - Henry Fayol (iii) “Management is the art of knowing what you want to do and then seeing that it is done in the best and the cheapest way.” – F.W.Taylor. Need for Management As the organization grows it faces a lot of problems like shortage of raw material, labour problem, and misunderstanding among various groups etc. So there is a need to have a central body or point to a) coordinate the work and b) remove such hurdles both internally and externally. This center point is called Management. Usage of Management Management is very vital 1) To achieve the common goal. 2) To develop overall activity. 3) To motivate the people. 4) To work efficiency. 5) To control the overall operation. 6) To take up overall planning. 7) To maintain mutual relationship among various levels of management. 8) To increase the profit or gain. 9) To reduce the complexity, difficulties and obstacles.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Functions of Management (“POSD CORB”) 1) Planning: Planning means forecasting or predicting the future activity in a specific manner or structure. It is the basic function and essential for all the organization. 2) Organizing: It is collection or joining of all the resources available within the organizational and outside, in order to achieve the organizational goal with efficiency. 3) Staffing: It involves appointing the right man for the right job at the right time. The management is to analyze the human resource, see if he is suitable for the job and accordingly allocate the work in the organization. 4) Directing: It is showing the correct path or correct way to achieve the organizational goal within the stipulated time. 5) Controlling: Controlling as a function involves regulating the person or examining the person whether he is working in the right way or not. In order to achieve the common goal as efficient as possible. 6) Coordinating: It is a type of support function. It involves accumulating the work to achieve the task. 7) Budgeting: It means allocation of the resources. It involves financial planning for the future activities. 8) Reporting: It is a statement showing the various activities to the top management. It shows the status of the work done. Levels of Management The various levels of management are, Levels of Management

As authority goes up the level of management, responsibility comes down. It means that the higher officials are more authority, while major responsibility are given to middle and lower level. Top management: The top management consists of the High officials like Chairman, Board, CEO, and Managing Director. They have a major role in Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

making decisions, setting up the various objectives, overall planning of the organizational goals. Middle Level Management: While the middle level official include Managers, Deputy managers, Branch managers etc. They are the key players in implementing the plans designed by the top management. They also act as a bridge between the top and lower level management. Lower Level Management: The lower level mainly includes the workers, supervisors and other people in the lower cadre. They have more responsibilities and the need to report the same to their higher officials. Nature or Characteristics of Management 1) Management is Goal oriented 2) It is universal 3) It is an integrating force 4) It is a social process 5) Multidisciplinary in nature 6) Intangible 7) It is an art as well as science. Administration vs Management Meaning Administration as a function is concerned with determination of corporate policies, coordination of the various departments (production, finance, distribution etc.) of the organization under the control of the executives. Management is concerned with execution of the policy within the limits setup by administration and employment of the organization for the particular objective before it. In other words Management is the doing process and administration is the thinking process.

Administration 1) All the policies are made by the Administration. 2) They are the owners / proprietors of the company. 3) Conceptual, human skills are necessary. 4) The main functions are planning and controlling. 5) Level of authority: Administration mainly comprise of

Management 1) Management has a main function of implementing the decisions made by the Administration. 2) They are the managers of the company. 3) Technical and human skills are more important here. 4) The main functions are directing and organizing. Management mainly carried on by

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Top level management. 6) Administration is thus more permanent in nature. 7) Objective: They are mainly interested in  Profitability  Sales volume 8) They don’t take part in the day to day activity of the organization. 9) Administration is the thinking process.

Middle and lower level management. 6) While management may change during the course of running the organization. They actually work for remuneration, thus they direct their efforts towards the attainment of goal. 8) Managers take part in the day to day activity. 9) While the management are the doing process.

Who is a Good Managers? Introduction Managers is a person who has the ability or strength to coordinate, motivate and guide all the personnel working under him so as to make sure they attain the organizational goal in the most efficient manner possible. Qualities of a Good manager 1) Good Education 2) Technical Knowledge 3) Personality 4) Communication skills 5) Honesty 6) Positive thinking 7) Control Management 8) Motivation 9) Guide 10) Leadership qualities 11) Coordinate 12) Decision making (planning, forecasting) 13) Innovative 14) Good analysis 15) Risk taking

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

EVOLUTION OF MANGEMENT THOUGHT Management practice is as old as human civilization when people started living together in groups. For, every human group requires management and the history of human beings is full of organisational activities. However, the study of how mangers achieve results is predominantly a twentieth century phenomenon. In the earlier years, management could not get the attention of researchers because the field of business in which the management concepts were applied was held low, unworthy of study; indifferent approach of other social scientists like economists, sociologists, psychologists, etc., These factors created the situation where the need for a systematic study of management was not felt. The situation continued till the beginning of the twentieth century. The situation started changing with the beginning of the 20 th century; specially the world war I created the situation where people started thinking of solution to the problem of how limited resources could be applied in better way. The world war II added further problem to this end. Growing competition and complexity of managing large business organizations further provided impetus to developing systematic management concepts and principles. Both these factors- growing competition and complexity in managing business- have demanded the efficiency in management process which can come not merely by trial and error methods but by developing and applying sound management concepts and principles. These factors emerged gradually which attracted the attention of a wide variety of intellectuals- economists, sociologists, psychologists, anthropologists, mathematicians, and management practioners- to study the organizations and processes through which these organizations could be made more effective. Each of these group of intellectuals viewed the organizations and the processes therein in a particular way and made recommendations accordingly. Another classification of management thought and approaches is in the form of classical, neoclassical and modern. Classical approach includes scientific management and administrative/operational management. Neoclassical approach includes human relations approach, management science approach, contingency approach, and some relavant portion of the above approaches not included in neoclassical approach. However, this classification is time-specific because what is modern in today’s context may not remain the same in future.

EARLY CONTRIBUTIONS

Before the systematic study of management which started close to 19th century, contributions in the field came from a variety of sources. Those contributions provided some insights about how resources could be utilized more effectively. However, those contributions were outside the field of business and other economic organizations. In the field of business organizations, some stray contributions have come from Robert Owen, James Watt, Charles Babbage, and Henry Town. Their contributions came bit by bit and in haphazard manner and have failed to stimulate to study management as a distinct discipline. However, their ideas created an awareness about managerial problems. By the end of 19th century, a stage was set for taking systematic study of management

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

and the beginning was made by Taylor in the early part of 20th century which took the shape of scientific management.

TAYLOR AND SCIENTIFIC MANAGEMENT The concept of scientific management was introduced by Fredrick Winslow Taylor in USA in the beginning of 20th century. This concept was further carried on by Frank and Lillian Gilbreth, Henry Gantt, George Berth, Edward Felen, etc. Taylor has defined scientific management as follows: “Scientific management is concerned with knowing exactly what you want your men to do and then see in that they do it in the best and cheapest way.” Since Taylor has put the emphasis on solving managerial problems in a scientific way, often, he is called as father of scientific management and his contributions as the principles of scientific management. On the basis of his experiments, he published many papers and books and all his contributions were compiled in his book ‘Scientific Management’. Taylor’s contributions can be described in two parts: Elements and tools of scientific management and principles of scientific management.

ELEMENTS AND TOOLS OF SCIENTIFIC MANAGEMENT Taylor conducted various experiments at his work places to find out how human beings could be made efficient by standardizing the work and better method of doing the work. These experiments have provided the following features of scientific management. 1. SEPERATION OF PLANNING AND DOING: Taylor emphasized the separation of planning aspect from actual doing of the work. Before Taylor’s scientific management, a worker used to plan about how he had to work and what instruments were necessary for that. The worker was put under the supervision of a supervisor commonly known as gang boss. Thus, supervisor’s job was merely to see how the workers were performing. This was creating a lot of problems, and Taylor emphasized that planning should be left to the supervisor and the worker should emphasise only operational work. 2. FUNCTIONAL FOREMANSHIP: Seperation of planning from doing resulted into development of supervision system which could take planning work adequately besides keeping supervision on workers.

For this purpose, Taylor evolved the concept of functional foremanship based on specialization of functions.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Workshop manager

Planning incharge

Route clerk

Instructi on card

clerk

Time and cost clerk

Production incharge

discipli narian

Speed boss

inspect or

Mainten ance foreman

worker

In this system, eight persons are concerned with planning: (i) route clerk, (ii) instruction card clerk, (iii) time and cost clerk, (iv) disciplinarian. The remaining four persons are concerned with doing aspect of the work. These are: (i) speed boss, (ii) inspector, (iii) maintenance foreman, and (iv) gang boss. All of them give directions to workers on different aspects of work. 3. JOB ANALYSIS: Job analysis is undertaken to find out the one best way of doing the thing. The best way of doing a job is one which enquires the least movements, consequently less time and cost. The best way of doing the thing can be determined by taking up time-motion-fatigue studies. (i) Time study involves the determination of time a movement takes to complete. The movement which takes the minimum time is the best one. This helps in fixing the fair work for a period. (ii) Motion study involves the study of movements in parts which are involved in doing a job and thereby eliminating the wasteful movements and performing only necessary movements. This reduces the time taken in performing a work and also the fatigue of workers. (iii) Fatigue study shows the amount and frequency of rest required in completing the work. After a certain period of time, workers feel fatigue and cannot work with full capacity. Therefore, they require rest in between. When the rest is allowed, they start working with full capacity. Thus, job analysis, as given by Taylor, suggests the fair amount of a day’s work requiring certain movements and rest periods to complete it. 4. STANDARDISATION: As far as possible, standardization should be maintained in respect of instruments and tools, period of work, amount of work, working conditions, cost of production, etc. These things should be fixed in advance on the basis of job analysis and various elements of costs that go in performing a work. Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Gang boss

5. SCIENTIFIC SELECTION AND TRAINING OF WORKERS: Taylor has suggested that workers should be selected on scientific basis taking into account their education, work experience, aptitude, physical strength, etc. A worker should be given work for which he is physically and technically most suitable. Apart from selection, proper emphasis should be given on the training of workers which makes them more efficient and effective. 6. FINANCIAL IINCENTIVES: Financial incentives can motivate workers to put in their maximum efforts. If provisions exist to earn higher wages by putting in extra effort, workers will be motivated to earn more. Taylor himself applied the concept of differential piece rate system which was highly motivating. To make the differential piece rate system work, Taylor has suggested that wages should be based on individual performance and not on the position which he occupies. Further, the wage rate should be fixed on accurate knowledge and not on estimates. 7. ECONOMY: While applying scientific management, not only scientific and technical aspects should be considered but adequate consideration should be given to economy and profit. For this purpose, techniques of cost estimates and control should be adopted. The economy and profit can be achieved by making the resources more productive as well as by eliminating the wastages. 8. MENTAL REVOLUTION: Scientific management depends on the mutual cooperation between management and workers. For this co-operation, there should be mental change in both parties from conflict to co-operation. Taylor feels that this is the most important feature of scientific management because in its absence, no principle of scientific management can be applied.

PRINCIPLES OF SCIENTIFIC MANAGEMENT Taylor has given certain basic principles of scientific management. The fundamental principles that Taylor saw underlying the scientific management may be given below: 1. REPLACING RULE OF THUMB WITH SCIENCE: Taylor has emphasized that in scientific management, organized knowledge should be applied which will replace rule of thumb. While the use of scientific method denotes precision in determining any aspect of work, rule of thumb emphasizes estimation. Since exactness of various aspects of work like day’s fair work, standardization in work, differential piece rate for payment, etc., is the basic core of scientific management, it is essential that all these are measured precisely and should not be based on mere estimates. This approach can be adopted in all aspects of managing. 2. HARMONY IN GROUP ACTON: Taylor has emphasized that attempts should be made to obtain harmony in group action rather than discord. Group harmony suggests that there should be mutual give and take situation and proper understanding so that group as a whole contributes to the maximum.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

3. CO-OPERATION: Scientific management involves achieving co-operation rather than chaotic individualism. Scientific management is based on mutual confidence, cooperation and goodwill. Co-operation between management and workers can be developed through mutual understanding and a change in thinking. 4. MAXIMUM OUTPUT: Scientific management involves continuous increase in production and productivity instead of restricted production either by management or by worker. Therefore, he advised the management and workers to “turn their attention towards increasing the size of the surplus until the size of the surplus becomes so large that it is necessary to quarrel over how it shall be divided.” 5. DEVELOPMENT OF WORKERS: In scientific management, all workers should be developed to the fullest extent possible for their own and for the company’s highest prosperity. Development of workers requires their scientific selection and providing them training at the workplace. Training should be provided to workers to keep them fully fit according to the requirement of new methods of working which may be different from the non-scientific methods.

FOLLOWERS OF SCIENTIFIC MANAGEMENT Other persons who worked to develop scientific management were Carl George Berth, Henry Gantt, Frank and Lillian Gilbreth, and Edward Felene to mention a few important. Berth worked with Taylor and later developed many mathematical techniques and formulae that made it possible to put Taylor’s ideas into practice. Gantt developed graphic methods of depicting plans and making possible better managerial control. Frank and Lillian Gilberth, tried to find out ‘one best way of doing’ under the given set of realities. Felene invited Gilberth to apply scientific management to manage his departmental store. The major areas of concern were employee training and evaluation and human element in business. Later, he created twentieth century Fund, a famous research organization still in existence.

FAYOL’S ADMINISTRATIVE MANAGEMENT Perhaps the real father of modern operational management theory is the French industrialist Henry Fayol. His contributions are generally termed as operational management or administrative management. Fayol’s contributions were first published in book form titled ‘administration industrielle at generale’ in French language, in 1916. However, the book was not made available outside France and was not translated until 1929. Its English version was published in 1949 in the United States of America. Therefore, in the early period, Fayol’s contributions could not make much impact on the development of management thought. He has used the term ‘administration’ instead of ‘management’ emphasizing that there is unity of science of administration. Therefore, management is a universal phenomenon. However, he has emphasized that principles of management are flexible and not absolute and are usable regardless of changing and special conditions. Fayol defined management as follows: Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

“To manage is to forecast and to plan, to organize, to coordinate and to control.” He found that activities of an industrial organization could be divided into six groups: 1. Technical (relating to production); 2. Commercial (buying, selling and exchange); 3. Financial (search for capital and its optimum use); 4. Security (protection of property and person); 5. Accounting (including statistics) and 6. Managerial (planning, organization, command, coordination, and control). He has divided his approach of studying management into three parts: (i) managerial qualities and training, (ii) general principles of management, and (iii) elements of management. MANAGERIAL QUALITIES AND TRAINING Fayol was the first person to identify the qualities required in a manager. According to him, there are six types of qualities that a manager requires. These are as follows: 1. Physical (health, vigour, and address); 2. Mental (ability to understand and learn, judgement, mental vigour, and capability); 3. Moral (energy, firmness, initiative, loyality, tact, and dignity); 4. Educational (general acquaintance with matters not belonging exclusively to the function performed); 5. Technical (peculiar to the function being performed); and 6. Experience (arising from the work). GENERAL PRINCIPLES OF MANAGEMENT Fayol has given fourteen principles of management. He has made distinction between management principles and management elements. While management principle is a fundamental truth and establishes cause-effect relationship, management element denotes the functions performed by a manager. While giving the management principles, Fayol has emphasized two things: (i)The list of management principles is not exhaustive but suggestive and has discussed only those principles which he followed on most occasions. (ii)Principles of management are not rigid but flexible. Various principles of management are as follows: 1. DIVISION OF WORK: Fayol has advocated division of work to take the advantage of specialization. According to him,” specialization belongs to natural order. The workers always work on the same part, the managers concerned always with the same matters, acquire an ability, sureness, and accuracy which increase their output. Each change of work brings in it training and adaptation which reduces output…yet division of work has its limits which experience and a sense of proportion teach us may not be exceeded.” This division of work can be applied at all levels of the organization. 2. AUTHORITY AND RESPONSIBILITY: The authority and responsibility are related, with the latter the corollary of the former and arising from it. Fayol finds authority as a continuation of official and personal factors. Official authority is derived from the manager’s position and personal authority is derived from personal qualities Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

such as intelligence, experience, moral worth, past services, etc. Responsibility arises out of assignment of activity. In order to discharge the responsibility properly, there should be parity of authority and responsibility. 3. DISCIPLINE: All the personnel serving in an organization should be disciplined. Discipline is obedience, application, energy, behavior, and outward mark of respect shown by employees. Discipline may be of two types: self-imposed discipline and command discipline. Self-imposed discipline springs from within the individual and is in the nature of spontaneous response to a skillful leader. Command discipline stems from a recognized authority and utilizes deterrents to secure compliance with a desired action, which is expressed by established customs, rules and regulations. The ultimate strength of command discipline lies in its certainty of application. Such a discipline can be obtained by sanctions in the forms of remuneration, warnings, suspension, demotion, dismissal, etc. 4. UNITY OF COMMAND: Unity of command means that a person should get orders and instructions from only one superior. The more completely an individual has a reporting relationship to a single superior, the less is the problem of conflict in instructions and the greater is the feeling of personal responsibility for results. This is contrary to Taylor’s functional foremanship. Fayol has considered unity of command as an important aspect in managing an organization. 5. UNITY OF DIRECTION: According to this principle, each group of activities with the same objective must have one head and one plan. Unity of direction is different from unity of command in the sense that the former is concerned with functioning of the organization in respect of its grouping of activities or planning while the latter is concerned with the personnel at all levels in the organization in terms of reporting relationship. Unity of direction provides better coordination among various activities to be undertaken by an organisation. 6. SUBORDINATION OF INDIVIDUAL TO GENERAL INTEREST: Common interest is above the individual interest. Individual interest must be subordinate to general interest when there is conflict between the two. However, factors like ambition, laziness, weakness, etc., tend to reduce the importance of general interest. Therefore, superiors should set an example in fairness and goodness. The agreement between the employers and the employees should be fair and there should be constant vigilance and supervision. 7. REMUNERATION OF PERSONNEL: Remuneration of employees should be fair and provide maximum possible satisfaction to employees and employers. Fayol did not favor profit-sharing plan for workers but advocated it for managers. He was also in favor of non-financial benefits though these were possible only in the case of large-scale organizations. 8. CENTRALISATION: Everything which goes to increase the importance of subordinate’s role is decentralization; everything which goes to reduce it is centralization. In small firms, centralization is the natural order, but in large firms, a series of Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

intermediaries is required. Since both absolute and relative values of the managers and employees are constantly changing, it is desirable that the degree of centralization or decentralization may itself vary constantly. 9. SCALAR CHAIN: There should be a scalar chain of authority and of communication ranging from the highest to the lowest. It suggests that each communication going up or coming down must flow through each position in the line of authority. It can be shortcircuited only in special circumstances when its rigid following would be detrimental to the organization. For this purpose, Fayol has suggested ‘gang plank’ which is used to prevent the scalar chain from bogging down action. His scalar plan and gang plank can be presented as follows:

A B C

D

E

F G

H

I

In the above figure, A is the top man having immediate subordinates B and L. in turn B and L are having immediate subordinates C and M. This continues to the level of G and Q. Ordinarily, the communication must flow from A to B to C to D and so on while coming from the top to down. Similarly, it must flow from G to F to E and so on while going up. It means if any communication is going from F to P, it will flow from F to A via E,D,C and B and coming down to P via L,M,N and O. Fayol suggests that this scalar chain system takes time, and therefore, can be substituted by gang plank without weakening the chain of command. In order to maintain authority, it is desirable that superiors of F and P authorize them to deal directly provided each informs his superiors of any action taken. Fayol suggested that this system allows F and P to deal in a few hours with some questions or other via the scalar chain would pass through twenty transmissions, inconvenience people, involve masses of paper, lose weeks or months to

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

get to a conclusion less satisfactory than the one which could have been obtained via direct contact. 10. ORDER: This is a principle relating to the arrangement of things and people. In material order, there should be a place for everything and every thing should be in its place. Similarly, in social order, there should be the right man in the right place. This kind of order demands precise knowledge of the human requirements and resources of the organization and a constant balance between these requirements and resources. Normally, bigger the size of the organization, more difficult this balance is. 11. EQUITY: Equity is the combination of justice and kindness. Equity in treatment and behavior is liked by everyone and it brings loyalty in the organization. The application of equity requires good sense, experience, and good nature for soliciting loyalty and devotion from subordinates. 12. STABILITY OF TENURE: No employee should be removed within short time. There should be reasonable security of jobs. Stability of tenure is essential to get an employee customed to new work and succeeding in doing it well. Unnecessary turnover is both cause and effect of bad management. 13. INITIATIVE: Within the limits of authority and discipline, managers should encourage their employees for taking initiative. Initiative is concerned with thinking out and execution of a plan. Initiative increases zeal and energy on the part of human beings. 14. ESPIRIT DE CORPS: This is the principle of ‘union is strength’ and extension of unity of command for establishing team work. The manager should encourage spirit de corps among his employees. The erring employees should be set right by oral directions and not by demanding written explanations. Written explanations complicate the matters.

ELEMENTS OF MANAGEMENT Fayol holds that management should be viewed as a process consisting of five elements. He has regarded these elements as functions of management. These are planning, organization, commanding, coordination, and controlling. He has regarded planning as the most important managerial function and failure to plan properly leads to hesitation, false steps, and untimely changes in directions which cause weakness in the organization. Creation of organization structure and commanding function is necessary to execute plans. Coordination is necessary to make sure that every one is working together, and control looks whether everything is proceeding according to plan. Fayol holds the view that these functions are required at all levels of management and in all types of organizations.

CONTRIBUTIONS OF TAYLOR AND FAYOL : A COMPARISON When we compare the contributions of Taylor and Fayol, we find that both are complementary to each other and have somewhat similarity. There are some similarity as well as dissimilarity in the contributions of both. Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Similarity: Both Taylor and Fayol have seen and analysed the problems of management from practioner,s point of view. Therefore, there must be some similarity between the two. The similarity exists on the following lines. 1. Both have attempted to overcome managerial problems in systematic way. 2. Both have developed some principles which can be applied in solving managerial problems. 3. Both have emphasized that management actions can be effective if these are based on sound principles. 4. Both of them have emphasized that managerial qualities are acquirable and can be acquired through training. Therefore, organizations should make attempts to develop these. 5. Both have emphasized harmonious relationships between management and workers for te achievement of organizational objectives.

Dissimilarity: There is more dissimilarity between the approaches of Taylor and Fayol as compared to similarity. This is because of the fact that Taylor has concentrated on the shop floor efficiency while Fayol has concentrated on higher managerial levels. The dissimilarity between the two is presented below: Basis of difference Taylor Fayol 1.Perspective

Shop floor level

Higher management level

2.Focus

Efficiency through simplification standarisation.

3.Orientation

Production and engineering

work Overall efficiency by and observing certain principles.

Managerial functions 4.Results

Scientific observation and Personal experiences measurement translated truths.

5.Overall contributions

into

universal

Basis for accomplishment on the production line Systematic theory management.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

of

OTHER ADMINISTRATIVE THEORISTS: Besides Fayol, contributions have come from other administrative theorists, notable among them being Max Weber, Sheldon, Mooney, Reiley, Urwick, etc. Weber has given five features of bureaucracy: Specialisation, hierarchy of authority, rules, impersonality and trained personnel. Oliver Sheldon has added the concept of ethics and social responsibility to the scientific study of management. Mooney and Reiley, both executives at general motors, U.S.A., emphasized basic principles of organization. These principles are: coordination principle, scalar principle, functional principle, and staff phase of functionalism. They have also emphasized that all organizations, irrespective of the field of their operation, have some features in common.

MEANING OF AUTHORITY

Authority is the official right of the person to do and make things happens in an organization. The person vested with authority is known as the ‘Superior’. The person on whom the authority is exercised is known as the ’Subordinate’. Authority gives the superior right to give orders, make decision and allocate resources.Authority comes to the superior by virtue of the official position.

DELEGATION OF AUTHORITY:

Meaning: In any organization, an individual alone cannot perform all the tasks. He has, therefore, to assign work to different persons who are engaged for the purpose. For example, the sales manager of a concern cannot look after sales in different towns and villages himself. Sales representatives are appointed to assist him in the work. The sales manager will depute each salesman to a particular place. Assignment of work or responsibility alone is not enough to make the salesman perform the task. They need to be given the necessary authority to carry out their responsibilities. ‘Delegation of authority’ is only the process of transfer of authority by a superior to his subordinate to enable the latter to perform the task assigned.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Definitions of delegation of authority:

The following are some of the important definitions of delegation of authority:

The process of delegation involves the determination of result expected, the assignment of task, the delegation of authority for the accomplishment of these tasks and the exaction of responsibility for their accomplishment -Konntz and O’Donnell

Delegation is the process a manager follows in dividing the work assigned to him so that he performs that part which only he, because of his unique organisational placement can perform effectively, and so that he can get other to help him with what remains -Allen

PRINCIPLES OF DELEGATION OF AUTHORITY:

The following are the important principles of delegation of authority:

Delegation to go by expected results: Before delegation authority to his subordinate, the superior must be clear about the tasks that he wants them to perform so as to realize the expected results. The extent of authority depends upon the nature and quantum of work to be done. If the tasks to be performed by the subordinates are not properly determined by the superior, he may not be able to decide on the extent of authority required.

Responsibility is absolute A superior can delegate only authority and not responsibility. For the performance of work by his subordinates the superior is responsible to his own superior. For example, the sales manager of a concern is responsible, for the performance of the salesman Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

working under him, to the General Manager. It, therefore, goes without saying that the superior has to constantly monitor the performance of his subordinates.

Authority to match responsibility There should always be parity between authority and responsibility, i.e., one must be equal to the other. If authority given to a subordinate is more that his responsibility, there may be a tendency to misuse the authority. On the other hand, if responsibility is more that the authority, the subordinate will not be able no perform the task. It is, therefore, necessary that both should be equal.

Unity of command This principle says that a subordinate should be assigned duty or responsibility by one superior only. He is also accountable to that superior alone. For example, a foreman should work as per the orders received from the production manager and should also report to him only. A salesman has to carry out the order of sales manager under whom he works. If two managers command a subordinate, he would not know whose orders he should carry out

Clarification of the limits of authority: The subordinate should know the limits of his authority. While delegating authority to his subordinate, the superior must tell him what he could and could not do. For example, a salesman, who has to travel to a different place, may have the authority to stay and have food in a hotel at the cost of his employer. But he would be informal of the maximum amount allowed per day.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

RESPONSIBILITY

‘Responsibility’ is the duty or obligation of a subordinate, to whom some work has been assigned by a superior, to perform the task required. Responsibility can be given to human begins only. The existence of superior- subordinate relationship between the persons concerned is an important condition for the assignment of responsibility. A production manager, for example, may assign some responsibility to foremen. This he is able to do because of the official authority he has- to get things done by the foreman. The foreman, in turn, may assign some work to a worker as he has the authority to do so.

Responsibility may be a continuing obligation of confirmed to a specific assignment. For example, the responsibility of a foreman to the production manager in a manufacturing concern is a continuing one. On the other hand, if the production manager assigns the job of installing a plant to a technician, the responsibility of the latter to the former is confined to that work alone.

The responsibility of a person may be defined in terms of functions or targets as the case may be. The responsibility of an office manager or a legal officer, for example, is in terms of functions. The responsibility of a factory worker, on the other hand, is in terms of targets (output to be produced).

A superior who assigns some responsibility to his subordinate to his subordinate should also give the latter the requisite authority to perform the task. For example, a salesman, who has been given a certain sales target to be attained within a specific period, should be given the authority to draw the necessary cash from the finance department to meet out the expenses in connection with his travel, stay and food. If the company gives in a two-wheeler, he needs to be given the cash necessary to meet out the fuel and maintains expenses. He must also have access to the telephone. The present-day salesman are given cell-phones or pages

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

It is clear from the above examples that is not possible for a subordinate to perform the work assigned unless he is given the necessary authority. It is also important that authority must match responsibility and vice versa. If authority exceeds responsibility, there may be misuse of authority. On the other hand, if responsibility exceeds authority, the subordinate cannot perform the task Assigned successfully. Hence, the need for parity (equality) between the two.

ORGANISATION

MEANING

The word organization has come from the word organism which means a structure of interrelated and interdependent parts. The part or components of organization consist of men, machines, materials, methods, money, functions, authority and responsibility. The task of organization is to unite or integrate these components effectivelt for the purpose of attaining the common goal.

DEFINITIONS

According to 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 Wheeler, “Organization is the structural framework of duties and responsibilities required of personnel in performing various futions within the company”.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

According to Haney, “Organization is a harmonious adjustment of specialized parts for the accomplishment of some common purpose or purposes”.

PRINCIPLES OF ORGANISATION:

A sound organization structure should adhere to the following principles:

Objective- The various activities performed in an organization should help to attain the goal of the enterprise. The goal of each individual and department must synchronise with that of the concern.

Division of work-The total work of the enterprise should be divided into identifiable functions like productions, purchases, marketing, finance, etc., for better performance and control. This leads to specialization.

Authority and responsibility:-authority is the official right of a manager. Responsibility is the duty of a subordinate, to whom some work has been assigned, to report to the superior on the work done.

Delegation-It means transfer of authority by a superior to his subordinate. A subordinate to whom some work has been given must also be given the necessary authority to carry out the task. Delegation results in a vertical flow of authority from the top level to the organization structure.

Balance- Authority and responsibility must always be equal. If responsibility exceeds authority, the subordinate will not be able to perform the task. On the other hand, if authority exceeds responsibility, there will be misuse of authority.

Responsibility is absolute- responsibility is never delegated. For the performance of his subordinates, a superior is accountable to his own superior.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Unity of command-It means that subordinate should get orders from one superior only and is accountable o him alone. Dual subordination results in confusion and leads to indiscipline.

Distinction between line and staff functions-Line functions are concerned with the performance of the basic activities of the business. Production and sales are the line functions of a manufacturer. Staff functions are of a supportive nature. Purchases, Personnel, etc., are staff functions. The staff managers can only advise on certain matters. They cannot take the final decision.

Simplicity-The organization structure must not be a complicated one. It should have only few levels of authority so that there is free flow of communication between persons.

Flexibility-The organization structure should not be rigid. It should be capable of being adjusted according to the required change in future.

ORGANISATION STRUCTURE:

An organization structure explains the position and official relationships between the various individuals working in an organization. It helps to understand an organization better. It provides answer to the following questions:



Who is the top-most official in an organization?

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Who are the department heads? What are their functions?

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Who are the subordinate staff in each department? Etc.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

ORGANIZATION CHART: Diagrammatic presentation of the organization structure is what is known as an 'organization chart'. It may show the names, designations and functions of the personnel in an organization. A specimen of an organization chart is given below:

General Manager

Production manager

Foreman 2

Foreman 1

Worker1

Worker2

Marketing manager

Worker1

Asst.marketin g manager1

Asst.marketing manager2

Worker2

Salesman1

Salesman2

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Salesman 1

Salesman2

Merits of an organization chart:

The merits of an organization chart may be stated as follows:

1. It shows the official positions of each individual in an organization. 2. From the organization chart, it is possible to make out who the superiors and subordinates are. 3. It gives identity to the personnel in an establishment. 4. It helps an outsider to understand the different designations in an organization.

Drawbacks of an organization chart:

The limitations or drawbacks of an organization chart are given below:

1. An organization chart can only show the formal or official relationships in an organization. It cannot depict the informal or personal relationships between the individuals. 2. It may, sometimes, promote ill-feelings among the personnel in an organization. An individual, who has been indicated in the chart as a subordinate, may not be able to take it in the true spirit. 3. Often, the organization chart is not updated in accordance with the changes in position taking place in the organization from time to time.

DEPARTMENTATION:

Departmentation is the process of dividing and grouping the activites and employees f an enterprise into the departments. The total work of an enterprise is divided into functions and sub-functions. Later, these are grouped together to form different departments. Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

In manufacture concern, the total work may be divided into the following functions:

i. Purchase ii. Production iii. Marketing iv. Personnel and v. Finance

Each of these functions will be entrusted to different departments. For example, the production department will look after production and related maters; the marketing department will look after marketing and other related matters and soon.

The activities normally performed by the different departments in a businedd enterprise may be stated as follows:

1. Purchase Department–

i. Purchase of raw materials. ii. Maintenance of necessary records pertaining to materials. iii. Stores control, etc.

2. Production Department –

i. Manufacture. ii. Quality control. iii. Plant maintenance, etc.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

3. Marketing Department –

i. Departmention of sales targets. ii. Appointment of dealers and distributors. iii. Advertisement and sales promotion. iv. Monitoring the performance of salesman, etc.

4. Personnel Department–

i. Recruitment and selection of employees. ii. Training iii. Wage administration, etc.

5. Finance Department–

i. Provision of working capital and also ii. Fixed capital for all other departments.

The concept of departmentation may be explained by means of a chart:

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Concept of departmentation

BASIS OF DEPARTMENTATION Dividing and grouping of activities and employees may be done by following any of the patterns given below:

1. Departmentation by functions 2. Departmentation by products 3. Departmentation by Territory 4. Departmentation by Customers 5. Departmentation by Numbers and Time

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Departmentation by function:

The most popular basis of departmentation is the one, done according to the major functions of an enterprise. As mentioned earlier, in a manufacturing concern, production, marketing, finance and personnel are the major functions. In a trading concern, buying, assembling and selling are the important functions. Separate departments will be established to perform these functions. Each major function may be divided into subfunctions. Marketing, for example, may be further divided into advertising, sales promotion, packing, market research, monitoring sales personnel and so on.

Functional departmentation by a concern selling cars may be shown by means of a chart:

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Advantages of departmentations by functions:

The following are some of the merits of functional departmentation:

1. It is the most natural approach to divide the activities and employees of an enterprise. 2. It recognizes the importance of the basic activities of a concern. 3. It provides sample scope for specialization. 4. As there are separate departments to look after all key activities of an enterprise, duplication of work is avoided. 5. It makes assessment of the performance of subordinate easier.

Drawbacks

The following are some of the limitation of functional departmentation:

1. It increases the responsibilities of the departmentation heads. 2. It gives too much importance to specialization. Even within a department, each employee may specialize only in a particular job. As a result, he may be indifferent to the total work of his department. 3. Functional departmentation increases the need for inner-dependence among different departments. This may, sometimes, result in conflicts between departments. 4. The autonomy enjoyed by each department may give the departmental head undue authority. This may be used against the interests of the subordinates. 5. It may also be difficult to secure proper co-ordination between the different departments. One department may not understand the needs of another. For Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

example, if the production department does not complete the production schedule as planned, it may be difficult for the sales department to execute the sales orders.

Departmentation by products

This approach is suitable for those concerns that market different lines of products. There may be separate divisions to look after the production, finance, personnel and marketing needs of each product line of the enterprise. For example, Godrej Ltd., is manufacturing different lines of products-soaps, locks, refrigerators, furniture, etc. There separate divisions to look after each product line of the company.

The idea of product departmentation by Godrej Ltd., may be presented by means of a simple chart:

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Advantages of product departmentations:

The following are the merits of product departmentation:

1. Each division focuses attention on the production and marketing of a specific product line. 2. It fixes responsibility on individual departments or divisions for the promotion of specific product lines. 3. It helps to reduce the problem of co-ordination as each division looks after all activities concerning a product. 4. It is also possible to evaluate the performance of each division am dthe contribution it makes to the growth of the entire business enterprise.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

5. Departmentation by product is the most suitable approach in the cash of an enterprise undertaking diversification of activities.

Drawbacks

The following are the disadvantages of product departmentation:

1. Each division must have all the necessary facilities in order to be self-sufficient. This increases the cost of operations. 2. The top management may find it difficult to exercise control over the various divisions and their activities. 3. There may also be duplication of certain activities.

Departmentation by Territory

This approach is suitable for such organization as bank, insurance companies, transport companies etc., whose activities are spread over the different parts of the state or country. Under territorial departmentation, division of activities is done region-wise or branch-wise. The activities of Indian Railways are divided region-wise.

The idea of territorial departmentation may be explained by means of chart:

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Merits of territorial departmentation:

The merits of territorial departmentation may be stated as follows:

1. It enables the organization to cater to the needs of the customers in different places. 2. Obviously, this approach provides scope for geographical expansion of business. 3. It is possible for the business to gain intimate knowledge of the customers in each place.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Limitations

Territorial departmentation, however, suffers from the following limitations:

1. It makes it difficult for the head office to exercise effective control over the zonal or branch offices. 2. It becomes necessary to employ more managerial and subordinate staff to manage the regional offices. 3. It is also important that the staff who are posted to the various regional offices are familiar with the regional language, customs and habits of the people living there.

Departmentation by Customers

In the case of departmentation by customers, the division of activities is done based on the needs of the customers. The depositors of a commercial bank are segregated on the basis of the nature of their deposit account, i.e., fixed deposit account, recurring deposit account, savings bank deposit account etc. this has been explained by means of a chart below:

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Merits

The advantages of departmentation by customers are given below:

1. The business is able to fulfil the specific needs of the customers. 2. It offers scope for specialization as well. 3. It also makes it possible for the business to maintain good rapport with different classes of customers.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Disadvantages

Some of the drawbacks of departmentation by customer are as follows:

1. Certain departments may not be active at all due to lack of clients. 2. There is also a possibility of under-utilisation of men, machines and other resources in certain departments due to a fall in demand. 3. There is also scope for duplication of activities.

Departmentation by number and time

In the case of departmentation by numbers, grouping of activities is done based on the number of persons engaged for the purpose. In the army, for example, the fighting troops are classified into battalions, brigades, etc., based on the number of person prescribed for each unit.

Departmentation by time is relevant in the case of those concern that work 24 hours a day and as a result may require additional sifts to cope with the volume of wotk. There may be separate departmentation to look after each shift.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

CENTRALISATION: MEANING: Centralization refers to systematic and consistent retention or concentration of authority for decision making at higher levels of management.

CONCEPT: Centralization of authority is that philosophy of top management of an enterprise; under which maximum authority for management of the enterprise is kept by top management with itself; and minimum authority for management is pushed down the management hierarchy i.e. is managers at middle and lower levels.

MERITS OF CENTRALISATION: 1. CONSISTENCY IN DECISION MAKING: Centralization leads to consistency in decision-making; because decisions are taken by a small group of managers at upper levels of management. Accordingly, there are lesser problems of co-ordination. 2. STRONG TOP MANGEMENT: Centralization of authority strengthens top management; and it is a position to provide out-standing leadership to the whole enterprise by virtue of its vast authority. 3. LOWER COST OF ADMINISTRATION: In a centralized set up of the organisation, cost of administration is lesser; because the enterprises can operate with a limited number of managers. This is a good advantage pf centralization, in the present-day-times characterized by highly inflationary conditions. 4. BROAD APPROACH TO MANAGING: In centralization, the top management has a broad outlook to managing; as it takes decisions from the system’s perspective – viewing the functioning of the organization as a whole. 5. DISCOURAGING INTER-DEPARTMENTAL CONFLICTS: Centralization discourages inter-departmental conflicts; because major decisions of departments are taken at upper levels of management with an orientation towards departmental co-operation. 6. NATURE DECISION-MAKING: In centralization, upper management, because of its experience, wisdom and broad outlook, is more mature in decision-making. Such decisions carry the chance of being least risky.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

7. RETENTION BY TOP MANAGEMENT. In centralization, top management retains tight control over the whole organization, because of its vast powers. 8. OPTIMUN UTILISATION OF RESOURCES: Under centralization, there is an optimum utilization of organisational resources, because of rational allocation of scarce resources among different uses. 9. EFFICIENT HANDLING OF EMERGENCIES: In centralization, there is an efficient handling of emergency by top management; and it can overcome organisational crises in an intelligent and planned manner. 10. SUITABLE IN THE PRESENT-DAY ENVIRONMENTAL SCENARIO: Centralization is highly suitable for tackling present-day environmental scenario; which is highly volatile and turbulent. Under these circumstances, top management can take sound decisions in consultation with specialists, from various fields.

DEMERITS: 1. HEAVY BURDEN ON TOP MANAGEMENT: There is heavy burden of management work on top management; as it has to do strategic planning, policy formulation and controlling over the whole organization. 2. ORGANISATIONAL GROWTH RETARDED: Centralization retards the growth of organization. Strategies of diversification, expansion programmes cannot be practical for organization; as top management, already over-burdened with normal management work, can hardly find time to think in these directions. 3. LOWER STATUS OF LOWER LEVEL MANAGERS: Centralization decreases the status of over level managers. As such, they have less motivation to work, because of the non-fulfillment of their ego needs. 4. AUTOCRATIC MANAGEMENT: Centralization may lead to autocratic management, in the organization. Top management with unrestricted powers may not hesitate to impose its autocratic policies and leadership styles on the whole organization i.e. it may misuse its powers. 5. INITIATIVE DISCOURAGED: Centralization discourages the exercise of initiative on the part of lower level managers. Their creativity and innovative skills have no scope, in the organization. 6. DELAYED DECISION MAKING: In centralization, there is delayed decision making; because of top management is burdened with many organisational issues and cannot pay timely attention to decision-making. 7. INFERIOR DECION MAKING: There is inferior decision making by top management. This may seem paradoxical; but it is true in the sense that top rank managers are much remote to the situational factors, in the context of which decisions have to be made. Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

8. MANAGERIAL DEVELOPMENT RETARDED: Centralization retards managerial training and developmental process. Under this philosophy, lower rank managers have little chance of development; because their roles in organisational life are routinised and they have nor or little freedom to exercise initiative and take bold decisions, in an unrestricted manner. 9. MANAGEMENT BY EXCEPTION RETARDED: Centralization retards the policy of management by exception; under which top management must concentrate its attention only on strategic issues. However, under centralization, this policy is not possible; as top management has to attend to all aspects of managing, because of reservation of substantial decision making with itself. 10. EGOISTIC PLANNING: As a matter of great men psychology, top management, sometimes, may indulge in egoistic planning for ambitious purposes: without caring for the attainment of enterprise objectives.

DECENTRALISATION MEANING: Decentralization means systematic dispersal of authority in all departments and at all levels of management.

CONCEPT OF DECENTRALIZATION: Decentralization of authority is that philosophy of management of an enterprise; under which maximum authority of the management of the enterprise is dispersed (or distributed) among managers of middle and specially, lower levels, and minimum authority is kept by the top management, in reserve, to be exercised by it itself.

DEMERITS: 1. LACK OF CONSISTENCY IN DECISION MAKING: There is a lack of consistency in decision-making; because a large number of managers at lower levels may decide the same issue in diverse manners – despite operating within the organizational policy framework. Accordingly, problems of coordination are accentuated. 2. WEAK TOP MANAGEMENT: Top management is rather weak; as most of its powers to given away among lower levels of management. It is not in a position to provide outstanding leadership to the organization; because of its reduced. 3. HIGHER COST OF ADMINISTRATION: The cost of administration is higher; because to operate the decentralized units, a large number of managers are necessitated.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

4. NARROW APPROACH TO MANAGING: The managers of decentralized units have, usually, a narrow outlook to managing. For them, their own departmental interests are supreme-as against the overall interests of the whole organization. 5. ENCOURAGING INTER-DEPARTMENTAL CONFLICTS: Decentralization encourages inter departmental conflicts; because different departmental managers take decisions in their own unique manners and style, by virtue of, their vast powers and hell care for departmental co-ordination and co-operation. 6. RISKY DECISION-MAKING: Lower level managers, because of its experience, wisdom and narrow are less mature in decision making. Sometimes, under decentralization such risky decisions might be taken as might endanger the very survival of the business enterprise. 7. LOSS OF CONTROL BY TOP MANAGEMENT: Top management’s control over the organization is loosened; as its substantial powers are passed on to the lower levels of management. 8. OPTIMUM UTILISATION OF RESOURCES: There may be, at times, less than optimum utilization of resources; because the same set of activities may be duplicated in various decentralized units-leading to wastage of precious organizational resources.

9. INEFFICIENT HANDLING OF EMERGENCIES: Lower level management may be frightened by emergencies and run the seek the shelter and guidance of top management for handling emergency situations. Failure to effectively deal with emergencies by lower level management, may tell upon the survival and prosperity of the whole enterprise. 10. UNSUITABLE IN THE PRESENT-DAY ENVIRONMENT SCENARIO: Present-day environment scenario makes decentralization impractical. For taking sound decisions under these circumstances, top management cannot provide specialists to every Tom, Dick and Harry managers at lower levels in the organizations; because of financial implications.

MERITS: 1. LIGHT BURDEN ON TOP MANAGEMET: There is light burden on top management; as much of the management work is passed on to lower levels of management. 2. ORGANISATIONAL GROWTH FACILITATED: Decentralization facilitates organizational growth. Dynamic and talented managers at lower levels coupled with power, can easily conceive of and implement growth strategies, of course, in consultation with top management. In fact, a trend towards decentralization has gained momentum to cope with requirements of growth.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

3. HIGHER STATUS OF LOWER LEVEL MANAGERS: Decentralization adds to the status of lower level managers. In fact, every thing which goes to increase is a measure of decentralization. With enhanced status, lower level managers have more motivation to work. 4. DEMOCRATIC MANAGEMENT: Decentralization leads to democratic features in organizational functioning. In fact, under decentralization, management decision making power gets divided among a large number of lower rank managers. This phenomenon puts restraints over the dictatorial use of powers by the top management. 5. INITIATIVE ENCOURAGED: Decentralization encourages the exercise of initiative on the part of lower level managers. They can think out and execute their innovative plans, for the overall betterment of organizational life. Their creativity and innovative skills have full scope in the organization. That is why, many decentralized enterprises have progressed a lot, in some cases. 6. QUICK DECISION MAKING: There is quick decision making. For one thing, lower level managers have comparatively limited managerial work, as they have to attend to only their own departmental problems. And for another, they need not seek approval of upper management for decision making on issues, for which authority has been decentralized to them. 7. SUPERIOR DECISION MAKING: Decision making is superior, in the sense that lower level managers are close to other situational factors, in the context of which decisions have to be made. In fact, they practically deal with situational factors and develop a better sense of their appreciation and tackling. 8. MANAGERIAL DEVELOPMENT FACILITATED: Decentralization is a systematic way of training and developing managers for higher management positions. This philosophy more or less does away with the problem of managerial succession. 9. MANAGEMENT BY EXCEPTION FACILITATED: Decentralization facilitates the policy of management by exception. By retaining authority for strategic decision making with itself, top management can decentralize substantial authority for operational management purposes to lower levels managers. 10. RATIONAL PLANNING: Rational planning is done by lower level managers. They have comparatively little ambition and ego and care more for attainment of their departmental objectives through designing and implementing rational plants.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

MBO (MANAGEMENT BY OBJECTIVE) MEANING: MBO is a management system in which each member of organization effectively participates and involves himself. This system gives full scope and to the individual strength and responsibility. DEFINITION: George S. Ordiorne “The system of management by objectives can be described as a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual’s major areas of responsibility in terms of results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members”. Koontz and weihrich “MBO is a comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed toward the effective and efficient achievement of organizational and individual objectives”. S.K. Chakravarthy “MBO is a result oriented non-specialists, operational managerial process for the effective utilization of material, physical and human resources of the organization by integrating the individual with the organization and organization with the environment”. FEATURES OF MBO: 1. IT IS NOT ONLY A TECHNIQUE BUT ALSO A PHILOSOPHY: The philosophy of MBO and its concepts guides and influences every aspect of management. MBO is an approach which includes of management. 2. SETTING OBJECTIVES: The assumption of MBO is that employee participation and involvement in goal setting which leads too better commitment and motivation towards the achievement of organizational objectives. It lay emphasis on participate decision making. MBO approach has various objectives of the organization and of individuals is collectively decided by superiors and subordinates. These objectives become the targets which are to be achieved by various persons in the organization. The review of objectives also done collectively. 3. PROVIDES EVALUATION AND MECHANISM: MBO is a systematic approach to managing an organization where in all key personnel are expected to contribute to achieve the overall goals. It attempts to blend and balance the goals of all key personnel. It provides evaluation mechanism through which the contribution of each individual is measured. Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

4. CREATES LINKAGE BETWEEN ORGANIZATIONAL GOALS AND INDIVIDUALS GOALS: MBO creates linkage between organizational goals and individuals goals. The performance targets are derived from the overall objectives of the organization. 5. REWARDS ARE GOVERNED BY THE RESULTS ACHIEVED: The performances of employees are periodically evaluated in the light of predetermined targets. MBO emphasis on improving future performance. Rewards are governed by the results achieved. 6. CONTINUOUS PROCESS: MBO is a continuous process or a never ending process. The continuous nature of MBO process not only ensures sustained concentration of efforts towards organizational goals, it also helps in modifying the goals to suit the changing conditions. SIGNIFICANCE AND ADVANTAGES OF MBO: 1. TARGETED PLANNING: MBO results in verifiable goals which can easily be translated into action plans. The objective setting process of MBO leads to an integrated hierarchy of objectives throughout the organization. 2. PARTICIPATION AND COLLABORATION: Under MBO objectives of each department are consistent with the overall objectives of the organization. Managers at all levels understand fully their role in total organization. There is active participation and collaboration among the various levels of the organization. 3. MOTIVATION: Managers at all levels are involved in goal setting. As a result they are more committed to the goals of the organization. Rewards are linked with performance. Employees are allowed considerable discretion in setting individual targets which provides them psychological satisfaction. 4. EFFICIENT COMMUNICATION: There is frequent interaction between superiors and subordinate which leads to mutual faith and understanding among them. It improves the work climate in the organization and leads to better communication. 5. TRAINING AND DEVELOPMENT: MBO provides opportunity to subordinate executives to participate in decision making process. This helps in developing their conceptual and human skills. MBO enables an organization to fully utilize the ability of its members. MBO helps in identifying the areas in which employees need further training. 6. PERFORMANCE APPRAISAL: MBO provides objective yardsticks for systematic evaluation of performance. The performance of subordinates in monitored more effectively due to periodic review of progress. The greatest advantage of MBO is perhaps that it makes it possible for a manager to control his own performance.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

LIMITATIONS OF MBO 1. DIFFICULTY IN TEACHING MBO PHILOSOPHY: The success of MBO depend its proper understanding by managers. When managers are clear about this concept only then they can explain to subordinates how it works, why it is being done, what will be the expected results, how it will benefit participants, etc. this philosophy is based on self direction and self control and aims to make managers professionals. 2. FAILURE TO PROVIDE GUIDELINES TO GOAL SETTERS: If goal setters are not given proper guidelines for deciding their objectives for deciding their objectives then MBO will not be a success. The managers who will guide in goal setting should themselves understand the major policies of the company and the role to be played by their activity. They should also know planning premises and assumptions for the future. Failure to understand these vital aspects will prove fatal for this system. 3. DIFFCULTY IN SETTING GOALS: The main emphasis in MBO technique is on setting objectives. The setting of objectives is not a simple thing. It requires lot of information for arriving at the conclusions. The objectives should be verifiable so that performance may be evaluated. Some objectives may not be verifiable, precaution should taken in defining such objectives. The objectives should not be set casually otherwise MBO may prove liability for the business. 4. EMPHASIS ON SHORT TERM OBJECTIVES: In most of the MBO programmes there is a tendency to set short term objectives. Managers are inclined to set goals for a yeanor loss and their trust is to give undue importance to short term goals at the cost of long term goals. They should achieve short term goals in such a way that they help in the achievement of long term goals also. There may be possibility that short term and long term objectives may be incompatible because of specific problems. So proper emphasis should be given to both short term and long term objectives. 5. DANGER OF INFLEXIBILTY: There is a tendency to strict to the objectives even if there is a need for modification. Normally objectives will cease too be meaningful if they are often changed, it will also be foolish to strive for goals which have become due to revised corporate objectives.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

MBE (MANAGEMENT BY EXCEPTION) MEANING: Management by exception is a system of identification and communication that signals to the manager when his attention is needed and implies the use of management by exception particularly in controlling aspect. Thus it can be stated that MBE is a controlling technique.

ADVANTAGES:  Executives are left with more time to tackle bigger and tougher issues, as the details of small problems are left to the subordinates.  There is better utilization of management talent across the organization as even the subordinates get to implement their own decisions and solve problems in their own way, however small they may be.  It increases the span of management and delegation of authority is improved.  It provides greater opportunities and thus increases confidence and motivation.  It uses the latest knowledge on trends, history and business data.  It forces every manager to be thorough and precise and also up-to-date with all relevant information.  It helps to identify problems before they become big.  It also prevents last minute run and panic.  Qualitative and quantitative yardsticks can be established judging the situation and people.  It increases chances of better performance appraisal and hence improves motivation.  Communication is improved between different segments of an organization.  This focus on results causes it identify any problem in any part of the organization.  Better organizational cohesiveness and achievement of objectives.

LIMITATIONS:  Newly established organizations and organizational with a dynamic environment cannot adopt the techniques easily.  Establishing standards i.e., both qualitative and quantitative takes a lot of time and involves lot of effort and precision (accuracy).  Proper and knowledgeable subordinates need to be found, which is a difficult process.  Subordinates act out of over-confidence and think they can handle bigger problems too. Thus often tougher problems go unreported and by the time it comes to the superior. It is too late and hence very difficult to set things. Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

PROCESS OF MBE      

Measurement Projection Selection Observation Comparison Decision making

Measurement: By assigning values to past and present performances, exceptional areas can be identified. Projection: All the values that are meaningful too the organizational objectives are to be extended to see future requirements. Selection: This involves the criteria and method which management will use to follow the progress path towards organizational objectives. Observation: Current performances are observed and measured so that managers are aware of the current state of affairs in the organization. Comparison: It involves the evaluation of the actual performance against planned performance, identifying the exceptions that require attention and reporting the variations to the management. Decision making: This involves prescribing the action that must be taken in order to bring performance back into control or to adjust expectations to reflect changing conditions within and outside the organization or to exploit opportunity.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

COMMUNICATION Meaning The word ‘communication’ has been derived from the Latin word ‘communis’ which means common. Communication, thus, is the process of sharing facts ideas and opinions in common manner. Communication is said to take place when an individual conveys some information to another.

Definition According to Haimann,” Communication is the process of passing information and understanding from one person to another”. According to Allen,” Communication is the sum of all the things one person does when he wants to create understanding in the minds of others”.

According to F.G.Meyer,” Communication is the intercourse by words, letters or message, intercourse of thoughts or opinions”.

Nature of communication The following characteristics of communication explains its nature

1. Two-ways process 2. Knowledge of language 3. Meeting of minds necessary 4. The message must have substance 5. Communication may be made through gesture as well 6. Communication is all-pervasive 7. Communication is a continuous process 8. Communication may be formal or informal

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Importance of communication 1. Helps in planning 2. Vital for decision making 3. Facilities delegation 4. Facilities effectives leaderships 5. Helps to motivate. 6. Helps in co-ordination. 7. Aid to job-satisfactions 8. Helps to save time and effort 9. Aid to public relations

TYPES OF COMMUNICATION

Communication may be classified into the following types: 1. Based on relationships i. Formal. ii. Informal. 2. Based on the its Flow of Direction i. Upward. ii. Downward. iii. Sideward. 3. Based on the method used i. Oral ii. Written iii. Gestural

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Types of communication

Based on Relationships

Formal

Informal

Based on Flow of Direction

Upward

Downward

Based on Method Used

Sideward

Oral

1. BASED ON RELATIONSHIPS

FORMAL COMMUNICATION

 It is the outcome of formal organization.  It follows the hierarchy.  Policy manuals, orders, circulars, notices, etc., are some of the examples of formal communication.

Features of formal communication 1. It follows the hierarchy (the scalar chain) 2. The information is always authentic 3. It is always in written forms. 4. It is binding on the receiver. 5. Proof of receiving the information is obtained.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Writ ten

Gest ural

Merits of formal communication The following are the advantages of formal communication: 1. It is official and therefore reliable. 2. It is proper and systematic. 3. If fixes responsibility on the sender as well as the receiver. 4. It is possible to locate the source of information. 5. It serves as evidence in future.

Demerits of formal communication The following are the limitations of formal communication: 1. It is slow. 2. It establishes only impersonal link with the receiver. 3. Sending formal communication requires the preparation of reports, circular, notices, etc., 4. It has more number of processes. 5. It is time taking method.

INFORMAL COMMUNICATION

Informal communication is the result of casual or personal contact between the individual in an organization. The news spreads like fire. Informal communication is also known as ’grapevine’ The grapevine spreads in a manner zigzag.

Features of Informal communication The important characteristics of informal communication are given below: 1. It is usually verbally transmitted. 2. It does not follow the scalar chain. 3. It starts binding the receiver. 4. There is no proof of receiving the information.

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Merits of formal communication The advantages of formal communication are given below: 1. It is fast 2. There is free and frank expression of views. 3. It has personal touch 4. It provides mental relief to employee to await a formal announcement.

Demerits of formal communication The following re some of the drawbacks of informal communication 1. It gives scope for rumors 2. The information is not authentic. 3. It origin cannot be traced. 4. It leads out information that should be kept confidental.

2. BASED ON THE ITS FLOW OF DIRECTION

UPWARD COMMUNICATION

It takes place when a subordinate conveys some information to his superior.

General Manager

Production Manager

Foreman

Worker

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

DOWNWARD DIRECTION It takes place when a superior conveys certain information to his superior.

General Manager

Production Manager

Foreman

Worker

SIDEWARD COMMUNICATION It takes place when the executives or subordinate operating at the same level exchange information. Such communication may be necessary to secure better coordination between the individuals and the departments. This has been explained below with the diagram.

Production Manager

Marketing Manager

Personnel Manager

Finance Manager

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

3. BASED ON METHOD USED Oral communication Written communication Gestural communication

PROCESS OF COMMUNICATION

Sender : He is the person who sends the message Message : It is the subject matter of communication. It may consist of certain facts, ideas, opinions etc. Encoding : Translating the message into machine language Channel : It is the medium through which the message is sent to the receiver. The channel may be formal or informal. The method of communication may be oral or written. Receiver : He is the person who receives the message. Decoding : Converted into machine language into meaningful statements. Feedback : It is the reaction, response or reply by the receiver

Sender

Message

Encoding

Channel

Receiver

Feedback

Mr.M.John Paul/ Management studies /Sathyabama University/ Chennai.

Decoding