PRINCIPLES AND PRACTICE OF MANAGEMENT

Introduction
This module unit is intended to equip the trainee with knowledge; skills in attitudes to enable
him/her carry out management function in a business set up.

Main topics of study

Introduction to principles and practice of management
a) Meaning of management
b) Characteristics/features of management
c) Management as a process
d) Management as a science/art.
e) Levels of management
f) Management skills
g) Environment of management
h) Managerial functions and over view.

Evolution of management throughout

Pre-scientific school of thought
Classical school of thought
Modern school of management thought

Planning function
Nature of planning
Importance of planning
Types of plans
Process of managing and appraising by objectives
Process of decision making

Organizing function
a) Nature and purpose of organization
b) Levels and span of management
c) Patterns of depart mentation
 d) Delegation
e) Centralization and decentralization of authority in an organization.
f) Use of committees and groups in decision making in an organization
g) Supervision

Leading/directing function
Relationship between management and human factor in directing/leading
Motivational factors of workers
Motivational theories and their relevance in management today
Leadership styles
Areas of communication breakdown in an organization
Techniques of effective communication

Controlling function
Meaning of control
Control process in an organization
Critical control process in a given situation in an organization
Types of critical points standards used in an organization
Requirements of control systems in an organization
Control techniques
Concept of production and operation management control
Methods used in general performance control.

Staffing function
Meaning of staffing
Activities in staffing

International management
Meaning of international management
International business environments
Managerial functions in international business
Different between international and domestic management
Attainment of global theory of management

Business policy
Nature, scope and need for corporate strategic planning
Strategic options and decisions
Evaluations of strategic options
Measurement and control of corporate strategic performance
Technique for corporate strategic planning
Corporate social responsibilities

Marketing management
Introduction
Analysis of consumer and organization buyer behavior (h)
Marketing segmentation and targeting strategies
Product decisions
Price policies.
Distribution decisions
Promotion decisions

Purchasing and supplying management

Overview of purchasing and supplies management
Purchase of consumable and resalable items
Purchase of equipment’s and other capital items
Storage and stock control

Emerging trends and issues in PPM

Emerging trends and issues in management
Challenges paused by emerging trends and issues in PPM
Coping with challenges paused by the emerging trends and issues in management.
INTRODUCTION TO MANAGEMENT
The term management has been defined in different ways by different authors:
i. Mary parker Follet defines management as an art of getting things done through other
people. E.g. managers achieve organizational goals by arranging for others to perform
any necessary task.
ii. Brech is a social process entailing responsibility for the effective and economic planning
and regulation of operation of an enterprise in fulfillment of a given purpose e.g.
judgments on decisions in determining plans, guidance, integration, motivation and
supervision of personnel
iii. Ker either defines management as a process of reaching organizational goals by with and
through people and other organizational resources

Characteristics/key features of management

1. Management is universal i.e. the basic principles of management or universally
applicable.
2. Management applies at all levels of organization i.e. the managerial functions are the
same at all levels of the organization, except for the types of decisions made at different
levels.
3. Management is purposeful the aim of all managers is the same i.e. to achieve a specific
objective.
4. Management is concerned with productivity which implies effectiveness of efficiency.
Productivity is the ratio of output to input of resources within a given time period with
due consideration to quality.
5. Management involves the allocation and control of human, money and other physical
resources. However, it excludes the actions of a person working alone. A person is not a
manager unless involved in a process of getting thing done through others.
6. Management is an integrative process the essence of management lays in the coordination
of individual efforts into a team i.e. management recon ales the individual goals with
organizational goals.
Nature and scope of management
Management is a distinct activity having the following salient features.
i. Economic resources management is considered to be an important economic resource
together with land, labour and capital.
As industrialization grows, the need for managers increases
ii. Goal oriented management is a purposeful activity. It coordinates the efforts of
workers to achieve the goals of the organization.
The success of management is measured by the extent to which the organizational
goals are achieved.
iii. Management is a continuous process management is a distinct process consisting of
such functions as planning, organizing, staffing, directing and controlling. These
functions are to inter-relate that it is not possible to lay down exactly the sequence of
various functions or their relative significance.
iv. Management is an integrative force the essence of management is integration of
human of other resources to achieve the desired objectives
All these resources are made available to those who manage. Managers apply
knowledge, experience and management principles are getting the results from the
workers by use of non-human resources.
v. Management is an intangible force – management has been called as an unseen force.
Its presence is evidenced by the results of its efforts i.e. orderliness, informed
employees, and adequate work output.
vi. Results are achieved through others – the managers cannot do everything themselves,
they must has the necessary ability and skills to get work accomplished through the
efforts of others. They must motivate the subordinates for accomplishment of the
tasks assigned to them.
vii. Management as a science and an art – management as an organized body of
knowledge consisting of well-defined concepts, principles and techniques which has
wide application. For this reason, it is treated as a science. The application of these
concepts, principles and techniques requires specialized knowledge and skills on the
part of the management since the skills acquired by a manager are his personal
possession, management is viewed as an art.
 viii. System of authority – management as a team of managers represents a system of
authority a hierarchy of command a control; managers at different levels possess
varying degree of authority.
Generally as you move down in the managerial hierarchy the degree of authority gets
gradually reduced authority enables the managers to perform their functions
effectively.
ix. Management is a multi-displinary subject management has grown as a field of study
taking the helps of some many others these disciplines such as engineering, sociology
and anthropology.
Much of management literature is the results of the association of these disciplines.
x. Universal application – management is universal in character. The principles and
techniques of management are equally applicable in the fields of business, education,
military, government and hospitals.
Henry Fayol suggested that principles of management would apply more or less in
every situation.

Management as a process
According to Henry Fayol management is a process which involves a series of inter-related
functions of planning, organizing, staffing and controlling to achieve a stated objective through
the utilization of human resources, capital, technology and materials.

Management as a group of managers

The term management is frequently used to denote a group of managerial personnel.
When one says management of this very efficient it implies that the person who is looking at the
affairs of the company is very efficient. Thus management is the body or group of people which
performs certain managerial functions for the accomplishment of predetermined goals.
These people are individually known as managers.

Management as a discipline
Management has been widely recognized as a discipline or a field of study
It is thought as a specialized branch of knowledge in educational institutions.
The subjects include management concepts, principles, techniques and skills.

Management as a science
A science is a systematically organized body of knowledge based on proper findings and exact
principles and is capable of verification.
Any subject which is scientifically developed and consists of universally accepted principles is a
science.
In order to be recognized as a science, a subject should have the following characteristics

Characteristics of a science
1. It should have systemized body of knowledge which includes concepts principles and
theories.
2. Should have a method of scientific enquiry
3. It should establish cause and effect relationships
4. Its principles should be verifiable
5. Should ensure predictable results
6. Should have universal application.
It cannot be denied that management is a systematized body of knowledge pertaining its field but
management is an exact science as other fiscal science like astronomy, physics, chemistry and
biology.

Management as an Art
An art may be defined as a skill or knowledge in a particular field of activity or a method of
doing a thing.
It is the bringing about desired results through the application of skills.
Features of an art
1. It donates personal skills in a particular field of human activity
2. Signifies practical knowledge
3. Helps in achieving complete results
4. It is creative in nature.
Every manager has to apply certain knowledge and skill while dealing with people to achieve a
certain goals.
Management is one of the most creative as it requires knowledge, innovating, initiating,
implementing and integrating skills in relation to goals, resources techniques and materials.
In conclusion, management is both a science and an art.
It is considered a science: coz it has an organized body of knowledge which contains certain
universal truth
It is also called an art coz management requires certain skills which are the personal skills of a
morning.

Management as an emerging profession

A profession is an occupation backed by a specially knowledge and training, whose code of
conduct is regulated by a professional body and which is duly recognized by the society.
The basic requirements of a profession are as follows:

Requirements of a profession
1. Knowledge- a substantial and expanding body of information in the concerned field
2. Competent applications -skilled and judicious utilization of knowledge in the solution of
complex and important problems.
3. This required education and training in the specified field
4. Professional body regulation of entry into profession a conduct of members by the
representative body.
5. Self-control an established code of conduct enforced by the professions membership
6. Social responsibility primarily motivated by desire to serve others and the community
7. Community approval recognition of professional status by the society.

Arguments for and against management as a profession

Arguments for management as a profession
Specialized knowledge – there exist a rapid expanding body of knowledge in the field of
management.
Many scholars in management have contributed to the field of management which has a
systematic body of knowledge that can be used for the development of managers.
Management is widely taught in the universities and other educational institutions as a discipline.
Competent application (education and training)
MBA’s are generally preferred for managerial jobs though MBA degree is not the essential
qualification to enter these profession personal qualifications with degrees in psychology and
engineering also practice management. Thus there is no standard qualification for the managers.
Managerial skills cannot be learnt by trial and error.
To be a successful manager, it is essential to acquire management skills through formal
education and training.
There are many institutions in many countries that offer MBA in management.
Code of conduct every profession must have code of conduct which prescribes norms n
professionals ethics for its members. But there is no universally accepted code of conduct for the
practicing managers.
Social responsibility managers of today recognize their social responsibility towards customers,
employee’s workers, suppliers and other group’s stakeholders.
Their actions are influenced by social norms and values that is why managers enjoy a respectable
position in their society as it is the case with doctors and chartered accountants.
Society approval the managers of modern organizations enjoy respect in their society.
There is typically a positive correction between a managers rank in hours status within the
organization where he is working.

Arguments against management as a profession

By all the bench marks, the professionalization of management is still far from complete.
It needs the above criteria of a profession only partially.
Management can fail to be recognized as a profession basing on the grounds below:
1. Though management has a well-defined body of knowledge, it is difficult to say whether
it meets the criteria of competent application because it’s not obligatory/mandatory to
possess specific qualifications for being appointed as a manager.
2. There is no professional body to regulate the educational and training standards of the
managers.
 3. Management does not satisfy the test of self-control as there is no central body to lie
down and enforce professional standards and code of conducts for the managers.
It cannot be conducted there for that management does not fulfill all the requirement of a
profession.
In which case it cannot be full recognized as a profession
However, it is moving in that direction because.
1. The field of management is supported by a well-defined body of knowledge that can be
taught and learned.
2. Management of modern organization requires competent application of management
principles techniques and skills
3. Managers are aware of their social responsibilities towards various groups of the society.

Objectives of management
The basic purpose of management of an enterprise is to achieve enterprise goals.
In order to achieve this, the managers peruse the following objectives
1. Efficient use of resources – management seeks to obtain max output with min resources
and efforts.
2. Satisfaction of customers – management attempts to produce products and services
required by customers. Satisfaction of customers is very important for survival and
growth of the business.
3. Adequate return on capital as an objective of management, must achieve a reasonable rate
of return for the owners of the business.
4. Satisfied workforce – management attempts to build development a team of good
workers who are happy and satisfied with the organization.
5. Good working conditions – management seeks to achieve a system to ensure fair wage
for the workers, security for employment and better working conditions for work force.
This raises the standards of living of life of workers.
6. Good relations with suppliers – management seeks to achieve good relations with
suppliers of raw materials and capital so as to continue in production
7. Contribution to national goals – the management must contribute to national goals.
 It should contribute towards the improvement of the surrounding where the plant is
located.

Levels of Management
The no of levels of management in a company depend upon the size and diversity in the rage of
production
However, there are 3 main levels of management.
1. Top management this consist of titles e.g. G.M, M.D, president of the CO, C.E.O, Board
of Directors

Functions of Top Management

1. Establishing the objectives, policies and missions of the company.
2. Officially represents the company to the external environment
3. Analyze evaluate and deals with the environment
4. Appoints dental and other key personnel of two companies
5. Exercises overall control of Cos operations
Middle level management includes division of heads, sectional heads departmental heads tcc
Serves as a link between top and lower management.

Functions
1. Interpreting and explaining policies established by the top management
2. Responsible for implementing plans and objectives developed by the top management
3. Supervises and coordinates activities of lower management.
4. Integrates various parts of the division, region are department
5. Motivates supervisory personnel
6. Trains and develops supervisory personnel

Lower level management/first/supervisory management consist of supervisors, office managers,

accounts officers
Act as a link between the worker and management.
Functions
1. Planning day to day production within the goals laid down by the higher management
2. Assigning jobs to workers/employees
3. Maintaining personal contacts with employees
4. Maintaining machinery
5. Arranging materials and tools
6. Supervising and controlling workers
7. Advising and assisting workers
8. Maintaining discipline among the workers
9. Reporting feedback information and workers problems which cannot be solved at the
supervisory level

Top

Middle

Lower

Skills of Management
Skills are various talents that managers need to perform their roles effectively.
As a job of today’s manager becomes more complex, different skills or required to manage
effectively.
It is agreed that effective managers tend to possess a mix of skills that sent them apart from
others.
These skills are grouped into four categories which are inter-related and required by all
managers. They can be discussed as:
1. Technical skills these are skills a manager needs to perform specialized work within the
organization.
 2. They are very important for first level managers (lower managers) coz they spend much
of their time with operating employees.
3. They must have a good understanding of the work the employees are in if they have to
supervise them effectively.
4. They are less important for middle managers since a greater portion of their time is
devoted to other managerial activities and even less important though not an unimportant
to top managers.
5. Conceptual skills these relate to a managers ability to think in an abstract manner.
6. Managers need to be able to see relationship between forces others cannot see, to
understand how a variety of factors are interdicted and to take a global perspective of the
organization and its environment.
7. Conceptual skills are more important for top managers because their job is to identify and
exploit new opportunities
8. The skills are moderately important to middle level and less important for first class level
managers.
9. Diagnostic skills these are skills used to define and understand situations.
10. They are most important at the top, moderately important at the middle and least
important to the lower/bottom of the managerial hierarchy.
11. Human skills/interpersonal skills are skills a manager needs to work well with other
people.
12. They include ability to understand someone else position, to present ones position in a
respectable way to compromise in deal effectively with conflicts
13. They are equally important at all levels of organization coz at every level, the managers
interacts and involves with people.

Managerial functions and roles

Functions and process
1. Planning – determining the objectives of the unit/activity.
It also involves deciding in advance as to what is to be done, how and when and who.
2. Organizing refers to identification of activities to be carried out, grapping of similar
activities and creation of department.
 Organizing also leads to creation of authority and responsibility relation throughout the
organization.
3. Staffing – involves man power planning employment of personnel, training, appraisal,
remuneration.
It is a process of ensuring that organization positions are filled up with the right kind of
people in terms of quality and quantity
4. Directing/leading – it is a very broad function concerned with the interpersonal relations.
Includes coordination with subordinates, providing leadership and motivation them.
This process also involves, providing guidance to workers
As the process of influencing them to work willingly and enthusiastically in order to help
ensure that activities are performed in the most efficient manner possible.
5. Controlling – refers to comparing the actually performance with the plans or standards
corrective steps are taken when the actual performance is not up to the mark/standard.
It is ensuring that events and situations conform to the plan adopted.

Roles
Fall under modern theory (integrative perspective)
Henry Mitzberg in study of what managers actually do, observed that managerial work involves
10 roles, 3 focuses on interpersonal contact, 3 involves mainly info processing and for relates to
decision making.

Roles That Focus on Interpersonal Contact

1. Figure head the managers acts as a representative of the organization or symbol
performs diverse ceremonial duties e.g. attending chamber of commerce meetings
2. Leader the manager interacts with subordinates motivates and develops them.
The supervisor, who conducts a quarterly performance interviews or selects training
opportunities for subordinates, performs this role.
3. Manager liaison – the manager establishes a network of contacts to gather into the
organization.
Roles Involving Information Processing
1. Monitor – the managers gathers information the organizations inside and outside.
2. He may attend meetings with subordinates and scan all the available information.
3. Disseminator – the manager transmits both factual and valuable information to
subordinates by sending a memorandum to start meetings formally to inform them.
4. Spokesman – a manager gives information to people outside the organization about its
policies and performance.

Roles Related to Decision Making

Entrepreneur – the management designs and initiates the change of organization.
The supervisor who decides the job of subordinates introduces flextime
Disturbance handler – the manager deals with problems that arise when the organizational
operations breaks down.
Resource allocator – the manager controls the allocation of people money, materials and time
by scheduling his/her own time, and programming subordinates work effort and organizing all
significant decisions. Preparation of budget is a major aspect of this role.
Negotiator – the manager participates in negotiation activities
A manager who hires a new employee may negotiate work assignment and compensation with
that person.
Conclusion: not all managers perform every role listed here but some diversity of role
performance always occurs
The choice of roles depends of manager’s specific job description and the situation in
hand/question.

Characteristics of managers
Managers must have a vision of the future and must think in term of success focusing on the
present rather than the past.
Must be able to trust others and take risks based on that trust.
Should be opportunity tinder’s seekers which are contrary to the routing problem solvers.
Should know how to inspire /influence the behavior of the employees towards performance.
Should have good knowledge of the original goals and should be able to measure the
effectiveness and efficiency of group and themselves. In conclusion, managers have a
fundamental role which applies to both business and non-business enterprises.

Environment of Management, Social Responsibility and Ethics

Organization environment
Environment is the sum total of factors/variables that may influence the existence of the
organization that are both inside and outside the organization.
According to Philip koller, a term environment means those forces that originate from within and
outside the organization.
No enterprise of any kind can operate in absence of environmental constraints or restrictions
imposed by the organization surrounding.
It is therefore important to note that all enterprises must adjust to the environment can also be
defined as: the aggregate of all those variables or factors and forces that affect the firms or
organization ability to achieve. Its objectives, existence and its activities.
Environment generally can also be referred to as the surrounding circumstances and influences
of individual, organization or the aggregate of political, economic, social, cultural, technological
or physical environmental conditions that may influence the life of individual organization or
community at large.
The effect of environmental can either be positive or negative.

Types of environments
Every organization has two types of environments i.e. internal and external.
Internal environment
Consist of all those variables, forces and factors that are within the entity and affect the terms
ability to achieve its objective, activities and its existence
These factors may include
1. Resources – this includes the manpower, fixed assets i.e. machines in technological
aspects that helps the organization achieve its objectives.
2. Marketing aspects of the organization – includes how organization manages its product
rage, productivity of the product, marketing strategy
 3. Organizational factors – these includes organization structure, types of decisions made,
original policies, rules and procedures etc.
4. Organizational culture – culture is shared attitude, ideas, values, norms
It also acts as a limiting factor e.g. what a manager believes as a way of doing things will
actually affect what is new in an organization.
5. Current financial results how much finances in the account
6. Processes and financial systems

External Environment
Consist of those factors that are found outside the control of management but affect the
managerial decision making.
These factors include:
Political and legal factors – these forces are associated with the government which is the
custodian of the legal system within which a firm operates regardless of where a company is
located. The government regulates the activities of the companies e.g. in Kenya, the government
sets min wages which it stipulates within the labour acts, issues to do with safety of workers.
Likewise, the government is in charge of security machinery which determines how the business
thrives in a given area e.g. with a stable political environment, business tends to thrive easily.
Business managers plays a multitude of roles that limit their powers with regard to political and
legal constraints e.g. for a business to operate, it must be licensed by the government; this means
business cannot control want the government does.
Economic factors-It is an important aspect of economy that affect managerial decision making
Economic forces entails rate of inflation, economic growth, balance of payment, internal varies
to trade tcc.For instance, during inflation, firms pay more economic growth tends to influence
demand of product, interest rate determines how much the organization will pay as a cause of
debt when borrowing money from lending institutions.
Level of unemployment will influence labour supply as well as labour cost. Thus each of the
above condition has a certain consequence on decision making of the organization.
Social cultural factors – these factors include the customs values, traditions and beliefs that
dominate the life of a given community in which the firm operation.
Such forces tend to influence customers taste, preferences, employees expectations, attitude and
the accepted role of the business in that society. They will also include religion, demographic
factors and social classes.
Demographic factors may include population distribution, birthrate, death rate, income
distribution in the society etc.
Technological factors – the rate of technology changes that has taken place recently particularly
in the area of ICT, has greatly affected the mode and style of doing business. E.g. availability of
E-commerce enables people do organize to organization trade with others all over the world.
The breakthrough in production system has improved products while breakthrough in
communication has improved means of communication; processing and storage of data to those
organizationsthat have been able to embrace technological development compared to those that
have not bothered to invest in new technology.
Technology has been known to reduce the cost of operation and increase competitiveness.
International factors – the aspect of globalization has brought about multinational corporations
who operate usually in every corner of the block which means wen making decisions, managers
must put in mind how these corporations that are well endowed with resources are behaving in
the world market.
Task /operating (factors) environment – this consist of factors that are external to the
organization and are firm specific i.e. the firm interacts with them directly and they affect that
firm directly.
These factors include customers, suppliers, public, marketing intermediaries, competitors,
government.
Customers refers to the group that buys goods and services produced by an organization the
activities of this group are major determinants of decisions made by the management
Suppliers are firms/individual that supplies the firm with its inputs. The understanding of
suppliers is very important as they affect the firm in very much way directly e.g. the price of the
product they sell to the firm becomes a cost to the firm. The quality of their supply will directly
affect the quality of the firm’s output. Their reliability affects the firm’s efficiency in operation.
Competitors refers to organization that offers similar/alternative products /services to customers
Decisions on how to influence customers must be based on the action of competitors.
Marketing intermediaries are those firm/individuals that are involved indistribution of firm’s
products. Their distribution network will determine the size of the market the firm will be able to
serve. They sometimes dictate their terms e.g. distributors, retailers, wholesaler etc.

Social Responsibility
It is the infelt obligation of managers of firms acting in their official capabilities to contribute
and enhance wellbeing of various stakeholders other than shareholders.
Involves managers making deliberate actions to enhance the wellbeing of various stakeholders
and refraining from actions that go against societal expectations.
It is managerial infelt obligation to do above min law requirements to contribute to the wellbeing
of various stakeholders and not just shareholders.
Stakeholders in any one with potential to affect the wellbeing of the firm, also is affected by the
activities of the entity and has any sort of interest financially or otherwise.

Area of Social Responsibility of Managers

To employees
i. Fair remuneration
ii. Give them fringe benefits e.g. medical covers
iii. Training and development, paying study leave etc.
iv. Good working conditions e.g. ensuring there is ventilation and proper lighting system.
v. Give them protective garments
vi. Treating them with dignity and respect
vii. Better terms of service
viii. Providing them with economic security e.g. hiring them on permanent basis
ix. Giving them adequate hardship allowances.
x. Sponsored holidays
xi. Allowing them to form informal groups
xii. Practicing equity
xiii. Providing recreational facilities
To customers
Produce quality products
Charge fair prices
Offering after sales services
Giving right information about products
Make a full disclosure of product content and any likely negative effect
Give credit facilities
Give free samples and discounts
Ensure steady supply of goods
Give warrants and guarantee
Provide advice on how to use the product
Have fun days.

To suppliers
Paying them promptly
Treat them with respect in dignity
Fair awarding of tenders
Give them authentic/reliable financial/statements
Engage in fair negotiations with suppliers
Maintain them i.e. don’t terminate them without notice

To the government
Pay taxes
Operate within the law i.e. don’t engage in illegal activities
Contributing to the development duties/activities of the economy

To the community
Giving charity to the poor
Responsible disposal of waste
Improving infrastructure
Providing employment opportunity to the locals
Deal fairly with the society members
Obtaining resource from the community where they are available

To the environment
Responsible disposal of waste
Planting trees
Use environmentally friendly material

Argument/case for social responsibility

1. Benefits the firm in the long run
2. Improves the corporate image of the firm. It is the society that gives an organization the
charter to exist and to succeed. It is there it only fair that the firm gives back to the
society by being socially responsible
3. Prevention is better than care.
4. The firm contributes a lot to the very many problems faced by the society hence should
help in solving e.g. planting trees.
5. Organization has a lot of resources hence use to same to help the society
6. Co/firms has the responsibility to make the environment they operating in better and even
protect it by being socially responsible.
7. By being socially responsible, firms can avoid government interventions and enjoy being
in business.

Case against social responsibility

It violates the profit maximization objective which is the primary objective of a profit making
firm.
The society ends up paying for the cost of social responsibility through increased prices.
Lack of accountability system and structures for administering social responsibility.
The firm may end up acting illegally by engaging in activities they are not licensed to undertake.
Organization also possesses a lot of power and influence over the society. By being socially
responsible e.g. helping the society a lot of power will be concentrated on them which will not be
politically proved.
Lack of full support in social actions
There are no established ways of taking stock and measuring the impact of social responsibility.

Ethics of Management
Ethics refers to the study of moral obligations involving separation of what is right or wrong
It deals with what is morally good/bad and right or wrong.
Personal ethics refers to rules by which an individual lives his/her life.
Business/management ethics narrows the search for right/wrong for /to productive organization it
is concerned with truth and justice in business and the interaction of managers with various
stakeholders and his moral obligation towards them.

Moral agendas of Managers

1. To provide goods and services that are socially valuable
2. To protect and promote the economic wellbeing of various stake holders
3. To enhance freedom, dignity and general wellbeing of individuals both in and out of the
firm.

Why managers should behave ethically

1. Being leaders, they are role models and therefore need to set a good examples
2. They are the face of the organization and therefore to uphold and maintain a good
corporate image, they must be ethical.
3. In most cases, it is a professional requirement
4. The rules of mortality requires the managers or any other person to behave ethically
5. It is fair to the players in the field
6. There are rules and regulations e.g. on corruption, sexual harassment which managers
should abide with
7. Managers are the strategists in the organization and hence their decisions and choices will
highly impact on the whole organization and society in general
Criteria of evaluating whether managers are ethical or unethical
1. Theory of justice-If managers make decisions that are indiscriminative, then he/she is
said to be ethical
2. Theory based on right -If a manager respects or protects other people’s rights, then he
will be said to be ethical
3. Utilitarian theory -Where managers make decisions that benefit a large group, then it is
ethical
4. From the way the manager deals with the firm’s policiesEthical managers will never
compromise the policies of the firm for their own interest.
5. By looking at how managers deals with his own personal issues-Ethical managers will
behave professionally always

Examples of Unethical Behavior

1. Underpaying workers, apprising them or mistreating them
2. Nepotism, favourism, tribalism, discrimination etc.
3. Sexual harassment
4. Accepting /taking bribes
5. Record falsification
6. Making misleading claims about a product
7. Environmental pollution
8. Behaving unprofessionally
9. Stealing from the firm in terms of money in time.

Causes of Unethical Behavior in an Organization

1. poor remuneration
2. selfishness
3. lack of clear guidelines on what constitutes ethical behavior
4. pressure for performance
5. pressure from competition
6. culture of the firm/organization
 7. peer pressure
8. pay off from the past practices

Measures that managers can take to improve ethical behavior in an organization.

1. Better remuneration
2. Clear guidelines on what constitutes ethical behavior and code of ethics for the entity.
3. Openly punishing unethical behavior (for others to learn from them) and rewarding good
behavior.
4. Policies of the firm should be clear and not ambiguous
5. Managers should be good role models
6. Conduct frequent ethical audit
7. Encouraging whistle blowing and also protecting the whistle blowers
8. Develop a culture of open communication and discussion of ethics
9. Establish ethical committee.

Factors determining individual ethics

1. Family influence
2. Peer influence
3. Values and morals
4. Situational factors

Other factors include

i. Law
ii. Code of ethics for organized organization
iii. Holy bible
iv. Conscience
v. Education
 CHAPTER TWO

EVOLUTION OF MANAGEMENT THOUGHT

Introduction
Although the 20th century is marked by history as an area of scientific management, this does not
mean that management was not present in previous years.
Though large businesses did not exist, management has been practiced for 1000s of years.
The practice of management can be traced to earliest recorded history.
Management as it is today can be better understood as an evolution of the following stages.

Pre-Scientific Era
Archeological evidence such as the great pyramid stands in salient tribute of bygone managers.
Illiterate workers, miserable working conditions, primitive agrarian economics and crude tools
made the task of managers in ancient civilization e.g. Egypt and Mesopotamia civilization
extremely difficult
Managers during the pre-scientific era didn’t have formal education and training in proven
management methods but they accomplished amazing things.
As time passed, exploitation of natural resources and technological advances led to the industrial
revolution.
The industrial resolution changed the nature of work, the nature of society and the location of
work.
This saw people moving from their local villages and firms to work in urban factories.
Money economies arose to replace the barter trade (economies) which saw the introduction
(payment) of wages. Industrial revolution also brought about different in interest in nationalizing
the managerial process.
Haphazard and unsystematic management practices proved to be inadequate for large scale
factory operations.

Management in antinguity (ancient)

Practice of management can be traced back to 1000s of years. The Egyptians used management
functions of planning, organizing and controlling when they constructed the great pyramid
The Raman Empire developed a well-defined organization structure that greatly facilitated
communication and control
Plato, profounded a system of job specialization in 350 B.C
The serious study of management did not begin until the 19th century.
Robert Owen (1771 – 1858) he was a British industrialist and reformer was one of the first
managers to recognize the importance of an organized human resources.He believed that workers
deserve respect and dignity.He implemented better working conditions and believed that giving
more attention to workers will pay off in increased output.
Charles Babbage (1792 – 1871) he was an English Mathematician and he focused his attention
on efficiency of production in his book titled “on economy of Machinery and manufactures” the
Babbage placed great faith in the division of labour and advocated for the application of math’s
to the problems such as efficient use of facilities and materials
Babbage was originator of modern management theory and practice
Therefore after haphazard in unsystematic management practices proved to be inadequate for
large scale factory operation, the classical management era was born out of this interest.

Classical Management Era/Perspective

The classical management emerged during the early years of this century (20th century) (1900 –
1930) and these ideas represent the first well developed frame work of management.
The classical management consists of 3 distinct branches namely
1. Scientific management
2. Administrative management
3. Bureaucratic management
Features of classical management
Was closely associated with industrial revolution and development of large scale industries
which demanded the development of new forms of organization in management.
Classical theory is based upon scientific and admin management in bureaucratic management.
Management thought focused on
a) Productivity
 b) Job content
c) Structure
d) Standardization
e) Simplification
f) Specialization
Focused on scientific approach towards management and organization
Classical management was based on 3 pillars
(i) Scientific school of thought
(ii) Administrative school of thought
(iii) Bureaucratic.

Scientific school of thought/management (taylorism)

It was concerned on improving productivity by improving standard performance of individual
workers.
Scientific conducts business by standards established by facts/truths gained through systematic
observation, experiment or reasoning.
Scientific management is also called tourism. It emphasized on detailed and precise planning of
work to achieve efficiency
It relied on formal top-down approach which leads to a centralized control system
Greater advances in managerial practices were made to determine tastes and better methods of
production and more efficient forms for organization and management

Basic steps of scientific management (Fredrick Taylor)

1. Develop a science for each element of the job to replace old rule of thumb method.
2. Scientifically select employees and then train them to do the job as per step one.
3. Supervise employees to make sure they follow prescribed instructions and methods
4. Continue to plan the work and make best use of workers.

Fredrick Taylor
He is considered as the father of scientific management
His first job was a foreman at the steel company in a field where he observed that employees
were deliberately working at a pace slower than their capabilities
He studied the workers and determined what the workers should produce and then decides what
workers should do it.
He then determined what each worker should produce and implemented each wage the worker
should be paid and linked payment with level of workers production.
The concern of Taylor was in increasing efficiency in production
Fredrick Taylor was of the opinion that productivity was an ignorance of both part of
management and labour.
The reason for this ignorance was the fact that neither managers nor workers knew what
constitutes a fair day work and a fair day pay
He believed that productivity was an answer to both higher wages and profits and applications of
scientific methods not the rule of thumb would yield productivity without expending more
human energy and efforts.

Principles of Taylor
Replacing rules of thumb by organized scientific method so that the best method for performing
each task could be determined.
The scientific selection of workers so that each worker would be given responsibility for a
task/job for which he/she is suited in.
Ensuring cooperation through incentives and provide work environment that reinforces optimal
work results in a scientific manner.
Divide responsibility for managing and for working and device scientific education methods and
training programmers
Introduction of stop watch

Frank and Lillian Gilbreth

Were the most noted pioneers of time in motion study? These people were husband and wife;
they developed the classification of motion used to complete the job and they called it Therbligs
Working individually and together they developed a numerous technique and strategies for
eliminating inefficiencies
They applied many of their ideas to their families. Their experience in raising 12 children are
documented in their books and movie “Cheape by Dozen”
Henry Gantt
He worked with Taylor on several projects including assignments in Bethlehem and other many
places.
He worked independently later and developed techniques for improving work output.
He came up with charting system for production scheduling i.e.
“Gantt Chart” which is still used today.
He developed work quarter system complete with bonus system for workers and all managers
who meet/exceed the quarter.
His bonus system was similar to the modern gain sharing technique where by employees were
motivated to higher levels of performance by the potential of sharing in profit generated.
He also introduced the concept of stop watch

Advantages of scientific school of thought

The valuable contribution to the evolution of management through scientific school of that is:
1. Division of labour and specialization leads to increased efficiency
2. Introduced techniques of work study and organization and methods in order to determine
the best method.
3. The school of thought profounder transformed management attitudes, achievement of
optimal efficiency and effectiveness.
4. It introduced the concept of piece work as a method of providing incentives to workers to
perform at a prescribed standard.
5. Despite perceiving workers as equivalent to machines, Taylor recognized the importance
of scientific selection and training of workers.
6. It is a rational approach to organization of work which enables tasks and processes to be
measured with considerable degree of accuracy.

Disadvantages
1. Ignored the social aspect of workers
2. Overlooked the human desire for job satisfaction
 3. The school de-humanizes people by making them work as machines
4. Puts planning and controlling of activities exclusively in the arms of management
5. Rules out any bargaining against any wages since any job was time measured and rated
scientifically.
6. During Taylor’s time, the mental revolution, he advocated rarely come about but at most
time led to increased productivity but also led to mass/layoffs.

ADMINISTRATIVE SCHOOL OF THOUGHT

This school of management looks at management as a process that involves certain functions
such as planning, organizing, controlling, directing, staffing etc.
That’s why it’s also called functional approach.

Henry Fayol
Regarded as the father of this school of management
Defined management interns of certain functions and then laid down 14 principles of
management. Which according to him has universal application?
He was a French executive who emphasized management could both be taught and learnt.
He began by classifying all operations in business organization under the following 6 categories:
1. Technical activities
2. Commercial activities i.e. buying and selling and creating
3. Financial activities dealing with the source and uses of funds or funding or controlling
capital.
4. Security dealing with safeguarding firms resources
5. Accounting operation i.e. balance sheet, cost recordings.
6. Administrative and managerial activities i.e. management function itself
Fayol pointed out that managerial activity deserved more attention.
According to him, management is the process composed of 5 elements i.e. planning, organizing,
coordination, commanding and controlling.
According to him, he observed that;
a) To plan is to study the future and arrange the plan of operation.
b) To organize is to build up material and human organization of the business
 c) To command is to make staff do their work
d) To coordinate is to unify all activities
e) Control is to see that everything is done to accordance to standards laid down and the
instructions given
f) Fayol concluded his theory by stating that, to be effective management should be based
upon the following 14 principles:

14 principles of Fayol
Division of labour work should be divided to allow specialization.
Specialization enables workers to acquire ability, sureness and accuracy which increase their
output.
Authority and responsibility – authority is the right to exercise power.
Responsibility is an obligation to perform and deliver results.
According to this principle, there should be a match between authority and responsibility
Too much authority without responsibility, will lead to abuse of power.
Too much responsibility without authority will render the worker incapable of delivering results.
Unity of direction – states that the organization effort should be geared towards same direction
i.e. towards the attainment of a common organization purpose.
In modern organization, managers formulate corporate goals, vision and mission a statement that
provides direction to all organization members such that all members are moving to the same
direction.
Unity of command – here, an individual worker should be only directly answerable to one boss.
Having multi-priority of processes will lead to confusion on the part of employee and conflicts
between managers
Order – according to this principle, people and material should have designated location for ease
of location.
Less time will be wasted locating people and material if there is order
This principle is applied into today’s management as people have designated to work stations,
there are store where material are kept and there are filling system that facilitate ease of retrieval
of data.
Discipline – according to this principle, workers behavior should be regulated through rules and
regulations that must be adhered to.
It is applied into today’s management as there is established code of conduct.
Centralization – here, an organization should have a central organ where decisions are centrally
made and control is exercised.
Subordination of individual interest to the general interest – according this principle, the
interest of the organization lay in supreme/comes before the interest of the individual.
Whenever there is a conflict of interest the organization should take precedent
Equity-involves fairness and justice.
Managers should exercise fairness in their dealing with employees and they should be non-
discriminative
Initiative – implies the workers should be encouraged to creative and innovate.
Scalar chain here, an organization should have clear hierarchy of authority flowing from top to
bottom.
Stability of tenure – the worker should be assured or guaranteed of their job.
Job insecurity will lead to lack of commitment and perpetuation of frauds by employees
Applied in modern management as workers are hired on permanent/pensionable basis or
contract.
Espirit de corps refers to harmony and mutual understanding among the members of an
organization
Managers should encourage team work in an organization.
Remuneration of personnel – the amount of remuneration in the methods of payment should be
just and fair and should provide max possible satisfaction to both employees and employers.
Workers should be paid well in accordance to /with their contribution.

Henry Fayol also identified qualities that managers need /require in order to perform their duties
effectively. These qualities include;
1. Physical qualities – e.g. smart, average, height energetic, physically fit tcc.
2. Mental quality – a manager should possess an above average IQ and wisdom.
3. Moral quality – integrity, honesty, tcc
 4. General knowledge and experience – should possess general knowledge on various
disciplines and on the happenings in the external environment.

BUREAUCRATIC SCHOOL OF THOUGHT

Bureaucracy was a brain child of max weber.
Max weber was a German socialist who was concerned with abuse of power by those in
authority.
In order to reduce these abuses, an organization system that will be operated by rules and
regulations commonly known as bureaucracy was proposed.
Under bureaucracy, an organization would be hierarchically structured where authority is clearly
defined and people are guided by rationality, rules and regulations rather than arbitrary actions.
He proposed the following bureaucratic principles
1. Assisting a system of interpersonal rules, regulations and procedures
2. Principle of division of labour and functional specialization.
3. Principle of hierarchy of authority
4. A cadre of professional employees
5. Autonomous decisions by office holders
6. Selection of workers should be based on competence/merit
7. Maintenance of written records, communication and rules
8. Separation of management from owners – the ownership should be separated from
management and this will ensure that organization is highly formalized.
Advantages of bureaucratic school of thought
1. There is consistence, predictability and order
2. Division of labour leads to increased efficiency
3. Division of labour eliminates conflicting jobs, duties and responsibilities
4. The high level of discipline in bureaucracy saves management time.
5. There is no biasness.
6. Less time is wasted in decision making since policies are well laid down and managers
made simple reference to policies.
 7. The merit based employee selection ensures that organization is staffed with competent
workers and this increases productivity.
8. Bureaucracy eliminates irrational decision making.

Disadvantages
1. Rigidity following the same rules
2. Hinders/hampers creativity, innovation and initiative.
3. Does not give room for participative management i.e. employees has no say
4. Some procedures are too lengthy and may not make any economic sales leading to a lot
of time wastage.
5. Over looks psychological impact it creates with people.

NEO-CLASSICAL ERA
The classical writers or authors including Fayol, Taylor and weber neglected the human relation
aspect
The neo-classists focused on the human aspect of industry
They modified the classical theory by modifying the fact that organization as social systems and
human factors are the most important element within it. Thus, this came to address the weakness
of the classical school of thought.
The main short comings of classical theory included
(i) They all ignored the man behind the machine
(ii) They all assumed that man is an economic beast who is only motivated by economic
gain/benefits.
(iii) They were all concerned with maximizing gains of the owners and the needs of the
workers were totally ignored.
(iv) They put all managerial control in the hands of management workers were ignored.
The main schools of thought developed during this period were:
1. Human relations school of thought
2. Behavioral school of thought.
 HUMAN RELATIONS SCHOOL OF THOUGHT
The main man behind this school of thought was Elton Mayo who was a professor at Harvard
University.
Together with his colleagues they did experiment in Hawthorne which was in Chicago.
The experiments were done in four phases. The main aim was to establish the factors that affect
workers’ productivity.
The four phases include
Phase 1: illumination study – the objective of this study was to determine the level of
illumination and level of productivity.
It was expected that workers’ productivity would increase with increase in illumination but the
study failed to prove the experiment accurately.
Phase 2: Relay assembling test room study – the objective of this study was to determine the
relationship between worker productivity and improved benefit and working conditions.
The experiment also wanted to find out whether there are other factors that influence
productivity and worker behavior.
The study found out there is no cause and effect relationship between working condition and
output, rather there were other factors e.g. attitude of the workers
Interviewing programme – this experiment, employees were interviewed to learn more about
their opinion with respect to their work, working conditions and supervisions.
The interviewers sought employees view on the factors that would lead in increased productivity.
The interviewees suggested the following factors;
a) Psychological factors which determine whether the workers are satisfied or dissatisfied.
b) The persons need for self-actualization will determine his/her satisfaction in the work
place.
c) A person work group and his relationship to it determines his productivity
Bank wiring test room study – this experiment was conducted to find out the effect of
social/factors on employees performance
A group of male workers were chosen and put in a room that was wired such that experimenters
could observe from remote locations.
The group was given the task and was left to work.
The experimenter’s observed that the workers selected a leader and organized themselves and
they helped to achieve objectives.

Conclusion
In summary, the following by the whole experiment
(i) An organization is a social technical system
(ii) Economic incentives are not the only significant motivators
(iii) Human beings are active and not passive as machines
(iv) Informal leader are as important as formal leaders
(v) Productivity in many cases is influenced by group behavior
(vi) Employees efforts (attitude) morale is an important determinant of productivity

Criticism of theory
1. Experiments lacked scientific objectivity
2. It is criticized for its failure to explain the effect of labour union.
3. The theory provides an unrealistic picture of informal groups by describing them as
majors sources of satisfaction of industrial workers.
4. The approach was in fact production oriented and not employee oriented as it argues
5. The approach over emphasizes the importance of symbolic reward and under played the
role of material.

BEHAVIORAL THEORY
Concerned with human behavior i.e. the “why” of human behavior
They recognized that human behavior can be explained by unmet needs that a man is struggling
to satisfy.
There several theories within this the organization. The main one include the following
1. Abraham Maslow hierarchy of needs
2. Clayton Alderfer: ERG
3. McGregor

Abraham Maslow’s Hierarchy of needs

This content theory of motivation seeks to determine the individual’s choice of goods hence
certain things are more important than others.
Abraham Maslow suggested that individuals are motivated by 5 levels of needs.
When the first level has been satisfied, the individual will attempt to satisfy the 2 nd level then
move on to other level.
The five categories include;
1. Physiological needs – this must be satisfied for a person to survive. They include basic
needs e.g. food, shelter and clothing
Income from employment allows people to satisfy these needs.
2. Security needs/safety – once psychological needs has been met and satisfied, the
individual will seek security at home, tenure at work and protection against living
standards.
House and medical insurance are examples of attempts to achieve security
3. Social needs most people desire affection, they want to belong to a community and feel
wanted hence social groups, religious, cultural, sporting and recreational organization are
formed.
4. Esteem needs – include need for recognition, authority and influence on one another, also
their desire to acquire position in external demand for self-respect.
Such needs could be met through the occupation of highly ranked jobs together with the
provision of status symbols; large expensive company cars, wall to wall carpeting etc.
5. Self-actualization – it is the highest level of needs in the Maslow’s hierarchy.
Contains creative entity and search for personal fulfillment
Having satisfied all other needs, the individual will want to accomplish everything he/she
is capable of achieving; to develop individual skills, talents and attitudes.
N.B, few people ever reach ever reach in this final stage
Douglas McGregor (X& Y)
Proposed theory X and Y
ASSUMPTIONS OF THEORY X
i. Most people must be forced and even threatened with punishment before they work.
ii. Personal goals prevail and conflict with those of the organization
iii. Man was lazy
iv. Man had to be controlled through strict supervision.
v. Man needed a lot of guidance to ensure high performance.
vi. Man hated work.
Assumptions of theory Y
Work is natural activity like rest and play
Man likes to work
Man was committed for organization goals
Man liked and sought responsibilities
Man has imagination and creativity

Implications of theory X and Y to managers

1. Management should identify different kind of employees
2. Theory x employees should be supervised to ensure results
3. Employees should be encouraged to be more creative and innovative.
4. Theory Y employees should be left to work on their own with minimal supervision.

Clayton Alderfer: ERG theory

Recategorised Maslow’s hierarchy on need into 3 simpler and broader classes of needs i.e.
 1. E-Existence Needs includes needs of basic material necessities i.e. physiological and
security needs
2. R-Relatedness – includes the aspirations individuals have for maintaining significant
inter-personal relationship with families, peers, getting or gaining public fame and
recognition.
Maslow’s social needs and external components of esteem needs fall under this class of
needs.
3. G-Growth Needs – needs for self-development and personal growth and advancement i.e.
self-actualization.

MODERN THEORIES OF MANAGEMENT

These theories run from 1960s to date
Under this school of thought several theories has been developed which include the following
Contingency/Situational Theory
This theory argues that there are no ready-made universal answers to management, rather,
appropriate managers action depends on situations prevailing at the time i.e., what the manager
does will depend on situational or contingency factors
Managers are entirely situational he should consider different situations before selecting the
cause of action.
There is no best way of managing a company and structuring it. The management depends upon
the environment, the firm’s strategy, technology in use by the firm, size of the organization,
culture of the firm etc.
Managers must use different strategies for different situations and that a method that is highly
effective in one situation may not even work in other situations.
Mary Parker Follet spoke of the rule of situation
She argued that different situations require different kinds of knowledge and the man possessing
knowledge by a certain situation tends in the best manage business other beings being people to
become the leader of the moment
Every situation that a manager will confront will somehow be different and will require different
reactions.

Features of a contingency theory

1. It is situational oriented, arguing/ calling upon managers to study, analyze and diagnosing
the situation.
2. After analyzing of the situation, managers are expected to prepare inventory of
management, principle and techniques and concepts.
3. In order to tackle the situation efficiently, the validity and applicability of the
management tools and techniques is prepared which is appropriate for the situation.
4. The organization environment is ever changing and the organization continually interacts
with dynamic environment
5. Management style and practice should match with requirement of the situation.
6. Successful managers will depend on ability to cope with environmental demand,
therefore management should sharpen their diagnostic skills to anticipate and
comprehend the environmental changes.
NB: It is important to know that contingency approach emphasizes the need for managers to
examine the relationship between internal and external environment of the organization.

Limitations of situational approach

Lacks sound theoretical base (no guidelines)
All depends upon the situation
A manager has to think on possible alternatives as he has no short cuts applied principles to act
upon.

Process of contingency approach

1. Analyze and understand the particular situation
2. Examine validity of alternative approaches to the situations at hand.
3. Make the right choice by matching right choice with two situation
4. Implement the choice and review choices.

THE SYSTEM THEORY /SYSTEMS APPROACH TO MANAGEMENT

Tries to look at how organization function function and operate as a system which can be a
subsystem of a much bigger system.
Views an organization as a system or a group of inter-related parts with a unified purpose
The action of one part will influence the other parts. It is therefore incorrect to assume that if a
problem exists in the production department, the solution to the problem will not has an impact
in another area e.g. market department
In general a system is an inter-related set of elements that functions as a whole.
It is a set of integrated variables working together to achieve common system goals
It is a process by which an organization received feedback.
Managers should view the organization as a dynamic whole when solving problems
System theorists started management by putting thing together and assumed that the organization
goals are created by the sum of its parts which are uniquely related to one another.
Every system has got subsystems which is a system within a system.
An organization as a system has got subsystems or inter-related components e.g. divisions,
depts., sections or other organization groupings.
An organization operates as an open system receiving inputs from the external environment and
releasing output to the external environment.
A system therefore receives inputs, transforms the resources into output and receives feedback
from the environment.
 Feedback

Input Transformation Output

The feed from the environment serves as a source of information about the performance of the
organization and hence serves as a good basis for better decision-making.
This idea of a system being a part of a greater system is very useful to management and it is the
greatest contribution of the systems theory.
Other concepts of systems theory are:
Synergies suggest that 2 or more people/unit/department can achieve more when working
together than working individually.
This considers departments as inter-dependent components that complement each other in
pursuit of organizational goals
It’s important for managers to promote cooperative effort/team work
Entropy – it is a concept that refers to what happens when an organization adopts a closed
system approach. They fall and die
Entropy is the amount of disorder/randomness present in any system
When an organization fails to make the necessary adjustment for it to exist in a particular
environment, it is likely to dis integrate and disappear.
The process of dis integration can take either a short period or a longer period but finally the
organization will fall and die.
Equifinality – it is the idea that two or more strategies/paths may lead to the same achievement
or place.

An organisation is a system containing for main part/subsystems. I.e. Task, structure, people and
technology.
a) Task subsystem – the task system refers to the main purpose of the organisation
 b) Structure subsystem – refers to formal distribution of authority and responsibility,
communication channel and work flow.
c) People sub-system – refers to employees with their motives, attitudes and values in
informal organisation.
d) Technology subsystem refers to tools and equipment as well as techniques which are
used by organisation to perform its task.
Other subsystems include:
e) Environment
f) Objectives
g) It is a set of interdependent parts which form a unitary whole that performs some
functions.

Importance of understanding organization system approach

1. It is an integrating approach which considers management in its totality
2. Points out the complex and multi-disciplinary character of management.
3. It is a valuable aid in understanding the inter-relationship between different parts of an
organisation and its environmental inter-phase.
4. Gives managers a wider and overall perspective.
5. This approach possesses a conceptual framework of much higher order than any other
approach.
6. Facilitate better understanding of organisation approach in complex environment
7. Suggest that the internal functioning of organisation must be consistent with the demands
to changing environment and the needs of the members.
Operational research approach/theory/management science
This involves the application of quantitative techniques to problem solving.
It is quantitatively oriented aspect of management and today in company; it’s used for planning,
designing, schedules, and managing inventories and determining how much to order.
The approach is sometimes referred to as Management science approach
Based on approach of scientific management.

Characteristics of operational research approach

Management is essentially decision-making and an organisation is a decision making unit.
Organisation efficiency depends upon quality of managerial decisions.
A problem is expressed in form of a mathematical model containing mathematical symbols and
relationship
The different variables in management can be quantified and expressed in form of equations.
The approach has provided sharp tools for rational decision making it is not used in organizing,
staffing, leadership, where problems are more human than taking it in nature and does not take
total view in management.

In conclusion a theory is a systematic grouping of independent concepts and principles that give
a frame work to ties and as together a significant area of knowledge.
Its relevant in the field of management because it provides a means of classifies significant and
pertinent management knowledge.
When identify an effective organisation structure, there are a number of principles applied and
which are inter-related.
These principles have a predictive value to managers e.g. certain principles guide managers
when delegating authority in an organisation.
Theories and history of management are important to managers for various reasons;

Importance of theories to managers

History assists managers in understanding the current developments in avoid mistakes of the
past.
History and theory promote an understanding and appreciation of the current situations and
development; also facilitate the prediction of future conditions.
Theories helps managers organize information and therefore are able to approach problems
systematically. Without theories all managers will has ideas or creations which will not be useful
in today’s complex and dynamic organisation.
PLANNING FUNCTION
Planning precedes all the other managerial functions and it is an ever increasing feature of
modern life even though there is no universal approach to planning.
Everyone has a plan either formally or informally
We are involved in planning leisure activities e.g. at work, at school, college
Planning – is a process of determining in advance what should be accomplished and how it
should be realized.
It is the process of determining which path among the several that you need to follow.
It involves in the present what will be done in the future.Involves formulating future goals of
action; it is a systematic thought that precedes action.
It is simply deciding in advance what to do, how to do it, when to do it and who is to do it.
A good plan should be able to tell what, how and when something is to be done.
The primary purpose for planning is to provide guidelines necessary for decision making and the
resulting action throughout the organization.
Plans give purpose to our lives and formalized plans enable managers to mobilize their intentions
to accomplish organisation purposes.
They are working documents by which organisation or parts thereof are managed.
A plan is a specific documented intention consisting of an objective and action statement.
An action plan is a documented method/strategy which is devised for the purpose of achieving
specific results. A plan for obtaining an objective which is an end or destination and addresses
the question.
Planning deals with future uncertainty and it is necessary for managers to be flexible. It bridges
the gap between the present and the future and it deals with future expectations.
Through planning, managers are able to have a clue of the future.
Planning involves selecting from among alternatives future courses of actions for the entire
organisation for every department and section within
In any organisation, it is necessary for people to know what they are expected to accomplish if
the group effort is to be effective.
In general, planning is what you do, before you do something so that when you do it, it is not a
mixed up.
Planning involves the following
 1. Decision making
2. Goal setting
3. Controlling
4. Forecasting

Nature of planning
Characteristic of planning
It is an intellectual activity involves vision and foresightedness to decide the things to be done in
the future
It brings to gap between were we are and where we want to go hence it requires mental skills.
Involves selection from among alternatives – planning is a choice of activity. It involves finding
of alternatives and selection of the best alternatives to achieve specified objectives and selection
of the best alternatives to achieve specified objectives. Thus decision making is an integral part
of planning.
It is forward looking – it means looking ahead. It is carried out to achieve some objectives in
future.
It may involve forecasting of future events such as customers demand competition tcc. Thus
planning is futuristic in nature.
Related to objectives – every plan specifies the objectives to be obtained in the future and steps
necessary to reach them.
It is the most basic of all the managerial functions – since managerial functions are organizing,
staffing, leading and controlling, they are all designed to support their accomplishment of
enterprise objectives.
Planning logically precedes the execution of all other managerial functions.
It is a continuous process – it is not a onetime event of activity but a continuous process
It is a pervasive function of management – planning is a function of all managers although the
character or nature and breadth of planning will vary with their authority and with the nature of
authority plans attained by superior.

Benefits of planning
Every function of business is planned in most of the enterprise because there are production
plans, sales plans, financial plans, research and development plans, purchase plans etc.
Planning is done to ensure proper utilization of human and material resources to achieve the
objectives of the business.
Planning is meant to avoid haphazard implementation of resources without plans, actions must
become merely random activity and it will lead to chaos and confusion.
Planning is prerequisite to good management. No organization can achieve its objectives without
planning because;
1. Growing complexity of modern business because of rapid technological changes and
keen competition in the market.
2. Rapid social and economic changes
3. Recognition of social responsibility
4. Growth of trade unionism
5. Uncertainties caused by trade or business cycle
6. Shortages of certain resources
7. Increasing government control over business
8. Need for research and development activities.
These are the challenges before the modern era managers, which can be dealt effectively only
through proper planning. That is to imply that good planning is the foundation of management.
Planning is therefore important because;

Importance of planning
Provided direction for the organization without a plan, members of the organization will not
know what is expected of them.
Reduces uncertainty and risk this is because managers did predict circumstances in the future and
will prepare well for any eventuality.
Guides decision making – sound planning avoids hasty and plans established are used as point of
reference for decision making.
Facilitates control – the actually performance can be checked and measured against the plans and
objectives they are in.
Facilitates coordination – through planning, it’s possible to divide labour and allocate resources
to ensure that there is harmony between various inter-related parts of the organisation.
Enhances efficiency in operations – planned efforts are always more efficient than unplanned
efforts
Facilitates optimal allocation of resources
Facilitates delegation/decentralization
Precedes the execution of all the other managerial functions. It is therefore impossible to execute
the other managerial functions effectively without prior planning

Limitations of planning
Sometimes planning fails to achieve the expected results because of
1. Lack of reliable data
There may be lack of reliable facts and figures over which plans may be based
Planning losses its value if reliable information is not available or if the planner fails to utilize
the available information.
Lack of initiative
Planning is a forward looking process, if a manager has a tendency of following rather than
leading, then he will not be able to make new plans.
Therefore, the planner must take the required initiative for planning to be effective.
Costly process
It is time consuming and expensive. This may delay action in certain process but it is also true
that if sufficient time is not given to the planning process, the plans so produced may prove to be
unrealistic.
Rigidity in organisation working internal inflexibility in the organisation may compel the planner
to make rigid plans.
This may deter the manager from taking the initiative in adjusting the plans.
No acceptability of change
Resistance to change is another factor which puts limits on planning.
It is a commonly experienced phenomenon in a business world. Even the planners themselves do
not like changes in other occasions hence making planning process in effective.
Psychological barrier
Psychological factors also limit the scope of planning
Some people consider present more important than future because present is more certain.
Such people are psychologically opposed to planning
External limitations the effectiveness of planning is sometimes limited because of external
factors which are beyond the control of planners. They may include drought, famine, and war.

Measures to overcome (limitations of planning)

1. Setting clear-cut objectives the existence of clear cut objective is necessary for efficient
and effective planning
Objectives should not only be understandable but also rational
2. Management information system – an efficient system of management information
should be installed so that all relevant facts and figures are made available to managers
before they perform any planning function.
3. Effective forecasting – business is greatly influenced by economic, social, political and
international environment.
The management should have a mechanism of forecasting changes in such environment.
4. Careful premising – the planning premises constitutes a frame work within which
planning is done.
They are the assumptions to be made regarding future happening. It is a prerequisite to
determine future settings such as marketing, pricing, government policies, tax structure,
tcc.
The planning premises should be set up very carefully
5. Flexibility – some element of flexibility must be introduced in the planning process
because modern business operates in an environment which keeps on changing.
6. Dynamic managers – the person concerned with the task of planning should be dynamic
in outlook.
 They must take the required initiative to make business focused and develop planning
premises.
7. Availability of resources – determination and evaluation of alternatives should be done in
the light of resources available to the management
Alternatives are always present in any decision problems.
8. Cost benefit analysis – the planners must undertake cost benefit analysis to ensure that
the benefits of planning are more than the cost involved in it.
This necessarily calls for establishing measurable goals, clear insight to the alternative
causes of action available.

Principles of planning
1. Principle of contribution to the objective – the purpose of plans and their components is
to develop and to facilitate realization of organization aims or objectives.
Long-range plans should be interwoven with medium range plans which in turn should be
set with short range ones in order to accomplish organisation objectives effectively and
economically.
2. Principle of pervasiveness of planning – planning is found at all levels of management
Strategic planning long-range planning is related to top management while intermediate
and short rage planning are the concern of middle and operating management respective.
3. Principle of limiting factors – planning must take into consideration the limiting factors
(manpower, money, machine, management and materials) by concentrating on them
when developing alternative plans, strategies, policies, procedures and standards.
4. Principle of flexibility – flexibility should be built into organizational plans. The risk of
loss due to unexpected events can be reduced by building flexibility into the plans.
Error in forecasting and decision making and future uncertainties are the two common
factors which call for flexibility in managerial planning.
5. Principle of navigational change this principle requires that managers should periodically
check on the events and re-draws /re-drafts plans to maintain a course towards a desired
goal.
6. Principle of commitment an organisation should plan in future for a period of time
sufficient to fulfill the commitments (goals/targets) of the organisation
 I.e. logical planning should cover a time period necessary to forecast the fulfillment of
commitments involved in a decision.
This is necessary to make reasonably sure of meeting commitments.
7. Principle of efficiency of plans – the efficiency of a plan is measured by the amount it
contributes to objectives minus the cost and other undesirable consequences involved in
the formulation and operation of the plan.
This principle stresses upon economical use of individual effort to achieve group goals
8. Principle of timing – the appropriateness timing and planning is important. All plans,
policies, strategies in procedures are useless without proper timing.
9. Principle of alternative – in choosing from among alternatives the best alternative will be
that which contributes most effectively and efficiently in accomplishment of a desired
goal.
10. Principle of competitive strategies – while formulating plans a manager should take into
account the plans of rivals/competitors
The plans should be chosen in the light of what a competitor will do in the same situation.

Types of plans/planning
Can be categorized according to the following basis
(i) Scope
(ii) Time frame

According to scope
Strategic plans – cover the entire organisation as a single business portfolio.
They are a broad plans developed by top level managers on how long term goals of the
organisation will be achieved.
These plans are concerned with positioning a company as a whole in its external environment.
They therefore has external focus
This type of planning has an aim of achieving effectiveness
They are complex as they try to integrate various units of the organisation and they deal with
external environment that is unpredictable as well as distance future that may not be predicted
with accuracy.
These plans are also concerned with allocation of corporate resources among various units of the
firm.
These plans are greatly influenced by those people in power.
Strategic plans may include;
a) Plans to merge
b) Plans to liquidate a business
Tactical plans these plans are developed by middle level managers and are concerned with
specific unit of the organisation e.g. department section branch etc.
These plans are drawn from a strategic plan and they focus on the medium term goals of
the organization will be achieved.
Formulated by the middle level managers and are concerned with effectiveness as
opposed to efficiency.
Example:
h) New product plans
ii) Marketing plans
iii) Human resource plans etc.
Operational plans – these plans has the narrowest focus and short term frame
Concerned with a specific activity in a specific unit in an organisation

Classification according to time frame

 Based on the time period covered by the plan
 The plans include
(i) Long l range/term plans these are plans that cover a period more than 5years (5-
10yrs) though it can extend up to 20yrs or so.
 They are prepared after an analysis of the firm’s environment.
 Such plans may require changes in the organisation structure and activities
 Long term planning is mainly the responsibility of top management
 Developed to guide the future efforts of the enterprise.
 The need for long period has increased on account of growing competition accelerated
obsolescence, increased specialization, tcc.
 (ii) Medium term plans/intermediate – covers 2-5yrs.
 Means to support the long term plans.
 May relate to development of new product and market, product publicity, raising return
of investment from existing product and market.
 Are more detailed than long rage plans.
(iii) Short-rage plans relates to a period of up to 1yr.
 Generally such plans are meant to achieve short term goals

Classification according to use/based on use

On the basis of use, there can be the following types of planning
1. Standing /multi-use planning are the recurring plans and they are used repetitively in
situations of a similar nature.
A standing plan is a standing guide to recurring problems and is used again and again
Objectives, policies procedures and rules are important standing plans
2. Single use/Adhoc planning – a single use plan is used once and then it is discarded.
Designed to meet the demands of a specific situation and scrap when the situation is over.
Programmes, budgets, schedules, projects are examples of single use plans.
These 2 types of plans are summarized as below

Plans

Multi-use plans Single use plans

Objectives Programmes
Strategies Budgets
Policies Schedules
Procedures Projects
Rules

Goal setting
Goal a statement of where an organisation wants to be at a specific time in future.
It is the end towards which the effort of the organisation are directed to achieve its
plans/objectives

Types of goals
Corporate goals are the broad goal which relates to the organization as a whole i.e. what does the
overall organisation wish to achieve.
Examples of corporate goals;
Company vision – a vision of a company is a mental picture of the company’s destination.
It is a road map to the company’s future and provides a general feature of the company.
Company vision will answer queries like;
(i) What is our business now?
(ii) What will it be in future?
(iii) What will our business in an ideal world?
Company mission – the company mission is a rationate for the business existence.
The mission statement describes a company’s function and purposes.
Operational Goals – these are goals that relate to the specific functional area of the organisation
e.g. production goals, marketing goals, HR gods.
Long term, medium term and short term goals – long term goals are achieved in 5 yrs. and
above.
Medium term goals are achieved in 2-5 years.
Short term goals are achieved in the current year.
Economic and non-economic goals – economic goals relates to profit. Non-economic goals e.g.
social responsibility goals do not relate to profit.
Primary vs. secondary goals – primary goals are basic goals that an organisation is established to
pursue. For profit making entities, max profit is a primary objective.
For nonprofit making entities, the primary goal is to provide services for members at an
affordable rate.

Characteristics of good objectives/goals

S – Specific
M – Measurable
A – Attainable
R – Realistic
R – Relevant
T – Time bound

Specific – a good objective should state in clear terms what should be achieved
This will ensure that there is no confusion and the workers know what is expected of them.
Measurable – good objectives should be measurable in quantitative terms. Those that have no
quantitative parameters should have a bench mark or a standard established to enable the
manager to assess the extent to which goals has been achieved.
Attainable/achievable – this implies that the goals should be attainable setting goals that are too
high and over-ambitious and impossible will demotivate the workers.
However, this does not imply the setting of unchallenging goals. Those that are unchallenging
will lead to boredom. On the side /part of the workers.
Realistic – good objectives should be in line with reality. I.e. in setting the objectives, the
circumstances surrounding the attainment of these objectives should be considered.
Relevant – good objectives should support the main purpose of the organisation (relevance)
Time bound – good objectives should state the time frame within which they are to be achieved

Other characteristics
1. Flexibility should provide room for change
2. Validity should be consistently reviewed and revised to ensure that they are not obsolete
and still valid.
3. Consistency – given that an organisation will pursue several objectives, at the same time,
the objectives should be made consistent with each other

Steps to goal/objective setting

1. Environmental scanning and monitoring through the SWOT analysis
2. Set the overall goal based on SWOT analysis
3. Establish the sub unit goals
 4. Establish operational goals that will help attain sub-unit goals
5. Implementation and monitoring of progress towards goals attainment at all levels of the
organization
6. Assessment of the feedback so that appropriate remedial action can be taken

Importance of goals
1. Facilitate planning as planning is impossible without objectives
2. Objectives provide motivation as they act as milestone closed by the workers
3. Provide direction for the organisation
4. Objectives ensure for the organisation
5. Objectives ensure there is optimal allocation and utilization of resources – this is because
resources are allocated based on what needs to be achieved.
6. Objectives facilitate control and measurement of performance i.e. objectives act as yard
sticks/bench marks
7. Goals assist in coordination especially voluntary
8. Goals will help in decentralization of power and authority i.e. delegation
9. Facilitate appraisal of all decisions

Barriers in effective goal setting

Lack of skills on part/side on those setting goals i.e. may end up setting goals that are not
SMART
Some time here is over emphasizes of quantitative goals on the expense of qualitative goals.
Resistance by workers as well as managers.
Setting unattainable/unrealistic goals
Conflicting expectations from various stake holders

Measures to overcome barriers to effective goal setting

1. Goals should be stated clearly
2. Understand the purpose of the goals i.e. managers must understand and appreciate that
goals are only a target that are aimed at but not necessarily hit at all times.
3. Ensuring consistence in goal setting
 4. Communication – once established, goals must be communicated to all members of the
organisation
5. Goals should be flexible
6. Involve workers in goal setting and reward them
7. Collect sufficient information

Forecasting as a planning tool

Forecasting is a systematic attempt to discover those economic, social and financial influences
governing or regulating business activities so as to predict or estimate current and future
financial production and marketing operations.
Thus forecasting is a process of predicting future systematically
The results of this process in known as forecast.
Forecasting is based on ability of helping managers to understand the future makeup of the
organization environment which in turn helps them formulate more effective plans
It’s used in a variety of ways in such areas as;
1. Production planning
2. Strategic planning
3. Sales analysis
4. Purchasing planning
5. Inventory control
6. Marketing planning
7. Logistic planning
8. Materials planning

Importance of forecasting
It is an essential element of planning every business executive make a forecast in one way or
another. The need to foresee the future on a systematic basis was well emphasized by Henry
Fayol who was of the opinion that the entire planning in business is made up of a series of
separate plan called forecast.
Forecasting has assumed a great importance in modern business world which is characterized by
growing competition, rapid environmental changes, fast technological changes and increased
government control

Advantages of forecast
a) Helps in effective planning by providing scientific and reliable basis for anticipating
future operations.
b) Aims at reducing levels of uncertainty there surrounds management decision making with
respect to cost production sales, pricing, profit tcc.
c) Making and reviewing of forecast on a continuous basis will compel the managers to
think ahead and to search for the best possible solution with a dynamic approach.
d) It’s necessary for efficient managerial control as it can disclose the areas where control is
lacking

Limitations
a) Though it is a necessarily in a modern business, it should not be forgotten that all forecast
are subject to a degree of errors and they can never be made with a 100% accuracy.
b) The quantitative with the help of forecast are limitation because they are based on certain
assumptions.
c) Managers often neglect to examine whether the forecast are supported by reliable
information
d) Time consuming and costly to carry out the analysis
e) Rapid environmental changes which renders forecast in effective
f) The various techniques of forecasting project future trends but cannot guarantee that a
particular event will occur in the future.

Steps in forecasting
Understanding the problem – this is the 1st step which requires the management to understand the
real problem about which forecasts are to be made.
Developing the ground work – at this stage the manager will try to understand what chances in
the past has occurred/happened.
He can use past data on performance to get the speedometer reading of the current rate and how
fast this rate is increasing or decreasing.
This will help in analyzing the cause of changes in the past
Selecting and analyzing data there is definite relationship between the choice of listical facts and
figure and determination why business fluctuations has occurred.
Estimating future events are estimated on the basis of analysis of post data. The manager must
use his past experience and judgment
Regulation of forecast – management has to constantly compare the actual operations with the
forecast prepared in order to find out the reasons for any deviations from the forecast.
Review of the forecasting process its necessary to examine the procedure adapted to the purpose
so that improvement can be made in the methods of forecasting.

Techniques of forecasting
July of executive opinion – this method involves combining and arranging top executive views
concerning the items to be forecasted.
Executives from sales, finance, production tcc come together in order to get benefit of broad
experience and opinion.
Forecast can be provided easily and quickly without elaborating characteristics.
Time series analysis most common methods are
Expotential, smoothing method, moving average method.
The general approach is to identify a pattern that pattern is then smoothen to eliminate the effect
of random fluctuations and extrapolated i.e. the future to provide forecast.
Regression analysis – assumes that the variable to be forecast can be predicted on the basis of
two values of one or more independent variables
It is a statistical technique that fits the specified model to the historical data available.
Goes beyond simple time series, extrapolation and basis forecast on causal relationship.
Sales force composite – involves obtaining the views of sales persons, sales management or both
on the outlook for individual products and on total sales
It is generally a bottom – up approach since different sales persons can estimate sales to only
some divisions of the company.
Has a disadvantage of being susceptible to the basis of those who are more influential in the sales
group.
Index number used commonly to provide a basis of anticipated short term fluctuations caused by
seasonal or cyclical pattern.
Such indices can be determined by simply looking at the ratio of sales for a given month for a
given month to annual sales for each of the past several years.
Economic model use a system of simultaneous regression equations that false into account the
interaction between various segments of the economy or areas of corporate activity.
Customer expectation – this technique seeks to use customers’ expectations, their needs and
requirements as the basis of forecasting often done through selected surveys

Decision making
Involves choosing a course of action from several a ternatives. It is a process of generating
alternatives and choosing among alternatives
The actual selection of a course of action from among alternatives the core of planning
Decision making is a matter of planning organization objectives and steps that will be used to
achieve them.
It is part of every managers job coz they must constantly choose what to be done, who is to do
and when it is to be done.
Regarded as a step in planning, even when done quickly and with little though or when it
influences action only for few minutes.

Elements of decision making

1. Decision maker
2. Decision problem
3. Environment in which the decision is to be made.
4. The objective of the decision maker
5. The alternative courses of actions
6. The outcomes expected from various alternatives.
7. The final choice of the alternatives.
Characteristics of decision making
1. It’s a process of choosing a cause of action from among alternative causes of action
2. It is a human process involving to a great extent the application of intellectual abilities.
3. It’s the end process proceeded by literation and reasoning
4. Always related do the environment. A manager may take one decisions in a particular set
of circumstances and another is a particular set.
5. Involves a time lapse.
6. It always have a purpose
7. Involves all actions such as defining and understanding the problem, probing the problem
and analyzing the various alternatives which takes place as final choice is made.

Types of decisions
Classified according to different basis as discussed below
Routine and strategic tactical/routine decisions are made repetitively following certain
established rules and policies.
They neither require collection of new data nor confirming with people thus, they can be taken
without much deliberation.
Strategic decisions are generally taken by top management. They are concerned with policy
matters and exercise fundamental influence of objectives, facilities and structures of the
organisation.
Such decisions involve long-term commitments and therefore, they require careful analysis and
considerable preparations e.g. location of plant, choice of a channel of distribution, development
of a new product etc.
Strategic decisions involve considerable risks and uncertainty
Experience, considered opinions and operations research techniques are used in making such
decisions.
Policy and operating decisions – policy decisions are of vital importance and affect the entire
organisation
Taken by top manager are sometimes published in the form of a policy manual for the guidance
of lower level executives.
Operating/admin decisions – are genera taken at lower levels of management.
They translate policies into specific actions i.e. the manner of executing the established policies.
Organisation and personal decisions – organisation decisions are those which a manager takes in
each official capacity.
Such decisions can be delegated but personal decisions relate to the manager as an individual and
not as a member of the organisation.
Programmed and non-programmed decisions – programmed decisions are of routine of repetitive
nature which is to be dealt with according to specific procedures.
Non programmed decisions – arise because of unstructured problems i.e. they are required to
solve unstructured problems.
They are of a non-repetitive and novel nature
There exist no standard procedures for handling such problems in every decision is a unique
case.
Individual and group decision making – when a decision is taken by an individual in the
organisation, its known as individual decision.
They are taken in small organisation and in those organizations where autocratic style of
management prevails.
Group or collective decisions refers to those decisions taken by a group of organisation members
e.g. B.O.D or committee.
Important and strategic decisions are generally taken by a group.
Group decisions lend to be more balanced, acceptable and practical but they involve greater
expenditure of time, money and effort.
Usually difficult to fix responsibilities for such decisions.

Importance of decision making

Without effective decision making organisation cannot achieve success. Decision making
spreads over all the managerial jobs and covers all the areas of the enterprise.
Manager and decision making are inseparable as the manager is always making decisions either
knowingly or unknowingly

Importance of decision making

Helps in achieving objectives rational decisions helps the organisation to achieve all its
objectives quickly because they are made after analysis and evaluating all alternatives.
Increases efficiency – rational decision makes results in higher returns at low cost.
Facilitates innovation helps develops new ideas, new product innovation etc.
Motivates employees – after rational decisions are implemented the organizations makes high
profit and can hence give financial and non-financial benefits to employees.
Better utilization of resources – helps to utilize the available resources for achieving the
objectives of the organization.
Facing problems and challenges – correct decisions help solve problems and challenges not by
avoiding them but facing them.
Business, growth – if good decisions are made, business can grow since activities will run
smoothly and efficiently.

Decision making and planning are inter-linked. The determination of objectives, policies,
strategies, involve decision making.
The most outstanding quality of a successful manager is the ability to make sound decisions this
he has to make sound mind.
While taking decisions, he gets enough time for fact finding analysis for other alternatives and
choice of the best alternative
Decision making is a human process and when the manager decides he chooses a course which
he thinks it’s the best.

Stages in decision making

A decision will be justified on a logical basis and does not suffer from personal bias of the
decision maker, if it is scientifically done
The following are the most important stages followed while making a decision
1. Diagnosing and defining the problem
2. Analyzing the problem
3. Data collection
4. Developing alternatives
5. Review of the key factors
 6. Selecting the best alternative
7. Putting the decision into action and practice
8. Follow up

Diagnosing and defining the problem

It’s true to a large extent that a problem well defined is half solved.
A lot of bad decisions are made because the person making the decision does not have a good
mastery/grasp of the problem.
Sufficient time should be used on defining the problem as it’s not easy to define the problem and
see the fundamental thing that is causing trouble and that needs correction.
Practically, no problem ever presents itself in a manner that an immediate decision may be taken.
It is therefore essential to define the problem before any action is taken otherwise the
management will answer the wrong problem rather than the core problem.

Analyzing the problem

After clearly recognizing the problem, the next phase is the analysis of the problem which
involves classifying the problem and gathering information;
Classification is necessary in order to know who should take the decision and who should be
consulted in taking it.
Without proper classification, the effectiveness of the decision may be jeopardized.
The following should be taken into consideration when the classification is done;
a) Nature of the decision
b) Impact of the decision
c) Futurity of the decision
d) Periodicity of the decision
e) Limiting factors relevant to the decision.

Data collection
A lot of information is required to classify any problem thus collection of right type information
is very important in decision making
A decision is as good as the information on which it is based.
Collection of facts and figures also requires certain decisions on the part of the manager.
He must decide what type of information he requires and how to obtain it.
By gathering the information, one must be clear as to how much time and money he can spend
on it.

Developing alternative
After defining and analyzing the problem, the next important step in decision making process is
development of alternative course of action.
Without developing alternatives courses of action, a manager is likely to be guided by his limited
imagination.
It is rare for alternatives to be lacking in any course of action.
When managers start developing alternatives, various assumptions come into his mind.

Review of the key factors

While developing alternatives the principle of the limiting factors has to be taken care of
A limiting factor is the one which stands in the way of accomplishing the desired goals.
It is a key factor in decision making

Selecting the best alternative

In order to make the final choice of the best alternative, one will have to evaluate all the possible
alternatives.
There are various ways to evaluate alternatives;
The common method is through intuition. I.e. choosing the solution that seems to be good at that
time.
There is an inherent danger in this process because a manager’s intuition may be wrong on
several occasions.
The second way is weigh the consequence of one against those of the others by looking at factors
like; risk, economy of effort, situation/timing, limitation of resources etc.

Putting the decision into action and practice

The choice of alternative will not serve any purpose if it’s not put into practice.
The manager is not only considered with taking a decision but also with its implementation
He should try to ensure that systematic steps are taken to implement the decision.

Follow up
It is better to check the results after putting the decision into action
This is due to the following reasons;
a) If the decision is a good one, one will know what to do if faced with similar problems
again.
b) If the decision is a bad one and one follows up soon enough, corrective action may still
be possible.
c) If the decision is a bad one, one will know what not to do next time.
In order to achieve proper follow-up, the management should device an efficient system of
feedback information.
This information will be very useful in taking the corrective measures and taking rightful
decisions in future.
Managers are unable to make perfectly rational decisions due to the following limitations;

Limitations of decision making

i. The individual does not study and analyze the problem fully because of personal bias in
different attitudes etc.
ii. The individual does not have full knowledge of the alternatives in their consequences.
iii. The individual interprets their organizations goals in his own ways he may adopt or
courses of action which according to him will meet the goals effectively.
iv. The individual does not search for the best solution but good enough. In other words, he
aims at satisfactory rather than optimum decision’s
v. The decision making situation may involve multiple goals all of which cannot be
maximized simultaneously.
vi. Further these goals may be of conflicting nature.
vii. The effectiveness of a decision is dependent upon environmental factors which are
beyond the control of decision makers. Thus, the consequences of variables alternatives
cannot be anticipated perfectly because uncertain environment.
Techniques of decision making
Decision taken must be accurate and should not lead to confusion and they must also be
scientific and available for accuracy and verification. The important techniques that aid the
manager in decision making include;
Probability theory analysis – probability refers to a chance that particular event will occur. The
events must be random and be affected by chance and not by design.
The probability of success is defined as the number of successful outcomes divided by the total
number of outcomes.
It cannot be denied that some element of probability does exist in all decision making.
Linear programming – this is defined as how a company with limited resources make optimum
use of those resources combined for the achievement of the desired objective goal.
That is the central idea of this mathematical technique.
Simulation – this technique is used to test the feasibility and possible outcomes of various
decision alternatives.
Simulation is a quantitative technique for evaluating alternative courses of action based upon
facts and assumptions with a computerized mathematical model in order to represent actual
decision making under conditions of uncertainty.
Decision tree – a decision tree is a map of the sequence of events in a decision problem. It shows
by means of diagram the number of future chance events which may affect a decision.
According to McFarland” a decision tree is a graphical method by which a decision maker can
more readily visualize the course of action open to him, together with the risks, possible
outcomes and information needs involved in a problem.
Cost benefit – this technique is used when weighing ramifications of each possible alternative as
a way to come to a final decision that makes that most sense from an economic perspective.
Pareto analysis – this technique is used when a large number of decisions need to be made.
This helps in priotizing which one should be made first by determining which decision which
will have the greatest over-all
T-chart – this chart is used when weighing the pluses and minuses of the option.
It ensures that all positive and negative are taken into consideration when making a decision.
Multi voting – this is used when multi people are involved when making a decision.
It helps whistles down a large list of options to a small amount to the eventual final decision.

Roles played by strategies, policies, procedures, rules and regulations in the planning process
Strategies
It can be defined as a game man ship or administrative Couse of action designed to achieve
success in the face of difficulties.
It’s a plan prepared for meeting challenges posed by the activities of competitors and other
environmental forces.
Strategy is the complex plan for bringing the organization from a given posture to a desired
position in a future period of time. E.g. if the management anticipate price cuts/price reduction
by competitors, it may decide upon a strategy of launching an advertising campaign to educate
the customers and convince them of the superiority of its products.
In order to formulate an effective strategy, management must anticipate accurately the plans of
competitors and look at them from the view point of rival firms.

Nature of strategy/characteristics
1. Strategy is a contingent plan as it is designed to meet the demands of difficult situations
2. Strategy provides the direction in which human and physical resources will be deployed
for achieving organizational goals in the face of the environmental pressure and
constraints.
3. Strategy relates an organisation to its external environment. Strategic decisions are
primarily concerned with expected trends in the market, changes in government policy,
technological development etc.
4. Strategy is an interpretive plan formulated to interpret and give meaning to other plans in
the light of specific situations.

Strategy making process

The process of strategic planning (strategy formulation) involves the following steps;
1. Environmental analysis – first of the entire external environment is analyzed to determine
the opportunities and threats for the enterprise.
 2. Self-appraisal – the internal environment of the enterprise (resources, capabilities) is
examined to know the strengths and weaknesses of the firm.
3. Strategic alternatives – alternative strategies are developed to deal with the environmental
forces.
4. Strategic choice – the most appropriate strategy is chosen so as the capitalize on the
strengths of the enterprise.
5. Strategy implementation – detailed operational plans are developed and communicated to
employees so as to execute the chosen strategy.

Policies
A policy is a general guide to thinking and action other than a specific course of action.
It is a general statement that guides subordinates
It defines the areas/limits within which decisions can be made to achieve organisation objectives
i.e. a policy is laid down to cover pre-decided issues within a pre-defined bracket.

Advantages of policies
Ensure consistency in decision making
Provide uniformity in action in various units and in different periods of time.
Avoids repeated analysis and therefore saves time.
Enables managers to delegate authority without much loss of control
Minimizes mistakes in decision making in as much as it provide guidelines
Helps in training subordinates to handle responsibilities.

Disadvantages
Are rival to different interpretation since they allow discretion and are usually broad
Delegation through policies allows wide spread participation in decision making as more
subordinates participate into decision making process due to this fact, uniformity is lost and
inconsistencies starts to emerge.
It’s seldom possible to fully control policies. In many circumstances different exists between
actual policy, intended policy and pronounced policy.
Procedures
It’s a chronological sequence of steps to be undertaken to enforce a policy and to attain an
objective
It lays down the specific manner in which a particular activity is to be performed.
It is a plan sequence of operations for performing respective activities uniformly in consistently.

Advantages of procedures
1. Enhances efficiency. I.e. the sequence of steps of any operation has been laid down in
advance.
2. One only needs to follow the analysis to proceed towards the required goals.
3. They constitute a simplified methodology of training operational level staff
4. Useful as devices for handling emergencies.

Disadvantages
1. Inhibits/hinders rational and logical thinking
2. Frustrates clients sometimes thus defeating the very purpose of saving the economy and
the empowerment of organisation image.
Rules and regulations
 Rules are rigid and definite plans that specify what is to be done/not done in a given
situation.
 A rule provides no scope of descriptions and judgment.
 It is a prescribed guide to conduct or action
 Usually, no deviation is expected from the rule.
 They are prescription of how members of a group ought not to behave.

Advantages of rules and regulations

1. Standardize the behavior and provide organization uniqueness by projecting its mission
on identify.
2. Provide group members with a sense of security i.e. they know in advance want is
expected of them to do or not to do.
 3. Rules set a discipline as a manager know in advance what action to take in the event of
breach of the rule.

Disadvantages
Don’t provide any desecration
Don’t need any decision
Violation or breach of rules is accompanied by penalties for non-compliance
Restrict initiative
It is highly bureaucratic

Programmes
Programmes are a planned series of future events, items or performances.
It is also a plan of action aimed at accomplishing a dear business objective with details on what
work is to be done, by whom, when and what means or resources will be used.

Advantages of programmes
Flexible distribution options are available
They are eligible; that is one can easily read them.

Disadvantages
Takes time to learn about them especially if they involve a group of people
They are tiresome to prepare.

Budgets
A budget is an estimate of income and expenditure for a set period of time.
It is an estimate of costs, revenues and resources over a specified period reflecting a reading of
future financial/ conditions and goals

Advantages of budgets
1. Provide a method of allocating and using resources within the organization
2. Helps to monitor and control operation
 3. Provide a frame work for delegations
4. It helps co-ordinate different departments and aligns them towards shared objectives.

Disadvantages of budgets
1. Time consuming – a budget can be very time consuming especially in a poorly organized
environment where many iterations of budget may be required.
2. Blame of outcomes if a department does not achieve its budgeted results.
3. It only considers financial outcomes and not subjective issues such as the quality of
products or services provided to customers.
4. Strategic rigidity especially for annual budgets.
Projects
A project is a planned set of interrelated tasks to be executed over a taxed period and within a
certain cost and of the limitations.
It is also a unique, transient endeavor, undertaken to achieve planned objectives, which could be
defined in terms of output, outcomes or benefits.

Advantages
1. Projects helps in the advancement of knowledge in any field
2. Projects help to solve certain problems.
3. They help to predict future trend and patterns of any given phenomena.
4. They play a key role in confirming hypothesis and coming up with new theories.

Disadvantages
It is time consuming to undertake
Also expensive to conduct a project
Project planning documents are sometimes created and then never used.

Schedules
A schedule consists of a list of times at which possible tasks, events or actions area intended to
take place or of a sequence of events in the chronological order in which such things are intended
to take place. It is also a plan of procedure, usually written, for a proposed objective.
Advantages
1. Schedules help to improve discipline among the employees since everyone knows where
to be and what to be doing.
2. Less time is devoted to administer duties to the various employees in an organisation
3. External networking – public scheduled training allows the employees to mix with and
talk to people from other companies and backgrounds.
This helps to improve on the knowledge.

Disadvantages
Complexity – keeping track of which production crew will be working, which materials will be
used and which products will be produced becomes very complex and tiresome for the person in
charge of production scheduling.
Cost – when implementing a production scheduling system, you may need to buy software and
other resources to help facilitate the process which ends up being expensive to maintain.

Management by objective (M.B.O)

This is a modern approach to objective setting that integrates the individual’s goals with the
goals of the organisation.
Objectives are set collaboratively by the managers together with the subordinates.

M.B.O PROCESS
1) Senior managers establish the overall organisation goals which are communicated to all
workers at all levels.
2) Collaboratively, the subordinates and managers agree on key responsibilities in their
purposes within the corporate plans.
3) Collaboratively, the subordinates and managers agree on the key tasks needed to fulfill
the key responsibilities.
4) The subordinates and managers agree on the key results (objectives) that must be
achieved in the light of overall organisation objectives.
 5) The managers and subordinates agree on the resources that are needed to achieve the key
results.
They also agree on the improvement plan i.e., they agree on when the managers will be
visiting the subordinates to review the progress and offer any assistance if needed.
6) Worker/employee is provided with resources and left to work on periodic basis as agreed.
The manager will meet will meet with subordinates to review the progress in offer
assistance.
7) On periodic basis as agreed, the manager will meet with subordinates to review the
process so that they can help where there is a problem.
8) At the end of the agreed period, the subordinates and the managers will meet and agree
whether the agreed objectives were achieved.
If a subordinate has achieved the agreed objectives, he is rewarded in the process begins
again.
If the subordinate has not achieved, problems are identified and is facilitated to go back
and achieve.

Advantage of M.B.O
1. Reduces resistance to change
2. Facilitates participative management
3. Increases motivation and commitment level
4. Enhances control through self-coordination
5. Helps managers develop the management i.e. it is a trading tool.
6. Forces the management to identify and clarify organisation of goals.
7. Helps improve communication between management and subordinates
8. Ensures that focus is concentrated to the key tasks
9. Saves the top managements time i.e. workers are well coordinated
10. The key responsibilities are clarified /defined reducing ambicquity in responsibility and
conflict among organisation members.

Disadvantages
1) Time consuming
 2) Some subordinates may not be good in goal setting. They may therefore ignore the
process.
3) Some managers may also not support the process reason being some managers would
want to retain the control over subordinates and will not support the process at all.
4) Management by objectives emphasizes on quantitative objectives while neglecting
qualitative objectives.
5) Emphasizes attainment of short term objectives.
6) Conditions in the environment changes too frequently for M.O.B to work.
7) It leads to inflexibility in the organisation
8) Unforeseen opportunities arising may be passed by or unforeseen trends may overcome
the process.
9) It sometimes involves a lot of paper work.
10) There is a danger of managers forgetting that there is more to manage than objective
setting

Features of M.B.O
Goal oriented – it focuses on the determination of unit and individual goals in line with the
organization goals.
 These goals define responsibilities of different parts of the organization in help to
integrate the organization with its parts in its environment.
 Management by objective seeks to balance and blend the long term objectives e.g. profit,
growth and survival of the firm with the personal objectives of key executives.
Participation – M.B.O is characterized by a high degree of participation of the concerned people
in goals setting and performance appraisal.
This helps to improve the motivation and morale and people and results in the role clarity.
The participation provides the opportunity to influence decision and clarify job relationship with
superior, subordinates and peers.
Key result areas – the emphasizes on MBO is on performance improvement in the areas which
are of critical importance to the organisation a whole.
By identification of key result areas, MBO ensures that due attention is given to the priority
areas. Which has significant impact on performance and growth of the organization?
System approach – MBO is a system approach of managing an organisation it attempts to
integrate the individual with the organisation and the organisation with its environment
Seeks to ensure the accomplishment of both personal and enterprise goal by creating congruence
goals.
Optimization of resources the ultimate goal of MBO is to secure optimum utilization of physical
and human resources of the organization.
It sets an evaluative mechanism through which the contribution of each individual can be
measured.
Simplicity and dynamism – MBO is a non-specialist technique and it can be used by all types of
managers.
At the same time it is capable of being adopted by both business and social welfare organisms.
MBO applies to every manager, whatever his function and level and any organisation; small and
large.
Operational it is an operational process which helps to translate concepts into practice.
Made operational through periodic review of performance which are future oriented and which
involve self-control.
Multiple accountability under MBO, accountability for results is not centralized at a particular
point rather every member of the organization is accountable for accomplishing the goals set for
him.
Comprehensive MBO is a total approach
It attaches equal importance to the economic in human dimension of an organisation.

ORGANIZING FUNCTION
Organizing can be defined as a process of defining tasks and activities to be carried out in order
to achieve particular objectives.
While planning entails formulation of organisation goals and objectives and determining, the
course of action required to achieve them, organizing entails the grouping of activities in such a
way that the organisation goals and objectives are achieved and attained in an effective and
efficient manner.
The process of organizing also involves the allocation of responsibilities so that everyone in the
organisation know their tasks and are aware of the resources they has at their disposal in order to
accomplish their tasks within a particular time frame.
N.B. For an organisation to achieve its goals and activities, it requires to has an organisation
structure
Organization structure is a chart/design that describes the way in which the inter-related groups
in an organisation are constructed.
It will show the chain of command and the official channel of communication that exists within
an organisation.
The primary purpose of the organizational structure is to divide and allocate work and authority
and then coordinate and control that work before the realization of organisation goals.

Elements of organisation pattern

1. Job definition are the tasks requirements of the particular job in an organisation
2. Authority – its derived to guide/direct the actions of other
3. Span of control – the number of subordinate who report directly to a single manager of
supervisor.
4. Responsibility an obligation/duty placed on an individual in an organisation to perform
the given assignment/task.
5. Accountability – responsibility for ones actions

Organisation
Definition: according to Chester Bernard an organisation is a system of consciously coordinated
activities or forces of people working together and formally agreeing to combine their efforts for
a common purpose.
Bebeian and zamnuto defined organisation is a social entity that are goal directed, deribalately
structured activity systems with a permeable boundary.
There are for key elements in this definition:
Social entity – the word social is derived from society meaning gathering people as opposed to
plans, machines, buildings the although all these exist in an organisation.
Goal directed all efforts of an organisation are directed towards a common goal.
Deliberately structured activity system by systematically dividing complex tasks into specialized
jobs and categories of activities in separate department an organisation can use its resources
more efficiently.
Permeable boundary all organization has boundaries that separate them from other organisation.
These boundaries determine as to who and what, is inside and outside the organisation.

Types of organisations
Formal organisation
It is a structure which has a formally and consciously coordinated relationship between two or
more persons working towards a common objective.
A formal organisation is simply a pattern of relationships and tasks defined by official rules,
policies and systems.
It’s made up of official authority and responsibility relationship.
It’s a structure of well-defined jobs each bearing a definite measure of authority and
responsibility designed to enable the people to work more effectively together in accomplishing
organisms goals.
It lays down the channel of communication, flow of authority accountability, rules and
procedures, tcc.

Characteristics of formal organisation

Has defined inter-relationship
Based on rules and procedures
Based on division of work
It’s deliberately created. It’s created to achieve organism’s goals
It’s impersonal i.e. feelings are ignored
It’s stable
Flows down wards and its delegated.

Informal organisation
Is a pattern of influence and interaction among people in an organisation which is motivated by
need to feel a sense of belonging and a great need to fit in, to be lived or to be one of them?
It is a set of evolving relationships and patterns of human interactions with an organisation which
are not officially prescribed.
Its natural and spontaneous network of personal and social relationships between individuals
formed on the basis of personal attitudes, values, friendship, prejudice, interest, physical location
of work place, similarity of work tcc.

Characteristics of informal organisation

1. Based on formal organisation – it’s created after formal organisation is created/formed.
2. Has no written rules and procedures
3. Has independent channel of communication flow of communication cannot be specified
4. Not deliberately created emerges out of mutual relationship and taste.
5. Has no place in an organizational chart – no into about it in the organisation manual
6. It is personal here, feelings are considered
7. Lacks stability

Characteristics of organizing
It’s the basic function of management
It’s the process of grouping activities to achieve organisations objectives
Organizing helps in granting/giving/permitting authority
Organizing coordinate among various functions and depts...
Effective communication is possible through some organisation structures.
Organizing is an association of men who unite together to obtain general objectives of an
organisation.

Importance of organizing
1. Promotes specialization and speed performance of tasks.
2. Helps in avoiding duplication of work and overlapping of responsibilities among various
employees and work groups.
3. Scientific division of work – the total work load is divided among different individuals
and groups based on their qualification experience and competence.
4. Creates a solid foundation for focusing managerial attention and actions on the
accomplishment of enterprise objectives.
 5. Sound organisation structure facilitates adjustment to change in workload caused by
changes.
6. Encourages creative thinking on the part of the employees.
7. Provides the optimum use of technological improvements.
8. The sound organizing increases managerial efficiency.

Principles/guidelines to organizing
Clear line of authority – which should run from top to bottom and this, will make each individual
in the organisation to know the rights authority to be able to perform respective roles.
Unity of command – there should be no subordinates reporting to many bosses/superiors.
Establishing clear responsibility under each superior by doing it in writing. This implies to
clarity roles of each superior.
Responsibilities of the manage for the acts of their subordinates should be clearly stated.

The authority and responsibility should be delegated as far down as possible. This means
effective organisation encourage participation of subordinates.
The number of levels of authority should be as few as possible for the purpose of easy
communication.
The principle of specialization should be applied in this, facilitates efficiency and quality of
work.
The line and staff action should be kept separate the overlapping of the functions results to role
ambiguity
The span of control should be reasonable and well established
Work distribution – there should be fair and even distribution of work among employees.

Process of organizing /steps

The building up of an organisation structure is an important function of management.
The process of organizing consists of the following steps:
Determination of tasks and division of work the 1st step in organizing is to determine the task
required and accomplishment of set objectives.
Enumeration and definition of activities initiates the organizing function
Fayol divided business activities information technical, commercial, managerial, financial,
security and accounting.
In a modern business enterprise, manufacturing, marketing, purchasing, financing in personnel
are considered to be the main activity of the business.
Grouping of activities the various activities identified under the 1st step are classified into
appropriate department and divisions according to similarities and common purpose.
Such grouping of activities is known as depart mentation
Assignment of duties the individual departments are then allotted to different positions and
individuals
The duties of every individual are defined on the basis of his ability and aptitude.
Clear definition of responsibility of each is necessary to avoid duplication of work and
overlapping of efforts.
Every individual is made responsible for the specific job assigned to him. In this way, duties are
assigned to specific individuals.
Delegation of authority once the duties and responsibilities of every individual have been fixed,
he must be given the authority necessary to carry out the duties assigned to him.
A chain of command is created from top to bottom through successive delegation of authority.
Different individuals are linked horizontally and vertically by establishing formal authority
responsibility relationship.
Provision is made for the coordination of individual efforts.
Establishment of span of control – refers to the number of employees who report directly to a
single manager/supervisor.
2 types of span of control:
1. Narrow span
2. Wide span
a) Narrow span – the narrower the span the closer the supervision in the higher the admin
cost due to higher managers to work ratio.

Advantage of narrow span

1) Allows the manager more time as subordinates supervise. This enable the manager to
guide in supervise these subordinates more effectively.
 2) The manager has more, time available to perform more of important task personally
rather than delegate to subordinates.
3) Improves quality of decision making
4) It is easier to develop group cohesiveness within the similar group of employees
reporting to each manager.
5) Helps more effective communication.

Disadvantages
i. Tends to increase the total number of organisation levels. This makes it difficult for
managers at higher level to keep in touch with ground realities at operating level.
ii. Increases total number of employees in organisation. This increases cost of labour on
employees.
iii. Creates problem of coordination between different managers and original units.

Wide span
 A manager who has a large number of subordinates is said to have a wide span of control.
 A wide span of control results in an organisation that has relatively fewer levels of
management and this is referred to as flat organisation

Advantages
i. Gives subordinates the chance for more independence
ii. Forces managers to develop clear goals and policies.
iii. Helps managers to delegate work effectively and select and train employees carefully.

Disadvantages
i. Managers management become overloaded with work
ii. Chances of case of control are high.
iii. Not suitable for complex activities
iv. It might result to high indiscipline cases
v. Might create coordination problems
vi. Might create communication, problems
vii. Not suitable for incompetent employees.

Factors influencing span of control

1) Geographical dispersion – if branches are widely dispersed, span will be small
2) Capability of workers – if they are highly capable, therefore they need less supervision.
3) Capability of the boss – an experienced boss with good knowledge of workers will be
able to supervise more workers.
4) Similarity of tasks – if tasks by subordinates are similar, then the span will be wide.
5) Volume of other tasks – if the boss has other responsibilities e.g. involvement in projects,
then the number reporting to him should be smaller.

Depertmentation
 It is the process of creating departments
 It involved grouping individual jobs into departments
 The larger and complex organisation is divided into smaller and flexible administration
units.
 A department is a distinct area or unit or system of the organisation specific duties over
which a manager has authority for performance of department duties.

Basis/types of depertmentation
1) Functional depart mentation
2) Product
3) Depertmentation by process
4) Depertmentation by numbers
5) Geographical depertmentation
6) Depertmentation by customers
7) Matrix organisation structure.

Functional depertmentattion.
 Under this, each major/basis activity is organized as a separate department
  A basic activity/function is that activity whose performance is vital for organisations
survival.
 The major functions are further subdivided into functions/sections

Board of Directors

Managing Directors

Marketing Production Personnel Finance

Quality control processing material Repairs and Maintenance.

Advantages
1. Cheaper than other forms of depart mentation and there is minimal duplication of
resources
2. There is specialization.
3. Each functional area is given attention and depart mentation begins by identifying basic
or essential activities that are vital for firms survival.
4. It is logical because it groups similar activities together.
5. It contributes to organize simplicity.
6. It maintains the centralized control of strategic decisions
7. Each department is staffed by experts leading to better organisation performance
8. Reduces conflicts since the functional depart mentation are differentiated.
9. Easy to delegate
10. Forces managers to work as a team.

Disadvantages
 1) Due to inter-dependence of departments, failure of one department will lead to the failure
of the entire system.
2) Inter-dependence between may lead to conflicts between departmental managers who
may has objectives that are conflicting.
3) It does not allow for development of general managers
4) It is not possible to identify where profits/losses are made on individual products
5) The chain of command becomes excessively long as new levels/sections are added and
this may slow down communication.

6) Leads to slow decision making

Product depart mentation

Each major product is organized as a separate department and each department looks after the
production, sales and finance of one product.

Board of directors

General Manager

Metal division Chemical division Plastic division

Finance Production Sales Personnel

Advantages
1) Failure in one department does not affect other departments
2) It is possible to develop the general managers
3) Reduces the chain of command.
4) Facilitates faster decision making
5) Possible to identify the unprofitable product in the product portfolio.
6) There is inter-product competition which is healthy for the company.
 7) There is better quality products and services
8) Coordination of control of activities is much easier.

Disadvantages
1) Duplication of efforts and facilities
2) It may be more expensive than functional depart mentation
3) There may be under utilization of resources when demand for a particular product falls.
4) May complicate the organisation structure especially where the firm has many products
in the product portfolio. This brings about coordination problems for the senior managers.
5) It may be difficult to achieve organisation goals since little or no coordination takes place
between departments.

Geographical /territorial depart mentation

 Very useful to a large scale enterprise whose activities are geographically spread
/dispersed.
 Will occur where the firm has many activities in different regions of the country.
 Each region is organized as a department and the following considerations have to be
made when departmentalizing based of locations.
a) Convenience to customers
b) Economic factors

Board of Directors

General Managers

Northern Region Western Region Central Eastern

Southern

Branch 11 Branch 11 Branch 111

  Examples of such depart mentation include banks, insurance companies, transport
companies, distribution agencies etc.
 Under territorial depart mentation; activities are divided into zones, or divisions and
branches.

Advantages
1) More convenient for the customers
2) Branches/subsidiaries are able to react in local conditions more appropriately.
3) The branches i.e. managers and workers in the branch are able to serve the customers
better.
4) Facilitate development of general manages
5) There is faster decision making because the consultation of the head office is minimized.

Disadvantages
1) The branches could be quite expensive to maintain
2) Communication problems may arise
3) The control problems may arise for regions that are in remote locations
4) Managers may pursue their own interest because the general manager is absent to
supervise them
5) Duplication of efforts and activities.

Depart mentation by customers

 Under this basis, of depart mentation, activities are grouped according to the time of
customers e.g. a large clothes enterprise may be divided into retail, wholesale and export
divisions
 This type is mostly appropriate for banks, departmental store etc.
 Each department specializes in serving a particular class/category of customers.

Board of Directors
 General Managers

Finance Marketing Production Personnel

Wholesale Export Retail

Advantages
1) Special attention can be given to particular taste and preferences of each class of
customers. Customer’s satisfaction enhances the good will and sales of the enterprise.
2) The benefits of specialization can be derived
3) The enterprise gains intimate knowledge of the needs of each category of customers.

Disadvantages
1) As such depart mentation applies only to sales persons; there may be difficulties in
coordinating the activities of different functions.
2) There may be under utilization of facilities and man power, particularly during periods of
low months.
3) Managers of customer department may put pressure for special facilities and benefits.
4) It may lead to duplication of activities

Equipment/process depart mentation

 Under this basis, activities are grouped on the basis of production processes or equipment
involved.
 This is generally used in a manufacturing enterprise and at a lower level of organisation
e.g. a printing press may consist of composing, proofreading and binding.

Board of directors

General Managers
 Composing proof reading Binding

Advantages
1) Encourages specialization
2) Proper maintenance of equipment’s
3) Effective utilization of manpower
4) The machines are arranged in such a way that a series of operations on material is visible
making operations economical.

Disadvantages
1) Difficulties in coordinating different process departments
2) Conflict among managers of different processes may arise
3) Volume of production must be large enough to justify a separate department.

Depart mentation by numbers

 Entails identification of the persons who perform same duties and putting them under one
superior/manager
 Its success lies on the number of persons included in the group,
 In this method, the main limitation is that it is assumed that the success of work depends
only on the number of persons involved.
 It is widely applied in the military

Advantages
Quite effective especially where there few persons to be involved.
Enhances coordination within a unit as the members will only report to a single manager.

Disadvantages
With a large number of persons, it may fail to achieve the desired results
Useful only at the lowest level of organisation
Groups composed only of specialized personnel are likely to be more efficient than those based
only on numbers.

Matrix organisation structure

The essence of matrix organisation normally is combining functional and project/product
patterns of departmentation in the same organisation structure.
This is often done in engineering where a project manager is put in charge of all the engineering
and support personnel necessary to accomplish the entire project.

Advantages
It is result oriented
Professional identification is maintained
Pinpoints product profit responsibility

Disadvantages
Conflicts in an organisation activity exists
Possibility of dis unity of command
Requires managers who have effective human relations.

Problems with matrix management

A state of conflict exists between functional and project managers as both compete for limited
resources
Role conflict – role ambiguity/overlap
Unrimbalance of power and authority as well as horizontal and vertical influence on the project
and functional managers.
Because of potential conflicts, managers may want to protect themselves against blame by
putting everything in writing which increases admin cost.
Matrix organisation requires a lot of time consuming meetings.

Guidelines for making matrix management effective

1. Define the objective of the project /task
 2. Clarify the roles, authority and responsibility of managers and team members.
3. Ensure that influence is based on knowledge and information rather than rank.
4. Balance the power of functional manager and project managers.
5. Select an experienced manager for the project who can provide leadership.
6. Undertake organisation and team development
7. Install appropriate time, cost and quality controls that report deviations from standards in
timely manner.
8. Reward project managers and members fairly.

Authority, responsibility, accountability and power

1. Authority
This is the legitimate right to give orders and to get those orders obeyed
The exercise of authority involves superior subordinate’s relationship
Authority in management relates to the right to decide, direct others to take action or to perform
certain duties in order to achieve organisation goals
It can be seen to take 3 characteristics.
a) It is a right
b) It involves making decisions, taking action or performing duties
c) Granted for the purpose of achieving organisation goals.
Therefore authority is a legitimate power exhibited by the original structure
2. Responsibility
It is an obligation to perform work / activities assigned to an individual
Therefore, accepting a particular job entails taking up the responsibility to perform the tasks
involved
Responsibility is usually better referred to as an obligation.
It is mandatory and it depends on the level of authority given to perform the assigned tasks
Responsibility can be continuous or can be a specific obligation as it goes hand in hand with
accountability.

Accountability
It is the mechanism of ensuring that a person who is supposed to do a particular job actually does
it correctly.
It is a way of becoming answerable to the attained results
It can be established in the following way
a) Where there is personal inspection by the manager
b) Where the subordinates are required to complete the report and give them to the manager.
c) Where there is a department that acts as a counter/controller of the other departments.
d) Where reporting is done by others e.g. customers reporting on faulty products/services.
Before accountability can be identified, certain conditions must be present
These are;
i. Responsibility must be thoroughly and clearly understood
ii. The person must be qualified and capable of fulfilling the obligation
iii. Must be sufficient authority to establish and accomplish the task given

Accountability is closely linked to responsibility.

Therefore, a manager’s accountability cannot be delegated to someone else.
Further managers are usually accountable not only for their actions and decisions but also for the
actions of the subordinates.

3. Power
It is the ability to influence the belief, actions/behavior of another person.
Unlike authority which is official, power is largely personal

Differences between power and authority

Authority 4. It is impersonal it is exercised in
1. Positional order to achieve organisations goals
2. Has one source i.e. organizational and objectives.
structure 5. Usually flows from top to bottom
3. Associated with formal organisation 6. Can be delegated.
and always formal 7. Authority and responsibility should
always be in balance Found only in
 the higher position in the 4. Often personal and subjective i.e.
organisation can be exercised to achieve personal
Power interest
1. Personal 5. Can flow from any direction.
2. Can originate from several sources 6. Some cannot be delegated e.g. expert
3. Can be both formal or informal power.
7. This is not a requirement for power.
8. It is pervasive

Sources of power

Legitimate power these results from the formal opposition held by an individual e.g. general
manager, marketing manager, personnel manager tcc.
Reward power – derived from a person’s ability to reward other individuals
This can be formal or informal e.g. the formal may depend on a manager’s ability to issue a pay
rise or position to the subordinate. Informal can take the form of individual to be able to reward
others through acceptance within the informal groups.
Charismatic power – based on the desire to be liked by others
Usually, it is exhibited when one possesses a unique character or personality that is like able by
others.
Seen when one is able to influence others through his/her unique personality e.g. influence of
musicians on youths.
Expert power – its power out of knowledge or skills held by an individual
Comes from a person possessing special knowledge or skills e.g. teachers, engineers, doctors etc.
A person may have a considerable influence on others because of special knowledge he/she
possesses.
Coercive power – its power derived from ability to punish/recommend a punishment
This power can be formal/informal such as right exercised by others to fire/dismiss workers or
the right of informal groups to punish a member through isolation.

Delegation of authority
This is the process of vesting decision making or performance of duties to the subordinates.
It is the process of passing the need authority to subordinate so as to accomplish particular
responsibility.
Authority is said to be delegated when a superior assigns part of his rights to the subordinate.

Features of delegation of authority

Occurs when a manager grants some of his rights to a surbodinate
A manager cannot delegate authority unless he himself possesses that authority
A manager never delegates all his authority to a surbodinate he only transfers part of his
authority
Delegation does not imply reduction of status of a manager – the manager retains the right to
exercise control over the surbodinate. Therefore, a manager can reduce, enhance, take back or
withdraw the delegated authority.
There is no manager who can avoid responsibility by delegating authority to subordinates.

Importance of delegation of authority

Delegation of authority provides a bond to the various parts that make up an organisation and
especially where the managers grow beyond his personal capacity
The succession of delegation of authority lies in the manager being able to multiply himself
through delegation of authority.

Importance
1. Allows the manager to distribute his workload among his subordinates
2. Delegation pushes authority nearer to the point of action. As a result, decisions can be
taken more easily without referring to higher authorities.
3. Helps to improve motivation and morale on the part of employees due to their
involvement in decision making activities
 4. It’s a means of training and developing subordinates executives. This is because the
subordinates acquire decision making skills through exercise of authority.
5. Improves harmony within the organisation as there is shared authority between the
manager and subordinates
6. Can facilitate growth of an organisation through the involvement of subordinates in
positions with authority.

Principles /guidelines to effective delegation of authority

Grant/give/permit proper amount of authority – the responsibility expected from subordinates
should be merged/balanced with proper amount of authority.
Failure to do so mean the subordinates will be held responsible for activities they cannot achieve.
Every responsibility on the part of subordinate, demands a given level of authority to be given to
them.
Define the results expected the delegator must ensure that he clearly defines the results expected.
Ambiguous results should be avoided if the subordinate is to be held accountable over delegated
authority.
Consider the capability of the subordinate’s authority should be held to those who are competent
and are willing to accept the authority.
In delegation of authority, a manager should consider attributes such as;
(i) The surbodinate background
(ii) Competence
(iii) Experience
(iv) Limitations in the ability of subordinates
Authority should be clearly stated – authority delegated should be well defined to the
subordinates and the relationship that exist between these authorities in others within the
organisation.
This is important as it helps the organisation to know how much authority he possesses in the
execution of his duties.
Modify the authority whenever possible/necessary majors should have a flexible attitude about
the nature of authority they delegate in how much they need to delegate.
This is because, given that business operates in a dynamic environment, authority relationships
are likely to be altered/modified from time to time.
Authority delegated is therefore always subject to change in that it can be increased, reduced, or
withdrawn altogether.
Follow the unit/chain of command this means that delegation of authority should always be done
in line with organisation structure i.e. a surbodinate should only report to one superior.
Develop a willingness to delegate – lack of courage on the part of managers to delegate implies
that subordinates has a lessor part to play in decision making
Create a supportive climate – managers must give the necessary support to accompany
delegation of authority to subordinates.
Both material and moral support will enable the subordinates to exercise the delegated authority
effectively.
Develop an effective communication system – even with delegation of authority, there is a need
for free flow of information between the managers and subordinates
This will enable the manager to give clear instructions and subordinates to seek necessary
clarification and guidance.
Establish an effective control system – managers should put into place appropriate measures to
ensure that delegated authority is exercised properly.
The manager can establish performance standard to act as a basis of measuring the effectiveness
of delegated authority.
Appropriate incentives suitable financial and non-financial incentives should be provided to
reward subordinates for successful assumption of authority.

Reasons why managers may not delegate

The feeling of superiority complex – it is where managers has a feeling that the subordinates are
not capable of doing any work without supervision.
Therefore the manager of the concentrates all the decisions making powers on himself.
Fear of exposure – if the manager is incompetent, he may fear delegation of authority especially
where it is likely to expose his incompetence.
Habit pattern as a result of low supervision, a manager may have developed personal contact
with all the aspects of his work.
Therefore, he may avoid delegation of authority in order to sustain his dip settled pattern.
Risk avoidance – this is the feeling of insecurity on the part of managers.
The insecurity will relate with the fear of losing the position or to the fear that the surbodinate
may misuse the delegated authority and thereby causing failure on the part of the manager.
Loss of importance delegation of authority should only be done where there is a good reason for
it.
Managers who are able to do their responsibilities may not see the importance of delegating.
Geographical limitations between manager and subordinates managers may become reluctant to
delegate part of the authority where there is geographical barriers between them and
subordinates.
Communication techniques adopted under delegation of authority – managers may not delegate
the authority in cases where there is lack of proper communication channels between them and
subordinates.

Reasons for subordinate’s failure to accept delegated authority

Fear of responsibility subordinates may avoid the delegated authority due to the fear of
responsibility of a company.
The delegated authority especially the subordinates confident safer to execute decisions rather
than make the decisions themselves.
Fear of criticism – subordinates may be reluctant to accept delegation of authority because of
fear of being criticized of their dismissal.
Inadequate resources – subordinates may avoid delegated authority because of fear that
necessary resources may not be available to enable them execute that duties.
Lack of self-confidence – sometimes subordinate may avoid. D.A due to lack of confidence to
their capability to discharge new responsibilities
Inadequate incentives – if the D.A is not accompanied by a suitable incentive, the subordinate
may not be motivated to accept it.

Advantages of delegation of authority

1. Promotes actions within the organisation as no consultation is required before decisions
are made.
 2. Enables the managers to perform higher levels of activities since some of the decisions
are left to the lower level managers and subordinates.
3. Helps the subordinates to develop themselves professionally by doing challenging
activities. In this way the subordinate becomes more confident.
4. Leads to better decision making as decisions are made at the lower organisations level
close to where the problems are.
5. Improves the subordinate’s morale due to their active involvement in decision making
activities.
6. Has the benefit of specialization and harmony within the organisation.

Disadvantages
1. Subordinates may make serious mistakes regarding the delegated work for which the
superiors will take the responsibility.
2. Subordinates may have the knowledge and skills required to do the delegated work but
may not put more max effort as managers would do.
3. Where manager assigns responsibility without appropriate D.A, the delegated work will
not be properly done.
4. Managers may delegate to subordinates who avoid decisions and therefore even if there
are no mistakes done by the subordinates, the work suffers.
5. There is increased cost associated with D.A due to incentive created.

Barriers to effective delegation of authority

1. Negative personal attitude on the part of managers – some managers lack confidence in
their subordinates and therefore find it difficult to delegate authority to them.
2. Unwillingness to let others make mistakes – mistakes are part of learning and
subordinates should always be allowed to make mistakes provided that it is not an act of
negligence.
3. Managers may be reluctant to delegate because of the fear that subordinates will make
mistakes in the exercise of D.A.
4. Perceived threat superiors may fear to delegate the authority especially if it will expose
their incompetence their incompetence there by leading to their replacement by the
 subordinates.
5. Disrespect of others – some managers is unable to welcome different opinions from
others and therefore become unwilling to delegate their authority.
6. Unwillingness to let go – delegation of authority involves willingness to give up part of
ones authority to others.
7. Managers may fail to delegate because of the need to retain their authority.

Centralization and decentralization of authority

Decentralization of authority
This section exercises dispersion of authority in the organisation.
Decentralization is the tendency to disperse decision making authority in an organisation
structure.
It is a fundamental aspect of delegation to the extent that if authority is not delegated, it is
centralized.

Decentralization as a philosophy and a policy

In general, decentralization is the systematic effort to delegate to the lowest levels of authority
except that which can only be exercised at central points.
Decentralization implies more than delegation. It reflects a philosophy or organisation structure
and which to hold near the top.
Specific policy making to guide decision making, proper selection and training of people and
adequate control.
A policy of decentralization affects all areas of management.

Centralization of authority
Centralization refers to the degree to which authority is retained by the higher level managers
within an organisation rather than being delegated. If a limited amount of authority is delegated,
the organisation is usually characterized as being centralized.
If a significant amount of authority is delegated to lower levels, the enterprise is described as
being decentralized.
Advantages of centralization
Produces uniformity of policy and actions
Results in fewer risks of errors by subordinates who lack either information or skills.
Utilizes the skills of central and specialized experts.
Enables closer control of operations
Provides for integration i.e. keeps all parts of organisation moving harmoniously towards to
common objective.
Enables emergency decisions to be made.
Lowers the cost of operation as it reduces duplication of resources.

Disadvantages
Resistance to change – centralization of authority usually means most of ideas and policies are
brought up and discussed in small circles of leaders.
This prohibits intersection of new blood/new ways of doing thing.
Poor creativity – an overly top-down organisation approach naturally prohibits creative thinking
and innovative ideas from front line levels.
Limited commitment – when big bosses at central office direct from line managers and
employees the level of loyalty is often limited.

Factors affecting the degree of centralization and decentralization of Authority

1. Size and complexity of the organisation – the larger the enterprise, the more the authority
the central manager is forced to delegate.
2. Dispersion of the organisation geographical dispersion of the organisation tends to result
in greater decentralization of authority.
3. Competence of personnel available – the competence and capability of subordinate is an
important determinant of the degree of centralization/decentralization
4. Adequacy of communication system – managers may seek to avoid decentralization
through the development of a common system that provides the speed, accuracy and
capacity of information needed for top management to exercise centralized control
5. History of the organisation – a firm is likely to have a very centralized structure if it has
grown primarily from within under personal leadership.
 6. The reverse is true for a firm that has grown through acquisition and mergers.
7. Philosophy of top management – the attitude of top managers has an important bearing
from the degree of centralization or decentralization.
8. Importance of the decision – decisions which are vital for the survival and growth of the
organisation are typically made at the top management while participatory oriented
managers will favour decentralization.
9. Uniformity of policy – the greater the need for uniformity of policy, the greater the
degree of centralization.
10. Business dynamics – business operating in fairly stable environment tends to be more
centralized.

Span of management/control/supervision/authority
This refers to the number of people a supervisor/superior can effectively supervise.
It’s the number of subordinates reporting directly to a superior.
There is always a limit to the number of subordinates each executive can supervise effectively,
because each executive has limited time, knowledge attention and capacity.
Opinion is however divided on what should be appropriate span. It changes from organisation to
organisation even from department to department within an organisation.

Factors attending span of control.

1. Capacity and philosophy of the superior – if the manager comprehends and resolves
problems quickly, gets allotting with staff quickly, commands loyalty, he/she can
supervise many people.
A managers philosophy can also influence the span of management e.g. an empire build
will tend to have a wide span of management.
Better trained and experienced managers may also be able to supervise more subordinates
that their less experienced counterparts.
2. Ability of subordinates – the more competent, well experienced and trained the staff are,
the less guidance they need and therefore the more of them a superior can supervise.
The willingness of staff to undertake responsibility and risks also applies.
 3. Nature of work – in general the more competent the work the shorter the supervision and
vice versa.
4. Clarity of plans – if the plans are clear subordinates, authority and responsibility are well
defined, subordinates don’t need frequent guidance from superiors leading to a wide span
of management.
5. Degree of decentralization – in highly decentralized organisation, a manager does not
have to make many decisions himself and can therefore supervise a wide number of
subordinates and vice versa.
6. Communication techniques – the more effective and well communication systems are, the
wider the span of management e.g. well established grievances technique reduces face to
face contacts/interactions
7. Control techniques – it also affects the span of management. I’m personal techniques e.g.
through reporting and budgeting allows for a wider span than personal supervision.
The use of objective standards also reduces to need for closed supervision.
8. Level of management
9. Staff assistance
10. Environmental factors
11. Personal preference of managers
12. Time taken in direct interactions with subordinates.

Coordination
This is the process of integrating objectives, goals, plans and activities of the various individuals
and departments to those of the entire organisation.
Coordination is intended to ensure that individuals and departments do not lose focus on the
organisation objectives while pursuing their individual activities.
Also ensures that there is unity of direction and individual objectives are in line with
organisation objectives.
The need of coordination mainly depends on the inter-dependence of various individual in units
in the execution of organisation activities.
Coordination ensures that individual units of organisation remain in work as integral parts of the
organisation.

Types of coordination
Pooled interdependence – this is where the units are totally independent of each other implying
that one unit does not bend on the another in undertaking
Its daily activities e.g. the coca cola units found in various countries operate with high degree of
pooled interdependence.
Sequential interdependence – this is where one until must act and complete its work before the
other units can start their work.
It means the output of one unit is the input of the next unit e.g. in a manufacturing organisation
the sales department has to wait until the production department has completed the production
for it to start selling the products.
Reciprocal interdepended – this is where the various units support one another. Implying that the
task to be
Importance of particular tasks, implying that for the task to be completed every unit has to
contribute e.g. in decision making by a committee, the various member have to contribute.

N.B. It is important for managers to understand how the units are interdicted as to coordinate
effectively.

Factors affecting coordination of work

1. Span of control – it’s easier where the span of control is narrow as compared to where it
is wide.
2. Nature of communication systems available – requires free flow of communication
implying that it becomes easier where proper communication systems are in place.
3. Operating environment of the organisation – if environmental factors are constantly
changing, this will affect coordination because the managers has to monitor them and
update their plans and activities in line with changing factors.
4. Degree of decentralization – for organisation that is tanked as highly decentralized,
coordination may become difficult due to the wide range of units within the organisation.
 5. Nature of specialization found within the organization – in organisation where individual
are highly specialized at work, coordination becomes difficult since every expert has his
own ways of achieving the desired goals.

Problems faced by managers in achieving effective coordination

Differences in interpersonal relation – managers within various departments may have their own
philosophy on how they should relate with each other and on how to achieve their objectives.
This difference makes it difficult to coordinate the activities of individual members.
Difference in control/evaluation each of the members in the various units believes in different
methods of evaluating the work done.
Differences in time orientation – usually, the duration of time required to execute the different
activities will vary. It therefore becomes difficult for the managers to coordinate the activities
with different time duration.
Difference in leadership orientation – various managers in various units has their own leadership
styles in managing affairs in their units.
Coordination becomes a problem since the managers believe their leadership should be the one
used in achieving organisation goals.
Difference in communication orientation – there are various terms that can be used by individual
units in undertaking their activities. Lack of a common communication system/form may inhibit
effective coordination.

Principles of effective coordination

Effective coordination requires a sound communication system to allow free flow of information.
The department should be supplied with all the necessary resources required for their activities.
This reduces interdependence, hence making coordination easy.
Required reduced span of control a single manager should only have a small number of
subordinates required to report to him.
Coordination should be organized with line of organisation structure, policies, rules and
procedures.
Committee decision making
A committee is a group of persons asked to consider, investigate or act for some matter (s)
Usually a committee also reports on the matter. The committee meets on an organized based for
consideration of matters brought before it.
Committee may also be known with a wide variety of other names such as a task force, a council,
board, an agency or commission.
It has often been argued that one way to make certain that nothing is done is to assign it to a
committee.
This has been prompted by the limitations of committees. Such limitation of committees
includes.

Limitation of committee
1. Committees are expensive to run and operate – several people working together on one
problem will cost the organisation move money than if one person was working on it.
2. Committees often act slowly and deasiveness – an individual can make a decision more
quickly than a group of people. Unless clearly guided, a committee can lead to extraneous
issue which gets them off the main track. Besides in the committee procedures, all
members are given a right to speak even if they are not knowledgeable and this can be
very time consuming.
3. Committees can lead to compromised decisions. A compromise is an
adjustment/settlement of a difference by mutual relinquishment (sacrifice) of references
or positions.
4. The ultimate decisions may reflect the opinion of non-so that there is little enthusiasm for
them.
5. The decisions made may therefore not be the best.
6. Committees do not fix responsibility with the committee system the responsibility for a
decision/recommendation that is made by the committee cannot be fixed by one
individual
7. Such decisions sometimes may be risky. Attention to details may also be down laid.
8. Domination by few a few aggressive or focal members often dominates committee’s
deliberation.
9. Decisions made therefore may be merely a fulfillment of individual interest on such
members
 10. Perpetuation committees have a tendency to perpetuate themselves even after the purpose
is solved.
11. Sometimes committees are just appointed to avoid actions.
12. Lack of secrecy - it is difficult to maintain secrecy regarding the decisions and actions
taken by the committee. A large number of persons participate in committee.
13. Inspire of all these weaknesses, committees are still widely used. Some of the main
reasons of this include.

Importance/reasons
Pulling of knowledge and experience – an individual rarely has full knowledge about a given
subject. The committee system is an excellent way to bring together individuals with different
experiences and viewpoints i.e. putting the talents of experts together.

Committees distribute authority – some committees are formed because the individuals involved
do not concentrate a large amount of authority on a single person. E.g. decisions that are
touching on a nation’s security
Committee’s faster support for decisions – committees gives employees an opportunity to
participle in decision making process and therefore helps develop support for decisions that are
made/arrived at/result.
Committees facilitate coordination – participation in committee meeting promotes teamwork,
mutual understanding and cooperation among employees bring together managers from different
departments.
Acts as a means of unifying and integrating various points of view.
Committees can broaden the knowledge of people who participate. A committee is a useful
device for educating and training subordinate managers.
Participating in committee provides an opportunity to tearing through experience.
Improved communication committee serve as an important means of communication between
the members of the organisation

Guidelines for making committees work effectively

The short coming of committees can be minimized in a few simple rules are followed.
 1. The purpose of the committee should be clearly stated in writing
2. Ensure that there is proper planning for the committees task
3. The size of committee should be just adequate to obtain the representativeness and
intellectual input required.
4. Select the right members in selecting members, the following should be taken into
account:
a) the members should have the required knowledge, skills and experience
b) Have interest in commit to the committees task
c) Members should be psychologically incompatible
5. There should be an odd number of committee members so as to avoid dead locking in
important issues.
6. The chairman of the committee should be able to manage committee meeting effectively.
7. The terms of reference and resources should be clearly stated and provided
The operating procedures should be carefully defined
8. Provide needed information and staff assistance
9. Expedite committees work i.e. set realistic deadlines for the completion of the assignment
10. Carry out periodic reviews to establish if the committee is still on track
11. Require a final report which all committee members are signatory to
12. Committee must be disbanded immediately it accomplishes its report.
13. Take action on the committees report i.e. show seriousness.

STAFFING FUNCTION
Staffing is a managerial function that is concerned with acquisition and maintenance of a
satisfied team of an employees and managers in an organisation.
It’s the process of filling and keeping filled all positions in an organisation with the right people.
It’s a function that deals with management of an organisation multi valued assets which are the
people.
It’s a people centered function that deals with the needs, values, and behaviors of the human
aspect of the organisation.
The staffing function can also be viewed as the process of recruitment selection, performance
appraisal, placement, replacement and termination of employees from an organisation.
Thus, it entails the management of people so as to ensure that they contribute to the attainment of
objectives of the organisation.
Therefore, as a management function, staffing involves building a highly competitive organizing
around a high committed and confident personnel.

Aims/objectives of staffing
1. Providing a strategic approach to personnel issues
2. Linking to organize missions and goals to human resource strategy.
3. Creating and maintaining an enabling environment that enables an employee to add value
to the organisation.
4. Providing fair working conditions, wages and other amenities for the employees.
5. Developing the human resource in the organisation through training and development.
6. Secure employees commitment to organisation goals and objectives.

Features of staffing
Strategic fit the right people in every aspect must be chosen
Culture and values – staffing tries to in calculate organisation values and culture to the
employees.
Behavior and commitment – staffing seeks to win the heart and minds of employees.
Compensation – seeks a reward system that recognized group performance
Training and development – for the organisation to remain competitive, staffing seeks to
continually develop the human resource through training.
Performance – seeks to achieve max possible contribution from every employee.

Staffing activities
The staffing function is concerned with the following to major activities
1) Managerial activities
2) Operating activities
Managerial/activities
Are the duties that relate to the management functions of planning, organizing staffing directing
and controlling performed by the HR managers which are tailored to the H.R Department needs?
In planning the H.R. manager comes up with goals and objectives of H.R management and
determines the ways to achieve them.
In organizing the H.R manager creates the required structure, activities and authority,
responsibility relationship necessary for the proper functioning of the organisation.
In directing the H.R. manager is involved in leading, communicating and motivating employees
towards achievement of organisation goals.
In coordinating the HR Manager integrates the efforts of individual employees so as to attain a
common goal.
In staffing the H.R. Manager ensures that the organisation only engages the right employees who
are willing to contribute to achievement of organisation goals.
In controlling the HR manager has to ensure that the performance of individual employees is
conforming to the standards that has been set.

Operating activities
These are the duties that relate to the employment, training, compensation and maintenance of
personnel within an organisation.
They include:
Employment – concerned with the engagement of the right number and kinds of personnel to
work in the organisation.
Development – involves induction of employees to their jobs
Compensation – involves determination of fair and equitable remuneration for the employees.
Integration – it’s the reconciling of individual interest to the organisation interest.
Maintenance – involves getting proper working conditions required to offer a conducive
environment for the employees.
Records and research – relates to systematic and up-to-date records that must be retained by the
HR manager relating to staff details.

Staffing process
This is a continuing procedure intended to keep the organisation supplied with the right people,
in the right position at the right time.
The main steps involved in the process are:
1. Human resource planning
2. Recruitment
3. Selection
4. Placement/orientation/induction
5. Training and development
6. Performance appraisal
7. Compensation
8. Termination/separation.

HUMAN RESOURCE PLANNING

Man power planning or HR planning refers to a strategy for acquisition, utilization, improvement
and retention of enterprises human resources.
This definition sees HR planning as a strategic activity i.e. one that is concerned with securing
resources on a long term basis
HR planning can also be defined as a process by which an organisation determines how it should
acquire its desired manpower to achieve the organisation goals.
Is the long term planning of manpower requirement of an organisation, taking into
account/consideration both internal activities and factors in the external environment.
It aims at;
a) Obtaining top retaining the required quality and quantity of people in an organisation
b) Making the best use of the people.
c) Being able to anticipate the future of potential supplies.

Steps/processes/activities involves in HR planning process.

Analyzing plans and objectives
Analyzing objectives of HR planning
Forecasting demand for HR planning
Forecasting supply of human resources
Matching demand and supply
Monitoring and control.

Importance of HR planning and need for HR planning

Need for HR planning
The need for manpower planning in an organisation is required for the following reasons.
Despite growth and development there has been shortage of human resource with required skills,
qualifications and capabilities to carry out work for organisation planning.
Large number of employees who retire, die, leave organisation or become incapacitated because
of physical or mental illness, there is need to be replaced by new employees.
HR planning ensures smooth supply of workers without interruptions.
HR planning is also essential in the phase of market price in work force turn over which is
unavoidable and also essential.
Technological changes and globalization ushers in changes in the method of production and
distribution of services in management techniques. These changes may also require a change in
the skills of employees as well as change in the number of employees required.
Its human resource planning that enables an originated to cope with such changes.
HR planning is also needed in order to meet the need of expansion and diversification of
programmes of an organisation.
The need for HR planning is felt in order to identify areas of surplus personnel’s or areas of
shortages.
In case of surplus personnel, it can be redeployed in other areas of organisation while in case of
shortages in personnel; it can be made good by additional work force.

Importance of HR planning
Helps avoid shortages and surplus of employees in an organisation. This ensures that the
organisation has optimum workforce required to help it achieve its goals.
Helps an organisation to engage highly qualified personnel who would help it to achieve its
desired goals.
Job analysis can be used as a tool for performance appraisal where an employee performance can
be measured against the quality specified on the job specification.
Help the organisation plan the training and development needs for its workers
Helps the organisation to avoid unnecessary delays in crucial projects and expansion
programmes that may be caused by lack of enough employees.
Can help in facilitating economic development in a country the government can be able to gather
information concerning employment levels in organisation with a view to formulate policies to
reduce unemployment thereby contributing to the economic development.

Recruitment
Involves activities used to attract candidates to apply for positions in an organisation.
It’s the process of creating awareness to the public regarding job positions that exist in an
organisation and thereby calling for application filling those positions.
It can also be defined as a process of searching for and securing applicants for the various job
positions which arise from time to time in the organisation.

Sources of recruitment
 Internal sources
 External sources

Internal sources
Involves recruiting within organisation offering opportunities to the existing employees to apply
for positions that may arise within the organisation.
It can be done through the following;
(i) Promotions
(ii) Transfers
(iii) Former employees
(iv) Present employees
(v) Employees referrals
(vi) Previous applicants
Promotions
Occurs when an organisation employee is appointed to a senior position with a higher authority
and responsibility.
It usually affects the nature of work and usually involves a higher/better remuneration.
Promotions can be based on merit or seniority
When it is based on merit or seniority
When it is based on merit an individual’s qualification, experience and competence is
considered.
When it’s based on seniority, then the person who has stayed in the organisation for long are
considered.

Transfers
Involves moving an employee from one work station to another.
Usually, transfers are done to move employees where they are in excess to areas where there is
shortage
For transfers to be effective, an organisation has to come up with a strong transfer policy which
will have the following features.
a) The organisation should determine the department to be affected in advance.
b) All workers to be affected by the transfer should be notified in advance and the
organization must define how the nature of work is to be affected by the transfers.
c) They must be done in a human manner.
d) Should be approved/authorized by the top level management or appropriate management
levels.
e) During the transfers, the organisation should first consider those persons who had shown
earlier interest before considering other.

Advantages of internal recruitments

1. Reduces excessive external recruitment and selection cost
2. Promotes improved morale and loyalty among organisation employees because they
believe that their performance will be rewarding with promotion.
 3. Generates internal competition for higher level positions leading to increased
productivity.
4. When managers promote from within, they deal with people whose qualities they already
know.
5. It can improve the skills of workers especially when they are recruited for new
positions/jobs.
Disadvantages
May lack sufficient experience and skills required for the vacant positions
Promotion from within lead to interbreeding where an organisation stagnant especially where the
workers one of the same opinion and experience.
May create conflicts within an organisation conflicts and controversies surfaces among the
internal candidates whether or not they deserve promotions.

External recruitment
Entails the hiring of employees from outside the organisation usually, it is used extensively for
highly specialized positions.
May be appropriate in the following circumstances/situations
1. Where organisation personnel are unqualified
2. Where an organisation is rapidly expanding and therefore there is need for more supply
of employees.
3. Where management wants to give the organisation an new vigorous orientation

Sources of external recruitment

1. Advertisement
2. Employment exchange
3. Employment agencies
4. Unsolicited application
5. Campus association
6. Professional bodies
7. Notices and circulars
8. Poaching/raiding
 9. Referrals
10. Walk-ins
11. Radio and TV

Advertisement
It is a method of recruitment frequently used for skilled workers, clerical and higher staff
Adverts can be given in newspapers and professional journals
These adverts attract applicants in large numbers of highly variable quality and it gives a very
wide choice.
However, it is very costly and time consuming

EMPLOYMENT EXCHANGE
An employment exchange is an office set up by the government for bringing together as quickly
as possible those men who are in search of employment exchanges register unemployed people
and maintain records of their names, qualifications etc.
The employers on their part intimate the exchange about the vacancies which occur in their
factories and types of employees they require for filling up these vacancies
Whenever any vacancy is intimated, the exchange selects some persons from among the
employment seekers already registered with it and forwards their names to the employers for
consideration.

Employment agencies
An organisation that helps firm’s recruit’s employees and at the same time, aids individuals in
their attempt to locate jobs and for these services they use to charge a fee.
Employment agencies are able to tailor their services to the specific needs of the client e.g. some
agencies specialize in a particular area such as HR or engineering.

Professional bodies
Associations in many business professions such as finance, marketing, information technology
and human resources provide recruitment and placement services for their members.
Professional associations and trade organisations provide a valuable service in bringing together
professional and professional job openings.
Most professional organisations have newsletters, annual meetings and trade publications that
advertise job opening.

Walk-in
If an organisation has the reputation of being a good place to work, it may be able to attract good
prospective employees without extensive recruitment efforts.

Poaching
This is a specialized form of private employment that place top level executives and experienced
professionals.
These are organisation that seek the most qualified executive available for a specific position and
are generally retained by the company needing or specific type of individual

Unsolicited applicants
Many job seekers visit the office of well-known because on their own such callers are considered
nuisance to the daily routine of the enterprise but can help in creating the talent pool or the
database of the probable candidates for the organisation.

Campus associations
Most common use is with technical and vocational schools, community colleges, colleges and
universities.
Direct recruitment from educational institutions for certain jobs which require technical or
professional qualification has become a common practice. A close liaison between the company
and educational institutions help in getting suitable candidates.

Referrals
Some industries with a record of good personnel relations encourage their employees to bring
suitable candidates for various opening in the organisation.
TV and radios
This is a practice where by vacant post are posted on TVs and radios to attract more applicants.

Advantages of external recruitment

1. Free exploitation of talents – there are no limited choice of talent because there are
variety of talents externally rather internally.
2. These variety of talents are combined to enable an organisation achieve its goals.
3. Encourages competition of skills – there is competition from candidates from outside the
organisation. This makes the workers to do their work keenly and carefully so as to
compete well i.e. they show extra performance.
4. Development of skills – with the knowledge that there is an alternative of recruiting
workers from outside the organisation the internal workers will work hard so as to gain
the advantage of promotion thus development of skills.
5. Enhances Harmony – this comes about because the managers will be fair and unbiased by
considering the qualifications and how a worker is hard working.
6. This will not bring about conflicts unlike random selection of members to promote.

Demerits
Lack of familiarity with the employer – there is lack of familiarity and knowledge of employers
and employees thus it’s not possible to know and identify their weaknesses and strengths. So it’s
a bit hard to cooperate well with them with time and it will take time to adjust.
Miss-Match of talents with applicants – employees from outside organisation maybe assigned
positions which they are not qualified in due to lack of knowledge of each other.
Expensive economically the organisation needs to advertise for the positions in the organisation
of which advertising is very expensive. Also there is time wastage while advertising.
Kills the morale of workers – this is because the workers are not assured of promotion since
there is alternative of recruiting workers from other organisations

Selection
Once enough candidates have been recruited, the actual selection process begins.
This process usually begins with an initial screening interview (short listing) which is followed
by completion of application forms.
This initial screening and completion of app forms allows the employer to get basic information
about the candidate and determine the level of interest of each candidate.
Further, it can help determine whether or not the selection process will continue. After the initial
screening, successful candidates will appear for the formal interview where they will meet the
recruitment panel and undertake various tests.
In general selection is the process of putting right people on the right job. It’s a procedure of
matching organisation requirements with the skills and qualifications of employee.
Effective selection can be done only when there is effective matching.
By selecting best candidates for the required job the organisation will get quality performance of
the employees.
Best selection also reduces absenteeism and employee turnover problems.
By selecting right candidates for the required job, organisation will also save time and money.

N.B. proper screening of candidates takes place during selection procedure. All the potential
candidates who applied for a given job are tested.

Differences between recruitment and selection

Recruitment Positive i.e. creates a pool of applicants by
Proceeds selection motivating them to apply
Process of identifying and encouraging Involves searching
potential candidates for jobs It is a short process as in recruitment,
publicity is given two vacancies and
information about candidates is collected Negative i.e. involves rejection of
from different sources of recruitment. inappropriate candidates
Involves the company settling on those
Selection already searched
Follows recruitment It is a lengthy process involves scrutinizing
Involves choosing the best out of those of applications, giving test to candidates,
recruited. arranging interviews and conducting of
medical examination

Limitations of selection
The entire selection process has some limitations such as
1. The diversity of selection method indicates that there is no perfect way to select the
employees. Even carefully selection approaches can still be imperfect in identifying the
right candidate.
2. There is distinction between what a person can do (ability and what he/she can do)
3. Selection techniques are not ensuring way of predicting what the people will do even
though they may have the ability to do it.
4. Testing itself especially seeking information may be considered an invasion of privacy.
5. The selection process is costly both terms of time and money.

Orientation/induction
Once a suitable candidate has been selected, he/she needs to be placed in a suitable job.
The person put on a suitable job; need to be made familiar with his/her job, the organisation and
other employees through induction/orientation so as to enable him/her to after max contribution.
Induction can be defined as the imparting of information about the organisation and its
environment to the newly acquired members of that organisation.
Its purpose is to assimilate the newly appointed individual (s) and groups (s) into the
organisation
It covers the following areas
1. Missions and aims of the organisation
2. History of the organisation
 3. Structure of the organisation and security measures
4. Objectives of the organisation and the envisaged strategy to achieve them
5. Commodities dealt with in the organisation
6. Disciplinary machinery
7. Programmes of the organisations
8. Customers of the organisation
9. Ownership of the organisation
10. Responsibility of members and job duties as laid down in his/her job description.
11. Various stations and branches of the organisation
12. Training, transfer and promotional programmes.
13. The alarms, extinguishers, first Aid Kits and actions.
14. Major competitors and suppliers of the organisation
15. Organisation information channels.

NB All the above should be given with a programme within a given time period. It should not be
given at once as it becomes impossible for the new member to remember everything at once.
In conclusion orientation is all process where a new employee is familiarized with the working
environment as well as the other colleagues
Involves the following levels
1. Overall/organisation induction
2. Departmental induction
3. Sectional induction
4. Job level induction
5. Groups induction
Orientation is therefore a socialization functions which gives the employees the following
information
1. A general information concerning the job
2. An understanding of the history and nature of the organisation
3. Knowledge of the present information groups and their membership.

Placement
It’s understood as assigning jobs to the selected candidates, may include initial assignment to
new employees or transfer, promotion or demotion of present employees.
The importance of placement lies on the fact that a proper placement reduces employee turnover,
absenteeism, accidents and dissatisfactions and improves employee’s morale.
It has been a custom for organisation to put employees initially on a probation period with a view
to judge various suitability of their job in the organisation
Having found the employees performance satisfactory their jobs are generalized.
Placement therefore involves posting a candidate (s) who is successful in the selection process to
their appropriate jobs. It is a highly sensitive area in employment because wrong placement can
adversely affect employee’s morale in his/her job satisfaction
Placement mainly involves evaluating employees, supplying them with job description and
briefing them for job requirement

NB Placement requires being an ongoing process so as to identify those employees who has been
misplaced in order for an appropriate action to be taken.

Training and development

Training
 Training is a way in which learning can take place within an organisation
 It has been defined as a process that modifies attitude, knowledge skills and behavior
through learning experiences to achieve effective performance.
 Training is also a process of improving knowledge and skills of employees in order to
help them continue contributing to the attainment of organisation goals.

Development
 Is a preparation for the knowledge and skills needed for predicted changes or acquires.
 It has been defined as the growth/realization of a person’s ability or potential from
conscious or unconscious learning and development programmes.
 Development therefore can be understood as the growth of an individual in all aspects.
 Training and development is intended to impact on the knowledge of employees their
problem solving activities and to make them has the right attitude.
  Training programmes are mainly concerned with technical aspect of the job while
development programmes entails the growth of individual employee in all aspect rather
than the job.

Reasons behind the need of employee training

1. Technology with the rapid change in technology applied in the organisation, there is need
to train employees on how to work with the new technologies.
2. Competition – modern business environment has a very stiff competition among
industrial players and therefore, it is important for an organisation to continuously train
its employees to cope with competition levels.
3. Promotions and transfers – for an employee to be promoted or transferred to another
position, he/she may need training on the job requirements of the new position.
4. Resistance to change – training provides a good tool for overcoming resistance to change
within the organisation.

Types of training
Internal training /on the job training
1. Orientation it’s the process of introducing new employees to the organisation in the job.
2. Job rotation – requires the employee to spend a certain amount of time in each of the
various key departments
The objective is to show the employee what each department does and how it relates to
the organisation as a whole.
3. Apprenticeship training – involves making an employee to work under an experienced
worker under a fixed period of time after which he is expected to work alone.
4. Coaching – it’s a form of informal person to person counseling intended to help the
employee understand his job.
5. Acting capacity – it’s where the trainee works in a senior position temporarily mainly
when the senior is away.
6. Committees and junior boards – its where the employees are appointed to some
committees created for some given tasks
 7. Assistant to positions – it’s where the trainee works under close supervision of an
experienced person who may assign him some of the duties.

External training
These are training programmes prepared outside the organisation
They are generally used to supplement internal training programmes
They are normally conducted by consultant’s professional bodies/institutions of higher learning
e.g. colleges and universities
Useful when the skills and knowledge required is highly specialized and the organisation does
not have persons of that knowledge.
Some of the methods used in external training include
1. Lecture courses
2. Conferences
3. Role playing
4. Continuing/corresponding education courses
5. Seminars and workshops
6. Case studies
7. Brain storming
Guidelines for successful external training
1. Should include all personnel’s i.e. both seniors and subordinates
2. The programmes should be evaluated regularly to justify its usefulness
3. Must be actively supported by the top management.
4. Emphasizes should be placed on the results and not the training activities.
5. The training needs should determine the methods/programmes of training
6. Training should be rewarded.

Performance appraisal
This is the process of evaluating the performance of employees on the basis of unidentified
criteria.
Its involves identify, measuring and developing HR performance in the organisation
May either be formal or informal?
Formal Appraisal occurs at defined time intervals e.g. monthly quarterly, yearly etc. and its aims
to evaluate employee’s performance and identifying those who deserve promotion and those who
require additional training
Informal appraisal – it is continuous process of informing the subordinates about how well they
are doing their work.

Objectives of performance appraisal

1. Allows subordinates to know formally about their current performances.
2. Identifies those subordinates who deserve promotions
3. Identifies those subordinates who require additional training
4. To provide a basis of compensation of employees
5. To identify any errors in employees placement for necessary action to be taken.
6. To provide a self-development indicator where individual employees learn about their
strengths and weaknesses.

Common errors that occur during performance appraisal

1. Strictness/leniency error its where the supervisor may be every strict on subordinates or
lenient during appraisal
2. Central tendency error – it’s where superiors tend to rate most of their subordinates
within a narrow range hence falling to distinguish significant differences between the
group members.
3. Ricency – it’s where superiors in annual evaluation tend to give undue emphasizes on the
recent performance, say the last 2-3 months and ignore performances in the other earlier
months.
4. Personal bias – can exist inform of racism, nepotism, tribalism religion etc.

Methods of performance appraisal

1. Divided into 2 traditional and modern methods
Traditional methods
1. Ranking
2. Person to person comparison method
 3. Descriptive essay method
4. Grading
5. Checklist method

Modern methods
1. Management by objectives
2. Behavioral anchored rating scale
3. Performance contract.

Advantages of performance appraisal

1. Facilitate training and development due to the realization of employees weaknesses
2. Can improve employee’s morale especially where it’s accompanied by rewards.
3. Facilitate development of a sound compensation policy.
4. If it’s appropriately and objectively done, it can reduce the social distance between the
managers and subordinate.
5. Forms the basis of other human resources actions e.g. transfer, promotions termination
etc.
6. Helps in testing effectiveness of placement and induction.

Demerits
1. If not done effectively, it can affect employee’s motivation leading to resistances and
disputes.
2. Can make employee to be defensive especially where rated poorly.
3. Costly and time consuming.
4. There are no universally accepted standards of performance appraisal.

Principles for a sound appraisal system

1. Should be simple to design, operate and understand
2. Each development should be based on a cost benefit analysis i.e. its benefit should be
higher than the cost of implementing.
3. The system should be objective in nature.
 4. All the information gathered and techniques used should be geared towards the desired
objectives
5. The people to conduct the appraisal should be properly selected and constantly trained on
how to use modern techniques and how to remain objective.
6. The system should enjoy the support of top management who should create a conducive
environment of appraisal through sound communication systems and properly setting the
appraisal goals.
7. All the standards set should be clear and precise
8. The appraisal system should be linked to rewards.
9. The system should be reviewed regularly in accordance with to the prevailing
organisation and industry circumstances.

Compensation
This is the financial remuneration for any payment/reward that an individual employee receives
in return for performing organisation tasks compensation can either be direct or indirect

Direct compensation
It’s the financial payment inform of salary and wages paid to individual employees in an
organisation.
It also includes elements such as overtime, bonus, commission etc.

Indirect compensation
It’s the general category of employee benefit e.g. insurance scheme, medical cover, and sick
leave tcc.

Importance of compensation
1. The basic compensation provides employees with means to maintain a reasonable
standard of living
2. Provides a tangible benefit or value of an individual employee to an organisation
3. Acts as a form of motivation enabling the employee to continually contribute to
achievement of organisation goals
 4. A good compensation system can help attract qualified personnel, retain the existing
employees and stimulate a high productivity.

Compensation policies
To set up successful compensation policies, the managers must make decisions about the
following:
1. Wage level decisions – involves deciding whether the organisation pays below or above
the going rate of labour in the market.
2. Wage structure decisions – involves conducting a job evaluation so as job able to
evaluate the worth of each job relative to other jobs.
The simplest method of creating a wage structure is to rank the jobs from those to be paid
more to those that are to be paid less.
This should be based on the job requirements in terms of skills and knowledge required.
3. Individual wage decision – are decisions that are concerned on how to pay each employee
for a particular job although, the easiest decision is to pay a single rate for all the
employees typically a range of pay rate are used to remunerate the different employees.
In summary a sound compensation policy should consist of the following elements.
(i) Levels and adequacy of wage payment
(ii) Equity in wage payment
(iii) Recognition of efficiency of performance
(iv) Incentive payment

Factors influencing compensation

1. Ability of the firm to pay – this relates to the financial position of the firm. The better the
financial position the better the compensation
2. Availability of required personnel in the job market – this relates to the supply and
demand of labour in the market. The more the supply the lessor the remuneration and
vice versa
3. Compensation levels of other related firms – the compensation in an organization, will be
influenced by the compensation of other related firms who use the same labour.
 4. Government policy – usually, the government can set the min wages and from time to
time issue regulation for equal pay for the same jobs to avoid issues of discrimination.
5. External constraints – external factors e.g. inflation and interest rates can affect an
organisation wages.
6. Product competitiveness and profit prospects – if organisation products are highly
productive and profits are good, the wage level of the organization are likely to increase.
7. The trade unions – these groups increases the bargaining power of workers and an
agreement may be reached to alter the existing compensation structure there by affecting
compensation in an organisation.
8. Job requirements in terms of skills and knowledge – various jobs in an organisation are
graded in accordance with the relative skills, efforts, and responsibility and job
conditions.
9. Usually, more difficult jobs tend to attract higher wages

Separation/termination/disengagement
This refers to the end of an employee’s service offered to a particular organisation.
It could be voluntary or compulsory.

Factors leading to termination

1. Dismissal from an organization – an employee can be dismissed from an organisation due
to a number of reasons e.g. gross misconduct, disobedience, poor performance.
2. End of contract – its where the employees contract is definite implying that at the expiry
of the given time period, the services of the employees are terminated.
3. Retirement most of the organisation will have set the retirement age at which the
employee is believed to be less productive and therefore given a chance to rest.
4. Natural causes e.g. death, poor health and physical disability can lead to termination of
employee’s service.
5. Voluntary termination/resignation – its where the employee chooses to leave the
organisation for one reason or the other. The employee therefore resigns from his position
in the organisation.
CONTROLLING FUNCTION
Fayol has defined controlling function as an activity that consist of the event of verifying
whether everything occurs in conformity with the plans adopted, instructions issued and
principles established
It has the objectives of pin-pointing the errors and weaknesses in order to rectify and prevent
recurrence in future.

Importance of controlling
To ensure that resources are optimum utilized.
To ensure the organization objectives are met
To limit the accumulation of errors as they are corrected on time.
Has a positive psychological impact on subordinates i.e. when employees know they are being
monitored they become vigilant/keen.
It aids in decision making
Facilitates decentralization/delegation
Enables organisation to adapt to environment changes i.e. properly designed control systems can
help managers to anticipate, monitor and respond to changing environment circumstances.
Can be used as an evaluation tool
Enables an organisation to achieve an optimal level of productivity and profitability.
Ensures tasks are completed within the given time.
Improves communication in the organisation
Controlling as monitoring process ensures that objectives and plans derived to achieve them are
being achieved.
Manager must monitor and evaluate the following in the organisation.
1. How efficiently the organisation is converting input to output
2. The product quality improvement
3. Employee responsiveness to customers
4. Whether organisation goals are being achieved.
Features of a good control system
1. Should be goal oriented
2. Should provide accurate information
3. Should be simple to the person operating it and to the people being subjected or operated
on.
4. Should be cost effective
5. Acceptability – should be accepted by both parties: organisation members and people
6. Timeliness – should give feedback at the right time.
7. Suitability – should be appropriate with the organisation i.e. should be tailor made to suit
the nature and requirement of the activity controlled
8. Should be suggestive the control system should not only show the deviation but also
suggest solution of the best nature.
9. Integration – should be properly integrated into the overall organisation system.

Types of controls
1. Freed forward control
2. Concurrent control
3. Feed backward control

Feed forward control

Used in the input stage of the process where managers anticipate problems as they arise and give
vigorous specification of suppliers of inputs and measures put in place to ensure nothing goes
wrong.

Concurrent control
This control provides immediate feedback on how input is converted into output and problems
are managed as they occur.

Feed backward control

This control provides after the fact information that manager can use in the future e.g. customer
action will provide information needed in the future.
Control process
1. Identify the area where control is required
2. Setting of the standard expected level
3. Measuring the actual performance
4. Compare actual performance against standards i.e. identification of deviations and
variances.
5. Evaluate the results and take collective action.

Symptom of inadequate control

1. Unexplained decline in revenue and profits
2. Employees dissatisfaction – this will be evidenced by increase in grievances.
3. Working capital shortage
4. Use facilities and personnel’s
5. Dis-organized operations
6. Excessive costs
7. Evidence of waste and in efficiency

Areas/ Forms of control

Financial control includes accounting control i.e. internal control system, budgetary control and
accounting ratio.
Behavioral control may include balance score card, performance appraisal, and bench marking
etc.
Quality control – this enhances quality of organisation products.

Budgeting and budgetary control

A budget is probable the most basic widely used technique
A budget is a statement, of planned allocation of resource expressed in financial terms/numerical
terms
Budgets are usually time specific.
Benefits of budgeting
Sound planning- budgeting makes planning sound
The express objectives and programmes of two enterprises in financial as well as quantitative
plans.Budgets are prepared on the basis of forecast therefore forces managers to think ahead.
Helps in reducing chances of snap
Coordination – budgeting make for unified action and coordination of individual efforts
Communication – in the process of developing the budget managers can communicate plans
effectively to subordinate.
Effective control – purchase of high standards against which actual performance can be
measures.
Budgets are quantified plans that allows managers to measure and control and measure
performance effectively.
They also facilitate control by exception i.e. focusing on the most critical area only
Employee motivation – budgets serve specific performance standards and tells people what is
expected of them.
Since budgets are prepared with consultation of lower level management they improve the
commitment and morale of employees.
Provides managers in additional insights in actual organisation goals – monetary allocation of
funds as opposed to mere lip service, more often than not is the true test of a firms
dedication/commitment to a particular goal.

Limitation of budgeting
Inaccuracy – budgets are essentially based on stimulates so their reliability is often doubtful.
They are as good as the fore cost on which they are made.
Rigidity – entails the danger of inflexibility. Budgets can become so restrictive that they dampen
initiative enthusiasms of subordinates.
Budgets may also be restrictive but managers are permitted little destructions in managing their
resources.
Expensive it’s a cumbersome and time consuming. Process it requires expenditure of time,
money and efforts to install and operate a budgets.
Misuse of budgets – budgets maybe misused to hide in efficiency some managers believe that all
funds allocated in the budget must be spent.
Emotional resistance – they are a criteria for measurement and evaluation. Naturally people
consider them as pressure device and complain about them.
Can distort performance evaluation – in evaluating a manager the main criteria may be
conformity to the budget rather than what the manager actually accomplished.
If this philosophy is preferred within the firm, poor managers will be recognized as superior
because they make the budget and good managers will be reprimanded for failure to follow the
exact budgetary guidelines

NB Budgets should not be considered as a substitute for management. By themselves, budgets

cannot prevent deviations and ensure satisfactory performance.

Steps in budget preparation

1. Create plans for functional management areas and coordinating those plans
2. Putting money value on some of those plans which are expenditure and revenue plans.
3. Communicating the agreed plans to the various managers who are responsible for seeing
that they are implemented.
4. Calculating the actual performance at a regular interval, spotting and identifying the
variance against the budget and communicating the variances to the managers
responsible.
5. Monitoring management action

Budgetary control
Concerned with the comparison of actual to planned expenditures
Done through the preparation of budgets, measuring and comparing the actual performance with
the corresponding budget estimates and taking corrective actions to rectify deviations if any.
It is the establishment of budgets relating to responsibilities of execution of policies and
continuous comparison of actual budget and budgeted results.
Steps in budgetary control
1. Establish a budget or a target performance
2. Record the actual performance.
3. Compare the actual performance against the budgeted
4. Calculate the differences and analyze reasons for them.
5. Act immediately if necessary for corrective action to be taken. There is a follow up or
conduct a follow up.

Essentials of effective budgeting

Budgeting can prove successful only when certain conditions and attitudes exist, absence which
negates to large extend. Such conditions and attitudes effective budgeting are:
1. Support of top management
2. Participation by responsible executives.
3. Reasonable goals
4. Clearly defined organisation objectives
5. Adequate accounting systems
6. Constant vigilance
7. Cost of the system.

Advantages of budgetary control

Coordinates activities across departments
Budgets translate strategic plans into action. They specify the resources, revenues and activities
required to carry out strategic plans for the coming year.
Clearly defines areas or responsibility
Provides a basis of performance appraisal
Compels management to think about the future
Improves allocation of scares resources.
Economics management of time.
Disadvantages
1. Managers may over estimate cost so that they will not be blamed in the future should they
overspend
2. It’s difficult to reconcile person/individual and corporate goals
3. Dental conflicts
4. Can demotivate employees due to lack of participation
5. Can cause perception of unfairness
6. A rigid budget structure reduces initiative and innovation at lower levels.
7. Can create competition for resources and politics

LEADING AND DIRECTING FUNCTION

Leadership
Its influencing others to do what the leader wants them to do
It’s the act of inspiring subordinates to perform their duties willingly, competently and
enthusiastically
It’s the influence process directed at shaping the behavior of others. It’s a social influence
process which leaders seek voluntary participation of subordinates in an effort to reach
organisation goals

Nature of leadership
The main features of leadership include:
1. Leadership is a process of influence exercised by the leader on group members
2. It involves exercise of interpersonal influence. A successful leader is able to influence the
attitudes of followers
 3. Leadership is a continuous process by which an executive guides, influences and directs
the behavior of his subordinates.
4. It’s a quality of behavior and the people who possess these qualities are known as leaders.
5. Its related at a particular situation at a given point of time and under specific set of
circumstances. This implies that a leader may adopt different style and behavior to
influence the subordinates under different conditions.
6. Leadership involves reconciliation of organisation goals with individual goals. A leader is
considered successful when he is able to create a goal congruency in such a manner that
the group members enthusiastically work for the achievement of common objectives.
7. Leadership is a function of interaction between the leaders, followers and the situation. A
person can be a successful leader when he is accepted by his subordinates.
8. Followers will be satisfied with the leader’s type when the leader acts as the represents of
the group and protect the interest of group members.
9. The objective of good leadership is to provide material satisfaction to the group as well as
its members.

Types of leaders
1. Transactional leaders
2. Transformational leaders
3. Visionary leaders
4. Traditional leaders

Transactional leaders
The relationship between leaders and followers is seen in terms of trade and exchange e.g. the
leader will give rewards in exchange of loyalty, success and compliance.

Transformational leaders
Their roles are seen as inspiring and motivating others to work at levels beyond mere
compliance. Their aims is to bring a positive change in the followers behavior e.g. a charismatic
leader is a leader based on personal attributes/charisma
Characteristics of a charismatic leader
Powerfully communicating a compelling a vision of the future
Passionately believing in the vision
Profounding new creative ideas.
Inspiring extra-ordinary performance there by expressing confidence in follower’s ability and
building followers trust and believe in the leader.

Role of a charismatic leader in an organisation

1. Vision provider and inspire, through own enthusiasm
2. As an example, serves as a model of behavior through his personality
3. Relationship controller – he influences how people are organized
4. The change agent i.e. Acts as a catalyst or initiator of change
5. A consensus builder i.e. gaining commitment and cooperation of his team.
Visionary leader
Are leaders with visions and has the ability of imagining and foreseeing the future prospects and
potentials of the organisation. They translate their imagination into their vision of what the firm
should be in future
Inspirers the followers towards attainment of the vision.

Traditional leaders
Are those leaders that are recognized and acknowledged in communities as leaders.
NB Leaders can also be described on the basis of style they use in his case, they are autocratic or
democratic.

Difference between leadership and management

Management Can be exercised on all resources both
It’s getting things done through other people human and non-human
in order to achieve stated organisation Its wider in scope and involves performance
objectives of various managerial functions and playing
various management roles.
Managers are concerned with conformity Its emphasizes is interpersonal behavior. It’s
(ensuring that things are done as per the plan often associated with willingness and
following rules and procedures and having enthusiastic behavior of followers
order in organisation to ensure consistency Can only be exercised on human resources.
and predictability. It’s a subject of management
Managers has subordinates under them The leader is concerned with inspiring and
Managers maintain motivating workers.
Managers rely on control Leaders has followers under them
Managers does things right Leaders develop
Managers keep an eye of the bottom line Leaders inspire trust
A leader does the right thing
Leadership Leaders has an eye on the horizontal

Approaches to leadership style/theories of leadership

Trait theory
A trait is defined as a distinctive physical or psychological character of an individual that
contributes to his/her behavior.
The trait approach to leadership is evaluation and selection of leaders based on their physical,
mental and psychological characteristics
According to this theory, a successful leader is the one who possesses certain traits/qualities.
To identify these qualities, researchers in this area attempted to;
a) Compare the trait of people who become leaders with those who remain as followers.
b) Identify characteristics and traits possessed by effective leaders.
The study of all successful leaders revealed that they possessed similar qualities. Such as good
personality, intelligence, self-confidence, enthusiasm, courage, imagination etc.
Some supporters of trait theory believe that leadership qualities are inborn/inherited while others
content that these traits can be acquired by training and experience.
The key benefit of trait theory is its simplicity. Its more descriptive than analytical and direct
attention to qualities which a person may have to become a leader.
However, this theory has been criticized on the number of grounds.
Criticisms against trait theory
1. The theory examines leadership in isolation and does not consider the leadership
environment. Personal traits are only just one part of the total environment. Leadership is
always related to a particular situation and is not unusual for a leader to be successful in
one situation and unsuccessful in another
2. There is no common or universal traits found in all successful leaders. The qualities and
characteristics required by a leader are determined to a large extent by demands of
situations in which the leader operates.
3. It’s not clear as to which of the traits are more important and which are less important.
The theory does not indicate relative importance of different traits
4. The theory does not distinguish between traits which are needed for acquiring leadership
and which are necessary for maintaining leadership.
5. However, the trait approach is not dead and the research is continuing in this aspect.

Contingency theories
Here, leadership focuses on particular variables related to the environment that might determine
which particular style of leadership is best suited for the situation
Here no leadership style is best on all situations.

Situational theories
This proposes that leaders choose the best course of action based upon situational variables e.g.
degree of knowledge and skills.

Behavioral theories
Here, leadership is based upon the believe that great leaders are made not born.
It focuses on the action of leaders, not mental qualities or internal state.
Here, people can learn to become leaders through teaching and observation.

Participative theories
Here, it suggests that the ideal leadership style is one that takes the input of others into account.
The leaders encourage participation and contribution from group members.

Management theories
Focuses on the role of supervision, organization and group performance. It bases leadership on
the system of rewards and punishment.

Relationship theories/transformational theories

Focuses on the connections formed between leaders and followers. These leaders focus on the
performance of group members but also want each person to fulfill his/her potential

Great man’s theory

Here, great leaders are simply born with the necessary internal characteristics e.g. charisma,
confidence and social skills that make them natural-born leaders.

Motivation
Derived from the word Motive which is amply the reason for doing something defined as the
tension/inner energy that drive/make people behave in a particular way.
It explains the way of human behavior and concerned with factors that influence people to
behave in a certain way.

Components of motivation
Direction
How hard a person is trying
Persistence. I.e. how does a person keep on trying

Types of motivation
1. Intrinsic
2. Extrinsic

Intrinsic
Its external motivation referring to what is done to a person to make him do something.
Motivating other people involves getting them to move in a direction u want in order to achieve
certain results motivating yourself on the other hand is about setting direction independently and
taking course of action that will ensure that you get there.

Process of motivation
1. Identification of need
2. Goal establishment
3. Course of action
4. Goal attainment

Why it is important for managers to understand motivation effectively

1. To understand the basic needs of motivation and influence of experience and expectation.
2. Understand that there is a relationship between motivation and performance.
3. To appreciate that motivation cannot be achieved by simply increasing feeling of
satisfaction because too much of it can bring problems.

General motivating factors

1. Participation in planning where employees are given a chance to contribute in planning,
they get motivated.
2. Recognition and status – involves boss approval, peers and friends. Such people can be
motivated by being given cars, credit cards, cabinet offices etc.
3. Authority, responsibility and power – some people are greatly motivated by being
responsible of others work
4. Advancement – people will fail to be motivated in an organisation that has little or no
room for upward mobility
5. Security – i.e. job security
6. Money – it’s the major motivating factor especially in developed countries.
7. Job itself

Importance of motivation in an organisation

 1. Grievances are likely to be reduced
2. Good human relations in organisation
3. Improved productivity due to high morale
4. Reduces labour turnover.
5. Good utilization of human resource
6. Improved organisation image
7. Quantity and quality of work is improved
8. Minimal supervision
9. Less resistance to change.
10. There is team work hence easy coordination
11. Improved behavior i.e. employees will relate well with colleagues, seniors etc.
12. Compliance to rules and regulations.

Characteristics of a good motivation system

1. Simple to understand
2. Flexibility
3. Economical i.e. organisation should has net benefit of using a particular way to motivate
workers
4. Consistence should sustain the mood in organisation
5. Must be applicable to all
6. Acceptability

Why motivation is very complicated/factors that complicate motivation

1. Different employees are differently motivated because they has different needs therefore
you cannot have a general motivating factor
2. Human needs are dynamic what motivates one today may not motivate him/her tomorrow
3. The management lack control over non-work environment

Factors that determine the level of motivation

1. Needs and goals i.e. pshological, economic, social needs etc.
2. Past experience
 3. Environmental factors i.e. both external and internal e.g. age, job interest etc.
4. Perception of reality – amount of effort required to achieve desired objective or reward
for previous effort
5. Skills needed, ability and intelligence
6. Pay reward and incentive expected
7. Personality/general characteristics of an individual.

Theories of motivation
1. Content theory
Concerned with the specific needs that motivate people i.e. concerned with identifying human
needs that make them do what they do.
Examples of content theory include
1. Abraham Maslow’s hierarchy of needs theory.
2. Clayton alderfer
3. ERG theory
4. MC Gregory Theory X & Y
5. Herzberg 2 factor theory
6. McClelland achievement need theory

2. Process theories
Concerned with how desired behaviors, patterns can be initiated directly and sustained
Examples include
1. Victor Vrooms Expectancy theory.
2. Adam equity theory – Adam viewed relationship between employer and employee in
terms of exchange where the workers give in their input in return for output.
The workers continuously compare their inputs and outputs i.e. what he is getting in return for
his input.
When a worker perceives that his input is greater than output and he compares his output with
that of others, he develops a sense of inequity which is unplessurable experience that motivate
individuals to remove or motivate the level of tension.
Degree of tension determines level of motivation. Adam identified 6 types of possible behaviors
as a consequence on inequity i.e.
(i) Change of input
(ii) Change of output e.g. negotiating for a better pay.
(iii) Leaving the field
(iv) Acting on others e.g. insisting others and organizing strikes
(v) Cognifydistortation of input and output
(vi) Changing object of comparison