DILLA INFOLINK UNIVERSITY COLLEGE

CHAPTER I
Management Fundamentals (Introduction)
1) Meaning And Definition Of Management
There are several definitions of Management; but they all are fundamentally the same.
Among the many, some are:
a) Management is the process of coordinating all resources through the five major
functions of planning, organizing, staffing, directing /leading and controlling to
achieve organizational goals/desired objectives.
b) It is the process of achieving organizational goals through engaging in the five major
functions of planning, organizing, staffing, directing/leading and controlling.
In the above definition there are three key concepts
i) Coordination of all resources – managers should coordinate the resources of
an organization. These resources may be human or non human.
ii) The five managerial functions – To coordinate the resources of an
organization a manager should employ/use the five managerial functions.
iii) Objectives – are the reason for the establishment of organizations and
management is useful for achieving these goals. Managing/management is
concerned with productivity: effectiveness and efficiency.
All organizations establish a variety of goals and direct their energies and resources to
achieve them.
All organizations also have resources that can be used to meet these objectives. Such
resources can be classified into: human and non-human, and management is the force that
unifies these resources. It is the process of bringing them together and coordinating them
to help accomplish organizational goals.
c) Management is the art of getting things done through other people by making the
atmosphere conducive for others.
d) It is the process of getting things done through others.
→ an effective manager focuses on both work and people.
→ the job of every manager is to achieve organizational goals through the
combined efforts of people.
e) Management is the utilization of scientifically derived principles to examine and
improve collective efforts or production.
- Hospital → Patient care
- Educational institution → Teaching, research & community
service
d) Management is the process of achieving organizational goals through engaging in the
five major functions of planning, organizing, leading, staffing and controlling. This
definition recognizes that:
- Management is an ongoing activity
- Involves knowing how to perform the five major functions of
management.
Characteristics of Management

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1.Goal Oriented 2 Dynamic 3. Decision Making 4. Universal 5. A

Continuous Process 6.Working with and through people 7.Multi –
Disciplinary 8.Not Absolute Principles

2) Managerial Functions
Regardless of the type of firm and the organizational level, all managers perform certain
basic functions. These managerial functions are Planning, organizing, staffing,
directing/leading/ and controlling.
I. PLANNING: is making decisions today about future actions. It involves
selecting missions and objectives and the actions to achieve them; it requires
decision making that is, choosing future courses of action from among
alternatives.
 Planning bridges the gap between where we are to where we want to be in a
desired future.
 Planning identifies goals and alternatives.
 It maps out courses of action that will commit individuals, departments and the
entire organization for days, months and years to come.
Planning is the first managerial function that all managers engaged in because it lays
the groundwork for other managerial functions.
Planning achieves these ends after setting in motion the following processes:
(1) Determination of what resources will be needed
(2) Identification of the number and types of personnel the organization will need
(3) Development of the foundation for the organizational environment in which work
is to be accomplished.
(4) Determination of standard against which the progress toward the objectives can
be measured so that corrections can be made if necessary
II. ORGANIZING: is concerned with assembling the resources necessary to achieve
organizations’ objectives and establishing the activity authority relationship.
 It is the management function that focuses on allocating and arranging human and
non-human resources so that plans can be carried out successfully.
 Resources are allocated on the basis of major company goals.
 Planning has established the goals of the company and how they are to be achieved;
organizing develops the structure to reach these goals.
It is through organizing function that managers determine which tasks are to be done,
how tasks can best be combined into specific jobs, and how jobs can be grouped into
various units that make up the structure of the organization. It involves creating job
positions with assigned duties and responsibilities, arranging positions into hierarchy by
establishing authority–reporting relationship, determining the number of subordinates
each manger should supervise, determining the number of hierarchical levels etc and
thereby create an organization. Organizing is not done once and then forgotten. As the
objectives of the company change, they will influence the structure of managerial and
organizational relationship.

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III. STAFFING: As it has been pointed out, organizing involves creating job positions
with assigned duties and responsibilities. Staffing involves filling and keeping filled the
positions in the organization structure. It is concerned with locating prospective
employees to fill the jobs created by the organizing process. It basically deals with
inventorying the people available, announcing vacancies, accepting, identifying the
potential candidates for the job, recruiting, selecting, placing, orienting, training and
promoting both candidates and existing employees.
Remember
Many aspects of staffing function are the responsibility of personnel department.
iv. Directing/LEADING: has been termed as motivating, influencing, guiding,
stimulating, actuating or directing. It is aimed at getting the members of an organization
move in the direction that will achieve its objectives.
Leading/leadership is the heart and soul of management. It involves influencing others to
engage in the work behavior necessary to reach organizational goals; i.e., it is influencing
people so that they will contribute to organization and group goals; it has to do
predominantly with the human/interpersonal aspect of management.
Leading is the most complex managerial function because it deals with complex human
behavior; and because most problems in organizations arise from people, their desire and
behavior. It includes communicating with others, helping to outline a vision of what can
be accomplished, providing direction, and motivating organization members to put forth
the substantial effort required.
v. CONTROLLING: is the measuring and correcting of activities of subordinates to
ensure that events conform to plans. It deals with establishing standards, measuring
performances against established standards and dealing with deviations from established
standards.
 Controlling is the process through which mangers assure that actual activities
conform to planned activities.
 It is checking current performances against predetermined standards contained in the
plan. Control activities generally relate to the measurement of achievement.
Significance Of Management
All the development that has taken place in the world is due to efficient management.
The points below bring out the significance or importance of management.
1. Encourages Initiative
Management encourages initiative. Initiative means to do the right thing at the right time
without being told or influenced by the superior. The employees should be encouraged to
make their own plans and also to implement these plans. Initiative gives satisfaction to
employees and success to organization.
2. Encourages Innovation
Management also encourages innovation in the organization. Innovation brings new
ideas, new technology, new methods, new products, new services, etc. This makes the
organization more competitive and efficient.

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3. Facilitates growth and expansion

Management makes optimum utilization of available resources. It reduces wastage and

increase efficiency. It encourages team work and motivates employees. It also reduces
absenteeism and labor turnover. All these result growth, expansion and diversification of
the organization.

4. Improves life of workers

Management shares some of its profits with the workers. It provides the workers with
good working environment and conditions. It also gives the workers many financial and
non-financial incentives. All this improves the quality of life of the workers.

5. Improves corporate image

If the management is good, then the organization will produce good quality goods and
services. This will improve the goodwill and corporate image of the organization. A good
corporate image brings many added benefits to the organization.

6. Motivates employees

Management motivates employees by providing financial and non-financial incentives.

These incentives increase the willingness and efficiency of the employees. This results in
boosting productivity and profitability of the organization.

7. Optimum use of resources

Management brings together the available resources. It makes optimum (best) use of
these resources. This brings best results to the organization.

8. Reduces wastage

Management reduces the wastage of human, material and financial resources. Wastage is
reduced by proper production planning and control. If wastage is reduced then
productivity will increase.

1. Increases efficiency

Efficiency is the relationship between returns and cost. Management uses many
techniques to increase returns and to reduce costs. Higher efficiency brings many benefits
to the organization.

2. Improves relations

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Management improves relations between individuals, groups, departments and between

levels of management. Better relations lead to better team work. Better team work brings
success to the organization.

3. Reduces absenteeism and labour turnover

Absenteeism means the employee is absent without permission. Labor Turnover means
the employee leaves the organization. Labor absenteeism and turnover increases the cost
and causes many problems in the smooth functioning of the organization. Management
uses different techniques to reduce absenteeism and labor turnover in the organization.

12. Encourages Team Work

Management encourages employees to work as a team. It develops a team spirit in the

organization. This unity bring success to the organization.

Levels Of Management
Is management the same throughout an organization? Yes and No
Yes: because all managers perform the five managerial functions.
No: because despite the fact that they perform all managerial functions, they perform it
with different emphasis and scope.
Managers – are those persons in the position of authority who make decisions to commit
(use) their resources and the resources of others towards the achievement of
organizational objectives.
 Everybody is the manager of his/her time, energy and talents.
Managers can be divided based on two criteria. These are:
1) Levels of management (vertical difference)
2) Scope of responsibilities (horizontal difference)

I. Types of Managers based on levels of management

Based on levels of management or hierarchy we do have three types of managers.
i. Top Level Managers
Top-level managers are managers who are at the top of the organizational hierarchy and
are responsible for the entire organization. They are usually few in number and the actual
title may vary from organization to organization. They establish companywide objectives
or goals & organizational policies. Furthermore, top management:
 Develop overall structure of the organization.
 Direct the organization in accordance with the environment.
 Develop policy in areas of Equal Employment Opportunity & employee
development.
 Represent the organization in community affairs, business deals, and government
negotiations.

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 Spent much of their time in planning and dealing with middle level managers and
other subordinates.
 Work long hours and spend much of their time in meetings and on telephone.
 Are persons who are responsible for making decisions and formulating policies that
affect all aspects of the firm’s operations.
 Provide overall leadership of the organization towards accomplishment of its
objectives.
 Top-level managers take the credit or blame for organizational success and failures
respectively.
 Top level management includes the board of directors, executive committee, and
chief executive, general manager ( the organization’s most important managers) or
the president and his/her immediate subordinates usually called vice-presidents etc, of
an organization.
ii. Middle Level Managers
Middle level managers occupy a position in an organization that is above first-line
management and below top management. They interpret and implement top
management directives and forward messages to and from first-line management.
- Their subordinates are managers.
- Often coordinate and supervise the activities of lower level managers.
- Receive broad/overall strategies from top managers and translate it into specific
objectives and plans for First-Line Mangers/operating managers.
- Are responsible for the proper implementation of policies and strategies defined
by top-level managers.
- Their principal responsibility is to direct the activity that implement the policies
of the organization.
- Coordinating inputs, productivity and outputs of operating level managements.
- Middle level management includes heads of the different areas and their
assistants, divisional heads, department managers, section heads, plant managers,
branch managers, etc.
iii. First Level Managers/Supervisory Level managers
- Are those at the operating level or at the last level of management
- Their subordinates are non-managers(workers).
- They are responsible for overseeing and coordinating the work of operating
employees.
- Assign operating employees to specific tasks.
- - Are directly responsible for the production of goods and services.
- Motivate subordinates to change or improve their performance.
- Serve as a bridge between managers and non-managers.
- Spent much of their time in leading and little in planning (Planning daily and
weekly activities and accomplishments based on the monthly, quarterly, and
yearly plans).
- Operating level managers direct a small team of workers
- Are in charge of carrying out the day-to-day activities within the various
departments to ensure that short-term goals are met.

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E.g. Department Heads, supervisory personnel, Sales managers, Loan officers,

Foreman.
All managers carry out managerial functions. However, the time spent for each function
varies according to their managerial hierarchy. Top-level managers spend more time on
planning and organizing than lower-level managers. Leading, on the other hand, takes a
great deal of time for first-line managers. The difference in time spent on staffing and
controlling varies only slightly for managers at various levels.

Planning

Organizing

Staffing

Controlling
Directing
Top

Middle

First-line

Organizational Hierarchy Time spent on carrying out managerial

functions
Fig. 1.1 The relative importance of the managerial functions at different levels
II. Types of Managers based on scope of responsibility
Based on the scope of responsibility/activities they manage, managers are divided into
two:
i. Functional Managers
Functional managers are managers who are responsible for a department that performs a
single functional task and has employees with similar training and skills. They are
responsible for only one organizational activity; such as accounting, personnel, finance,
marketing, and production or sales etc. All these functions are necessary for the success
of the organization. Their responsibility is limited to their specialization/specification.
ii. General Managers
General Managers are managers who are responsible for several departments that
perform different functions. They are responsible for the entire operations of the
organization without being specific.
A small company may have only one general manager – its president or executive vice
president – but a large organization may have several, each at the head of a relatively
independent division.
4. Managerial Roles
Role is an organized set of behaviors that is associated with a particular office or position.
A role is any one of several behaviors a manager displays as s/he functions in the
organization

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Managers perform the basic managerial functions by playing a variety of managerial

roles. Henry Mintzberg studied or identified 10 a variety of managerial roles which are in
turn grouped into three categories: interpersonal roles, informational roles, and
decisional roles.
I. Interpersonal Roles involve developing and maintaining positive relationships with
significant others in the organization. It is communication oriented. It includes:
i. Figurehead Role: managers perform symbolic duties of a legal or social nature.
The manager is the head of his work unit, division, section or department. Because of
this “lead person” position the manager represents his work unit at ceremonial or
symbolic functions.
The top level managers represent the company legally and socially to those outside of
the organization..
E.g. Signing documents, presiding at a ceremonial event, greeting visitors, attending a
subordinate’s weeding, taking a customer to lunch, university president hands out a
diploma for graduates – in all these cases the manager is representing his/her
organization.
ii. Leadership Role: The manager is the environment creator – s/he makes the
environment conducive for work by improving working conditions, reducing
conflicts, providing feedback for performance and encouraging growth. The leader
builds relationship and communicates with employees, motivates & coaches them. As
a leader, the manager is responsible for hiring, training, motivating and encouraging
employees/subordinates.
→ The leadership role is evident in the interpersonal relationship between manager
and his/her subordinates.
iii. Liaison Role/Coordinator role: The liaison maintains a network of contacts outside
the work unit to obtain information. The manager serves as a link between the
organization and the informants who provide favors and information. S/he fulfills this
role through community service, conferences, social events, etc, participation is
meetings with representatives of other divisions.
Refers to dealing with the member of the organization superiors, subordinates, peer
level managers in other departments, staff specialists and outside contacts such as clients
II. Informational Roles focuses on the transmission of important information to and
from internal and external sources. It involves the following activities:
i. Monitor role: is also called information gathering role. This role refers to seeking,
receiving, screening and getting information. The manager is constantly monitoring
the environment to determine what is going on. The monitor seeks internal and
external information about issues that can affect the organization. S/he seeks and
receives wide variety of special information to develop through understanding of the
organization and the environment.
Information is gathered from news reports, trade publications, magazines, clients,
associates, and a host of similar sources, attending seminars & exhibitions.

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ii. Disseminator Role: what does the manager do with the information collected? As
the disseminator, the manager passes on to subordinates some of the information that
would not ordinarily be accessible to them. After the information has been gathered
(by monitor role), it has to be disseminated to superiors, subordinates, peers and
other concerned clients. The types of information to be forwarded to members could
be facts, opinions, interpretations, and influences.
iii. Spokesperson/representative Role: the spokesperson transmits information about the
organization to outsiders. The manger is the person who speaks for her/his work unit
to people outside the work unit.
One aspect of this role is to keep superiors well informed and a second aspect is to
communicate outside the organization like press, government agencies, customers
and labor unions. Although the roles of spokesperson and figurehead are similar,
there is one basic difference between them. When a manager acts as a figurehead, the
manager’s presence is as a symbol of the organization, whereas, in the spokesman
role, the manager carries information and communicates it to others in a formal sense.
III. Decisional Roles: involve making significant decisions that affect the organization
i. Entrepreneur Role: (initiator of change) the manager acting as an entrepreneur
recognizes problems and opportunities and initiates actions that will move the
organization in the desired direction. In the role of entrepreneur, the manager tries to
improve the unit. ii. Disturbance Handler Role: solution seeking role. In the role of
disturbance handler, the manager responds to situations over which s/he has little control.
The disturbance handler is responsible for taking corrective action when the organization
faces important, unexpected difficulties.
ii. Resource Allocator Role: deciding on the allocation of the organization’s
physical, financial and human resources. As a resource allocator, the manager is
responsible for deciding how and to whom the resources of the organization and
the manager’s own time will be allocated. This involves assigning work to
subordinates, scheduling meetings, approving budgets, deciding on pay increases,
making purchasing decisions and other matters related to the firm’s human,
financial, and material resources. The resource allocator distributes resources of
all types, including time, funding (finance), equipment and human resources.
iii. The Negotiator Role: representing the organization in all important/major
negotiations. Managers spend a great deal of their time as negotiators, because
only they have the information and authority that negotiators require.
E.g. negotiations to buy firms, to get credit, with government, with suppliers, etc.
The Ten Managerial Roles
Category Role Activity
Interpersonal Figurehead Perform ceremonial and symbolic duties such as greeting visitors, signing
legal documents
Leader Direct and motivate subordinates; training, counseling, and communicating
with subordinates.
Liaison Maintain information links both inside and outside organization; use mail,

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phone calls, meetings.

Informationa Monitor Seek and receive information, scan periodicals and reports, maintain
l personal contacts.
Disseminator Forward information to other organization members; send memos and
reports, make phone calls.
Spokesperson Transmit information to outsiders through speeches, reports, memos.
Decisional Entrepreneur Initiate improvement projects; identify new ideas, delegate ideas, delegate
responsibility to others.
Disturbance handler Take corrective action during disputes or crises; resolve conflicts among
subordinates; adapt to environmental crises.
Resource allocator Decide who gets resources; scheduling, budgeting, setting priorities
Negotiator Represent department during negotiation of union contracts, sales,
purchases, budgets; represent departmental interests.

5. Managerial Skills And Their Relative Importance

A manager’s job is diverse and complex and it requires a range of skills. Skills are
specific abilities that result from knowledge, information, practice, and aptitude.
 Effective managers are essential to the performance of all organizations, whether they
have the ability to plan, organize, staff, lead and control business operations effectively
can determine a firm’s ultimate success or failure.
 Management success depends both on: a fundamental understanding of the principles
of management and the application of technical, human and conceptual skills.
 Modern businesses are dynamic and complex, and competition in the market place is
fierce. Consequently, managers must be highly skilled to succeed. The skills managers
need can be classified as:
@*Technical skill *Human Relations skill*Conceptual skill*Decision making
skill*computer skill.
1. Technical Skills – involve process or technique, knowledge and proficiency. It is the
ability to use the tools, procedures, or techniques of a specialized field. It includes
mastery of the methods, techniques, and equipment involved in specific functions, such
as engineering, manufacturing, or finance. Technical skill also includes specialized
knowledge, analytical ability, and the competent use of tools and techniques to solve
problems in that specific discipline.
- Technical skills are most important at the lower levels of management. It
becomes less important as we move up the chain of command because when
they supervise the others (workers), they have to show how to do the work.
E.g. A surgeon, an engineer, a musician, a quality controller or an accountant all
have technical skill in their respective areas.
2. Human Relations /Interpersonal Skill – the ability to interact effectively with
people. It is the ability to work with, understand and motivate other people,
either as individuals or as groups. Managers need enough of human relationships
skill to be able to participate effectively and lead groups. These skills are

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demonstrated in the way a manager relates to other people, including the way
s/he motivates, facilitates, coordinates, leads, communicates, and resolves
conflicts. A manager with human skills allows subordinates to express
themselves without fear of ridicule and encourages participation. A manager
with human skills likes other people and is liked by them. This skill is a
reflection of the manager’s leadership ability.
Managers who lack human skills often are abrupt, critical, and unsympathetic toward
others. The results are often abrupt, critical, and unsympathetic response from workers to
management.
Because all work is done when people work together, human relation skills are equally
important at all levels of management.
3. Conceptual skills – it is visualizing the different parts of an organization as one
big whole and involves the formulation of ideas. It refers to the ability to see the
big picture – to view the organization from a broad perspective and to see the
interrelations among its components. It includes recognizing how the various
jobs in an organization depend on one another and how a change in any one part
affects all the others. It also involves the manager’s ability to understand how a
change in any given part can affect the whole organization, ability to understand
abstract relationships, solve problems creatively, and develop ideas.
Conceptual skills are more important in strategic (long range) planning; therefore, they
are more important to top-executives than middle managers and supervisors.
Although all three of these skills are essential to effective management, their relative
importance to specific manager depends on his/her rank in the organization. Technical
skill is of greatest importance at supervisory level; it becomes less important as we move
up the chain of command. Even though human skill is equally important at every level of
the organization, it is probably most important at the lower level, where the greatest
number of management–subordinate interactions is likely to take place.
On the Other hand, the importance of conceptual skill increases as we rise in the rank of
management. For top management, which is responsible for the entire organization,
conceptual skill is probably the most important skill of all.
 Technical skill deals with things, human skill concerns people and
conceptual skill has to do with ideas.
Technical Skills

Conceptual

Top
Human Skills

Skills

Middle

First-line

Managerial Levels Managerial Skills

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Fig. 1.2 Variation of skills necessary at different management levels

4. Decision making skill
It is the ability to choose the best alternative among alternatives. In order to make
a decision there must be alternative and before making the choice gathering data,
analyzing it and understanding all alternatives is important. The whole process
requires the manager to have the decision making skill.
Remember
This is relatively more important at the top level management than at lower level
management.
5. Computer Skill
It is a conceptual understanding of computers, in particular, knows how to use
the computer and software to perform many aspects of their job.
4. Management: Science or Art?
Science: - It is an organized/systematized body of knowledge constituting concepts,
theories, and principles concerning a particular field of study. Especially, it is knowledge
obtained from observation, test, and experimentation of facts; and it is universally true;
and applied in any country, organization, etc. Besides, it exploits mathematical models.
1) Its principles are systematized body of knowledge.
2) Its principles are universally applicable:
3) It is based on scientific inquiry, observation, test, and experiment:
4) It explains the cause and effect relationships among/between various
variables:
5) Its validity can be verifiable and can serve as a reliable basis for predicting
future events
Art:
Art implies the application of knowledge and skills to bring about the desired results. Art
is characterized by using common sense, personal feeling, beliefs, impulses, etc. It is
doing things in light of the existing realities of a situation. It is concerned with the
application of know-how and skill to the specific time, place, and condition tactfully,
creatively and wisely. The essential elements of arts are:
 Practical knowledge
 Personal skill
 Result oriented approach
 Creativity
 Improvement through continuous practice

Management as a profession

Mr. Louis Allen defined profession as "a specialized kind of work practiced through and
by use of classified knowledge, a common vocabulary, and requiring standards of
practice and code of ethics established by a recognized body like medicine, law,
accountancy, etc.,

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1. Systematic Knowledge: Every profession has a well defined area of organized

knowledge. Management also deals with distinct area of knowledge which is developed
around functions of management.

2. Formalized method of acquiring knowledge: For present day managers, formal

education and training is an important source of knowledge.
3. Performance-based status: Manager's status in the present day organization is linked
to its performance rather than other extraneous factors like family or political
connections.

4. Code of ethics: Professionals must be governed by a strict code of ethics formulated

and enforced by professional bodies to protect their members integrity.

5. Dedication and commitment: True professionals through dedication and commitment

serve their clients interest. Financial reward is not the measure of their success. Managers
today are expected to serve the long-run interest of the organization but they are also
conscious of their social responsibilities.

6. Universality Of Management
Regardless of title, position, or management level, all managers do the same job. They
execute the five managerial functions and work through and with others to set and
achieve organizational goals. Managers are the same whether the organization is private
or public, profit making or non-profit making, manufacturing or service giving, and
industrial or small firms. Hence, management is universal for the following reasons.
1. All managers perform the five managerial functions even if with different emphasis.
2. It is applicable for all human efforts; be it business, non-business, governmental,
private. It is useful from individual to institutional efforts.
3. Management utilizes scientifically derived operational principles.
4. All managers operate in organizations with specific objectives.
5. Management, in all organizations, helps to achieve organizational objectives.
6. Principles of management are universal. They are applicable to any kind of
organization wherever there is a coordinated effort of human being.
In sum, management theories and principles have universal application in all kinds of
organized and purposeful activity and at all levels of management.

CHAPTER TWO
PLANNING

Definition of planning
Ways of defining planning are legion in management literature. Some definitions are
simplistic; some are long and exhaustive. Essentially, the following important aspects
have been emphasized while defining the term “planning”:

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i) Futurity
Haynes and Massie: planning is that function of management in which s/he decides in
advance what s/he will do. It is a decision –making process of a special kind: its essence
is futurity.
Russell L. Ackoff: planning if ‘anticipatory decision making’ planning is done to decide
what to do and how to do it prior to taking action.
ii) Thinking Function
Knootz and O’ Donnell: planning is an intellectual process, the conscious determination
of courses of action, the basing of decisions on purpose, facts and considered estimates.
Alford and Beatty: planning is the thinking process, the organized foresight, the vision
based on fact and experience that is required for intelligent action.
Other definitions
According to Koontz and O’ Donnell, “planning is deciding in advance what to do, how
to do it, when to do it and who is to do it. It bridges the gap from where we are to where
we want to go”.
According to Peter Drucker, “planning is a continuous process of making present
entrepreneurial decisions systematically and with best possible knowledge”.
In general the planning activity involves defining the organization’s objectives,
establishing an overall strategy for achieving these goals and developing comprehensive
hierarchy of plans to integrate or coordinate activities.
Why planning?
Without planning, business decisions would become random, ad hoc choices. Four
concrete reasons for the paramount importance of the planning function are as follow:
1. Minimize risk and uncertainty
By providing a more rational, fact based procedure for making decisions, planning
allows managers and organizations to minimize risk and uncertainty.
2. Leads to success
Planning does not guarantee success, but studies have shown, often being equal,
companies with plan not only outperform the non-planners but also outperform their
own past results.
3. Focuses attention on the organization goals
Planning helps the manager to focus attention on the organization goals and
activities. This makes it easier to apply and coordinate the resources of the
organization more efficiently. The whole organization is forced embrace identical
goals and elaborate in achieving them. It also enables the manger to outline in
advance an orderly sequence of steps for the realization of an organization’s goals
and to avoid a needless overlapping of activities.
4. Facilitate control
In planning, the manger gets goals and develops plans to accomplish these goals.
These goals and plans then become standards or benchmarks against which

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performance can be measured. The function of control is to ensure that the activities
conform to the plans. Thus, controls can be exercised only if there are plans.
Nature or Characteristics of Planning
(i)The Primacy of planning
The primacy of planning means that the function of planning precedes all other
managerial functions. Since the other management functions are performed to facilitate
the achievement of goals that are set in facilitate the achievement of goals that are set in
planning process, planning logically precedes all other managerial functions.
ii)Pervasiveness of planning
Planning is a function of all managers, although the character and breadth of planning
will vary with their authority and with the nature of policies and plans outlined by their
superiors. Mangers at higher levels in the organization spend more of their efforts in
planning than do lower level managers. There is another important general relationship of
planning activities to organizational levels. Because lower levels tend to derive their
plans from the plans of higher levels, higher level plan must be set before lower level
plans established. For instance, top level mangers plan the general direction of the firm
and develop a strategic plan, whereas, middle level managers plan how to implement the
strategic plan and how to coordinate and integrate the top level plan and the first line
mangers activities. In other hand first line mangers develop a work schedule and a short
term plan that will help them in transforming the strategic plan in to action.
iii)Contribution to purpose & objective
This implies that the purpose of any plan and all its supportive & derivative plans is to
facilitate the accomplishment and the achievement of the purposes and the objectives of
the organization. Managerial planning seeks to achieve a consistent, coordinated structure
of operations focused on desired ends. Without planning, actions much become merely
random activity, producing nothing but chaos.
iv)Planning is directed towards efficiency
The efficiency of a plan is measured by its contribution to purpose & objectives, offset by
the costs and other unsought factors required to formulate & operate it. Plans are efficient
if they achieve their purpose at a reasonable cost. Cost is measured not only in terms of
time, money, or production but also in the degree of individual & group satisfaction.
v)It concerns future activity
Since planning is deciding currently about the future, it involves forecasting and decision
making. The essence of planning is looking a head & is concerned with deciding in the
present what is to be done in the future. A decision must be as to what to do, how to do,
who to do, when to do, where to do and what to achieve before it is actually done.
vi)It has dynamic aspects (it is flexible & continuous)
A manager does planning on the basis of some assumptions, which may not come true in
the future. Therefore, he has to go on revising, modifying and adjusting plans in the light
of the prevailing realities/circumstances. Thus, planning is not only the primary function

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of management, but it is also a continuous function of management. Planning is flexible

as it is based on future conditions which are always dynamic.
In sum, every business plan must have the following characteristics: objectivity, futurity,
flexibility, stability, comprehensiveness, clarity & simplicity.
vii) Planning is a means to an end
Planning is not an end by itself, but a means to an end. It is an instrument that pushes
human effort towards the achievement of objectives.
Importance of planning
i)To offset uncertainty:-
Future is always full of uncertainties and charges which make planning a necessity
because planning foresees the future and makes provisions for it thereby giving an added
strength to the organization for continuous growth and steady prosperity.
ii)To focus attention on objectives:-
Because, all planning efforts are directed towards achieving enterprise objectives, the
very act of planning focuses attention on these objectives. Well considered overall plans
unify interdepartmental activities.
iii)To gain economical operation:
Planning minimizes costs because of its emphasis on efficient operation and consistency.
It substitutes joint directed effort for uncoordinated piecemeal activity, even flow of work
for uneven flow, and deliberate decisions for snap judgments.
iv)To facilitate control
Planning and controlling are inseparable, and commonly referred to as the Siamese twins.
This is because; unplanned action cannot be controlled, for control involves keeping
activities on course by correcting deviations from plans. Any attempt to control without a
plan would be meaningless, since there is no way for people whether they are going
where they want to go (the task of control), unless they first know where they want to go
(the task of planning), plans thus furnish the standards of control.
Generally, a coordinated sense of action, managerial perspective, improved decision
making, increased efficiency, improve control & performance are also benefits of
planning
Types of plan
Plans can be classified on the bases on different factors:
a. Plans based on formality/ status dimension
a. Formal plans
They are written, documented plans developed through an identifiable
process. The type of plan developed by organizations will be categorized here
under,
b. Informal plans
They are unwritten plans which are made in the daily life of individuals. The
type of plan that you and me develop in our day- to- day activity categorized
here under.

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ii. Plans based on scope/ Breadth dimension

a. Strategic plans
They are defined as plans that determine the major objectives of an
organization and the policies and strategies designed by top level management
to govern the acquisition, use and disposition of resources to achieve
organizational objective. It defines the organization mission and may describe
a set of goals to move a company into the future.
Strategic planning is:
 Performed by top level mangers
 Mostly long range in its time frame
 Expressed in relatively general non- specific terms and
 Is a type of planning that provides general direction
They address such issues as:
 How shall we finance the organization?
 How the organization should be structured?
 Which business should the organization enter?
b. Tactical plans
It is an intermediate one which helps to reduce long range planning into
intermediate one by increasing the amount of specificity and making the
actions more goal oriented. They usually center on translating the broad
objectives set by top level management into more specific goals. It refers to
the process of developing action plans through which strategies are executed.
Departmental managers in organizations are often involved in tactical
planning. Examples of tactical planning are:
 Developing annual budget for each department, division
 Choosing specific means of implementing strategic plans
 Deciding on course of action for improving current operations
It addresses such question as:
 What is the best pricing pattern?
 What is the best distribution channel?
c. Operational plans
They are concerned with the day to day activities of the organization and are
made and/or developed by lower level managers. It is the most detailed and
narrowest of all plans. They concentrate on the formulation of functional plans
and it translates the broad concept of the strategic plan into clear number,
specific steps and measurable objectives for the short term. Examples are:
production schedules, sales plans, lesson plans.
ii. Plans based on Time Dimension
All planning deals with the future and the future is measured in time. Hence, it is
convenient and acceptable to think of different kind of planning in terms of the
time periods for which the planning is intended.
a. Long range planning

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It has longer time horizon and it is concerned with not the immediate future
but the distant future. It is concerned mainly with the future direction of the
organization. They extend beyond five years.
b. Medium range planning
These plans are usually made to support long term plans. They cover a period
of more than one year, but less than five years. Here the length of time may
vary from one business to another depending on the nature, risk and other
factors.
c. Short range planning
Such types of plans are made to achieve short term goals and they constitute
the steps toward the implementation of long range plans. These plans are
action oriented and the responsibility of lower level managers. The period is
generally one year.
iii. Plans based on Use Dimension
Use- based plans indicate whether we can use plans repeatedly for uniformity or
for a single period.
A.Single use plan
They are designed to accomplish a specific objective usually in a relatively
shorter period of time and it is non- repetitive. These types of plan focuses on
relatively unique situations within the organization and are used only once.
These plans are programs, projects, budget and short term objectives.
1. Program
They are a complex of goals, policies, procedures, rules, task assignments, steps
to be taken, resources to be employed and other elements necessary to carry out a
given course of action. It also refers to exceptionally large, long range projects or
a group of similar project. For example, the Ethiopian Road Authority (ERA) may
develop a program to upgrade the highways from Addis to different regional
states.
2. Project
It is a small and separate portion of a plan. Each project has limited scope and
distinct directives concerning assignments and time. In the broadest sense, a
project is a specific, finite task to be accomplished, large or small scale or long or
short run is not particularly relevant. What is relevant is that the project be seen as
a unit.
3. Budgets
It is the formulation of plans for a given future period in numerical or financial
terms. It is a financial plan outlining how funds will be spent in the given period
of time and how these funds will be obtained. Budget is a fundamental planning
instrument in many companies. It forces a company to make in advance – whether
for a week or for 5 years- a numerical compilation of expected cash flow,
expenses and revenues, capital outlays, or machine hour utilization. The budget is

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necessary for control but it cannot serve as a sensible standard or control unless it
reflects plans.
B. Standing use plans
They are plans which are formulated to be used again and again for the day to day
operation of the organization. They are plan which are used for repetitive activities and
relatively for longer periods. They provide a ready guideline for solving recurring
problems. The most kind of standing plans are: mission or purpose, strategies, policies,
procedures, methods and rules.
a. purpose or mission
An organization mission is actually the broadest and highest level of objectives. It
defines the basic purposes of the organization or outlines why the organization
exists. A mission statement is a statement of the firm’s long term vision of what
the firm is trying to become, that differentiate this firm from other firms. Mission
of an organization should be examined continuously i.e. not only at its inception
or during difficult times but also during successful periods. Mission or purpose
possesses the following characteristics:
 it must be customer focused
 it must be achievable but challenging
 it must be motivational
 it must be specific
b. Goals
It is a future states or conditions that contribute to the fulfillment of organization
mission. They are more concrete and specific than mission. They describe what is
important to an organization and give its staff a sense of purpose. They are
derived from organization mission.
c. Objective
It is a statement outlining what the organization is trying to achieve, they give an
organization and its member’s direction and purpose. They are short term,
specific and measurable targets that must be achieved to accomplish
organizational goals. They are derived from organization’s goals.
Managers and employees at all levels of an organization should have objectives
and these objectives at all levels must be match together for organizational
success. There are two way of match objectives at all levels.
1. A cascade approach
This is a management method of setting objectives. In this case
objectives flow from top to lower organizational unites.
2. Management by objectives(MBO)
It is a system of management whereby managers work in conjunction
with subordinates to identify goals and make plans for achieving them.
C. Strategies
They are ways and means to achieve the established objectives. Strategies are
major course of action that the organization plans to take in order to achieve

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objectives. It is important to notice that every objective must have at least one
strategy. This means that management should at least have one stated course of
action to accomplish every objective. Strategies do not attempt to outline exactly
how enterprise is to accomplish its objectives. This is the task of countless major
and minor supporting plans. But they furnish a framework for guiding, thinking
and action.
D. Policies
Policies are also plans in that they are general statements or understandings that
guide or channel thinking in decision making. They do not tell organizational
members exactly what to do, but they do establish boundaries
Within which they must operate and ensure that the decision will be consistent
with and contribute to an objective.
E. Procedure
It shows the sequence of activities. They are chronological sequences of required
actions. It defines a step-by-step fashion the methods through which policies are
achieved. They are guides to action, rather than to thinking, and they detail the
exact manner in which certain activities must be accomplished. It becomes more
exacting and more numerous at lower levels because of the necessity for more
careful control. For example “take your registration”
F. Methods
A method is even more detailed. Whereas a procedure shows a series of steps to
be taken, a method is only concerned with the single operation, with one
particular step, and it tells exactly how this particular step is to be performed.
Example; “how the users prepare material requisition”, “how vendors (suppliers)
are selected.”
G. Rules
They are statements that states a specific action must or must not be taken in a
given situation. Rules spell out specific required actions or non- actions, allowing
no discretion. They are usually the simplest type of plan. They are
The most explicit of standing plans and are not guides to thinking or decision
making rather, they are substitutes for them. They permit no flexibility and
deviation. For example, “no smoking”, “no entry”.
The Planning Process
The following are the steps that serve as a general model, which can be applied, with
some modification, to the planning processes of any organization. (Whether it is large or
small, profit making or not-for-profit).
1. Identifying and defining the real problem
An awareness of opportunities in the external environment as well as within the
organization is the real starting point for planning. We should take a preliminary look at
possible future opportunities and see them clearly and completely, know where we stand
in the light of our strengths and weakness, understand what problems we wish to solve

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and why, and know what we expect to gain. Our setting of realistic objectives depends on
this awareness planning requires realistic diagnosis of the opportunity situation.
2. Establish clear-cut objectives
The next step in the planning process is to set objectives to the entire organization and to
each work unit, not only for long-term but also for the short range.
Objectives specify the expected results and indicate the end point of what is to be done,
where the primary emphasis is to be placed, and what is to be accomplished by the net
work of strategies, policies, procedures, rules, budgets, and programs.
3. Establishing the planning Premise
Premises are assumptions providing a background against which estimated events
affecting the plan will take place. They are assumptions about the environment in which
the plan is to be carried out knowledge of the organizations goods and existing condition
provides a framework for defining which aspects of the environment will have the
greatest influence on the organizations ability to achieve its objectives. The purpose of
environmental analysis is to identify ways to respond to changes in economic,
technological, social /cultural & political/ and legal environments having indirect
influence to the organizations plans, and for changes direct influences which have
extended on the organizations market, industry, suppliers, competitors, or key resources
and skills. Here, great consideration should be made to the assumptions regarding the
future. Therefore, the assumption and the constraints under which plans are to operate
should be clearly brought about/established.
4. Identify Alternative Courses of Action
The fourth step in planning process is to find alternative course of action. We may have a
number of alternatives and finding alternatives is not common problem, but reducing the
number of alternatives so that selecting the most promising may be analyzed which
requires the assessment of their probable consequences. Thus, the planner must usually
make preliminary examination to discover the most fruitful possibilities.
5. Evaluating Alternative Courses
After identifying the alternatives, the next logical step is to evaluate each and every
alternative by weighing them against in the light of the premises and goals. One course
may appear to be profitable but require a large each out lay with a slow pay back; another
may look less profitable but involves less risk; still another may better suit the company's
long range objectives but it is difficult to adapt it, etc. Therefore, make an adjustment for
the forecast plan if any; see if the cost, speed, and quality requirements are satisfied and if
mechanization expedite the work for the achievement of desired objectives in terms of
each possible course of action.
6. Selecting a course of action /best Alternative
After evaluating each alternative based in the goals and premises, the next step is to
decide or select the best course of action that will help efficiently achieve the
organization objectives. When we decide, we have to make sure that the plan possesses
flexibility to adjust to varying conditions, acceptance of the plan by operating personnel

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as well as the existing capacity of the firm and need for new equipment, space personnel,
training and supervision.
7. Formulating Derivative Plans
An arrangement of detailed sequence and timing should be made for the proposed plan.
At the point when a decision is made, planning is seldom complete and certain
arrangements should be made that support the basic plan of action chosen, that is,
identification of the derivative plans that support the major plan of action.
8. Numberizing Plans by Budgeting
After decisions are made and plans are set, the final step is to give them meaning that is
to numberize plans by converting them to budgets, this helps to establish verifiable
targets of achievement, to facilitate control and hear. The planner should be able to
arrange for sufficient reports and records over a reasonable period to be collected to
inform proper management members and measure results as well as what remedial action
could be proposed if results indicate weakness when plans are in action.
Limitations of planning
The process of planning may suffer from the following limitations;
1. Expensive process
Planning is a time consuming and expensive process. It may delay action in a
certain cases. Sometimes, it may not be feasible to devote so much time to
planning. And if sufficient time is not given to planning, the decision taken by the
management may prove to be unrealistic. The expense on planning is directly
proportionate to the time spent on planning. The gains of planning must justify the
expenditure incurred on it.
2. Time consuming process
Planning is the lengthy process. It consumes a lot of time in defining objective,
collection of data, analysis of data and choices of alternatives. It may not be
feasible to undergo this process when the situation demands quick decisions.
Thus, planning may not be useful under abnormal conditions.
3. Non availability of data
There may be lack of reliable information on which the plans may be based.
Planning loses its values if reliable information is not available or if the
management is not ready to spend money to get sufficient and accurate
information.
4. Inability of planners
Planning is a forward looking process. If the planner has a tendency to follow
rather than lead, s/he will not be able to make a good plan. Similarly, if the
planner fails to utilize the relevant information for the purpose of planning, s/he
will not be able to produce good plans.
5. Rigidity

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Planning involves determining a course of action in advance. It may lead to

internal inflexibility and procedural rigidity. This may prevent the managers from
taking initiatives and from doing innovative thinking.
6. External limitations
Planning is based on certain premises relating to future. The planning premises
are derived from the forecast s about the future events such as change in demand,
technology or government policy. The management does not have any control
over the external factors. If forecasts about the factors prove to be wrong, the time
and energy devoted to planning will go waste.
Measures to overcome limitations of planning
In order to overcome the above limitations of planning, the following measures should be
taken:
1. The management should give sufficient time and attention to planning since it is
the basis of every other managerial function.
2. The managers should adopt a forward looking attitude. They should be prepared
to do innovative thinking to increase the efficiency of planning.
3. The management information system should be properly organized so that the
relevant information is made available to the planners before they make any
plan.
4. A system of forecasting coupled with a keen insight into the dynamics of future
environment should be developed which will improve the reliability of planed
course of action.
5. The system of control should be directly associated with planning to ensure that
the plans are implemented properly.

Skills Required In Planning

Skills required in planning are
(i) Forecasting
(ii) Decision Making
(i) Forecasting: is the attempt to predict outcomes and future trends that can serve as
basis for planning, by inferences from known facts. By relating the past and the
present information or data, management should be able to anticipate the future
environment.
In developing premises, the kind of markets, volume of sales, prices, products,
technical developments, costs, tax rates, policies, policies related to dividends, the
social and political environment, long-term trends, etc of the future should be
predicted with the help of forecasting.
Effective planning is made with the help of forecasting because planning it self is a
future oriented course of action. *Accordingly, we have to assess the dynamism of
both the internal and external environment. When managers assess the alternatives,
they try to forecast how events both with in and outside the organization will affect
each alternative and what the outcome of each will be.
Forecasting Methods

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We can use both qualitative & quantitative forecasting methods to predict future
situations.
Qualitative Forecasting:- it is a judgement-based forecasting technique used when hard
data are scarce or difficult to use. It is appropriate when hard data are scarce or difficult
to use. It thus involves the use of subjective judgements and rating schemes to transform
qualitative information into quantitative estimates. Example includes the jury of
executive opinion, market research and the survey of expert opinion.
Quantitative Forecasting:- It Is a technique used when enough hard data exist to specify
relation ships between variables. It is used when there is sufficient "hard" or statistical
data to specify relationships between key variables. Extrapolation forecasting, such as
time-series analysis, uses past or current trends to project future events. Sales records of
the past several years, for example, could be used to extend the sales pattern into the
coming year. It disregards political considerations, action of competitors, technological
changes. It merely depends on the past and current trends.
Quantitative forecasting can be used if information exists about the past, if information
exists about the present, if information exists about the present, if these information can
be specified numerically and if it can be assumed that the pattern of the past will
continue. To the contrary, inputs to qualitative forecasts are mainly the results of intuitive
thinking, judgement, and accumulated knowledge. However, it is believed that
quantitative techniques are generally more accurate than qualitative ones. To conclude,
our forecasting should be accurate, up to date, applicable and less costly as much as
possible
(ii) Decision Making: is defined as the process of selecting or choosing based on some
criteria, the best course of action from a number alternatives. Because managers are
continually confronted with opportunities and problems, they must constantly
analyze the effect of different decisions on their organizations and select the
alternative that will move the firm toward its stated objectives.
Types of Decisions: Several authors believe that there are two types of decisions:
programmed & non-programmed decisions.
Programmed decisions: are the kinds that managers face time and again. These decisions
are "programmable" because of a specific procedure can be worked out to resolve them
based on experience in similar situations.
Non-programmed Decisions: are used to solve nonrecurring problems.

CHAPTER THREE

DECISION MAKING
Meaning of Decision Making

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Decision making is a conscious choice among analyzed alternatives, followed by action

to implement a choice. It can be defined as a solution selected after examining several
alternatives chosen because the decider foresees that the course of action he selects will
be more than others to further his goals and will be accompanied by the fewest possible
objectionable consequences.

Decision making is a selection process, the means to achieve the end, the application of
intellectual abilities to a great extent, a dynamic process, situational and taken to achieve
the objectives of an organization. Decision making includes the evaluation of available
alternatives through critical appraisal methods.

Decision making is defined as a rational choice among alternatives. There have to be

options to choose from; if there are not, there is no choice possible and no decision.
Decision making is a process, not a lightning bolt occurrence. In making the decision, a
manager is making a judgment, reaching a conclusion, from a list of known alternatives.

Effective decision making requires a rational selection of a course of action. Managers’

goals can be reached under existing circumstances and limitations. They must also have
the information and the ability to analyze and evaluate alternatives in the light of the
goals sought. And finally, they must have a desire to come to the best solution by
selecting the alternative that most effectively satisfies goal attainment. Thus, rationality
implies making decision based on facts, experience, experimentation or research and
analysis with distinct procedure.

The Decision‐Making Process

Quite literally, organizations operate by people making decisions. A manager plans,

organizes, staffs, leads, and controls her team by executing decisions. The effectiveness
and quality of those decisions determine how successful a manager will be.

Managers are constantly called upon to make decisions in order to solve problems.
Decision making and problem solving are ongoing processes of evaluating situations or
problems, considering alternatives, making choices, and following them up with the
necessary actions. Sometimes the decision-making process is extremely short, and mental
reflection is essentially instantaneous. In other situations, the process can drag on for
weeks or even months. The entire decision-making process is dependent upon the right
information being available to the right people at the right times.

The decision-making process involves the following steps:

1. Define the problem.

2. Identify limiting factors.

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3. Develop potential alternatives.

4. Analyze the alternatives.

5. Select the best alternative.

6. Implement the decision.

7. Establish a control and evaluation system.

1. Define the problem

The decision-making process begins when a manager identifies the real problem. The
accurate definition of the problem affects all the steps that follow; if the problem is
inaccurately defined, every step in the decision-making process will be based on an
incorrect starting point. One way that a manager can help determine the true problem
in a situation is by identifying the problem separately from its symptoms.

The most obviously troubling situations found in an organization can usually be

identified as symptoms of underlying problems. (See Table 1 for some examples of
symptoms.) These symptoms all indicate that something is wrong with an organization,
but they don't identify root causes. A successful manager doesn't just attack symptoms;
he works to uncover the factors that cause these symptoms.

TABLE Symptoms and Their Real

1 Causes

Symptoms Underlying Problem

Low profits and/or declining Poor market research

sales

High costs Poor design process; poorly trained employees

Low morale Lack of communication between management and

subordinates

High employee turnover Rate of pay too low; job design not suitable

High rate of absenteeism Employees believe that they are not valued

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Symptoms Underlying Problem

2. Identify limiting factors

All managers want to make the best decisions. To do so, managers need to have the ideal
resources — information, time, personnel, equipment, and supplies — and identify any
limiting factors. Realistically, managers operate in an environment that normally doesn't
provide ideal resources. For example, they may lack the proper budget or may not have
the most accurate information or any extra time. So, they must choose to satisfice — to
make the best decision possible with the information, resources, and time available.

3. Develop potential alternatives

Time pressures frequently cause a manager to move forward after considering only the
first or most obvious answers. However, successful problem solving requires thorough
examination of the challenge, and a quick answer may not result in a permanent solution.
Thus, a manager should think through and investigate several alternative solutions to a
single problem before making a quick decision.

One of the best known methods for developing alternatives is through brainstorming,
where a group works together to generate ideas and alternative solutions. The assumption
behind brainstorming is that the group dynamic stimulates thinking — one person's ideas,
no matter how outrageous, can generate ideas from the others in the group. Ideally, this
spawning of ideas is contagious, and before long, lots of suggestions and ideas flow.
Brainstorming usually requires 30 minutes to an hour. The following specific rules
should be followed during brainstorming sessions:

 Concentrate on the problem at hand. This rule keeps the discussion very
specific and avoids the group's tendency to address the events leading up to the
current problem.

 Entertain all ideas. In fact, the more ideas that come up, the better. In other
words, there are no bad ideas. Encouragement of the group to freely offer all
thoughts on the subject is important. Participants should be encouraged to
present ideas no matter how ridiculous they seem, because such ideas may spark
a creative thought on the part of someone else.

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 Refrain from allowing members to evaluate others' ideas on the spot. All
judgments should be deferred until all thoughts are presented, and the group
concurs on the best ideas.

Although brainstorming is the most common technique to develop alternative solutions,

managers can use several other ways to help develop solutions. Here are some examples:

 Nominal group technique. This method involves the use of a highly structured
meeting, complete with an agenda, and restricts discussion or interpersonal
communication during the decision-making process. This technique is useful
because it ensures that every group member has equal input in the decision-
making process. It also avoids some of the pitfalls, such as pressure to conform,
group dominance, hostility, and conflict, that can plague a more interactive,
spontaneous, unstructured forum such as brainstorming.

 Delphi technique. With this technique, participants never meet, but a group
leader uses written questionnaires to conduct the decision making.

No matter what technique is used, group decision making has clear advantages and
disadvantages when compared with individual decision making. The following are
among the advantages:

 Groups provide a broader perspective.

 Employees are more likely to be satisfied and to support the final decision.

 Opportunities for discussion help to answer questions and reduce uncertainties for
the decision makers.

These points are among the disadvantages:

 This method can be more time-consuming than one individual making the
decision on his own.

 The decision reached could be a compromise rather than the optimal solution.

 Individuals become guilty of groupthink — the tendency of members of a group

to conform to the prevailing opinions of the group.

 Groups may have difficulty performing tasks because the group, rather than a
single individual, makes the decision, resulting in confusion when it comes time
to implement and evaluate the decision.

The results of dozens of individual-versus-group performance studies indicate that groups

not only tend to make better decisions than a person acting alone, but also that groups
tend to inspire star performers to even higher levels of productivity.

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So, are two (or more) heads better than one? The answer depends on several factors, such
as the nature of the task, the abilities of the group members, and the form of interaction.
Because a manager often has a choice between making a decision independently or
including others in the decision making, she needs to understand the advantages and
disadvantages of group decision making.

4. Analyze the alternatives

The purpose of this step is to decide the relative merits of each idea. Managers must
identify the advantages and disadvantages of each alternative solution before making a
final decision.

Evaluating the alternatives can be done in numerous ways. Here are a few possibilities:

 Determine the pros and cons of each alternative.

 Perform a cost-benefit analysis for each alternative.

 Weight each factor important in the decision, ranking each alternative relative to
its ability to meet each factor, and then multiply by a probability factor to
provide a final value for each alternative.

Regardless of the method used, a manager needs to evaluate each alternative in terms of
its

 Feasibility — Can it be done?

 Effectiveness — How well does it resolve the problem situation?

 Consequences — What will be its costs (financial and nonfinancial) to the

organization?

5. Select the best alternative

After a manager has analyzed all the alternatives, she must decide on the best one. The
best alternative is the one that produces the most advantages and the fewest serious
disadvantages. Sometimes, the selection process can be fairly straightforward, such as the
alternative with the most pros and fewest cons. Other times, the optimal solution is a
combination of several alternatives.

Sometimes, though, the best alternative may not be obvious. That's when a manager must
decide which alternative is the most feasible and effective, coupled with which carries the
lowest costs to the organization. (See the preceding section.) Probability estimates, where
analysis of each alternative's chances of success takes place, often come into play at this

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point in the decision-making process. In those cases, a manager simply selects the
alternative with the highest probability of success.

6. Implement the decision

Managers are paid to make decisions, but they are also paid to get results from these
decisions. Positive results must follow decisions. Everyone involved with the decision
must know his or her role in ensuring a successful outcome. To make certain that
employees understand their roles, managers must thoughtfully devise programs,
procedures, rules, or policies to help aid them in the problem-solving process.

7. Establish a control and evaluation system

Ongoing actions need to be monitored. An evaluation system should provide feedback on

how well the decision is being implemented, what the results are, and what adjustments
are necessary to get the results that were intended when the solution was chosen.

In order for a manager to evaluate his decision, he needs to gather information to

determine its effectiveness. Was the original problem resolved? If not, is he closer to the
desired situation than he was at the beginning of the decision-making process?

If a manager's plan hasn't resolved the problem, he needs to figure out what went wrong.
A manager may accomplish this by asking the following questions:

 Was the wrong alternative selected? If so, one of the other alternatives
generated in the decision-making process may be a wiser choice.

 Was the correct alternative selected, but implemented improperly? If so, a

manager should focus attention solely on the implementation step to ensure that
the chosen alternative is implemented successfully.

 Was the original problem identified incorrectly? If so, the decision-making

process needs to begin again, starting with a revised identification step.

 Has the implemented alternative been given enough time to be successful? If

not, a manager should give the process more time and re-evaluate at a later date.

Types of decision

Although managers in large business organizations, government offices, hospitals and

schools may be separated by background, lifestyle and distance, they all sooner or later
must share the common experience of making decisions. They all will face situations
involving several alternatives and an evaluation of the outcome. In this section we will
discuss various types of decisions.

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Programmed decisions:
Are decisions managers make in response to repetitive and routine problems and at lower
level management. These decisions are "programmable" because of a specific procedure
can be worked out to resolve them based on experience in similar situations.
 Such decision should be made without expending unnecessary time and effort
 They are handled through policies
 Once a standard procedure has been established, it can be used to treat all like
situations.
 They usually involve an organization's every day operational and administrative
activities
 They are primarily found at the lower levels of management.
 Data used in making a programmed decision usually are complete and well defined.
 Participants know the details and agree on how to resolve the problem.
Non-programmed Decisions:
Are made for non- repetitive, non-routine, infrequent, novel, special, highly important,
dynamic, complex and unstructured problems. When a problem has not arisen in exactly
the same manner before, or extremely important, it may require a non programmed
decision. Making such decision is clearly a creative process.
 No well-established procedure exists for handling them, primarily because managers
do not have experience to draw upon.
 Usually handled by general problem solving processes, judgment, intuition and
creativity.
 In contrast to programmed decisions, available data are usually incomplete.
 Non programmable decisions are commonly found at the top levels of management
and often is related to an organization's policy-making activities such as whether to
manufacture new product, to reorganize the company, or to acquire another firm, are
examples.
Formal decision

A decision made on data and well organized and well documented manner. Usually
decisions made in organization are formal plans. They do follow certain prescribed
patterns, written rules and procedures.

Informal decisions

A decision made without proper data support and proper organization. They are not in
properly documented manner. Usually decisions made in our personal life are informal
plans.

Intuitive decisions: A decision made based on estimating or guessing to decide among

alternatives.

Systematic decisions: a decision made based on organized, exacting and data driven
process for choosing alternatives.

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Proactive decision: a decision made in anticipation of an external change or other

conditions.

Reactive decision: a decision made in response to external change.

Types of Decision Making in Management

Decision making is a fundamental element of the managerial process. In considering the
types of decision making, managers need to look at two aspects: the seven kinds of
decisions that a manager might face or produce and the four processes or styles
employed in making the decision.
The seven kinds of decisions that a manager might face or produce

Irreversible: These decisions are permanent. Once taken, they can't be undone. The
effects of these decisions can be felt for a long time to come. Such decisions are taken
when there is no other option.
Reversible: Reversible decisions are not final and binding. In fact, they can be changed
entirely at any point of time. It allows one to acknowledge mistakes and fresh decisions
can be taken depending upon the new circumstances.
Delayed: Such decisions are put on hold until the decision maker thinks that the right
time has come. The wait might make one miss the right opportunity that can cause some
loss, specially in the case of businesses. However, such decisions give one enough time
to collect all information required and to organize all the factors in the correct way.
Quick Decisions: These decisions enable one to make maximum of the opportunity
available at hand. However, only a good decision maker can take decisions that are
instantaneous as well as correct. In order to be able to take the right decision within a
short span of time, one should also take the long-term results into consideration.
Experimental: One of the different types of decision making is the experimental type in
which the final decision cannot be taken until the preliminary results appear and are
positive. This approach is used when one is sure of the final destination but is not
convinced of the course to be taken.

Trial and Error: This approach involves trying out a certain course of action. If the
result is positive it is followed further, if not, then a fresh course is adopted. Such a trail
and error method is continued until the decision maker finally arrives at a course of
action that convinces him of success. This allows a manager to change and adjust his
plans until the final commitment is made.

Conditional: Conditional decisions allow an individual to keep all his options open. He
sticks to one decision so long as the circumstances remain the same. Once the competitor
makes a new move, conditional decisions allow a person to take up a different course of
action.

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The four processes or styles employed in making the decision:-

A leader gives direction to people to follow. He is responsible for ensuring that his
decision provides the right direction to the organization. Be it in a business or in other
organizations, decision making is an important component of leadership skills. The
different types of decision making that a leader typically encounters are:
Authoritative: In authoritative type of decision making the leader is the sole decision
maker which subordinates follow. The leader has all the information and expertise
required to make a quick decision. It is important that the leader is a good decision maker
as it is he who has to own up to the consequences of his decision. Though effective, in
case the leader is an experienced individual, it can harm the organization if the leader
insists on an authoritative type of decision making even when there is expertise available
within the team.
Facilitative: In facilitative type of decision making, both the leader and his subordinates
work together to arrive at a decision. The subordinates should have the expertise as well
as access to the information required to make decisions. Such an approach could be
useful when the risk of wrong decision is very low. It is also a great way of involving and
encouraging subordinates in the working of the organization.
Consultative: As the name suggests, consultative decisions are made in consultation with
the subordinates. However, the fact remains that unlike in the facilitative decision making
style, in consultative decision making it is the leader who holds the decision making
power. A wise leader tends to consult his subordinates when he thinks that they have
valuable expertise on the situation at hand.
Delegative: As per the term, the leader passes on the responsibility of making decisions
to one or more of his subordinates. This type of decision making is usually adopted by
the leader when he is confident of the capabilities of his subordinates.
It would have been so good had there been a universal model for decision making.
However, due to the dynamic nature of conditions, be it our workplace or our personal
lives, we have to resort to different types of decision making.
The Decision Making Environment

Decision making, like planning and other management functions, does not take place in a
vacuum. There are many factors in// the environment that affect the process and the
decision maker.

Degree of certainty

In some situations, the manager has perfect knowledge of what to do and what the
consequences of the action will be. In others, the manager has no such knowledge.
Decisions are made under conditions of certainty, risk and uncertainty.

Decision under certainty

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It means the manager has what is known as a prefect knowledge. The manager has had
this decision to make before; the alternatives are known, and the consequences of each
alternative are fully understood. In this type of decision making situation, the manager
will choose the alternative known to get the best results. Here it means a manger can rely
on a policy or standing plan; the decisions will be made routinely.

Decisions under risk

It provides a more difficult decision making environment. In this situation, the manager
knows what the problem is, knows what the alternatives are, but does not know how each
alternative will work out even though s/he knows the odds (probabilities) of possible
outcomes. The manager is faced with dilemma of choosing the best alternative available.

E.g. tossing a coin, metrology

Decision under uncertainty

It is the most difficult for a manager. This decision making situations is like being a
pioneer. In this situation, the manager is not able to determine the exact odds
(probabilities) of the potential alternative available. The manager may be dealing with too
many variables or perhaps there are too many unknown facts.

Regardless of the reasons, the manager is unable to accurately predict the probable results
of choosing anyone of the alternative. Reliance on experience, judgment and other
people’s experience can assist the manager in assessing the value of the alternatives.

E.g. Innovation of new machine, journey of discoverers.

Why Do Managers Make Poor Decisions?

All managers recognize the importance of making sound decisions. Yet most managers
readily admit having made poor decisions that hurt their company or their own
effectiveness. Why do managers make mistakes? Why don’t decision always result in
achieving some desired goal? Making the wrong decision can result from any one of
these decision-making errors:

 Lack of adequate time: Waiting until the last minute to make a decision often
prevents considering all alternatives. It also hampers thorough analyses of the
alternatives.
 Failure to define goals: Objectives cannot be attained unless they are clearly defined.
They should be explicitly stated so that the manager can see the relationship between
a decision and a desired result.
 Using unreliable sources of information: A decision is only as good as the
information on which it is based. Poor sources of information always result in poor
decisions.

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 Fear of consequences: Managers often are reluctant to make bold, comprehensive

decisions because they fear disastrous results. A “plays it safe” attitude sometimes
limits a manager’s effectiveness.
 Focusing on symptoms rather than causes: Addressing the symptoms of a problem
will not solve it. Taking aspirin for a toothache may provide temporary relief, but if
an abscess causes the pain, the problem will persist. Business managers too often foul
on the results of problems instead of the causes.
CHAPTER 4
The organizing function

4.1. Concept of Organizing and Organization

In planning, managers set their objectives and determine exactly what to do to attain these
objectives. Of course, no one person can implement all the plans of a modern organization or one
person can not do everything necessary to meet the goals set forth in those plans. Planning,
consequently, requires organizing the efforts of many people. It forces us to address several basic
questions:
 What specific tasks are required to implement our plans?
 How many organizational positions are needed to perform all the required tasks?
 How should these positions be grouped?
 How many layers of management(Organizational levels) are needed to coordinate them?
 How many people should a manager supervise directly?
The answers to these and other questions enable us to create an organizational arrangement, a
structure, for putting plans into action.
Organizing - is a management function that involves arranging human and non-human (physical)
resources to help attain organizational objectives. It is the management function that establishes
relationship between activity and authority. The end result of an organizing process is an
organization.
Organization - is the total system of social and cultural relationship among peoples who are
joined together to achieve some specific common objectives. It is a whole consisting of unified
parts (a system) acting in harmony to execute tasks to achieve goals effectively and efficiently.

4.2. Types of Organizations: Formal and Informal Organization

There are two types of organizations: Formal and informal

Formal organization - is the intentional, deliberate or rational structures of roles in a formally
organized enterprise. It is characterized by well-defined authority - reporting relationships, job
titles, policies, procedures, specific job duties and a host of other factors necessary to accomplish
its respective goals.
It is represented by a printed chart that appears in organizational manuals and other formal
company documents called organization chart. Organization chart is a diagram of formal

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relationship which shows how departments are tied together along the principal lines of authority.
Formal organization has consciously designed durable and inflexible structure. Formal
organization may have legal personality.
Informal organization - is a network of personal and social relationships that arises spontaneously
as people associate with one another in a work environment. It is an unofficial network of personal
and social relations developed as a result of association or working together. E.g. the Chess group,
the Morning Coffee group, the Bowling team, etc. It operates outside formal authority
relationships. It doesn’t have legal personality. Informal organization develops within the formal
organization. It is composed of all the informal groupings of people with in a formal organization
(it is not only the domain of workers; managers form informal groups that cut across departmental
lines). Informal organization has a structure which is loosely designed, highly flexible and
spontaneous. In such an organization, the pattern of information flow, the exact nature of
relationships among the members, and the goals of the organization are unspecified. However, to
identify the existence of informal organizations and their composition we can use two tools: a
Sociogram and an Interaction Chart.

A Sociogram is a diagram of group attraction. The Sociogram is developed through a process

asking members whom they like or dislike and with whom they wish to work or not to work. It is
based on the belief that group interactions are the result of people's feelings of like and dislike for
another.

An Interaction Chart is a diagram that shows the informal interactions people have with one
another. For any specific person, the chart can show with whom the person spends the most time
and with whom the person communicates informally.

Members in most informal organizations change with time, i.e. when people highly vary in income
level, educational background, status, etc they tend to leave the original group and join the new
one. Members are bonded together through the need for one another’s company and the fact that
they find their memberships beneficial to them in one way or another, i.e. mutual benefit is the
bondage between or among members.

The informal organization presents a challenge for a manager because it consists of actual
operating relationships not prescribed by the formal organization and, therefore, not shown on the
company’s organizational chart.

Types of Groups in the Informal Organization

The informal organization is often looked at as groups of people. Informal groups may be
described as horizontal, vertical, or mixed. These titles indicate whether the group members come
from the same or different levels of formal organization.

Horizontal Groups:

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 Include persons whose positions are on the same level of the organization i.e. they are groups that
are formed by peers.
 The groups can consist of all the members in the same work areas or membership developed
across departmental lines.
 Members may be all management or non-management personnel.
 Horizontal groups are the common kind of informal groups by virtue of the ease of accessibility.
 Membership in a horizontal group is usually mutually beneficial to individuals - “You help me and
I will help you”. People in the same or related work areas often share the same problems, interests,
and concerns.

Vertical Groups:
 Include people on different levels of the formal organization’s hierarchy.
 These people always come together within the same department (work areas).
 A vertical group can consist of a supervisor and one or more of his/her employees. It may also be
formed through skip - level relationships - a top-level manager may associate with a first level
manager.
 Their relationships can be the result of outside interests or various employment relationships.

Mixed Group:
 It is a combination of two or more persons whose positions are on different levels of the formal
organization and in different work areas.
E.g. a Vice-President may develop a close relationship with the director of computer services in order to
get preferential treatment.
A production manager may cultivate an informal, social relationship with the director of
maintenance for the same reason.
 Mixed groups often form because of common bonds outside work.

Why people form informal groups?

Informal groups are formed for different reasons
1. Need for satisfaction
People have needs that in some cases are not met through the formal organization. The
opportunity to fulfill security, affiliation, esteem, and sometimes self-actualization needs can
encourage people to look out and join others in an informal group. They provide the opportunity to
satisfy needs.
2. Proximity and interaction
A common reason people join groups is that they work near one another. This can be either
through working in close proximity physically or because of frequent interaction. Horizontal
informal groups are prime examples of this.
3. Similarity

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People may join informal groups because they are attracted to other people who are similar to
themselves. Several persons with the same attitudes or beliefs may join one group. Other factors or
similarity can be personality, race, sex, economic position, age, educational background etc.

* In informal group/organization one is not limited to one informal organization because there
may exist still unsatisfied needs by involving in one/two informal organization.

Why informal groups exist?

Informal groups remain in existence because they serve four major functions:
1. They maintain the social and cultural values of the group members.
Individuals in the group are likely to share the same beliefs and values as a result of background,
education, or cultural heritage. The many areas about which the group may have beliefs are
reinforced and maintained by the group environment. Such belief areas are, for example, the work
ethic.
2. They provide group members the opportunity for status fulfillment and social interaction.
Individuals can receive what the formal organization cannot or has not chosen to provide. “I am
just another figure” feeling (identity crisis) may be avoided by informal group. E.g. an individual
whose post is a technician may assume a position of head for a volleyball team.
3. They provide information for their members
The informal group develops its own system and channels of communication parallel to
management’s formal channels. The ability to acquire access to information for members is a
major function of informal groups. Crucial information can be obtained through informal
communications.
4. They influence the work environment
Informal groups regulate or influence the behavior, dress, or work standards of their members
through positive means-acceptance, support, and affiliation or through negative methods – threats
of ostracizing non-complying members. The informal group can also regulate or influence the
actions of management and other informal groups.

The Impact of Informal Organization on the Formal Organization

The groups that compose the informal organization can affect the formal organization negatively
and positively.

The Negative Impacts

i. Resistance to change: The informal organization can resist change. In an effort to protect its
values and beliefs, the informal group can place roadblocks in the path to any modifications in the
work environment. The informal group shows its resistance through hampering its
implementation.

ii. Conflict: The informal group can create two “masters” for an employee. In an attempt to satisfy
the informal group, the employee may come in conflict with the formal organization.

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E.g. The Company may allow 10 minutes for coffee break; however, the informal group may
extend it to 30 minutes for the employee’s social satisfaction. There, the employee’s social
satisfaction is in conflict with the employer’s need for productivity.

iii. Rumor: The informal communication system - the grapevine - can create and process false
information or rumors. The creation of rumors can upset the balance of the work environment.

iv. Pressure to conform: The norms that the informal groups develop act as a strong inducement
toward conformity. The more cohesive the group, the more accepted are the behavioral standards.
Non-conforming in the person’s reference group can result in gentle verbal reminders from the
group but can escheat to harassment – ostracism.

The Positive Impacts

Despite the possibility of these problems, informal groups do have the potential to be helpful to
managers.
i. Makes the total system effective: If the informal organization blends well with the formal
system, the organization can function more effectively. The ability of the informal group to
provide flexibility and instantaneous reactions will polish the plans and procedures developed
through the formal organization.

ii. Provides support to management: The informal organization can provide support to the
individual manager. It can fill in gaps in the manger’s knowledge through advice or through
performing the work, for example, budgeting and scheduling. By performing effectively and
positively, it can build a cooperative environment. This, in turn, can mean more delegation to the
employees and less time spent by the manager controlling employee behavior.

iii. Provides a useful communication channel: The informal organization provides employees with
the opportunity for social information, for discussing their work, and for understanding what is
happening in the work environment.

iv. Encourages better management: Managers should be aware of the power of the informal
organization in what is actually a check and balance system. Planned changes should be made
with an awareness of the ability of the informal group to make the plan successful or unsuccessful.

v. Provides stability in the environment: The informal organization can provide acceptance and
belonging. This feeling of being wanted by the group can encourage employees to remain into
environment, thus reducing turnover. Additionally, the informal organization provides a place for
a person to vent frustrations. Being able to discuss them in a supportive environment may receive
emotional pressures.

4.3. Organizational Structure

Meaning
 Organization structure is the structural framework for carrying out the functions of planning,
decision-making, controlling, communication, motivation, etc.

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 Organization structure is the formal pattern of interactions and coordination designed by a

manager to link the tasks of individuals and groups in achieving organizational goals. The word
“formal” in this content refers to the fact that organization structures typically are created by
management for specific purposes related to achieving organizational goals, and, hence, are
official, or formal outcomes of the organizing function.
 Organization structure is the arrangement and interrelationship of the component parts, and
positions of an organization.
The process of developing an organization structure is sometimes referred to as organization
design.
The formal structure of an organization is of two-dimensional: The horizontal dimension and
vertical dimension.
The horizontal dimension identifies departments, units, and divisions on the same level of a
management. Whereas the vertical dimension refers to the authority relationships between
superiors and subordinates and it also identifies who is responsible and accountable for whom.
One aid to visualizing organization structure is the organization charts.

Organizational Chart
 It is the means through which we depict the organization structure. Organization chart is a line
diagram that depicts the broad outlines of an organization’s structure. It shows the flow of
authority, responsibility, and communication among the various departments which are located at
different levels of the hierarchy. An organization chart is a visual representation of the way in
which an entire organization and each of its components fit together

Organization charts vary in detail, but they typically show in visual form the various major
positions or departments in the organization, the way the various positions are grouped into
specific units, reporting relationships from lower to higher levels, and official channels for
communicating information.

Because organization charts facilitate understanding the overall structure of organizations, many
organizations have found them useful. Such charts are particularly helpful in providing a visual
map of the chain of command.

The organization chart can tell us:

- Who reports to whom (chain of command)
- The number of managerial levels
- How many subordinates work for each manager (the span of control)
- Channel of official communication through the solid lines that connect each job (box)
- How the organization is structured-by function, territory, customer, etc.
- The work being done in each job- the labels on the boxes
- The hierarchy of decision making- where a decision maker for a problem is located
- How current the present organization is (if a date is on the chart)
- Type of authority relationships- line authority, staff authority, and functional authority

President

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V-P V-P

GM GM GM GM GM
Advertising

Division Division Manager Manager

Sales Sales Product Consumer
Manager Manager Research Research

Example of an organization structure Manager Manager Manager

Operations Manufacturi
 In addition, the chart is a trouble-shooting tool. It can help managers locate duplications and
conflicts as a result of awkward arrangements. What the chart does not show are the degree of
authority, the informal communication channels (grapevine), and the informal relationships.

4.4. Departmentation: Meaning and Bases

Departmentation - All organizations, regardless of their size or mission, divide their overall
operations into sub-activities and then combine these sub-activities into
working groups. This process of grouping specialized activities in a
logical manner is called Departmentation.
Department - is a distinct area, division, or branch of an organization over which a manager has
authority for the performance of specified activities. It is a unit formulated as a
result of the Departmentation process.

The physical and mental limitations of individual managers to effectively oversee and coordinate
activities beyond a given limit partly justify the need for departmentation.
Departmentation is not an end in it self but is simply a method of arranging activities to facilitate
the accomplishment of objectives.

Bases for Departmentation

Since organizations are different in their activities, objectives and areas in which they operate,
there are different bases for departmentation. The most common bases are function, territory,
product, customer, and process

I. Departmentation by Function

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It is the grouping together of activities in accordance with the functions of an enterprise - on the
basis of similarity of expertise, skills or work activities. In other words, jobs that call for certain
skills or the use of similar working methods will be put together. It is probably the most common
base for departmentation and is present in almost every enterprise at some level in the organization
structure. It asks the question “what does the enterprise/organization do” what kind of activities.
E.g. Human resources, production, marketing, finance, etc.

It is the responsibility of top management to identify the activities needed for the attainment of
organizational goals and then groups these activities into distinctive units, each one dealing with
functionally similar activities and then assign them to people who can perform them efficiently and
effectively.

Advantages:
1. It is a logical reflection of functions.
2. It maintains power and prestige of major functions of the organizations. Assigns responsibility of
each function to the head of that function by providing individual status and prestige to major
functional areas.
3. It follows principle of occupational specialization, thereby promoting efficiency in the utilization
of people. Simplifies to fill vacant positions.
4. It simplifies training. Train functional specialists by indicating special abilities required.
5. Provides unity of command for closely related activities.
6. Managers have an easier time coordinating and planning because all the jobs that report to them
are similar in content.
7. Promotes specialization and operational efficiency. Because closely related activities and
employees are grouped together, functional departmentation permits effective economies of scale.

Disadvantages
1. De-emphasis of overall company objectives - narrow minuends may develop. Identification with
the department and its objective is often stronger than identification with the organization and its
objectives.
2. Over specializes and narrow viewpoints of key personnel.
3. Reduce coordination and communication between (among) functions.
4. Decisions are concentrated at the top management, creating delay.
5. Limits development of general managers.

II. Departmentation by Territory/ Geography

 Groups activities on the basis of geographic region or territory.
 Is common in enterprises that operate over wide geographic areas i.e. it is attractive to large-scale
firms or other enterprises whose activities are physically or geographically dispersed. The logic is
that all activities in a particular area or region should be assigned to a manager. This individual
would be in charge of all operations in that geographic area.
 Can be used by business, government, NGOs, or other enterprises.

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Geographic departmentalization works best when different laws, currencies, languages and
traditions exist and have a direct impact on the ways in which business activities must be
conducted.

Advantages
1. Places emphasis on local markets and problems; better face to face communication with local
interests or allows the company to address needs or characteristics of consumers that are particular
to that area.
2. Encourages local participation in decision-making
3. Improves coordination of activities in a region
4. Takes advantage of economies of local operations
5. Furnishes measurable training ground for general managers. Managers are responsible for the
activities in that geographic area. Decision concerning that region will be made of that level and
not forwarded up the chain of command.
6. Encourages decentralized decision-making.

Disadvantages
1. Requires more persons with general manager abilities
2. Duplicates staffs, services, or effort.
3. Tends to make maintenance of economical central services difficult and may require services such
as personnel or purchasing at the regional level
4. Increases problem of top management control

III. Departmentation by Product (Line)

It is the grouping and arrangement of activities around products or product groups.
Departmentation by product should be considered when attention, energy and efforts need to be
focused on an organization’s particular products. This can be true if each product requires a unique
strategy or product process or distribution system or capital sources.
 This approach works well for an enterprise which engaged in very different types of products.
E.g. Textile products - Nylon products, woolen products, silk products, cotton products
Petroleum refining - kerosene, diesel,
Electronics - Radios, TVs, Computers

Advantages
1. Places attention and effort on product line
2. Facilitates use of specialized skill, capital facilities and knowledge
3. Permits growth and diversity of products and services
4. Places responsibility for profits at the division level
5. Furnishes measurable training ground for general managers

Disadvantages
1. Requires more persons with general manager abilities

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2. Tends to make maintenance of economical central services difficult - duplication of business

functions within each product line. Each needs marketing, personnel, finance, and production
operations, which may be so specialized they are unable to serve more than one product line or
division.
3. Presents increased problem of top management control

IV. Departmentation by Customer

It is a grouping of activities around customers. This grouping reflects a primary interest in
customers. Customers are the key to the way activities are grouped when each of the different
things an enterprise does for them is managed by one department head. This makes economic
sense when the customers are distinct enough in their demands, preferences, and needs. It helps
organizations meet the special and widely varying needs of customers. It can be used in medical
institutions such as hospitals and clinics - emergency services, out patient services, inpatient
services, x-rays; retail stores- men's clothing, women's clothing, children's clothing.

Advantages
1. Encourages concentration on customer needs
2. Gives customers the feeling that they have an understanding supplier
3. Develops expertness in customer area

Disadvantages
1. May be difficult to coordinate operation between competing customer demands
2. Requires managers and experts in customers’ problems
3. Customer groups may not always be clearly defined
4. The possibility of underemployment of facilities and labor specialized workers in customer groups

V. Departmentation by Process
Manufacturing firms often group activities around a process or type of equipment. This is when
special skill is needed to operate different machines. Making plywood, for example, involves
several sequential processes: poling (removing bark from logs); sawing logs in to 8’ lengths,
heating; veneer stripping and stamping veneer sheets in to 4' segments; drying and grading
according to quality; gluing plies together; finishing and bundling.

Advantages
1. Achieves economic advantage
2. Uses specialized technology
3. Simplifies training

Disadvantages
1. Coordination of departments is difficult
2. Responsibility for profit is at the top
3. Is unsuitable for developing general mangers

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VI. Departmentation on Combined Base

It is a base in which multiple bases are used at different organizational levels of a particular
organization.

4.5. Span of Management

Meaning: The term span of management is also referred to as a span of control, span of
supervision, span of authority or span of responsibility.
Span of management - refers to the number of subordinates who report directly to a manger, or
the number of subordinates who will be directly supervised by a
manager.
This varies from one situation to another. There is no magical number for the span of control.
There are various factors affecting the span of management. Based on the number of subordinates
who should report to a manager or the number of subordinates that a superior should supervise, we
can have Wide span of management and Narrow span of management.

i. Narrow Span of Management

This means superior controls few numbers of subordinates or few subordinates report to a
superior. When there is narrow span of management in an organization, we get:
 Tall organization structure with many levels of supervision between top management and the
lowest organizational level.
 More communication between superiors and subordinates.
 Managers are underutilized and their subordinates are over controlled.
 More trained managerial personnel and centralized authority.

Advantages
1. Close supervision and control
2. Fast communication between subordinates and superiors.
3. Easy to coordinate and control activities.
Disadvantages
Superiors tend to get too involved in the subordinates work
The problem of setting more trained managerial personnel
Excessive distance between lowest level and top level management. This kills intuitive for top-level
positions.
High costs due to many levels
ii. Wide Span of Management
This means many subordinates report to a superior or a superior supervises many subordinates.
If the span of management is wide, we get:
 A flat organization structure with fewer management levels between top and lower level
 Many number of subordinates and decentralized authority
 Managers are overstrained and their subordinates receive too little guidance and control
 Fewer hierarchal level
Advantages

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1. Superiors are forced to delegate

2. It initiates the development of clear polices

Disadvantages
1. Tendency of overloaded superiors to become decision bottle necks
2. Danger of superior’s loss of control
3. Require exceptional quality of mangers

Span of Control Vs Levels of Management: If one wants to reduce the number of hierarchical
levels in an organization, the only way to do so without reducing the number of employees at the
bottom is to increase spans of control.

Relationship of centralization to span of control

The company’s philosophy of centralization or decentralization in decision-making can influence
the span of control of subordinate managers. A philosophy of decentralized decision-making
generally means that the span of management should be wider for each manager. This is so
because decision-making is forced down to subordinates, thus feeling up a manager’s time
commitments. This situation also generally means fewer level of management in an organization.

Conversely, a philosophy of centralized decision-making should result in a narrower span of

control and more levels of management. If it is the philosophy of the company to have managers
make the majority of decisions, the mangers will closely supervise their subordinates and delegate
little. Contacts with subordinates should increase in number and in length, thus narrowing the span
of control.

Factors Determining an Effective Span of Management

The principle of span of a management states that there is no any specific number of subordinates
to be supervised by a manager. Rather, it states, there are factors that affect the span of
management. Some are:
1. Ability of the manger: The ability of the manager (supervisor) who is responsible for supervising
subordinates affects the span of a management. If the manager is well trained and highly capable,
receives assistance in performing her/his supervisory activities, doesn’t have many additional non-
supervisory activities to perform, and if that manager defines tasks and responsibilities to
subordinates clearly, the appropriate span can be relatively broad (wide).
2. Manager’s personality: if managers strongly need to share power, they may prefer a wider span of
control. Some managers develop reputation as empire builders and attempt to increase their spans.
3. The abilities of subordinates: The amount of training, experience, and ability that subordinates
have is directly related to a manager’s span of control. Knowledgeable subordinates who work
well on their own require less supervision than inexperienced, poorly trained workers do. Well -
trained subordinates require not only less of their manager’s time but also fewer contracts with
them.

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4. Motivation and commitment: motivated employees take initiative and responsibility, utilize and
develop their skills committed to their job, devote more time and effort and needs less of their
supervisor’s time.
5. Need for autonomy: subordinates with high need for autonomy prefer to make decisions by
themselves (wider span) and vise versa is true for those who take every problem to their superior
for decision-making.
6. Type of work: Routines and simplicity of work. Managers supervising people with simple and
repetitive jobs are able to manage more immediate subordinates than are those who supervise
people with complex, non-repetitive tasks.
7. Geographic dispersion of subordinates: Normally, there is an inverse relationship between a
manager’s span of control and the geographic dispersion of his/her subordinates. For example, a
sales manager whose sales people are scattered over a wide geographic region cannot supervise as
many subordinates as a manager can whose subordinates are in one building. This is especially
true when the manger and subordinates must meet on a regular basis.

8. The availability of information and control systems: If there are sophisticated information and
control systems, well-defined policies and plans, the manager can supervise many subordinates
and hence the span will be wide.
9. Levels of management: The size of the most effective span differs by organizational level.
 At the top level of management the span is wide, because
 The communication and conceptual skill that top level managers have.
 The nature of their work they deal with: general/broad policy control rather than direct
supervision.
 Their subordinates are relatively skillful.
 At the middle level of management the span is narrow, because they involve in policy supervision
and much more direct, personal contract with subordinates than top-level managers.
 At the lower level of management the span is wide, because as managers of operating employees,
supervisors frequently supervise work that is not complex and that rarely requires policy
decisions. Instead, they will usually rely on rules and procedures to help them solve the daily
problems that arise.
7. Economic Factor: Narrow spans of management require not only more supervisors (and their
services) but also the added expense of executive offices, secretaries and fringe benefits.
However, the wide spans of a management require few supervisors with their accessories. So,
organizations should take cost into consideration.

There are two major reasons why the choice of appropriate span is important.
(1) Span of management affects the efficient utilization of managers and the effective
performance of their subordinates. Too wide a span may mean that managers are overextending
themselves and that their subordinates are receiving too little guidance or control. Too narrow a
span of management may mean that managers are underutilized.
(2) There is a relationship between span of management throughout the organization and the
organization structure. A narrow span of management results in a "tall" organizational structure
with many supervisory levels between top management and the lowest level. A wide span for the
same number of employees means fewer management levels between the top and bottom.

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The concept of an "optimal" span of management is the one that is neither too broad nor too
narrow. The concept of an optimal span of management suggested that spans could be too broad or
too narrow in specific instances.

The wider the span of management, the less direct supervision there is; the narrower the span, the
greater the number of managers and, therefore, the higher the cost in salaries.

4.6. Authority Relations in Organization (Line, Staff,

Functional)
In an organization different types of authority are created by the relationships between individuals
and between departments. There are three types of authority.

i. Line Authority
Line authority defines the relationship between superior and subordinate. It is a direct supervisory
relationship. It exists in all organizations as an uninterrupted score or series of steps.

In line authority a superior exercises direct command over a subordinate. Line authority is
represented by the standard chain of command that starts with the most superiors and extends
down through the various levels in the hierarchy to the point where basic activities of the
organization are carried out.

ii. Staff Authority - is advisory in nature.

The function of people in a pure staff capacity is to give advice, expertise, technical assistance,
and support to help line managers to work more effectively in accomplishing objectives. Advisory
authority doesn’t provide any basis for direct control over the subordinates or activities of other
departments with whom they consult (Within the staff manager’s own department, s/he exercises
line authority over the department’s subordinates).
E.g. Personnel, research and development, legal, plant maintenance, compost quality control, etc.
 Staff authority is advisory and normally flows upward.
Line and Staff Departments: line and staff authority are concepts that describe the authority
granted to managers. Line and staff departments have different roles or positions within the
organization structure. Line departments, headed by line managers, are the departments
established to meet the major objectives of the organization. Departments normally designated as
line departments include production, marketing, and finance. In functioning with employees and
departments under their control, line managers exercise line authority.

Staff departments provide assistance to the line departments and to each other. They can be
viewed as making money indirectly for the company through advice, service and assistance. Staff
departments are created on the basis of the special needs of the organization. As an organization
develops, its need for expert, timely, ongoing advice becomes critical. Examples could be legal,
personnel, computer service, etc.

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iii. Functional Authority

It is the right which is delegated to an individual or a department to control specified process,
practices, or provinces or other matters relating to activities undertaken by persons in other
departments. If the principle of unity of command were followed without exception, authority over
these activities would be exercised only by their line superiors, but numerous reasons - including a
lack of specialized knowledge, lack of abilities to supervise processes, and danger of diverse
interpretations of policies - explain why they occasionally are not allowed to exercise this
authority. It is delegated by their common superior to a staff specialist or to a manager in another
department.

Functional authority is not restricted to managers of a particular type of department. It may be

exercised by line, derive or staff department heads, more often the latter two, because they are
usually composed of specialists whose knowledge becomes the basis for functional controls.
Example:
1. The Finance Manager can give direct command to the marketing manager of the same level about
financial affairs.
2. The Legal Advisor can give direct command to others concerning the legal affairs of the
organization.
3. The Personnel Manager can give direct command to others regarding recruitment, selection,
performance appraisal systems

Benefits of Staff
1. Staff managers provide advice for line managers, i.e. the advice of well-qualified specialists in
various areas of an organization’s operations can scarcely be overestimated, especially as
operations become more complex.
2. These specialists may be allowed to the time to think, to gather data, and analyze, when their
superiors, busy managing operations, cannot do so.
 As problems become more complex, staff analysis and advice becomes an urgent necessity.

Conflict between Staff and Line Managers

For several reasons there is a conflict between line and staff managers. Some are:
1. Demographic factor: There is a general premise that staff mangers are younger, well educated,
firmly attached to their profession than their organization and want more money, power and
prestige. The older line officers dislike or receiving what they regarded as instructions from
someone so much younger than themselves.
2. Threats to Authority: Line managers consider staff managers as potential threats to their authority,
particularly if staff managers exercise functional authority.
3. Dependence on knowledge: Line managers feel discomfort and get frustrated when they
progressively depend on the advice of staff managers; i.e. they fell that they are less important to
the organization.
4. Staff managers may exceed their authority and attempt to give direct command to the line
managers.

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5. Staff managers may attempt to take credit for ideas implemented by line managers; conversely,
line managers may not acknowledge the role of staff managers.
6. Staff departments are organizationally placed in a relatively high position to top management.

Resolving Conflict
The line - staff problem is not only one of the most difficult that organizations face but also the
source of an extra ordinarily large amount of inefficiency, solving this problem requires great
managerial skill, careful attention to principles and patient teaching of personal. Some ways of
resolving the conflict include:
1. Understanding authority relationships: Managers must understand the nature of authority
relationships if they want to solve the problems of line and staff. Line means making decisions
and acting on them. Staff relationship, on the other hand, implies the right to assist and counsel.
In short the line may “tell”, but the staff must “sell” (its recommendations).
2. Making line listen to staff: Although line-staff friction may stem from ineptness or
overzealousness on the part of staff people, trouble also arises when line executives too carefully
guard their authority and resent the very assistance they need. Line manager should be encouraged
or required to consult with staff. Enterprises would do well to adopt the practice of compulsory
staff assistance where in the line must listen to staff.
3. Keeping staff informed: Common criticisms of staff are that specialists operate in a vacuum, fail to
appreciate the complexity of the line manager’s job, or overlook important facts in making
recommendations. Specialists should take care that their recommendations deal only with part of a
problem. Many critics arise because staff assistants are not kept informed on matters in their field.
Even the best assistant cannot advise properly in such cases. If line managers fail to inform their
staff of decisions affecting its work or if they don’t pave the way through announcements and
requests for cooperation - for staff to obtain the requisite information on specific problems the
staff cannot function as intended.
4. Requiring completed staff work: Completed staff work implies presentation of a recommendation
based up on full consideration of a problem, clearance with persons importantly affected,
suggestions about avoiding any difficulties involved, and often, preparation of the paper work -
letters, directives, job descriptions, job specifications so that a manager can accept or reject a
proposal without further study, long conferences, or unnecessary work.
5. Clear areas of responsibility and accountability for results.

4.7. Delegation of Authority, Centralization

and Decentralization
Authority - is the right to commit resources (that is, to make decisions that commit an
organization’s resources), or the legal (legitimate) right to give orders (to tell
someone to do or not to do something)
- is the right to make decisions, carry out actions, and direct others in matters related to the duties
and goals of a position

-is the formal right of a superior to command and compel his subordinates to perform a certain act.
All managers in an organization have authority. It provides the means of command.

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Generally, level of authority varies with levels of management. Higher-level managers have
greater authority, with ultimate power resting at the top. Authority decreases all the way to the
bottom of the chart, where positions have little or none. Authority is vested in a manager because
of the position he/she occupies in the organization, that is why we say, “authority comes with the
territory.”

When an organization gives one of its members authority, or the legitimate right to use power over
others, it carries with it the burden of responsibility. Responsibility means being held accountable
for attainment of the organization’s goal. Authority is derived from the person’s official position
in the organization. The person who occupies the position has its formal authority as long as
he/she remains in the position. As the job changes in scope and complexity, so should the amount
and kind of formal authority possessed. Even though a manager has formal or legitimate authority,
it is wise to remember that the willingness of employees to accept the legitimate authority is a key
to effective management. Chester Bernard called this Acceptance Theory of Authority.

Delegation of Authority - is the downward pushing of authority from superiors to subordinates to

make decision within their area of responsibilities. It is the process of allocating tasks to
subordinates, giving them adequate authority to carry out those assignments, and making them
obligated to complete the tasks satisfactory. Delegation is a concept describing the passing of
formal authority to another person. It is the assignment of part of a manager’s work to others,
along with both the responsibility and authority necessary to achieve expected results.

Delegation is necessary for an organization to exist. Just no one person in an enterprise can do all
the tasks necessary for accomplishing a group purpose, so is it impossible, as an enterprise grows,
for one person exercise all the authority for making decisions.

In delegating authority a manager doesn’t surrender his power because he does not permanently
dispose of it; delegated authority can always be regained. This is called recovery of delegated
authority. Reorganization inevitably involves some recovery and redelegation of authority. In a
shuffle in an organization, rights are recovered by the responsive head of the firm or a department
and then redelegated to managers of new or modified departments.

The Process of Delegation

Delegation of authority has the following steps:
1. Assignment of tasks
Specific tasks or duties that are to be undertaken are identified by the manager for assignment to
the subordinate. The subordinate is then approached with the assignment (task).
2. Delegation of authority
In order for the subordinate to complete the duties or tasks, the authority necessary to do them
should be delegated by the manager to the subordinate. A guideline for authority is that it be
adequate to complete the task - no more and no less.

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3. Acceptance of responsibility
Dispensability is the obligation to carryout one’s assigned duties to the best of one’s ability. It is
the obligation created when someone accepts task assignments together with the appropriate
authority. Responsibility is not delegated by a manager to an employee, but the employee becomes
obligated when the assignment is accepted. The employee is the receiver of the assigned duties
and the delegated authority; these confer responsibility as well.
4. Creation of accountability
Accountability is having to answer to someone for your results or actions. It means taking the
consequences - either credit or blame. It is the requirement to provide satisfactory reasons for
significant deviations from duties or expected results. When the subordinate accepts the
assignment and the authority, s/he will be held accountable or answerable for actions taken. A
manager is accountable for the use of his/her authority and performance. The manager is also
accountable for the performance and actions of subordinates.

The manager should take the time to think through what is being assigned and to confer the
authority necessary to achieve results. The subordinate, in accepting the assignment becomes
obligated (responsible) to perform, knowing that s/he is accountable (answerable) for the results.

Importance of Delegation
1. It relieves the manager from his/her heavy workload: Delegation frees a manager from some time
consuming duties that can be adequately handled by subordinates and lets the manager devote
more time to problems requiring his/her full attention (lets the manager concentrate on strategic
issues). Enables managers to perform higher level work.
2. It leads to better decisions: Since subordinates are closer to real “firing line” activities and
problems than superiors, they have more realistic information and better understanding. The
realistic information that subordinates have may lead them to make better decisions.
3. It speedup decision-making: Decisions made by lower level managers usually are timelier than
those that go through several layers of management.
4. It helps subordinates to train and builds moral: Subordinate managers can reach their full
potential only if given the chance to make decisions and to assume responsibility for them.
5. It encourages the development of professional managers: Had there not been any delegation,
professional managers wouldn’t have been produced.
6. It helps to create the organization structure: If there were no delegation of authority is an
organization, there would exist only the president/CEO/ top-level manager. And an individual
cannot create an organization.

Centralization and Decentralization

The terms centralization and decentralization refer to a philosophy of organization and

management that focuses on either the selective concentration (centralization) or the dispersal
(decentralization) of authority within an organization structure. Centralization or decentralization
is a relative concept when applied to organizations. They are tendencies of delegation of authority.

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Centralization - is the extent to which power and authority are systematically retained by top
managers.
If an organization is centralized:
- Decision-making power remains at the top
- The participation of lower-level managers in decision-making is very low

Decentralization - is the extent to which power and authority are systematically dispersed /
delegated throughout the organization to middle and lower level managers. It is the tendency to
disperse decision-making authority in an organized structure.
 In a decentralized organization decision-making power is pushed downwards and lower-level
managers actively participate in decision-making process. That is, they are not only called for
implementation but also for decision-making.

Centralization and decentralization are not opposites rather they are tendencies/proportions in
delegation of authority. If they were opposites, there could be absolute centralization or absolute
decentralization, but there is no absolute centralization or absolute decentralization. There could
be absolute centralization of authority in one person. But that implies no subordinate managers
and therefore no structured organization. Some decentralization exists in all organization, on the
other hand, there cannot be absolute decentralization, for if managers should delegate all their
authority, their status as mangers would cease, their position would be eliminated, and there
would, again, be no organization. Centralization and decentralization are tendencies; they are
qualities like “hot” and “cold”.

 Centralization and decentralization form a continuum with many possible degrees of delegation of
power and authority in between.

When decentralization is greater:

 The greater is the number of decisions made at lower level of the organization
 The more functions are affected by decisions made at lower levels
 The less a subordinate has to refer to his/her manager prior to a decision and the less checking
required as decisions are made at the lower level.

Factors Determining Delegation

Managers cannot ordinarily be for or against decentralization of authority. They may prefer to
delegate authority, or they may like to make all the decisions. Some factors that affect the degree
of centralization or decentralization- delegation of authority- are:

1. The history and culture of the organization: Whether authority will be decentralized frequently
depends upon the way the business (organization) has been built. Those enterprises that, in the
main, expand from within show a marked tendency to keep authority centralized. On the other
hand, enterprises that result from mergers and consolidations are likely to show, at least first, a
definite tendency to retain decentralized authority. In other words, organizations which were

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centralized or decentralized at their establishment tend to centralize and decentralize authority to

repeat what they have done before. When centralized organization is changed into
decentralization and the vice versa people feel discomfort.

2. The nature of the decision: The costlier and the riskier the decision is, the more centralized the
authority will be. Cost may be reckoned directly in birr and cents or in such intangibles as the
company’s reputation, its competitive position or employee morale. The fact that the cost of
mistake affects the decentralization isn’t necessarily based on the assumption that top managers
make fewer mistakes than subordinates. They may make fewer mistakes, since they are probably
better trained and in possession of more facts, but the controlling reason is the weight of
responsibility. Delegating authority is not delegating responsibility; therefore, managers typically
prefer not to delegate authority for crucial decisions.

3. Availability and ability of managers (Lower level managers): A real shortage of managers would
limit decentralization of authority, since in order to delegate, superiors must have quantified
managers to whom to give authority. In addition to the availability of lower level managers, the
quality of the existing lower level managers (subordinates) has impact on centralization or
decentralization. Hence, the competency to carry out and exercise the delegated authority has
some effects. Some managers lack confidence in their subordinate or fear the consequences or
criticism of having subordinates make bad decisions.

4. Management philosophy: The willingness of managers to delegate authority and limit the degree
of decentralization or the desire to do the job by herself/himself. The character and philosophy of
top executives have an important influence on the extent to which authority is decentralized.
Sometimes top managers are despotic, tolerating no interference with the authority they jealously
hoard. At other times, top managers keep authority not merry to gratify a desire for status or
power but because they simply cannot give up the activities and authorities they enjoyed.

5. Size and character of the organization: The larger the organization, the more decisions to be
made, and the more places in which they must be made, the more difficult it is to coordinate them.
These complexities of organization may require policy questions to be passed up the line and
discussed not only with many managers in the chain of command but also with many managers at
each level, since horizontal agreement may be as necessary as vertical clearance.
Slow decisions - show because of the number of specialists and managers who must be consulted -
are costly. To minimize the cost, authority should be decentralized wherever feasible. Also
important in determining size is the character of a unit. For decentralization to be thoroughly
effective, a unit must possess a certain economic and managerial self-sufficiency.

6. Geographic dispersion of operations: Geographic dispersion of operations makes decentralization

more necessary because top executives frequently find it impossible to keep abreast of the details
of what is going on at various locations. Moreover, managers on site may be in a better position to
assess local situations and make appropriate decisions.

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7. Environmental uncertainty: Environmental uncertainty tends to produce a need for more

decentralization. In this case, the fast pace of change interferes with top management’s ability to
assess situations with the speed necessary to make timely decisions.

Problems in Effective Delegation

Despite of the advantages, many managers are reluctant to delegate authority and many
subordinates are reluctant to accept it. Both these barriers hinder effective delegation.

Reluctance to delegate/Problems from Managers

There are a number of reasons that managers commonly offer to explain why they do not delegate.
Some are:
1. Fear of loss of power - Some managers fear when they delegate authority because they expect that
they will be substituted/replaced by their subordinates if subordinates have got the experience and
skill of decision-making.

2. “I can do it better myself” fallacy: Some managers have an inflated worth of themselves and think
that they do everything better than their subordinates.

3. Lack of confidence in subordinates: The perception of managers that my subordinates just are not
capable enough. When managers delegate authority to their subordinates they do also delegate
responsibility. That is, managers are accountable for the actions of their subordinates and may
fear the blame if subordinates fail, if subordinates lack knowledge and skill.

4. Fear of being exposed: Some managers fear that their subordinates do too good job as compared
with themselves i.e. feel threatened that competent subordinates may perform too well and
possibly make the manager look poor by comparison.

5. Difficulty in briefing: Many times managers are reluctant to delegate authority if they conclude
that the time for briefing is more than the time for decision-making or if they believe they lack the
time to train subordinates. “It takes too much time to explain what I want done”.

Reluctance to Accept Delegation/problems from subordinates

1. Fear of failure and criticism: Subordinates who fear criticism or dissemble for mistake are
frequently reactant to accept delegation. The solution for this problem can be teaching
subordinates when they make mistakes than criticizing or dismissing.

2. Subordinate may believe that the delegation increases the risk of making mistakes but doesn’t
provide adequate rewards for assuming greater responsibility: Lack of incentive or reward for

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assuming a greater workload. Accepting delegation frequently means that they will have to work
harder under greater pressure. Without appropriate compensation subordinates may be unwilling
to do so.

3. Lack of adequate information and resources: If subordinate managers think that they don’t have
enough factual information on which to base a decision or other resources necessary to carryout
the assigned duties, they tend to decline/reject accepting authority delegated.

4. If subordinates are already overworked

5. Lack of self-confidence
6. Believing / Thinking that decision-making is the boss’s job.

Overcoming the barriers in effective delegation

The most basic prerequisite to effective delegation is the willingness of managers to give their
subordinates real freedom to accomplish delegated tasks. Managers have to accept the fact that
there are usually several ways to solve a problem and that subordinates may legitimately choose a
path differently from their own. And, subordinates will make errors in carrying out their tasks.
But they must be allowed to develop their own solutions to problems and learn from their
mistakes. The solution to subordinates mistake is not for the manager to delegate less, but to train
or otherwise support subordinate more.

Improved communication between managers and subordinates will increase mutual understanding
and thus help to make delegation more effective. Managers who know the abilities of their
subordinates can more realistically decide which tasks can be delegated to whom. Subordinates
who are encouraged to use their abilities and who feel their managers will “back them up” will in
turn be more accepting of responsibility

4.8. The Organizing Process

The organizing process has the following steps.
1. Identification of objectives
This is to understand clearly the objectives of the organization, i.e. to reconsider the objectives
established during planning and identify the specific objectives to be pursued.
2. Identification of the specific activities needed to accomplish objectives
Knowing the objectives clearly makes the identification of activities needed clear and simple.
Here we ask what work activities are necessary to accomplish the identified organizational
objectives. Creating a list of tasks to be accomplished begins if we identify clearly what objective
is to be accomplished or met. This identification of specific activities needed is called division of
labor.
3. Grouping of activities necessary to attain objectives
The series number of activities listed and/or identified must be grouped together. That is, this
involves grouping together of activities in accordance with similarities (homogeneity) of the
activities, interdependence, job characteristics or any other grouping criteria, and this result in

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departments and the process is called Departmentation. Grouping of similar activities is based on
the concept of division of labor and specialization.
4. Assigning group of activities (work) and delegate the appropriate authority
Management has identified activities necessary to achieve objectives, has classified and grouped
these activities into major operational areas and has selected a departmental structure. The
activities now must be assigned to individuals who are simultaneously given the appropriate
authority to accomplish task.

5. Provision for coordination/Design a hierarchy of relationships

This step requires the determination of both vertical and horizontal operating relationships of the
organization as a whole. The vertical structuring of the organization results in a decision-making
hierarchy showing who is in charge of each task, of each specialty area, and the organization as a
whole. Levels of management are established from bottom to top in the organization. These
levels create the chain of command, or hierarchy of decision-making levels, in the company.

The horizontal structuring has two important effects.

i. It defines the working relationships between operating departments.
ii. It makes the final decision on the span of control (the number of subordinates under the direction
of each manager).
The result of this step is a complete organization structure. This structure is shown visually by an
organization chart.

Importance of Organizing
a.Organizing promotes collaboration and negotiation among individuals in a group. Thus, it
improves communication within the organization.
b. Organizing sets clear-cut lines of authority and responsibility for each individuals or
department’s. It helps employees to know their responsibilities and concentrate on the key tasks at
hand. It specifies who is responsible for what.
c.Organizing improves the directing and controlling functions of managers. It enables management
to effectively control the work and workers.
d. Organizing develops maximum use of time, human, and material resources. It also enables for
proper work assignment for individuals in pursuit of common goal.
e.Organizing enables the organization to maintain its activities coordinated so that the efforts of
managers and employees can be well integrated and directed towards an end; i.e. to accomplish
organizational goal.

4.9. Major Elements of the Organizing Function: Division of

Labor
When joint accomplishment of a grand task is the goal of many people, this overall task must be
split into its component jobs and apportioned among the people involved. It is only after these jobs
are correctly done that the grand task can be achieved. The degree to which the grand task of the
organization is broken down and divided into smaller component parts is referred to as division of

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labor. Division of labor is performed in light of organizational objectives. It begins by determining

(sub tasks) called jobs that are necessary to accomplish the identified objectives. These sub tasks
could include ongoing tasks which are part of the regular routine for running any business such as
hiring and record keeping or tasks unique to the nature of the business; such as assembling,
machining, storing, inspecting, selling, advertising, computer programming.

After determining the sub-tasks, sub-tasks will be defined by enumerating the activities that each
individual sub-tasks would entail in terms of what the incipient sub task performer is expected to
do. This is called job description. Job description is an account of activities what the sub-task
performer is expected to perform and the associated authority and responsibility relationships
among jobs. The sub-task assigned to the sub task performer is called job. Thus by doing so
individuals specialize in doing part of the task rather than the entire task, i.e. division of labor in
effect is the assignment of various portion of a particular task among organizational members.

In short, division of labor involves:

 Breaking down a task into its most basic elements
 Training workers in performing specific duties
 Sequencing activities so that one person's efforts build on another's

Advantages of Division of Labor

1. It enables a person performing a task to become highly proficient in a relatively short time; as a
result efficiency and productivity increases.
2. Decreased transfer time. It saves the time that is always lost in changing from one job to another.
3. Less wastage of materials in the learning process including time.
4. Ease of supervision. When employees are performing similar simplified tasks it will require the
superior to have a narrow range of skills to effectively oversee subordinates.
5. Training is more easier with specialization and takes shorter period. Plus, it decreases training
cost.

Disadvantages of Division of Labor

6. Boredom and fatigue caused by monotonous, repetitive tasks because the work becomes less
challenging.
7. Specialization would result in workers' having limited knowledge.
8. Creates communication barriers. Specialists develop their own language and customs, which can
hamper communication across departments.
9. Specialization sometimes causes workers to think more in terms of their department or function
instead of the company. Becoming engrossed in their own tasks, they lose sight of the company's
mission.
10. Specialization leads to time-oriented confusion. Production department, for instance, are commonly
short-run oriented; research and development departments are concerned with the long term.
Consequently, production departments typically evaluate their performance in the short run, where
as R&D efforts may go unrecognized for several years.
11. Different specialties often formulate rules, policies, and procedures that conflict with those of
other operational units

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Chapter Five
Staffing Function of Management
Definition:
The managerial function of staffing is defined as filling and keeping filled positions in
the organizational structure through identifying work-force requirement, inventorying the
people available recruiting, selecting, placing, promoting, appraising, compensating the
training and/or developing both candidates and current job holders to accomplish their
tasks effectively and efficiently.
Staffing processes:
The staffing process represents the following eight activities or steps:
1. Human resource planning /Man power planning/
2. Recruitment;
3. Selection;
4. Orientation and Induction;
5. Training and Development;
6. Performance Appraisal;
7. Transfer; and [Promotion, demotion, lateral transfer)
8. Separation
1) Human Resource Planning /Man power planning/:
It is the process of determining the need of the right man at the right time to the right
job. It is the process of determining the need of the provision of adequate human
resources to the job in the organization. It is designed to ensure that the personnel
need of the organization will be constantly and appropriately met. It is accomplished
through analysis of
(i) Internal factors such as current and expected skill needs, vacancies, and
departmental expansions and reductions; and
(ii) External environmental factors such as the labor market, the government
regulation, the labor union; etc
As a result of this analysis, plans are developed for executing the other steps in the
staffing process. This helps an organization to determine the need of employees for
short term or for long term.
There are four basic steps in human resource planning:
a. Planning for future needs. How many people with what abilities will the organization
need to remain in operation for the foreseeable future?
b. Planning for future balance. How many people presently employed can be expected
to stay with the organization? The difference between this number and the number the
organization will need leads to the next step.
c. Planning for recruiting and selecting or for lay off. How can the organization attain
the number of people it will need?
d. Planning for development. How should the training and movement of individuals
within the organization be managed so that the organization will be assured of a
continuing supply of experienced and capable personnel?

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The organizational internal environment (such as its strategic plan) as well as its external
environmental will broadly define for managers the limits with in which their human
resource plan must operate. Once there broad limits have been established, managers can
begin to compare their future personnel needs against the existing personnel situation
inorder to determine what recruitment, training and development procedures they will
need to follow. The fact that the internal and external environments of an organization
change means that managers must monitor these environments to keep their human
resource plan up to date.

The central elements in human resource planning are forecasting and the human resource
audit. Forecasting attempts to assess the future personnel needs of the organization. The
human resource audit assesses the organizations current human resources. These two
elements give managers the information they need to plan the other steps in the staffing
process, such as recruiting and training.
2) Recruitment:
It is the process of reaching out and attempting to attract potential candidates who are
capable of and interested in filling available positions of an organization. It is concerned
with developing a pool of job candidates, in line with the human resource plan. It is an
intermediary activity between manpower planning on the one hand, and selection of
employees on the other hand.

An important part of the recruiting process is developing a written statement of the

content and the location (on the organization chart) of each job. this statement is called
the job description or position description. This statement lists the title, duties and
responsibilities for that position. Once this position /job description has been
established/determined and accompanying hiring or job specification, which defines the
background, experience, and personal characteristics an individual must have in order to
perform effectively in the position, is developed.
 Sources of Recruitment:
Sources of supply are the places, agencies, and institutions to which recruiters go to
seek potential candidates that will fill the vacant positions or the job needed. These
sources of supply are generally categorized in to two.
(i) Internal Recruitment / recruitment from within: this involves recruitment within the
organization; it could be through promotion lateral transfer, demotion or any
therefrom.
Advantage:
 It is usually less expensive to recruit or promote from within than to hire from outside the
organization.
 It may faster loyalty and inspires greater effort among organization members.
 Individuals will already be acclaimed to the organization and may therefore need less
initial training and orientation.

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Disadvantage:
 It limits the pool of talent available to the organization.
(ii) External /outside/ recruitment:It involves recruitment outside the organization. The
major alternative sources are:
a. Direct application
b. Employee referrals /word of mouth/
c. Advertising
d. Educational institutions
e. Private/public employment agency
f. Other sources such as professional associations
3) Selection:
 It can be defined as the process of determining from among applicants WHICH
ONE FILLS BEST for the job description and specification which is offered to the
job within the organization. It involves evaluating and choosing among job
candidates. The role of recruiting is to locate job candidates; the role of selection is
the evaluate each candidate and the pick the best one for the position available.
Application forms, resumes, interviews, employment & skill tests, and reference
checks are the most commonly used aids in the selection process.
 Selection is the mutual process whereby the organization decides whether or not to
make a job offer and the candidate decides on the acceptability of the offer.
4) Orientation and socialization /induction/
It is designed to provide a new employee with the information he/she needs in order to
function comfortably and effectively in the organization. Typically, socialization will
convey three types of information.
(i) General information about the daily work routine;
(ii) a review of the organizations history, purpose, operations, and products or services,
and how the employee's job contributes to the organization’s needs, and
(iii) a detailed presentation, perhaps in a brochure, of organizations policies, work rules,
and employee benefits.
5) Training and Development:
Organizing human resources is a dynamic activity. Job demands change, which requires
altering and updating an employee's skills. Therefore, managers are involved in deciding
when their subordinates may be in need of training. Thus, training is a process designed
to maintain or improve current job performance; development is a process designed to
develop skills necessary for future work activities.
Reasons for Training:
a. to orient new employees: while schools and training institutions provide general
education in many skills new employees require additional training to acquaint them
with specific situation of the organization and the job.
b. To improve performance: training will help to improve performance by increasing
productivity, improving quality, reducing turnover, reducing labor cost, etc.

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c. To maintain current performance: sometimes individuals holding a position or

doing a job may get obsolete so train these employees will help to maintain current
performance.
Training Methods:
There are two different types of training techniques.
(i) On-the-job training
(ii) Off-the-job training
(i) On-the-job training: involves learning methods and techniques by actually doing a
job (performing the work) and increasing the levels of skills of the employee. The
employee usually learns under the supervision of the in mediate boss or co-worker
who has greater knowledge and skills about the job. It is widely used, because it is
economic and convenient; and no special facilities, equipment and training places are
required and the employee produces and contributes to the organizational objective
and at the same time he learns job rotation and job instruction methods are few of the
techniques used in on the job training. It is convenient for small number of trainees.
Some of its disadvantages are: - it creates disinterest of employees, employees have
dual responsibility, & it is not convenient for large number of employees.
(ii) Off-the-job training: This technique involves participation of employees in a series
of events removed from the actual performance of the organization and the work
situation.
Advantages:
 It creates interest of employees: because employees are removed from their routine
activities and are moved to new environment.
 It is convenient for large number of employees. (trainees)
Disadvantages:
 It is expensive- there are costs for trainers, facilities, and also the employee does not
contribute during the training.
 There is a problem of transfer of knowledge from the training situation to the actual
situation of the job.
Vestibule training, classroom instruction / lectures, films and simulation exercises are the
more popular techniques of off-the-job training.
6) Performance Appraisal:
It is the process used to determine whether an employee is performing according to what
is designed or intended. It helps to formally evaluate the adequacy of recruitment and
selection and suggests whether or not the employee will need to be replaced, or trained.

The many purposes of performance appraisal can be summarized in the following key
points:
 Performance appraisal should lead directly to increased productivity.
 It helps in salary administration
 It plays a vital role in determining an employee for promotion.
 Appraisals are used as a vehicle for bringing about employee development because
the results of the performance evaluation can serve as a basis for coaching and
counseling.

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 Performance appraisal results are used extensively in human resource research.

7) Transfer:
It is a shift of a person from one job, organization level, or location to another. The
transfer may be a promotion, demotion, or a shift to another same level position /lateral
transfer./
Promotion: refers to a shift for advancement of an employee to a higher job with more
employment and prestige, higher status, and higher responsibility. The possibility of
advancement often serves as a major incentive for superior performance, and promotions
are the most significant way to recognize such superior performance. Therefore, it is
externally important that promotions be fair i.e., based on merit and free from favoritism.
Demotion: refers to a shift of an employee to a lower position in the hierarchy due to
inefficiency, and incompetence to fulfill assigned tasks.
Lateral transfer: refers to the movement of an employee from one job or position to
another without involving any significant change in the employment and status
8. Separation:
This refers to those factors that bring the termination or ceasing of the relationship
between the organization and the employee. Separation may result from such factors as
resignation, layoff, discharges, and retirement.

Chapter Six:
Directing/Leading Function of Management
Definition
Leading according to Kooth and Weihrich, is the process of influencing people so that
they will contribute to organization and group goals. It is influencing people so that they
will work willingly and enthusiastically toward the achievement of organizational goals
ultimate objectives. When we say influencing, it does not mean that coercing/forcing,
imposing, suctioning or pushing people behind. It means rather-motivating people so that
they contribute their maximum effort for the achievement of organizational goal.

Leading/Directing is that part of management function which actuates the

organization members to work efficiently and effectively for the attainment of
organizational objectives. Planning, organizing, and staffing are merely preparations for
doing the work, and the work actually starts when managers start performing the
directing function. Directing is the interpersonal aspect of management, which deals
directly with influencing, guiding, supervising, and motivating the subordinates for the
accomplishment of the per determined objectives.

Directing is a challenging function of management, because it deals with the

human element of the organization, which represents a complex of forces about whom

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not much is known. A person's beliefs, hopes, ambitions, behavior, satisfaction, and
interaction with other persons are all involved in the directing process.

Elements of Directing/Leading

There are three elements of directing that helps managers to influence people to
contribute willingly for the achievement of organizational goal. These are:
(a) Motivation
(b) Leadership
(c) Communication

A) MOTIVATION

- Motivation refers to the forces to a person that arouse enthusiasm and persistence to
pursue a certain course of action. It means stimulating people to action through
incentives or inducements
The study of motivation helps managers understand what prompts people to initiate
action, what influences their choice of action, and why they persist in that action over
time.

- People have basic needs such as for food, achievements or monetary gain that
translate into an internal tension that motivates specific behaviors with which to fulfill
the need. To the extent that the behavior is successful, the person is rewarded in the
sense that the need is satisfied. The reward also informs the person that the behavior
was appropriate and can be used again in the future.
Rewards are of two types
a. Intrinsic reward - the satisfaction a person receives in the process of
performing a particular action. The completion of a complex task may
bestow a pleasant feeling of accomplishment, or solving a problem that
benefits others may fulfill a personal mission.
b. Extrinsic rewards - given by another person, typically the manager, and
include promotion and pay increases.

THEORIES OF MOTIVATION
The following are some of the basic theories of motivation:
Hierarchy of Needs Theory (Abrham Maslow)
It proposes that humans are motivated by multiple needs and that these needs exist in
hierarchy order:
1. Physiological needs - the need for food, water air & sex
2. Safety needs - the need for security & safety
3. Belongingness/Social needs - the need for friendship, interaction and love
4. Esteem needs - the need for respect & recognition
5. Self-actualization needs - the ability to reach one's potentials.

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Self actualization Need

Esteem need

Social Need

This theory is based on

1. Only an unsatisfied need can influence behavior; a satisfied need is not a
motivator.
2. A person's needs are arranged in a priority order of importance. The
hierarchy goes from the most basic needs to the best complex.
3. A person will at least minimally satisfy each level of need before feeling
the need at the next level.
4. If need satisfaction is not maintained at any level, the unsatisfied need will
become a priority once again. For example, for a person who is presently
feeling social needs, safety will become a priority once again if he or she
is fired.
The two-Factor Theory (Herzberg 1975)
The findings of the two factor theory suggested that the work characteristics associated
with dissatisfaction are quite different from those pertaining to satisfaction which
prompted the notion that two factors influence work motivation. These factors are
hygiene factors and motivation factors.
Hygiene factors (salary, job security, working conditions, status; Company policies;
quality of technical supervision and quality of interpersonal, relationships among peers,
supervisors, and subordinates) are the primary elements involved in job dissatisfaction.
When present in sufficient quality, they have no effect; when absent, they can lead to job
dissatisfaction.
Motivation factors (achievement, recognition, responsibility, advancement, the work
itself, and possibility of growth) are the primary elements involved in job satisfaction.
When present, they can stimulate personal and psychological growth.
Theory X and Theory Y (Douglas McGregor 1960)
Theory X is a philosophy of management with negative perception of subordinates
potential for work and attitudes toward work. It assumes that subordinates dislike work,
are poorly motivated, and require close supervision. A manager with these beliefs tends
to control the group, use negative motivation, and refuse to delegate decision-making.

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Theory Y is a philosophy of management with a positive perception of

subordinates' potential for and attitudes toward work. It assumes that subordinates can be
self-directing, will seek responsibility and find work as natural as play or rest. The
outcome of this belief is a manager who encourages people to seek responsibility,
involves people in decision making and work with people to achieve their goals.
The important point about theory X and theory Y is that a management philosophy
influences the type of work climate the manager endeavors to create and ultimately, how
the manager treats people.

The following are the components of theory X and theory Y.

o People basically dislike work and avoid it Most people find work as natural as play or rest
whenever, possible and develop an attitude toward work based on
their experience with it.

Because most people dislike work, they have People do not need to be threatened with
to be closely supervised and threatened with punishment, they will work voluntarily toward
punishment to reach objectives organizational objectives to which they are
committed.
Most people preferred to be told what to do,
have little ambition, want to avoid
responsibility, and want security above all The average person working in an environment
else. will good human relations will accept and seek
responsibility.
Most people have little creativity. They are
not capable of solving problems. Rather, Most people possess a high degree of
they must be directed. imagination, ingenuity, and creativity with
which to solve organizational problems.
Most people have limited intellectual
potential. Contributions above basic job Although people have intellectual potential,
performance should not be expected. modern industrial life utilizes only part of it.

B). Leadership
Leadership is the process of influencing individuals and groups to set and achieve goals.
It is an act of influencing and motivating people to perform certain tasks to achieve
organizational objectives. Thus, an effective leader is expected to have adequate
knowledge of human behavior, including the ability to persuade and motivate people and
communicate with them properly.

Definition
a) "The art or process of influencing people so that they will strive willingly and
enthusiastically towards the achievement of group goals."

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b) "Leadership is the ability to secure desirable actions from A group of followers

voluntarily without the use of coercion."
c) "The process of directing & inspiring workers to perform the task related activities of
the group."
People should be encouraged to develop not only willingness to work, but also
willingness to work with zeal and confidence.
In short leadership involves,
 Influencing and interacting with people to attain goals.
 Related to a particular situation at a given point of time and a specific set of
circumstances.
 By accepting the willingness, followers will make the leadership process possible.

Theories of Leadership

1. The trait theory of leadership:-

Traits are inborn and inherent personal qualities of individuals. This theory believes
leaders possess certain specific inborn traits, which are inherited rather than acquired. It
has a root from "the great man theory" dating back to the ancient Greeks & Romans
time, holds that leaders are born not made.

The trait theory studies focused on the personal traits of leaders and attempted to
identify a set of individual characteristics that distinguished leases from followers' also
successful leaders from unsuccessful ones. In general the trait theory hasn't been a fruitful
approach to explain leadership.
2. The behavioral theory of leadership:-
The behavioral theory of leadership focused on what leaders do rather than their traits.
Studies showed that one set of traits/leadership style might not be equally appropriate in all
situations. This theory suggested that there were two distinct types of leadership which are
known as task-oriented /production centered/ and employee oriented /people centered/.
3. The situational /contingency/ theory of leadership:
According to this theory, leadership is strongly affected by a situation from which a leader
emerges and in which he/she works. It's a function of the leader, the followers and the
situation.
It attempts to discover that the one unique set of leadership traits were largely
unsuccessful. Modern management theorists are more prone to the belief that leadership
is more complex; that is it can't be represented by one set of traits or by single set of
behavior, thus effective leadership behavior depends on the environment or the situation.
LEADERSHIP STYLES
Managers in an organization shall relatively be consistent in the way they try to influence
others behavior. The manager who dominates subordinates in one situation is not likely to
use a high degree of consideration and participation in another. This behavioral pattern of
leaders is known as leadership style.

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It can be defined as the various patterns of behavior favored by leaders during the
process of directing and influencing workers, which is determined by leaders personality,
experience and value system, nature of followers and environment.
There are three important leadership styles
a) Autocratic
b) Democratic /participate/
c) Laissez-faire /free rein/
Autocratic style - "I" approach,
Is a leadership approach in which a manager does not share decision making authority
with subordinates. Autocratic managers may ask for subordinates' ideas & feedback about
the decision, but the impute does not usually change the decision unless it indicates that
something vital has been overlooked.
Under certain conditions, the autocratic style is appropriate. eg. During crisis &
when subordinates are trainees and when there is act of insubordination.
It is also effective when managers face issues that they are best equipped to solve, create
solutions, whose implementation does not depend on others & desire to communicate
through orders & instructions

This leadership style is closely associated with the classical approach to

management and it is characterized by the following behavioral patterns of leaders.
 The leader doesn't seek any opinions from subordinates, holds conflicts and with less
creativity.
 Exercises rigid control and close supervision, relies on punishments.
 Subordinates typically react by doing only what's expected and by suppressing their
frustration.
 The autocratic leader is task-oriented, gives little value on showing consideration to
subordinates.
 Depends on one way communication downward only.
Participate (democratic) style - "We" approach
It is a leadership approach in which a manager shares decision making authority with
subordinates. It involves others and lets them bring their unique viewpoints, talents &
experiences to bear on an issue.
Before subordinates are made to participate in the decision making process:
A. Mutual trust & respect must exist between them & managers
B. Subordinates must be willing & trained to be competent to solve problems
C. Managers should give time & be patient to make subordinates participate.
However, limits on subordinates' participation must be clearly spelled out before hand
there should be no misunderstanding about who holds authority to do what.
This leadership style is characterized by the following behavioral patterns of the leader.

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 Allows the group members to participate in decision making process, proposed

actions and encourages participation at all levels.
 The leader will develop two way communications and promote team sphere.
The democratic leader explains to the group members like reasons for personal decisions
when necessary and objectively communicates criticism and praise to subordinates.
Free-rein style -"They" approach
It empowers individuals or groups to function on their own, without direct involvement
from the managers to whom they report. The style relies heavily on delegation of
authority, and works best when the parties have expert power, when participants have and
know how to use the tools & techniques needed for their tasks.
Free-rein leadership works particularly well with managers & experienced professionals
in engineering, design, research & sales. Such people generally resist other kinds of
supervision.
In most organizations managers must be able to use the decision making style that
circumstances dictate. Because people &circumstance constantly change & because
subordinates must be prepared to the change. The effective manager switches from one
leadership style to another as appropriate.
The following are the behavioral patterns of laissez-faire leader.
 Laissez-faire leaders make a few attempts to increase productivity, to develop their
attempts or to meet subordinates psychological needs.
 Use their power very little, if a tall, giving subordinates a high degree of
independence in their operation.
 These leaders maintain hands off policy where each subordinate work is clearly
defined.
 Such leaders depend on subordinates to set their own goals and the means of
achieving them, and they see their role as one of aiding the operations of followers by
furnishing them information and acting primarily as a contact with the groups
external environment.

The laissez-faire leader has little or no self-confidence in his/her leadership ability, sets
and goals for the group and minimizes communication and group interaction.
COMMUNICATION
Communication is the tool in which we exercise to influence others, bring about changes
in the attitudes and views of our associates, motivate them, establish and maintain
relations with them. Without communication there would be no interaction between
persons.
Definition:
 "Communication is the transfer of information from one person /sender/ to another
person /receiver/ to achieve goals."
 "It's a process consisting of a sender transmitting a message through media to a
receiver who respond"

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Importance of Effective Communication

Effective communication is important to managers for three primary reasons.
 Communication provides a common thread for the management processes of
planning, organizing, leading, and controlling.
 Effective communications skills can enable managers to draw on the vast array of
talents available in the multicultural world of organizations.
 Managers spend a great deal of time by communicating face-to face, electronic or
telephone communication with employees, supervisors, suppliers or customers.
The Communication Process
Communication takes place in the relationship between a sender and a receiver. It can
flow in one direction and ends there.
A model of the communication process:

Transmit Receive
Message Message

Sender ending Channel RECEIVER

SENDER
(Source) Decoding

Noise

Feed back
Receive Transmit
a) Sender:
The sender/source of message initiates the communication. In an organization the sender
will be a person with information, needs or desires and a purpose for communicating them
to one or more other people.
b) Receiver:
The person whose senses perceive the sender's message. There may be a large number of
receivers, as when a memo is addressed to all members of an organization or there may be
just one, as when one discusses something privately with a colleague.
c) Encoding:
It takes place when the sender translates the information to be transmitted into a series of
symbols.
d) Decoding:
The process by which, the receiver interprets the message and translates it into meaningful
information. It's a two-step process.
e) Channel:
The formal medium of communication between a sender and a receiver.

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f) Noise:
Any factor that disturbs confuses or interferes with communication. Noise can arise along
what is called the communications channel or method of transmission.
g) Message:
The encoded information sent by the sender to the receiver.
h) Feed back:
It's the response of the receiver to the sender, also passes through the same process.
Communication can be
I) Formal Communication
a) Downward communication Messages from higher authority levels to lower
levels.
b) Upward communication  Messages from subordinates to supervisors and to higher
levels.
c) Horizontal communication That flows between persons of equal status in the
organization.
d) Vertical communication  May be downward or up word communication.
II) In formal Communication
It Include :-
* Grapevine
* Gossip etc.

Chapter Seven
Controlling Function of Management

In the series of managerial functions, planning is the first function and controlling is the
last. Success in business is very often proportionate to the astuteness of its planning and
the skill with which it is controlled. Plans can be effectively achieved in most
organizations only with good controls, and planning is always pre-requisite for
controlling. Planning seeks to set goals and programs and control seek to secure
performance in accordance with plans.
Definition
a) According to Koontze and O'donnell,, "The managerial function of control is the
measurement and correction of the performance of activities of subordinates in order
to make sure that enterprise objectives and the plans devised to attain them are being
accomplished. It's thus the function of every manager, from the chief executive to the
Forman."
b) "Controlling is the process by which management sees if what did happen was what
was supposed to happen. If not, necessary adjustments are made." Moore.

An analysis of the foregoing statements regarding control brings out the controlling
function of management.

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i) Planning is the foundation of control:

Planning sets the course, control observes deviations from the course, and takes corrective
action.
ii) Action's the essence of control:
Control terminates in taking corrective action where there is a deviation in performance
from the desired goals.

iii) Delegation is the key to control:

Control is exercised by taking action, and action can be taken within the authority
delegated. Accountability must be within the authority given to the manager.
iv) Information is the guide to control:
Control exercised by a manager on the basis of the information and reports from those
actively doing the job. Such reports and information may be described as "feed-back" from
subordinates. Feedback enables the manager to determine how far the operations.
THE CONTROL PROCESS
In controlling process there are three steps,
1. Setting standards
2. Measurement of performance
3. Taking corrective action
1) Setting Standards:
Standards may be tangible or intangible. Greater emphasis should be laid on tangible
standards. The standards in tangible terms may be in terms of output, costs, profit, time
persons available for training etc. intangible terms standards may be for the results to be
expected from a training program, employee morale, advertising campaign, etc.

Organizations create standards to help measure and monitor both productivity and
quality efforts. People and processes are governed by qualitative and quantitative
standards. An organization uses these standards to teach, train, and evaluate
organizational performance.

2) Measurement of Performance and comparing it against standards

An organization measures actual performance of people and processes to ascertain if they
are functioning according to plans and expectations. After it has been measured it will be
compared against the established standards.
2) Taking Corrective Actions
As soon as the deviations are reported, it is the duty of the manager concerned to take
steps to correct the past action or at least to bring similar action closer to the standards in
future. When significant deviations from established standards occur, the organization
must determine the cause by identifying the nature and scope of the problem

TYPES OF CONTROLLING
Controlling can be feedforward, concurrent or feedback controls.

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1. Feedforward controls are preventive in nature. They are created to screen out possible
causes of problems. Procedures and training can be preventive as well as remedial.
2. Concurrent controls monitor on going operations as they occur in real time, allowing
for instant reactions and the spotting of trends.
3. Feedback controls are after action controls. Inspecting output after an operation has
been performed and soliciting customer feedback are examples of after-action
control.
All the three types of controls are important to managers and their organizations. When
designed and used properly, they can prevent, identify, and correct deviations from
established standards.

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