MBA - MS 1

Tasks of a Professional Manager

UNIT 1 TASKS OF A PROFESSIONAL

MANAGER

Objectives

The objectives of this unit are to enable you:

• to know who is a professional manager

• to develop familiarity with various tasks of a professional manager

• to know what exactly are the tasks which a manager has to undertake in the course

of managing his organisation

Structure

1.1 Providing Purposeful Direction to the Firm

1.2 Managing Survival and Growth

1.3 Maintaining Firm's Efficiency in Terms of Profit Generation

1.4 Meeting the Challenge of Increasing Competition

1.5 Managing for Innovation

1.6 Building Human Organisation

1.7 Retaining Talent and Inculcating Sense of Loyalty

1.8 Sustaining Leadership Effectiveness

1.9 Maintaining Balance Between Creativity and Conformity

1.10 Postponing Managerial Obsolescence

1.11 Meeting the Challenge of Change

1.12 Coping with Growing Technological Sophistication

1.13 Coping with Growing Public Criticism and Political Opposition-both

Objective and Irrational

1.14 Coping with Increasing Levels of Aspiration

1.15 Maintaining Relations with Various Society Segments

1.16 Summary

1.17 Key Words

1.18 Further Readings

TASKS OF A PROFESSIONAL MANAGER

As a participant in this programme you are either a practising manager or are aspiring

to be one. Your, first concern, therefore, is to know the tasks which you are expected

to fulfill as a professional manager. These various tasks are discussed in this unit.

There is a lot of confusion over the much widely used terms-professional

management and professional managers. Some researchers contend there is nothing

like professional management. Management is a discipline. There are practitioners of

this discipline who practise management as a profession and 'thus are, professional

managers. Just as there are doctors and lawyers by profession similarly there are

professional managers. As doctors practise medicine, managers practise management.

The only difference between professional managers and other professionals is that,

while the latter must possess a formal degree in their discipline, a professional

manager need not have a formal degree or education in management. He may have

learnt the necessary skills and gained competence from his experience. The second

characteristic of a professional manager is that his primary concern is the

organisation or the company with which he works. This is true whether the manager

works for a private or public sector or a multinational company; whether he is the

executive director or the personnel manager reporting to the executive director. The

professional manager always has his company's overall perspective in his mind and

all his actions are guided by the company's objectives.

The third and the most important characteristic of a professional manager is that he is

responsible for performance. Managing involves collecting and utilising resources

(money, men, materials and machines) in. the most optimal manner for achievement 5

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Role of a Manager

of some pre-determined objectives or results. It is the professional manager's

responsibility to utilise resources to produce the required results. Responsibility and

performance are really the key words in defining a manager's role. Performance implies

action, and action necessitates taking specific steps and doing certain tasks. Let us first

take up the various tasks which a manager is expected to do to produce results.

1.1 PROVIDING PURPOSEFUL DIRECTION TO THE

FIRM

A manager can be compared to the captain of a ship who has first to set the course to

reach the destination and then steer the ship along the course. Similarly, a manager has

to, first of all, set objectives which the firm must achieve. Objectives provide the

direction in which the firm must move. Having decided upon the objectives, the

manager must constantly monitor the progress and activities of the firm to ensure that it

is moving in the desired direction. This is the first and foremost task of every manager.

If you are a part of the top management team then you will be very actively involved in

this task through the process of defining the mission and objectives for the entire

organisation. If you are a manager reporting to the top manager, it is your task to see

that the actions of the people who work for you in your department or division are in

the desired direction. It is your task as a manager to prevent all such actions which take

your company away from the direction set by the top management.

A large American multinational company has its subsidiary in India which

manufactures and markets a popular line of cosmetics and cough and cold medication.

It maintains a large farm in Uttar Pradesh for production of a medicinal plant which is

used as an active ingredient in all its medication. Control over this essential raw

material gives the company a substantial cost advantage. To derive further cost

advantage it was proposed that the company set up its own printing press for printing

the packaging labels. The proposal was in the final stage of approval till the top

management team realised that printing was not their business. Diversification into

printing would only .take the company farther away from, and not closer to, the desired

direction. Production and marketing of medication was their main line of business and

the farm made an essential contribution. However., printing was not such a critical

activity that it required the company to have full control over it.

This illustration highlights the fact that all actions and decisions must be evaluated on

the basis of their contribution towards achievement of the company's objectives.

However, this illustration should not give you the idea that objectives or direction once

set will hold good for all times to come or that any movement away from the current

line of production or activity is always undesirable. The key point is that all movements

and actions must be consistent with achievement of the objectives. To ensure

consistency it is important that the manager carefully thinks through each alternative

course of action, to evaluate its potential to contribute towards attainment of objectives.

1.2 MANAGING SURVIVAL AND GROWTH

"Survival of the fittest" is the law of the jungle which is equally applicable to the

competitive market place where firms struggle and fight for survival. Ensuring survival

of the firm is a critical task of the manager. But that alone is not enough. The manager

has also to actively seek growth. No matter how big or powerful a firm may be today, it

is sure to be left behind in the race by newer, healthier and more efficient firms if it

does not pursue growth.

Two sets of factors impinge upon the firm's survival and growth. The first is the set

of factors which are internal to the firm and are largely controllable. These internal

factors are choice of technology, efficiency of labour, competence of managerial

staff, company image, financial resources, etc.

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Most of the old traditional textile mills were setup in India around the late 19th or

early 20th century based on the then prevalent technology. These mills continued to

flourish till the late 1960s. The early and mid-seventies witnessed a dramatic

revolution in textile technology all over the world. Ignorant of this changing trend,

the Indian mills continued with the old technology. But some new companies

(notable among them Reliance Textiles with its `Vimal' brand of textiles) entered this

field with the latest technology, offering superior quality textiles in a wide range of

polyester and cotton blends. The traditional mills could not match these new entrants

in terms of either product or price. And one of the oldest and the most prosperous

industry was. faced with unprecedented levels of sickness. Most of the old mills

became unprofitable and had to be bailed out or taken over by the government, or

finally shut down. Failure of managing technological change sounded the death knell

of the textile mills.

The second set of factors influencing the firm's ability to ensure survival and growth

are those which are external to the firm and over which it has little or no control.

These external, environmental factors refer to government policy, laws and

regulations, changing customer tastes, attitudes and values, increasing competition

etc. Hindustan Lever Limited (HLL) is a subsidiary of a multinational company

which, till some years ago, was manufacturing and marketing detergents (Surf, Rin),

soaps (Lux, Liril, Lifebuoy, etc.) and Dalda Vanaspati, groundnut oil, and agro-

products. Most of these are low-technology lines. Being a foreign company in low-

technology areas, further growth opportunities were restricted under the Foreign

Exchange Regulations Act (FERA) unless HLL diluted its foreign equity to 40 per

cent. Not willing to dilute the equity holding to 40 per cent level HLL had to find a

way to manage its survival and growth. HLL sold off its line of vanaspati and

cooking oil to Lipton India and diversified into the production of basic chemicals-a

high-technology area where foreign companies are allowed to invest and grow as per

FERA. Thus by changeover from low-tech to hi-tech area HLL has ensured its future

in India

Activity A

Identify the managers whose prime task is to plan and steer the future of your

company. What are the various survival and growth options which your company has

adopted in the recent past?

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1.3 MAINTAINING FIRM'S EFFICIENCY IN TERMS OF

PROFIT GENERATION

Efficiency is the ratio of output to the input. A manager has not only to perform and

produce results, but to do so in the most efficient manner possible. To produce results

a manager requires inputs in the form of money, men, materials and machines. The

more output that the manager can produce with the same input, the greater will be the

profit generated. Profit is the surplus or difference the manager can generate between

the value of inputs and outputs.

Profit is essential for the survival and growth of a business. A manager may decide to

forego some profit today for the profits which he is seeking tomorrow but in the long

run he must understand that no business can survive if it does not make profits

Business activity is undertaken to satisfy a need of the society in a manner which yields

profits. A business is not a philanthropic or charitable activity which is run merely to

provide some goods and services irrespective of whether it is making a profit.

Profit generated can be used for expansion, upgrading of technology, growth or paying

dividends. Profits are one of the cheapest sources of financing growth, as they involve

no interest liability nor putting the freedom at stake by having representatives of

financial institutions sit on your board of directors. Profit gives you the cushion to take

risk, think big and venture into relatively unknown areas.

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Role of a Manager

A profitable firm can turn unprofitable because of obsolete technology, inability to

meet high fixed cost structures, high levels of wastage, or simply because the product is

no longer in demand by customers. We have illustrated how the traditional textile mills

became unprofitable and the fate they eventually met. A similar fate awaits all

unprofitable businesses. The consistent failure of, Engineering Projects India, a public

sector company, to generate profits and. execute international projects within the time

limits has threatened the very existence of this company.

In contrast, companies such as Colgate-Palmolive, Tata Engineering and Locomotive

Company (TELCO), Century Enka, Richardson Hindustan Limited, etc. have been

showing consistently good profits.

Activity B

What is your company's ranking in terms of profit generation within the industry?

Which is the most efficient company in your industry?

List three specific ideas which you think can improve your company's efficiency.

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1.4 MEETING THE CHALLENGE OF INCREASING

COMPETITION

In today's fast changing world one of the very critical tasks of every manager is to

anticipate and prepare for the increasing competition. Competition is increasing in

terms of more competitors, more products, wider variety of products, better quality of

products and a customer who is, today, better informed and more aware than ever

before. The increasing reach and popularity of TV as a means of information has also

contributed to the increasing competition. The manager today has more potential

customers to sell to and easy access to these customers yet the market is crowded with

many competitors wooing the same customers.

Till a decade ago, the Times of India group of newspapers and magazines reigned

supreme in the magazine market with its Ìllustrated Weekly of India' being the only

Indian family magazine and `Filmfare' the only notable film magazine. The former

could be found in most homes which had a minimum level of literacy and affluence.

And `Filmfare' was the only magazine for people interested in films. The introduction

of Ìndia Today' and `Stardust' brought about a radical change. Starting in a modest

fashion. Ìndia Today' is probably the most widely read general interest magazine while

`Stardust' has blazed its own unique trend-setting trail of popularity. In the wake of the

success of these two magazines, many other magazines followed, such as general

interest magazines, film magazines, women's magazines, children's magazines, special

interest magazines, etc. All these new magazines have better reading content, more

colour, better layout and are very glossy and attractive to look at. Unable to match

these new magazines the circulation of the Ìllustrated. Weekly of India' and `Filmfare'

slumped. However, in the last years these two magazines h a v e b e e n attempting to

regain the lost ground and have succeeded to some measure. But they can certainly

never again enjoy the leading position which

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they once did. In developed countries the concept of competition is very closely

linked to that of obsolescence. Companies keep introducing successively new models

of cars, washing machines, refrigerators, etc., with minor variations, and persuading

the customers to discard their older models for the newer ones.

Activity C

List the firms whose products compete with your firm's products. Write down specific

options you would adopt to fight this competition.

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1.5 MANAGING FOR INNOVATION

Innovation is finding new, different and better ways of doing existing tasks. In the

context of business, innovation has to be defined in terms of the additional value it

imparts to the existing products or services. Value is not expressed in terms of

increased cost or price but in terms of the difference it makes to the customer.

A television manufacturing company, after years of painstaking effort, introduced a

circuit with a neat and clean layout which was extremely easy to service. The

company spent large amounts of money promoting this new circuit and its improved

servicing but the customers were not impressed and sales did not pick up as per

expectations. Customers were not convinced because they could not really perceive

the difference and importance of the circuit since its impact on performance was very

marginal. The marketing consultant to the company recommended that instead of

using plywood the company should use transparent plastic back-covers for the

chassis. This would allow the customers to see the circuit and decide for himself the

truth of the company's claim. This is an innovation because it makes a vital

difference to the customer, since he can see and understand for himself the

improvement.

Very often it is the customer himself who provides the source of innovation. Digital

Equipment Corporation, a U.S. company manufacturing and marketing

minicomputers, does not spend its own time and money in finding new business

applications for its mini-computers. Instead, it maintains close contact with its

customers and relies on them to find uses for their mini-computers. A study

conducted by Eric Von Hippel and James Utterback on the source of innovation in

the scientific instruments business revealed that more than 75 per cent of ideas for

innovations came from users.

To plan and manage for innovation as an on-going task, the first thing the manager

must do is to maintain close contact and relation with customers. The firm's salesmen

provide the most direct link for the company with its customers. The task of the

manager is to train these salesmen to keep their eyes and ears open for any type of

information, ideas, suggestions, complaints, criticisms, and feed it back to the

company. An extensive innovation study conducted by Christopher Freeman has

concluded that successful companies pay a great deal of attention to the market.

Successful firms innovate in response to market needs, involve potential users in the

development of the innovation, and understand users' needs.

The manager can also maintain a direct link between customers and the

company. Proctor and Gamble, one of America's largest consumer goods

company, put on its

packaging a telephone number at which the customers could call at company's

expense and give any information regarding the product. In 1979 this

company received 20,000 telephone calls, each of which was followed through,

and was a major source of ideas for innovation and improvements.

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Role of a Manager

Keeping track of competitor's activities and moves can also be a source of innovation

as can improvements in technology. To qualify as innovative, the technology must be

market and customer-oriented rather than research-oriented. In most cases,

innovation as finally introduced in the market was never originally intended to be so.

You can appreciate the truth of this statement better when you know that xerography

was originally aimed at a small segment of the lithography (a special type of printing

process) market, it was never intended to be used in making mass copies. Transistors,

which, prior to the development of integrated circuits, were used in manufacture of

television, radio, etc., were originally developed for military use. As a manager you

should keep a close watch on the technology improvements taking place and try to

find a customer-oriented application for it.

The manager who has his finger on the pulse of the market can quickly find out

under-the-surface changes and shifts taking place and accordingly modify his product

to match the customer requirement. It is not the absolute amount of money and effort

which a firm invests in research and development but its ability to quickly adapt and

place in the market the improved product which accounts for its innovativeness. This

calls for flexibility in organisational structure to accommodate the necessary changes.

In the final analysis, it is the manager who inculcates and nurtures curiosity and an

open mind, and combines it with market feedback, who will emerge as winner in the

race in which innovation is at a premium.

1.6 BUILDING HUMAN ORGANISATION

Man is by far the most critical resource of an organisation. No amount of money,

materials and machines can produce results by themselves. Men are needed to

manage them. Machines can be programmed to take over routine, repetitive jobs, but

only a human brain can design the machines.

Surround yourself with the best people you can find, delegate authority, and don't

interfere", is the advice given by U.S. President, Ronald Reagan to practising

managers (FORTUNE, September 15, 1986). Certainly useful advice except for the

drawback that good people, leave alone the best, are so difficult to find. Ì just can't

seem to find the right people' is an oft heard lament from many a manager. It is

indeed a paradoxical situation that we have so much unemployment on the one hand

and on the other it is genuinely difficult to find the right sort of people.

A small consulting firm's experience is that an advertisement for sales representatives

in a national newspaper fetches anything upto four hundred applications and you are

lucky if you are able to pick up even two or three good people.

This only reinforces the fact that a good worker is a valuable asset to any company.

And, every manager must constantly be on the look out for people with potential and

attract them to join his company. A manager with a competent team has already won

half the battle. Note that we use the word team, and not individuals. However,

competent or brilliant individuals may be, if they cannot work together with each

other they are of not much use to a company. It is up to the manager to mesh

individuals into a well-knit team. The manager who cannot build his team cannot

succeed. Teams should be built on the principles of division of labour, specialisation of

work and mutual give and take.

Pearl Polymers Private Limited is engaged in manufacturing and marketing a

wide range of consumer and industrial thermoplastics under the brand name

of PEARL PET. In addition, the group is involved in garment exports,

computer manufacturing and retailing and trading in basic chemicals. The top

management team consists of four brothers each having a special area of

activity. The eldest brother is the overall group in-charge who coordinates and

looks after the interests of the entire group besides being responsible for

marketing and trading. The second brother, a chemical engineer by training, is

responsible for production. The third brother is a chartered accountant and

manages the finances and accounts. The fourth brother has a

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business management degree and is responsible for garment exports. Having clear

cut areas of functioning and responsibility these brothers have been able to create the

right team spirit and are very successful.

Realising the importance of creating a team spirit and teamwork for achieving the

organisational objectives, progressive companies are trying to build this up in every possible

way. Quad Graphics, a very successful print company in USA, calls its workers `partners'.

W.L. Gore Associates, an American high-tech manufacturer refers to its 4000 people on its

payrolls as àssociates". Over 8,000 American companies share part of their ownership with

more than 10 million employees through Employee Stock Ownership Plans.

1.7 RETAINING TALENT AND INCULCATING SENSE

OF LOYALTY

Hiring good people is still a relatively simple task as compared to the task of retaining them,

people may join a company because of its favourable image but will stay on only if they find

appreciation for, and satisfaction from, their work.

To retain talented people the manager should provide a comfortable working environment

which is conducive to work. More important than the physical environment is the degree of

freedom which a worker enjoys in making decisions within the defined parameters of his job.

When a worker knows that it is his responsibility to produce results and he is accountable for

them, he will put in his best effort. On the other hand, if the worker is always ordered to do

every single act, and nothing is left for him to decide, whatever little potential exists in him

will be killed. A worker should be able to take pride in his work, derive satisfaction from

saying `This is my achievement'. To ensure that work does not degenerate into a boring and

meaningless affair, repetitive, dull tasks should be interspersed with tasks which call for some

element of creativity. In practice this may be difficult, but the manager must at least give some

thought to how best he can make work meaningful. Rotating jobs within the same department

at the same level may be one way of making work more interesting and provide opportunity

to the worker to demonstrate his professional and technical skill.

The manager must also understand that each individual is unique and his degree of expertise

at handling various aspects of works varies from that of another. As an effective manager

your attempt should be to pinpoint your subordinates' strengths and give them work in which

their skill can be utilised to the maximum. In areas where they feel inadequate, provide them

support. A talented, competent man is definitely worth that bit of extra support.

Recognising, appreciating and nurturing your subordinates' talents will bring you rewards in

terms of improved results and loyalty. However, to really earn the loyalty of his people the

manager must remember two other key concepts, communication and motivation. A manager

who encourages open, direct and frank communication is always able to tackle issues much

before they become problems and also take advantage of the creative ideas of his employees.

Opportunity to communicate directly with the top manager enhances the sense of self-esteem

of workers and helps create in them a sense of belonging, a feeling that what they think and

feel is important to their organisation. Such a feeling goes a long way in building loyal

employees.

Every individual's behaviour is initiated because of some needs, drives, and desires and is

directed towards achievement of goals. These needs and drives motivate a man to action. The

manager's attempt should be to influence these needs, desires or motives towards the achievement

of the organisational goals. The more such motivational factors a manager can incorporate in the

work content, environment of work and rewards of work, the more willingly will people put in

hard work. Money, power, status, recognition, etc. are all powerful motivators which a manager

can use. Under the Employees Stock Ownership Plans in use in many U.S. companies,

employees can buy shares and become part owners of the companies for which they work. Recent

research reveals that these plans encourage employees to remain loyal. to their organisations and

stay on with them.

Activity D

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Role of a Manager

List all such key personnel who you think are loyal to the company. What do you think are

the reasons for their loyalty?

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1.8 SUSTAINING LEADERSHIP EFFECTIVENESS

Every manager is a leader in the sense that he has to influence his subordinates to work

willingly for achieving the organisational objectives and inspire them to put in their best

effort. The only way a manager can be acknowledged as a leader is by continually

demonstrating his leadership abilities. If the manager always gives due importance to the

welfare and interests of his employees, makes objective decisions that benefit everyone, he

will be rewarded by the confidence and trust of his people.

J.R.D. Tata is an excellent example of an effective leader. Appointed Chairman of Tata

Steel in 1939 he held this position, performing with distinction and providing admirable

leadership, right up to 1985. Even today he is the Chairman of the Tata group of companies,

whose name is synonymous with the highest standards of quality and integrity. That all Tata

products right from salt to trucks enjoy, the trust of lakhs of customers speaks volumes for

the highest kind of leadership provided by J.R.D. Tata. There are equally big industrial

houses but how many of them enjoy the kind of customer confidence or have the clean and

impeccable record of the Tatas? The beginning is always made from the top-the beginning

of rot or excellence, that is up to you to choose. Whichever you choose remember that it is. a

very important choice, because once the momentum builds up it is difficult to stop and

reverse the process.

An effective leader must be a man with vision who can think and plan ahead, and also have

persuasion to carry along all the people.

1.9 MAINTAINING BALANCE BETWEEN CREATIVITY

AND CONFORMITY

Developing a new idea, concept or product can be very creative, challenging and exciting.

But, that is only one part of the story. The other part of the story, and usually the more

difficult part, is to translate this idea into a successful business. This requires detailed

planning and organising of finance, marketing, administration, etc. While new product

development involves a high degree of creativity, its transformation into a successful

business reality involves carrying out relatively more routine and repetitive tasks.

Designing a new high-fashion garment can be very challenging and satisfying work but

selling it to boutiques all over the country, and chasing them for outstanding dues hardly

offers that kind of excitement, but certainly offers the satisfaction of a routine job well

done.

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A manager is lucky if he can find elements of both creativity and conformity

in the same individual. Usually this is not the case, and most organisations

have separate; product Development Groups or Research and Development

Division. Creativity can flourish best when allowed full freedom with

minimum rules and regulations. Thin most firms allow the product

development groups to function in a relatively freer atmosphere. An

advertising agency known for the excellent advertisements it produces, allows

its creative people, the copy-writers and art-director, the freedom to come into

office and leave whenever they please. As long as the work is completed within

the deadline, management allows its creative people a great degree of freedom.

In contrast to creative success for which definite output or results cannot be pre-

determined, business success requires achievement of specific, usually quantifiable

targets. In business the best results are usually obtained within the conformity of

company policies and rules. However, this is not to say that managing for business

results is boring and requires no creativity. On the contrary, succeeding in today's

cut-throat competitive world calls for creativity in all the functional aspects of

managing, be it finance, marketing, advertising, public relations or human relations.

To succeed, an organisation needs both creative people and people who can produce

business results. The manager must encourage both kinds of persons in his

organisation. A new product idea gives a company a rare opportunity to emerge out of

the humdrum of competition to the top, but the transformation of opportunity into

reality depends on the people performing for business results.

Activity E

How does your company encourage and promote creativity in its employees?

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1.10 POSTPONING MANAGERIAL OBSOLESCENCE

Managers and executives, after 20 to 25 years of work experience, often find

themselves having reached a plateau where, on the one hand, the prospect of

enhanced status, increased pay and perks are no longer motivators enough to work

hard; and on the other, they find they are unable to relate to the latest managerial

knowledge and skills and feel totally lost. In both cases, these managers cease to be

productive and become a drag on the organisation in terms of their heavy cost and

inability to make meaningful contribution. This is the problem of managerial

obsolescence, that is when managers become unproductive, or out of date, or both. In

the situation where lack of motivation seems to be the cause, the solution lies in

redesigning their job content to make it more meaningful. An aerospace company

designates its senior engineering managers as consultants to its groups of young

engineers, thus providing the right outlet for their rich experience.

Training programmes aim to provide or improve knowledge and skills which can

help the manager improve his performance on the job. Many companies regularly

sponsor their senior managers to attend such training programmes. Other companies

invite experts to their own company premises to conduct these programmes and

workshops. Training programmes, refresher courses, and basic courses in functional

areas are the solution for managers facing knowledge obsolescence.

These training programmes are not restricted to senior managers alone. In fact,

younger managers can also benefit from these programmes, especially those which

provide knowledge of other functional areas such as production for non-production

managers. Also beneficial for the young managers are workshops aimed at training

them for the top level management posts.

Activity F

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Role of a Manager

Does your company have an explicit policy for training personnel? How many

training programmes have you attended in the last five years? Describe how these

programmes have helped you in updating your knowledge and skills.

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1.11 MEETING THE CHALLENGE OF CHANGE

One of the important tasks which every manager has to perform is that of a change-

agent. The social, political, economic, technical and cultural environment in which the

firm operates is always changing. The company must keep pace and change

accordingly. Similarly, within the organisation, new types of production technology

may be introduced, the existing product lines may be phased out, formal procedures

and techniques for planning, resource allocation, job appraisal, etc. may be

introduced. All these imply a change. And man by his very nature resists any change.

Used to the old system or method of doing a particular job, people perceive change as a

threat to their security. Moreover, change implies learning afresh the new methods or

processes and most people resist making this extra effort.

The marketing department of a television company always complained of the low

quality circuit in the black and white TV and held it responsible for its poor sales

performance. However, when an improved circuit was introduced, the marketing

department tried its best to convince the top management against this change saying

that the old circuit was now performing in a satisfactory manner. The real reason

however, was that the marketing department would now be under pressure to show

results as it would have no scapegoat to blame for its lack of results. The engineers

responsible for providing after sales service opposed the new circuit since it meant

putting in an effort to learn the new way of servicing it.

There will always be change. It is the manager's task to ensure that the change is

introduced and incorporated in a smooth manner with the least disturbance and

resistance. Sharing information about the impending change, educating the people

about the benefits resulting from changes, and building favourable opinion of the key

people in the organisation by involving them with the change process itself, go a long

way in making the manager's task easy. The ideal way of introducing change is that

you, as a manager, simply sow the idea of the proposed change in the minds of a, few

people, and then let the idea grow and build till the people themselves come round to

asking for the change. This is the way the Japanese make decisions-by consensus.

However, it is not always possible to introduce change by having consensus. There

may be limitation of time or money, or pressure of competition which may make the

consensus method impractical.

1.12 COPING WITH GROWING TECHNOLOGICAL

SOPHISTICATION

The two areas which are witnessing dramatic changes in technology are production and

information handling.

In the area of production, technological sophistication has reached the level where the

entire production plants are fully automated and programmed to run with the

minimum human intervention. For instance, at Nissan's Zama plant, where Nissan cars

are manufactured, the final assembly line operations are fully automated and

controlled by robots. These robots have totally replaced men in such jobs in which

15


the former can be programmed to perform round the clock without any fatigue or loss

of efficiency. Robots are also being used in manufacturing which requires handling

of bulky and dangerous materials. All these changes in production techniques have

forced managers to find ways and means of relocating the workers rendered

redundant. Simply laying off is not always the best solution as it can involve a very

high compensation cost. Moreover, in many countries because of the government's

political ideology or cultural values (as in Japan where the concept of employment

with a company is life-long), laying off workers is not permissible.

The use of computers in business has totally changed the way that managers make

decisions. Managers today not only have access to more updated information but also

better information which can improve quality of their decisions. Moreover, with

electronic data processing managers can use complex statistical and mathematical

models and tools to study the possible impacts of their decision. All this helps lessen

the degree of risk by reducing the level of uncertainty. However, access to more

information places the onus on the manager to define what is the relevant information

that he needs and also ensure that the benefit derived from the information which he

receives is greater than the cost incurred in collecting and processing it.

1.13 COPING WITH GROWING PUBLIC CRI TICIS

AND POLITICAL OPPOSITION-BOTH OBJECTIVE

AND IRRATIONAL

Large business groups are often the target of political and public criticism because of

their apparent power and clout arising out of concentration of economic power. By

Indian standards this economic power may seem great but is very small by

international standards. The criticism is not always evoked by facts but because of

ideological, political or personal reasons. But sometimes the criticism may be

founded (fl facts as in the recent case of the Reliance Textiles, attempts to corner

large : amounts of loans from various nationalised banks. Similarly, Peerless General

Finance Limited was the subject of controversy and criticism on account of amassing

large amounts of funds without following proper procedures.

The best way to avoid political criticism is to keep all activities absolutely

legal and above board. Secondly, the manager should keep a low profile of his

company to avoid drawing unnecessary attention to his firm's activities. And

finally, the manager should feed correct information to the media and political

parties to ensure that they view his firm in the right perspective.

1.14 COPING WITH INCREASING LEVELS OF

ASPIRATION

Improvement in information technology is resulting in an increasing trend towards

democratisation of the society. People in one part of the world know more about

peoples and events in other parts of the world. Similarly, people belonging to one

socio-economic segment of society know more than ever before the life styles of

people in higher socio-economic segments. Exposed to a better quality of life and a

better life style, people from the lower economic segments, especially the younger

people, aspire to the same kind of life style.

A manager must bear this fact in mind while dealing with blue-collar workers

because these is bound to be a vast gap between their levels of aspiration and reality.

If the manager is ignorant and insensitive to this gap, the workers' resentment and

frustration is bound to spill over in ways which can prove disruptive and destructive

to the firm's working.

You, as the manager, must understand the nature of aspiration of your workers and

try to fulfil them, as far as possible, within the framework of the company and the

worker's job. Giving more autonomy, responsibility, money, status and enhancing the

worker's sense of self-esteem through participation in management decisions can

channelise his latent or potential resentment towards more productive ends.

1.15 MAINTAINING RELATIONS WITH VARIOUS

SOCIETY SEGMENTS

16

Role of a Manager

A firm fulfils a need or needs of the society. It exists within the society and has a two-

way interaction with it. It seeks inputs in the form of money, men, materials, machines,

technology from the society and processes them to produce goods and services for

consumption by the society. In course of this interaction the manager has to deal with

various society segments, such as the labour market from which it recruits its people,

suppliers of machines and technology, banks and financial institutions who supply

money, the government which defines the scope and parameters within which the

company has to operate, the retail outlets or agencies which stock and sell the products

and the customers who buy the product. This is by no means an exhaustive list, but just

an indicative listing of the various types of society segments with which you have to

maintain relations.

In fulfilling the needs of the society and interacting with various society segments a

firm creates impacts. Some of these impacts are intended while others are not. When a

firm advertises through newspapers and magazines it is creating an awareness for its

products. This awareness is an intended impact. However, when the magazines and

newspapers carry editorial articles about the company and its products, it creates an

impact which was never intended by the firm. Since some of these unintended impacts

may be unfavourable to the company's image or spread information which is incorrect

or inaccurate, the manager's attempt should always be to minimise these impacts.

Interactions with various society segments and their intended and unintended impacts

are taken up for discussion in the next unit.

Activity G

Identify various areas (e.g. computerising personnel office) in your company which

you think require a technological change.

In respect of each, how would you handle the change?

To what extent would you find consistency between the change and aspiration levels of

the people?

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1.16 SUMMARY

The specific tasks which a manager has to perform flow out of his job description. The

tasks may vary depending upon the managerial level, function and industry to which

the manager belongs. In this unit we have discussed an exhaustive list of tasks which

every manager has to perform. It is possible that you may not be performing all the

tasks described here but confining yourself to only a few. Also, some tasks may be of

greater importance than others.

Given the wide range of diverse tasks which a manager is called upon to perform

it is essential that the manager be a thinker, a doer and a people-oriented man-

all rolled into one. However, it is rare that you find a manager who has the

ideal combination of all three dimensions in equa parts. To be effective you

must recognise your strong dimension and look for an opening where your

strength can be best utilised.

17


1.17 KEY WORDS

Firm: Organisation established for commercial purpose. The terms organisation, firm

and company are used interchangeably.

High-tech-industry: Industries which use modern, sophisticated production

technology and involve high level of research and development.

Mission: Mission of a firm defines the very purpose and justification for a firm's

existence. It is always described in terms of the benefits which a firm provides to the

customers and not in any physical terms.

Multinational corporation or company: Commercial organisation with

manufacturing and marketing facilities in more than one country.

Objectives: Specific aims of the firm. Obsolescence: The process of becoming

obsolete, i.e. going out of use, or going out of date.

Public limited company: A company whose shares are quoted and dealt with on the

stock exchange.

Public sector: A commercial organisation owned and managed by the state.

Top management: That level of managers which is concerned with defining the

mission and objectives of the firm, and designing strategy to achieve them.

Obsolescence: The process of becoming obsolete, i.e. going out of use, or going out

of date.

Public limited company: A company whose shares are quoted and dealt with on the

stock exchange.

Public sector: A commercial organisation owned and managed by the state.

Top management: That level of managers which is concerned with defining the

mission and objectives of the firm, and designing strategy to achieve them.

1.18 FURTHER READINGS

Drucker, Peter F., 1981. Management Tasks, Responsibilities and Practices, Allied

Publishers Private Limited: New Delhi.

Matsushita, Konosuke, 1983. Not for Bread Alone, PHP Institute Incorporated:

Tokyo.

Peters, Thomas, J. and Waterman, Robert H., 1985. In Search of Excellence, Harper

and Row: New York.

Tata, J.R.D., 1986. Keynote, Tata Press Limited: Bombay.

for Bread Alone, PHP Institute Incorporated: Tokyo.

Responsibilities of a Professional

Manager

UNIT 2 RESPONSIBILITIES OF A

PROFESSIONAL MANAGER

Objectives

The objectives of this unit are to help you to develop:

• a familiarity with the various responsibilities of a professional manager

• an appreciation of the responsibilities of a manager towards various

society segments.

Structure

2.1 Responsibility Towards Customers

2.2 Responsibility Towards Shareholders

2.3 Responsibility Towards Employees

2.4 Responsibility Towards Suppliers

2.5 Responsibility Towards Distributors and Retailers

2.6 Responsibility Towards Industry and Competition

2.7 Responsibility Towards Union

2.8 Responsibility Towards Government

2.9 Responsibility Towards Society

2.10 Summary

2.11 Key Words


A firm is a social institution. Its very existence is dependent upon its harmonious

relationships with various segments of the society. This harmonious relationship

emanates from the firm's positive responsiveness to the various segments and its closely

associated with the tasks a manager is expected to perform. The process of evolving this

mutual relationship between firms and various interest groups begins by acknowledging

the existence of the responsibilities of a manager. These responsibilities are towards

customers, shareholders, employees, suppliers, distributors and retailers, competitors,

unions, government and society.

2.1 RESPONSIBILITY TOWARDS CUSTOMERS

The manager must always remember that the customer comes first. The starting point

for the business firm is an understanding of the needs of the customer, and the firm's

foremost responsibility is towards the customer.

A firm's responsibility towards its customer is in terms of ensuring that the desired

quality of product at a reasonable price is made easily available to the customers. Product

quality is of the utmost concern and covers dimensions of product design, materials used

in production, safety, purity, hygiene and aesthetic appeal. The quality of spices is

measured in terms of its purity, fragrance, freshness, cleanliness and colour. In case of a

car the quality refers to its fuel-efficiency, maximum speed at. which it can run, reliability

and trouble-free working of the engine, efficiency of its brakes, sturdiness of the body,

comfortable sitting space, commodious boot for keeping luggage, fitted-in

airconditioner, stereo system, foam seat covers, etc. The list is endless. This is because

quality means different things to different people. For a professional racing driver the car's

ability to accelerate to the maximum speed in the shortest possible time is probably the

most important indicator of quality. In contrast a man buying a car for his family would

give more importance to factors such as spacious seating and luggage keeping facility,

sturdiness of the body and the engine's fuel-efficiency, availability of spares and servicing

facility, etc. Connotations of quality vary not only from one individual to another but

also from society-to 19

society because of different social; cultural and economic values. In most European,

American and Japanese cars, features such as safety-belts, airconditioning, stereo

systems, radio, clock, carpeted floors, upholstered seats are standard features. In

India these are considered super-luxuries. Here were may think of Maruti which

markets two models of its cars, ordinary and deluxe with all these additional features.

20

Role of a Manager

In India durability is a very important ingredient of quality. When we buy consumer

durable products such as pressure cooker, sewing machine, bicycle, refrigerator,

airconditioner, typewriter or even clothes, and furniture we expect them to last for 10

to 15 years if not more. The longer the product works or lasts, the better is its quality

in our perception. In contrast, people in the developed countries discard even a

perfectly functioning product in favour of a new one as soon as it is possible.

In attempting to provide the best quality product the manager must always remember

that quality is perceived in relation to the price of the product. Your company may

spend a fortune in producing the best quality product, but if it is priced significantly

higher than the accepted price you will not be able to find any buyers for your product.

Price is always determined in relation to your cost of production and what the

customer thinks is good value for money.

It is the responsibility of the manager to provide the right match between quality and

price. This relationship of quality and price is very important. Japan's economic

recovery and rise to the position of world's number one position in electronics and

automobiles is the result of its winning combination of best quality which

competitors can't match and at prices which competitors can't beat.

Products manufactured by reputed companies carry stickers saying checked for

quality control', `tested', 'O.K.'. Over a period of tittle the customer starts associating

certain level or connotation of quality with particular companies and their brand

names. If, however, your products do not enjoy this kind of quality association, you

can have the quality ascertained by government bodies such as the Indian Standards

Institution which puts its ISI mark of approval on your product after testing for

adherence to minimum quality standards. Getting such certifications will go a long

way in building the customers' confidence in your products.

Having ensured the desired quality of your product, and fixed a reasonable price for

it, your next responsibility is to ensure that your product is easily and conveniently

available to your customers. Unless you happen to be marketing a product in which

your company enjoys a monopoly and no substitute is easily available, persistent

non-availability of your product will lead your customers to switch over to the best

available substitute. As a manager you are also responsible for ensuring that the

dealers or retailers through whom you sell your product provide the correct

information about the product to the customers, charge the correct. price, sell the

correct weight or amount (if your product is sold loose) and provide the proper after

sales support. A dealer who cheats on any one of these accounts is spoiling the image

of your product and company and you should discard such dealers immediately.

Often firms, in their anxiety to make a success of a new product, make very tall

claims about the potential benefits of their product. Such a promotional effort may

create a short-term effect but can never provide a long-term stability. In India, there is a

tendency on' the part of many firms to bolster the image of their products by making

claims far from the truth primarily because many customers are not in a position to

challenge such claims either through a voluntary or legal framework. In the absence of

pressure from consumers, it becomes the responsibility of the manager to promote the

products only on the basis of real and not imaginary benefits.

Finally, there are always; some product or service concepts the consumption of which

is viewed to be unethical. For instance a private medical clinic promoting the concept

of determining the sex of a foetus, knowing fully well that there is a distinct'

preference for a male child in most families, is certainly promoting an unethical

service.

Therefore, in terms of responsibility towards customer, the management of a firm should

always, aim at marketing, the right product, at the right price and of the right quality.

21


Manager

Activity A

What do you think are the responsibilities of the following firms and institutions

towards their customers and users?

a)

b)

c)

d)

e)

f)

g)

h)

i)

j)

A drugs and pharmaceutical company

A commercial bank

A university

A food products company

A cosmetic manufacturing company

A pressure cookers manufacturing company

An airline

A lawyer's firm

A toy manufacturing company

A private hospital

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2.2 RESPONSIBILITY TOWARDS SHAREHOLDERS

Except in the case of a proprietorship firm where the capital is fully contributed by

the proprietor, in all other companies, capital is collected from a variety of sources.

The sources may be friends and relatives of the owners, financial institutions and, fn

case of public limited companies, individual members of the public. All those people

who contribute capital to a firm are known as its shareholders.

The prime responsibility of the manager is to ensure the security of the shareholders'

capital.The manager must ensure that the firm does not become bankrupt or it is •

faced with a situation where the shareholders' capital is endangered. In other words,

the manager must, at least, ensure the survival of the firm.

Having done that, the manager has to ensure that the shareholders are able to earn

profit on their capital. Shareholders invest their hard earned savings in your firm with

the hope that they will be able to earn more on it than if they keep the money in a

bank. Money invested by shareholders is representative of the faith they have in your

competence and ability as a manager to put their money to good use and give them a

satisfactory return. The onus is on you to make your firm profitable and provide

regular dividends to your shareholders.

By virtue of the capital invested in your firm, shareholders are owners of your firm.

As a manager you have to keep them regularly informed about all important

decisions, activities and results. The balance-sheet and the annual general meeting are

the usual yearly forums for such information sharing. You have to ensure that the

information provided in reports.and balance-sheets is correct and authentic, and does

not in any way mislead the shareholders. During the annual general meeting or

any other such meeting with shareholders you must encourage them to ask questions

about the working of the firm and also provide ideas for improvement, and not threaten

or intimidate them in any manner.

22

Role of a Manager

Activity B

From the records of your company analyse and comment upon the service that it has-

rendered to its shareholders in terms of dividend payments and bonus issues. Do you

think your company has behaved responsibly towards its shareholders? If not, what

suggestions will you offer to your company's management?

2.3 RESPONSIBILITY TOWARDS EMPLOYEES

Your employees are your most important resource. Their hard work, ingenuity,

loyalty and dedication are critical contributions to the success of your firm. In return,

you have to ensure that you are giving them a fair deal in terms of wages and salaries,

and compliance with the statutory obligation of provident fund, gratuity, insurance,

bonus, etc. The wages and salaries which you give must, of course, be in accordance

with the minimum level as specified by the government, but they must also be at part

with other firms within your industry. Result or productivity linked bonus and

incentives are a way to ensure that your employees can share in the growth and

prosperity of the firm.

Apart from wages, provision of a safe, healthy environment which is conducive to

work is your responsibility. There must be proper and adequate facilities such as

canteen bathrooms, first-aid room, etc. The extent and importance of these facilities

will vary from one organisation to another. In an administrative-office with -30

employees; you do not require a full-fledged first-aid room. A small first-aid box

with the minimum accessories will suffice. In contrast, in a factory where the

incidence of accidents is bound to be higher, a proper first-aid or emergency room

with a doctor is an essential requirement. Realising the importance of a comfortable

working environment, many progressive companies have canteens which provide hot,

wholesome lunch at subsidised rates. Some companies also provide transportation for

employees at their own cost.

Instrumentation Limited, Tata Iron and Steel Company and Hindustan Machine Tools

have developed beautiful townships in Kota, Jamshedpur and Bangalore respectively

with the best possible facilities and amenities for the benefit of their employees.

Where the company is situated in a remote,. undeveloped area, provision of housing

and other facilities is necessary to attract and retain the required work-force. But in

many other cases, development of such amenities is a reflection of the growing

realisation by companies that employees are not simply another resource for

production, but are human beings with emotions, desires, aspirations and have a life

outside the factory too. Only a happy, satisfied human being can be a productive

worker. Many firms extend their mantle of responsibility to include the employees'

families too. They contribute towards education and marriage of their employees'

children.

The thoughts of J.R.D. Tata, Chairman of Tata Steel, expressed in 1943 in a proposal

for the creation of a Personnel Department in the company are noteworthy.

"What are the main causes of our difficulties with our workmen? In many

respects we have treated our employees exceptionally well. Our rates of pay

and bonuses; our hours of work and conditions of service; the

accommodation, amenities and medical care we have provided for them

23


Manager

and their families, etc., exceeded what any other company in India had done

for its employees. Normally, therefore, it would be reasonable to expect that

our employees would be appreciative of the liberal treatment and generous

terms of employment they get at Jamshedpur. If, instead, they are frequently

discontented and mistrustful, and hostile towards us, I think we must assume

that the fault lies with us and not win with them. It is, therefore, up to us to

find out where we have been at fault and then formulate the necessary

corrective."

Speaking about the importance of human level personal contact with employees

J.R.D. Tata laments:

"One of the inherent drawbacks of modern industry, with its large and

concentrated labour forces, is the difficulty of maintaining personal touch

between management and employees. As a result, many petty grievances,

negligible individually but substantial in the aggregate, which might have

been eliminated by a friendly word or timely action, are allowed to build up a

sense of discontent and frustration among the workers."

Your responsibility as a manager is also to ensure that all dealings with the

employees are fair. Whether it is determining the profit linked bonus that is being

calculated or the provident fund of a retired employee which has to be paid, you must

ensure that the employees are not cheated, harassed or humiliated.

The fact that we still have child labour, bonded labour, workers suffering from

debilitating diseases because of unhealthy, unsafe working environments speaks

volumes for our collective failure to discharge managerial responsibility towards our

employees.

2.4 RESPONSIBILITY TOWARDS SUPPLIERS

Responsibility towards your suppliers emanates from the fact that their survival and

growth (partly or wholly) is dependent upon your survival-and growth. Suppliers

provide you the raw materials, components and parts necessary for the production of

your products. You are dependent upon your suppliers for regular, timely supplies of

the specified quality at the agreed price. The suppliers in turn depend on you for

providing correct design specification, adequate time for production, fixation of a fair

price and prompt and timely payments. This two-way relationship works best when it

is based on the realisation of mutual dependence and one party does not try to

pressurise the other for its own benefit.

Escorts Limited and Hero Cycles are examples of how firms can play a responsible

role in nurturing the growth of suppliers. As these firms have grown from success to

success so have their suppliers. A full-fledged bicycle ancillary industry has been

established in and around Ludhiana in response to the needs of Hero Cycles and other

cycle manufacturers. In some cases firms may even provide the seed capital and other

necessary infrastructural support to an individual to start an ancillary industry. There

are numerous examples where these small ancillary industries have grown to be as

successful and large as the firms to which they were originally supplying.

The manager's responsibility towards suppliers of funds, i.e. banks and other

financial institutions, is that not only he has to make the interest payments, but make

the repayment on time as per the agreed repayment schedules. By doing so the fine is

not only helping the bank but also helping itself because the health of the bank will

determine the health of the firm and vice versa. An added dimension of responsibility

towards the banks is that the manager must provide accurate and complete

information about the various facets of its business when applying for financial

assistance. This will help the bank in assessing the risk and return potential of your

project and determine the amount of loan it can sanction.

Advertising agencies supply creative inputs used in promoting your company's

products. since their services are not of a very tangible nature, most firms have the

tendency to postpone or delay making their payment. As a responsible manager you

must check against this tendency. Advertising agencies after all, run a business, like

any other, and are your suppliers, and payment delays from your end puts undue

pressure on them and affects the efficiency of their operations.

Activity C

24

Role of a Manager

Prepare a list of all the suppliers of raw materials and components to your company.

Meet them one by one to assess their live of satisfaction in terms of dealing with your

company.

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2.5 RESPONSIBILITY TOWARDS DISTRIBUTORS AND

RETAILERS

Distributors and retailers are the link between the firm and the actual customers who

consume the product. In your capacity as a manager you are responsible for ensuring

regular supplies to your distributors. Persistent delays in processing and supplying

distributor's order can lead to a situation where the distributor eventually loses

interest in your product and switches over to a competitor firm. Timely supplies have

their relevance provided they are as per the order specification. Supplying spoons

instead of forks, simply because forks are out of stock in the factory, is not a

responsible way of dealing with your distributors.

The products that you supply to the distributor must be checked for quality to ensure

that second grade or inferior quality goods are not shipped. Outer packaging of the

product should protect it from damage in transit,. because the dealer will return all

spoilt and damaged stock which will eventually reflect negatively in your profits. A

company manufacturing and marketing plastic bottles switched over from 5-ply to 7-

ply cardboard carton when it started receiving complaints that the bottles were being

dented and crushed out of shape in transit. The company. had to absorb the increased

cost of the heavier carton, but it was more than compensated by the fact that return of

stock sharply declined and the distributors had no more cause for complaints. A

television marketing company provides service engineers to all its outstation

distributors for testing each TV before it is despatched onwards for sale. This adds an

extra cost but ensures that the distributors and retailers receive sets which are trouble-

free.

The distributors and retailers who sell your products are in it for business and they

'must earn a fair return. Apart from the fixed percentage which you provide to your

dealers, target based incentives, commissions and rewards will motivate your dealers

to push your products harder. Providing support to the dealers by way of extending

credit, sharing promotion cost, after sales service and help for decorating the

showroom also form part of your responsibility. You must also nurture and maintain

cordial relationship with all your dealers. Many companies hold regular dealer meets

in an attempt to build up dealer relations for better corporate gains.

25


Manager

Activity D

List all the distributors and major dealers of your company. Circulate a small

questionnaire amongst them to assess their perception about your company: On the

basis of the findings of this questionnaire make suggestions to your company's top

management.

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2.6 RESPONSIBILITY TOWARDS INDUSTRY AND

COMPETITION

Other firms within the industry are your competitors in the market place but are your

associates when you have to lobby for or represent and an industry and not as

individual firms. Most industries have their own associations at the local, regional,

national and international level. The objectives of organising such bodies are to

protect and promote the interests of the industry, seek concessions from government

and represent against any discrimination, and provide a forum for sharing and

disseminating information on the latest technological and market trends.

As a manager it is your responsibility to register your firm as a member of your

industry association and comply with all its rules and regulations. The information

which you provide to your association must be correct so that the association can

present a true picture of the industry. If you have developed or learnt some improved

technology you may consider sharing it with other fellow firms.

All industry associations are voluntary bodies formed with the idea of providing

support to individual firms within the industry. The onus of successfully managing

the association is on all managers of individual firm members. You must be always

willing to step forward and take an active responsibility in the association. It may

impinge on your already tight schedule but it is good to remember that the interests of

your firm are best served when the interests of the industry as a whole are served.

Healthy competition encourages firms to improve their performance and nurtures

progress and it is the responsibility of each firm to ensure that the competition it

indulges in is fair and ethical. Resorting to unfair practices, trying to push out other

firms on the basis of political influence or financial strength may yield, some

short-term gains but will eventually tarnish the image of the entire industry. All your

actions must be guided by concern for the stability and prosperity of the industry.

26

Role of a Manager

Activity E

Is your firm a member of any industry association?

How does your company representative, within the association, contribute towards

improving the performance of the association?

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2.7 RESPONSIBILITY TOWARDS UNION

Your first responsibility towards your employees' union is to acknowledge it as a friend

rather than as a foe of the firm. Most problems with unions arise because of the

assumption of the managers that unions have no constructive contribution to make but

are interested only in playing a negative role. As a responsible manager you must

understand and appreciate the fact that the management and union have a great degree

of mutual dependence and the union cannot further its interests at the cost of the firm's

interests and vice versa. Only a relationship based on mutual trust and cooperation will

best serve the interests of the firm and the union.

The union represents the collective strength of all the individual workers. In dealing with

the union the manager must recognise and acknowledge the bargaining power of the

union arising out of its collective strength. The union will always bargain with you for

the maximum benefit. As a manager you should not try to block this bargaining process

but aid it by providing the union with the correct facts and figures about costs and

profits and thus aim for a realistic, workable agreement which suits both the parties.

Besides providing the correct information you should attempt to involve the union in

the process of managing the firm. You can do this by inviting representatives of . the

union to sit on the management board. This is known as participative management. The

chairman of Japan's Matsushita Electric Company often makes this little speech to his

workers about participative management:

"Don't think I run this company. Each of you has a part to play in its

management. We need the ideas, skill and knowledge of everyone to make a

reservoir of wisdom for more efficient operation, better product and service

quality, and effective management. We have a good future if we can work that

way."

The basic requirement for encouraging participative management is the manager's

positive attitude and creation of an atmosphere which encourages free and frank

exchange of views among employees and management.

27


Manager

Activity F

Does your company have a recognised union?

What are the mutual perceptions of the management and the union?

What steps has your management taken to involve the union in its growth process?

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2.8 RESPONSIBILITY TOWARDS GOVERNMENT

It is wholly the responsibility of the manager to ensure that the constitution and

operations of the firm are within the legal framework as specified by the government.

This legal framework may vary, depending upon the nature of ownership of firm

(proprietory, partnership, private limited, joint stock, Indian or foreign, etc.), size of

the firm, and specific industry within which the firm operates. The government has

laid down specific rules, guidelines and norms which impinge upon the firm right

from the stage of its inception. As a responsible manager you must ensure that your

company is operating well within the legal framework and is fulfilling all its

obligations towards the government. Whether it is a matter of posting a copy of the

company balance sheet to the Registrar of Companies or setting up a joint venture in

a foreign country, the actions must not violate the laws and regulations.

The second area of discharging your responsibility towards the government is in the

matter of paying regularly and fairly all taxes, dues and duties. The recent raids on

large industrial groups are an attempt on the part of the government to unearth unpaid

taxes and undeclared assets. A manager who acts in a responsible manner will be

ensuring that his firm never has to face such a situation. The manager must strive to

make his firm a model corporate citizen.

2.9 RESPONSIBILITY TOWARDS SOCIETY

Apart from the specific society segments with whom the firm interacts in the course of

conducting its business, the manager also has responsibility towards his surroundings

and the people living in the vicinity of his factory and office.

Firms behave irresponsibly when they pollute their physical environment by

releasing harmful smoke and gas into the atmosphere, discharging toxic effluents into

nearby rivers, lakes or seas, and dumping their waste matter in surrounding lands. All

these have a detrimental effect on the environment and affect the health of the people

by polluting the air they breathe, the water they drink and the food they eat. The

Bhopal tragedy where poisonous gas leaking from the factory of Union Carbide

caused the death of thousands of innocent people is an example of the extent of

damage which can be caused if proper precautions .are not taken.

The government is only now realising the irreparable harm which firms, in pursuit of

their business, are causing to the environment and the ecological balance. Vast '

forests have been indiscriminately felled by firms in their narrow, single-minded

pursuit of profit. This has created an imbalance in the ecology of the area. Floods

have become a recurrent feature in areas which had never been known to be flood-

prone. The pattern and extent of rainfall is changing, leading to frequent droughts in

widespread areas. Rare species of animals, birds and plants have become extinct in

the wake of the destruction of their natural habitat. People are deprived of their

traditional means of livelihood and the rich cultural heritage is destroyed for ever. All

this does not imply that there should be no factories, industry or no economic

development. Certainly we need development, economic as well as ecological and

environmental. The solution lies in matching economic development with

development of the environment. When a firm puts up its factory it must also install a

plant for treating and disposing of its industrial waste. When a timber merchant cuts 15

trees he must plant at least that many new saplings. Nature's resources are limited.

When we consume them faster than they can be replenished or provided anew, it is

our responsibility to ensure that our children inherit a world which is healthy, green

and safe for all living creatures. It is your responsibility as a manager to make sure that

the operations of your firm do not in any way obstruct, disturb, disrupt or destroy

physical structures (historical buildings, monuments), the flora and fauna, an d

animal and human life.

28

Role of a Manager

Managers have much to learn by emulating the example of Indian Petrochemicals

Corporation Limited (IPCL), a government undertaking, which is playing a very

positive and active role in fulfilling its social responsibility. Reproduced below is the

copy of 1PCL's advertisement which appeared in the issue of BUSINESS INDIA

(July 28 to August 10, 1986).

THE WELL WISHER

That's IPCL-caring for the environment, the economy and the people. Aiding industrial

progress, at the same time, preserving the ecology and improving aesthetics, A Rs. 25 crores

facility for round the clock monitoring of the environment and pollution control. A mini forest.

An experimental farm using treated waste water. A living museum of trees. A lake-cum-bird

sanctuary. Symbolic of our concern for preserving harmony in nature. Marble sculptures, murals

and paintings by young artists-an effort at improving aesthetics. All within close vicinity of our

manufacturing complex.

An involvement in modernising agricultural practices and promoting afforestation

programmes through the use of plastics in water management, drip irrigation, mulching,

nursery bags and food produce packaging.

That's not all. A special concern for small customers. Providing direct and indirect employment

for 500,000 and reaching out to the farthest corners of the country, with raw materials for

industry at uniform prices.

Caring for employees and our neighbourhood. An investment of Rs.25 crores in safety measures,

a modern disaster management plan, and continuous safety audit.

A harmonious work environment for employees. The results are evident-seventeen years of no

production loss due to industrial unrest.

A truly responsible manager not only takes steps to prevent or minimise any negative

impact of his firm's operations on the society, but also takes the initiative in playing a

more positive role towards society. Tata Steel's attempts at educating people about

leprosy through advertisements in newspapers and magazines is an example of the

useful; and constructive role firms can play in creating a more harmonious society.

Many companies have founded educational institutions and free medical facilities for

the benefit of society at large. Irrespective of the motivation behind such acts, the

result is a tangible benefit for use by all society members. In times of calamities such

as earthquakes and floods, many companies finance teams of doctors and rescue

workers for relief work. In our aim towards a peaceful and prosperous society we

need business firms who are willing to step out of the narrow confines of their offices

mto the larger arena of society and take bold decisive actions to create a better quality

of life for all of us.

Konosuke Matsushita, the chairman of Matsushita Electric, has very aptly expressed

the social responsibilities of a firm in the folloiwng words:

"The mission of a manufacturer is to overcome poverty, to relieve society as a whole from the

misery ' of poverty and bring it wealth. Business and production are not meant simply to enrich

the 'Stops or the factories of the enterprise concerned, but all of society. And society needs the

dynamisin and vitality of business and industry to generate its wealth. Only under such

conditions will businesses and factories truly prosper...:'

29


Manager

Finally, as a very practical code of conduct, to guide your actions and behaviour as a

manager, we would recommend the following points as set forth by Matsushita way

back in 1933:

1 spirit of service through industry

2 spirit of fairness

3 spirit of harmony and cooperation

4 spirit of striving for progress

5 spirit of courtesy and humility

6 spirit of accord with natural laws

7 spirit of gratitude.

Activity G

Enumerate the various schemes that your company may have initiated as part of

fulfilling its responsibility towards society.

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2.10 SUMMARY

Your responsibilities as a manager arise out of the various social interactions in

which your firm is engaged in the pursuit of its business. You may be directly

involved in these as in the case of interactions with employees, shareholders,

customers, etc. where the interaction is based on a fair and obvious exchange of

money, goods and services. The interaction can also be indirect as in case of

interaction with society where both the firm and society impinge upon and affect

each other in hundreds of different ways. A firm which wants to maintain a positive

image in the society must assume and Liischarge with utmost sincerity its social

responsibility. Gone are the days when firms confined themselves solely to running

their business without a thought for the society in which they existed. Today every

firm, big or small, is expected to make its contribution towards a better quality of life

for the entire society. .

2.11 KEY WORDS

Balance sheet: Statement of company's financial position at a particular point,

usually at the end of a financial year.

Bankrupt: When a firm is linable to pay its creditors and assets of the firm are

distributed among the creditors.

Capital: Money and goods, such as buildings, plants, machines, used in running a

business.

Dividend: Interest paid on capital.

Financial institutions: Institutions from which firms can borrow money, e.g. bank,

State Financial Corporation, Industrial Development Bank of India, etc.


Drucker, Peter F., 1981. Management Tasks, Responsibilities and Practices, Allied

Publishers Private Limited: New Delhi.

Matsushita, Konosuke, 1983. Not for Bread Alone, PHP Institute Incorporated:

Tokyo.

Peters, Thomas J. and. Waterman, Robert H., 1985. In Search of Excellence, Harper

and Row: New York.

Tata, J.R.D., 1986. Keynote, Tata Press Limited: Bombay.;

UNIT 3 MANAGEMENT SYSTEMS

AND PROCESSES

Objectives

The objectives of this unit are to enable you:

to develop familiarity with various types of systems and processes involved in

managing an organisation

•

•

•

•

to understand the concept of a system and learn what the management

information system is

to develop an understanding about the necessity of each managerial process and

its logical sequencing in relation to the other processes

to identify the major elements of each process

Structure

3.1 The Systems Concept

3.2 Management Information System

3.3 Management Processes

3.4 Planning

3.5 Controlling

3.6 Organising

3.7 Motivating and Leading

3.8 Decision-making

3.9 Summary

3.10 Key Words


Having read the first two units, you know the various responsibilities and tasks

expected of you as a manager. Now you have to get down to the nitty-gritty of

actually performing all these tasks and discharging your responsibilities. For this you

must understand the various systems and processes involved in managing. It does not

matter whether you manage a private company, a public sector company, or even a

non-commercial organisation. The essentials of managing remain the same.

In this unit we began by introducing the systems concept and see how it can be

applied to organisations. We then move to the all important concept of management

information systems and examine it in detail. Later on we shall take up for discussion

the management processes of planning, controlling, organising, motivating, leading

and decision-making.

3.1 THE SYSTEMS CONCEPT

Every practising manager knows from experience that whatever actions and decisions

he takes, in any particular area of activity, have results which extend well beyond that

specific activity. The impact of decisions in some cases affect the whole organisation

and even external environment. A simple decision to throw out an inefficient, lazy

worker can trigger off union activity which can, in extreme situations, even result in

strike. The situation may become so hot that the union forces the neighbouring units

also to join the strike. Thus when a manager takes a decision he never views its

impact in isolation but tries to understand and anticipate its repercussions on the

entire organisation and the environment. The manager

understands that his organisation is a totality of many, inter-related, inter-dependent

parts, put together for achieving the organisational objectives. This in a nutshell is the

very essence of the systems concept.

A system is defined as a sum total of individuals but inter-related parts (sub-systems),

and are put together according to a specific scheme or plan, to achieve the pre-stated

objectives. 31

32

Role of a Manager

•

•

•

•

A system has the following components:

1 A number of parts of sub-systems which when put together in a specific manner

form a whole system

2 Boundaries within which it exists

3 A specific goal or goals. This goal is expressed in terms of an output which is

achieved by receiving input and processing it to form the output

4 Close inter-relationship and inter-dependency amongst the various sub-systems

The inter-relationship of the sub-systems can be defined in terms of:

The flows which exist among them, such as flow of information, money,

materials, etc. The most important of these is the information flow which we

shall discuss in the next section.

The structure within which they relate to each other. This structure may be

physical, geographic or organisational and shall be dealt with in the section entitled

òrganising'.

The procedures by which the sub-systems relate to one another. By procedures

we mean those planned activities which affect the performance of the entire

system. In the context of an organisation, this refers to planning and we shall

discuss these under the heading `planning'.

The feedback and the control process and mechanisms which exist to

ensure that the system is moving towards its desired objectives. In this

unit, we have dealt with this in the section on controlling.

A system can be biological (human body), physical (machine) or social (commercial

organisations, voluntary bodies, etc.). Social systems are man-made systems and the

relationships of the sub-systems is the most critical element. Further, since social

systems involve human beings, their beliefs, values, attitudes and perceptions have an

important bearing on the working of the system. This aspect is dealt with in the section

on motivating and leading.

A system can be closed or open. A closed system is self-sufficient and self-regulatory

and has no interaction with the environment in which it exists (see Figure I). The

feedback from the output triggers off a control mechanism which then regulates the

input to bring back the output to the desired level.

An open system is one which interacts with the environment in which it exists. Figure

II illustrates an open system. All living, biological and social systems are examples of

open systems. An organisation is an open system and its sub-systems are its various

divisions and departments. But at the same time, it is a sub-system of the

environmental system within which it operates. The environment itself consists of

social, economic, political and legal sub-systems (see Figure III).

The importance of the systems concept to the manager is that it helps him to identify

the critical sub-systems in his organisation and their inter-relationships with each other

and the environment.

A system is always seeking an equilibrium state, that is, where all the sub-systems are

at the optimum level, in tune with and at rest with each other, and the desired output

is being achieved. In an open system, this level of equilibrium is never static but is

always dynamic. This is because the environment is never static, it is always changing

and since the open system is all the time interacting with environment, what may

have been an equilibrium level today will not be so tomorrow. It is the concern of the

manager to seek this equilibrium level.

Figure I: A Closed System

Figure II : An Open Systems

33

Management System and Processes

Figure III : A Firm & Its Environment

Activity A

34

Role of a Manager

Visualise your organisation as a system and list the critical sub-systems within it. Note

down the various flows between these sub-systems which interlink them.

Visualise your organisation as a sub-system of the environment and describe the

important interactions between the two.

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One of the most important interactions between an organisation and the environment

is that of information. A manager who has information about the impending

government legislation which will affect his organisation can suitably modify his

decision and avoid costly mistakes. Similarly, a manager who is well informed about

his employees' activities, expectations, opinions and grievances can take corrective

action much before a crisis develops. We now turn our attention to this information

flow and see how best it can be organised from the manager's viewpoint.

3.2 MANAGEMENT INFORMATION SYSTEM

Management Information System (MIS) refers to that system by which information is

collected, processed and presented to management to help it in making better

decisions. A manager makes decisions all the time and anything which helps improve

his decision-making will obviously lead to better results, and he becomes a better

manager. As we discussed in the previous section, the systems concept implies an

input, a process, and an output. In case of MIS, data is the input which is processed to

provide output in the form of information reports, summaries, etc. To be really useful

the output must aid the manager's decision-making process. If it ' does not do so, it is

not a management information system, but just an information system. An effective

MIS should be:

Timely : A market research report, pointing out the unacceptability of milk

sold in plastic containers in retail stores, presented to the manager after he

has already launched his product in the market is of little use. Information is

useful only when it is within the time limits of the decision.

i)

ii)

iii)

Accurate: If the information presented is inaccurate, the manager who takes

a decision based on this will invariably end up making a mistake. However, it

is not possible to have hundred per cent accurate information. But the way to

overcome this is to indicate the expected range of deviation or the level of

inaccuracy. Thus the manager acting on the basis of this information knows

the risk-he is taking.

Relevant: Volumes of reports (however excellent they may be) on the export

potential of cashew nut to a manufacturer of sports goods are of no value

simply because it is outside his area of interest and activities. The manager

himself can make an important contribution in ensuring that the information

he receives is relevant to his decision-making. To do so he must provide an

answer to the question "What do I need to know"?

A manager's requirement of information depends on the level of management at

which he is operating. In any organisation there are three broad levels of management

i.e., top, middle and operating management. It is the type of decisions made by one

level that distinguishes it from the others.

The top management's concern is the entire organisation or group of organisations. At

the top, the manager needs to have information about changes in the environment

which can affect the very survival of his company. The decisions that the top

manager makes are oriented towards the future. A decision to diversify into paper

manufacturing is not a decision which a printing, company will make every now and

then, but when it does, it totally changes the future of the company.

Top management decisions cannot be taken in a regular, routine manner but only after

a great deal of deliberation and consideration and are known as non-programmable

decisions.

35


The manager at the middle level is mostly concerned with acquiring and controlling the

necessarIy resources to implement the objectives laid down by the top management.

The middle level managers are concerned with decisions which are important both in

the present and future context. However, the future horizon of the operating manager's

decision is much shorter than that of the top management. The middle level manager's

is concerned with managing his own department, or activity rather than the entire

organisation. Information needed by the middle manager relates to utilisation of

resources and measurement of performance.

Managers responsible for production scheduling and customer service who perform

specific tasks, within well-defined rules and procedures, are referred to as operating

managers. The decisions these managers need to make are of a routine nature and are

encountered almost every day. Since the situations are repetitive, it is easy to specify

how the decisions are to be made. Such decisions are known as programmable

decisions. A store-keeper who orders for a new lot of packing cartons when the stock in

the store is down to just the next two days supply is an example of a programmable

decision.While designing the MIS, the different types of information required by

different managers must be kept in mind. The manager at the top needs more

information about the environment. Regarding the internal operations of the company,

the top manager is only concerned with the results as reflected in profits, sales volume,

turnover, etc. Moreover these results should be presented in a summary rather than

detailed format. The middle level manager is interested in finding out why the results

were not as per the expected plan, knowing about the deviations of the critical variables

and taking corrective action. The operating manager's concern is with details, like the

number of hours each machine operated, number of units produced per hour, etc. Most

of the internal organisational information is generated at this 'level but as it moves

upward it is reduced to a summary highlighting only the critical performance variables.

We have so far defined what we mean by the terms system and management, but

have yet to talk about information. Let us understand this with the help of an

illustration. A market research team interested in finding out the daily sales volume of

Beauty Soap in Nagpur, notes down the number of soap cakes sold from each outlet in

the city. The number of soaps sold by M/s Soaps Stores on 18 September, 1986 is a

piece of data. In a similar manner, data on sales made by each store in the city is

collected. All this data when put together is information. Data by itself does not convey

much meaning. However, when all the data is put together we know that 67 outlets in

Nagpur account for a sale of 224 soap cakes. It constitutes a meaningful piece of

information. To make it more meaningful, we may further classify the outlets by the

type of store (general merchant, super bazar, departmental store, etc.), geographical

location or volume of sale. From this same data we may generate a daily sales report

for the marketing department and one for the accounts department showing the

outstanding amount against each store.

Thus we see that only when data is put together in a meaningful form does it

constitute information. Further, the same data can be used for generating multiple

reports for use by different individuals and departments.

In designing an effective MIS, the manager must understand the nature and flow of

information. Information regarding government policy, legislation, competition, etc. is

generated in the environment but is collected and used within the organisation.

Similarly, the firm or organisation may send out information to the environment in the

form of annual reports, company balance sheets, press-releases. Besides this, the

company managers and employees are also information carriers. Within an

organisation, information may flow from operating level towards top management level

(bottom to top) and from top to bottom. Reports, summaries and feedback about impact

of decisions flow from bottom to top and decisions, instructions flow from top to

bottom. Information also flows sideways from one manager to another at the same

managerial level.

Figure IV presents the flows of information amongst different management Ievels.

36

Role of a Manager

Figure IV: Levels of Management & MIS

Ideally a manager would like to collect information on all possible aspects of a

situation before making a decision but that is not always possible due to constraints

of time and money. The costs which act as a constraint on MIS are the costs involved

in data collection, data processing and data access.

Data may be easily available within the organisation but still there is a definite cost

involved in collecting it.

Suppose you want to gather information about the age and educational qualifications

of all the 150 workers in your organisation to determine how many of them would

qualify for the proposed scholarship for the under 35 years matriculate workers. You

may either depute a man to personally go to each employee and note down the data or

you may circulate a small cyclostyled note to the employees asking them to furnish the

relevant data. Anyway you decide to do it, a cost is involved (cost in terms of

mandays of the person collecting the data or the 150 cyclostyled slips of paper).

Having collected all the data, someone will have to sit down and put it in a particular

format (process it) so that it constitutes meaningful information which will serve your

purpose. Again, an element of cost is involved.

Having determined that only 64 workers qualify for the scholarship, the immediate

use of the information is over. You can throw away the remaining information or if

you think you may offer. this scholarship again next year, it would be wiser to store

the information. The peon simply puts all the papers in a file and locks it in the filing

shelf. Next year when you need the information, somebody will have to search for

that particular file and make it available to you (make it accessible). Time is needed

to access the information. Thus every step involves time and money.

With the advent of computers the tasks of processing and storing data have become

easier, and the amount of data that can be processed and stored has increased a

thousand fold. Buying, maintaining and operating a computer also involves cost. The

manager has to determine whether the costs incurred in collecting, processing and

accessing data are commensurate with the improvement it yields to his decision-

making.

Activity B

Make a list of all the daily, weekly, monthly reports which you receive or are

expected to prepare for your boss. Describe how each of these reports help improve

the quality of your decision-making process.

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3.3 MANAGEMENT PROCESSES

37


We now turn to the management processes of planning, controlling, organising and

leading. A particular manager may be more concerned with say, controlling and

organising, while another may be more concerned with planning. The degree of

involvement with each of these processes may vary from manager to manager, but

essentially all managers have to be concerned with these processes.

We shall first take up the planning process because only when there is planning can

the other processes follow in logical sequence.

3.4 PLANNING

Planning is the most basic and pervasive process involved in managing. It means

deciding in advance what actions to take and when and how to take them.

Planning is needed, firstly for committing and allocating the organisation's limited

resources towards achieving its objectives in the best possible manner and, secondly

for anticipating the future opportunities and problems.

Planning is putting down in black and white the actions which a manager intends to

take. Each manager is involved in planning though the scope and character may vary

with the level of the manager. At the top, the managing director is involved in

planning for the company's diversification over the next five years. The middle level

marketing manager undertakes planning to increase the sale of his products. The field

sales supervisor plans the day's activities of his team of sales officers.

Planning implies:

Making choices: There can be any number of diversification opportunities to

choose from. It is up to the management to choose the alternative which

offers maximum potential for growth and profitability.

i)

ii)

iii)

Committing resources: The marketing manager who increases the amount

earmarked for television promotion, and adds four more salesmen in each

territory with the objective of achieving higher sales, is committing scarce

resources (money, people, etc.) which then are not available for any other

use.

A time horizon: Planning always refers to a specific time limit within which

it must be completed. The field supervisor plans movements of each of his

salesmen on a daily basis. The marketing manager plans promotion effort for

the next three months, six months or twelve months. The top management

may have a time perspective which may extend anywhere between 5 and 15

years.

Irrespective of the activity or level at which plans may be drawn, the critical, factor is

that they focus on objectives and are directed towards their achievement. They serve

to channelise the energies of the company in the desired direction. The future is

always uncertain and therefore risky. Stepping out of home on a cloudy day with an

umbrella in hand is the way I cover my risk (of getting wet) against the anticipated

but uncertain future rain. It may or may not rain but I am prepared. The umbrella is

representative of the plan which a company draws up in anticipation and preparation

of the future opportunities and problems. Planning implies not simply reacting to

events but anticipating and preparing for them.

Planning ensures the most efficient use of scarce resources. Planning implies

coordinated, inter-related effort towards achievement of the common objective rather

than uncoordinated haphazard, arbitrary, overlapping action towards individual

objectives. Joint, coordinated effort implies pooling of resources and their optimum

allocation without any wastage.

Planning is the only way by which an organisation can exercise control to check that

it is on the desired course of action. Only when there are objectives to work for, and

plans to achieve these objectives, can the manager exercise his control to measure the

performance of his organisation, department or subordinates. An organisation without

plans and controls is like a raft marooned on high seas with no maps and

compass to show the direction and no steering to manoeuvre with. Planning is needed

at every level of management and in every activity and department of the company.

Annual sales targets, cash-flow statements, budgets of each branch, individual career

development blueprint, assembly line operations, scheduling of production over a

number of machines in the factory are examples of plans.

38

Role of a Manager

To ensure that a plan is effective and succeeds in achieving its objectives, it must have

the following components:

• Planning must start from the top. Objectives for the entire company are

defined by the top management and then they percolate down throughout the

organisation. Thus, logically, planning too must start at the top. For instance,

one of the objectives of the top management of Beautiful Books Ltd. (a

company specialising in publishing books on Indian culture and history) is to

increase its turnover from Rs.1.15 crore to Rs. 5 crore in 1987-88. The

marketing director accordingly draws up a plan for increasing sale in existing

markets and the new markets to be penetrated. From this overall plan, each

area marketing manager will make his own annual, quarterly and monthly

plans. And in turn each area sales supervisor will draw the plan for his entire

sales team.

• Planning must be flexible. Planning is needed to anticipate and prepare for

the unknown events of the future. To the extent that the future is uncertain

and events may or may not occur, planning must be flexible. Flexibility

implies ability to keep moving towards objectives despite unexpected

occurrences. Flexibility is especially needed when there is high degree of

uncertainty and risk, the lead time involved in implementing the plan is long,

and cost of making mistakes is high. The R & D cell of a television

manufacturing company designed a completely indigenous circuit for black

and white television after 18 months of experimentation and used 100% more

funds than were allocated to it. The success of the circuit is critical to the

company as its entire marketing strategy for the coming 2-3 years is based on

this. If the circuit is successful, the company will be able to establish its

strong position in the market. However, if the circuit shows signs of failure

the company is ready with its plans to airlift the circuits at a day's notice from

its Japanese collaborator. Thus one way to allow for flexibility is by

developing alternate or contingency plans.

• In the short-run, careful detailed planning without allowing for much flexibility

will improve operational efficiency. But undue emphasis on inflexibility or

rigidity may do more harm than good. Every manager has to find his own level

of balance in allowing for flexibility.

• Short-term planning must be integrated with long range planning. The long

range plans, must be broken down into short-term plans on the basis of which

the managers can take action. There can always be a difference of opinion on

what constitutes the long and short-term. Some define five years as the long-

term and anything up to one years as the short-term. In reality the definition

will vary according to the nature and scope of organisational activity for which

planning is being undertaken. However, you may define the long and short-

term, the point to remember is that the short-term plans must be derived from,

and contribute to the long-term plans.

• Plans are good only if they are properly implemented by the people down the

line. An effective way to ensure this is to involve the people responsible for

implementation in the entire process of planning.

However, despite all the above precautions, plans sometimes fail because of

environmental and internal limitations. Government policies, regulations,

laws, statutory obligations, and rapid social and technological changes pose

external limitations on the company's planning effort. Within the company,

cumbersome procedures, capital inflexibilities in terms of investments

already made, inadequate or inaccurate information are the possible barriers

which a company may face.

Activity C

39


List the various activities for which your organisation undertakes the formal planning

process. Evaluate these plans on the basis of what you have learnt about planning.

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3.5 CONTROLLING

Planning and controlling go hand in hand. There can be no control without a plan and

plans cannot be successfully implemented in the absence of controls. Controls

provide a means of checking the progress of the plans and correcting any deviations

that may occur along the way.

As each worker enters the factory premises in the morning, his time of arrival is

electronically (or manually) punched on his card and every evening his departure

time is similarly recorded. This simple control process is effective in checking the

time spent by each worker in the factory and at the end of the month for calculating

his wages and overtime. The mere act of recording makes each worker conscious of

his late arrival and acts as a self-check on his timing. In contrast to this simple

control, the annual budget for the subsidiary of a multi-location company requires a

far more sophisticated process for controlling its many diverse activities.

The type of control required will vary according to the factors that are to be

controlled, and the critical importance of the factors to the organisation's success. The

more critical the factor the more complex is the control mechanisms needed to check

its progress. Finance is a very critical area of management and most companies

devise elaborate and sophisticated financial controls.

A control is meaningful only when there is clear cut responsibility for activities and

results. It is meaningless to have a control process which simply points out deviations

but cannot pinpoint the area in which they occurred and who is responsible for taking

the corrective measures.

Controls maybe used to measure physical quantities (such as volume of output,

number of man hours, number of units of raw material consumed per machine, etc.),

monetary results (value of sale, capital expenditure, return on investment, earnings

per share, etc.) or to evaluate intangibles such as employee loyalty, morale, and

commitment to work. Obviously; the third kind of controls are the most difficult to

40

Role of a Manager

ii)

iii)

design and implement: No quantitative measure can be used, but only a qualitative,

descriptive evaluation is possible.

There are three basic steps involved in designing a control process.

i) Establishment of standards: Controls are established on the basis of plans

and so the first step. is to have clear plans which in turn become the standards for

controlling. The sales forecast plan which sets sales targets itself becomes the

standard against which actual sale is measured. However, an effective control

process focusses only on the critical variables rather than controlling all the .

variables. It also indicates the permissible range of deviation from the expected

target. Only when the actual performance, is outside this range, does it become a

. matter of concern for the manager to find out why this has happened and take

corrective action. Similarly, the marketing manager at the head office is

interested in the sales figures achieved by each branch and not in the

performance of individual salesman.

Measurement of performance: Having set standards it is necessary to devise a

system for measuring the performance of individuals, departments or the

company against these standards. In some cases quantitative goals can be set,

such as number of units to be sold by each salesman, number of units to be

produced per machine, or the profit to be generated by each branch office.

However, evaluating performance in case of managers at the top level or those

operating in areas such as personnel, public relations, and administration is far

more difficult. The work output cannot be translated into quantifiable terms.

Only a qualitative appraisal is possible.

Correcting deviations: The ultimate objective of the control process is to

pinpoint the occurrence outside the permissible range of action to allow

management to take corrective action. The maximum number of rejects per

machine per day is fixed. When the number of rejects increases beyond this

acceptable level, it is time for the production supervisor to investigate and take

suitable steps to correct the situation.

The successful control process hinges on the all important concept of feedback. This

refers to the information on the critical control variable of the operation or activity

which when fed back to the manager triggers off corrective action.

Except in a self-regulated, closed mechanical system where the corrective action is

taken instantaneously and automatically, most activities within an organisation

require human intervention.. The finance manager must find out why profits have

'fallen below the established level and take suitable steps to remedy this. In some

ases, only a minor corrective action is needed. But sometimes the situation requires

drastic action, even scrapping a department or plant whose operation has become

totally unprofitable.

Within the organisation, feedback usually implies a lag between the time when the

event actually occurs and the time by which information about the event reaches the

concerned manager. Sales figures for the preceding month may not be available to

the manager before the 7th of the current month. The manager can only take note of

what happened in the past and take measures to prevent its occurrence in the future.

Too long a time lag prevents any meaningful control or corrective action. To

overcome this problem of time lag, most companies generate daily reports of critical

variables which provide early warning signals to the manager. But even daily reports

may reach two days later when they have to travel a long distance from say Jaipur to

Delhi. With the introduction of computers and real time information systems

(instantaneous transmission of information) this problem can largely be overcome.

All control processes should reflect the plans that they are supposed to follow.

However, to be truly effective the controls must highlight the critical variables in an

objective manner, and be worth their cost in installing and operating.

Budget is a traditional and widely used control process. Apart from this a company

may use historical statistical data, or break-even analysis to control its operations. By

the use of mathematics, many sophisticated control techniques are also possible.

These pertain to implementing control for inventory management, distribution

logistics and project or programme management. Some of these such as Programme

Evaluation and Review Technique (PERT), Critical Path Method (CPM) will be

dealt with in detail in the subsequent units.

Activity D

41


What are the various control processes used in your organisation, and specifically in

your department? Assess the effectiveness of these controls from the viewpoint of

their ability to measure performance and highlight critical deviations.

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3.6 ORGANISING

Organising refers to the formal grouping of people and activities to facilitate

achievement of the firm's objectives. Issues for discussion here are the types of

organisation structure, degree of centralisation, levels of management, span of

control, delegation of authority, unity of command, line and staff relationship, and

staffing.

Structure refers to the specific manner in which people are grouped. An organisation

can group its people on the basis of the various functions (such as production,

personnel, finance, marketing), geographical territories or around specific products or

product lines (such as detergents, toiletries, basic chemicals, agro-products, as in case

of Hindustan Lever Limited). The concept of matrix organisation is a recent

evolution and combines the functional and product organisation. This type of

organisation is especially useful in case of projects which require both specialists as

well as functional experts to execute a project within a specified time frame. Another

type of organisation is by the type of customers served. A company manufacturing

and marketing computers has organised its sales department in two groups. One

group sells to institutions such as offices, banks, schools, colleges, etc., while the

other group sells to individuals. Many companies selling office equipment have

organised separate marketing teams to cater to the private sector and the public sector

because of the different cultures prevailing in them.

Centralisation refers to the point or level where all decision-making authority is

concentrated. One-man enterprises; such as a small bread and butter stores, vegetable

vendor, a self-employed car mechanic, are examples of complete centralisation. As

the enterprise grows, it becomes increasingly difficult for one person to manage alone

and he has to necessarily line up other. people and give them authority to make some

decisions. These decisions may be routine, programmable decisions but complete

centralisation is no longer possible. The decision-making authority is now vested in

more than one individual. This is decentralisation.

You require information to make a decision. It is possible that information may be

generated at one place but the decision is taken at another. A Bombay based

multinational involved in making and selling ball bearings has its manufacturing

facility at Pun. Every evening all information regarding the day's production,

machine down time, inventory position is sent to the head office via the linked

computer facility and all decisions regarding change in production scheduling are

made at the head office. The introduction of real time information with the help of

computers enables information generated at one place to be instantaneously

transmitted thousands of miles away for making a decision. However, the real

criterion for an organisation having a centralised or decentralised structure is a

reflection of the top Management's thinking and philosophy.

Closely related to the concept of centralisation are the concepts of levels of

management and span of control. Levels of management refers to the number of

hierarchical levels under the control of a particular manager. Machine operator,

foreman, floor manager and production manager represent the levels of management

in a typical production department under the director. The machine operators report

to the foreman, the foreman reports to the floor manager who in turn reports to the

production manager who is accountable to the director. The number of machine

operators who directly report to the foreman represents his span of control. There is a

great deal of controversy regarding the ideal number of people that a manager can

effectively control or the ideal span of control. Many management thinkers are of the

view that three to seven is the ideal range. In practice, this may actually vary from

one individual manager to another.

42

Role of a Manager

At each level of management, there is a reporting relationship between the manager

and the workers. The fewer the number of people that a worker has to report to, the less

will be the problem of conflict in instructions, and greater the feeling of

responsibility for results. Similarly, the clearer the line of authority from the manager

to the workers, the better the decision-making and communication.

The staff functionary reports directly to the top management and is not a part of the

chain of command.

A company may draw up any number of ambitious plans, but if it does not have the

right kind of people, it can never succeed in implementing these plans. One of the

biggest challenges which a manager faces is matching the right people with the right

jobs. The process of staffing starts with defining the job to be done and the necessary

qualifications, skills and experience required to do it. The next step is to search for

the persons with the desired background. The search may involve a number of

complex steps such as advertising the job through newspapers and specialised

magazines, screening the applications received in response to the advertisement,

conducting a selection process which may include a variety of techniques such as

written test, group discussion, personal interview, etc. Before making the final

selection, it is important to be sure that the candidate fits in well with the other people

and the culture of the organisation.

Having found the right candidate, it is equally important that you are able to retain

him. Among other things, motivation and leadership provided by the top management

of organisation also plays an important role.

Activity E

What is the basis for organising the various departments in your company?

Can you identify the various levels of management and the span of control at each

level as well as the reporting relationships?

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3.7 MOTIVATING AND LEADING

43


Having established plans, controls, and an appropriate structure to achieve the

organisational objectives, the manager now has to get his people to work. Motivation

is that desire or feeling within an individual which prompts him to action. Every

individual has needs, desires and drives, which we collectively call motives and

which channelise all his or her behaviour and action towards achievement of some

objectives. The manager's role is to influence each individual's behaviour and action

towards achievement of common organisational objectives.

A great deal of research has been conducted in this area and there are many theories

of motivation. It is not possible to explain all these theories here and we shall only

briefly explain the various factors that can act as motivation.

Money is the most commonly used motivating factor in the form of salary, bonus,

incentives, commissions and rewards. Salary or wage is of course the primary

motivation, and the poorer the economic background of an individual the greater the

motivational value of money. However, once a basic salary or wage is assured, to

motivate people to work that little bit extra, achieve that ten per cent higher sales

figure, incentives and commissions come in handy. Most sales organisations pay

salary plus incentives to their sales people. The incentives may be calculated on the

basis of individual or team results, and may be linked to a sales target. Similar

incentives can be offered to the production department. However, performance linked

rewards are difficult to compute in areas such as finance, personnel, and

administration where work output cannot be easily measured. A percentage of total

profits can be distributed to these departments as incentive.

Man does not live by bread alone is an old saying. Man is a social animal and seeks

recognition and status in society through his work. The status or position which an

individual enjoys in the organisation, the number of people who work for him, the

non-monetary benefits and perks which he enjoys are important motivational factors.

In fact sometimes these are more important than the actual take-home pay packet.

Gupta started his career as a salesman in a medium sized company manufacturing

and marketing stereo systems. Because of his analytical ability, capacity to work hard

and achieve results, Gupta soon rose to be the area sales manager of North India. The

owner of the company relied a great deal on Gupta's judgement and always consulted

him on every important matter. Gupta was making good money, performing well and

enjoyed the great confidence of the owner, yet he felt that there was no power or

position in his job which could give him a better status in society. Therefore, when

the opportunity arose, Gupta joined an American multinational as Divisional

Manager, selling scientific laboratory glassware. It was the glamour, the power, and

the status which the job conferred on him that motivated Gupta to join. However, two

years with the multinational were enough for Gupta to realise that he had no authority

to take any independent decisions and he was not deriving any satisfaction from his

job. Gupta quit his job and went hack to his previous employer. Thus satisfaction at

work is an important motivating factor.

The lesson from Gupta's story is that the same individual will be motivated by

different factors at different stages of his career. Generally as you move up the

organisation to more important positions, the importance of money and monetary

benefits as motivating factors decreases and intangible factors such as job

satisfaction, confidence of the boss, good relationship with the boss, the status and

respect commanded in the organisation, etc. become more important.

The physical working environment in which a person works also has tremendous

motivational force. A pleasant, noise-free, well-lit room with comfortable

temperature, and proper facilities of telecommunication, secretarial assistance,

canteen, transport, etc. is always conducive to work.

Different individuals are motivated by different factors. This is because each

individual in the organisation comes from a different socio-economic, cultural,

religious, educational and family background, and each of these has a role in

determining the degree to which he can be motivated by different factors.

In most Western countries, a great deal of emphasis is laid on leisure and individuals

may be motivated to take up that job which affords greatest opportunity for leisure.

Similarly religious background and personal values are important influences on the

effectiveness of motivating factors. No matter how attractive the salary, not many

Hindus would like to work in a beef packing factory.

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Role of a Manager

The manager's concern is to find a set of common factors which can motivate all his

people coming from diverse and different backgrounds and working at different

levels of management. The manager's task will be greatly simplified when he

understands that motivational factors are present in, and can be used, in design of

work, rewards, work environment, work relationships and work content. All

monetary benefits and non-monetary advantages such as free medical cover,

company car and driver, club membership, etc. are part of the work reward and are

important motivators.

Work environment as a motivating factor, first and foremost, refers to the status of

the organisation for which a person works and the mere fact of his working in that

organisation gives him that status. Harvard University has the reputation of being

amongst the best in the world and anyone who has graduated from Harvard is

generally perceived to be at least above average, is not excellent. The actual physical

factors present in the work environment also act as motivators.

Relationships developed at work, with the boss, colleagues and subordinates have an

important motivating influence. The more congenial, friendly and supportive are

these relationships, the greater their positive motivational value. In contrast, strained

relationships which create tension and unhappiness are serious enough reasons for

people to leave jobs which in all other respects seem very comfortable and attractive.

The design and content of the actual work to be done is in itself an important

motivational factor. An element of freedom to experiment with new ideas within the

parameters of the job fulfils the creative urge in every individual. Freedom to take

decisions and assume responsibility for the results are factors which enhance an

individual's self-confidence and feeling of self-esteem. The more such factors can be

built into the job, the greater would be the job satisfaction of the individual

performing the job. A happy, satisfied worker is a productive worker and a great

asset to any organisation. If an individual is himself associated with designing the

content and objectives of his job, there are greater chances. that he will work his

utmost to fulfil these objectives. This is the approach known as Management by

Objectives (MBO) and has tremendous motivational potential.

The manager has not only to motivate his people but also provide them with

leadership. To that extent every manager is a leader. A manager has to inspire and

influence his people to willingly work towards achieving the organisational

objectives.

Much research has been conducted in this field and different studies have emphasised

different aspects in attempting to answer the question `What makes an effective

leader'? When put in a situation of leading, you must remember it is a role that your are

performing, but that your personality has an important influence on your performance

as does the situation in which you are expected to perform.

To be an effective leader, a manager must have a pleasing physical personality,

ability to get along with people, qualities of honesty and integrity and be an excellent

speaker. To command respect of others he must excel at his basic job whether it is

operating a lathe machine or managing the finances of a large company. The leader

must first set an example by his own actions rather than by just making speeches. His

actions must communicate to the people that he belongs to them. Only when he is

able to generate this feeling of oneness will he be able to inspire confidence in his

people.

Secondly, a manager-must remember that he is only playing a role. However, to be

able to perform effectively, the role demands that the manager be perfectly objective in

all his judgements and decisions, and be guided only by the organisational objectives

and have no other considerations. For a leader the interests of his people are of

paramount importance and come first while personal benefits, take second place.

Thirdly, the role must be moulded according to the unique situation in which the

manager is placed. In our society, great emphasis is laid on personal relationships and

contacts and managers are perceived to be father figures and are expected to have a

paternalistic attitude towards their workers. In contrast, in the West, especially in

countries with a British colonial past, the relationships between manager and worker

is only confined to the work. There, if a manager were to adopt a paternalistic

approach, he would be totally ineffective. A manager who usually follows a

consultative, participative approach, seeking the opinions and consensus of his

subordinates before implementing any decision, in a crisis situation may adopt a very

authoritarian approach and effectively manage the situation.

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When Lee Iaccoca, took over the management of Chrysler Corporation, USA, it was

an ailing automobile giant. To bring it out of the loss making situation, Iaccoca inspired

tremendous confidence and loyalty in his workers by setting personal example of

great hard work and accepting only a token wage. Under his leadership the company

was soon able to turn its losses into profits.

Political leaders such as Gandhi who commanded the respect of millions of people

are a model for managers to learn from. Gandhi's leadership style was so finely

turned to the moods of the people and the situation that his every word was law for

the common man. His actions and life-style made the people feel he belonged to

them.

Activity F

How do you evaluate your boss as a leader on account of his personality, role play,

and tuning to the requirements of the situation?

Briefly describe a situation in which you excelled as a leader. What do you think

were the contributing factors to this performance?

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3.8 DECISION MAKING

Underlying the processes of planning, controlling, organising, leading and motivating

is the all important process of decision-making. Every manager makes decisions, no

matter what his area of management responsibility may be.

Decision-making implies making a choice between alternatives. The choice is made

rationally after due consideration of all the pros and cons. The rational approach

implies that it is a carefully thought out, deliberate and well-weighed choice, guided

only by the consideration of the organisational objectives to be achieved.

In making a decision, the manager first of all define the issue on which the decision

needs to be made. Then he should generate all the possible alternatives available to

tackle the issue at hand. The third step involves a careful evaluation of each

alternative to choose that which offers the best chance of achieving the objectives.

Making a choice is making the decision. Follow up of the decision to ensure that it is

properly carried out is very important. A decision which does not get implemented

remains a decision only on paper and not in reality. The final step is to gather

feedback on the impact generated by the decision.

46

Role of a Manager

Decision-making is so important because it implies. commitment of resources, the

desired outcome of which is never certain. Decisions are made under conditions of

uncertainty and risk. Decisions made today have implications reaching into the

future. The risk arises out of the fact that the manager never has complete facts and

knowledge about the implications of his decision and there is always the chance that

the wrong decision maybe taken.

Many mathematical tools and theories have been developed to improve the

quality of decisions which managers have to make under risky and uncertain

conditions. Linear programming, queuing theory, probability and game

theory, risk analysis, and decision trees are some of these tools. These will be

discussed at length at a later stage.

Activity G

Think of any decision which you may have made in the recent past. Write down the

various alternatives which you considered, and the manner in which you evaluated

them to arrive at the best choice.

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3.9 SUMMARY

In this unit we introduced the systems concept. This is a useful concept for

understanding the operations of a firm by identifying the critical sub-systems, their

inter-linkages and inter-dependence in the achievement of a common goal or sets of

goals. There can be a number of sub-systems within the system of a firm and the

most important of these is the Management Information System. The objective of a

MIS is to improve the quality of decision-making by providing the relevant

information at the right time. The starting point for designing an effective MIS is

spelling out the objectives of the MIS, understanding the various kinds of decisions to

be made at each level and the nature of information flows.

The basic processes common to every management situation are those of planning,

controlling, organising, motivating and leading, and decision-making. Planning helps

the manager allocate his scarce resources in the most efficient manner to achieve the

organisational objectives. Controlling is the process by which the manager checks the

implementation of his plans against certain pre-determined measures of performance.

Organising refers to the formal grouping of people and activities for doing work.

Leading and motivating are the behavioural aspects of the manager's role. The

manager is expected to provide leadership by way of personal example and inspire

confidence, and bring into play all those factors by which he can persuade, convince

and motivate his subordinates to turn in their best performance. Pervading all these

management processes is the process of decision-making. Every

47


manager has to make decisions. Decision-making implies making a choice, and

because there is never complete information and certainty, there is always a risk that

the choice made may be wrong. It is the task of the manager to minimise this risk.

3.10 KEY WORDS

Break-even Analysis: Comparison between sales and expenses to determine that

volume of production where there is no profit and no loss.

Budget: Statement of plans expressed in quantitative and financial terms for the

allocation and use of resources.

Environment: The universe in which the firm operates is known as its environment

and includes all those economic, political, socio-cultural, legal, demographic and

other factors which have a critical bearing on its operations.

Organisation, Firm or Company: These terms have been used interchangeably and

refer to all types of formal bodies created for a specific purpose. These include all

types of business organisations and non-commercial organisations such as hospitals,

schools, charitable trusts, voluntary bodies, etc.

Organisational Objective(s): The specific purposes, results and achievements

sought by the organisation. In this lesson we have used this term in a broad sense to

include both mission and objectives.


Schein, Edgar, H., 1973. Organisational Psychology, Prentice Hall of India: New

Delhi.

Hersey, Paul and Kenneth H., Blanchard, 1980. Management of Organisational

Behaviour: Utilizing Human Resources, Prentice Hall of India: New Delhi.

Kanter, Jerome, 1984. Management-Oriented Management Information Systems,

Prentice Hall Incorporated: Englewood-Cliffs.

Koontz, Harold and Cyril O'Donnell, 1976. Management: A System and Contingency

Analysis of Managerial Functions, McGraw-Hill Kogakusha: Tokyo.

Newman, William H. Summer, Charles E. and Warren, E. Kirby, 1974. . T h e

Process of Management Concepts, Behaviour and Practice, Prentice Hall of

India: New Delhi.

Richards, Max D. and William A. Nielander, (ed.), 1967. Readings in Management,

D.B. Taraporevala Sons and Company: Bombay.

Organisational Context of

Decisions

UNIT 5 ORGANISATIONAL

CONTEXT OF DECISIONS

Objectives

•

•

•

To understand what is meant by mission, objectives, strategy, policies,

programmes and procedures as important areas of decision making

To learn how mission, objectives, strategy, policies, programmes and

procedures are formulated

To understand the importance of each of these concepts and their

relationship with each other.

Structure

5.1 Mission

5.2 Objectives

5.3 Goals

5.4 Strategy

5.5 Process of Strategy Formulation

5.6 Policies

5.7 Framing Policies

5.8 Importance of Policies

5.9 Types of Policies

5.10 Programmes

5.11 Procedures

5.12 Summary

5.13 Key Words


This Unit is designed to help you form a clear idea of the various terms and

concepts of mission, objectives, strategy, policy, programmes and procedures

which will help you understand the management of organizations. In this Unit

we will seek answers to questions such as: Why is an organization created?

What is its purpose? How best can it achieve that purpose? What methods and

means will it employ to achieve the purpose?

5.1 MISSION

The mission is the very reason and justification for the existence of a firm.

Mission is always defined in terms of the benefits the firm provides to its

customers and not in terms of any physical dimensions of the firm or its

products.

A firm exists and functions only in relation to the customer whose need(s) it

satisfies.. If there were no customers there would be no firm. Thus the starting point

for, defining the mission of any business is its customer. Since the customer exists

outside the business, the mission must be defined from the outside. The firm must

ask the 5

questions "What is our business?" and "What should it be?" but seek the answer

from the customer's viewpoint.

Decision Making

6

The important thing is to identify the not-so-obvious, but the perceived benefit

or value which the customer is actually seeking when buying the product.

Correct identification of the real benefit or value to the customer will help the

firm to answer the question "What is our business?"

A retail outlet may view its business as merely selling ready-made garments,

but the customers buying these garments may in reality be buying convenience,

high fashion, status or any other value they perceive in the garments.

Further, mission' is always concerned with the future. "What should our

business be?" The mission should be so described that it remains valid for at least

some years to come. Sometimes the mission may be so intelligently described,

anticipating future opportunities so well, that the concept may remain valid for

even as long as 15 to 20 years. Drucker gives the classic example of the American

Telephone and Telegraph Company which in 1890 defined its mission as "our

business is service". This definition stood the company in good stead right up to

late 1960s spanning almost 70 years.

However, long a definition of mission may remain valid without any change, it

must be remarked that the concept of mission is dynamic and not static. It must

change over time with changes occurring in the environment. These may relate to

changes in technology, social structure, tastes, fashion, etc. A firm which wants

to grow and ensure its future must keep pace with these environmental changes

and, if need be, accordingly change its definition of business. But the critical

factor which the firm must remember is that its future is determined by the way it

defines its business today. There can be many descriptions of the business

mission and there is no one right or correct answers. The firm has to make a

choice as to how it wants to define what its business is. Making a choice is never

easy. It involves examining and evaluating the various alternatives available and

finally choosing that which is consistent with top management's perception about

the benefits they are providing to the customers today and their aspirations for the

future. Thus the mission has to seek a balance between the present and the future,

and avoid being defined too narrowly or too broadly.

Too narrow a definition will prevent a firm from availing many new and

profitable opportunities that may come its way. A firm involved in distributing

films for screening in cinema theatres had defined its business as "seeking to

fulfill the entertainment needs of customers through distributing films to theatres

for exhibiting to actual customer". With the increasing popularity of videos and

the subsequent decrease in earnings from theatres this firm was soon faced with

the prospect of dwindling business. On the other hand, if the firm had defined its

business as "fulfilling the entertainment needs through distributing means of

audio-cum-visual entertainment", it could have undertaken the distribution of

video films along with films and continued to grow. The key words are

'entertainment', the specific need of the customers that the firm is seeking to

fulfill, and àudio-cum-visual', describing the type of entertainment.

Suppose this same firm had, instead, defined its business as "distributing means

of entertainment". What would be the outcome? The field which the firm had

identified is far too broad to be meaningfully able to concentrate on any workable

opportunity. Consider that books, magazines, records, music cassettes also

constitute means of entertainment. For many people both indoor and outdoor

games are a way of entertainment. Should this firm then include hockey sticks,

badminton rackets footballs, and chess boards also?

The scope of a firm's business flows from its definition of mission but is

described in more specific rather than generic terms. Scope refers to the choice of

the specific products and markets in which a firm wishes to operate. The

definition of product/ market scope has a direct bearing on the subsequent

decisions regarding choice of objectives and strategy.

A shipping company may describe its mission as fulfilling the transportation

needs of its customers. It may, if it so chooses, further qualify the scope by

defining whether the transportation is meant for goods (cargo) or for passengers.

Activity A Organisational Context of

Decisions

7

Write down what you think is the mission of each of the following

organisations. Discuss your answer with your colleagues to find out their

perception of the mission for these.

1 Skypack-a firm providing courier service within India. (Clue: what is the

difference between the service provided by Posts and Telegraphs as against

Skypack?)

……………………………………………………………………………………………

…………………………………………………………………………………………...

2 National Textile Corporation (a public sector company)……………………..

……………………………………………………………………………………………

3 Indian Railways…………………………………………………………………

……………………………………………………………………………………………

4 Reliance Textiles (manufacturers of “Vimal” brand of textiles)…………..…

……………………………………………………………………………………………

5 Pure Drinks (manufacturer of Campa Cola and other carbonated soft drinks)

……………………………………………………………………………………………

6 Your own organisation…………………………………………...……………..

……………………………………………………………………………………………

5.2 OBJECTIVES

Once the mission and scope of a firm have been defined by the top management

the next logical step is to translate them into action. This can be done by

breaking down the business mission into smaller, workable objectives for

managers down the line. These objectives relate to the long-run and are

described as open ended attributes (described in terms of maximizing or

optimizing or minimizing rather than in any specific quantitative terms) which a

firm seeks to fulfill in pursuance of its mission.

Objectives reflect the àction' orientation of the mission which, in contrast, is

expressed in relatively abstract terms. Objectives form the basis for work and

provide a yardstick for measuring performance.

A firm can have a number of objectives. Sometimes there may be a conflict

between objectives, such as between the objectives of profit and sales growth.

To overcome this, the firm has to set priorities. It must decide which objective

is more important and first seek to fulfill that before pursuing the second.

Objectives may be set for different levels: for the corporate level, business level,

divisional level and individual level. Obviously, objectives set for one level will

not be identical with those set for another level, but they must certainly be

compatible .with each other and seek the fulfillment of the firm's mission.

While setting objectives it is important to leave room for the unexpected, the

unforeseen, occurrence which can prevent achievement of objectives. To the

extent that it is not possible to plan for such events, objectives are at best only

statements of expected and not actual outcomes.

There is much difference of opinion amongst management thinkers on the role

of profit in a firm. Some view profit as the only reason for a firm's existence.

On the other hand, many thinkers, notable among them Peter F. Drucker, are of

the opinion that profit is not the rationale for a firm's existence, but rather the

test of its validity and performance.

Drucker's reasoning is that profit is a vitally integral part and need of business activity and there can be no long-term business without profit. Only that firm

which makes sufficient profit has the means of survival. A firm which cannot

generate profit has an endangered future. Thus to survive and grow a firm

must generate profits.

In certain government and public sector undertakings, profit is sometimes ignored

and the emphasis is laid on providing an essential service at a subsidised rate.

Most transport corporations providing bus and train facilities within a city usually

run at a loss. Similarly, power and electricity are supplied to individual customers

at highly subsidised rates. Though in some cases it may be important to relegate

profits to the backseat there is every reason to provide the maximum service at

the minimum cost. Whatever be the mission of the organisation and criteria of

decision making there is no justification for tolerating commercial inefficiency.

Decision Making

8

5.3 GOALS

Goals are derived from the objectives and are intermediate time-bound targets

which are necessary for the achievement of objectives. Goals are expressed in

very specific quantitative or qualitative terms. All goals have four components: i)

derived from the objective which seeks to fulfill, ii) an index or standard for

measuring progress and performance, iii) a target or hurdle to be achieved, and

iv) a time limit within which has to be achieved.

Thus goals are time-bound and work-oriented and they are important because

they provide a path for converting plans into individual tasks and action, and for

motivating people.

Some samples of typical business goals are shown in Figure I.

Figure I : Some Typical Business Goals

1. Percentage market share (by product and/or market).

2. Percentage increase in sale and/or an absolute sales figure.

3. Minimum number of units to be ,produced (per worker/per hour/day/ week, per machine, per

factory).

4. Maximum number of `rejects' per hour of machine operation.

5. Maximum number of man-days lost in strikes, go-slow and other industrial conflicts.

6. Minimum contribution percentage per branch/per unit of production.

7. Cost reduction target.

8. A time limit which certain event(s) must occur (e.g. a new machine to be installed).

To obtain optimal performance the objectives and goals of the firm must be:

a)

b)

c)

d)

i)

ii)

iii)

consistent with achievement of the mission;

balanced between the requirements of the present and the future;-

balanced against each other and priorities established wherever there is scope

for conflict; and

consistent with the firm's resources and the market opportunities.

Let us look at the concepts of objectives and goals with the help of the following

illustration.

One of the objectives of the Sixth Five Year Plan was to create maximum

employment opportunities. Some of the goals towards fulfillment of this objective

related to:

specific amounts per year to be disbursed as loans to unemployed graduates

for starting enterprises;

number of training programmes per year for teaching vocational skills to

uneducated unemployed; and

number of new Industrial Training Institutes and Polytechnics to be opened

in each state and the time limit within which these must be established, etc.

Activity B

Interview some of the top personnel of your organization with the idea of

identifying the objectives and goals being pursued. Does your organization state

its annual goals in quantitative terms or not? If not, how does the top management

measure the performance?

..........................................................................................................

..........................................................................................................

5.4 STRATEGY Organisational Context of

Decisions

9

Having set objectives the firm now has to work to achieve them. The specific

path of action chosen by the firm to achieve its objectives is referred to as its

strategy. It is the fundamental means a firm uses to try and achieve its objectives.

Any strategy, thus defined, has the following components:

i) A product/market scope: The specific products and markets in which a firm

operates and which define its limits of activity.

ii) Growth vector: The changes the firm plans to make in its product/market

scope for ensuring its future growth.

iii) Competitive advantage: Those specific properties of individual

product/market that give the firm its unique position vis-a-vis its competitors.

iv) Distinctive competence: The specific organizational strengths of a firm

which help in achieving its objectives.

v) Synergy: The overall or joint effects that are sought from the firm's various

product/market scopes.

Thus strategy seeks to achieve the firm's objectives in the context of a specific

product/market scope with a future orientation, based on its internal strengths and

the unique market position that it enjoys.

As an illustration let us review the strategy of a medium-sized company involved

in manufacturing and marketing electronic entertainment products. In terms of

product/market scope the company has restricted itself to marketing of television

sets in the Northern and Eastern regions of the country. In terms of future areas of

growth, the company's R&D division is involved in designing video cassette

players and personal computers to be marketed in either Northern or East region

markets. The company has evolved a competitive advantage in terms of an

excellent after sales service not easily matched by any of its close competitors.

Most of the key personnel in marketing and sales have been deployed in such a

way that they contribute their maximum in various regions with high degree of

autonomy and constitute the company's distinctive competence. By seeking entry

in the video cassette players and personal computers in the future the company

would be using its existing distribution network thus creating marketing synergy.

5.5 PROCESS OF STRATEGY FORMULATION

Strategy is concerned with choosing, from the various alternatives open to it, that

path which will best help the firm achieve its objectives. There are specific steps

involved in the process of strategy formulation. These are:

External-Internal Analysis: This analysis helps identify the really

meaningful opportunities and threats which can affect the firm in the light of

its own strengths and weaknesses:

i)

ii) Generate Strategy Alternatives: The next step is to generate all the possible

strategy alternatives which can fulfil the objectives. One way or generating

and analysing strategy alternatives is presented in Figure II

Figure II: Analysis of Strategy Alternatives

Product Market

Current

New

Current

(a)

(c)

New

(b)

(d)

Decision Making

10

iii)

iv)

There are four strategies available here:

a) Current products in current markets: Strategies which help improve the

firm's' position in this area should be the first concern of the firm before

moving into new, unknown and often risky areas. All those strategies which

aim to increase brand share and increase profitability of existing operations

should. be implemented;

b) New products in current markets: The firm is already incurring costs of

marketing, distributing and sales operations. Adding on new products is thus a

logical way of getting benefits of economy of scale and. cutting. overhead

costs;

c) Current products in new markets: The firm's experience in a specific market

would come in handy when it wants to launch the same product in new

markets. New markets may be defined in terms of geographical areas or new

customer segments; and

d) New products for new markets: This is by far the most risky strategy

alternative which a firm can choose and it involves 'high risk.

Diversification is the strategy alternative.

Evaluating the Strategy Alternatives: All the strategy alternatives identified (in

step II) may lead to achievement of objectives but not all may be realistic or

feasible. The firm has to evaluate them in the context of its own aspirations,

internal strengths and weaknesses, and the environmental opportunities and

threats, and short list all possible strategies for consideration.

Choice of Strategy: The selection of one strategy that best satisfies the

objectives of the firm.

5.6 POLICIES

So far we have discussed the concepts of mission, objectives and strategy in the

context o f a. firm. Now we shall turn our attention to policies, programmes and

procedures. Before we get into a detailed discussion it would be helpful if we

differentiate these two sets of concepts on the basis of their distinguishing

characteristics:

Mission, objectives and strategy are mainly the concern of top management while

policies, programmes and procedures are concerned primarily with the middle and

operating management level. While formulation of the mission is an exclusively top

management function, the formulation of secondary objectives and strategy may

imply some involvement of. the middle management. too.

The time horizon for mission, objectives and strategy is long-term and their

formulations have far-reaching consequences affecting the very survival and growth

of the firm. On the other hand, policies, programmes and procedures. have a shorter

time horizon, are easier to change without much adverse impact and do not have a

very critical bearing on the firm.

The formulation of mission,"objectives, and strategy imply interaction with the

environment and their concern is with improving the effectiveness of the firm.

(Effectiveness being defined as the degree to which actual outputs of the firm

correspond to its desired output. Its concern is with doing the right things, right in the

context of the inter-relationship between the firm and its. environment)

On the other hand, policies, programmes and procedures affect the internal structure

and operational activities of the firm. Their concern is with improving the efficiency

of the firm. (Efficiency being defined as the ratio of actual outputs to actual inputs:

Its concern is with doing things in the right manner.)

Once the firm has set its objectives and designed an appropriate strategy to meet

these objectives it h a s to gear up its internal operations to p r o v i d e all the back-

up support and input in the most efficient manner.

Setting objectives and framing strategies require decisions to be made only once in a

while, but many other operations involve frequent, often periodic decision-making;

To facilitate such recurrent decision making a firm may lay down guidelines. Such

guidelines are known, as policies.

Policies may pertain to either the internal operations of a firm or to those decisions

hitch have to be taken internally but vitally affect the implementation of the

strategy and achievement of objective. A policy for the write-off of damaged

stocks affects only the internal operations of the firm. A policy on credit terms

to its dealers is decided internally but affects the firm's ability to attract and

retain the desirable type and number of dealers, thus impinging on the effective

implementation of its marketing strategy.


Decisions

11

To ensure that policies act as an aid and not an obstacle in the implementation

of strategy, it is important that they be derived from the design of the strategy

itself.

5.7 FRAMING POLICIES

In a one-man enterprise there is no need for having any policies, since the

entrepreneur is both the `thinker' and the `doer.’ But with physical expansion,

increased complexity of tasks and emergence of various levels of decision

makers, the need to have well-thought out and clearly specified policies

becomes imperative.

While framing the policies the top management must take into account the

following considerations:

i)

ii)

iii)

iv)

v)

While objective setting and strategy design are òutward directed' (they

involve active interaction with the environment), policies, programmes and

procedures are more 'ìnward-directed''. Their concern is how best to utilise

the available resources in achievement of the mission. While the former is

concerned with finding the right match between the environment and the

firm's objectives, the latter's concern is to provide the right infrastructural

support to achieve the stared objectives;

Policies must evolve from past experiences, facts and participation of

people who are going to be. affected by them;

Policies must change with change in the characteristics of the operations or

decisions which they are meant to govern and change in the environment;

Policies must be flexible enough to allow for the exceptional situation,

which may call for unconventional or exceptional solutions;

Policies are best implemented only when they are fully accepted by the

people responsible for their implementation. The best way of ensuring

acceptance is to involve the concerned people in the process of framing

policies; and

Too many policies governing every aspect of decision making would only retard

the achievement of objectives. Instead of acting as an aid, policies may become

an obstacle.

5.8 IMPORTANCE OF POLICIES

Policies are an important tool for management for ensuring the smooth running

of the firm's day-to-day activities. Policies are needed:

i)

ii)

iii)

iv)

v)

to ensure consistency of individual decisions taken by different branches

and departments. Amongst different departments or within the same

department, specific decisions are recurrent, but the situation. in which the

decision has to be taken may be different in each case. Therefore, the need

for policies which provide for a set of common parameters and criteria for

decision making in different situations;

to ensure compatibility of individual decisions with the mission and

strategy;

to ensure consistency of decisions over time;

to facilitate delegation of work and authority; and

to avoid ad hoc and arbitrary decisions.

5.9 TYPES OF POLICIES

Policies are framed in accordance with the nature of the strategy being pursued:

Detailed policies may be framed for each functional area or depending on the

relative importance of the different areas, they may be framed for only certain

areas. Some sample policies in various functional areas are described in Figure

III.

Decision Making

12

Figure III : Some Sample Policies In Functional Areas Marketing

Marketing

1. Percentage mark-up allowed to retailers on manufacturer's price

2. Parameters for selection and appointment of distributors and dealers

3. Types of promotion to be undertaken by branch offices or subsidiaries

Finance

1. Norms for expenditure limits on different activities

2. Treatment of bad debts

Personnel

1. Minimum educational qualifications and experience required for recruitment at different

levels

2. Recruitment of women

Production and Purchase

1. Make-or-buy decisions for non-critical, low value components

2 Selection of vendors

3 Minimum quality standards of raw materials to be purchased

4 Mode and terms of payment to suppliers.

5.10 PROGRAMMES

Fun Fizz Company manufactures and. markets a popular carbonated drink

`Fizzy' which is bottled at a continuous production plant. In the four peak months

of summer the plant is run 24 hours, everyday of the week. To prevent against

breakdown, policy on maintenance has been laid down which states that in the

summer each machine and each section of the plant must be subject to preventive

maintenance once every fortnight but one-fourth of the usual output level must be

maintained. Thus each fortnight an elaborate exercise has to be undertaken. The

dealers selling Fizzy have to be informed to buy more stock and also keep with

then the empties for that day since the delivery van would not be visiting them.

Within the plant the time involved in cleaning each machine and section has to be

calculated, keeping in mind the tolerable limits of raw material that can wait at

each work-station without being spoilt and the minimum production level that has

to be maintained. This entire exercise of preparation involving certain steps to be

taken i s known as a programme.

ABC Company was faced with the problem that none of the marketing

executives and sales representatives they recruited would stay with them for more

than 6 to 8 months. Investigation revealed that the executives felt very frustrated

that though there was a specific policy on promotions, there was no way of

reviewing and evaluating the performance of individuals, as a result of which

promotions were made for personal rather than professional reasons. To

overcome this, the management drew up a plan for evaluating individual

performance. This involved collecting, confirming, reviewing and evaluating

feedback on the individual performances to take a decision about their future

progress in the company. This exercise involves carrying out certain actions,

within a specific time, and. to be repeated every year. Since it is a repetitive

exercise it is important to find the most efficient way of doing it rather than

experimenting each year with a new approach. The most efficient way would

involve listing of steps and the sequence in which these steps have to be taken to

complete the entire work which constitutes a programme.

The concern of programmes is to organize and schedule repetitive activities

which constitute a complete set or work assignment in the most efficient

manner. Programmes relate to activities rather than decisions: They may help in

making strategic decisions but are not concerned directly with operating

decisions. The factor which characterises a programme is that all the activities

involved constitute a complete work-set.

A programme must be derived from the policy which it seeks to help.

Activity C Organisational Context of

Decisions

13

List one or two major programmes that might have been undertaken by your

organization during the last two years. With what policy areas were these. 'programmes concerned?

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.11 PROCEDURES

Programmes relate to scheduling of activities while procedures refer to the

specific method and sequence by which an activity has to be performed.

A company initiates a. programme of fire fighting at its factory premises.

This programme consists of activities such as evacuating the premises, using

the fire extinguishing equipment, transmitting information to the fire station,

etc. Within each activity the steps to be taken are the procedures. For

instance, in the matter of evacuating the building the procedure may specify

that people on the second floor will be the first to leave followed by those on

the first floor and so on. It may specify which doors or staircases are to be

used.

To go back to the case of Fizzy, policy on general maintenance of the plant has

been specified and programme for carrying out and coordinating the various activities

that constitute the maintenance has been evolved. Procedures refer to the sequential

steps by which each section or machine of the plant will be dismantled, cleaned,

serviced, and put back into operation.

The way of calculating depreciation by a firm is an accounting procedure.

The manner in which a company has to file information for its claim for

compensation from the insurance company for goods lost in transit

constitutes a procedure. A. branch office of a public sector company has to

follow a certain procedure for requesting for extra salesmen during the peak

season.

Procedures are meant to aid the implementation of a programme by ensuring

that each activity is fully completed and within the shortest possible time.

Procedures should:

a)

b)

c)

i)

ii)

iii)

iv)

v)

evolve from knowledge of past experiences and facts;

be as precise as possible; and

have the concurrence of the people who have to use them.

The idea of following procedures is to avoid disorderly and arbitrary ways of

doing those tasks which are essential to the operations of the firm. To be

really useful, procedures should be laid down for only those activities which

are critical to the overall plan of strategy, policy and programmes. Having

too many procedures can hamper the working style of individuals while their

total absence would lead to chaos. Generally government organizations,

public sector companies and bureaucratic set-ups have more procedures: in

every area of activity than private ' sector companies. Procedures are what we

usually refer to as `red-tapeism' in government. Often all of us, at one fire or

the other has experienced the futility of having too many procedures, while

getting our ration card, renewal of driving licence or payment of road tax,

etc. Thus to he useful, procedures must:

be laid down in critical activity areas;

serve a specific purpose

facilitate achievement of the programme or output toward which it is

geared;

follow a certain logical process; and

be balanced in terms of being too many or too few.

Activity D Decision Making

14

Identify three major departments within your organization and list the various

departmental procedures in each case: Which of these in your opinion, hamper the

efficiency of the department?

................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

5.12 SUMMARY

In this Unit we have identified the important areas of decision-making in an

organization. Further, we analyzed the inter-relations and inter-linkages between

these areas. The mission of the organization provides the starting point from

which objectives, goals, strategies, policies, programmes and procedures are

derived in a sequential manner. This sequential process is a logical one as it

provides the framework for decision making at each level of management.

5.13 KEY WORDS

Firm or Company: Includes all types of business organisations and non-

commercial organisations and institutions such as universities, hospitals, libraries,

etc. Our discussion in this Unit is in the context of a business firm but all that we

discussed is valid for non-business organisations too.

Environment: The universe in which the firm operates is known as its

environment and includes all those economic, political, socio-cultural, legal,

demographic factors, etc. which have a critical bearing on its operations.

Levels of Business Activity: All business activities can be classified into a

hierarchy of three levels.

Corporate Level: This refers to the top management level of an industrial or

business group which has under its management more than one firm, each with a

different product/market scope. These may be engaged in the same or different

industries and may be located in different cities or countries. The concern of the

top management is to manage the complex and diverse sets of business activities

best to serve the interests of the group as a whole.

Business Level: The business level is concerned with the management of one or

more firms which have a common product/ market scope and from the viewpoint

of management is treated as a single unit. The concern of the management is how

best to compete in the specific product/ market scope.

Functional Level: At the functional level the concern of the management is to

maximise productivity of resources deployed in the various functional areas such

as marketing, finance, personnel, production etc.


Albert, Kenneth J.,(ed.),1984. The Strategic Management Handbook, McGraw-Hill

Book Company : New York.

'Drucker, Peter F., 1975. Management Tasks, Responsibilities and Practices,

Allied Publishers Private Limited : New Delhi.

Glueck, William F., 1980, Strategic Management and Business Policy, McGraw-

Hill Book Company,: New York.


Decisions

15

Harvey, Donald F., 1984. Strategic Management, Charles E. Merrill Publishing '

Company : Columbus.

Hofer, Charles W., and Schendel, Dan,1980. Strategy Formulation : Analytical

Concepts, West Publishing Company : New York.

Hussey, David,1982. Corporate Planning Theory and Practice,. Pergamon Press :

New York.

King, William R. and David I. Cleland, Strategic Planning and Policy, Van

Nostrand Reinhold Company : New York.

Koontz, D. and Donnell C., 1985. Management : A System and Contingency

Analysis of Managerial Functions, McGraw-Hill Kogakusha Limited : Tokyo.

Decision Making Models

UNIT 6 DECISION MAKING MODELS

Objectives

After studying this Unit, you should be able to:

• Appreciate the three steps of the process through which you make any decision

• Classify the kinds of decisions you make

• Identify the varying degrees of knowledge under which you make decisions

• Recognize the assumptions of different models which either describe how

decisions are made or prescribe how decisions should be made.

Structure

6.1 Introduction

6.2 Three Phases in Decision Making Process

6.3 Types of Managerial Decisions

6.4 Decision Making under Different States of Nature

6.5 Models of Decision Making Process

6.6 Summary

6.7 Key Words


6.1 INTRODUCTION

You will possibly agree that decision making is a part of everyday life. The fact that

you have taken up a course in management or the fact that you are reading this Unit

are both products of your decisions to do them against other alternatives which were

available to your. Whether you are at a board meeting or in the playground, you are

almost constantly making decisions, sometimes working on several at the same time.

These may be major or minor, but some of these might have proved to be effective

decisions, viz. appropriate, timely and acceptable. Some of your decisions might have

been wrong, but you knew that there was something worse than a few wrong

decisions and that was indecision!

Making decisions has been identified as one of the primary responsibilities of any

manager. Decisions may involve allocating resources, appointing people, investing

capital or introducing new products. If resources like men, money, machines,

materials, time and. space were abundant, clearly any planning would be

unnecessary. But, typically, resources are scarce and so there is a need for planning.

Decision making is at the core of all planned activities. We can ill afford to waste

scarce resources by making too many wrong decisions or by remaining indecisive for

too long a time.

6.2 THREE PHASES IN DECISION MAKING PROCESS

You can define decision making as the process of choosing between alternatives to

achieve a goal. But if you closely look into this process of selecting among available

alternatives, you will be able to identify three relatively distinct stages. Put into a

time framework, you will find:

1. The past, in which problems developed, information accumulated, and the need

for a decision was perceived;

17

Decision Making

18

2. The present, in which alternatives are found and the choice is made; and

3. The future, in which decisions will be carried out and evaluated.

Herbert Simon, the well-known Nobel laureate decision theorist, described the

activities associated with three major stages in the following way:

1. Intelligence Activity: Borrowing from the military meaning of intelligence Simon

describes this initial phase as an attempt to recognise and understand the nature of

the problem, as well as search for the possible causes;

2. Design Activity: During the second phase, alternative courses of action are

developed and analyzed in the light of known constraints; and

3. Choice Activity: The actual choice among available and assessed alternatives is

made at this stage.

If you have followed the nature of activities of these three phases, you should be able

to see why the quality of any decision is largely influenced by the thoroughness of

the intelligence and design phases.

Henry Mintzberg and some of his colleagues (1976) have traced the phases of some

decisions actually taken in organisations. They have also come up with a three-phase

model as shown in Figure I.

Figure I: Mintzberg's empirically based phases of decision making in organizations

Source: Mintzberg, Raisinghani and Theoret, 1976.

1. The identification phase, during which recognition of a problem or opportunity

arises and a diagnosis is made. It was found that severe immediate problems did

not have a very systematic, extensive diagnosis but that milder problems did have.

2. The development phase, during which there may be a search for existing

standard procedures, ready-made solutions or the design of a new, tailor-

made solution. It was found that the design process was a grouping, trial and

error process in which the decision-makers had only a vague idea of the ideal

solution.

3. The selection phase, during which the choice of a solution is made. There are

three ways of making this selection: by the judgment of the decision maker, on

the basis of experience or intuition rather than logical analysis; by analysis of the

alternatives on a logical, systematic basis; and by bargaining when the selection

involves a group of decision makers. Once the decision is formally accepted, an

authorization is made.

Note that the decision making is a dynamic process and there are many feedback

loops in each of the phases. These feedback loops can be caused by problems of

timing, politics, disagreement among decision-makers, inability to identify an

appropriate alternative or to implement the solution or the sudden appearance of a

new alternative etc. So, though on the surface, any decision-making appears to be a

fairly simple three-stage process, it could actually be a highly complex dynamic

process.

,Activity A

Before we move on to the next topic on types of decisions that you and other

managers make, let us pause to check whether we have understood the general nature

of any decision making situation. You will recall that decision making is a process by

which we make a choice among various alternatives to achieve our goals. Based on

this definition and earlier discussion, complete the missing entries in . Figure II of the

Managerial Decision Process.


19

Figure II: Managerial Decision Process

Answers:

1. Objectives/ Goals

2. Identifying/ Defining

3. Alternatives

4. Evaluating/ Assessing

5. Selecting/ Choosing

6. Decision/ Choice

6.3 TYPES OF MANAGERIAL DECISIONS

There are many types of decisions which you would be required to make as a

manager. Three most widely recognised classifications are:

1. Personal and Organisational Decisions

2. Basic and Routine Decisions

3. Programmed and Non-programmed Decisions.

The first classification of Personal and Organisational decisions was suggested by

Chester Barnard, nearly fifty years ago in his classic book: "The Functions of the

Executive". In his opinion, the basic difference between the two decisions is that

"personal decisions cannot ordinarily be delegated to others, whereas organisational

decisions can often if not always be delegated" (Barnard, 1937). Thus, the manager

makes organisational decisions that attempt to achieve organisational goals and

personal decisions that attempt to achieve personal goals. Note that personal

decisions can affect the organisation, as in the case of a senior manager deciding to

resign. However, if you analyse a decision, you may find that the distinctions

between personal and organisational decisions are a matter of degree. You are, to

some extent, personally involved in any organisational decision that you make and

you need to resolve the conflicts that might arise between organisational and personal

goals.

Another common way of classifying types of decisions is according to whether they

are basic or routine. Basic decisions are those which are unique, one-time decisions

involving long-range commitments of relative permanence or duration, or those

involving large investments. Examples of basic decisions in a business firm include

plant location, organisation structure, wage negotiations, product line, etc. In other

words, most top management policy decisions can be considered as basic decisions.

Routine decisions are at the opposite extreme from basic decisions. They are the

everyday, highly repetitive, management decisions which by themselves have little

impact on the overall organisation. However, taken together, routine decisions play a

tremendously important role in the success of an organisation. Examples of, routine'

decisions are an accountant's decision on a new entry, a production supervisor’s

Decision Making

20

decision to appoint a new worker, and a salesperson's decision on what territory to

cover. Obviously, a very large proportion (most experts estimate about 90 per cent)

of the decisions made in an organisation are of the routine variety. However, the

exact proportion of basic to routine types depends on the level of the organisation a

which the decisions are made. For example, a first-line supervisor makes practically

all the routine decisions whereas the chairperson of the board makes very few routine

decisions but many basic decisions.

Simon (1977) distinguishes between Programmed (routine, repetitive) decisions and

Non-programmed (unique, one-shot) decisions. While programmed decisions are

typically handled through structured or bureaucratic techniques (standard operating

procedures), non-programmed decisions must be made by managers using available

information and their own judgement. As is often the case with managers, however,

decisions are made under the pressure of time.

An important principle of organisation design that relates to managerial decision

making is Gresham's Law of Planning. This law states that there is a general tendency

for programmed activities to overshadow non-programmed activities. Hence, if you

have a series of decisions to make, those that are more routine and repetitive will tend

to be made before the ones that are unique and require considerable thought. This

happens presumably because you attempt to clear your desk so that you can get down

to the really serious decisions. Unfortunately, the desks very often never get cleared.

After going through the three types of classification of managerial decisions, you

could see that there is no single and satisfactory way of classifying decision

situations. Moreover, the foregoing classifications have ignored two important

problem-related dimensions: (1) How Complex is the Problem in terms of number

of factors associated with it; and (2) how much certainty can be placed with the

outcome of a decision. Based on these two dimensions, four kinds of decision modes

can be identified: Mechanistic, Analytical, Judgmental, and Adaptive (See Figure Ill).

Figure III: Types of Managerial Decisions

1. Mechanistic Decisions: A mechanistic decision is one that is routine and

repetitive in nature. It usually occurs in a situation involving a limited number of

decision variables where the outcomes of each alternative are known. For example,

the manager of a bicycle shop may know from experience when and how many

bicycles are to be ordered; or the decision may have been reached already, so the

delivery is made routinely. Most mechanistic decision problems are solved by

habitual responses, standard operating procedures, or clerical routines. In order

to further simplify these mechanistic decisions, managers often develop charts, lists,

matrices, decision trees, etc.

2. Analytical Decisions: An analytical decision involves a problem with a large

number of decision variables, where the outcomes of each decision alternative can be

computed. Many complex production and engineering problems are like this. They

may be complex, but solutions can be found. Management science 'and operations

research provide a variety of computational techniques that can be used to find

optimal solutions. These techniques include linear programming, network analysis,

inventory reorder model, queuing theory, statistical analysis, and so forth.

3. Judgemental Decisions: A judgemental decision involves a problem with a

limited number of decision variables, but the outcomes of decision -alternatives are


21

unknown. Many marketing, investment, and resource allocation problems come

under this category. For example, the marketing manager may have several

alternative ways of promoting a product, but he or she may not be sure of their

outcomes. Good judgement is needed to increase the possibility of desired outcomes

and minimise the possibility of undesired outcomes.

4. Adaptive Decisions: An adaptive decision involves a problem with a large

number of decision variables, where outcomes are not predictable. Because of the

complexity and uncertainty of such problems, decision makers are not able to agree

on their nature or. on decision strategies. Such ill-structured problems usually require

the contributions of many people with diverse technical backgrounds. In such a case,

decision and. implementation strategies have to be frequently modified to

accommodate new developments in technology and the environment.

Activity B

Refer to Figure III and subsequent discussions on four types of managerial decisions.

Answer the following questions.

1 Which types of managerial decisions correspond to "Programmed" decision?

................................................................................................................................

2 Which types of managerial decisions correspond to "Non-programmed" decision?

................................................................................................................................

3 Which types of managerial decisions correspond to "Basic" decision?

................................................................................................................................

Answers:

1 Mechanistic Decisions and Analytic Decisions.

2 Judgemental Decisions and Adaptive Decisions.

3 Judgemental Decisions, Adaptive Decisions and Analytic Decisions.

6.4 DECISION MAKING UNDER DIFFERENT STATES

OF NATURE

In the previous topic on types of decisions you have seen that a decision-maker may

not have complete knowledge about decision alternatives (i.e., High Problem,

Complexity) or about the outcome of a chosen, alternative (i.e., High Outcome

Uncertainty). These conditions of knowledge are often referred to as states of nature

and have been labelled:

1 Decisions under Certainty.

2 Decisions under Risk

3 Decisions under Uncertainty

Figure IV depicts these three conditions on a continuum showing the relationship

between knowledge and predictability of decision states.

Figure IV Decision Making Conditions Continuum

Decision Making

22

Decision making under certainty: A decision is made under conditions of certainty

when a manager knows the precise outcome associated with each possible alternative

or course of action. In such situations, there is perfect knowledge about alternatives

and their consequences. Exact results are known in advance with complete (100 per

cent) certainty. The probability of specific outcomes is assumed to be equal to one. A

manager is simply faced with identifying the consequences of available alternatives

and selecting the outcome with the highest benefit or payoff.

As you can probably imagine, managers rarely operate under conditions of certainty.

The future is only barely known. Indeed, it is difficult to think of examples of all but

the most trivial business decisions that are made under such conditions. One frequent

illustration that is often cited as a decision under at least near certainty is the purchase

of government bonds or certificates of deposit. For example, as per the assurance

provided by Government of India, Rs. 1,000 invested in a 6-year National Savings

Certificate will bring a fixed sum of Rs. 2,015 after six complete years of investment.

It should still be realised, however, that the Government defaulting on its obligations

is an unlikely probability, but the possibility still exists. This reinforces the point that

very few decisions outcome can be considered a sure thing.

Decision making under risk: A decision is made under conditions of risk when a

single action may result in more than one potential outcome, but the relative

probability of each outcome is known. Decisions under conditions of risk are perhaps

the most common. In such situations, alternatives are recognised, but their resulting

consequences are probabilistic and doubtful. As an illustration, if you bet on number

6 for a single roll of a dice, you have a 1/6 probability of winning in that there is only

one chance in six of rolling a 6. While the alternatives are clear, the consequence is

probabilistic and doubtful. Thus, a condition of risk may be said to exist. In practice,

managers assess the likelihood of various outcomes occurring based on past

experience, research, and other information. A quality control inspector, for example,

might determine the probability of number of `rejects' per production run. Likewise, a

safety engineer might determine the probability of number of accidents occurring, or

a personnel manager might determine the probability of a certain turnover or

absenteeism rate.

Decision making under uncertainty: A decision is made under conditions of

uncertainty when a single action may result in more than one potential outcome, but

the relative probability of each outcome is unknown. Decisions under. conditions of

uncertainty are unquestionably the most difficult. In such situations a manager has no

knowledge whatsoever on which to estimate the likely occurrence of various

alternatives. Decisions under uncertainty generally occur in cases where no historical

data are available from which to infer probabilities or in instances which are so novel

and complex that it is impossible to make comparative judgements.

Examples of decisions under complete uncertainty are as difficult to cite as example

of decisions under absolute certainty. Given even limited experience and the ability

to generalise from past situations, most managers should be able to make at least

some estimate of the probability of occurrence of various outcome. Nevertheless,

there are undoubtedly times when managers feel they are dealing with complete

uncertainty.

Selection of a new advertising programme from among several alternatives might be

one such example. The number of factors to be considered and the large number of

uncontrollable variables vital to the success of such a venture can be mind-boggling.

On a personal level, the selection of a job from among alternatives is a career

decision that incorporates a great deal of uncertainty. The number of factors to be

weighed and evaluated, often without comparable standards, can be overwhelming.


23

Activity C

Identify six decisions that you have taken during last one year. Check which

decisions were made under Certainty, under Risk and under Uncertainty.

6.5 MODELS OF DECISION MAKING PROCESS

By now, you have learnt what the different phases of a decision making process are,

what types of decisions you are likely to make in an organisation and under what

states of nature these decisions are made. Now, you are going to examine three

suggested models of the decision making process which will help you to understand

how decisions are made and should be .made. These three models are: (I) the

econologic model, or the economic man, (2) the bounded rationality model or the

administrative man; and (3) the implicit favourite model or the gameman. You will

notice that each model differs on the assumptions it makes about the person or

persons making the decision.

i) Econologic Model or Economic Man Model

The econologic model represents the earliest attempt to model decision process.

Briefly, this model rests on two assumptions: (1) It assumes people' are

economiccally rational; and (2) that 'people attempt to maximise outcomes in an

orderly and sequential process. Economic rationality, a, basic concept in many

models of decision making, exists when people attempt to maximise objectively

measured advantage, such as money or units of goods produced. That is, it is

assumed that people will select the decision or course of action that has the greatest

advantage or payoff from among the many alternatives. It is also assumed that they

go about this search in a planned, orderly, and logical fashion.

A basic econologic decision model is shown in Figure V. The figure suggests the

following orderly steps in the decision process:

1 Discover the symptoms of the problem or difficulty ;

2 Determine the goal to be achieved or define the problem to be solved;

3 Develop a criterion against which alternative solutions can be evaluated;

4 Identify all alternative courses of action;

5 Consider the consequences of each alternatives as well as the likelihood of

occurrence of each; Figure V: An Econologic Model of Decision-making

Decision Making

24

6 Choose the best alternative by, comparing the consequences of each. alternative

(step 5) with the decision criterion (step 3); and

7 Act or implement the decision.

The economic man model represents a useful prescription of how decisions should

be made, but it does not adequately portray how decisions are actually made. If you

look closely in this prescriptive model you shall be able to recognise some of the

assumptions it makes about the capabilities of human beings:

First, people have the capability to gather all necessary information for a decision,

i.e., people can have complete information;

Second, people can mentally store this information in some stable form, i.e., they can

accurately recall any information any time they like;

Third, people can manipulate all this information in a series of complex calculations

design to provide expected values; and

Fourth, people can rank the consequences in a consistent fashion for the purposes of

identifying the preferred alternative.

As you can possibly imagine, the human mind is simply incapable of executing such

transactions at the level and magnitude required for complex decisions. To that

extent, this model is unrealistic. However, due to the advent of sophisticated data

storage, retrieval and processing machines, it is now possible to achieve economic

rationality to some extent.

ii) Bounded Rationality Model or Administrative Man Model

An alternative model, one not bound by the above assumptions, has been presented

by Simon. This is the bounded rationality model, also known as the administrative

man model.

As the name implies, this model does not assume individual rationality in the

decision,' process. Instead, it assumes that people, while they may seek the best

solution, usually settle for much less because the decisions they confront typically

demand greater information processing capabilities than they possess. They seek a

kind of bounded (for limited) rationality in decisions.

The concept of bounded rationality attempts to describe decision processes in terms

of three mechanisms:

Sequential attention to alternative solutions: People examine possible solutions to

a problem sequentially. Instead of identifying all possible solutions and selecting the

best (as suggested in the econologic model), the various alternatives are identified

and evaluated one at a time. If the first solution fails to work it is discarded and the

next solution is considered. When an acceptable (that is, `Good enough' and not

necessarily the best') solution is found, the search is discontinued.

Use of heuristics: A heuristic is a rule which guides the search for alternatives into

areas that have a high probability for yielding satisfactory solutions. For instance,

some companies continually select Management graduates from certain institutions

because in the past such graduates have performed well for the company. According

to the bounded rationality model, decision makers use heuristics to reduce large

problems to manageable proportions so that decisions can be made rapidly. They look

for obvious solutions or previous solutions that worked in similar situations.

Satisfying: Whereas the econologic model focuses on the decision maker as an

optimiser, this model sees him or her as a satisficer. An alternative is optimal if: (1)

there exists a set' of criteria that permits all alternatives to be compared; and (2) the

alternative in question is preferred, by these criteria, to all other alternatives. An

alternative is satisfactory if: (I) there exists a set of criteria that describes minimally

satisfactory . alternatives; and (2) the alternative in question meets or exceeds all

these criteria.

Based on these three assumptions about decision makers, it is possible to outline the

decision process as seen from the standpoint of the bounded rationality model. As

shown Figure VI, the model consists of eight steps:


25

Figure VI: A Bounded Rationality Model of Decision Making

1 Set the goal to be pursued or define the problem to be solved.

2 Establish an appropriate level of aspiration or criterion level (that is, when do you know that

a solution is sufficiently positive to be acceptable even if it is not perfect'?)

3 Employ heuristics to narrow problem space to a single promising alternative.

4 If no feasible alternative is identified (a) lower the aspiration level, and (b) begin the search

for a new alternative solution (repeat steps 2 and 3).

5 After identifying a feasible alternative (a), evaluate it to determine its acceptability (b).

6 If the identified alternative is unacceptable, initiate search for a new alternative solution

(repeat steps 3-5).

7 If the identified alternative is acceptable (a) implement the solution (b).

8 Following implementation, evaluate the ease with which goal was (or was not) attained (a),

and raise or lower level of aspiration accordingly on future decisions of this type.

As can be seen, this decision process is quite different from the econologic model. In

it we do riot seek the best solution; instead, we look for a solution that is acceptable.

The search behaviour is sequential in nature(evaluating one or two solutions at a

time). Finally, in contrast to the. prescriptive econologic model, it is claimed that the

bounded rationality model is descriptive; that is it describes how decision makers

actually arrive at the identification of solutions to organisational problems.

iii) Implicit Favourite Model or Gamesman Model

This model deals primarily with non-programmed. decisions. You will recall that

non-programmed decisions are decisions that are novel or unstructured, like seeking

one's first job. Programmed decisions, in contrast, are more routine or repetitious in

nature, like the procedures for admitting students to a secondary school.

The implicit favourite model developed by Soelberg (1967) emerged when he

observed the job choice process of graduating business students and noted that, in

many cases, the students identified implicit; favourites very early in the recruiting

and choice process. However, they continued their search for additional alternatives

and quickly selected the best alternative candidate, known as the confirmation

candidate. Next, the students attempted to develop decision rules the demonstrated

unequivocally that the implicit favourite was superior to the alternative confirmation

candidate. This was done through perceptual distortion of information about the two

alternatives and through weighing systems designed to highlight the positive features

of the implicit favourite. Finally, after a decision rule was derived that clearly

favoured the implicit favourite, the decision was announced. ironically, Soelberg

noted that the implicit favourite was typically superior to the confirmation candidate

on only or or two dimensions. Even so, the decision makers generally characterised

their decision rules as being multi-dimensional in nature.

The process is shown in Figure VII. As noted, the entire process is designed to justify

to the individual, through the guise of scientific rigour, a non-programmed decision

that has already been made in intuitive fashion. By doing so, the individual becomes

convinced that he or she is acting in a rational fashion and making a logical, reasoned

decision on an important topic.

Decision Making

26

Figure VII: An Implicit Favourite Model of Decision Making

Source: Behling and Schriesheim, 1976, p. 32.

Activity D

Read the following assumptions about the nature of human beings as decision

makers. Identify which assumptions are made under which models of decision

making.

Answers:

1 Administrative Man Model.

2 Economic Man Model.

3 Gamesman Model.

Activity E

Recall the process through which you decided to apply for joining the course in

management. Which model best characterizes your decision process? Would you

claim that as a rational decision? Why or why not? Prepare a short note.

…………………………………………………………………………………………

……………………………………………………………………………………….…

…………………………………………………………………………………………

…………………………………………………………………………………….……

…………………………………………………………………………………………

………………………………………………………………………………….………

…………………………………………………………………………………………

……………………………………………………………………………….…………

…………………………………………………………………………………………

…………………………………………………………………………….……………

…………………………………………………………………………….……………

…………………………………………………………………………………………


27

6.6 SUMMARY

In this Unit, you have made yourself familiar with the three phases of any decision

making situation. You have seen that these phases deal with identification, evaluation

and selection of alternatives to a problem. It is possible to follow a logical process of

taking decisions, as the Economic Man Model suggests, particularly when your

problem is routine, mechanistic and programmed or when you are taking decisions

under conditions of certainty or risk.

Self-assessment Question

Go back to the four learning objectives listed at the beginning of the Unit. Check for

yourself, without referring to the main text, whether you have achieved each of these

objectives. After a self-assessment, in case you feel you have not attained an

objective satisfactorily, refer to the main text. Proceed to the next U nit only when

you feel you have attained all the learning objectives of this Unit.

6.7 KEY WORDS

Adaptive Decision: An adaptive decision involves a. problem with a large number of

decision variables where outcomes are not predictable.

Mechanistic Decision: A routine and repetitive decision.

Heuristics: Heuristic is a rule which guides the search for alternatives into areas that

have a high probability for yielding satisfactory solutions.


Barnard, C.I.,1937. The Functions of the Executive. Harvard University Press:

Cambridge.

Behling, O., and Schriesheim, C.,1976. Organisational Behavior, Theory, Research

and Application. Allyn and Bacon: Boston.

Elbing, A.1978. Behavioral Decisions in Organisations, Scott Foresman: Glenview.

Soelberg, P.O.,1967. A Study of Decision Making, Job Choice. MIT Press:

Cambridge.

Vroom, V.H. and Yetton, P.W.,1973. Leadership and Decision Making. University of

Pittsburgh Press: Pittsburgh.

Decision Making

Techniques and Processes

UNIT 7 DECISION MAKING

TECHNIQUES AND PROCESSES Objectives


• Understand the necessity of identifying and evaluating a reasonable number of

possible alternative courses of action for accomplishing organisation objectives

• Display familiarity with various means for generating alternative courses of

action

• Decide to what extent participation of others is desirable; when and how

group decision strategies should be used

• Diagnose roadblocks to effective decision making and develop some strategies to

overcome them.

Structure

7.1 Introduction

7.2 Techniques Used in Different Steps of Decision Making

7.3 Individual Versus Group Decision Making

7.4 Overcoming Barriers to Effective Decision Making

7.5 Summary

7.6 Key Words


7.1 INTRODUCTION

In this Unit, various techniques involved in decision making e.g. brainstorming,

semantics, and nominal grouping are described and discussed. Then the Unit

describes various methods for identification, selection of various alternatives and

implementation of decisions made. Differences and similarities between individual

versus group decision making are then explained, including the phenomenon of

groupthink. Various barriers to effective decision making are finally enumerated.

7.2 TECHNIQUES USED IN DIFFERENT STEPS OF

DECISION MAKING

In the models of decision making, you must have observed that any systematic

approach to decision making starts with a proper definition of the problem. You will

often experience that a problem well defined is a problem half-solved because the

proper definition helped you to search at relevant place for promising alternatives.

You would also agree that a "fair" approach to decision-making demands that

parameters (for judging alternatives which are sometimes referred to as "criteria",

"level of aspiration", "decision rules", etc.) should be explicitly developed before the

alternatives are generated and not after. This imperative minimises the chances of

unnecessary compromise which is the hall-mark of a low-quality decision. However,

once you have developed the criteria, keep them aside and forget about them at the

time of generation of the alternatives. This dissociation of criteria from the

alternative-generation phase will improve your chance of coming up with a

reasonably sufficient number of alternatives. You will understand the importance of

generating a "reasonable" number of alternatives by the simple realisation that the

quality of a decision can be no better than the quality of the alternatives that you

identify.

Identification of Alternatives

Generation' of a reasonable number of good alternatives is usually no problem.

Occasionally, however, developing a variety of good alternatives can be a complex

matter requiring creativity, thought, and study. Three means for generating

alternatives are particularly well-known. These are brainstorming, synectics, and

nominal grouping.

29

Decision Making

Brainstorming: Developed by Alex F. Osborn, brainstorming is the oldest and best

known technique for stimulating creative thinking. It involves the use of a group

whose members is presented with a problem and is asked to develop as many

potential solutions as possible. Members of the group may all be employees of the

same firm or outside experts in a particular field. Brainstorming is based on the

premise that when people interact in a free and uninhibited atmosphere they will,

generates creative ideas. That is, as one person generates an idea it serves to

stimulate' the thinking of others. This interchange of ideas is supposedly contagious

and creates an atmosphere of free discussion and spontaneous thinking. The objective

is to produce as many ideas as possible in keeping with the belief that the larger the

number of ideas produced, the greater the probability of identifying an acceptable

solution.

Brainstorming is governed by four important rules:

1 Criticism is prohibited Judgement of ideas must be withheld until all ideas have

been generated. It is believed that criticism inhibits the free flow of ideas and

group creativity.

2 Freewheeling' is welcome. The wilder the idea the better. It is easier to `tame

down' than to `think up' ideas.

3 Quantity is wanted. The greater the number of ideas, the greater the likelihood of

an outstanding solution.

4 Combination and improvement are sought. In addition to contributing ideas of

their own, group members suggest how ideas of others can be improved, or how

two or more ideas can be combined into still another idea.

Brainstorming sessions usually involve six to eight participants and run from thirty

minutes to an hour. A one-hour session is likely to produce anywhere from 50 to 150

ideas. Typically, most ideas will be impractical, but, a few will merit serious

consideration. Brainstorming has given encouraging results in the field of

advertising, in all branches of the Armed Forces, and in various Central, State, and

local agencies.

Brainstorming, however, is not without limitations. It is usually most effective when

a problem is simple and specific. In addition, brainstorming sessions are time-

consuming and, therefore, can be costly. Finally, brainstorming often produces

superficial solutions. This latter limitation, of course, can be overcome by selecting

group members who are familiar with at least one aspect of the problem being

considered.

Synectics: Developed by William J.J. Gordon, synectics is a more recent and

formalised creativity technique for the generation of alternative solutions. The term

synectics is derived from a Greek word meaning "the fitting together of diverse

elements." The basic intent of synectics is to stimulate novel and even bizarre

alternatives through the joining together of distinct and apparently irrelevant ideas.

Members of a synectics group are typically selected to represent a variety of

backgrounds and training. An experienced group leader plays a vital role in this

approach. The leader states a problem for the group to consider. The group reacts by

stating the problem as they understand it. Only after the nature of the problem is

thoroughly reviewed and analysed does the group proceed to offer potential

solutions. It is the task of the leader to structure the problem and lead the ensuing

discussion in such a manner as to force group members to deviate from their

traditional ways of thinking. Various methods are employed to "invoke the

preconscious mind". These may include role-playing, the use of analogies, paradoxes,

metaphors, and other thought-provoking exercises. The intended purpose is to induce

fantasies and novel ideas that will modify existing thought patterns in order to

stimulate creative alternatives. It is from this complex set of interactions that a final

solution hopefully emerges. A technical expert is ordinarily present to assist the

group in evaluating the feasibility of their ideas. Thus, in contrast to brainstorming

where the judgement of ideas is-withheld until, all ideas have been generated, judicial

evaluations of members' suggestions do take place from time to time.

In general, available evidence suggests that synectics has been less widely used than

brainstorming. While it suffers from some limitations as brainstorming (it can be

time-consuming and costly), its sophisticated manner makes it much more

appropriate for complex and technical problems.

30

Decision Making


31

Nominal Grouping: Developed by Andre Dellbecq and Andrew-Van de Ven,

nominal grouping differs from both brainstorming and synectics in two important

ways. Nominal grouping does not rely on free association of ideas, and it purposely

attempts to reduce verbal interaction. From this latter characteristic a nominal group

derives its name; it is a group "in name only".

Nominal grouping has been found to be particularly effective in situations requiring a

high degree off innovation and idea generation. It generally follows a highly

structured procedure involving the following stages:

Stage 1: Seven to ten individuals 'with different backgrounds and training are

brought together and familiarised with a selected problem such as, "What alternatives

are available for achieving a set of of ,objectives?"

Stage 2: Each group member is asked to prepare a list of ideas in response to the

identified problem, working silently and alone.

Stage 3: After a period of ten to fifteen minutes, group members share their ideas,

one at a time, in a round-robin manner. A group facilitator records the ideas on a

blackboard or flip chart for all to see. The round-robin process continues until all

ideas are presented and recorded.

Stage 4: A period of structured interaction follows in which group members openly

discuss and evaluate each recorded idea. At this point ideas may be reworded,

combined, deleted, or added.

Stage 5: Each group member votes by privately ranking the presented ideas in order

of their perceived importance. Following a brief discussion of the vote, a final secret

ballot is conducted. The group's preference is the arithmetical outcome of the

individual votes. This concludes the meeting.

Nominal grouping has been used successfully in a wide variety of organisations. Its

principal benefit is that it minimises the inhibiting effects of group interaction in the

initial generation of alternative solutions. In this sense, the search process is pro-

active rather than reactive. That is, group members must generate their own original

ideas rather than "hitch-hike" on the ideas of others. Additionally, the use of a round-

robin recording procedure allows risk-inclined group members to state risky solutions

early, making it easier for less secure participants to engage in similar disclosure.

Nominal grouping, however, also has limitations. Like brainstorming and synectics,

it can be time-consuming and, therefore, costly.

Creative Thinking: There are many ways of searching for information and

alternatives in problem solving. Effective managers use all of their capacities-analytic

and creative, conscious and subconscious-and seek both individual and group

involvement in this stage of decision making process.

As you have seen, the basic requirement at the stage of identification of alternatives

is to become more creative. Creativity involves novel combination of ideas which

must have theoretical or social value or make an emotional impact on other people,

Like the decision' making process itself, the creative process also has three stages as

shown in the following exhibit:

STAGES IN THE CREATIVE PROCESS

Stage Type Behaviours

Preparation Conscious Saturation: Investing the problem in all

directions to become fully familiar with it, its

setting, causes, and effects

Deliberation: Mulling over these ideas,

analysing and challenging them, viewing them

from different optics.

Latent Period Unconscious Incubation: Relaxing, switching off, and turning

the problem over to the unconscious mind.

Illumination: Emerging with possible answers-

dramatic, perhaps off beat, but fresh and new.

Presentation Conscious Verification: Clarifying and flushing out the

idea, testing it against the criterion of

appropriateness.

Accommodation: Trying the solution out on

other people and other problems.

Decision Making

Evaluation of Alternatives

Evaluation of various identified possible courses of action constitutes the second step

of decision-making. Having identified a `reasonable' number of alternatives as a

manager you should now be in a position to judge the different courses of action

which have been isolated. Each alternative must be evaluated in terms of its strengths

and weaknesses, benefits and costs, advantages and disadvantages in achieving

organisational goals. Since there are usually both positive and negative aspects of

every alternative, most evaluations involve a balancing or trade-off of anticipated

consequences. Needless to say, such assessments should be as objective as possible.

Evaluation of the relative merits of various alternatives may be performed by a single

manager or by a group. An evaluation may be completely intuitive or it may be

scientific, using analytical tools and procedures associated with what is known as

operations research (OR). More than likely, it will employ a combination of both

approaches. Whatever the basis of evaluation, the more systematic the assessment,

the more likely it is that the resulting judgements will be accurate and complete.

You will know more about different OR techniques like pay-off matrix, decision

trees, queuing theory, linear programming, simulation, etc. in a separate Unit which

will help you in your task of evaluation of alternatives.

Selection of an Alternative

Once appropriate alternatives have been identified and evaluated, you must select the

one alternative with the greatest perceived probability of meeting organisational

objectives. Of course, it is entirely possible that the decision maker may be made to

go back and identify other alternatives if none are judged to be acceptable.

Theoretically, if the identification and evaluation of alternatives has been properly.

handled, making a choice should be an easy matter, The most desirable alternative

will be obvious. In practice, however, selection of a course of action is often the

result of a compromise. Enterprise objectives are multiple. As a consequence, choice

of an alternative must be made in light of multiple and often conflicting objectives.

Indeed, the quality of a decision may often have to be balanced against its

acceptability. Resource constraints and political considerations are examples of

confounding factors which must be carefully weighed. At this point, sound

judgement and experience play important roles.

Implementation of Decision

Once a plan (course of action) has been selected, appropriate actions must be taken to

assure that it is implemented. Implementation is crucial to success of an enterprise.

Indeed, it is considered by some to be the key to effective planning. The best plans in

the world are absolutely worthless if they cannot be implemented. The activities

necessary to put plans into operation must be skillfully initiated. In this respect, no

plan is better than the actions taken to make it a reality.

With selection of a course of action, you must make detailed provisions for its

execution. You must communicate the chosen course of action, gather support for it,

and assign resources to see that it is carried out. Development of a sound means of

implementation is every bit as important as the decision as to which course of action

to pursue. All too often, even the best plans fail as a result of being improperly

implemented.

Activity A

Imagine that you are working in a consulting firm specialising in producing creative

ideas to solve various problems. Current projects involve the following problems:

i)

ii)

Creative uses of Used dry cells.

Within ten years, all the plants in the world are going to die due to a non-

removable chemical in the polluted soil of the world.

Collect four of your friends to form a group of five.

Spend 30 minutes to "brainstorm" ideas for identifying different alternatives to the

problems.

32

Decision Making


33

• • •

After recording the ideas, judge how many are realistic. Evaluate them on the

following criteria:

Is the idea technically feasible?

Is it economically feasible?

Is it socially acceptable?

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7.3 INDIVIDUAL VERSUS GROUP DECISION MAKING

You are perhaps aware that in recent times most of the decisions in any large

organisation are usually taken by a group of people (e.g., Board of Directors,

Committees, Task-force, etc.) rather than by a single individual manager, however,

brilliant, bright or powerful the manager may be. Perhaps from your own experience,

you are also aware of some of the obvious advantages and disadvantages of group

decision making like the one given below:

Advantages and Disadvantages of group decision making

Advantages Disadvantages

• • Groups can accumulate more knowledge

and facts.

Groups often work more slowly than

individuals.

Groups have a broader perspective and

consider more alternative solutions.

Group decision involves considerable

compromise which may lead to less than

optimal decisions.

Individuals who participate in decisions

are more satisfied with the decision and are

more likely to support it.

Groups are often dominated by one

individual or a small clique, thereby negating

many of the virtues of group procedures.

Group decision processes serve an

important communication function as well as

a useful political function

Over-reliance on group decision making can

inhibit management's ability to act quickly

and decisively when necessary.

• •

• •

•

Source: Maier, 1967.

Looking at this kind of a balance-sheet on group decision making, you may well ask

whether, on the whole, groups are superior to individuals as far as' the decision

making effectiveness is concerned. It is not possible to give a categorical answer

without reference to the nature of the people, the nature of the group and the context

in which the group is making a decision. However, what we know about the impact

of the groups in decision making process has been summarised by Harrison (1975) in

the following way:

In establishing objectives, groups are typically superior to individuals in that

they possess greater cumulative knowledge to bring to bear on problems.

•

•

•

In identifying alternatives, individual efforts are important to ensure that

different and perhaps unique solutions are identified from various functional areas

that later can be considered by the group.

In evaluating alternatives, group judgement is often superior to individual

judgement because it brings into play a wider range of viewpoints.

Decision Making

•

•

In choosing an alternative, involving group members often leads to greater

acceptance of the final outcome.

In implementing the choice, individual responsibility is generally superior to

group responsibility, Regardless of whether decisions are made individually or

collectively, individuals perform better in carrying out the decision than groups

do.

As you can well see, groups do have some edge over individuals in certain stages of

the decision making process. For this reason, you have to `decide' to what extent you

should involve others (particularly, your subordinates in the work group) to

participate in decisions affecting their jobs. In fact, you have to take a position on the

continuum of degrees of participation in decision making (See Figure I).

Figure I: Continuum of Degrees of Participation in Decision Making

Based on a series of studies on managerial decisions making behaviour, Vroom and

Yetton (1973) found evidence in support of the following propositions:

Managers tend to be more participative when the quality of the decision is

important.

•

•

•

•

•

•

Managers tend to be more participative when subordinate acceptance of the

decision is critical for its effective implementation.

Managers tend to be more participative when they trust their subordinates to

focus on organisational rather than personal goals and when conflict among

subordinates is minimal.

Managers tend to be less participative when they have all the necessary

information to make a high quality decision.

Managers tend to be less participative when the immediate problem is well

structured or where there is a common solution that has been applied in similar

situations in the past.

Managers tend to be less participative when time is limited and immediate action

is required.

At this juncture, it will be useful for you to be aware of two phenomena which have

been observed in group decision making situations. Technically these two

phenomena, which are sometimes experienced in a group decision situation, are

referred to as `Risky shift phenomenon' and `Groupthink'.

1. Risky Shift Phenomenon

Contrary to the popular belief that groups are usually more conservative than

individuals there is abundant evidence to support the proposition that groups make

riskier decisions than individuals do. There are four possible reasons. First, risk

takers are persuasive in getting more cautious companions to shift their position.

Second, as members of a group familiarise themselves with the issues and arguments

they seem to feel more confident about taking, risks. Third, the responsibility for

decision making can be diffused across members of the group. Fourth, there is the

suggestion that in our culture people do not like to appear cautious in a public

context.

34

Decision Making


35

2. Groupthink

Closely related to the risky-shift, but more serious, is the phenomenon known as

`groupthink'. This phenomenon, first discussed by Janis (1971), refers to a mode of

thinking in a group in which the seeking of concurrence among members becomes so

dominant that it over-rides any realistic appraisal of alternative course of action. The

concept emerged from Janis' studies of high level policy decisions by government

and business leaders. By analysing the decision process leading up to each action,

Janis found numerous indications pointing to the development of group norms that

improved morale at the expense of critical thinking. One of the most common norms

was the tendency to remain loyal to the group by continuing to adhere to policies and

decisions to which the group was already committed, even when the decisions proved

to be in error.

Outcomes of groupthink: Groupthink can have several deleterious consequences on

the quality of decision making. 'First, groups often limit their search for possible

solutions to problems to one or two alternatives and avoid a comprehensive analysis

of all possible alternatives. Second, groups often fail to re-examine their chosen

course of action after new information or events suggest a change in course. Third,

group members spend very little time considering whether there are any non-obvious

advantages to alternative courses of action compared to the chosen course of action.

Fourth, groups often make little or no attempt to seek out the advice of experts either

inside or outside their own organisation. Fifth, members show positive interest in

facts that support their preferred decision alternative and either ignore or show

negative interest in facts that fail to support it. Finally, groups often ignore any

consideration of possible roadblocks to their chosen decision and, as a result, fail to

develop contingency plans for potential setbacks.

Activity B

If you are currently a member of a recognised decision making group in your

organisation, what is the purpose or decision on which you are now working? What

specific steps could be taken by individuals to improve the process if improvement is

needed? List your ideas.

………………………………………………………………………………………….

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………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

7.4 OVERCOMING BARRIERS TO EFFECTIVE

DECISION MAKING

You have just examined different outcomes of a faulty group decision process under

the phenomenon called groupthink. In fact, these "faults" are not exclusive to group

decisions only. You will appreciate that in the early stages of any decision process,

there is' the likelihood that a variety of perceptual biases may interfere with problem

analysis or the identification of possible solutions. Elbing (1978) has identified

several roadblocks that can impede managerial effectiveness in arriving at the most

suitable decision:

The tendency to evaluate before one investigates. Early evaluation precludes

inquiry into a fuller understanding of the situation.

•

•

•

The tendency to equate new and old experiences. This often causes managers to

look for what is similar rather than what is unique in a new problem.

The tendency to use available solutions, rather than consider new or innovative

ones.

Decision Making

•

•

• •

•

•

•

•

•

•

•

•

•

The tendency to deal with problems at face value, rather than ask questions that

might illuminate reasons behind the more obvious aspects of the problem.

The tendency to direct decisions toward a single goal. Most problems involve

multiple goals that must be handled simultaneously.

The tendency to confuse symptoms and problems.

The tendency to overlook unsolvable problems and instead concentrate on

simpler concerns.

The tendency to respond automatically or to act before thinking.

Problems like these often cause managers to act in haste before the facts are known

and often before the actual underlying problem is recognised or understood.

Knowledge of these roadblocks will assist you in your attempts to analyse problem

situations and make reasoned decisions.

In case you are a member or leader of any decision making group, you would like to

overcome the emergence of a groupthink mentality in groups and organisations.

Taking your cue from Janis you can now formulate several strategies to overcome the

barriers:

Group leaders can encourage each member to be a critical evaluator of various

proposals.

When groups are given a problem to solve, leaders can refrain from stating their

own position and instead encourage open enquiry and impartial probing of a wide

range of alternatives.

The organisation can give the same problem to two different independent groups

and compare the resulting solutions.

Before the group reaches a final decision, members can be required to take a

respite at intervals and seek advice from other wings of the organisation before

returning to make a decision.

Outside experts can be invited to group meetings and encouraged to challenge the

views of group members.

At every group meeting, one member could be appointed as a devil's advocate to

challenge the testimony of those advocating the majority position:

When considering the feasibility and effectiveness of various alternatives, divide

the group into two sections for independent discussions and compare results.

After deciding on a preliminary consensus on the first choice for a course of

action, schedule a second meeting during which members of the group express

their residual doubts and rethink the entire issue prior to finalising the decision

and initiating action.

In other words, if groups are aware of the problems of groupthink, several specific

and relatively simple steps can be taken to minimise the likelihood of falling victim

to this problem. As you already know, recognising the problem represents half the

battle in the effort to make more effective decisions in organisational settings.

Activity C

Does the group to which you belong ever engage in a discussion of the process it is

going through? Do you think such a discussion would be helpful in leading to

improvements in the group's effectiveness? How would you suggest that such

discussions be initiated and conducted? Prepare a note.

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.…………………………………………………………………………………………

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.…………………………………………………………………………………………

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.…………………………………………………………………………………………

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.…………………………………………………………………………………………

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Decision Making


37

7.5 SUMMARY

Many analytical techniques under Management Science are available to help you take

decisions. But when your problems are of the non-programmed variety, it is not

sufficient to be alert and analytical. You have to use your creative thinking in

identifying viable alternatives, judgement and discretion in evaluating and making a

choice. We have also brought the issue of group decision to your attention as you

often make decisions as a member of a group. You have observed certain inherent

advantages of group decision situations. At the same time, we have drawn your

attention to some phenomena like risky-shift or groupthink which might emerge in

the group process and affect the quality of your decisions. Since you have also

reckoned the usual barriers to effective decision making and have noted some

strategies to overcome them, we are sure this Unit will sharpen your skills of decision

making as a manager.

7.6 KEY WORDS

Brainstorming: A group process, where the members are presented with a problem

and are asked to develop as many solutions as possible in a free environment.

Operations Research: Use of scientific methods of analysis to process complex

information and arrive at decisions achieving an optimum balance of probabilities as

well as identifiable facts.

Synectics: A method of generating alternatives by combining diverse and apparently

irrelevant ideas.


Janis, I.L. and Mann, L. 1977. Decision Making: A Psychological Analyais of

Conflict, Choice and Commitment. Free Press: New York.

Maier,N.R.F. 1967. Assets and liabilities in group problem solving: The need for an

'integrative function. Psychological Review, 4, 239-249.

Mintzberg, H., Raisinghani, D., and Theoret, A., 1976. The structure of unstructured

decision processes. Administrative Science Quarterly, June 1976, 246-275.

Simon, H.A. 1960: The New Science of Management Decision. Harper: New York.

Management by Objectives

(MBO)

UNIT 8 MANAGEMENT BY

OBJECTIVES (MBO)

Objectives

To understand the concept of Management By Objectives • • • • •

To develop familiarity with the key concepts of MBO

To understand the process of MBO

To understand the various benefits and limitations of MBO

To familiarise you briefly, with some of the successes and failures associated

with MBO in India.

Structure

8.1 Focus of Decision Making

8.2 Evolution of MBO

8.3 The need for MBO

8:4 Definitions and Concepts

8.5 The MBO Process

8.6 Ensuring Successful Implementation of MBO

8.7 Benefits of MBO

8.8 MBO in India

8.9 Summary

8.10 Key Words

8.11. Further Readings

8.1 FOCUS OF DECISION MAKING

When a manager takes a decision the purpose is to increase either the efficiency or

the effectiveness of the existing operation, or increase both efficiency and

effectiveness; Efficiency is the best way of performing a task. Formally, efficiency is

defined as the ratio of output to input. The more output that can be obtained from a

given input, the more efficient is the utilization of the input.

While efficient refers to the right or best way of doing a particular task, effectiveness

is concerned with doing the right task. However efficient a manager may be at

performing his tasks, if the choice of tasks itself is not right; his efficiency is

certainly not helping his organisation. A sales manager is very efficient in managing

the time of his sales force and ensures that each salesman makes at least six to seven

sales calls every day. But wrong identification of potential customers makes the

salesman's calls totally ineffective as no sale is actually made.

The manager's concern should always be to increase his own effectiveness and that of

the total organisation. An organisation which concentrates on doing the right tasks,

i.e. its focus is on effectiveness, will surely survive and grow even if it performs the

tasks in a somewhat less efficient manner. But a firm whose choice of tasks is totally

wrong, no matter how high its efficiency, will certainly fail.

Management By Objectives (MBO) is a tool by which managers can improve their

performance and increase their effectiveness.

8. 2 EVOLUTION OF MBO

The term MBO was coined by Peter Drucker more than 25 years ago. Drucker used

the term. in a very broad sense to connote not just a specific tool, but rather an

approach or philosophy of management. Later contributors to the subject have

39

focused on MBO in terms of improving performance of either an individual in the

context of a superior-subordinate relationship or the entire, organisation. In the

United States, the name most associated with MBO is that of George Odiorne and he

stresses the superior-subordinate relationship and propounds MBO as a "guide for

operating the unit and assessing the contribution of each of its members". John

Humble of U.K. visualises MBO as a "system which integrates the company's need to

achieve its goals with the managers need to contribute and develop himself" and

consequently places greater emphasis on corporate planning.

Decision Making

40

8.3 THE NEED FOR MBO

At this, point you may like to raise the question "Why do we need MBO?" Why

should an organisation, which has been performing well all these years, now turn its

attention to MBO and go through all the problems involved with its introduction?

The answer to this lies in the very nature of an organisation which tends to draw

attention away from, rather than towards, the common organisational goals.

Specifically there are four factors inherent in each organisation which is barriers

towards the achievement of the organisational goals. These are: specialisation of

work; misdirection of effort by the boss: hierarchical structures of management; and

misdirection by cornpensation.Thus there is need to unify the efforts of individuals

towards achievement of corporate goals. This unifying force is provided by MBO.

Today's technological sophistication requires specialised knowledge, specialised

skills and specialised workers. The danger is that these specialised workers, in their

quest for perfection within the narrow confines of their specialised function, often

tend to lose sight of the organisational goals. They forget they are working for an

organisation, and that their specialised function has to operate within specified

parameters. MBO helps to mesh together the various functional specialists for the

achievement of the firm's overall objectives.

The compensation and appraisal system tends to act as a deterrent towards achieving

organisational goals. This is because there is a tendency for people to `please the

boss' even in the most objectively designed appraisal system. People tend to take

even the most casual observation or remark of the boss seriously and work to please

him because they know that the boss plays an important role in their promotion. And

organisational goals are relegated to the back seat. M I30 brings in greater objectivity

with its emphasis on results.

In every organisation there are various hierarchical levels of management. Each level

has its own vision and own set of narrow objectives to fulfil. Often these levels are

totally insulated from each other. This creates barriers towards harmonious working

together for achieving the organisational goals. For instance, the machine operator

would like to maximise his production and minimise the number of rejects and his

interest is limited to the machine he operates. The shop floor supervisor is concerned

with all the machines and is interested in maximising the total output with maximum

utilisation of various inputs. In achieving this objective, the supervisor may like to

minimise the operation of an inefficient machine.. However, the operator of that

particular machine would not like that. If there is agreement about the overall

organisational goals which have to be achieved, this kind of conflicting pressure can

be avoided.

Finally, the compensation system can often create situations in which people work

towards maximisation of their compensation, often to the detriment of achieving the

organisational goals. If the machine operator's compensation is tied to the output

which he produces on the machine he would obviously like to produce the maximum'

numbers, disregarding the factor of inefficiency, wastage, rejects, etc. Similarly, a

salesman would like to book maximum orders irrespective of the fact whether the

payment is made promptly or not. But at the organisational level, the concern is not

only with output and orders booked, but equally with the costs incurred and

realisation of payments. Only when 'objectives are specified for each person, drawn

from and contributing towards the organisational goals, with emphasis on team work,

can these forces of separatism be minimised.


(MBO)

41

8.4 DEFINITIONS AND CONCEPTS

For our purpose we shall define MBO as an approach which uses objectives as a

focal point to improve managerial performance and managerial effectiveness, both at

the individual and at the organisational level. These objectives serve to guide, direct,

review and measure performance. However, MBO should not be thought of as

merely a tool for performance appraisal. It is a far more comprehensive mechanism

and provides a framework for organisational and managerial decisions.

In the MBO approach while the objectives provide the focal point, the emphasis is on

improving the performance and providing better results. This is because MBO is

concerned with achieving the objectives as well as the process by which they are

achieved. The objectives will necessarily vary with the managerial level at which

they are set. Objectives at the level of the managing director will be different from

those of a branch manager or the production manager. However, all these objectives

are derived from the organisation's overall objectives and in turn are linked to the

corporate plan. The fact that MBO allows for distant, intangible organizational -

objectives to be converted into achievable, personalised objectives (for each level of

management) is the reason for its success and popularity. The key concepts in M BO

are emphasis on results than activities, objectives for specific managerial positions,

participatory or joint objective setting, and identification of key result areas and

establishment of periodic review system.

Emphasis on results rather than activities

The basic feature of every MBO is the emphasis on results rather than activities.

Activities, per se, are never important. Their importance lies in the fact that they lead

to results. If an activity produces no results, it may just as well be dropped, for

obviously it is only consuming time and resources with no output.

In MBO, the starting point is the identification of results which are important to the

organisation and then working backwards to sec which activities can lead to these

results. George Morrisey has identified "management by activities or reactions" and

"management by objectives and results" as the two theoretical extremes.

Traditionally, management was characterised by activities. Even today you may find

this happening in many cases. For instance, most job descriptions are spelled out in

terms of activities, such as travelling, meeting people, corresponding, etc, rather than

results. It is this disproportionate focus on activities which leads to the situation

where apparently all managers are very busy but are not able to achieve any

significant results.

To shift from an activity-oriented to a result-oriented management system is not

always easy. Engaging in activities gives a lot of satisfaction to most people even

when they know that its result contribution is very low. The more visible is the

activity, such as preparing graphs, charts, etc. the greater is the satisfaction. The other

reason why people derive satisfaction from engaging in activities is because

sometimes the gap between activities and results may be so long and uncertain that

keeping a constant focus on results may be very difficult. Urgent, pressing problems

arising out of crisis situations or out of the need to meet deadlines such as drawing up

of balance sheet by the end of the financial year require immediate activity which is

unavoidable. However, if the manager always keeps in mind the results for which he

is accountable, he can change his style of working towards result achievement.

Objectives for specific managerial positions

In the context of M BO, objectives are defined as expected results. Objective must be

specified for every managerial position at each, level of the managerial hierarchy.

Objectives are set for specific managerial positions and not for the individuals who

occupy these positions.

Irrespective of whether it is Mr. K.D. Das or Mr. R. Venkat who is manager of after

sales service, the objective of the managerial position still will remain the same. It is

important to specify objectives according to managerial positions to ensure the

continuity of effort in the achievement of organisational objectives. The only

exception to this is in the case of top management. When a company changes hands

or a new managing director is appointed it is likely that he may like to modify or even

totally change some of the existing corporate objectives and provide a totally new

direction to the organisation. In such a situation, objectives for all the managers may

have to be modified or changed.

Decision Making

42

There are three distinct levels of management in every organisation. these are: the top

management, middle management and operating management. Objectives must be

specified for each level of management. At the top management level the objectives

are referred to as corporate objectives and they provide the general direction for the

entire organisation. Since their scope extends to the entire firm, corporate objectives

necessarily encompass a span of five to ten years. Predictions of future events can

never be made with complete certainty and therefore the corporate objectives are

specified more in general rather than very specific terms. Corporate objectives are

externally oriented as they are derived from the external environment in which the

firm operates. This environment comprises economic, technical, legal, social,

cultural, political and demographic factors as well as consumer tastes, attitudes,

competition, etc. Thus a company manufacturing mopeds may well define its

corporate objective as satisfying the short distance transportation needs of middle

income classes.

The corporate objective must be broken down into more specific objectives to

become practical and workable for the middle management. Managers of functional

divisions and geographical territories represent the middle management. In case of

the moped company, the objective at the middle level i.e. marketing manager may be

to achieve sales figure of 85,000 mopeds per year by March 1988, and 60 per cent of

this sale is to be achieved in the southern region since the company is located in

Bangalore.

Area sales managers, shop-floor production managers, and managers of inventory

control are all representative of the operating management level. Objectives at the

operating level are concerned with the short-term, such as sales per month,

production level per machine, etc. Operating level objectives are derived from the

objectives of the middle management level which in turn are derived from the

corporate objectives. Objectives at different levels and in different functional areas

are linked to each other. To reach the sales figure of 85,000 units, production must

also be set correspondingly at 86,000 units (allowing 1000 for defective and rejects).

Apart from this hierarchy of objectives and their linking with each other, there is also

the need to rank them in order of importance. The more important objectives must

first be fulfilled before moving on to the next most important objectives. This is

necessary because the resources and time at the disposal of the organisation are

limited and simultaneous fulfilment of all objectives is not possible.

To be truly workable, objectives must be measurable in specific terms such as

quantity, time, cost and quality. An objective which simply states improve quality' is

not useful because it does not specify up to what level and by what time, and at what

cost. In case of such vaguely stated objectives it is impossible to measure their

attainment. To be achievable, objectives must be set realistically, taking into account

all the strengths and weaknesses of the existing situation. Objectives which are set at

an unrealistically high level will only serve to frustrate the people for whom they are

set. Similarly, objectives which are set too low are also not desirable.

Activity A

List the corporate objectives of your company and following the MBO sequence

identify your own objectives. Also identify the objectives of your immediate superior

and subordinate.

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

Participatory or joint objective setting Management by Objectives

(MBO)

43

We have seen that all operating objectives are derived from the corporate objectives

by breaking them down into smaller workable and specific functional area objectives.

In an organisation practicing MBO these objectives are set by the concerned

managers themselves in consultation with their superiors. The emphasis is on

participation of the concerned manager himself. The participation process allows the

manager to exert his influence on those very objectives and decisions against which

his performance will be measured. This participation ensures that the objectives set

are realistic since the manager is in direct contact with the market, labour, production

facilities, etc. and knows the true situation. Since the objectives are realistic and set in

agreement with the concerned manager their chance of being attained is also higher.

Identification of key result areas

Every managerial position has associated with it certain results or outputs. However,

it is the achievement of only a few result areas that is critical to the organization’s

success and these are known as key result areas. For instance, the various result areas

for a production manager may include quality, quantity, adherence to delivery

schedules, rejects, wastage, inventory, labour costs, material cost, machine down

time, etc. Depending on the nature of his organisation and industry, the production

manager will identify his key result areas. In an industry, where the raw material and

machinery are the major cost contributors, the manager's key result areas may be raw

material cost, wastage and machinery utilisation. On the other hand, in an industry

like television set manufacturing, where assembly is the major operation, labour

costs, critical component costs, and quantity may be the key result areas. Similarly, in

other functional areas the key result areas can be identified. In marketing, these may

be related to sales, new markets, new customers, marketing research, distribution,

pricing policy, media advertisements, local sales promotion plans, etc.

Just as key result areas (KRAs) can be identified for different functional areas, these

can also be identified at the organisational level. For instance, Modi Xerox, a

company engaged in manufacturing and marketing photocopiers views itself

primarily as a service organisation and emphasises the after sales service aspect. In

contrast, other companies may view their business as mainly manufacturing. While

service is obviously one of the important key result areas for modi Xerox, it may not

be so for its competitors.

There are KRAs which are common to all business organisations' and all managerial

positions irrespective of the functional area or industry. Peter Drucker has identified

eight such KRAs common to all firms. These are: profitability, market standing,

innovation, productivity, worker performance, financial and physical resources,

managers' performance and development, and public responsibility.

W.J. Reddin has identified five KRAs which are common to all managerial positions.

These are: subordinate development, innovation, project implementation, managerial

development and systems implementation.

In 1978-79, Madura Coats, a company engaged in manufacturing and marketing of a

variety of threads and yarns had identified its various KRAs as financial resources,

profitability, and development of organisation, management development, labour

relations, diversification and cotton, development. In the same year, Gujarat

Industrial Development Corporation, a state government: agency for encouraging and

assisting industrial development, had identified its RAs as capacity utilisation, cost

reduction, resource mobilisation, organisation development,, customer service,

infrastructure planning and development, diversification, corporate image and rural

industrial infrastructure.

Identification of key result areas helps the manager and the organisation focus its

scarce resources on those activities which contribute to the critical results. Focusing

is important because, in most cases, all managerial activities do not equally

contribute to results. In the course of an average day, a manager may indulge in a

number of activities such as meeting people, sorting out employee's grievances,

planning for products to be launched in the next year, reviewing last month's

expense sheet, etc. While sorting out personal grievances and meeting unexpected

visitors- may be unavoidable and urgent, it is activities such as future planning which

are important and contribute to results.

Decision Making

44

Key result area can .be identified by asking the simple question: what is the unique

contribution of my job or the organisation? The answer to this question will provide

the clue to identifying the key result areas. Once identified, these KRAs may remain

unchanged for a number of years. These may change when the scope of the

managerial position or organisation is changed or if a subordinate has been developed

to take over an existing KRA so that it is no longer in the purview of the manager's

responsibility. As is the case with objectives, so also the KRAs at the corporate level

are more durable than those at the middle and operating management levels.

Establishment of Periodic Review System

An important feature of every MBO is the periodic review system. The review may

be held at intervals of every three, six or twelve months. The purpose is to review the

performance against the objectives'. Also, the validity of continuing with the pre-

established objectives may be reviewed.' An organisation which professes to follow

the M BO approach but has no review system is only paying lip service to MBO

without actually practising it. Objectives are useful only if they can initiate action and

the review system is a way to ensure that the action in the desired direction is being

taken and is yielding the desired results. The review system thus provides a

mechanism for both measuring and controlling.

MBO should not be confused with a performance appraisal system. There are many

elements which are common to both, but MBO is wider in both the concept and

application than a system of performance appraisal. Without going into too many

details, it would be useful to point out one major difference between the two. In

performance appraisal, the emphasis is on simply reviewing the past, while in MBO

the focus is on initiating future corrective action. Though MBO may also be used for

performance appraisal, you must remember that this is not its main purpose. The

purpose of MBO is to improve managerial performance and effectiveness.

Activity B

Identify the various possible key result areas in your organisation. In case these are

already identified, analyse whether they are adequate, inadequate, or excessively

identified.

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

8.5 THE MBO PROCESS

There are three steps involved in the MBO process. These are setting objectives in

each key result area, action planning, and performance review.

Setting Objectives

Key result areas are usually more durable than objectives. While KRAs delineate the'

broad areas within which the organisation must focus its. attention, the objectives

represent the specific results expected to be' achieved within these KRAs.


(MBO)

45

• • • • •

Thus the first step is to identify the KRAs and pin responsibility for results with

specific managerial positions. Making people responsible for KRAs is a very critical

step for translating MBO theory into practice. KRAs and the persons responsible for

them must be identified at the level of the entire organisation as well as each

functional area.

Having identified KRAs, the next step is to set objectives within them. At the

organisational level, these will be the corporate objectives. Corporate objectives

define the purpose and mission of the organisation and can be described by seeking

to answer the question `what is our business'. Following out of the corporate

objectives are the long and short-term strategic objectives. Five to ten years is the

usual time horizon for long range plans while anything between three to five years

describes the short-range. Strategic objectives spell out those objectives related to

choice of product, market and technology. Derived from these are the unit level

objectives in the case where an organisation consists of several different business

units.

Action Planning

Planning enables the objectives to be turned into reality. If objectives describe the

`what', plans describe the `how' or the way in which the objectives are to be achieved.

Managers are paid to achieve certain objectives. The objectives can be achieved only

if the manager converts them into specific action plans spelling out the various steps

or activities to be performed and the specific time within which these must be

performed.

There are four broad steps involved in every action plan:

• Choosing strategies which are appropriate to the objectives

• Assigning responsibility for achieving the objectives

• Allocating resources for achieving the objectives

• Scheduling specific activities to achieve maximum utilisation of resources.

Activities form the basis of every plan. Activity refers to the thing or series of acts

which have to be done in order to achieve the objective. Further, these activities have

to be arranged sequentially in the most logical manner and a time frame has to be

specified for the completion of each activity. This is known as scheduling. It is only

when this has been done that the plans get converted into àction' plans.

There are many techniques which are extremely useful in planning. Some of the more

common ones are Activity Networks, Decision Trees, Milestone Charts, Programme

Evaluation and Review Technique (PERT), and Critical Path Method (CPM).

Depending on the specifics of your plan you can use the appropriate technique to

make them more useful.

In MB\O, objectives are set for the organisation or the unit as well as for specific

individuals. Therefore two kinds of plans are needed: plans for the team and

individuals' plans. The reference point for team or group plan may be the sales team,

or group of R & D engineers working on new product development or even the entire

regional office striving as a team to achieve the objective of a specified sales figure.

Wherever objectives are specified for a group of people working together towards a

common goal, a team plan is required. Within the team individuals are assigned

specific objectives for achieving and these individuals need individual or personal

plans.

Performance Review

Regular performance review is one of the main features of MHO. In the absence of a

review system the MBO system cannot function. In the MBO process, the focus of

the performance review is on:

performance

improvement

future corrective action

frequency of reviews

self-appraisal

It is on the basis of these five elements that the performance review system of M BO

is distinguished from other kinds of appraisal system. In MBO the purpose of

evaluating performance is to provide corrective feedback to the concerned person. In

an appraisal system, the appraisal may be done for the purpose of assessing the

individual's potential and his compensation, for career planning and identification of

training and development needs and also includes appraisal of personality traits and

not merely performance. Figure I present a system of performance review in an

organisation where the MBO approach is followed.

Decision Making

46

8.6 ENSURING SUCCESSFUL IMPLEMENTATION OF

MBO

The MBO process seems apparently simple but to practice it requires great analytical

skill and clarity of purpose on the part of the management. MBO is not a managerial

technique which can simply be introduced at a moment's notice. MBO involves

people who have their own fixed ideas, attitudes, values and perception which can

make the MBO implementation a very complex affair. The prerequisites of a

successful MBO are:

• Evaluation

• Preparation

• Top management support

• Time horizon and

• Proper entry point

Evaluation

The first step is to evaluate what you expect from MBO. The most commonly made

mistake is that MBO is visualised either very narrowly as a just another appraisal

system or as merely another way of tackling the problem of writing job descriptions

or it is visualised as a solution to all problems. This leads to unrealistic expectation

from MBO. To avoid this, it is best, first of all, to evaluate the existing organisational

performance, culture, management style, systems of planning, controlling and

monitoring and then decide upon the specific needs which can be fulfilled by MBO.

It must be remembered that MBO is a powerful tool which can be used for improving

the entire organisational performance, provided there is clarity about the expected

results.

Preparation

The next step is to prepare the people for accepting MBO. Human nature always

resists change. The best way to overcome this resistance is to disseminate maximum

information about M130 and educate the concerned key people about its expected

benefits. If possible, all the managers should be given a formal training exposure to

MBO. This stage of preparation is very critical as MBO can be successful only if

people willingly accept and practice it.

Top Management Support

For MBO to be successfully implemented it is important that it has the full backing

and support of the top management. In the process of implementation, there may be

some redefining of objectives which in turn may lead to jobs being redefined,

restructured or even totally scrapped in some cases. This is bound to lead to conflicts

and friction and top management intervention may often be required to soothe

disturbed emotions and find practical solutions. Top management needs to exhibit

great patience, understanding, and perseverance to see the MBO through its teething

stage.

Time Horizon Management by Objectives

(MBO)

47

MBO means change which implies upheaval and disturbances. Just as some people

can accept and adapt to change quicker than others; similarly one organisation's

adaptability to change is different from that of another. Depending on its personality

and attitude towards change (whether it is resistant or highly flexible) each

organisation has to decide upon the rate of change which it can withstand. How

quickly is MBO to be introduced and implemented in the organisation? In phases or

at one go? In certain departments or in all departments simultaneously? These are the

issues best decided on evaluation of specific characteristics. There can be no hard and

fast rule except that sufficient time should be allowed to give MBO a fair trial.

Entry Point

If MBO is being introduced in phases, then the best point for beginning its

implementation is the top management level. But the top management must really be

serious about it and not merely profess to practice without actually doing so. Starting

at the top has the advantages of setting an example for the rest of the people and the

relatively small number of people involved.

8.7 BENEFITS OF MBO

The benefits accruing from MBO can be discussed in terms of the specific benefits to

the subordinate, the superior and the organisation:

i) Benefits to subordinates include greater role clarity, measurement of performance

and increased job satisfaction. W hen specific objectives have been agreed upon, the

subordinate knows exactly what he has to achieve and can plan his various activities

towards this end. Role and goal clarity ensure that there is no wastage of scarce

organisational resources, on the one hand and single minded dedication to

achievement of objectives on the other."

MBO implies regular feedback and measurement of performance against objectives.

This serves as a great motivating factor for people to put in their best effort to

achieve the objectives. It also helps to weed out the non-performer and identify the

real contributors. Clear, specific objectives and unbiased feedback about performance

contribute to increased job satisfaction as compared to a situation where a person

does not know what is expected of him and how, if at all, his performance will be

judged. Job satisfaction emanates from the feelings of having done a job well to the

best of your capability as well as public recognition and approval for it. The former is

possible only when there are specific objectives while the latter can occur only if

there is a system of review and reward. A worker or manager who derives

satisfaction from his job will work harder in order to improve his performance while

a dissatisfied, discontented manager will make a negative contribution. Thus MBO

can serve to bring about a change and put people on the self-propelling cycle of role

clarity, increased job satisfaction and increased productivity.

ii)Benefits to Superiors: The benefits accruing to the subordinate will, of course,

also accrue to the superiors. But besides these, the other specific benefits for

superiors are that MBO motivates subordinates, strengthens superior-subordinate

relationship, and provides an objective appraisal method.

MBO is based on the concept of participation and this leads to greater motivation.

Setting objectives implies that both the superior and the subordinate have to sit across

the table and openly discuss their respective roles, work, obstacles and competencies.

Such candid discussion always leads to increased mutual trust and confidence in each

other and provides an enduring bond to the relationship.

One of the biggest advantages of MBO is that it provides an objective basis for

reviewing performance on the basis of achievements rather than personality traits.

Reviewing a person on the basis of his personality not only puts him on the defensive

but serves no purpose from the organisation's point of view. The only thing that

matters is results. People are retained by organisations to produce results and

not because they are sociable, soft spoken, introverted or possess any other such

personality characteristic which has no bearing on their competence or capability.

Decision Making

48

Benefits to the organisation: MBO focuses on managerial effectiveness as a central

value in the entire organisation. And this emphasis permeates down to the lowest

level, influencing each manager and worker. This shows up in all the decisions which

each manager makes and the overall performance of the organisation is improved.

Secondly, MBO with its focus on objectives improves concentration and co-

ordination of managerial effort. There is maximum utilisation of resources and

conflicting pulls in opposite directions are avoided. Thirdly, the periodic review in

MBO helps identify advancement potential of workers and managers. It also helps in

identifying workers-who are under-utilised or not making the full contribution.

Lastly, MBO creates many centres of accountability as against one centralised

accountability point. It is not only the managing director or proprietor who is

accountable for producing the desired results but each manager is responsible for

achieving the agreed-upon objectives. Thus MBO leads to greater decentralisation in

terms of setting and achieving objectives.

Some limitations:

In practical implementation you could sometimes encounter one or more of

the following limitations of MBO.

Problems in joint objective setting among unequals. MBO implies a process of point

or consultative objective setting between the superior and the subordinate. But this

very relationship, based upon status, may prove to be a hindrance in free, frank and

open communication between the two, and stall the process of setting goals in an

objective manner;

Problems of MBO being effective at the lowest level. Theoretically, MBO is

supposed to percolate throughout the organisation right down to the lowest level

since the manager as well as the worker at each level have set their own agreed upon

objectives. However, in reality, the workers or managers at the lower levels often do

not have the full freedom to set their own objectives. This is because MBO operates

from top to down, starting with the corporate objectives. Thus, the process of

objective setting implies that the objectives at the lower level have already been

locked in and managers down the line have to match their own objectives with those

of the level above them only. If the process of objective setting is reversed to

overcome this limitation, and objectives are first set at the lowest level, it would

mean that the entire organisation is being guided by people who have less experience,

less education, less knowledge and awareness; and it is

Difficult to implement in a situation of change. MBO assumes a stable environment

in which the objectives once set will hold good till they are achieved. In reality,

however, many unforeseen changes may occur which may render the objective

impossible to achieve, or irrelevant, or invalid. In a situation where sudden changes

occur frequently MBO is difficult to implement.

8.8 MBO IN INDIA

MBO was introduced in India in the early seventies. It has followed the British

model, rather than the American one. and consequently there is greater emphasis on

corporate planning and control. By now more than fifty companies of different sizes

and backgrounds, and belonging to different industries have experimented with BO

Not all have been successful, but the number of successes is larger than those of

failures. M BO has been adopted in private as well as public sector companies and

also in state government organisations.

The Indian company with the longest history of practising MBO is Madura Coats.

Since 1971, MBO has become an established way of management in this company.

Managers meet almost every other day for objective setting and reviewing. The

managing director and MBO consultants meet every month to review the various

aspects of MBO. The success at Madura Coats proves the fact that top management

commitment is the most critical factor for success.


(MBO)

49

•

•

•

•

•

•

•

In contrast to Madura Coats, which is more than a 100 years old, Bharat Bijlee is a

relatively young company engaged in manufacturing and marketing various kinds of

motors and lifts. MBO was initiated in 1974 with the selection of ten key result areas

for improving effectiveness. These key result areas were profitability, expansion,

diversification, manager development, organisation development, cost effectiveness,

employee relations, plant modernisation, material availability and public relations.

Specific objectives were set in each key result area with emphasis on role clarity.

This was achieved by defining objectives for twenty senior managers in a

simultaneous process thus ensuring integration and intermeshing of objectives.

The experience with Hindustan Copper Limited (HCL) proves that MBO can work

well in a large public sector undertaking. The experience of HCL proves that MBO

can become institutionalised and continue despite changes in the top management

team. MBO was started in 1974 and restricted only to defining corporate objectives

and covering one part of the organisation.

MBO is applicable not only to business firms but to other kinds of non-commercial

organisations too. MBO has been successfully implemented in state government

organisations such as the Tamil Nadu Dairy Development Corporation, Department

of Stationery and Printing and Directorate of Industries and Commerce amongst

others. Besides Tamil Nadu, Gujarat is the other state which has enthusiastically

adopted MBO. To begin with, the Commissionerate of Industries and the Gujarat

Industrial Development Corporation were selected for the MBO programme.

Some of the other companies which have successfully implemented MBO are Bharat

Heavy Electricals Limited, Grindlays Bank, Blue Star, Shaw Wallace, and Glaxo

Limited.

There have been cases where M BO has totally failed. The most commonly

encountered reasons for the failure of MBO are:

Lack of top management support and commitment

Lack of or inadequate planning and preparation

Lack of information and education

Very short time horizon

Overemphasis on appraisal

Poor understanding of the role of M BO and

Lack of clear cut policy towards MBO.

By avoiding the above mentioned pitfalls you can ensure that MBO will be

successfully implemented

Activity C

Sit with your subordinate and plan objectives for the next two or three quarters. List

the various problems you may have faced in these meetings. What steps would you

suggest to overcome these problems?

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

Decision Making

50

8.9 SUMMARY

Management by objectives helps improve managerial performance and effectiveness.

It provides a workable framework to the manager within which he can make

decisions which are in the best interest of the organisation. The key concepts of MBO

are emphasis on results, participative objective setting for each managerial position,

and emphasis on team work, human relations and a regular review system. The

process of MBO involves setting objectives, action planning and reviewing

performance. For successful implementation, proper planning and preparation are

required. To achieve success with MBO it is necessary to have the top management's

full support and commitment, a realistic time frame for implementation, adequate

training of people who would be involved in the process, and a proper understanding

of the role of MBO.

8.10 KEY WORDS

Action Planning: Drawing up of detailed plans which spell out the various

sequential activities to be performed in order to achieve the specified objectives.

Corporate Planning: Planning undertaken by the top management to define

objectives for the entire organisation as well as the means of achieving these

objectives.

Effectiveness: The extent to which the output requirements are actually achieved.

Emphasis on doing the right things.

Efficiency: Ratio of output to input, doing things in the right manner.

Joint Objective Setting: A process by which a boss and his immediate subordinate

arrive at mutually agreeable objectives for the latter.

Key Result Areas: Those results or outputs whose achievement is critical to the

survival of the specific managerial position. These can also be defined at the level of

a division, a unit and the entire organisation.

Objectives: Expected results.

Performance Review: A system for evaluating the results achieved as against the

specified objectives in order to initiate corrective action and improve future

performance.


Drucker, Peter F. 1955. Practice of Management, Heinemann: London.

Maheswari, B.L. 1980. Management By Objectives, Tata McGraw-Hill Publishing

Company: New Delhi.

Reddin, W.J. 1972. Effective Management by Objectives: The 3-D Method of MBO,

Tata McGraw-Hill Publishing Company: New Delhi.

Drucker, Peter F. 1975. Management Tasks, Responsibilities, Practices, Allied

Publishers: New Delhi.

Management of Organisational

Conflicts

UNIT 10 MANAGEMENT OF

ORGANISATIONAL CONFLICTS

Objectives


• Recognise different types of conflicts • Describe the process of a conflict • Compare and contrast different views about conflict • Appreciate functional and dysfunctional consequences of conflict • Identify the sources of conflict • Decide when and how to stimulate conflict • Diagnose which conflict resolution strategy to use and when.

Structure

10.1 Introduction

10.2 Types of Conflict

10.3 The Process of Conflict

10.4 Different Views About Conflict

10.5 The Impact of Conflict

10.6 Sources of Conflict

10.7 Modes of Conflict Management

10.8 Summary.

10.9 Self-assessment Test

10.10 Key Words


10.1 INTRODUCTION

Life is a never ending process of one conflict after another. Remember the time when

you were a small child and had to choose between a tricycle and a cricket set or say, a

set of dolls and a new frock for a birthday present. That was probably your first

exposure to a conflict situation. Of course, this is a simplistic example of a conflict,

but has life been the same since? Probably not. Think back and recall how each

succeeding conflict in your life over the years has, been increasingly complex.

Conflict is a theme that has occupied the thinking of man more than any other with

the exception of God and love. Conflict has always been widespread in society but it

is only recently that it has generated a lot of interest and has been the focus of

research and stud We are living in the age of conflict. Everyday the choices available

to us regarding any decision are increasing in number. You may have wanted to

become a manager, an entrepreneur or a computer scientist. On the other hand, your

father might have wanted you to become a doctor, a lawyer or a chartered accountant.

Thus you faced a conflict not only at an intrapersonal level, in terms of the various

choices confronting you, but also at an interpersonal level-your choice vs. your

father's choice of a career for you.

Conflict is not confined at the individual level alone but is manifesting itself more

and more in organisations. Employees have become more vociferous in their

demands for a better deal. Various departments in an organisation face a situation full

of conflicts due to a number of reasons like goal diversity, scarcity of resources or

task interdependence etc.

Management today is faced with the awesome responsibility of ensuring optimum

levels of growth and productivity in an environment that is full of conflicting

situations. A survey suggests that the modern manager spends over 20% of his time

21

handling one form of conflict or the other. Top and middle level managers in the

same survey have pointed out the importance of conflict management skills. We hope

that the knowledge you will gain from this Unit will equip you better to manage

conflict situations more deftly at your workplace.

Organisational

Climate and Change

22

10.2 TYPES OF CONFLICT

Conflict within an Individual

You can locate conflict at various levels. There could be conflict within oneself-the

intrapersonal conflict. Basically, there are three types of such conflicts. You may

have an excellent job offer in a city you are not willing to go to. In such a case, you

are attracted to and repelled by the same object-an approach-avoidance conflict.

Similarly you may be attracted to two equally appealing alternatives like seeing a

movie or going for a picnic-an approach-approach conflict. You may also be repelled

by two equally unpleasant alternatives like the threat of being dismissed if you fail to

report against a friendly colleague who is guilty of breaking the organisation's rules-

an avoidance-avoidance conflict.

Conflict between Individuals

Conflict can also take an interpersonal form. Conflict between individuals takes place

owing to several factors, but most common are personal dislikes or personality

differences. When there are only differences of opinion between individuals about

task-related matters, it can be construed as technical conflict rather than interpersonal

conflict. Of course, technical and interpersonal conflicts may influence each other

due to role-related pressures. The sales manager may put the blame for low sales

volume on the production manager not meeting his production schedule and may

start disliking the production manager as an incompetent person. It is often very

difficult to establish whether a conflict between two parties is due to manifest rational

factors, or it emanates from hidden personal factors.

Conflict between an Individual and a Group

These types of intragroup conflicts arise frequently due to an individual's inability to

conform to the group norms. For example, most groups have an idea of a "fair day's

work" and may pressurise an individual if he exceeds or falls short of the group's

productivity norms. If the individual resents any such pressure or punishment, he -

could come into conflict with other group members. Usually, it is very difficult for an

individual to remain a group-member and at the same time, substantially deviate from

the group norm. So, in most cases, either he conforms to the group norm or quits (or

is rejected by) the group. Of course, before taking any such extreme step, he or the

other group members try to influence each other through several mechanisms leading

to different episodes of conflict (much to the delight of the researchers in this field

called Group Dynamics).

Conflict between Groups within an Organisation

Intergroup conflicts are one of the most important types of conflict to understand, as

typically, an organisation is structured in the form of several interdependent task-

groups. Some of the usually chronic conflicts in most of the organisations are found

at this level, e.g., Union vs. Management, one Union vs. another Union; one

functional area like production vs. another functional area like maintenance; direct

recruits vs. promotees, etc. The newly emerging field of Organisational Politics has

started systematically investigating such types of conflict and in a later section on the

effects of conflict we shall give examples of what happens to groups when their

conflicts are not solved.

Conflict between Organisations

Conflict between organisations is considered desirable if limited to the economic

context only. The laissez-faire economy is based on this concept. It is assumed that

conflict between organisations leads to innovative and new products, technological

advancement, and better services at lower prices. However, in this Unit we shall

refrain from probing into this macro-level conflict.

Activity A Management of Organisational

Conflicts

23

From your own experience, give an example of approach-approach conflict where

you had to choose between two equally attractive goals. Recall another example of

avoidance-avoidance conflict where you had to choose between lesser of two evils:

Cite yet another example of approach-avoidance conflict where you felt quite

ambivalent because both positive and negative incentives were associated with the

same goal.

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Activity B

Recall an interpersonal conflict situation where you found two persons you care

about were in conflict in which anger, hostility, and strong opinions were present,

Outline the triggering events and what exactly happened. What did you do? Did you

become involved and take a position? Or did you attempt to mediate? Or were you

observing to see what happens? Or did you leave the scene because you thought it

was none of your business?

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Activity C

Cite an example of inter-group conflict in the organisation where you work, It can be

an example of lateral conflicts, e.g., between two departments, between line and staff,

between two unions, etc. Or it can be an example of vertical conflict, for example

between union and management. What are the behaviours of the groups from which

you infer that they are in conflict? List these behaviours.

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10.3 THE PROCESS OF CONFLICT

You have just observed that beginning within an individual, conflict can be found on

several levels. The nature of intrapersonal conflict is of very high significance and

the knowledge of mechanisms available to resolve it is immensely important in

improving personal effectiveness, In this Unit; however, our focus will be on

interpersonal, intragroup and intergroup conflicts as these types directly influence

effectiveness of an organisation.

For a conflict to exist it must be perceived by the parties to it. If no one 'is aware of a

conflict then it is generally agreed that no conflict exists. Still, does, a mere

awareness of opposing goals, or differences of option, or antagonistic feelings imply

that there is a conflict? It would be easier for you, to understand conflict, if you view

it as a dynamic process which includes antecedent conditions, cognitive states,

affective states and conflicting behaviour. Have a look at Figure I on the conflict

process and you will be able to describe and analyse conflict between two parties-

individuals, groups or organisations-in a chain of episodes which tend to unfold in a

particular

sequence.

Organisational

Climate and Change

24

Potential Antagonism

The first stage is the presence of antecedent conditions that create opportunities for

conflict to arise. They need not necessarily lead to conflict and may be present in the

absence-of conflict as well. You may refer to this stage as the source of conflict and

in a later section we shall have a fuller discussion on these antecedent conditions

which might prepare the ground for the onset of the second stage. Some of these

antecedent conditions which we shall discuss refer to scarcity of resources,

heterogeneity of members and diversity of goals, values, perception; degree of

dependence between groups; insufficient exchange of information, etc.

Cognition and Personalisation

The antecedent conditions may or may not lead to conflict. They must be perceived

as threatening if conflict is to develop. The situation may be ignored if it is seen as

minimally threatening. Moreover, if a conflict is perceived, it does not mean that it is

personalised ("felt conflict"). However, if feelings are generated, they tend to

influence perception of the conflict. It is at the felt level, when individuals become

emotionally involved and parties experience feelings of threat, hostility, fear or

mistrust.

Conflictive and Conflict-management Behaviour

Manifest behaviour is the action resulting from perceived and/or felt conflict. At this

stage, a conscious attempt is made by one party to block the goal achievement of the

other party. Such behaviour may range from subtle, indirect and highly controlled

forms of interference to more open forms of aggressive behaviour like strikes, riots

and war. Most conflict-handling behaviours are displayed in several forms like

resignation and withdrawal, appeasement and compromise, confrontation and

collaboration, etc. These behaviours are often referred to as conflict management

styles and stem from .the strategies of conflict stimulation or conflict resolution. In a

later section, we shall discuss in greater detail some of these modes of conflict

management.

Aftermath

The interplay between different forms of overt conflict behaviour and conflict

handling strategies of stimulation or resolution influence the consequences. These

consequences (in terms of perforntace. of the group, the level of satisfaction and Management of Organisational

Conflicts

25

quality of relationship in the involved parties, change of structure and policies etc.) in

turn influence the antecedent conditions and probability of future conflict.

Sometimes, the aftermath sows the seeds of yet another conflict episode in which

case the entire process is repeated.

The four-stage conflict-process model is a very useful framework to understand the

episode of any conflict. On the basis of such a framework you can now define

conflict as the process which begins when A, as one party perceives that B, as the

other party, is making some conscious efforts to frustrate A in pursuing his interest.

Party A and/or B may he an individual and/or group(s).

Activity D

Think about a conflict episode in your workplace between two parties about whom

you have some knowledge. What were the antecedent conditions which allowed the

conflict to arise? How did the two parties respectively perceive the conflict situation?

What were their respective feelings? What manifest behaviour showed that they were

in conflict? How was the conflict managed? What were the consequences? Prepare

an analytical report.

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10.4 DIFFERENT VIEWS ABOUT CONFLICT

At this stage, you might be tempted to ask quite a few questions about the role of

conflict in groups and organisations. Can you avoid all conflicts or are they

inevitable? Is it at all good to have any conflict? Who is primarily responsible in

allowing a conflict to take place?' What should be the role of a manager once it

arises? These are very important questions which people tend to answer in one way

or the other depending upon the views they hold about conflict. The views about

conflict itself are "conflicting". In this section, we shall examine these views and

their impact on management practices.

The Traditional View

The traditional view. prevalent in the 1930s.1940s, regarded all conflicts as harmful

and evil. Conflict was viewed negatively and was associated with violence,

turbulence, agitation, destruction and irrationality. It was believed that conflict

indicated a malfunctioning within the organisation and that the appearance of conflict

was the consequence of the management's failure to bind the employees and the

organisation together and failure to communicate to them the commonality between

the individual and organisation interests. Had the management corrected those lapses,

according to the traditionalists, there would have been no conflict, and the

organisation would have been able to function as a smooth integrated whole. In fact,

Frederick Taylor, the father of "Scientific Management" was of the opinion that if the

principles of scientific management were properly applied, then the age-old conflict

between labour and management would disappear. The traditionalist view offers a

rather simplified approach to conflict. Since all conflict is bad and is to be avoided,

then we need merely isolate the factors that cause conflict and eliminate them.

Research studies have provided evidence to dispute this viewpoint, yet many of us

continue to believe that conflict is unnecessary and is to be always avoided.

The Behavioural View

The, behavioural school of thought argues that conflict is the logical and inevitable

outcome in any organisation and as such should be accepted. The conflict theory was

dominated by the behaviouralist approach from the late I940s through the mid-1970s.

The behaviouralists maintained that since an organisation was composed of individuals and

they had different perceptions of goals and differing values, conflict was bound to arise in

the organisation. Managers of various departments had separate priorities and conflicting

ideas about resource allocation. Hence conflict was the unavoidable outcome. Subordinates

may clash with the manager over whether the work can be accomplished in the given

period of time or not. They might even argue with subordinates at their own level over the

best possible way to do a given job. Thus, according to the behaviouralists, conflict was an

unavoidable outcome but at the same time they believed that conflict need not always be

detrimental. Under some circumstances it could focus on problems and instigate a search

for better and more innovative solutions to problems. Though the behaviouralists conceded

that conflict could lead to more creativity in problem solving and could be beneficial to

organisation under certain conditions, yet they perceived conflict as harmful something to

be resolved once it arose. Their views about human nature were that people are essentially

good; trust, cooperation and goodness are given in human nature. According to the

behaviouralist, the major antecedent conditions which induce aggressiveness and conflict in

people are the faulty policies and structure resulting in distortion and breakdown in

communication. Hence the manager's role in resolving conflict is to restore understanding,

trust and openness between parties.

Organisational

Climate and Change

26

The interactionist View

The thinking currently prevalent about conflict has been labelled as the interactionist

view. In contrast to the behaviouralist view which merely accepts conflict as

inevitable, the interactionists not only accept conflict but also encourage it. However,

they maintain that conflict must be regulated so that it does not get out of control

producing dysfunctional consequences. The inevitability of conflict results from the

interaction between organisationally imposed struggle for limited rewards (e.g.,

status, responsibility or power) and innate aggressive and competitive instincts in

people. Against this perspective, the interactionists maintain that if harmony, peace,

tranquility and cooperativeness prevail in a situation for a long time, the group is

prone to become nonresponsive to innovation and change. To shake the group out of

its complacency and to make it viable, self-critical and creative, an ongoing

minimum level of conflict must be maintained. Advocates of interactionist view

emphasise that the mission of management is effective goal attainment, not the

creation of harmony and cooperation. So, a manager's task is not to eliminate or

reduce conflict but to manage it in such a manner so that its beneficial effects are

maximised and its negative or harmful aspects are minimised. Such conflict

management may even include stimulation of conflict where absence of conflict may

hamper an organisation's innovation and creativity and thus prevent it from reaching

an optimal level of performance.

Activity E

Test your comprehension of the three views of conflict by checking each of the

following statements as "TRUE" or "FALSE"

Answers: (i) T; (ii) F; (iii) T; (iv) T; (v) F; (vi) T; (vii) T


Conflicts

27

10.5 THE IMPACT OF CONFLICT From the discussions on different views on conflict, what inference do you draw? Inference

could be that conflict can have both positive and negative impact on individuals, groups and

organisations. For example, as a result of intergroup conflict, certain changes occur within

groups and between groups. Some changes have positive effects, others have negative effects.

Let us explore this issue with Edgar Schein (1980) who has compiled a list of changes on the

basis of research findings.

As a result of intergroup conflict some changes that may occur within the groups

involved are:

1 Group cohesiveness increases. The group becomes more closely knit; its members show

greater loyalty.

2 The group becomes task-oriented. Group climate changes from informal to task-oriented

in order to deal with the external threat.

3 Leadership becomes more directive. As the group becomes more task-oriented, the leader

becomes more authoritarian.

4 Organisational structure becomes more rigid. Authority and responsibility

relationships among and between members become more clearly defined.

5 Group unity is stressed. The group demands increasing loyalty and conformity from its

members.

Prolonged group conflicts cause the following changes in relationship between

groups:

1 Groups become antagonistic toward each other. Each group sees the other as an enemy

who interferes with its goal-oriented behaviour.

2 Perceptions are distorted. Each group develops positive perceptions about its own group

and negative perceptions toward the other.

3 Communication ceases to exist. When in conflict members of one group avoid interaction

with members of the other. If they are forced to interact, they tend to show hostility and

aggression towards each other.

4 Groups apply a double standard. Each group clearly sees all the vicious acts of the other

party while remaining blind to the same acts performed by their own group.

From the above two lists of changes within and between groups in conflict, you can

spot a number of negative effects. What about some potential benefits of intergroup

conflicts? Here is such a list:

1 Conflict clarifies the real issue. When people of groups express their concerns and

differences, it helps sharpen the real issue involved in a problem. Without conflict, many

organisational problems go unnoticed and remain unresolved.

2 Conflict increases innovation. Conflict generates a greater diversity of ideas and viewpoints.

Such a diversity can stimulate innovation in organisational practices.

3 Intergroup conflict solidifies the group. When members of a group are faced with an

external enemy, they tend to work together more closely to deal with it. A manager may use

this new cohesion to reduce internal conflicts.

4 Conflict serves as a catharsis. Conflict can provide an outlet through which organisational

members can ventilate their feelings without damaging organisational functioning.

5 Conflict resolution solidifies intergroup relationships. Once group conflict is successfully

resolved, it can solidify the relationships between groups and it may even make the groups

feel closer to each other.

Looking into some of the effects of conflicts you can take a balanced view to

conclude that conflict is inherently neither good nor bad but simply has the potential

to improve or impair an organisation's performance through its consequences.

Conflicts that result in increased organisation performance and help an organisation

to attain its goals may be termed as Functional. On the other hand, conflict that

hinders an organisation's growth and prevents it from achieving its goals can be

termed as Dysfunctional. Thus conflict in certain forms can be functional or

dysfunctional depending upon its nature, intensity, duration and the manner in which

it is handled.

You may ask: How do I know whether a conflict is functional or dysfunctional? On

what criteria should I base my judgment about the value of conflict?

It is true that the demarcation between functional and dysfunctional conflict is neither

clear nor precise. No particular level of conflict can be adopted as acceptable or by

the impact it has on group/unit performance, rather than on a single individual.

criterion for you to base your judgment upon is unit performance. Since a group

exists to achieve certain predetermined goals, the functionality of a conflict can be

measured by the impact it has to group/unit performance, rather than on a single

individual. Figure II shows the relationship between organisational conflict and group

or unit performance.

Organisational

Climate and Change

28

Figure II: Organisational conflict and unit performance

The figure shows that there is an optimal, highly functional level of conflict at which

the unit's performance is at the maximum. This can happen because at that level of

conflict the group or the unit's internal environment is characterised by self-criticism

and innovativeness. When the conflict level is too low, it is dysfunctional as the unit's

performance is low due to apathy, stagnation, lack of new ideas and

nonresponsiveness of the unit-members to the demands of change. In such a sitution,

a manager may have to resort to stimulating conflicts to make the unit more viable

On the other hand, when the conflict level is too high, it is again dysfunctional, as t

he survival of the group or the unit is threatened owing to diversion of energies away

from performance and goal attainment activities of the members. Chaos and

disruption prevails. Naturally, the most important managerial task becomes how to

resolve the conflict.

Activity F

Recapitulate your experience of an intergroup conflict in your work situation. Refer

to the changes within and between groups listed in this section. Check whether such

changes took place in your experience or not. What additional changes did you

notice? Referring to your group as A and the other as B, narrate the entire

proceedings of the events from the eyes of an outsider in the form of a case.

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Activity G Management of Organisational

Conflicts

29

Hold a 20-minute discussion with your friends on the issue of functionality of

conflicts. You take the position that conflict can he functional. Collect some

evidences to substantiate your position. Encourage others to hold an opposite view

and prove their position with the help of evidence. After this discussion is over,

reflect and report whether conflict between you and your friends on the issue of

functionality of conflict has been `functional' or not in terms of clarifying the issue!

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Activity H

Locate a workgroup where there is almost no conflict and the group is characterised

by peace and tranquility. Collect some data on this group's performance and the

average performance of all other similar groups but with different degrees of conflict.

Plot the performance of this group against the average performance. Check whether

the relationship between unit performance and absence of conflict suggested in

Figure II is correct. Revise your understanding, if need be.

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Organisational

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10.6 SOURCES OF CONFLICT

In the earlier sections, you have seen that it would be naive to think that conflicts in

an organisation take place simply due to lack of understanding between people. A

large number of potential sources of conflict exist in organisational life as antecedent

conditions and realistic basis for some conflicts. In this section, we shall quickly

review some such sources.

Competition for Limited Resources

Any group exists for the purpose of attaining some goals with the help of available

resources. These resources may be tangible like men, materials, and money or

intangible like power, status or the manager's time. No organisation is capable of

providing all the resources demanded by various units. Resources are limited and

different groups have to compete for these scarce resources and many conflicts arise

from this source.

Diversity of Goals

Groups in organisation have different functions to perform and as such they develop

their own norms and goals. Theoretically the achievement of these goals should

achieve overall organisational goals but, often, in real life the reverse is true. Goals of

one group are incompatible to the goals of another group. Take, for example, a

company which manufactures electric fans that has a seasonal demand. Three

departments marketing, production and finance-are involved. Since the demand for

the product is seasonal, the marketing manager would like to have sufficient stock

during the season. The production department has to gear up its capacity during the

season but because of a tight labour market finds it difficult to hire labour

temporarily and resorts to employ people on a permanent basis. This creates another

problem. The finance manager says that as the storage costs are high it is expensive

to keep stock build up in the slack season, and maintaining the production line during

slack season imposes an additional burden.

This example shows that each department develops its own goals, which may conflict

with another department's goals and one department may try to achieve its goals at

the expense of another. This happens quite often when the reward system is linked to

group performance rather than to overall organisational performance.

Task Interdependence

Groups in an organisation do not function independent of one another. They have to

interact with one another in order to accomplish their tasks. The sales department will

have nothing to sell unless the production people produce goods and goods can not be

produced unless the financial department comes up with the money to buy raw materials.

Thus smooth interaction between various groups is essential for the efficient functioning

of the organisation. Three types of interdependence can cause intergroup conflict-pooled,

sequential and reciprocal. Pooled interdependence

exists when two work groups may not directly interact with each other but are affected by

each other's actions. For example, when one independent product group performs poorly,

all other groups may suffer financially, This can happen when rewards are contingent

upon collective performance.

Sequential interdependence occurs when one group's performance depends on

another group's prior performance. In a construction project, for example, the

excavating team must prepare the foundation before the masons can work on the

building structure. Since the masons depend on the excavators, conflict between the

groups can occur when the excavators' work is delayed.

Reciprocal interdependence occurs when two or more groups are mutually

interdependent in accomplishing their tasks. For example, in developing and

marketing a new product, three major departments (marketing, production and

research) depend on each other to perform their tasks. Information possessed by one

department is needed by another department. For example, the research department

needs market information from the marketing department, and marketing needs

research to provide customer services. When one group is unable to meet the

expectations of another group, intergroup conflict usually results.

Differences in Values and Perception Management of Organisational

Conflicts

31

A lot of conflict is generated within organisations because various groups within the

organisation hold `conflicting' values and perceive situations in a narrow,

individualistic manner. An example that comes readily to mind is that of the

managment-labour conflict. Labour feels that management is exploiting it because in

spite of making a profit, management does nothing for the economic welfare of

labour. On the other hand, management feels that the profits should go to cash

reserves so as to make the company an attractive proposition for investors. Another

example is the conflict between engineering and manufacturing. Engineering lays

stress on technological sophistication and precision and is accused by manufacturing

of designing products that will last for 50 years but that the customers cannot afford.

Similarly, engineering accuses manufacturing of making products of such limited

durability that the company's reputation suffers.

Organisational Ambiguities

As implied, conflict may emerge when two organisational units compete over new

responsibility. Intergroup conflict stemming from disagreement about who has

responsibility for ongoing tasks is an even more frequent problem. Newcomers to

organisations are often struck by the ambiguity that exists about job responsibilities.

Few organisations make extensive use of job descriptions or periodically update the

job descriptions that do exist. Further, it is rare that the manager or employee

consults his own job description. Managerial and staff jobs by their very nature are

difficult to structure tightly around a job description.

Introduction of Change

Change can breed intergroup conflict. Acquisitions and mergers, for example,

encourage intergroup conflict, competition, and stress. When one organisation is

merged into another, a power struggle often exists between the acquiring and

acquired company. An attempt is usually made to minimise conflict by laying out

plans for power sharing before the acquisition or merger is consummated. Frequently,

the acquired company is given representation on the board of directors of the

acquiring company. Nevertheless, power struggles are difficult to avoid.

Nature of Communication

One of the major fallacies abounding about conflict is that poor communication is the

cause of all conflicts. A typical statement is: "If we could just communicate with

each other, we could eliminate our differences". Such a conclusion is not surprising

considering the little time most of us have at our disposal communicating with one

another. At the same time, evidence does suggest that problems in the

communication channel such as noise, distortion, omission and overload do affect the

process of collaboration and lead to misunderstanding. The potential for conflict

increases when either too little or too much communication takes place. Apparently,

an increase in communication is functional upto a point, whereafter it is possible to

overcommunicate with a resultant increase in potential for conflict. Too much

information as well as too little information can lay the foundation for a conflict;

Aggressive Nature of People

Another factor that has a large potential for generating conflict within an organisation

is personality characteristics that account for individual idiosyncracies and

differences. Evidence suggests that certain personality types-for example, individuals

who are highly authoritarian, arrogant, autocratic and dogmatic-lead to potential

conflict. People have a natural need to find an outlet for their aggressive tendencies.

Organisations are sometimes used as arenas for expression of aggression-'blowing off

steam'-leading to conflict.

This discussion on the sources of conflict is intended to emphasise that it is not

possible to design an organisation which will remain conflict-free for all times to

come. Conflict is inevitable. in an organisation as some of these sources will always

remain in any organisation. However, these sources are not to be confused with the

causes of a conflict. A conflict, in ultimate analysis, is caused by perceptions and

feelings people experience when an incompatibility exists between what they want

and what someone

else wants. When perception of incompatibility and feeling of frustration generate

actions. conflict is manifested.

Organisational

Climate and Change

32

Activity 1

Which sources of conflict have contributed most in the conflict examples that you

have given in your earlier exercises? Is one particular source more recurrent than

others? Could you identify some other sources of conflict so as to make the list more

comprehensive? Prepare a revised list of sources with examples from yours and your

friends' experiences.

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10.7 MODES OF CONFLICT MANAGEMENT

We can now move on to examine the modes through which conflict can be handled

so as to result in optimal unit performance. You have already seen that when conflict

level is too low, the unit performance is also likely to be low and there is a scope for

a perceptive manager to stimulate conflict in order to enhance the performance of the

group. Similarly, when the level of conflict is too high, conflict needs to be resolved

so as to restore high performance and optimal level of conflict. So, in this section, we

shall examine both the strategies of conflict management-stimulation as well as

resolution.

Stimulating Productive Conflict

Most of us since childhood have been taught to avoid conflict and even disagreement,

How many times have you heard the statements "Don't Argue", "Stop fighting" or

"It's better to turn the other cheek"? However, this tendency to avoid conflict is not

always productive and there are times when there is a need to stimulate conflict. In an

interesting experiment, series of groups were formed to tackle a problem. Some

groups contained a planted member to challenge the majority opinion, some groups

did not have. Without fail, all groups that had a planted member came up with a more

perceptive solution than the other groups. However when the groups were asked to

drop a member, all groups that had a planted member chose to drop the dissenting

memher despite clear evidence that the conflict was beneficial. Such resistance to

conflict is what managers have to overcome in stimulating productive conflict.

Robbins (1978) suggested the following as signs where conflict stimulation is

needed:

1 The organisation is filled with "yes men".

2 Employees are afraid to admit ignorance.

3 Compromise is stressed in decision making.

4 Managers put too much emphasis on harmony and peace.

5 People are afraid of hurting the feelings of others.

6 Popularity is given more importance than technical competence.

7 People show great resistance to change.

8 New ideas are not forthcoming.

9 There is an unusually low rate of employee turnover


Conflicts

33

a)

b)

c)

d)

a)

b)

c)

d)

a)

b)

c)

The presence of one or more of these signs is usually an indication of the need for

conflict stimulation. Once the need has been identified you may adopt one or more of

the following techniques:

1 Manipulate Communication Channels

Deviate messages from traditional channels

Repress information

Transmit too much information

Transmit ambiguous or threatening information

2 Alter the Organisation's Structure

(redefine jobs, alter tasks, reform units or activities)

Increase a unit's size

Increase specialisation or standardisation

Add, delete or transfer organisational members

Increase interdependence between units

3 Alter Personal Behaviour Factors

Change personality characteristics of leader

Create role conflict

Develop role incongruence

These are only a few of the suggestions possible. Depending upon your values and

the organisation's value-system, some of the suggestions may even sound unethical as

you may feel that a desirable end-state does not always justify the questionable

means (like transmitting threatening information). We leave it for you to decide. But

if by stimulating your value-conflict, we become successful in helping you to

understand the important option of conflict stimulation, we shall consider that such

conflicts are functional.

Resolving Interparty Conflict: How and When

You have seen that stimulating conflict is a required mode of conflict management when

groups are characterised by apathy, complacency, non-responsiveness to needed change,

lack of enthusiasm for generating alternatives, etc. Though these symptoms are very

much present in a number of work-units in Indian organisations (and hence calls for

appropriate conflict stimulation interventions), the more commonplace are heightened

manifest conflicts. So, for most practical purposes, you should not only possess the

knowledge of different strategies of conflict-resolution hut should also know when to use

which strategy.

There is no dearth of literature in this area and different authors have given different

taxonomies in reviewing possible conflict resolution strategies. Here we consider

Feldman's (1985) strategies of intergroup conflict-resolution.

The primary dimension along which intergroup conflict-resolution strategies vary is

how openly you as a manager should address the conflict. The chief characteristic of

conflict-avoidance strategies is that they attempt to keep the conflict from coming

into the open. The goal of conflict-defusion strategies is to keep the conflict in

abeyance and to "cool" the emotions of the parties involved. Conflict-containment

strategies allow some conflict to surface, but tightly control which issues are

discussed and the manner in which they are discussed. Conflict-confrontation

strategies are designed to uncover all the issues of the conflict and try to find a

mutually satisfactory solution.

Conflict-avoidance Strategies

Ignoring the Conflict

This strategy is represented by the absence of action. You, as a manager, have often

avoided dealing with dysfunctional aspects of conflict. Unfortunately, when you avoid

searching for the causes of the conflict, the situation usually continues or becomes

worse over time. Although ignoring the conflict generally is ineffective for resolving

important policy issues, there are some circumstances in which it is at least a

reasonable way of dealing with problems. One such circumstance in which ignoring the

conflict is a reasonable strategy is when the issue seems to be symptomatic of other,

more basic conflicts. For example, two groups may experience conflict over the amount

and quality of office space. Such conflicts often reflect more important issues

about relative power and status. Resolving the office space problem would not

address the key issues, and attention could be directed more fruitfully to the more

basic concerns.

Organisational

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34

Imposing a Solution

This strategy consists of forcing the conflicting parties to accept a solution devised by

a higher-level manager. Imposing a solution does not allow much conflict to surface,

nor does it leave room for the participants to air their grievances, so it also generally

is an ineffective conflict-resolution strategy. Any peace that it does achieve is likely

to be short-lived. Because the underlying issues are not addressed, the conflict

reappears in other guises and in other situations.

Forcing a solution can, however, be appropriate when quick, decisive action is

needed. For instance, when there is conflict over investment decisions, and delays

can be very costly, forcing a solution may be the best strategy available to top

management. Likewise, it may be necessary when unpopular decisions must be made

and there is very little chance that the parties involved could ever reach agreement

(Thomas, 1977). An example of this is when an organisation must cut back on the

funding of programs. It is unreasonable to expect that any department would agree to

cut its staff and expenses for the greater good, yet some hard unpleasant decisions

ultimately must be made.

Conflict-defusion Strategies

Smoothing

One way you can deal with conflict is to try to "smooth it over" by playing down its

extent or importance. You may try to persuade the groups that they are not so far

apart in their viewpoints as they think they are, point out the similarities in their

positions, try to "pat" group members whose feelings have been hurt, or play down

the importance of the issue. By smoothing the conflict, you can hope to decrease its

intensity and avoid escalation or open hostility. Like forcing a solution, smoothing

generally is ineffective because it does not address the key points of conflict.

However, smoothing sometimes can serve as a stop-gap measure to let people cool

down and regain perspective. In the heat of the battle, people may make statements

that are likely to escalate the conflict, and smoothing often can bring the

disagreement back to a manageable level. Smoothing also may be appropriate when

the conflict concerns nonwork issues. For instance, intergroup conflict frequently

occurs between older and younger employees because of their different political

beliefs and moral values. Smoothing can help to defuse the tension so that the

conflict does not spill over into central work issues.

Appealing to Superordinate Goals

You can defuse conflicts by focusing attention on the higher goals that the groups

share or the long-range aims that they have in common. This tends to make the

current problem seem insignificant beside the more important mutual goals.

Finding superordinate goals that are important to both groups is not easy. Achieving

these goals requires cooperation between the groups, so the rewards for achieving the

goals must be significant. The most successful, and most frequently used,

superordinate goal is organisational survival, i.e., if the subunits do not cooperate

sufficiently, the continued existence of the larger organisation itself will be severely

jeopardised.

Conflict-containment Strategies

Using Representatives

One of the strategies you can use to contain conflict is the use of representatives. In

order to decide an issue, you can meet with representatives of the opposing groups

rather than deal with the groups in their entirety. The rationale is that the

representatives know the problems and can argue the groups' points of view

accurately and forcefully.

Although this seems to be a logical way of proceeding, the research on the use of

representatives as a means of solving intergroup conflict is fairly negative.

Represntatives are not entirely free to engage in compromise; rather, they must act.

out of loyalty and are motivated to win (or at least avoid defeat) even though a

solution to the intergroup problem may be sacrificed in the process. A representative

who "gives in" is likely to face suspicion or rejection from group members, so if a

representative cannot win, he or she will try to deadlock a solution or at least forestall

defeat.


Conflicts

35

Although individual representatives have difficulty in negotiating an agreement

because of their fear of rejection by their groups, two situational factors can increase

the effectiveness of this strategy. First, the use of group representatives from each

side can help to overcome individual anxiety about group rejection. The members of

each team can provide mutual support when they need to make concessions in order

to achieve agreement. Also, groups of negotiators may receive broader support and

trust from their respective sides, since each representative may represent a different

constituency or bring a different expertise to the negotiations. Most labour

negotiations involve several representatives of both management and labour.

Resolving conflict through representatives is more effective before positions become

fixed or are made public. After positions become fixed, representatives become even

more intransigent, and "given in" is more likely to be attributed to the personal failure

of the representatives than to situational factors.

Structuring the Interaction

Some managers assume that one way to decrease conflict is to increase the amount of

contact between the groups (if the groups interacted more, they would like each other

better and fight less). In reality, increased interaction can merely add fuel to the fire;

the two groups spend their time looking for additional reasons to reinforce their

negative stereotypes of each other:

However, structuring the interaction between the groups can be effective in resolving

conflict. Providing a framework on how many issues are discussed and the manner in

which they are discussed can facilitate conflict resolution. There are many ways to

structure the interaction between groups to deal with conflict; some of the most

effective strategies include: (a) decreasing the amount of direct interaction between

the groups in the early stages of conflict resolution; (b) decreasing the amount of time

between problem-solving meetings; (c) decreasing the formality of the presentation

of issues; (d) limiting the recitation of historic events and precedents and focusing

instead on current issues and goals and (e) using third-party mediators.

All these strategies allow some conflict to surface but prevent it from getting out of

hand and reduce hardening of the groups' positions. Decreasing the amount of direct

interaction between the groups early in the conflict helps to prevent the conflict from

escalating. Decreasing the amount of time between problem-solving meetings helps

to prevent backsliding from tentative agreements. Decreasing the formality of the

presentation of issues helps to induce a problem-solving, rather than a win-lose

orientation to the conflict. Limiting how far back historically and how widely

precedents can be cited helps to keep the focus on finding a solution to the current

conflict. Finally, a mediator can act as a go-between, who transmits offers and

messages, helps the groups to clarify their positions, presents each group's position

more clearly to the other, and suggests some possible solutions that are not obvious to

the opposing parties.

Structuring the interaction is especially useful in two. situations: (a) when previous

attempts to discuss conflict issues openly led to conflict escalation rather than to

problem solution; and (b) when a respected third party is available to provide and

enforce some structure in the interactions between the groups.

Bargaining

Bargaining is the process of exchanging concessions until a compromise solution is

reached. Bargaining can lead to the resolution of a conflict, but usually without much

openness on the part of the groups involved and without much real problem solving.

Typically, in bargaining each side begins by demanding more than it really expects to

get. Both sides realise that concessions will be necessary in order to reach a solution,

but neither side wants to make the first concession because it may be perceived as a

sign of weakness. Thus, each party signals a willingness to be flexible in exchanging

concessions without actually making an explicit offer; a tacit proposal can be denied

later if it fails to elicit a positive response from the other party. Bargaining continues

until a mutually satisfactory agreement is reached, although such a solution can be

reached without much open discussion of the conflict issues and without much effort Organisational

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36

to solve the underlying problems. Therefore, bargaining often results in a

compromise agreement that fails to deal with the problem in a rational manner and is

not in the long-term interests of either group.

For bargaining to be feasible at all as a conflict-resolution strategy, both parties must

he of relatively equal power. Otherwise, one group simply will impose its will on the

other, and the weaker group will have no means of obtaining concessions from the

stronger one. Bargaining also is more likely to work if there are several acceptable

alternatives that both groups are willing to consider. Otherwise, bargaining is likely

to end in a deadlock.

Conflict-confrontation Strategies

Problem Solving

Problem solving is an attempt to find a solution that reconciles or integrates the needs

of both parties who work together to define the problem and to identify mutually

satisfactory solutions. In problem solving, there is open expression of feelings as well

as exchange of task-related information. Alderfer (1977) summarises the most critical

ingredients in successful problem solving:

1 Definition of the problem should be a joint effort based on shared fact finding

rather than on the biased perceptions of the individual groups.

2 Problems should be stated in terms of specifics rather than as abstract

principles.

3 Points of initial agreement in the goals and beliefs of both groups should be

identified along with the differences.

4 Discussions between the groups should consist of specific, non-evaluative

comments. Questions should be asked to elicit information, not to belittle the

opposition.

5 The groups should work together in developing alternative solutions. If this is

not feasible, each group should present a range of acceptable solutions rather

than promoting the solution that is best for it while concealing other

possibilities.

6 Solutions should be evaluated objectively in terms of quality and acceptability

to the two groups. When a solution maximises joint benefits but favours one

party, some way should be found to provide special benefits to the other party

to make the solution equitable.

7 All agreements about separate issues should be considered tentative until every

issue is dealt with, because issues that are inter-related cannot be settled

independently in an optimal manner.

There are two preconditions for successful, integrative problem solving. The first is a

minimal level of trust between the groups. Without trust, each group will fear

manipulation and may not reveal its true preferences. Secondly, integrative

problem solving takes a lot of time and can succeed only in the absence of pressure

for a quick settlement. However, when the organisation can benefit from merging the

differing perspectives and insights of the two groups in making key decisions,

integrative problem solving is especially needed.

Organisational Redesign

Redesigning or restructuring the organisation can be an effective, inter-group

conflict-resolution strategy. This is especially true when the sources of conflict result

from the coordination of work among different departments or divisions. Unlike the

other strategies discussed so far, you may note, organisational redesign can be used

both to resolve the conflict or to stimulate it.

One way of redesigning organisations is to reduce task inter-dependence between

groups and to assign each group clear work responsibilities (i.e., create self-contained

work-groups) to reduce conflict. This is most appropriate when the work can be

divided easily into distinct projects. Each group is provided with clear project

responsibilities and the resources needed to reach its goals. A potential cost of this

strategy is duplication and waste of resources, particularly when one group cannot

fully utilise equipment or personnel. Innovation and growth also may be restricted to

existing project areas, with no group having the incentive or responsibility to create

new ideas.

The other way to deal with conflict through organisational redesign is to

develop over-lapping or joint work responsibilities (e.g.. integrator roles).

This helps in Management „ of maximising the use of the different

perspectives and abilities of the different departments. but as you have already

seen, it also tends to create conflict. On the other hand. there may be tasks

(e.g., developing new products) that do not fall clearly into any one

department's responsibilities but require the contributions, expertise, and

corrdination of several. Assigning new-product development to one

department could decrease potential conflict but at a high cost to the quality of

the product. In this case, you might try to sustain task-based conflict but

develop better mechanisms for managing the conflict. For example, providing

"intergrating teams" can facilitate communication and coordination between

the members of interdependent departments.


Conflicts

37

Activity J

In your organisation there is a conflict between two departmental heads on the

allocation of budget. Department A feels that they should he given additional funds

for its proposed new activities in the offing. Department B objects saving that the`

parity between the departments should not be disturbed.

What do you think is the source of the conflict? What strategy do you recommend?

Why? Prepare a report, share it with another experienced manager and compare your

views with him.

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Activity K

In a hank, there is a conflict between the hank management and the stiff-association

on the ratio of employees to he promoted in vacant positions to those a he recruited

through open competition. The two parties differed markedly on the issue of

proportion of promotees versus direct recruits.

What strategy do you recommend? Contact a person working in a bank. Ask whether

his bank faced the same kind of issue. How was the issue managed? Compare that

strategy with your recommended strategy.

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Activity L

Interview friends who are working in different organisations. Collect as many cases

of successful as well as unsuccessful attempts at resolving conflicts of different ature.

Compare the practices actually followed with your understanding of process of

conflict, sources of conflict and available strategies for conflict management. Prepare

analytical reports putting successful and unsuccessful cases side by side.

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10.8 SUMMARY

In this Unit we have considered mainly various types of inter group conflicts, as these

types are most pervasive and important from the point of view of organisation

effectiveness. In keeping with our emphasis on intergroup conflict, we have defined

conflict as a process which begins when A, as one party, perceives that B as the other

party is making some conscious efforts to frustrate A in pursuing his interests or

goals. Besides intergroup conflicts, there are other types of conflicts as well: Intra-

individual, interpersonal, intergroup and between organisation. In general, conflict

process has four stages of potential antagonism, cognition and personalisation,

conflictive and conflict-coping behaviour, and conflict aftermath. We have examined

three different views on conflict-traditional, behavioural and interactionist. The

current view of conflict is that it is not only inevitable, but could be desirable as well.

Depending upon the nature, intensity, duration and the way it is handled, it could be

functional leading to higher goal attainment or dysfunctional leading to goal failure.

The section on the sources of conflict has focused attention on a number of factors

like competition for limited resources, diversity of goals of different units, task inter-

dependence of different units, differences in values and perception etc. which are

always present in an organisation as the antecedent condition for most of the

conflicts.

There are different modes of managing conflict in an organisation. When a work-

group shows the symptoms of over-emphasising conformity, compromise, consensus,

popularity etc., there may be need for stimulating conflicts by manipulating

communication channels, organisation structure and personal behaviour of the

manager. These techniques are to be used to shake the group up from its slackened

postures.

There are four distinct strategies of conflict resolution because as a manager your

need to know when and how to resolve conflicts. While avoidance and defusion

strategies allow little or no conflict into the open, containment and confrontation

strategies deal with the conflict more openly and thoroughly. Which strategy is most

effective depends on how critical the conflict is to task accomplishment and how

quickly the conflict must be resolved. If the conflict arises from a trivial issue and/or

must be resolved quickly, a conflict-avoidance or conflict-defusion strategy is most

likely to be effective. If the conflict centres around an important work issue and does

not need to be solved in a short period of time, a conflict-containment or conflict-

confrontation strategy is most Iikely to be effective.

10.9 SELF-ASSESSMENT TEST

1 What is the difference between functional and dysfunctional conflicts? How can

one handle both?

2 Briefly review the process of conflict.

3 Discuss the influence of process on the outcomes in dealing with conflict in

organisations.

4 Is conflict inevitable'? If so, how should one deal with it'?

5 Analyse two instances of inter-departmental conflicts in your organisation.

Examine the changes, if any, you notice in the sources, processes, strategies and

outcomes.

10.10 KEY WORDS

Antecedent Conditions: The source of conflict where cause for conflict exists in an

incipient form, but it need not necessarily lead to actual conflict.

Approach Approach Conflict: Conflict between two equally attractive choices.

Approach-Approach Conflict: Conflict between two equally attractive choices.

repulsion towards the same object.

Avoidance-Avoidance Conflict: Conflict between two equally unpleasant choices,

or in choosing the lesser evil.

Avoidance: Withdrawal from or suppressing conflict. Management of Organisational

Conflicts

39

Bargaining: Is a conflict containment or resolution strategy that involves mutual

compromise and concession.

Behavioural View of Conflict: The belief that conflict is an inevitable outcome in

any group.

Conflict Aftermath: Refers to the consequences that different conflict handling

strategies may have on the antecedent conditions. It may either resolve the conflict or

make for future conflict.

Conflict Handling Behaviour: It refers to the conscious action of one party to the

conflict in checking the other party from reaching his goals.

Conflict Resolution: Refers to the manner in which a manager could address himself

to a conflict situation. The chief modes are avoidance, defusion, containment and

confrontation.

Conflict Stimulation: Refers to a situation when common values are challenged. It

can often be a useful way of re-examining one's position and discovering alternatives.

Confrontation Strategy: Is a strategy designed to uncover all the issues of the

conflict and find a mutually acceptable solution. It can be accomplished through the

openness of problem solving, or through a comprehensive organisation redesign.

Containment Strategy: Is a strategy of controlled conflict management where issues

are selectively discussed through mediating representatives, or by structuring the

interaction patterns or through bargaining.

Delusion Strategy: Attempts to keep conflict in abeyance and cast tempers through

smoothing or by appeal to super-ordinate goals.

Dysfunctional Conflict: Conflict that hinders group performance.

Felt Conflict: Emotional involvement in a conflict creating anxiety, tenseness,

frustration, or hostility.

Functional Conflict: Conflict that supports the goals of the group and improves its

performance.

Goal Diversity: The efficient functioning of every part of an organisation requires

formulation of its own immediate goals, which may or may not be compatible with

overall organisation objectives.

Interactionist View of Conflict: The belief that conflict is not only a positive force

in the group, but that it is absolutely necessary for a group to perform effectively.

Intergroup Conflict: Conflict between the various constituent units of an

organisation such as Unions and Management, between various functional areas, etc.

Interpersonal Conflict: Conflict between various individuals in an organisation

which may stem from personal dislikes, personality differences, or role related

matters.

Intragroup Conflict: Conflict within a group between various individuals due to lack

of consensus or inability to conform to group norms.

Intrrpersonal Contlict: Conflict within the individual, involving a decision

regarding the choice to opt for in any instance of behaviour.

Manifest Conflict: It results from perceived and/or felt conflict. Conflict comes out

into the open and influences action.

Perceived Conflict: Awareness by one or more parties of the existence of conditions

that create opportunities for the rise of conflict. It is different from felt conflict in that

it is not personalised.

Problem Solving: Bringing about change or resolving conflict through interpersonal

discussions; seeks to identify differences.

Smoothing: Conflict defusion by playing down its importance, thereby avoiding

escalation and letting people regain their perspective.

Superordinate Goals: The long range aims or higher goals that are common to all in

an organisation even in a conflict situation.

Task Interdependence:: The mutual inter-connectedness of responsibilities of

various parts of an organisation that is essential for efficient functioning.

Traditional View of Conflict: The view that all conflict must be avoided.

Organisational

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Alderfer, C.P., 1977. Group and intergroup relations. In J.R. Hackman J.L. Suttle

(Eds.) Improving Life at Work. Goodyear: Santa Monica.

Feldman, D.C., 1985. A taxonomy of intergroup conflict-resolution strategies. In The

1985 Annual: Developing Human Resources, University Associates: San

Diego.

Robbins, S.P., 1978. Conflict management and conflict resolution are not

synonymous terms. California Management Review, Winter.

Schein, E., 1980. Organisational Psychology. Prentice Hall: Englewood Cliffs.

Thomas, K.W., 1977. Toward multidimensional values in teaching: The example of

conflict behaviours. Academy of Management Review, 2.

Managing Change

UNIT 11 MANAGING CHANGE Objectives

After reading this Unit, you should be able to:

Appreciate why all organisations must change • • • • • • • •

•

Differentiate between individual change and organisational change

Describe how an organisation grows

Compare and contrast between degrees and nature of change

Identify the major antecedent conditions for change

Recognise the phases of any change process

Outline different coping strategies for change

Understand the process of resistance to change and means of overcoming

resistance

Devise an appropriate strategy to implement organisational change

Structure

11.1 Introduction

11.2 Nature of Change

11.3 Antecedents of Organisational Change

11.4 The Process of Organisational Change

11.5 Coping Strategies for Change

11.6 Resistance to Change

11.7 Strategies of Implementing Change

11.8 Summary


11.10 Key Words


11.1 INTRODUCTION

You are perhaps aware of the axiom that the only certainty in the world is that there

will be change. "The old order changeth, yielding place to new." In this process of

change, the Darwinian principles of adaptation and natural selection are as true for

the corporate world as they are for the animate. If you compare closely, you will find

that in many respects an organisation is akin to a living organism. Just as any living

organism needs to keep harmony with the ever-changing environs for its survival, o

does an organisation need to respond to changes in the market, governments,

creditors, communities, even the weather. `Survival of the fittest' is the unwritten but

the radical rule of this game.

The environment which engulfs an organisation provides the resources and

opportunities for the organisation's existence. At the same time, the environment

itself imposes sanctions determining what an organisation can or cannot do. If an

organisation is to survive, grow and remain prosperous, it must adapt to the demands

of the environment. Since these demands are constantly changing, organisations must

also change.

What are some of the changes which affected almost all organisations in the past few.

decades? A short list is given here, but you can lengthen it from your own

observation of events:

Technological innovations have multiplied; products and know-how are fast

becoming obsolete Basic resources have progressively become more expensive

Competition has sharply increased Communication and computers have reduced the time needed to make

decisions

Environmental and consumer interest-groups have become highly influential

41 The drive for social equity has gained momentum

The economic inter-dependence among countries has become more apparent.

These and scores of other changes compel an organisation to cope with the

environment and become more adaptive. In fact, as a response to the change in the

environment, the attributes of the organisations are changing. Examine some such

continua of attributes towards which more dynamic organisations are shifting:

Organisational

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Direction of Change

From

Formal

Structured

Definite

Deterministic

Conservative

To

Informal

Less structured

Ambiguous

Probabilistic

Opportunistic

What happens when organisations fail to adapt? The answer is unequivocal: They

become extinct. But much before such a catastrophe, you can diagnose the

syndromes of organisational maladjustment. Here is a list of some such syndromes

whose half-serious names are trying to conceal the malady of maladjustment:

Some Syndromes of Organisational Maladjustment

Amoeba: Lack of strong direction from top executives. Not enough structure, order

or guidance leading to activity trap, i.e. doing things without knowing where one is

heading to.

Anarchy: A situational upheaval where leadership, responsibilities, functions and

resources are in dispute.

Buggywhip: Clinging to obsolete products, services and practices which no longer

have potential for sustaining livelihood.

Deadlock: Stand off condition between management and leader of workforce leading

to toxic antagonistic relations between the factions.

Mom & Pop: Small company managers can not/will not help the company grow past

the awkward stage.

Myopia: No future orientation. Little thought to strategy, sense of direction and

advance planning. Live day to day, week to week.

Rat-race: Toxic climate coming from oppressive, primitive, slave-driving policy.

Remote Control: Too much administrative or executive control from the parent

body. Decision making autonomy is seriously impaired.

Rigor Mortis: Conditions of inertia and constricted activity prevail. Primary

organisation value is structure and order.

This illustrative list of syndromes of organisational maladjustment is meant to draw

your attention to the fact that failure to change at-an appropriate time typically results

in some acute or chronic malaise for an organisation eventually forcing it to die.

However, a diagnostic knowledge of when to initiate change and skills of managing

change to a long way to prevent such disasters. This unit is designed to achieve such

purposes.

Activity A

Add a few more points to the list of some changes that have taken place during the

last few decades. For this purpose, interview some senior persons and collect their

views.

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Activity B

43

Managing Change

Select any industry (e.g., writing instrument, printing, footwear, clothing fabrics,

container, mechanical transportation etc.) where some technological innovations have

taken place. Gather information regarding how the manufacturers of earlier products

have coped with these changes and prepare a case study.

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Activity C

Locate a workplace where a computer has been installed and is functioning for at

least a year. Interview relevant people to gather some information relating to

problems faced, if any, before introduction of the computer. What aspects of work

are now being handled through the computer? What other changes the organisation

has undergone due to computerisation? Prepare a report.

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Activity D

Show the list of syndromes of the organisational maladjustment to some of your

friends working in different organisations. Ask them if they agree with any particular

combination of syndromes prevailing in their organisations. If they do, collect some

more facts so that you can develop live examples and cases (using hypothetical

names for the real organisation and the real people), illustrating the syndrome.

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11.2 NATURE OF CHANGE

Organisations introduce changes through people. Unless the people are willing to

accept the need and responsibility for organisational change, intended changes can

never be translated into reality. In addition, individuals have to learn to adapt their

attitudes and behavioural patterns to constantly changing environments.

In this section, we are going to focus on three frequently raised issues on the nature

of change. First, can we bring change in an organisation by beginning to change at

the individual level only? Second, does organisational change take place through a

slow unfolding process or through cataclysmic events overturning status quo

arrangements? Third, do we always have to comply to environmental changes, or can

we also initiate change?

Organisational

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Individual Change and Organisational Change

When the issue before you is management of change, it may be useful to note the

difference between individual change and organisational change, although the two

are interwoven. Individual change is behavioural-determined by individual

characteristics of members such as knowledge, attitudes, beliefs, needs, expectations

etc. It is possible to bring about a total change in an organisation by changing

behaviours of individual members through participative-educative strategy. Of

course, the degree of difficulty involved in the change and the time taken to change

will be primarily dependent upon what exactly is your target of change. As Figure I

shows, if your target of change is a person's knowledge, it would not be a very

difficult and time-consuming endeavour. For example, let us assume that you did not

know much about "management of change in an organisation". However, if you

spend a couple of hours on this Unit, you will know several aspects of this topic.

Changing attitudes is usually considered more difficult and time taking when

compared to changing knowledge. For some, organisational change is

beneficial, but for others it is a threat, a signal of danger and a source of fear. Some

view change as a vital life force. Others may perceive it as a disturbance to be

avoided or borne with stolidity and patience. The àttitudes toward change' are

largely dependent on the context of the situation, the nature and the extent of change

and the manner in which changes are initiated and executed, and these attitudes are

more difficult to modify than the knowledge about the change.

Changing individual behaviour is a still more time-taking and difficult task. We

often assume that having enough knowledge and a positive attitude towards

something will naturally result in changing behaviour or modification towards that

direction, but it does not necessarily happen. For example, we know that honesty is

the best policy. We might have favourable attitudes towards people who are honest

and dislike those who are dishonest, but in certain situations we still may act in a less

honest manner. The linkage between attitude and behaviour is not so straight-forward

and for this reason changing behaviour is more difficult than changing knowledge or

attitudes.

You can possibly reason why changing the behaviour of a group is usually a more

prolonged and harder task. Every group has its own dynamics of push and pull which

attempts to neutralise the change in an individual and continuous efforts are

expended to maintain `norm'. Due to this group dynamics, individual member's

"changed behaviour" may revert to earlier normative behaviour so that the status quo

is maintained. However, due to the same reasons of a group's over-riding influence

on individual members, sometimes it may be easier to tackle the group as a whole

rather than trying to change a member's behaviour in an isolated manner.

Bringing total behavioural change in all the groups and members in an organisation

usually entails the most difficult long-range effort. More often than not, it is a slow

painful process to usher in a total cultural change in an organisation.

Figure I: Time and Difficulty involved in Change

Figure I is only intended to highlight that it is possible, although difficult and

prolonged. to bring about total behavioural change in an organisation starting with its

individual members. However, this is not the only route. It is equally possible to

influence and change the total organisation without focusing at the level Of

individual's change of knowledge, attitude and behaviour. Total organisational change

can be brought about by modifying the organisation's structures, policies, procedures,

techniques etc. These types of change alter prescribed relationships and roles

assigned to members and eventually modify the individual member's behaviour and

attitudes. Thus a focus of through attempts to change the structure, policies,

procedures, techniques, personnel; or it can be both. As these two kinds of changes

are interdependent, the complexity of managing change makes it necessary for you to

understand both the behavioural and non-behavioural approaches to change.

45

Managing Change

Evolutionary Change and Revolutionary Change

When you compare an organisation with any other open system organism, you can

describe it in terms of its birth, growth, maturity, senility, decline, entropy or death.

Any organisation, like any other organism, passes through these stages and in the

process changes itself from one form to another form. But is this change smooth,

gradual and evolutionary? Or violent, radical and revolutionary? Probably it is both.

Times of tumultuous turbulence surface between the smooth periods of evolution.

Look at the following exhibit on the stages of organisation's change and

development. You will find that in each stage there are some critical concerns and

key issues which must be addressed to and satisfactorily solved. The exhibit also

shows the consequences if he concerns are not met with satisfaction.

In order to meet the critical concerns of each stage, organisations go through some

rapid, visible, shake-ups of their structure, policies, procedures, techniques,

personnel, etc. These changes in calmer moments of steady growth, may be viewed

as revolutionary changes. You will be able to appreciate the difference between the

two degrees of change through yet another model of organisation's growth given by

Larry Greiner (1972). Greiner postulates that as an organisation grows from young to

mature stage, tiny sized to giant size, it passes through five phases of evolution each

of which ends with a period of crisis and revolution. Evolutionary periods are

characterised by the dominant management styles used to achieve growth, while

revolutionary periods are characterised by the dominant problems that must be solved

before growth continues.

Organisational

Climate and Change

46

The first phase of a newly-born organisation is characterised by creating a viable

product in a promising market. The founders, who are usually technically brilliant

and entrepreneurially oriented, manage their endeavours themselves in an ad hoc

manner with little respect to any formal system of communication and control. Their

physical and mental energies are entirely absorbed in making and selling. But as the

organisation starts growing from its tiny embryonic stage, many managerial problems

crop up, forcing the founders to wonder as to who is going to lead the organisation

out of confusion. By the end of the first phase, the crisis of leadership has emerged.

The solution usually lies in locating and installing a strong business; manager who is

acceptable to the founders and who can pull the organisation together.

When leadership crisis forces the founders to relinquish some of their power to a

professional manager, organisational growth is achieved by direction through

systematisation of operating procedures. The manager is usually given a free hand

and zealously accepts most of the responsibility for initiating direction. But the lower

level supervisors are treated merely as functional specialists devoid of any decision-

making authority. In course of growth for the organisatidn, the lower level managers

demand more autonomy in decision-making and the stage is set for the crisis of

autonomy to come to the fore. The second phase of the organisation's growth is

capped by this turmoil for autonomy.

The crisis of autonomy is resolved through the delegation of authority which helps in

gaining expansion through heightened motivation at lower rungs. But one serious

problem that eventually evolves is the loss of top management control over highly

diversified field of operations. The crisis of control emerges at the conclusion of

phase three where field managers run their own shows without aligning plans,

money, technology, or manpower with the rest of the organisation.

In order to achieve more efficient allocation of organisation's limited resources, an

elaborate network of coordinating mechanisms is usually introduced at phase IV of

'the organisation's growth.

The organisation becomes typically much more formalised; rules, regulations and

rigidities increase almost exponentially. For some time, the new systems prove useful

for achieving growth through coordinated efforts. But soon procedure takes

precedence over problem-solving, the chronic conflict between line and staff

becomes acute. The organisation becomes too large and complex to be managed

through formal programmes and rigid systems. Thus begins the crisis of reshape.

The fifth phase of an organisation's growth is characterised by strong inter-personal

collaboration in order to overcome the crisis of redtape and the widespread conflicts

between several subsystems. Developing the team becomes the theme, social contra'

and self-discipline take over from formal control, more flexible and behavioural

approaches are adopted to attack the problems of managing a large organisation. What

crisis do you anticipate at this phase of organisation's growth? Nobody seems to

know the exact nature of this future shock, as no organisation has traversed so far.

Larry Greiner, the author of this model, feels that some problems may emerge

centering around the psychological saturation of employees who grow emotionally

and physically exhausted by the intensity of teamwork and the heavy pressure for

innovative solution. Do you agree with Greiner?

47

Managing Change

Reactive and Proactive Changes

'Forces for change arise out of an organisation's interaction with elements in its

external or internal environment. The action of competitors, suppliers, government

units, or public groups may have substantial impacts on change. Social and cultural

factors such as life styles, values or beliefs also lead to important changes. Forces of

change may also arise from within an organisation depending upon different phases

of growth or demands made by different interest groups.

Reactive changes occur when these forces make it necessary for a change to be

implemented. It is passive compliance to the demands. Proactive change takes place

when some forces to change lead an organisation to conclude that a particular change

is desirable and goes about in initiating the change in a planned manner.

The difference between reactive and proactive changes corresponds, by way of

analogy, to that between reflexive behaviour and purposive behaviour. An individual

responds reflexively to a sudden intense light by eye-blinking or pupillary

contraction. This is an immediate, automatic response without any thought. A

purposive response to the same stimulus would mean devising a plan to shield the

eyes or removing the. light. It would require coordination of central nervous system

and psychomotor capacities.

Reactive change, like reflexive behaviour, involves a limited part of the system

whereas proactive change and purposive behaviour coordinate the parts of the system

as a whole. Also, reflexive behaviour and reactive changes share the characterstics of

responding to immediate symptoms, while purposive behaviour and proactive change

respond to underlying forces producing the symptoms.

In this Unit, you are going to be more concerned about the proactive changes than the

reactive ones. Management of change requires foreseeing the need for change and

going about it in a planned sequential manner.

Activity E

Collect examples which show that the knowledge changes do not necessarily lead to

attitude changes, or attitude changes do not automatically lead to behaviour changes.

Similarly, collect a few more examples where total organisational changes were

brought about b modifying an organisation's structures, policies, procedures,

techniques etc. rather than attempting to train individuals,

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Activity F

Try to know the history of an organisation's growth since its inception. Following

Greiner's model, describe the organisation's process of growth and make a forecast

about the nature of crisis the organisation is likely to face in the near future.

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11.3 ANTECEDENTS OF ORGANISATIONAL CHANGE Organisational

Climate and Change

48

You can well imagine that there must be many reasons for which organisations

change. In this section we will discuss some such major antecedent conditions which

serve as stimuli for changes to be undertaken in an organisation.

Changing Forces in Internal and External Environment

An organisation changes its structure and practices as a result of the forces from

internal origins as well as from external pressures arising in the environment.

There are two primary aspects of organisational structure-differentiation and

integration. Differentiation is the division of the organisation into subsystems, e.g.

research, sales, production etc. Each differentiated subsystem develops particular

attributes in responding to the requirements posed by its relevant external

environment. However, differentiation requires the integration of these subsystems

to achieve unity of effort and the accomplishment of the organisation's goals.

The more turbulent environment would be associated with a higher degree of

differentiation among the organisation's sub-parts and also a correspondingly high

degree of integrative effort. Similarly, an organisation faced with a stable

environment would have less differentiated subsystems and require fewer integrative

procedures. The success of an organisation depends upon an appropriate amount of

differentiation to cope with the environment and also the right amount of integrative

or coordinating effort. Researches by Lawrence and Lorsch (1967) provide evidence

for such a generalisation. For example, in the plastics industry, facing a turbulent

environment of rapid change in technology and unpredictable customer demand, the

high-performing organisations had the greatest differentiation and integration. In the

standardised container industry, facing a stable environment of unchanging

technology and steady demand, the highest performing organisations had the least

differentiation and consequently the least need for integration.

So, you can see that, depending upon the kind of environment an organisation is

placed in, the organisation has to change its structure. Of course, a certain amount of

organisational change may. occur almost entirely from internal origins. For example,

someone may decide that a particular department is so big, and unwieldy that it

should be split into two separate units. Internal change may also occur in furtherance

of individual or group strategies for self-enhancement or the aggrandizement of

power. For example, a new unit may be established to provide a job for a favoured

relative or to shelve an incompetent, obsolescent but undischargeable manager. But

most internal origins of change are in part self-generated, and in part represent

response to external pressures perceived by the members of an organisation. For

example, a number of companies have set up departments designed to cope with

problems of consumer complaints.

In the beginning of the unit, we have outlined some changes which have taken place

in the last few decades. They represent the external environment forces which

influence organisations. Organisations face the need for both to adapt internally to

external forces and to initiate changes in the external environment. These needs

explain, for example, why companies engage in lobbying for legislation they favour

(external influence, proactive change), but comply when laws not favoured are

passed (internal adaptation, reactive change).

Growth and Decay

You have seen that an organisation's growth presents many problems and

opportunities for change. Decay too poses change problems. It leads to defensive,

restorative changes aimed at survival and the es; ntial resumption of growth.

When growth occurs through internal vigour of pro' 'act lines, services or market

penetration, change is gradual. Change is more extensive when growth occurs from

mergers, acquisitions or exceptionally rapid success of organisational activities.

Mergers and acquisitions are undertaken for many reasons such as consolidating or

increasing capital, pooling management talent using facilities more efficiently,

increasing production and marketing capacity and achieving vertical integration.

Changes due to merger and acquisition lead to substantial impacts on people. There is

high potential for generating feelings of anxiety, fear of insecurity among all

organisational members from top echelons to rank-and-file workers. Sometimes,

these anxieties, if not properly handled, turn into hostility towards the organisation.

49

Managing Change

New Personnel

Some change is inevitable because of internal factors such as death, retirement,

transfer, promotion, discharge, or resignation and constantly changing elements in the

external environment. No two managers, you will agree, have the same styles, skills,

or managerial philosophies, or the same personal needs. Managerial behaviour is

always selective, so that a newly appointed manager may favour different

organisational designs, objectives, tasks, procedures and policies than a predecessor.

The new, executive will not be exactly like the previous one, nor even like those

already present. In matters of intelligence, personality and temperament the new

manager may be quite different and still possess the "qualifications for the position".

One of the most frequent reasons for major changes in company structure is a change

of executives at the top. They usually begin by examining the structure below them to

see if it corresponds to their ideas of what will be needed to do their job effectively.

Upon taking over a position at the top, a new manager may make sweeping changes.

Moreover, some who opposed the appointment are likely to resign. The filling of

these top vacancies, particularly where the new person comes in from outside,

presents a strategic opportunity for a re-examination of the entire structure.

Change Agents

Change Agent is the technical term for an organisational member whose role

involves the strategies and procedures for bringing about change. Any individual can

be a change agent at one time or another, but many people have positions, tasks, or

formal roles in which their main assignments involve dealing with change. A change

agent's formal role is primarily to plan and initiate changes rather than to implement

them. Change agents serve as catalysts, interpreters, and synthesists. They often work

quietly behind the scenes to promote change.

An interesting kind of change agent is often referred to as "The Young Turk". Young

Turks are new, usually young employees, eager and ambitious, full of ideas for

improvement, and willing to be a bit pushy, and obnoxious, or at least persistent, in

trying their ideas. Organisations sensing the need for change often deliberately

appoint Young Turks to challenge the status quo. They are not always popular with

colleagues or even their bosses. The best of the Young Turks are those who have real

talent combined with a measure of tact and patience. Do you think Young Turks are

‘a good idea’ for initiating organisational change?

Barometers of Declining Effectiveness

Organisations have a number of ways of "taking their pulse" by looking at indicators

from their own information systems. A business firm monitors data on sales,

absenteeism, turnover, scrap rates, manufacturing costs and numerous ratios of

financial measures. Some firms also conduct regular opinion surveys of their work

force. Others have systematic methods of obtaining feedback from customers.

In response to the information obtained through the above methods, the organisations

make the required changes in organisation to maintain the desired level of efficiency.

Change in Corporate Strategy

An organisation may undertake comprehensive changes even when no indicators

would suggest immediate problems in its performance. However, current and past

performance have been based on conditions that organisation officials believe to be

changing. Forecasts of long run trend may prompt a decisions to enter new markets,

to pursue a strategy of growth, to become less dependent on government, to switch

from a centralised to a decentralised structure, or to adopt new technologies. All these

strategic decisions have implications for changing the behaviour of people in their

organisation. Nothing less than a `new order' is required to put such strategies into

operational effect.

Crises Organisational

Climate and Change

50

Not infrequently, the occasion for organisational change is an unforeseen crisis which

makes continuation of the status quo unthinkable. The sudden death of a Chief

Executive Officer, the resignation of key members of a top management team, a

strike by a critically important group of specialised workers, loss of major client or

suppliers on whom the company has been dependent, a drastic cutback in budget,

even spontaneous civil disturbances directed against an organisation force a

reorientation of the corporate posture and initiate a total revamping of policy, practice

and behaviour. Crises create an unstable condition which is likely to become the

stimulus for a thorough-going self-assessment and reform.

Personal Goals

Leaders, interest groups and coalitions have their own goals: to see the company

become more aggressive, to shape the organisation around some distinctive theme, to

cast a particular corporate image, to further some ideology or philosophy. Seldom are

these goals stated in precisely those forms, at least for the record or for public

consumption. More frequently, they are clothed in rationalisations about their

presumed effect on profit and service.

The Domino Effect

The last main source of change is change itself. There is often a domino effect in

which one change touches off a sequence of related and supporting changes, e.g.,

creating a new department may cause the creation of a new managerial or non-

managerial positions or change in assignments within other departments, budgeting

reallocations and office space. Other departments may need to realign their missions,

structure, tasks and staffing.

It is quite common for people to fail to consider the domino effect. Such an oversight

leads to problems of coordination and control, and necessitates effective planning

processes that limit the tendency of individual units to change only in accordance

with their own needs. Before any significant change is made, its possible

consequences must be examined to see whether an undesired chain reaction will

occur.

To appreciate the complexity of the interdependence or domino effect of change, you

need to consider more closely what is included in the work environment. Actually., in

an organisational change, four factors are involved: task, people, technology and

structure. These factors are interrelated and interdependent, a change in one produces

alterations in one or more of the other work environment factors (See Figure III).

Task refers to the job, which can vary in several ways or dimensions such as variety,

autonomy, task identity, feedback, and significance. People includes individuals who

perform or fill various jobs within the organisation. Individuals vary in their attitudes,

motivations and values which influence their perception and evaluation of change.

This can complicate the implementation of change. Technology includes those

methods, techniques, and processes that collectively convert inputs of the

organisation into its outputs. Finally, the structure embraces the job responsibilities

and relationships of organisational members. Structure is reflected in the number of

hierarchical levels, span of control (number of persons supervised), and the way in

which parts are organised and related to one another. Communication, decision, and

power systems are significantly influenced by such structural arrangements.

51

Managing Change

Organisational changes can be introduced through the alteration of any one of these

four variables or a combination of these factors. One of the pitfalls of organisational

change is focusing upon one of the change factors and failing to gauge its impact

upon other factors, as they are related.

Activity G

Collect a case of organisational change. Identify the internal and external forces

which prompted the change.

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Activity H

Mergers and acquisitions often take place in the Indian corporate scene. When such

attempts are made by big industrial houses, they make news for the public as well.

Stories are published in business magazines. Get hold of such a story and analyse the

before-merger and after-merger scenes.

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Activity I

Get to know a case of corporate succession at the top (change of Chairman, MD,

President etc.). Collect evidence of impact of such change of executives at the top.

Compare this chain of events with the description given in Subsection : New

Personnel.

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Activity J

Business Management Graduates (MBAs) are often hired by some companies to act

as the "Young Turks". Familiarise yourself with such a company or with a person

whose explicit role is to act as a change agent. Learn a little more about the change-

process from their experience as recounted to you.

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11.4 THE PROCESS OF ORGANISATIONAL CHANGE Organisational

Climate and Change

52

People change their knowledge, attitude and behaviour when they become

dissatisfied with status quo or when there is a more desirable substitute. A successful

change involves (1) recognising the need for it. (2) learning a new behaviour or

substitute and, (3) feeling comfortable with the "new situation".

This change process was best described by Kurt Lewin when he described the three

stages of change-Unfreezing, Moving and Refreezing (See Figure IV).

Figure IV: Change Process

The three stages of changes will be described shortly, but before you proceed to look

into the phases, you need to become familiar with three more terms which Kurt

Lewin gave us to understand the processof change. These are the concepts of quasi-

static equilibrium, driving forces and restraining forces. At any given point of

time, any pattern of behaviour is a result of equilibrium between two sets of forces-

driving and resisting. The "Present" position is achieved because the strength of

driving forces and resisting forces is equal. If you have to change the present

position, you have to shift the equilibrium (which is not quite stationary, i.e. quasi-

static") by any of the following, means: increasing the driving force, reducing the

resisting forces or by converting a resisting force into a driving force. After you have

disturbed the present state of equilibrium by any one or a combination of the above

mentioned means, a new state of equilibrium will be achieved. This state will remain

for some time as "after-change phenomena as long as nobody disturbs the new found

equilibrium. A clear analysis of what are the driving ("Push forward") or resisting

("Pull backward") forces will help you manage a change better.

Unfreezing

As a practical matter, change does not occur in a vacuum of no prior perspective. To

the extent the new is different from the old and the old-had value to the individuals,

the old patterns of perspective implies a questioning and doubting of existing

assumptions and feelings. For most change which is significant, the unfreezing

requires a loosening of emotional as well as intellectual forces. Unfreezing involves

the following steps:

Recognising the Driving Forces

Recognising major changes in the environment and problems within the organisation

is the first step toward organisational change. Institute managers may recognise these

pressures for change and take corrective action. In many organisations, however, the

need for change may go unnoticed until a major problem strikes. and, it may he too

late to solve it. It is important for people like you to develop keen sensitivity towards

the external as well as internal environment.

Increasing the Driving Forces

Once the need for change is identified, it has to he communicated to people who w he

involved in the changing process. As noted earlier, if members know why the change

is needed, they are more likely to adopt it. You can employ the following strategies to

increase the - acceptance of a change.

1 Express the need for change

53

Managing Change

People who will be affected by the change have to y the change is needed. If

they do not, they will hesitate to cooperate in the change process.

2 Communicate the potential benefit

People have a tendency to ask, "what's in it for me?" Unless they feel that the

change will benefit them or that failure to change will hurt them

substantially, they are less likely to cooperate. If no benefits can be

identified, the costs of not changing must at least be understood.

3 Protect the interest of concerned people

People fear change because it may cause them to lose their jobs, income or

status. Assurances of job security, income protection and maintenance of

status can increase the acceptance of change.

4 Get people involved in the process

Participation can help people accept change. Some individuals have a

positive outlook on change and when they participate, the progress of change

is facilitated.

5 Communicate the progress of change

In order to minimise fear of the unknown, the content and progress of change

must be communicated to employees. It is often difficult to know all the

potential consequences and influences of a given change, but, by keeping

employees informed of its progress, management can at least maintain a

climate of trust.

6 Use a respected change agent

The credibility and power of the change agent can facilitate the process of

change. The change agent must be familiar with the technical and

behavioural aspects of a given change and must be someone with an

influence on organisational functioning.

7 Reinforce earlier changes

When an organisation undertakes a large scale change involving a series of

continual modification, it is important for people to see that earlier changes

have been successful.

Managing the Resisting Forces

Most of the strategies designed to increase the driving forces are equally applicable

for reducing resisting forces to change. People resist change because they perceive

that it ' can be harmful to them; thus, it is essential that they be made aware of its

need and benefit. Understanding the reason why people resist change can help you

formulate a plan to reduce the resistance.

Moving

In the moving or changing phase the individual is ready for new behaviour and a

change in perspective. It is important that he or she have an opportunity to build by

experimentation new patterns of behaviour and new assumptions, perceptions and

feelings.

It is a time of trial and error learning, characterised by ambiguity and tentativeness.

The phase is typically one of careful guidance by an authority, of learning the pieces

of a new pattern of behaviour before the whole can be conceived. Moving or change

involves changing the organisational components. Traditionally, organisational

change was thought to mean modifying only one subsystem of an organisation. For

example if there was a change in technology, modifying a task was thought to be

sufficient. In recent years, however, more attention has been paid to larger-scale

organisational changes involving several organisational components. This approach

is based on the view that an organisation is composed of four major components-task,

structure, technology and people and that a change in any one of them requires

changing the others. You are already familiar about this interdependence which was '

discussed in the earlier section on Domino Effect.

Refreezing

The final phase involves the establishment of a new perspective compatible with and

leading to the new desirable behaviour. In effect, the new part of one's total

perspective is now established and integrated so that it fits the whole. This makes it

possible for the new behaviour to be accomplished as a matter of course. This is the

period in which the individual or group begins to enjoy the rewards for the new

behaviour, either extrinsically in the form of social approval, monetary reward and

the like or intrinsically in the form of ego satisfaction, sense of mastery and self-

fulfillment.

Organisational

Climate and Change

54

In order to continuously reinforce the newly acquired behaviour, the organisation

needs to maintain the organisational fit among various components that are

supportive of such behaviour. Without such organisational compatibility, the

organisation will encounter instability. Since the new found behaviour cannot be

adequately reinforced in an unstable organisational climate, it may soon be

discontinued.

Unsuccessful efforts to induce significant and lasting change in organisational

behaviour can generally be traced to failure in one of the three stages described

above. Either they fail to alter in any significant fashion the forces maintaining old

behaviour; or they fail to offer a clear, satisfying alternative; or they fail to "stamp in"

the new behaviour. Remember, however, that an organisation operating in a complete

dynamic environment may not be able to maintain a level of organisational fits for

long. Since both internal and external components change constantly, organisational

fits cannot exist at one level for a long time. Under this environment you need to

search for organisational fits at different levels. For you the task of performing

organisational change becomes a continuous process, finding a moving equilibrium.

Based on this understanding of the three basic phases of any change process now you

should be able to appreciate the dynamics of successful organisation change. The

success stories of change have taught us that the organisational changes are typically

initiated at the top management level after they are aroused to take action for "setting

things right". They might feel alarmed by a number of distressing symptoms but may

not have clear idea about what the specific problems are. They might still hold on to

their present understanding of the perspective and might engage in reflexive

behaviour. A lot of unfreezing interventions are required at top to facilitate their

diagnosis of problem areas and recognition of specific problems. Only when the

perspective is redrawn with the help of hard data, attempts are made to invent new

tentative solutions and commitments are generated to implement the same This is the

typical trial-and-error changing process where experimentations with new solutions

and search for results continues. Only when enough reinforcements are received from

positive results, are the new practices accepted and a change stabilised.

Activity K

Successful unfreezing often requires something like "shock treatment" where old

ways of coping prove ineffectual. Alternatively there must be serious unambiguous

disconfirming feedback about the efficiency of current behaviour. Recall any

personal incident which helped you to unfreeze and question your previously held

assumptions. Compare your personal experience with the unfreezing process

described in this section.

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Activity L

In your previous activities, you might have collected a case of successful organisation

change. Analyse the case in step-by-step model of dynamics of change phases.

Compare the model with your realistic case and comment to what extent the model is

confirmed or disconfirmed.

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11.5 COPING STRATEGIES FOR CHANGE

55

Managing Change

Organisations depend on the environment for their survival. So they need to manage

their external dependence and protect their core technology from disruptive external

influences.

Every organisation develops its own technology whereby inputs are subjected to

people and/or machine processes and subsequently become the outputs for the

organisation. Before resorting to any change in core technology, all organisations

attempt to protect it. You as a manager can attempt to protect the core technology of

your organisation by several methods. You may seek to buffer environmental

changes on both the input and output side of your organisation's operations. Buffering

on the 'input side may be achieved by stockpiling materials acquired in an irregular

market and their steady utilisation in the production process. You may buffer on the

output side by maintaining warehouse or distribution inventories. You may

anticipate change in the demands of the products and services of your organisation

and subsequently modify production schedule on the basis of new forecasts. When

such anticipation or modification is not possible you can attempt to level the demand

fluctuations through levelling techniques like offering inducements in the form of

special sales in slow

periods.

The more the organisation is dependent on external environment, the more vulnerable

it is. There are again three ways in which organisations can manage their external

dependence: Adaptation, Avoidance and Control.

Adapting to External Changes

The adaptive strategy takes the marketing approach to environmental demands. It

usually starts with an assessment of the needs of the market place and then produces

goods and services to meet these. As discussed by Schein (1965), the strategy

involves the following sequence of activities in the adaptive-coping cycle:

1 Sensing a change in the internal or external environment;

2 Importing the relevant information about the change into those parts of the

organisation that can act on it;

3 Changing activities inside the organisation according to the information

obtained;

4 Stabilising internal changes while reducing or managing undesired by-

products;

5 Exploring new products, services, or methods that are more in line with the

originally perceived changes in the environment; and

6 Obtaining feedback on the success of the change through further sensing of

the state of the external environment and the degree of integration of the

internal environment.

From these stages of the cycle, Schein indicates four conditions for successful

coping, conditions that are very similar to the ultimate criteria of organisational

health (1) ability to take in and communicate information reliably and validly; (2)

internal flexibility and creativity to make the changes that are demanded by the

information obtained; (3) integration and commitment to the goals of the

organisation, from which comes the willingness to change; and (4) an internal climate

of support and freedom from threat.

Avoiding External Dependence

An organisation can reduce external dependence in a number of ways:

a)

b)

Finding an environmental niche

This can be done by selecting specific environmental domains with little or no

competition, no restrictive regulations, but plenty of suppliers and customers. Indeed,

his is too ideal to be realistic, but some innovative companies keep other

organisations out of competition and maintain monopolistic positions in the market.

Reducing dependence through diversification

To the extent that an organisation depends on a limited number of outsiders for its

needed resources and outputs, the degree of its dependence on them increases. The

'organisation can reduce this dependences through diver' uiation. The organisations

Organisational

Climate and Change

56

a)

b)

c)

d)

may cultivate alternate sources of suppliers or acquire new sources of supply and

distribution or expand its product lines for this purpose.

c) Developing mutual dependence

When people or organisations depend on each other for survival or for positive

exchange relationships, one party may not take an arbitrary action against the other

because of fears of repercussions. However when one party is more dependent on the

other, an imbalance in their exchange relationship is created. This stronger party can

take an action against the dependent one without being challenged. In order to avoid

such one-sided dependence, the dependent party may have to diversify its

dependence or increase the other party's dependence on it. Such a necessity for

mutual dependence is vividly demonstrated in international power politics.

Controlling Environmental Forces

Organisations can reduce their external dependence by controlling the forces in the

environment that, in turn, control their behaviours. These forces may include

competitors, suppliers, customers, legislative bodies and unions. Many tactics can be

employed, of which some are:

Create an organisational structure with a large number of boundary spanners,

who interact with the environmental forces. Creating a public relations department or

project group is an example.

Appoint individuals from external elements who can establish personal

linkages to those who control the environment; for example companies that rely on

defence contracts may appoint ex-service officers to provide such personal linkages.

Create or participate in trade associations. They reduce competition among

their members and allow them to control their environments jointly. Many

professional organisations protect their members' interests through such organised

effort.

Lobby the legislative and regulatory agencies to create favourable

environments for an industry or organisation. This is the reason why an army of

lobbyists operates in Delhi and in state capitals.

Other devices can be used to control the environment as well. These include such

tactics as price fixing, forcing out competitors, false advertising and bribes. However,

these methods are mostly illegal or against contemporary social norms and values.

For this reason, not many respectable organisations use such tactics explicitly or

extensively.

11.6 RESISTANCE TO CHANGE

From its inception, the study of organisational change has noted the fact that many

participants respond with dogged resistance to altering the status quo. Since the

industrial revolution began, workers have at times sought, occasionally in extremely

violent fashion, to block the introduction of new technology. Supervisors and lower

level managers have balked at large scale projects in job redesign and job

enrichment; even low level employees, the presumed beneficiaries of such projects,

have fought such changes. Divisional managers have fought pitched battles against

realignment of corporate structure. Even the proposal by a course coordinator to

adopt a different text book is capable of touching, off a frenzy of defensive tactics to

resist change.

Such behaviour may be either overt or covert. Overt resistance may take the form of

employees deliberately failing to do the things necessary for successful change or

simply being unenthusiastic about the change. The absence of overt resistance does

not mean that resistance is not present, as resistance may be hidden from direct

observation. Covert resistance can be more detrimental to change than open

resistance because it is harder to identify and eliminate.

Watson (1966) has suggested that there are at least two sets of factors which explain

the process of resistance. One set relates to the personality and the other relates to the

social system.

In case of the personality related factors one can include the following:

Homoeostasis or the tendency of the organisation to maintain an equilibrium.

Because of this tendency all change related phenomena are resisted.

57

Managing Change

Habit : Since change entails a conflict with established habits, it tends to be resisted.

Primacy: The way in which a situation is first encountered and the difficulties are

overcome tends to be firmly established. This becomes an established behaviour

tendency.

Selective perception and retention : Human beings have a tendency to perceive and

retain those aspects of their environment which are cognitively consonant. An

individual does not like to read or hear views which contradict his own opinions.

Many a good idea 'is rejected as a theory which would not work in the practical

situation.

Dependence: Since childhood an individual learns to he dependent on adults, or on

others for comfort and security. This tendency does not allow him to take the

initiative and accept innovation and change.

Super ego: This represents individual moral codes of ethics that decide the 'dos' and

dont's of society. It provides an internalised code of control which may induce a high

sense of conformity.

Self-distrust : Due to the various super ego pressures a sense of self-distrust may

sometimes be developed. The puritanical views may ultimately create a sense of self-

distrust and to be 'good' is to accept the status quo ante.

Insecurity and regression : It is almost a universal human tendency to seek refuge

in the past when the going gets rough. The frustration-regression sequence hampers

the acceptance of change when the change is needed most.

In case of the causes of resistance to change in social system, the following factors

have been identified:

Conformity to norms: The norms in a social system are similar to habits in the

individual. They indicate the expected ways of behaving. These include time

schedules, modes of dress, forms of address to colleagues and indications of

company. loyalty etc.

Systemic and cultural coherence : Generally a social system is made up of several

component elements. When the system needs to be changed, relationships between

elements have to be altered. Since changes in a diode or triode may unleash a series

of changes elsewhere in two systems. the resistance may come about from the other

elements.

Vested interests : In the social system, it is not uncommon to observe the resistance

emanating from individuals whose economic or prestige interests are at stake.

The sacrosanct : Certain beliefs and ideals are held sacred by the members of an

organisation or a social system. Changes relating to these ideals are resisted the most.

Cultural taboos represent a special class of events which are prescribed for members

and serve the same function as "super ego".

Rejection of "Outsiders" : It is customary to suspect and show hostility to outsiders

or "the others". In scientific researches also it has been observed that certain projects

are not acceptable if they are perceived as sponsored by outside agencies and not

evolved from within.

To conceptualise resistance to change as a rational response to the threat of losing

security, status, autonomy, and investment in the status quo leads naturally to the

consideration of organisational change as a political process. Indiviudals, interest

groups, and coalitions favouring change presumably stand to gain either because of

their identification with measures that render the organisation more effective, or

because they derive personal gain through greater status, perquisites, prestige,

automony and the like. Since some people stand to lose, or at least believe that to be

the case, they will defend the status quo. What strategies and tactics will unfold?

Both sides will seek early on to appeal to the uncommitted-those who have no strong

feelings for or against the change, either because they may be largely unaffected or

because they cannot decide whether the outcomes to them are, on balance, positive or

negative. Appeals to this group may take the forms of lobbying, distortion,

propaganda, persuasion, cashing in credits from old favours, implied threats, appeals

to loyal and friendship, or mixtures of all of the above.

You will usually find that winning over thc uncommitted is a necessary but not

sufficient condition for actually ushering in a change programme. Frequently the

resisters, even if a small minority, will include in their ranks critically placed

individuals or groups who, even if not able to block change, have the potential for

sabotaging it when put into operation. Successfully implemented change requires

some means of coopting these groups. This usually necessitates substantial

modifications of the originally proposed programme.

Organisational

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58

One means of accommodating resisters is to invite their participation in the

planning, design and process of carrying out programmes. Numerous experiments

and experiences demonstrate that when members are allowed participation in

planning the installation of new production methods, they show less resistance to

learning and adopting new methods. Participative forums give affected parties a

sense of ego-identification with the proposed changes leading to a commitment to see

the change effectively implemented. It also provides sufficient exposure to

information about the nature and consequences of the change so that the anxiety out

of uncertainty is reduced.

11.7 STRATEGIES OF IMPLEMENTING CHANGE

Ask any experienced manager how organisational change should he implemented and

likely to get an earful. Most managers who have been responsible for implementation

have developed personal perspective consisting of assumption and ,g feelings about

how change should be introduced. These philosophies fall into camps,-either "tops-

down" or "bottoms-up".

The Tops-down Strategy

The advocates of this strategy believe that, in general, people resist changes and

require direction and structure for their well being as well as to work efficiently and

effectively. The basic psychological contract between employees and management, it

is assumed, is one in which the employee provides work, effort and commitment and

expects in return pay, benefits, and a clear definition of what is expected to be done.

It follows that it is the management's responsibility to design the changes it deems

appropriate and to implement these thoroughly but quickly by directives from the top.

The Bottoms-up Strategy

The advocates of this approach profess what to them is a more enlightened view of

human nature. They argue that people welcome change and the opportunity to

contribute to their own productivity, especially if the change gives, them more

variety in their work and more autonomy. These managers assume people have a

psychological contract which includes an expectation that they be involved in

designing change as well as in implementing it. Commitment to change, they say,

follows from involvement in the total change process and is essential to successful

implementation.

Which is more correct? Is the question of correctness the right question to ask? What

is your philosophy of change?

If your answer to the question was, in effect, "the correct strategy of change depends

on the circumstances", you are in agreement with the currently very popular

contingency school.

Contingency Approach

According to the contingency school, the choice of an appropriate strategy and the

implementation diagnosis consists of assessing eight independent variables or factors

in the organisations. These are shown in the upper part of Figure V, where each

variable is given a continuum of potential values. Based on the diagnosis which

evolves, the basic implementation strategy will consist of selecting values along the

continua for the three dependent variables as shown at the bottom of Figure V.

59

Managing Change

1.

2.

3.

4.

5.

6.

7.

8.

1. Pace…………………..Fast…………………..Slow

2.

3.

Once the values of these variables have been located, and if the answers to the

diagnostic for the independent variables fall towards the left of the continuum, then

the implementation strategy would also be leftwards. On the other hand, if the values

of variables tend towards the right side of continuum then the implementation

strategy would also be rightwards. Thus, for example, if there is very little time

available, the crisis or need for change is clear to all, it is a small organisation, and so

on, the appropriate change strategy is tops-down, directive, and fast.

Figure V: Variables for diagnosis and strategy setting of Implementation of organisational change.

Diagnostic (independent) variables

Time available …………………..Short …………………..Long

Clarity of crisis or need for change…………………..Clear to all

…………………..Clear to few

Size of organisation …………………..Small…………………..Large

Effects of existing controls and incentives …………………..Encourage

initiative …………………..Encourage focus

Organisational concentration of relevant

knowledge…………………..Concentrated at top

…………………..Concentrated at bottom

Expectations of people regarding involvement in implementation

…………………..None …………………..Extensive

Potential resistance …………………..Small…………………..Great

Total power base of change

agent…………………..Great…………………..Small

Implementation strategy (dependent) variables

Use of power…………………..Tops-down…………………..Bottoms-up

Management

style…………………..Directive…………………..Participative

So, whenever you are faced with a problem of managing change, assess the situation

mentally and depending upon your diagnosis of the situation you can proceed to the

task of implementing change with reasonably greater probability of success.

Activity M

Think of the implementation of an organisational change (e.g., new administration

procedure, computer system, or other technology etc.) which you have experienced.

Using the checklist of diagnostic variables given in Figure V, indicate what the

situation was for each variable. What does the analysis suggest as to the appropriate

method of implementation? How did this differ from the actual method of

implementation?

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

Activity N Organisational

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60

Collect a case where implementation of a change programme met with so much

resistance that the attempt had to be given up. Make a post mortem analysis of the

failure by commenting on the factors behind resistance, process of change and

strategy of implementation. Had you been in charge of the implementation, what else

would you have done?

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

………………………………………………………………………………………….

Final Activity

Go back to the learning objectives of this Unit and Check for. yourself how many of

these objectives you have attained.

11.8 SUMMARY

We have discussed about the nature of change: individual and organisational;

evolutionary and revolutionary; and, reactive and proactive. Several forces influence

changes in internal and external environment of organisations. These changes in turn

influence the effectiveness of organisations and require a change in corporate

strategy. The process of organisational change involves three stages-unfreezing,

moving and refreezing. Understanding these three basic phases is necessary to cope

with change and manage the external dependence of organisations through

adaptation, avoidance and control.

11.9 SELF-STUDY EXERCISES/QUESTIONS

1 What are the major forces for change that confront organisation?

2 Discuss the process of organisation change and the strategies to cope with it.

3 Distinguish between:

a)

b)

c)

Individual change and organisational change

Evolutionary change and revolutionary change

Reactive and proactive change

11.10 KEY WORDS

Adaptive-coping Cycle: The attributes of an organisation change in order to help it

cope with changes in the environment.

Amoeba Syndrome: Lack of strong direction from top executives, not enough

structure, order or guidance leading to activity trap. Doing things without knowing

where one is leading.

Anarchy Syndrome: A situational upheaval where leadership responsibilities,

functions and resources are in dispute.

Bottoms-up Strategy: A change implementation strategy which assumes that

employees welcome change and should be involved in imitation of change.

61

Managing Change

Buggywhip Syndrome: Clinging to obsolete products, services and practices which

no longer have potential for sustaining its livelihood.

Change Agents: Members of an organisation whose role involves strategies and.

procedures for inducing change in the organisation.

Deadlock Syndrome: Stand off condition between management and leader of work'

force leading to antagonistic relation between the factions.

Diagnostic Variables: Are the eight independent factors which need to be assessed

before the strategy for implementing change is decided upon.

Differentiation: Division of the organisation into specialised subsystems to cope

with various demands imposed upon by the environment.

Domino Effect: A situation where one change sets off other changes in an

organisation owing to interdependence of various subsystems.

Driving Forces: These are pressures or the needs for change which demand

corrective action, which must be perceived by every manager.

Evolutionary Change: In course of time, every organisation exhibits change which

is slow, smooth and gradual from birth to maturity to decline and may be even death.

Growth Phases: An organisation, like a living organism passes through various

stages of growth such as birth, maturity, decline and death.

Integration: Refers to the unity of purpose and commonality of wider goals that

holds the diverse and specialised subsystems of an organisation together.

Moving Phase: This phase involves actual change in the various components, for

subsystems of an organisation.

Mom and Pop Syndrome: Small company managers can not/will not help the

company grow past the awkward stage.

Myopia Syndrome: No future orientation, little thought to strategy, sense of

direction and advance planning.

Proactive Change: Change that anticipates a desired state of affairs. It contrasts with

reactive change as purposive behaviour contrasts with reflexive behaviour.

Purposive Response: It is a response to a stimulus that involves planning and

coordination of effort with respect to the goal in mind.

Rat-race Syndrome: Toxic climate coming from oppressive, primitive, slave driving

policy.

Reactive Change: Change that is initiated in response to needs as force generated by

the organisation's interaction with the environment.

Reflexive Response: it is the immediate, spontaneous, automatic and unthinking

reaction to a stimulus.

Refreezing Phase: It involves reinforcing newly generated changes through a

process of countering instability and ensuring compatibility between various

subsystems.

Remote Control Syndrome: Too much administrative or executive control from the

parent body. Decision-making autonomy is seriously impaired.

Resisting Forces: Personality and social system related factors that generate

responses which tend to check onset of change.

Revolutionary Change: Every now and then, there emerges a crisis situation in an

organisation, which necessitates a rapid, visible, radical shake up in its structure,

policies, procedures or personnel.

Rigor Mortis Syndrome: Conditions of inertia and constricted activity prevail.

Primary organisation value is structure and order.

Tops-down Strategy: A change implementation strategy that believes in change

coming by way of directives from top management as being entirely appropriate.

Unfreezing Phase: This initiates the change process. It leads to recognising the need

for change after having questioned existing value suppositions.

Young Turk: Is a type of change agent who is young, dynamic, pushy, persistent and

ambitious. His new ideas tend to challenge status quo.

Organisational

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Greiner, 1972. Evolution and revolution as organisations grow, Approved Business

Review, July-August.

Lawrence, P.R. & Lorsch. J.W., 1967. Organization and Environment: Managing

Differentiation and Integration, Harvard Graduate School of Business

Administration: Boston.

Schein, E.H., 1965. Organisational Psychology, Prentice-Hall: Englewood-Cliffs.

Watson, G. 1966. Resistance to Change. In : Goodwin Watson (Ed.), Concepts for

Social Change, CPEDS: Washington, D.C.

Organisational and

Managerial Ethics

UNIT 9 ORGANISATIONAL CULTURE AND

MANAGERIAL ETHOS

Objectives


• Understand the nature of the concepts of organisational culture and

organisational climate

• Identify some of the factors that contribute to the uniqueness of each

organization

• Appreciate the values and the characteristics of managerial ethos

• Describe the process through which traditions and customs are maintained in

any organisation

Structure

9.1 Culture or Climate

9.2 Perceived Characteristics of Culture and Climate

9.3 The Dimensions of OC

9.4 Determinants of OC

9.5 Managerial Values and Ethos

9.6 Managerial Ethos: Its Characteristics

9.7 How Culture and Ethos are Maintained

9.8 Summary


9.10 Key Words


9.1 CULTURE OR CLIMATE

Every organisation has some characteristics which are common with any other

organisation. At the same time, each organisation has its unique set of

characteristics and properties. This psychological structure of organisation and

their sub-units is usually referred to as Organisational Culture.

For a layman, culture is a commonly experienced phenomenon and many words like,

climate, atmosphere, environment and milieu are often used interchangeably to

describe it. In fact, most of the studies which have tried to measure an organisation's

"Culture" have operationalised it in terms of "Organisation Climate". A couple of

formal definitions of organisation climate are given below for your perusal:

Organisational climate is a relatively enduring quality of the internal environment

that is experienced by the members, influences their behaviour, and can be described

in terms of values of a particular set of characteristics of the organisation (Renato

Tagiuri, 1968).

Organisational climate is the set of characteristics that describe an organisation and

that (a) distinguish one organisation from other organisations; (b) are relatively

enduring over time and (c) influence the behaviour of the people in the organisation

(Forehand & Gilmer, 1964).

Compare these two definitions of "Organisational Climate" with a definition of

"Organisational Culture" as given by Stephen P. Robbins (1986): Organisational

Culture is a relatively uniform perception held of the organisation, it has common

characteristics, it is descriptive, it can distinguish one organisation from another and

it integrates individual, group and organisation system variables. 5

9.2 PERCEIVED CHARACTERISTICS OF CULTURE

AND CLIMATE

Organisational

Climate and Change

6

If you examine closely these sample definitions, you will not only be able to identify

the commonalities but also be able to see that the abstract concept of culture and

operational concept of climate basically refer to the perceived personality of an

organisation in very much the same sense as individuals have personality. Just as you

have a personality -a set of relatively stable traits-so does an organisation. Just as any

culture has some do's and don'ts in the form of totems and taboos which dictate how

each member should behave with a fellow member or an outsider, similarly each

organisation has a culture that influences the behavior of employees towards clients,

competitors, colleagues, supervisors, subordinates and strangers. In this Unit, we

shall be concerned with this relatively stable perceived internal environment of an

organisation, called Organisational Climate or Organisational Culture (OC).

It should be noted that Organisational Culture or Organisational Climate (OC) is the

perceived aspects of an organisation's internal environment, but within the same

organisation there may be very different OCs. This might happen because people

with different length of experience or at different levels of organisation's hierarchy,

may perceive internal environment of an organisation differently. Personal

characteristics such as Values, Needs, Attitudes and Expectations determine the

manner in which an individual is likely to perceive the various aspects of the internal

working environment of the organisation.

Activity A

Based on this-discussion about the concept of Organisational Culture or

Organisational Climate (OC), complete the following sentences:

A The unique set of characteristics which is perceived as internal environment

of an organisation is usually fairly……………………… over time.

OC refers to the perceived………………………………. environment of an B

D

E

organisation.

C Though OC tends to be a shared perception, within the same organisation,

there may be…………………………………………OCs depending upon the

characteristics of the group of persons who perceive it.

OC influences the………………………….of people in an organisation.

The concept of organisation culture or organisation climate (OC) allows us to

…………………………….one organisation from other organisations.

Answers: A. Stable, B. Internal, C. Different, D. Behaviour, E. Distinguish.

Activity B

Step 1 Think of an organisation of which you are a member and are familiar with its

internal environment. Use five adjectives and adverbs which describe a set of

characteristics of that environment.

Name of the Organisation ……………………………………………………………...

Its internal environment is ………………………………………………………...

......................................…………………………………...……………………………

…………………………………………….....................................................................

......................................…………………………………...……………………………

…………………………………………….....................................................................

......................................…………………………………...……………………………

…………………………………………….....................................................................

......................................…………………………………...……………………………

Step 2 Do you find each of these characteristics relatively enduring and stable? Organisational and

Managerial Ethics

7

Yes [ ] No [ ]

If you have ticked 'NO', try to replace them with more enduring characteristics.

Step 3 Give an example showing how any one of those enduring characteristics of

that organisation has influenced your behaviour towards others.

......................................…………………………………...……………………………

…………………………………………….....................................................................

......................................…………………………………...……………………………

…………………………………………….....................................................................

......................................…………………………………...……………………………

…………………………………………….....................................................................

Step 4 Do you feel that other members of the organisation may not share your

perception and agree with you about any particular quality that you have mentioned

in Step 1.

Yes [ ] No [ ]

If you have tick marked `YES', can you replace that quality of the organisation with

any other enduring characteristic about which other members of the organisation are

also likely to agree?

Step 5 Think of any other organisation with which you are fairly familiar. Do you

feel that the set of characteristics mentioned by you in Step 1 distinguishes your

organisation from the other?

Yes [ ] No [ ]

If you have tick marked 'NO', go back to Step 1 to revise the set of characteristics

which you perceive as typical and fairly stable of your organisation and with which

you are able to distinguish your organisation from other organisation(s).

9.2 DIMENSIONS OF OC

You have seen that OC refers to a set of some commonly experienced stable

characteristics of an organisation which constitutes the uniqueness of that

organisation and differentiates it from others. You might have faced some difficulty

in identifying this set of characteristics because you do not yet know the various

dimensions or factors of OC in which you should look for these characteristics. In the

last two decades, extensive studies have been conducted which have helped us to

identify some key factors of OC. Some of these common dimensions are described

below:

Individual Autonomy: This refers to the individual's freedom to exercise his or her

responsibility. In other words, individual autonomy is the degree to which employees

are free to manage themselves; to have considerable decision making power; and not

to be continually accountable to higher management.

Position Structure: This refers to the extent of direct supervision, formalisation and

centralisation in an organisation. In other words, position structure is the degree to

which objectives of the job and methods for accomplishing it are established and

communicated to the individual by supervisors.

Reward Orientation: This refers to the degree to which an organisation rewards

individuals for hard work or achievement. An organisation which orients people to

perform better and rewards them for doing so, will have an OC characterised by high

ward orientation.

Consideration, Warmth and Support: This refers to the extent of stimulation and

support received by an individual from other organisation members. In other words,

if there is a sense of team spirit among the members of an organisation, the OC is

likely to be perceived as considerate, warm and supportive.

Organisational

Climate and Change

8

Conflict: This refers to the extent of conflict present between individuals and the

willingness to be honest and open about interpersonal differences.

Progressiveness and Development: This aspect refers to the degree to which

organisation conditions foster the development of the employees, allow scope for

growth and application of new ideas and methods.

Risk Taking: The degree to which an individual feels free to try out new ideas and

otherwise take risks without fears of reprisal, ridicule or other form of punishment,

indicate the risk-taking dimension of OC. This dimension is akin to "cautious" versus

"venturesome" quality of an organisation.

Control: This dimension refers to the degree to which control over the behaviour of

organisational members is formalised. In a highly bureaucratic organisation, control

systems are well defined. In a low-control organisation, most of the controls are self-

regulated, i.e., individuals monitor their own behaviour. You can think of this

dimension as "tightness" versus "looseness" of an organisation.

These eight dimensions account for most of the research findings, but they do not

account for all that we intuitively feel to be present in the "Climate" or "Culture" of an

organisation. For example, you may perceive an organisation culture to be

"paternalistic", or a climate to be "impersonal". Though the fourth OC dimension

(consideration, warmth and support) may cover both these different qualities, yet the

"richness" that you find in the two qualities is not fully reflected in that dimension.

However, the identification of these eight dimensions (which are not absolutely

independent of each other) do help us in mapping and measuring OC.

Before we move on to the next topic on Determinants of OC take the following pair

matching test to check whether you have understood the focus of each dimension.

Activity C

Given below are two columns. The left column lists the dimensions of OC, the right

column lists their major focus. Match each dimension with its corresponding focus.

Dimensions Focus

1 Individual Autonomy A the extent of direct

supervision and formalisation.

2 Position Structure B the extent of socio-emotional

support provided by others.

3 Reward Orientation C the extent of freedom to

experiment with new ideas.

4 Consideration D the scope of growth of self,

other members and

organisation as a whole.

5 Conflict E the degree of check imposed

on behaviour of organisational

members.

6 Progressiveness & Development F the degree of freedom from

accountability to others.

7 Risk-taking G the extent of expression of

differences and blocking of

each other.

8 Control H the extent of incentives

provided for higher effort and

performance.

Answers: 1F, 2A, 3H, 4B, 5G, 6D, 7C, 8E

Organisational and

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9

9.4 DETERMINANTS OF OC At the very onset of this topic, it is useful to distinguish between determinants and

dimensions of OC. Determinants are the causes, while dimensions are the

components of OC. You may say, determinants are those which influence whereas

dimensions are those which are influenced.

Although OC refers to the internal environment of an organisation, the nature of OC

is determined by a variety of internal and external factors. One of the basic premises

of organisational behaviour is that outside environmental forces influence events

within organisations. After acknowledging the dynamics of internal as well as

external factors in this section, we will consider in greater detail the following seven

internal factors. You will find these factors as determinants of OC in the following

order:

1 Economic Condition

2 Leadership Style

3 Organisational Policies

4 Managerial Values

5 Organisational Structure

6 Characteristics of Members

7 Organisational Size

Economic Conditions

Several dimensions of OC are influenced by an organisation's position on the

economic cycle. The economic condition of any organisation influences whether its

budget should be "tight" or "loose". In times of prosperity-when budgets are more

loose than tight-the organisation tends to be more adventuresome. On the other hand,

tight budget would lead to an air of caution and conservatism within an organisation.

Few managers are willing to suggest new programmes (probably deserving merit)

when the order from above is to exercise tight control over expenses. So, dimensions

of OC like "Risk-taking", "Control", "Progressiveness and Development" etc. are

directly influenced by economic conditions.

Leadership Style

The leadership style prevailing in an organisation has a profound influence in

determining several dimensions of OC. The influence is so pervasive that you may

often wonder whether OC is a product of the philosophy and practices of prominent

persons in an organisation.

Consider, for example, the results of an experimental study where three organisations

were "created" by simulation. All these three Organisations-A, B and C-were

identical in terms of nature of business, size of the organisation, characteristics of

employees, and initial economic condition. The major difference among these three

organisations was the "leadership style". Organisation A was characterised by

authoritarian style with high power motivation. Organisation 13 was characterised by

democratic style with affiliation motivation. Organisation C was characterised by

goal directed style with achievement motivation. The meaning of - these different

leadership styles and their effects on different dimensions of OC can be seen in Table

1. You will notice that one type of leadership style can

influence more dimensions of OC than another style. Table-1

Leadership Style of three Simulated Business Firms and their effects on Dimensions of OC

Organisational

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10

Organisational Policies

Specific organisational policies can influence a specific dimension of OC to quite an

extent. For example, if the company policy states that layoffs will be used only as a

last resort to cope with business downturn, then it would, in general, foster an internal

environment that is supportive and humanistic.

Similarly if you are working in a company where it is agreed that the first

beneficiaries.; of increased profit would be the employees of that organisation and

shareholders would get second priority, then the OC will be characterised by High

Reward Orientation and probably by High Progressiveness and Development.

Managerial Values

The values held by executives have a strong influence on OC because values lead to

actions and shape decisions. Values add to perceptions of the organisation as

impersonal, paternalistic, formal, informal, hostile or friendly. You will learn more

about managerial values under the topic: Managerial Ethos.

Organisation Structure

The design or structure of an organisation affects the perception of its internal

environment. For example, a bureaucratic structure has an OC much different from a

System 4 organisation. What is a System 4 organisation? According to Rensis Likert,

all organisations can be classified into four major groups, depending upon the way

basic organisational processes are conducted. These major groupings are as follows:

System 1 - Exploitative Authoritative

System 2 - Benevolent Authoritative

System 3 - Consultative

System 4 - Participative

How does one know whether an organisation should be categorised as System 1 or 2

or 3 or 4? It depends on the way following processes are perceived and rated in an

organisation:

• Leadership process

• Motivation process

• Communication process

• Decision-making process.

• Goal-setting process

• Control process,

Organisational and

Managerial Ethics

11

• • • • • •

Employees of an organisation rate these processes on a rating scale; asking questions

like the following:

How much confidence is shown in subordinates?

Where is responsibility felt for achieving organisation goals?

How well superiors know problems faced by subordinates?

How much covert resistance to goals is present?

At what levels are decisions formally made?

Is there an informal organisation resisting the formal one?

Based on the answers to these questions, an organisation can be classified as system 1

or 2 or 3 or 4. A bureaucratic structure is likely to be rated as System 2 or System 3.

A System 4 organisation will have a distinct OC where the main theme would be

strong involvement and self-control of all organisation members at all levels in all

basic organisational processes

Characteristics of Members

Personal characteristics of the members of an organisation also affect the climate

prevailing in the organisation. For example an organisation with well educated,

ambitious and younger employees is likely to have a different OC than an

organisation with less educated, and less upwardly mobile, older employees. The

former might inculcate an environment of competitiveness, calculated risk-taking,

frankness of opinions, etc.

Organisational Size

In a small sized organisation it is much easier to foster a climate for creativity and

innovation or to establish a participative kind of management with greater stress on

horizontal distribution of responsibilities. On the other hand, in a large organisation it

is easier to have a more authoritative kind of management with stress on vertical

distribution of responsibilities. This in turn leads to distinct environments as has been

explained with the help of the concept of System 4 organisation.

We have now studied seven basic determinants of OC. The list is not exhaustive but

these are the basic internal factors determining the internal environment of an

organisation.

Note that OC is not influenced by factors existing within the organisation only.

Societal forces help shape OC as well. To understand societal influences on OC, let

us consider an example in relation to the changing profile of existing and future

employees. You may have noticed at least two changes which are taking place in our

society. First, educational level of employees of all categories is rising. Second,

societal values toward recreational and leisure activities are becoming stronger. The

effect of the first change is in the expectations of employees. People want more

satisfying and fulfilling work which should match their qualifications and abilities.

The impact of the second change is that the passion for non-work is increasing:

people feel less passionate about job performance. So, while one change is pushing

towards increased professionalism, the other change is pulling towards leisure-

orientation. Against these backdrops of societal forces influencing the profiles of the

employees, the content of the job and the organisation processes determine the OC.

To sum up, OC is determined by a variety of internal and external factors where

internal factors are specific to the organisation while external factors refer to a

number of societal forces.

Activity D

Before we move on to the next part on Managerial Ethos, we pause for a while to

check how far you have grasped what has been covered in the last section. Write

`true' or `false' in the space provided against each of the following statements.

1 OC is determined by only internal factors specific to the organisation. ( )

2 Leadership style and structure of an organisation immensely influence ( )

the OC.

3 A System 4 kind of an organisation is more authoritative than a ( )

System 1 organisation.

4 It is easier to establish participative management in a small sized ( ) Organisational

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12

organisation than in a large one.

5 Under tight economic condition, an organisation tends to he ( )

adventuresome.

6 A bureaucratic organisation tends to be either system 1 or system 4. ( )

7 Organisation's policies do not have any effect on the ( )

perceived internal environment of an organisation.

Answers: 1-False, 2-True, 3-False, 4-True, 5-False, 6-False, 7-False.

9.5 MANAGERIAL VALUES AND ETHOS

In the earlier section, we have indicated that the managerial values affect perceived

characteristics of the internal environment of an organisation. At this juncture you

may well ask what some of these values are. How do these values develop? How do

they get transmitted from one generation of managers to another? In this section, we

are going to explain briefly some of these issues.

Ethos refers to habitual character and values of individuals, groups, races, etc.

Managerial ethos is concerned with the character and values of managers as a

professional group. Contemporary managers hold some specific values which affect

work and some of these are: autonomy, equity, security and opportunity.

You may recall that individual autonomy is a very important dimension of OC.

Enlightened managers believe that most people prefer to feel free and to do things as

they like within the constraints imposed by their group. These managers tend to allow

enough latitude to individual employees as long as the use of this freedom does not

violate basic norms of the organisation. In the last two decades, some management

practices have been innovated which are in keeping with this value of autonomy.

Equity refers to justice in rewarding performance. Here again, modern managers

strongly feel that a person must get a reward proportionate to his input. In any case,

deliberate exploitation is to be avoided and as far as possible "fairness" is to be

maintained.

Another highly rewarded value is security, both economic and emotional. Keeping a

person on his toes by making him feel insecure is slowly but steadily getting

discredited as a management philosophy. Even the societies which have practised

"hire and fire" policy are unmistakably shifting towards providing security of job.

Providing enough career advancement opportunities to employees is yet another

contemporary managerial value. For several reasons it may not be possible for many

organisations to create enough vacancies for everybody to advance in their career.

However, modern managers encourage themselves and others to continue growing

through various modes of education, although, it does not necessarily lead to career

advancement. Besides these four values which affect a manager's work, the manager

may have a strong "Work Value". Work Value refers to the worth a person ascribes

to the opportunity of work. If you have a "strong" work value you are going to

identify the worth or value of work to you in more ways than one. You may view

work as an opportunity to: (a) accept challenges, (b) serve others, (c) earn money, (d)

enjoy prestige and status, (e) be creative, or (f) be independent, etc.

9.6 MANAGERIAL ETHOS: ITS CHARACTERISTICS

Apart from these values, the managerial ethos of high order requires certain other

characteristics as well. Let us describe these very briefly to you.

Action goal orientation: Persons with high sense of adequacy have clear goals about

their future and are directed by these goals. They usually do not think their goals in

status terms (i.e., what they would like to be) but in activity terms (i.e., what they

would like to do). For example, when a junior manager thinks that he would

like to be the "Chief of Marketing" he is status-goal oriented; but when he thinks that

he would like to be influenced the marketing policies of the company, he is action-

goal oriented.

Organisational and

Managerial Ethics

13

Pro-action: Proactive people do things on their own without having to be told by any

one. Such initiative taking behaviour leads to a high level of activity and

experimentation. As contrasted to these people are reactive persons or conformists

who spend most of their lives in doing things that others expect them to do. Reactive

people are other-directed, whereas proactive ones are inner-directed. A superior

managerial ethos requires more of pro-action than reaction.

Internal resources: Managers with high sense of adequacy are aware of their internal

'strength and are guided by these strengths. They are aware of their weaknesses but

this awareness does not deter them from acting positively or to look for opportunities

for continuous self-improvement. They are open to feedback and ready to learn from

experience.

Problem-solving attitude: A superior ethos requires that managers view themselves

as problem solvers, rather than problem-avoiders. These managers have a positive

orientation to problem situations and do not want to run away from problems. They

tend to approach problem situations with optimism because they have internal locus

of control, i.e., a strong belief that they can change the environment through their

own efforts.

Before we move on to the next topic on Socialisation Process (How OC and Ethos

are transmitted), it would be useful if you complete some or all, of the following

suggested exercises.

Activity E

Get acquainted with at least one manager who values "Autonomy" and professes that

he/she practices it, as far as possible. Collect evidence to describe. how does he/she

do it? What has been the experience? Where has he/she faced problems? Prepare a

report.

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Activity F

Discuss with some other managers whether, according to their opinions, there are

some other values which are central to managerial ethos. What are these? How

relevant are these to the Indian situation? Prepare a short write-up.

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Activity G

Identify an organisation which values "opportunity for growth and development"

rather highly. Collect evidences of some organisational practices which support of

negate this value. Make a journalistic report. Try to publish it.

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Activity H Organisational

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14

Locate a situation where "Equity" principle is grossly violated. Look for the impact

of this violation. Draw some lessons from this situation to develop an insight into the

process of work motivation.

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Activity I

Individually ask a few of your colleagues, "What does work mean to you"? Record

their verbatim responses. Analyse these responses. Make some non-evaluative and

descriptive comment on the nature of their Work Values. Share your observations

with them.

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Activity J

Hold an interview with a manager whom you respect for his/her managerial ethos.

Share with the person the four characteristics of ethos. Get his/her views on those

characteristics. Add any other characteristics of superior ethos which might emerge

out of this interview.

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9.7 HOW CULTURE AND ETHOS ARE MAINTAINED

You may have often experienced that every organisation has its own unique

traditions and customs. Seldom are these traditions and customs explicitly spelt out,

yet, over a period of time, organisations do develop long standing unwritten rules,

regulations and rituals to commemorate special moments, standards for social

etiquette, taboos about what is not to be done or spoken, jargon or special code

language understood only by insiders. These, with a whole lot of other features taken

together, ate generally viewed as the "culture" of an organisation. You May also

have seen that often there is. a uniform perception held about these features of an

organisation.. Sometimes these "images" are fairly stable passing from one

generation to another generation without undergoing much of a change. You might

have wondered how this happens.

In this section, we are going to discuss this issue; How does an organisation maintain

uniformity of its traditions and customs?

The process through which the people are indoctrinated to accept the tradition and

maintain the homogeneity of ethos and behaviours is termed as socialisation. It is a

process of adaptation by which `new' members come to understand the basic values,

norms and customs for becoming àccepted' members of an organisation. Though the

most intense period of socialisation is at the `fresher' stage of entry into an organisation,

the process continues throughout one's entire career in the organisation. This is done to

ensure traditions and to maintain uniformity. The people who do not learn to adjust to the

culture of the organisation become the targets of attack and are often rejected by the

organisation.

Organisational and

Managerial Ethics

15

Socialisation process has three stages:

• Prearrival

• Encounter

• Metamorphosis

Prearrival: This stage tries to ensure that prospective members arrive at an organisation

with a certain set of values, attitudes and expectations. This is usually taken care of at the

selection stage itself. Selectors try to choose the "right type" of people, who they feel,

will be able to "fit" the requirements of an organisation. Thus an organisation, even

before allowing an outsider to "join", makes an attempt to ensure a proper match which

contributes toward the creation of a uniform culture within the organisation. The views of

the founding fathers of an organisation as well as the ethos of the present top

management influences-consciously or inadvertently the selection of the parameters of

this "proper match".

Encounter: After gaining an entry into the organisation a new member faces an

encounter stage. There is always a possibility of difference between his expectations of

an organisation and the OC. If the expected image and OC matches, then encounter stage

passes off smoothly leading to confirmation of the image. If the imbalance between the

two is acute, the person has usually two choices open. First, he undergoes further

socialisation which detaches him from his previous expectations, replaces these with

another set of expectations and thus helps him get adjusted to the prevailing system.

Second, he drops out due to disillusionment. In both the cases the final result is the same:

the status quo of traditions and customs are maintained.

Metamorphosis: People who had discovered an anomaly between their expectations and

OC, but decided not to drop out, enter into the metamorphosis stage. They must sort out

their problems and go through changes-hence this is called metamorphosis. When this

metamorphosis is complete, the members develop a uniform perception of OC and feel

`comfortable' with the organisation and job. Successful metamorphosis results in the

member's productivity being as per organisation's `norm', àverage' commitment and

lowered propensity to leave the organisation. All these are indications of "typical" or

"normative" behaviour.

For a very few persons, the metamorphosis stage may remain incomplete or unsuccessful.

These people, as yet, have not been able to "accept" the OC and thereby remain non-

conformist. This phenomenon is likely to result in atypical behaviour. Sometimes they

continue to `fight' the system, at least for some more time, with zeal and enthusiasm. A

larger number are likely to alienate themselves to soothe their feelings of disappointment.

The process of socialisation is shown in Figure I.'

Figure 1: Socialisation Process and its Impact on OC

Here again, you will be able to see, the results remain the same - organisations

maintain their traditions and customs till the time the “fighters” win their case.

Organisational

Climate and Change

16

Sometimes an organisation, anxious to break away from its stifling OC, may choose

to deliberately appoint people without subjecting them to metamorphosis stage so

that they bring organisational change. We shall take up the issue and strategy of

bringing organisation change in a separate unit.

In order to understand some aspects of your organisation’s culture you may attempt

some or all of the following exercises.

Activity K

Every organisation has some long-standing unwritten rules. All members implicitly

accept and agree to adhere to these rules. You may call these as unwritten code of

conduct. Discuss with some of your colleagues and identify at least five such

unwritten rules of conduct. Analyse the factors which influenced the development of

these unwritten rules.

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Activity L

Rituals refer to ceremonies or series of actions which are performed with some

regularity to observe special occasions (e.g., wearing a particular kind of dress;

observing a particular day of the year; throwing farewell parties to retiring members;

introducing newcomers in a particular way, etc.). Make a list of some rituals

observed in your organisation. Compare this list with somebody else’s from some

other organisation. Comment on the uniqueness of your organisation’s rituals.

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Activity M

Taboos refer to some of the prohibitions imposed on a few patterns of behaviour, i.e.,

the things which one is not supposed to do (e.g., not calling superiors by their first

names, not discussing personal lives of others in public, not coming to the place of

work in an inebriated state, etc.). Make a list of such taboos followed in your

organisation. Avoid including those which you have already mentioned in the earlier

exercise on unwritten rules.

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Activity N Organisational and

Managerial Ethics

17

Jargon refers to a special language which only the members of the fraternity

understand. This is sometimes referred to as `Code language,' and may include

nicknames for persons, events and processes, etc. Prepare a list of words and

expressions which are peculiar to your group or organisation.

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Activity O

Give an account of the socialisation process of your organisation in the prearrival

stage. What kind of traits in a person are usually favourably considered in the

selection processes? Is there any favourable or unfavourable bias towards a particular

community? Caste? Mother tongue? Schooling pattern? Family background?

Personal appearance? Make a small note.

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Activity P

Describe what happens in the Encounter stage when a person is appointed in your

organisation. What method of training is adopted to familiarise the person with the

customs and practices of the organisation? Is there any formal orientation training or

one has to learn these on the job? Recall your "Encounter" stage. What kind of

expectations did you have before joining it? How did you resolve any difference that

you might have observed between your expectations and experiences after joining.

Prepare a report.

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Activity Q

Locate a person in your organisation who is very different from all others in terms of

his performance or commitment to the job (It could be quite high or quite low). How

does the rest of the organisation relate with this person? Is he isolated? Ignored?

Highly respected? Are people annoyed with him? What do others do to express their

feelings towards him? If possible, hold an interview with the person and try to

discover his perceptions about different dimensions of OC.

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Organisational

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9.8 SUMMARY You have come across a variety of concepts in this unit. Let me help you in

integrating these concepts through a model. You can see (Figure II) that there are

some determinants in the form of Internal and External factors which influence

various dimensions of an organisation's internal environment. These dimensions are

perceived as OC, i.e., characteristics of climate and culture of an organisation. Both

Managerial Ethos and Socialisation Process help maintain OC.

9.9 SELF-ASSESSMENT TEST 1 Distinguish between culture and climate. What difference does this

distinction mean to you as a manager.

2 What is the influence of leadership style on organisational climate?

3 How can traditions and customs be maintained in organisations where

change is the order-whether by design or default?

9.10 KEY WORDS Action-Goal Orientation: Tendency to think about one's goals in activity terms.

Atypical Behaviour: Actions which are not usually displayed by the majority of

people in any group.

Conflict: The extent to which people oppose and block each other.

Consideration: The extent to which stimulation and help is received by an individual

from others.

Control: The degree to which a check is kept on the behaviour of an individual.

Encounter: A stage of socialisation when a person explores the difference between

his expectations and reality.

Equity: A value of maintaining fairness in receiving a reward in proportion to one's'

contribution.

Ethos: Character and values of an individual or of a group.

Individual Autonomy: The extent of freedom from accountability to others.

Internal Resources: Awareness of one's intellectual and moral strength.

Metamorphosis: A stage of socialisation where adaptation and changes take place.

Normative Behaviour; Actions which are usually displayed by majority people in

any group.

Organisational and

Managerial Ethics

19

OC: A coined term which refers to perceived characteristics of organisational climate

and organisational culture.

Opportunity: A value which stands for providing enough scope to people to develop

their capacities.

Organisational Climate: Enduring qualities of the internal environment of an

organisation.

Organisational Culture: A relatively uniform perception about a number of features

of an organisation which allows distinction of one organisation from others.

Position Structure: The extent of direct supervision and formalisation.

Prearrival: A stage of socialisation which screens the values, attitudes and

expectations of people before joining an organisation.

Pro-action: An orientation to take initiative and to do things without being told to

do.

Problem-solving Attitude: A propensity to face problems rather than avoiding them.

Progressiveness & Development: The scope for growth of oneself and others.

Reward Orientation: The tendency to provide incentives for higher effort and

performance.

Risk-taking: The extent of freedom given in an organisation to experiment with new

untried ideas.

Security: A value which stands for providing economically, physically and

emotionally safe environment to employees.

Social Forces: The forces in the environment outside an organisation.

Socialisation: A process of adaptation through which the people come to understand

the values, norms and customs of an organisation.

System 4: A type of organisation structure which allows participation and

involvement of all groups in all important processes.

Value: An enduring belief that a specific mode of conduct is personally and socially

preferable to other alternative modes of conduct.

Work Values: Degree of worth a person ascribes to the opportunity of work.


Forehand, G.A. & Gilmer, B.V.H. 1964. Environmental variation in studies of

organisational behaviour. Psychological Bulletin, December.

Rao, T.V. & Chattopadhyay, S.N. 1974. A Study of the Perceptions of Organisational

Climate by the Employees of Small Industries. Indian Journal of Industrial

Relations, 10 (1).

Robbins, S.P. 1985. Organisational Behaviour: Cases, Concepts and Controversies,

Prentice Hall of India: New Delhi.

Schneider, B. 1975. Organisational Climate: An Essay, Personnel Psychology, 28.

Schneider, B. & Reichers, A.E. 1983. On the Etiology of Climates. Personnel

Psychology, 36 (2).

Sharma, Baldev R. 1986. Organisational Climate and Employer-Employee Relations

in India. International Management Institute: New Delhi.

Tagiuri, R. 1968. The concept of organisational climate. In Renato Tagiuri and

George H. Litwin (eds.) Organisational Climate, Division of Research,

Graduate School of Business Administration, Harvard University: Boston.

Organisational Structure

and Design

UNIT 12 ORGANISATION

STRUCTURE AND DESIGN

Objectives

The objectives of this unit are to:

understand the basic elements of an organisation structure •

•

•

•

•

differentiate between formal and informal organisation structures

appreciate the various factors impinging upon the design of an organisation

structure

familiarise you with different types of organisational structures and the

advantages and disadvantages of each

develop an understanding of the issues involved in designing a service

organisation

Structure

12.1 Introduction

12.2 Organisation Structure and Chart

12.3 Formal and Informal Organisations

12.4 Factors Influencing the Choice of Structure

12.5 Degree of Decentralisation

12.6 Line and Staff Relationships

12.7 Specialisation of Work

12.8 Span of Control and Levels of Management

12.9 Differentiation of Tasks and Activities within an Organisation

12.10 Matrix Structure

12.11 Network Structure

12.12 Integration of Organisational Tasks and Activities

12.13 Designing Structure for a Service Organisation

12.14 Summary

12.15. Key Words


12.1 INTRODUCTION

Organising is the formal grouping of activities and resources for facilitating attainment

of specific organisational objectives. It is possible to achieve objectives without

formally organising, but there is likely to be great wastage of resources and time.

Organising ensures that objectives are achieved in the shortest possible time, in an

orderly manner, with maximum utilisation of the given resources.

In the context of a firm, its people, machines, building, factories, money, and credit

available for use are the resources at its disposal. All these resources are limited.

Your role as a manager is to organise all these resources, so that there is no confusion,

conflict, duplication or wastage in achieving your organisation's objectives. You will

be required to allocate to each person his role, designation and position in the

organisation, his responsibility for achieving specific objectives and authority for

utilising the resources assigned to him, and the higher authority to whom he has to

periodically report his progress. In this unit, we will take up all these issues for

discussion, dwelling at some length on the various types of organisation structure that

you can choose from to suit your company's specific objectives.

12.2 ORGANISATION STRUCTURE AND CHART

Organisation structure refers to the formal, established pattern of relationships

amongst the various parts of a firm or any organisation. The fact that these

relationships are formal implies that they are deliberately specified and adopted and

do not evolve on their own. Of course, it may sometimes happen that given an unusual

5

situation, new working relationships may evolve and which may later be adopted as

representing the formal structure.

Organisational Structure and

Process

6

The second key word in our definition of structure is èstablished'. Only when

relationships are clearly spelled out and accepted by everyone, can they be

considered as constituting a structure. However, this does not mean that once

established, there can be no change in these relationships. Changes may be necessary

with passage of time and change of circumstances, but frequent and erratic changes

are to be avoided. A structure can be based on relationships only if they exhibit a

certain degree of durability and stability.

The formal relationships in an organisation are those as described in an organisation

chart. Figure I presents a typical chart for a company engaged in manufacturing. The

boxes in the chart represent the various important positions in the organisation. The

title of the position in the box, viz., manager purchase or manager marketing,

indicates the activities of that position. The distance of the box from the top indicates

its position in the hierarchy. The closer the position to the top, the higher its status

and vice-versa. The lines joining the various positions represent the formal reporting

relationships, usually between a superior and a subordinate.

Figure I : Organisation Chart for a Manufacturing Company


and Design

7

i)

ii)

iii)

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The organisation chart is a rather abstract illustration of the structure. To get a more

complete picture, the chart may be supplemented by job descriptions of each

position. The job description gives in detail the activities and responsibilities

expected of the person occupying the position.

Both the organisation chart and job description are simplified abstractions of the

actual situation. In reality there are many more positions and relationships than

indicated in the organisation chart. The degree of authority a superior has over his

subordinate is also not indicated in the chart, nor is the relationship between two

managers at an equal level reflected in the organisation chart.

Despite all these limitations, the organisation chart is an extremely useful tool in

understanding and designing the structure. The structure of an organisation, unlike

that of a physical, mechanical or biological system, is not visible; Therefore, it can

only be understood by a representative model and by observing its behaviour.

Activity A

Draw the organisation chart of your company. Clearly mark your position in the

structure and draw the lines depicting the reporting relationships between you and

your immediate boss and immediate subordinate.

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The elements of an organisation structure are:

the network of formal relationships and duties, i.e. the organisation chart

plus the job descriptions,

the manner in which various tasks and activities are assigned to different

people and departments (differentiation),

the manner in which the separate activities and tasks are coordinated

(integration),

the power, status, and hierarchical relationships within the organisation

(authority system),

the planned and formalised policies, procedures and controls that guide the

activities and relationships (administrative system), and

the flow of information and communication network.

The network of formal relationships has already been discussed. Before we get into a

detailed description of the specific elements of an organisation structure, it would be

useful to differentiate between formal and informal organisations and the factors

affecting the design of structure.


Process

8

12.3 FORMAL AND INFORMAL ORGANISATIONS

If you and your colleagues decide to meet every Saturday evening for one hour and

form a recreation club to play chess and carrom, you are meeting in an informal

organisation. However, when the same group of your colleagues meets to review

tilt last quarter's performance and plan for the next three months it is in the context of

a formal organisation. Thus, while the informal organisation is spontaneous, the

formal organisation is the result of a deliberate and planned effort to pattern

activities and relationships in a specific manner to facilitate achieving the specified

objectives. A formal organisation is the result of explicit decision-making, deciding

how people and activities should be related to one another. However, there is no such

decision-making involved in an informal organisation which may simply evolve

over time.

In the context of a business organisation, both the formal and the informal

organisations operate together to form the total organisation. The formal structure

delineates specific departments, activities, people and their reporting relationships.

The informal structure refers to the social groups or friendships which people

working together may form.

A most important aspect of the informal organisation is the informal

communication network or `grapevine' as it is more commonly known. If you

analyse the communication network in your organisation, you would realise the

amount of information you gather from official circulars, memos and speeches is

rather insignificant compared to what you unofficially learn from your colleagues,

your subordinates and even your peons. The grapevine constitutes an extremely

important component of the organisational information system. How often you have

been able to avert a crisis much before it actually erupted because the information

about the impending crisis was conveyed to you by the grapevine?

Besides the grapevine, the other rnanifestation of the informal organisation is the

formation of groups which may spontaneously evolve when the formal organisation.

is slow to respond to changing external and internal forces. But sometimes these

informal groups may also work against the formal organisation. This may happen

when an informal group of workers may force other workers to lay down tools, or

work to rule or generally pose impediments in the path of progress.

Sometimes the norms and work ethics evolved by the informal organisation take

precedence over the official norms. The head of the market research division of a

large multi-national company involved in manufacturing and marketing a wide

range of consumer products, would always spend three to four hours every

Saturday morning in office, even though Saturday was officially a holiday.

Observing that the departmental head worked on a holiday, his immediate

subordinates also felt obliged to be in office every Saturday. The manager did not

expect it from his subordinates, but the latter felt that by doing so they would be

creating a favourable image for themselves in the eyes of their boss which would

help them in their promotion within the formal organisation.

Similarly, you would find informality evolved values operating within the

parameters of the formal organisation. These values may relate to dress,

employment of women, employment of members of a minority community, etc., In

understanding the structure of an organisation, you must understand the important

role played by the informal organisation within the formal organisation.

Activity B

List all the informal organisations in which you regularly participate. What are the

activities undertaken by these informal organisations?

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12.4 FACTORS INFLUENCING THE CHOICE OF

STRUCTURE Organisational Structure

and Design

9

As a manager, it is your job to design a structure that will best suit the specific

requirements of your organisation. Designing an organisation structure is a

continuous process. What seems to be the ideal design today may tomorrow prove to

be totally ineffective. It is your task as a manager to be continually improving the

structure of your organisation. Any change in factors which impinge upon the design

of an organisation will necessitate a change in the structure to suit the new conditions.

Impact of Environment

The first factor affecting the design of your organisation structure is the environment.

An organisation is continuously interacting with its environment in terms of drawing

inputs from it and providing it its outputs. All organisations operate within an

environment which comprises economic, social, cultural, political and legal sub-

systems. A change in any of these sub-systems may force you to change the design of

your structure. Change in Government regulations regarding foreign equity

participation in India made it imperative for the most foreign owned companies to

dilute their holdings and become more national in character. Increasing awareness

about personal rights and social pressure on maintaining the natural state of

environment have forced many companies to set up Personnel Welfare Departments

and instal expensive equipment to neutralise the toxic effluents generated in their

manufacturing process. You might have-noticed that banks have instituted a process

by which public complaints can be tackled at the highest level. Some of the bank

managers and chairmen even set aside specific timings when they give a personal

hearing to individual grievances.

Business organisation are very much in the public eye today. Generally speaking, the

more responsive your organisation is to the changes in the environment, the more

favourable will be its public image and greater the chances of its survival and success.

You have not only to ensure that appropriate changes are made, but equally important

these changes must be perceived by both the public and the Government.

Impact of Technology

The second factor affecting the structure of your organisation is the technology that

you have adopted. To begin with, each pair of shoes was made by a single cobbler

who. probably spent four to five days on the entire process. With the concept of

specialisation and division of work, organisations, instead of being designed around

individual craftsmen, were structured on the basis of different people doing only a

specialised part of the entire process of shoe-making. This concept was further

refined with the introduction of automation and assembly lines. Now with the

introduction of computerisation and robots, new structural designs are once again

emerging. Entire plants are manned by a single operator who controls the operations

through computers. Major human inputs are needed in designing computer controls

and software rather than in performing repetitive jobs.

These technological changes affect not only the large firms but also the smaller ones.

In India, in a large number of medium and small scale companies, simple routine

functions such as preparing payroll, invoicing and ledger maintenance have been

computerised. Such small changes also necessitate redefining jobs and redesigning

existing departments to suit the new technological process. Today the greatest impact

of technology is on the manner in which people collect, receive and use information.

In many companies full-fledged Management Information System departments have

been set up in response to the explosion in information technology.

Impact of Psychosocial Characteristics

The changing psychosocial characteristics of the workers is the third factor impinging

upon the design of the organisation structure. Greater demand for leisure time led to the

introduction of the five, and in some places, even the four-day week. Our country has

also recently adopted a five-day week. Greater awareness about worker rights and

use of more militant means to earn those rights have led to the widespread formation

of trade unions in almost every organisation. Some companies have had to redesign

their structure in order to give a formal recognition to the unions.


Process

10

The three factors that we have discussed so far are external to the organisation and its

management. However, there are some attitudes and values of the management

which have a critical bearing on the structure of an organisation. Most important of

these are the management's attitude towards the issues of decentralization and

delegation of authority and the role and function of line and staff personnel. Also

affecting the organisation structure are the scalar principle and span of control.

12.5 DEGREE OF DECENTRALISATION

Centralisation refers to the concentration of authority and decision-making in one

single position in the organisation. In a one-man enterprise, the entrepreneur makes

all the decisions and all the authority and decision-making power is vested in him.

With the expansion of business, it may no longer be possible for one man to control all

the operations and may become necessary for him to delegate some responsibility and

authority to another person. Delegation implies that you are acting on behalf of your

boss by virtue of the power which he has given to you. The greater the delegation of

power the greater is the extent of decentralisation in the organisation.

You will find that some companies, even though physically very large, have highly

centralised structures. All decisions are taken by the top management, with the

middle and operating level managers having little or no say in running the show. On

the other hand, you may find that even in a relatively small organisation, there is

greater delegation of power and the structure is very decentralised. The degree of

decentralisation in an organisation is partly a manifestation of the top management's

attitude. Some managers do not like to delegate even the smallest task to their

subordinates. There may be a variety of reasons for this. Doing all the tasks himself

may give the manager a great sense of power, or he may feel that the subordinate is

incompetent and may commit mistakes.

Total centralisation, however, is never desirable as it may bog down the manager in

routine, trivial tasks and leave him no time for planning the company's future. An

effective manager would decide the issue of centralisation versus decentralisation on

the basis of the requirements of the situation rather than his own personal bias.

Decentralisation is effective when:

Conditions in each market are so different that only a high degree of adaptation

to local conditions will lead to success. Multi-national companies with

subsidiaries in many different countries are a typical example

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Success depends on the quick response to the information and conditions

generated at the local level. Companies dealing in stocks and shares or

international currencies require speedy response to the fluctuating prices for

getting the best returns

Active participation of people in the planning and implementation of objectives

is conducive to good performance. An engineering company manufacturing

electrical switching equipment sells mainly to the State Electricity Boards

(SEB) through the tender system. Each tender requires close ntonitoring and

personal follow up at each stage till the final award is made. Realising that

personal rapport with individual SEB is important, the company has fully

decentralised local offices in each city where the SEB is located.

The introduction of computers and real time information has influenced the concept

of centralisation in an organisation. Information may be generated at the factory, but

it is instantaneously transmitted to the decision-maker (even if he is located 10,000

kms away) for suitable action. Information may be processed and used at the place

where it is generated or it may simply be passed on to another location for use in

decision-making. Real time information can lead to greater centralisation or

decentralisation.

The degree to which a term decentralises its structure depends on the requirements of

its unique situation. Also. a firm may not decentralise all its operations, but go in for

only partial decentralisation. Functions which facilitate local adaptation, quick

decision-making in response to local changes and strengthen worker participation

should certainly be decentralised. On the other hand, functions involving economics

of scale, utilisation of specialised knowledge and involving huge sums of money may

remain centralised. Finally, the degree of decentralisation also depends on the

availability of competent and reliable people to head the independent operations.


and Design

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12.6 LINE AND STAFF RELATIONSHIPS

The role of line and staff personnel is the other issue to be decided in the context of

designing your organisation structure. Traditionally, any function which directly

contributed to the organisation's objectives was viewed as a line function. Staff

functions were those which helped line functions to perform more effectively.

However, an important point to note about line and staff is that in the former there is a

direct relationship of command from superior to subordinate while in the latter the

relationship is more advisory in nature. There are some traditional principles which

have greatly influenced the concept of organisation structures. The most important of

these are specialisation of work, scalar principle and span of control.

Activity C

Evaluate the organisation of your company in terms of whether it is a highly

centralised or decentralised structure. If you were made the chairman of the

company, what kind of a structure would you adopt? Describe in detail the functions

which you would centralise and those you decentralise.

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12.7 SPECIALISATION OF WORK

A very basic and traditional principle of organising is to break down a task or process

into smaller, more manageable tasks which call for utilisation of special skills. This

concept of work specialisation aid division of labour was the forerunner of assembly

lines. This is indeed a useful principle in so far as it allows a worker to concentrate on

that activity at which he is most proficient. But in many situations, this concept has

been carried too far and Jobs of workers have become so fragmented and trivial that a

worker's job may be reduced to putting a screw on a bolt and simply tightening it.

Scalar Principle Organisational Structure and

Process

12

Scalar principle and unity of command are two closely related principles. The

scalar principle states that authority should flow in a straight line from the superior

to the subordinate in a hierarchical manner. The principle of unity of command

states that ideally each subordinate should have only one superior. These two

principles establish the basic hierarchical nature of an organisation.

12.8 SPAN OF CONTROL AND, LEVELS OF

MANAGEMENT

Closely related to the concept of hierarchical structure are the concepts of span of

control and levels of management. Let us understand these with the help of an

example.

In 1975 Mrs. Das, a housewife living in Bombay, started making garlic chilly sauce

at home and selling it to her close friends, relatives and neighbours. The sauce

became quite popular and Mrs. Das began receiving many orders, including two

from the nearby Chinese restaurants. Unable to cope with so much work she hired

Indrani as an assistant. This was the first step in delegating authority and creating

another level of management. Existing customers now had to deal with Indrani as

Mrs. Das herself concentrated on preparing the sauce and tapping potential new

customers.

A year later Mrs. Das hired one girl to help in the kitchen, two girls to assist her in

making sales calls and one office assistant for Indrani. Now authority had to be

delegated in the kitchen as well as in making sales calls and hence two levels of

management were created in the kitchen and sales. The new office assistant

reported only to Indrani, who in turn reported to Mrs. Das and thus there were three

levels of management in administration. Span of control refers to the number of

people a manager has to control. Now Mrs. Das's span of control extended to four

people (Indrani, one kitchen assistant, two sales assistants) and Indrani's span of

control was restricted to only one. By 1980, the small sauce making enterprise had

shifted to a shed in the nearby industrial estate, with a full-fledged production

facility consisting of 10 people and a sales team of 16 girls, divided into 4 territorial

teams supervised by a sales manager and an office administration set up of 25

people.

Mrs. Das's organisation as it evolved is shown in figures II, III, IV, and V.

Starting out with a relatively flat organisation where Mrs. Das was in direct contact

with all her customers and suppliers, her organisation had acquired many levels of

management and a vertical structure by 1980.

As an organisation adds on levels of management it becomes vertical and the span

of control at each level becomes narrow. In a flat organisation,.the span of control

is relatively wider and levels of management are few. The flow of information in a

flat organisation is fast and there is greater individual satisfaction and it is the ideal

structure for conducting research and development and new product development

groups.

There is a great deal of controversy regarding the optimum number of people a

manager can effectively manage or the ideal span of control. The important factor

is not the number of people whose work a manager has to control but the number of

people he actually has to work with. On paper the marketing president may have 30

area sales managers under his span of control. But since he does not have to

interact with them individually more than once in six months, and all other

interactions including the regular reports are through the vice-president (sales), the

system works well. In practice, there is no ìdeal' span; it will vary from individual

to individual and from one organisation to another.

Similarly there is no hard and fast rule governing the levels of management. Too

many levels only add unnecessary complexity because decisions, information and

instructions must go through too many channels. Each organisation has to find its

own ideal balance.


and Design

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12.9 DIFFERENTIATION OF TASKS AND

ACTIVITIES WITHIN AN ORGANISATION


Process

14

The various, multifaceted tasks and activities of an organisation have to be divided

into smaller, manageable components to facilitate efficient achievement of

objectives. The most common basis for differentiation and division are function,

product, location and customer. In recent times the two types of organisation

structures which have evolved are the matrix organisation and the network

organisation.

Differentiation by Function

The grouping of activities according to the type of function performed is the most

commonly used structure. You would find this not only being widely used in business

organisation but also in non-commercial organisation such as hospitals, universities

etc.

The functional structure is most suited when an organisation is dealing with a single

product or service. The activities can easily be segmented into similar,

complementary activities such as production, marketing, finance, purchase etc.

Depending on the nature of the organisation and its scope of activities, the functions

it has to perform may differ vastly from those of another organisation. For instance,

one company which undertakes both manufacturing and marketing may have

departments engaged in purchase, production, marketing and finance. If it is selling a

product such as TV or refrigerator it may also have an after-sale-service department.

On the other hand, a company which is an ancillary to a parent company may have

only departments for purchase, manufacturing and finance. Since it is selling its

entire production to the mother company there is no need for a marketing department.

Figure VI shows a typical functional structure.

The most important advantage of functional structure is that it allows for

specialisation of work, thus ensuring the most efficient utilisation of human resources.

The other benefit of this form of departmentalisation is that there is concentration of

authority and responsibility in the top man, thus ensuring that there are no conflicts

arising from different authorities. The hierarchical line of responsibility is very

clearly delineated.

The major disadvantage of the functional structure is that functional specialists often

lose sight of the overall organisational objectives and work for narrow, functional

objectives rather than organisational objectives. The other major problem associated

with this type of structure is that of co-ordination amongst so many functional

departments each with its unique set of constraints and problems.

Figure VI: Functional Organisation

Differentiation by Product Organisational Structure

and Design

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As a company moves from a single product or service to manufacturing a wide

range of products it may find that the functional structure is no longer effective.

This is especially true if the products are very different from each other in

terms of the technology, raw material and manufacturing process used and the

final product. In such a situation, the company may then have to adopt a

structure which revolves around individual products or product lines. Figure VII

illustrates one such organisation structure.

Companies such as Hindustan Lever (manufacturing and marketing uetergents,

toiletries, chemicals, and agro-based products) Richardson Hindustan with its

range of Vicks products, Clearasil cream and soap have structures revolving

around different products. The extent of differentiation would vary from one

company to another. One company may club all its toilet soaps, detergents, and

washing powders in one product line, while another may differentiate between

toilet soaps and detergents or even between individual toilet soaps if they cater

to distinct market segments or have a very different raw material base.

The main advantages of using a product based organisation structure are that it

facilitates optional utilisation of specialised machinery and technological

processes, permits greater co-ordination, where specialised customer service is

required, and enables product managers to be responsible for the profit

generation of their department. Johnson & Johnson manufactures and markets a

wide range of specialised surgical sutures and accessories as well as a range of

products for children. Product based departmentalisation ensures that the two

major product lines operate as independent profit divisions since there is almost

no commonality in terms of the manufacturing process, marketing skills and

market segments served.

Figure VII: Product Organisation

The biggest disadvantage of this type of structure is that it leads to duplication

of managerial manpower thus leading to higher costs. It also requires a strong

leader to control the various product groups so that they do not become

alienated from the overall organisational objectives.

Differentiation by Location Organisational Structure and

Process

16

When an organisation is departmentalised on the basis of location of different tasks

and activities, then the organisation is geographically organised. Figure VIII shows

the organisation structure of Food Corporation of India in which the functions and

activities are differentiated on the basis of four different zones

The biggest advantage of differentiating the functions geographically is that it

allows for maximum utilisation of local resources and talents, as well as speedy

decision-making in response to changes in local conditions. In fact, where the

participation of local people is essential to the success of the organisation. as in

voluntary and social organisations, a geographic differentiation is ideal. The

problems associated with this type of structure relate to problems of top management

control and require a large number of executives with general management skills to

head the various area operations.

Figure VIII: Geographical Organisation

Differentiation by Type of Customers Organisational Structure

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Another kind of possible grouping is by the type of customer served. A Delhi based

company manufacturing electronic typewriters and desk top photocopiers had

organised its sales force on the basis of its two product lines. Its major customer

segments were Government organisations (public sector companies, ministries,

departmental undertakings, public libraries etc.) and private sector companies. The

company was not very successful in its marketing efforts. Investigation revealed that

the same customer (organisation) was being visited by two different salesmen (one

each for typewriter and copier) resulting in unnecessary duplication of effort and

time. Moreover, the Government and private sector organisations each had a very

different set of criteria governing their decision to purchase. The sales approach

which succeeded in a private sector company could not be similarly applied to a

government set-up. The company then re-organised its sales force into two teams,

one catering to the government sector and the other to the private sector, with each

team having responsibility for both the product lines. With the reorganised structure

the company was able to make a dent in the highly competitive market.

12.10 MATRIX STRUCTURE

The matrix structure is a combination of the product and functional organisation and

is usually created for executing a project which requires the skilled services of a

functional man as well as the specialised knowledge of a product man. Large turn-

key projects in specialised fields require a matrix structure. Figure IX illustrates a

matrix structure.

The distinguishing characteristic of a matrix structure is that it operates under a dual

authority. A person is accountable to two bosses at the same time, one his usual boss

and the other his boss for the duration of the project. Obviously the problems

emanating from this type of structure relate to conflicting roles and authority arising

out of an ambiguous demarcation of authority and responsibility.

Figure IX: Matrix Organisation


Process

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12.11 NETWORK STRUCTURE

When an organisation needs to control other organisations or agencies whose

participation is essential to the success, a network structure is organised. In this, the

main organisation creates a network of relevant agencies and it influences in different

ways.

Network structure is mostly used in non-business organisations which have socio-

political objectives. For instance, the State Industrial Development Corporation

(SIDC) may resort to a network structure in their objective to establish an industrial

estate. In this the SIDC may act as the lead agency and involve the State Electricity

Board, Local Municipal Authorities, Land Development Authority, Authorities for

Water & Sewage Control, P&T Department for communication facilities,

appropriate authorities for building roads etc. The SIDC would also need to establish

a network with people who would ultimately be using the industrial estate to know

their requirements in terms of specification and special needs. It would also use the

services of an advertising agency to promote the industrial estate and attract

maximum number of entrepreneurs. For the construction of sheds and factories the

SIDC may have to utilise the services of private construction agencies

Thus, a network structure envisages the utilisation of a number of different services

offered by different agencies. There is need to coordinate the different inputs and

synchronise them towards the ultimate objective.

Activity D

What is the basis of differentiation of tasks and activities in your organisation? On

the basis of the above discussion, can you suggest three definite improvements in

the organisation structure which would enhance its effectiveness?

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12.12 INTEGRATION OF ORGANISATIONAL

TASKS AND ACTIVITIES

Having designed your organisation's structure to suit the specific needs of your

company and its environment on the basis of most efficient grouping, you now have

to ensure that these differentiated groups are integrated towards the common

organisational objectives. Generally speaking, the more differentiated and

specialised are the activities, the greater the need for coordination and integration.

This is because there is danger of these specialised groups getting isolated and start

viewing each other as rivals rather than companions in pursuit of the same goal.

Have you ever witnessed .a situation where departments belonging to the same

organisation vigorously fight each other over the allocation of annual funds? Think

of our country as one big organisation and the States and Union Territories as its

differentiated groups. Do you think they are well integrated towards the common

goal of national economic development?

The basis for integration is provided by the three elements of an organisational

structure, namely authority, administration and communication network.

Integration through Authority Organisational Structure

and Design

19

The hierarchical relationships in an organisation define the status of each position in

relation to the others and the power that goes with that position. The basis for the

hierarchical relationship is that the superior has authority over the subordinate in

terms of assigning him work and the latter, in turn, is obliged to obey the superior.

Hierarchical relationships facilitate integration because they ensure that all activities

are ultimately placed under one authority and thus are linked together. The top

position becomes the centre for all coordination. In a small organisation, with a

single product line, integration and coordination from one central position is certainly

feasible. But if you consider large organisations with operations spread over many

geographical areas, product lines running into hundreds and employing thousands of

people, it is no longer physically possible for one person to coordinate all the tasks

and activities. In such situations, .the hierarchical structure has to be supported by the

administrative structure and communication network.

Integration through Administration

"A great deal of coordinative effort in organisation is concerned with a horizontal

flow of work of a routine nature. Administrative systems are formal procedures

designed to carry out much of this routine." (Joseph A. Hitterer, The Analysis of

Organisations, 1973).

Every organisation has its own administrative procedures and systems. These relate

to almost every aspect of organisational life. The procedure for selecting new

recruits, calculation and mode of overtime, travel, medical and other allowances, the

system of memos and movement of a file from one department to another for

decision-making are all illustrations of administrative procedures. The larger the

organisation, generally, the more formally prescribed and numerous are its

administrative procedures.

How administrative procedures help in integrating different departments and

different levels within an organisation can easily be understood by an illustration. In

a typical organisation, at the end of the corporate year, each individual, say a

salesman, would fill his own assessment of his performance. The salesman's

immediate boss would fill in a Confidential Report (CR) on his performance. The

salesman's own assessment and the CR would both be given over to the Personnel

Department which may add information from its records on the number of years the

salesman has been with the company, his starting salary and designation, number of

promotions and increments and bonus received, any loans outstanding against his

name etc. This complete file would then go to the manager marketing, who would in

consultation with the general manager decide on the salesman's next promotion and

increment in accordance with the established salary structure.

Thus, the administrative procedure for deciding promotions involves sharing of

information between different levels in the same department (Marketing) and.

between different departments (Marketing, Personnel and General Administration).

Integration through Communication

In the previous illustration, the bases for taking a decision about the salesman's

promotion were his own assessment report and his boss' Confidential Report (CR).

Both these are representatives of the means of communication used in an

organisation. Minutes of meetings,, circulars, notices, progress reports, monthly in-

house newsletters are all specific tools of the communication network of an

organisation.

Just as manpower, raw material and machines are the resources of an organisation, so

is information. Information regarding the development of a new technology by a rival

company, or the introduction of a new model of refrigerator are vital pieces of

information which can drastically affect the future course of action for a company.

But information is highly perishable. If not communicated to the right person at the

right time it has little value.

Information may be received at one level in the organisation but utilised at another.

Salesmen and other field staff are usually the eyes and ears of any organisation. They

gather bits and pieces of vital information. But to be useful, these disjointed

information pieces must he immediately communicated to the ‘brain’ of the

organisation i.e. the managers who will analyse and act upon the information. Just

as market information moves upwards within the organisation, decisions have to be

communicated downwards. A decision regarding change in the distribution network

ii made at the top, but implemented by people in the field. Therefore, there is need

for communication networks which provide for transmission of information both up

and down the hierarchical structure. Similarly, networks should be available for

exchange of information at the horizontal level.


Process

20

Computers and many other technical improvements have resulted in organisation's

increased ability to collect, process, analyse and transmit vast amounts of

information Organisations today have greater access to an almost unbelievable

array of information.

In the final analysis, however, it is not so much the access to sophisticated

technology which an organisation has that determines the efficiency or efficacy of

its communication network but rather the stance and attitude of the top

management in encouraging its people to talk with each other and share more

information.

Activity E

List the various official means of communicating information in your organisation.

How effective are these in integrating the various departments and different levels

of management? Can you think of some more such means of communication which

your company can adopt?

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12.13 DESIGNING STRUCTURE FOR A SERVICE

ORGANISATION

The distinguishing characteristic of a service organisation is that it does not

produce any physical or tangible product, but instead it provides a service which may

in some cases be almost totally intangible. Dry-cleaning, after sales maintenance

for your TV and air-conditioner, health clubs, municipal corporations, banks,

universities etc. are all organisations which provide service. A health club's service

can be described in terms of tangible and specific gadgets and equipment which it

has. However, the behaviour of the staff towards its clients also forms an extremely

important part of health club's service, but is intangible. In many cases, it is the

intangible part which is more important in attracting and retaining customers.

In dealing with service organisations, therefore, you should lay emphasis on efficient

service as well as friendly and courteous behaviour. In highly undifferentiated

organisations such as Nationalised Banks, personalised and friendly service can

become a basis for distinguishing the organisation.

The other important variable in organising service institution is to correctly identify

the service which the organisation is providing to the customer and the activities

needed to be undertaken to maintain and improve the service.

The telephone department provides a communication service to its customers. To

maintain and improve its service, it has to ensure smooth operations of existing

telephones, provide for new equipment, procurement and installation. Figure X

illustrates the organisation structure of Mahanagar Telephone Nigam Ltd., Delhi.


and Design

21


Process

22

12.14 SUMMARY

In this unit we have discussed various issues involved in structuring your

organisation. You have a variety of designs.to choose from, but no one design as it

is, can prove to be a perfect fit for an organisation. You would always need to

modify and adopt a strucfural designàccording to the specific objectives of your

organisation, the environmental factors'such as political, legal,.cultural and social

conditions, and your own attitude as a,manager towards the issues of centralisation

of power and delegation of responsibility.

Whatever be the structure you decide upon for your organisation, you must always

keep in mind the basic principles of defining and describing jobs, differentiating

them to form manageable parts, and then integrating them to achieve the common

goals.

12.15 KEY WORDS

Structure: Formal and established pattern of relationship in an organisation. The

relationship includes people, tasks and activities.

Environment: The business environment of a firm comprising economic, social,

political, cultural, legal and geographic factors which critically affect the working

of organisation.

Centralisation: The concentration of power and authority. This may be concentrated

in a person or a group of persons in the organisation.

Delegation: The sharing or handing over of authority and responsibility to a

subordinate.

Line Functions: Those functions in an organisation which are perceived tobe

directly contributing to the organisation's objectives.

Staff Functions: Functions which are advisory or auxiliary in nature but do not

directl contribute towards the organisational objectives.

Scalar Principle: The chain of direct authority relationship from superior to

subordinate within the organisation.

Principle of Division of Work: That principle by which work is organised into

smaller jobs allowing people to undertake only specialised activities thus ensuring

efficiency i the use of labour.

Organisation Chart: The depiction of specific positions in an organisation, their

state within the organisation and the reporting relationship between a subordinate

and his superior.

Differentiation: The process by which the tasks and activities of an organisation are

segmented into smaller groups. The basis for differentiation may be function,

product, location or customer.

Integration: The process by which differentiated groups are pulled together to

contribute towards the common organisational objectives. Hierarchical control,

administrative procedures and communication networks are the processes used for

integration.

Geographical Structure: The organisation structure in which activities and tasks are

grouped together on the basis of their location in a geographical zone or territory.

Functional Structure: The organisation structure wherein activities and tasks are

observed into smaller groups on the basis of their belonging or contributing to a

particular function such as manufacturing, marketing, finance etc.

Product Structure: An organisation in which activities and tasks are grouped on the

basis of individual products or product lines.

Matrix Structure: Used generally for project execution which requires the services

of skilled functional people and the specialised knowledge of product specialists.

Matrix structure is a combination of the functional and product structures and its

distinguishing characteristic is dual authority.


and Design

23

Network Structure: A structure in which one organisation acts as the `lead'

organisation and creates a network of many other external organisations whose

services the lead organisation utilises in fulfilment of its objectives.

Principle of Span of Control: The principle which states that there is a limit in each

managerial position on the number of persons which can be effectively controlled.


Kast, F.E. and Rosenweig, J.E. 1985. Organisation and Management: A System and

Contingency Approach, McGraw-Hill Book Company: New York.

Koontz, H. and O'Donnell, C. 1976. Management: A System and Contingency

Analysis of Managerial Function. Mc Graw-Hill, Kogakusha Ltd.: Tokyo.

Paul, S. 1983. Strategic Management of Development Programmes, Management

Development Services No. 19, International Labour Organisation: Geneva.

Managerial Communication

UNIT 13 MANAGERIAL

COMMUNICATION

Objectives

The purpose of this unit is to explain:

the meaning and purpose of communication • • • •

•

the process of communication

the media and channels of organisational communication

the intentional or unintentional barriers that prevent organisational communication to be effective

what a manager should do to make his communication effective

Structure 13.1 Communication: Meaning and Purpose 13.2 Importance of Communication 13.3 Communication Process 13.4 Verbal and Non-verbal Communication 13.5 Channels of Communication 13.6 Barriers to Communication 13.7 Making Communication Effective 13.8 Summary 13.9 Self-assessment Test 13.10 Key Words 13.11 Further Readings

13.1 COMMUNICATION: MEANING AND PURPOSE

Communication refers to sharing of ideas, facts, opinions, information and understanding. Simply stated, communication can be said to be the passing of information and understanding from one person to another. It will be seen that there are at least three elements involved here, the sender at one end, the receiver at the other, and in between is the message or information that is to be passed on from one end to the other. The information is passed from the sender to the receiver, and the knowledge of its effects is passed from the receiver to the sender in the form of a feedback. Whether the effect produced is the desired one will depend upon how well the receiver understands the meaning of the information. Communication can, therefore, be aptly said to be the transmission of meaning.

13.2 IMPORTANCE OF COMMUNICATION

One of the important roles of the manager is the informational role wherein a manager seeks information from his peers, subordinates and others about anything relating to their jobs and responsibilities. He is at the same time a disseminator of information about his job and the organisation to those who are concerned with it. As such a considerable part of his time is devoted to receiving or disseminating information, i. e. in communication inside or outside the organisation. Some of the studies made in the USA show that between 40 to 60 per cent of the work time in a typical manufacturing plant is involved in some phase of communication. Further, the top and middle level managers typically devote 60 to 80 per cent of their total working hours to communicating.

According to Peter Drucker, good communication is the foundation for sound management. The managerial functions of planning, organising, directing and controlling depend on communication in an enterprise. For planning to be realistic, it is essential that it is based on sound information which is not possible without a good system of communication existing in an enterprise. The latest developments in the

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market may not be communicated to the planners, making their future plans totally meaningless. Adaptation to external environment on which rests the survival of the business may not be possible without good communication. Again in order to reach the objectives, it is necessary that leadership is exercised, decisions made, efforts coordinated, people motivated and operations controlled. Each of these functions involves interaction with the people in the organisation and leads to communication The important fact of organisational life for a manager is communication, and his success will depend upon how effectively he can communicate with others in the organisation; in other words, how successfully he can put his ideas across to those who work with him and thereby, persuade others to work in the direction of the achievements of goals of the organisation.

Organisational Structure and Process

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Let us take a relevant example. What is our objective in preparing lessons like these Simply stated, it is to put across your mind the essence of managerial functions and enable you to understand how these can be discharged effectively. In other words, we are trying to communicate to you the concepts of management, and whether we have been successful in meeting our objective will depend upon the extent to which you a able to ùnderstand' what we are trying to communicate to you. Communication, therefore, aims at developing understanding.

13.3 COMMUNICATION PROCESS

The simplest model of the communication process can be:

Sender ……… > Message………………..> Receive

The model indicates the essential elements of communication, viz., the sender and 1 receiver, and the message that is exchanged between them. If any one of the three elements is missing, communication does not take place.

However, the process of communication is a much more complex phenomenon consisting of at least five elements which are subject to various influences. The mod can be put as follows:

Figure I: Model of Communication Process

F E E D BA C K

We shall see briefly what the various elements of this model mean.

Source

In this model the first element is the source of the communication from where the communication originates. The source or sender can be a person, a number of persons, or even a machine. The sender initiates communication because he has sc need, thought, idea or information that he wishes to convey to the other person, persons or machine. If, for example, an accidental fire has broken out in a part of godown of the factory, the security officer (source) will need to convey the messaee immediately to the fire station, (receiver). Fire alarm (machine) will do the same ur place of the security officer.

Encoding Message Managerial Communication

27

The next element in the process is that of encoding the information to be transmitted Encoding enables the thoughts to be put in the form of symbols. Normally language provides the symbols that are used in the transmission of thoughts to another person. However language is not the only means to convey the thoughts, needs or information. There are non-verbal means, e.g., gestures, which provide another form tnrough which thoughts can be transmitted. The more complex the ideas, needs or information to be communicated, the more complex becomes the process of encoding them. While an involuntary shriek may adequately convey the degree of alarm felt by the victim, even a carefully worded statement or letter may fail to convey the essential purpose of the communication. This can happen if the language or symbols used convey different meanings to the sender and the receiver.

Encoding of the thoughts produces a message which can be either verbal or non-verbal. Verbal message is in the form of words and language, while non-verbal would be in the form of body gestures like wink, smile, grunt, frown, wave of hand, etc.

Channel

The next element in the process of communication is the channel through which the communication is transmitted. It is the link that joins the sender and the receiver. The most commonly used channels are sight and sound. In the organisational environment, the channel could take the form of face-to-face conversation, written memos, telephonic exchanges, group meetings, etc. Outside the organisation, the channels could be letters or circulars, magazines, radio programmes or TV shows, etc. For communication to be effective the channel used should be appropriate for the message as well as the receiver. For an urgent message telegram, telephone or radio would be the appropriate channel. Again, the channel chosen would be influenced by the consideration as to whom the message is being directed.

Activity A

List the various channels of communication that you use while communicating with

Decoding

Decoding and understanding the message constitute the last two elements in the process of communicating from sender to receiver. The receiver in the first instance receives the message and decodes it, that is to say, interprets and translates it into thoughts, understanding and desired response. A successful communication occurs when the receiver decodes the message and attaches a meaning to it which very nearly approximates the idea, thoughts or information the sender wished to transmit.

Decoding and understanding are affected by several factors. For example, a receiver cannot decode a message which is in a language not known to him. This applies to symbols also. The same symbol may carry a different meaning to the receiver. Again, the receiver's past experience, as well as his expectations colour the meaning that is attached to the message. All this tends to bring about a divergence between the ìntended' meaning and `perceived' meaning.

In order that this does not happen, it is necessary to develop greater degree of homogeneity between the sender and the receiver, both of whom have their own fields of experience. The field of experience constitutes an individual's attitudes, experience, knowledge, environment, and socio-cultural background. The greater the overlap of the source and receiver's fields of experience, the greater the probability of

successful communication. In other words, they have things in common that facilitate better communication. An individual engaged in communication with another person of a significantly different educational or cultural background will have to put in greater effort to ensure successful communication. A model of communication credited to Wilbur Schramm illustrates this point.


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The greater the overlap of the two persons' fields of experience, the higher is the probability of successful communication. The shaded area shows the overlap.

Feedback

Response and feedback complete the two-way process of communication. It is through the feedback that the source (sender) comes to know if his message was correctly received and understood. In case it is found that the message has been received incorrectly, it is possible to make corrections subsequently if response is timely.

Sender's efforts to communicate are aimed at eliciting the desired response. However, a communication may result in producing any of the three outcomes: a desired change may occur, an undesired change may occur or no change may take place. We consider communication as successful only when it produces the desired response.

Noise

Surrounding the entire spectrum of communication is the noise that affects the accuracy and fidelity of the message communicated. Noise is any factor that disturbs, confuses or otherwise interferes with communication. It can arise at any stage in the communication process. The sender may not be able to encode the message properly or he may not be properly audible. The message may get distorted by other sounds in the environment. The receiver may not hear the message, or comprehend it in a manner not entirely intended by the sender of the message. The channel also may create interference by 'filtering', i.e. allowing some information to pass through and disallowing others. In any case, there is so much of noise or interference in the entire process that there is every possibility of the communication being distorted. We will see later in this unit why distortion takes place and what can be done to minimise the distortion of communication.

13.4 VERBAL AND NON-VERBAL COMMUNICATION

A communication in which words are used can be called verbal communication. Communication over long distance takes place usually through verbal communication. As an adjunct-to this is the non-verbal communication which refers to the use of `body language' in communicating ideas from the sender to the receiver. Non-verbal communication most often takes place unconsciously, and it may either fortify or supplement the verbal communication, or may at times negate the very purpose of verbal communication.

Let us examine each of these one by one. Managerial Communication

29

The main characteristics of verbal communication is the use of words, either written or spoken.

Written communications include personal letters, memoranda, policy and procedure manuals, and notices placed on the notice boards.

Examples of oral. communications are conferences, committee meetings, telephone conversation, loudspeaker announcements, etc.

Both written and oral communication have their merits and demerits.

A written communication has the advantage of being easily verified and of being more precisely defined if there arises a need for subsequent correction. Spoken messages cannot always be verified so easily.

Secondly, because a written communication is likely to be a permanent record, we are more particular in making it precise and accurate.

Thirdly, lengthy and complicated messages are better understood if they are put in writing. It would be difficult to understand and retain a lengthy message if it were only in oral form.

Together with these advantages, written communications have some drawbacks also. Some of these are:

Firstly, it is a slower method of communication if we consider the total amount of time involved from the formulation of idea by the sender to the understanding of the idea by the receiver. A written communication competes with all other written material that reaches the desk of an executive. As such there can be a gap between the time when a communication reaches the manager's desk and the time when he reads it. Moreover, if clarifications are needed because the message is not clear to the receiver, further delay would take place.

Secondly, despite the fact that a greater degree of preciseness is aimed at while preparing a written communication, there is always a possibility of ambiguity or lack of clarity creeping in leading to misunderstanding on the part of the receiver. Clarifications naturally mean delay.

Lastly, over-reliance on written communication can lead to too much of paper-work in the organisation. This not only consumes time, money and energy, but also indicates a lack of trust among the employees of the organisation. It has been observed that when trust is low and suspicions are high in an organisation, an over-reliance on written communication is likely to occur.

Oral Communication

Although an organisation cannot function without written communications of various kinds, yet by far the greater percentage of information is communicated orally. It has been observed that managers spend 60 to 80 per cent of their work time in oral communication. Oral communication has the merit of being more rapid. Generally, the spoken word is a quicker and less complicated way of getting one's ideas across another person. Again, it offers the potential of two-way information flow, and therefore less possibility of misunderstanding the communication. The creation of a less formal atmosphere and generation of fellow feelings are the additional advantages brought about through oral communication.

However, the oral communication is not entirely free from defects. It is less effective as a means of presenting complicated and lengthy data. It is also subject to misinterpretation and the effects of barriers arising from interpersonal relationships.

Can you determine which of the two, oral or written; is a better means of communication? You will see that the choice between the two is, generally speaking, determined by the situation. However, the use of both together will very often strengthen and reinforce a message.

Take your own case. The material in your hand is the written communication which will be fortified subsequently through oral communication in the contact classes or

educational TV programmes. The two together, we hope, will further increase your understanding of the concepts and application of management.


30

Choosing Your Words

You have read earlier that communication refers to the transmission of meaning from the sender to the receiver. Such transmission takes place through the use of symbols, whether verbal or non-verbal. In verbal communication the symbol is a word. In order that the transmission of meaning takes place it is important that the particular symbol (word) used must create within the mind of the receiver the same image which was in the mind of the sender of the communication. It is only then that the basic purpose of communication which is to influence the behaviour of the receiver will be achieved. It has been found that words do not necessarily have commonly understood meanings. The abstract words like "participation" or "democracy" or "satisfactory" suffer from the difficulty that different people are likely to attach different meanings to these words. The greater the use of such abstract words, the bigger the difficulty in bringing about an understanding of the message and a change in behaviour through communication.

Keith Davis in his well known book "Human Behaviour at Work: Organisational

Behaviour", has suggested a few guidelines for making verbal communication more effective. These are:

• Use simple words and phrases.

• Use short and familiar words.

• Use personal pronouns (such as "you") whenever appropriate.

• Give illustrations and examples.

• Use short sentences and paragraphs.

• Use active verbs such as in "The manager plans".

• Economise on adjectives.

• Express thoughts logically and in a direct way.

• Avoid unnecessary words.

Use of Body Language

In determining the effectiveness of communication, in the sense of effecting a change in behaviour, non-verbal communication has an important role to play. Experts in the field of human communication have found that, in a typical message between two persons, only about 7 per cent of the meaning or content of the message is carried by the actual words being used. Another 38 per cent of the message is carried by one's tone of voice (which includes pacing, timing, pauses, accents). The major part of 55 per cent of the content of the message is in non-verbal form, in other words, in the form of our physical attitude going along with our verbal message. The physical attitude is also referred to as body language.

Non-verbal communication can take place with our actions or with our body gestures. For example, a manager who pounds his fist on the table while announcing that from now on participative management will be practised in his organisation creates a credibility gap between what he says and what he practises. A manager who says that he believes in an open door policy for all his employees but is busy with his own files while an employee is giving him certain suggestions towards improvement in work environment, is making non-verbal communication quite in conflict with his verbal communication. In such situations the non-verbal message is the stronger one and the verbal message will cease to be effective.

Body gestures that "communicate" may relate to your handshake, your smile, your eye-contact, your posture while standing or sitting, your facial expression while listening, the shrug of your shoulders, indeed, the movement of any part of your body. You must, therefore, be watchful of your body language so that it does not contradict your verbal message. This is indeed difficult because the body language is so involuntary that we are not even aware of it.

Some of the non-verbal actions which assist communication include:

• Maintaining eye contact

• Occasionally nodding the head in agreement

• Smiling and showing animation

• Leaning towards the speaker Managerial Communication

31

• Speaking at a moderate rate, in a quiet tone

Some of the non-verbal actions that impede the communication are:

• Looking away or turning away from the speaker

• Sneering or using other contemptuous gestures

• Closing your eyes

• Using an unpleasant tone of voice

• Speaking too slow or too fast

13.5 CHANNELS OF COMMUNICATION

An organisation structure provides channels for the flow of information on which the decisions of the organisation will be based. As such an organisation can be described as the network of communication channels. These channels can be either intentionally designed, or they may develop of their own accord. When a channel is intentionally prescribed for the flow of communication in the organisation, we call it a formal channel, and the communication passing through that channel as formal communication. On the other hand, when communication takes place through channels not intentionally designed, in other words, outside the formal channels, such channels are referred to as informal channels, and the communication as informal communication.

Formal Communication

An organisation chart shows the direction of formal communication flow in an organisation. It identifies the various transmitters and receivers, and the channels through which they must communicate. The authority relationships indicate the direction of communication flow in an organisation. A formal communication takes place between a superior and subordinate in the form of instructions and directions Such a flow takes place in the downward direction.

Another formal communication takes place between subordinate and superior when reporting on performance is made by the subordinate. Since the subordinate initiates communication to the superior, the flow is upward. We call this upward communication. The upward communication can take the form of progress reports, budget reports, profit and loss statements, requests for grants, etc.

Again formal communication may take place between one division of an organisation and another. This could be either lateral or diagonal. There is substantial formal communication between production foreman and maintenance foreman, or, between production manager and quality control manager. Formal communication may pass across organisational levels also: for example, communication between line and staff units takes place very frequently across organisational levels. Such communication helps tremendously in the coordination of activity.

Finally, formal communication may also arise between the organisation and outside parties, e.g., suppliers, customers, Government, etc. This may happen when the management is required to provide information on certain aspects of working of the organisation. Communication of this kind is usually one-way.

Networks in Formal Communication

You have seen earlier how the formal organisational structure prescribes the channels through which communication flows take place. These channels are designed to keep the flow of information in an orderly manner and to protect the higher level managers from an overload of unnecessary information. However, the way in which these channels are designed and work can affect the speed and accuracy of information as well as the task performance and satisfaction of members of the group. As such, managers have to think of how best to design the organisational structure and the communication network which meets the requirements of the situation.

Some research in the design of communication networks has been carried out which indicates their relative merits for use in different situations. Although these networks

can assume many forms, the most frequently discussed are four, known as the wheel, chain, `Y', and circle, shown in the diagram below:


32

These forms can well be looked at as an organisational structure made up of five members.

The ‘circle’ network represents a three-level hierarchy in which there is communication between superiors and subordinates, with cross communication at the operative level.

The ‘chain’ can represent a five-level hierarchy, in which communication can take place only upward and downward, and across organisational lines.

The ‘wheel’ or ‘star’ represents an administrator and four subordinates with whom he interacts. There is no interaction among the subordinates.

In the ‘Y’ network two subordinates report to the superior. It may be regarded as a four-level hierarchy.

To test the effect of various communication structures, a series of experiments involving simple as well as complex problems were conducted. The studies demonstrated that network centrality was the critical feature that determined whether a particular communication pattern was effective and satisfying to the members for a particular type of task. An index of relative centrality was developed for this purpose in order to determine who occupied the central position in each network. It was found that `Y' and `star' networks are highly centralised, with C occupying the central position. The `circle' and `chain' networks were found to be decentralised with no member being able to influence all other members.

Further experiments to determine how performance and attitudes were affected by different communication networks showed that centralised networks performed faster and more accurately than decentralised networks, provided tasks were comparatively simple. For complex tasks, however, the decentralised networks were comparatively quicker and more accurate.

The emergence of a leader and the satisfaction of group members was also affected by the centrality of networks. In centralised groups whether the tasks were simple or complex, one person who occupied the central position by virtue of the control of information emerged as the leader. In decentralised networks no one position could emerge as the leadership position.

As far as the satisfaction of group members is concerned, it was found to be higher in decentralised networks in all types of tasks. Satisfaction was higher in the `circle', highest in the `chain', lower in `Y' and the least in the `star' pattern. The reason for higher satisfaction in decentralised networks was that members of those networks could participate in problem-solving.

These experiments have certain implications for the design of organisational structure and the-communication network:

Firstly, an organisation with mostly routine, simple tasks is likely to work more efficiently with a formally centralised network of communication, while more complicated tasks would require decentralised networks.

Secondly, the problem-solving objectives of speed and flexibility cannot be achieved by the same pattern of communication. Rather, speed in problem-solving can be

achieved at the expense of flexibility, and vice-versa. As such the communication pattern should be designed with reference to the objective that is regarded as most important.


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Thirdly, the pattern that leads to highest average morale and greatest flexibility in adapting to changed conditions is the one in which there are a large number of active participants in decision-making process.

Lastly, access to information is an important source of power in organisations.

We were so far explaining to you the communication patterns that are made use of for formal communication in an organisation. You are, of course, aware that along the formal organisation exists another organisation known as informal organisation which has its own channels for communication. We shall now have a look at the informal communication and its channels.

Informal Communication

Communication that takes place without following the formal lines of communication is said to be informal communication. This channel is not created by management and is usually not under the control of management. An informal system of communication is generally referred to as the `grapevine' because it spreads throughout the organisation with its branches going out in all directions in utter disregard of the levels of authority and linking members of the organisation in any direction.

The informal communication arises as a result of employee needs for information which are not met by the formal channels. It has been observed that problems relating to work and unfavourable reactions to various organisational practices are transmitted through informal communication. Since the channels are flexible and establish contacts at personal levels among members of organisation at different hierarchical levels, the grapevine spreads information faster than the formal system of communication. As has been pointed out in the unit on Planning and Organising, about 10 to 40 per cent of employees receive information (or misinformation) about the organisation and its members through informal channels of communication.

In contrast to the formal communication which moves on slowly from one person at one hierarchical level to another at the next hierarchical level; the grapevine transmits information from one person to a group of persons much more rapidly in a cluster chain arrangement. The cluster chain is made up of individuals who act as information sources. Each individual passes the information to several others, some of whom repeat the message to others. Some of those who receive the message may not pass on the information to others but the information may lead to a change in their thinking on the subject and may sometimes affect their behaviour as well. The following diagram illustrates the cluster chain network of informal communication.

Figure: III


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a)

b)

c)

d)

e)

Though it has been found that informal communication carries accurate information about three-fourths of time, yet there are strong possibilities of its communications being distorted. This happens because of the process of `filtering' whereby each member of the cluster chain acting as a kind of filter passes on only that part of communication which he regards as important. The receiver is left to fill in the gaps and complete the story according to his own imagination. This naturally leads to a very great distortion of the real situation and may at times cause serious problems in the organisation.

The characteristics of grapevine have been summarised by Keith Davis as follows:

People talk most when the news is recent.

People talk about things that affect their work.

People talk about people they know.

People working near each other are likely to be on the same grapevine.

People who contact each other in the chain of procedure tend to be on the same grapevine.

You have seen that the grapevine is a fast and a substantially accurate channel of communication. It has tremendous capacity to carry information both helpful and harmful to the formal organisation. In most cases it carries information which the formal channel may not or will not carry. The manager's responsibility, therefore, lies in utilising the positive aspects of the informal channels of communication and in minimising the negative aspects of this channel.

In order to do this, what the manager can do is to identify the members of the organisation who usually seek and spread information. It is possible that different individuals are active at different times but usually it will be found that some individuals tend to be more active carriers of information than the others. After identifying such people a manager can use them as sounding boards. If it is discovered that misleading rumours are circulating, it may be a desirable policy on the part of the manager to release the official information in order to clarify the situation. At times management may even find the informal communication channel more useful in transmitting information than the formal channel. A common method of using informal communication is by `planned leaks', or strategically planned `just between you and me' remarks, which would obviously reach all parts of the organisation much more quickly than any kind of communication through formal channels.

Activity B

Identify various types of communication networks found in your organisations. Which is the most effective one? Why?

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13.6 BARRIERS TO EFFECTIVE

COMMUNICATION


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By now you are familiar with what communication is. You will recollect that in the earlier part of this unit, communication has been defined as the transmission of meaning or understanding. Yet by far, most of the communication in organisations or between persons fails to satisfy this criterion. Communication quite often fails to convey the meaning or develop an understanding of the communication sufficient enough to bring about a change in the behaviour of the recipient. According to Peter Drucker, "We have more attempts at communications today, that is, more attempts to talk to others, and a surfeit of communication media yet communication has proved as elusive as the Unicorn. The noise level has gone up so fast that no one can really listen any more to all that babble about communications. But clearly there is less and less of communicating. The communication gap within institutions and between groups in society has been widening steadily-to the point where it threatens to become an unbridgeable gulf of total misunderstanding." (Management Tasks, Responsibilities and Practices p. 481.)

One of the biggest dangers in communication is to assume that communication has taken place. Most of us indeed make a great effort in formulating ideas, and finding appropriate words for communicating them to others. In organisations, too, much money and energy is used to develop its system of communication. And yet, if you try to assess how far the system has led to effective. communication in terms of the desired response, you will be surprised at the results. There is a fifty-fifty chance of the communication not being understood to the degree you would be satisfied with. This has been proved by a number of experiments and observations made by communication specialists. There is a story from the army which tells of an instruction starting at one end of the line as `Send reinforcements' and ending up at the other end of the line as `send three shillings and six pence'.

You can perhaps test it yourself. Try to recollect the news items of the previous evening's news telecast or broadcast. How many items can you recollect? Most likely less than half!

These examples indicate what happens to most of the communications between persons or within organisations. It is not only important that a communication be sent, it is much more important that it be understood. When an understanding of the communication does not take place, we can hardly expect a desired change in the behaviour of the receiver. What causes a failure of communication?

The failure in communication arises because of certain blockages or barriers between the sender and the receiver. In order to make a communication effective, it must be ensured that these barriers are removed. What the commercial media men these days try to achieve is to overcome the barriers and reach the target audience. What kind of barriers interfere with the effectiveness of communication? In the paragraphs that ' follow, we shall discuss the various reasons which either prevent the communication from reaching the receiver or distort it in such a manner that it ends up either as non-communication or as miscommunication. Since a manager has to use communication as a means of getting the work done through his subordinates, he must ensure that barriers are minimised and effective communication takes place.

The barriers that interfere with the understanding of the, communication are of three kinds: semantic, psychological and organisational. We shall discuss them one by one.

Semantic Barriers

Most of the difficulties in communication arise because the same word or symbol means different things to different individuals. Perhaps you remember what happened to Shiny Abraham at the recent (1986) Asian Games at Seoul. Despite coming first by a very wide margin in the 800 m. race, she was disqualified and lost her gold medal for having crossed the track at the place where she should not have done. According to her she mistook the symbol, i.e. the colour of the flag. Whereas in our country the red flag indicates danger, in South Korea white flag is used for the same purpose. Misinterpreting the white flag which had been put up at that point, she crossed the track at the wrong place and suffered a setback.

Words, which are in reality symbols representing a thing, an action or a feeling, can have several meanings. As explained earlier, words which represent concrete things, e.g. car or house, tend to be understood in the same way, while abstract words like merit, effectiveness or responsibility, tend to be interpreted by different persons in different ways. Difficulty in understanding may arise even in the case of ordinary words which have different contextual meanings. Lately such difficulties are being experienced increasingly by people working in international development field. One such problem arose in interpreting the meaning of the word `steps'. In a training programme of health workers relating to the family health in Jamaica when a question "What are some of the steps that a mother should take to make sure that her baby keeps healthy?" was asked, it was found that there was no response to it. The trainees who were accustomed to only one meaning of the word `steps' based on their experience, could not just make any sense of the question.


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Semantic difficulty may arise because of unfamiliarity with words, for example, a word of some foreign language of which the receiver has no knowledge. A technical word may also create such a problem-it may be beyond the ability of the receiver to understand it.

In order to make it effective, a communication must be put into words which are appropriate to the environment and mental framework of the receiver. This ensures the communication to be grasped properly and implemented effectively. A very interesting example of a communication made effective by the use of words appropriate to the environment in which they were used is provided by the following incident that took place in one of the. agricultural states of the USA.

A proposal for raising the salaries of the faculty members of an agricultural college was under discussion. The farmers' bloc was totally against giving the raise to the college teachers-they could not see why they should pay those college teachers $5,000 a year just for talking 12 or 15 hours a week. Faculty representatives made no headway in their negotiations until one of them who had some farming experience, got an inspiration.

"Gentlemen", he told the members of the administrative body, "a college teacher is a little like a bull. It's not the amount of time he spends. It's the importance of what he does!"

The faculty members got the raise.

Semantic barrier may further be created by body language being inconsistent with the verbal communication. A manager who praises the honesty and sincerity of his subordinate in a sarcastic tone creates doubts in the minds of the subordinate as to the course of action he should adopt in a given situation in future. The same kind of barrier is created by a divergence between the verbal language and the action language of the superiors. When action and language are used jointly, the actions often have more powerful influence on other's actions than do words. A management may, for example, profess its belief in being guided solely by the merit of employees while making promotions. Yet if employees observe that in actual practice promotions are made on considerations other than merit, the management's professed policy is bound to be affected by a semantic barrier-it is not likely to communicate anything, only the actions will communicate and what they communicate will be contrary to what had been said in so many words.

Psychological Barriers

Psychological barriers are the prime barriers in inter-personal communication. The meaning that is ascribed to a message depends upon the emotional or psychological status of both the parties concerned. As such the psychological barriers may be set up either by the receiver or the sender of the message.

You have already seen that the effectiveness of any communication depends upon the perception of the right meaning of the message on the part of the receiver. However the perception of meaning is very much affected by the mental frame of the receiver al the time the message is received. Emotions which dominate our mood at the time, e.g., anger, anxiety, fear, happiness, etc., will affect our interpretation of the message. The phrases `viewing with coloured glasses' or `seeing with jaundiced eyes' explain vividly how our inner feelings may vitiate our perception of the message or the

situation. Past experience of the receiver in such situations would also lead to the same effect. The same thing may happen when different individuals interpret the same event or situation. For example, take the case of a supervisor watching a group of employees resting and gossiping on the lawns. How will this situation be perceived?


37

To the supervisor who believes that employees are basically lazy, the situation communicates to him that they are playing truant with their work, and therefore should be given more work to do and disciplined.

To the supervisor who believes that his workers are self-motivated and are sincere workers, the situation communicates that they are enjoying a well-earned rest.

To the supervisor who is personally insecure, the situation communicates that they are conspiring against him.

You will, therefore, see that a particular kind of situation, event, happening or words and symbols are capable of being interpreted by different people in different ways according to their own psychological states. A receiver who is suspicious or hostile, either as a consequence of his feeling of insecurity or because of his past experience with the sender of the communication, is more likely to start `reading between the lines' and ascribe a distorted meaning to the message.

To the receiver's mind a communication gets tied up with the personality of the source. This is what some people call the halo effect. Thus if we receive a message from a person we admire, we are more likely to agree with it and act accordingly. On the other hand, our immediate reaction will be one of disagreement with a message that has been received from a person we do not like or trust. Thus our perception of meaning of the communication is coloured by our own value judgments about the source of the communication.

A receiver of the communication suffers from another problem which psychologists refer to as cognitive dissonance. Since an individual tends to be fed with too much of information from different sources, which is commonly the case in an organisational setting, he becomes selective in receiving and responding to the communications. He is most likely to `hear' only those messages that conform to his own beliefs, attitudes and judgement. Communications that conflict with his own viewpoint tend to be ignored. Often the òther' point of view may not only be ignored, it might indeed be regarded as unfriendly or even hostile. If this happens frequently, subordinates may start questioning whether their superior really wants to hear the `bad' news, i.e., opinions contrary to his own. As a consequence, much of the unfavourable news in an organisation would never get reported to higher levels until the problem has assumed the form of a crisis.

One common phenomenon with all communications is the effect of filtering. This effect is produced when the communication passes through a large number of persons. Each individual through whom the information is passed interprets facts differently, judges from his own point of view what is important or relevant, and passes it on with his own interpretations, with the result that the original communication gets altered in the process. The process of filtering involves a biased choice of what is communicated, on the part of either the sender or the receiver. Thus filtering refers to the process of `selective telling' or `selective listening'. For example, a subordinate may tell the boss what he (the boss) wants to hear. Similarly, though several factors affecting productivity in the organisation may have been identified by the staff, yet the manager may hear and respond only to those factors that fit his preconceived view of the situation. In either case selectivity is introduced in the process of communication leading to a distortion in communication.

Organisations are particularly prone to the effect of filtering. In large organisations where there are several levels through which a communication must pass, filtering takes place at each level. In order to save the time of the busy executive and to save him from information overload, it is common in organisations for subordinates to prepare notes or abstracts of the communication before passing it on to the superior. The higher information has to travel the higher is the degree of abstraction, with the possibility that significant pieces of information may be entirely missed or their significance diluted or distorted. The larger the number of filtering points in an organisation the greater is the chances of distortion. This may happen even outside

an organisation when communication is passed on verbally from one to another, as in a grapevine.


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Organisational Barriers

Organisations provide a formal framework through which communication is designed to flow. The structuring of the flow itself tends to act as a barrier against freer flow of communication between persons and levels in the organisation. Rules may prescribe how communications are to move from one level to another in upward or downward directions. Not only is there a possibility of delay in the communication reaching its destination, but also there is every possibility of communication getting distorted through the process of filtering described in the previous paragraphs. It has been found that when information is channelled through different levels of organisation, it became altered as people interpreted facts differently. In an organisational setting this can be a very big problem since senior level executives who work through others have to depend more and more on the information and interpretations of their subordinates. Critical information that has lost its criticality because of the actions of the intervening levels may jeopardise the position of the manager as well as the organisation itself.

It has been observed that the upward communication is particularly subject to the influence of filtering in large organisations. Upward communication serves essentially two purposes in an organisation. First, it helps in coordinating and controlling the activities of the organisation. Second, it enables the superior to appraise the performance of his subordinates. While the former does not create ony problems, the latter has behavioural implications. It is human nature to show one's performance in a better light than what it actually is. This tendency of an individual naturally brings about a filtering through conscious or unconscious altering, withholding or interpreting facts to be transmitted upward.

Dependency syndrome of the subordinate heightens the tendency to filter information. In a superior-subordinate relationship, the subordinate is, generally speaking, dependent on the superior for his advancement. Studies show that the greater the dependency of the subordinate on his superiors for the satisfaction of his needs, the more his tendency to filter information of an unfavourable kind. It has been found that subordinates are generally unwilling to communicate unfavourable information when they feel that their superior has the power to punish them in some way. Only positive aspects of performance are likely to be communicated upwards.

Another barrier in organisational setting is created by the superior-subordinate relationship itself which develops a distance between the two. People are more comfortable in communicating with persons of similar status as their own. Communication with persons of higher or lower status is likely to be formal and reticent rather than informal and free. The distance between the superior and subordinate and the difficulty in freer communication between them tends to be heightened through status symbols which might be used to show the hierarchical status of the person concerned. Status symbols within an organisation may be in the form of separate parking space, separate bathrooms, separate refreshment rooms, cabins with stylised furniture, carpets, etc. Such symbols accentuate the distance between the different hierarchical levels and tend to widen the communication gap. Perhaps you may have read that among the several characteristics of Japanese style of management is the removal of status symbols. For example, under the Japanese system there are no separate cabins for managers, uniforms for workers and managers are the same, they eat the same menu in the same cafeteria. All these are intended to reduce the distance between the workers and the managers, and bring about a better understanding of the problems of the organisation which is the chief objective of organisational communication.

You have read in the last few pages about the problems that crop up in communicating with others, whether inside or outside the organisation. These problems create an interference in the process of sharing of the meaning of a communication, and thus block its effectiveness. As a manager you will be continuously required to make use of your communication abilities in the performance of your job. Since your success as a manager will be judged in terms of the results that you produce, the effectiveness of your communication is, therefore, of prime importance to you. We shall explain to you in a few paragraphs below what you can do to make your communications effective.

Activity C Managerial Communication

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Identify the barriers that prevent the effectiveness of communication. What can both: of you do to remove these barriers between you and your boss ?

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13.7 MAKING COMMUNICATION EFFECTIVE

In order to make your inter-personal communication more effective, the following are some of the points that you should bear in mind:

Use direct, simple language and avoid words which can have ambiguous

meanings:

Keep the receiver (audience) in mind while choosing the words and phrases. Your communication will be effective if the words you use are appropriate for the level of receivers for whom the communication is aimed at.

If you look through history, you will find that the great messages have been simple and short. Moses had only ten commandments and they hardly add up to sixty words, and the 17 Rock Edicts of Ashoka are equally brief and to the point.

Use face-to-face communication: Face-to-face communication allows more accurate feedback to be achieved through two-way communication. Generally speaking, people express themselves more freely while talking rather than through writing. Face-to-face communication permits a manager to see and understand the non-verbal signs also.

Use feedback: Feedback enables the sender to judge whether his ideas have been received in the manner as they were originally intended. Most often it is assumed that communication has taken place because a notice has been put on the notice board, or an order issued. You must devise ways to separate fact from distortion.

Listen with understanding: The biggest block to interpersonal communication is said to be the inability to listen intelligently, understandingly and skillfully to another person. We tend to confuse listening with hearing, which is a physical process. Listening actually is much more than hearing, it involves understanding. Real communication takes place when the listener truly hears and understands the position and intent of the speaker. Most managers are, however, poor listeners. Apart from other reasons for poor listening performance, the main reason is the discrepancy in the speeds of speaking and of listening. While an average person can speak at the rate of 150 words per minute, one can listen and think at the rate of over 1,000 words per minute. The difference obviously leaves idle time for the mind to wander about and lose some part of the message that is sought to be conveyed. In order to be a successful manager you must attempt to develop your listening ability by utilizing your idle time

in projecting yourself into the mind of the other party and understanding the factual and emotional content of the message, without making any attempt at criticising, approving or disapproving it until after you have fully heard and understood the remarks. The empathetic listening, as it is called, vastly improves the understanding of both the parties, bringing in its wake improved interpersonal relationship in the organisation.


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Create constructive environment for the expression of ideas: If you can create a climate in which people can be confident that what they say will be listened to with sympathy and considered constructively, you can be sure of a successful and creative communication. This is, however, possible only in an environment of trust which has to be generated by management through its policies and actions.

Be careful about your non-verbal communication: Because you hold a status higher than your subordinates, your gestures are observed and `felt' by your subordinates. Your body language, therefore, must be supportive of your communication through words. One of the powerful means of communication are your actions which speak louder than words. If you expect your communication to be effective, ensure that your actions are consistent with your words.

Develop and use organisational structures which minimise the chances of

filtering the communication: Decentralisation of authority and broadening of span of control can be attempted to reduce the levels in the organisation and minimise the authority filters.

The American Management Association has developed a set of ten suggestions for improving communication, referred to as "The Ten Commandments of Good Communication". Briefly, these suggestions are:

1. Clarify before attempting to communicate. 2. Examine the purpose of communication. 3. Understand the physical and human environment when communicating. 4. In planning communication, consult others to obtain their support, as well

as the facts. 5. Consider the content and the overtones of the message. 6. Whenever possible, communicate something that helps, or is valued by

the receiver. 7. Communication, to be effective, requires following up. 8. Communicate messages that are of short-run and long-run importance. 9. Actions must be congruent with communication. 10. Be a good listener.

13.8 SUMMARY

Communication is the transfer of information from one person to another. Successful communication is much more than mere transfer of information-it is the transfer of meaning and understanding between two persons.

Communication has paved the way for modern civilisation and good communication is the foundation for sound management. No managerial activity is possible without communication of some kind, and the major part of a manager's working time is devoted to communicating.

Communication is accomplished through a process in which the sender encodes an idea which is transmitted through a channel to a receiver who decodes the message and gains an understanding of the idea of the sender. The reverse process of feedback also follows the same pattern. During the entire process, interference is created by `noise' which can lead to distortion of the communication.

Communication takes place either orally or in writing. It could be just one-way or two-way, which allows the sender and receiver to interact with each other. A two-way communication is regarded better, as it brings about understanding through clarity of the message. In an organisation, communication may take place in several directions-upward, downward, lateral and diagonal.


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Words either written or oral convey a very small part of the communication: most of it is transmitted through non-verbal gestures. A manager ought to be careful lest his non-verbal gestures contradict his verbal message.

Communication within an organisation flows either through formally designed authority channels or through informal channels spontaneously formed and cutting across authority levels. Informal channels can have both positive and negative sides. Cluster chain network of informal communication permits a rapid flow of information through the formation of a grapevine. Formal communication is transmitted through several kinds of networks. The choice of a network will depend upon considerations of the complexity of a task, speed in decision-making in order to adapt to a change, and the satisfaction of members desired.

Interference in communication is caused by semantic, psychological and organisational barriers. In order to achieve effectiveness in communication, managers should consciously try to lower these barriers.


1. Why is effective communication important to the manager?

2. Explain the elements of the communication process.

3. What is `noise' in communication? What factors in the organisational environment cause noise?

4. What purposes are served through vertical communication?

5. What problems are encountered in vertical communication?

6. Why is informal channel of communication called, a grapevine? Should managers use the grapevine or rely on formal channels?

7. Explain the significance of body messages in communication effectiveness.

8. Explain the statement, "Words are symbols and meaning exists in the mind".

9. Think of a situation at home or at work, and identify communication problems you observed or experienced.

13.10 KEY WORDS

Communication: The process of transmitting or receiving abstractions such as ideas or beliefs through the use of symbols and language.

Communication Networks: Patterns of channels of communication.

Communication Barriers: Physical, psychological and organisational hindrances resulting into ineffective communication.

Grapevine: A very powerful informal communication channel.


Baskin and Aronoff, 1980. Interpersonal Communication in Organisations, Goodyear Publishing: Santa Monica.

Davis, 1975. Human Behaviour at Work, Tata McGraw-Hill: New Delhi.

Hampton, Summer and Webber, 1973. Organisational Behaviour and the Practice of

Management, Scott, Foresman: Glencove.

Myers and Myers, 1982. Managing by Communication: An Organisational Approach,

McGraw International: Tokyo.


and Design

UNIT 14 PLANNING PROCESS

Objectives


• understand the managerial process of planning

• introduce the various methods of formulating plans

• develop an understanding of planning framework

• develop insights into the planning practices in Indian enterprises

Structure

14.1 Planning as an Activity

14.2 Strategic and Operational Planning

14.3 Formulating a Plan

14.4 Planning Framework

14.5 Planning Practices in Indian Organisations

14.6 Summary


14.8 Key Words


14.1 PLANNING AS AN ACTIVITY

Planning is a household word today. Perhaps there is no sphere of activity where

`Planning' is not used in one context or the other these days. Though planning as an

instrument of aiming at future has been in vogue in business since a long time, its use at

the macro-level for the gearing up of operations of Government towards the

attainment of certain targets is of recent origin. Our Five Year Plans are an example of

macro-level planning for the achievement of targets aimed at increasing the standard

of living of our people.

Planning, thus, means having a view of the future and deciding in advance where we

would like to be and what is to be done in order to reach there.

Planning starts with the definition of the objectives and the formulation of the

specific goals or targets to be achieved. Goals are derived from the analysis of

existing situation of an organisation and once defined provide a sense of direction to

all managerial activities. In order to achieve the goals, specific plans are drawn up.

Objectives, goals or targets provide answer to the question, "Where is the

organisation heading to?”.

Planning is essentially concerned with the future. Since future conditions are

unknown, forecasts or estimates must be made to provide a basis for planning. You

will appreciate that better forecasts lead to better planning for future. While most

forecasts are made intuitively or on the basis of experience, mathematical tools have

seen developed to make more accurate forecasts.

Planning is done by managers at all levels of organisation. You will see that all

managers plan though the character and breadth of planning may differ at different

levels of organisation. For example, while an Assistant Engineer at a work-site plans

for the accomplishment of work at his site from day to day or for two or three days in

advance, the Chief Project Manager must plan for the whole project over a larger

period of time. Similarly, a multinational company's top management must plan over a

longer time frame for a world-wide market. 43


Process

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i)

ii)

iii)

iv)

v)

Planning is a means to some end as such involves choices among alternatives-

alternative goals, alternative programmes and alternative means of achievement.

What alternative to choose gives rise to decision-making which every manager will

be required to do.

Question: Do you plan your day? How?

Do you plan for your holidays/vacations? How? Why?

Have you actively participated in the planning of some big event like the Annual

Function of your college or the marriage of a female relative of yours? Recapitulate

how the event was planned.

If you have given thought to the above questions, you must have sensed the need for

planning any activity whatsoever. Planning is considered important because it-

attempts to offset uncertainty by foreseeing the future and bringing about

preparedness for the happenings in future. In this way, it minimises the chances

of mistakes,

focuses attention on the objectives or goals of the organisation and their

attainment,

leads to economy in operation through the selection of the best possible course

of action,

helps in controlling the activities by providing measures against which

performance can be evaluated,

helps in coordinating the operations of an enterprise since a well-considered

plan embraces and unifies all the divisions of an enterprise.

Activity A

As a manager, identify various planning activities that you are involved in.

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14.2 STRATEGIC AND OPERATIONAL PLANNING

As already explained above, a plan provides a view of the future by defining the

goals or targets of the organisation. By themselves the targets would have no

meaning unless a time limit is fixed for their attainment, e.g. our Five Year Plans

indicate the targets to be attained by the end of the respective plan period viz., five

years.

In terms of planning horizon, planning can be of two kinds:

1. Strategic Planning, also known as long-range planning,. has two important

elements-first it covers a longer period of time which may extend from five to

twenty or more years. A capital intensive industry, e.g., a public utility service, or

a company dealing in international markets must necessarily plan for a longer

period. Strategic planning also takes into consideration the totality of activities

of the enterprise. In other words it refers to planning for the total, enterprise

over a longer duration. Planning for a duration of fifteen, twenty or more years

is also known as perspective planning.

2. Operational Planning, tactical planning or short-range planning usually extends

over a period of one year and is more detailed. While strategic plans indicate the

activities to be undertaken or goals to be achieved in general terms, and are an

instrument of planning and control in the hands of top management; operational

plans are prepared in more specific terms. These plans are directly concerned

with operations and deal with the various functional areas of the enterprise

like production, marketing, finance, research and development, etc. They

guide lower levels of managers in their day to day activities and serve as a

yardstick for measuring their performance.


and Design

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The following table explains the distinction between operational and strategic

planning.

Operational Strategic Planning Planning

Focus Operating Problems Longer-term Survival

Development

Objective Present Profits Future Profits

Constraints Present Resources Future Resources

Environment Environment

Rewards Efficiency, Stability Development of Future

Potential

Information Present Business Future Opportunities

Organisation Bureaucratic/Stable Entrepreneurial/Flexibl

Leadership Conservative Inspires Radical

hProblem Solving Reacts, Relies on Past Anticipates, Finds New

Experience Approaches

Low Risk High Risk

Source: Bernard Taylor; Strategies for Planning: Long Range Planning (August 1975) Quoted

by Stoner, Management (Prentice Hall, New Delhi) Page 102.

You should remember that the long-range plans and short-range plans are not

mutually exclusive. They overlap and, in fact, an operational plan is a part of the

strategic plan in the sense that it contributes to the attainment of some part of the

objectives or goals laid down in the strategic plan.

All too often the relationship between the operational plan and strategic plan may

be forgotten, and policies may be framed under operational plan which may prove

unfavourable for the attainment of long-term goals. For example, the longterm plan

may aim at increasing labour productivity per hour by 50%. However, the operational

plan aimed at cost reduction might lead to the curtailment of expenditure on

manpower development, which in the long run may actually decrease productivity

rather than increase it.

14.3 FORMULATING A PLAN

Preparing a plan is a step by step exercise. Generally speaking the following four

steps will be involved in planning for an enterprise.

1. Perception of opportunities

2. Establishment of goals

3. Appraisal of planning premises

4. Exploring of action paths and selection of a course of action.

Perception of opportunities

The first step for you to take while planning is to be aware of the opportunities. As

you have studied earlier, plans determine a course of action to be adopted `today' in

order to obtain the desired results `tomorrow'. In order that planning is regarded as

effective, it must anticipate and meet the conditions as they develop in future.

Forecasting, therefore, is a prerequisite to planning which simply stated, means

making an intelligent estimate of the conditions that will exist during the plan period.


Process

46

a)

b)

c)

For example, a demand forecast, which shows the level of demand of a particular

product over a period of time, is the first step towards production and sales planning in

an enterprise.

Quite often existing problems themselves induce managers to search for

opportunities. A dealer in fashion goods confronted with the problem of falling sales

and profit levels will himself be driven to seek new opportunities. Planning requires

realistic diagnosis of opportunities.

Establishment of goals

The second step for you is to establish goals which are to be achieved during the

specified period. This implies the establishment of goals for the whole enterprise as

also for each of its sub-units. Whatever the goal-profits, sales, market share- i t is

better if it is measureable because later you will use these goals to evaluate the

performance of the unit or its managers. Various kinds of budgets and cost standards

provide a means of establishing the standards.

Appraisal of planning premises

Premises refer to the factors in the environment that affect the achievement of goals.

Government policy is one of those factors which can have significant impact either

favourable or unfavourable on any plan formulated by an enterprise. Take for

example a recent change in the Government policy regarding the conversion of

debentures into equity. Until recently a conversion of debentures into equity was

permissible under certain conditions. A large business house which had taken

recourse to such conversion in the past and benefited by it, had planned for new

projects banking upon the conversion of a new series of debentures into equity.

Almost an overnight ban on such conversion into equity by the Government not only

created a crisis situation for that enterprise in respect of the financing of the new

projects but it also led to the erosion of confidence of investors in the future plans of

the company. As a result the market prices of equity share of the company severely

declined. You must have guessed that this is the story of Reliance'.

Planning in any organisation rests on several premises, in other words, on

assumptions about the expected environment conditioning the plan. Obviously a

change in any one or more assumed conditions will necessitate an alteration in the

plans. Such assumptions relate to factors which may affect the plans either from

within the enterprise or from outside. Accordingly, planning premises may be

grouped as external or internal.

A brief description of some of the factors that influence the formulation of the plan by

an enterprise will follow later.

Explore and determine action paths

The final step in the planning function is to explore and evaluate alternative plans of

action, and determine a specific action plan.

Once the goals have been established and the factor or factors affecting the plans

taken care of, actual action plan in the form of programmes and budgets are

formulated.

A programme shows:

major steps required to reach an objective,

organisational unit or person responsible for each step, and

sequence and timing of each step.

A programme may be accompanied by a budget which indicates the financial

resources allocated by the organisation for the implementation of the plan. Actually

in order to achieve the overall goals of the organisation, a number of activites will

have to be performed, each activity having a separate programme and a separate

budget within the overall programme and budget. The system under which budgets

are used for purposes of planning is known as the Budgetary Planning System.

We shall go into some details about the role of budgets in a business enterprise. You

should, however, remember that budgets in addition to serving as a tool for planning

also serve as a tool for control. This means that at .the appropriate time, your

performance will be appraised in relation to the budget which had guided you so far.

Budget therefore, is-an instrument of control also.


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47

Activity B

Request your senior manager to procure a copy of the corporate plan of your

company. Read it carefully and summarise some of the important programmes of

your company.

…………………………………………………………………………………………

…………………………………………………………………………………………

…………………………………………………………………………………………

…………………………………………………………………………………………

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…………………………………………………………………………………………

…………………………………………………………………………………………

………………………………………………………………………………………….

14.4 PLANNING FRAMEWORK

As previously stated planning rests on premises about the expected environmental

conditions. Such premises are classified into two categories-

a. Extrenal, i.e. Business Environment

b. Internal premises can be several, e.g., capital investment made; approved sales

forecasts; values and beliefs of top management and the policies adopted; and the

given organisational structure.

Business Environment refers to the totality of economic, political, social, cultural

and technological conditions that affect the formulation of plans of any organisation.

Since the environment is primarily looked upon from the point of view of its impact

on the demand for the product or services offered by the organisation, changes in the

environment may have favourable or unfavourable consequences for the

organisation. A rise in per capita income may signify more disposable income and

indicate more purchasing power in the hands of consumers. On the other hand,

political instability has an undesirable impact on the plans of a business enterprise.

The Government policies of regulation and control as also of taxation, and providing

or withdrawing incentives all affect the future planning by a business enterprise.

What can be produced or sold by a business may be subject to Government controls.

The difficulty in business planning arises because it is impossible to forecast the

character and effect of such controls. Again in an industry where technological

changes are many and rapid, planning on the basis of old technology will spell doom

for the enterprise. In order to succeed, managers today are expected to keep

themselves abreast of technological changes taking place in the industry and plan the

industry on that basis

Capital Investment Committee

Business enterprises today need large capital investment and an investment once

made in fixed assets tends to have long-run influence on its future plan as the

investment made cannot be recouped except through use.

While developing plans, you should first assess carefully your own resources and

commitments made, and adjust the plans i n such a manner that the existing resources

are more productively utilised.

Sales forecasts, which are a projection of expected sales over a period of time, provide

a framework on which plans of most enterprises are based. Since sales give rise to

revenues which sustain the enterprise, business enterprises tend to attach a great deal

of importance to the framing of such forecasts. A forecast of rising sales over a long-

term would indicate the need for the expansion of the facilities. On the other hand, a

decline should alert the management to look into the causes of decline and initiate

corrective actions.


Process

48

Generally speaking, making a sales forecast is a two-step process:

1. Make industry-wise demand forecast.

2. Make sales forecast for a specific company.

For example, if you are in automobile business producing two-wheelers, first

estimate the total demand for two-wheelers by types and then estimate your market

share and the demand for the two-wheeler you are producing or intend to produce.

There are several methods of making demand forecasts and sales projections which

you will study elsewhere.

It will be interesting for you to know that some of the most interesting and important

contributions in management science are associated with the planning function.

Values and Policies of Top Management

The plans formulated and action taken by managers in an organisation are immensely

affected by the values attached to alternative courses of action and policies pursued in

each case. Value defines what is `good' and what is `not good'. A top management

holding a `good' belief is not likely to plan for something, which they regard as `not

good'. A case in point is a monthly magazine `Kalyan' devoted to the propagation of

religious literature. It has been the basic policy of the top management of that

magazine not to accept any advertisements. While planning for increased revenue

advertisements are never considered as an alternative source.


Plans are implemented through an organisational structure which consists of people

arranged in a hierarchy, each one responsible for the performance of a specific task in

coordination with others. Quite often it may be found that a particular plan drawn up

cannot be satisfactorily implemented simply because the structure is such that while

on the one hand there is duplication of effort, on the other hand, there is nobody to

look after another part of the job.

In almost every kind of large-scale enterprise, examples can be found where well-

conceived strategic plans were thwarted by an organisational structure that delayed

the execution of the plans or gave priority to wrong set of considerations. While

drawing up a plan, you should give attention to the needs of the organisation not only

in terms of the number and kind of personnel required but also to the change in the

organisational structure required for the effective implementation of the plan.

14.5 PLANNING PRACTICES IN INDIAN

ORGANISATIONS

Several researchers have looked into the planning practices in Indian enterprises.

Some of these studies are reported here:

Richman and Copen (1972)

Virtually all of the medium-sized and larger companies surveyed established at least

some quantitative objectives or targets on an annual or short-term basis. These

generally include profitability, sales and production objectives. Most also had some

kind of growth objectives and some general guidelines to help determine those areas

in which the firm would concentrate or expand its efforts. However few defined

longer-term objectives clearly.

Only one of the Indian firms surveyed, a drug producer, did a truly thoughtful job of

developing a long-term growth and development model. It identified explicitly a

desirable position to strive for several years in the future and designed specific

strategies to reach it. This firm established specific three and five-year goals for

market share and profitability.


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49

In general, planning processes and plans at firms studied in India focused on the short

run, and in particular on short-term projections of monthly, weekly and daily

operating data. Planning documents consisted mostly of sales forecasts and some

kind of operating budgets. However, these were prepared more for control purposes

than for future planning. The only planning activity found in most of the major firms

was the translation of a sales forecast into requirements of imported raw materials

and the ordering and stockpiling of these items. In only a few cases were accurate

forecasts of capital requirements or productive capacities made.

Bhatia (1981)

This research study on the objectives of a sample of 65 out of the 251 giant companies

listed by Research Bureau of Economic Times, revealed that only 45 per cent of these

have explicitly defined objectives and 55 per cent do not have expressed objectives.

Moreover out of those which have specified their objectives 17 per cent feel that their

objectives are confidential and not to be divulged.

The above evidence indicates that the Indian business organisations, specially the

large-sized, do realise the need and urgency of planning their operations over longer

periods of time. Many however, still consider planning over longer periods a waste of

effort primarily because of a larger measure of uncertainties prevailing in the Indian

environment.

The Section 14.7 at the end of this unit contains an extract from the chairman's speech

of a fairly large Indian company which is indicative of how Indian business look at

the planning function and how they proceed to take advantage of the opportunities

available in the environment.

You should read it carefully and answer the questions given at the end.

14.6 SUMMARY

Let us now summarise the ideas contained in this section. The function of

management starts with planning and organising. A plan defines the goals which are

to be attained during a specified period of time in future. Planning involves a vision

of the future. The process of planning, therefore, is a mental exercise involving a

choice among alternative goals, programmes and means of achievement. Every

manager in an organisation has a role in planning though the character and breadth of

planning might differ from manager to manager.

A plan encompasses a period of time in which it is expected that the goals would be

attained. This period known as planning horizon can be short or long. A short-term

plan generally covers a period of one year and is detailed and much more specific

than a long-term plan in defining the goals or targets. The process of formulating a

long-term plan is known as strategic planning through which an organisation defines

its long-term goals.

In formulating a plan a number of sequential steps are involved. In the first place, you

have to look for the opportunities. Scanning the environment and forecasting will

enable you to perceive the opportunities that exist. Secondly, you specify the goals

that you would like to attain during the planning horizon in measurable terms.

The third step involves an appraisal of those premises on which planning of an

organisation rests. Such premises can be external to the enterprise or internal to it. In

general the economic, socio-cultural and technological environment tends to

influence from outside what managers will plan and how. Among the internal

premises, i.e. factors that influence the plan from within are the capital investment

which has already been made or committed, the forecast of sales which has been

approved as the basis for planning the values and beliefs of top management, and the

capabiiity of the organisational structure of the company.

The final step in planning is to lay down an action plan in terms of programmes and

budgets with specific targets.


Process

50

Research studies relating to planning functions in Indian business generally indicate a

low importance given to this function. Though sales forecasting and budgeting is

common, long-term planning is done by only few large enterprises.


Perspective Planning in Mahindra Ugine Steel Co. Ltd.

The following passages are extracted from the statement of the chairman of Mahindra

Ugine Steel Co. Ltd. at its annual general meeting in 1971. These extracts will

provide you an idea of the importance attached to a perspective (long-term) plan for

an enterprise and also of some of the factors which condition the planning of a

business enterprise.

"I am happy to advise you that in furtherance of our plans to expand the capacity of

your Plant and to achieve maximum economies of scale your Company has been able

to submit a comprehensive plan to the Government for enlargement of the productive

capacity upto 60,000 tonnes of finished Tool, Alloy and Special Steels per annum In

planning the expanded capacity of our plant we shall strive to achieve maximum

diversification of the end-products consistent with a favourable capital-output ratio…

For this, we have to constantly strive to expand our operations and diversify

our product-mix so that the goals are met or even exceeded.

The observations about our sales and the outlook for our Company prompts me to

discuss briefly the developments and trends in our own industry and share some

thoughts on perspective planning. Planning today is a universally accepted exercise

for one and all. It involves looking as far ahead as the data on our hands and our

vision permit. In the life of a corporation this means a ,close study of all the factors that

shape its progress and influence it decisively. There are several such factors and one

such all-important factor, external to the organisation that could provide the

guidelines for future growth is the assesssment of the potential market. I attach

overriding importance to a sincere, honest and realistic attempt to size up the

approximate if not the exact requirements of a given product for a given year in the

planning and creation of manufacturing capacity.

Your Company is vitally interested in making projections of its own growth with the

help of macro-projections of the demand for Mild, Alloy and Special Steels released

by various Government and semi-Government agencies. During the last decade there

has been several such macro-projection . The last estimates of demand for Steel

have come from NCAER. Most of the studies work out the potential demand with the

.help of the end-use method which is a simple but down to earth technique to assess

the short-term as well as long-term demand in developing countries. The recent

estimates of NCAER also utilise the same method.

In the latest study of the demand for Steel, the NCAER has taken full account of (a)

all the major steel consuming sectors, (b) requirements of such consumers, (c)

increase in demand due to export of Steel, (d) Steel content of machinery and

engineering goods to be exported, (e) possible reduction in demand due to

substitution of Steel by items such as plastics, asbestos, cement, aluminium, etc. in

such products as motor cars, railway rolling stock, ship-building, pipes and tubes, (f)

Price elasticity of Steel demand and (g) Steel content of imported products and so on.

The main assumption underlying the end-use method is firstly that the targets for

various industries obtained from research organisations like the Planning

Commission or those of NCAER itself, would be achieved. Experience tells us that

this has not always been a correct assumption and plan targets for even the major

steel consuming sectors get elasticised. Also in several industries there have been

shortfalls in respect of the attainment of targets. As you can see for yourselves, such

shortfalls may result in over-estimation of the requirements. Conversely, where

targets are exceeded, which is not often the case, the forecast of requirements for a

particular industry turn out to be under-estimates.

Secondly, the success of the end-use method is largely conditioned by the accuracy

of the norms that relate the Steel industry to the Steel consuming industry by

indicating the input co-efficient. Such norms are known to change with technological

progress and innovations and there have been several occasions in the past when

estimates have gone haywire on account of unrealistic norms having been adopted.

For instance, the norms employed by the Perspective Planning Division in its 1965

estimate of the requirements of Alloy and Special Steels have been replaced by the

NCAER which has employed its own norms for various industries. The end-use

method thus assumes that the impact of technological changes would be minimal, if

not nil on the norms of consumption of Steel. Naturally to obtain more accurate

figures at the end of such an exercise, the final estimates are adjusted upward to

provide for such findings of changes in various consuming sectors. In order to make

the macro-projections meaningful for the producers to plan and expand their

capacity, it is essential that norms are kept under review and at the end of every year

or so the Associations of Consumers and Producers should get together and see that

any significant changes in the norms are reflected in the demand figures and

necessary adjustments and/or corrections are made on the overall demand

projections. By such an exercise the year to year projection of demand would be

rendered more realistic and would provide a workable basis to determine the gap

between demand and availability.


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51

With these considerations regarding the merits and demerits of the end-use technique

in mind, let us consider the recent studies in demand estimates with special reference

to the products of our own industry viz. Alloy and Special Steels. There have been as

many estimates of demand for Alloy and Special Steels as there are for other Steels

also. As against about 300,000 tonnes for 1973-74 and 430,000 tonnes for 1978-79.

estimated by the Steering Group of the Steel Ministry in 1968 and incorporated in the

Fourth Five Year Plan document, the latest study of the Council provides for 434,000

tonnes for 1975 and 817,000 tonnes for 1980.

The estimates of the Steering Committee as revised by the Technical Wing of the

Steel Ministry have now become available. Accordingly the demand for Alloy and

Special Steels has been revised upwards from 300,000 tonnes to 400,000 tonnes for

1973-74 and from 430,000 tonnes to 590,000 tonnes for 1978-79. What is of interest

to your Company as a producer of Alloy Constructional Steel in these varying

estimates is that for 1973-74 the estimates of both the Technical Wing and the

NCAER arrive at almost the same figure, but for a difference of only about 2,000

tonnes. The marginal divergence, however, turns out to be sizable in the estimates for

the end of the Seventies. As against the Technical Wing's estimate of 178,700 tonnes

for 1978-79, the Council Places the demand for Alloy Constructional Steel at

239,906 tonnes for 1980.

It is now accepted that the assessment of the Technical Wing has been rather

conservative and that the Council's studies despite certain limitations are more

realistic. A message that emerges loud and clear from these studies is that even after

the schemes for expansion or setting up of new units on green sites which are now

under consideration are successfully implemented by the end of the decade, there

would still be a gap, probably substantial rather than marginal between requirements

and actual production.

All said and done the numerous estimates referred to above need to be further

processed and worked upon for purposes of drawing meaningful conclusions that

guide us in deciding about future investments in the creation of new Alloy Steel

capacity and in determining the ideal product-mix for your or other plants. The

breakdown of such broad aggregates into categories, grades, shapes, surface finish

i.e. black or bright, etc. is a pre-condition for successful corporate planning. Quite a

few snap judgments, I am afraid, have already been made based on broad aggregate

demand resulting in duplication of capacity of the same size ranges. And

circumstances may force us to amend them, it not reverse such decisions. In this

context, I would emphasize that before a final sanction is issued for creation of fresh

capacity, adequate thought is given to the point whether such fresh capacity should


Process

52

come about through new units on green sites or through expansion of existing units

or both. These considerations weigh very heavily in favour of the second proposition.

Expansion would firstly help creation of new capacity faster; it would involve lower

capital investment; and finally what is important, it would help the existing units to

achieve economies of scale.

It is high time that a master perspective plan for the speedy expansion of Steel

capacity in the country is drawn up and Government and industry jointly and single-

mindedly work for the crystallisation of such plans. This exercise has to be followed

by clearer thinking about the future needs.

A corporate or industrywise perspective plan considers not only the market potential

for a product but also the derivative demand for essential inputs to be supplied by the

feeder and ancillary industries. Only such an assessment of the requirements and

availability of raw materials would give meaning and content to the perspective

plan.”

Questions:

What factors influence the planning in MUSCO?

How does Government policy influence planning in MUSCO?

What method of making future forecasts is referred to in these passages? What are its

elements ? How accurately can be the forecasts arrived at through this method? Find

out from the books listed below what the other methods of demand forecasting are.

14.8 KEY WORDS

Strategic Planning: Planning activity undertaken keeping in mind the long-term future

of an organisation.

Operational Planning: Planning activities related to day to day functioning of an

organisation.


Lawrence, Paul and Jay Lorsch, 1967. Organisation and Environment: Managing

Differentiation and Integration, Harvard Business School: Cambridge.

Etzioni, A. 1961. Complex Organisations, Holt, Rinehart and Winston: New York.

Koontz, O'Donnell, and Weihrich, 1982. Essentials of Management, Tata McGraw-

Hill: New Delhi.

Stoner, J.A.F. 1982. Management, Prentice Hall: New Delhi.

Richman & Coper, 1972. International Management and Economic Development, Tata

McGraw-Hill: New Delhi.

Bhatia, M.L. 1981, Corporate Objectives, Indian Management, September.

Controlling

UNIT 15 CONTROLLING

Objectives

The purpose of this unit is to:

• understand the nature and purpose of control

• examine the prerequisites and characteristics of control

• describe the control process

• analyse the methods and managerial strategies of control

Structure

15.1 What is Control? 15.2 The Prerequisites and Characteristics of Effective Control Systems 15.3 The Control Process 15.4 Control as a Feedback System 15.5 Methods of Control 15.6 Policies and Design Choices in Control 15.7 Strategies of Control 15.8 Summary 15.9 Self-assessment Test 5.10 Key Words 15.11 Further Readings

15.1 WHAT IS CONTROL?

Control is the process of assuring the efficient accomplishment of enterprise objectives. In the turbulent environment faced by management, control is necessary to anticipate problems, measure performance against standards, take corrective actions for deviations from plans and if necessary, modify plans.

The term control may have some nagative connotations for some. But, in the management process, it is a facilitating function aiding the organisation to accomplish the set objectives. To draw an analogy, it is like a thermostat in an air-conditioning system.

The primary responsibility for exercising control rests with every manager charged with the execution of plans. As Henry Fayol said, "In an undertaking, control consists in verifying whether everything occurs in conformity with the plans adopted, the instructions issued and principles established. Its object is to point out weaknesses and errors in order to rectify them and prevent recurrence. It operates on everything, things, people, and actions". It is wrong to assume that only top management has the responsibility for control and that there is little need for control at lower levels of management. While the scope for control may vary to some extent depending upon the position of an employee in the hierarchy, all those who have responsibility for the execution of plans need to exercise control too.

15.2 THE PREREQUISITES AND CHARACTERISTICS

OF EFFECTIVE CONTROL SYSTEMS

The major prerequisites of control are two: a plan and a structure.

a) Plan: controls must be based on plan. The more clear and complete the plans are the more effective controls can be; plans become the standards by which the actions are measured.

b) Structure: There is need for a structure to know where the responsibility rests for deviations and corrective action, if any needed. As in the case of plans, the more clear and complete the organisation structure is, the more effective control can be. Controls, to he effective, should share the following basic characteristics:

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Appropriate: Controls should correspond to an organisation's plans. Controls designed for a general manager are inappropriate for a supervisor. Similarly, control systems suitable for a line department may be inappropriate for a staff department.


54

Strategic: Control should serve a stretegic purpose and provide spotlight on positive and negative exceptions at critical points.

Acceptable: Controls will not work unless people want them to. They should be acceptable to those to whom they apply.

Reliable and objective: Controls should be accurate and unbiased. If they are unreliable and subjective, people will resent them.

Cost-effective: The benefit from control should be greater than the costs. Control devices should yield tangible benefits.

15.3 THE CONTROL PROCESS

The control process involves three steps: (a) establishing standards, (b) measuring performance against these standards, and (c) reinforcing success/correcting deviations.

a) Establishing Standards: Standards mean criteria of performance. Standards may be of many kinds and include verifiable goals set in qualitative or quantitative terms. An organisation can establish standards in such areas as

Profitability

Productivity

Market Share

Worker Performance

Innovation

Social Responsibility

Standards can be based on past performance, managerial judgment or scientific analysis. Standards are used to measure performance and judge success or failure.

b) Measuring of Performance: Essentially, it is a comparison between "what is" and "what should be" the performance. Ideally, measurement should be done on a forward-looking basis to predict probable deviations from standards rather than merely be used as a post mortem exercise. To the extent prediction becomes possible, control becomes effective because appropriate actions can be taken well in advance of their actual occurrence.

c) Reinforcing Success/Correcting Deviations: When plans and organisation structures are clear, it is easy to reinforce success and avoid failures. When deviations are noticed or apprehended based on warning signs, the reasons can be analysed and appropriate corrective actions taken promptly.

15.4 CONTROL AS A FEEDBACK SYSTEM

Management control is usually viewed as a feedback system. This is seen more clearly by looking at the process involved in control system, as shown in Fig. I. Control is more than a matter of establishing standards, measuring performance and correcting for deviations. To initiate corrective action, there should be a programme (or a plan of action) which needs to be implemented and monitored as to whether such implementation will give the desired performance.

Figure 1: Feedback System in Control Process

Source: Koontz Harold (1981), "Management". Aukland McGraw-Hill.

In the simple feedback system there is a time lag in the control process. The old notion is to look at planning as looking forward and control as looking backward. But good management requires future-directed control where it is possible to get feedback somewhat ahead of actual happening than after the event. As Harold Koontz observed, "Since the past cannot be changed, effective control should be aimed at preventing present and future deviations from plans". Computers make it possible now to get feedback on a real-tine basis, i.e., as of now or on a here-and-now basis. Where there are time lags in a system, corrective steps should be taken on a proactive basis predicting or anticipating efforts. As such, effective control systems should seek to overcome the deficiency of common or simple feedback systems to be modified as `feedforward systems'. Feedforward systems monitor inputs into a process to ascertain whether the inputs are as planned; if they are not, the inputs, or perhaps the process, are changed in order to ensure the desired action. As shown in Fig. II a feedforward control system is really one of feedback. The only difference is that the information feedback is at the input side of the system so that corrections can be made before the system output is affected.

Controlling

55

Figure II: Comparisons of Simple Feedback and Feedforward Systems:

15.5 METHODS OF CONTROL

Arthur Bedeian discusses nine methods of control and classifies them into three categories based on their frequency, of use:

Constantly used controls: Self-control, group control and policies, procedures and rules.

Periodically used controls: Management Information Systems, External Audits and Budgets.

Occasionally used controls: Special reports, personal observation and project control.

The nine methods of control mentioned above (see Fig. III) are briefly discussed hereunder.

Constant Controls

Self-control: Managers need to exercise more self-control to minimise the need for other control methods and making control in the organisation acceptable and effective. Self-control means giving a fair day's work for a fair day's pay, reporting to work on time, discharging duties and responsibility properly and respecting the rights of others in the organisation. Self-control is more in tune with Theory Y discussed later in the unit on Leadership Styles and Influence Process in Block 5. Respect for self-control in an organisation can be a motivating factor. A sense of appreciation for self-control can be promoted among employees through training in behaviour modification.

Group Control: Work groups are a source of control. Group-defined norms exert greater influence in organisations than the norms that managements may choose to set unilaterally and thrust on groups. Group norms and group control can aid or hinder formal authority. Organisations would do well to develop and use group control processes to reinforce formal authority. While in some organisations group control processes helped increase output and improve quality,, in others they resulted in restricting output. For group norms to contribute to organisational goals there should be a climate of trust and openness, a culture of cooperation than confrontation. Quality circle, quality of worklife programmes and work redesign experiments being taken up in some organisations are examples that point to organisational thrust toward reinforcing group control processes for achieving organisational goals through integration of members' interests with those of the organisation.


56

Figure Nine Methods of Control and Their Frequency of Use

Source: Bedian-A G-(1986), "Management", New York, Dryden Press, p. 553.

Policies/Procedures/Rules: These are essentially bureaucratic control mechanisms referred to in the discussion on control strategies. They reflect past managerial experience and include a variety of aspects concerning how to make certain decisions, deal with resources, etc. If the policies, procedures and rules are properly formulated, clearly communicated and implemented consistently throughout the organisation, they can be effective in controlling individual and work group behaviour.

Periodic Controls

Management Information Systems: A Management Information System is a mechanism designed to collect, combine, compare, analyse and disseminate data in the form of information. As such, management information systems link the various decision-making centres within an enterprise and serve a useful function in providing feedback for control purposes.

External Audits: The annual financial audit by an outside accounting firm is one form of external audit, mainly of the finances of an organisation. In the case of public sector units, such an audit is performed by Comptroller and Auditor General also. Forward looking progressive private companies have in the past sought to have a social audit, not for evaluating financial performance, but to find out whether and how well they have been discharging their social obligations. An example is the case of Social Audit conducted in Tata Steel in the late 1970s.

Budgets: Budgets are plans that deal with the future allocation and utilisation of various resources to different enterprise activities over a given period of tittle Budgets help establish plans and also serve as the basis for measuring or evaluating the standards of performance. Budgetary control is a good example of bureaucratic control strategy (discussed separately in this unit).

Controlling

57

Occasional Controls

Special Reports: These have a special role. Special reports can be commissioned by an organisation when its normal control systems point to the need for detailed investigation or study of a particular operational aspect. When major policy decisions of strategic importance are taken, special reports may be commissioned. These include situations where the organisations find the need for overcoming the existing difficulties, modernisation, expansion, diversification, merger, acquisition etc. Special reports vary in content and style depending upon the purpose. They could be prepared internally by managers in the organisation or by consultants or outside institutions. Special reports are a valuable method for controlling in turbulent environments, warranting changes in products and markets, technology and production processes, organisational structure, etc.

Personal Observation: Managers can know what is happening in an organisation by relying on information provided by others as also by finding out for them. First hand knowledge has to be critical to be effective. The importance of personal observation is best illustrated by Arthur Bedeian through his reference to the ill-fated ITT effort to build a giant wood/cellulose plant in Canada. The resulting $320 million loss could probably have been averted if someone had just gone to Canada and looked at the trees, which grew to no more than an uneconomical 3 inches in diameter.

Project Controls: Various methods have been developed for controlling specific enterprise projects. The best example is the network analysis using the PERT tool. PERT is an acronym for Programme Evaluation and Review Technique. It is a diagram showing the inter-relationships between the events and activities that comprise a project. It is a detailed, easy-to-communicate means for determining current status of a project, stimulate alternative plans and schedules and controlling activities.

15.6 POLICIES AND DESIGN CHOICES IN CONTROL

Organisations have three options in exercising control:

• centralisation or delegation

• formal or informal

• direct or indirect

Preferences for one or a mix of all options are matters of judgment. Judgment in

turn could be based on theory, practice or premonition. Each option has relevance in a particular situation. Here we shall briefly consider the three options mentioned above.

Centralisation or Delegation

The concepts of centralisation, decentralisation and delegation were discussed in the previous unit, `Delegation and Interdepartmental Coordination’.

Centralisation is an approach where control is exercised by the chief executive or the top management group (comprising a few individuals). Others in the lower rungs of hierarchy cannot act on their own or use their discretion. Thus, functional autonomy will be lacking at operating levels.

Delegation, on the contrary, manifests transfer of decision-making authority downward and outward within the formal structure. For example, in a multiplant situation, plant managers may take decisions without having to seek prior consent of head office on financial matters involving a sum of not more than Rs.2 lakhs in each transaction. This is an instance of delegation of financial powers. If a transaction involves an expenditure of Rs 2.5 lakhs, the plant manager will have to refer to the head office which exercises control over the decision. Sometimes, decision-making power is transferred downwards in a hierarchy prescribing limits on the scope and t

type of decisions. For example, a branch manager is allowed to spend upto Rs 5000 per month on consumables, without referring upwards for approval, so long as it falls within the monthly budget. Here although the decision-making power is transferred, overall control is incorporated into the arrangement. Where delegation occurs in an organisation-wide context, it becomes decentralisation.


58

Centralised Control:

• makes it easier to coordinate the activities of various subunits/departments in an organisation.

• seeks to achieve balance among various functions because the top management can be expected to have a broad organisation-wide perspective.

• proves more useful because control will be in the hands of senior, experienced top executives.

• is necessary to meet extraordinary situations.

• is economical since duplication in activities and resource use can be avoided.

Delegation and decentralisation too have positive features:

• they relieve the top management from overload.

• motivate individuals to give better performance due to opportunities for individual freedom, discretion and control.

• contribute to the personal and professional development of managers.

• people at operating levels are more knowledgeable about the dynamics in decision-making situations and can be expected to take appropriate actions to suit local conditions. This is particularly true in the case of large and widely dispersed units.

• affords prompt actions and provides flexibility.

As seen above, both are beneficial, but each one is appropriate for specific conditions and situations. The option is to be exercised at two levels:

• in respect of different types of decisions which vary in importance.

• the contingencies and capabilities of managers in the total context of the organisation.

Strategic decision-making and control can be centralised. Routine operational matters can be delegated and decentralised. Large organisations with widely dispersed units find a greater need for delegation.

Formal or Informal

Formalisation refers to establishing written policies, procedures, rules etc. which prescribe the do's and dont's. As organisations grow, formalisation grows. Formalisation renders activities more predictable in a desired direction and facilitates coordination and control. In large organisations where it is no longer possible to retain high degree of centralised control, formalisation helps to retain consistency and continuity by restraining the negative effects of delegation and decentralisation. Formalisation is appropriate for large organisations operating in conditions of stability. But, in today's fast changing environments, complete formalisation may not be desirable and practicable. Excessive formalisation vitiates the climate for initiative and employee freedom in performance, results in employee resistance and may even become counterproductive.

Formalisation can be effective insofar as policies, procedures and rules are flexible enough and reviewed periodically to make them appropriate to current changing situation.

Direct or Indirect

There are two ways of controlling. One way is to supervise subordinates' activities closely, trace deviations to the persons responsible and get them to correct their practices. This is called indirect control The other way is to develop high quality managers who will properly understand and apply managerial principles, functions, techniques and philosophy, make few mistakes and initiate corrective actions, wherever necessary, themselves. This is called direct control. The higher the quality of managers and their subordinates, the less will be the need for indirect controls.

Exercising close supervision through indirect controls adds to overhead costs and reduces employee motivation. Modern management practices call for a greater degree of ‘self control’ (which in effect means direct control) by those who perform work. With the revolution in information technology using computers, control can be exercised through real-time information, i.e., gathering information on what is happening as events are occurring. This made it easy for organisations to combine direct controls with indirect controls. But here indirect control is exercised not through close personal supervision, but through modern technology and hence several of the negative features of close personal supervision of superiors such as infringement on freedom of operation and subjectivity in evaluation are avoided.

Controlling

59

Direct control hastens corrective actions, lightens the burden caused by indirect control and subordinates feel less concerned about superior's subjectivity in rating their performance because in indirect control one would feel a close relationship between performance and measurement.

15.7 STRATEGIES OF CONTROL

John Child discusses four control strategies as listed in Figure IV.

Figure IV: Four Strategies of Control in Organisation

Each strategy will utilise one or more of the features listed

1 Personal centralised control

1. centralised decision-making

2. direct supervision

3. personal leadership: founded upon ownership or charisma, or technical expertise

4. reward and punishment reinforce conformity to personal authority

2 Bureaucratic control

1. breaking down of tasks into easily definable elements

2. formally specified methods, procedures and rules applied to the conduct of tasks

3. budgetary and standard cost-variance accounting controls

4. technology designed to limit variation in conduct of tasks with respect to pace, sequence and possibly physical methods

5. routine decision-taking delegated within prescribed limits

6. reward and punishment systems reinforce conformity to procedures and rules

3 Output control

1. jobs and units designed to be responsible for complete outputs

2. specification of output standards and targets

3. use of `responsibility accounting' systems

4. delegation of decisions on operational matters: semi-autonomy

5. reward and punishment linked to attainment of output targets

4 Cultural control

1. development of strong identification with management goals

2. semi-autonomous working: few formal controls

3. strong emphasis on selection, training and development of personnel

4. rewards oriented towards security of tenure and career progression

Source: Child, J. (1984) "Organisation: A Guide to Problems and Practice" p. 159.

a) Personal centralised control: Strategy is usually found in small owner-managed enterprises. Control is centralised in the proprietor or chief executive who combines his rights of ownership with his unique personal qualities and expertise. Ht. such a system reward and punishment are based more on loyalty to leader than competence. The system makes it easy to breed favouritism and distorts feedback so vital for

control. Organisational Structure and Process

60

b) Bureaucratic control: Strategy is the most common feature in large organisations in both private and public sectors, besides Government. The main thrust of bureaucratic control strategy is to ensure predictability through the specification of how people in the organisation shall behave and carry out their work. Formalisation in the sense of written definitions of jobs and procedures is the most characteristic feature of the bureaucratic control strategy. Division of work in modern industrial organisations lends itself to simplification and standardisation.

The focus in highly bureaucratic organisations is to seek compliance and `keeping your nose clean'. Rules, then, become more important than goals. Compliance results in job security and other benefits and non-compliance leads to sanctions and punishments.

The accounting control systems are perhaps the best examples of bureaucratic control strategy. One advantage of bureaucratic control strategy is that the delegation becomes easy in such systems. Managers can easily delegate without losing control over what is going on so long as such delegation occurs within formalised limits to discretion.

c) Output control: Strategy is appropriate in case of activities where it is easy to identify tasks which are complete in themselves and their outcomes measureable in definite terms. Common criteria of achievement, applied to individuals or groups, product lines and whole units respectively, are quantity of items processed, value added, profitability, etc. Once outputs or criteria for overall achievement have been identified, it is possible for management to specify output standards and targets. Reward and punishment systems can he linked with actual performance vis-a-vis standards and targets. Measurement is the most important activity in the job of a manager. It is also one of the weakest areas. Output control strategy becomes relatively difficult to apply in office jobs and where the relationship between effort and outcome is not easy to establish. In production jobs, on the other hand, output control is easy and effective. Once output standards are agreed upon mutually by the management and work group or individual work, it is easy to grant semi-autonomy to the worker or work group and hold the worker or work group responsible for the output. Thus output control strategy too, like bureaucratic control strategy, facilitates delegation and at the same time is free of the negative features of bureaucratic control.

One major problem with output control strategy, however, is the possible resistance from work groups for improving the methods of working, norms of output, etc. Thus, it can even stand in the way of introducing technological changes and introduction of improvements based on work study and work simplification. The other major and practical problem is related to establishing suitable and agreeable measures of output.

d) Cultural control: Strategy refers to an approach of maintaining control by ensuring that members of an organisation accept as legitimate, and willingly comply with, the managerial requirements. This requires strong professional identification and high degree of loyalty to the organisation. To the extent that employees and subordinates in any organisation accept management's right to give executive instructions, one may say that a degree of cultural control already exists. This is reinforced further through conscious efforts to develop this pragmatic effort into a more enthusiastic support for management's purposes and organisational goals. As John Child says, "Cultural control combined with personal autonomy to follow strongly internalised norms of competence and conduct has long been the mark of the professional". Professionals resent administrative controls. They accept controls comparable with the mode of self-control within agreed cultural parameters worked out through discussion and negotiation. Experiments in àutonomous work groups', `quality circles' and `quality of work life programmes' are examples in this direction. Cultural control fosters closer identification with organisation and induces high degree of motivation towards result oriented behaviour.

Controlling

61

15.8 SUMMARY

We have observed that control is the process of assuring the efficient accomplishment of enterprise objectives. It is the primary responsibility of every one who has responsibility for execution of plans. Controls should be based on plans and there is need for a structure to know where the responsibility lies. Controls should be appropriate, strategic, acceptable, objective and cost-effective.

The control process involves three steps: establishing standards, measuring performance and reinforcing success or correct deviations. Controls can be constant, periodic or occasional. As a matter of policy organisations may prefer control to be centralised or dispersed and delegated, formal or informal and direct or indirect. Large organisations need delegation, certain amount of formalisation and direct control systems. The control strategies can be classified as personal and centralised, bureaucratic, output oriented or cultural. The appropriateness of strategies varies from organisation to organisation.


1. Discuss whether you need any control when everything is going as planned.

2. Do you subscribe to the view that only top management is responsible for exercising control function in the organisation?

3. Explain how you could use the three step control process to control your academic performance.

4. Examine the control methods and strategies used in your organisation.

5. Design a control system for controlling the performance of your own subordinates, keeping in view the characteristics of effective controls.

15.10 KEY WORDS

Budgetary Control: Measuring performance against plans and expected results expressed in numerical terms.

Controlling: The managerial function of measuring and correcting performance of activities of subordinates in order to assure that enterprise objectives and plans are being accomplished.

Control Process: In managing, the basic process involves establishing standards, measuring performance against standards and correcting for deviations.

Direct Control: The concept that the most direct of all controls is to assure high-quality managers on the premise that qualified managers make fewer mistakes requiring other (or indirect; controls, perceive and anticipate problems, and initiate appropriate actions to avoid or correct for deviations.

Feedback: An informational input in a system transmitting messages of system operation to indicate whether the system is operating as planned. Information on operations is relayed to the responsible persons for evaluation.

Feedforward Control: A control system that attempts to identify future deviations from plans, early enough to take action before the deviations occur.


Bedeian, A.G. 1986. Management, Dryden. Press: New York.

Child, John, 1984. Organisation, Harper & Row: London.

Fayol, Henry, 1949. General and Industrial Management, Pitman: New York.

Koontz Harold et al. 1981. Management, McGraw-Hill: Auckland.

Ouchi, W.G. 1977. The Relationship between Organisational Structure and Organisational Control, Administrative Science Quarterly, March.

Delegation and Interdependent

Coordination

UNIT 16 DELEGATION AND

INTERDEPARTMENT

COORDINATION

Objectives


• clarify the process, problems and prerequisites of delegation

• distinguish between delegation, decentralisation and centralisation as they

relate to authority

• identify the problems of and approaches to interdepartmental coordination

Structure

16.1 Delegation of Authority

16.2 Elements of Delegation

16.3 Informal Delegation

16.4 The Problems in Delegation

16.5 Prerequisites of Effective Delegation

16.6 Centralizations and Decentralisation

16.7 Coordination

16.8 Warnings on Interdepartmental Conflict

16.9 Approaches to Coordination

16.10 Summary


16.12 Key Words


16.1 DELEGATION OF AUTHORITY

The process by which authority passes from one managerial level to another is known

as delegation. As organisations grow in size and complexity, no one person can

perform all the tasks or exercise all the authority that is needed to accomplish goals.

Delegation of authority is not the same as division of work. As Henry Fayol says,

"Division of work permits reduction in the number of objects to which attention and

effort must be directed and has been recognised as the best means of making use of

individuals and of groups of people".

Delegation of authority denotes the superior vesting decision-making power in his

subordinate. No one can delegate an authority which he himself does not have.

Delegation is one of the most important skills a manager must possess. The

overworked managers are often those who do not know how to delegate. For they

lack the skill to get results through others. An individual can perform limited work in

a day, all by himself. But through delegation-through dividing his load and sharing

his responsibilities with others-he can accomplish much more. No manager and no

organisation can run smoothly and effectively without delegation.

16.2 ELEMENTS OF DELEGATION

63 The number of delegation marks the effectiveness of the manager and influences the

relationship between the superior and the subordinate.

Organisation Structure and

Processes

64

•

•

•

•

Delegation is the process where a manager divides the work assigned to him so as to

get help from others in accomplishing the same. It involves the following four steps

that are indivisible:

the determination of results expected

the assignment of tasks

the delegation of authority for accomplishing these tasks

the exaction of responsibility for their accomplishment

Looked at differently, these four steps have three elements: responsibility, authority

and accountability. Delegation is the entrustment of responsibility and authority to

another and the creation of accountability for performance. Let us briefly consider

these three elements.

Responsibility: Responsibility refers to the activities which must be performed to carry

out the task assigned. Responsibility can be delegated.

Authority: Authority refers to the powers and rights entrusted to enable performance

of the task assigned or delegated. Certain authority is imperative to shoulder a given

responsibility. In organisations people derive authority mainly from two sources:

position and personal. Position authority is related to powers of decision-making,

reward and punishment. Personal authority refers to the expert knowledge and certain

qualities which are part of the personality of an individual manager. Position

authority can be delegated, but not personal authority. Authority could be formal or

informal. Here we refer to formal authority that is clear, structured and

communicated to all.

Accountability: Accountability is the obligation to carry out responsibility and

exercise authority as per established standards or norms. It is an obligation to account

for, and report upon, the discharge of responsibility or use of authority.

Accountability can not be delegated. The person who delegates continues to be

responsible to his superior for what he had delegated as well.

Since accountability cannot be delegated, the accountability of superiors for the acts

of their subordinates is absolute. By the same token, we see that the delegatee is

accountable to the delegator to the extent he is delegated responsibility and authority

For example, if the line managers are not given the responsibility to train the

operators, they cannot beheld accountable for the operators proficiency.

While accountability always moves upward, responsibility and authority move

downward in a hierarchy. A person can be accountable only to one superior for

delegated responsibility and authority. Accountability is easy to establish if the

standards and measures of performance are predetermined.

16.3 INFORMAL DELEGATION

So far we have discussed about formal delegation in the exercise of authority defined

by organisational role. Formal delegation is effective to the extent of the acceptance

and respect for formal authority.

Informal delegation occurs because people want to do something, not because they

are told to do. It cuts red tape. It is something that is not formally required to be done.

When there is problem in the exercise of formal authority, informal delegation may

become handy.

Bottom-up-delegation: Delegation takes place, in fact, not to the extent delegated, but

to the extent that the subordinate is willing to carry out the orders received. It may be

possible to enforce willingness to do the job itself, but not to comply with the

standards of performance established by supervisor. In large organisations, informal

group leaders, without formal authority, assume authority to restrict output and

workers accept such informal delegation. The people in the group will bring down

production to the level they consider fair rather than comply with the orders of their

superior.

Lateral Delegation: In modern organisations, few jobs are independent and teamwork

may result in members of a group entrusting, informally, their responsibility and


Coordination

65

authority to others in the group at their level. The process of entrustment that

occurs when teamwork develops among members of a group is called lateral

delegation.

16.4 THE PROBLEMS IN DELEGATION

We shall examine here four key problems in delegation:

What to delegate? • • • •

• • • • •

How much to delegate?

How far down to delegate?

How to deal with employees resistance to accept delegation?

What to Delegate?

If a manager does not delegate, he will end up doing what his subordinates must be

doing. If he delegates what he should be doing himself, his leadership position would

be in jeopardy and there would be conflict among subordinates.

The first step in effective delegation is for the manager to analyse his job and to

determine, in principle, what he should or should not delegate. The following points

help in this regard:

No manager can effectively delegate responsibility and authority for initiating and

making final decisions on planning, organising, coordinating and controlling the

activities and positions that report to him. Such responsibilities and authorities should

be reserved for his own performance.

A large part of the work in every. management position consists of activities that are

routine and repetitive. These lend themselves readily to delegation. Once delegated

these form the main tasks that the subordinates perform.

How much to Delegate?

Usually the dilemma is how much authority to delegate than that of responsibility. A

salesman appointed to sell the products of the company should have the authority to

approach customers in the name of the company, offer them the products for sale at

certain price and assure growth and delivery.

Beyond this minimum authority, the supervisor should decide on other matters, if

any, that arise like whether the salesman can rent a car for commuting, whether the

salesman can hire people to assist him, whether the salesman can offer discounts or

credit. The authority of the salesman can on each of these probable issues needs to be

clarified preferably before he is asked to shoulder the responsibilities. While one

can have rules and procedures laid down for routine questions that arose in the past,

as and when new questions crop up prompt decisions need to be taken.

There is a popular misconception that "authority should always be delegated equal to

responsibility". But people with responsibility for coordination and control, usually

withhold a part of the authority and delegate only such authority as is

commensurate with responsibility.

How far down to Delegate?

To what levels in a hierarchy can responsibility and authority be delegated? People

who do the work should have the responsibility. Those with responsibility should

have commensurate authority. Taken together, it means that it is necessary to

delegate authority to all those who do the work at the operating levels.

How to deal with Employee Resistance?

Employee may resist accepting delegated authority for a variety of reasons:

lack of proper job information

lack of skills, training, supportive tools and equipment or self-confidence

uncertain about the authority vis-a-vis responsibility

lack of proper reward or sense of personal gain for the individual

inertia and avoidance

Managers have the formal authority to direct others, and can invoke reward and

punishment systems to enforce this format authority. But to exercise informal

authority to delegate, they should earn the confidence and respect of their

subordinates.


Processes

66

To be sure it is imperative that managers check what their subordinates are capable of

doing and remove the aforementioned inhibiting factors.

16.5 PREREQUISITES FOR EFFECTIVE

DELEGATION Delegation is an art, not a science. It depends on the personality, skills and attitudes

concerning two actors: delegator (one who delegates) and delegatee (one who was

delegated). The following are some of the essential prerequisites for effective

delegation.

Climate of openness, trust and confidence among employees at all levels and a

culture of team work and cooperation.

a)

b)

c)

d)

e)

f)

g)

h)

The two psychological hurdles in delegation, namely lack of faith in the

competence of subordinates and fear that the subordinates may outshine them

deter managers from delegating. The managers should not have any feeling of

insecurity that by delegating they would be making themselves redundant.

Goals should be established and made clear: Every person in an organisation

should know what his contribution to the organisation is. In accomplishing his

goals, he can formulate the objectives of delegation too so that delegation is done

with a purpose and becomes effective. The machine operator may not be happy

with running the machine. He would be happy to know how the outcome of his

effort contributes to organisational purpose.

People who carry out work should have clearly defined responsibility and

authority: Job descriptions or position guides should clearly state the objectives,

responsibilities, relationships and limits of authority of each position. Clear

definition of responsibility and authority at each position eliminates the scope for

confusion that duplication and overlap in entrustment of duties would cause.

Motivation is important because the manager who wants to delegate should be

able to motivate people to do what he wants done, willingly and enthusiastically.

As Louis Allen puts it, "Motivation is the moving force in delegation".

Make delegation complete: Delegation is supposed to reduce a manager's

workload. But, if not properly done, it may increase the workload. There are

often problems as to whether, at what stage and how often should the subordinate

check back with his boss. The problem can be resolved if (i) the assignment is

clear cut, (ii) subordinate is told how the assignment will be coordinated and

motivated by the boss, (iii) the boss specifies to the subordinate at what stage, in

what form and how often he should provide him with feedback on the progress

and (iv) the boss provides counselling and guidance. Once an assignment is

delegated the boss should intervene only to provide guidance but not withhold his

approval for specific actions involved in completing the task. To delegate

complete assignment or task requires certain sense of faith and self-control on the

part of boss in not intervening but giving counsel and advice. Likewise, the

subordinate should exercise discipline in making choice of a course of action in

carrying out the task. Delegating complete tasks relieves managers from detail

and provides opportunities to subordinates to learn to be independent and feel a

sense of fulfilment in work.

Train: Managers should help in preparing their subordinates to accept

delegation. Such' need is all the more felt in case of subordinates who show a

tendency to depend on the bosses than be independent. Managers should,

therefore, carefully identify the weaknesses; develop potential and attitudes

conducive to accepting and making a success of delegated authority. Training in

delegation should include appraisal of current performance, counselling for

improvement and coaching on the job.

Establishment controls: Even after delegation the manager continues to be

accountable. So there is need for him to control without limiting the effectiveness

of delegation. The more complete is the delegation the more comprehensive

should the system of control be.


Coordination

67

Self-control is the best in establishing controls for delegation. The person to whom

responsibility and authority are delegated should participate in setting standards that

are to measure his performance so that he can understand and accept them. He

should also be able to measure and evaluate his own p e r f o r m a n c e if the control

systems are àuto' and `transparent'; thus it is easy to achieve control without limiting

the effectiveness of delegation.

Activity A

How Well Do You Delegate?

You can get a good idea of whether you are delegating as much as you should by

responding to the following items. Answer as accurately and frankly as possible.

How to Test Your Delegation

16.6 CENTRALISATION AND DECENTRALISATION Organisation Structure and

Processes

68

Centralisation and decentralisation are extensions of delegation. Delegation refers

mainly to entrustment of responsibility and authority from one person to another.

Downward transfer of responsibility and authority at individual level is referred to as

delegation and when the same is done organisation-wide in a systematic way it is

known as decentralisation. Decentralisation refers to systematic delegation of

authority in an organisation. An organisation is considered centralised to the degree

that authority is not delegated, but concentrated at higher levels of management. In

juxtaposition, to the degree that authority is delegated, an organisation is considered

decentralised. As Henry Fayol puts it, "Everything that goes to increase the

importance of the subordinate's role is decentralisation, everything which goes to

reduce it is centralisation".

The terms centralisation and decentralisation are meaningful only in a relative sense.

No organisation can operate on a completely decentralised basis since all authority to

make decisions would rest at the lowest managerial levels and make it difficult to

achieve coordination. Similarly, except very small firms, no organisation can be

completely centralised. It is appropriate to recall the experience of two of the largest

automobile corporations in the U.S. The Ford Motor Company, at one time, was said

to have suffered due to centralisation while the General Motors suffered due to

decentralisation. This example bears out the impracticability of complete

centralisation or complete decentralisation.

Factors Influencing Centralisation

An organisation or a manager needs to have some reserve authority to integrate the

efforts in an organisation and achieve the desired degree of coordination and control

required to accomplish the specific goals.

Centralisation also facilitates personal leadership when the company is small, to

provide for integration and uniformity of action, and to handle emergencies.

Factors Influencing Decentralisation

Decentralisation becomes important and imperative when an organisation grows

bigger. The main purpose of decentralisation is to ease the burden of top executives.

The warning signals that point to a need for decentralisation can be had from the

problems in planning and control of operations, neglect of proactive strategies in

preference to routine fire-fighting operations, proliferation of personal staff around

top executives and mushrooming of committees. Decentralisation also facilitates

diversification and divisionalisation and is in fact a necessary accompaniment, if not

a prerequisite.

Decentralisation also encourages and motivates managers to better performance

because it affords them opportunities to take more important decisions, gives them

the flexibility and autonomy in their functioning.

How to Decentralise?

Clearly, as organisations grow, expand or diversify, the need for decentralisation

increases. The moot question then is, ‘How to decentralise’?

The first step in decentralisation, though it may sound paradoxical, is centralisation.

As in the case of delegation, here again, there is need for some reserve authority for

coordination and control at the nerve centre of the organisation, i.e., the corporate

headquarters. Planning, overall guidance and direction for each subunit or division or

department of the organisation need to be formulated, coordinated and controlled at

the headquarters.

If the organisational activities are somewhat homogeneous (say, confined to one

industry such as automobiles) it is relatively easy to develop sound policies and

control systems for all the decentralised work units or profit centres in the

organisation. But when the organisation is highly diversified and deals in a variety of

businesses such as engineering, textiles, tea and chemicals, it is difficult to develop

uniform policies and


Coordination

69

control systems for all the work units or profit centres. Thus the design of the

administrative structure should take into account the needs of the organisation and of

its operating units as competitive units in their own markets.

Effective decentralisation requires a balance of the necessary centralisation of

planning, organisation, coordination and control, while decentralised units should

be developed as autonomous business units operating as individual profit centres,

with provision for effective coordination and communication. The central

management team should have a well-established system for measuring, recording,

and reporting operating results.

16.7 COORDINATION

Organising involves not only division of jobs into separate work units through

division of labour, decentralisation and delegation, but also relating the work units-

be they divisions or departments-to ensure that they pull together and work in

harmony. Linking or relating various parts and activities of an organisation to one

another is known as coordination. In the smallest of the smaller organisations where

all activities are performed by one or two persons in just one unit, there is little need

for coordination. But, as activities spread and organisations grow large and

complex the need for coordination becomes imperative and assumes greater

significance. Lack of coordination is a common complaint against most large

organisations. "The right hand does not know what the left hand is doing" is an oft

heard reaction among employees, customers and suppliers. Lack of coordination

results in break-down of operations, delays, wastages and frustrations.

One example of lack of coordination is the case of an organisation with different

divisions operating on the same site. One of the divisions was found to be

auctioning raw materials as scrap while another had been buying similar materials

from the market at a premium. In another case, while the factory had to cut down

production for want of storage space to stock finished goods at the plant, there was

shortage in the market for the same product.

Why is Coordination a Problem?

Any organisation will have certain objectives. People are grouped in an

organisation, usually, into separate departments such as production, finance,

marketing, personnel, etc. Each department is allocated different tasks. One deals

with production of goods and another deals with their distribution. One department

may plan, a second may develop new products and a third carries out actual

production. There are a number of service functions such as finance, maintenance,

materials, personnel, etc., each with a different task, though all are collectively

directed to accomplish the organisational goals. The process of internal

specialisation and task differentiation grows with the overall size of the

organisation. Over the years, modern organisations acquired centrifugal tendencies,

with individuals and departments straining to pursue different paths toward

functional autonomy. As a sequel, loyalty of managers today is generally more

toward their own specialisation or department than to the organisation. Within the

departments there may be a high degree of homogeneity and commitment to the

functional tasks but the more such homogeneity and commitment the greater the

problems in achieving integration between and among departments.

Such problems accumulate and aggravate in situations where allocation of different

objectives, targets and resources to departments caused perceptual difficulties and

misunderstanding. Sometimes the reactive approaches of top management may '

reinforce the centrifugal tendencies and quest for functional autonomy than promote

what is known in current management literature as "superordinate goals" that

promote and preserve awareness of an overriding organisational objective. For

example, in one organisation the Chairman of a company issued directives to plant

managements that they should stop overtime payments with immediate effect. Three

months later, when the Chairman noticed that overtime is still being paid in some

departments he issued another directive, this time to the finance department, not to

make overtime payments even if the time managers authorise such payments. This

new directive strained the relations between finance and production departments.

When each of the several departments in an organisation have different objectives to

follow, some of them at least may conflict with those of other departments in the day

to day operations. The vigorous pursuit of sectional objectives continues if reward

systems encourage such behaviour.


Processes

70

The conflict between sales and production in a British company with six sales

departments and 18 different plants was studied by A.J.M. Sykes and J. Bates. There

was constant conflict between the production side, which wanted to limit the range of

products in order to increase the volume of output for each one and reduce unit costs,

and the sales department, which sought to force production to comply with the

consumer's preferences regardless of the merits of standardisation. Among different

sales departments also there was conflict with each department competing for earliest

possible delivery date for its customers disregarding the system of priorities laid

down by the company. The company intended to give priority to export orders as also

to certain large and important customers. The sales clerks had been recruited from

production and they were able to organise preferential treatment for their òwn'

customers through informal deals with the production staff.

To overcome the above problems, the company had set up a Sales Organisation

Liaison Department (SOLD) between sales and production, as shown in Fig. I.

SOLD's main functions were to secure information and production capacity and sales

requirements, to formulate a comprehensive price policy, and to maintain statistics,

producing reports for the Chairman and the Board. Detailed instructions were drawn

up for how SOLD was to operate. For instance,. orders to plants are to be allocated

based on Plant's capacity to meet delivery schedules as required by customers.

Establishing a new department for coordination and laying down new procedures

helped to achieve inter-departmental coordination.

Figure I: An Example of Coordination between Sales and Promotion Departments

The communication system before SOLD

Source: Sykes, AJM and Bates, J (1962), `Study of conflict between formal company policy

and the interests of informal groups'. Sociological Review, November, pp. 313-327.


Coordination

71

16.8 WARNINGS ON INTERDEPARTMENTAL

CONFLICT Common warning signs of interdepartmental conflict include the following:

a) Persistent conflict between departments: When the same matters of conflict

keep recurring between or among departments, conflict becomes embedded and

persistent. If this is not diagnosed and dealt early enough, the departments

involved start accepting it as normal and the outcomes arising out of such

conflict tend to he taken for granted.

b) Proliferation of committees: While committees are constituted in organisations

to bring about effective coordination on important issues affecting more than one

department, their proliferation may paradoxically reveal the basic weakness in

the organisation, viz., lack of coordination. Proliferation of coordination

committees fudge inter-departmental disputes and delay the resolution of inter-

departmental conflict.

c) Overloading of top management: One common tendency among departmental

heads is to expect the general manager or the chief executive to intervene in

matters requiring coordination between departments. If issues are not resolved

often enough by departmental heads among themselves, the top management will

be preoccupied more with such matters than deal with their main function of

policy, planning and relationships with important constituents outside the

organisation. Top management overload is another sign of inadequate

coordination.

d) The ritual of `red tape': Coordination can take place through use of formal

procedures. For example, the procedure may require that the two concerned

departments should consult each other on certain specified matters. But managers

may not follow this or take it seriously. When procedures are not followed or cut

short, problems may aggravate. The purpose of adhering to procedures is not to.

perpetuate the red tape as a ritual. Where procedures are redundant or

inappropriate, they need to be modified, than being ignored.

e) Empire-building: Once coordination is provided at a level higher than the

departments, the persons performing the role of coordinators may like to

perpetuate the institution of coordination and strengthen their role by consciously

endeavouring to avoid direct cooperation and coordination among departments.

Where coordination seeks to monopolise and block initiatives at departmental

level to achieve harmony in goals and actions at peer level, the writing on the

wall is clear.

f) Complaints from constituents: Lack of inter-departmental coordination leads to

unsatisfactory performance and affect the quality of service and relations

between the organisation and its constituents like the customers, suppliers,

Government etc. When different departments of an organisation provide

conflicting information, it affects the credibility of the organisation.

A simple exercise which can help to pinpoint the areas of difficulty is to request the

managers and members of the units to complete a form of the kind shown in Figure

II. This particular design was originally developed for use in an investigation of an

airlines, and Figure II gives an example of a completed form in which a respondent

has scored the relationships shown. In his perception, coordination between Flight

operations and In-Flight services is posing serious problems. The form, however, can

be adapted to suit any type of organisation. Analysis of the response helps to

understand where there are shared perceptions and where problems of coordination

exist and whether there is a large measure of agreement across the organisation on

the location of the problematic horizontal working relations. If respondents are also

asked to give examples of the performance problems/failings arising from the lack of

coordination, the data may provide a useful basis to work toward resolving problems

and achieving effective coordination.

Activity B

Adapt the format given in Figure II to suit your organisation. All that you have to do

is to replace the names of operating units in the Figure with those in your

organisation. Use the same pattern for scoring of relationships. Select the statement

which you feel is most descriptive of relations between each of the units, even if you

are not directly involved in them.


Processes

72


Coordination

73

16.9 APPROACHES TO COORDINATION

Interdepartmental cooperation and coordination are imperative for the success of any

organisation. Coordination is easy, if the degree of differentiation among different

departments is less. Successful companies evolve effective mechanisms and

procedures to strike a balance between the requisite degree of differentiation and

requisite degree of inter-dependence among departments/functions.

James D. Thompson classified internal interdependence of work units/functions into

three types: Pooled indirect interdependence, sequential (one-way) inter-dependence

and reciprocal (two-way) interdependence as shown in Fig, III.

Pooled Indirect Interdependence is a situation where the activities of different

departments or divisions are not directly dependent on each other. For example, as

shown in Fig III the advertising department is essentially independent from shipping

and receiving department. Yet, they are inter-dependent in the sense that each is part

of the same enterprise. Failure of either could threaten the entire company and thus

other departments. Each department makes a discrete contribution to the organisation

and is, in turn, supported by it. The degree of coordination required here is minimum.

In cases where the outputs from one department become the inputs for the other,

sequential (one-way) interdependence exists. This type of interdependence occurs in

process industries. The example shown in Panel B of Fig. III is that of a brewery.

Here greater degree of coordination is required in the sequence in which the process

occurs.

Figure III: Types of Internal Interdependence

Source: Bedeian, A.G. 1986, Management, Dryden Press : New York

Reciprocal (two-way) interdependence occurs when output from one becomes input

for the other and vice-versa. Such two-way interdependence occurs between

maintenance and operations units. The example shown here (Panel C of Fig. III) is

that of an airline. Here close coordination is needed because problems in either will

be ' quickly felt by the other.

James Thompson lists three main categories of integrative mechanisms to achieve

coordination:

a) Integration through. standardisation. This involves establishing rules or procedures

that channel the actions of each job, holder or department into a direction

consistent with the actions of others.


Processes

74

• • •

b) Plans and schedules can be established to integrate the actions of separate units.

Integration through planning is somewhat more flexible than standardisation in

that the plans can be modified quickly.

c) Integration can also occur through "mutual adjustment" This involves

transmission of information directly between people and the mutual adjustment

of their actions in the light of that information.

The traditional bureaucratic approach which is common to most of our organisations

relies heavily on coordination through standardisation and planning. Three

mechanisms are available for the purpose. Firstly, an elaborate system of rules and

procedures is worked out to deal with recurrent problems. Secondly, non-routine

problems are handled by referring up to the hierarchy. Where matters\of policy and

procedure require some deliberation, committee meetings are held. These committee

meetings are scheduled at regular intervals in stable conditions. They ate also held at

short notice, if the need arises.

The advantage of a bureaucratic system is that it operates smoothly and effectively in

normal and predictable conditions. But it is inadequate to meet the requirements of an

organisation in an ever changing turbulent environment. Often managers complain,

"If we had to go through the formal channels, we would never be able to get things

done on time". This could well be an exaggeration. Carefully structured bureaucratic

systems of formal coordination minimise the dependence on informal systems. There

is need for a balance rather than excessive reliance on formal or the informal system.

John Child lists the various forms of coordination through lateral relationships as

below in order of increasing sophistication, difficulty in design and overhead cost.

Usually managements adopt the more sophisticated mechanisms as additions to

rather than simply substitutes for those mentioned higher up the list:

a) Bring about direct contact between managers or employees who share a problem.

b) If departments are required to have a substantial amount of contact, one or more

of their staff will have special responsibility to liaise with their counterparts in

the other departments.

c) In case of special situations or problems where several departments need to

conflict until the matter is resolved, temporary task forces would be set up to deal

with it, with members from those departments.

d) If such inter-departmental problems recur, permanently constituted task forces or

committees provide the coordination.

e) If lateral relationships become a problem, a coordinating department such as the

SOLD discussed above may be created to perform the task of coordinating.

f) Another method of coordination is through creation of product managers in

multi-product organisations with overall, responsibility to coordinate operations

required to market, develop, produce and service a product.

g) The most elaborate method is to establish a matrix organisation. Here, an attempt

is made to combine integration of personnel within functionally specialised

departments with their integration around a common contribution to products.

Van de Ven et al discuss three principal modes of coordination :

Impersonal mode, i.e., coordination through setting programmes and procedures

Personal mode, i.e., coordination through feedback

Group mode, i.e., committee, task force, meetings, etc.

The choice of the modes is dependent upon conditions of certainty, problems of inter-

dependence and size of work units (in terms of number employed). As uncertainty

increases, group mode becomes appropriate since coordination requires discussions

at lateral levels in a hierarchy. As inter-dependence increases, there is greater need

for personal and group modes. As the organisation grows large and complex, the

structure needs to be more formal with greater stress on impersonal mode.


Coordination

75

Whatever be the approach, wherever the organisation chooses to vest a manager in

a coordination role, it should ensure that he is given proper authority. Only then can

the exercise influence meaningfully over departmental heads. There should be

clarity about the role, responsibilities, authority and accountability. The

coordinators should be non-controversial and acceptable to the departments or

groups they are called upon to coordinate. Coordinators should have the resources

and staff.

For effective inter-functional coordination and integration of departments with

different goals and criteria of performance, there is need for a climate of openness

and trust, the inter-personal relationships among employees, and the careful

cultivation of open confrontation for resolving conflict through a process of mutual

adjustment than aggression. Before inter-functional conflict reaches a point where it

affects organisational performance, organisations should initiate such organisation

development programmes as would promote teamwork and cooperation. The

people in the organisation need to realise that, "united we stand, divided we fall".

This can occur, not so much by zealously cultivating narrow loyalties to one's

function and specialisation, but by developing superordinate goals for the entire

organisation.

16.10 SUMMARY

We observed that delegation is one of the most important skills a manager must

possess. It has three elements: responsibility, authority and accountability. There is

need for balancing formal and informal delegation and the latter should reinforce

the former. The key problems in delegation include: what, how and how far to

delegate? It is important to deal with employee resistance to delegation through

counselling and guidance. We observed the distinction between delegation,

decentralisation and centralisation. We also noted the factors influencing

centralisation and decentralisation and the approach to decentralisation.

In the latter part of the unit, we have examined the problem of inter-functional

coordination, analysed the warning signs of conflict and studied the various

approaches to coordination.


1. Prepare a job description for your boss, yourself and your subordinate. See

what part of the job of your boss can be delegated to you and how much of your job

you can delegate to your subordinate. Also discuss the why and how of it.

2. What are the merits and prerequisites of delegation.

3. Give an example each to illustrate the following statements: Accountability is

indivisible. Delegation is not the same as decentralisation.

4. Discuss the importance of coordination. Give one example each (other than

those mentioned in the text) of the three types of internal inter-dependence among

work units.

5. What are the warning signs of lack of coordination? Give one example each.

6. Give four examples of different forms/modes of coordination.

16.12 KEY WORDS

Accountability: Obligation to account for, and report upon the discharge of

responsibility and/or use of authority.

Authority: Powers and rights entrusted to enable performance of task assigned.

Centralisation: Concentration of authority at higher levels of management.

Coordination: Linking or relating various parts and activities of an organisation to

one another.


Processes

76

Delegation: Entrustment of responsibility and authority from one person to another.

Decentralisation: Systematic delegation of authority in an organisation-wide

context.

Profit Centre: A work unit (department or division) which is held accountable for

the profit it earns and the loss it sustains.

Responsibility: Activities which must be performed to carry out the task assigned.


A l l e n , L.A. 1958. Management and Organisation, McGraw-Hill: Auckland.

Bedeian, A.G. 1986. Management, Dryden Press: New York.

Child, J. 1984. Organisation : A Guide to Problems and Practice, Harper & Row:

London.

Pugh, D. 1979. Effective Coordination in Organisation, Advanced Management

Journal, Winter.

Sykes, A.J.M. and Bates J., 1962. Study of Conflict Between Formal Company

Policy and the Interest of Informal Groups, Sociological Review, November.

Thompson, J.D. 1967. Organisations in Action, McGraw-Hill: New York.

Van De Ven, A.H. et al. 1976. "Determinants of Coordination Modes within

Organisations", American Sociological Reviews, April.

Walker, A.H. and Lorsch, J.W. 1968. "Organisational Choice: Product vs.

Function. Harvard Business Review, November-December.

Analysing Interpersonal Relations

UNIT 17 ANALYSING INTERPERSONAL

RELATIONS

Objectives

After studying this unit, you should be able to:

• appreciate the need for interpersonal competence

• understand how the self-concept operates and is protected

• understand how interpersonal needs, orientations and attractions affect behaviour

• understand how an interpersonal relationship is created, developed and

maintained

• develop a set of interpersonal skills

Structure

17.1 Introduction

17.2 Understanding Determinants of Interpersonal Behaviour

17.3 Developing Interpersonal Relationship

17.4 Developing Interpersonal Skills

17.5 Summary



17.1 INTRODUCTION

Think about yesterday. Out of the total number of hours while you were awake, how

much time did you spend all by yourself with nobody around to talk to or deal with?

How much time did you spend in a "dyadic" relationship, that is, with another

person? How much time did you devote in a small group upto eight persons? Finally,

how much time did you interact with a large group?

Chances are high, that most of your daily time is spent in some sort of interpersonal

situation-rather than all by yourself or being just a member of a large group. Most of

your daily experiences involve interactions with other human beings. Some such

experiences have been quite joyful resulting into relationships which have flourished

overtime. Some experiences have hurt you, upset you, resulting in relationships

which have remained stagnant or have worsened or have even been abandoned.

Understanding how and why these have happened to you will help you develop and

improve your relationships with others. You' are likely to feel more competent in

interpersonal situations and be happier.

Your "interpersonal competence" refers to the degree to which you are accurately

aware of your impact on others and of the impact of others on you. It is your ability

to engage in any mutually helpful relationships. It enables you to achieve your

personal goals as well as task goals in the organisations where you are a member.

What are the effects of your interpersonal competence on your managerial

behaviour? Interpersonally incompetent managers create an organisational

environment in which members act very defensively to protect their own interests.

Since everybody acts defensively in the organisation, where roles and relationships

are basically interdependent, neither the personal goals of the members, nor the task

goals can be fully realised. Problems are not confronted and are kept hidden from

each other for fear that exploring the problems will only aggravate the situation. In

course, of time, issues which were avoided and swept under the rug assume gigantic

proportions and overwhelm the members. On the other hand, interpersonally

competent managers allow their subordinates to challenge their views and to question

the organisation's norms, policies, rules and objectives. When these kinds of

behaviours are tolerated, people are likely to discover problems and commit

themselves to their solutions. Organisational effectiveness increases. 5

6

Behavioral Dynamics

Your role in the organisation can be viewed as a central role surrounded by at least

three other types of roles: Superiors, Colleagues and Subordinates.

Besides these three types of roles, you may have to interact with a lot of other people

from different positions: consumers, suppliers, people from regulatory agencies,

general public, etc. Interactions with different interest-groups demand different type

of specific skills and competencies. Possession and understanding of these skills may

not guarantee successful human relations, but it can increase your interpersonal

sensitivity and help you take appropriate action to improve relationships. But

remember: any attempt to improve interpersonal competence must begin with

knowing oneself more accurately.

Activity A

Check your understanding of the concept of "interpersonal competence" by indicating

whether the following statements are True (T) or False (F).

An interpersonally competent manager:

i. is able to engage in any mutually helpful relationship

ii. achieves personal goals but not the task goals of the organisation where he is a

member

iii. is more accurately aware of his impact on others and others' impact on him,

iv. creates an environment in which members act very defensively to protect their

own interests

v. allows subordinates to challenge his views and to question the organisation's

norms, policies, rules and objectives

Answers: (i) T, (ii) F, (iii) T, (iv) F, (v) T

17.2 UNDERSTANDING THE DETERMINANTS OF

INTERPERSONAL BEHAVIOUR

Self-Concept: What am I?

Mankind is unique because only a human being has the capacity for thinking about hi

or her behaviour and appearance. Each person has an attitude toward himself or

herself and this attitude comprises the self or self-concept. The self-concept has three

aspects-beliefs, feelings and behaviours. The belief component represents the content

of the self. This is illustrated by such thoughts as "I am intelligent, sociable, sincere,

overweight" etc. The feeling component about one's self is reflected in feelings of

self-worth or in general as Ì'm O.K.' or Ì'm not O.K.' Finally, the behavioural

component is the tendency to act toward one's self in a self-deprecating c self-

enhancing manner.

Your self-concept is a reflection of all your past experiences with other persons and

includes characteristics which distinguish you from others. Once your self-concept is

established and specific patterns of behaviour are adopted, it tends to resist

change.This resistance to change also gives you a degree of stability that prevents

you from regarding yourself as worthless at one moment and worthy at the next. As

your activities are organised and integrated in relation to your self-concept, you can

expect to develop a relatively consistent life-style. Also, you achieve a stable

interpersonal environment by maintaining a consistent relationship between your

self-concept and your beliefs about how others behave and feel toward you with

regard to your self-concept. In order to maintain your interpersonal environment and

to maximise congruence or harmony, you (like any other individual) actively use

certain mechanisms to stabilise interactions:

7


1. Misperception: When the actual expectations of others are not congruent with

your self-concept or behaviour, you may simply misperceive how others see you.

2. Selective Interaction: You may choose to interact with those persons with

whom you can most readily establish a congruent state.

3. Selective Evaluation of the Other Person: You maximise congruency by

favourably evaluating those who behave congruently towards you and devaluate

those who do not.

4. Selective Evaluation of Self: You maximise congruency by altering the values

placed on various aspects of your self-concept so that the aspects that are in

agreement with the perception of your own behaviour and those of others arc

most highly evaluated.

5. Response Evocation: You, intentionally or unintentionally, behave in a way that

results in others' behaving toward you in a congruent fashion. A person in

interaction controls the cues provided to others to ensure that he or she will be

categorised in certain ways and not in any unexpected way.

The mechanisms, mentioned above, are some of the means used by any person to

protect one's self-concept and maintain an interpersonal environment.

Interpersonal Needs: What do you want from me?

People need people, but for what? Schutz (1966) maintains that there are three

interpersonal needs-inclusion, control and affection-that cause one, to establish and

maintain relations with others. These needs are defined as follows:

1 Inclusion-the need for interaction and association.

2 Control --the need for control and power.

3 Affection-the need for love and affection.

Individuals differ, however, in the strength of their interpersonal needs.

For each interpersonal need, there are two behavioural aspects--expressed and

wanted. Expressed behaviour is the behaviour that we initiate toward others.,

whereas wanted behaviour is the behaviour we want or prefer from others toward us.

Compatibility is a property of a relationship between two or more persons that leads

to the mutual satisfaction of interpersonal needs and harmonious coexistence. If what

is wanted and what is expressed is equal for both interacting persons, mutual needs

are satisfied. For example, those who wish to dominate and control activities, work

well with those who want to be controlled or directed. However, if both parties want

to dominate, some degree of conflict may be expected.

When you compare these interpersonal needs with self-concept, you will find that the

need for inclusion is to feel that the self is significant and worthwhile; for control; the

need is to feel one's self as a competent and responsible person; for affection, the

need is to feel that self is a lovable person.

8

Behavioral Dynamics

Activity B

Write eighteen simple sentences about yourself starting with "I am" or "I want others

to," or "I like" Write these sentences as frankly and spontaneously as possible

without exercising much caution. Analyse the sentences yourself to determine your

self-concept and interpersonal needs. 'You may find some of the sentences cannot be

put into any of the categories we have discussed so far.

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Interpersonal Orientations: How do you influence me?

Individuals vary greatly in how they relate to and influence others. Three basic types

of persons have been identified-the tough battler, the friendly helper, and the

objective thinker. These three styles and associated behaviours are outlined in Chart

1.

The interpersonal orientations are shown in terms of extremes, but they are typical

descriptions of familiar behaviour. Many people are more oriented to one style than

another and feel more comfortable with its associated behaviours. While one's style is

related to his or her personal needs and self-concept, a style can be overdone and

distorted. Each style reflects behaviour that, in varying degrees, is ineffective in some

situations.

The Tough Battler would relate better to others, if he or she were more sensitive to

others, could accept his or her own inevitable dependence on others, and recognise

that some situations will not yield to pressure. The Friendly Helper would be more

satisfied if he or she could stand up for his or her own interests and face conflict.

Like-wise, the Objective Thinker could relate to others more effectively, if he or she

were more aware and accepting of his or her own feelings and those of others. One

does not have to assume that his or her behaviour is fixed or impossible to control.

Chart 1

Three Interpersonal Orientations and Associated Behaviours

Activity C

9


Draw an equilateral triangle and name three vertices with three interpersonal

orientations. Note where you think you are and put a dot at that space within the

triangle which will depict your position. Get the opinion of a close friend and ask'

him to place you within the triangle. Do you agree on his assessment of your

interpersonal orientation? Explore, with him, the differences in perception.

……………………………………………..………………………………………

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……………………………………………..………………………………………Interpersonal Attraction: Why do we like each other?

You are not passive in your interpersonal interactions with others but seek to

structure these relationships. You will choose to interact with others with whom you

can most readily establish a harmonious relationship. For example, if you regard

yourself as very intelligent, you will interact with others who respect your

intelligence or allow you to use it. By choosing such persons as friends, an important

and durable source of harmonious interactions is created. So, remember: people

interact more frequently with those who are perceived as confirming their self-

concept to the greatest extent.

The greater the importance and common consequences of an "object" for two people,

the greater the attraction between both persons. An "object" may refer to any focus of

perception-including physical objects, symbols, the other person's self-concept or to

one's own self-concept. This relationship is depicted in Figure I.

Figure I: Factors and Dynamics of Interpersonal Attraction

10

Behavioral Dynamics

The attraction of 'A' towards `B' is affected by the similarity between A's attitude

towards `X' and his or her perception of B's attitude toward `X'. Moreover, A's own

attitude towards `X' and his or her perception of B's attitude are influenced by the

degree to which he or she is attracted to `B'. For example, assume that À', who is

attracted to `B', discovers a difference between A's and B's attitudes towards their

common supervisor `X'. Assume that À' likes the supervisor but B' does not and

holds many unfavourable views about him. Since À' is attracted to `B', even while

holding divergent views, a strain is created that must be resolved. Return to a state of

balance may take several forms:

1. ‘A shift in A's perception of B's attitude may occur. À' may decide that he or she

was mistaken in attributing to `B' a negative attitude towards the supervisor. If

`B' actually does have a negative attitude, this would be a misperception.

2. ‘A' might change his or her own attitude in the direction of `B' and develop a

negative attitude towards the supervisor (X)..

3. ‘A' might try to convince `B' that `B'' is mistaken about the supervisor. If `B' is

attracted to À' and is also experiencing a strain, `B' might be susceptible to such

persuasion.

4. ‘A' might restore balance to the relationship by reducing his or her attraction

towards `B'.

These actions indicate how people seek to validate their attitudes by seeking

agreement with others-consensual validation.

When a group begins to interact and acquire information of other's views and

attitudes, bonds of attraction form most strongly between those who hold similar

views toward things that are important and relevant to both. Also, a person likes

others who have the same feeling toward him or her as that person has toward

himself or herself. This reinforces one's self-concept and facilitates interpersonal

relations.

Activity D

Recall a situation where you had differences of attitude with your very close friend

about somebody whom both of you knows well. How was the difference in attitude

reduced? Reflect on the process of returning to the state of balance and prepare a

small introspective note.

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Activity E

Select three to four close friends with whom' you are mutually attracted. Prepare a list

of similarities and differences of values, attitudes, needs and expectations between

you and your friends. How does the list look like? Do similarities outweigh

differences or the way round?

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11


17.3 DEVELOPINGINTERPERSONAL

RELATIONSHIP

The development of successful working relationships takes time. No one can

cultivate such a relationship with another person without going through a long

arduous process that usually takes months or years to develop. The development of a

working relationship occurs in the following sequences:

1. The initial contact produces a set of impressions and attitudes in each towards the

other. A favourable mutual impression is needed to develop a long-term

relationship.

2. A positive impression opens the door for a long-term working relationship.

When this occurs, the interacting parties develop a set of mutually agreeable

expectations regarding their roles, performance and relationships.

3. The interacting parties make continuous attempts to meet each other's

expectations. Failure to carry out this psychological contract will probably

terminate the relationship.

4. Mutual trust and influence develop as a result of meeting the psychological

contract, and these ensure the continuation of the relationship.

In this section, we are going to discuss, in brief, the four stages of developing

interpersonal relationship:

1. Forming first impressions

2. Developing mutual expectations

3. Honouring psychological contracts

4. Developing trust and influence.

Forming First Impressions

First impressions, though often inaccurate, are lasting impressions. First impressions

are lasting because they influence the way in which people see subsequent data about

the perceived object or person. So, whether or not first impressions are correct, it is

important for us to make favourable impressions on other people. Initial impressions

do not guarantee long-term relationships, but they are essential for entering into

enduring relationship with others. Many studies have shown that much of the ground-

work for subsequent relationships with others is laid in the very first stage of

socialisation.

The first stage of socialisation has a significant implication for those who are looking

for jobs. When an organisation searches for a new manager, it will probably contact

between 10 to 40 potential candidates. Of these, it will probably interview between

three to eight people, but only one will be selected for the position. What factors help

the employer to narrow down the list? The initial selection is probably based on

substantive qualities such as educational achievement, job experience and

specialisation, references, etc. as described in the resume, But the next selection most

likely results from the impression the candidates make during the job interview.

Image consultants list the following qualities which help make a good first

impression (Thompson, 1977):

1. Poise: One should maintain composure by being diplomatic and personable.

Nervousness disturbs one's poise.

2. Articulation: One should speak naturally and fluently, use proper language and

add deep tones in the voice to create an impression of maturity.

3. Conservative Dress: Conservative dress in classic styles are appropriate for a

business engagement such as job interview. Extremes in fashion should be

avoided.

4. Positive Attitude: Without being a naive optimist, one should show a positive

outlook towards life, for people generally prefer a prudent optimist to a pessimist.

5. Knowledgeability: Learning something about the organisation and its products,

> services and people before an interview demonstrates one's interest.

12

Behavioral Dynamics

6. Thoughtfulness: One should be alert and responsive, yet weigh each question

before responding. A hasty response can be seen as indicative of immaturity or

lack of wisdom.

7. Self-confidence: In order to make other people have confidence in him or her,

the person needs to appear self-confident. An erect posture, head held high and

an assertive tone of voice can help show self-confidence with requisite humility.

Remember that in forming first impressions, your non-verbal behaviour plays as

important a role as your verbal behaviour. Read the theme paper of transactional

analysis and you will appreciate that the body-language associated with different

"ego-states" (like Nurturing Parent, Adult, Adapted Child and Natural Child) play a

very important part in the process of exchange of positive "strokes" to each other.

Developing Mutual Expectations

When people are mutually impressed, they are more likely to enter into a long-term

relationship.' When this happens, they develop certain expectations about each other.

In work organisations, managers may expect new employees to be competent,

productive, reliable and loyal and to conform to organisational norms. New

employees, on the other hand, expect their superiors to be fair, supportive and

considerate of their needs.

Many of these expectations are unwritten and unspoken. People usually do not have

clear ideas about what they expect from other people or from organisations,

especially at the beginning of a relationship. Initial expectations are usually very

general and tend to be unrealistic. Unrealistic expectations often develop because

people promise more than they can deliver at the initial stage in order to impress the

other party.

Parties must go beyond the stage of establishing general expectations in order to

determine whether or not the relationship is satisfactory. Unless they work out more

realistic expectations, the relationship becomes superficial and less meaningful. The

process of working out mutual expectations involves a series of exchanges and

adjustments to each other's expectations.

A set of mutual expectations that is worked out. and understood by the parties is

called a psychological contract; it governs the relationships between them in day-to-

day interactions. Although this contract is neither formally stated nor legally binding,

it serves as the basis for evaluating the quality of the relationship.

Activity F

What is the nature of "psychological contract" between you and another person (your

employer or your friend or your life partner)? What do you expect the other party to

do? What do you believe the other party expects you to, do? Find out the areas of

expectations where you think both the parties mutually but tacitly agree.

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Honouring Psychological Contracts

An effective interpersonal or work relationship cannot develop and be maintained

unless the participants are willing to honour their psychological contracts. Each party

expects the other to be faithful in the relationship, not to take arbitrary actions and to

13


be honest with him or her. There will, of course, be times when some of these

expectations cannot be fully satisfied. But when this happens, each party must be

reassured that the other is acting in good faith.

What do people expect from others in working relationships? In one study (Gabarro,

1978); executives expected three things from their colleagues: reliable character,

professional competence and good judgment.

The character-based expectations include:

1. Integrity: Maintaining personal and moral honesty in the relationship.

2. Motive: Having good intentions and acting in good faith.

3. Consistency: Showing consistency in behaviour.

4. Openness: Levelling and being honest with another person.

5. Discretion: Maintaining confidences.

The competence-based expectations include:

1. Technical competence: Having the ability to perform the assigned task.

2. Interpersonal competence: Being able to maintain effective interpersonal

relationships.

The judgment-based expectations include:

1. Business sense: Making good business judgment.

2. Interpersonal judgment: Making an accurate perceptual judgment of other

people.

Each of us has a minimum acceptable level of satisfaction. If the actual fulfilment of

expectations is below that level, the situation will be viewed a* a violation of the

contract. When this happens the affected member will send out signals of

dissatisfaction in the form of joking, complaining or showing anger (sometimes

through withdrawal). If these signals are received and honoured by the other person,

the relationship can be restored or the contract may be renegotiated. Otherwise, the

association will suffer chronic discontent, strife, alienation and eventual termination.

Activity G

Think of a situation where the other party violated the "psychological

contract" you had with him or her. In what way did you send your signal of

dissatisfaction? What happened to your signals?

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Developing Trust and Influence

The result of meeting the psychological contract is an increased level of trust and

influence. When the parties to the contract are able to meet their mutual expectations,

the relationship produces mutual trust and favourable sentiment. The more

satisfactory the association becomes, the greater the influence the parties have on

each other. Since the relationship is fulfilling, the parties will continually rely on it to

satisfy their needs. This dependency permits them to exert influence on each other.

The increased level of influence enhances each party's ability to affect the behaviour

and thinking of the other. When a person is able to influence others, the person

14

Behavioral Dynamics

becomes more effective in performing a task. The person's effectiveness is especially

increased when the task requires a high degree of interaction with other people, for

the influential person is capable of enlisting the necessary support and cooperation

from others.

17.4 DEVELOPING INTERPERSONAL SKILLS

The quality of interpersonal relationships is largely affected by the way the parties

relate to each other. How we relate to another person reflects our own personality. As

you have seen earlier, some people have a greater desire to maintain close -

relationships, others are relatively insensitive. But the ability to create, develop and

maintain such relationships is not inborn. More often than not, this ability involves

the way a person listens, questions, cares and responds to others. In order to develop

a close and binding relationship, parties must expose themselves to each other so they

can really get to know each other. Unless they know each other well, they cannot

develop a trusting relationship.

Increasing Interpersonal Awareness: The Johari Window

The Johari Window is a conceptual model for studying interpersonal awareness. It

was developed by Joseph Luft and Harry Ingham (the name Johari combines their

first names). It is a schematic model that shows how people expose themselves to

others and receive feedback from others in their interpersonal relationships. As

shown in Figure II, the Johari Window has four parts: Arena, Blindspot, Closed and

Dark. Arena represents the "Public self" that is known to the self and others. The

Blindspot area is known to others, but not to the self. The Closed area is the "private

self" which is known to the self, but not to others. The Dark area is neither known to

the self nor to others.

Figure II: The Johari Awareness Model of Interpersonal Process

(Source: Jay Hall, 1975)

The implication of this model is that if Arena is very small, there is very little free

and spontaneous interaction. On the other hand, the larger the Arena, the greater the

chance for participants in any relationship to make correct perceptual judgments

about each other. This accurate perceptual judgment helps them to develop realistic. .

mutual expectations. Meeting these expectations increases their level of trust and

15


influence, and it helps them maintain a mutually satisfying relationship. As. Arena

expands, the closed area or private self shrinks and it becomes less necessary to hide

or deny things one knows or feels. The Blind spot takes longer to reduce because self

concept protection mechanisms are involved.

Arena can be expanded by means of self-disclosure and feedback. These two variables

are shown as two large arrows in the figure and range from less to more. Self-disclosure

means revealing oneself to another person and sharing one's own "feelings, emotions,

facts and knowledge with that individual. Self-disclosure is an act of showing respect for,

and sharing intimacy with another person. Such an act requires trust in another person

and is likely to encourage the other person to follow suit. But self-disclosure involves

both rewards and costs. Being open (more self-disclosure) offers the possibility of self-

understanding, growth and better interpersonal adjustments. On the other hand, when we

disclose ourselves to another, we are taking the risk of being rejected, misinterpreted or

short changed. However, unless someone takes the risk and initiates self-disclosure, the

relationship will not develop.

Feedback reduces the Blindspot area and helps us increase our self-awareness, since we

often do not know how others view us. We can guess how they see us by their reactions,

but these reactions are often not clear and likely to be misperceived. Unless we receive

feedback as to how they see us, or what kind of effects our behaviours have on them, we

are likely to be blind to their feelings and reactions.

The feedback given by others can hope to reduce Blindspot only if it has the following

characteristics (Anderson, 1970):

1. Intended to help the recipient.

2. Given directly, with real feelings and based on a foundation of trust between the

giver and the receiver.

3. Descriptive rather than evaluative.

4. Specific rather than general, with good, clear and preferably recent examples.,

5. Given at a time when the recipient appears to be in a condition of readiness to accept

it.

6. Checked with others to be sure that they support its validity.

7. Includes only those things that the recipient might be expected to be able to do

something about.

8. Does not include more than the recipient can handle at any particular time.

Interpersonal awareness can be increased in several ways. When you feel that something

is wrong with a relationship but the problem area cannot be identified, you may take one

of the following actions:

1. Ask the other party how the relationship is working out for him or her (i.e., solicit

feedback). Take the initiative in expressing your concerns and feelings (i.e., initiate

self-disclosure) and listen to the feedback with empathy and without any attempt to

defend. The feedback obtained may not be satisfactory but at least opens the door for

improvement.

2. Ask yourself whether you are fulfilling the psychological contract. Take stock of

your perceptions of mutual expectation and see if each of you is meeting these

expectations. Keeping in mind the characteristics of effective feedback, communicate

your concerns to your partner.

Taking Interpersonal Risks

Nothing really happens in a relationship until the participants learn to trust each other.

However, trusting another person is not simple because it involves risk of being

exploited. If the other person behaves in such a manner that it violates one's trust in him

or her, the relationship cannot continue; However, we do not know if we can trust,

another person until such an opportunity of violation of trust arises: There are a few

things a person can do to create and maintain a trusting relationship:

1. Take the initiative in self-disclosure. This can set the tone for developing and

maintaining a relationship of trust.

2. Accept another person's self-disclosure: Appreciate the other person for taking the

initiative and the risk of rejection.

3. Reciprocate another's initiative with your own self-disclosure. Failure to do so will

be interpreted by the other person's a lack of interest and will arouse the anxiety of

16

Behavioral Dynamics

possible exploitation.

4. Remember that the self-fulfilling prophecy works in an interpersonal relationship.

An initial assumption about a person has a way of proving itself. If you assume that

the other person cannot be trusted, you will find evidence to that effect. If you

assume that other person can be trusted, you are likely to experience the same.

Developing Cooperative Relationships

A relationship will be maintained and will prosper only when it satisfies the

participants' needs and expectations. In a mutually helpful relationship, the

participants tend to cooperate rather than compete in sharing limited resources or

rewards. In work organisations, people compete for limited resources-pay increases,

promotions, power and recognition. But those who want to develop mutually helpful'

relationships with others should make an effort to cooperate rather than compete in

such a situation.

However, development of a cooperative relationships is a function of three factors:

1. Shareable goal: The perception that the goal is shareable by the parties. In all

interdependent relationships, there exists at least one superordinate goal which

can be achieved only if the parties cooperate.

2. Perceived power of all parties: The perception that all parties have power

enough to use in a benevolent or a malevolent manner, depending upon their

individual choice. This factor refers to the appreciation of the fact that anybody

in a relationship has the power to help or hinder goal achievement.

3. Trust: A minimum level of trust prevailing amongst the parties that power of the

other party will not be used in a malevolent way. The present level of trust is a

product of past experience and self-fulfilling prophecy. The more trusting the

parties become, the more likely it is that they will engage in cooperative

relationships in future.

Resolving Interpersonal Problems

A close interpersonal relationship is maintained by building trust, acceptance and

support. But there are times when one party may become angry with the other for

failing to meet the psychological contract. When this occurs, the first party should

constructively confront the second. How well the two handle such an interpersonal

problem will indicate the depth of the relationship. In a shallow relationship, one

party may ignore the destructive behaviour of the other, but in a mature relationship,

however, both parties should engage in constructive confrontation in order to

improve the quality of the relationship.

Constructive confrontation is defined by Johnson (1972) as a deliberate attempt to

help another person examine the consequences of his or her behaviour. It involves

providing feedback that is useful and unthreatening to the confrontee. Keeping in

mind the characteristics of giving feedback as discussed earlier, you can improve the

effectiveness of confrontation by observing the following principles:

1. Importance of the relationship: Do not confront another person unless both

parties see the importance of the relationship and truly value it. Otherwise,

confrontation may turn into, or be perceived as, criticism.

2. Ability of the confrontee: Confront another person only when you perceive that

he or she has the ability to act on your feedback. If the confrontee cannot change

his or her behaviour, confrontation can lead to frustration.

3. Use of empathy: View the problem from the confrontee's perspective. You may

even change your perception of the problem as a result of this empathy.

4. Use of "I" language: Use "I" language, such as the words "I", "Me" and "My"

to reduce the defensiveness of the confrontee. "You" language-use of "You" and

"Your" is more closely related to criticism and sermonising.

5. Focusing on behaviour: Focus you feedback on specific behaviours rather than

on the person. A person-directed feedback produces defensive behaviour and

resentment. We can change our behaviour but not ourselves.

6. Use of descriptive statements: Describe how you see and feel about the

situation. Evaluating in judgmental statements can easily evoke defensive

17


behaviours because such statements can be interpreted as criticism.

7. Exploring alternative behaviours: Instead of suggesting any specific solution

to the problem, help the person explore various means of overcoming it.

8. Selection of time: Since timing is important for an effective confrontation, select

a time when the confrontation is relaxed and more open to receiving feedback

without being defensive.

9. Importance of privacy: Confront the person in private. Open confrontation will

be considered a personal attack rather than a helpful encounter.

10. Use of non-verbal behaviour: Use non-verbal behaviours, which speak louder

than words, to express yourself to others. Eye contact, appropriate tone of voice

and correct posture can all add to the effectiveness of confrontation.

Activity H

Select a person with whom you would like to develop a closer relationship in a work-

related environment. Make a list of the things that you want most from this person.

After you have done this, make a list of the things that this person may want from

you. Compare what you want from the other person with what you think the other

person wants from you, and answer the following questions:

i)

ii)

iii)

iv)

v)

What are the bases for mutual attractions?

How well can or do you meet the other person's expectations?

How well does the other person meet your expectations?

If the relationship is not satisfactory, what do you think is the cause?

How can you improve the relationship?

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Activity I

Recollect a situation where you constructively confronted another party by providing

feedback effectively. Analyse what exactly did you do and how it worked. Recall

another situation where you failed to successfully confront another person. Analyse

how and why it happened that way. What would you do in case you get a second

chance?

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18

Behavioral Dynamics

……………………………………………..………………………………………

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Activity J

Transactional Analysis is a very useful framework for understanding and improving

interpersonal behaviour. Read the theme paper on Transactional Analysis and

integrate TA concepts with the concepts mentioned in this unit.

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17.5 SUMMARY

In this unit we have discussed the importance of interpersonal competence which is at

the heart of social skills required by any manager in any organisation. You have seen

that, in order to improve interpersonal competence, one must have a fairly accurate

idea about one's self-concept. Self-concept, once formed, resists changes through

several protective mechanisms.

Three types of interpersonal needs, i.e. inclusion, control and affection are related

with self-concept. But these have two behavioural aspects-expressed and wanted.

Concepts of interpersonal orientation tell us how we influence each other. In that

section you have seen that three basic types of persons have been identified-the tough

battler, the friendly helper and the objective thinker. The concept of interpersonal

attraction tells us why we like each other. You have seen that people interact more

frequently with those who are perceived as confirming their self-concept to the

greatest extent. Bonds of attraction form most strongly between those who hold

similar views towards things that are important and relevant to both.

In this unit, we have discussed four stages of development of a working relationship.

The first stage of socialisation is forming the initial impression. Initial favourable

impressions do not guarantee long-term relationships, but they are essential for

entering into enduring relationship with others. In forming first impressions, non-

verbal behaviour plays as important a role as verbal behaviour. In the second stage a

set of mutual expectations are worked out and understood by the parties. Many of

these expectations are unwritten and unspoken. Hence, these are called psychological

contracts. An effective interpersonal or work-relationship cannot develop unless the

participants are willing to honour their psychological contracts. The result of

fulfilling the psychological contracts is an increased level of trust and influence.

In the last section on `developing interpersonal skills', you have come across a

conceptual model called `Johari Window'. You have seen that interpersonal

competence can be greatly enhanced by enlarging Àrena' with the help of feedback

and self-disclosure. Several characteristics of effective feedback have been discussed.

It is also emphasised that interpersonal relations cannot flourish unless the parties are

prepared to take certain interpersonal risks. Development of cooperative relationships

19


is facilitated when there are shared goals, mutually perceived power and the

minimum level of distrust. Finally, we have discussed the principles of constructive

confrontation in resolving Interpersonal problems.


1 Explain the various aspects of self-concept. What steps will you take to achieve a

stable interpersonal environment?

2 What are the specific stages involved in developing interpersonal relationship?

3 After going through this unit, do you think that you can enrich your relationship

with others? If yes, how?


Anderson, J. 1970. `Giving and receiving feedback'. In G.W. Dawson, P.R.

Lawrence and L.E. Greiner (eds) Organisational Change and Development,

Irwin: Homewood.

Gabarro, J.J. 1978. `The development of trust influence and expectations'. In A.G.

Athos & J.J. Gabarro (eds.) Interpersonal Behaviour, Prentice Hall: Engelwood-

Cliffs.

Hall, J. 1975. Interpersonal style and the communication dilemma: Utility of Johari

Awareness Model for genotypic diagnosis'. Human Relations, October (p 716).

Johnson, D.W. 1972. Reaching Out, Prentice-Hall: Engelwood-Cliffs.

Schutz, W.C. 1966. The Interpersonal Underworld. Science and Behaviour Books:

Palo Alto.

Thompson, J.A. 1977. `The Image Doctors: A guide to the personal packaging

consultants'. MBA, September (p. 23-30).

Leadership Styles and Influence

Process

UNIT 18 LEADERSHIP STYLES AND

INFLUENCE PROCESS

Objectives


• introduce various leadership styles

• familiarise you with various theories and styles of leadership

• create an awareness that leadership is a process of shared influence on the work

group

Structure

18.1 Introduction

18.2 Leadership Styles

18.3 Leadership Styles and Leadership Theories

18.4 Leadership and Influence Process

18.5 Types of Power

18.6 Types of Leader and Power Concept

18.7 Successful Vs. Effective Leader

18.8 Summary


18.10 Key Words


18.1 INTRODUCTION

In giving the input on leadership styles and influence process to you, we presume

your main aim is to understand and improve your style of functioning as a leader.

To start with, you must have clear idea as to what is meant by leadership. Leadership

is the activity of influencing people to strive willingly for group objectives. As you

can see, this process is a function of the leader, the followers and the situation. There

may not be any particular organisation in our mind, when we talk of leadership. In

any situation where you are trying to influence the behaviour of another individual or

group, leadership is operating. Thus each one of us tries leadership. at one time or the

other, whether our activities are centred around a business, educational institution,

hospital, political organisation, Government organisation or a family. As part of this

process, one who attempts to influence the behaviour of others becomes a potential

leader and the persons he is attempting to influence are the potential followers. This

may happen irrespective of the fact that the leader may be their boss or a colleague

(associate) or a subordinate or a friend or a relative. In other words through a style of

functioning he influences attitudes and expectations, which in turn encourage or

discourage the follower's activity or achievement, enhance or diminish the follower's

commitment to the work, etc.

In our day-to-day life, we come across instances of how people are influenced by the

activities or word of a person who is trying to lead them. We always make judgments

about the leaders of our own office. In our mind, we make a difference between a

good leader and a bad one, by judging his style or way of functioning and his

influence on others. Hence, in understanding the phenomenon of leadership, we must

first understand the various styles of the leaders.

18.2 LEADERSHIP STYLES

The word style is the way in which the leader influences followers. Let us have a

look at the various studies that help us to understand the leadership styles. 21

Hawthorne Studies

22

Behavioral Dynamics

Mayo and Roethlisberger did a series of studies from 1924 to 1932 in an electricity

company, at Illinois, in USA. These studies are known as Hawthorne Studies.

One phase of these studies aimed at finding out if changes in illumination, rest period

and lunch breaks can affect the productivity of the workers. It was found to the

surprise of the researchers that less light, shorter and fewer rest periods and shorter

lunch breaks resulted in increased productivity. And once all these changes; were

eliminated and the normal working conditions were resumed, it was also seen that the

workers' productivity and the feeling of being together went up. The increase in

productivity was attributed to the attitude of workers towards each other and their

feeling of togetherness. In addition, attention paid to the workers by the researches

made them feel important which resulted in improvement in their work performance.

This is known as Hawthorne effect. These findings made Mayo and Roethlisberger

conclude that a leader has not only to plan, decide, organise, lead and control but also

consider the human element. This includes social needs of being together and being

recognised for the work interaction of the group members with each other and their

well being. A good leader ought to keep the above aspects in his style of working

with people and supervising their work.

Theory X and Y

McGregor (1960) categorised leadership styles into two broad categories having two

different beliefs and assumptions about subordinates. He called these Theory X and

Theory Y. The Theory X style of leaders believe that most people dislike work and

will avoid it wherever possible. Such leaders feel they themselves are a small but

important group, who want to lead and take responsibility, but a large majority of

people want to be directed and avoid responsibility. Therefore, this style of

leadership exercises strong controls and direction and wherever necessary punish

people if they do not do the work. If people do the work as desired, they may even

get monetary or other rewards. Theory Y leaders assume that people will work hard.

and assume responsibility if they can satisfy their personal needs and the objectives

or goals of their organisation. Such leaders do not sharply distinguish between the

leaders and the followers in contrast to Theory X style. They feel that people control

themselves within rather than being controlled by others from outside such as a

leader or a manager or a supervisor.

An effective leader needs to examine carefully his own ideas about the motivation

and behaviour of subordinates and others, as well as the situation, before adopting a

particular style of leadership.

Iowa Leadership Studies

In 1939 Lippitt and White under the direction of Lewin, did a study on three different

styles of leadership in the task performance of ten-year old boys in three groups. The

authoritarian leader of the group was very directive. He did not allow any

participation. He was concerned about the task and told the followers what to do and

how to do it. He was friendly while praising the performance of the individual

member and was impersonal while criticising the individual member. In the other

group, the democratic leader encouraged discussion with the group and allowed

participation in making decisions. He shared his leadership responsibilities with his

followers and involved them in the planning and execution of the task. The laissez-

faire leader of the third group gave complete freedom to the group and did not

provide any leadership. He did not establish any policies or procedures to do the task.

Each member was let alone. No one attempted to influence the other.

The researchers selected boys of the same intelligence level. Each group did the same

task of making paper masks or model air-planes or murals or soap carvings. The room

used by the three groups remained the same. The three group leaders assumed different

styles as they shifted every six weeks from group to group. The researchers under the

direction of Lewin, who did several studies on groups, were trying to see how different

styles of leadership could change the satisfaction, frustration-aggression levels of the

individuals. One definite finding was that nineteen out of twenty boys like the

democratic leadership style. That kind of a leader never tried to boss over them, yet

they had plenty, to do. The only boy who liked the authoritarian style of leadership

23


Process

happened to be the son of an army officer. It was also observed that seven out of ten

boys preferred the laissez-faire leader to the autocratic one as they preferred

confusion and disorder to strictness and rigidity present in the autocratic style. Boys

under the latter style exhibited more of aggressive, hostile and indifferent behaviour

as compared to their counterparts under other styles of leadership. They either

showed hostility or cracked jokes about hostility towards others. Others belonging to

the democratic style of leadership showed less aggressive and more indifferent

behaviour when brought under the autocratic style of a leader. Even under the

laissez-faire style of the leader, boys committed more aggressive acts than the ones

under the democratic style.

Of course, a study on ten year old boys in making paper masks or soap carving, etc.

cannot be compared to leader behaviour of adults with complex jobs. But like the

studies of Mayo and Roethlisberger, the studies by Lewin, Lippitt and White are a

pioneering effort in understanding leadership styles from the point of scientific

methodology. They also throw light on how different styles of leadership can produce

different complex reactions from the same or similar groups.

Michigan Studies on Leadership Styles

Likert (1961) at University of Michigan Survey Research Centre identified two major

styles of leadership orientations-employee orientation and production orientation.

The employee oriented style of the leader emphasises the relationship aspect of the

jobs of the individual. Such a leader takes interest in every one and accepts the

individuality and personal needs of the individual. He has complete confidence and

trust in all matters in his subordinates. His subordinates feel free to discuss things

about their jobs with their superior. He always asks subordinates for ideas and

opinions and always tries to make constructive use of them.

The production oriented style of the leader emphasises production and technical

aspects of the job. He looks at subordinates or employees as tools to accomplish the

goals of the organisation. Work, working condition and work methods are tried to be

understood better in his style of the leadership orientation. Likert related these

orientations to the performance of the employees. He showed that the employee

oriented style brought high-producing performance compared to production-oriented

style. Of course, the satisfaction of employees was not directly related to productivity

in Likert’s study.

Ohio State Studies on Leadership Styles

Stogdill (1957) at the Bureau of Business Research at Ohio State University initiated

‘a series of researches on leadership in 1945. He, along with his colleagues, studied

leader behaviour in numerous types of groups and situations by using a Leader

Behaviour Description Questionnaire (LBDQ). The studies were conducted on Air

Force Commanders and members of bomber crews, officers, non-commissioned

opersonnel, civilian administrators in the Navy Department, manufacturing

supervisors, executives, teachers, principals and school superintendents and leaders

of various civilian groups. They did not have any satisfactory definition of

leadership. They also did not think leadership is synonymous with `good' leadership.

The LBDQ was administered in a wide variety of situations and surprisingly two

dimensions of, leadership continually emerged from the study: one is `consideration'

and the other is ‘initiating structure’.

Consideration reflects the extent to which individuals are likely to have job,

relationship characterised by mutual respect for subordinates, ideas and consideration

of subordinates, feelings. You may like to describe it as the behaviour of the leader

indicating friendship, mutual trust, respect and warmth in the relationship between

the leader and his group members.

Initiating structure reflects the extent to which individuals are likely to define and

structure their roles and those of their subordinates towards goal attainment. In other

words, it is the behaviour of the leader which deals with the relationship between

himself and the work-group and tries to establish well-defined patterns of

organisation, channels of communication and method of procedure.

Examples of observed behaviour of the leader under consideration and initiating

structure are as follows:

24

Behavioral Dynamics

Consideration Initiating Structure

The leaders finds time to listen to group

members ( )

The leader assigns group members to

particular tasks ( )

The leader is willing to make change ( ) The leader asks the group members to

follow standard rules and

regulations ( )

The leader is friendly and approachable ( ) The leader lets group members know

what is expected of them ( )

Activity A

In the above example of items check how frequently as a leader you engage yourself

by marking A(Always), O(Occasionally) or N(Never), against each one of the items

in the box given at the right hand side of each statement. This may help you to know

your own style of leadership.

One can do this exercise by observing and judging the behaviour of the leader in a

work situation.

Scientific Manager's Style

Taylor (1911) stressed the best way of doing a job. He emphasised the importance of

having management and labour work in harmony to maximise profits. The basis of

his scientific management was technological in nature. It was felt that the best way to

increase output was to improve the techniques or methods used by workers.

Therefore, profit can be maximised by using a systematic and scientifically based

approach to the study of jobs. Taylor was not trained as a manager He relied on

scientific study of time and movement spent and used for a job to improve the

performance of the worker. According to the scientific managerial style, management

of a work organisation must be divorced from human affairs and emotions and people

have to adjust to the management and not management to the people. Once jobs are

recognised with efficiency in mind, the economic self-interest of the workers could

be satisfied through various incentive work plans such as piece rate . system of

payment, etc. The leader is assumed to be the most competent individual in planning

and organising the work of subordinates according to Taylor's principle of scientific

management.

Various studies reflecting different styles of functioning of a leader have been stated

above, which highlight how the leader simultaneously pays attention to the:

a)

b)

task to be accomplished by the group, and

needs and expectations of the group and its individual members.

Exactly how the leader goes about attending to these two functions is a matter of his

leadership style. Many theories have been suggested by the researchers regarding

which leadership style is most effective. Even the above two functions can have

different descriptions for different leaders. But in course of time every leader

develops a particular style which reflects his own ideas and perspectives on the

relative importance of task and people.

We should now consider in what ways we can enrich the understanding of various

styles of leadership by making ourselves familiar with some important theories of

leadership.

18.3 LEADERSHIP STYLES AND LEADERSHIP

THEORIES

Trait Theory

This theory as described by Kelly (1974) attempts to classify what personal

characteristics such as physical, personality and mental, are associated with

leadership success. Trait theory relies on research that relates various traits to the

success of a leader. A lengthy list of traits has been made to describe an effective

leader in terms of certain characteristics. A broad classification of six categories of

traits are given below:

1. Physical characteristics of the leader, such as age, height, weight.

25


Process

2. Background characteristics-education, social status, mobility and experience.

3. Intelligence-ability, judgment, knowledge.

4. Personality-aggressiveness, alertness, dominance, decisiveness, enthusiasm,

extroversion, independence, self-confidence, authoritarianism.

5. Task-oriented characteristics-achievement needs, responsibility, initiative,

and persistence.

6. Social characteristics-supervisory ability, cooperativeness, popularity,

prestige, tact, diplomacy.

These characteristics according to some people are considered valid indicators of

successful leaders, but if you compare leaders by various physical personality and

intelligence traits, you may find very little agreement on these. Some findings point

out to the fact that leaders are intelligent individuals. But they do not provide any

clue as to whether leaders are brighter than their followers or are as close to them in

intelligence. Again, some of the personality traits are overlapping with each other.

Therefore, you need to be cautious in stating, personality or any other characteristic

as a cause of successful leadership. You must ask the questions: Who is a successful

leader? Is he far superior physically? Is he far brighter? Is he more mature as a

person? Is he more motivated to achieve his goal? Does he have more consideration

for his followers? etc. Some of the traits may describe a successful leader but

predicting successful leaders on the basis of traits alone is not a correct approach. The

followers have a significant effect on the job accomplished by the leader. Trait theory

completely ignores the followers and the situations that also help a leader to be

successful. Secondly, we should also weigh in our own mind, which of the

objectives, `confident' or independent' or intelligent' is relatively more important in

becoming a, successful leader. You may observe one or all the above traits as

important in ' a successful leader whereas your friend may feel that an enthusiastic,

aggressive and authoritarian person is a good leader. To be more objective, traits of

the person as well as demand of the situation together determine the effectiveness of

the leader.

Group and Exchange Theories of Leadership

These theories as reported by Hollandder and Julian (1969) state that the leader

provides more benefits or regards than burden or costs for followers who help him

achieve the goal of the organisation. Thgre must be a positive exchange between the

leader and followers in order for group goals to be accomplished. The leader can give

rewards to his followers in the form of praise or pay increase or promotion for

accomplishment of the group goal or task. This has positive impact on attitudes,

satisfaction and performance of the followers. In return, they respect the leader and

give due regard for his status and esteem and believe in his heightened influence. As

you are already aware, that a leader emphasises initiating structure when followers do

not perform very well. He increases his emphasis on consideration when the

followers do a good job. In return, the perception of his followers of his being an

effective leader increases. Hence the leader and the followers mutually affect each

other.

Social Learning Theories

This theory by Bandura (1977) states that there is a continuous reciprocal interaction

between person, environment and behaviour as shown in Figure I.

Person and environment function in conjunction with the behaviour itself and

reciprocally interact to determine behaviour. A person, through his actions, produces

the environmental conditions that affect his behaviour in a reciprocal fashion. The

experience generated by behaviour also partly determines what a person becomes and

can do. This in turn affects his subsequent behaviour. The theory is called social

learning theory because, individuals learn in an environment in the process of

interacting with each other- which is a social process. You will appreciate the

application of this theory in understanding the behaviour of a leader and the

continuous reciprocal interaction between the person (leader's cognitions) and

environment (including subordinates and their needs, experiences, objectives in the

organisation, abilities, skills, energy performance, etc. known as contingencies that,

regulate their behaviour). Thus a social learning approach to leadership can be shown

in Figure II.

26

Behavioral Dynamics

Figure II: A Social Learning approach to leadership

The three aspects of this theory of leadership assume that the leader knows how his

behaviour is controlled by various needs, situations and experiences that he

undergoes. The leader works with the subordinates to discover what those needs

situations and experience. The leader and the subordinates jointly attempt to discover

ways in which they can manage their individual behaviour to produce mutually

satisfying as well as organisationally productive outcomes. In this approach, .

theleader and the subordinates have a negotiable and interactive relationship. They

are' continuously aware of how they can modify or influence each other's behaviour

by giving the rewards or holding back the performance respectively.

Managerial Grid Theory

Leaders can be oriented towards both tasks and persons. This theory by Blake and

Mouton (1978) has a popular application of both task and person orientation.

According to this theory leaders are most effective when they achieve a high and

balanced concern for people and for tasks. Each leader can be rated somewhere along

each of the axes from 1 to 9 depending on his orientation as shown in Figure III.

Figure III: Interaction between Pelrson and Task orientations

Although there can be 81 possible combinations you should try to understand the 5

types that are shown in the diagram. These will give you a basic understanding of the

theory, on which you can base your other combinations.

27


Process

1. The (9, 1) leader is primarily concerned about the task or production. He is

concerned with his responsibility to see that the work is completed. He is called a

Task-Management leader.

2. The (1, 9) leader is primarily concerned for people and only incidentally

concerned with production. The leader's major responsibility is to establish

harmonious relationships among subordinates and to provide a secure and

pleasant work atmosphere. He is called as Country Club Management leader.

3. The (1,1) leader is concerned with neither production nor people. He tries to stay

out of the way and not become involved in the conflict between the necessity for

production and the attainment of good working relationship. He is called as

Impoverish Management leader.

4. The (5,5) leader reflects a middle ground position and is called as Middle of the

Road Management leader. He seeks to compromise between high production and

employee satisfaction.

5. The (9,9) leader is extremely concerned about the task and also the people. He is

concerned to see that the work accomplishment is from committed people;

interdependence through a'common stake' in organisation; purpose leads to

relationship of trust and respect. He is called a Team Management leader.

Activity B

Read the following statements/examples and mark for yourself, the ones that are

applicable to you -as a leader of the group.

Contingency Theory of Leadership

Regarding this theory Fiedler (1967) states that a leader may become effective if the

situation is favourable in three ways. These are: good leader-member relations

showing acceptance of the leader by the group; details of the task spelled out to the

leader's position; and a great deal of authority and power is formally attributed to the

leader's position. With these three favourable situations and his style of functioning, a

leader will be effective.

When the situation is very favourable or very unfavourable to the leader, the task-

oriented leader is effective. When the situation is moderately favourable to the leader

the person oriented leader is effective.

28

Behavioral Dynamics

Example (of moderately A leader with good interpersonal relationships may

favourable situation to be developing a new policy that will have great

person-oriented leader) impact on the work group. The situation is relatively

vague but moderately favourable. The task is not

very well defined and the leader-member relation is

good. The leader is likely to be effective as he would

like to consult the members and consider their

thoughts and ideas. When the new policy gets

approved, the situation becomes more favourable to

` him.

Path-goal Leadership Theory

This theory by House (1971) states that the leader smooths out the path towards goals

and provides rewards for achieving them.

As a leader, you should understand the needs of the people and their desire to work or

behave in a way that accomplishes goals that satisfy those needs. This theory is based

on a situation of the above kind. If you know the need of the person and his desire to

work and he is able to accomplish the work, you can reward him to make him feel

happy and satisfied. In essence, you are doing three things: One, you are motivating

the members of the group by clarifying the path to personal rewards that result from

attaining work goals. You have thus `fixed' him on the job and made him see that his

performance can lead to positive or negative rewards.'Two, you have already made

the path-goal clear to the member and also told him about what the job requires. You

need not say too many things about the job to him as this may decrease his interest in

the work and deter his performance. Three, you must offer the reward to the member

of the group who actually accomplishes the task. Your reward may be a praise or

increase in the pay or promotion of the member to a higher position. Your judgment

about the desirability of the member to a higher position is crucial. Your judgment

about the desirability of the member's effort and the goal helps you to decide whether

a reward can be given.

It is very important for the leader to know every member as a person, in order to use

a style to get the best out of the member. For example, a task-oriented leader is

preferred by a highly achievement-oriented member, whereas a person-oriented

leader is preferred by a person who needs a good deal of affiliation with others.

Similarly it does good for the leader to know each situation to adjust his style of

functioning for better results. With a clear task on hand, members feel satisfied if the

. leader is supporting them. They may not show a lot of output, but they are satisfied.

On the other hand with a less clear or more vague task on hand, member show more

output, if the leader directs them to work better. The member in this situation may not

be very satisfied.

In most of the Indian work settings, it is usually observed that members are quite

dependent on the leader or the superior. They also are quite conscious of their status,

but have very little commitment to work. Singh (1980) suggests that the leader who is

task-oriented and nurtures the dependence of members on him is most effective in

dealing with such members. He or she can get the work done in his nurturant task

style from the members of his group. To a great extent, he knows characteristics of

the members' work group, that he or she utilises in making the leadership style

effective and getting the work done.

From the above discussions, it is clear that a leader is a person who has ability to

persuade others to get the work done. You must have seen a person having the title of

a leader. He may be very popular, but map not have the ability of leadership. Many

leaders try to become popular by agreeing with everyone, thus avoiding any kind of

conflict. Their influence on the subordinate or members of the work group may not

be very lasting. There are leaders, who by virtue of their ability to exercise authority

and power show better influence on members. It is therefore necessary for you to

understand the authority of a leader and his sources of power, which help him to

exercise influence on the subordinates.

29


Process

15.4 LEADERSHIP AND INFLUENCE PROCESS

Authority is the right to command and extract obedience from others. It comes from

organisation and it allows the leader to use power. Power is the ability to exercise

influence or control over others.

In the functioning of a leader the ability to guide the action of others is achieved

through his authority. Carrying out of these decisions is accomplished because of the

power of the leader. You will see the relationship between the authority and power of

a leader as we go further to understand various types of power.

15.5 TYPES OF POWER

Legitimate Power

This power comes to the leader when the organisation's authority is accepted. It

comes from the rules of the organisation. For example, parents, teachers, mana, ers,

police, etc. have legitimate power only when their authority is accepted in the

positions they hold.

Expert Power

This is the power of knowledge and skill of special kind that are important in getting

the job done. A person's professional competence or knowledge gives him the expert

power. His credibility increases. He can lead other persons to trust his judgments and

decisions, as an expert like a physicist or a lawyer or a chemist or a computer

programmer or a purchasing agent or a financial analyst. A leader himself may not be

an expert in all fields, but he can certainly take the help of experts in particular fields.

Charismatic Power

This is the power of attraction or devotion, the desire of one person to admire

another. A subordinate feels a positive attraction towards a leader by identifying

himself with the leader, or gets influenced by the leader's attractive power. This

power helps the subordinate to understand and value the leader so much that he

understands and acts according to the expectations of the boss or the leader. It helps

him to act as his own boss, and behave in ways he thinks the boss will want.

Reward Power

This power is the present or potential ability to reward for worthy behaviour. The

superior or the leader has the power to give tangible rewards such as promotion,

office space, time off from work, attractive work assignments and help to the

subordinate. Also phychological rewards like praise, appreciation, approval and

recognition can be given by the leader or the superior to the subordinate. The

subordinate has to believe that he has access to higher authorities, therefore he can

give rewards. This reward power of the leader can also increase the leader's

charismatic and legitimate power.

Coercive Power

This is the ability to threaten or punish. The leader can give tangible punishments like

dismissal, demotion, low rating, less satisfying work assignments, etc. Psychological

punishments include criticism, avoidance, disapproval, satirical remarks on the

subordinate. The reward power helps to avoid something undesirable. Self-esteem of

the subordinate increases because of reward power and decreases because of

punishment or coercive power. Even a subordinate may withdraw or break the rules

or become hostile. He may not feel attracted towards the charismatic power of the

leader and at times may ignore the leader's legitimate power. Having seen the reasons

for differences between the authority and power of the leader, you should know the

type of leaders as understood on the basis of their authority and power.

18.6 TYPES OF LEADER AND POWER CONCEPT

30

Behavioral Dynamics

Formal Leader

A formal leader is selected by the organisation. For example, a manager is a formal

leader by virtue of the authority coming from the organisation. He influences others

to help accomplish the goals of the organisation or unit. Such a leadership lasts over a

long period of time.

Informal Leader

An informal leader is chosen by the group. Thus, all managers are leaders if their

authority is accepted, but not all leaders are managers. Informal leadership is

leadership without position and may shift from one person to another. It may last for

a brief time. Most people are leaders at one time or the other and they can have

influence on others as defined by the concept of leadership itself.

The ideal leader is the one who can combine the formal and informal leadership

simultaneously within himself.

18.7 SUCCESSFUL VERSUS EFFECTIVE LEADER

As we have seen in the preceding discussions, leadership is the activity of influencing

people to strive willingly for group objectives. It is the ability to persuade others to

get something done. So the leader attempts to have some effect on the behaviour of

another, which we call attempted leadership. The response to this attempt may or

may not be successful. A basic responsibility of managers in any work organisation

is. to get the work done with and through people. The success of managers is

measured by the output or productivity of the group they lead. Therefore, we should

clearly distinguish between successful versus effective leader.

Figure IV: Successful-Unsuccessful Leadership Continuum

In the above figure, A's attempt to influence B to do a certain job can be judged

successful or unsuccessful. B does the job for the reason that A has position of power

and he controls the reward and punishment, then A's attempted leadership.is

successful.

A's style of leadership may not be compatible with B's expectation and B is made

hostile towards A and does the job only because of A's position power; then we can

say A has been successful, but not effective. B does the job because A can punish

him for not doing it or reward him for doing it. B's own needs are not being

accomplished by satisfying the goals of A (the leader) for the organisation.

On the other hand, A's attempted leadership leads to a successful response and B does

the job because he wants to do it and finds it rewarding, then we may say, A has both

position power as well as personal power. B respects A, B is consistent with ' some

personal goals and B sees personal goals as being accomplished by the job he does

for A. We can then say A's leadership is effective.

We should try to understand the difference between success and effectiveness.

Success has to do with how the individual or the group behaves. Effectiveness

describes the

internal state or predisposition of an individual or a group and is thus attitudinal in

nature.

You may have noticed that individuals who are interested in success tend to

emphasise their position power. They use close supervision of the work of their

associates. If they have to be effective, they have to use their personal power as well

as their general supervision.

31


Process

Examples of successful and effective individuals can be noticed if one understands

the underlying acceptance of the superior by the subordinate. In the examination hall,

a certain kind of teachers fear that if they leave the hall for a while the students will

indulge in copying and exchanging notes. There are yet another kind of teachers who

leave the examination hall, but the students never behave differently.

Let us work at family level which is a less formal organisation. Parents can be

successful and effective by using their position and personal power. The children

easily accept the goals of the family as their own. Parents who use position power

and a closer supervision, are likely to face a kind of revolt or disobeying attitude

among their children not accepting the goals set by the parents for the family. With

the absence of the parents, the whole house becomes topsy-turvy. This can never

happen in 'a family where parents create a good deal of trust between them and the

children by exercising their personal power of love and discipline. The children in

the absence of parents do not behave differently than if their parents were there.

Leaders are successful, but ineffective when they have a short-run influence over the

behaviour of others. They must try to be both successful and effective to have long-

term influence for leading others towards productivity and developing the

organisation as a whole. The most importantconclusion from the above discussion is

that the managers must understand their own abilities and their impact on others.

Activity C

Interview several people asking them to describe situations where someone's attempt

to influence them was successful or unsuccessful

…………………………………………………………………………………………

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18.8 SUMMARY

In this unit you have been exposed to leadership as a process of influence on others to

work willingly for group objectives. You have also come across different leadership

styles, such as Human relations style, theory X and Y styles, Authoritarian,

Democratic and Laissez-faire style, Employee-orientation and Production-

orientation styles, Consideration and Initiating Structure styles and Scientific

Managerial styles. Styles have been related to various theories of leadership such as

Trait theory, Group and Exchange theory, Social Learning theory, Managerial Grid

theory, Contingency Thoory and Path-goal theory.

In the context of leadership and influence process, a distinction was drawn

between authority and power. Five types of power such as legitimate power,

reward power, expert power, charismatic power, and coercive power were

explained. Based an the types of power, we discussed two types of leader-

formal and informal. We also attempted to distinguish between a successful

and an effective leader.


32

Behavioral Dynamics

1. What are the various ways in which you influence your colleagues and

subordinates?

2. To what extent various theories of leadership are likely to influence your

leadership styles.

3. Discuss the various types of power. Relate the concept of power to the types of

leadership. Who is an ideal leader?

4. Is there any difference between a successful and an effective leader? Discuss.

18.10 KEY WORDS

Authoritarian Style: The assumption that the power of leaders is derived from the

position they occupy and that people are innately lazy and unreliable.

Consideration: A leader's acts which imply supportive concern for the followers in a

group.

Contingency Theory: A theory that considers an organisation's objectives,

environment and leadership skills, as interacting and affecting the effectiveness of a

leader.

Democratic Style: The assumption that the power of leaders is granted by the group

they are to lead and that people can be basically self-directed and creative at work, if

properly motivated.

Employee Orientation: Stresses the relationship aspect of the job.

Group and Exchange Theories of Leadership: These theories state that the leader

provides more benefits and rewards than burdens or costs for followers who help him

achieve the goal of the organisation.

Hawthorne Effect: When worker's behaviour changes and productivity increases

because the workers become aware of their importance.

Human Relation Style: Follows from the work of Elton Mayo and his associates to

find the best technological methods to improve output by studying human relations at

interpersonal level.

Initiating Structure: Reflects the extent to which individuals are likely to define and

structure their roles and those of their subordinates towards goal attainment.

Laissez-faire Style: This style of a leader permits the members of the group to do

whatever they want to do. No policies or procedures are established.

Leadership: The ability to influence the behaviour of others. The task is to help the

group reach both organisational and personal goals.

Managerial Grid Theory: The theory suggests that each manager must be

concerned about both production (structure) and people (consideration).

Path-goal Theory: This theory defines the relationship between leader behaviour,

subordinate's work attitudes and performance as situational. The essential ingredient

of this theory is that the leader smoothes out the path to work goals and provides

rewards for achieving them.

Production Orientation: Stresses the production and the technical aspects of the

job. Employees are seen as tools to accomplish the goals of the organisation.

Style Scientific Manager: This style of the leader focuses on the needs of the

organisation and not on the needs of the individual.

Social Learning Theory: The theory deals with continuous, reciprocal interaction

among the leader (including his cognition) the environment (including

subordinates/followers and other variables) and the behaviour itself.

Theory X, Theory Y: McGregor's theory that behind every management decision,

there is a set of assumptions that a manager makes about human behaviour. The

31

33


Process

theory X manager assumes that people are lazy, dislike work, want no responsibility

and prefer to be closely directed. The theory Y manager assumes that

people seek responsibility, like to work and are committed to doing good work if

rewards are received for achievement.

Trait Theory; This theory attempts to specify which personal characteristics

(physical, personality) are associated with leadership success. Trait-theory relies on

research that relates various traits to success criteria of a leader.

Authority: The legitimate right to use assigned resources to accomplish a delegated

task or objective, the right to give orders and to extract obedience.

Charismatic Power: This power is based on followers' identification with a leader.

The leader is admired because of one or more personal traits. Followers can be

influenced because of this admiration.

Coercive Power: The power of a leader that is derived from fear. The follower

perceives the leader as a person who can punish deviant behaviour and action.

Expert Power: An individual with this type of power has some technical expertise,

skill or knowledge which is important in getting the job done.

Formal Leadership: A manager is a formal leader by virtue of authority coming

from the organisation that a formal leader is usually selected by the organisation.

Informal Leadership: An informal leader is chosen by an individual or a group.

Legitimate Power: The power comes when the organisation's authority is accepted.

It is power that stems from implicit or explicit rules.

Power: Ability to exercise influence or control over others.

Reward Power: The present or potential ability to give some reward for worthy

behaviour.

Situational Management: Skill in changing the style demands of one or more

situational elements so that managerial effectiveness increases.

Situational Manipulation: Changing the style demands of one or more situational

elements so that personal effectiveness increases.

18.11 FARTHER READINGS

Bandura, A. 1977. Social Learning Theory, Prentice-Hall: Engelwood-Cliffs.

Bass, B.M. 1960. Leadership, Psychology and Organisational Behaviour, Harper and

Brothers: New york.

Blake, R.R. and J.S. Mouton. Should You Teach There's Only One Best Way to

Manage?

Fiedler, F. E. 1967. A Theory of Leadership Effectiveness, McGraw Hill: New York.

House, R.J. 1971. A Path-Goal Theory of Leadership Effectiveness, Administrative

Science Quarterly, September, (pp 321-228).

Kelly, J. 1974. Organisational Behaviour, Rev. Ed Irwin: Homewood.

Likert, R. 1961. New Patterns of Management, McGraw-Hill: New York.

Mayo, E. 1933. The Human Problems of an Industrial Civilisation, Viking: New

York.

McGregor, D. 1960. The Human Side of Enterprise, McGraw Hill Book Company:

New York.

Roethlisberger, F.J. and W.J. Dickson, 1939. Management and the Worker, Harvard:

Cambridge.

Singh, J.B. 1980. The Nurturant Task Leader, First Edition, The Concept Publishing

House: New Delhi:

Taylor, E.W. 1909. The Principles of Scientific Management; Harper: New York.

Group Dynamics

UNIT 19 GROUP DYNAMICS

Objectives

This unit aims at developing your understanding of the Group Dynamics in work

organisations. To be more specific it will familiarise you with the

• concept of group and group dynamics

• bases of group formation

• theories of group formation

• needs groups offer to satisfy

• types of groups

• management of formal and informal groups especially with reference to

committee organisations

• ways by which one could become an effective member of a group

Structure

19.1 Introduction

19.2 Group Dynamics

19.3 What is a Group?

19.4 The Dynamics of Group Formation

19.5 Group Roles

19.6 Implications of Formal and Informal Groups for Management

19.7 Summary


19.9 Key Words


19.1 INTRODUCTION

Your main aim apparently is to understand why do individuals form groups. Let us

ask you some questions: How old were you when you first joined a group? How

many different groups do you belong to? How would you identify a group leader?

Does your behaviour change when you are with different groups? Have you ever led

a group? In what sense were you the leader? What were the results?

If on your own you start answering these questions, you will find that understanding

group behaviour and the properties of groups are essential to being both a good

manager and an effective member of groups. In some of the preceding units of

lessons in this course, you must have by now become familiar with the manager's

functions related to groups. For example, a manager spends half of his time in some

formal or informal meetings, where a group of people get together to solve problems

or make plans. So the manager himself acts as a member of a group with other

managers or colleagues.

In unit 18, you have come across the Hawthorne studies. These studies demonstrated

that groups have a powerful effect on human behaviour. Any, increase in output of

those workers in the Hawthorne studies was because of the importance and attention

given to the group of workers by the researchers as well as their own interactions

with each other about the quality and quantity of output they were supposed to

produce. In unit 17, you have come across the fact that people are motivated to act in

a certain way in a given situation and one should change the situation in order to

make the people act the way one wants them to.

There are also many examples where the manager decides to take a decision on his

own or to rely on groups by holding meetings or making committees. In

Management, small groups with which he interacts are very important for a manager.

It may consist of his peers or colleagues, other managers, specialists or others who

really help the manager to take an effective decision. You might have also come

across instances of 35

Behavioral Dynamics

36

well knit and cohesive groups, which really make a superior performance under a

good leader. For all these purposes you must try to gain understanding of how to

manage a group and how to become a more effective group member. In order to

develop the above two objectives, you must always keep in mind that a group is part

of a larger organisation with which it interacts. It is in this context that we talk of

group dynamics. So we must understand the meaning of Group Dynamics before we

talk about the dynamics of group formation.

19.2 GROUP DYNAMICS

Group Dynamics is concerned with the interactions and forces among group

members in a social situation. In the context of this course on Management Functions

and Behaviour, it is important to understand dynamics of members of formal or

informal groups in the organisation. In the 1930s Kurt Lewin popularised the term,

Group Dynamics to mean interaction of forces among group members in a social

situation. You are already familiar in unit 1S with the three styles of leadership, i.e.

Authoritarian, Democratic and Laissez-faire, which Lewin (1939) and his associates

have developed by creating three different social situations for the three styles of

leadership. In course of time, various meanings were attached to the term `group

dynamics' (Kelly 1974). One of the meanings suggests how a group should be

organised and conducted. In democratic leadership, member participation and

overall cooperation are emphasised. Another meaning of Group Dynamics is that it is

a set of techniques. In various group exercises it tries to make the leader as well as

the member effective. An attempt is made to make the above members play their

roles in a management situation of group discussions, team building, finding out

various solutions to problems by brainstorming and understanding ourselves in

relation to others while we transact or interact with others. Such exercises are also

provided in situations where only members are present and no leader exists to direct

or control the group. All these exercises are techniques to develop both the individual

as well as the organisation in which he or she works. The last meaning of the term

Group Dynamics is closest to Lewin's use of the term suggesting internal nature of

the groups as to how they are formed, what their structures and processes are, how

they function and affect individual members, other groups and the organisation. In

this unit, our main attention will be focused on the third meaning of the term. You

will appreciate therefore the plan here to start with defining a group and then

consider the dynamics of group formation.

19.3 WHAT IS A GROUP?

A group is any number of people who:

• have a common purpose or objective

• interact with each other to accomplish their objective

• are aware of one another

• perceive themselves to be part of the group

This is the way Huse and Bowditch (1977) defined a group. You were asked at the

beginning as to how many different groups you belong to. You may see, from the

above definition that throughout our lives, we belong to many different groups.

Families are groups, a cricket team is a group, a club is a group, drama and music

organisations are all groups. You can thus apply the concept of group to various

examples of religion, politics, consumer, sports, etc. as the case may be. In

management, we primarily talk of groups at work. In most organisations, getting the

work done requires group efforts. Thus, a manager must know how to manage an

individual by knowing the individual dynamics, such as his values, personality,

perceptions and attitudes as discussed earlier. Also a manager must know how to

manage a group by understanding Group Dynamics.

At this point, the number of people as contained in the definition of the group should

not be taken too literally. At some point, the number of people may become too large to

fit the rest of the definition. For example all the people of India cannot interact with

37

Group Dynamics

each other. Also, each group has a common objective, but the members who belong

to it may have other personal objectives. For example, a life insurance agent may like

to become a member of a parent-teacher association of a school to help promote the

development process of its students. But belonging to that association will also help

him to increase his or her contact to ensure more and more people, so he gets more

commission for as many members as he can sell the insurance to.

What is most important in the content of the definition of a group is to be aware of

each other in a group. This awareness is seldom there, when we look at an

aggregation of people. They are mere collections, different from what we call a

group, where members see themselves as belonging to a group in order to interact

and achieve the common objectives of the group. Moreover, such kind of interaction

may be over a long or a short period of time. In waiting for a bus, passengers make a

queue. All of them have a common purpose, that is, to enter the bus after buying

tickets. We cannot call them a group, although they have a common purpose.

Suddenly a person breaks the queue to go ahead. All others get together to prevent

that person from gatecrashing and getting his ticket ahead of those standing in the

queue before him. At that moment, a group is formed. Perhaps, after controlling that

person from getting a ticket out of turn, the others keep continuing to talk to each

other but the common purpose of keeping the queue breaker out vanishes. The group

disappears and the number of people become an aggregation or a collection.

19.4 THE DYNAMICS OF GROUP FORMATION

From the above example, it becomes imperative that you should understand why

people do form into groups. Some people believe that it is because of propinquity or

affiliating with one another that individuals form into groups. In a room people

sitting nearer to each other more easily make a group than people sitting at opposite

ends of a room. This kind of affiliation of people with each other is due to spatial

nearness or geographical nearness. But it does not help us to understand some of the

complexities of group formation which are more than mere affiliations due to

physical or geographical nearness. It will do you good to know some major theories

of group formation in brief.

Theories of Group Formation

i) Homans (1950) explained the basis of group formation in terms of activities,

interaction and sentiments of people. These three elements are directly related to each

other. In the above example of controlling a queue breaker in the line the required

activities are the assigned tasks at which people work. All others knew their turn and

how to exercise it especially, with a sudden change of then created by the queue

breaker. The required interaction takes place when any one person's activity

follows or is influenced by the activity of another. In this example the person whose

turn was dislocated by the queue breaker influences all others' activities. As soon as

he pushes out the person (the queue breaker) or tells him not to do it, all others follow

him. Hence required interaction may be verbal (telling him not to break the queue) or

non-verbal (pushing him out of the queue). One can see the activities and the

interactions. But as sentiments are the feelings or attitudes of a person towards

others, his likes or dislikes, approval or disapproval, can only be inferred from the

behaviour. After the activity of throwing out the queue breaker changed, the

interactions also change. In the above example, people talk to each other in a very

informal way after they succeeded in throwing out the queue breaker. These informal

interactions known as emergent interactions change the activities into informal or

emergent activities such as people reorganising their queue and ensuring that no other

intruder comes in out of turn, etc. All these activities emerge because of the

sentiments or feelings of the people.

You will notice that the more activities the people share, the more numerous will be

their interactions and the stronger will be their mutual sentiments. Therefore, in turn,

with more interactions among persons, the more will be their shared activities and

sentiments. Again in turn the more sentiments the persons have for one another, the

more will be their shared activities and interactions. Homan's theory therefore

explains the formation of groups on the basis of people's interaction with each other.

Behavioral Dynamics

38

People are not only physically together, but they also solve problems, attain goals,

facilitate coordination, reduce tension and achieve a balance. In an organisation the

participants interact with each other in this manner and tend to form into powerful

groups.

ii) Newcomb (1961) states a theory known as balance theory of group formation which

explains group formation on the basis of attraction of persons towards each other as

they have similiar attitudes towards common objects or goals. For example, person A

and B will interact and form a relationship because of their common

attitudes and values towards C.

Figure I: A Balance Theory of group formation

Common attitudes and values

Politics

Religion

Literature Work

Aesthetics Authority Marriage

If A and B form a relationship or a group, they will strive to maintain a symmetrical

balance between the attraction and the common attitudes and values, Whenever this

relationship between A and B becomes unbalanced, both them will try to restore the

balance. If the balance cannot be restored, then their relationship is dissolved, Both

affiliation and interaction play a significant role in balance theory.

(iii) Thaibaut and Kelley (1959) talk of another theory of group formation, stating the

outcome of interaction as the basis of group formation. The outcome of a relationship

should be rewarding in order to have attraction or affiliation among the persons or

members of a group. The persons derive personal and social satisfaction from having

interactions with each other. If they incur anxiety or frustration or embarrassment or

fatigue in such interactions, then that interaction becomes a cost for them rather than a

reward. Thaibaut and Kelley's theory of group formation is known as exchange theory

of reward and cost outcomes. You will appreciate that there are affiliation, interaction

and common att i tudes-all playing roles in the exchange theory.

Activity A

Think of a group with which you have been familiar with over a period of time. Explain

the relationships among its activities, interactions and sentiments.

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What do Groups Offer to Individuals?

For individuals, there are some very practical reasons to join a group or forming a

group. If you are hungry, you can satisfy your need for food by eating. This need for

food involves others too. You need money to buy food, but in order to have money

you must work for it or have someone give it to you. Very few people can live alone or in

isolation, like Robinson Crusoe. But most of us can satisfy our needs only with or

through other people. Let us see what some of the needs are that groups help us to

satisfy.

39

Group Dynamics

i)

ii)

iii)

Safety and security needs

Do you remember, the very first question asking you as to how old you were when you

first joined a group? The answer is, perhaps you joined in a group in your pre-school

years in a nursery class room. You learned to protect yourself by being in a group. A

newborn baby has to be protected from a hostile world and therefore he or she

belongs to a group by depending on it for its security and comfort. In the nursery class,

a teacher asks the small kids who broke the toy and seldom gets an answer. All the

kids keep quiet. Although young, they protect their members by not disclosing

anybody's name or pointing out at any one in a group. A teenager at the adolescent

stage derives social support from his group when he or she strives for individual

independence in taking decisions and actions. You may like to appreciate how group

is a source of support to an individual in an organisation. Workers become members

of a union and thus feel more secure to be with the group.

Even in emergency activities of putting off fire, the fire fighters depend on each other

for protection; similarly, coal miners depend heavily on each other for protection.

These are cases where individuals doing hazardous jobs as above derive

physiological and psychological support from the groups. They need to be physically

together even if they know that this may increase their collective danger. This helps

them to be more confident and able to perform well, less fearful and more responsible

to carry out their duties.

Relatedness or belongingness needs

You might have noticed many persons in your working life, who are very isolated or

who prefer to be absent from work most of the times or an organisation having high

turnover of employees or frequent change of employees. Studies show, such

phenomena occur where people are unable to belong to groups. This is because of

the fact that all of us are social beings, and belonging to or relating to groups satisfies

a number of social needs. We get emotional support from a group, which is

particularly helpful at times of stress. In normal situations, as is seen in Hawthorne

studies, affiliation to a group has a major influence on human behaviour in

organisations. When we are isolated from human communication and

companionship, we simply lose touch with reality.

Esteem and growth needs

When you do a piece of work, you get a praise from others. This gives how a sense of

recognition which fulfils your esteem need (being recognised) and also brings a sense

of fulfilment of your need for growth towards further achievement of good work and

career prospects.

Activity B

In one of the units of an organisation there are six trainers of technicians, three clerk-

typists and seven trainers associated with developing training materials. The unit has

a change of its head and he restructures the unit by placing all of them in separate

offices, effectively breaking up the group.

Earlier, they exchanged ideas and complaints. Now each one talks to himself or

herself. One really does not appreciate the groups until one is separated and put in

isolation.

Q: Which was the need that really remained unsatisfied by this restructuring?

A:………………………………………………………………………………………

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Behavioral Dynamics

40

We should now make ourselves familiar with many kinds of groups and many

different ways to classify them. In the present management course, we should

concentrate on both formal and informal groups existing in organisations. We shall

talk of other groups, but in brief.

Types of Groups

i. Formal Groups

These groups are established by the organisation to accomplish specific tasks.

According to Cartwright and Zander (1974) these groups include command groups

which consist of managers and their direct subordinates; and committees and task

forces which are created to carry out specific organisational assignments or activities.

Example: In an educational institution there are three broad formal groups of

teachers, students and administration. In the command group, the top administrator

or principal or head of the institution has Heads of Departments of different

disciplines as his direct subordinates. Various committees to look at academic

activities of teaching and research are made to carry out the assignments of the

organisations. Various task forces are set to carry out specific activities such as

selecting students, making of a curriculum; developing teaching and evaluation

methods, moderating performance, etc. in each department for a specific discipline or

course. The example can be extended to student groups of various levels and

disciplines, having their command groups, committees and task force as well as

administrative staff of various levels and categories (such as academic, accounts,

audit, sports, etc).

In all cases, command groups and committees continue to exist whereas task forces

are usually established to solve a particular problem. They are disbanded after the

work is done. The idea of task force is more applicable to manufacturing or service

organisations rather than research institutions. In the latter kind of organisations, task

forces consist of managers, technical experts from research, development, marketing,

production and purchasing departments, to make sure that each new product passes

through smoothly from the idea stage through the production stage and into market.

ii. Informal Groups

These groups are formed within the structure of the organisation but by the members

themselves rather than by the organisation. Sometimes they do not have the, approval

)f the management. Basically, informal groups are formed to satisfy social needs on

the job. Sometimes they are formed to perform a task better, sometimes they are

formed to hold production at a certain level. In a rigid system of organisation, these

informal groups meet fairly regularly to cut short the rigid bureaucratic practices of

the management.

iii. Primary Groups

Cooley (1911) defined and analysed primary groups as those characterised by

intimate, face-to-face association and cooperation. They are primary in several

senses, but chiefly in that they are fundamental in forming the social nature and

ideals of the individuals.

Example of primary group is family and the peer group. Many people use the term

small group interchangeably with primary group. But the small group only meets the

criterion of small size for face-to-face interaction and communication to occur. In

addition to being small primary group must have a feeling of comradeship, loyalty

and a common sense of values among all its members. Thus, all primary groups are

small groups but riot all small groups are primary.

The logic of primary group is extended to work groups in Hawthorne studies. These

work groups have primary group qualities which tremendously influence individual

behaviour irrespective of contact or environmental conditions.

iv. Membership Groups

These are the ones to which the individual actually belongs. Examples: clubs,

cooperative societies, workers unions, etc.

v. Reference Groups

These are the ones with which an individual identifies or to which he would like to

belong. Examples: socially or professionally prestigious groups with which the

individual would like to, belong.

vi. The In-groups

41

Group Dynamics

The in-groups represent a clustering of individuals holding prevailing values in a

society or at least having a dominant place in social functioning. Examples: Member

of a team, family members.

vii. The Out-groups

The out-groups are the conglomerates looked upon as subordinate or marginal in the

future, Examples: street performers for an office worker, a hawker for a surgeon.

Whenever there is a win-lose situation in a competitive task, members of win or lose

group show tremendous in-group feelings within themselves. Their group, in relation

to the other group, is also called an out-group.

Activity C

You are by now familiar with some major theories of group formation. Identify the

theoretical bases of various groups by putting a (V) tick mark on the appropriate

theory against the type of group.

Type of group Theoretical basis

Interest groups Interaction/reward-cost

Formed on informal basis Interaction/reward-cost/balance on the basis

of similar attitudes and values

19.5 GROUP ROLE

Shakespeare said, "All the world's a stage, and all the men and women merely

players." Using the same metaphor, all group members are actors, each playing a

role. By this term, we mean a set of expected behaviour patterns attributed to

someone occupying a given position in a social unit. The understanding of role

behaviour would be dramatically simplified if each of us chose one role and "played

it out" regularly and consistently. We are required to play a number of diverse roles,

both on and off our jobs. As we shall see, one of the tasks in understanding

behaviour' is grasping the role that a person is currently playing.

For example, on his job, Mr. `X' is a plant manager with Electrical Industries, a large

electrical equipment manufacturer. He has a number of roles to fulfil on that job, for

instance, Electrical Industries employee, member of middle management, electrical

engineer and the primary company spokesman in the community. Off the job, he

finds himself playing still more roles: huband, father, Rotarian, tennis player, number

of the Thunderbird country club and president of homeowner's association. Many of

these roles are compatible, while some create conflicts e.g., how does his religious

incolvement influence his managerial decisions regarding layoffs, expense account

padding, or providing accurate information to Government agencies. Thus, we are all

required to play a number of roles and our behaviour varies with the role we are

playing.

Role Identity and Perception

There are certain attitudes and actual behaviours consistent with a role and they

create the role identity. People have the ability to shift roles rapidly when they

recognise that the situation and its demands clearly require major changes. For

example, when union stewards were promoted to foremen positions, it was found that

their attitudes changed from pro-union to pro-management within a few months of

their promotion. When these promotions had to be later rescinded because of

economic difficulties in the firm, it was found that the demoted foremen had once

again adopted their pro-union attitudes.

When the situation is more vague and the role one has to play is less clear, people

often revert to old identities. In spite of the fact that some of the former losers were

now winners by society's standards, they found it very difficult to deal with the

winners', role when placed in an environment in which they had always been losers.

With the role requirements ill-defined, identities became clouded, and individuals

reverted back to old patterns of behaviour.

One's own view of how one is supposed to act in a given situation is a role perceptio

Behavioral Dynamics

42

Based on an interpretation of how we believe we are supposed to behave, we engag

in certain types of behaviour. Where do we get these perceptions? One author

suggests that we all learn roles from such media as movies, books and television and

from friends. If this is true, we might propose that many persons may have formed

their role identities perceiving their favourite character. Of course, the primary reason

apprenticeship programmes exist in many trades and professions is to allow

individuals to watch .an "expert" so they can learn to act as they are supposed to.

Role Expectations and Conflict

Role expectations are defined as how others believe you should act in a given

situation. How you behave is determined, to a large part, by the role defined in the

context in which you are acting. The role of a Parliament Member is viewed as havin

propriety and dignity, whereas a football coach is seen as aggressive, dynamic and

inspiring to his players. When role expectations are concentrated into generalised

categories, we have role stereotypes. During last decades we have seen a major

change in the general population's role stereotypes of females. In 1950, a woman's

role was to stay home, take care of the house, bring up children, and generally care f -

her husband. Today, most of us no longer hold this stereotype. Girls can aspire to be

doctors, lawyers, managers and astronauts as well the more traditional activities of

nurse, school teachers, secretary or housewife. In other words, many of us have

changed our role expectations of women and, similarly many women carry new role

perceptions.

In the work place, it can be helpful to look at the role expectations through the

perspective of the psychological contract, an unwritten agreement, existing between

employee and the employer. It sets out mutual expectations-what management

expects from workers and vice versa. In effect, this contract defines the behavioural

expectations that go with every role: Management is expected to treat employees

justly, provide acceptable working conditions, clearly communicate what is a fair

day's work and give feedback on how well the employee is doing. In turn employees

are expected to respond by demonstrating a good attitude, following directions, and

showing loyalty to the organisation.

When an individual is confronted by divergent role expectations, the result is role

conflict. It exists when an individual finds that compliance with one role requirement

may make more difficult the compliance with another. At the extreme it would

include situations where two or more role expectations are mutually contradictory.

The issues of ethics in business demonstrates a well-publicised area of role conflict

among corporate executives. A recent study found that 57 per cent of Harvard

Business Review readers had experienced the dilemma of having to choose between

what was profitable for their firms and what was ethical.

Spatial Influences on Role

Research evidence indicates that the way individuals position themselves within a

group, that is, the spatial arrangement that they voluntarily develop, is far from

random.

Spatial factors can also determine who within a group will be chosen or accepted for

a leadership role. When one wants to take on the role of adversary pr to emphasise

superior-subordinate relationships, it is natural to place a barrier between himself and

others to identify a we-they distinction.

This may more readily be illustrated by comparing a traditional classroom situation,

where the instructor stands in front of the class before a podium, with the students in

clearly established neat rows and columns, and a less structured situation with the

chairs geographically dispersed about in a circle and the instructor taking one of the

seats in the circle. The latter positioning can be expected to increase group

interaction, reduce the feeling of superior-subordinate interaction, and place the

instructor on more equal footing with the students.

19.6 IMPLICATIONS OF FORMAL AND INFORMAL

GROUPS FOR MANAGEMENT

43

Group Dynamics

i) Formal Groups: Committees

As defined earlier under section 4.3 formal groups are established by the organization

to accomplish specific tasks. These groups include command groups, committees and

task forces. I this section, we should further clarify committee organization as an

important type of formally designed group and its implication for management.

Committees are special kinds of groups which serve the following purposes in an

organisation:

a) Exchanging views and information

b) Recommending action

c) Generating ideas

d) Making decisions

The size of the committee is usually kept small. It is to encourage good quality of

decisions. Communication among members is thus limited to few. With increase in

the size of committee, many members feel less willing or threatened to participate

actively.

The chairperson of the committee provides directions to the committee to fulfil the

objectives of the committee. He or she should be a person of open mind and a careful

listener. He or she should allow members to voice their opinions and should not place

his or her opinion above those of others. He or she should involve everyone in the

activities of the committee. He or she should have active interest in the purpose of the

committee and in the ideas of the members. He or she should help the committee

focus on the task at hand and on the progress made.

The members of the committee should cooperate with each other to achieve the

purpose of the committee. To a great extent the image of a committee depends on the

cooperation of members with each other. They should have stronger motivation to

accomplish the task. They should have effective communication with each other.

There should be more ideas generated in the group, along with increased satisfaction

and performance of the members. It is the chairperson who should try to ensure

communication, satisfaction and productivity among the members of the committee.

With today's organisations becoming increasingly large and complex, the committee

form of organisation will, undoubtedly become more important and more widely

used in future. The modern manager must learn how his committees or teams or

commissions or boards or groups or task forces should be effectively formed and

should function, no matter whether he is in a Government or educational or religious

or business organisation. In other words this kind of group management will become

more popular as well as important in times to come.

Meetings of members in a committee may be time consuming and costly insofar as

individual's time is concerned. Committees are also criticised for not making the

members responsible for bad decisions or mistakes. Many individuals use the

committee as a shield to avoid personal responsibility for bad decisions or mistakes.

In fact, all committee members as well as chairperson should be made responsible for

all decisions. It is in the interest of the committee to differentiate between very

conscientious members who voted against a wrong decision as well as those who

took a particular decision and can defend it to the end. Many decisions taken by a

committee may or may not be liked by members of the organisation who are likely to

be affected by it.

In spite of all the above shortcomings that are likely to be there, the future manager

must learn to arrive at an improved decision through the combined and integrated

judgment of the committee members. He or, she can reduce conflict in the group,

facilitate coordination of various groups in the organisation and increase commitment

and motivation of members of the organisation through participation.

Committees, which are thus the formally designated groups of the organisation, are

assuming more importance in day-to-day functioning at any organisational level.

Today they are acknowledged as significant features of group dynamics in

Behavioral Dynamics

44

organisational behaviour.

Activity D

Show your familiarity with any committee (finance or executive or bonus or

grievance committee) that might have been formed in your organisation to fulfil

a certain objective.

1 What was the size of the committee?

2 How many times did the chairman and the members of the committee meet?

3 Did they arrive at a decision soon?

4 Was the decision implemented?

5 How did people in the organisation feel about it?

6 In what way the committee could have functioned in your opinion?

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ii) Informal Groups: Work Groups

Informal groups play a significant role in the dynamics of organisational behavior A

formal group has officially prescribed goals and relationships which an informal

group does not have. But we cannot think of these two groups as separate entities, as

they coexist and they are inseparable. Every formal organisation has informal groups

and every informal organisation eventually evolves some semblance of formal

groups. An illustration will make it clear. When an engineer designs the plans and

technology for a new factory and when an architect designs the office layout, they are

also designing the social relations that will prevail in the organisation. The formal

organisation of the management determines where men will work and what

opportunities they will have to contact each other during the day. Also the rates of

pay, work condition and other aspects of the job as decided by the management are

important too. Given these basic elements one can predict the social relations that

exist within the organisation long before the first person is employed and enters the

factory. This is because of the fact that every person is told formally where and how

he or she is to work, with whom to come in contact. Obviously, one develops

friendships with the people one most often comes across. In fact, those employees

who have the greatest opportunities to make contacts on the job make the largest

number of friends. In course of time, they may be in the best position to become

leaders of the group.

Remember for yourself, who were the first person you came in contact with when

you joined your present work organisation? how frequently did you meet them? In

course of time, have you noticed that you have become a member of your work group

having made contacts with quite a number of people-trying to share your problems

with them and their problems with you? This is how a work group is formed. In

course of time, you select from among various groups you are in touch with a group

which is important to you for your work, a group which matters to you for leisure and

recreation, a group which acknowledges you more for your personal qualities. As

time passes your affiliation with certain groups becomes more meaningful and

strong.

Based on contacts and common interests such friendship groups made by employees

arise out of the life of the organisation. Once these groups have been established they

develop a life of their own, which is almost completely separate from the work

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Group Dynamics

process from which they started. The process is dynamic and self-generating and

makes the work group an organisation in itself.

Characteristics of Effective Work Groups

in managing the organisation, you have to understand how groups can be made into

effective work groups. The factors that influence the work group effectiveness are

norms, cohesion and leadership. Let us see how each one of them contributes to

making the group effective to achieve the objectives of the organisation.

i) Group norms

When the group functions for a period of time, to attain certain objectives, it develops

norms or standards of behaviour. A norm is a rule. This tells the individual how to

behave in a particular group. An individual may be a member of a welfare group, a

chess club, his family and his work group. You may like to watch his behaviour in

various groups. You will see the different kinds of behaviour of the same individual

in different groups.

You may also notice that sometimes the norm is formal and is accepted by the group

that way. For example all members of a particular work group wear safety glasses

while operating on a particular machine. All of them would do so by accepting this

norm. On the other hand, a norm can be informal arising out of interactions and

feelings of the people. All the members of a task group decide to keep their output

high by regulating their pace of work. For example, a number of typists decide to

attain a target of fifty pages of neat typing everyday. So they do it.

It is also possible that another group may like to keep its output low again because of

some emergent activities, interactions and feelings of the group. So it is important to

know what behaviour is significant for the group which helps to develop a norm. In

other words, having high or low output is equally influenced. by what the group

prescribes for its members as well as what other activities, interactions and feelings

develop among the members in course of doing a work. So we can say that one of the

characteristics of norms is they develop behaviour that is significant for the group.

We also find another characteristic of norms: some norms are applicable to some

people only and not to all. For example, a manager of a group behaves differently,

from other members of the group. His or her behaviour is what is expected of him or

her in a given position by others. When a new member joins the group, he or she is

expected to follow the norms more closely than the senior members.

Some norms have central importance and are accepted by everyone of the group

while others have less importance. Schein (1974) talks of pivotal and relevant group.

norms. A pivotal group norm is a norm to which every member must conform. A

worker who remains absent or does not do any work will not last long in an

organisation. A relevant group norm is one which is neither central nor absolutely

essential to follow but is worthwhile and desirable. So any norm may be pivotal in

group, but may be irrelevant to another.

Some of us conform to all the norms of the group, some of us select only pivotal

norms for acceptance, still others reject all values and norms of the group. It is

usually seen that complete conformity to norms, as in the first case and complete

rejection of the norms, as in the last one, have undesirable consequences. A complete

conforming individual loses his or her ability to influence the group. An individual

who rejects all group norms is likely to be expelled from the group. It is therefore

advisable that the individual exercises his or her choice of acceptance of the norm

quite discreetly.

It is equally important to understand that with increase in size of the group, norms are

less likely to be accepted. It is also true that more intelligent persons are less likely to

conform to norms. You may notice that, as the group increases in size, there are

chances of subgroups being formed. Hence a general norm of the total group is

difficult to maintain with uniform conformity all the time.

The last characteristic of norms is that they allow possible deviations. An individual

who deviates too far gets punished. When the union is on strike, its member attending

to work is punished by being boycotted by the group.

Ask yourself the following questions in the position of a manager.

Behavioral Dynamics

46

• What have you understood about norms when you are a formal leader of a group

and when you are a member of other group?

• Have you understood what the norms of various groups are?

• Do you know which are the central norms?

• Do people conform to norms completely?

• Do people wait for their leader to speak first in a meeting?

• Do people come in time for meetings?

• Is disagreement allowed?

• Do people have a common style of clothing?

As a manager, you must also try to understand why people opt to lower their output

and if need be, you should change the situation in order to change the norm of low

output. You should try to develop trust among your members in order to be able to

influence and change or modify the norms of your group. Your effectiveness as a

manager will increase with a high level of trust between you and your group

members.

ii) Group cohesiveness

This means the degree to which group members are motivated to remain within the

group and consequently behave in similar ways. A cohesive group also helps the

members in their satsifaction of needs and attainment of goals. Cohesiveness

develops out of the activities, interactions and sentiments of the people. The cohesive

group acts as one man to attain its goal.

What are the factors which influence the cohesiveness?

Size of the group: With very few people in a group, you may fall short of skilled

hand: to do a good job. With a large number of people you may find it difficult to

communicate and identify the best talent. At the same time an individual member

may not be happy with his or her interaction with the group. In the first case, there is ,

breakdown of the task and in the second case reaching out of people is difficult.

Quite unintentionally you may even encourage formation of many sub-groups in a

large group. Hence group cohesiveness will suffer.

Proximity or geography of the group: Nearness or working closely together helps

in group cohesiveness. It helps face to face contact. A small isolated work group is

cohesive and will work better to attain its goals.

Outside pressure: This binds together all the members against a common enemy and

thus makes its members forget their differences. You might have observed how

groups become cohesive under outside pressures when there is (i) competition with

other groups or (ii) union management conflict or (iii) reaction against the supervisor

who closely supervises the work or (iv) lack of trust between the manager and his

group or (v) even mistrust between two groups.

Accomplishing group goals

As the group becomes more cohesive the members become more motivated to

accomplish its goals and behave in similar ways. Accomplishing group goals

increases the cohesion of the group. Failing to accomplish the group goals reduces

the group cohesiveness.

It is necessary to remember that it is not always desirable to have group cohesiveness,

which may result in going against the objectives of the work group. For example,

workers being highly cohesive may decide to work against the management. So you

must find out what the harmful effects are likely to be of a cohesive group. Examples

of rejection of new ideas by cohesive group members are not uncommon. At times

these members feel that they know the best. This kind of feeling is known as `group

think' where members show tremendous desire for unanimity. A great deal of

solidarity and loyalty to the group overrides the motivation of the members to consider

different courses of action logically and in a realistic manner. In governmental

administration many significant decisions are made on the basis of group think

principles which have been quite unfortunate for a large number of people.

As a manager, you must make a cohesive group to accomplish organisational goals.

You have to give information, get the resources for your members to accomplish the

47

Group Dynamics

task and hold frequent open meetings. O'Donnell (1961) and Filey (1970) suggest

that one should try to avoid group think by having open discussion and allowing

conflicting points of view.

Group leadership

As you have studied in unit 13, leadership is the ability to influence the behaviour of

others. Any effective work group wanting to accomplish its task gaining some sort of

social satisfaction and having some sense of contribution and growth should like to

look up to a leader to help reach these goals.

Informal leaders often emerge from the activities, interactions, sentiments of the

ongoing group. They may help the group to accomplish its task or fulfil its social

goals. You will always notice that formal task instruction comes from the supervisor,

but informal help comes from the informal leader.

Informal leader may be lower in official status than the formal leader. But he helps

the group satisfy both personal and organisational goals. If this job is done by the

formal leader, then there will be no informal leader emerging out of the group. If the

informal leader helps in attaining the organisational goals, then he becomes task

oriented like a formal leader and there may be chances that a social leader will

emerge to maintain a balance between organisational and personal needs.

In order to be effective as a manager, you must recognise the existence of informal

leaders and work with them to develop group norms of high productivity, build more

cohesion and enable the members to have their social needs satisfied.

Managing Group Productivity

In your role as a manager you will do well to remember some useful ways to make

your work group effective. As O'Donnel (1961) suggests you must know the

following to manage your group of people towards attaining the goal.

i) Content

While having a meeting with your group members try to understand the subject

matter of the task to be performed by the committee. This will help you to see the

problem clearly and solve it to:

• decide about the size of the commitee (having about five to fifteen members) and

include experts in the committee to solve your problem

• distribute the agenda before the meeting is held to all the members

• specify the timings of the meeting

• encourage persons to present their ideas and do not encourage them to pick up

the first feasible solution to a problem. Allow them to think of various alternative

solutions

• periodically summarise the discussion and restate the current position of the

committee as to whether the committee has to finally decide on a solution or only

recommend a solution to a higher authority/advise the higher authority.

ii) Process

This involves how the content is handled or discussed by the members. Benne and

Sheats (1948) describe three effective ways to approach the group processes.

One of the ways the content is handled is by group task activities. You may initiate,

orient the group to its goals, coordinate, give and seek information about the

problem.

Another way may be through the group building activities like encouraging members

to cooperate with each other. In the work, encourage people to participate, share

jokes or humour with them at times and see to it that they enjoy doing the work

because of a good group atmosphere. This is the group building activity which helps

a manager to establish better group relationship.

Still another way the group members satisfy their needs is through-self-serving

activities. Members satisfy their needs at the cost of others. You might have noticed

that more behave in a dominating manner, more try to get attention, more behave

aggressively and more withdraw while working in the group. Persons engaged in the

above activities are only serving their own purpose or interest rather than helping the

group to achieve its goal.

Behavioral Dynamics

You must try to understand the difference between the content and process to make

the group more effective. Too much of task activity and too little of group building

activity is not a good way to make an effective work group.

Self-serving activities are signs of non-constructive satisfaction of valid personal

needs and are disruptive. They reduce the ability of the group to attain its objectives.

Many times we overlook the fact that people can be both emotional and rational in

understanding the content and process of work. Emotions are realities that have to be

taken care of. A good manager must not neglect the group building activity as it may

make group and committee meetings ineffective. He or she should draw on the

influence of the informal group by integrating its objectives with those of formal

group as well as try to keep the formal activities from unnecessarily disrupting the

informal organisation.

19.7 SUMMARY

In this unit, we have come across the input, how groups represent an important

dynamic input into organisational behaviour. Group formation, types and theories

have relevance to the study of organisation. Members in an organisation form into

groups for satisfying their security, social and esteem needs. We have also come

across the concept of formal and informal groups which are especially important in

organisational functioning. We have discussed the role of the individuals in the

group, indentification, perception and various expectations of the group members

and the self from the role occupant ultimately leading to conflicts. Committees and

work groups in particular play an important role in modern organisations.

Characteristics of effective work groups, such as group norms, group cohesiveness

and group leadership are discussed and finally suggestions have been made about

how to manage effective groups and committees. Management in the future must be

able to understand, and when possible, take advantage of group dynamics, of formal

and informal groups in organisations.


Having gone through the Unit 19, you should be able to define and use the following

concepts:

Emergent activities

pivotal group norms

relevant group norms group

cohesiveness leadership

Group

- Formal group

- Command groups

- Committees

- Task force

Content Informal Group

process - required activities

group tasks activities group

building activities self-

serving activities

- required interactions

- sentiments

- emergent interactions

On the basis of the objectives listed above:

1. Identify the characteristics of effective work groups, in not more than half a page

on each characteristic.

2. State in a page, how groups can help or hinder the manager in achieving

organisational goals.

3. Suggest the process of effectively managing a group or committee. Your answer

may not exceed a page.

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Group Dynamics

19.9 KEY WORDS

Command Groups: Formal groups that consist of managers and their direct

subordinates.

Committee: A formal group that is created to carry out specific organisational

assignments or activities.

Content: The subject of the meeting or of the task being performed.

Emergent Activities: Informal actions beyond those required that result from

changed sentiments.

Formal Group: A unit established by the organisation to accomplish specific tasks.

individuals are usually assigned to formal tasks.

Group: Any number of people who

i. have a common purpose or objective

ii. interact with each other to accomplish their objective

iii. are aware of one another, and

iv. perceive themselves to be a part of the group.

Group Building Activities: Those activities that allow the group to maintain itself

by helping to satisfy members' needs and by encouraging cooperation among

members.

Group Cohesiveness: The extent to which group members are motivated to remain

within the group and in consequence to behave in similar ways.

Group Task Activities: Activities performed within the organisational structure by

the individuals rather than by. management.

Leadership: The ability to influence the behaviour of others. The task of the leader is

to help the group reach both organisational and personal goals.

Pivotal Norms: Organisational values which are absolutely necessary for any one

who wants to stay in the organisation.

Process: The way the content is handled or discussed by the members of the group.

Relevant Group Norms: Not as central as pivotal norm, but considered as

worthwhile and desirable.

Required Activities: Assigned tasks performed by the individuals.

Required Interaction: This occurs, when a person's activity follows or is influenced

by the activity of another; interaction can be verbal or non-verbal.

Self-serving Activities: Activities that satisfy individual needs at the expense of the

group.

Sentiments: The feelings or attitudes a person has about others, such as likes or

dislikes and approval or disapproval.

Task Force: A group established to solve a particular problem.

19.10 FURTHER READINGS Benne K. and P. Sheats, 1984. Functional Roles of Group Members. Journal of

Social Issues. 4 (Spring), pp 4149.

Cartwright, D. and D. Lippitt, 1974. Group Dynamics and the individual. In

Organisational Psychology: A Book of Readings, Revised. Eds. D. Kolb, I.

Rubin and J: McIntyre, Prentice Hall: Engelwood-Cliffs.

Cooly H.C.L. 1911. Social Organisation Scribner: New York.

Filey A. 1970.Committee Management. Guidelines from Social Science Research.

California Management Review 13, Fall, 1970 pp 13-21.

Romans G. C. 1950. The Human Group, Harcourt, Brace and World: New York.

Documents

MBA - MS 1