Principles of Management

MODULE 2

MANAGEMENT FUNCTIONS

INTRODUCTIONManagement functions are those which,

managers at all levels have to perform in order to achieve organizational

objectives.

A function is a group of similar activities.

Management functions

PLANNING

ORGANISING

STAFFING

DIRECTING

CONTROLLING

PLANNING

Planning is the conscious determination of future course of

action.This involves ‘Why an action’, ‘What action’ and ‘How to take

action’.

PLANNING Planning includes:• Determination of specific objectives• Determining projects and programmes• Setting policies and strategies• Setting rules and procedures• Preparing budgets Plans may be prepared for :• Long term plans (5 yrs and more)• Intermediate term plans (2-5 yrs)• Short term plans (for 1 yr)

ORGANISINGOrganising is the process of dividing work in

to convenient tasks or duties, grouping of such duties in the form of positions, grouping of various positions in to

departments and sections, assigning duties to individual positions, and

delegating authority to each position so that the work is carried out as planned.

ORGANISING• Organising function contributes to the

efficiency of the organisation by insuring that all necessary activities will be performed and objectives are achieved.

STAFFING• Staffing involves manning the various positions

created by the organising process.a)It includes preparing inventory of personnel available

and b)Identifying gap between manpower required and

available,c) Identifying the sources from where people will be

selected, selecting people,d)Training and developing them, e)Fixing financial compensation, f) Appraising them periodically etc.• Usually personnel department is responsible for this.

DIRECTING• When people are available in the organisation,

superior managers communicates subordinates about their expected behaviour.

• Once subordinates are oriented, its superiors responsibility of guiding them fo better work performance.

• Directing includes:• Communication• Motivation • Leading

CONTROLLING

Controlling Involves identification of actual results, comparison of actual results with the expected results as

set by planning process, identification of deviation between the two, if any, and taking corrective action so that actual results match with expected

results.

MODULE 3EXECUTIVE FUNCTIONS

Executive functions

INTRODUCTION

• Executive functions are actually functional areas of management. Also known as organisational functions.

• Major Executive Functions are:• Production• Marketing• Finance and Accounting• Personnel

PRODUCTION• Production manager manages production.• Sub activities of production are:• Purchasing (Sourcing of raw materials)• Materials management ( storing,

controlling, material issue to various departments)

• Research and Development ( renewing existing product, developing new product)

MARKETING

It involves the distribution of organisations product to the buyers.

Sub areas are:• Advertising• Marketing Research• Sales Management

MARKETING• Advertising ( giving information of the product

to prospective buyers and including them to purchase these)

• Marketing research (Systematic collection, recording analysis of data relating to the marketing of goods)

• Sales management (managerial efforts directed towards the movement of products and services from producers to consumers)

FINANCE and ACCOUNTING• Involves record keeping of various

transactions and management of financial resources

• Financial Accounting• Managerial Accounting• Costing• Investment Management• Taxation

FINANCE and ACCOUNTING• Financial Accounting ( record keeping of

various financial transactions, their classification and preparation of various statements to show the working of results and financial position of the organisation.)

• Managerial Accounting (analysis and interpretation of financial records so that management can take certain decisions.)

• Costing (recording of cost, their classification, analysis and interpretation and cost control.)

• Investment Management ( investing in large number of alternatives.)

• Taxation (deals with the direct and indirect taxes an organisation has to pay)

PERSONNEL• It deals with the management of human

resources in the organisation.• Areas :• Recruitment and Selection• Training and Development• Wage and Salary administration• Industrial Relations

PLANNING

NATURE OF PLANNING

Nature can be understood in three ways:• Rational Approach• Open-System Approach• Pervasiveness

Planning: A Rational Approach• Concept of rationality denotes the choice of

appropriate means for achieving stated objectives.

• This approach tries to fill the gap between actual status and desired status of the organisation based on time period.

• The objectives can be achieved by actions with in the time. Actions can be completed by appropriate use of all resources available( both human and non human).

Planning: A Rational Approach

DESIRED STATUS

GAP

PLANNING REQUIRED

CURRENTSTATUS

STATUS

TIMEt1 t20

Planning: An Open System Approach

• As an open system, it takes inputs from the environment, process these and exports outputs to the environment

• This is based on the identification of gap between current status and desired status and the action to bridge this gap, influenced by variety of environmental factors economic, political, technological, cultural……(changing in nature))

Pervasiveness of Planning

• This explains that planning exist in all levels of management, regardless of its size or nature of activities.

• Top management is responsible for overall objectives and actions of organisations (what, How).

• Departmental head has to fulfill departmental objectives.

• And the process continues….

Pervasiveness of Planning

COPRPORATE/ ORGANISATIONAL PLAN

DIVISIONAL PLAN

DEPARTMENTAL PLAN

SECTIONAL PLAN

IMPORTANCE OF PLANNING

• All types of organisation whether its private or public, small or large, developed or non developed considers planning as very important

• Efficient planning is required for any organisation to be successful.

Importance Continued

• Primacy of planning• To offset uncertainty and change• To focus attention on objectives• To help in coordination• To help in control• To increase organisational effectiveness

Primacy of Planning

PLANSObjectives and how

To achieve them

What kind of organisation

structure

What kind of people are required

How effectively to lead people

By furnishing standards of control

Which helps to know

Which affects the kind of direction

In order to assure success of plans

Necessary for

Primacy of planning

• Planning precedes all other managerial function

• Planning is unique in that it establishes the objectives necessary for all group effort

• All other functions are performed to achieve the objectives set by the planning process

To offset uncertainty and change

• There is continuous change in environment and the organisation has to work in accelerating change ( changes technology, market forces, attitudes, values, cultures ….)

• Planning gears the organisation to take suitable actions so that it is successful in achieving its objectives

To focus attention on objectives

• Planning focuses on organisational objectives and direction of action for achieving these objectives.

• Objectives are defined in more meaningful way.

• E.g.: although organisational objective is profit making, planning activity will specify how much profit is to be earned looking in to all facilitating and constraining factors

To Help in Coordination

• Planning act as base for coordination of management.

• Real beginning of coordination is done by planning as it sets plans for all other managerial levels and the different activities under management.

To help in control

• Control involves the measurement of accomplishment of events against plans and the correction of deviations to assure the achievement of objectives set by the plans.

To increase Organisational Effectiveness

• Planning ensures organisational effectiveness.

• The concept of effectiveness is that organisation is able to achieve its objectives within given resources.

• Planning along with control ensures the resources are put in action in a way in which these have been specified.

Steps in Planning1. Perception of opportunities (awareness)2. Establishing objectives3. Planning premises( internal and external

conditions)4. Identification of alternatives5. Evaluation of alternatives6. Choice of alternatives7. Formulation of supporting plans8. Establishing sequence of activities( helps in

plans to put to action)

Objectives

• Objectives are very precise and used to specify the end result which an oraganisation wants to achieve.

• Terry and Franklin- “ A managerial objective is the intended goal that prescribes definite scope and suggests direction to the planning efforts of managers”

Features of Objectives• Each organisation or group of individuals have

objectives and they should try to achieve it.• Objectives can be broad or specific, short or

long term.• Objectives have to be clearly defined for clear

direction for managerial action.• Objectives have hierarchy starting from broad

perspective to narrow one.• They are created with in social norms.• Organisation may have multiple objectives.• Organisational objectives can be changed

STRATEGY• The term strategy is derived from the Greek

word ‘Strategos’ which means general.• This word was used commonly in military and it

means managers act to offset actual or potential actions of competitors.

• In management Chandler has defined strategy as “Strategy is the determination of the basic long term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary to carrying out these goals”.

STRATEGY- Features• Strategy relates the firm to its environment,

particularly external environment, where organisation is treated as a part of society.

• Strategy is the right combination of both internal and external environment, being connected to the organisation.

• Strategy is relative combination of actions. The combination is to meet a particular condition, to solve certain problem, or to attain desirable objectives.

STRATEGY- Features

• Strategy may involve contradictory action as its variables depends on environment and is bound to change and so, an action taken today has to be changed tomorrow depending on situations.

• Strategy is forward looking as its actions aim at the future result.

Levels of StrategyCorporateStrategy

SBU 1 SBU 2 SBU 3

Operations Strategy

MarketingStrategy

Financial Strategy

PersonnelStrategy

1. Corporate management2. SBU Top Management3. Middle Management

Policy• Derived form the Greek word ‘Politeia’

meaning citizen and • Latin word ‘Politis’ meaning polished• Koonz have defined policy as :• “ Policies are general statements or

understandings which guide or channel thinking in decision making.”

Policy• Kotler has defined policy as :• “Policies define how the company will deal

with stake holders, employees, customers, suppliers, distributors, and other important groups. Policies narrow the range of individual discretion so that the employees act consistently on important issues.”

Policy- Features• Policy provides guidelines to the members of the

organisation for deciding a course of action and thus restricts their freedom of action. Policies permit prediction of role with certainty.

• Policy limits an area within which a decision is to be made and assures that the decision will be consistent with and contributive to objectives

• Policies are expressed in qualitative, conditional or general way.

• Policy making is an action of all managers. Higher is the level, more is the role of the manager in policy making.

Procedures- Meaning

• Procedures are plans for handling future activities in a specific manner in which a particular activity is to be performed.

• They prescribe the chronological sequences of action required to achieve an objective.

Procedures- Definition

• Terry and Franklin have defined procedures as:

• “ A procedure is a series of related tasks that make up the chronological sequence and the established way of performing the work to be accomplished.”

Procedures- Characteristics• Procedures should be based on adequate facts and

not on guesses. Consideration should be given to objectives and all other factors regarding the work.

• A procedure should possess stability and changes should be made only when there is change in factors affecting the operation or the procedure. Procedures are also flexible in case of emergencies.

• There should be a continuous review of procedures.

• A basic principle of procedure is that there should be less number of procedures. The more the number of procedures, more is the cost on the part of management.

Decision-Making“ Decision making is a conscious human

process involving both individual and social phenomenon based up on a factual and value premises which concludes with a choice of one behavioral activity from

amoung one or more alternatives with the intention of moving towards some desired

state of affairs.”- SHULL et al-

Decision-Making-Features

• Existences of alternatives• Expected results are arrived by choosing

the best alternative from amoung various alternatives.

• Decision making is not fully rational but may be judgemental and emotional in which personal preferences and values of the decision maker play significant role.

• Goal - oriented

Decision-Making-Process

Specific objectives Identification of

problemsSearch

for alternatives

EvaluationOf

alternatives

Choice ofalternativesactionresults

Feedback

MODULE 5ORGANISATION

ORGANISING- Definition

‘The term Organization implies a formalized intentional structure of

roles or positions.’

ORGANISATION-Concept

• The term organization can be described as:

• ENTITY( company, corporation, partnership, firm etc)

• GROUP OF PEOPLE (interaction to objectives)

• STRUCTURE( forms of organisation)• PROCESS ( departmentation, fixing

authority and responsibility)

Organizing-Concept

• Organizing in the corporate scenario is the management function that usually follows after planning. It involves the following –

• assignment of tasks• grouping of tasks into departments• assignment of authority • allocation of resources across the

organization

Organizing-Concept

• Organizing is –• Identification and classification of required

activities• Grouping of activities necessary to attain

objectives• Assessment of each grouping to a

manager with the authority necessary to supervise it/(delegation)

• Provision of coordination

Organization-Theories

• Classical• Neo classical• Modern

CLASSICAL THEORY

• There are four classical factors known as classical pillars.

• They are:• Division of labour• Scalar and functional processes• Structure• Span of control

CLASSICAL THEORY

Division of labour:• The work must be divided to obtain clear-

cut specialization with a view to improving the performance of individuals in the organization.

• This is made possible by dividing the work in to activities and sub activities in the process and through differentiation leading it to the objectives

CLASSICAL THEORY

• Scalar and functional processes:• Its based on the assumption of chain of

command through out the organisation.• It refers to the growth of chain of

command, delegation of authority, unity of command and the obligation to report.

• Scalar chain generates superior-subordianate relationship.

CLASSICAL THEORY

• Functional process refers to the division of organization in to specialized parts and the regrouping of the parts in to compatible units. e.g.) marketing unit, production unit.

CLASSICAL THEORY

• Five basic components of scalar and functional processes and they are:

• Departmentation• Coordination by hierarchy• Unity of command• Delegation of authority• Line and staff relationships

CLASSICAL THEORYa) DEPARTMENTATION:• The process of dividing the work of the organisation

in to various units or departments.• There are many bases or types of departmentation.

The commonly used bases are:• Functional• Product• Territory• Processes• Customer• Time

CLASSICAL THEORY

b) Functional:• Grouping of common or homogeneous

activities to form an organisation unit.• Units are organised around common

functions. there will be both basic and secondary functions.

• Usually seen in large organisations.

CLASSICAL THEORY

c) Product Departmentation:• Grouping together of all activities

necessary to manufacture a product or product line.

• Preferred in cases of product expansion and diversification and high valued products like automobiles, electronics etc.

CLASSICAL THEORY

d)Territorial/ Geographical Departmentation:

• Those having activities which are physically or geographically spread such as banking,insurance, transportation etc.

• All activities in a given area of operations are grouped in to zones, divisions, branches etc.

CLASSICAL THEORY

e) Process Departmentation:• When the production activities involves the

use of several distinctive processes, these can be used as the base for grouping of activities.

• Activities may be textiles, oil production etc.

CLASSICAL THEORY

f) Customer: • customer based departmentation is

basically market-oriented in which departments are created around the market served or around marketing channels.

• Eg) pharmaceutical company supplying to hospitals, government, retail stores etc

CLASSICAL THEORY

g) Time • The work is been divided in to

shifts.• Eg) call centre

CLASSICAL THEORY

• COORDINATION BY HIERARCHY:• Coordiantion can be achieved by hierarchy

or chain of command. Implies that every one from bottom to top should have a superior to whom he is accountable.

CLASSICAL THEORY

• Unity of command:• A person in the organisation should

receive orders from only one superior.• Delegation of Authority:• Means authorization to an individual for

making decisions.

CLASSICAL THEORY

• LINE AND STAFF REALTIONSHIP:• Line relationship exist between the

superior and subordinate, where superior can direct the activities of subordiante.

• Staff relationship involves tendering advise by staff personnel to line managers. It is not obligatory on the line managers to carry the work according to the advice.

CLASSICAL THEORY

3) STRUCTURE:• It is the framework of the formal relationship

amoung various tasks, activities, and people in the organisation.

• The basic element in classical theory is position. These positions are grouped horizontally and vertically and then authority is delegated and based on the distribution organisational structure will be centralized or decentralized.

CLASSICAL THEORY

4) SPAN OF CONTROL:The number of subordinates which

can be effectively supervised by a superior.

NEOCLASSICAL THEORYExplains the Significance of human beings in

the organisation structure.1.Organisation situation should be viewed in social,

economical and technical terms2.Organisation is a social system3.Presence of both formal and informal organisation4. Integration between individuals and organisation5.Team work and co-operation amoung people.6.Etc…

NEOCLASSICAL THEORY

• Emphasis is given on:• Flat structure• Decentralization• Informal organization

NEOCLASSICAL THEORY1. Flat Structure:• Flat structure with wide span of control is

more suitable for motivating human beings in the organisation.

• Communication chain is shorter• Free from hierarchical control as against

tall structure.

NEOCLASSICAL THEORY1. Decentralization:• In a decentralized organization,

management consciously attempts to spread authority to the lower organization levels.

• Decentralization is the systematic effort to delegate all authority to the lowest levels except that which can only be exercised at central leadership level. The power is distributed among the subordinates.

NEOCLASSICAL THEORY• Related to flat structure as wild span of

control will result in to horizontal increase of people.

NEOCLASSICAL THEORY• Informal organisation:• It is created because of the limitations of

formal orgnisation to fulfill the members needs particularly the psychological needs.

• The behaviour of the members is determined with interaction of both formal and informal organisation.

• Manager cannot control informal organisation, but he should achieve organisational objecteives through the best use of this.

MODERN ORGANISATIONAL THEORY(Systems Approach)

• Scientific way of explaining a complex organisation.

• The systems approach of organisational design explains subsystems in organisation and their linking and structural arrangement.

MODERN ORGANISATIONAL THEORY(Systems Approach)

Subsystems in the organization:Every system has a subsystem which are

interrelated to constitute system as entity.Organizations are systems, which contains

various subsystems.Each subsystems is identified by certain

objectives, processes, roles, structures and norms of conduct.

Subsystems are all dependent to each other.

MODERN ORGANISATIONAL THEORY(Systems Approach

• These subsystems interact and create new patterns of behavior.

• This emerged behavior will influence all other subsystems, even if its positive or negative.


Important Subsytems are:• Technical subsystem• Social subsystem• Power subsystem• Managerial subsystem


• Technical Subsystem:• Refers to the knowledge required for the

performance of tasks, including the techniques used in the transformation of inputs in to outputs.

• Technical system also constitutes the formal arrangement of functions, relationships and behavior to be performed under the system although it cannot fully explain it.


• Social Subsystem:• Every organization has a social system

which is composed of individuals and groups in interaction.

• Interaction will be informal in nature.• Certain norms of behaviour and

satisfaction of psycological needs has been expected from others in the group.


• These expectations would modify their behavior according to group norms and the group modify according to individual personality factors.


• Power Subsystem:• Power is one’s ability to influence others to

achieve desired results.• Power distribution is in both formal and

informal way.• Power subsystem is important to transform

a decision into action in the organization.• People have varying degrees of success as

there is varying degrees of control on power


• Managerial Subsystem:• Involves two processes: operation, review and

control.• Operation refers to conversion of inputs into

outputs. ( known as conversion process)• Inputs as information, materials and energy

which would be put in to action to attain results• Review and control is to make sure that it is

going as it has been planned.

Forms of organisation• Forms of the organization is based on the

organisation structure.• Organisation structure is the pattern of

relationships among various components or parts of the organisation.This prescribes the relationship amoung various activities and positions

• Two forms in organisation:• Informal • Formal

Formal Organisation

Formal organisations refers to the structure of well-defined jobs, each

bearing a defenite authority, responsibility and accountability.

Formal organisation• Characteristics:

organisational structure is designed by the top management to fulfill objectives

• Organisational structure is baaed up on the principle of division of labour

• The organization concentrates more on the performance of job and not on the individuals performing the jobs.

• Based on the concept of authority and responsibility people are placed in hierarchy and their status is determined accordingly.

Informal Organization

It refers to the natural grouping of people on the basis of some similarity in an organisation.

Informal Organization• Characteristics:• It’s a natural outcome at work place, its not

designed and planned.• These organisations are created on the basis of

some similarity like age, sex, religion, origin, characteristics etc.

• Membership is voluntary. There can be more than one informal orgsnisation for a member.

• Behaviour of the members of the informal organization is controlled and co-ordinated by group norms.

Line organisation Structure• One of the oldest form of structure.• Known as scalar, or vertical organisation.• Single head to command, ultimate

responsibility rest up on him, although authority can be delegated.

• Two ways of organization design.• Pure line organization• Departmental line organisation

Pure line organisation• Similar activities are performed at a

particular level.• Each group of activities is self contained

unit and is able to perform the assigned activities with out assistance.

Departmental line organisation

• Entire activities are divided in to different departments on the basis of similarity of activities.

• Each department is placed under one departmental superintendent.

• All the persons in the department are controlled by head.

• The objective of this form is to have uniform control, authority and responsibility.

Line organisation Structure• Characteristics: • Lines of authority and instructions are vertical.• The unity of command is maintained in a straight

and unbroken line• All persons at the same level of organization

are independent of each other.• There si authority and responsibility for all the

positions limiting the area of action by a particular position holder.

Line and Staff organization Structure

• Refers to a pattern in which staff speciallists advise line managers to perform their duties.

• The staff positions or departments are of purely advisory nature.

• They have the right to recommend but no authority to enforce their performance on other departments.

Line and Staff organization Structure

• To make line and staff organisations clear the activities can be classified in to two:

1. Direct activities in its contribution to the organisational overall objectives

2. Indirect activities in its contribution to objectives

• The departments performing direct group of activities are line organisation.

• The departments performing indirect group of activities are staff organisation.

Line and Staff Relationship• Line Relationship:• It is the direct relationship between a superior

and his subordinate• It works on follows:• As a chain on command (one head and

control)• As a chain of communication (upward and

downward communication)• As a carrier of Responsibility (each person is

accountable for the work assigned)

Line and Staff Relationship• Staff Relationship:• Staff personal have the authority over line

personnel. The exercise of his authority depends on the degree of authority delegated.

• Staff authority is in following forms:• Advisory staff authority• Concurring Staff authority• Control staff authority• Functional staff authority

Line and Staff Relationship• Advisory Staff authority:• Pure advisory relationship with line

managers.• Advisory staff manager studies the

problem and provides advice, assistance, suggestions and information on it.

• To accept or reject the suggestions depends on the line managers.

Line and Staff Relationship• Concurring staff authority:• When a control on some operations is

important then the staff man is given authority as to decide on the action to be taken.

• E.g.) Quality control inspector must check on the raw materials before they move to the next stage of production.

Line and Staff Relationship• Control Staff Authority:• Staff authority who has direct and indirect

control over other units in an organisation, through policies procedures etc set by the organisation.Eg) quality inspection manager have authority on the products to meet the quality standards, but it cant directly engage in production.

Line and Staff Relationship• Functional Staff authority:• Formal technique for extending the

influence of staff personnel over line mangers.

• These orders will be those which holds competence.

• Eg) Chief managers having control over departmental heads through which line managers can be influenced.

Span of Management• Is also known as span of control or span of supervision.• It refers to the number of subordinates who can be

effectively managed under a superior.• Researches have suggested that optimal span is likely

to be in the range of 5-10.• Larger spans 8-10

There are three types of superior subordinate relationship:

• Direct single relationship• Direct group relationship• Cross relationship

Span of Management• Direct single relationship:• Direct individual contact of the superior

with his subordinates.• Eg) if there are 3 subordiantes x, y, z

under one superior A, there will be three direct single relationship.

Span of Management

• Direct group relationship:• It is the direct group relationship between the

superior and subordinate in all possible combinations.

• The superiors may consult his subordinates with one or more providing assistance.

• With three subordinates there will be nine such relationships like X with Y,X with Z, Y with Z… with the superior associated with all group.

Span of Management

• Cross relationship: • Arise because of mutual interaction of

subordinates working under the common superior, such as x and Y, X and Z, Y and X.

• The relationship is quite different • There are six such relationship with three

subordinates.

Authority

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Principles of Management