Study MaterialOn
PGDHHM Correspondence Course
PRINCIPLES OF MANAGEMENT
COMPILED BYProf. A.M. Joshi
B.Sc., CAIIB, DFM, MPM
Symbiosis Centre of Health Care (SCHC)
AUTHOR
Printed and Published on behalf of the Symbiosis Centre of Health Care byDr. Rajiv Yeravdekar, Hon. Director, SCHC.
Printed at Gayatri Graphics, Pune - 411 037.
Prof. A. M. JoshiB.Sc., CAIIB, DFM, MPMVisiting Faculty SIMS
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other means, without permission in writing from the Symbiosis Centre of Health Care.
PRINCIPLES OF MANAGEMENT
CONTENTS
No. Chapter Page No.
1. Principles of Management ....................................................................1
2. Evolution of Management Thought...................................................13
3. Functions of Management Planning .................................................27
4. Functions of Management Organizing .............................................37
5. Functions of Management Directing .................................................51
6. Functions of Management Coltrolling...............................................57
7. Recent Trends in Management ...........................................................65
8. References .............................................................................................78
About the Author :
Prof.A.M. Joshi, B.Sc., CAIIB, DFM, MPM worked with State Bank of India for 30Years in various capacities. Presently engaged in management education on training in mangement institutes, training centres of banks and corporate concerns
UNIT 1
PRINCIPLES OF MANAGEMENT
CONTENTS
• Introduction
• Definitions of management
• Management – Art or Science ?
• Management functions / process
• Managerial levels
• Managerial skills
• Managerial roles
• Significance of management
OBJECTIVES
After reading this unit, you should be able
• to know the concept and nature of management.
• to understand managerial levels, skills and roles.
• to describe the process of management.
• to explain the significance of management.
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INTRODUCTION
Managing is the most important area of human activity. It is seen in every walk of life.
When people attend some function, go to a musical orchestra, get admitted to a hospital
for treatment, they often express their happiness or unhappiness, satisfaction or dis-
satisfaction about it. Shri. R. K. Laxman, has very effectively depicted this in his cartoon
(Refer page 11). It clearly indicates that mere infrastructure, latest technology,
knowledgeable and experienced doctors do not make a good hospital. What is required
is the co-ordination of efforts of people and proper synchronization of all activities. This
co-ordination of individual efforts to achieve the predetermined goals itself is management.
Ever since people realized that certain goals / aims could not be achieved as individuals,
they started forming the groups. This necessitated the co-ordination of individual efforts.
Thus management can be said as organized / coordinated efforts so as to accomplish
the tasks, goals or results.
Management is a critical element in the economic growth of a country. It brings together
four factors of production viz. men, machines, materials and money. Peter Drucker says
that without management, a country’s resources remain as resources only and never
become production. We will now study few definitions of management.
Mary Parker Follett defines management as ‘an art of getting things done through
people.’
Koontz and Weihrich define management as ‘the process of designing and maintaining
an environment in which individuals, working together in groups, efficiently accomplish
selected aims.’
It will be observed, from the above definitions that management means
- achieving predetermined goals
- through and with people
- efficiently and effectively.
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Otherwise there will be confusion and chaos.
Thus management is essential in all organized efforts irrespective of the nature of activity.
It is a process of transformation, wherein resources / inputs are converted into products
/ services or outputs.
It is equally important in manufacturing industry or service industry. It is a life giving
element in every organization e.g. a government department, a company, etc.
Management is the function of not only the Chairman or CEO but of all the managers,
supervisors and those responsible for getting the work done. People who are responsible
to help others to achieve their goals are managers. Various thinkers / authors have defined
the term managers. However, the version given by Peter Drucker is considered as the
most appropriate. He defines a manager as ‘one who is responsible for the work of
others’. He says ‘the manager directs the work of others. He does his work by getting
other people to do theirs’.
Organization : Two or more people who work together in a structured way to achieve
a specific goal or a set of goals.
inputs / resourcestransformation
outputs / products / services
Goals : The objectives, purpose that an organization strives to achieve. They give a
sense of direction to the organization and its members. Organizations always have more
than one goal.
Organizations
Formal Business, Govt. Agencies,
Hospitals, etc.
Informal Families, Certain
Voluntary Groups etc.
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We can conclude that management is an attempt to create a desirable future, keeping
the past and present in mind. It produces consequences and effects over a period of
time.
MANAGEMENT : SCIENCE OR AN ART ?
People always debate whether management is a science or an art.
Science is organized, systematized and acquired knowledge. It is a systematic way of
doing things. It is why of a phenomenon. On the other hand an art is an application of
knowledge, how of a phenomenon. It is the most creative human activity.
The most productive art is always based on understanding science underlying it. Thus
science and art are not mutually exclusive but they are complementary. Management is
synthesis of both art as well as science. e.g. a surgeon performing an operation. He
may be knowing all the theory but its application is an art. The way he uses his scalpel
will make him a successful surgeon.
Management as a science can be learnt through the study of basic rules and formulas,
but as an art it is acquired through practice, trial and error and years of experience.
While management as a science is concerned with efficient use of resources and
equipments, as an art it deals with people.
Planning
Organizing
Directing
Controlling
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MANAGEMENT FUNCTIONS
We have earlier seen that management is a process of transformation. It consists of
various sub-processes, which also form the functions of the managers. While Stoner
identifies these processes as planning, organizing, leading and controlling, Koontz and
Weihrich have added yet one more function viz staffing. Luther Gullick has coined a
word POSDCORB to describe these functions as Planning, Organizing, Staffing, Directing,
Coordinating, Reporting and Budgeting.
Thus management process can be diagrammatically shown as under :
Though these functions will be dealt with in detail in the following pages, it will be
worthwhile to describe them briefly.
Planning : It is determining in advance, what should be done, looking ahead and
preparing for future. It is deciding the objectives and charting out the methods to achieve
them. It is what, how, when, where and by whom of doing.
Organizing : A process of arranging and allocating work, authority and resources among
the members of organization to achieve the goals.
Staffing : Providing right persons for the right job in right number, at right place and
right time. It involves recruitment, selection and training.
Directing : Moving towards the objectives. Leading, influencing, motivating,
communicating come under this head.
Controlling : This enables compliance and ensures that things are done in conformity
with the adopted plans.
MANAGEMENT / MANAGERIAL LEVELS
In management, there are three broad levels viz. first line / junior management, middle
management and top management.
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First level / Junior management : It is the lowermost level in managerial hierarchy.
These managers direct non-managerial employees. They do not supervise other managers.
In some organizations they are called as supervisors also. They are white-collar
supervisors, one step above the rank and file.
Middle management : This consists of more than one level in an organization. They
direct activities of junior managers and at times those of employees also. Vast and diverse
group of managers of various departments come under this head.
Top management : It consists of a comparatively small group which is responsible for
overall management of the organization. They are referred as Chairman, President, Vice-
president, Chief Executive Officer, Managing Director, Directors, etc. They normally
establish policies, strategies, coordinate activities and guide the people.
MANAGERIAL LEVELS AND SKILLS
In order to effectively discharge their functions, the managers at all levels require certain
skills. A skill can be defined as an ability to translate knowledge into action. It is the
expertness or dexterity, which enables them to handle the situation in a desired manner.
Skills are not necessarily inborn as was believed earlier but they can be learnt and
developed.
Henri Fayol has identified three basic skills necessary for all managers. They are technical
skills, human skills and conceptual skills. They deal with things, people and ideas
respectively. Technical and conceptual skills are required for decision making whereas
human (relations) skills are necessary for a good leader.
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Top Management
Middle Management
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Technical skills : It means understanding the nature of the job, process and technique.
They consist of methods and processes, procedures and functional areas, e.g. engineers,
drivers, surgeons, accountants have technical skills. In short it is the job related
knowledge. These skills are necessary for lower level / front line managers, supervisors,
etc. Its relative importance goes on reducing as a manager moves up the hierarchical
ladder.
Human skills : They comprise of the ability to interact effectively with people at all
levels. It is the ability to work with people. These skills enable managers to recognize,
feelings, sentiments, aspirations of others, judge possible reactions of their actions and
motivate people.
Conceptual skills : Ability to take broad & futuristic view, to analyse various forces
and ability to assess environment and deciding about the changes to be implemented. It
is the creative and innovative ability and having a vision. These skills enable them to set
goals for themselves, the organization and the people. This is required more in top
management.
Even though all these skills are necessary for all the managers, their relative importance
depends mainly upon the rank of the manager in the organization.
Technical skill : Importance at lower levels.
Human skill : Though needed at all levels but primarily needed at middle level.
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Conceptual skill : Mainly for top level; importance rises as one goes up the rungs of
hierarchy.
This will indicate as to how people at top can shift from one industry / activity to another
without reduction in their efficiency. e.g. Mr. Ravi Venkateshan who had all along been
with Pune based Cummins India Ltd. (dealing in diesel engines) moved to Indian arm
of Microsoft (dealing in IT sector). The conceptual skill of these people makes up for
their lack of technical skills.
Management and administration : Often these words are used synonymously. Peter
Drucker has given an appropriate differentiation in them as under :
Management - governance of business enterprise
Administration - governance of non-business enterprise (govt. depts. army etc.)
MANAGERIAL ROLES
A manager has to ensure that the goals of the organization are achieved effectively. For
that he has to perform the functions of planning, organizing, directing and controlling.
However, he has to perform many more activities / functions. Henry Mintzberg studied
and observed what five top executives actually did during the course of their work. He
saw that these executives in addition to the above functions were performing some more
activities or roles. He has described them as managerial roles in his book ‘ The nature
of managerial work’. According to him they perform a series of roles which are as under:
1. Interpersonal Roles
a. The figurehead role : The Manager / CEO performs symbolic duties as
the head of the organization. These are ceremonial and social duties like
receiving the visiting dignitaries, inaugurating / launching new products / new
equipments etc.
b. The leader role : He establishes the work atmosphere, motivates and
encourages the employees to achieve the results.
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c. The liaison role : He develops and maintains webs of contacts outside
the organization.
2. Informational Role
a. The monitor role : He collects all types of information relevant and useful
to the organization.
b. The disseminator role : He circulates, transmits the information collected
from outside to the members in the organization.
c. The spokesman role : He transmit information from inside the organization
to the outsiders.
3. Decisional role
a. The entrepreneur role : Innovation, seeking new ideas and initiating
controlled change in the organization to adapt to the changing environment
come under this role.
b. The disturbance handler role : This is like a fire fighter role. A manager
has to seek solutions to the unanticipated and unexpected problems and to
deal with sudden changes.
c. The resource allocator role : In this role, he makes decisions regarding
the use of organizational resources. Division of work, delegation etc. come
under this role.
d. The negotiator role : Here he deals with other organizations, agencies as
well as individuals etc.
The success of a manager will depend upon his ability to discharge these roles effectively.
SIGNIFICANCE / IMPORTANCE OF STUDY OF MANAGEMENT
To reiterate the words of Peter Drucker, ‘management is the dynamic, life giving element
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in every organization’. It is essential in all organized efforts. A business is a system created
to satisfy the needs and desires of the consumers and the society. It has to generate
surplus on a continuous basis. It is a economic pulse of a nation striving to improve the
economy of the nation and the society’s standard of living. Business is a product of
environment comprising of several internal, external forces. Success of a business depends
upon how well these forces are analysed, synthesized and integrated. We can describe
today’s environment in this acronym LPG meaning thereby liberalization, privatization and
globalization. The days of protection, licensing and nationalization are no more. This has
drastically changed the role of management. Stiff and cutthroat competition is observed
in every filed. This has led to the customer and his satisfaction gaining more and more
importance. People are no longer prepared to settle for inferior products and services
when they have access to excellent products and services elsewhere. As such quality,
price, delivery schedule and after sales service have become important. This has
necessitated a drastic shift in the working of the organizations and the style of managing.
As such there is a need for the organizations to be – customer driven, cost effective,
fast and flexible and continuously improving. Otherwise they will not be able to sustain
in this highly competitive global environment. ‘Survival of the fittest’, ‘perform or perish’
have become today’s business Mantras. Hence there is a paramount need to manage
the affairs of an organization in such a way that will ensure its continuous success. This
will be possible through committed and involved employees. Dynamic and progressive
management will be able to address all these challenges. This is more so in hospital
management and health care services. Health is fundamental to quality of life. Hence
health care plays an important part in our lives. The delivery of health services to the
community is highly visible and open to criticism. The human factor is very important in
respect of both the consumers and providers of care. This field also now faces a very
stiff competition. As such efficient and effective management will only ensure that the
organizations providing health care services are able to flourish in this environment.
Organizations in the ‘also ran’ category will not be able to survive. Therefore the study
and application of the principles of management has become essential. One has to
remember that 21st century is going to be the century of customers and hence all the
organizations will have to gear up for meeting this challenge.
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LET US SUM UP
Management is an art of getting things done through others. It is organized efforts so
as to achieve the predetermined goals. It is a continuous process made up of various
functions like planning, organizing, directing and controlling. A manager is one who is
responsible for getting work done through people. In order to discharge his functions
effectively, he should possess technical, human and conceptual skills. The managerial
hierarchy consists of top, middle and junior levels and they have to exhibit certain
managerial roles. Management is needed in every walk of life. It is synthesis of art and
science. Without management there will be chaos. Management occupies a significant
place in the highly competitive global environment in the 21st century.
Questions
1. ‘Management is an art of getting things done through others’ Discuss.
2. Whether management is a science or art?
3. What is meant by management process? Describe the various functions of
management.
4. Explain the managerial levels and the skills necessary at these levels.
5. Describe the managerial roles as suggested by Henry Mintzberg.
6. Explain the significance of management with a special reference to the 21st century.
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He was rushed in only yesterday and now is rushing out? You can’t blame the poorfellow, the conditions here are so bad!
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Evolution of Management Thought
UNIT 2
EVOLUTION OF MANAGEMENT THOUGHT
CONTENTS
• Early approaches
• Scientific theory of Taylor
• Modern operational management of Fayol
• Behavioural and social approach with special reference to Elton Mayo
• Peter Drucker – The Management Guru
• Present scenario
OBJECTIVES
After reading this unit, your should be able
• to know the early approaches of management thought.
• to understand the management theories of Taylor, Fayol and Mayo.
• to know the Management Guru ‘Peter Drucker’ and present scenario.
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EVOLUTION OF MANAGEMENT THOUGHT
Management and organizations are the products of historical and social times and places.
In fact the management thought emerged from the days when people first attempted to
achieve their goals by working together in groups. Management in one form or other
was being practised since ancient times. The Pyramids of Egypt, Angakorvat temples of
South East Asia, Ajanta-Ellora caves would not have been possible without management.
We find some references about management in the writings of few early thinkers. Sun-
Tzu, the famous Chinese Philosopher in his book ‘Art of War’, written about more than
2000 years back, prescribed certain management dictums. On the Indian scene, we have
Arya Chanakya’s ‘Arthashastra’ and other works. We find various references about
governance (which is nothing but management) in the Mahabharat by Vedvyas.
In the mediaeval period Machiavelli, an Italian, in the 16th century in his books ‘The
Prince’ and ‘Discourses’ described various principles, which hold good even today. The
Roman Catholic Church, with formal structure of hierarchy, was practising all these even
before the word management came into use. However modern management theories
emerged in the early 20th century, with the works of Frederic Taylor and Henri Fayol.
We know that Industrial Revolution in the 2nd half of the 18th Century ushered the factory
system. Two major events led to this, first being the invention of printing press by
Guttenberg in 1455. This resulted in the spread of knowledge in European continent.
The second was the invention of steam engine by James Watt in 1769. The power of
steam was used for work in the factories and railways. In fact the railway conquered
the distance in a way. People started moving out, mobility was increased expanding the
horizons of people. The factory system resulted in mass-production and adventurous
entrepreneurs began establishing mills and factories. It was at this stage that some of
them introduced certain management techniques.
James Watt Junior and Mathew Boulton brought in market research, forecasting,
production planning, standardization of products etc. In the personnel area they developed
worker and managerial training, work-study, development programmes, etc.
Robert Owen :th One of the most successful industrialists in the early 19 century, Robert
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Owen is considered as a pioneer of management. During those days, the situation of
workers was very bad and pitiable. Long hours of labour, very very low wages and
that too paid irregularly, lack of safety and hygiene requirements, child and women labour
were rampant everywhere. In short the employers exploited the employees. They were
treated as mere inert instruments of production. On this background Robert Owen
attempted many changes. He improved their working conditions, raised the minimum
working age of children, reduced working hours, provided meals and constructed houses
for them, etc. He was not a philanthropist. He believed that the good personnel
management pays dividends to the employer. As such he is rightly considered as ‘the
father of modern personnel management’. The major thinking in management thought was
propagated by Frederick Taylor and Henri Fayol in the early 20th Century.
FREDERICK TAYLOR AND SCIENTIFIC MANAGEMENT
Even though Industrial Revolution resulted in the tremendous increase in factories and
mills, the then managers were merely keeping a close watch on the workers. No one
thought about ways and means to improve the productivity. If they observed that a
worker was producing less he was severely scolded. But who was to decide whether
the productivity was less or more as there were no parameters or standards. Taylor,
amidst this chaotic situation laid down the foundation of scientific management by his
famous ‘time and motion study’.
Frederick Winslow Taylor (1856-1915) came from a very affluent family. He gave up
college and started working as an apprentice pattern maker and machinist in 1875. In
1878, he joined Midvale Steel Works in Philadelphia as a machinist. Simultaneously he
studied engineering in the evening classes and earned an engineering degree. He went
on rising in the company and rose to the position of Chief Engineer in 1884. He invented
high speed steel cutting tools and patented them. He had about 100 such patents to his
credit. The shape of present lawn tennis racquet is the contribution of Taylor. He also
worked as a Consulting Engineer. His experience as an apprentice, a common worker,
foreman and Chief Engineer gave him the opportunity to know at first hand the problems
faced by the workers and their attitudes. After earning huge money he retired at the
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age of 45 years and spent the rest of his life in honorary consulting and propagating his
ideas of scientific management. He has made great impact on the development of
management thought. Throughout his life his concern was to increase efficiency of
production. He was not merely interested in reducing the costs and increasing the profits
but he desired to pass on the benefits of higher productivity and profits to the workers
through increased pay. He observed that workers used to produce less since they were
afraid that if they produced more, prices would fall, profits would go down and as such
they would lose their jobs. Taylor also observed that both the employers and workers
were not aware of ‘fair day’s work’ and ‘fair day’s pay’. He believed that productivity
was the right answer to higher profits and higher wages. According to him productivity
could be improved by application of scientific method instead of ‘rule of thumb’ practices.
Thus scientific knowledge and methods were to replace the traditional rule of thumb
methods and as such his theory is known as the theory of scientific management.
TAYLOR’S CONTRIBUTIONS
i. Time and motion study : Under this, he measured each motion in respect of
the time, with the help of a stopwatch. Thus he could arrive at a standard measure
for carrying out a given job and the best way to do it.
ii. Differential payment : We have seen earlier that the workers used to produce
much below their capacity and potential. As such he introduced a new method to
establish linkage between production and incentives. Here a worker was paid at
a lower rate for standard production and at a higher rate if he exceeded the
standard. He thought that this ‘differential payment’ would motivate the workers
to produce more.
iii. Drastic reorganization of supervision : Those days the supervisors used to
merely allot the work. The workers used to plan their work, select the tools and
the way / order in which to complete the job. The supervisor used only to tell
‘what to do and not’ ‘how to do’. Taylor suggested that foreman / supervisor
should plan the work and should give instructions to the workers as to how to
do it. He also suggested that for different activities, there should be separate
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supervisors. Thus he introduced the principles of (a) separation of planning and
doing and (b) functional foremanship respectively.
iv. Scientific recruitment and training : Taylor stressed on the need for scientific
selection and development of workers. He felt that management should develop
and train every worker to enable him to bring out his best. This would make the
work more enjoyable and interesting than in the past.
v. Intimate friendly cooperation between management and workers : Taylor
favoured harmonious relations between the management and the workers. He said
that ‘complete mental revolution’ both on the part of the management and workers
was needed. Taylor propagated all these thoughts in his books ‘Shop management’
and ‘The Principles of Scientific management’ published in 1903 and 1911
respectively. He created an awareness that tools and movements involved in a task
could be made more rational and efficient. This approach professionalised
management. The scientific management developed a rational approach to solving
organization problems.
LIMITATIONS AND CRITICISM
This theory was widely appreciated as well as severely criticized. His assumption that
incentives are strong motivators has been proved wrong. Money does not attract a person
beyond a certain limit. Time and motion study was not accepted as entirely scientific.
Two individuals may take different time to perform the same job and do it in different
ways. There cannot be ‘the way’ to do a job. Better tools, equipments and machines,
improved techniques rendered workers as excess. Some of them lost their jobs and
found it difficult to get alternate jobs. They wrongly attributed this loss of jobs to Taylors
theory. As such there was a wide resentment among them. Consequently he was
summoned to appear before a committee of House of Representatives to justify his theory.
His stand was published in ‘Testimony before the special House Committee’ in 1912.
In spite of the criticism, the theory, for the first time tried to rationalize and professionalise
the management by a scientific approach. As such it occupies an important place in the
development of management thought.
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The theory was further refined and developed by his followers, notable being Henry
Gantt, Frank and Lillian Gilberth thought various modifications.
ADMINISTRATIVE / MODERN OPERATIONAL MANAGEMENT
While Taylor is considered as the ‘Father of Scientific Management’, Henri Fayol (1841-
1925) is known as ‘The Father of Administrative / Operational Management’. This theory
lays focus on development of administrative principles applicable to managerial levels.
Henri Fayol was a French mining engineer and while working in a local mining company
rose to the rank of managing director. Later on he became a leading industrialist. He,
for the first time advocated that management can be and should be taught. He presented
his famous functional approach to management in 1908, which contained a systematic
analysis of the process of management. He wrote another book on management in 1916.
However both these works were in French and could be translated and circulated in
English in the 1940s. As such his work was not known to the other thinkers.
He classified the activities of Industrial Undertakings into the following six groups :-
Technical : production, manufacture, adaptation
Commercial : buying, selling, exchange.
Financial : search for and optimum use of capital,
Accounting : stock taking, balance sheets, costs and statistics.
Security : protection of property and persons.
Managerial : planning, organizing, commanding, coordinating and controlling.
Fayol observed that these activities are performed in every kind of business. While the
first five were better known, the sixth viz managerial was little known and he concentrated
on its analysis.
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According to Fayol, a manager, in order to be effective should have the qualities given
below :
Physical : health, vigour.
Mental : ability to understand and learn, judgment, adaptation.
Moral : energy, firmness, initiative, loyalty, dignity, willingness to accept
responsibility.
Educational : general acquaintance.
Technical : pertaining to the function.
Experience : which comes out of work proper.
Fayol, based upon his experience, came out with fourteen principles of management;
These according to him, are flexible and not rigid, which can be applied irrespective of
changing and specific conditions. These principles are as under :
1. Division of labour : In managerial process, various functions like planning,
controlling, organizing, directing etc. cannot be performed efficiently by a single
person or group. As such they should be entrusted to different persons. This
specialisation is necessary for efficiency of labour. This increases skill and produces
better and more work. Fayol applies this principle to all kinds of work, technical
as well as managerial.
2. Authority and responsibility : Since management means getting work done
through people, it implies that manger who has the responsibility to get the work
done, should also have authority to command obedience. He may exercise formal
authority and personal power. The former is derived from the official position,
whereas the latter is the result of knowledge, intelligence, ability to lead, moral
worth, etc. Responsibility is closely linked to authority. It arises when authority is
exercised.
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3. Discipline : Discipline is essential for the smooth running of business. By discipline,
we mean observance of rules and regulations, compliance with systems and
procedures, respect for superiors etc. Good supervision, clear and fair terms of
employment and judicious application of penalties can ensure discipline.
4. Unity of command : This implies that the employees should receive instructions,
directions or orders from one supervisor, manager only. If they receive orders from
more than on supervisor, they may be confused and this may lead to chaos.
5. Unity of direction : Those activities or operations within the organization that
have the same objective should be directed by only one manger using one plan.
e.g. the personnel deptt. in a company should not have two managers each with
a different hiring policy.
6. Subordination of individual interest to general interest : In any organization,
the interests of the organization should get priority over the interests of the individual
member of the organization.
7. Remuneration : Remuneration and methods of payment should be fair and should
afford maximum possible satisfaction to both the employees and the employer.
8. Centralisation : Centralisation means that decision making is concentrated in the
superiors as against decentralization where the sub-ordinates have an increasing
role in decision making. According to Fayol, the responsibility of centralization rests
with the manager and he will determine depending upon the circumstances, the
extent to which the role can be passed on to the sub-ordinates.
9. Scalar Chain : This means that the hierarchy of authority starts from the top level
and extends to the lowest level. The orders should pass through the proper channel
along the scalar chain. However, in case of need, it can be short-circuited.
10. Order : It means that things should be in proper order. This requires special
efforts. The principle of ‘place for everything and everything in place’ should be
practised in every organization.
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11. Equity : It means fair treatment without any kind of discrimination. This comes
from combination of kindness and justice on the part of the managers while dealing
with the sub-ordinates.
12. Stability of tenure : If the workers are assured of job security, they will be
motivated to perform better. In case of insecurity of job, their morale will be low,
which will affect their performance adversely and they will not have attachment
with the organisation.
13. Initiative : Employees should be given freedom to conceive and carryout their
ideas and plans, even if there are mistakes in their work. This will encourage them
to innovate and take decisions.
14. Esprit de corps : Promoting team spirit will give the organization a sense of unity
and unity is strength. Fayol says that even small factors should help to develop
team spirit. He suggested use of verbal communication to develop team spirit.
Thus Fayol for the first time systematized the managerial behaviour. While Taylor was
more concerned about shop floor management, Fayol focused on total organizational
management as this area was hitherto neglected. Prior to Fayol, there was a belief that
managers are born and not made. However, Fayol strongly advocated that management
can be taught and need not be inborn.
Thus like Taylor, Fayol’s theory forms an important milestone in the development of
management thought.
BEHAVIOURAL AND SOCIOLOGICAL APPROACHES
Taylor and Fayol laid the foundation of management thought. Various thinkers
based on the above theories, also started thinking about the management in different ways. It was
thought earlier that the employees are paid for their work and as such they have to
and should discharge their duties willingly and with involvement,. However, it was not
uniformly observed. It was seen that while some workers were sincere and enthusiastic,
others merely worked just to escape being scolded by the supervisors. They did not
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seem to be involved and committed. It appeared, therefore, that money alone was not
enough to inspire the workers to the best of their abilities. So what were these factors?
The study led to the development of industrial psychology. Hugo Munsterberg, was the
pioneer in this field and focused on the application of psychology to industry. His
objectives were to find out :
i. How to find people whose mental qualities are best suited for the work they
perform?
ii. What are the psychological conditions under which greatest and most satisfactory
output can be obtained from every individual?
iii. How a business can influence the workers so as to obtain best possible results?
Munsterberg published his views in his landmark book ‘Psychology and Industrial
Efficiencies’ in 1912. For his work Munsterberg is called as ‘The Father of Industrial
Psychology’.
Some thinkers like Max Weber (German), Vilfredo-Pareto (Italian) and others focused
on observing people as ‘products of group behaviour’. The views of these people had
considerable influence on Elton Mayo, F. J. Roethlisberger and others who carried out
the famous Hawthorne Experiments at the Hawthorne plant of Western Electric Co. in
Cicero, Illinois from 1927 to 1932. This plant employed 29000 workers to manufacture
telephone parts and equipments. The experiments were conducted to determine the
effects of working conditions and other factors on the productivity of the workers. They
were carried out in four parts as under :
i. Illumination experiments
ii. Relay assembly test room
iii. Interviewing programme
iv. Bank wiring test room
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Through these experiments it was observed that changes in working conditions basically
were not affecting productivity significantly. As such they thought that some other factors
were responsible for this. They found that improvement in productivity was due to social
factors like morale, sense of belonging etc. Elton Mayo laid emphasis on understanding
human behaviour, especially group behaviour and using interpersonal skills like motivating,
counselling, leading and communicating. This phenomenon is known as the Hawthorne
effect wherein people basically like to be noticed and recognized. This factor was the
famous human factor.
CONTRIBUTIONS OF HAWTHORNE EXPERIMENTS
• Business is a social system and not merely techno economic system. Therefore
social satisfaction of workers was necessary for effective production.
• There was no significant correlation between improved working conditions and high
production.
• Realisation that group behaviour and group pressure play an important role in
productivity.
• Monetary incentives did not work all the time; non-monetary rewards are also
needed and they are equally important.
• Democratic and participative style of leadership was more suitable than task
oriented leadership.
This behavioural and social approach to management was another important milestone
in the development of management thought.
Peter Drucker : With the business becoming more and more complex, different
management thinkers started studying management from various angles, dimensions and
perspectives. Earlier management was basically confined to manufacturing industries but
over a period of time service sector and later on even non-profit organisaions were
also included in business. New ideas and concepts emerged and various thinkers
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contributed to the development of management thought. The most important and
prominent position among them is held by Late Peter Drucker who is considered as a
legand, as a Guru, so far as management is concerned. He is the most prolific writer
on almost every aspect of management.
Peter Drucker was born in Vienna (Austria) in 1909 in an affluent family. He graduated
in 1927 and secured a degree of LLD in 1931 from the Frankfurt University. He started
teaching in Law and writing on topics related to Economics. He shifted to UK in 1933
and to USA in 1937 and lived there till his death in 2005. An assignment as a consultant
in General Motors, gave him an opportunity to study the aspects of top management
and this gave birth to his book ‘Concepts of the Corporation’ in 1946. Prior to that he
had written ‘The End of Economic Man’ and ‘The Future of Industrial Man’ in 1939
and 1942 respectively. In 1950 came ‘The Principles of Management’ followed by not
less than 25 books on management. ‘Managing in the New Society’ was published in
2002, at the age of 93.
His Contributions : He, for the first time, gave a most appropriate definition of a
manager as “One who is responsible for the work of others”. He called manager as a
dynamic, life-giving element in every business. According to him, the management has
to perform the following main functions :
i. to build an effective and vibrant team from the people so that they can bring out
their best. The manager has the responsibility to co-ordinate these efforts.
ii. to maintain a balance between the present and the future. The manager has to
mould the organization so as to adapt to the changing time.
Drucker has dealt with the desired skill of the manager as under –
a. Ability to analyse and assess
b. Ability to manage people
c. Ability to communicate effectively
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Peter Drucker pays maximum importance to the integrity of the manger. He gives first
preference to integrity as against intelligence. He prescribes ‘Management by Objectives’
(MBO). The approach was first proposed by him in his ‘The Practice of Management’
in 1954. Since then MBO has been very widely discussed. MBO refers to a formal
set of procedures that starts with setting the goals and thereafter planning for them and
achieving them. He has contributed to all areas of management specially management in
the 21st century, knowledge worker, management of non-profit organizations and so on.
Thus Peter Drucker occupies a unique position in modern management. Tom Peters, as
such has rightly observed that, ‘Our debts to Peter Drucker knows no limits’. The Guru
of modern management was active till his death in November 2005 at the age of 96.
His last book will be published posthumously in 2006.
PRESENT SCENARIO
In the subsequent period, globalisation, which led to stiff competition and created new
challenges in the field of management, gave rise to many more important management
thinkers. Tom Peters, Michael Porter, Jim Collins, Warren Bennis, C.K.Prahlad are a
few notable contributors. Stephan Covey has focused on ‘The Seven Habits of Highly
Effective People’. Jack Welch, the most influential executive of the 20th century, who
actually practised the principles of management in his ‘General Electric Co.’ has also
contributed in form of two books ‘Jack-Straight from the Guts’ and ‘Winning’. The
emphasis on Total Quality Management and other Japanese techniques has changed the
entire thinking of management. The 21st century will see many far-reaching concepts and
changes in the area of management.
LET US SUM UP
Management is very ancient phenomenon. It emerged when people realized that certain
goals could be achieved only when they acted together. However there were few
references in the ancient literature about management. Sun-Tzu, Arya Chanakya, etc were
the early contributors to the management thought. In the mediaeval period, Machiavelli
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propagated certain principles of management. The Church in fact was practising
management in their activities. However, the Industrial Revolution and resultant
establishment of factories, mills, etc led to the development of managerial thought in the
real sense. In the 20th century there was a real boost and many management thinkers
started studying the various aspects of management and significant contributions came
from them. Last decade and half of the 20th century and the present 21st century are
witnessing various revolutionary changes in management and managing in the 21st century
is going to be very very challenging.
Questions
1. Discuss the contributions of Henry Fayol to the management thought.
2. What is Scientific Management ? Explain the contribution and criticism in respect
of Taylor’s theory.
3. Discuss the Hawthorne experiments by Elton Mayo and significance thereof in the
area of management.
4. Explain the contributions of Peter Drucker.
5. Write short notes on –
a. Time and Motion study
b. Qualities desired of manager by Fayol
c. Management by Objectives
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Functions of Management Planning
Unit 3
FUNCTIONS OF MANAGEMENT PLANNING
CONTENTS
• Introduction
• Significance of planning
• Strategic and Tactical planning
• Objectives - characteristics of objectives
• Objectives – requirements and benefits
• Steps in planning
• Limitations of planning
• SWOT analysis
OBJECTIVES
After studying this unit, you should be able
• to understand the nature and importance of planning as a management
function
• to know the objectives of planning, their characteristics and benefits
• to learn the steps and limitations in planning
• to realize the importance of SWOT analysis
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We have earlier seen that, management is a process of transformation. It consists of
various sub-processes, which are also known as the functions of management. Planning,
Organising, Directing and Controlling are the various functions of management. In this
chapter, we will study the function of planning.
PLANNING
Planning is the most basic function of management. In fact it is the beginning of the
process of management. Management is seeking of goals and achieving them. This
requires prior arrangement of charting out the objectives and deciding as to how to
allocate the resources and identifying the people who will perform the jobs. This entire
process is known as planning. As such it is a must before all other managerial functions.
Planning is required everywhere. Without planning there will be chaos, which will result
in failure in a accomplishing the objectives. Thus planning is ‘thinking in advance’. It is
what, when, how and by whom of doing. It is defined as ‘choosing among the
alternatives’.
Planning is a continuous process. According to Koontz, planning and controlling are the
Siamese twins of management. As a navigator constantly checks whether the ship is going
in desired direction, manager should constantly monitor the progress of his plans and
initiate mid-way corrections if any. Thus a plan must be flexible so that changes can be
made depending upon the situations.
IMPORTANCE / SIGNIFICANCE OF PLANNING
i. Planning minimizes risks and uncertainties. Today’s business is complex and subject
to many forces, both external and internal. As such we can not rely solely on the
sixth sense or gut feeling and take any ad-hoc actions. Hence the importance of
planning. It provides a rational, fact based procedure to take decisions.
ii. Leads to success : Human behaviour is goal oriented. Goals give directions to
the efforts. Planning enables to perform better and leads to success. It is a
proactive process.
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iii. Focus on organization goals : It helps the employees and all others to focus
on organizational goals and activities. It enables to apply resources more efficiently.
iv. Facilitates control : Planning enables to achieve the goals set by management.
These goals work as the benchmark for comparison with actual performance. Thus
the activities can be controlled / monitored.
STRATEGIC AND TACTICAL PLANNING :
Strategic planning means deciding the major goals of the organization and policies to
achieve them. Tactical planning on the other hand is deciding about utilizing the available
resources to achieve the strategic goals. e.g. In view of increasing proportions of HIV /
AIDS, the hospital may decide to start a special cell / wing to provide preventive and
curative treatment for this dreaded disease. This will be a strategic decision and once it
is decided, the other detailed planning will amount to tactical planning. It involves deciding
how to deploy the resources of the organization. The points of distinction between them
can be described as under :
Strategic Planning
1. Deciding major goals and policies
as well as strategies to achieve
them
2. Done at top / higher level of
management
3. Long term view
4. Broad perspectives
5. Based on long term forecasts about
technology, environment, more
uncertain
Tactical Planning
1. Deciding detailed use of resources
and finer aspects of action
2. Done at lower level of management
3. Short term view
4. Minute & detailed perspectives
5. Based on past performance and
experience thereof, lesser uncertainty
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However, these differences are not very hard and fast. They are not like watertight
compartments.
OBJECTIVES
Planning starts with deciding objectives to be achieved. They form the foundation or
basis of planning function. Objectives can be defined as the broad ends or goals, which
are to be achieved. They are the end results and act as polestars towards which the
activities of the organization are directed.
Characteristics of Objectives
i. Multiple in number : Every business or activity may have more than one
objective. These may be in different key areas. e.g. A hospital may have one
objective of improving the profitability and also an objective of reducing customer
complaints. It may also ponder over curtailing the staff strength. Peter Drucker
has identified eight key areas in which objectives are set. They are – market
standing, innovation, productivity, physical and financial resources, profitability,
manager performance and development, worker performance and attitude and social
responsibility.
ii. Tangible and intangible objectives : Tangible objectives can be quantitatively
measured whereas intangible objectives are qualitative and can be measured in
quantitative numbers. e.g. productivity, sales, profits etc. are tangible whereas
worker’s morale, integrity are intangible.
iii. Have priority : Certain objectives, depending upon the circumstances may have
priority over other objectives. Say, e.g. addressing customers’ grievances may be
given more importance than launching a new site or service.
iv. Have hierarchy : There are objectives simultaneously at the corporate, divisional,
departmental, sectional, level etc. Naturally they will have more importance in that
order and will be dealt with accordingly.
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v. Objectives at times clash with other : The classification of objectives in the
earlier manner (hierarchy) and objectives of the different departments may at times
clash with other. Suppose finance department’s objective is to cut down costs,
then it may adversely affect the marketing department or R & D Department since
their resources would be curtailed. These are called the ‘Dilemmas of the
Management’.
Requirements of the objectives
The objectives should be - clear and acceptable
- precise
- measurable
- must support each other
- should remain valid always
Benefits of objectives
- basis for planning
- act as motivators for individuals as well as other depts.
- facilitate co-ordination between different departments,
sections
- serve as managerial control;
- facilitate better management.
- reduce misunderstanding and conflicts
STEPS IN PLANNING
We have earlier seen that planning is choosing / deciding among the alternatives. The
process of planning comprises of various steps which are given below :
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i. Setting goals / objectives : This is normally done at the top management level
after taking into consideration all the relevant aspects. Values of the organization
play a vital role in this.
ii. Establishing planning premises : Premises mean certain assumptions about future
which form the basis of planning. These promises are very important because
success of planning depends upon them.
Internal and external premises : The premises which are within the organization
are internal premises e.g. sales forecast, policies of the organization, capital to be
invested in equipments, etc. The premises which are outside the organization are
external premises, e.g. business environment, technological changes, political stability,
factors that influence demand for the products and services, etc.
Tangible and intangible premises : The former can be measured quantitatively
while the latter are being qualitative. Population growth, demand, capital investment
are tangible premises. Attitudes of the employees and customers, political stability,
etc. are intangible premises.
Controllable and non-controllable premises : As above, premises which are
within control of the organization and those beyond such control, are controllable
and non-controllable promises respectively. Resources, policies strategies etc. are
controllable premises and strikes, wars, natural calamities, emergency etc. are non-
controllable premises.
iii. Deciding planning period : Whenever planning is done, it has to be for a certain
period. This planning period depends upon the policies of the organization and
the nature of objectives to be achieved. Short range period may be for about a
year and long range period may extend up to 5-10 years. The factors influencing
the planning period are as under :
a. Lead time in developing and commercial launching of a product : e.g.
a pharmaceutical company develops a drug for some disease. Once
everything is finalized, tests are carried out, suitable permissions are obtained,
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the company may go in for commercial production. This intervening period
is the lead time.
b. Pay back period : Time requirement to recover capital investment in
machinery, equipment, etc. e.g. A machine costing Rs. 10 lacs, generates
cash flow of Rs. 2 lacs per year. Then the length of planning period should
be at least 5 years.
iv. Alternative course of action : Since planning is choosing among the alternatives,
the organization has to search and examine alternative course of action.
e.g. if they have to obtain technical know-how – then they have to examine
whether it can be obtained from certain overseas expert or through training the
concerned staff abroad. Similarly while launching sale of a product, the alternatives
would be to sell directly or through some specialized agencies.
v. Evaluating / selecting a course of action : We will once again reiterate that
planning is choosing among the alternatives. In the previous step we have seen
that alternative courses of action i.e. various choices are before us. We have to
screen, evaluate and select the best course from these alternatives. Thus the best
alternative will be identified.
vi. Developing derivative plans : Once the course of action is finalized, plans are
drawn / formulated to derive it. Now herein lies the main action, operations and
processes. Usually this is done at middle and junior level of management.
vii. Measuring and controlling progress : This is the process of monitoring. Any
mid-way corrections, if necessary, are carried out to ensure the success of planning.
LIMITATIONS OF PLANNING
Planning is a process directed towards achieving the pre-decided goals. Hence it is a
very essential and useful process. However, in planning, there are certain limitations and
we should be aware of them.
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i. Expensive and time consuming process : It involves money, energy or efforts
and it is not free from certain risks / uncertainties. As such smaller organizations
cannot afford to have a formal planning dept to workout planning programmes.
ii. It curbs initiatives on the plea that everything has already been charted out and
therefore it is not possible to deviate from it. At times it places restrictions on
adopting innovative approaches. Organizations, therefore, are constrained to adopt
the proven track only.
iii. It is said that change is a universal phenomenon. However, since last few decades,
the pace of change is very very fast as compared to the earlier period. Therefore
the scope of planning is limited as planning essentially relates to future course of
action. Due to fast pace of obsolescence, planning may have a limited scope.
iv. There are difficulties in correctly and accurately formulating planning premises.
Hence an element of error is possible.
v. Resistance from the implementors : At times the employees who are going to
implement the plans, may not be willing to implement the decided course of action.
They may think that this is being thrusted upon them. Therefore, there may be
poor / cold response or even resistance from them. Normally by adopting
participative decision making, this can be avoided.
In spite of the limitations, planning is necessary in every business activity. It is essential
even in individual life, family affairs and in society also. Unplanned business leads to
chaos, disorder. There is an adage that ‘well begun is half done’. This applies to planning
also. For making planning successful, the following factors are necessary –
- co-ordination
- communication
- commitment
- conducive work climate and
- participation
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SWOT Analysis
SWOT analysis is also considered as another form of planning. These days the business
is subjected to internal and external environment. A business enterprise always carriesout SWOT analysis before launching/ commencing an action. ‘S’ stands for strength,
‘W’ for weaknesses. Both these factors are part of internal environment. ‘O’ stands forOpportunities before the enterprise and threats to it are external factors. Strengths are
to be further improved, weaknesses are to be overcome, opportunities are to be judged
and caught as they are like tide and time who never wait for others.
Threats are to be faced and
‘T’ stands for
conquered. SWOT analysis, therefore, is a very useful tool in the hands of the organizations. It has to be carried out and implemented in
right manner else the entire exercise will mean Simply Waste Of Time.
LET US SUM UP
Management as a process of transformation consists of various functions. Planning isthe most basic and important function among them. Planning means deciding in advance.
It is the what, when, how and by whom of doing; In planning, we have strategic and
tactical planning. The process of planning begins with setting up of objectives followedby other sequential steps. Planning leads to focus on the goals and in turn to success.
However, there are certain limitations in planning and we have to overcome them. SWOT
analysis is another recent development in planning. Without planning, there would be
chaos, confusion and failure to achieve the goals effectively.
Questions
1. Define planning and steps involved in planning.
2. ‘Planning is the most basic function of management’ Elucidate.
3. What are the planning premises?
4. Discuss the characteristics and importance of objectives in planning.
5. Describe the limitations in planning.
6. Write a short note on SWOT analysis.
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Functions of Management Organizing
UNIT 4
FUNCTIONS OF MANAGEMENT ORGANIZING
CONTENTS
• Organizing and organization
• Characteristics of organization
• Importance / significance of organization
• Steps in organizing
• Types of organizations
• Departmentation
• Organizational structure
• Authority and responsibility
• Line and staff authority
• Delegation
• Decentalisation
OBJECTIVES
After studying this unit, you should be able
• to understand the concept of organizing.
• to explain the organization, its characteristics and importance.
• to learn the steps in organizing.
• to know organizational structure, line and staff authority.
• to realize the importance of delegation and decentralization.
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ORGANIZING
Organizing is one of the important functions of management. After planning, the activities
are set in motion. This requires arranging and allocating work, authority and resources
to the employees. This process is called as organizing. Thus
- organizing is the process of arranging and allocating work, authority and
resources among the members of an organization so as to achieve the goals.
- it is to design and maintain a system of roles.
- it is an ongoing managerial process.
ORGANIZATION
Organization means two or more people who work together in a structured way to
achieve a specific goal or a set of goals. Amitai Etzioni defines an organization as a
social unit or human grouping deliberately structured for the purpose of attaining specific
goals.
It is a formalized intentional structure of roles and positions, having interwoven
relationships.
Characteristics of an Organization
a. Common or shared objectives e.g. the main objective of hospital will be alleviation
of human suffering health care and This will be common to all employees, from
room boys, ambulance drivers, accounts clerks to surgeons and doctors.
b. Clear concept of major duties and activities involved so that work is carried out
in a systematic manner.
c. An understood area of authority and discretion so that people occupying a post
are aware of their powers as well as responsibilities. This is known as hierarchy
or chain of command.
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d. Proper co-ordination between different activities.
e. Set of rules and regulations, systems and procedures.
f. Channels of communication.
IMPORTANCE / SIGNIFICANCE OF ORGANIZATIONS
An organization is a mechanism through which management directs, co-ordinates and
controls the business. Hence an organization is the foundation of management; it has
the following benefits :
i. It facilitates administration and ensures success.
ii. It gives strength to a group of people.
iii. It improves managerial efficiency.
iv. It accelerates growth and diversification.
v. It encourages proper utilization of human resources, gives rise to workers’
participation and avoids duplication.
vi. It ensures proper co-ordination of work, authority and resources.
vii. It creates a healthy work climate.
viii. It stimulates creativity and initiative through well-defined areas of work.
ix. It provides for optimum use of technological improvements.
x. It provides for supply of systematic information.
STEPS IN ORGANIZING
Like in planning, there are steps in organizing as it is also a process. These steps are
as under :
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a. Set the objectives : Setting goals / objectives is a necessary element in organizing
also. As stated in planning, goals give us a direction in which to proceed.
b. Define (identify) the activities : Organizing is arranging and allocating work,
responsibilities and resources. As such we have to define and determine the
activities to be carried out.
c. Group activities : Here various activities are classified and grouped according
to their nature. e.g. plumbing, electric work / repairs, proper conditioning of lifts
etc. would come under maintenance. Routine check-up, medication, medical check-
ups etc. would be grouped in day care or OPD etc.
d. Assign activities : Once objectives are set, activities have been defined and
grouped, it becomes necessary to assign these activities to specific people. They
will be responsible and accountable for implementing these activities. This is like
establishing structural relationships. This results in systematic working or else there
will be disorder and chaos.
e. Set time frame : It is important since the objectives need to be achieved in a
time bound manner. This will help generating and maintaining a pace of the activities.
f. Follow-up (monitor) : this is to ensure that we have been proceeding in the right
and the desired direction. Diversions, deviations, if nay, can be corrected so as
to ensure compliance with set objectives.
TYPES OF ORGANIZATIONS
Organizations broadly are classified into formal and informal. The formal organizations
are those wherein activities of the persons are consciously coordinated towards a given
objective. e.g. A govt. dept., a hospital, a bank, insurance company, medical college
are formal organizations. This structured way / hierarchy, formalities are not there in
informal organizations. e.g. certain voluntary groups, family etc. are informal organizations.
Some people may voluntarily offer to come, sit and accompany those patients who don’t
have relatives to attend to them.
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DEPARTMENTATION
In order to ensure smooth working of an organization, the work is divided into tasks
that can logically and comfortably be done by the individuals or groups. This grouping
of tasks and employees is called as departmentation. The word department designates
a distinct area, division or branch of an enterprise over which a manger has authority
for the performance of specified activities. This makes possible to expand the organization
to an indefinite degree. Pattern of departmentation may vary from organization to
organization, from situation to situation. Thus separating the organization into various parts/
depts. / sections, depending upon the functions, results into specialization which in turn
improves skill, efficiency, speed of working. It helps in smooth functioning since there is
a role clarity. In hospital set up the various departments are like OPD, surgery, paediatric
ward, pathological laboratory, radiology etc.
ORGANIZATIONAL STRUCTURE - SPAN OF MANAGEMENT
The numbers of sub-ordinates, a manager can efficiently and effectively handle is called
a span of control or span of management control. This leads to emergence of various
levels in an organization. Once work is divided, departments are created, span of control
chosen, managers can decide on the chain of command. This sets a pattern called as
hierarchy. At the top of hierarchy there is a senior ranking manager who is responsible
for overall operations. He is known as President, Chief executive officer, Chairman etc.
Other lower ranking managers are located down at the various levels of the organization.
Span of control : (a) Narrow span, tall hierarchy (b) Wide, flat hierarchy
a. Narrow span, tall hierarchy : In this set up there are many levels between top
and bottom.
b. Wide span – Flat hierarchy : In this set up there are few management levels
between the top and the bottom.
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Merits Demerits
- Close supervision and control - Many levels of management
- Fast communication - High cost of operations
- Slow decision-making
CEO
Narrow span, Tall hierarchy
CEO
Wide span, Flat hierarchy
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Advantages Disadvantages
- Improved delegation - Superiors are overloaded and overtaxed.
- Effective decision-making - Decision bottlenecks
- Risk of loss of control of the superior
- Will succeed when the managers are capable.
Both these setups have certain advantages and few drawbacks. Basically there is a need
for balancing. These days there is a trend on designing lean or flatter organization.
AUTHORITY AND RESPONSIBILITY
Henri Fayol, the renowned French management expert has said that responsibility and
authority should go hand to hand. Organization authority is the formal right of the superior
to command and make the sub-ordinates to perform a given act. It is a right to give
orders and power to exact obedience. It is essential for managerial functions.
Sources of authority – classical view : Authority originates at the top and flows
downward i.e. managers at each level derive their authority from their superiors and so
on.
Human relations view : Authority of a manager or superior depends upon the
willingness of his sub-ordinates to accept it. If they do not accept his authority, they
may not comply with his orders. A sub-ordinate accepts authority when it is legitimate.
According to Chester Bernard, four conditions are necessary for an order to become
acceptable to a person.
a. he must understand the order (communication)
b. he must believe that it is not inconsistent with the purpose of the organization
c. he must believe that it is not incompatible with his personal interests
d. he must be physically and mentally capable of complying with the order
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AUTHORITY AND POWER
Authority emerges from the position, designation, whereas power is to influence a person
to perform an act. It is a wider concept. A person may have authority on account of
the position he is occupying but may lack in power which is an individual aspect.
Authority Power
- right of superior to command & control - ability to influence to perform
- rests with the chair (position) - rests in an individual
- can be delegated - to be earned
- well defined - not defined
- formal - informal
Advantages of Authority
Herbert Simon gives the benefits of authority as under :
a. It enforces obedience to norms
b. It results in expertise in decision making
c. It permits centralisation of decision making and co-ordination of activities
RESPONSIBILITY
While authority is the right of the superior to give orders, responsibility is the obligation
of the sub-ordinate to comply with the orders. Thus when a superior assigns a job to
a sub-ordinate, it becomes his responsibility to do it.
Authority can be delegated but not responsibility.
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LINE AND STAFF AUTHORITY
In the entire managerial set up, this issue has wide differences of opinions. Basically it
is a matter of relationships between the various departments of an organization. It is
referred to as line and staff function also. Line functions are those that have a direct
impact on the accomplishments of the objectives of the organization. Line staff are directly
responsible to achieve organizational goals. e.g. production, sales and at times finance
are called as line functions. Support functions on the other hand, assist the line authority
to achieve the goals. e.g. purchasing, accounting, personnel, maintenance etc are called
as the staff functions. They supplement line activities. They are complementary functions
and lead to the success of an organization.
DELEGATION
Delegation means entrusting a task to another person, when the activities increase beyond
the capacities of an individual. It is an arrangement between two persons when one,
normally the superior, delegates the task (responsibility) which belongs to him along with
appropriate authority, to the other person. Thus it is a process of transferring certain
authority to immediate capable sub-ordinate with a view to decentralization for smooth
administration.
Principles of Delegation
a. Delegator’s authority only can be delegated. He has to retain the responsibility
and accountability. The delegatee also becomes jointly responsible to a certain
extent. Delegation, therefore, is not abdication.
Responsibility
Responsible for the job Responsible accountable to the superior
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b. Authority can not be forced upon the delegatee.
c. Delegatee should be capable of shouldering the authority of the delegator.
d. The role boundaries should be made known to the delegatee.
e. Delegatee can not delegate down the line.
What to Delegate
i. routine administrative matters
ii. routine correspondence
iii. staff matters where clear guidelines are available
iv. expenses of routine nature
Whom to Delegate
a. capable, willing sub-ordinate
b. should be aware of his duties and responsibilities
c. experience and availability of time should be taken into consideration
d. proper explanation and counseling necessary
Why to Delegate
- for smooth administration
- speedy disposal
- better customer service
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- creating confidence in the subordinate and thus developing him for future
- encouraging him to take decisions
- preparing a line of succession
Barriers to Delegation
Though delegation is considered as a desirable management process, it is rather difficult
to implement in practice on account of various barriers / obstacles. These can be
classified as pertaining to the delegator, delegatee and the situation. These barriers are
give below –
i. Delegator - I like doing it myself
- I can do it better myself
- I don’t want to develop sub-ordinates (insecurity)
- I can’t tolerate mistakes (perfectionism)
- No time to explain, to supervise
- Envy of the ability of sub-ordinate
ii. Delegatee - Lack of experience
- Work overload
- Avoidance of responsibility
iii. Situation - Boss would not tolerate mistakes
- Too critical decisions
- Urgency
- Understaffing
Do’s of Delegation
- provide necessary infrastructure / resources
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- assist the delegatee to enhance his competence
- allow freedom to delegatee to exercise creativity
- take joint responsibility for genuine mistakes and take corrective steps
- respect each other’s role boundaries
- appreciate when needed
Don’ts of Delegation
- do not exercise close supervision
- do not overload delegatee
- do not delegate authority which you yourself don’t have
- do not delegate authority down the line
Thus by delegating, the executive becomes free from the routine matters and can devote
more time and energy on developmental activities and for attending to other important
matters. Delegation is an art and an important function of management.
DECENTRALIZATION
When the decision making authority in an organization is concentrated in few hands at
the top managerial level, the setup is called a Centralised setup. Whereas in a
decentralized setup this authority is dispersed throughout the organization. Organizational
authority is the power conferred on people to use their judgment in decision making.
Every organization decides the extent or degree of centralization and decentralization.
The degree of decentralization, according to Ernest Dale, is greater where -
i. the number of decisions made at the lower level is more.
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ii. the more important decisions are made at the lower level.
iii. the functions or areas affected by the decisions at lower level are more.
iv. less checking is required on a decision.
Fayol says that everything that increases the importance of the role of subordinates is
decentralization and everything that goes on to reduce its is centralization.
These are relative terms. Absolute centralization is not possible in any organization except
in a proprietary concern. Also it is not possible to have absolute decentralization in any
organization.
DIFFERENCE / DISTINCTION BETWEEN DELEGATION AND
DECENTRALIZATION
a. Delegation is a process, whereas decentralization is the end-result of delegation.
b. In delegation the superior continues to be responsible for the work delegated. In
decentralization a sub-ordinate becomes liable for it.
c. Decentralization is optional depending upon the policy of the organization. However
delegation is an important managerial process.
The organizations have to seek a balance between centralization and decentralization in
the best interests of the organization and its members.
LET US SUM UP
In the process of management, the basic function is planning. Thereafter, a manager has
to arrange and allocate work, authority and resources among the members of the
organization. Organizations are the entities, where two or more people come together
who have common and shared objectives. There are formal and informal organizations
followed by a structure. In order to effectively monitor the work of organizing, there
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are departments, sections etc, where the principle of division of labour is practised.
Organizing gives rise to responsibility and authority. Delegation and Decentralization
facilitate the effective functioning of the organization.
QUESTIONS
1. Explain the term organizing and steps in organizing.
2. What is an organization? Discuss the characteristics of organization and its
significance.
3. Write a note on departmentation.
4. Explain organizational structure. Elucidate wide and narrow span of control with
merits and demerits.
5. What is meant by authority ? Distinguish between authority and power. Explain
the conditions required for acceptable instructions.
6. Write short notes on –
a. Line and Staff authority
b. Principles of delegation
c. Decentralization
d. Barriers to delegation
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Functions of Management Directing
UNIT 5
FUNCTIONS OF MANAGEMENT DIRECTING
CONTENTS
Coordinating - concept, techniques, obstacles and significance
OBJECTIVES
After studying this unit, you should be
• aware of importance and necessity of co-ordination
• to know techniques of co-ordination
• to understand obstacles in co-ordination
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DIRECTING
Management is a process of transformation. Resources, inputs are converted in to outputs,
products and services. We have also seen that achieving predetermined objectives is
essential in management. Planning, organizing are the initial functions in the process of
management. Directing is the next critical and important function of management.
Directing can be defined as moving towards the objectives. This is the stage of real
action and efforts carried out to accomplish the goals. Directing consists of various
activities like leading, influencing, motivating, communicating, etc. All these activities have
been dealt with in other study material, the copies of which are already with you.
Coordinating is yet another function included in directing. We will study coordinating in
this chapter.
Coordinating is an essential element and an ongoing process of management. In fact
management itself is co-ordination of human efforts. As such it is the essence of
managership.
Coordinating can be defined as achieving harmony among individual efforts towards
achievement of group objectives.
All managerial functions contribute to co-ordination. It is management of interdependence
in work situations. e.g. in a hospital, unless there is proper co-ordination between all
the departments, section, etc, the purpose of a hospital will not be achieved. Similarly
a human body is another example of co-ordination. It is like synchronization of all the
players in an orchestra, where the conductor, with a baton in his hands, co-ordinates
all the activities so that a fine melody enthralling the audience emerges. Thus co-ordination
is “common action, movement or condition that seeks to bring persons or things into
proper perspective and relation so that they act together in a smooth and concerned
manner.”
Certain authors consider co-ordination as a part of directing, whereas Henri Fayol feels
that it is a separate managerial function. Co-ordination, at times is confused with co-
operation. Co-operation is working together towards the same goal. In a football match,
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one player, howsoever skillful, can not carry the ball to the goal post. At the appropriate
time, he has to give it to another player, teammate who is better placed to put the ball
in the net. This will be possible when there is co-operation among them. Co-operation
is the pre-requisite of co-ordination. They are mutually complimentary. Mere co-ordination
will not ensure success unless there is proper co-operation among the members. It
requires congruence of the goals – individual and organizational.
NEED FOR COORDINATION
1. Division of labour : When a job is broken into smaller elements that can be
performed by an individual, it amounts to division of labour. It leads to improving
skills, faster production and increase in profits. Henry Ford, in his assembly plant
of manufacturing cars, successfully utilized this. A car that could be completely
assembled in 12 hours in 1908 could be completed in 1 minute in 1920 and 5
seconds in 1925. One can imagine the tremendous output and the resultant
increase in profits. However this will be possible only when there is proper co-
ordination among all the factors of production.
2. Organizational objectives : The activities in an organization are interdependent.
e.g. A surgery can be performed only when all the concerned departments like
radiology, pathology, maintenance, etc function properly. This will be possible when
there are common and shared objectives.
TECHNIQUES OF CO-ORDINATION
- laying down clear cut objectives / goals
- simplifying the process
- achieving harmony in policies and programmes
- well defined and open system of communication
- proper supervision
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- directing interpersonal relationships
- continuity and consistency
- dynamism
OBSTACLES IN CO-ORDINATION
Even though co-ordination is desired in successfully achieving the objectives of the
organization, it is not that simple. There are certain obstacles, hindering factors. Let us
study them.
a. Uncertain behaviour : Co-ordination is concerned with human efforts. Human
behaviour is uncertain and can not be predicted accurately. There is difference
between a man and a machine. A man has a mind. As such a man has feelings,
emotions, likes and dislikes, prejudices etc. A man may want recognition and
appreciation. This makes human behaviour a highly individualistic subject and has
to be handled properly.
b. Lack of knowledge, skill, experience and above all initiative.
c. Confused and conflicting policies and strategies
d. Resistance to change
Absence of co-ordination
It will lead to - chaos
- confusion
- inefficiency
- expenditure on time, money and energy
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- either goals are not reached or difficulties are encountered in achieving
the goals
LET US SUM UP
Like planning and organizing, directing is an important function of management. Leading,
motivating, communicating and coordinating are included in directing. Coordinating is
achieving synchronization of individual efforts which ultimately results / helps in reaching
the goals. As such it is an essential and ongoing process of management.
QUESTIONS
1. Describe the significance of co-ordination in the process of management with a
special reference to hospital and health care.
2. Write notes on –
- Techniques of co-ordination
- Obstacles in co-ordination
- Difference between co-ordination and co-operation
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Functions of Management Controlling
UNIT 6
FUNCTIONS OF MANAGEMENT CONTROLLING
CONTENTS
• Concepts, definition
• Steps in controlling
• Types of control
• Principles of effective control system
• Techniques of control
• Budgeting
OBJECTIVES
After studying this unit, you should be able –
• to understand the concepts and importance of controlling.
• aware of steps in controlling, types of control.
• to understand principles of effective control system.
• to know budgeting, its process and advantages.
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CONTROLLING
In managing we try to achieve the predetermined goals through planning, organizing and
directing. It is a continuous process, it is like a flow. In any kind of flow, if there are
blockages, it creates problems and as such it becomes necessary to ensure that these
obstacles in flow don’t emerge and if at all they emerge, they have to be corrected.
This equally applies to management. When we are moving, acting in the direction of
achieving the goals, we have to see that we are not deviating from the course of action.
This is achieved through another function of managing i.e. controlling.
Controlling is an important function of management. It is the process of ensuring that
actual activities conform to the planned activities. It is a process of monitoring the
effectiveness of planning, organizing and leading activities. Brech defines controlling as
“checking current performance against predetermined standards contained in the plans
with a view to ensuring adequate progress and satisfactory performance.” Controlling is
a continuous and proactive process.
Objectives of Controlling
To ascertain variations if any, between standards set and actual performance and if
necessary to take corrective / remedial steps to prevent occurrence of such variations
in future. In short controlling means
- to measure progress
- to ascertain deviations, if any and
- to initiate remedial actions
STEPS IN CONTROLLING
a. Establishing standards necessary for measuring the results. Organizations should
develop their own standards and the key areas, e.g. productivity, profitability,
employee performance, customer grievances etc. These standards should preferably
be in quantitative terms, should be precise (not vague or in general terms) i.e. in
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clear measurable terms, specific time bound limits etc.
e.g. – standard : reduction in costs - No
– but reduction in costs by 10% - Yes
– to improve employee skills – No
– but to improve employee skills in correspondence – Yes
b. Measuring and Comparing actual results against standards (i.e. measuring
performance). This measurement is an ongoing process. The frequency may vary
form activity-to-activity and depending upon the circumstances. e.g. In case of a
cardiac patient, the ECG, while in ICU will be monitored continuously but later
on it’s periodicity will go on increasing suitably. Then this performance will be
compared with the predetermined standards by using various control systems, say
by
- observing actual work
- studying the figures, reports etc
c. Taking corrective action : After comparing the performance and ascertaining the
deviations, the next job is to correct these deviations. Remedial action should be
fast and without wasting time, so that normalcy is restored without delay. This
will ensure smooth accomplishment of organizational goals and also save avoidable
wastage of resources, energy, money and manpower. The causes for deviation will
vary. e.g. inadequate and delayed supply of resources, poor equipment, shortage
of power, lack of employee skill, lack of motivation and communication etc. The
remedial steps will depend upon the nature of causes for deviation.
Establishing standards
and methods for
measurement of
performance
Measure performanceCompare with
standards
If yes, carry onIf no, initiate
remedial steps
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CONTROLLING PROCESS
Types of control : (a) past oriented controls (b) future oriented controls
a. Past oriented controls : In this type of control, the results are measured after
the process, or when the events, happenings are over the results are examined
thereafter.
e.g. - financial statements of an organization (Trading and manufacturing account,
Profit & Loss account and Balance sheet)
e.g. - performance of the schools in the examinations, etc
Thus the discrepancies observed, lessons learnt, shortcomings / lapses noticed etc
can be used for future corrective steps.
These controls are also known as post action controls.
b. Future oriented controls : They are also referred to as steering controls or feed
forward controls. They are designed to measure the results during the process itself,
so as to initiate action before the job / or process is completed. They are mainly
the warning signals to attract the attention and not for evaluating.
e.g. Cash Flow and Fund Flow analysis
Past oriented and future oriented controls are not alternatives to each other. They are
complementary to each other and should be used simultaneously.
PRINCIPLES OF EFFECTIVE CONTROL SYSTEMS
We have seen that controlling is necessary to ensure compliance to planned activities.
Hence the control systems should be so designed to facilitate the main process and not
to hinder it. As such there is a need to have some ground rules / principles while
introducing the control systems, which are given below.
i. They should be appropriate to the nature and needs of the activity.
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ii. Timely and forwards working : shortcomings noticed should be reported in time
and immediately.
e.g. the water level of flooding rivers above the danger mark should be reported
immediately so that evacuation of the people and live stock can be commenced
and possible loss could be averted. It calls for a quick and efficient feed back
system.
iii. Objective and easy to understand - in clear and specific terms.
iv. Flexible so as to adjust / adapt to the change in environment.
v. Economical : The system of control should be such that benefits from the control
will be greater than the cost involved in implementing the control.
vi. Prescriptive and operational : The control system should not only detect
deviations but should also suggest solutions to the problems that cause the
deviations. They must disclose where failures are occurring, what are the causes
and remedies.
vii. Acceptable to all : This will enable to gain wholehearted support and commitment
of all the concerned. This will motivate them and thus in turn ensure success.
METHODS / TECHNIQUES OF CONTROL
Over a period of time, various methods / techniques of controlling have been evolved.
They vary according to the activity.
Old and traditional techniques are as under –
budgeting, cost accounting, breakeven analysis, financial statements, ratio analysis, audits,
reports, etc.
New techniques : PERT (Performance Evaluation and Review Techniques), CPM
(Critical Path Method), TQM (Total Quality Management), ISO certification, human
resource accounting , human resource audit, etc.
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The new techniques are in addition to the old ones. They have not been scrapped and
continue to be used.
BUDGETING
Budgets are the formal quantitative statements of the resources set aside for carrying
out planned activities over a given period of time, usually one year.
Budgets
1. are stated in monetary terms, used as a common denominator for a wide variety
of organizational activities – like purchasing, selling, manufacturing, hiring,
advertising, training, etc.
2. focus on two major factors : capital (key organizational resources) and profit (key
organizational goal)
3. establish unambiguous standards of performance for a set period of time, usually
a year. This period can vary depending upon the activity and circumstances.
Budgeting Process
It begins when the top management sets the strategies and goals of the organization.
Lower lever managers establish / finalize the budgets of their sub-units within the above
guidelines. The draft budget is reviewed by the top / senior management and thereafter
final budget is compiled. The overall budget of the organization comes into force when
it is approved by the board of directors.
Advantages of Budgetary Control
1. Indicates limits for expenditure and the results to be achieved in a given period.
2. Coordination of organizational work becomes possible.
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3. Active participation of all levels of management is ensured. As such it becomes
the product of combined wisdom of all. It leads to motivation, commitment and
involvement of all the concerned.
4. It brings together the activities of various departments which results in greater
cooperation and building of team spirit.
5. Deviations can be ascertained and corrective measures can be initiated in time.
6. It helps people learn from the past.
7. It improves communication.
Limitations
a. As budgetary control is used to evaluate results, inefficient and lethargic employees
do not cooperate wholeheartedly.
b. Budgetary estimates, at times, prove absolutely wrong / inaccurate. Therefore the
system becomes ineffective.
c. The budgets are mostly rigid and inflexible. They do not respond to the changes
in the environment, both internal and external.
d. Are not effective in handling urgent problems, which, at times, require here and
now solutions.
e. They become, sometimes, cumbersome and expensive.
f. They act as discouragement for good and ambitions managers.
g. They are well suited for hiding inefficiency.
h. The control systems are designed to cope up with changes of a certain magnitude.
As such if there are sudden and unexpected changes, which are beyond normal
ways, then the control system fails.
In spite of these limitations, they play an important role in all types of the organizations.
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LET US SUM UP
Controlling is an essential, ongoing management function. It ensures compliance of planned
activities. As Koontz has said it is ideally forward looking and the best kind of managerial
control that checks deviations from the plans before they occur. Controls are of two
types, past action and future action control. The control system to be effective should
contain certain principles. The controlling is an essential element. It has certain limitations,
which can be overcome. Thus control ensures compliance and timely intervention.
QUESTIONS
1. ‘Controlling is an essential managerial function to ensure compliance with planned
activities’ Discuss.
2. Explain the steps in controlling.
3. Describe the types of control and how they are used.
4. What is budgeting? What are the benefits of budgeting?
5. Discuss the principles of effective control system.
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Recent Trends in Management
UNIT 7
RECENT TRENDS IN MANAGEMENT
CONTENTS
• 21st century – its uniqueness and management challenges.
• Japanese management
• Quality circles (QCs)
• Total Quality Management (TQM)
• JIT i.e. Just do it or Kanban
• ISO 9000
OBJECTIVES
After reading this unit, you should be able -
• to know the challenges and special features of the 21st century.
• to understand the Japanese management.
• to learn about Quality Circles, Total Quality Management, Kanban etc.
• to explain ISO 9000 series of certification.
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INTRODUCTION
Management is a dynamic process. It has been changing over a period of time, with
changes in environment and thinking. In the earlier period, the workers were illiterate,
unorganized. Also there was little competition. As such the entrepreneurs, who established
industrial activities, were oblivious of various factors, which are considered important
today. They mostly concentrated on more production and higher profits. As the workers
were ignorant, they directed them and the workers were supposed to merely execute
the orders. Long hours of work (16-17 hrs), meagre wages and those too not paid in
time, child and women labour, lack of safety and hygienic conditions were the order of
the day. In short there was exploitation of working class. They were considered as inert
instruments of production and had to work in inhuman conditions. However, with trade
union movement, awakening of workers, growing competition and enlarged markets
started having its effect. The employers realized that they will have to change their style
of management in order to get satisfactory returns from the workers. Growing
International Trade and entry of domestic and foreign competitors worsened the situation.
It was getting increasingly difficult to stay alive in this mad race. As a result, human
and behavioural approaches to management emerged. The employees were looked as
human beings who had mind. This mind made much difference and the employers
became aware of the distinction between man and machine. Efforts were started to win
over the commitment and involvement of this vital and important resource i.e. human
resource. Various new methods and techniques were experimented to harness this
resource. Growing competition changed the markets from hitherto sellers’ market to
buyers’ market. The customer now had options, choices and as such was not prepared
to settle with inferior goods when quality goods were available elsewhere.
Hence quality, price, delivery schedule, and after sales service became
important. ‘Survival of the fittest’ ‘perform or perish’ became the ‘Mantras’ of modern
management.
Japanese people did lot of work in this direction. Actually Japan at one time, was known
for shoddy and low quality goods. By copying the American products she wanted to
capture the market, the results of which were disastrous. Hence it dawned upon them
that unless and until they really give quality goods at most competitive prices, they will
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not be able to survive. The Second World War had already hit them badly. On this
background they started examining ways and means to improve quality, reduce wastages
and costs. They were aided in these efforts by their own people as well as two Americans
viz. Dr. Edward Deming and J. M. Juran. They also utilised the knowledge and
experience of their employees in this endeavour. Increasing employee participation was
a major change in the style of management. Various techniques like Quality Circle,.
Kanban or just do it, Kaizan, 5 S etc emerged over a period of time. This changed
the Japanese products and services altogether and from shoddy and substandard goods,
Japan = Quality became an equation. We will consider some of these movements in
brief in the following pages.
QUALITY CIRCLES
Quality Circles are the voluntary associations of the employees working in the same work
area or doing the same kind of work. They meet regularly, preferably once a week or
any fixed appointed date, to identify, analyse and solve work related problems. They
suggest improvements to productivity, quality of service etc. This apart from improvement
in sales and profits, results in enriching quality of work life The concept of Quality Circle
was developed by two Americans, viz Dr. Edward Deming and J. M. Juran. They were
not, taken seriously in America and hence shifted to Japan in the early 1960s. Japanese,
however, welcomed this idea and the concept of Quality Circles was introduced in Japan
in 1962. Another Japanese thinker Dr. Ishikawa further refined the concept and made
significant contributions to this. As such he is considered as the Father of Quality Circle
Movement.
The concept started yielding results and therefore there was a phenomenal increase in
the number of Quality Circles in Japan. It was picked in about 40 countries all over
the world. In India it was initiated around 1982 in Bharat Heavy Electrical Ltd. (BHEL).
Initially it was thought that the concept was applicable to manufacturing activities only.
However it was realized that it was equally applicable to service industry like banks,
insurance cos, hotels, hospitals, offices etc. Today worldwide lacs of Quality Circles are
operating in their respective field and making significant contributions.
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Steps in Quality Circle Working
a. Formation : Quality Circle is a purely voluntary, optional formation. Though there
is no ceiling on the number of members, it is desirable to have around 8-10
members. In case the number is either less or more than the desired number it
may not yield the expected results. These members elect a leader to facilitate the
proceedings. Leadership can be rotated so that all get an opportunity to discharge
this role. Usually the departmental lead monitors, encourages, supports and guides
the members.
b. Identification of problem : QC at a time deals with only one problem. In an
organization there may be various problems in the varying degrees of priorities.
All the members discuss freely, express their views and assign priority to the
problems. This is carried out by open, free and frank discussion. No one is
discouraged or laughed at for his view. This technique is known as brainstorming.
It was developed by Alex Osborne in 1938. The members make out a list of
various problems. Thereafter each one assigns rankings to these problems in terms
of their own priorities. Thereafter the problem that receives maximum ranking score
is identified as a problem for solving. This process is called Pareto Analysis, named
after an Italian Economist Vilfredo Pareto. Pareto diagram is also drawn.
Sco
re
Problems
c. Cause-effect analysis : After the problem has been identified, the members start
analyzing the problem and various factors / causes that lead to the problem. There
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may a few sub causes also. These are classified under the broad headings of Men,
Method, Machines and Materials. Thus the problem is the effect and the factors
causing it are the causes. A diagram called cause-effect diagram or Ishikawa
diagram (named after Dr. Ishikawa) or fish-bone diagram (it resembles a fish-bone)
is drawn to make the situation more clear.
d. Finding out solutions : Once the causes are identified, solutions are suggested
to do away or overcome these causes. These solutions are thoroughly discussed
in terms of practicability, viability, feasibility etc. and finally the solutions are worked
out.
e. Presentation : A presentation of this project is prepared. A suitable write-up
consisting of names of the members, various problems that emerged in the
discussion, identification of the problem, working out solutions etc. is prepared.
Various charts, diagrams (like Pareto diagram, Ishikawa diagram, histogram, pie
diagram etc.) transparencies are prepared for this presentation. It can be done
on PowerPoint also. It is thereafter presented before the management. All the
members of QC are involved in this presentation. Management examines the
solutions suggested and gives its views and go-ahead signal when it agrees to it.
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f. Implementation : The solutions are implemented. Thus one project is completed.
The QC continues its quest by taking up another project in the similar way.
g. Review : The project implementation is reviewed so as to ensure proper
compliance.
Gains / Benefits / Advantages of QC
There are various monetary and non-monetary pay-offs of QC. e.g.
Monetary Non-monetary
- Improvement in quality - Self development
- Waste reduction - Ability to communicate and to listen
- Cost reduction - Mutual development
- Problem solving - Team building
- Increase in sales - Participation
- Improvement in productivity - Involvement
- Increase in profits - Commitment
- Safety, reduction in accidents - Job satisfaction
- Reduced absenteeism - Creativity, innovation
QCs are not panaceas for all problems. They are not the forum for grievances, nor are
a substitute for task force, committees etc. QC is not a management technique to tackle
their problems. It is a philosophy, a way of life, where the tangible and intangible benefits
accrue both to the organization and the members.
Worldwide QCs are doing commendable work. As stated earlier, they can be practised
in any activity, irrespective of its nature. These days they are being used in schools,
colleges, families and communities also. In India Quality Circle Forum of India (QCFI),
an apex body has been doing important work of coordinating, guiding the activities of
QCs allover India.
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JUST IN TIME (JIT) OR KANBAN
While Japan was known, earlier, as a flimsy and poor quality manufacturer, post war
Japan came to be known for quality. Today, Japanese products are considered as a
hallmark of quality. Various revolutionary ideas, concepts were developed in this pursuit
and Just In Time (JIT) or Kanban is one of them. It is a simple and direct communication
at work centre. Originally, it was introduced in Toyota production system, the purpose
being to eliminate wastage and reduce costs.
JIT is aimed at regulating flow process i.e. the right parts needed in assembly reach the
assembly line intime they are needed and in number they are needed. The system aims
at reducing inventory or stock and thus reducing inventory carrying costs. It is also
known as zero-inventory, wherein optimum inventory needed for consumption, only is
maintained. It makes use of a flag or a piece of paper which contains all relevant
information like part number, description, process area used, time of delivery, quantity
available, needed etc. These flags are called as Kanban in Japanese. Hence the name.
The principle is to make just what is needed in time, but not making too much. This
means that a radically new systems will be required so that old way of work can be
given up. Brain storming discussion will be necessary before its introduction so that the
change implementors understand its necessity and importance and will implement it
wholeheartedly. Thus Kanban aims at minimum or zero inventory so as to reduce
wastage chain.
The Japanese thought of and implemented various such techniques in their management.
Kaizan or continuous improvement is one of them.
5 S – consisting of
SEIRI – Organization or reorganization
SEITON – Neatness
SEISO – Cleanliness
SEIKETSU – Standardization
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SHITSUKE – Discipline
is also yet another technique.
TOTAL QUALITY MANAGEMENT (TQM)
We have earlier seen how the shift from sellers’ market to buyers’ market established
the importance and necessity of quality. Customers now had the option and as such
their satisfaction became of paramount importance. Hence everywhere the providers of
products and services realized that quality would alone enable them to survive in this
fiercely competitive global environment. Prior to TQM, the journey towards it had began
in the following stages :
Quality - Inspection
- Control
- Assurance
- Reliability
All these meant controlling, inspecting for quality, amend and resell if necessary so that
they could assure to the customer of quality and reliability. But soon they started realizing
that these were the post production stages i.e. products were inspected and checked
for quality after they were manufactured. In case of defects noticed they were sorted
out and reworked. At times, they were returned by customers and again delivered to
them after removing the defects. All these operations added to the cost and thus reduced
the profit margins, which were getting thinner due to competition. Hence a solution in
the form of maintaining quality throughout the manufacturing process, working every step
in such a way so as to ensure quality, was thought of. This solution is named Total
Quality Management; wherein everyone, at each level, in every operation is focused on
one factor i.e. quality.
Let us now see what is meant by quality. It means different things to different people.
Quality means – value for money.
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- consistent conformance to customer expectations.
- customer satisfaction, the delight of the ultimate judge as to howwell the products and services measure up.
- prevention, constructing solutions to problems before they occur and
designing excellence into a product or service.
Once quality is defined, the next step would be to work for total quality management
i.e. it would not be sufficient by merely knowing what is meant by quality but to strive
for managing in such a way that the concept of quality would guide all the operations
like a polestar. This is total quality management.
Thus TQM is an investment reaping a payoff because in the long run, doing it right for
the first time, is less expensive than correcting it latter. It is everything an organization
does in the eyes of its customers, which will determine whether they buy from them or
from their competitors. It will establish the confidence of the buyers. TQM is an approach
for improving he effectiveness and flexibility of business as a whole. It is essentially a
way of organizing and involving the whole organization, every department, every activity,
every single person at every level.
Components of TQM (i.e. How to achieve total quality management)
• Understanding the business : Its nature, market, competition, functional analysis,
quality costs etc.
• Understanding the customer : What are his needs, requirements and
expectations? Here they distinguish between the external; and internal; customer.
The former being the actual buyer and user of the company’s products or services.
Whereas the latter means the person in the organization itself to whom the product
would go for the next operation. He is an insider, an internal person within the
company. It simply means that any person while doing his job has to think of the
next person so that he can do his part of the job in a proper manner. It is also
denoted by NOAC (Next Operation As Customer).
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• Quality management schemes : A controlled and documented system of
procedures designed to ensure that only conforming products and services are
released to the customers. It is a systematic way of guaranteeing that all activities
within the organization happen the way they have been planned. It is a management
discipline concerned with preventing problems by creating an attitude and controls
that make prevention possible.
QUALITY TOOLS
For achieving TQM, various tools are used like flow diagram, brainstorming, data
collection, Pareto analysis, cause-effect diagrams etc.
All these measures focus on participative management, open and free communication,
mission and vision statement, quality policy, quality plan etc.
Thus TQM is a philosophy of management that strives to make the best use of all
available resources and opportunities by constant improvement. Thus it is an ongoing
process.
ISO 9000
We have seen how the quality of products and services started getting
increasing importance. Quality became the criteria and standard. But the major problem
was as to how to measure this quality? What should be the standards,
the parameters or the benchmarks to judge, ascertain and certify the quality? In India,
e.g. we have ‘ISI certification’ (Indian Standards Organization) for products other than
food and related articles. For the later we have ‘Agmark’ certification. The standards
like these were the local standards used and approved in the respective countries.
But with the growing international trade, a need was felt for some standard that would
be acceptable to all the countries. This over a period of time led to the setting up of
ISO-9000.
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ORIGIN
The 19th and 20th centuries witnessed rapid growth of technology. This made inspection
a costly and ineffective process. As such statistical sampling was introduced which helped
in sorting out products as good or bad. However, it did not contribute for quality
improvement of production process. In 1924, Dr. WA Shewhart devised control charts
for production process control. This was effectively used in Second World War.
Thereafter various standards were introduced and implemented. Seeing this interest
International Organization for Standardization, Geneva, published in 1987, a series of
Quality System Models to enable the world communities to standardize on a common
set of Quality System Requirements, known as ISO-9000 series.
AIM
To establish a customer oriented quality discipline in marketing, designing, engineering,
procurement, production, inspection, testing and related service functions. Quality thus
has become everybody’s job. It will be observed that ISI, Agmark etc. certify the quality
of the products. However ISO-9000 series is wider. It goes deep down in the entire
process and certifies that the process confirms to the standards laid down. It will
automatically ensure quality. Also in today’s growing international trade an overseas buyer
may not know the credentials of the foreign manufacturer and may be hesitating while
buying from him.
However, if the manufacturing company has a ISO certification, he may be rest assured
for the quality of the products. ISO-9000 series are also applicable for service industries.
That is why we see today colleges, management institutes, universities, hotels, hospitals,
banks, etc. going in for ISO-9000 certification.
In ISO, there are various series like ISO 9000-1 to ISO 9000–3, ISO 9001 to ISO
9004 etc. They are adding more and more series to this list. eg. ISO-14000 relates to
environmental management systems.
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QS-9000
A set of quality system requirements set up by 3 big American Automobile Manufacturers
viz. Ford Motors Co., General Motors Corporation and Chrysler Corporation for
adherence to their main suppliers.
Bureau of Indian standards (which certifies ISI, Agmark) is a member of International
Organization for Standardization, Geneva.
Thus ISO-9000 series, establishes a quality conscious process, which is recognized
worldwide. It in a way has helped for growth of international trade.
LET US SUM UP
Management is a dynamic concept and has been changing over a period of time.
However the change has become very fast in the last two decades of 20th century and
present 21st century. Waves of changes are hitting the shores faster. There are no borders
to protect the countries from the overseas competition. Hence quality has become the
hallmark of products and services. With the changing environment, including cultural
changes, management today has become very demanding and challenging. Man in order
to cope up with this situation has introduced and developed various revolutionary
concepts. Gone are the days of controlling and dictating the employees where once the
situation was ‘Do or Die, do not ask why’. It has been replaced by participative style
of management wherein an employee is considered as an important and valuable resource
and all out efforts are done to encourage his participation. His knowledge, skills,
innovation and creativity are being harnessed. His contribution is being valued and
recognized. Various new concepts like quality circles, total quality management, Kanban,
Kaizan, 5S, reengineering, ISO-9000 are being utilized. This has made the role of
managers highly significant. He has to show leadership qualities. Warren Bennis, as such,
has aptly said that 21st century requires the leaders and not the managers. Management,
therefore, in the 21st century, will be highly dynamic, demanding, challenging but at the
same very interesting and rewarding.
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QUESTIONS
1. Explain the uniqueness of Japanese management techniques.
2. Write short notes on -
a. Kanban or JIT
b. Non-monetary payoffs of Quality Circle.
c. Quality tools
d. Participative management and its importance
3. ‘Quality Circle is not a panacea to all problems’ Discuss and explain the steps in
Quality Circle.
4. ‘ISO-9000 is a global certifying system in respect of management process’ Explain.
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REFERENCES
I gratefully acknowledge having used the books mentioned below for reference.
• Management – Harold Koontz, Cyril O’Donnell and Heinz Weihrich
• Principles of Management – P C Tripathi and P V Reddy
• Boardroom (Marathi) – Acchyut Godbole
• Organizational Behaviour - Stephen P Robbins
• Human Resource and Personnel Management – K Aswathappa
• Quality Circles – Concepts and Practices – B R Dey
• Quality Circles in Banks – Dr. P. Amsa
• Quality Circle Forum of India, Secundarabad – Booklets on ISO-9000 and JIT
or Kanban by K Ganapathy, V. Narayana and B Subramanian