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BBA 103 Introduction to Mgt Dr. Renson

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INTRODUCTION TO MANAGEMENT -BBA 103

CIPS DR. RENSON WANYONYI, Ph.D

(Bsc., Msc., PhD., MKISM)
0710637465, [email protected]
1.0 INTRODUCTION TO MANAGEMENT
1.0 Introduction
Organizations abound in today’s society. Groups of individuals constantly join
forces to accomplish common goals. Sometimes the goals of these
organizations are for profit, such as a restaurant chain or a supermarket.
Other times, the goals are non-profit, such as churches or public schools. No
matter what their aims, all these organizations share two things in common:

They’re made up of people, and certain individuals are in charge of these

people. Managers appear in every organization. These individuals have the
task of making decisions, solving difficult problems, setting goals, planning
strategies, and motivating individuals. Managers administer and coordinate
resources effectively and efficiently to achieve the goals of an organization. In
essence, managers get work done through other people.

Management- Management may be defined in many different ways. Some of

these definitions are:
1. Management is a process consisting of planning, organizing, implementing
and controlling to determine and accomplish the objectives by the use of people
and resources.
2. In the words of Henry Fayol - “To manage is to plan, to organize, to
command, to co-ordinate and to control”.
3. Management is the process of decision-making and control over the actions
of human beings for the purpose of attaining pre-determined goals.
4. Management consists of getting things done through other people. A
manager is one who accomplishes objectives by directing the efforts of others.

1.1 Functions of Management

a) Planning: Planning is the primary function of management. It involves

determination of a course of action to achieve desired results/objectives.
Planning is the starting point of management process and all other functions
of management are related to and dependent on planning function. Planning
is the key to success, stability and prosperity in business. It acts as a tool for
solving the problems of a business unit. Planning plays a pivotal role in
business management It helps to visualize the future problems and keeps
management ready with possible solutions.

b) Organizing: Organizing is next to planning. It means to bring the resources

(men, materials, machines, etc.) together and use them properly for achieving
the objectives. Organization is a process as well as it is a structure. Organizing
means arranging ways and means for the execution of a business plan. It
provides suitable administrative structure and facilitates execution of
proposed plan. Organising involves different aspects such as departmentation,
span of control delegation of authority, establishment of superior-subordinate
relationship and provision of mechanism for co-ordination of various business
activities.

c) Staffing: Staffing refers to manpower required for the execution of a

business plan. Staffing, as managerial function, involves recruitment,
selection, appraisal, remuneration and development of managerial personnel.
The need of staffing arises in the initial period and also from time to time for
replacement and also along with the expansion and diversification of business
activities. Every business unit needs efficient, stable and cooperative staff for
the management of business activities. Manpower is the most important asset
of a business unit. In many organizations, manpower planning and
development activities are entrusted to personnel manager or HRD manager.
'Right man for the right job' is the basic principle in staffing.

d) Directing (Leading): Directing as a managerial function, deals with guiding

and instructing people to do the work in the right manner. Directing/leading
is the responsibility of managers at all levels. They have to work as leaders of
their subordinates. Clear plans and sound organization set the stage but it
requires a manager to direct and lead his men for achieving the objectives.
Directing function is quite comprehensive. It involves Directing as well as
raising the morale of subordinates. It also involves communicating, leading
and motivating. Leadership is essential on the part of managers for achieving
organizational objectives.

e) Coordinating: Effective coordination and also integration of activities of

different departments are essential for orderly working of an Organization. This
suggests the importance of coordinating as management function. A manager
must coordinate the work for which he is accountable. Co-ordination is rightly
treated as the essence of management. It may be treated as an independent
function or as a part of organisms function. Coordination is essential at all
levels of management. It gives one clear-cut direction to the activities of
individuals and departments. It also avoids misdirection and wastages and
brings unity of action in the Organization. Co- ordination will not come
automatically or on its own Special efforts are necessary on the part of
managers for achieving such coordination.

f) Controlling: Controlling is an important function of management. It is

necessary in the case of individuals and departments so as to avoid wrong
actions and activities. Controlling involves three broad aspects: (a)
establishing standards of performance, (b) measuring work in progress and
interpreting results achieved, and (c) taking corrective actions, if required.
Business plans do not give positive results automatically. Managers have to
exercise effective control in order to bring success to a business plan. Control
is closely linked with other managerial functions. It is rightly treated as the
soul of management process. It is true that without planning there will be
nothing to control It is equally true that without control planning will be only
an academic exercise Controlling is a continuous activity of a supervisory
nature.

g) Motivating: Motivating is one managerial function in which a manager

motivates his men to give their best to the Organization. It means to encourage
people to take more interest and initiative in the work assigned. Organizations
prosper when the employees are motivated through special efforts including
provision of facilities and incentives. Motivation is actually inspiring and
encouraging people to work more and contribute more to achieve
organizational objectives. It is a psychological process of great significance.

h) Communicating: Communication (written or oral) is necessary for the

exchange of facts, opinions, ideas and information between individual’s and
departments. In an organization, communication is useful for giving
information, guidance and instructions. Managers should be good
communicators. They have to use major portion of their time on
communication in order to direct, motivate and co-ordinate activities of their
subordinates. People think and act collectively through communication.
According to Louis Allen, "Communication involves a systematic and
continuing process of telling, listening and understanding".

1.2 Responsibilities of Modern Business Managers

Managers perform five basic functions: planning, organizing, staffing, directing,
and controlling.
1. Planning: Planning refers to setting of objectives and deciding on the means
or courses of action that would be pursued in order to achieve the objectives.
It implies looking ahead and deciding in advance what is to be done, when,
how and where it is to be done. A plan is a predetermined future course of
action i.e. an outline of steps to be taken in the future.
2. Organizing: It is the process of determining which activities are necessary
to achieve the objectives, classifying them, to groups or individuals for effective
performance.
3. Staffing: It is the function of filling all the positions in the organization with
adequate and qualified personnel.
4. Directing: It is the function of guiding, supervising, motivating, and leading
people towards the attainment of planned targets of performance.
5. Controlling: It is the function of ensuring that the organization is moving in
the direction and that progress is being made towards the achievement of
goals. It involves monitoring performance and taking corrective action where
necessary.

Levels of management in an organization

There are three main levels of management in any organization:

1. Top level: Managers at this level ensure that companywide objectives are
established and accomplished. Top managers include chief executive officer
(CEO), chief operating officer (COO), president, and vice president. These
senior managers are responsible for the performance of an organization as a
whole or for one of its major parts.

2. Middle level: Middle level managers report to top managers and are in
charge of large divisions consisting of several smaller units. Examples of
middle managers include division managers, plant managers, and branch
sales managers. Middle managers develop and implement plans consistent
with top-level objectives, such as increasing market share.
3. Low level: These are first-line managers, such as supervisors or foremen
that are in charge of smaller work units composed of hands-on workers. They
ensure that their units are able to meet performance objectives, such as
producing a number of items at a given quality, that are consistent with the
plans of middle and top management.
Skills needed by managers
Certain skills or abilities are required by managers to perform effectively.
These skills fall under the following categories:
1. Technical skills: This refers to the ability to apply scientific methods and
techniques in doing a job. Such skills include statistical engineering,
accounting etc.
2. Interpersonal / human relations skills: It’s the ability to work with and
understand other people as individuals or groups. It includes the ability to
lead, motivate, and manage conflicts in the work place.
3. Conceptual skills: These skills call for the ability to think analytically.
Analytical skills enable managers to see the relations among the parts, and to
recognize the implications of any one problem on other parts.
4. Communication skills: This involves the ability to pass information
effectively e.g. giving clear instructions. Communication skills include
listening, speaking, reading and writing skills. 6

Attributes of a successful manager

In order to carry out the process of management and the execution of work,
the manager requires a combination of the following:
Energy, drive

Appearance-presentability

Enthusiasm

Personality – height and weight

Initiative

Intelligence

Judgment

Self-confidence

Sociability

Tact and diplomacy

Moral courage and integrity

Willpower and flexibility

Emotional stability

Knowledge of human relations.

Managerial roles
Henry Mintzberg describes a set of ten roles that a manager fills. These
roles fall into three categories:
1. Interpersonal: This role involves human interaction.

2. Informational: This role involves the sharing and analysing of information.

3. Decisional: This role involves decision-making.

a) Interpersonal roles

a. Figurehead Role: Managers head the different positions created in the

process of organizing; they head the organization as the Managing Director or
General Manager. They are also found in the departments as functional
managers and in units as supervisors. Because of this position as the
headman of the organization or head of a department or head of a unit, the
manager is responsible for all actions taken.
a. Liaison Role: Managers also associate with people outside the organization.
They Liaise with superiors and subordinates as well as outsiders results in the
collection of information that benefits the entire organization.
b. Leadership Role: The manager directs and motivates subordinates; he
provides guidance and communicates with subordinates.

b) Informational roles
c. Monitoring Role: Through the liaison and monitoring roles of the manager,
each information will be made available which will guide the manager in taking
decisions
d. Dissemination Role: The manager conveys information to the appropriate
places where it is needed for decision-making. The manager uses some of the
information while others are passed to the superior managers, to peer
managers and to the subordinates as the case may be.

c) Spokesperson Role: He speaks on behalf of the department, the unit, or the

organization he is responsible for.

d) Decisional roles

e. Resource Allocation Role: The manager decides who gets what and how
much resources in the organization or in the department or in the unit.

f. Entrepreneurial Role: As soon as a new idea is found, the manager switches

to his entrepreneurial role whereby he initiates studies and projects aimed at
taking advantage of such new ideas.

g. Disturbance Handler Role: Conflicts arise between the workers and

departments. It is the responsibility of the manager to reconcile conflicting
interests so that the members of the group can work in harmony.

h.Negotiator Role: The manager spends much time in bargaining on behalf of

the organization.

The concept of management

The concept of management has acquired special significance in the present
competitive and complex business world. Efficient and purposeful
management is absolutely essential for the survival of a business unit.
Management concept is comprehensive and covers all aspects of business. In
simple words, management means utilising available resources in the best
possible manner and also for achieving well defined objectives. It is a distinct
and dynamic process involving use of different resources for achieving well
defined objectives. The resources are: men, money, materials, machines,
methods and markets. These are the six basic inputs in management process
(six M's of management) and the output is in the form of achievement of
objectives. It is the end result of inputs and is available through efficient
management process.

The management Process

Management process is a process of setting goals, planning and/or controlling
the organizing and leading the execution of any type of activity, such as:

a) a project (project management process) or a process (process management

process, sometimes referred to as the process performance measurement and
management system).
An organization's senior management is responsible for carrying out its
management process. However, this is not always the case for all management
processes, for example, it is the responsibility of the project manager to carry
out a project management process.[1]

Steps of management/ Process of Management

a) Planning, it determines the objectives, evaluate the different alternatives and
choose the best
b) Organizing, define group's functions, establish relationships and defining
authority and responsibility
c) Staffing, recruitment or placement and selection or training takes place for
the development of members in the firm
d) Directing, is to give the Direction to the employees.

Elements of Management Process

a) Planning: Planning is the primary function of management. It involves
determination of a course of action to achieve desired results/objectives.
Planning is the starting point of management process and all other functions
of management are related to and dependent on planning function. Planning
is the key to success, stability and prosperity in business. It acts as a tool for
solving the problems of a business unit. Planning plays a pivotal role in
business management It helps to visualize the future problems and keeps
management ready with possible solutions.

b) Organizing: Organizing is next to planning. It means to bring the resources

(men, materials, machines, etc.) together and use them properly for achieving
the objectives. Organization is a process as well as it is a structure. Organizing
means arranging ways and means for the execution of a business plan. It
provides suitable administrative structure and facilitates execution of
proposed plan. Organising involves different aspects such as
departmentation, span of control delegation of authority, establishment of
superior-subordinate relationship and provision of mechanism for co-
ordination of various business activities.

c) Staffing: Staffing refers to manpower required for the execution of a

d) Directing (Leading): Directing as a managerial function, deals with guiding

e) Coordinating: Effective coordination and also integration of activities of

different departments are essential for orderly working of an Organization. This
suggests the importance of coordinating as management function. A manager
must coordinate the work for which he is accountable. Co-ordination is rightly
treated as the essence of management. It may be treated as an independent
function or as a part of organization’s function. Coordination is essential at all
levels of management. It gives one clear-cut direction to the activities of
individuals and departments. It also avoids misdirection and wastages and
brings unity of action in the Organization. Co- ordination will not come
automatically or on its own Special efforts are necessary on the part of
managers for achieving such coordination.

f) Controlling: Controlling is an important function of management. It is

g) Motivating: Motivating is one managerial function in which a manager

h) Communicating: Communication (written or oral) is necessary for the

Characteristics of Management
a) Management is a managerial process: Management is a process and not
merely a body of individuals. Those who perform this process are called
managers. The managers exercise leadership by assuming authority and
direct others to act within the organization. Management process involves
planning, organizing, directing and unifying human efforts for the
accomplishment of given tasks.

b) Management is a social process- Management takes place through people.

The importance of human factor in management cannot be ignored. A
manager's job is to get the things done with the support and cooperation of
subordinates. It is this human element which gives management its special
character.
c) Management is action-based: Management is always for achieving certain
objectives in terms of sales, profit, etc. It is a result-oriented concept and not
merely an abstract philosophy. It gives importance to concrete performance
through suitable actions. It is an action based activity.
d) Management involves achieving results through the efforts of others:
Management is the art of getting the things done through others. Managers are
expected to guide and motivate subordinates and get the expected
performance from them. Management acts as an activating factor.
e) Management is a group activity: Management is not an isolated individual
activity but it is a collective activity or an activity of a group. It aims at using
group efforts for achieving objectives. Managers manage the groups and
coordinate the activities of groups functioning in an organization.
f) Management is intangible: Management is not directly visible but its
presence is noticed in the form of concrete results. Management is intangible.
It is like invisible spirit, which guides and motivates people working in a
business unit. Management is like government, which functions but is not
visible in physical form.

Need for Management/Importance of Management

a) Direction, coordination and control of group efforts: In business, many
persons work together. They need proper direction and guidance for raising
their efficiency. In the absence of guidance, people will work as per their desire
and the orderly working of enterprise will not be possible. Management is
needed for planning business activities, for guiding employees in the right
direction and finally for coordinating their efforts for achieving best/most
favorable results.
b) Orderly achievement of business objectives: Efficient management is
needed in order to achieve the objectives of business activity in an orderly and
quick manner.

c) Performance of basic managerial functions: Planning, Organising, Co-

coordinating and Controlling are the basic functions of management.
Management is needed as these functions are performed through the
management process.
d) Effective communication at all levels: Management is needed for effective
communication within and outside the Organization.
e) Motivation of employees: Management is needed for motivating employees
and also for coordinating their efforts so as to achieve business objectives
quickly.
f) Success and stability of business enterprise: Efficient management is
needed for success, stability and prosperity of a business enterprise.

2.0 MANAGEMENT TECHNIQUES

2.1 Historical Perspectives of Management
The origin of management can be traced back to the days when man started
living in groups. Evidence of the use of well-recognized principles of
management is to be found in early civilizations of ancient Greece, Egypt,
China, Rome, the organization of the Roman Catholic Church and Roman
military forces. With the onset of the Industrial Revolution, the structure of
business became extremely complex. At this stage, the development of a
formal theory of management became necessary. It was during this time that
the pioneers of management laid the foundations of modern management
theory and practice.

Management in early Egypt

History tells us that civilization started in Egypt. This was as far back as 1300
B.C. Some historians have made interpretations of Egyptian papyrus which is
the form of writing of ancient Egypt. The interpretations showed the
recognition of the importance of organization and administration especially in
the construction of the famous pyramids which are still standing even today.
Management in ancient China
The analyses of ancient Chinese philosophers’ works indicate the existence of
practical management in China. Confucius, for example came up with
parables that were mainly practical suggestions in public administration.
There are also guides in form of admonitions to choose honest, un- selfish,
and capable officers. All these still find relevance in modern personnel
management and have bearing on recruitment and selection which are
important management duties.

Management in Greece
In ancient Greece, there existed the Athenian common wealth that consisted
of councils, popular courts administrative officials and board of generals. Each
of these had its set of administrative functions to perform. To be able to carry
out these duties obviously required management planning, organizing and
other management functions.

Socrates, a Greek philosopher gave the definition of management as a skill to

be practiced which is different from technical skill and experience. This
definition is remarkably close to our current understanding of management.

Management in ancient Rome

The details of administrative work in ancient Rome must have demanded
considerable management techniques. There was for instance the existence of
the Roman magistrates who were responsible for certain functional areas i.e.
each magistrate had his own specialized cases to treat. Beside their functional
areas, they had varying degrees of authority; not all the magistrates had equal
authority. There were those with lower authority and also those with higher
authority. This was indicative in the type of cases being handled by different
people. All these fantastic arrangements took place in the ancient time, and
we have similar system in our judicial system.

One of the most effective formal organization in the history of roman

civilization is the Roman Catholic Church which is said to be the oldest church
in the world. It has had a long organizational life which is mainly due to the
effectiveness of its organization and management techniques. Examples of
these techniques are the development of a hierarchy of authority,
departmentation according to territory, the specialization of work along
definite functions etc.

Management in the military

The practice of management has been emphasized in the military right from
ancient times till today. Important principles and practices of modern
business management may be traced to military organizations. These include
the following:
Authority relationships: In the military, the junior in rank reports to the
senior officers for directives. Levels or hierarchies have been created for the
purpose of ensuring smooth authority relationships
Techniques of leadership: The military has a variety of stages and techniques
of leadership depending on the circumstance and situation. These
include autocratic style which means barking out orders to juniors who must
comply by implementing and following the orders, participatory leadership
techniques which involve some elements of consultation with the
subordinates, and the style which involves a combination of autocracy and
participating techniques. All these styles/techniques are applicable even in
present day organizations.
The use of staff specialists: This practice is common in the military as well
as in business organization. It is a technique which ensures that the line
commanders/managers should focus on prosecuting the battles while
concerns for uniform, caps, boots, medicine, treatment for the injured,
accommodation, logistics supplies, etc. should be in the hands of specialists.

Effects of the Second World War

The Second World War and the effects it created stressed the importance of
management as an organized body. These effects are important to
management development in several ways:
The war created the need for big programs necessary to fight the war
successfully. Such programs involved the mass production of weapons as well
as space programs. The emphasis for these programs was on production with
minimum cost. It was only through proper management that this could
happen.
It was also noticed that many young men were sent to the war fronts and
sound management was required to get the best out of them. Again the
technical advances that were made during the war had to be properly managed
e.g., nuclear technology. To do this required solid management practice.
Another factor was the emergence of big and complex organizations that
required the application of thorough management principles and theories.

The emergence of stiff competition

Stiff competition among companies and the rivalry for markets, power and
prestige necessitated good management skills. The competition arose because
as soon as the war was over, technical knowledge on improved methods of
production started gaining application in industries and com- merce. Due
to improved ways of production and distribution, there was an increase in
product variety from which consumers could choose.

2.2 Management Techniques

1. Management by Objectives, MBO
Management by objectives (MBO), also known as management by results
(MBR), was first popularized by Peter Drucker in his 1954 book The Practice
of Management. Management by objectives is the process of defining specific
objectives within an organization that management can convey to organization
members, then deciding on how to achieve each objective in sequence

MBO is also a mechanism for appraising performance. In fact, it‘s the preferred
method for assessing managers and professional employees. With MBO,
employees are evaluated by how well they accomplish a specific set of goals
that has been determined to be critical in the successful completion of their
jobs.

2. Total Quality Management, TQM

Total Quality Management (TQM) is an enhancement to the traditional way of
doing business.
Total - Made up of the whole
Quality - Degree of Excellence a Product or Service provides.
Management - Art of handling, controlling, directing etc.
TQM is the application of quantitative methods and human resources to
improve all the processes within an organization and exceed customer needs
now and in the future.

Total quality management (TQM) consists of organization-wide efforts to install

and make permanent a climate in which an organization continuously
improves its ability to deliver high- quality products and services to customers.
While there is no widely agreed-upon approach, TQM efforts typically draw
heavily on the previously developed tools and techniques of quality control.
TQM enjoyed widespread attention during the late 1980s and early 1990s
before being overshadowed by ISO 9000, Lean manufacturing, and Six Sigma

3. Project Evaluation & Review Technique (PERT)

The program (or project) evaluation and review technique (PERT) is a statistical
tool used in project management, which was designed to analyze and
represent the tasks involved in completing a given project. First developed by
the United States Navy in the 1950s, it is commonly used in conjunction with
the critical path method (CPM).

4. Just in time, JIT

Just-in-time (JIT) manufacturing, also known as just-in-time production or
the Toyota Production System (TPS), is a methodology aimed primarily at
reducing times within production system as well as response times from
suppliers and to customers. Its origin and development was in Japan, largely
in the 1960s and 1970s and particularly at Toyota.

5. The Balanced Scorecard

It was originated as a performance measurement framework that added non-
financial performance measures to traditional financial measures of
performance to give managers and executives a more 'balanced' view of
organizational performance.

Perspectives of the Balanced Scorecard

The balanced scorecard suggests that the organization is viewed from four
perspectives, and its performance should be analysed relative to each of these
perspectives:
1. The Learning & Growth Perspective: This is related to both individual and
corporate self-improvements. In a knowledge-worker organization, people are
the main resource. Due to the rapid technological change, it is necessary for
knowledge workers to be in a continuous learning mode.
2. The Business Process Perspective: This perspective refers to internal
business processes. Performance measures based on this perspective allow
managers to know how well their business is run-ning, and whether its
products and services conform to customer requirements.
3. The Customer Perspective: If customers are not satisfied, they will
eventually find other suppliers that will meet their needs. Poor performance
from this perspective is thus a leading indicator of future decline, even though
the current financial picture may look good.
4. The Owners/Shareholder's Perspective: This is concerned with the
shareholders’ view of performance. Shareholders are concerned with many
aspects of financial performance such as:
Market share
Revenue growth
Profit ratio
Return on investment
Return on capital employed
Corporate goals
Survival
Profitability
Profit growth
Sales revenue
Share price

6. Creativity Enhancement Techniques in Management

These are tested ways of finding new solutions and perspectives to a concept
or a difficulty that needs to be dealt with. To become more creative and
innovative one needs to learn to observe what’s happening around you. One
needs to take one's observations to a new level – by seeing things from a wider
perspective. Some creativity techniques include:
1. Challenging assumptions
Your assumptions are your mental shortcuts. They are your blind spots, or
lines you’ve drawn in the sand. People are inclined to assume that a situation
they’re going through is just like other situations they’ve faced before. Taking
things for granted prevents you from developing characteristic traits of creative
people – assumptions stand in the way of your creativity.
2. Brainstorming
Brainstorming is method of problem solving in which members of a group
contribute ideas spontaneously. It is among the well-known creativity methods
that help you spark off brand new ideas which wouldn’t have occurred to you
under usual circumstances. Brainstorming is used to generate new ideas
before you switch to analysis or decision-making.
4. Thinking outside the box or thinking out of the box is a metaphor that
means to think differently, unconventionally, or from a new perspective. This
phrase often refers to novel or creative thinking. To think outside the box is to
look farther and to try not thinking of the obvious things, but to try thinking
of the things beyond them.
5. SWOT analysis (alternatively SWOT matrix) is a structured planning method
used to evaluate the strengths, weaknesses, opportunities and threats
involved in a project or in a business venture. A SWOT analysis can be carried
out for a product, place, industry or person. It involves specifying the objective
of the business venture or project and identifying the internal and external
factors that are favourable and unfavourable to achieve that objective.
Strengths: characteristics of the business or project that give it an advantage
over others.
Weaknesses: characteristics that place the business or project at a
disadvantage relative to others.
Opportunities: elements that the project could exploit to its advantage.
Threats: elements in the environment that could cause trouble for the
business or project.
The decision makers should consider whether the objective is attainable, given
the SWOTs. If the objective is not attainable a different objective must be
selected and the process repeated.
Users of SWOT analysis need to ask and answer questions that generate
meaningful information for each category (strengths, weaknesses,
opportunities, and threats) to make the analysis useful and find their
competitive advantage.
6. The Five Ws, Five Ws, are questions whose answers are considered basic in
information-gathering. They are often mentioned in journalism, research, and
police investigations. They constitute a formula for getting the complete story
on a subject. According to the principle of the Five Ws, a report can only be
considered complete if it answers these questions starting with an
interrogative word:
Who is it about?
What happened?
When did it take place?
Where did it take place?
Why did it happen?

7. Management Consultancy
This is the practice of helping organizations to improve their performance by
analyzing the existing organizational problems and the development of plans
for improvement.

Organizations may draw upon the services of management consultants to gain

external objective advice and access to the consultants' specialized expertise.
As a result of their experience with numerous organizations, consulting firms
are more aware of industry "best practices ".

Management consultancies help in providing organizational change

management assistance, de-velopment of coaching skills, process analysis,
technology implementation, strategy development, or operational
improvement services. Management consultants often provide methodologies
or frameworks to guide the identification of problems and to serve as the basis
for recommendations for more effective and/or efficient ways of performing
work tasks.
Management consulting is often in the form of the consultant conducting a
management audit.
The Management Audit
A management audit is a comprehensive, systematic, independent, and
periodic examination of an organization's environment, objectives, strategies,
and activities with a view to determining problem areas and opportunities and
recommending a plan of action to improve organizational performance. It is an
assessment of methods and policies of an organization's management in the
administration and the use of resources, tactical and strategic planning, for
employee and organizational improvement.
It has four characteristics:
1. Comprehensive: The audit covers all the major organizational activities,
processes, systems, etc.
2. Systematic: The audit is a step-by-step examination of the organization’s
objectives and strategies, systems, activities, etc.
3. Independent: An audit is generally conducted by outside consultants who
have the necessary objectivity, broad experience, and the time and attention
to give to the audit.
4. Periodic: The audit is performed periodically, often annually.

Objectives of Management Audit

Establish the current level of effectiveness
Suggest Improvements
Lay down standards for future performance
Increased levels of service quality and performance
Guidelines for organizational restructuring
Introduction of management information systems to assist in meeting
productivity and effective-ness goals
Better use of resources due to program improvements.

2.3 Liberalization & local industries

Economic liberalization (or economic liberalization) is the lessening of
government regulations and restrictions in an economy in exchange for greater
participation by private entities It is associated with classical liberalism. Thus,
liberalization in short is "the removal of controls" in order to encourage
economic development. It is also closely associated with neoliberalism.

Benefits to Industries
Most high-income of the countries have pursued the path of economic
liberalization in the recent decades with the stated goal of maintaining or
increasing their competitiveness as business environments. Liberalization
policies include partial or full privatization of government institutions and
assets, greater labor market flexibility, lower tax rates for businesses, less
restriction on domestic and foreign capital, open markets, etc.

In developing countries, economic liberalization refers more to liberalization or

further "opening up" of their respective economies to foreign capital and
investments. Three of the fastest growing developing economies today; Brazil,
China, and India, have achieved rapid economic growth in the past several
years or decades, in part, from having "liberalized" their economies to foreign
capital.
The service sector is probably the most liberalized of the sectors. Liberalization
offers the opportunity for the sector to compete internationally, contributing
to GDP growth and generating foreign exchange. As such, service exports are
an important part of many developing countries' growth strategies. India's IT
services have become globally competitive as many companies have
outsourced certain administrative functions to countries where costs are
lower. Furthermore, if service providers in some developing economies are not
competitive enough to succeed on world markets, overseas companies will be
attracted to invest, bringing with them international best practices and better
skills and technologies.
The entry of Foreign Service providers can be a positive as well as negative
development. For example, it can lead to better services for domestic
consumers, improve the performance and competitiveness of domestic service
providers, as well as simply attract FDI/foreign capital into the country. In
fact, some research suggests a 50% cut in service trade barriers over a five- to
ten- year period would create global gains in economic welfare of around $250
billion per annum.

3.0 MANAGEMENT IN PRACTICE

All organizations are purposive. They are established to accomplish objectives.
Objectives are “those ends which the organization seeks to achieve by its
existence and operations”. An objective is a statement of what is to be
accomplished in a given period. Objectives, which are desired outcomes,
provide direction for the organization. They direct the efforts of management
towards the end. They also provide a standard against which the organization
can measure its performance and results.

Considerations when setting organization objectives

a. Environmental conditions. These conditions include the availability of
raw materials, skilled labour, energy and other resources. Objectives
must keep abreast with the new technological develop- ments.
b. Economic conditions. The current economic conditions and economic
trends must be seriously considered while setting objectives. The
objective of expansion during recession may not be advis- able.
c. Internal resources. Objectives should be set relative to the company’s
resources of capital, skilled personnel, physical equipment, etc.
d. Anticipating the future. Future events, opportunities and threats
must be incorporated in the organizational plans.

Common Organizational Objectives

Major organizational objectives include:
Profitability
Survival
Growth
Market-share
Productivity
Innovation
Employee welfare
Service to customers
Social responsibility

Features of Objectives
1. Plurality; every organization exists to achieve several objectives rather
than one.
2. They can be arranged hierarchically i.e. they can be arranged in order of
importance or priority.
3. Time span; some objectives are long term (3-years or over) while others are
not.
4. Scope; some may be general and others specific.

Characteristics of Good Objectives

The characteristics of sound objectives are:
1. Objectives should be realistic and attainable. Overly optimistic but
unrealistic objectives serve as morale-deflators. Realistic objectives
provide a sense of accomplishment and thus act as motiva- tors.
2. Objectives should be specific and measurable. General objectives
are difficult to interpret and difficult to measure. For example,
“improving employee safety” is more difficult to define and
measure than, “reducing work accident by 20 percent”. Similarly, an
objective of increasing the market share of the company by 5 percent allows
a manager to measure progress as the time passes.
3. Objectives should be time-bound. The objective can be set on a daily,
weekly, monthly, or yearly basis. In many situations, there are five-year
plans and ten-year plans. The time frame in which the given objectives
are to be achieved must be realistically established.
4. Objectives should be result-oriented. The focus should always be on
ends and not on means. The means may be modified, if necessary, by
retraining employees or changes in methods or equipment, but the
end must remain in focus.
5. Objectives should be set in a participative manner. The people who
are responsible for accomplishing these objectives should be
encouraged to participate in formulating them.

Advantages of Objectives
Objectives are beneficial in the following ways:
1. They make the integration of activities possible. They encourage
unified planning. Thus the opera tions of the organization are not
disoriented and haphazard but are unidirectional towards a common
objective. This helps in coordination of different departments and
activities resulting in a sense of unity and harmony.
2. Objectives serve as guides for decision-making. A clear understanding
of organizational objectives gives managers the direction as well as the
tools for effective decision-making. They have a
clear-cut basis for problem solving and making pertinent decisions.
3. Well-defined and clearly understood objectives are motivating
elements. When individuals participate in goal setting or accept them
as desirable, then achieving them presents a challenge and becomes
a source of satisfaction to the employee.
4. Objectives act as standards for control. Organizational objectives
serve as a criteria or standards against which progress can be
measured. Any deviations can be corrected in a timely manner.
This reduces costly waste of human efforts and resources, thus increasing
organizational efficiency.
5. Good objectives serve as a basis for decentralization. If the objectives
and the process and policies to achieve them are clearly identified, then
the decision-making authority can be delegated and assigned to lower
level operational management. This would free the top management for
policy making and growth decisions. These qualities can be shortened into
S.M.A.R.T

DECISION-MAKING IN MANAGEMENT
It is the process of thought and action that leads to a decision. Management
spend their time choosing between alternative courses of action on the basis
of the information available to them at the time; in other words, making
decisions. There are several definitions for decision-making:
a. Decision-making is a process of selecting an alternative from two or
more alternatives, to determine a course of action.
b. It is a process involving information, choice of alternatives actions,
implementation and evaluation that is directed to the achievement of
certain stated goals.
c. A decision is the selection of action from two or more alternatives; the
decision-making process is a sequence of steps leading to that selection.
Characteristics of Decision Making
1. The need for decision-making arises only when more than one alternative
exists.
2. The aim of decision-making is to find out the best possible course of
action. It is a rational and purposeful activity designed to attain well-
defined objectives. In order to identify the best alternative, it is
necessary to evaluate all available alternatives.
3. Decision-making is always related to the situation or environment. A
manager may take one decision in a particular situation and an
opposite decision in a different situation.
4. Decision-making is a pervasive function of management. Managers at
all levels perform this function, though the nature of decisions may
differ from one level to another.
5. Decision-making is a continuous process.
6. The choice in decision-making implies freedom to choose from among
alternative courses of action without coercion.

Steps in Decision-Making
Decision-making is a systematic and planned process consisting of several
interrelated phases.
1. Defining the problem: The first step is to recognize, identify, determine
and define the problem clearly. Accurate diagnosis or perception of the
problem is necessary to find the right solution. Def- inition or perception
of the problem involves the definition of desired results, identification
of the fundamental cause and magnitude of the problem and the limits
or boundaries within which it can be solved.
The problem must be understood in relation to higher-level goals of the
organization. Clear-cut definitions of the problem will help in collecting
relevant data and finding the correct solution.
2. Analysing the problem: Once the problem is defined it must be
analysed in terms of nature, impact, futurity, periodicity etc. of the
problem. The step involves conception of the problem. It is necessary to
collect all the facts and figures that are pertinent to the decision. The
collected data must be classified and analysed very carefully. This
involves finding out which people have the most experience of the
problem and the most information about it. It involves enumeration of
the factors relevant to the decision. These are the major obstacles in
achieving the results. These may be material, human or external factors.
Such analysis is required to determine who should take the decision,
what information is required and how it can be gathered.
3. Developing alternative solutions: In order to make a sound decision,
it is essential to search for and identify possible alternatives. A number
of solutions should be examined, rather than the first feasible one
being chosen. This is the stage of investigation into the problem.
Brainstorming is a technique of generating alternatives courses of
action. The step requires considerable imagination, experience and
judgement. The ability to develop a reasonable number of alternatives
is often as important as making a right choice among alternatives.
4. Evaluating alternatives: After the alternatives are developed, the next
step is to compare and evaluate them in terms of their costs, time, and
contribution to objectives. Evaluation involves de- liberate or
measurement of the merits and demerits of various alternatives in
terms of their strengths and weaknesses in achieving objectives. It is
the most important in determining the action to be taken in solving
a given problem.
5. Selecting the best alternative: A comparative evaluation of different
alternatives will reveal the relative worth of each alternative. The
alternative that can make maximum contribution to the objectives is
the best alternative.
6. Implementation of the decision: Implementation or execution of the
decision involves development of detailed plans, communication of the
decision, gaining acceptance of the decision, getting support and
cooperation of those concerned to ensure successful implementation. A
decision can be properly executed when people understand its
implications and are able and willing to convert it into effective action.
7. Evaluation of the decision: An appraisal of both the decision and the
process of decision-making should be done. If the evaluation or follow-
up shows unsatisfactory results, the process should be reviewed and
the decision may be modified. The actual results of decision and the
action should be compared with the expected results and the deviations
analysed.
The feedback obtained through the follow-up of the decision will become the
basis for necessary improvements in the decision-making process.

Types of Decisions
Managerial decisions may be classified on different basis.
1. Organizational and personal decisions: Decisions taken by an
executive in his official capacity or on behalf of the organization are
known as organizational decisions. The authority for taking such de-
cisions can be delegated and have a direct bearing on the functioning of
the organization, for example; transfers of employees made by a
manager are organizational decisions.
Personal decisions are the decisions taken by an individual for himself in his
personal capacity and not on behalf of the firm. In some cases, these
decisions may affect the organization. E.g. decision to leave the organization.
2. Routine and strategic decisions: Routine or tactical decisions relate
to the day today operations of the organization. They are taken
repetitively in accordance with the established policies, practices and
procedures. They can be taken without much thought and deliberation.
Routine decisions are normally taken at lower levels of management.
They involve little risk and uncertainty. Such decisions involve few
alternatives and relate to the economic use of resources.
Top management generally takes strategic or basic decisions. They are
concerned with policy matters and exercise fundamental influence on the
objectives, facilities and structure of the organization. Such decisions involve
long-term commitments and therefore require careful analysis and
considerable deliberation. Location of the plant, choice of the channel of
distribution, development of a new product etc. are examples of strategic
decision.
3. Policy and operational decisions: Policy decisions affect the entire
organization and are made by top management. Policy decisions are
sometimes published in the form of a policy manual for the guidance
of lower level executives.
Operating or administrative decisions are generally taken at lower levels of
management. They translate policies into specific action e.g. merit based
promotion is a policy decision while calcula- tion of merit of employees is an
operative decision. Policy decisions serve as the basis for taking operational
decisions.
4. Programmed and non-programmed decisions: Programmed
decisions are of a routine and repetitive nature and they are dealt with
according to specific procedures. For instance, if an employee applies
for leave, the supervisor can decide the case according to the
established rules and regulations without referring it to the higher
authorities.
Non-programmed decisions are required to solve unstructured problems. They
are of
non-repetitive nature. There exist no standard procedures for handling such
problems and every decision is a unique case e.g., if a large number of
employees apply for leave on a particular day, the supervisor will have to
refer it to the top management.
5. Individual and group decisions: Decisions may be taken either by an
individual or by a group of persons. A decision taken by an individual
is known as an individual decision. Individual decisions are taken in
small organizations or those that operate under an autocratic style of
management. Group decisions refer to the decision taken by a group of
persons e.g. board of directors, executive committee etc. A group takes
important and strategic decisions. Group decisions tend to be more
balanced and acceptable but they involve greater expenditure of time,
money and effort.

Group Decision Making

Group decision-making is when two or more people collectively make a choice
from the alternatives before them. The decision is not attributable to any
single individual who is a member of the group.
Benefits of Group Decision-Making
1. Integration: Organizational departmentation by functional expertise
may pose some coordination problems. One method of providing
integration is the establishment of teams.
2. By including individuals with specialized expertise, it improves the quality
of the decision.
3. Groups tend to develop a greater number of potential and creative
alternatives.
4. Commitment to the decision: Individuals contributing to a decision
tend to feel greater ownership to the decision. There is increased
acceptance of, and commitment to, the decision, because the members
had a voice in it.
5. Members develop knowledge and skills for future use.

Demerits of Group Decision-Making

1. Denying responsibility: In a group decision no one is held accountable
or responsible for a wrong decision that is made.
2. Collective responsibility for decision: When the chairman of the group
takes a decision, it becomes a collective decision of the group
irrespective of whether a member likes it or not.
3. Domination of the group by one forceful member or clique, who may
force a decision to the rest of the members.
4. It is usually more time consuming, because a group is slower than
an individual in making a decision.
5. Disagreements may cause hard feelings among members.
6.
PROBLEM-SOLVING TOOLS IN DECISION-MAKING
Quantitative techniques help a manager improve the overall quality of
decision-making. The techniques commonly used are:
1. Decision trees: A decision tree shows a complete picture of a potential
decision and allows a manager to graph alternative decision paths.
Decision trees are a useful way to analyse hiring, marketing,
investments, equipment purchases, pricing, and similar decisions that
involve a progression of smaller decisions. The term decision tree
comes from the graphic appearance of the technique that starts with
the initial decision shown as the base. The various alternatives, based
upon possible future environmental conditions, and the payoffs
associated with each of the decisions branch from the trunk. Decision
trees force a manager to be explicit in analysing conditions associated
with future decisions and in determining the outcome of different
alternatives. The decision tree method can be used for many situations
in which emphasis can be placed on sequential decisions, the
probability of various conditions, or the highlighting of alternatives.
2. Payback analysis: Payback analysis comes in handy if a manager needs
to decide whether to purchase a piece of equipment. Assume that a
manager is purchasing cars for a rental car company. Although a less-
expensive car may take less time to pay off, some clients may want more
luxurious models.
To decide which cars to purchase, a manager should consider some factors, such
as the expected useful life of the car, its warranty and repair record, its cost of
insurance, and, of course, the rental demand for the car.
Based on the information gathered, a manager can then rank alternatives based
on the cost of each car. A higher-priced car may be more appropriate because of
its longer life and customer rental demand. The strategy, of course, is for the
manager to choose the alternative that has the quickest payback of the initial
cost.
Many individuals use payback analysis when they decide whether they
should continue their education. They determine how much courses will
cost, how much salary they will earn as a result of each course completed
and perhaps, degree earned, and how long it will take to recoup the in-
vestment. If the benefits outweigh the costs, the payback is worthwhile.
3. Simulations: Simulation is a broad term indicating any type of activity
that attempts to imitate an existing system or situation in a simplified
manner. Simulation is basically model building, in which the simulator
is trying to gain understanding by replicating something and then
manipulating it by adjusting the variables used to build the model.
Simulations have great potential in decision making. In the evaluation of
alternatives stage of decision making, a manager could simulate alternatives
and predict their outcomes thus eliminate guesswork from decision making.
4. Linear Programming: Linear programming is a mathematical
technique used to optimally allocate resources, e.g., money, capital
equipment, raw material and personnel. It is useful in production
management where several variables must be evaluated. If a Bottling
Company wishes to determine the best cost method of distributing
its products from its bottling plants to a number of warehouses
located in a given market, linear programming technique will be
employed.
5. Queuing Theory: Queuing theory is often called waiting-line theory.
The technique is used in determining the optimal utilization of a
facility in an intermittent service.
4.0 PRINCIPLES AND THEORIES OF MANAGEMENT
The evolution of modern management may be divided into four stages:

1. Pre-Classical period.
2. Classical period
a. Scientific Management
b. Administrative Management
c. Bureaucratic Approach
3. Neo-classical period
4. Modern Theories

1. Pre-classical period
The advent of industrial revolution in the middle of the 18th century brought
about a complete change in the methods of production, tools and equipment
and organization of labour. The factory system became a dominant feature of
the economy. During the period following the industrial revolution, certain
pioneers tried to challenge the traditional character of management by
introducing new ideas and approaches. The notable contributors of this period
are:

a) Professor Charles Babbage (UK 1729 -1871)

He was a Professor of Mathematics at Cambridge University. He found that
manufacturers made little use of science and mathematics, and that they
(manufacturers) relied upon opinions instead of investigations and accurate
knowledge. He felt that the methods of science and mathematics could be
applied to the solution of methods in the place of guesswork for the solution
of business problems. He advocated the use of accurate observations,
measurement and precise knowledge for taking business decisions.
b) Robert Owens (UK 1771 - 1858)
Robert Owens, a promoter of the trade union movement in England,
emphasized the recognition of the human element in industry. He firmly
believed that workers’ performance in industry was influenced by the working
conditions and treatment of workers. He introduced new ideas of human
relations - shorter working hours, housing facilities, training of workers,
education of their children, etc. Robert Owens came to be regarded as the
father of Personnel Management.

2. Classical period
The real beginning of the science of management started in the last decade of
the 19th century. During this period, management thinkers like F.W. Taylor,
H.L. Gantt, Frank and Lillian Gilbreth etc. laid the foundation of management,
which came to be known as scientific management. This period in the history
of management was an era in which traditional ways of management were
challenged. The contributions of the pioneers of this age have had a profound
impact in furthering the management know-how and enriching the store of
management principles.

Features of Management in the Classical Period:

1. It was closely associated with the industrial revolution and the rise of large-
scale enterprises.
2. Classical management theory is based on contributions from scientific
management, Administrative management theory, and bureaucratic
management.
3. Management thought focused on division of labour, standardization and
scientific approach towards management.
4.
c) Frederick Winslow Taylor’s Scientific Management
He started as a machinist in Philadelphia, USA and rose to be the chief
engineer at the Midvale Engineering Works and later with the Bethlehem
Works where he experimented with his ideas. He was the first to emphasize
the need for adopting a scientific approach to managing an enterprise. He
investigated the causes of low efficiency in industry and concluded that much
of the inefficiency was due to the lack of order and system in the methods of
management. He found that management was ignorant of the amount of work
that could be done by a worker in a day and the best method of doing a job.
He suggested that those responsible for management should adopt a scientific
approach in their work, and make use of “scientific methods” for achieving
higher efficiency.

The scientific methods consisted mainly of:

Observation

Measurement

Experimentation

Taylor’s 4 Principles of Scientific Management

After years of experiments to determine optimal work methods, Taylor
proposed the following four principles of scientific management:
1. Replace rule-of-thumb work methods with methods based on a scientific
study of the tasks.
2. Scientifically select, train, and develop each worker rather than leaving
them to train themselves.
3. Cooperate with the workers to ensure that the scientifically developed
methods are being followed.
4. Separate work between managers and workers, so that the managers
apply scientific management principles to planning the work and the workers
actually perform the tasks.
Elements of Scientific Management

Scientific Task and Rate-setting, work improvement, etc.

Planning the Task.

Selection and Training of workers

Standardization (of working conditions, material equipment etc.

Specialization

Scientific Task and Rate-Setting (Work Study): Work-study is the systematic,

objective and critical examination of all the factors governing the operational
efficiency of any activity in order to effect improvement. Work study includes:
1. Methods Study: Management should try to ensure that the factory is laid
out in the best manner and is equipped with the best tools and machinery.
The possibilities of eliminating or combining certain operations may be
studied.
2. Motion Study: It is a study of the movement of an operator or even of a
machine in performing an operation with the purpose of eliminating useless
movements.
3. Time Study (work measurement): The basic purpose of time study is to
determine the proper time for performing the operation.
4. Fatigue Study: It is necessary to regulate working hours for workers and
provide for rest pauses at scientifically determined intervals.
5. Rate-setting: A wage system under which workers performing the standard
task within the pre-scribed time are paid a much higher rate per unit than
inefficient workers.

Planning the Task: Necessary steps must be taken to plan the production
thoroughly so that there are no bottlenecks and the work goes on smoothly.
Selection and Training: Workers should be selected and trained
professionally. Standardization: Standardization may be introduced in
respect of the following: Tools and equipment: Standardization means the
process of bringing about uniformity. Management must select and store
standard tools and equipment which will be the best or the best of their
kind.

Speed: There is an optimum speed for every machine. If it is exceeded, it is

likely to result in dam-age to machinery.

Conditions of Work: To attain standard performance, the maintenance of

standard conditions of ventilation, heating, cooling, humidity, floor space,
safety etc., is very essential.

Materials: The efficiency of a worker depends on the quality of materials

and the method of handling materials.

Specialization: Under this plan, the two functions of ‘planning’ and ‘doing’ are
separated.

Benefits of Scientific Management

The benefits of scientific management are:
1. Replacement of traditional rule of thumb method by scientific techniques.
2. Proper selection and training of workers.
3. Incentive wages to the workers for higher production.
4. Elimination of wastage.
5. Standardization of tools, equipment, materials and methods of work.
6. Detailed instructions and constant guidance of the workers.
7. Establishment of harmonious relationship between the workers.

8. Better utilization of various resources.

Criticism of Scientific Management

1. Loss of individual worker’s initiative: Scientific Management reduces
workers to automatic ma-chine by taking away from them the function of
thinking.
2. Problem of monotony: By separating the function of planning the work from
that of doing, Scientific Management reduces work to mere routine.
3. No wage bargaining: Under Scientific Management, management
through scientific investigation decides the wages and working conditions and
workers have little say in the matter.

Frank (USA, 1867 - 1924) and Lillian Gilbreth (U.S.A, 1878 - 1912)
The famous husband and wife team of Frank and Lillian Gilbreth also
supported Taylor’s ideas. They became interested in wasted motions in work.
After meeting Taylor, they combined their ideas with Taylor’s to put scientific
management into effect. Frank Gilbreth is regarded as the father of motion
study.

Gilbreth’s contributions to management

a. The ‘one best way’ of doing a job is the way that involves the fewest motions
performed.
b. He emphasized the training of workers from the very beginning to achieve
competence as early as possible.
c. He emphasized the welfare of the workers.
d. He devised methods for avoiding wasteful and unproductive movements.

Henry Lawrence Gantt (USA, 1861 - 1819)

In 1887 Gantt joined the Midvale Steel Company and soon became an
assistant to F.W Taylor and worked with him until 1919. He did much
consulting work on scientific selection of workers and the development of
incentive bonus systems.

Gantt’s contributions
Gantt made four important contributions to management:
a. Gantt chart to compare actual to planned performance. Gantt chart was a
daily chart that graph-ically presented the process of work by showing
machine operations, man-hour performance, de-liveries effected and the work
in arrears. The chart was intended to facilitate day-to-day production
planning.
b. Task-and-bonus plan for remunerating workers. The plan was aimed at
providing extra wages for extra work done.
c. Psychology of employee relations indicating management responsibility to
teach and train workers.
d. Gantt laid great emphasis on leadership, considered management as a
leadership function. Gantt’s contributions were more in the nature of
refinements rather than fundamental concepts. They made scientific
management more humanized and meaningful to devotees of Taylor.

Harrington Emerson (USA, 1853 - 1931)

Emerson was an American Engineer who devoted his attention to efficiency in
industry. He was the first to use the term ‘efficiency engineering’ to describe
his brand of consulting and called his phi-losophy “The Gospel of Efficiency”.
According to him, “efficiency means that the right thing is done in the right
way, by the right man, at the right place, at the right time”.

Administrative Management Theory

Henry Fayol (France, 1841 - 1925) was the most prominent exponent of this
theory. He graduated as a mining engineer in 1860 from the National School
of Mining. After, he joined French Coal Min-ing Company as an Engineer. After
a couple of years, he was promoted to manager and later to General Manager
of his company in 1888. At the time, the company was suffering heavy losses.
Fayol succeeded in transforming his company from near bankruptcy to a
strong financial position.
He divided management into six groups:
a. Technical activities - Production.
b. Commercial activities - buying, selling and exchange.
c. Financial activities - search for and optimum use of capital.
d. Security activities - protection of property and persons.
e. Accounting activities - stocktaking, balance sheet, cost, and statistics.
f. Managerial activities - planning, organization, command, coordination and
control.

According to him, these six functions had to be performed to operate

successfully any kind of business.

Fayol’s 14 Principles of Management

The principles of management are given below:
1. Division of work: Both technical and managerial activities can be performed
in the best manner only through division of labour and specialization that give
maximum productivity and efficiency

2. Authority and Responsibility: The right to give orders is called authority.

The obligation to accomplish is called responsibility. Authority and
Responsibility exist together. They are complementary and mutually
interdependent. Authority delegated should correspond or be at par with the
responsibility assigned. Responsibility for action cannot be greater than that
implied by the authority delegated nor should it be less.
3. Discipline: Rules and regulations, policies and procedures must be honored
by each member of an organization. No organization can work smoothly
without discipline.
4. Unity of Command: In order to avoid any possible confusion and conflict,
each member of an organization must receive orders and instructions only
from one superior (boss).
5. Unity of Direction: All members of an organization must work together
to accomplish common objectives.
6. Subordination of Personal Interest to General or Common Interest: Each
shall work for all and all for each. General or common interest must be
supreme in any enterprise.
7. Remuneration: Fair pay with non-financial rewards as incentive for good
performance. Sound scheme of remuneration should include adequate
financial and non-financial incentives.
8. Centralization: There must be a good balance between centralization and
decentralization of authority and power. Extreme centralization and
decentralization must be avoided.
9. Scalar Chain: The unity of command should bring about a chain or
hierarchy of command linking all members of the organization from the top to
the bottom.
10. Order: There should be proper scheduling of work to ensure that
everything is in the right place at the right time.
11. Equity: Employees should be treated with kindness and justice and without
favoritism.
12. Security of Tenure: Employees and managers must have job security.
Security of income and employment is a pre-requisite to sound organization
and management.
13. Spirit of Co-operation: Esprit de corps is the foundation of a sound
organization. Union is strength. Pride, loyalty and sense of belonging are
responsible for good performance.

14. Initiative: Creative thinking and capacity to take initiative provides sound
managerial planning and execution of predetermined plans.

Bureaucratic Theory
The theory focuses on organization structure. Max Weber, a sociologist,
contributed to the socio- logical approach to management called bureaucracy.
The approach that Weber used was to carry out an analysis of the church,
government, the military and business organizations. Weber disliked that
many organizations of his time were managed on a “personal” family-like basis
and that employees were loyal to individual supervisors rather than to the
organization. He believed that organizations should be managed by a formal
organizational structure, where specific rules were followed. He didn’t think
that authority should be based on a person’s personality but should be
something that was part of a person’s job and passed from individual to
individual as one person left and another took over. He called this non-
personal, objective form of organization structure bureaucracy. Bureaucracy
to Weber means an organization structure with clear rules, definition of tasks
and the maintenance of discipline. A manager should influence a subordinate
to do something by laying down rules and procedures on how something
should be done by the subordinate. Weber believed that a bureaucratic
structure was suitable for all kinds of organizations and would have the
following characteristics:

Features of Bureaucracy
1. A well-defined organizational hierarchy. All positions within a bureaucracy
are structured in a way that permits the higher positions to supervise and
control the lower positions. This clear chain of command facilitates control
and order throughout the organization.

2. Division of labour and specialization. All responsibilities in an organization

are specialized so that each employee has the necessary expertise to do a
particular task. Rules and regulations. Standard operating procedures should
govern all organizational activities to provide certainty and facilitate
coordination.
3. Impersonal relationships between managers and employees. Managers
should maintain an impersonal relationship with employees so that
favouritism and personal prejudice do not influence decisions.
4. Competence. Competence, not “who you know,” should be the basis for all
decisions made in hiring, job assignments, and promotions in order to foster
ability and merit.
5. Records. A bureaucracy needs to maintain a complete record regarding all
its activities. Therefore, all rules, decisions, and actions are formulated and
recorded in writing.
6. Authority. Authority stems from the office and not the office-holder.

Limitations of Bureaucracy
In practice bureaucracy has been found to have the following limitations:

The system is too rigid i.e. lacks flexibility due to obsession with rules and
procedures

There is an excessive long chain of command.

There is discouragement of individual initiative

Impersonality of interpersonal relationships

Anxiety due to pressure of conformity to rules and procedure

Dependence on superior

According to the bureaucratic model, the main goal of an organization is the

preservation of the organization itself. Change is very slow and difficult
because the structure isn't designed for change. Change causes uncertainty,
and this type of organization isn't strong on changing anything. The
bureaucratic Model is preferred where the rate of change can be predicated. It
is followed in govern-ment departments and in large business organizations.

NEO-CLASSICAL PERIOD
Neo-classical/Behavioural/Human Relations Theory improves on the classical
theory. Classical theory concentrated on job content and management of
physical resources whereas Neo- classical theory gave greater emphasis to
individual and group relationships in the workplace. It pointed out the role of
psychology and sociology in the understanding of individual and group
behavior in an organization.

Elton Mayo (Australia, 1880 - 1949)

Elton Mayo is recognized as the father of Human Relations School. Mayo led
a team of researchers from Harvard University that carried out investigations
in human problems at the Hawthorne Plant in Chicago. The experiments
(known as Hawthorne Experiments) investigated informal groupings, informal
relationships, patterns of communication, patterns of informal leadership etc.

The experiment lasted from 1927 to 1932 and indicated that the productivity
of employees is not the function of only physical conditions of work and wages
paid to them but also depends heavily upon the satisfaction of the employees
in their work situation.

The Hawthorne experiments consisted of four parts:

Illumination Experiment.

Relay Assembly Test Room Experiment.

Interviewing Program.

Bank Wiring Test Room Experiment.

1. Illumination Experiment: This experiment was conducted to establish the

relationship between output and illumination. When the intensity of light was
increased, the output also increased. The output showed an upward trend
even when the illumination was gradually brought down to the normal level.
Therefore, it was concluded that there is no consistent relationship between
output of workers and illumination in the factory. There must be some other
factor that affected productivity.
2. Relay Assembly Test Room Experiment: This phase aimed at knowing the
impact of length of the working day, rest hours, and other physical conditions.
In this experiment, a small work- group of six girls was constituted. These girls
were friendly to each other and were asked to work in a very informal
atmosphere under the supervision of a researcher. Productivity and morale
increased considerably during the period of the experiment. Productivity went
on increasing and stabilized at a high level even when all the improvements
were taken away and the pre-test conditions were reintroduced. The
researchers concluded those socio-psychological factors such as feeling of
being important, recognition, attention, participation, a cohesive work-group,
and non-directive supervision held the key for higher productivity.

3. Mass Interview Program: The objective was to make a systematic study of

the employees’ attitudes to their “working situation” or environment. The
researchers interviewed a large number of workers with regard to their
opinions on work, working conditions and supervision. The findings confirmed
the importance of social factors at work in the total work environment.

4. Bank Wiring Test Room Experiment: This experiment was conducted with
a view to develop a method of observation and obtaining information about
social groups within a company and also finding out the causes which restrict
output. The experiment was conducted to study a group of 14 workers under
normal conditions. After the experiment, the productivity of this group was
com-pared with their earlier production records. It was observed that the
group evolved its own production norms for each individual worker, which was
made lower than those set by management. Be-cause of this, workers would
produce only so much, thereby defeating the incentive system. The workers
who tried to produce more than the group standard were isolated, harassed
or punished by other members of the group.
5. The findings of the study were that:

Each individual was restricting output.

The group had its own “unofficial” standards of performance.

Individual output remained fairly constant over a period of time.

Informal groups play an important role in the working of an organization.

Elements of Behavioral/Human Relations Theory

There are six elements of behavioural theory.
1. Individual Differences: The neoclassical theory emphasized that individual
differences must be recognized. Each person is unique. He brings to the job
situation certain attitudes, beliefs, ways of life, as well as skills. The inner
world of the worker is more important than the external reality in the
determination of productivity. Thus human relations at work determine the
rise or fall in productivity.
2. Informal Groups: Workers are social beings and should be treated as such
by management. The existence of informal groups in organizations is natural.
3. Participative Management: Allowing workers to participate in decision-
making aids in increasing productivity.
4. A business organization is basically a social system. It is first and foremost
made up of humans, not just a techno-economic system.

5. The employee can be motivated by psychological and social needs because

his behavior is also influenced by feelings, emotions and attitudes. Economic
incentives are not the only method to motivate people. Management must
learn to develop co-operative attitudes with workers and not only rely on
command.

Limitations of Human Relations/Behavioral Approach

a. The study tends to overemphasize psychological and social aspects at the
cost of other work aspects.
b. The behaviourists saw only the human variable as critical and ignored other
variables.
c. The human relationists overemphasize the group and group decision-
making. In practice, groups have their own disadvantages.

Modern Theories of Management (From 1960 to date)

The modern business ideologists have recognized the social responsibilities of
business activities. The formation of big companies resulted in the separation
of ownership and management.

This change in ownership pattern inevitably brought in ‘salaried and

professional managers’ in place of ‘owner managers’. The giving of control to
the hired management resulted in the wider use of scientific methods of
management. But at the same time the professional management has be-come
socially responsible to various sections of society such as customers,
shareholders, suppliers, employees, trade unions and government agencies.

Under modern management thought three streams of thought exist:

1. Systems Approach
2. Contingency Approach

3. Quantitative or Mathematical Approach or Management Science Approach

1.The Systems Approach

A system is a set of interconnected and inter-related elements or component
parts to achieve certain goals. All parts or components are interrelated and
each part is equally important. An organization as a system consists of sub-
systems such as the production department, marketing department, finance
department, personnel department etc. Each of the areas does not operate in
isolation and must co-operate and work in harmony with other parts. As a
result, if one part is not working well, it will affect other parts. Also, the
decision of one part will also affect other parts. E.g., the marketing department
notices that there is greater demand for the products of an organization. This
means that there should be an increase in production. But to increase
production is not the job of the marketing department. The production
department may request for more workers so as to be able to cope with
additional volume of work. The personnel department is called forth to assist
in employing extra hands. These extra workers will have to be compensated by
paying them salaries or wages. The finance department will then have to look
into this.

Any business enterprise must build a true team and weld individual efforts
into a common effort i.e. each member of the enterprise contributes something
different but they must all contribute towards a common goal. Their efforts
must all pull in the same direction, and their contribution must fit together to
produce one whole-without gaps, without friction, without unnecessary
duplication of effort.

Features of Systems Approach

1. A system consists of interacting elements. It is a set of inter-related and
interdependent parts arranged in a manner that produces a unified whole.
2. The various sub-systems should be analyzed in their inter-relationships
rather than in isolation from each other.

3. An organizational system has a boundary that determines which parts are

internal and which are external.
4. A system does not exist in a vacuum. It receives information, material,
energy, etc from other systems as inputs. These inputs undergo a
transformation process within the system and leave the system as outputs to
other systems.
5. An organization is a dynamic system as it is responsive to its environment
i.e., it is vulnerable to changes in its environment.
Importance of the systems theory
1. It calls attention to the dynamic and interrelated nature of an organization
i.e. it requires that when a manager is making a decision he should consider
its implications on all the parts of an organization and the impact the external
environment would have on such a decision.
2. It stresses the need for feedback from the environment that acts as a source
for information and hence helps in decision-making.
3. It enhances the manager’s appraisal of his own line function by requiring a
broader view of the needs of the system as a whole.
4. The manager is able to evaluate several alternative courses of action to solve
a problem at hand.
5. The manager is able to recognize the need for co-operation, co-ordination and
teamwork.

Concepts of the systems approach

1. The concept of synergy: It’s the idea that the whole is greater than the
sum of its parts i.e. 2+2=5.
2. The concept of atrophy: Is what happens when a firm adopts a closed
system approach. It simply dies or ceases to exist.

1. The concept of equifinality: This means that two or more strategies may lead
to the same end results. Hence it is important for a manager to consider all
possible alternatives to a problem.
2. Open system: That the organization is in constant interaction with the
environment and cannot survive without this interaction
3. The “chain of effects” concept: It postulates that a chain of effects follows
from any decision or event that occurs in a system. The manager making such
a decision should be able to foresee the chain of effects that will follow from
such decision to the whole organization.
4. The “state transition” concept: Every organization is in a given state or
condition at any moment. A decision taken when the organization is in one
state will produce a chain reaction which will take it to a new state. Hence a
manager should be able to predict the behaviour of complex systems and
reduce the disadvantages while maximizing the advantages of the new state.

2. The contingency approach

It is also called the situational approach. The theory was developed during the
1970’s by J.W. Lorsch and P.R. Lawrence, who were critical of earlier
approaches presupposing one best way to manage. It avers that management
problems are different under different situations and require to be tackled as
per the demand of the situation. The contingency view seeks to understand the
inter-relationships within and among sub-systems as well as between the
organization and its environment and to define patterns of relationships or
interactions of variables.

The state of an organization is said to be contingent on forces of environment.

“Hence, a contingency approach is an approach, where behavior of one sub-
unit is dependent on its environment and relationship to other units or sub-
units that have some control over the sequences desired by that sub- unit.”

Thus, the contingency approach provides a pragmatic method of analysing

organizational sub- systems and tries to integrate these with the environment.
If a manager wants to change the situation of any part of the organization, he
must try to change the situation influencing it.

Contingency approach is an improvement over the systems approach. The

approach recognizes that organizational system is the product of the
interaction of the sub systems and the environment.

Features of Contingency Approach

The contingency approach does not accept the universality of management
theory. It stresses that there is no one best way of doing things. Management
is situation, and managers should explain objectives, design organizations
and prepare strategies, policies and plans according to prevailing
circumstances.

For managerial practices to be effective, they must be adjusted to changes in

environment.

Management should improve diagnostic skills so as to anticipate and be

ready for environmental changes. Managers should have sufficient human
relations skill to accommodate and stabilize change.

Management should apply the contingency model in designing the

organization, developing its information and communication system, following
proper leadership styles and preparing suitable objectives, policies, strategies,
programs and practices.

This approach takes a realistic view in management. It discards the universal

validity of principles and executives are advised to be situation-oriented and
not stereo-typed. Hence executives become innovative and creative. On the
other hand, the approach does not have theoretical base. An executive is
expected to know all the alternative courses of action before taking action in a
situation, and this is not always feasible.

The Mathematical/Quantitative/Management Science Theory

The Mathematical school of thought gives a quantitative basis for decision-
making and considers management as a system of mathematical models and
processes. This school is also sometimes called, ‘Operations Research” or
“Management Science School’. The main feature of this school is the use of
mixed teams of scientists from several disciplines to solve problems. It uses
scientific techniques for providing a quantitative basis for managerial
decisions.

Different mathematical and quantitative techniques or tools, such as linear

programming are being used in management for solving a wide range of
problems. The exponents of this school believe that all the phases of
management can be expressed in quantitative terms for analysis.

Limitations
1. This approach does not give any weight age to human element which plays
a dominant role in all organizations.
2. In actual life executives have to take decisions quickly without waiting for
full information to develop models.
3. The various mathematical tools help in decision making. But decision
making is one part of managerial activities. Management has many other
functions than decision-making.
4. This approach supposes that all variables to decision-making are
measurable and interdependent. This assumption is not realistic.
Sometimes, the information available in the business for developing
mathematical models are not up to date and may lead to wrong decision-
making.

5.0 POWER, INFLUENCE AND AUTHORITY

Power: Power is the ability to affect the behaviour and attitudes of others. It
is the desire of an individual to change his behaviour and attitudes through
the suggestions and promptings of another person who has influence over
him.
Influence: This is the conscious and unconscious exercise of power over
another person either positively or negatively.
Authority: Authority is the power resulting from one’s position within the
organization. It is the right to influence other people’s behaviour and action

Authority Relationships
This is divided in three namely: line authority, staff authority and functional
authority.
Line Authority: Line authority indicates “command” relationship. This is
the authority that makes one expect obedience from subordinates. Line
authority is the chain of command that flows from the Board of Directors, to
the Managing Director all the way to the operational employees.
Staff Authority: This position is advisory in nature. Generally, staff executives
are specialists who make recommendations to line managers for decision-
making. They only advise but don’t make the decisions. It allows a staff
executive (engineers, lawyers, accountants, etc.) to make decisions and
implement them within clearly defined guidelines. This reduces the workload
of line executives by taking advantage of the expertise of the staff executive.
The staff authority aims at supplementing the activities of line authority.

Distinction between Authority and Power

i. Authority is the right of a person to influence others whereas power
is the capacity or ability of a person to influence others.
ii. Authority is institutional in character while power is personal in nature.
iii. Authority is legitimate and formal while power is informal and does not
have to be legitimate.
Difference Between accountability and Responsibility Accountability
Accountability can be described as answerability. Having accountability means
a necessity and ex- pectation to explain one's actions for whatever they are
accountable for. An easy way to think about being accountable is - whatever
the results of a person's actions, that person must be able to give an account
of not just what happened, but why it happened and how.
For example, a CEO, as an executive of a company, may allow it to fall into
ruin, and squander all of its funds and assets - but still be accountable, if
they are up for the task of simply explaining what happened, how it happened,
and why. Accountability, then, does not lay blame for or pin success to the
person who is accountable, it only describes that person as being able to
explain their actions or the actions of a group or business.
Responsibility
Responsibility is the idea of being completely in charge of something, that the
person who is responsible for something is the root cause behind whether that
thing succeeds, fails, lives, or dies. If a person is responsible for taking care of
a sick patient, the patient’s fate is dependent on that person. If the patient
lives, it was the responsibility of that person and can be attributed to that per-
son's actions. If he dies, the responsibility also lies with that person.
Importance of Authority
a. Authority and enable managers to apply rules on employees so that
they can work towards organizational goals.
b. It enables managers to exert influence on other people.
c. It enables managers to delegate work to lower ranking managers since
they cannot do everything that must be done to accomplish
organizational goals.
DELEGATION OF AUTHORITY
Authority is said to be delegated when a supervisor assigns part of his right
to the subordinates. Delegation means transferring of authority to
subordinates to enable them make decisions promptly and take action
required for the performance of tasks and achievement of goals assigned to
them. It is the process through which authority is distributed throughout
the organization.
The process of delegating authority
i. Assigning duties and responsibilities to subordinates.
ii. Transferring of corresponding authority for the performance of assigned
duties.
iii. Creation of obligations on the part of the subordinates to perform
their duties effectively and efficiently.
iv. Establishment of control mechanisms to ensure that subordinates are
performing effectively.
Objectives of delegation of authority
a. To apportion part of the manager’s work he needs not to do himself
so that he can focus on more important matters.
b. To train and develop the subordinates for future responsibilities.
c. To push decision making down to the operational level so that decisions
are made speedily.
d. It is used as a way of motivating subordinates and to obtain their
commitment in formulation and implementation of plans.
Guidelines to Effective Delegation
a. Authority once delegated may be enhanced/ reduced on changes in
responsibility.
b. Authority is completely withdrawn when an employee quits the
organization.
c. An executive cannot delegate authority, which he himself does not
possess.
d. A superior cannot delegate all of his authority.

Principles of Delegation
1. Functional definition principle: There should be a clear explanation
and definition of the activities to perform, the authority provided and
the relationship with other positions or departments.
2. Expected result principle: The subordinate must understand the
results expected from his work.
3. Scalar principle: The clearer the chain of command from the top
manager in an organization to every subordinate position the more
effective will be decision making and communication withinthe
organization since subordinates know who will delegate authority to
them and whom to refer matters that are above their authority.
4. Authority level principle: The principle states that managers should
make decisions they can but such decisions must be based on the
delegated authority i.e., they should never take decisions that are
above their authority.
5. Unity of command principle: The principle says that the more a
subordinate reports to a single superior, the less the problem of
conflict in instructions.
6. Principle of parity of authority and responsibility: Authority
delegated should correspond or be at par with the responsibility
assigned. If this is the case, responsibility for action cannot be greater
than that implied by the authority delegated nor should it be less.
Reasons for Failure to Delegate/Barriers to Effective Delegation
Despite the fact that delegation is a very important organizational process,
some executives find it difficult to delegate. Some of the major reasons are:
1. Some executives get trapped in the “I can do it better myself”
assumption i.e. lack of confidence in subordinates
2. Lack of ability to direct or encourage co-operation among subordinates.
3. Fear that delegation diminishes managerial authority.
4. Fear that through delegation subordinates may gain experience
and could be promoted to take over the manager’s job.
5. Some managers fail to delegate because of the fear that
subordinates may take better decision than them.
6. Subordinates may be reluctant to take higher responsibilities
because of fear of failure or inade quacy.
6.0 CORPORATE 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.
The International Organization for Standardization (ISO) emphasizes that a
business's relationship to its society and environment is a critical factor in
operating efficiently and effectively.

Social responsibility means that individuals and companies have a duty to act
in the best interests of their environments and society as a whole. Social
responsibility, as it applies to business, is known as corporate social
responsibility (CSR). Many companies, such as those with "green" policies,
have made social responsibility an integral part of their business models.

-The concept of social responsibility of business is concerned with the obligation

that business has in helping to promote the welfare of the society. Business has
therefore been experiencing an increasing pressure from the society to be socially
responsible. Two major factors or reasons have accounted for this, namely:
1. Society has become more enlightened. A more educated society is more
aware of its problems, rights, and the role business can play in social
welfare.
2. Society’s problems have become more alarming. The society is
impatient and feels that something must be done. Therefore, more than
ever before business cannot be expected just to sit and wait. It must also
play a role in helping to combat these problems.

Social Responsibilities of the Organization

Social responsibility is the obligation of managers to pursue policies, to make
decisions or to follow lines of actions, which maintain or improve the well-
being of society.
In this context social responsibility include related factors such as:

the environment

Social welfare

sustainability

exploitation, child-labor, social and environmental damage

corruption, armed conflict and political issues

staff and customers’ relations - for instance education and training, health
and safety, duty of care, etc.

local community and other social impacts on people's health and well-being

The actions of the manager that emanate from the objectives of the
organization should be in harmony with the objectives and values existing in
society. They provide the standards through which the organizations’ activities
can be measured and evaluated.

The social responsibilities of the manager can be seen in several ways:

1. Responsibility to the Community: Here, the manager is expected to
discharge his responsibility to the community along the following lines:

Provision of Scholarships: Depending upon the resources available

scholarships can be provided for the poor students who cannot pay for
themselves.

Provision of good quality products at affordable prices: The goods and

services besides being of good quality must also be at affordable prices.

Provision of employment Opportunities: Members of the community who

are qualified and are interested in working for the organization should be able
to do so.
2. Responsibility to employees

Payment of good wages and salaries and other fringe benefits. This will keep
the workers on the job beyond making them to be happy.

Providing a safe working environment by obeying safety standards, installing

fire extinguishers at strategic places, covering dangerous machines, having staff
clinic and so on.

Taking care of welfare matters and job security: This is necessary not only
to make the employees happy, but to make them readily identify with and be
committed to the organization. They know that their jobs are secure and they
strive for absolute loyally and dedication.

Provision of training facilities: The manager should ensure that workers are
exposed to training and re-training so that they can be acquainted with
current skills. This will be of value not only to the employees but also to the
organization as they are expected to apply their know- how in their different
jobs, making them to be effective and efficient.

3. Responsibility to the Shareholders.

Payment of dividends and issuance of bonus shares: The shareholder

should be paid dividends. This is necessary because the shareholder has
taken a risk by investing his money through the purchase of shares in the
business.

Holding Regular annual general meetings: This is because; it is during the

annual general meetings that important decisions concerning the business are
taken. Such decisions include, the election of board members, discussing the
audit report, declaring dividends for the shareholders, etc.

4. Responsibility to the Government

Payment of taxes: The organization should pay taxes regularly to the

government. This can hardly be over emphasized since government uses the
money for developmental purposes. Falsification of the exact amount to be
paid and delay in the payment of tax should be avoided.

Complying with government rules and regulations: The necessary rules and
regulations affecting the business should be complied with, such as
registering the business under the companies Act. Responsibility to
Customers. It involves:

Producing quality goods: Goods produced for the consumers/customers

must be safe for human consumption. The quality should also be there so as
to meet the needs of the consumers.

Proper Education in product usage: It is the duty of the manager to carry out
proper education of the consumer on proper use of the product.

Avoiding fake and misleading advertisement: Managers should give correct

benefits of their prod-ucts. The awareness being created should not be a
misleading one.

Attending to customers’ complaints: Customers are supreme. That is why

whenever the customer brings a complaint, such complaint should be properly
investigated and necessary answers provid-ed. Customers’ satisfaction is vital
to continued survival and profitability of the business and must not be
overlooked.

The Social Responsibility Debate

The idea of corporate social responsibility dates back to early 20th century. It
was started by business executives who believed that businesses had an
obligation to use their resources in ways that would be beneficial both to the
owners and the society as a whole. Business or corporate social responsibility
did not, however, find its way into business management philosophy with ease.
Some business executives were opposed to the idea and only gradually accepted
it. A number of arguments were and have been raised for and against this social
responsibility of business.
Arguments for Social Responsibility
The major arguments that have been raised in support of business social
responsibility are as follows:
1. Changing public needs and expectations: The changing public needs
have led to changing expectations of business, therefore, increased
business social response is necessary in order to narrow the gap between
expectations and actual response and keep business in tune with society.
2. Moral obligation: Social responsibility is ethical. Therefore, a business
is ethical by being socially responsible
3. Limited resources: A business must act responsibly not only to conserve
the earth’s limited resources but also to use such scarce resources wisely
4. Better social environment: a business can help in creating a better
quality of life by helping to solve difficult social problems
5. Long-run profit. A more socially responsible business tends to have more
secure long-run profits
6. Discouragement of further government regulations: If business is
socially responsible, it will discourage government from imposing more
regulations
7. Balance of responsibility with power: A business should be more
socially responsible as a balance to the large amount of social power it
enjoys
8. System interdependence requires social involvement: The modern
social system has become so complex and interdependent that almost any
internal act of business ahs some influence on the external world.
Therefore, because business action affects others outside the business, it
should act socially responsible
9. Business contributes to social problems: Many of society’s problems
have been caused by business, therefore, it (business) should help correct
them
10. Public image: Business social response improves the public image
of business
11. Business contributes to social problems: Business has valuable
resources that could be applied to social problems, therefore, it should
share its resources
12. Prevention is better than cure. It would be easier and cheaper for
business to act to prevent social problems, than to solve the problems once
they have occurred.

Arguments Against Social Responsibility

The following are the major arguments that have been raised against social
responsibility of business:
1. Need for profit maximization: The singular pursuit of profit enables
business to reduce costs and prices which benefit society
2. Divided purposes and confused expectations: if business executives
have also to pursue social goals besides the economic ones, their interests
may be so greatly divided that they will become confused and ineffective
3. Costs of social responsibility: Social responsibility costs something and
such costs are eventually passed on to society
4. Weakened international balance of payments: The costs of social
programs eventually make products of a country expensive (due to
attempts to recover costs in prices), which weakens a country’s competitive
position in international trade. Such a country is likely to end up in a
poor balance of payments relationship with other countries.
5. Business has enough power: That business already has enough social
power, therefore, business would be too powerful if it had also to assume
social responsibility.
6. Lack of social skills: Business executives are economically oriented and
unlike social workers lack the social skills required in the administration
of social responsibility
7. Lack of accountability: Business has no direct lines of social
accountability to the people, therefore, it is unwise to allow business
activities in areas where business is not accountable.
8. Inability to make moral choices; only persons or individuals can make
moral choices, not organizations or business. Therefore, it is a waste of
time talking about business social responsibility.

Areas of Social Responsibility

-Business has an obligation to be socially responsible to various parties in the
society. The parties define the area where business is expected to be socially
responsible. The major ones are as follows:
1. The shareholders/owners
Business has the following major responsibilities to the owners:
(i) Increase shareholders earnings
(ii) Pay the best dividends through the best dividend payout ratio
(iii) Safeguarding the shareholders interests, for example by protecting
shareholders property from fraud or damage.
(iv) Improvement of full disclosure and other areas of business dealings
and economic activities.

2. The employees
Business should be socially responsible to the employees in ways such as the
following:
(i) Rewarding employees equitability
(ii) Safeguarding employees health and safety
(iii) Giving employees equal opportunities in such things as promotion and
training
(iv) Promoting employees welfare through the provision of such things as
educational, recreational, housing and credit facilities
(v) Effective and efficient personnel administration and industrial relations
practices.
3.The consumers
Business should be socially responsible to the consumers in ways such as the
following:
(i) Giving consumers good quality and not defective products
(ii) Giving consumers safe products
(iii) Educating consumers about products and use of the products
(iv) Being fair in the quantity and prices of products sold
(v) Avoiding misleading advertisements
(vi) Making products available and affordable to the consumers
(vii) Being fair in their terms of sale to the consumers
(viii) Making the after-sale services that may be required by consumers
available and affordable
(ix) Proper labeling, packaging and presentation of products in a manner
that the quality, quantity, hazards of use and limitations of use are
clearly set forth
(x) Responding to consumer complaints and adhering to ill-stated or
implied warranties
(xi) Conducting ample research before allowing a product on the market

4.The suppliers
The major business social responsibilities in this area are as follows:
(i) Being fair in the allocation of tenders to suppliers
(ii) Paying the suppliers in good time
(iii) Fair and reasonable terms of purchase
5.The creditors
Here business should be socially responsible in such matters as:
(i) Not defaulting in payments
(ii) Paying fair and reasonable rates of interest
(iii) Paying interests and the principal on time
6.The government
Business should be socially responsible to the government in:
(i) Complying with government laws and regulations
(ii) Paying proper taxes
(iii) Supporting the government in welfare and development programs

7.The community
Here business could be socially responsible by doing the following:
(i) Supporting or providing such things as educational, recreational,
cultural, health, transportation, welfare and housing facilities
(ii) Active participation in community development programmes
(iii) Welfare programmes for the aged, handicapped and undernourished in
the community.

8.The general public

Here some of the ways in which business could be socially responsible are as
follows:
(i) Not only by creating employment opportunities, but also by making
such opportunities equal for all
(ii) Giving due consideration to the minorities and disadvantaged groups
in society
(iii) Avoiding pollution of the environment through such things as noise too
bright light and waste products

Importance of Corporate Social Responsibility

a) Improving the Company's Brand
Being a socially responsible company can bolster a company's image and build
its brand. The public perception of a company is critical to customer and
shareholder confidence in the company. By projecting a positive image, a
company can make a name for itself for not only being financially profitable,
but socially conscious as well. Also, by being active in the community, a
company's employees are engaging with potential customers and in doing so,
indirectly marketing the company in the process.

b) Engaging Customers
Building relationships with customers is the cornerstone of a successful
company and having a social responsibility policy can impact the buying
decisions of customers. Some customers are willing to pay more for a product
if they know a portion of the profit is going to worthy cause. Also, if a company
is active in the local community – for example, a bank that offers loans to low-
income families – the company will be viewed positively by the community
and perhaps boost the company's sales as a result. In short, building a
positive relationship with customers and their communities can lead to
increased sales and rising profits.

c) Retaining Top Talent

Many employees want to feel like they're part of something bigger. Social
responsibility empowers employees to leverage the corporate resources at their
disposal to do good. Some public corporations' employees number in the tens
of thousands, and when they get behind an initiative, the results can be
amazing.
Furthermore, being part of a strategy that helps the greater good can boost
employee morale and lead to greater productivity in the workforce. Knowing a
product and service is also helping with social causes can create a sense of
pride and that pride shows in relationships with customers and fellow
employees.

d) Helping Companies Stand out from the Competition

When companies are involved in the community, they stand out from the
competition. Building relationships with customers and their neighborhoods
helps improve the brand's image. For example, Elon Musk, CEO of Tesla Inc.
(TSLA) has bridged the gap between the corporate world and his socially
responsible vision by offering electric-powered cars and environmentally
friendly automotive products.

e) The Bottom Line

When social responsibility is recognized as part of a company's business
model, it can attract positive publicity, help attract and retain top talent, and
improve relationships with customers and their communities. The benefits can
be far and wide, including client retention, improved sales, and financial
success.

TOPIC 7: CORPORATE GOVERNANCE

Meaning and definition of Corporate Governance
Corporate governance “refers to the manner in which the power of the
corporation is exercised in the stewardship of the corporation’s total portfolio of
assets and resources with the objective of maintaining and increasing
shareholders value through the context of its corporate vision” (PSCGT, 1999)
The Capital Markets Authority of Kenya (CMA, 2000) defines corporate
governance as the process and structures used to direct and manage business
affairs of the company towards enhancing prosperity and corporate accounting
with the ultimate objective of realizing shareholders long-term value while taking
into account the interests of other stakeholders.
It is about promoting corporate fairness, transparency and accountability. In
other words, 'good corporate governance' is simply 'good business'.

Rationale for Corporate Governance

The organization of the world economy (especially in current years) has seen
corporate governance gain prominence mainly because:
1. Institutional investors, as they seek to invest funds in the global economy,
insist on high standard of Corporate Governance in the companies they invest
in.

2. Public attention attracted by corporate scandals and collapses has forced

stakeholders to carefully consider corporate governance issues.

Objectives of Corporate Governance

Profitability and efficiency of the firm;

Long-term competitiveness of firms in the global economy;

The relationship among the firm’s stakeholders;

Transparency in business transactions and effective decision making to

achieve corporate objectives;

Statutory and legal compliances;

Protection of shareholder interests;

Commitment to values and ethical conduct of business.

Principles of Corporate Governance

These are summarized below:
1. The authority and duties of owners (shareholders): Members and
shareholders shall jointly and severally protect, preserve and actively exercise
the supreme authority of the corporation in gen-eral meetings (AGM). They have
a duty to exercise that supreme authority to:
Ensure that only competent and reliable persons who can add value are elected
or appointed to the board of directors (BOD).

Ensure that the BOD is constantly held accountable and responsible for the
efficient and effective governance of the corporation so as to achieve corporate
objective, prosperity and sustainability.

Change the composition of the BOD that does not perform to expectations or
in accordance with the mandate of the corporation
2. Leadership: Every corporation should be headed by an effective BOD, which
should exercise leadership integrity and good judgement in directing the
corporation so as to achieve continuing prosperity and to act in the best interest
of the enterprise in a manner based on transparency, ac-countability and
responsibility.
3. Appointments to the BOD: It should be through a well-managed and effective
process to ensure that a balanced mix of proficient individuals is made and that
each director appointed is able to add value and bring independent judgment on
the decision making process.

4. Strategy and Values: The BOD should determine the purpose and values of
the corporation, deter-mine strategy to achieve that purpose and implement its
values in order to ensure that the corporation survives and thrives and that
procedures and values that protect the assets and reputation of the corporation
are put in place.
5. Structure and Organization: The BOD should ensure that a proper
management structure is in place and make sure that the structure functions to
maintain corporate integrity, reputation and responsibility.

6. Corporate Performance, Viability & Financial Sustainability: The BOD

should monitor and evaluate the implementation of strategies, policies and
management performance criteria and the plans of the organization. In addition,
the BOD should constantly revise the viability and financial sustain-ability of the
enterprise and must do so at least once in a year.

7. Corporate Compliance: The BOD should ensure that the corporation

complies with all relevant laws, regulations, governance practices, accounting
and auditing standards.

8. Corporate Communication: The BOD should ensure that the corporation

communicates with all its stakeholders effectively.

9. Accountability to Members: The BOD should serve legitimately all members

and account to them fully.
10. Responsibility to Stakeholders: The BOD should identify the firm’s
internal and external stakeholders and agree on policies determining how the
firm should relate to and with them, increasing wealth, jobs and sustainability
of a financially sound corporation while ensuring that the rights of the
stakeholders are respected, recognized and protected. TRENDS AND EMERGING

8.0 ORGANIZATIONAL LEADSRHIP AND STRUCTURE

Organizational leadership
Leadership is the process by which an executive influences the work and
behaviour of subordinates, in choosing and attaining specific objectives.
Leadership is the activity of influencing people to strive willingly for group
objectives.
It is the ability of a superior to influence the behaviour of his subordinates and
persuade them to follow a particular course of action.
A person is said to have influence over others when they are willing to carry out
his wish and accept his advice or guidance.
A manager will be a leader only when he is successful in influencing and
motivating his subordi-nates to work enthusiastically to accomplish the stated
goals.
Importance of Leadership
a. Motivation of employees: Leadership makes people eager to work towards the
achievement of group goals. The will to work is triggered by leadership.
b. Creating confidence: An effective leader creates and sustains self-confidence
among his followers. He serves as a father figure and members gain strength and
security by identifying emotionally with him.
c. Coordination: Leadership is the cohesive force which holds the group intact,
the force that trans-forms chaos into order, the disciplinary power that keeps
the group working towards the goal, the electric current that energizes human
action and the insight that converts despair into hope and changes half-hearted
endeavour into superior performance.
d. Facilitates change: Leadership is the mechanism that convinces people about
the need for change and becomes the agent of that change.
e. Goal setting: A leader provides guidance to the group by setting and
interpreting objectives. He outlines the operations of the organization.

Theories of Leadership
I. Trait theory
According to trait theory of leadership, a successful leader is one who processes
certain traits or qualities. These qualities can be deduced by analysing the
personality of a successful leader in dif-ferent life situations.
This approach assumes that leaders are born and not made. Leadership consists
of certain inherited characteristics or personality traits which distinguish leaders
from their followers.
Traits of effective leaders
Intelligence.
Ability to think logically.
Initiative
Creative and innovative.
Self-confidence
Visionary
Sense of responsibility
Human relations skills
Energy and drive
Appearance
Enthusiasm
Personality – height and weight
Judgement
Tact and diplomacy
Moral courage
Integrity
Emotional stability

Limitations of the Trait theory

a. The theory does not consider the whole environment of leadership. The same
person may prove successful in one situation but may fail in another situation.
b. It is difficult to formulate a generally accepted list of traits of leadership.
Different people have the same traits in different degrees and it is difficult to
measure the traits. It has not been possible to isolate and identify traits that are
common to all leaders.
II. Situational theory

Under the situational theory, leadership is considered to be a function of the

situation in which a leader emerges and works. It assumes that the traits and
behaviour of a leader are governed by the demands of the situation.
The situational theory focuses attention on the interaction between the leader,
the group and the environment in which they operate.
Leadership behaviour is determined by two situations or factors:
a. The personal characteristics of the subordinates
b. Nature of the task
c. The nature of the physical environment

The personal characteristics of the subordinates determine the managers’

behaviour and the extent to which they see such behaviour as an immediate or
potential source of satisfaction.
The nature of the task relates to the extent that it is routine and structured, or
non-routine and un-structured.

When a task is highly structured, the goals readily apparent and subordinates
are confident of their ability to perform, then attempts to further explain the job
or to give directions are likely to be viewed as unacceptable behaviour. However,
when a task is highly unstructured, the nature of the goals is not clear and
subordinates lack experience, then a more directive style of leadership be-
haviour is likely to be welcomed by subordinates.
Effective leadership behaviour is therefore based on the willingness of the
manager to help subor-dinates and the needs of the subordinates for help.

Leadership Styles
Definition: Leadership style is the way in which the functions of leadership are
carried out, the way in which the manager typically behaves towards members
of a group.
Leadership styles can be classified according to the philosophy of the leaders.
What the leader does determines how he leads.
The attention given to leadership style is based on the assumption that
subordinates are more like-ly to work effectively under a manager who adopts a
certain style of leadership than they will for managers who adopt alternative
styles.

Types of Leadership Styles

1. Autocratic or Dictatorial Leadership
Autocratic leaders keep the decision-making authority and control in their own
hands and assume full responsibility for all actions. In addition, they structure
the entire work situation in their own way and expect the workers to follow their
orders. The autocratic leader believes that his leader-ship is based upon the
authority conferred upon him by some source, such as his position, knowledge,
strength or the power to punish and reward.
Advantages
Autocratic leadership is useful when the subordinates are new on the job and
have had no experience either in the managerial decision making process or
performing without active supervision.
It can increase efficiency, when appropriate, and get quicker results, especially
in a crisis or emergency situation when the decision must be taken immediately.
The autocrat is useful when the subordinates are not interested in seeking
responsibility or when they feel insecure at the job and when they work better
under clear and detailed directives.
It is useful when the chain of command and the division of work is clear and
understood by all.

Disadvantages
One-way communication without feedback leads to misunderstanding and
communication break-down.
Since it inhibits the worker’s freedom, it fails to develop his commitment to the
objectives of the organization.
Since it provides for worker resentment, it creates problems with their morale
resulting in poor productivity in the long run.
It is unsuitable when the work force is knowledgeable about their jobs and the
job calls for team work and cooperative spirit.

2. Participative or Democratic Leadership

In this type of leadership, the subordinates are consulted and their feedback is
taken into decision making process. The leader’s job is primarily of a moderator,
even though he makes the final deci-sion and he alone is responsible for the
results. The group members are encouraged to demon-strate initiative and
creativity and take interest in setting plans and policies and have maximum
participation in decision making. This type of leadership is especially effective
when the workforce is experienced and dedicated and is able to work
independently with least directives.
Advantages
Active participation in the management by labour assures rising productivity.
Workers develop a greater sense self-esteem due to importance given to their
views and ideas
They become more committed to changes that may be brought about by policy
since they them-selves participated in bringing about these changes.
The leadership induces confidence, cooperation and loyalty among workers.
It results in higher employee morale.

Disadvantages
This approach assumes that all workers are genuinely interested in the
organization and its growth.
Some group members may fill alienated if their ideas are not accepted for
action. This may create a feeling of frustration and ill will.
This approach is time consuming since many viewpoints and ideas have to be
incorporated in a decision.
Some managers may be uncomfortable with this approach because they may
fear an erosion of their power and control over others.
This approach relies heavily on incentives and motivation through recognition,
appreciation, status and prestige but employees may be more interested in
financial incentives instead of prestige.

3. Laissez-faire or Free-reign Leadership

In this type of leadership, the leader is just a figurehead and does not give any
direction. He acts principally as a liaison between the group and the outside
parties and supplies necessary materials and information to group members. He
lets the subordinates plan and develop their own tech-niques for accomplishing
goals within the organizational policies. The leader does not attempt to regulate
or control and there is complete group or individual freedom in decision-making.
Advantages
It creates an environment of freedom, individuality and team spirit.
This approach is very useful where people are highly motivated and
achievement-oriented.

Disadvantages
It may result in disorganization and chaos.
Insecurity and frustration may develop due to lack of specific guidance.
Some members may put their own interests above the group’s interests.

4. McGregor’s Theory X and Theory Y

Under here, Douglas McGregor argues that the style adopted by a manager in
managing his subor-dinates is basically dependent upon his assumption about
his subordinates. Theory X is a negative, autocratic style while Theory Y is a
positive, participatory and democratic style.

Theory X
According to Douglas McGregor, this is the traditional theory of human
behaviour, which makes the following assumptions about human nature:
a) People are inherently passive-even resistant to organizational needs. Hence
they must be per-suaded, rewarded, punished and properly directed for them to
perform.
b) The average human being has an inherent dislike of work and will avoid it if
he can. He lacks ambi-tion, dislikes responsibility and prefers to be led.
c) He is by nature resistant to change.
d) He is gullible, not very bright.

Theory Y
The assumptions of theory Y are as follows:
a) Work is as natural as play or rest, provided the conditions are favourable; the
average human being does not inherently dislike work.
b) External control and the thrust of punishment are not the only means for
bringing about efforts towards organizational objectives. Man can exercise self-
control and self-direction in the service of objectives to which he is committed.
c) The average human being, under proper conditions does not shun
responsibility, but learns not only to accept responsibility but also to seek it.
d) He has capacity to exercise a relatively high degree of imagination and
creativity in the solution of organizational problems.
5. Paternalistic Leadership
Under this type of leadership, the leader assumes that his function is fatherly.
His attitude is that of treating the relationship between himself and his group as
that of family with the leader as the head of the family. The leader works to help,
guide, protect and keep his followers happily working together as a family. He
provides them with good working conditions, fringe benefits and employee
services. It is said that employees under such leadership will work harder out of
gratitude to the leader.

Types of Leaders
i. The charismatic leader: Is the one who gains influence mainly from strength of
personality e.g. Napoleon, Hitler, Churchill, Barrack Obama, etc. The difficulty
with charismatic leadership is that few people possess the exceptional qualities
required to transform all people around them into willing followers.
ii. The traditional leader: It is the one whose position is assured by birth e.g.
kings, queens and tribal chieftains. Except in the small family business, there
are a few opportunities for traditional leader-ship at work.
iii. The situational leader: One whose influence can only be effective by being in
the right place at the right time. This kind of leadership is too temporary in
nature to be of much value in a business.
iv. The appointed leader: One whose influence arises directly out of his position
e.g. managers and supervisors. Legitimate power springs from the nature and
scope of the position. Although the powers of the position may be defined, the
jobholder may not be able to implement them because of weak personality, lack
of adequate training or other factors.

Leadership Power
Power: Is the ability to exert influence on other people i.e. the ability to change
the attitudes or behaviour of individuals or groups. In organizations, managers
exert power.
Leadership Authority is the power resulting from one’s position within the
organization. It is the right to influence other people’s behaviour and action. The
organization has created a position with definite role and such role must be
performed and authority enables one to perform that role, that is, you are
responsible for the performance of that role and nobody else.
Types of Leadership Power
1. Legitimate Power. This is the power that is vested or conferred upon the leader
to take certain actions. It is that which is obtained by holding a formal position.
2. Reward Power. This power is based upon the ability to give or influence the
rewards and incentives for the subordinates. These may be in the form of
promotions, increase in pay, bonuses or other form of recognition for a job well
done.
3. Coercive Power. It is the ability to influence behaviour by threats and
punishment. It is the power to reprimand, demote or fire for unsatisfactory
performance of duties.
4. Referent Power. This power is more of personal nature than positional; it is
not acquired because of a position, but because of personal “charisma” of the
leader. This is especially true in the case of celebrities whose followers and fans
follow what the celebrities do.
5. Expert Power. This is acquired by expertise in a field or area e.g. a doctor’s or
accountant’s instruc-tions will be followed because people believe in their ability
and knowledge in those specified are-as. If subordinates view their leaders as
competent, they would follow him. When someone is an ‘authority’ in a certain
field, he or she knows a great deal about the subject and thus has expert power
6. Connection power. Some people have a lot of influence over others simply
because of their “con-nections” with the right people. A person knowing the
manager of a company can get a job for somebody or recommend a promotion
for somebody and hence commands considerable influence. Hence, he is
“connected”.

Differences between Leadership and Management

a. Managers tend to adopt impersonal attitudes towards subordinates while
leaders adopt a more personal and active attitude.
b. Managers may see themselves as conservators and regulators of the status
quo, i.e., they seek to maintain the current state of affairs while leaders are
transformers and seek opportunities for change.
c. Management may be viewed in terms of planning, organizing, directing and
controlling the activi-ties of subordinate staff whereas leadership is concerned
with communicating, motivating and in-volving people i.e. leaders emphasize on
interpersonal behaviour often associated with getting work done through
subordinates i.e. you manage things (plans, budgets, procedures), but you lead
people.
d. Leadership can exist in both organized and unorganized groups but
management cannot operate without a formal organization structure. There can
be managers only where organizational struc-tures create such roles.
e. A manager directs people through the use of formal authority, but a leader
may or may not have formal authority i.e. the right to command, but he always
has power [ability to influence]. He influ-ences people through the use of informal
authority.
f. The scope of management is wider than that of leadership. A manager has to
perform all the functions of planning, organizing staffing, directing and
controlling. A leader directs followers by influencing their behaviour. Thus
leadership is partly part of management.
g. A manager depends on his authority. But a leader depends on his personality.
He inspires enthusiasm.
h. Management involves using human, equipment and other resources to
achieve various objectives while leadership focuses on getting things done
through others; i.e. you manage things (plans, budgets, procedures), but you
lead people.
i. A manager does things right, a leader does the right thing.
j. A manager reacts, leader pro-acts.
ORGANIZATION STRUCTURE
Meaning of Organization Structure
An organization structure refers to the way in which an organization’s activities
are divided, grouped and coordinated into relationships between managers and
employees. The division of tasks for efficiency and clarity of purpose,
coordination between the interdependent parts of the organization to ensure
organizational effectiveness calls for the use of structure. Structure balances the
need for specialization with the need for integration.

Organizational design is the creation or change of an organization’s structure.

The organizational de-sign of a company reflects its efforts to respond to changes,
integrate new elements, ensure collabora-tion, and allow flexibility.

The Purpose of Structure

1. The division of work among members of the organization
2. The coordination of their activities so they are directed towards achieving the
objectives of the organization.
3. The defining of tasks and responsibilities, work roles and relationships and
channels of communica-tion.
4. The creation of a framework of order and command, through which the
activities of the organiza-tion can be planned, organized, directed and controlled.

TYPES OF ORGANIZATION STRUCTURES

I. Functional Structure
It’s by far the commonest method of specialization is to allocate activities and
responsibilities on the basis of common function as illustrated below. Thus all
production matters are unified under a production manager, and all personnel
matters become the prime responsibility of a personnel manager. It gives all staff
from top to bottom the opportunity to devote their energies to ensuring the
success of their own functional group.
Advantages
1. It is the most logical and simple form of departmentation.
2. It makes supervision easier, since each manager has to be an expert in only
his functional area of operation.
3. It makes efficient use of specialized resources and skills.
4. It fosters development of expertise in specialized areas.
5. Career and promotion paths are easily discernible.

Disadvantages
1. Functional departmentation is often found to be inadequate to meet the
growing needs of the business, particularly as the organization expands or
diversifies activities.
2. Decision-making becomes slow as the functional managers have to get the
approval of the head-quarters.
3. Functional managers tend to develop a narrow perspective and lose sight of
the bigger picture, Members of each department feel isolated from those in other
departments. For example, the manufacturing department may be obsessed with
cost reduction and meeting the delivery dates neglecting the quality of the
product. As a result, marketing department may be flooded with com-plaints
from customers

II. Product Structure

One of the most common ways in which businesses grow is by increasing the
number of products they make and sell. If the organization is successful several
product lines may attain such high sales that they require a separate division.
Under product Departmentation, a single manager, often re-ferred to as the
brand or product manager, is a delegated authority over all activities required to
produce and market that product. Basic products or services become the
primary or major depart-ments in the product departmentation.

Advantages
1. Product departmentation paces attention and effort on the basic products, the
success of which is critical to the survival of the organization.
2. Since the revenues and costs are assigned to a particular product, cost centers
can be established, high profit areas can be encouraged and unprofitable
product lines can be dropped.
3. Proper coordination of all functional areas can be achieved as all the functional
managers work as a team under close supervision of the product manager. Since
the department or division is multi-functional, it often operates like a complete
company.
4. Provides managers a training ground in general management, which is useful
in overcoming narrowness of interest.
5. Expansion and diversification of activities is made easy by creating new
departments for the new products that are added to the existing ones.

Disadvantages
1. Requires more persons with general management abilities as more and more
departments are created for the various products.
2. The product departments may try to become too autonomous, thereby
presenting top manage-ment with a control problem.
3. It is also common to find product departments engaged in the duplication of
efforts. Each product unit has its own functional departments. They may not be
sufficiently large to make maximum use of facilities. Thus product
Departmentation becomes an expensive organizational form.

III. Territorial/Geographic Structure

When an organization operates in different geographical areas, each with distinct
needs, it is desirable to create departments along geographical lines. This is
called territorial departmentation. This type of organization makes it easier for
the organization to cope with local tastes and customer needs. Public utilities
like transport companies, insurance companies etc. often use territorial de-
partmentation. Similarly, a large-scale organization operating both in domestic
and international markets may have separate departments or divisions created
for different regions of the world. Many multinational companies recognize their
global activities with regional headquarters in dif-ferent parts of the world.
Advantages
1. Makes possible utilization of locally available resources.
2. Widely spread markets can be catered for.
3. It makes it easier for the organization to deal with local tastes and customer
needs.

Disadvantages
1. Requires more persons with general management abilities.
2. Increases the problem of top management control because of the distance
between the corporate headquarters and regional offices.
IV. Customer Structure

Some organizations sell a wide variety of goods or services to different groups of

customers, each of which has distinguished needs. In such case, departments
are created around customer groups.
Advantages
1. Customer departmentation facilitates concentration on customer needs in line
with ‘the customer orientation’ professed by organizations.
2. Helps the organization to offer products and services according to customers’
preferences.

Disadvantages
1. Difficult to coordinate operations between competing customers’ demands.
2. There is a possibility of underutilization of facilities and employees specialized
in terms of customer groups.

3. May result in some amount of duplication of the facilities and effort.

V. Matrix Structure
The matrix structure combines functional specialization with the focus of project
or team structure. It is a hybrid structure that attempts to combine two types of
structures into one structure. As a result, it utilizes the merits inherent in both
as well as reducing their disadvantages. The structure uses permanent cross-
functional teams to integrate functional expertise with a divisional focus.
Employees in a matrix structure belong to at least two formal groups and chains
of command at the same time—a functional group and a product or project team.
They also report to two bosses—one within the functional group and the other
within the team.
The structure not only increases employee motivation, but also allows technical
and general man-agement training across functional areas as well.
Advantages
1. The matrix structure is an efficient means of bringing together the diverse
specialized skill required to solve a complex problem.
2. Problems of coordination are minimized since the most important personnel
for a project work together as a group.
3. It gives the organization a great deal of cost saving, because each project is
assigned only the number of people it needs, hence unnecessary duplication is
avoided.

Disadvantages
1. The two-boss system is susceptible to power struggles, as functional
supervisors and team leaders vie with one another to exercise authority.
2. Members of the matrix may suffer task confusion when taking orders from
more than one boss.
3. Teams may develop strong team loyalties that cause a loss of focus on larger
organization goals.
4. Adding the team or project leaders to a matrix structure can result in
increased costs.
Factors Affecting Choice of Organizational Structure
1. Age of the organization; With age; an organization incorporates standardized
systems, procedures and regulations. Like people, organizations evolve through
stage of life cycle – birth, youth, midlife and maturity. In the birth stage, the
organization created by the entrepreneur is informal, with no rules and
regulations. Decision making is centralized with the owner and tasks are not
specialized. In the youth stage, the organization is growing – it expands and hires
more employees. It incorpo-rates division of labour and formal rules and policies.
Decision making is still with the owner alt-hough it is shared by few persons
close to the owner. In the midlife stage, the company has become quite large. It
now has extensive sets of rules, regulations, policies and systems to guide the
em-ployees. Control systems are used, professionals are hired, tasks are
decentralized and authority is delegated to functional departments. In the
maturity stage, rules, regulations, specialized staffs, budgets, a refined division
of labour and control systems are in place.
2. Technology; Some kind of technology is used to convert the resources into
outputs in every organ-ization. Technology includes the knowledge, machinery,
work procedures, and materials that con-vert the inputs into outputs. The
technology used to manufacture the products decides the kind of organization
for the production system.
3. Strategy; The best approach to organizational structure is a company's
strategic plans. The plans, meanwhile, follow from a company's vision, which
itself follows from the company's mission. All strategy tries to fulfil the vision,
and the organizational structure should support that effort. For in-stance, a
company that has decided to expand to overseas markets might organize itself
into geo-graphical divisions. Changes in strategy call for an updated structural
design.
4. Environment; The business environment that employees work within cannot
be ignored by organi-zational designers. An unpredictable, rapidly changing
environment demands flexibility, adaptability and interdepartmental
cooperation. In such a situation, a rigid, mechanized structure would be a hurdle
to responsiveness of staff. Designers can instead build an organic, horizontal
structure, which flattens management levels and decentralizes decision-making.
A stable environment, meanwhile, allows for the controls, well-defined tasks and
centralized authority found in the mechanistic structure with its vertical levels
of increasing power.
5. Size; Small businesses with few people often have an overlap of roles, behave
informally and don't write a lot of rules. Since this organization arises
organically, it would be a mistake to try to overlay a formal, mechanistic
structure on it. Doing so would be an exercise in futility. Also, the unneces-sary
bureaucracy could get in the way of operations. Large organizations need more
control and oversight. A mechanistic structure creates clear accountability and
responsibility and is, therefore, suitable for companies with many employees.

9.0 EMERGING ISSUES IN MANAGEMENT

1. Strategic Management
Strategic management is a discipline which provides overall direction to an
enterprise and involves specifying the organization's objectives, developing
policies and plans to achieve those objectives, and then allocating resources
to implement the plans

Strategic Managements involves the formulation and implementation of the

major goals and initiatives taken by an organization's top management on
behalf of owners, based on consideration of resources and an assessment of
the internal and external environments in which the organization operates.

Concept and Purpose of Strategic management

Strategic Management is all about identification and description of the

strategies that managers can carry so as to achieve better performance and a
competitive advantage for their organization. An organization is said to have
competitive advantage if its profitability is higher than the average profitability
for all companies in its industry.

Strategic management can also be defined as a bundle of decisions and acts

which a manager undertakes and which decides the result of the firm’s
performance. The manager must have a thorough knowledge and analysis of
the general and competitive organizational environment so as to take right
decisions. It encompasses concepts such as Strategic Management:
Components of a Strategy Statement, Strategic Management Process,
Environmental Scanning, Strategy Formulation, Implementation, Strategic
Leadership, Corporate Governance, Business Ethics, Core Competencies,
Competitor Analysis, Business Policy, Strategic Decisions, BCG Matrix, SWOT
Analysis.
The purpose of Strategic Management
Strategic management plays a key role in the success of an organization. It
involves making and implementing strategic decisions to meet the objectives.
It defines the stakeholders need to go through to bring the vision to life and
ignite business growth. Furthermore, the strategic management process gives
the organization a competitive edge.

2. Staff Re engineering
Reengineering an organization is simply the process of reviewing all the
different levels of an organization’s way of doing business and considering how
to improve things. The goals of reengineering include increased company
profits, improved competitive advantage in the marketplace and enhanced
public image. Reengineering requires an organization to look closely at its
strengths and weaknesses, ask difficult questions where necessary and make
changes for the better of the organization.
Staff re-engineering is the subset of Business process re-engineering (BPR). In
itself, BPR is a business management strategy, originally pioneered in the early
1990s, focusing on the analysis and design of workflows and business
processes within an organization. BPR aimed to help organizations
fundamentally rethink how they do their work in order to dramatically improve
customer service, cut operational costs, and become world-class competitors.

3. Business Process Re engineering BPR

The notable definitions of BPR are;
a) It is the fundamental rethinking and radical redesign of business processes
to achieve dramatic improvements in critical contemporary modern measures
of performance, such as cost, quality, service, and speed.

b) It encompasses the envisioning of new work strategies, the actual process

design activity, and the implementation of the change in all its complex
technological, human, and organizational dimensions

BPR seeks to help companies radically restructure their organizations by

focusing on the ground- up design of their business processes. According to
early BPR proponent Thomas Davenport (1990), a business process is a set of
logically related tasks performed to achieve a defined business outcome. Re-
engineering emphasized a holistic focus on business objectives and how
processes related to them, encouraging full-scale recreation of processes
rather than iterative optimization of sub-processes.

Business process reengineering is also known as business process redesign,

business transformation, or business process change management.

4. Employee Involvement
Employee involvement is creating an environment in which people have an
impact on decisions and actions that affect their jobs. Employee involvement
is not the goal nor is it a tool, as practiced in many organizations. Rather, it is
a management and leadership philosophy about how people are most enabled
to contribute to continuous improvement and the ongoing success of their
work organization.

A solid recommendation for those organizations that wish to create an

empowering, continuously improving workplace is to involve people as much
as possible in all aspects of work decisions and planning. This involvement
increases ownership and commitment, retains your best employees, and
fosters an environment in which people choose to be motivated and
contributing.

Methods for Involving Employees

How to involve employees in decision making and continuous improvement
activities is the strategic aspect of involvement and can include such methods
as suggestion systems, manufacturing cells, work teams, continuous
improvement meetings, Kaizen (continuous improvement) events, corrective
action processes, and periodic discussions with the supervisor.

Intrinsic to most employee involvement processes is training in team

effectiveness, communication, and problem-solving; the development of
reward and recognition systems; and frequently, the sharing of gains made
through employee involvement efforts.
Employee Involvement Model

For people and organizations who desire a model to apply, the best was
developed from work by Tannenbaum and Schmidt (1958) and Sadler (1970).
They provide a continuum of leadership and involvement that includes an
increasing role for employees and a decreasing role for supervisors in the
decision process. The continuum includes this progression.

 Tell: the supervisor makes the decision and announces it to the

staff. The supervisor provides complete direction.
 Sell: the supervisor makes the decision and then attempts to gain
commitment from staff by "selling" the positive aspects of the decision.
 Consult: the supervisor invites input into a decision while retaining
authority to make the final decision herself.
 Join: the supervisor invites employees to decide with the supervisor.
The supervisor considers her voice equal in the decision process.

 Delegate: the supervisor turns the decision over to another party.

5. Information Communication technology

Information technology (IT) has historically played an important role in the
reengineering concept. It is regarded by some as a major enabler for new forms
of working and collaborating within an organization and across organizational
borders

BPR literature identified several so called disruptive technologies that were

supposed to challenge traditional wisdom about how work should be
performed.

 Shared databases, making information available at many places

 Expert systems, allowing generalists to perform specialist tasks

 Telecommunication networks, allowing organizations to be centralized

and decentralized at the same time
 Decision-support tools, allowing decision-making to be a part of
everybody's job

 Wireless data communication and portable computers, allowing field

personnel to work office independent

 Interactive videodisk, to get in immediate contact with potential buyers

 Automatic identification and tracking, allowing things to tell where they

are, instead of requiring to be found
 High performance computing, allowing on-the-fly planning and
revisioning

6. Globalization
Globalization is the process of interaction and integration among people,
companies, and governments worldwide. As a complex and multifaceted
phenomenon, globalization is considered by some as a form of capitalist
expansion which entails the integration of local and national economies into a
global, unregulated market economy. Globalization has grown due to advances
in transportation and communication technology. With the increased global
interactions comes the growth of international trade, ideas, and culture.
Globalization is primarily an economic process of interaction and integration
that's associated with social and cultural aspects. However, conflicts and
diplomacy are also large parts of the history of globalization, and modern
globalization.

Economically, globalization involves goods, services, the economic resources

of capital, technology, and data. Also, the expansions of global markets
liberalize the economic activities of the exchange of goods and funds. Removal
of Cross-Border Trades barriers has made formation of Global Markets more
feasible. The steam locomotive, steamship, jet engine, and container ships are
some of the advances in the means of transport while the rise of the telegraph
and its modern offspring, the Internet and mobile phones show development
in telecommunications infrastructure. All of these improvements have been
major factors in globalization and have generated further interdependence of
economic and cultural activities around the globe.

7. Social ills and undercutting practices in management

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