TECHNOLOGICAL INNOVATION MANAGEMENT AND ENTREPRENEURSHIP

LEADERSHIP
MEANING
Leadership is an important aspect of managing. Leadership is defined
as "Influence, that is, the art or process of influencing people so that
they will strive willingly and enthusiastically towards the achievement of
group goals". (Koontz and Weihrich) In other words, people should be
encouraged to develop not only willingness to work but also willingness
to work with zealand confidence.
"The will to do is triggered by leadership and lukewarm desires for
achievements are transformed into burning passion for successive
accomplishment by the skilful use of leadership" (George R Terry).
"Leadership is the lifting of man's visions to higher sights, the raising of
man's performance to a higher standard, the building of man's personality
be-yond its normal limitation". (Peter Drucker) "Leadership is the ability to
secure desirable actions from a group of followers voluntarily without the
use of coercion." (Alford and Beatty) "Leadership is the ability to persuade
others to seek defined objectives enthusiastically. It is the human factor
which binds a grouptogether and motivates it towards goals". (Keith
Davis)
Trait is basically a character and early notions about leadership dealt with
personal abilities. It was believed thatsome people have leadership
qualities by birth or god's gift. The traits that associate with leadership are
identified as: mental and physical energy, emotional stability, knowledge of
human relations, empathy, objectivity, personal motivation, communication
skills, teaching ability,social skills, technical competence, friendliness and
affection, integrity and faith, intelligence etc. This approach has several
drawbacks: It failed to identify right traits required for effective leadership. It
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is difficult to associate the traits with jobs to be carried out. A leader who is
successful in one area may be a failure in different area.
Since these are subjective, it is difficult to measure theireffectiveness
quantitatively. This approach implies that leadership is in-built quality
and no training can make aperson leader.

DIFFERENCE BETWEEN A LEADER AND A MANAGER

1. A person emerges as a leader. The question whether he will or will
not emerge as leader always depends on anumber of situational factors.
A manager, on the other hand, is always put into his position by
appointment.
2. A leader always has some personal power (i.e., ability to influence)
that enables him to lead. He may or may nothave positional power (i.e.,
the right to command). A manager, on the other hand, always has some
positional power He may or may not have personal power. If he has
also personal power, then he will be that much moreeffective as a
manager.
3. A leader focuses on people and generally seeks thosevery objectives
which are the objectives of his followers. Thus there is mutuality of
objectives between the leader and his followers. A manager, on the
other hand, focuseson systems and structures and seeks those
objectives which his subordinates do not regard as their own. Thus there
is clash of objectives.
4. A leader generally looks at the horizon and not just the bottom line. He
is innovative, challenges the status quo and believes in doing right things.
A manager, on the otherhand, is generally bureaucratic, accepts the
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status quo and believes in doing things right, according to the rules, to
cope with complexity.
It should be noted that in today's changing business environment,
notwithstanding the above difference, evenmanagers are in leadership
roles. Therefore, in this chapter, the terms 'leaders' and managers' are
used interchangeably.

CHARACTERISTICS OF LEADERSHIP
Some important characteristics of leadership are asfollows.
1. Leadership implies the existence of followers
We appraise the quality of a person's leadership in practice by studying
his followers. We ask: How many andwhat kind of followers does he
have? How strong is their commitment as a result of his leadership? How
long will their commitment last? By answering questions of this nature we
get to know the quality of leadership. We must not, however, forget that
leaders within organizations are also followers. The supervisor works for a
branch head, who works for a division manager, who works for the vice-
president of a department and so on. Thus, in formal organizations of
several levels, a leader has to be able to wear both hats gracefully, to be
able to relate himself bothupward and downward.
2. Leadership involves a community of interestbetween the
leader and his followers
In other words, the objectives of both the leader and his men are one and
the same. If the leader strives for one purpose and his team of workers
for some other purpose, it is no leadership. In the words of G.R. Terry,
"Leadershipis the activity of influencing people to strive willingly for
mutual objectives."
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3. Leadership involves an unequal distribution ofauthority

among leaders and group members
Leaders can direct some of the activities of group members; that is the
group members are compelled or arewilling to obey most of the leader's
directions. The group members cannot similarly direct the leader's
activities, though they will obviously affect those activities in a number of
ways.
4. Leadership implies that leaders can influence theirfollowers or
subordinates in addition to being able togive their followers or
subordinates legitimate directions
In other words, leaders not only tell their subordinates what to do by way
of command but also influence by theirbehaviour and conduct. The use
of command by leaders succeeds only in bringing about a temporary
behavioural change in the followers. Permanent attitudinal change in

followers comes through the use of influence only.

According to Hersey and Blanchard6 leadership of the first type though
successful is not effective. The second type of leadership is both
successful and effective.

Behavioral approach
Several studies have been made did not agree as to whichtraits are
leadership traits or their relationship to actual instances of leadership. It is
found that most of these so called traits are really pattern of behavior.
There are several theories based on leadership behavior and styles.
Some of them are:
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(i) Leadership based on the use of authority.

(ii) Likert's four systems of managing.
(iii) The managerial grid and
(iv) Leadership involving a variety of styles and levelof use of power
and influence.

Style based on authority: Based on how the authority isused, the

leaders are styled into 3 groups.

 The first is "autocratic leader" who commands and expects

compliance, is dogmatic and positive, and leads by the ability to
withhold or give rewards andpunishment.

 The second is "democratic or participative leader" who consults

with subordinates on proposed actions and decisions and
encourages participationfrom them. This type of leaders include

the person who does not take action without the concurrence
of subordinates and who makes decisions butconsults with
subordinates before doing so.
 The third type is "free-rein" leader who uses his power very little
and gives a high degree of independence to his subordinates to
carry out theirwork. Such leaders depend largely on subordinatesto
set their own goals and the means to achieve.
Figure below shows the flow of influence in the threesituations of
leadership.
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CO-ORDINATION

MEANING

Some definitions of the term 'co-ordination' would be:

"Co-ordination refers to the orderly arrangement of individual and group

efforts to ensure unity of action in therealization of common goals." -
Mooney and Reiley

"To co-ordinate means, to unite and correlate allactivities." -

Henry Fayol

"Co-ordination means balancing and keeping the team together by

ensuring a suitable allocation of working activities to the various
members, and seeing that theseare performed with due harmony
among the members themselves" - E.F.L. Brech

"Co-ordination in an organization by a manager is similarto directing an

Orchestra by the conductor. Just like a conductor directs his musicians
to produce harmony andmelody in music, a manager co-ordinates the
activities ofa group to achieve harmonious and united actions"
-IGNOU Manual

All the above definitions give a combined good meaningco-ordination.

On the basis of these definitions, we can state the basic features of co-
ordination, which are as under:
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1. Co-ordination implies deliberate actions on the part ofmanagers to

bring about harmony and unity of actions.

2. Co-ordination applies to group efforts, and not to individual effort. It

involves the orderly arrangement ofgroup efforts.

3. Co-ordination does not result in a one-shot action. It iscontinuous

action.
4. Co-ordination is all-pervasive. It has to happen along allverticals and
horizontals of an organization.

5. Co-ordination is necessary not only within the organization but also of

the organization with the outsideenvironment.
TYPES OF COORDINATION
Coordination may be variously classified as internal orexternal,
vertical or horizontal and procedural or substantive.
Coordination among the employees of the same department or section,
among workers and managers at different levels, among branch offices,
plants, departmentsand sections is called internal coordination.
Coordination with customers, suppliers, government and outsiders with
whom the enterprise has business connections is called external
coordination.
Vertical coordination is what exists within a department where the
departmental head is called upon to coordinatethe activities of all those
placed below him. On the other hand, horizontal coordination takes place
sideways. It exists between different departments such as production,
sales, purchasing, finance, personnel, etc.
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By procedural coordination is meant the specification of the organization

itself—that is, the generalized descriptionof the behaviors and
relationships of the members of the organization. Procedural coordination
establishes the linesof authority, and outlines the sphere of activity and
authority of each member of the organization. Substantivecoordination is
concerned with the content of the organization’s activities. In an
automobiles factory, an organization chart is an aspect of procedural
coordination,while blueprints for the engine block of the car being
manufactured are an aspect of substantive coordination
IMPORTANCE OF CO-ORDINATION
The importance of co-ordination can be understoodthough the
following points:

1. Co-ordination increases efficiency

Co-ordination helps minimizing wastages, overlapping and
duplication of work, misuse of resources etc., and the thus
increases efficiency and economy in the organization. Co-
ordination enables an organization to use all its resources in a
optimum way.

2. Co-ordination improves human relations

Co-ordination improves and maintains harmonious relationship
between individuals between individuals and the organization. With
co-ordination,members begin to work, understand and adjust with
eacher, develop mutual trust and co-operation and probably move
closer to each other. All these help improve human relations.
3. Co-ordination resolves conflicts
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Conflicts in organizations arise usually because of differences

between organizational goals and individual goals. An individuals
perception of an organizational goal could be different to that of an
another, which again leads to conflicts. Co- ordination is the only
means by which such conflictscan be avoided.
4. Co-ordination makes all departments focustogether
Different departments in an organizations such as production, R &
D, finance, marketing, accounts etc., have to jointly focus in order
to achieve but results. Without co-ordination, each department
tends to look only at its needs and necessities, without caring for
other departments. Co-ordinationis the only way of m2king them
look for common cause.
5. Co-ordination helps sharing of resources
In any organization, there is always a shortage of resources such
as manpower, finance, space, transportation etc. Co-ordination is
the only way toensure the best distribution of resources among all
individuals and departments of the organization.
6. Co-ordination retains and attracts talent
Good all-around co-ordination improves not only harmonious
relationships but also increases profit to an organization and to its
employees. Naturally talented youngsters are attracted to join
such organizations. There are lists of best employers inevery
country where people would love to work, and this does not
necessarily depend on pay packets alone. Co-ordination plays a
great role if acompany comes to be known as a good employer.
TECHNIQUES OF CO-ORDINATION
A variety of techniques are used by managers to achieveco-ordination.
The important ones are:
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1. Co-ordination by plans and procedures

If plans and procedures are highly structured and in place, co-
ordination becomes somewhat automatic. Apart from these, if the
other types of plans such as schedules, rules, budgets, policies etc.,
are stated inprecise terms so as to avoid confusion, it results in
better co-ordination.
2. Co-ordination by sound and simple organization If the structure
of an organization is sound and simple, it leads to better co-
ordination. If the authority,responsibility and accountability are
established in aclear-cut manner, it improves co-ordination.
3. Co-ordination by chain of command
If it is very clear as to who should report to whom in an organization,
it helps co-ordination. Establishing aclear chain of command or a
superior-subordinate relationship goes a long way in ensuring co-
ordination.
4. Co-ordination by effective communication Effective
communication plays a vital role in achievingco-ordination.
Communication facilitates proper understanding between individuals
and groups amongwhom co-ordination is to be achieved.
5. Co-ordination by committees
Formation of committees to co-ordinate is a sound management
technique. Committees are made up of Knowledgeable, experienced
and responsible persons entrusted with discharging some functions
collectively as a group. Creation of teams, task forcesand
interdepartmental committees are some of the ways of achieving co-
ordination.
6. Co-ordination by conference
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In large business organizations conferences are organized at regular

intervals to provide a platform fordiscussion to the various units
which could be geographically widespread. In such conferences top
management and executives at lower levels exchange views, identify
problems and resolve it through discussion. Some companies have
Open forums' where any question raised by any employee should be
answered by the appropriate man-in- charge. Such discussion
forums and platforms pave the way for better co-ordination
throughout the organization.
7. Co-ordination by special co-ordinators
If a manager in an organization has very less time to address issues
of co-ordination, he may hire an assistant or a 'Special coordinator'
to do the job for him. This man's job is to collect information
regardingproblems, analyze them, list various alternatives available,
and suggests steps to be taken to the manager.
8. Co-ordination through sound leadership
Sound leadership of top management is the surest means of
achieving co-ordination. Good leaders maypersuade and convince
their subordinates to place company interests above their personal
interests.They may even inspire self-coordination within a group.
CONTROLLING

Meaning

Some definitions of the term 'Control' with respect toan organization

are:
"Control is checking current performance against pre-determined
standards contained in the plans, in orderto ensure adequate
progress and satisfactory performance". - E.F.L. Brech
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"Control consists in verifying whether everything occurs in

conformity with the plans, instructions and principles established" -
Henry Fayol "Control is the process of regulating organizational
activities so thatactual performance conforms to expected
organizational standards and goals." - NewMan

From the above definitions, we can follow thatcontrolling

functions involves-
(i) developing appropriate standards
(ii) Compare on-going performance against thosestandards.
(iii) Take steps to ensure that corrective actions aretaken when
necessary.
It should also to be noted here that a good controlling system is actually
designed to keep things from going wrong, and not just to correct them
afterwards. It is more about "prevention is better than cure" than about
"Crying over spilt milk"! It’s about `preventive maintenance' ratherthan
'breakdown maintenance'.
The general features of controlling functions are:
1. Controlling is a positive force.
2. Controlling is a dynamic and continuous process.
3. Controlling is goal-oriented.
4. Control is forward-looking
5. Control process is universal
6. Control is based on planning
7. Delegation is key to control.
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NEED FOR CONTROL SYSTEM

A control system is needed for four purposes:
1. to measure progress;
2. to uncover deviations;
3. to indicate corrective action; and to transmit corrective action to the
operation.
To Measure Progress
There is a close link between planning and controlling theorganization’s
operations. We have discussed in Chapter 4 how in the planning process,
the fundamental goals andobjectives of the organization and the methods
for attaining them are established. The control process continually
measures progress towards goals. As Fayol3 so clearly recognized
decades ago, "In an undertaking, control consists in verifying whether
everything occurs in conformity with the plan adopted, the instructions
issued and principles established". As the navigator continually takes
readings to ascertain where he is relative to a planned course, so does
the manager take readings to see where his enterprise or department is
on the charted and predetermined course.

To Uncover Deviations
Once a business organization is set into motion towards its specific
objectives, events occur that tend to pull it "offtarget". Major events
which tend to pull an organization "off target" are as follows:
Change
Change is an integral part of almost any organization’s environment.
Markets shift, new products emerge, new materials are discovered and
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new regulations are passed.The control function enables managers to

detect changesthat are affecting their organization’s products or services.
They can then move to cope with the threats or opportunities that these
changes represent.
Complexity
Today's vast and complex organizations, with geographically separated
plants and decentralized operations make control a necessity. Diversified
product lines need to be watched closely to ensure that quality and
profitability are being maintained; sales in different retail outlets need to
be recorded accurately and analysed; the organisation's various
markets—foreign and domestic— require close monitoring.
Mistakes
Managers and their subordinates very often commit mistakes. For
example, wrong parts are ordered, wrong pricing decisions are made,
problems are diagnosed incorrectly, and so on. A control system enables
managersto catch these mistakes before they become serious.
Delegation
As we discussed in Chapter 8, when managers delegate authority to
subordinates, their responsibility to their own superiors is not reduced.
The only way managers can determine if their subordinates are
accomplishing the tasks that have been delegated to them is by
implementing a system of control. Without such a system,managers will
not be able to check on their subordinates' progress, and so not be able
to take corrective action untilafter a failure has occurred.
To Indicate Corrective Action
Controls are needed to indicate corrective actions. They may reveal, for
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example, that plans need to be redrawn orgoals need to be modified or

there is need for reassignment or clarification of duties or for additional
staffing or for conforming to the way the work should be done.
To Transmit Corrective Action to the Operation
Controls are needed to transmit corrective action to the operation while it
is progressing so that the transformationsubsystem modifies its inputs or
its production plan to reduce any discrepancy or error and keeps the
output "oncourse". The thermostat is a classic example of this operating
principle. When the room temperature drops below a desired level, the
control mechanism in the transformation subsystem at once transmits this
information (called "feed forward") and the temperature begins to rise till it
reaches the selected level. Control- related information flows in most of
our modern organizations also follow the above-mentioned thermostat
operating principle. They make available to the transformation subsystem
at all times the information about operating results in various forms, such
as electronic impulses, written or spoken words, reports, etc.to serve as
the basic input for comparison with the standards and for automatic
decision-making. The transformation subsystem thus takes the shape of
a closed loop as shown in Fig. 18.1. However, the system isclosed only in
the short run. Human intervention is involved to adjust the system
periodically, according to a subjective impression of the environment.
Thus, the overall system is open, but we have closed loop control once
the system is set.
BENEFITS OF CONTROL
A well-developed control system
 increases productivity
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• reduces defects and mistakes,

• helps meet deadlines,
• facilitates communication,
• improves safety,
• lowers cost, and
• gives the workers control over their environment.
ESSENTIALS OF EFFECTIVE CONTROL SYSTEM
The essentials of an effective control system are asfollows.
Suitable
The control system should be appropriate to the nature and needs of the
activity. Controls used in the sales department will be different from those
used in finance andpersonnel. Similarly, a machine-based method of
production requires a control system which is different from the system
that is used in labor intensive methods of production. Hence, every
concern should evolve such a control system as would serve its specific
needs.
Timely and Forward Looking
Although an ideal control system, as in certain electric controls, should
be able to detect deviations before they occur, the same is not possible
in personnel and marketing controls which always include a time lag
between the deviation and corrective action. In any case,
the feedback system should be as short and quick as possible and
the information should reach the superiorbefore it is too late to head
off failures.
Objective and Comprehensible
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The control system should be both objective and understandable.

Objective controls specify the expected results in clear and definite terms
and leave little room forargument by the employees. They avoid redtape
and provide employees with direct access to any additional information
which they may need to perform their task.
Employees are not made to go up and down the hierarchyto get the
information. When the precise purposes, for which the control system
exists, are not understood it is difficult, if not impossible, to establish
criteria for its evaluation and review.
Flexible
The control system should be flexible so that it can be adjusted to suit
the needs of any change in the basic nature of the inputs and/or the
sizes, varieties or types ofthe same product or service. One way of
introducing flexibility into a control system is to make the adjustments
automatic. Both flexible budgets and standard costs, for example,
provide a shifting standard for expenses, as thevolume of work goes up
or down. A similar type of adjustment is in effect when the sales quotas
are tied to general business activity. In all such plans, the basis for
shifting the control standard is built right into the system.
Economical
Economy is another requirement of every control system. The benefit
derived from a control system should be morethan the cost involved in
implementing it. To spend a dollar to protect 99 cents is not control. It is
waste. Eighty years ago this was clearly understood by the men who built
Sears, Roebuck—the world's biggest retail store. In the early days of the
mail-order business, the money in incoming orders was not counted. The
orders were weighed, unopened. (These were, of course, the days when
currency was still metallic.) Sears, Roebuck had runenough tests to know
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what average weights correspond tooverall amounts of money—and this

was sufficient control.
Prescriptive and Operational
A control system in order to be effective and adequate must not only
detect deviations from the standards but should also provide for
solutions to the problems that cause deviations. In other words, the
system should be prescriptive and operational. It must disclose where
failures are occurring, who is responsible for them, and what should be
done about them. It must focus more onaction than on information.

Acceptable to Organization Members

The system should be acceptable to organization members. When
standards are set unilaterally by upperlevel managers, there is a danger
that employees will regard those standards as unreasonable or
unrealistic. They may then refuse to meet them. Status differences
between individuals also have to be recognized.
Individuals who have to report deviations to someone theyperceive as a
lower level staff member may stop taking the control system seriously.
Reveal Exceptions at Strategic Points
A control system should be such as to reveal exceptions at strategic
points. Small exceptions in certain areas have greater significance than
larger deviations in other areas. Five per cent deviation from the standard
in office labor cost is more important than 20 per cent deviation from the
standard in cost of postage stamps. That we can quantify something is no
reason for measuring it. The question is "Is this what a manager's
attention should be focused on?"
Take steps to ensure that corrective actions are taken when
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necessary It should also to be noted here that agood controlling

system is actually designed to keep things from going wrong, and not
just to correct them afterwards. It is more about -prevention is better
than cure" than about "Crying over spilt milk"! Its about
'preventive maintenance' rather than 'breakdownmaintenance'.

The general features of controlling functions are:

1. Controlling is a positive force.
2. Controlling is a dynamic and continuous process.
3. Controlling is goal-oriented.
4. Control is forward-looking
5. Control process is universal
6. Control is based on planning
7. Delegation is key to control.

STEPS IN CONTROLLING
The various steps that are involved in the process ofcontrolling are
as follows:
Step 1:
Setting of standards
The first step in the control process is to establish standards.
Standards are the targets against which actual performance will be
compared. Standards arenothing but criteria of performance. They
serve as benchmarks as they specify acceptable levels of
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performance. Control standards are broadly divided intotwo types.

(i) Quantitative standards:
These are standards which can be quantified.
Eg: Production level, rejection level, labor-hours, speedof service,
sales volume, profit, expenses etc.
(ii) Qualitative standards:
These are standards which cannot be quantified i.e.,they are
qualitative in nature.
Eg: Employee morale, brand image, company image,goodwill,
industrial relations etc.

Step 2:
Measurement of actual performance
The second step in the control process is to measure actual
performances of various individuals, teams and departments in the
background of established standards. Wherever quantitative
measurement is applicable, it is easy to measure, while qualitative
standards are difficult to measure. Tests, surveys, employee
appraisals, exit interviews, media reports, open forums etc., are some
of the ways employed to measure qualitative standards.

To make any measurement process effective, thefollowing three

aspects have to keep in mind:
(i) Completion
The actual performance measurement has to be complete in all
respects. In other words, all aspects ofthe job should be measured
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and not just the ones thatare more evident.

(ii) Objective
Performances at work should be measured in an objective manner
without fear, favorer bias. Only thenmeasurement can be effective.
(iii) Responsiveness:
The management of any performance should support the belief that
effort and performance lead to improvement, both from the personal
and organizationalpoint of view.
Step 3:
Comparison of actual performance with standards
The third step in the control process is to compare the actual
performances with established standards and ascertaining the causes
of deviation. The causes of deviation may be machine-dependent,
process- dependent, plan-dependent, manpower-dependent etc.
Whatever may the reason, deviation are thoroughly
analyzed and properly presented. Statistical methods are usually
adopted to look at deviation from a broaderperspective.
Step 4:
Taking corrective measures
The final step in the control process consists of taking remedial
actions so that deviation may not occur againin future. Corrective
steps are initiated so that any defects in the actual performance may
be rectified.
Corrective actions may include the following activities.
1. Change in methods, rules, procedures strategies etc.
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2. Introduce training programs

3. Job redesign
4. Replacement of personnel
5. Re-establishing budgets and standards
6. Better compensation packages to employees
7. Changing machinery and processes
8. Identifying recurring bottle necks and avoiding them
9. Trying to understand the competition better.
10. Looking at raw material resources and suppliers.

SOCIAL RESPONSIBILITY

MEANING OF SOCIAL RESPONSIBILITY

DEFINITION of 'Social Responsibility' Social responsibility is the idea that
businesses should balance profit-making activities with activities that
benefit society; it involves developing businesses with a positive
relationship to the society in which they operate.
Social responsibility is a nebulous idea and hence is defined in various
ways.
Adolph Berle! has defined social responsibility as the manager's
responsiveness to public consensus. This means that there cannot be
the same set of social responsibilities applicable to all countries in all
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times. These would be determined in each case by the customs,

religions, traditions, level of industrialisation and a host of other norms
and standards about which there is a public consensus at any given
time in a given society.
According to Keith Davis,' the term "social responsibility" refers to two
types of business obligations, viz., (a) the socio-economic obligation,
and (b) the socio-human obligation.
The socio-economic obligation of every business is to see that the
economic consequences of its actions do not adversely affect public
welfare. This includes obligations to promote employment op-
opportunities, to maintain competition, to curb inflation, etc. The socio-
human obligation of every business is to nurture and develop human
values (such as morale, cooperation, motivation and self-realization in
work).
Every business firm is part of a total economic and political system and
not an island without foreign relations. It is at the centre of a network of
relationships to persons, groups and things. The businessman should,
therefore, consider the impact of his actions on all to which he is
related. He should operate his business as a trustee for the benefit of
his employees, investors, consumers, the government and the general
public. His task is to mediate among these interests, to ensure that
each gets a square deal and that nobody's interests are unduly
sacrificed to those of others.
SOCIAL RESPONSIBILITY OF BUSINESS TOWARDS DIFFERENT
GROUPS:
Social responsibility of business refers to its obligation to take those
decisions and perform those actions which are desirable in terms of the
objectives and values of our society. Reality is that, despite differing
arguments relating to social responsibility, business enterprises are
concerned with social responsibility because of the influence of certain
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external forces.
Business enterprises have responsibility towards
1.Towards the Consumer and the Community 2.Towards Employees and
Workers
3.Towards Shareholders and Other Businesses 4.Towards the
government
A businessman's social responsibilities to each of these parties are briefly
enumerated below.
Towards the Consumer and the Community
1. Production of cheap and better-quality goods and services by
developing new skills, innovations and techniques, by locating factories
and markets at proper places and by rationalizing the use of capital
and labor.
2. Levelling out seasonal variations in employment and production
through accurate forecasts, production scheduling and product
diversification.
3. Deciding priorities of production in the country's interest and
conserving natural resources.
4. Providing for social audit (see section below).
5. Honoring contracts and following honest trade practices. Some
important but dishonest trade practices are: making misleading
advisements calculated to deceive the purchaser: misbranding of
articles with respect to their material. impediments, quality, origin, etc.;
selling rebuilt or secondhand goods as new; procuring business or
trade secrets of competitors by espionage, bribery or other means:
restraining free and fair competition by entering into combination
agreements; using containers that do not give a correct idea of the
weight and quantity of a product; making false claims of being an
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"authorized dealer". "manufacturer" or "importer" of certain goods;

giving products misleading names so as to give them a value which
they do not possess; declaring oneself insolvent through questionable
financial manipulations.
6. Making real consumer needs as the criterion for selecting messages to
be given by product advertisements. Nearly all current advertising
seeks to create wants. Thus. people no longer buy soap to make them
clean. They buy the promise that it would make them beautiful.
Toothpaste is bought not to kill bacteria but to create white teeth. Cars
are bought for prestige rather than travel. Even foodstuffs such as
oranges are bought for vitality, not nutrition. This kind of advertising
promotes over- consumption, forces consumers to constantly compare
themselves negatively with others, creates in them dissatisfaction with
the old and outmoded. and makes them feel that without a particular
brand of a product they are losers.

7. Preventing the creation of monopolies. Monopolies are bad in that they

make the community face high prices, short supply and inferior quality
of goods. Inequalities of wealth distribution are accentuated and the
standards of public morality deteriorate as bribing the
judges. legislators and the government to gain favors becomes very
common.
8. Providing for after-sale servicing.
9. Ensuring hygienic disposal of smoke and waste and voluntarily
assisting in making the town environment aesthetically satisfying.
10. Achieving better public relations (that is, creating a more favorable
attitude towards the enterprise) by giving to the community, true,
adequate and easily intelligible information about its working.
11. Supporting education. slum clearance and similar other programs.
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Towards Employees and Workers

1. A fair wage to the workers (and not merely one determined by market
forces of supply and demand), which is possible only when the
businessman is willing to accept a voluntary ceiling on his own profits.
2. Just selection, training and promotion (without any discrimination on
grounds of sex, race, religion and physical appearance).
3. Social security measures and good quality of work life.
4. Good human relations (i.e., maintaining industrial peace, creating
conditions for collective bar-gaining, educating workers to produce their
own leadership and participative management).
5. Freedom, self-respect and self-realization. A businessman should
devote his knowledge and ability not only to making his worker's life
more affluent, but also to making it more satisfying and rewarding.
There should he an awareness that the quality of man's life is as
important as the-quantity of his material wealth.
6. Increase in productivity and efficiency by recognition of merit, by
providing opportunities for creative talent and incentives.
Towards Shareholders and Other Businesses
1. Promoting good governance through internal accountability and
transparency.
2. Fairness in relations with competitors. Competition with rival
businessmen should always be fair and healthy, based on rules of
ethics and fair play rather than on rules of warfare. Businessmen
sometimes treat their rivals as enemies and try to harm each other by
malicious propaganda, price-cutting, interference in production and
distribution.
 TECHNOLOGICAL INNOVATION MANAGEMENT AND ENTREPRENEURSHIP

Towards the government

1. Shunning active participation in and direct identification with any
political party.
2. Observing all the laws of land which may have the following objectives:
(a) To provide direction to the economic and business life of the
community.
(b) To bring about harmony between the limited enterprise interest
and the wider social interest of the country.
(c) To provide safeguard against errant business practices.
(d) To compel business to play fair to all participants in the
economy—employees, shareholders, minority shareholders, etc.
(e) To prevent oppression or exploitation of the weaker partners in
business, such as employees, minority shareholders, etc.
(f) To enforce maximum production according to the priority of sectors and
production lines laid down by the government.
(g) To allocate limited resources according to social priorities and
preferences.
(h) To enforce distributive justice, especially to weaker sections of the
community.
(i) To implement rural uplift and secure balanced development of the
country
SOCIAL AUDIT
A social audit is a systematic study and evaluation of the organization’s
social performance as distinguished from its economic performance.
The term "social performance" refers to any organizational activity that
effects the general welfare of society.
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BENEFITS
1. It supplies data for comparison with the organization’s social policies
and standards. The management can determine how well it is living up
to its social objectives.
2. It develops a sense of social awareness among all employees. In the
process of preparing reports and responding to evaluations, employees
become more aware of the social implications of their actions.
3. It provides data for comparing the effectiveness of different types of
programmes.
4. It provides data about the cost of social programmes, so that the
management can relate this data to budgets, available resources,
company objectives, etc.
5. It provides information for effective response to external groups which
make demands on the organization.

LIMITATIONS
A social audit is a process audit rather than an audit of results. This
means that a social audit determines only what an organization is
doing in social areas and not the amount of social good that results
from these activities. An audit of social results is not made because:
1. They are difficult to measure. If. for example, following a company's
S.C./S.T. employment programme in a certain region. there is a fall in
the violent crime rate by
4 per cent, it is difficult to measure how much of the benefit is caused by
this programme.
2. Their classification under "good" or "bad" is not universally accepted. In
other words, the same social result may be classed as "good"
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according to one opinion, and as "bad" according to an-other.

3. Most of them occur outside the organisation, making it difficult for the
organisation to secure data from these outside sources.
Even though social results cannot be proved, an audit of what is being
done is still considered desirable, because it shows the amount of
effort that a business is making in area deemed beneficial to society.
Further, if effort can be measured, then informed judgements can be
made about potential results.
Social audits can be made either by internal experts, outside consultants,
or a combination of the two. The internal auditor has the advantage of
familiarity with the business, but his judgements may be influenced by
company loyalties. An outside consultant has the advantage of an
outsider's view, but he lacks familiarity with organisational activities, so
he may overlook significant data. In any case, if audit information is to
be released to the public, the outside auditor has more credibility.
There is a difference of opinion on the issue whether social audit should
be made public by means of a social performance report or not. Some
say that these reports are too vague and inconcrete to satisfy the
public and anyone can find reasons for criticising a firm's performance,
which can increase social conflict. But some others assert that these
reports contribute to public understanding for they replace rhetoric with
facts.
The Tata Iron and Steel Company is the first industrial organisation in
India to have carried out a social audit of its performance in 1979. The
social audit was conducted by a committee under the chairmanship of
Justice S.P. Kotval, former Chief Justice of Mumbai High Court. The
committee's terms of reference were to examine and report whether,
and the extent to which the company had fulfilled the objectives
contained in clause 3A of its Articles regarding its social and moral
responsibilities to the consumers, employees, shareholders, society
 TECHNOLOGICAL INNOVATION MANAGEMENT AND ENTREPRENEURSHIP

and the local community. The Committee in its report praised TISCO's
social welfare work and made a number of suggestions to improve its
programmes.

BUSINESS ETHICS AND CORPORATE GOVERNANCE

BUSINESS ETHICS
Business ethics is the application of moral principles to business
problems. However, ethics extend beyond the question of legality and
involve the goodness or badness of an act. Therefore, an action may
be legally right but ethically wrong. For example, a small village
community located twenty miles from the closest urban shopping area
has a single grocer's shop. The owner of the shop can charge any
exorbitant price for his product though legally but not ethically.
Sexual harassment, discrimination in pay and promotion and the right to
privacy are some other issues specially relevant to the study of ethics.
Sexual harassment in the workplace can be defined as unwelcome
sexual advances, sexual favor or other verbal or physical conduct of a
sexual nature. Although the landmark judgment of the Supreme Court
in the case of Vishaka& others vs State of Rajasthan makes it a
mandatory duty of the employer to prevent this misconduct at the
workplace, it does not appear that the sensitivity of today's
organisations has kept pace. The negative aspects of sexual
harassment are: costly lawsuits, decreased productivity, increased
absenteeism, lower morale and higher staff turnover.
Discrimination against women in pay and promotion opportunities is also
unethical, which continues to exist despite there being the Equal
Remuneration Act, 1976. One of the most commonly cited reasons for
the lack of promotions of women is the glass ceiling effect a term used
for artificial barriers based on attitudinal or organisational bias that
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prevent qualified women from progressing in the organisation into

senior management level positions.
Employees' right to privacy raises several questions, some of which are:
"Can a company refuse to hire smokers and/or make current smokers
quit smoking"? and "Can a company conduct drug tests on its
prospective employees"?
It should be remembered that the corporate "shield" which protects a
company's management from unlimited legal liability does not protect it
against unlimited public condemnation for its unethical and immoral
actions. The credibility of a business depends on its high business
ethics and integrity.
How does a manager decide what is ethical or unethical? There are four
important factors which affect his decision.
• Government legislation.
• Business codes. (But being voluntary in nature these codes, though
pointed to with pride, are usually ignored in practice.)
• Pressure groups. (For example, in recent years Indian carpet industry
has been facing consumer boycott from the west for employing child
labor.)
• Personal values of the manager himself. (But a manager with strong
personal values mostly finds himself in a dilemma when an unethical
course of action

becomes his only choice to achieve the company's goal. This has
prompted many major business houses, to teach executives the
importance of remaining true to their convictions, whether rooted in
organized religion or personal morality, amid the conflicting demands
and temptations they confront when taking decisions. New approaches
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(e.g., asking participants to write their autobiographies, as if they are at

the end of their lives) are being tried to make them inspiring decision-
makers, with a sense of morality. "Under-promise over-deliver" is a
much-revered motto at Infosys. The company can excuse
incompetence but not lack of ethics.)

CORPORATE GOVERNANCE

The term "corporate governance" is used to denote the extent to which

companies run in an open and honest manner in the best interest of all
stake- holders. The key elements of good corporate governance are
transparency and accountability projected through a code which
incorporates a system of checks and balances between all key players,
viz., board of directors, auditors and stake-holders. In Britain, following
corporate scandals in the early
1990s, a committee was appointed in 1991 under the chairmanship of Sir
Adrian Cadbury to prepare a code for best corporate governance.
Major recommendations of this committee are as under:

• Non-executive directors whose most important role is to bring an

independent judgement to bear on issues of strategy, performance,
resources, etc. should be picked through a formal selection process on
merits.
• Companies should have remuneration committees consisting wholly or
mainly of non-executive directors which should recommend to the
board executive directors' emoluments.
Companies should have audit committees consisting of minimum 3 non-
executive directors to report on any matter relating to financial
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management.
• Audit partners should be rotated and there should be fuller disclosure
of non- audit work.
This is a voluntary code and has only some moral pressure of the London
Stock Exchange requiring companies to mention in their annual report
whether they are following the code, and if not, why.

Benefits of Good Corporate Governance

I. It creates overall market confidence and long-term trust in the company.
2. It leads to an increase in company's share prices.
3. It ensures the integrity of company's financial reports.
4. It maximizes corporate security by acting as a whistle blower.

5. It limits the liability of top management by carefully articulating the

decision-making process.
6. It improves strategic thinking at the top by inducting independent
directors who bring a wealth of experience and a host of new ideas.

Review Questions - LEADERSHIP

1. What is leadership? Describe the functions of a leader.
2. "Leaders are not born but made." Comment.
3. "The successful leader accurately understands himself, the organization, the individuals and
the group he is dealing with and the broader social environment in which he operates."
Discuss.
4. Is leader the same as manager? Discuss.
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5. What factors should govern the selection of a style of

leadership by a manager?
6. Point out some important qualities that make for
successful leadership. Define the concept of empathy.
7. Define leadership and give its characteristics.
8. "Leadership is situational". Comment.
9. "A successful leader is not necessarily effective." -Comment
SYLLABUS: