MEENAAKSHI RAMASAMY ARTS AND SCIENCE COLLEGE -THATHANNUR

DEPARTMENT OF BUSINESS ADMINISTRATION

MANAGEMENT CONCEPT AND ORGANISATIONAL BEHAVIOUR

I- MBA

PREPARED BY
Dr.R.Kamalakkannan.,MBA.,M.Phil.,Ph.D
 UNIT - I
Definition of Management
There were four blind men. They wanted to see an elephant. The first man described elephant
was like a pillar, second man as rope, the third man as wall and the last man as a fan. Similarly, there
was no single definition of Management. To have an understanding, three important definitions are
discussed below:
“Management may be defined as the art of securing maximum results with a minimum of
effort so as to secure maximum prosperity and happiness for both employer and employee and give
the public the best possible service”. -JOHN.E.MEE
“Management is the art of getting things done through and with people in formally organised
groups. It is the art of creating the environment in which people can perform as individuals yet
cooperate towards attainment of group goals. It is the art of removing blocks to such performance, a
way of optimising efficiency to reach goals.” -HAROLDKOONTZ
“Management is a distinct process consisting of planning, organising, actuating, and
controlling performed to determine and accomplish the objectives by the use of people and resources.”
-GEORGE. R. TERRY
FEATURES OF MANAGEMENT:
1. Activity: Management is a process of organised activity. It is concerned with the efficient use
of resources like men, money and materials in the organisation.
2. Group Activity: Management cannot exist independent of the group or organisation it manages. It
is a cardinal part of any group activity and inspires workers to put forth their best efforts.
3. Universal Activity: Management is a universal phenomenon. However, management principles
are not universally applicable but are modified to suit the given situation and the type of
organisation.
4. Purposeful: Management is a goal-oriented activity. It is concerned with the
accomplishment of goals through its various functions like planning, organizing, staffing,
directing, and controlling.
5. Process: Management is a process, which involves planning, organizing, directing and controlling
the efforts of human resources in the use of material resources. These are the basic functions,
which every manager performs for the accomplishment of certain goals.
6. Intangible: Management is abstract and cannot be seen with the eyes. It is indicated by the
quality of the organisation and the results. Thus, feeling of management is result-oriented.
7. Profession: Management is a profession because most of its established principles are being
applied in practice.
8. Interdisciplinary: This implies that, even though management has been developed as a distinct
discipline, it draws knowledge and concepts from other social sciences like psychology,
sociology, anthropology, economics, and soon.
9. Decision-making: Management process involves decision-making at various levels for getting
things done by others. It involves selecting the most appropriate alternative out of the several
available.

2
10. Science and an art: Management has developed certain principles and laws, which have wide
applications. So it is treated as a science. It is also an art, because it is concerned with the
application of knowledge for the solution of organisational problems.
Pioneers of Early Management Thinkers
After understanding the concept of Management, let us trace the history of Management. You
see management has been practised in some form or other since the dawn of civilization. The Egyptian
pyramids, the Great Wall of China, Qutab Minar in Delhi, the Tajmahal in Agra, the Stupas or Sanchi,
the Jain temple at Mount Abu the Archaological findings of Mohanjodara all clearly indicate that
organizations and ideas about how to manage them have been around since antiquity. In this section,
we would come across the pioneer thinkers of management, who provided solid mettle for
constructing the sophisticated and elegant buildings of management. Their contributions are
explained below:
Frederick Winslow Taylor (1856–1915):
F.W. Taylor was born in 1856 in Philadelphia, U.S.A. Taylor was a chief engineer in the
Midvale Steel Works where he started his career as an apprentice. He carried out many experiments
to find out the best way to work, over a period of more than two decades. One of his experiments led
to the discovery of high speed steel which made him popular. He became disgusted with the existing
monotonous methods of working. Soon he realised that there was a lot of waste of material, resulting
in loss of production and efficiency. As a solution to these problems, he wanted to apply scientific
reasoning to management. After leaving Midvale Steel works, Taylor joined the Bethleham Steel
Company where he experimented with his ideas. He discussed his thoughts of management in a paper,
‘A Piece Rate System and shop Management’, before the American Society of Mechanical Engineers.
Moreover, Taylor’s publications like ‘Shop Management’ and ‘Principles of Scientific Management’
have received wide public attention and reading.
Frederick W. Taylor rested his philosophy on four basic principles:
1. the development of a true science of management, so that the best method for performing each
task could be determined.
2. the scientific selection of workers, so that each worker would be given responsibility for the
task for which he or she is best suited.
3. the scientific education and development of the worker and
4. the Intimate, friendly cooperation between management and labour.
Taylor contended that the success of these principles required “a complete mental revolution”
on the part of management and labour. Rather than quarrel over profits, both sides should try to
increase production; by so doing, he believed, profits would rise to such an extent that the labour and
management would no longer have to fight over them. In short, Taylor believed that management and
labour had a common interest in increasing productivity.
Taylor based his management system on production-line time studies. Instead of relying on
traditional work methods, he analysed and timed steel workers’ movements on a series of jobs. Using
time study as his base, he broke each job down into its components and designed the quickest and
best methods of performing each component. In this way he established how much workers should
be able to do with the equipment and materials at hand. He also encouraged employers to pay more
productive workers at a higher rate than others, using a “scientifically correct” rate that would benefit

3
both company and worker. Thus, workers were urged to surpass their previous performance standards
to earn more. Taylor called his plan the different piece rate system.
The substitution of the rule of thumb by scientific approach is one of the chief contributions
of Taylor. Cooperation between labor and management may be regarded as a foundation on which
the structure of Scientific Management can be built. This can only be achieved through a change in
the mental attitude of the workers and the management towards each other. Taylor called it as “Mental
Revolution”.
The main functions of mental revolution are the following:
1. to create the sprit of mutual trust and confidence.
2. to put in all efforts for increased production.
3. to inculcate and develop the scientific attitudes towards problems.
Taylor suggested that the management is responsible for maintaining a congenial atmosphere
in the factory and should take all necessary steps to include the best methods / practices for carrying
out various jobs. The workers should also change their attitude towards the management. They should
be loyal, sincere and disciplined in discharging their assigned tasks. They should not indulge in
wastage of resources and utmost importance should be given for mutual trust and confidence. To sum
up, Taylor laid emphasis on the following:
1. Science, not rule of thumb.
2. Harmony in group action, rather than discord.
3. Maximum output; not restricted output.
4. Scientific selection and placement of the workers.
5. Development of all workers to the fullest extent possible for their own and the
organisation’s prosperity.
Benefits of Scientific Management
The following are the benefits:-
1. Replacement of the traditional rule of thumb method.
2. Better workforce through proper selection and training.
3. Harmonious labour-management relationship
4. Standardisation of tools, equipment and work methods.
5. Better utilization of scarce resources.
6. Continuous improvement of the workers
7. Incentives (wages) to the workers for higher production
8. Satisfaction of the needs of the customers by providing them with higher quality products
at lower prices.
9. High productivity for the nation.
Criticism of Scientific Management
Taylor’s scientific management was criticized by the workers, managers, psychologists and the public
at large. The various grounds of criticism are as follows:
1. The concept of functional foremanship is not feasible in practice as it violates the principle of
unity of command.
2. ‘Taylorism’ is confined mostly to production management and fully ignores the areas of
finance, marketing, accounting, and personnel.
4
 3. The use of the word ‘Scientific’ before ‘Management’ is objected to because what is actually
meant by scientific management is nothing but a scientific approach to management.
4. Trade unionists object to it as the wages of the workers are not increased in direct proportion
to the increase in productivity.
In spite of the above criticism, many of the recommendations of Taylor are still being applied by the
modern business undertakings.
Henri Fayol(1841-1925)
Henri Fayol, a French contemporary of Taylor started his career as a coal mine engineer in
the French coal mine company in 1860. He was its Managing Director from 1888to 1918. During this
period, he took the company to great heights from the verge of bankruptcy. As a Managing Director
he came to the conclusion that there was only a singly administrative science applicable to all types
of organisations. Because of his emphasis on universality of administrative science or management
principles, he is known as the ‘Universalist’.
Fayol’s contributions are generally termed operational management or administrative
management. They were first published in the book form under the title Administration
industrielletegenerale(General and Industrial Management.) in French, in 1916. However, his
contributions did not become famous until 1949 when the English translation of his book became
widely available.
Fayol divided all activities of industrial enterprises into six groups.
They are as follows:
1. Technical activities concerning production.
2. Commercial activities of buying and selling.
3. Financial activities intended to seek optimum use of capital.
4. Accounting activities concerning final accounts.
5. Security activities relating to protection of property.
6. Managerial activities.
Unlike Taylor, Fayol considered management from a top manager’s is viewpoint. He not only
recommended teaching theories in management dealing with planning, organizing, commanding,
coordinating, and controlling but also practised it by founding a centre for Administrative Studies in
Paris. Major contributions of Fayol are the following:
1. Identification and classification of business activities.
2. Identification of management as a separate set of functions.
3. Classification of functions of management into five elements.
4. Development of universal principles of management.
5. Emphasis on managerial qualities.
Henri Fayol’s Principles of Management
Henri Fayol has suggested fourteen principles of management for running the business
efficiently. According to him, “there is nothing rigid or absolute in management affairs; it is all a
question of proportion”. Thus these principles are flexible and capable of adaptation. They are as
follows:
1. Division of work. It refers to the division of work among various individuals in the organisation
to bring about specialization in every activity. Specialisation tends to increase efficiency and helps to
avoid waste of time and effort caused by changes from one work to another.
2. Authority and responsibility. Authority is the power to give orders to the subordinates.
5
Responsibility means the duty, which the subordinates are expected to perform. Fayol suggested that
authority and responsibility should go hand in-hand. Authority without responsibility promotes
irresponsible behaviour on the part of management. Similarly, responsibility without authority
makes management ineffective. Thus there should be parity between authority and responsibility.
3. Discipline. Discipline is highly essential for the smooth running of the organisation. It means
obedience to rules and regulations of the organisation. Maintenance of discipline in the
organisation depends upon the quality of leadership, clear and fair agreements etc.
4. Unity of Command. An employee should receive orders from one superior only for any action or
activity. This principle is necessary to avoid confusion and conflict. Besides, when there is unity of
command, it is easy to fix responsibility for mistakes. Fayol stated that if this principle is violated,
authority will be undermined, discipline will be in jeopardy, order will be disturbed and stability will
be threatened.
5. Unity of direction. The principle of unity of direction states that for a group of activity having the
same objective, there should be one head and one plan. It alone can produce a sense of loyalty and
devotion among the subordinates. Fayol observed that, unity of direction must not be confused with
the unity of command. Unity of direction is provided for by a sound organisation of the body
corporate. Unity of command pertains to the functioning of the personnel. Unity of command cannot
exist without unity of direction, but it does not follow from it.
6. Subordination of individual interest to general interest. This principle calls for the
reconciliation of objectives of individuals with those of the organisation. Organisation is superior to
individuals. When the individual and the organisational interests conflict, the latter must prevail.
7. Remuneration of personnel. The remuneration of the employees should be fair and just.
Employees who are paid decent wages will have a high morale.
8. Centralisation. Centralisation refers to the concentration of authority at one level in the
organisation. On the other hand, decentralization is the dispersal of authority to the lower levels in
the organisation. The degree of centralization may be different in various organisations. But a balance
should be maintained between centralization and decentralization to ensure the best results.
9. Scalar chain. Scalar chain refers to the chain of superiors ranging from the final authority to the
lowest level in the concern. It is otherwise, regarded as a chain of command because orders or
instructions issued at higher levels flow through intermediate managers before reaching lower levels,
Scalar chain states superior-subordinate relationship throughout the concern. It is highly
essential to ensure unity of command and effective communication in the organisation. But it is
subject to certain limitations. They are:
 Communication takes too long a time as the order flows from the top to the bottom in the
chain.
 There is a possibility of distortion of messages in the course of its transmission. However, a
‘gang plank’ may be created bypassing the established line of authority to allow quick
communication and swift action.
10. Order. This principle implies a “right man in the right place.” Fayol said that there should be a
place for everything and everyone. The management should get order in work through suitable
arrangement of men and materials.
11. Equity. It means justice and kindness. Management must practice equity and equality of
treatment while dealing with the people. Equity ensures healthy industrial relations between the
management and the labour.

6
12. Stability of tenure. This principle calls for the lowest possible turnover of personnel for the well-
being of the organisation. Since the loyalty of the employees highly depends on their stability in the
organisation, the management should strive to minimize employee turnover.
13. Initiative. Initiative implies freedom to think and execute a plan. Initiative is a powerful
motivator of human behaviour and a source of strength for the organisation.
14. Esprit de corps. ‘Esprit de corps’ means the spirit of loyalty and devotion, which unites the
members of a group. This is the principle of ‘union is strength’ and extension of unity of command
for establishing teamwork.
Strength of an organisation lies in the cooperation and harmony of its workers. The policy of ‘divide
and rule’ should, therefore, be replaced by ‘union is strength’. The differences of opinion should be
settled then and there.

Comparison Between Taylor and Fayol

F. W. Taylor Henri Fayol
He is known the father of scientific He is known the father of functional
management. management.
He worked from bottom to top level. He worked from top to bottom level.
He gave greater emphasis to shop and factory He gave greater emphasis to the office and
management. the management process as a whole.
His main concern was to increase the His main concern was to evolve principles
efficiency of workers and managers. of general management and the functions of
managers.

Max Weber (1864-1920)

Max Weber was a German sociologist. Writing in the early part of this century, Weber
developed a theory of authority structures and described organisational activity on the basis of
authority relations. He described an ideal type of organisation called a bureaucracy, characterized
by division of labour, a clearly defined hierarchy, detailed rules and regulations, and impersonal
relationships. Weber recognized that this ideal bureaucracy didn’t exist in reality but, rather,
represented a selective reconstruction of the real world. He used it as a basis for theorizing about work
and the way that work could be done in large groups. His theory became the design prototype for
many of today’s large organisations. Weber’s bureaucracy was an attempt to formulate an ideal model
for organisation design and a response to the abuses that Weber observed within organisation.
Weber believed that his model could remove the ambiguity, inefficiencies, and patronage that
characterized most organisations at that time. Weber’s bureaucracy is not as popular as it was a decade
ago, but many of its components are still inherent in large organisations.
His theory of bureaucratic management stressed the need for a strictly defined hierarchy
governed by clearly defined regulations and lines of authority. He considered the ideal organisation
to be a bureaucracy and its activities and objectives were rationally thought out and its divisions of
labour were explicitly spelled out. Weber also believed that technical competence should be
emphasized and that performance evaluation should be made entirely on the basis of merit.
Mary Parker Follett(1868-1933)
Mary Parker Follett was among those who built on the basic framework of the classical school.
However, she introduced many new elements, especially in the area of human relations and

7
organisational structure. In this, she initiated trends that would be further developed by the emerging
behavioural and management science schools.
Follett was convinced that no one could become a whole person except as a member of a
group; human beings grew through their relationships with others in organisations. In fact, she called
management “the art of getting thing done through people.” She took for granted Taylor’s assertion
that labor and management shared a common purpose as members of the same organisation, but she
believed that the artificial distinction between managers (order givers) and subordinates (order takers)
obscured this natural partnership. She was a great believer in the power of the group, where
individuals could combine their diverse talents into something bigger. Moreover, Follett’s holistic
model of control took into account not just individuals and group, but the effects of such
environmental factors as politics, economics, and biology.
Follett’s model was an important forerunner of the idea that management meant more than
just what was happening inside a particular organisation. By explicitly adding the organisational
environment to her theory, Follett paved the way for management theory to include a broader set of
relationships, some inside the organisation and some across the organisation’s borders. A diverse set
of modern management theories pay homage to Follett on this point.
She strongly believed that management and labour share a common purpose as members of
the same organisation. She also believed that participative style of management could increase
cohesiveness, sense of belonging and creativity. She advocated ‘Behavioural approach in
management’.
Elton Mayo and the Hawthorne Experiments 1924 - 1933
The Hawthorne Experiments conducted by Elton Mayo and his associates at the Western
Electric Company provided new insights into the human behaviour. Many of the experiments were
performed at the Western Electric’s Hawthorne plant near Chicago. Mayo’s findings in these
experiments marked the beginning of the Human Relations Era.
The studies attempted to investigate the relationship between the physical conditions at the
workplace and the productivity of workers. The researchers divided the employees into two groups.
One group called the test group was subjected to changes in lighting. The lighting condition for the
other group called the control group remained constant throughout the study. When the test group’s
lighting conditions were improved, productivity increased as expected. What surprised the researchers
most was the fact that productivity continued to increase even when the lighting was reduced. Further,
to add to the mystery, the control group’s output also increased as the test group’s lighting conditions
were changed, though there was no change in the lighting conditions for the control group. As a result,
for the first time, it was realized that something in addition to lighting was influencing the worker’s
performance.
In another set of experiments, the changes, in the performance of a group of workers were observed
by changing the various work related factors such as;
 Increasing the wages;
 Introducing rest periods; and
 Reducing the workdays and work week;
Workers were also allowed to choose their own rest periods and to have a say in all these
changes. These experiments revealed that financial incentives alone were not causing the productivity
improvements. It was found that a complex set of attitudes were responsible for the productivity
8
increase. Employers develop group norms at the work place. The test and the control groups
developed some group understanding that motivated them to perform well. The fact that employees
would work hard if they were convinced that supervisors pay special attention to their welfare was
also made abundantly clear. This is often referred as the Hawthorne Effect.
Another conclusion of the studies was that informal work groups exist in the work place. The
informal groups help the individuals share common values, understanding and beliefs. These informal
groups exert significant influence on the employees. It is our common knowledge that many a time
we find in the organisations how employees associations and friendships with co- workers influence
their attitude towards the work and the superiors.
The contribution of the Human Relations movement is quite significant in that the individual
and the impact of his association with a group had received due attention. Employee productivity was
viewed as a function of the human relations at work rather than an engineering problem. Elton Mayo’s
studies in fact, contributed to a thorough change in the attitude and approach towards training.
Chester I. Barnard(1886-1961)
Chester Barnard, like Follett, introduced elements to classical theory to be further developed
in later schools. Barnard, who became president of New Jersey Bell in 1927, used his work experience
and his extensive readings in sociology and philosophy to formulate theories about organisations.
According to Barnard, people come together in formal organisations to achieve ends they cannot
accomplish working alone. But as they pursue the organisation’s goals, they must alsosatisfy their
individual needs. And so Bernard arrived at his central thesis: An enterprise can operate efficiently
and survive only when the organisation’s goals are kept in balance with the aims and needs of the
individuals working for it. What Barnard was doing was specifying a principle by which people can
work in stable and mutually beneficial relationships overtime.
For example, to meet their personal goals within the confines of the formal organisation,
people come together in informal groups such as cliques. To ensure its survival, the firm must use
these informal groups effectively, even if they some times work at purposes that run counter to
management’s objectives. Barnard’s recognition of the importance and universality of this ‘informal
organisation” was a major contribution to management thought.
Barnard believed that individual and organisational purposes could be kept in balance if
managers understood an employee’s zone of indifference - that is, what the employee would do
without questioning the manager’s authority. Obviously, the more activities that fell within an
employee’s zone of indifference (What the employee would accept), the smoother and more
cooperative an organisation would be. Barnard also believed that executives had a duty to instil a
sense of moral purpose in their employees. To do this, they would have to learn to think beyond their
narrow self-interest and make an ethical commitment to society. Although Barnard stressed the work
of executive managers, he also focused considerable attention on the individual worker as “the basic
strategic factor in organisation.” When he went further to emphasize the organisation as the
cooperative enterprise of individuals working together as groups, he set the stage for the development
of a great deal of current management thinking.
According to Barnard an organisation exists when the following three conditions are fulfilled:
 there are persons able to communicate with each other,
 they are willing to contribute to the action and
 they attempt to accomplish a common purpose.
9
 He has identified three types of functions, which an executive performs in an organisation. These are:
 maintenance of organisational communication.
 the securing of essential services form individuals in the organisation so as to achieve the
overall purpose and
 the formulation and definition of organisational purpose.
Barnard’s views on the concept of authority are noteworthy. He does not agree with the
traditional view that authority transcends from the top to bottom. In his view, a person does not simply
obey an order or directive because a superior has given it. As such, the exercise of authority depends
on its acceptance, which is possible only when an individual,
 understands the communication,
 believes that it is not inconsistent with the organisational purpose,
 believes it to be compatible with his personal interest as a whole, and
 is mentally and physically able to comply with it.
The contribution of Barnard shows his perception of the organisation as a social system.
Herbert A. Simon(1916-1978)
Herbert Simon is an eminent American social scientist. Born in 1916, he was awarded the
Nobel Prize in Economics in 1978, in recognition of his outstanding contribution in analysing the
Decision-Making Process. He goes to the extent of equating decision-making with management. He
laid emphasis on how decisions are made and how they can be made effectively.
In his writings on decision-making, he maintained that to be scientific, one must exclude value
judgements and concentrate on facts, apply rigorous analysis and test factual statements. Simon
viewed an organisation as a structure of decision – makers. The missing factor, according him, is
correct decision-making. He argued that optimum rational choice between alternative courses of
action is rarely made.
Simon divides the decision – making process into three phases, namely,
 Intelligence activity: This involves finding occasions calling for decision. The manager
analyses the environment and identifies conditions that need action;
 design activity: Identifying, developing and analyzing all possible alternative courses of action
are the important tasks in this stage.
 choice activity: Finally, the manager selects one of the alternative sources of action available
to him.
According to Simon, every decision consists of a logical combination of facts and value
propositions. He argues that complete rationality in decision-making is not always possible. He
disputes the concept of total rationality in administrative behaviour. Human behaviour is neither
totally rational non totally non-rational. It involves, “bounded rationality”. ‘Bounded rationality’ and
‘satisfying’ are the two important terms used by him to drive home the point further. ‘Satisfaction’’
involves the choice of an action which is satisfactory or fairly satisfactory.
Simon argues that managers do not aim at maximum satisfaction or result from a decision but
are satisfied with reasonably good enough outcome or result. It is because of the limitations involved
in identifying the alternatives, collecting all the facts and data, knowing the values of all alternatives.
Though some of Simon’s views on decision-making are widely acclaimed, his critics point

10
out that social, political, economic and cultural factors did not get due attention. His theory is
criticized as being extremely general and does not provide the details to guide the managers in
decision-making. Inspite of some imperfections, Simon’s contribution is undoubtedly a major
breakthrough in the decision-making behaviour of managers.
RensisLikert(1903-1972)
Resins Likert is an American social psychologist born in 1903. Likert and his associates
carried out extensive research on management practices in a wide variety of situations like industrial
units, railways, hospitals, schools and voluntary organisations and covered unskilled workers in
factories to top scientists in research laboratories. He believed that the body of knowledge of social
sciences can pave the way to frame a generalised theory of organisation and management. His
findings provided deep insights into supervision, general management systems and dynamics of
interpersonal relationships.
Likert classified supervisors into two categories: job centred and employee centred: the
primary concern of the first category of supervisors is to ensure performance of assigned tasks and
maintenance of prescribed standards. On the other hand supervisors in the second category are
primarily concerned with the human aspects of their subordinates and effective team- building for
high task performance.
It is argued that high performing managers are humane to their subordinates, and low
performing managers are compelled to get tough with their subordinates to achieve better results. To
resolve this dilemma, Likert and his colleagues conducted a series of experiments in which high and
low performing managers were changed into each other’s jobs. While high performing managers
succeeded in improving the performance of low production units, low performing managers placed
in high production units brought down their output over a span of time.
Management Systems
The most important contribution of Likert is his conceptualisation of different systems of management
along a continuum. He identifies four distinct points along the continuum for purpose of illustration
of the characteristic of each of the management systems. He labels them as under.
1. exploitative-authoritative,
2. benevolent-authoritative,
3. consultative and
4. participative.
The four management systems are then arrayed along the two important dimensions, the type
of authority or control an organisation exercises over its members is represented as one dimension.
The second dimension relates to the motivational forces used to control the activity of the people.
The operating characteristics include leadership, motivation, communication, interaction
influence, decision-making and goal-operating characteristic and are juxtaposed over the four types
of management systems.
Likert points out that authoritarian-exploitative management system displays a steep
hierarchical structure and a centralised decision-making and results in top-down communication, tight
supervision performance under pressure, and low degree of employee motivation. On the other hand,
the participative management system displays flat structure, group decision processes, open and
authentic three-way communication (up, down and lateral), adaptive supervision, individual and work
11
groups with a high degree of achievement motivation. The other management systems 2 and 3 reveal
intermediate combination on forms and processes.
The intermediate forms of management systems 2 and 3 will reveal transitory characteristics
of progression from management system from 1 to 4 over a period. In system- 2 management
orientation is still authoritative, but becomes less exploitative and more benevolent towards the
members of the organisation. In system- 3 exercise of authority is more broad-based with delegation
of powers to middle levels and consultation of affected interests at lower levels. To the extent
motivation, communication and involvement of subordinates replace reliance on exercise of formal
authority, consultative management systems will be well set to move forward to the management
sytem-4.
Douglas McGregor(1906-1964)
McGregor proved that reliance on authority as the primary means of control leads to
resistance, restriction of output and indifference to organisational objectives. His monumental classic
“The Human side of the Enterprise” (1960) marked the watershed in the history of management
movement. He questioned the various models describing man as rational, economic, and self-
actualising.
McGregor’s assumptions, on the other hand, about human beings in the form of ‘Theory X
and Theory Y’ present contrasting nature of man. Theory X revolves around the Traditional Theory
of Human Behaviour. In his own words, these assumptions are as follows:
 The average human being has an inherent dislike of work and will avoid if he can;
 Hence most people must be controlled, directed and coerced with punishment to get them to
put forth adequate effort towards the achievement of organisational objectives;
 The average human being prefers to be directed, wishes to avoid responsibility, has relatively
little ambition, and wants security above all.
Theory Y assumptions on the other hand, hold an optimistic view of human nature. According
to this set of assumptions modern life does not fully tap the potential of the average human being.
They suggest that the manager should take advantage of the subordinates’ willingness and ability to
work by providing a climate for their performance. The assumptions under theory Y as pronounced
by McGregor are as follows:
 The expenditure of physical and mental effort in work is as natural as play or rest;
 External control and the threat of punishment are not the only means for producing effort
towards organisational objectives. People will exercise self direction and self- control in the
service of objectives to which they are committed;
 The degree of commitment to objectives is in proportion to the size of the rewards associated
with their achievement;
 Average human beings learn, under proper conditions, not only to accept but also to check
responsibility;
 The capacity to exercise with a relatively high degree of imagination, ingenuity and creativity
in the solution of organisational problem is widely and not narrowly distributed in the
population;
 Under the conditions of modern industrial life, the intellectual potentialities of human beings
are only partially utilised.
12
 As can be easily seen, these two sets of assumptions are fundamentally different. Theory x is
pessimistic, static and rigid. Control is external in that the superior imposes it on the subordinate. In
contrast, Theory Y is optimistic, dynamic and flexible with an emphasis on self-direction. It also
advocates the integration of individual need with organisational demands.
ChrisArgyris
Chris Argyris was in early 1950s a teacher of Industrial Administration at Yale University. In 1968,
he moved to the Harvard Business School. He has been consultant to IBM. DuPont, Shell and several
governments.
A staunch supporter of job enrichment, Argyris believes that each person already has the
‘psychological energy’ that provides motivation. The challenge, he suggests, is not to find ways of
artificially motivating people; it is to recognize and channelize this innate energy.
T-groups. Chris Argyris was the main force behind the ground-breaking T-group experiments
in the 1960s. ‘T-group training’ is a phrase used to describe a number of similar training methods, the
purpose of which is to increase the trainee’s skills in working with other people – and a considerable
proportion of time on such a training course is spent in discussing the trainees’ relationships with one
another.
Modern Management thinkers
As you know, the twentieth century has witnessed a few more thinkers on management. Their
contribution has made the management more advanced. They are Peter F. Drucker, Michel E. Porter,
Tom Peters, Gary Hamel, H. Igor Ansoff and Henri Minzberg. Let us see the contributions of these
management thinkers.
Peter F.Drucker
Drucker is a highly respected management thinker; He is a prolific writer and has published several
books and articles on the management practices. He is so versatile that there is hardly area in management,
which is not touched by him. He has drawn heavily from his consultancy experience spread over the last four
to five decades. Drucker perhaps is the only management thinker who is admired by even the socialist block
countries also. His views on management may be summarized as follows:
1. Management as a practice: According to Drucker management has two important functions,
namely, i) Innovation and ii) Marketing. He has treated management as a discipline as well as a
profession. For him, management is more a practice. It is always goal oriented. His comment on the
purpose of business as the creation of customer, if understood and in the right way helps any
organisation to achieve success.
Drucker’s views on innovation are equally important for the emphasis they place on new product
development. He argues that ‘new products should drive out existing products’ rather than the other way round.
As such, he is against bureaucratic management for it stifles the innovative spirit and the initiative among the
people in the organisation. He contends that modern organisations are knowledge based organisations and
describes the modern workers as ‘knowledge workers’ considering their skills, and innovative abilities.
2. Functions of management; Drucker points out three basic functions of management. The actions
of management should contribute to
 the achievement of purpose and mission of the institution;
 make the work productive and the worker achieving, and
 effective management of social responsibilities.
3. Objective setting; Drucker has attached great importance to objective setting. He has specified
that objectives should be set for all the key result areas of business. To make the objective setting and
13
their achievement more meaningful, he has given a new tool, what is popularly known as Management
by Objectives.
MBO is regarded as one of his most important contributions to the discipline of management.
He has discussed the concept in great detail in his book, the practice of management 1954. MBO is a
process whereby superiors and subordinates jointly identify the common objective, set the results that
should be achieved by subordinates and assess the contribution of each individual. It is viewed more
as a philosophy than as a tool or technique to achieve the objectives.
4. Orientation towards Future; Drucker is a great visionary and futurologist. He was ahead of
others in visualizing the future trends that affect the society. He visualized the modern organisation
and its impact on the society several years ago. His views on the many facets of the modern
corporations have almost all become reality now. To put it in his own words, he described the present
age as the ‘age of discontinuity’’.
5. Federalism; Drucker has advocated the concept of federalism. Federalism according to him
involves centralized control in a decentralised structure. Federalism has certain positive values over
other methods of organizing. These are as follows;
 It sets the top management free to devote itself to major policy formulation and strategy
development;
 It defines the functions and responsibilities of the operating people;
 It creates yardsticks to measure twin success and effectiveness in operating jobs; and
 It helps to resolve the problem of continuity through giving education to the managers of
various units while in an operating position.
Drucker’s realistic way of looking at the organisations and society has earned him the status
of a Management Guru. His contributions have made tremendous impact on the management
practices all over the world.
Michael E.Porter
Michael E. Porter is an authority on competitive strategy and competitive advantage. He has
written sixteen books and more than one hundred research papers. ‘Competitive Strategy’ (1980),
‘Cases in Competitive Strategy’ (1982), ‘Competitive Advantage: Creating and Sustaining Superior
Performance’ (1985).
The important contributions of Michael Porter are given below:
Five Forces Analysis
Porter has developed a model describing the forces which shape competition in an industry.
This model is as follows:
1. Threats of Entry: New entrants to an industry bring new capacity, and attempt to gain market
share. When barriers to entry are high and a new entrant can expect sharp retaliation from the existing
players, the threat of entry will not be high. There are six sources of barriers to entry namely
economies, product differentiation, capital, cost advantage, access to channels and govt. policy.
2. Bargaining Power of Customers: When customer group is powerful, then it may be buyers’
market. Powerful customers can shape product quality, prices distribution channels, etc. Bargaining
power of customers is high in various circumstances:
3. Bargaining Power of Suppliers: Suppliers can exercise power on firms in an industry by
raising prices of goods and services.
The supplier group is powerful in the different circumstances:
4. Substitute Products: The substitutability of products of an industry also determines the
14
degree of competition in the industry. In several cases product substitutes have affected the growth
of industry. Packing materials have affected jute industry.
Five forces model enables a firm to carry out a deep analysis of competition and industry. This
is helpful in designing an effective competition strategy. Right competitive positioning on the basis
of the five forces will help to improve performance. These five forces also influence the cost of
operations, prices of end products, investment and capacity to create and sustain entry barriers in the
industry.
Generic Competitive Strategies:
In order to cope with the five competitive forces, Porter has suggested three generic strategic
approaches:
1. Cost Leadership Strategy: Under this strategy, the cost of production is reduced to the
minimum possible level. Low cost relative to competitors enables a firm to increase market share and
drive out competition.
2. Differentiation Strategy: This strategy involves differentiating the product or service from
rival products or services so that it is perceived unique throughout the industry. Differentiation can
be created in several forms, e.g., unique design, brand image, customer service, dealer network or
other dimensions. Product differentiation enables the firm to earn above average returns.
3. Focus Strategy: A firm pursuing this strategy focuses on a particular buyer group, segment
of the product line or geographic market. The strategy is based on the premise that the firm can serve
its narrow strategic market more effectively than the competitors who are competing more broadly.
Value Chain Analysis:
Porter has developed the concept of value chain analysis to dissect a firm into “activities” that
are the building blocks of competitive advantage. It includes primary and secondary activities. It helps
in determining value creating potential of different activities.
Tom Peters:
In 1982, Peters co-published with Bob Waterman In Search of Excellence, which brought him
worldwide fame. This book describes McKinsey 7-S Model focusing on shared values, staff, systems,
strategy, structure, skills and style. Peters’ work represents a shift from number-centred, rational and
analytical frameworks to more innovative, intuitive and people-centred approach.
Gary Hamel
Strategy as Revaluation:
In a seminal article, “Strategy as Revolution” (Harvard Business Review, July/Aug 1996, pp.
69-82), Hamel sets out 10 principles that strategy generators should bear in mind.
 Change is not the problem-engagement is – People will support change and welcome the
responsibility for engendering it, if this gives them some control over their own future.
 Strategy making must be democratic – The capability for strategic thinking is not limited to
senior people, and it is impossible to predict where a good, revolutionary idea may be lurking.
 Anyone can be a strategy activist – People who care about their organization do not wait for
permission to act.
 Perspective is worth 50 IQ points – subversive strategy means gaining a new perspective on
the world, and looking at potential markets through new eyes.
 Top-down and bottom-up are not alternatives – if top-down can achieve unity of purpose
among the few involved, bottom-up bring diversity of perspective. Bring the two together.
 You can’t see the end from the beginning – Surprises do not appeal to everyone, but delving into
15
 discontinuities and identifying potential competencies will bring about unpredictable
outcomes. These will probably not fit the orthodox strategic mould – but strategy making is
about letting go.
Creating Strategy:
Hamel turns his revolutionary principles into action points, and urges organizations to adopt
a new stance through:
 New voices – Top management relinquishing its hold on strategy and introducing newcomers;
young people and people from different groups bring richness and diversity to strategy
formulation.
 New conversations – The same people discussing the same issues over and over again leads
to sterility; new opportunities arise from juxtaposing formerly isolated people.
 New passions – People will go for change when they can steer it and benefit from it.
 New perspectives – Search for new ways of looking at markets, customers, and organizational
capabilities; think different, see different.
Professor Gary Hamel is one of the most respected contributors to the debate on strategy of
the late 20thcentury. His fresh and often hard-hitting approach to organizational innovation has
brought wide acknowledgment from academics and practitioners alike.
H. IgorAnsoff:
Ansoff wrote several books out of which ‘Corporate Strategy’ became most popular. Ansoff
identified four standard types of organizational decisions as related to strategy, policy, programmes,
and standard operating procedures. The last three of these, he argued, are designed to resolve recurring
problems or issues and, once formulated, do not require an original decision each time. This means
that the decision process can easily be delegated. Strategy decisions are different, however, because
they always apply to new situations and so need to be made anew every time.
Ansoff developed a new classification of decision-making, partially based on Alfred
Chandler’s work, Strategy and Structure (Cambridge, Massachusetts: MIT Press, 1962). Decisions
are: strategic (focused on the areas of products and markets); administrative (organizational and
resource allocating); or operating (budgeting and directly managing). Ansoff’s decision classification
became known as Strategy-Structure-Systems, or the 3S model.
: Henry Mintzberg and ManagerialRoles
In the late 1960s, Henry Mintzberg found that the managers engaged in a large number of
varied, unattended and short-term acuities. He also provided a categorization scheme for defining the
manager’s job. These are commonly known as Mintzberg’s Managerial Roles.
Mintzberg concluded that managers perform 10 different but highly related roles. The term
managerial roles refer to specific categories of managerial behaviour. They can be grouped under
their specific headings – interpersonal relationships, transfer of information and decision-making.

16
Mintzberg’s Managerial Roles
Roles Description Identifiable Activities
Interpersonal Symbolic head: obliged to perform a Greeting visitors: signing legal
Figurehead number of routine duties of a legal or documents
social nature
Leader Responsible for the motivation and Performing virtually all activities
activation of employees: responsible for that involve employees
staffing, training, and associated duties.
Liaison Maintains self-developed network of Acknowledging mail: doing
outside contacts and informers who external board work: performing
provide favours and information other activities that involve
outsiders
Informational Seeks and receives wide variety of Reading periodicals and reports:
Monitor special information (much of it current) maintaining personal contacts
to develop thorough understanding of
organisation and environment: emerges
as nerve center of internal and external
information about the organisation
Disseminator Transmits information received from Holding informational meetings:
other employees to members of the making phone calls to relay
organisation- some information is information
factual, some involves interpretation and
integration influencers
Spokesperson Transmits of diverse value positions of Holding board meeting giving
organisational information to outsiders information to the media
on organisation plans, policies, actions,
result, etc.: serves as expert on
organisation’s industry
Decisional Searches organisation and its Organizing strategy and review
Entrepreneur environment for opportunities and sessions to develop new programs
initiates improvement projects to bring
about change: supervises design of
certain projects as well
Disturbance handler Responsible for corrective action when Organizing strategy and review
organisation faces important sessions that involve disturbances
disturbances. and crises
Resource allocator Responsible for the allocation of Scheduling: requesting
organisational resources of all kinds- in authorization: performing any
effect, the making or approval of all activity that involves budgeting and
significant organisational decisions the programming if employees
work
Negotiator Responsible for representing the Participating in union contract
organisation at major negotiations negotiations or in those with
suppliers

17
 PLANNING: NATURE, PURPOSE, PRINCIPLES AND PLANNING PREMISES

A number of management thinkers have given their own definition of planning, with the central
core being that of making decisions now that will affect the future of the company.

As such the planning process has three characteristics. These are:

1. Planning is anticipatory in nature. A decision must be made now as to what to do and how,
before it is actually done.
2. Planning is a system of decisions. It involves a process of making decisions which will
define what is to be achieved in the future and the formulation of action plans for achievement
of goals.
3. It is focussed on desired future results. Planning is a means of ensuring that the important
organizational objectives are accomplished as and when desired

Purpose of Planning

1. Planning is essential in modern business. The growing complexity of the modern

business with rapid technological changes, rapid changes in consumer tastes and growing
tough competition necessitates orderly operations not only in the current environment but also
in the future environment. Since planning takes a future outlook, it takes into ace-aunt the
possible future developments.
2. Planning is related to performance. It can be expected and there is evidence to support
the hypothesis that companies that engaged in formal planning consistently performed better
than those with no formal planning, and improved their own performance aver a period of
time. The performance was measured by such factors as return an investment, sales volume,
growth in earnings per share, etc.
3. Planning puts a focus an objectives. The effectiveness of formal planning is primarily
based upon clarity and specificity of objectives. Objectives provide a direction and all
planning decisions are directed towards achievement of these objectives. This ensures
maximum utility of managerial time and efforts.
4. Planning anticipates problems and helps in the smooth flow of operations. Since
planning is involved in forecasting the future, it minimizes the chances of hapbazard and
hurried decisions. Since the needs of the organization are anticipated in advance, the proper
acquisition and allocation of resources can be planned thus minimizing wastage ensuring
optimal utility of these resources.
5. Planning is necessary to facilitate control. Since plans are made to the plans are being
implemented correctly. Well developed plans can aid the process of control in the following
ways:
(a) Establish advanced warning of possible deviations from the expected performance. The
deviations in production, sales, profits, etc. may come to light during periodic investigations
and remedial “action can be taken.
(b) Provide quantitative data. There may be provision in plans to compare the actual
performance, in quantitative terms, concerning production of sales, with industry statistics or
market forecasts.
6. Planning helps in the process of decision-making. Since planning specifies the actions
and steps to be taken in order to accomplish organizational objectives, it serves as a basis for

18
 decision-making about future activities. It also helps managers to make routine decisions
about current activities since the objectives, plans, policies, schedules, etc. are clearly laid
down.

Nature of Planning

A good plan can be identified by certain characteristics. Some of these characteristics are given
below:
1. A good plan is based upon clear, well-defined and easily understood objectives. General
objectives like improving morale or increasing profits are ambiguous in nature and do not
lend to specific steps and plans. If possible, objectives must be quantified for sake of
simplicity.
2. A good plan must be simple and comprehensive. It should be simple so that all employees
can grasp its significance and it can be easily put into operation. It should be detailed enough
so that it covers all aspects of the operations that are necessary to achieve objectives.
3. It should be well-balanced, but flexible. A good plan should be well-balanced so that the
existing resources are properly utilized for all functions and that short-term gains are not at
the cost of long-term gains and vice-versa. Similarly, it should be flexible enough to
incorporate any changes in these resources, if necessary. Additionally, it should be responsive
to changed conditions so that if future events do not follow the anticipation, the same plan
can be modified and adopted to the altered situation.
4. Every plan should be time-bound. Even though planning is an attempt to anticipate the
future, the time period allowed for achieving goals should be reasonable. Long-range planning
has more uncertainties built into it due to difficulty in correctly anticipating events for a longer
period of time. Hence the time period covered should be reasonable and reasonably stable.
5. The plans should involve participation by subordinates. Planning should not be an
exclusive responsibility, of top management. Subordinates will not be responsible if a plan is
imposed upon, them. Also; subordinate participation

Principles of Planning

These principles are primarily based upon Gary Dressler. They are as follows:
1. Keep aims crystallized
2. Develop accurate forecasts
3. Involve subordinates in the planning process
4. The plan must be a sound one
5. Assign planning responsibility to the right people
6. Don’t be-over-optimistic
7. Decide in advance the criteria for abandoning a project
8. Keep your plan flexible
9. Review long-range plans on a short-range
10. Fit the plan to the environment.

19
 PLANNING PREMISES
As we have seen before, planning premises refers to the forecasts or predictions about the
environment in which the plans are going to operate. They are basically assumptions or
anticipated environmental conditions. Premises can be of varied types:
• Internal (philosophy, worker’s skills, company policies) and external premises (cultural,
technological, political environment, etc.)
• Tangible (hours of work, units of production and sale) and intangible (employee’s
attitude, morale, goodwill) premises
• Controllable (money, machine, material), Semi-controllable (advertising strategy) and
non-Controllable (natural calamities, government’s policies, consumer behaviour)
premises
• Constant (machine, money, men) and variable (union-management relationships)
premises

Policies: It refers to the general guidelines or constraints that aid in managerial thinking and action.

PROCEDURES, METHODS, RULES, PROJECTS AND BUDGETS

Procedures: While policies cover a broad area of action, procedures prescribe the exact manner in
which an activity is to be completed. It is a series of steps established to accomplish a specific project.
These generally indicate how a policy is to be implemented and carried out. These are more precise
guidelines permitting little or no individual discretion. Procedures can be defined as a series of related
tasks that make up the chronological sequence and the established way of performing the work to be
accomplished.
• Rules: While procedures specify a chronological sequence of steps to be performed, a rule is very
specific and a narrow guide to action. These are plans that describe exactly how one particular situation
is to be handled. For example, a company may prescribe a number of safety rules, such as ‘No smoking
on company premises’. ‘No eating in the classroom’ is a rule in all schools and colleges. A rule is
meant to be strictly followed and is generally enforced by invoking penalties.
• Method: A method refers to a prescribed process in which a particular operation of a task is to be
carried out. It specifies the most efficient way of performing different steps in a task. It defines the
technology of individual operations in a work situation. A method functions as a complete guide for
individuals in their performance of tasks. Thus, it is important to determine the standardized, simplified
and efficient methods of performing physical task by operatives. That is why even in modern computer
systems standard methods are generated to instruct the computer what operations it has to perform in
processing data.

Budgets: A budget is another single-use programme which is a financial plan that covers a specified
period of time. This plan identifies as to how funds will be raised and how these funds will be utilized
for procuring resources such as labour, raw materials, information systems and other business
functions such as marketing, research and development, and so on. Every organization prepares a
budget for its various activities. These budgets are usually for a one-year period at a time. When a
specific budget period ends, the value of that budget as a planning device is finished, even though it
may form the basis for the budget for the following period. In that respect, it is a single-use plan.

20
• Projects: A project is a single-use plan which is part of a general programme. It is defined as any
scheme or a part of a scheme for investing resources, which may be analysed and evaluated as an
independent unit. A project has a distinct mission and a clear termination point. It is a one-time crash
programme. The essential features of a project may be summarized as follows:
o It is a non-recurring plan.
o The activity is definable in terms of specific objective.
o It involves time-bound activities.
Projects are very advantageous for managers. When the programme is set up in projects, the task of
management becomes easier. There is a precise allocation of duties with a clear sense of responsibility.
This makes the implementation of the plan easy.

21
 UNIT II ----ORGANISING

NATURE, IMPORTANCE, PURPOSE AND SCOPE

The word organization is used and understood widely in our daily lives. It has been defined in a number
of ways by psychologists, sociologists, management theorists as well as practitioners. Let’s learn a
little bit about the concept of organization. Chester Barnard, a well-known management practitioner,
nearly sixty years ago, still remains popular among organization and management theorists. According
to him, an organization is, a system of consciously coordinated activities or efforts of two or more
persons. In other words, a formal organization is a cooperative system in which people gather together
and formally agree to combine their efforts for a common purpose. It is important to note that the key
element in this rather simplistic definition is conscious coordination and it implies a degree of formal
planning, division of labour, leadership and so on. For example, if two individuals agree to push a car
out of a ditch, as a one-time effort, then these individuals would not be considered as an organization.
However, if these two individuals start a business of pushing cars out of ditches, then an organization
would be created. More recently, Bedeian and Zamnuto have defined organizations as “social entities
that are goal directed, deliberately structured activity systems with a permeable boundary”. There are
four key elements in this definition:
1. Social entities:
2. Goal directed:
3. Deliberately structured activity systems
4. Permeable boundary

Principles of Organizing

The principles of organizing can be understood as:

1. Principle of Functional Definition: Organizing requires the different duties, responsibilities,

authority and relationships to not only be identified clearly but also be allocated to people in a
systematic fashion. This clear definition of relationships between managers and subordinates ensures
that coordination and organization occurs in a harmonious fashion.
2. Principle of Supervision: This principle gives a guideline or structure as to how many subordinates
or junior employees can be handled or supervised by a single manager. The span of control specifies
their area of control in the organizational structure. There can be two types of span of control: wide or
narrow. Each type of differentiation has its own benefits and disadvantages. It is based on the cost of
supervision, employee’s responses, communication infrastructure, nature of job, etc.
3. Principle of Specialization: The division of work is done in an organization to ensure that
maximum efficiency is achieved. The work is divided or delegated on the basis of skills, qualifications
and abilities of the subordinates.
4. Principle of Scalar chain: The work flow or the chain of command in an organization which
follows the direction of top to bottom is known as the

22
scalar chain. It ensures easy organization, minimization of wastage, avoidance of duplication of duty
and many other benefits. Here the managerial and subordinate hierarchy is clear at every stage.

5. Principle of Unity of command: This principle dictates that one subordinate be answerable or
accountable to one manager at a time. This ensures that the unity of command in the sense that the
responses and coordination are very clear and prompt. There is effective utilization of resources and
therefore effective coordination and organization of functions.

Organizing Functions of Management

The organizing functions which are undertaken by a manager in an organization are:

1. Recognition and identification of tasks: This step requires the managers to first be aware of all
the activities or functions that are required to performed in order to achieve the objectives of the
organization. This involves every activity like production, sales, record keeping, quality control,
preparation of accounts, inventory management amongst others.
2. Departmentation of activities: After the identification of activities, it is important that these are
segregated and combined with different activities so that all the tasks of similar nature are under one
department.
3. Authority and Delegation: Next to the departmentation function is complete, it is time to clarify
and designate the span of control of managers overseeing these different departments and the various
managers who will be helping them carry out these functions in these departments. This is then
followed by the hierarchical division of authority to establish a chain of command. It is this step which
clarifies broad functions like policy making for top managers, departmental supervision for middle
level managers and supervision of foreman by the low level managers.
4. Coordination: An important organizing function of management is to ensure co-ordination between
different managers in the organization. This is important for the managers as they will be clear as to
what becomes their responsibilities and who they are accountable to in the organization. Once the
reporting chart of activities is clear, all the activities.

Classifications of Organization

Organizations can be of many types but a broad classification of organizations on the basis of their
functioning includes the categories of a formal organization and an informal organization.
A formal organization typically consists of a classical mechanistic hierarchical
structure. In such a type of structure, the position, responsibility, authority, accountability
and the lines of command are clearly defined and established. It is a system of well-
defined jobs with a prescribed pattern of communication, coordination and delegation of
authority.
The informal organization, similar to informal groups, on the other hand, comes into
existence due to social interactions and interpersonal relationships and exists outside the
formal authority system without any set rigid rules. Though unrecognized, it exists in the
shadow of formal structure as a network of personal and social relations, which must be
understood and respected by the management.

23
Principles of Organization

The three important steps involved in organizational structure and design are discussed as follows:
(i) Determination, identification and enumeration of activities: Once the goals and objectives of
the organization have been established, the activities required to achieve these objectives are identified.
These activities are broken down into sub-activities as far down the hierarchy as possible so that each
individual knows as to what part of the activity he is responsible for. Care must be taken so that all
necessary activities are taken into account and any activity that is unnecessary is taken out. This
process applies to both managerial operational activities.
(ii) Grouping and assigning of activities: All similar activities are grouped together and assigned on
the basis of divisions or departments. These sets of activities may further be sub-divided into sections
or units. These groupings may be done on the basis of primary functions such as production, finance,
sales, personnel and so on; or these may be done on derivative basis such as types of customers,
geographical areas and so on. These activities are then assigned to personnel as heads of the
departments, such as production managers, marketing managers, personnel directors and so on. They
in turn delegate and distribute jobs to their subordinates down the line. Care should be taken that the
personnel and their jobs are well matched.

(iii) Delegation of authority: Since the persons who are assigned particular activities are responsible
for performing these duties to the best of their ability, they must be given corresponding authority to
discharge their obligations. Responsibility and authority are tied together. Responsibility is really the
accountability of authority. Authority without responsibility is a dangerous element. For example, if a
marketing manager has the responsibility to increase sales, but does not have the authority to hire and
maintain a competent sales force, then the responsibility in itself has little meaning

Theories of Organization
Based on the approaches of organization, some authors have developed theories of organization. They
are known as classical theories, neoclassical theories and modern organizational theories. We have
learnt about the management science and theories in Unit 2 of this book. Some of those ideas will be
discussed here again.
1. Classical Theories
Classical theories are based on traditional thinking. These theories were first propounded in 1900 and
incorporated original and initial ideas of management. The classical theories were devoted mainly to
the superior’s authority, objectives, rules and economic activities. The theories are broadlydivided
into: (1) Bureaucracy
(2) Scientific management, and (3) Process management.
(A) Bureaucracy model
The bureaucratic model developed because some people wanted to dominate others in business and
other activities. They organized men and materials for achieving objective for their personal benefits.
This theory was given a formal shape by a German Sociologist, Max Weber, who believed that
bureaucracy was an ideal weapon to harness human and physical resources. It is a formative model of
organization characterized by a large and complex atmosphere with impersonal detachment from
human resources. Rules, regulations, rigid hierarchy and specialized functions are important features
of bureaucracy. It is the epitome of structural relationship to control.
Features: The hierarchy of authority involving the superior—subordinate relationship is
the main feature of bureaucracy. The superior has more authority to control the
subordinate. There is a chain of superior—subordinate relations. There is a clear-cut
division of work upon which the structural organization is based, for getting the benefits

24
 of specialization and functionalization. Rules, regulations and procedure are considered
to be important functional guidelines for management. The importance of routine,
objectivity, uniformity and consistency are stressed under bureaucracy. Behaviour is
controlled by rules and regulations. The discipline is judged from the extent of following
of rules and regulations. Impersonal

(B) Scientific management

The scientific management theory was propounded by F.W. Taylor and was carried out by
Frank and Lillian Gilbreth, Henry L. Gantt and Emerson. Taylor postulated that management
was haphazard and inefficient at the time. The management was based purely on individuals’
capacity. The personal talent of the manager guided the workers who were motivated by bonus
and monetary benefits. F. W. Taylor therefore tried to find out the basic principles of
management by using time and work study, detailed analysis, investigation and planning of
work allocation. It is known as scientific management because systematized knowledge is used
for work allocation and assignment of specific jobs. The salary, wages, etc., are to be decided
as per the work performance of individuals. It revolutionized the entire shop or plant
management. Industrial engineering and management was promoted by Taylor. He said that
scientific management tries to perform the job in the best way.
Features: The essential features of scientific management are given below:
(i) Scientific Selection of Personnel: F.W. Taylor places great emphasis on the scientific
selection and training of workers. His theory stresses on selecting suitable persons for the job.
All persons cannot perform a particular job. People have different capacities and attitudes and
therefore are selected for the job best suited to them.
(ii) Incentives: Workers are inspired to perform the job if they are paid according to their
contributions. Taylor has, therefore, suggested a differential piece rate system for wage
determination. It required planning, analysing, preparing and inspecting work performance
and determination of standard production in a specific time. If a worker performs better than
the standard he will be paid at a higher rate.
(iii) Functional Foremanship: Workers themselves become supervisors because the worker
performing the function is interested in getting more wages by producing more units. The
supervisor has functional authority. He guides and directs the way of performing the job. Many
supervisors based on different natures of jobs are guiding persons to perform their jobs
effectively and efficiently.
(iv) Specialization: Specialization is developed in scientific management. It points out the
managerial and non-managerial functions. Persons capable of managing functions are given
the jobs of planning and control, while workers with the capacity for work performance are
put into production.
(v) Coordination: Since the jobs are performed by different specialized persons, coordination
of their activities becomes essential. The management should organise the activities in such a
way that it can perform its activities effectively. Coordination between workers and managers
as well as among themselves is essentially performed in scientific management.
(vi) Economic Performance: Workers are considered economic beings. They utilize physical
resources in the best manner possible in order to get maximum production out of human and
physical resources.
(vii) Work Order: Workers perform their jobs in a systematic order. The raw materials,
machine and the time are used in a systematic way. This helps workers achieve maximum

25
 utilization of the capacities and resources available to them. The materialistic approach is
always visible in the work order.

(C) Process management

Process management was propounded by Henry Fayol, wherein technical, commercial, financial
security, accounting and managerial activities are well-defined. Henry Fayol in his book General and
Industrial Management, published in 1916, described administration as the main component of
management, having special features of the deductive theory—closed system, hierarchy, formal
organization, organized groups and the universal principle of management. He said that the manager
has the right to disseminate managerial functions and can exercise his discretion for getting things
done through and with people. The employees are directed and controlled by managers. Process
management was propagated by H. Simon, L.F. Luwick, L. Gulick, G. Terry and several others who
pointed out that planning, organizing, motivating, coordinating and controlling are important functions
of management.
2. Neoclassical Theories
The classical theories concentrated on discipline and the economic well-being of people. They ignored
their morale and desires. Neoclassical theories while accepting the merits of classical theories have
given more importance to human relations and behavioural sciences. The neoclassical theories
modified, added and extended the classical theories by realising the fact that management exists in a
social system wherein human factors have cognizant roles to perform. Employees can play crucial
roles in the decision-making process. Human Relations and Behavioural Science have become two
important approaches of neoclassical theories.
(A) Human relations
The human relations theory was developed by Elton Mayo and his associates from 1924 to 1932 at the
Hawthrone plant of Western Electric Company. They experimented in four phases: (i) Illumination
experiments, (ii) relay assembly test,
(iii) interviewing programmes, and (iv) the bank wiring observation room experiments. Illumination
experiments revealed that light had no significant impact on the productivity of workers. The intensity
of light did not influence the productivity of telephone relays. The relay assembly test provided several
facilities to telephone relay assemblers, wherein it was observed that special attention and treatment
caused employees to increase their productivity. It was termed as the Hawthorne effect, where people
feel the pride of belonging to a group. The interviewing programme was tested on human relations
rather than on favourable physical conditions. It revealed that employees are unwilling to answer direct
questions. They gave important clues towards the management style when asked indirectly. The bank
wiring room experiment gave sufficient freedom to an informal group. It revealed that employees were
not only economic beings but social and psychological beings as well. Their productivity is influenced
by sentiments, beliefs and the group behaviour of employees.
The Hawthrone experiments brought about the conclusions that the business organization also includes
social and psychological factors. It considered organization as a social process where feelings,
sentiments and attitudes were given due importance. Mayo and Roethlisberger of Harvard Business
School postulated that efficiency and productivity could increase if the attitudes of employees were
well regarded.
(B) Behavioural science
The Behavioural Science theory believes in interpersonal relations. While human relations
concentrates on morale and productivity, behavioural science lays emphasis on interpersonal roles and
relationships. Sociologists and psychologists contributed significantly to the areas of behavioural
science for treating the human element as a social system. Group behaviour was given more
importance. McGregor Arguris and Likert believed that self-actualized man would contribute
to the development of management. They emphasized democratic values and human motivation. The
task itself is the primary source of satisfaction and self-motivation. Unlike the beliefs of the classical

26
theory, behavioural science believes that human beings like work but it should not be super-imposed
and should instead be self- realized.They enjoy work and believe in self-discretion and self-control.
They are interested in their own jobs and creativity in a healthy, safe, comfortable and congenial
environment. People consider themselves to be important persons and like to be treated as important
people by their superiors. The behavioural science theory tries to develop new insights and brings
about a congenial environment in the factory whereby new thinking and new techniques put forward
by employees are welcome.

3. Modern Organizational Theories

Modern organizational behaviour has become complex. It synthesises the classical and neoclassical
theories, while incorporating technological development. Modern organization theories are classified
into quantitative, system and contingency.
(A) Quantitative theory
The quantitative theory includes operation research and quantification of the problem. It analyses the
problems from quantifiable angles and provides solutions to complex problems only with the help of
statistical and mathematical models such as linear and non-linear programming, game theory, decision
tree, simulation and probability. Computers are used to solve management problems, whereas
mathematical models were previously used for the purpose. A large number of problems are solved
with the use of simulation equations and computers.The development of equations requires specialized
skills and advance knowledge of mathematics, statistics, economics and behavioural sciences. Models
are tested within the context of the real world and use of operation research.
(B) System theory
A system is a set of interconnected and interrelated elements of management activity. It
is an arrangement of components of activities performed for achieving certain objectives.
Thus, a system has three components: (i) arrangement, (ii) objectives and a (iii) plan. The
arrangement is designed and planned in an effective manner to achieve the objective. Men,
materials and money are planned to achieve the objectives of the organization. Recently,
it has been agreed that the organization is a system wherein operation, marketing, finance,
etc., are subsystems. The modern organization theory believes in the General Systems
Theory (GST) which is applicable to all scientific phenomena. Kenneth and Boulding
have contributed a systems theory to establish to single, self-contained and generalized
theory for particular disciplines. The system approach believes in a static structure and a
dynamic and cybernetic system. It has increased mobility, technological behaviour, self-
awareness and the goal-directed approach. The system is an
(C) Contingency theory
The contingency theory is an extension of the open system. It has an adaptable approach which
is applicable to all situations. Organizing a business based on changing situations and the
environment has its own quality and advantages. It is ready to cope with the increasing needs
of the company and society. The contingency theory is a situational theory which changes its
approach according to the requirements of the situation. It is away from the angle of different
theories of management, although it cannot claim that the valuable theories of management are
not applied for solving the problem. It is an attempt to provide something more contributory
for the help of practising managers.
The basic tenets of the theory are the relationships between various organizational
subsystems. Supra systems are established after focuszing on the external and internal
factors of environment. There is no prescribed managerial action or organizational design
for management action. The best organization to be followed depends on the situation.

27
 It deals with a variety of organizational and environmental variables with empirical
support.

LINE AND STAFF STRUCTURE

In this type of organization, the functional specialists are added to the line, thus giving the line
advantages of specialists. This type of organizational structure is most common in our business
economy and especially among large enterprises. Staff is basically advisory in nature and usually
does not possess and command authority over line managers. There are two types of staff:
1. General staff: This group has a general background which is usually similar to the background
of executives, and serves as assistants to top management in one capacity or another. They are not
specialists and generally have no direct authority or responsibility of their own. They may be
known as special assistants, assistant managers or in a college setting as deputy chairpersons.
2. Special Staff: Unlike the general staff which generally assists only one line executive, the
specialised staff provides expert advice and service to all on a company-wide basis. This group
has a specialised background in some functional area and it could serve in any of the following
capacities:
A. Advisory capacity: The primary purpose of this group is to render specialised advice and
assistance to management when needed. Some typical areas covered by advisory staff are legal,
economic and public relations.
B. Service capacity: This group provides a service that is useful to the organization as a whole
and not to any specific division or function. An example would be the personnel department
serving the organization by procuring the needed personnel for all departments. Other areas of
service include research and development, purchasing, statistical analysis, insurance problems
and so on.
C. Control capacity: This group includes quality control staff who may have the authority to
control the quality and enforce standards The line and staff type of organization uses the expertise
of specialists without diluting the unity of command. With the advice of these specialists, the line
managers
Organizational Structure also become more scientific and tend to develop a sense of objective
analysis of business problems.

DEPARTMENTALIZATION

Departmentation is the process of grouping related work activities into manageable work units
with some logical arrangement. The purpose of departmentation is to make a more efficient and
effective use of organizational resources. These work units may be related on the basis of work
functions, product customer, geography, technique or time.
As the organizations grow, supervising employees becomes more and more difficult for one
manager or supervisor. Consequently, new managerial positions are created to supervise the work
of others. The jobs are grouped according to some logical plan and the logic embodied in such a
plan forms the basis of departmentation. Departmentation is practised not only for division of
labour but also to improve control and communications. Departmentation fits into two general
categories, namely, functional and divisional and the divisional structures are based on groupings
of different activities

The Functional Structure

28
The functional design is also known as a U-form organization (U stands for unity) and it groups
positions into departments according to their main functional areas. Some of the main functions of
most organizations are those of production, marketing, finance, human resources, legal, research and
development. The type and the number of functions would depend upon the type of organization. For
example, some functions in a service organization will be different from these in a manufacturing
organization. The chain of command in each function leads to a functional head who in turn reports to
the top manager.

Divisional Structure

An alternative to the functional structure is the divisional structure which allows an organization to
coordinate intergroup relationships more effectively. It involves grouping of people or activities with
similar characteristics into a single department or unit.
Also known as self-contained structures, organizations operate as if they were small organizations
under a large organizational umbrella. The decisions are generally decentralized so that the
departments guide their own activities. This facilitates communications, coordination and control, thus
contributing to the organizational success. Also, because the units are independent and semi-
autonomous, it provides satisfaction to the managers and this in turn improves efficiency and
effectiveness.
There are basically three major forms of divisional structures that companies can choose from. These
are: product, customer and geography.

Product Structure.

In this type of structure, the units are formed according to the type of product and is more useful in
multi-line corporations where product expansion and diversification and manufacturing and marketing
characteristics of the production are of primary concern. For example, Pepsico owns and controls three
product units, namely, Kentucky Fried Chicken (KFC), Taco Bell and Pepsi. Each of these products
has special production and marketing demands. Similarly, General Motors has six divisions which are
autonomous and decentralized. These are: Buick, Pontiac, Oldsmobile, Cadillac, Chevrolet and GMC
trucks. While the general policies are decided upon by the top management within the philosophical
guidelines of the organization, each division is autonomous and strives to improve and expand its own
product line and each divisional general manager is responsible for its costs, profits, failures and
successes.
In this type of organizational structure, the responsibility as well as accountability is traceable thus
making the division heads sensitive to product improvements in response to changing customer tastes.
Furthermore, product structure facilitates the measurement of managerial as well as operative results
and the contribution of each product line to the total profit of the organization can be evaluated.
Customer Structure. This type of structure is used by those organizations which deal differently
with different types of customers. Thus the customers are the key to the way the activities are
grouped. Many banks have priority service for customers who deposit and maintain a prescribed
amount of money with the bank for a given period of time. Similarly, business customers get better
attention in the banks than other. First class passengers get better service from the airlines than
economy class passengers. An organization may be divided into such areas as industrial product
buyers and consumer product buyers.
Geographic Structure. If an organization serves different geographical areas, the divisional
structure may be based upon geographical basis. Such divisional structures are specially useful for
large scale enterprises which are geographically spread out such as banks, insurance companies,

29
chain department stores. Such a structure groups the activities of the organization along geographic
lines. For example, there may be separate vice-presidents of marketing who are responsible for
promotion of the product in Eastern Region, in North-Western Region, in Southern Region and so
on. In the case of multinational organizations, the geographic division may be European Division,
Middle-East Division, Far-East Division and so on, with central control office in the home country
such as United States.
In these cases, the local population is served by the divisional personnel while the general policies are
formulated at the headquarters. The local management is in close contact with the people in the area
taking advantage of such local factors as customs, cultures, styles and social preferences. The main
problem may be some difficulty in communication with the head office which can delay important
decisions and create problems with coordination of interrelated activities. This problem is specially
acute for multinational companies with operations in such underdeveloped countries where
telecommunication networks are not sufficiently developed.

AUTHORITY AND RESPONSIBILITY

Authority is considered as the root of an organizational structure. It integrates different units of an

organization. In the absence of authority even a manager ceases to be a manager. It is impossible to
visualise an organization if nobody is given the minimum authority required to get the assigned tasks
completed.
Characteristics of Authority
The main characteristics of authority are as follows:
1. Legality and legitimacy: The authority prescribed to a position is legal as well as legitimate. It is
considered in a formal sense and is maintained by certain standards of law and dependability.
2. Predefined limits: In an organization, the limits and extent to which an authority is to be utilised is
defined in advance and the position holder is expected to follow the rules, regulations and the norms of
the organization.
3. Relationship: An authority is a kind of relationship between a superior and his subordinate. The
superior gives the guidelines to the subordinate with the expectation of a sincere acceptance by the
subordinate and a successful execution thereby.
4. Attainment of organizational goals: Authority is basically given to subordinates to influence their
behaviour so as to do the right things at the right time, and thereby attain the goals of the organization.
5. Basis of managerial job: In the absence of authority, it would be more difficult for a manager to set
out the guidelines for subordinates and to get things done from them. Lines of authority work as a linkage
for the organizational hierarchy for the attainment of common objectives.
6. Right of decision making: Before giving authority, a manager decides the area of work that is to be
done by the subordinates.
7. Objectivity versus subjectivity: Authority is an objective thing but it is always taken in a subjective
form, thereby depending on the personality of both the manager and the subordinate who are supposed to
exercise them.
8. Delegation: Authority can be delegated by a superior to his subordinate who can further transfer a part
of the authority to their subordinates.

Sources of Authority
Authority flows both from top to bottom and also from bottom to top.

30
1. Formal Authority Theory: According to this theory, authority originates at the top of an organization
and flows downward through the process of delegation. The Board of Directors stand at the top of the
organizational hierarchy. Each and every member of board can delegate either full or a part of their
authority to the Chief Executives who in turn, can delegate it to Departmental Heads and so on. But the
extent of authority is predetermined by the immediate superior who is delegating it, and the person to
whom it is delegated is not allowed to exceed that limit. Therefore it is clear that authority always lies at
the top and moves down the scalar chain depending on the various positions. It is therefore traditional and
legitimate. It is formal because it creates a relationship between subordinates and their immediate
superiors.
2. Acceptance Authority Theory: Formal Authority Theory is of no significance unless it is willingly
accepted by the subordinates. They will accept only if they think that the advantages of acceptance are
greater than the disadvantages of non-acceptance. The decision regarding whether the order has the
authority depends upon the individual to whom it is addressed and not on the individual who issues it.
The subordinate will accept the authority if he gets recognition, appraisal, rewards and promotion for
doing so. According to Chester Barnard, authority flows upward and therefore it should be called Bottom
Up authority. This theory has a disadvantage that it cannot be carried out in case it is not willingly
accepted by the subordinates.
3. Competence Theory: This theory says that it is not necessary that each and every individual should
have the formal authority, meaning thereby that personal qualities or technical competence of an
individual also flow as an order wherever necessary. Henry Fayol has called it “authority of personality”.
A manager utilises authority by virtue of his expert knowledge, intelligence and skill. Both a staff
specialist and a subordinate possess and accept this authority due to their expert knowledge.

All the three theories have their importance and are utilised depending on the norms of the organization.
Formal authority is common to organizational structure while the acceptance authority theory and
competence theory form part of leadership. Therefore, it can be said that authority flows from all
directions.

Delegation of Authority
Delegation is the downward transfer of formal authority from one person to another. Superiors delegate
authority to subordinates to facilitate the accomplishment of the assigned work. Delegation of authority
becomes necessary as the organization grows. The chief executive cannot perform all the tasks of the
organization himself so that he must share some of his duties with his immediate subordinates. This
process continues until all activities are assigned to persons who are made responsible for performing
them.
Principles for Delegation
Delegation of authority should be effective and result oriented. Some of the principles that serve as
guidelines for effective delegation of authority are described as follows:
1. Functional clarity: The functions to be performed, the methods of operations and the results expected
must be clearly defined. The authority delegated must be adequate to ensure that these functions are well
performed.
2. Matching authority with responsibility: Authority and responsibility are highly interconnected. For
example, if a marketing manager is given the responsibility of increasing sales, he must have the
authority over advertising budgets and on hiring more capable sales people. Authority should be adequate
and should not only match the duties to be performed but also the personal capabilities of the
subordinate.
3. Unity of command: A subordinate should be responsible to only one superior who is delegating the
authority to the subordinate in the first place. In this manner, the responsibility for mistakes or
accomplishments is traceable and the chances of conflict or confusion are minimal.

31
4. Principle of communication: A misunderstood responsibility can be very dangerous. A general
authority can be easily misused. Accordingly, both the responsibility and authority must be clearly
specified, openly communicated and properly understood. The lines of communication must be
continuously kept open for issuing directions as well as for receiving feedback.
5. Principle of management by exception: Management should delegate the authority and responsibility
for routine operations and decision making to subordinates, but must retain such tasks for themselves for
which they alone are uniquely qualified. On the other hand, the subordinates must make decisions and
take actions wherever they can and should only refer matters of such nature to their superiors, which are
unique, and outside their domain of authority. This practice saves valuable time of top management that
can be utilised for more important policy matters. Also, by trying to solve most of the problems by
themselves, the subordinates prepare themselves for higher challenges and responsibilities.

Responsibility

Responsibility has been defined in various ways. Mostly it is considered to be the ‘duty’ to perform
certain assigned tasks in a satisfactory manner. It is the obligation of an individual to perform certain
activities which are assigned to him, the source of responsibility lies within the individual. If he accepts a
job or ‘responsibility’, he should see that the job is completed to the best of his ability. It is governed by
contractual as well as moral obligations. Contractual obligations ensure that the job is done and morality
ensures that it is done honestly and efficiently.
Since responsibility is an obligation that a person accepts, it cannot be delegated to the subordinate even
if the activity is performed by the subordinate. Responsibility cannot be delegated though authority can
be/is delegated.
Responsibility in one sense is a ccountability for authority.An authority misused has a negative effect on
operations. It must be used in a responsible.

CENTRALIZATION AND DECENTRALIZATION

Centralization means that the authority for most decisions is concentrated at the top of the managerial
hierarchy and decentralization requires such authority to be dispersed by extension and delegation
through all levels of management. There are advantages as well as disadvantages of both types of
structures and the organizational structure determines the degree of centralization or decentralization.
A pure form of centralization is not practical, except in small companies, and pure form of
decentralization almost never exists. As organizations grow bigger by expansion, mergers or
acquisitions, decentralization becomes both necessary as well as practical. If an automobile
manufacturing company acquires a company which makes refrigerators, then decentralization would
be the natural outcome since policies and decisions in these two areas may not be similar. The
important question is not whether there should be decentralization, but decentralization to what
degree? In addition to decentralization being logistically superior in most situations, it is also
advocated by many behavioural scientists as being more democratic. Secondly, if all decisions are
made at the top, then the lower organizational members end up only as workers and not as innovators
or thinkers, and it inhibits the growth and development of personnel. On the other hand,
decentralization tends to create a climate where by taking additional responsibilities and challenges
enable, the organizational members.

ADVANTAGES OF CENTRALIZATION

The following advantages are claimed for centralization:

32
1. It is a means for adopting and enforcing uniform policies and it achieves coordination and
conformity since all decisions are made at one central point.
2. The quality of the decisions is expected to be higher since the top management who make such
decisions are much more experienced and knowledgeable about organizational problems and situations
than the subordinates who are still “going through the mill”. Also, decisions made by subordinates in
decentralization may not be optimal for the entire organization since the subordinates lack the wider
perspective of the needs and issues of the organization as a whole and tend to concentrate on the
optimality of their own units.
3. Centralization makes it easier to achieve a balance among the activities of different departments and
functional areas. If the departments of production, marketing and finance, each went its own way, then
each would try to make decisions that would be beneficial to its own department, even at the cost of
other departments. This would be harmful to the organization as a whole. The centralised system looks
at these different sub-units as parts of the whole unit and relates these sub-units to each other so as to
maximize the total benefits.
4. Centralization results in the optimal utilisation of human and physical resources. One of the
disadvantages of divisionalisation and decentralization is the duplication of efforts and resources for
similar activities being conducted by different sectors of the organization. For example, General
Motors has five divisions with each division having its own executives and separate research facilities
which would be combined under centralization.
5. The Central management is better equipped to handle any emergencies that might affect all the units
of the organization. This emergency may be related to policy matters or operational matters. This may
be a breakthrough in technology or a sudden change in the tactics of competitors. For example, if one
airline suddenly and drastically reduces its airfares, other airlines must follow immediately to keep
their market share. This can only be effectively done through central management.
6. Centralization provides for the services of staff specialists in those areas where they are needed.
Different units of the same organization independently would not have the resources to provide for
specialised services.
7. Centralization can be highly motivating and morale boosting for executives. It is better to be an
important executive of the whole organization than only of one unit. It provides prestige and power
which strengthens the self- confidence which in turn would be useful in decision making at time of a
crisis.

ADVANTAGES OF DECENTRALIZATION

The following advantages are claimed for decentralization:

1. It relieves the top executive from excessive workload, since in decentralization, most of the routine
managerial responsibilities are delegated to subordinates. This gives the central management more
time to concentrate on planning, coordination, policymaking, control and so on.
2. It provides foundations for development of future executives. The more responsibility is given to
subordinates, the more experience they will gain, thus preparing them for higher positions. This makes
promotions from within more desirable because these newly promoted managers would be much more
familiar with the organizational problems and aspects.
3. Decentralization is highly motivational for subordinates because it gives them the freedom to act
and freedom to make decisions. This gives them a feeling of status and recognition and this results in
a feeling of dedication, commitment and belonging. The behavioural scientists argue that such
commitment leads to higher productivity.

33
4. Decentralization leads to prompt actions and quick decisions, since the matters do not have to be
referred to the higher-ups and spending time for their guidance, approvals or decisions. Also, the
supervisors are much closer to the points of operations and are in a position to know the problems
more accurately and are more likely to make the right decisions.
5. Decentralization results in effective control over operations and processes. In decentralization, the
responsibility is much more specific and any mistakes are easily traceable. This makes the
accountability much more clear-cut and hence controls much more effective. This would make the
managers of the units much more conscious of their duties resulting in higher productivity. It can be
seen that decentralization is advantageous in most situations and unavoidable in large diversified
organizations. To make decentralization more effective, its concept must be clearly understood that it
does not mean total autonomy but only operational independence and the unit managers are responsible
to the central management for their actions and results. Perhaps, the best form of decentralization
would be centralised control with decentralized responsibilities.

INFORMAL ORGANIZATION

We have learnt a little bit about formal and informal organizations in. Now let’s discuss informal
organizations. A formal organization typically consists of a classical mechanistic hierarchical
structure. In such a type of structure, the position, responsibility, authority, accountability and the
lines of command are clearly defined and established. It is a system of well-defined jobs with a
prescribed pattern of communication, coordination and delegation of authority. We have also studied
the major features of a formal organization.
Informal organizations come into existence due to social interactions and interpersonal relationships
and exists outside the formal authority system, without any set rigid rules. Though unrecognized, it
exists in the shadow of formal structure network of personal and social relations, which must be
understood and respected by the management.

Some of the concepts of informal organization are:

(a) Group norms. Parallel to performance standards established by the formal organizational
structure, the informal groups have their own norms as rules of conduct and standard of behaviour
which is expected of all members. These norms may be established in consultation with the
management so that the group goals do not conflict with the organizational goals. For example, if
one member of the group is unproductive or talks ill about the organization, he may be sanctioned by
the other members either by ridicule or by the “silent treatment.” Similarly if one member is overly
productive in order to please the management, thus making the other members look bad, he could be
similarly sanctioned to bring him back in line. Astudy conducted by P.C. de la Porte showed that the
group norms that are favourable to the organization are: organization pride, team work, honesty,
security, planning, customer relations etc. The norms about profitability and supervision were
unfavourable to the organization.
(b) Group roles. There is an unwritten assignment within the group as to which task wi1l be done by
whom and under what conditions. Some job roles are assigned by the management by matching the
job description with the person’s qualifications, while some other roles develop within the group.
Some members may informally, be technical advisors to others as to how to do the job better and
others may act as arbitrator; in social problems or other differences that may arise among members.
(c) Group goals. The goals of the informal group, whether it be profitability, which conflicts with the
organizational goals or customer service, which is in accord, heavily influence productivity. It is

34
necessary to integrate the group goals with the organizational goals for the purpose of improvement
and success.
(d) Leadership. The informal group leader emerges from the group, either because of his personal
charisma or his social status or his technical expertise. He is not formally elected, but is accepted in
the minds and hearts of the workers. These leaders influence the behaviour of others and remain
leaders as long as they are sincere to the group interests.
(e) Group cohesiveness. Cohesiveness refers to the degree and strength of interpersonal attraction
among the members of the group. High degree of cohesion is highly motivating in achieving the
group goals. Members help each other and support each other. The degree of cohesiveness depends
upon the commonness of the percepted group goal, the size of the group and the ability of the group
leader to facilitate cohesion. Group cohesion also has synergetic effects where together, they produce
much more by the collective efforts than the sum product of the individual efforts.

Staffing is the traditional management function of attraction and selection of the best people and
putting them on jobs where their talents and skills can be best utilized, and retention of these people
through incentives, job training and job enrichment programmes, in order to achieve both individual
and organizational objectives. This emphasizes managing human and not material or financial
resources. This function is becoming extremely specialized due to the unique importance and
complexity of human nature and its ever-changing psychology, behaviour and attitudes.
The staffing function is generally handled bythe personnel department where the personnel
management is concerned with ‘planning, organizing, directing, and controlling of the procurement,
development, compensation and integration of people into the system for the purpose of contributing
to organizational, individual and social goals.’

Importance of Staffing

The importance of staffing can be understood through the following points:

• It helps in ensuring that the right personnel is selected and recruited to the right positions so that
maximum level of productivity is maintained.
• It assists in attaining the judicious utilization of human resources.
• It helps in bringing down superfluous labour costs in tune with the productivity.
• It helps in discovering and hiring of qualified candidates for the right jobs in the organization.
• It assists in making sure that the morale of the employees and job satisfaction is kept at a good level.
• It ensures that there is not a shortage of employees or workforce in the organization so that the
processes are not hampered or stalled unnecessarily.
• It attaches value to the staffing process so that the employees as well as the organization uses the
work force in a productive and ethical manner

GENERAL PRINCIPLES OF STAFFING

The general principles of staffing can be understood through the staffing function consists of the
following sequential steps:
Step 1 Job analysis: Analyse the job by preparing a job description, job specification and job analysis.
35
Step 2 Actual recruitment: This would explore all the internal and external sources from where the
required personnel can be recruited.
Step 3 Employee selection: This crucial step involves using such techniques as would identifyand
isolate suitable people who would eventuallybe selected.
Step 4 Retention: When the right people have been hired, they must be retained so that they stay with
the organization for a long time. This step discusses such factors that are influential in maintaining the
work force.
Step 5 Training and development: This consists of all such programmes that assist in continuous
growth and development of employees.
Step 6 Performance appraisal and career development: This step involves devising methods that
would judge an employee’s performance over a period of time and providing opportunities to
employees to develop their careers and managerial talents.
Let’s discuss some of these topics in this section.

Job Analysis

Job analysis is an orderly study of job requirements and involves systematic investigation relating to
the operations and responsibilities including knowledge, skills and abilities required for the successful
performance of a job.

Job Description

Job description is a systematic, organized and written statement of ‘who does what, when, where,
how and why,’ and is a tangible outcome of job analysis. It describes the work to be performed, the
responsibilities and duties involved, conditions under which the work is performed, the relationship of
one job with other similar or dissimilar jobs and the skill, education, and experience required. A job
description is used for a variety of purposes such as recruitment and selection, and job evaluation.
Job Specification
Job specification cites personality requirements and lists qualifications both physical and mental,
necessary to perform the job properly. It is used to inform the prospective employees about minimum
acceptable qualities required to get the job and perform it well. It may be a specific period of
experience, educational degree or physical requirements such as height, weight, etc.

UNIT III

CONTROLLING: MEANING AND OBJECTIVES

Control is very important in both organized living as well as ‘living’ organizations. When things go
smoothly as planned, they are considered to be under control. ‘Self-control’ is a word we are all
familiar with and which simply means that we discipline ourselves in such a manner that we strictly
adhere to our plans for our lives and generally do not deviate from these plans. Controls are there to

36
ensure that events turn out the way they are intended to. It is a dynamic process, requiring deliberate
and purposeful actions in order to ensure compliance with the plans and policies previously
developed. This means that the managerial functions of planning and controlling are very closely
related. Without proper controls, planning itself has little meaning.

According to Robert L. Dewelt, the importance of the planning process is quite obvious. Unless we
have a sound chartered course of action, we will never quite know what actions are necessary to meet
our objectives. We need a map to identify the timing and scope of all the intended actions. This map
is provided through the planning process. However, simply making a map is not enough. If we do not
follow it or if we make a wrong turn along the way, chances are we will never achieve the desired
results. A plan is only as good as our ability to make it happen. We must develop methods of
measurement and control to signal when deviations from the plans occur so that corrective action can
be taken.

OBJECTIVES OF CONTROL

A good budgetary control technique should have the following essential features:
• Prompt feedback: A good budgetary control technique should be able to give prompt feedback
concerning actual performance to the managers. This can enable them to take quick actions to rectify
and correct deviations.
• Clear-cut goals: Budgetary goals should be laid in definite terms for accurate calculation and
analysis of results.
• Responsibility accompanied by authority: Besides the responsibility to achieve budgetary targets,
the concerned employees must be given the required authority to apply the budgetary control
technique.
• Comparison: Comparisons between the budgetary targets and functioning results must be carried
on from time to time. This facilitates early discovery of deviations and minimizes possibility of loss.
• Flexibility: Budgets should be open to changes and review according to changing market
conditions. A good budgetary control technique should permit considerable freedom to the person
utilizing it.
Harmonious participation: As a budget is a unified action, it should be prepared in consultation with
the employees. This will improve the level of understanding the budget in the organization.
Process of Control
A business organization should be able to tailor controls suited to the particular plan or manager.
Controls should be designed keeping in mind certain elements that a control process must constitute.
According to Robert J. Mockler: Management control is a systematic effort to set performance
standards with planning objectives, to design information feedback systems, to compare actual
performance with these pre-determined standards, to determine whether there are any deviations and
to measure their significance, and to take any action required to assure that all corporate resources are
being used in the most effective and efficient way possible in achieving corporate objectives.
Mockler’s definition divides the process of control into four steps.

These steps are described as follows:

Establishing Standards
The control process begins with the establishment of standards of performance against which
organizational activities can be compared. These are levels of activities established by management
for evaluating performance. These standards must be clearly specified and understood by all

37
 organizational members without ambiguity. They should be defined in measurable terms, wherever
possible, such as physical units produced over a period of time, profit to be made per unit and so on.
Vaguel worded standards or general goals such as ‘better skills’ or ‘high profits’ are difficult to
interpret and hence lead to confusion and conflict. For example, the goal of a real estate broker may
be to sell four houses per month.
Measuring Performance
Once the standards have been established, the second step in the controlling process is to monitor and
measure the actual performance. Monitoring and measuring is a continuous activity and involves
collection of relevant data that represents the actual performance of the activity so that a comparison
can be made between what is accomplished and what was intended to be accomplished. The
measurement of actual performance must be in the units similar to those of predetermined criterion.
The unit or the yardstick thus chosen should be clear, well-defined and easily identified and should be
uniform and homogeneous throughout the measurement process.
Measuring Devices
One of the most difficult tasks in measuring actual performance is the selection of an appropriate
measure. It is very important that all performance measures used in controlling organizational and
individual performances be both valid as well as reliable. Validity reflects as to how good the
performance measure is and reliability describes as to how consistent such performance measure is in
obtaining results. The methods of measurement established would answer the question, ‘What, how
and when to measure?’ Some of the measuring devices used are as follows:
(i) Mechanized measuring devices: This involves a wide variety of technical instruments used for
measurement of machine operations, product quality for size and ingredients and for production
processes. These instruments maybe mechanical, electronic or chemical in nature.
(ii) Ratio analysis: Ratio analysis is a powerful management tool for measuring various aspects of
business operations. It describes the Controlling relationship of one business variable to another.

The following are some of the more important ratios.

(a) Net sales to working capital: The working capital must be utilized adequately. If the inventory
turnover is rapid, then the same working capital can be re-used. Hence, for perishable goods, this ratio
is high. Any change in this ratio will signal a deviation from the norm.
(b) Net sales to inventory: The greater the turnover of inventory,
generally, the higher the profit on investment.
(c) Current ratio: This is the ratio of current assets (cash, accounts receivables) to current liabilities
and is used to determine acompany’s ability to pay its short-term debts.
(d) Net profit to net sales: This ratio measures the short run profitability of a business.
(e) Net profit to tangible net worth: Net worth is the difference between tangible assets and total
liabilities. This ratio of net profit to net worth is used to measure profitability over a long period
of time.
(f) Net profit to net working capital: The net working capital is the operating capital on hand. This
ratio would determine the ability of the business to finance day-to-day operations.
(g) Collection period on credit sales: The collection period should be as short as possible. Any
deviation from established collection periods should be promptly investigated.

(iii) Comparative statistical analysis: The operations of one company can be usefully compared with
similar operations of another company or with industry averages. It is a very useful and practical
performance measuring methodology. For example, farmers can compare output per acre with farmers
at other locations. Any differences can be investigated and the reasons for such differences can be
ascertained. Similarly, hospitals at one location can measure their medical costs against those of other
hospitals, and the performance of police departments can be measured by comparing crime rates in

38
 their locality with those in other localities. Statistical models can be used for such Measurements and
such comparisons.
(iv) Personal observation: Personal observation, both formal as well as informal can be used in certain
situations as a measuring device for performances, especially the performances of personnel. The
informal observation is generally day-to-day routine type. A manager may walk through a store to get
a general idea about how people are working. An airline officer may fly incognito to evaluate the
performance of in flight attendants.

Requirements of Effective and Integrated Controls

Controls at every level focus on inputs, processes and outputs. It is very important to have effective
controls at each of these three stages. Effective control systems tend to have certain common
characteristics. The importance of these characteristics varies with the situation, but in general,
effective control systems have the following essential characteristics.
• Accuracy: Effective controls generate accurate data and information. Accurate information is
essential for effective managerial decisions. Inaccurate controls would divert management efforts
and energies on problems that do not exist or have a low priority and would fail to alert managers to
serious problems that do require attention.
• Timeliness: There are many problems that require immediate attention. If information about such
problems does not reach management in a timely manner, then such information may become useless
and damage may occur. Accordingly, controls must ensure that information reaches the decision
makers when they need it so that a meaningful response can follow.
• Flexibility: The business and economic environment is highly dynamic in nature. Technological
changes occur very fast. Arigid control system would

Acceptability: Controls should be such that all people who are affected by it are able to understand
them fully and accept them. A control system that is difficult to understand can cause unnecessary
mistakes and frustration and may be resented by workers. Accordingly, employees must agree that
such controls are necessary and appropriate and will not have any negative effects on their efforts to
achieve their personal as well as organizational goals.
Integration or Integrated control: When the controls are consistent with corporate values and
culture, they work in harmony with organization policies and hence are easier to enforce. These
controls become an integrated part of the organizational environment and thus become effective.
• Economic feasibility: The cost of a control system must be balance against its benefits. The
system must be economically feasible and reason able to operate. For example, a high security
system to safeguard nuclear secrets may be justified but the same system to safeguard office supplies
in a store
would not be economically justified. Accordingly, the benefits received must outweigh the cost of
implementing a control system.
• Strategic placement: Effective controls should be placed and emphasized at such critical and
strategic control points where failures cannot be tolerated and where time and money costs of
failures are greatest. The objective is to apply controls to the essential aspect of a business where a
deviation from the expected standards will do the greatest harm. These control areas include
production, sales, finance and customer service.
• Corrective action: An effective control system not only checks for and identifies deviation but
also is programmed to suggest solutions to correct such a deviation. For example, a computer
keeping a record of inventories can be programmed to establish ‘if-then’ guidelines. For example, if
inventory

39
of a particular item drops below five per cent of maximum inventory at hand, then the computer will
signal for replenishment of such items.
• Emphasis on exception: A good system of control should work on the exception principle, so
that only important deviations are brought to the attention of management. In other words,
management does not have to bother with activities that are running smoothly. This will ensure that
managerial attention is directed towards error and not towards conformity. This would eliminate
unnecessary and uneconomic supervision, marginally

BUSINESS PROCESS REENGINEERING

Sometimes in order to develop a good information system that will serve the purpose of management
even in the future, it becomes very essential to have a relook at the way business processes are
conducted in a firm. The rationale for this is that the manner in which business is conducted changes
with time and an information system that is designed over such out dated business processes would
not provide any worthwhile value to managers. Business organizations are a continuing entity but the
products or services that they offer change with time. Even the manner in which it conducts business
changes with time. New ways of doing business emerge over time. New markets emerge. New products
and services emerge. New geographies emerge. New technologies emerge. All this changes the
organization fundamentally. If however, the organization continues to engage with its customers
(internal as well as external) in the same way as it had been doing in the past then it risks losing
business and efficiency. It has to change its process to remain competitive. However, organizations
cannot change individual processes on an ad hoc basis and neither can they change the processes in
isolation. Concerted efforts are required and a complete scientific exercise is required to change
processes of doing business and to ensure, at the same time, that the business does not suffer from this
changed effort. This scientific exercise of overhauling the process of doing business is called business
process reengineering (BPR).

BPR Model
As is evident, BPR is a scientific exercise comprising of a set of logical micro tasks. Therefore, it may
be worthwhile to define the BPR exercise in the form of a
model.
• Business objective definition—In this the goals of the business are crystallized. The goals may be
cost reduction, time reduction, etc. Essentially in this stage the BPR team must identify the major
driver for the processes in the overall business perspective.
• Process identification—In this stage the critical process that helps in the attainment of the business
objectives are identified and ranked according to their perceived importance in the overall business.
• Process evaluation—In this stage the process is examined in detail by first pictorial depiction the
process (that may be done after actually passing through/seeing the process in action) and then finding
out the areas that are redundant or can be made redundant after adequate use of managerial or
technological intervention. In this stage the process is examined from a cost and time perspective which
helps to understand the efficiency of the process. In most cases, this exercise results in process
improvement.
• Process specification—In this stage process specifications are plotted in a
process diagram.

40
• Prototyping—In this stage, a working model of the software that mimics the process is created in
collaboration with the developers and the customers. This prototype acts as the basis for further
development.
• Refinement—The feedback on the prototype is factored in the new design and a process of
refinement of the prototype starts. This step may involve several stages of refinement to arrive at a
fully functional system.
• This is a broad template that ensures that the BPR exercise is don systematically and not on an ad
hoc basis.
• Process improvement—It is the activity of critically examining a process with the objective of
making it more efficient. In most cases, it involves the shortening of the process, reduction of people
handling the process, intervention of technology, changing the manner of doing tasks within the
Process.

TOTAL QUALITY MANAGEMENT

Let us being by discussing the definition of TQM.

Definitions of TQM

TQM is a transformational process that touches all aspects of managing a business and all people in
the company. It is not a simple quality management system; it is a management strategy to transform
and change the organizational work culture for improvement in overall performances of the business.
Many experts claim that TQM is a strategic tool for changing and revitalizing the organization for
rapid
growth and development. Though TQM brings about all-round improvements in the business processes
by making the organization adaptive, flexible, nimble, responsive and creative, the consequences of
TQM can be grouped into: product and productivity related, process and process quality related,
employee satisfaction related, cost and value related, customer satisfaction and market share related,
and finally, business performance and competition related. The most startling benefit of total quality
comes from the culture of seeking continuous improvement in anything that is done in the organization
and its focus to customer satisfaction.

Principles of TQM

The principles governing the TQM system are:

• ‘Customer-oriented’ approach: All activities and processes in the organization should be
coustomer focused. This approach ensures that all are concerned with the customers’ needs and their
efforts should be directed towards winning customer satisfaction.
• Strategic planning and leadership: For achieving the customer-focused quality targets in all
activities and processes, senior management leadership should lead to strong ‘customer orientation’ in
the organization and be willing to make long-term commitments to its customers, employees, vendors,
Stock holders and to the society.
• Process focus: In all activities there should be process focus which may require restructuring of
vertical processes to ‘cross-functional’ horizontal processes where clear view of customer needs can
be established in each of these processes. This is the new approach to change the work culture to
Team work and make everyone in the process responsible for the quality by
training and empowerment.

41
• Creating a culture of working through people’s involvement: To give effect to this principle,
TQM system works on an ‘internal customer ’system, where each person and process can be linked as
customer to each other in the chain of activities for production and delivery of goods and services.
This system is proving to be at the core of TQM for involving all people into the process of customer
satisfaction, and developing a customer orientation culture in the organization.
• Continuous improvement of all processes and activities, leading to total customer satisfaction
and competitive advantage: This is a key measure for TQM; TQM believes that there is no end to
improvement and it must be continuously pursued in an organization for performance excellence.
Emphasis on continuous improvement in an organization makes people involved in work to think
‘outside the box’ and promote creativity and innovation in their work. Efforts for continuous
provident demand orientation to a new work culture, where continued thinking and working for
improvements become a part of corporate life.

Training and development of people : The TQM system believes that people are at the core of every
process and activities of the organization. It is the people who drive the processes under the TQM
system. Therefore, people should be trained and developed for understanding the process of TQM, the
values and vision of the company, systems and tools of TQM and, above all, understanding the
ustomer needs. This system is intended to empower and enable people of the organization for superior
performance.
• Empowerment and teamwork: This is to provide people with the opportunity to learn, apply and
practice their skills, creativity and knowledge. Team approach to work and the cross-functional process
management are important aspects of TQM work culture. Under TQM system, cross functional
customer-focused horizontal processes are always run and owned by teams drawn for various
connected functions, and the team is sufficiently.

Concept of Six Sigma

Six Sigma is a quality metric that counts the number of defects per million opportunities (DPMO) at
six levels. The higher the sigma-level, the better is the quality level with lower DPMO. General
approach for this task is to work in terms of reduction of variations and defects by following a four-
phase approach:
1. Measure: Select critical quality characteristics, determine the frequency of defects, define
performance standards, validate measurement system, establish process capability and evaluate current
performance.
2. Analyse: Understand what, when, where and why of defects and causes by analysing sources of
variation vis-à-vis target objectives. The process of analysis includes process mapping, identifying root
causes and establish in cause-and-effect relationships.
3.Improve: Brainstorm and generate ideas, narrow the list of potential solutions, select the best
solution, validate the solution (use mathematical modeling, if necessary) and develop implementation
strategy.
4. Control: Maintain improvements by revalidating measurements, determining improved process
capability and implementing statistical process control system to monitor performance.

Purpose of six steps in six sigma are:

• Steps I & II: These steps involve determining the products to be made, customer segment to be
served, what is to be served and how to do that
.

42
• Step III: This step involves in making the organization look at the needs for suppliers’ support to
meet the target quality and focus on developing suppliers’quality capability.

• Step IV: This is the step where all processes being carried out by the company should be mapped
out, and needs and means for process improvement should be determined for fulfilling the mission.

• Step V: This step involves critical evaluation of the process to be upgraded, and all non-value
added steps, activities and sources of errors should be eliminated.

• Step VI: This is the step for establishing measurement criteria, analyzing data and driving the
process with a spirit of continuous improvement.

Definition and Reasons for Benchmarking

benchmarking process may require partnering with that company of superior practice, understanding
their logic of working and practice, appropriately adopting the practice in one’s own organization as
per its own specific situation and potential in order to achieve improvement and superior level of
performance. Necessity to partner with external companies or identifying suitable source to partner
with from within the organization’s other processes would depend on the subject matter and purpose
of the benchmarking. The essence of benchmarking is the endeavour to analyse and understand the
process, products or services of a world class company (or a superior performer) in order to learn how
it achieved those superior results, and then set up one’s own internal measures and steps to meet or
surpass it. Juran described this as practice for managerial breakthrough. The purpose of benchmarking
is to enable the organization to set in world-class practices in the company for much improved quality
results, business results, customer confidence and competitive advantage.
It has the following components:
1. Plan: Plan what is to be benchmarked, identify critical success factors, form teams, document
processes and set performance measures to be achieved.
2. Search: Identify partners and establish partnership.
3. Observe: Understand and document the partner’s process, procedures and practice.
4. Analyse: Identify gaps in performance and find out root causes.
5. Adopt: Choose ‘best practice, understand the methods and practice for improvement, adapt to
company’s own situation, but do not copy as they are being done in the partner’s company.

BENCHMARKING PROCESS
Key factors for successful benchmarking are: (i) believing that there is a better way of doing things
and there is a need for change and improvement from the present level, (ii) determining what should
be improved and changed to make impact on company’s performances, (iii) accepting the fact that
another company’s solution can be better and (iv) developing a vision of what it should be after the
change. Translating these into actions broadly involves:
• Analysing the gap between own and other superior practices
• Understanding the prevalent ‘best-practices’ in industries to identify what must be changed or
improved
• Identifying the most appropriate ‘benchmarking partner’and studying their
best practices methodology
• Implementing benchmarked practices at one’s own unit to achieve set goals

43
• Reviewing of results and outcomes to determine ‘where you are’ after the
change and what needs to be done further Benchmarking process steps can be grouped under the cycle
of plan– search–observe–analyse–adopt, as mentioned earlier.

In the step-by-step practice, this would mean following a systematic

sequence of steps in following order:

Step 1. Identify the function to be benchmarked and form teams.

Step 2. Identify ‘best-in-class’ company in that function.
Step 3. Identify the key performance variables to measure and collect data.
Step 4. Establish benchmarking partnership with the chosen company and function.
Step 5. Ensure that types of data being collected are amenable to accurate comparison with the
benchmark partner’s data.
Step 6. Analyse and compare the data for understanding the measures taken
by the partner. In addition to the collection of quantitative data, identify if management
approach differs between the companies and identify the critical factor that led to
the success of the partner.
Step 7. Prepare enablers from the study of partner’s technique and management actions.
Step 8. Set new goals or levels of performance in the chosen function (benchmarked level).
Step 9. Establish functional goals for the benchmarking team and allow analysis of how the goals
can be accomplished in the situations of the company.
Step 10. Allow team to make presentation and recommendations about how the company must act
and improve to reach to the new goals. Make management review in terms of resources and facility
requirements and finalize target and actions.
Step 11. Communicate and share the findings and goals with the people of the organization to build
understanding, commitment and motivation to work for the goals.
Step 12. Develop action plan for implementation covering all related areas.
Step 13. Implement actions and monitor progress and share the improvement outcomes with the
partner and people of the organization.
Step 14. Review and recalibrate the benchmarked goals and levels.
Step 15. Re-evaluate periodically the benchmarks to ensure that they are valid for current data and
business situation and aimed at best targets.

44
 UNIT - IV
Definition of organizational Behaviour:
Organisation behaviour is the study and application of knowledge about how and why
people behave in organizations. Though it is defined by various authors, three important
definitions are given below:
“Organisational behaviour is directly concerned with the understanding, prediction
and control of human behaviour in organizations”- Fred Luthons.
“The study and application of knowledge how people act or behave within
organization. It is a human tool for human benefit. It applies broadly to the behaviour of
people in all types of organizations such as business government, schools and service
organizations”- Davis and Newstorm.
“Organisational behaviour is a field of study that investigates the impact that
individuals, groups and structure have on behaviour within organizations for the purpose of

45
 applying such knowledge towards improving an organization’s effectiveness” – Robbins
The above definitions illustrate that orgaisational behaviour is multi-dimensional. It
requires the help of other social sciences. Now, let us discuss the relationship of
organizational behaviour with psychology, sociology, andanthropology.

NATURE AND SCOPE (FEATURES) OF ORGANIZATIONAL BEHAVIOUR

1. A Separate Field of Study and not a Discipline

By definition, a discipline is an accepted science that is based on a theoretical

foundation. But, O.B. has a multi-interdisciplinary orientation and is, thus, not based on a
specific theoretical background. Therefore, it is better reasonable to call O.B. a separate
field of study rather than a discipline only.
2. An Interdisciplinary Approach

Organizational behaviour is essentially an interdisciplinary approach to study

human behaviour at work. It tries to integrate the relevant knowledge drawn from related
disciplines like psychology, sociology and anthropology to make them applicable for
studying and analysing organizational behaviour.

3. An Applied Science

The very nature of O.B. is applied. What O.B. basically does is the application of
various researches to solve the organizational problems related to human behaviour. The
basic line of difference between pure science and O.B. is that while the former concentrates
of fundamental researches, the latter concentrates on applied researches. O.B. involves
both applied research and its application in organizational analysis. Hence, O.B. can be
called both science as well as art.

4. A Normative Science

OrganizationalBehaviourisanormativesciencealso.Whilethepositivesciencediscuss
es only cause effect relationship, O.B. prescribes how the findings of applied researches
can be applied to socially accepted organizational goals. Thus, O.B. deals with what is
accepted by individuals and society engaged in an organization. Yes, it is not that O.B. is
not normative at all. In fact, O.B. is normative as well that is well underscored by the
proliferation of management theories.

5. A Humanistic and Optimistic Approach

Organizational Behaviour applies humanistic approach towards people working in

the organization. It, deals with the thinking and feeling of human beings. O.B. is based on
the belief that people have an innate desire to be independent, creative and productive. It
also realizes that people working in the organization can and will actualize these potentials
if they are given proper conditions and environment. Environment affects performance or
46
workers working in an organization.

6. A Total System Approach

The system approach is one that integrates all the variables, affecting
organizational functioning. The systems approach has been developed by the behavioural
scientists to analyse human behaviour in view of his/her socio-psychological framework.
Man's socio-psychological framework makes man a complex one and the systems
approach tries to study his/her complexity and find solution to it.

SCOPE OF ORGANIZATIONAL BEHAVIOUR

The three internal organizational elements viz., people, technology and structure
and the fourth element, i.e., external social systems may be taken as the scope of O.B.

1. People

The people constitute the internal social system of the organization. They consist
of individuals and groups. Groups may be large or small, formal or informal, official or
unofficial.
Theyaredynamic.Theyform,changeanddisband.Humanorganizationchangeseveryday.Tod
ay, it is not the same as it was yesterday. It may change further in the coming days. People
are living,
thinkingandfeelingbeingwhocreatedtheorganizationandtrytoachievetheobjectivesandgoals
. Thus, organizations exist to serve the people and not the people exist to serve the
organization.

2.Structure defines the sole relationship of people in an organization. Different

people in an organization are given different roles and they have certain relationship with
others. It leads to division of labour
sothatpeoplecanperformtheirdutiesorworktoaccomplishtheorganizational goal. Thus,
everybody cannot be an accountant or a clerk. Work is complex and different duties are to
be performed by different people.Some may be accountant,others may be managers,clerks,
peonsorworkers.Allaresorelatedtoeachothertoaccomplishthegoalinaco-ordinatedmanner.
Thus, structure relates to power and duties. One has the authority and others have a duty
to obey him.
3 Technology

Technologyimpartsthephysicalandeconomicconditionswithinwhichpeoplework.W
ith their bare hands people can do nothing so they are given assistance of buildings,
machines, tools, processes and resources.
The nature of technology depends very much on the nature of the
organizationandinfluencestheworkorworkingconditions.Thus,technology brings
effectiveness and at the same restricts people in various ways.

4.SocialSystem

47
 Social system provides external environment which the organization operates. A
single organization cannot exist also. It is a part of the whole. One organization cannot give
everything and therefore, there are many other organizations.
All these organizations influence each other. It influences the attitudes of people,
their working condition sand above all provides competition for resources and power.

O.B. is the study of human behaviour at work in organizations. Accordingly, the

scope of O.B. includes the study of individuals, group sand organization/structure. Let us
briefly reflect on what

LEVELS OF ANALYSIS IN OB:

Individual Level:

Individual Level ,organizational behavior involves the study of learning,

perception, creativity, motivation, personality, turnover, task performance, cooperative
behavior , deviant behavior , ethics, and cognition. At this level of analysis, organizational
behavior draws heavily uponpsychology,engineering,andmedicine.A study of
organizational behavior at the individual level of analysis might focus on the impact of
different types of overhead lighting on such factors as productivity and absenteeism.
Group Level:
Group Level At the group level of analysis, organizational behavior involves the
study of group dynamics, intra- and inter group conflict and cohesion, leadership, power,
norms, interpersonal communication, networks, and roles. At this level of analysis,
organizational behavior draws upon the sociological and socio-psychological sciences A
study of how different personality types correspond to different leadership styles and levels
of results operates at the group level of analysis.

Organizational Level:

Organizational Level At the organization level of analysis, organizational behavior

involves the study of topics, such as, organizational culture, organizational structure,
cultural diversity, inter-organizational cooperation and conflict, change, technology, and
external environmental forces. At this level of analysis, organizational behavior draws
upon anthropology and political science. The study on organizational cultures, by William
Ouchi's classic Theory Z: How American Business Can Meet the Japanese Challenge
(1981) is example of organizational behavior conducted at the organization level of
analysis.

MODELS OF ORGANISATIONAL BEHAVIOUR

The five models of organizational behaviour are the:

Auto cratic model,

custodial model,
supportive model,

48
 collegial mode land
system model.

 Autocratic model

Autocratic model is the model that depends upon strength, power and formal
authority.In an autocratic organisation, the people (management/owners) who manage the
tasks in an organisation have formal authority for controlling the employees who work
under them. These lower-level employees have little control over the work function. Their
ideas and innovations are not generally welcomed, as the key decisions are made at the top
management level.

The guiding principle behind this model is that management/owners have

enormous business expertise,and the average employee has relatively low levels of skill
land need s to be fully directed and guided. This type of autocratic management system
was common in factories in the industrial revolution era.

One of the more significant problems associated with the autocratic model is that
the management team is required to micromanage the staff – where they have to watch all
the details and make every single decision. Clearly, in a more modern-day organisation,
where highly paid specialists are employed an autocratic system becomes impractical and
highly inefficient.

 Custodial model

The custodial model is based around the concept of providing economic security
for employees–throughwagesandotherbenefits–
thatwillcreateemployeeloyaltyandmotivation.

In some countries, many professional companies provide health benefits, corporate

cars, financial packaging of salary, and soon–these are incentives designed to attract tand
retain quality staff.

Theunderlyingtheoryfortheorganisationisthattheywillhaveagreaterskilledworkforc
e, more motivated employees, and have a competitive advantage through employee
knowledge and expertise.

 Supportive model

Unlike the two earlier approaches, the supportive model is focused around aspiring
leadership.Itisnotbaseduponcontrolandauthority(theautocraticmodel)oruponincentives(the
custodial model), but instead tries to motivate staff through the manager-employee
relationship and how employees are treated on a day-to-daybasis.
Quite opposite to the autocratic model, this approach states that employees are self-
motivated and have value and insight to contribute to the organisation, beyond just their
day-to- day role.

Theintentofthismodelistomotivateemployeesthroughapositiveworkplacewherethei
r ideas are encouraged and often adapted. Therefore, the employees have some form of

49
“buy-in” to the organisation and its direction.

 Collegial model

The collegial model is based around teamwork – everybody working as colleagues

(hence the name of the model). The overall environment and corporate culture need to be
aligned to this model, whereeverybodyisactivelyparticipating–
isnotaboutstatusandjobtitles–everybodyis encouraged to work together to build a better
organisation.

The collegial model is quite effective in organisations that need to find new
approaches – marketing teams, research and development, technology/software – indeed
anywhere.

 Systematic model

The final organisational model is referred to as the system model. This is the most
contemporary model of the five models discussed in this article. In the system model, the
organisation looks at the overall structure and team environment, and considers that
individuals have different goals, talents and potential.

The intent of the system model is to try and balance the goals of the individual with
the goals of the organisation. Individuals obviously want good remuneration, job security,
but also want to work in a positive work environment where the organisation adds value to
the community and/or its customers.

The system of model should be an overall partnership of managers and employees

with a common goal, and where everybody feels that they have a stake in the organisation.

50
51
 OTHER SIMILAR FIELDS OF STUDY:

 Psychology:

The term ‘psychology’ is derived from the Greek World ‘Psyche’ which
means ‘soul’ or ‘spirit’. Organisational behaviour studies human behaviour which is
concerned mainly with the psychology of the people. Psychology, especially, industrial
or organisational psychology is the greatest contributor to the field of organisational
behaviour. Psychologists study behaviour and industrial or organisational psychologists
deal specifically with the behaviour of people in organisational settings.
 Sociology:
Sociology also has a major impact on the study of organisational behaviour. Sociology
makes use of scientific methods in accumulating knowledge about the social behaviour
of the groups. Sociologists study social systems such as a family, an occupational class, a
mob or an organisation. It specifically studies, social groups, social behaviour, society,
customs, institutions, social classes, status, social mobility, prestige.
 Anthropology:
Anthropology is concerned with the interactions between people and their environment,
especially their cultural environment. Culture is a major influence on the structure of
organisations as well as on the behaviour of people within organisations. ‘Anthropo’ is a
Greek word which means ‘man’ and ‘logy’ means ‘Science’

52
  Political Science:
In recent times, political science has also started interesting the organisational
behaviourists. Political Science is usually, thought of as the study of political systems.
But political scientists are interested in how and why people acquire power, political
behaviour, decision making, conflict, the behaviour of interest groups and coalition
formation. These are also major areas of interest in organisational behaviour.

Political parties and Government directly intervene in many activities of the

organisation. Specific principles of political science are observed in organisational
behaviour for delegation of authority and responsibility, conflict resolution and stress
management.

 Economics:
Economists study the production, distribution and consumption of goods and
services. Students of organisational behaviour share the economist’s interest in such
areas as labour market dynamics, productivity, human resource planning and forecasting,
and cost benefit analysis.
The economic conditions of a country have long lasting impact on organizational
behavior. If psychological and economic expectations of employee are met, they are
satisfied and become high performers. Economic systems include financial, commercial
and industrial activities which have greater influences on the behaviour of the people. The
consumption pattern in society monitors the behaviour of employees. Consumption
oriented society witnesses a different employee behaviour from that of a production
oriented society.

 Science:
Science is systematized knowledge. The scientific methods attempt to produce
information that is objective in the sense that it is certifiable and independent of a person’s
opinions or preferences. Scientific method is the backbone of organisational behaviour.
Organisational behaviour is based on the systematized study of facts, behaviour, their
relationships and predictions.

 Technology:
The level of technological development affects the behaviour of the employees.
Modern age is the age of computerization. It has come within the framework of the model
of organisational behaviour. The study of technological development is becoming
essential for understanding the organisational behaviour, because people are influenced
by the technological development.
Human behaviour relations and environments develop as a result of technological
innovations.
Technology changes consumer behaviour, production activities, distribution
and storage activities. To cope up with the technological development people have to
become educated and/or technically skilled. They should have to be responsibility
conscious and development oriented. Unskilled or irresponsible will have no place in
the modern innovative age. Thus, technological development leads to effective work
behaviour, improved organisational culture and helpful work environment.

53
  Engineering:
Engineering also influences the study of organisational behaviour. Some topics are
common to engineering as well as organisational behaviour e.g. work measurement,
productivity measurement, work flow analysis, work design, job design and labour
relations. In fact, organisational behaviour is dependent on engineering for these technical
jobs.

 Medicine:
Nowadays, medicine has also come in connection with the study of human
behaviour at work. Stress is becoming a very common problem in the organisations as
well as in the people working in the organisations. Research shows that controlling the
causes and consequences of stress in and out of organisational settings, is important for
the well being of the individual as well as the organisations. Medicine helps in the control
of stress as well as stress related problems.

Thus, it can be concluded that organisational behaviour has an interdisciplinary

focus. It draws from a variety of other fields and attempts to describe behaviour as
opposed to prescribing how behaviour can be changed in consistent and predictable
ways.
 Psychology
Psychology is the science that attempts to measure, explain, and at times change
the behavior of humans and other animals. Early industrial/organizational psychologists
were concerned with problems of fatigue, boredom, and other factors relevant to working
condition.

54
55
 UNIT V

INDIVIDUAL BEHAVIOUR:

Individual behavior can be defined as how an individual behaves at work. A person's behavior is influenced
by the following factors − Attitude. Perception .Personality.

FACTORS AFFECTING:
Some of the factors affecting Individual Behavior in an organization are as follows:
I. Persona Factors:

The personal factors which influence the individual behaviour can be classified into two categories:

1. PhysicalCharacteristics:

Some of these characteristics are related to height, skin, complexion, vision, shape and size
of nose, weight etc. All these have an impact on the performance of the individuals. It is sometimes
said that the eyes betray the character of a person. Similarly certain ideas about the behaviour can
be formed on the basis of whether the person is fat, tall or slim.

Tall and slim people are expected to dress well and behave in a sophisticated manner and
fat people are supposed to be of a jolly nature. Whether there is a correlation between body structure
and behaviour or not has not been scientifically proven. Even if there is a correlation between these
two, it is very difficult to understand which the independent variable is and which is dependent
variable.

2. Age:

Age is considered to be an inherited characteristic because it is determined by the date of

birth. The relationship between age and job performance is an issue of increasing performance.
Psychologically, younger people are expected to be more energetic, innovative,
adventurous, ambitious and risk taking. Whereas old people are supposed to be conservative, set in
their own ways and less adaptable. Though it is incorrect to generalize all old people as unadoptable,
physiologically, performance depends on age.

Performance declines with advancement of age because older people have less stamina,
memory etc. Younger people are likely to change jobs to avail better job opportunities, but as one
grows old, the chances of his quitting job are less. There is a relationship between age and
absenteeism also. Older people tend to absent more from their jobs due to unavoidable reasons e.g.
poor health.

Whereas younger people absent themselves from job due to avoidable reasons e.g. going for
a vacation. In the organisations which are subject to dramatic changes due to latest innovations, the

56
 older people get less job satisfaction as they start feeling obsolete as compared to their younger
colleagues. Though there is no clear cut demarcation between young age and old age but according
to Lehman the peak of creative ability is among people between the ages 30 and 40.

3. Gender:

Being a male or female is genetic in nature and it is considered to be an inherited feature. Whether
women perform as well as in jobs as men do, is an issue which has initiated lot of debates,
misconceptions and opinions. The traditional view was that man is tougher than woman or women are
highly emotional than men. But these are some stereotyped baseless assumptions. Research has proved
that there are few if any, important differences between man and woman that will .

4. Religion:

Though there are no scientific studies to prove it and we cannot generalize it, but religion and
religion based cultures play an important role in determining some aspects of individual behaviour,
especially those aspects which concern morals, ethics and a code of conduct. The religion and culture
also determine attitudes towards work and towards financial incentives.

People who are highly religious are supposed to have high moral values e.g. they are honest,
they do not tell lies or talk ill of others, they are supposed to be contended. But there is another side
of the picture also. Though there are no evidences but it has been observed that sometimes people
who are highly dishonest and immoral are more religious as compared to the others.

5. Marital Status:

There are not enough studies to draw any conclusion as to whether there is any relationship
between marital status and job performance. Research has consistently indicated that as marriage
imposes increased responsibilities, to have a steady job becomes more valuable and important.
Married employees have fewer absences, less turnover and more job satisfaction as compared to
unmarried workers. But no research has so far identified the causes for this.

6. Experience:

The next biographical characteristic is tenure or experience. The impact of seniority on job
performance is an issue which is subject to a lot of misconceptions and speculations. Work experience
is considered to be a good indicator of employee productivity. Research indicates that there is a
positive relationship between seniority and job performance. Moreover studies also indicate a negative
relationship between seniority and absenteeism.

Employee turnover is also considered to be negatively related to seniority. But in considering

this relationship, past experience i.e. experience of the employee on the previous job is also to be
considered. Research indicates that experience and satisfaction are positively related. Here we have
to distinguish between chronological age and seniority of the employee. Seniority experience is a
better indicator of job satisfaction than the chronological age of the person.

7. Intelligence:

Generally, it is considered that intelligence is an inherited quality. Some people are born

57
 intelligent or in other words intelligent parents produce intelligent children. But practical experience
has shown that sometimes very intelligent parents have less intelligent children and sometimes average
parents have very intelligent children.

Moreover intelligence can be enhanced with efforts, hard work, proper environment and
motivation. Anyway, whether it is an inherited trait or acquired trait this factor affects the behaviour
of the people. Intelligent people are generally not adamant and stubborn, rather they are
considered to be stable and predictable.
8. Ability:

Ability refers to the capacity or capability of an individual to perform the various tasks in a
job. Ability is the criterion used to determine what a person can do.

9. Personality:

By personality we don’t mean the physical appearance of a person. Psychologists are not
concerned with a smart person, with a smiling face and a charming personality. They consider
personality as a dynamic concept describing the growth and development of a person’s whole
psychological system. Rather than looking at parts of the person, personality looks at some aggregate
whole that is greater than the sum of the parts.

Personality generally refers to personal traits such as dominance, aggressiveness, persistence

and other qualities reflected through a person’s behaviour. Some personality traits like physical built
and intelligence are biological in nature but most traits like patience, open mindedness, extrovertness
etc. can be learned.

An individual’s personality determines the types of activities that he or she is suited for.
According to Tedeschi and Lindskold, people who are open minded seem to work out better in
bargaining agreements than people who are narrow minded. Similarly people who are extroverts and
outgoing are more likely to be successful as managers than those who are introverts.

10. Perception:

Perception is the viewpoint by which one interprets a situation. In other words, “perception
is the process by which information enters our minds and is interpreted in order to give some sensible
meaning to the world around us. Psychology says that different people see and sense the same thing
in different ways. For example, if a new manager perceives an employee to be a job shirker, he will
give him less important jobs, even though that employee is a very ableperson.
Sometimes, we tend to lose good relatives and friends because we change our perceptions
about them.

II. Environmental Factors:

The external environment is known to have a considerable impact on a person’s behaviour.

A brief description of the external factors follows:

1. Economic Factors.

The behaviour of an individual is affected to a large extent by the economic environment.

58
2. Socio-cultural Factors:
The social environment of an individual includes his relationship with family members,
friends, colleagues, supervisors and subordinates. The behaviour of other people not with the
individual, but in general, is also a part of his social environment. Similarly, every individual has a
cultural background, which shapes his values and beliefs. Work ethics achievement need, effort-
reward expectations and values are important cultural factors having impact on the individual
behaviour.

3. Political Factors
Political environment of the country will affect the individual behaviour not directly, but
through several other factors. In a politically stable country there will be a steady level of employment
(both in quantity and quality) and high level of capital investment. Whereas companies are reluctant
to invest large sums of money in a politically instable country.

The political ideology of a country affects the individual behaviour through the relative
freedom available to its citizens. A country can have a controlled society or less controlled society.
The relative freedom available to the individuals can affect their career choice, job design and
performance.

4. Legal Environment.

Rules and laws are formalized and written standards of behaviour. Both rules and laws are
strictly enforced by the legal system. Laws relate to all the members of the society e.g. Murder is a
crime which is illegal and punishable by law and applies to all the people within the system.
Observing the lIII. Organisational Factors:

Individual behaviour is influenced by a wide variety of organisational systems and resources.

III. Organisational Factors:

These organisational factors are as explained below:

1. Physical Facilities:
The physical environment at a work place is the arrangement of people and things so that is
has a positive influence on people. Some of the factors which influence individual behaviour are noise
level, heat, light, ventilation, cleanliness, nature of job, office furnishing, number of people working at
a given place etc.

2. Organisation Structure and Design:

These are concerned with the way in which different departments in the organisation are set
up. What is the reporting system? How are the lines of communication established among different
levels in the organisation. The behaviour and performance of the individual is influenced by where
that person fits into the organisational hierarchy.

3. Leadership:
The system of leadership is established by the management to provide direction, assistance,
advice and coaching to individuals. The human behaviour is influenced to a large extent by the
behaviour of the superiors or leaders. Behaviour of the leaders is more important than their qualities.

4. Reward System:
The behaviour and performance of the individuals is also influenced by the reward system

59
established by the organisation to compensate their employee

PERCEPTION

Meaning :

Perception is an intellectual process of transforming sensory stimuli to meaningful

information.It is the process of interpreting something that we see or hearinour mind and use
it later to judge and give a verdict on a situation, person, group etc.
Perception means perceiving, i.e., giving meaning to the environment around us. It can be
defined as a process which involves seeing, receiving, selecting, organising, interpreting
andgivingmeaningtotheenvironment.Sensationistheresponseofphysicalsensoryorgan

It can be divided into six types −

Of sound − The ability to receive sound by identifying vibrations.

Of speech − The competence of interpreting and understanding the sounds of language
heard.
Touch − Identifying objects through patterns of its surface by touchingit.
Taste − The ability to receive flavor of substances by tasting it through sensory organs known
as tastebuds.
Other senses − They approve perception through body, like balance, acceleration, pain, time,
sensation felt in throat and lungsetc.
Ofthesocialworld−Itpermitspeopletounderstandotherindividualsandgroupsoftheir
socialworld.Example−Priyagoestoarestaurantandlikestheircustomerservice,soshe will
perceive that it is a good place to hang out and will recommend it to her friends, who may or
may not like it. Priya’s perception about the restaurant is good.

60
 PERCEPTUAL PROCESS

Perceptual process are the different stages of perception we go through. The different stages
are

Receiving
Selecting
Organizing
Interpreting

Receiving

Receiving is the first and most important stage in the process of perception. It is the initial
stage in which a person collects all information and receives the information through the sense
organs.
Selecting

Selecting is the second stage in the process. Here a person doesn’t receive the data randomly
but selectively. A person selects some information out of all in accordance with his interest or needs.
The selection of data is dominated by various external and internal factors.

Externalfactors−Thefactorsthatinfluencetheperceptionofanindividualexternallyare
intensity, size, contrast, movement, repetition, familiarity, and novelty.
Internalfactors−Thefactorsthatinfluencetheperceptionofanindividualinternallyare
psychological requirements, learning, background, experience, self-acceptance, and
interest.
Organizing

Keeping things in order or say in a synchronized way is organizing. In order to make sense
of the data received, it is important to organize them.

We can organize the data by −

Grouping them on the basis of their similarity, proximity, closure, continuity.

Establishing a figure ground is the basic process in perception. Here by figure we mean
61
 whatiskeptasmainfocusandbygroundwemeanbackgroundstimuli,whicharenotgiven
attention.
Perceptual constancy that is the tendency to stabilize perception so that contextual changes
don’t affect them.

Interpreting

Finally,we have the process of interpreting which means forming an idea about a particular
object depending upon the need or interest. Interpretation means that the information we have
sensed and organized,is finally given a meaning by turning it into something that can be categorized.
It includes stereotyping, halo effect etc..

FACTORS INFLUENCING PERCEPTUAL PROCESS

External Factors :

1. Size : Bigger size attracts the attention of the perceiver

2. Intensity:A loud sound,strong odor or bright light is noticed more as compared to as sound, weak
odour or dimlight.

3. Repetition:A repeated externalstimulusismoreattentiongettingthanasingleone.Advertisers use

this principle.

4. Novelty and Familiarity:A novel or a familiar external situation can serve as attention getter.

5. Contrast :It is a kind of uniqueness which can be used for attention getting. Letters of bold types,
persons dressed differently than others, etc., get more attention.

6. Motion:A moving object draws more attention as compared to a stationary object. Advertisers
use this principle.

Internal Factors
Self-concept :The way a person views the world depends a great deal on the concept or
image he has about himself. The concept plays an internal role in perceptual selectivity.

Beliefs :A person's beliefs have profound influence on his perception. Thus, a fact is
conceived not on what it is but what a person believes it to be.

Expectations :These affect what a person perceives. A technical manager may expect
ignorance about the technical features of a product from non-technical people.

Inner Needs :The need is a feeling of tension or discomfort, when one thinks he is missing
something. People with different needs experience different stimuli. According to Freud, wishful
thinking is the mean.

62
PERSONALITY

Meaning :The word personality is derived from a Greek word “persona” which means “to
speak through.” It is the combination of an individual thoughts, characteristics, behaviors, attitude,
idea

DEFINITION OF PERSONALITY

Macionis define as “It is the constant pattern of thinking, feeling and acting.”
Ogburnand Nimkoffdefineit as the totality of sentiments,attitudes,idea,habits,skillsand
behaviors of an individual.”

TYPES OF PERSONALITY
1. Extrovert Personality

This type has the tendency to live mostly outside the like to live with others. Those
individuals are highly socialized and have contact with outside people in the society. They want
joinothergroupswhoaremoreinnumber.Thesetypeofpeoplearedrivers,excessive drinkers, smokers,
robbers, thieves, wicked persons etc. The extrovert is a friendly person who is quick to establish
relationships with others. Extroverts are gregarious and display a high level of social engagement.
They enjoy being with people and like to be in the company of large groups. Extroverts are active

63
and tend to get involved in many activities.
2. Introvert Personality
Introvertisoppositetoextrovert.Thosepeoplearealwayslivealoneintheirroomsanddo not want
to go outside. They have their own imaginary world. They are teachers, scientists, thinkers and
philosophers.

3. Ambivert Personality
Between extrovert and introvert personalities there is a third one type called ambivert.
People belonging to this type enjoy both the groups and attend them. They have middle mind and
want to live in both parties. Sometimes they join outside people but sometimes they live in their
own rooms.

4. Agreeable Personality
Theagreeablepersoncancooperatewellwithotherpeoplebyputtingasidepersonalneeds while
getting along with peers. These people trust others and rely on their integrity, character and abilities.
Often the agreeable personality feels the need to help other people, and can derive fulfillment by
offering support.

5. Conscientious Personality
Conscientiouspeopleexudeconfidenceandfeelcapableofaccomplishinggoals.Theymay be
overachievers who want to be viewed as successful.

6. Cautious Personality
Cautiouspeoplewilllookatproblemsfromeveryanglebeforeactingormakingadecision, while
those who are not cautious often act or speak before they think things through.

7. Self-Conscious Personality
Self-conscious people are highly sensitive to what others think and say about them. They
dislike criticism and are sensitive to rejection, while those who are not all that self-conscious are
not bothered by being judged by other people.

8. Adventurous Personality
Peoplewithanadventurouspersonalityseekoutnewexperiencesanddislikeroutine.They may
be unafraid to challenge authority and conventions,while those who are less adventurousmay have
traditional values and prefer security over adventurousness. Those with an adventurous personality
enjoy having power and may be more amenable to taking risks.

Personality Development Tips

1. Should be a better listener

2. Good conversation
3. Be positive in outlook and attitude
4. More reading and building interest
5. Should be a good courteous
6. Interaction with new people
7. Helpful to other people
64
 8. Give respect if you want respect
9. Confident about yourself

DETERMINANTS OF PERSONALITY:

1. Heredity:Human behaviour is partly affected by heredity. The parent's qualities are passed
on to the children through the molecular tructure of gene slocated in the chromosomes.In our
day to day life, so many times we use the term "Like father like son" as "Like Mother like
daughter".
2. Environment:All personality trait sarenot determined by heredity.Environmental so plays a
very important role in the development of personality of a person. Environment comprises of
culture, family, social and situational factors.

(a) Culture:Culture is sum total of learned believes,values and customs.Cultural factors

determine now a person acts whether independently or dependently. Culture establishes
norms, attitudes and values that are passed along from generation to generation.

(b) Family :Families influence the behaviour of a person especially in the early stages. The
nature of such influence will depend upon the following factors:

(i) Socio-economic level of the family

65
 (ii) Family size, (iii) Birth order, (iv) Race, (v)Religion

(vi) Parent's educational level and Geographic location.

C Social:Socialization is a process by which acquires customary and acceptable behaviour. Social

life has a considerable impact on the individual's behaviour.

D Situational :Situational factors also play a very important role in determining the personality of a
person. Life is a collection of experiences. Some of the events and experiences can serve as important
determinants of his personality

Characteristics of a Group:

The factors that characterize a group are:

Collection of people: Two or more individuals come together. They are motivated to join
together. Groups operate in a social situation. Members perceive themselves as a group. They have
collective identity. They are a unified unit.

Interaction and interdependence: Individuals interact with each other. Interaction affects the
feelings and actions of group members. Members are interdependent on each other.
Similar Interests: Group members share similar interests. They have common norms and
values. They have collective identity.

Common goals: Groups achieve particular goals that are common to all member . They carry
out task to achieve goals.

Role differentiation: The role of individual group members vary. Their contributions also vary.

REASON FOR FORMATION OF GROUP

1. Task accomplishment:

The basic purpose of group formation is the achievement of certain objectives through
task performance.

Individuals come closer in order to understand the tasks and decide on the procedures of
performance.

In any organization, task accomplishment is the reason for which different groups such as
an engineering group; marketing group, foreman’s group and personnel group are formed for
achievement of the organizations’ goals.

2. Problem Solving:

When people foresee or face certain problems, they unite to solve the problems. Unity has
strength.

66
 A group provides strength to members who are willing to challenge any problem. Group
behaviour gives more strength to come down heavily on problems.

3. Proximity:

Peopleformgroupsbecauseofproximityandattractiontowardseachother.Thegroupformation
theory is based on propinquity, which means that individuals affiliate because of spatial or
geographical proximity.

4. Socio-psychological Factors:

Sentiments and action-uniformities bring people closer. They also form groups for safety,
security and People cooperate with member soft he group on social as well as economic grounds
to reach satisfactory levels.

People form groups basically for activities, interaction and due to sentiments. People
living in proximity frequently discuss their problems.

They try to reduce their tensions and achieve satisfaction. Individuals interest each other
only when they have common attitudes and sentiments.

67
68
 Definition

"Group norms are the informal rules that groups adopt to regulate and regularise group members’
behaviour" – Feldman

CHARACTERISTICS OF GROUP NORMS:

1. The norms are based on social values.

2. Norms are social rules which define correct and acceptable behaviour
in a society or a group to which people are expected to confirm.
3. They prescribe the way the people should behave in particular situations.
4. They determine, guide, control and also predict human behaviour.

Types of Group Norms:

1. Behaviour Norms

These are rules and guidelines defining the day-to-day behavior of people at work. This
69
behavior pattern may include punctuality as a habit, completing any given assignments within the
required time framework, not losing temper, showing respect for other member’s opinions, not
monopolizing the conversation and so on. Certain professionalism is expected from all members
and this professionalism is predictable form of behavior.

2. Work Norms

Work norms regulate the performance and productivity of individual members. An overly
ambitious worker who produces more is considered as much a deviate from the norms as a worker
who is an under producer. Work norms usually put an acceptable level of productivity, within
reasonable tolerances so that comparatively poor performers can also be accommodated and that
they do not become a burden on their peers.
Workers performing below the lower acceptable level are generally Informally reprimanded
and encouraged to produce more. On set by the group are also ostracized for encouraging the
management to raise its expectations the other hand, rate-busters who perform above the upper
acceptable limit.

Leadership:
You would have heard of great leaders of the world. Some are ‘born leaders’ and some ‘made
leaders’. All managers need not be good leaders but all leaders are good managers. The success or
failure of an organization depends upon its leadership. The organizational effectiveness tends on again
leadership. Let us discuss the concept and theories of leadership.
Definition of leadership
Keith Davis defines leadership as “the ability to persuade others to seek defined objectives
enthusiastically. It is the human factor that binds people together and motivates them towards goals. Leadership
is the process of encouraging and helping others to work enthusiastically towards objectives.’’
Wendell French has defined leadership as ‘the process of influencing line behaviour of others
in the direction of a goal or set of goals or more broadly, towards a vision of the future.’’
Koontz and O Donnell defined leadership as, “influence, the art or process of influencing
people so that they will strive willingly towards the achievement of group goals.’’
Peter Drucker defined it as, “the lifting of man’s visions to higher sights, the raising of man’s
performance to higher standard, the building of man’s personality beyond its normal limitations.”
A. Gouldner defined leadership as, “a role which an individual occupies at a given time in a
given group.’’
According to Chester I. Bernard, “it refers to the quality of the behaviour of the individual
whereby they guide people on their activities in organized efforts.”
Characteristics of leadership
1. Leadership is the process of influencing the behaviour of others.
2. Leadership uses non-coercive method to direct and coordinate the activities of the members.
3. Leadership directs the people to attain some goal.
4. Leadership occupies a role for a given time and for a group.
5. A leader possesses qualities to influence others.
6. Leadership gives people a vision for future.
7. It is a group activity. Leader influences his followers and followers also exercise influence

70
 over their leader. Leadership interacts.
8. Leadership is meant for a given situation.
9. Leadership is a continuous process of influencing behaviour. It instills dynamism in the group.
10. It is a psychological process and multi-dimensional in character.
Functions of Leadership
Krech who identifies fourteen functions provides a useful summary.
1. The leader as executive – top coordinator of the group activities and over-seer of the
execution of policies.
2. The leader as planner – deciding the ways and means by which the group achieves its ends.
This may involve both short-term and long-term planning.
3. The leader as policy maker – the establishment of group and policies.
4. The leader as expert – a source of readily available information and skills, although there
will be some reliance on technical expertise and advice from other members of the group.
5. The leader as external group representative – the official spokesperson for the group, the
representative of the group and the channel for both outgoing and incoming communications.
6. The leader as controller of internal relations – determines specific aspects of the group structure.
7. The leader as purveyor of rewards and punishment – control over group members by the
power to provide rewards and apply punishments.
8. The leader as arbitrator and mediator – controls interpersonal conflict within the group.
9. The leader as exemplar – a model of behaviour for members of the group, setting an
example of what is expected.
10. The leader as symbol of the group – enhancing group unit by providing some kind of
cognitive focus and establishing the group as a distinctentity.
11. The leader as substitute for individual responsibility – relieves the individual member of the
group from the necessity of, and responsibility for, personal decision.
12. The leader as ideologist – serving as the source of beliefs, values and standards of behaviour
for individual members of the group.
13. The leader as father figure – serving as focus for the positive emotional feelings of
individual members and the object for identification and transference.
14. The leader as scapegoat – serving as a target for aggression and hostility of the group,
accepting blame in the case of failure.
Styles of leadership
Styles of leadership are usually classified under the two categories, namely, authoritarian (or
autocratic) and democratic; Sometimes a third heading of laissez-faire is included. There are of course
many dimensions within these broad headings and a number of other styles may be identified, such
as for example, dictatorial, bureaucratic, benevolent, charismatic, consultative, participative and
abdicatorial.
 The authoritarian style is where the focus of power is with the manager and all interactions
within the group move towards the manager. The leader alone exercises decision-making
and authority for determining policy, procedures for achieving goals, work tasks and
relationship control of rewards orpunishments.
Autocratic leader centralize power and decision making in them. They structure the complete

71
work situation for their employees, who are supposed to do what they are told. The leaders take full
authority and assume full responsibility. Leadership behaviour typically is negative, based on threats
and punishment; but it can be positive, because an autocratic leader can choose to give rewards to
employees, in which the style becomes ‘benevolent-autocratic’’. Some employees have expectations
of autocratic leadership. The result is that they feel a certain amount of security and satisfaction with
this type of leader.
Some advantages of autocratic leadership style are that it provides strong motivation and
reward for the leader. It permits quick decisions, because only one person decides for the entire group.
It is the best style in emergencies. Furthermore this style gives good results when one is dealing with
unskilled employees doing repetitive tasks.
The main disadvantage of autocratic leadership style is that most people dislike it. Frustration,
dissatisfaction, fear, and conflict develop easily in autocratic situations. Employees do not involve their ‘self’’
in the organisational activities because their drives and creativity are suppressed.
Participative leadership style or Democratic style
Participative leadership style is the expression of leader’s trust in the abilities of his subordinates. The
leader believes that his people are desirous of contributing to the organisational efforts as well as they have
requisite capacities. Participative leaders decentralize authority. Participative decisions are not unilateral, as
with the autocrat, because they arise from consultation with followers and participation by them. The leader
and group are acting as one unit. Employees are informed about conditions requiring decisions, which
encourages them to express their ideas and suggestions. Whereas autocratic leader control through the authority
they possess, participative leaders exercise control mostly by using forces within the group. The group
members have a greater say indecision-making.
Participative style is supposed to be a better style of managing people. However, it is not
without its own drawbacks. This style is useless when the leader is dealing with an emergency.
Furthermore, the basic assumption of this style that the people have the skill and will to help
organisational effort may not be correct.
Free rein leadership style or Laissez Faire Style
On the continuum of leadership style free rein style is the extreme. Free rein leaders avoid power and
responsibility. They depend largely upon the group to establish its own goals and work out its own problems.
A free rein leader is the one who abdicates all his decision-making responsibilities and prerogative in favour
of his followers. The leader plays only a minor role. In an organisational setting, such a leader happens to be a
bystander; he happens to be there because of his organisational appointment. He fails to guide, motivate and
develop his subordinates. This is more a non-style leadership or it could perhaps be called abdication.
Attention to the manager’s style of leadership has come about because of a greater understanding of
the needs and expectations of people at work.
It has also been influenced by such factors as:
 Changes in the value system of society;
 Broader standards of education and training;
 The influence of trade unions;
 Pressure for a greater social responsibility towards employees, example through schemes of
participation in decision making;and
 Government legislation, for example in the areas of employment protection.
All these factors have combined to create resistance against purely autocratic style of leadership.

72
 Theories of leadership:
Leadership is a qualitative concept. That is why there is no single definition for leadership.
Let us see the various theories of leadenly.
Trait theory
Behavioral theory
Contingency theory
Fielders contingency
Likert’ssystems
Managerial grid
Reddin’s theory
Situational theory
Path-goal theory
Theories of Leadership
1. Trait Theories
The most commonly used approach to the study of leadership concentrated on leadership traits.
Trait theories of leadership try to differentiate leader from non leaders on the basis of traits. A leader was
described on the basis of qualities such as intelligence, charisma, decisiveness, enthusiasm, strength, integrity,
and self-confidence. There were certain characteristics such as physical energy or friendliness that were
essential for effective leadership. These personal qualities like intelligence were felt to be transferable from
one situation to another. Since all individuals did not have these qualities, only those qualities can be considered
as leaders. It is, however, intended to identify traits that are consistently associated with leadership. For
example, intelligence, dominance, self-confidence, high energy level and task-relevant knowledge are five
traits that show positive correlation with leadership.
2. Behavioural Theories
The deficiency in the trait theory to explain the leadership prompted the researchers to take
into the behaviours that specific leaders exhibited. The Ohio state Group and the University of
Michigan Group are the two popular studies which developed the leadership styles. Ohio State studies
have identified two types of leadership behaviour described by the subordinates.
Initiating structure: The leader is characterized as holding the highest position with initiating
structure and he assigns group members particular tasks. He expects workers to maintain definite
standards of performance and emphasizes the meeting of deadlines.
Consideration: A leader with consideration shows concern for his or her followers’ comfort, well
being, status, and satisfaction Such leaders help subordinates with personal problems and treat all
subordinates as equals.
3. Contingency Theories of Leadership
Tannenbaum and Schmidt’s Leadership Pattern: Contingency theory advocates that there is no “one
best way” to lead in all situations. Effective leadership style varies from situation to situation.
Leadership style depends upon various factors like traits of the leader, the characteristics of the nature
of the task being done and other situational factors. It was felt that the concern for task tends to be
represented by autocratic leader behaviour, while concern for relationship is represented by
democratic behaviour. This was popular because it was generally agreed that, leaders influence their
followers by either ways (1) they can tell their followers what to do and how to do it or (2) they can
share their leadership responsibilities with their followers by involving them in the planning and
73
execution of the task.
The former is the traditional authoritarian style, which re-emphasises task concerns. The latter
is more of a non-directive democratic style, which stresses the concern for human relationship. The
authoritarian leadership is often based on the assumption that the power of leaders is derived from the
position they occupy and the members of the group are inherently lazy (theory X). The democratic
style approves that the power of the leaders is granted by the group they are to lead (theory Y). In
authoritarian style all policies are determined by the leader. In democratic style, policies are open for
group discussion and decision.
Robert Tannenbaum and Warren H Schmidt depicted a broad range of styles between these
two extremes as a continuum moving from authoritarian or boss centered leader behaviour at one end
to democratic or subordinate centered leader behaviour at the other end.
Authoritarian Democratic
(Boss-centered leadership) (Subordinate-centered leadership)

Use of Authority by manager

Area of freedom for subordinates

Manager Manager sells Manager presents Manager lets

decision
makes decision problem and arguments, group make
and announces gets suggestions the decision

74
4. Fiedler’s Contingency Theory
The point of concern is not the ‘best’ style of leadership but of the most effective type of
leadership style for a particular situation. The effective or ineffective leadership style depends upon
the important elements of the situation.
Fiedler (1967) developed a contingency model of leadership effectiveness. The model is based on the
relationship between leadership style and the favourableness of the situation.
The favourableness of situation depends upon the following
1. The leader-member relationships: the personal relations with the members of the group are a
critical variable in determining the favourableness and unfavourableness of a situation.
2. The degree of task structure: the degree of structure in the task that there group has been
assigned to perform.
3. The leader’s position power. The power and authority that their position provides which is
the third most critical dimension of the situation.

Management of change
We live in an age of transition. One of the few things of real permanence in our world is change. It has
become an inescapable fact of life a fundamental aspect of historical evolution. The amount of technical
information available doubles every ten years. Change is inevitable in a progressive culture. Change, in fact,
is accelerating in our present day society. Revolutions are taking place in political, scientific, technological
and institutional area. Sophisticated communication capabilities have also increased. Telemarketing,’ robotics’
etc are taking over some jobs currently performed by employees that bear testimony of the fast paced, rapidly
changing organisation. Pressures for change are created both outside and inside the organisation. In fact, an
organisation that refuses to adapt and adopt change cannot last longer.
Meaning of change
Change is to be initiated at various levels within the organisation system. Manager has to ensure that
the individuals and groups in organisations and structures, processes and behaviour of sub-systems adopt to
the changing external and internal environment. A manager can bring in the needed change in many ways. The
individual can be made ready to accept the change by offering special training required to handle the new
assignment. Groups can be helped through team building efforts to operate interactively in a smooth and
harmonious fashion, so as to increase their effectiveness. Technological changes can be introduced with the
change in the structures and the job can be redesigned or new policies initiated which serves the need of both
employees and organisation. The changes at attitudinal, perceptual and behavioural level can be brought by
changing the organisational climate.
Features of change
Characteristics of organisational change:
1) Change basically results from stimuli from both outside and inside the enterprise;
2) Change takes place in all the organisations but at varying rates of speed and degrees of significance;
3) Finally, the enterprise changes in several ways. Its technology may change; its structure,
people, procedures and other elements may also change.
Any alteration that occurs in the overall work environment is called change. Change requires
new adjustments and new equilibrium. The nature of work change is so complicated that the
management should gain acceptance for the change, and restore the group equilibrium and personal
adjustment that change upsets.

75
 FORCES OF CHANGE

a) InternalForces:Therearesomeinternalforcesthatcausechangesintheorganisations.
They relate to change in machinery, equipment, methods and procedures, work standards, change
in the structure, changes in authority, status, and responsibility etc.
b) External forces: Outside the organisation, environmental conditions are becoming less and less
stable day by day. They are even becoming turbulent. These pressures necessitate the
organisation to change and adapt to meet the new demands and requirements. Organisation
cannot afford to be rigid and inflexible in the wake of environmental pressures. They must be
dynamic and viable, so that they cansurvive.
(i) Technology:Technology is the major external pressure of changes. It is perhaps the greatest
factor that the organisation has to reckon has to with. The rate of technological changes is so fast that
we have to run to be where we are. Technological changes are creeping in our private lives too. They
are also responsible for changing the nature of jobs performed at all levels in the organisations.
Knowledge explosion, more particularly the computer technology and automation have made a
remarkable impact on the functioning of industries in recent times. Technology change has always
been equated with the progress in society. Today’s technology has outstripped the imagination of the
science fiction writers of the last generation. Each technological alternative results in setting into
motion a chain of changes. Technology necessitates an organisation to change its process of
manufacturing, make line and staff adjustments etc. Organisations of to day must equip themselves
to absorb rapid extensive changes in the technology and the resultant need to deal with the great
ambiguity and uncertainty.
(ii) Economic Shocks: Increase in the purchasing power of the people has increased the demand
for luxury goods. The consumer has also become quality conscious.
a) Export/import policy of the Government. b) Changes in the interestrates.
c) The status of the economy. d)The status of money market.
(iii) MarketSituation:Changing marketsituationsisaseeminglyubiquitousphenomenon.
The market changes include rapidly changing tastes of consumers, needs and a desires of consumers,
suppliers, etc. Competition for new products, designs, changes in quality are growing at a terrific
pace. In a nutshell the entire complexion of the market is changing. Modern organisations are
functioning in a highly competitive terrain. If they are to survive, they must adapt themselves to the
change and adopt the change as well.
(iv) Social and Political Changes:Such environmental pressures as social and political changes, as well as
the relations between government and business also influence the results of the organisational efforts. Many
new legal provisions get introduced every time that affects the organisations. Organisational units literally have
no control over these forces but in order to survive they must adapt to changes.

RESISTANCE TO CHANGE

Many a time change is resisted by employees, even if the change is for their benefit and the
organisation. Resistance to change is perhaps one of the baffling problems a manager encounters
because it can assume many forms. The effects of resistance may be overt or implicit, may be subtle
and cumulative. Implicit resistance may be manifested in tardiness, loss of motivation to work,
increased absenteeism and the requests for transfer etc. Overt resistance, on the other hand, assumes
76
the form of wildcat strikes, shoddy work, and reduction in productivity etc.
In fact, there may be near-infinite reasons why people resist change in the organisation.
According to Keith Davis, the following are the main reasons for resistance to change.
1) Economic Reasons: Keith Davis, remarks “people fear technological advances may result in
unemployment, reduced work hours, demotion, reduced wages and reduced incentives and
hence resist change.”
2) Obsolescence of Skills: Sometimes, however, introduction of new technology throws people
away from doing important jobs (or demanding works) to less important or dead-end ones
where little or no skills are required to exhibit. More realistically, when people perceive
psychological degradation of the job they are performing they resist such achange.
3) Preference for Status Quo: Perhaps the biggest and the most sound reason for the resistance to
change is the preference for status-quo. People have vested interest in the status quo. Change
may pose disturbance to the existing comforts of status quo.
4) Fear of the Unknown: Change presents the unknown things, which cause anxiety. Whenever
people do not know exactly what is likely to happen, they are likely to resist it. The unknown
thing poses a constant threat. Thus people resist change and it s consequences.
5) Social Reasons: Economic and personal reasons for the resistance apart, some social reasons
may also be accountable for the possible resistance to change. Social displacements and peer
pressure are among those social reasons that are very important for the manager to consider
when dealing with resistance to change.
6) Social Displacements: Introduction of change often results in breaking up of work groups. In
the work environment develop informal relationships. When the friendship with fellow-
members is interrupted, then there is a possibility for the employees to experience
psychological let down. When the social relationships develop, as normally is the case, people
try to maintain them and fight social displacement by resisting change.
7) Peer Pressure: Situations are not rare where individuals are prepared to accept change at their
individual level, but refuse to accept it for the sake of the group.
8) Security: People have to learn new methods of doing things. They are not sure whether they
would become adept in the new method even after training. This fear of retraining the
effectiveness with new methods creates a sense of insecurity in the minds of the people. This
is apart from the economical job security.
9) Undermining of Status and Authority: The newer technologies and methods may do away with
part of the status and authority that is vested with a position earlier. For example if the work
methods are completely automated, the supervisor feels that his authority and status are
undermined and that he will have no control over the subordinates and they will not respect
or obey him.
10) Retraining: Change may require the employee to go for retraining to update his/her skill to
work with the newer machines. But some may be scared to interact with the new machines
and methods. People prefer the status quo. Most of the people are comfortable with the
existing set up. This may also add to the resistance to change.
11) Non-Involvement in the Decision Making: People may resist change if they are not consulted
before the introduction of change. Whenever changes are introduced without the participation
of those who are concerned with the change, they will definitely resist change. On the other
hand, if the contemplated changes are the result of the participation of all those who are going
to be affected, it will make them to take personal interest to see that the change works.
77
Dealing with resistance to change
Kotter and Schlesinger (1979) identified six general approaches to handling resistance. They
are described below:
a) Education andCommunication
Resistance can be reduced through communication with employees to help them see the logic
of a change. Resistance can be expected if the nature of the change is not made clear to the individual
who is going to by affected by change, If people get to know the facts and the misunderstanding gets
cleared up. This can be done through listening, group presentation etc. Different people see different
meanings in a proposed change. People may distort the information if they see discomfort and threats
in their past work situation.
b) Participation
Participation is the involvement of the individuals who resist changes in the decision making
process. It becomes difficult for them to resist change as they have participated in decision-making.
c) Facilitation and support
The change agents can offer counselling, new skills training when the employee fears and
anxiety are high. This would help in reducing the resistance to change. It is expensive and results are
uncertain.
d) Negotiations
Potential resistance to change can be dealt with through negotiations. A specific reward
package may be negotiated that will meet their individual needs. If the resistance is centered in a few
powerful individuals, there is a possibility of being blackmailed by others.
e) Manipulation and Co-operation
Manipulation is distortion of facts and withholding of the desirable information to accept
change. Co-operation, on the other hand is a form of both manipulation and participation. It seeks to
buy off the leaders of a resistance group by giving them a key role in the change decision. If the
individuals are alert, the change agents’ credibility may drop to zero.
f) Coercion
Coercion is the application of threats of force upon resistance. Examples of threats include,
threats of transfer, loss of promotion etc. The advantages and disadvantages of manipulation of co-
operation are valid with coercion also.
Introducing change
Management of organisational change is a complex phenomenon involving formidable
exercises on the part of the management. Before a particular change is shaped and implemented
effectively in an organisation, certain minimum number of steps need be followed viz.
1) Recognize the forces demand change:
2) Recognise the need for the change;
3) Diagnose the problem;
4) Plan the change;
5) Implement the change
6) Follow-up or seek feedback.
1) Forces Demanding Change:
78
 Whenever a manager intends introducing change he should proceed in a logical sequential
order. Manager should, first of all, identify the forces demanding change. Change is the reaction to
the pressures created both within and outside the organisation. These forces thus may be internal or
external. Depending upon the nature of the change agent, as well as the strength of the forces, the
managerial strategy to introduce the change will be decided upon.
2) Recognise Need fo rChange:
All forces certainly do not demand change but some do require careful attention on the part
of the management. Manager should identify the discrepancy between what is and what should be.
He must analyse the forces that contribute to this gap through evaluation or performance reports.
Management then must try to separate unnecessary forces and keep a close eye on next the step in the
process known as diagnosis.
3) Diagnose the Problem:
The next phase in the management of change is a thorough and careful diagnosis of the
problem. This involves the identification of the root cause.
It is advisable that the work of diagnosing the problem be entrusted to an outside consultant.
Generally the services of an outsider are useful at this stage because he is not restrained by the internal
inhibitions. He can afford to call a spade a spade. Various diagnostic techniques such as interviews,
questionnaires, observation and secondary data/ unobtrusive measure, etc., are used in this stage. The
manager or change agent depending on the nature of the problem and capabilities of the enterprise
employs these diagnostic techniques.
4) Plan the Change:
The diagnosis would tell the manager if the change has to be adopted; it might also give him
a clue as to the manner and the phases in which it is to be introduced.
According to Harold Leavitt “all organisational changes can be classified as change in structure, task,
technology or people. Changing structure involves reorganisation of the departments, re-specification of span
of control, decentralization etc. Changing task includes job enrichment, job specification and specialization
and job redefinition or any other changes concerned with the task of employees. Changing technology involves
introduction of new lines of production, installing new control systems, instituting new selection and
recruitment etc. And finally, changing people comprises of training, development activitiesetc.
5) Implementing theChange:
Having identified the focal points of concentration, the manager’s immediate job is to
implement change. Here he confronts a biggest challenge through resistance by the employees. Nadler
and Tushman assert that any change encounters three problems in implementation.
Having taken in account the problem at this stage of implementation of change the manager can
think of implementing change-
a) by Changing the structure and/or
b) by changing the technology and/or
c) by changingpeople.
6) Action and Evaluation
The change agent and the employees carry out specifying methods to solve the identified
problems. The effectiveness of the action plan is evaluated and if necessary modification is carried
out. Action research has two advantages. It is problem focused and has a favourable solution. Action
research involves people heavily in the process, and resistance to change reduced.

79
 CONFLICT MANAGEMENT
Conflict is a part of life. People are being subjected to conflict both inside and outside the
organisation. Conflicts arise due to limitation of resources, competition and difference in values,
goals, attitudes, expectations etc. Whatever may be the cause, if conflicts are not managed well, they
may adversely affect the mental health of the managers and also the health of theorganisation.
An organisation consists of people with different backgrounds; as these individuals differ in
their opinions and attitudes, interaction among them often leads to conflicts. Conflict, which can occur
at individual, group or organisation levels, discourages people from cooperating with each other.
While some degree of conflict is desirable in organisations so as to promote the spirit of competition
among employees, it jeopardizes the effective functioning of the organisation if it is allowed to persist
for a long time. Therefore it becomes essential to resolve conflicts quickly. Though there are several
methods available to resolve conflicts, the ideal way is through negotiation. Thus, in order to be
effective, it is important that the manager possesses adequate negotiation skills.

MEANING OF CONFLICT;

Conflict may be defined as the disagreement between two or more individuals or groups over
an issue of mutual interest, Conflicts may arise between two parties when: one party (an individual
or a group) feels that the actions of the other party will either affect its interests adversely or obstruct
the achievement of its goals; the goals of both the parties differ significantly or are interpreted
differently; or the basic values and philosophies of the two parties are different. Conflicts can range
from small disagreements to violentacts.
Conflict may be defined as a situation in which there is a breakdown in decision making owing
to irrational and incompatible stand taken by one or all related to decision making. Thus conflict leads
to disruption and incompatibility in the behaviour of the people. Conflict is the function of opposite
views held by the parties in dispute. The conflict becomes worse when the people stick to their
irrational stand. Managing conflicts does not mean merely containing them. Conflict management
involves anticipation of conflict devising means by which destructional conflicts can be avoided and
when the conflict do occur overcoming them without creating problems for people and the
organisation.

SOURCES OF CONFLICT

 Organisation change: Organisations undergo changes due to new technological political and social
developments that affect them or due to change in the competitive forces. As people may hold
different views about change and the future direction of an organisation, conflict mayarise.
 Personality clashes: Individuals’ personalities differ widely due to difference in their levels
of maturity, emotional stability and their behaviour. When they do not recognize or
appreciate these differences conflicts occur.
 Difference in value sets: Different people have different opinions, values and beliefs. When

people with contradicting values and beliefs interact with each other conflict is likely to
occur. These conflicts are often irrational and difficult to be re solved.
 Threats to status: Most individuals associate their identity with their status in society or the
organisation. When an individual feels that another person’s acts may harm or damage his
image, which in turn may affect his status, conflict, is likely to arise.
80
  Perceptual difference: People perceive different things, issues and their environment
differently. When they act as though their perception is the only reality, without attempting
to understand or another person’s view, conflict arise.
Classification of conflicts
Conflicts in all organisations occur when people fail to arrive at a consensus regarding the
organisational goals or the means to achieve them. Organisational conflict can be classified as follows:
Intra-personal Conflict:
According to most behavioural theories, people are motivated to achieve goals either when
meeting the goals results in the satisfaction of a need or when the incentives for achieving the goal
are attractive. However, this is not as simple as it seems. An individual may have conflicting needs
or he may have to overcome many barriers to achieve his goals. Thus, the process of achieving goals
is complicated one. In the process of achieving his goals, an individual may experience stress and
frustration and may face internal conflict. This is referred to as interpersonal conflict.
Interpersonal Conflict:
People always try to maintain their image and respect. When someone threatens their self-
concept, they try to retaliate and this leads to interpersonal conflict. Different individuals have
different tolerance levels, and this depends on their personalities. Individuals with low tolerance levels
get into interpersonal conflicts frequently. Often, interpersonal conflicts are the result of differences
in perception and gaps in communication.
Inter Group Conflict:
In an organisation, people from different departments compete for limited resources such as
funds, personal and support services. This competition often results in conflict. Sometimes conflict
occur when one group attempts to take the entire credit for the successful complication of a task, to
the completion of which another group may have also made significant contributions. Perceived
inequitable treatment in matters of working conditions, rewards and status, in comparison to other
groups can also lead to inter group conflict.
The Role of Conflict:
The approach to the organisational conflict is very simple and optimistic. The organisation
conflict is based on the following assumptions. Chris Argyris says that there is basic incongruence
between the needs and characteristics of adult, mature employees and the requirements of the modern
formal organisations. The behavioural approach has re-examined the concept and advocated the
following assumptions
1. Conflict is inevitable.
2. Conflict is determined by the structure.
3. Conflict is integral to the nature of change.
4. A minimal level of conflict is optimal.
On the basis of these assumptions, the management of organisational conflict has taken several
approaches.

Managing the Organisational Conflict:

Conflict cannot be managed simply. The three main strategies are avoidance, diffusion and
confrontation.
Avoidance:
This is not facing conflict. People may use several mechanisms to avoid conflict. There are
several methods used to avoid conflict. One way of avoiding conflict is ignoring the situation causing
81
conflict. Another way is run away from the situation. This may be either physically or mentally. The
third method is to accept all the demands of the parties. Avoidance strategies do not help the people
in leadership positions. Leaders who avoid conflict are seen as incompetent and lack courage.
Subordinates may create more conflicting situations to weaken the leader. However, issue once
avoided may surface again. When the emotions are high, the conflict can be ignored. The issue can
be slowly taken up when the people involved in are in more congenial and harmonious mood. This
strategy reduces the self-confidence of the people involved in resolving the conflict.
Diffusion:
The decision may be delayed until the tempers cool down. Diffusion may involve the focus
on unnecessary issue to avoid the critical problem for sometime. This leaves the future uncertain and
cause dissatisfaction to the people.
Confrontation:
Confrontation is facing conflict. Confrontation may involve negotiation and using authority.
Authority may be used to sort out the conflict. This may satisfy one party and dissatisfy the other.

82