UNIT - 3
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Organizing and Staffing :
Nature & Purpose of Organization :
Some Definitions on Organization :
One Definition being “Including all the Behavior of
Participants in a Group”.
 The other definition being “Describe the Total System of
Social & Cultural Relations”.
 According to Amitai Etzioni “An Organization is a
Social Unit or Human Grouping, deliberately structured
for the purpose of attaining Specific Goals.”

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Egs: Corporations, Schools, Colleges, Hospitals, Temples etc are
all Organizations.
Note: But, friendship groups & families are not Organizations
because they do not involve any significant amount of Conscious
Planning or deliberate structuring. But for Practicing Managers,
the term “Organization implies a formalized intentional
structure of Roles or Positions.”
By “Intentional Structure of Roles we say, People working
together must fill certain Roles. The Roles that the people are asked
to fill should be intentionally designed to ensure that required
activities are done & that activities fit together so that people work
smoothly, effectively, & efficiently in Groups.
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For an Organizational Role to exist & be meaningful to
people, it must incorporate,
1) Verifiable Objectives, which are Major part of the Planning
Process.
2) A clear idea of the Major duties or Activities involved &
3) An understood area of discretion or authority so that the
person filling the Role knows what he can do to accomplish
Goals.
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To make a Role work out more effectively, provision should
be made for supplying needed information & other tools
necessary for performance in that Role.
 Organizing is considered as :
1) The identification & classification of reqd activities.
2) The grouping of Activities necessary to attain Objectives.
3) The assignment of each Grouping to a Manager with the
delegation of Authority necessary to supervise it &
4) The Provision for Co-ordination horizontally on the same
or similar organizational level & vertically with corporate head
quarters, division & dept etc., in the Organizational Structure.

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This should be designed to clarify who is to do what tasks & who is
responsible for what results to remove hindrances caused by confusion &
uncertainty of assignment & to furnish Decision Making & Communications
Networks reflecting & supporting enterprise Objectives.
Purpose of Planning :
This is to aid in making Objectives meaningful & to contribute to enterprise
Objectives :
1) Principle of Unity of Objectives : An Organization Structure is
effective if it enables individuals to contribute to Enterprise Objectives.
2) Principle of Organizational Efficiency : An Organization is efficient if
it is structured to aid the accomplishment of Enterprise Objectives with a
minimum of unsought consequences for Costs.
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Principles of Organization :

This is the strength & basis of Organization Structure, the
thread that makes it possible, the means by which groups
of activities can be placed under a Manager & Co-ordination
of Organizational Units can be promoted. It is the tool by
which a Manager is able to exercise discretion & to create an
environment for individual performance.
Therefore, some of the most useful principles of
Organizing are related to Authority. They are highlighted as
follows :
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1) Scalar Principle : The clearer the line of authority from the
topmost management position in an enterprise to every
subordinate position, the clearer will be the responsibility for
Decision Making & more effective will be the Organization
Communication.
2) Principle of Delegation by Results expected :
The responsibility of subordinates to their superiors
for performance is absolute, & the superiors cannot escape
responsibility for the Organizational activities of their
subordinates.
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3)
Principle of parity of Authority & Responsibility :
The responsibility for actions cannot be greater than that implied by the
authority delegated, nor should it be less.
4) Principle of Unity of Command :
The more complete an individual’s reporting relationships to a single superior,
the smaller the problem of conflicting instructions & greater the feeling of personal
responsibility for results.
5) Authority – level principle :
Maintenance of intended delegation requires that decisions within the
authority of individual manager’s should be made by them & not be referred upward
in the Organization Structure.
Other principles of Organization related to achievement of Objectives are as
under :
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6) Principle of Unity of Objectives :
An Organization Structure is effective if it
enables individuals to contribute to Enterprise
Objectives.
7) Principle of Organizational Efficiency :
An Organization is efficient if it is structured to
aid the accomplishment of enterprise objectives with a
minimum of unsought consequences or Costs.
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8) Specialization :
Effective Organization must promote specialization. The
activities of the enterprise should be divided according to functions &
assigned to persons according to their specialization.
9) Span of Management Principle :
In each Managerial Position, there is a limit to the number of
persons & individual can effectively manage but the exact number will
depend on the impact of underlying variables. As far as possible, the
span of control should be the minimum. That means, a Manager should
be asked to supervise a reasonable number of subordinates only, say
six.
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10) Simplicity :
The Organization Structure should be as simple as
possible & the Organization levels should, as far as possible,
be minimum. A large number of levels of Organization
means difficulty of effective communication & coordination.
11) Flexibility :
The Organization should be flexible, should be
adaptable to changing circumstances & permit expansion &
replacement without dislocation & disruption of the basic
structure.
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12) Balance :
There should be reasonable balance in the size of
various depts, between Centralization & Decentralization,
between the principle of span of control & short chain of
command, & among all types of factors such as Human,
Technical & Financial.
13) Unity of Direction :
There should be one Objective & one plan for a group
of activities having the same Objective. Unity of Direction
facilitates unification & co-ordination of activities at various
levels.
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14) Personal Ability :
As people constitute an Organization, there is a need for
proper selection, placement & training of Staff. Further, the
Organization Structure must ensure Optimum use of Human
Resources & encourage Management Development Programmes.
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Process of Organizing :
The various principles of Authority Delegation & of
Departmentation or Segmentation of the activities on
the basis of some Homogeneity & Integration are
fundamental truths about the process of Organizing.

They deal with phases of the three primary aspects of
Organizing – a) Authority b) Delegation c) Activity
Groupings & Integration.

Integration is the process of achieving unity of effort
among the various Departments or Subsystems to achieve
the Objectives of the Enterprise.

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The Process of Organizing involves the following Six Steps :
Consideration of Objectives :

The first step in Organizing is to know the Objectives of the
Enterprise.

They determine the various activities which need to be
performed & the type of Organization which needs to be built for
this purpose, i.e., the Strategy of the Organization determines its
Structure.

For Eg: The Structure of an Educational Institution is not
the same as that for a Business Enterprise. Therefore,
Consideration of Objectives has the First & Foremost Role to
play in the Process of Organizing.
1)
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2) Grouping of Activities into Depts / Divisions/ Segments/
Subsystems :

The Second Step is to identify the activities necessary to achieve them
& to group the closely related & similar activities into divisions & depts or
Subsystems.

For Eg: The activities of a graded Cast Iron Castings Manufacturing
Enterprise may be grouped into such Depts as Pattern Shop, Moulding
Shop, Core Shop, Sand Plant, Melting Shop, QA Dept, Personnel Dept,
etc.

In addition, the activities of each Dept can be further classified &
placed under the charge of different sections of that Dept. For Eg: In the
Moulding Shop, separate sections may be created for Machine Moulding,
Hand Moulding etc.
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3) Identification of Key Depts :

They are activities essential for the fulfillment of the Goals.
Such Key Depts demand utmost importance.

Other Depts exist merely to serve them.

If Key Depts are not identified, Top Management very often
tends to focus its attention on Minor Issues leading to wastage of
Time & Resources.

Thus Key Depts have to be identified & placed directly under
the Top Management.

For Eg: An enterprise manufacturing Soaps & Detergents can
identify advertising & sales promotion Depts as Key Depts which
report directly to the MD of the enterprise.
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4) Determining Levels at whichVarious Types of Decisions
are to be made :
After deciding the relative importance of various depts, the levels at
which various Major & Minor Decisions have to be taken, have to be
determined.

Each enterprise must decide on the degree of Centralization &
Decentralization of authority & responsibility it wants to have.

Extreme Decentralization may lead to loss of Control, on the
other hand, Extreme Centralization may lead to improper decisions,
failure to take decisions at the right time, delays & complete breakdown
of the morale of the employees.

Therefore, Top Management must very carefully decide the levels of
the enterprise at which various types of decisions can be taken in order to
achieve overall Objectives of the enterprise most effectively & efficiently.

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5) Deciding the Span of Management :
 One has to decide on the Span of Management. i.e., the
Number of Subordinates who should report directly to
each Executive.

The Narrower the Span, the taller would be the Structure
with several levels of Management. This will complicate
Communication & increase financial burden of Salaries.

For these reasons, a Flat Structure is generally desirable.
However, the Span of Management, of each Executive Position
must be tailored to meet the satisfactory working environment
of the enterprise.
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6) Setting up a Coordination Mechanism :
 Proper Coordination among various depts & its individuals
is very important for the successful & smooth running of the
enterprise.
 As individuals & depts carry out their specialized activities,
the overall goals of the Organization may become submerged
or conflicts among Organization members may develop.
 Therefore, effective Coordination Mechanisms are reqd to
enable members of the Organization to keep sight of the
Organization Goals & reduce inefficiencies & conflicts.
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Peter F Drucker’s Process of Organizing
:
 Activities Analysis :
A thorough & careful activities analysis clarifies as to
what work has to be performed, what kinds of work belong
together, & what emphasis each activity is to be given in the
Organization Structure.
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
Decision Analysis :
Second Step involves Decision Analysis. Although, it is
important for any one to anticipate the contents of the future
decisions, one can predict their kind & decide their places so that
when they arise in future, they need no “go looking for a
Home.”
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
Relations Analysis :
In the final step, an analysis should be made of
various relationships between the tasks of a Manager &
those of his subordinates, peers & superiors.
Traditionally, only downward relationships of a
Manager are analyzed. But, this done not give a
complete picture of his contribution to the total
Organization. This can be obtained only by analyzing
his Horizontal & upward relations also.
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Types of Organization :

Organizations can be of 2 Types as given below :
1)
2)
Formal Organization.
Informal Organization.
Both types are found in the Organization shown
below :
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1) Formal Organization :
There are various Levels in any Organization, right from President or
Chairman or Managing Director or Chief Executive Officer at the top to
Foremen/Supervisors down the line.

Formal means the Intentional Structure of Roles in a Formally
Organized Enterprise.

This doesn’t mean there is anything inherently inflexible. If a Manager
is to organize well, the structure must furnish an environment in which
individual performance, both present & future contributes most effectively
to Group Goals.

Formal Organizations should be flexible, there should be room for
advantageous utilization of creative talents for recognition of individual likes
& capacities in the most formal of Organizations.Yet, individual efforts in a
Group situation should be directed towards Group & Organization Goals.

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2)
Informal Organization :
Such an Organization is a Joint Personal Activity without conscious
joint purpose, even though contributing to joint results.

Thus, the Informal Relationships established in the Group of people
during morning Tea Break or Playing Cricket in the Evening etc., may aid
in the achievement of Organization Goals.

It may be easier to ask for help in an Organization Problem from
someone you know personally, even if he may be in a different section, than
by passing thro the Organization Structure.

Definition : “ A Network of Personal & Social Relations not established
or required by the formal organization but arising spontaneously as people
associate with one another. Thus, relationships not appearing on the
Organization Chart might include Evening Cricket Team & Morning Tea
Regulars.

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Organizational Division – The Department.
The Word Dept indicates a distinct area, division or
branch of an Organization over which a Manager has
authority for the performance of specified activities.

Dept could be the Manufacturing Division, Sales
Division, R&D division etc.

Each Division is generally headed by a VP or a Manager.
These designations may change from one Organization to the
other.

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Organization levels & Span of Management
:
Span Of Control :
Meaning of Span of Control & its importance :
The term “Span of Management” is also referred to as “Span of
Control, Span of Supervision, Span of Authority, Span of
Responsibility.”
 This indicates the Number of Subordinates who report
directly to a Manager.
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While the purpose of Management is to make Human
Cooperation more effective, the Reasons for levels of
Management is the Limitations of the Span of
Management.

In other words, the Organization Levels exist because
there is a limit to the number of persons a Manager can
supervise effectively.

This limit to the Number of Persons a Manager
can supervise effectively varies depending on the
Situations & Types of Organization. This is
called as Span of Control or Span of
Management.

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Reasons for deciding an Appropriate Span of
Control in an Organization :
 There are 2 Possible Reasons :
1) This affects the efficient utilization of Managers &
the effective performance of their Subordinates. When
the Span of Control is too Wide, Managers are
overstraining themselves & also, their Subordinates are
receiving very little guidance from their Managers.
This also means Managers have very little
Control on their Subordinates.
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2) There is a Relationship between Span of Control &
Organizational Structure.
A Narrow Span of Control results in a “Tall”
Organization” with many Levels of Supervision between
Top Level Management & Lowest Organizational Level.
This creates Ineffective Communication Problems & also
increases the Financial Burden on the Organization.
There is also a Burden of finding suitable
experienced personnel at different levels.
On the other hand, a Wide Span of Control for the
same number of Employees, means a “Flat Organization”
with fewer Management Levels between Top & Bottom
Levels.
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Relationships between Span of Control &
Organizational Levels :
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In the figure shown above, the Relationships between Span of
Control & Organization Levels are shown. A Wide Span of
Control is associated with Few Organization Levels; a
Narrow Span contains Many Levels.
Advantages & Disadvantages of Narrow & Wide Spans of
Control :
Advantages of Organizations with Narrow Spans :
1) Managers have Close Supervision on their Subordinates.
2) Therefore, Close & effective Control on them.
3) There is a Clear Cut Fast Communication between
Subordinates & their Superiors & therefore Communication is
not diluted.
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Disadvantages of Narrow Organization Spans :
1) Superiors tend to get too involved in Subordinates Work.
2) There are many Levels of Management.
3) Financial Burden of the Organization increases due to
high costs because of many levels in the Organization.
4) There is an Excessive Distance between Lowest Level &
Top Level.
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Advantages of Organizations with Wide Spans
:

Superiors are forced to delegate authority &
responsibility to their Subordinates.

Organization makes clear policies.

Subordinates are very carefully selected.
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Disadvantages of Wide Span Organizations
:

There is a tendency of Overloaded & Stressed
Superiors to become Decision Bottlenecks.

There is a tendency of Superiors loss of Control
on his Subordinates.

This requires Managers with Superior &
Exceptional Qualities.
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Deciding on the Span :
In every Organization, it must be decided how many subordinates
a Superior can manage effectively & efficiently.

According to Research, the Number is usually about, 4 to 8
Subordinates at the Upper levels, & 8 to 15 or more at the Lower
Levels.

According to another Study, “the ideal number of Subordinates
for all Superior Authorities is to be 4”, while at Lowest Levels in the
Organization, what is delegated is Responsibility for the Performance
of Specific Tasks & not for the Supervision of Others, the Max Number
being 8 to 12. Other Management Experts find that Manager may be
able to manage as many as 20 to 30 Subordinates.

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Summary :

Studies on several Well Managed Companies have shown
widely varying Spans & that merely counting the Numbers in
the existing Spans is not enough to establish what a Span ought
to be.

This is true even if it could be assumed that each Company
has reached the best Number thro Trial & Error.

That might prove only that underlying conditions vary for
different Companies.
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Factors Governing Effective Span of
Control :
The Number of Subordinates a Manager can effectively depends
on Various factors discussed below :

Apart from such personal capacities as Comprehending Quickly,
getting along with people & commanding Loyalty & Respect, the
most important determinant is a Manager’s ability to reduce the time
he spends with his Subordinates.

This ability naturally varies with Manager’s & their jobs, but
several factors materially influence the number & frequency of such
contacts & therefore the Span of Control.

The appropriate Span of Control, therefore, must be
determined by the Specifics of the Manager’s particular
situation. They are given below :
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1) Subordinate Training.
2) Competency of the Manager.
3) Competency of the employees.
4) Nature of Work.
5) Delegation of Authority & Responsibility.
6) Communication Technique.
7) Clarity of Plans.
8) Use of Objective Standards.
9) Geographic Location.
10) Levels of Management.
11) Economic Considerations &
12) Other Factors.
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1) Subordinate Training :

Proper Training of Subordinates for their job leads to the
fewer number of necessary Superior Subordinate
Relationships.

Also, well trained Subordinates require not only less of
Manager’s time but also less contact with their Manager’s ,
thus allowing a Larger Span of Control.
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2) Competency of the Manager :

A Manager who is Competent & Well trained can
effectively Supervise more Subordinates than one who is not
!

Therefore, in Planning an Organization, the Span of
Control should be based on Manager’s Average Competency
Level.
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3) Competency of the Employees :
 If the Employees are Competent, & possess necessary
skill & Motivation to perform the Task assigned, Less
Control & Supervision from the Manager is reqd & a
wider Span of Control can be employed.
 If, Incompetent Employees are there, they demand
more of the Manager’s time in Supervision & Control,
a Narrow Span of Control will have to be forced in.
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4) Nature of Work :

If Employees are carrying out, similar repetitive jobs, the
Span of Control can be widened.

However, if their Jobs keep changing frequently, more of
Manager’s time is reqd in Supervision & Control, & hence
again forcing Narrow Span of Control.
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5) Delegation of Authority & Responsibility :

If the Authority & Responsibility of each employee are
properly defined & delegated, they need not meet their
Superiors very often for guidance & Instructions.

This helps the Superior to manage a large number of
Subordinates.
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6) Communication Techniques :
The effectiveness with which communication Techniques are
used also influences the Span of Control.
 An Ability to communicate plans & instructions clearly &
concisely tends to increase a Manager’s Span.

The Subordinates Job is greatly facilitated by Superiors
who can express themselves.

On the Other Hand, if clarity is lacking in Communication
about what is reqd to be carried out, Subordinates will make
frequent visits to the Superiors for seeking Clarifications,
therefore a Narrow Span of Control becomes necessary.

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7) Clarity of Plans :
Much of the Character of a Subordinate’s Job is defined by the
plans to be put into effect.

If Plans are well defined & if the Authority to undertake them
has been delegated, & if the Subordinate understands what is
expected of him, little of Supervisors time is reqd & hence, Span
of Control is much larger. Such is the case with a Production
Supervisor responsible for largely Repetitive Jobs.

On the other hand, if plans cannot be accurately drawn, &
subordinates do much of their own Planning, they may require
considerable guidance from their Superiors, thereby, requiring a
Narrow Span of Control.

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8) Use of Objective Standards :
A Manager must find out, either by personal
observation or thro use of Objective Standards,
whether, Subordinates are following Plans. Obviously,
good Objective Standards, revealing with ease, any
deviations from Plans, enables Managers to avoid many
time consuming contacts.
 But, Direct Attention under exceptional cases will
be reqd, which may be Critical to the Organization’s
Success.

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9) Geographic Location :

An Office Manager who has 30 Employees, all located in
One Place ,may be able to Supervise them very well.

On the Other Hand, a VP – Marketing who has 30
Marketing Managers located at different places in the
Country would find direct supervision difficult.
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10) Levels of Management :
Span of Management also varies with each level in the
Organization.
 Gerald G. Fisch has divided the Management Hierarchy for
this purpose into 4 Basic Groups : 1) Super Managers 2)
General Managers 3) Middle Managers 4) Supervisors.
 The Max Span of Management of Super Managers, whose
functions involve only Broad Policy Control rather than Direct

Supervision, can be 50 Subordinates.
Contd ……
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But, for General Managers who are more closely
involved with their Subordinates, than Super Manager’s, the
Span of Control has to be comparatively narrow, say 9 to 10
Subordinates only.
 For Middle Level Managers, the appropriate Span of
Control depends on the precise mix of Executive &
Operative Supervision than their specific Jobs require. It can
be 40 to 50 Subordinates.
 For Supervisory Level whose Job is of a Routine Nature,
the Span of Control is normally quite Wide, say up to 100
Subordinates.

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11) Economic Considerations :
Economic Considerations also affect choice of Span.
Smaller Spans means a Large No of Managers with added
Salaries & other Costs they entail.

But Wide Spans also involve extra costs due to
inefficiencies that result from decreased Managerial
Leadership.

Hence, an Economic Balance has to be struck between
Costs Saving that result from the largest possible Span &
the added Costs that an Organization begins to incur as the
Span grows too Wide.

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12) Other Factors :
Simple Tasks may allow for a Wider Span than Tasks
which are Complex & include a Great Variety of
Activities.

A Wider Span of Control can also result from the +ve
attitude of Subordinates toward assumption of
responsibility, as well as their willingness to take
reasonable risks.
 Similarly, with more mature Subordinates, the
Superior may delegate more Authority thus Widening the
Span.

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Departmentation :
The Horizontal Differentiation of Tasks or Activities into
discrete segments is called Departmentation.

The limitation on the Number of Subordinates that can be directly
managed would restrict the size of the enterprises if it were not for
the tool of Departmentation.

Grouping of activities & people into depts makes it possible to
expand Organization & to manage it effectively & efficiently.

Departmentation is thus the Key in building up an effective &
efficient Organization.


The basic aim is to take advantage of the division of
Labor & Specialization.
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
Depts however differ with respect to the basic patterns used to
group the activities.

There are several bases for Departmentation, each of which is
suitable for particular Organizations, strategies & purposes.

It can be emphasized “there is no single best way of
Departmentizing that is applicable to all Organizations or to all
situations”.

The pattern used will depend on given situations & on what
Managers believe will give the best results for them in the situation
they face.
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The various bases of Departmentation :
1) Departmentation by Enterprise Functions :
Functional Departmentation is the most widely employed
basis for Organizing Activities & is present in almost every
Enterprise at some level in the Organization Structure.
Each Major function of the enterprise is grouped into a
Dept.
For Eg : A typical Manufacturing Company will have
Production, Engineering, Marketing, Finance & Personnel
Depts. A typical Manufacturing Unit representing such
Functional Depts is shown below :
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Advantages : ( Function based Departmentation)
It is logical & time proven.

The Power & prestige of the basic activities of the
enterprise are maintained by the Top Managers. The
identity of various functions is maintained.

Functional Departmentation follows the principle of
Occupational Specialization & thereby facilitates
efficiency in utilization of people.

It simplifies training.

It furnishes a means of tight control at the Top, as the Top
Managers are responsible for end results.

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Disadvantages :

This may tend to de-emphasize over all Enterprise Objectives.

Over specializes & narrows view points of Key Personnel.

People develop attitudes & other behavioral patterns involving
loyalty to their Functional Depts & not to the enterprise as a whole &
this tends to reduce Co-ordination between Functions.

Responsibility for profits is at the Top only. In small Enterprises,
this may be acceptable, but in large Enterprises the burden becomes
too heavy for the person to bear.

Functional Departmentation makes it difficult to adapt quickly to
environmental changes.

It limits development of General Managers.
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2) Departmentation by Products :
This method is ideally suited for Large Organizations
manufacturing various different Products.

In this method, a separate Semi Autonomous Dept is
created for each Product & is put under the Charge of a VP
or, a Manager is made responsible for achieving Set Goals.

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Within each Dept, all the needed Production,
Engineering, Personnel, Marketing & other facilities are
grouped.

This method is ideal when an Organization grows to a
very Large Size & the usual method of Functional
Departmentation creates Operational Problems.

For Eg: An Automobiles Manufacturing Company has 3
Products say : 1) Tractors 2) LCV & 3) Luxury Cars etc.
The Company may create 3 Different for these Products,
each headed by a VP for efficient & effective running of the
Organization.

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Advantages :
It facilitates use of specialized Capital (eg : A person may
be extremely good in Marketing Luxury Cars or LCV & his
Services may be used in these areas.)

Relieves Top Management of Operating Task
Responsibility, therefore it can better concentrate on such
centralized activities like Finance, R & D, & Control.

This enables the Top Management to Compare the
performance of different Products & take the Policy
Decisions about those Products which are not
performing at expected levels.

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
In this form, since Responsibility for Performance of each
Product is entrusted to a particular Dept Head, he is well
stimulated for improving his performance.

Here, those who Work within the Dept derive greater
satisfaction from identification with a recognizable Goal.
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Disadvantages :
This form results in Duplication of Facilities & Staff.

Extra expenditure is incurred in maintaining a Sales Force
for each Product Line.
 Employment of a Large No of Management Personnel is
reqd.
 Plant & Machineries in each Dept may not be used fully.

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3) Customer Departmentation :
An enterprise may be divided into a Number of Depts on
the basis of the Customer that it serves.
 In this form, the Customers are the Key to the way the
activities are grouped when each of the different things
an enterprise does for them is managed by one Dept
Head for that particular activity/thing.

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Advantages :



Encourages Concentration on Customer Needs.
Gives Customers feeling that they have an understanding
Supplier.
This form helps to develop Expertise in Customer Area.
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Disadvantages :



It may result in Under Utilization of resources & facilities
in some Depts.
There may be duplication of Services.
Requires Manager’s & Staff Experts in Customer’s
Problems.
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4) Departmentation by Territory or Geography or
Regions :
It is based on Territory or Region which is Very
Common in Enterprises that operate over Wide
Geographic Areas.

For Eg: Used widely in Automobile Assembling, Chain
Retailing, Wholesaling & Oil Retailing. i.e., “Big Bazaar”,
“Wal Mart in USA”, departments based on Region
“Western Railways, Southern Railways etc”.

Here, it is important that activities in a given area
or region be grouped & assigned to a GM, when this
type of Departmentation is adapted.

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Advantages :






It motivates each regional head to achieve high performance.
Places responsibility at a Lower Level.
Places emphasis on Local Markets & problems.
It improves Coordination in a Region.
It enables better face to face communication with the local
interests. Takes advantage of economics of Local Operations such as
Raw Materials availability, Cheap Labor, Market etc.
It enables Organization to compare Regional Performances &
invest more in Profitable Areas & withdraw Resources from
Unprofitable Ones.This promotes spirit of healthy competition
between the Regions.
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Disadvantages :
 It requires more people with GM capabilities.

It increases problem of Top Management Control.
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5) Departmentation by Time :

One of the Oldest form of Departmentation generally
used at Lower Levels of Organization, i.e., Grouping
based on Time. The use of Shifts is Common in many
enterprises where for Economic, Technological or other
reasons, the normal day will not suffice.
Egs: Hospitals, Machine Shops, Forging Shops, Press
Shops working in 3 Shifts for Economic Reasons. This is also
true for Chemical Industries, Blast Furnaces, Steel Melting
Furnaces etc where processes cannot be interrupted. These
industries work in 3 Shifts.
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Advantages :
Services may be rendered that go beyond the typical 8
Hours a Day, often extending to 24 Hours a Day.
 It is possible to use processes that cannot be
interrupted, those that require a Continuous Cycle.
 Expensive Capital Investment on Plant & Machinery
can be used more than 8 Hours a Day when Workers in
all the 3 Shifts use the same Machines. This is a very
important Economic Consideration.

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Disadvantages :





Supervision may lack during Night Shift.
There is a fatigue factor ; it is difficult for most people to
switch, for instance, from a Day Shift to a Night Shift & Vice
Versa.
Having Several Shifts may cause problems in
Communication & Coordination.
In a factory, the night shift people may not clean up the
machines to be used by the day shift people.
Efficiency of the people have generally been found to be
quite low between 12:00 AM to 8:00 AM.
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6) Process or Equipment
Departmentation :
This is done on the basis of several discrete processes or
technologies involved in the manufacture of a Product.

In this kind of Departmentation, the necessary Resources
are brought in to do the particular Job.
 Eg: This can be explained by means of a Cast Iron
Foundry manufacturing Graded cast Iron Castings. There are
so many processes involved such as Moulding, Core Making,
Melting, Sand Preparation, Fettling etc. The Block Diagram
of a Typical Enterprise is shown below :

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Advantages :
It achieves Economic Advantages.
 Follows principle of Specialization – each Dept is engaged
in doing a special type of work, therefore utilizing special
skills of the people & increases Operational Efficiency.
 Ideally suited for manufacturing enterprises using a
Number of Intermediate Processes to manufacture their
Products.

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Disadvantages :

It does not provide a good training ground for overall
development of Managerial Talent.

Coordination of different Depts is difficult & some
times, it may lead to Production Bottle Necks.

Responsibility for Profit is at the Top.
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7) Matrix Organization or Combined
Base :

It is quite typical to find an enterprise having a
different base of Departmentation at different levels.
 For Eg: An enterprise Manufacturing Consumer
Durables viz., Refrigerators, Washing Machines & TV
‘s may follow “Product” as the Base at the Top level,
“Region” as the base at the Intermediate level &
“Function” as the base at the Bottom Level.
This is represented in Block Diagram given below :
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Matrix Organization in an Engineering Dept :
Another kind of Departmentation is Matrix or Grid
Organization or Project or Product Management.
 The essence of Matrix Organization normally is the
combining of Functional & Product Patterns of
Departmentation in the same Organization Structure.
 In the figure given below, there are Functional
Managers In Charge of Engineering Functions & an
Overlay of Project Managers responsible for the end
products.

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Functional Depts are a permanent feature of the Matrix
Organization.

They retain Authority for Overall Operation of their
Respective Depts.

Product Depts or Project Teams, on the other hand, are
created as the need for them arises.
 Members of a Project Team are grouped from the various
functional depts & are placed under the direction of a Project
Manager.

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The Manager for each Project is responsible & accountable for
its success; thus, he has the authority over the other team members
for the duration of the Project.

This temporary authority is shown by the dotted lines as shown
in fig. above.

On Completion of the Project, the members of the Team
including the Project Manager revert back to their respective Depts
until the next assignment to a New Project.

This type of Organization is frequently found in Construction
Projects, Designing & Launching Weather Satellites, in Management
Consulting Firms, where Experts work together on a Specific
Project for a fixed period.

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Advantages :



Oriented towards End Result.
In this Organization, Professional Identification of the
Individuals are maintained.
It pinpoints Product Profit Responsibility.
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Disadvantages :

Conflict in Organization Authority exists.

Possibility of disunity of Command exists.

Requires Manager to be good at Human Relations.

Matrix Organization requires many Time Consuming
Meetings.
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Useful Tips for making Matrix
Organization Effective :
1) Define clearly the Objectives of the Project or Task.
2) Clarify the Roles, Authorities & Responsibilities of
Managers & Team Members.
3) Ensure that influence is based on Knowledge &
Information than on Rank.
4) Balance Power of Functional & Project Managers.
5) Select experienced Manager for the Project who can
provide leadership.
6) Reward Project Managers & Team Members fairly etc.
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Choosing Pattern of Departmentation :
Departmentation is not an End in Itself, but it is
simply a Method of arranging activities to facilitate the
accomplishment of Organization Objectives.
 There is no one best way of Departmentising
applicable to all Organizations & all situations.
 They must decide what is Best Looking at the situation they
face - Jobs to be done, the way they should be done, the
people involved & their personalities, the Technology
employed in the Dept, whether the Users are being served,
the other Internal & External Factors in the situation.
However, some factors are given below :

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1)
Specialization :
The base of Departmentation should ensure Maximum
Specialization of Skill & Effort. The points to be considered for
this purpose are :
a) Which approach permits the max use of Special Technical
Knowledge.
b) How will the Choice affect the differentiation among
Specialists.
c) Will it allow necessary differences in View Points to
develop so that specialized Tasks can be performed effectively.
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2)
Coordination :
The base of Departmentation should ensure Proper
Coordination & Control of the Activities of Different Depts. The
Points to be considered for this purpose are :
a) Which base provides the best hope of achieving reqd
Control & Coordination.
b) Will a particular base increase problems of achieving
integration or reduce them.
c) How will the Decision affect the ability of Organization
Members to communicate with each other, resolve conflicts &
reach necessary Joint Decisions.
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3)
Economy :
The expenditure involved in introducing Departmentation
is also an important point to be considered. Benefits of
Departmentation should always be higher than the Costs. Points
to be considered here are :
a) Which base provides the most efficient utilization of Plant &
Machinery.
b) What is the financial burden involved in following a
particular base etc.
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4)
Whole Task :
The Organization should be so divided that each Dept
has a Whole Task, this “Wholeness” may be achieved either
by Technological Departmentation or by Regional
Departmentation or by Time Departmentation or by
Combination of these.
Thus, in each Case, Managers of Different Depts have
a realistic accountability & those who work within the
Depts derive satisfaction from identification with a
Recognizable Goal.
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Committees :
It is a Group of People who have been formally
assigned some specific task or some problem for their
decision & or implementation.

In Modern Business Enterprises, use of Committees
is very common in all areas of Management &
Administration.

The use of Committees is due not only to the
Democratic Tradition but also to a growing emphasis on
Group Management & Group Participation in
Organizations.

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Committees are broadly classified into 2 Groups as under :
1) Advisory Committees &
2) Executive Committees.
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1)
Advisory Committees :
When Committees are vested with Staff
Authority, they are known as Advisory Committee.

They have only a Recommendatory Role & cannot
enforce implementation of their advice.

Some of the usual advisory committees formed in
Business Enterprises are : a) Works Committees b)
Sales Committees c) Finance Committees
d)
Workers Welfare Committees etc.

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2)
Executive Committees :

Whenever Committees
are vested with
Line Authority, they are called as Executive
Committees.

These Committees not only take Decisions but
also enforce Decisions & thus perform a Double
Role of taking a Decision & its implementation. The
Board of Directors of a Company is an Example
of an Executive Committee.
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Advantages of a Committee :
When Committees consist of all Departmental Heads as
Members, people get an Opportunity to have a better
understanding of the Problems of each other & Coordinate
effectively to achieve Organizational Goals.

It is a forum for the Pooling of Knowledge & experience
of many persons of different skills, ages, & backgrounds. This
leads to taking improved Quality Decisions.

Committees provide an Opportunity for many persons
to participate in the Decision Making Process.

Contd ….
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More appropriate decisions or solutions are likely to
emerge for a given problem by a group of people, (group
decision making) rather than individuals.
 They are an excellent means of transmitting
information & ideas, both Upward & Downward.

By exposing members to different issues & view points.
They contribute indirectly to their Training &
Development.

They are impersonal in action & hence their decisions
are generally unbiased & are based on facts.

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Drawbacks of Committees :
One of the best administrative procedures to delay
action is to refer the matter to a Committee. Almost
without exception, it takes longer time to get action from a
Committee than from an individual Manager.
 For wrong Decisions, no members of the Committee can
be individually held responsible & members therefore may no
apply their mind seriously.
 A huge amount of time & money is spent in convening such
meetings & giving allowance to the members. Therefore,
Committees increase the Financial Burden on the
Organization.

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Members of Coordinating Committees frequently
regard themselves as appointed to protect the interests
of their Depts rather than to find the most appropriate
solution to the problem in Question.

Decisions are generally arrived at on the Basis of some
Compromise among members. Hence, not always the Best
Decisions.

As Committees consist of a large number of persons, it
is difficult to maintain secrecy regarding the Decisions
taken at the Committee Meetings.

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Guidelines for making Committees more effective
:
Some of the disadvantages of Committees can be overcome by
applying the following guidelines for more effective working of the
Committee. They are as given below :
a) Authority.
b) Size.
c) Membership.
d) Subject Matters.
e) Chairperson.
f) Minutes &
g) Cost effectiveness.
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They are as explained below :
1) Authority : The Committee’s Authority should be
spelled out so that members know whether their
responsibility is to make decisions, make
recommendations, or merely deliberate & give the
Chairperson some insights into the problem under
discussion.
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2)
Size :
Size of the Committee is very important. As a general rule,
a Committee should be large enough to promote deliberation &
include the breadth of expertise reqd for the Job.
It should not be too large so as to waste time or foster
indecision. The Optimum Size is 5 to 6 members & the members
chosen should possess adequate skills & knowledge to deal with
the problem referred to the Committee.
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3)
Membership :
It must be selected carefully. If a Committee is to be
successful, the members must be representative of the interests
they are intended to serve.
They must also possess the reqd authority & be able to
perform well in a Group.
Finally, members should have the capacity to
communicate well & reach Group Decisions by
integrated Group Thinking rather than inappropriate
Compromise.
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4)
Subject Matter :
This should be carefully selected. Committee work should
be limited to Subject Matter than can be handled in a GD.
It could be more effective if an Agenda & relevant
information are circulated well in Advance so that the members
can study the Subject & come prepared for the Meeting.
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5)
Chairperson :
The selection of this person is extremely important for
Effective Communication.
Such a person can avoid the Wastes & Drawbacks of
Committees by planning the Meeting, preparing the
Agenda, seeing the results of Research are made available
to the members in Advance, formulating definite proposals
for discussion or action & conducting the meeting
efficiently.
He sets the tone of the Meeting, integrates the ideas &
keeps the discussion from Wandering.
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6)
Minutes :
Sometimes, individuals leave the meeting with varying
interpretations as to what was discussed & agreed upon.
This can be avoided by taking careful minutes of the meeting
& circulating them in Draft form for correction or modification
before the final copy is approved by the Committee.
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7)
Cost Effectiveness :
The Committee must be worth its Costs. It may be
difficult to count the benefits, especially such Intangible Factors
such as Morale, enhanced status of Committee members, & the
Committee’s value as a training device to enhance Team Work.
But the Committee can be justified only if the Costs are
Offset by Tangible & Intangible Benefits.
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Centralization versus Decentralization of
Authority & Responsibility :
Meaning of Decentralization :
Organization Authority is merely the discretion
conferred on people to use their judgement to make
decisions & issue instructions.
It is the tendency to disperse decision making
authority in an Organized Structure.
It is a fundamental aspect of delegation, to the
extent the authority is not delegated ; it is Centralized.
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Delegation of Authority & hence Decentralization is
necessary for an Organization to exist.

Just as no one person in an enterprise, can do all the tasks
necessary for accomplishing a group purpose, so it is impossible,
as an enterprise grows, for one person to exercise all the
authority for making decisions.

There is a limit to the No of Persons Managers can effectively
supervise & make decisions for.

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Once this limit exceeds, Authority must be delegated to
Subordinates, who will take decisions within the area of the
assigned duties.

Decentralization implies more than delegation. It reflects the
philosophy of the Organization & Management.
 It requires careful selection of which decisions to be taken
at lower levels of the Organization Structure & which to be
taken at the Top levels.

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It also requires specific policy making to guide the decision
making, proper selection & training of people & adequate
control.
 A policy of Decentralization affects all areas of Management
& can be seen as an essential element of a Managerial System.
In fact, without it, Managers wouldn’t be able to use their
discretion to handle the ever - changing situations they face.
 Every enterprise has to decide as to how much decision
making authority should be centralized in the hands of
the President & theVP (Top Levels) & how much should
be delegated to the Managers at the Lower Levels.

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In a Centralized set up, the Decision making Authority is
concentrated in a few people at the Top, in a Decentralized
Set up, it is delegated to the Lower Levels where the actual
work is performed.

Following are the criteria to measure the extent of
Decentralization in an Enterprise.
Decentralization is greater :
1) When, the greater is the number of decisions made at
Lower Levels.
2) When the more important are the decisions made at
Lower Levels.
3) When more is the number of areas in which decisions can
be made at Lower Levels &

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4) When fewer are the people to be consulted & less is the
checking reqd from the Top Levels on the Decisions made at
the Lower Levels.
Definition on Decentralization :
“ Everything that goes to increase the importance of
the Subordinate’s Role is Decentralization & everything
that goes to reduce it is Centralization.”
The terms “Centralization” & “Decentralization” are not
absolute but are relative. Absolute Centralization is not
possible, except in a One – Man Enterprise. Consequently,
we can say that Decentralization Characterizes all
Organizations.
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
Similarly, there cannot be absolute Decentralization
of Authority because the Manager cannot delegate all
his authority without surrendering his position as a
Manager.
Meaning of Centralization :
It has several meanings :
1) Centralization of Performance :
Pertains to Geographic Concentration ; it
characterizes, for Eg : a Company operating in a single
location.
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2) Departmental Centralization :
Refers to Concentration of specalized activities in one
Dept. For Eg : Repairs & Maintenance for an entire plant
may be carried out by a Single Dept.
3) Centralization as an aspect of Management :
It is the tendency to Restrict Delegation of decision
making. A high degree of authority is held at or near the
Top by Managers in the Organizational Hierarchy. We are
concerned with this aspect of Centralization &
Decentralization of Authority & Responsibility.
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Delegation of Authority :
Authority is delegated when a Superior gives a
Subordinate discretion to make Decisions. The process
of delegation involves :
1) Determining the results expected from a position.
2) Assigning Tasks to a position.
3) Delegating Authority for accomplishing these tasks.
4) holding the person in that position responsible for
the accomplishment of tasks.
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
In practice, it is impossible to split this process, since
expecting a person to accomplish goals without giving
him the Authority to achieve them is unfair, as is
delegating authority without knowing the end results for
which it is used.

Moreover, since the superior’s responsibility cannot
be delegated, a Superior has no practical alternative but
to hold subordinates responsible for completing their
tasks.
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Distinction between Delegation & Decentralization
:
They appear to be the same, but in reality they mean
different things. The Major differences are given below :
1) Delegation is a process, while Decentralization is the
end result (Outcome) of the Delegation & Dispersal of
Authority. Delegation mainly refers to granting of
Authority & the creation of responsibility as between one
individual & another; Decentralization is the situation
which exists as a result of the systematic delegation of
Authority throughout the Organization.
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2) In Delegation, a Superior continues to be
responsible for the work delegated to his Subordinates,
while in Decentralization, the Superior is relieved from
his responsibility for the work Decentralized &
Subordinate becomes liable (responsible) for that.
3) Delegation is Vital & essential to the Management
Process. Only thro Delegation, Subordinates can be involved
in the Organization & the Management can get things done.
Decentralization is Optional, in the sense, that it may or may
not be done as a Systematic policy.
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Advantages of Decentralization :
Relieves Top Management of some burden of Decision
Making & forces upper level managers to let go. (giving
freedom to the Lower Level Mgrs to take independent
Decisions.)

Reduces problems of Communication & hence enables Top
Managers to take timely decisions on all important issues, thus,
enhancing the efficiency of the Organization.

Encourages Decision Making & assumption of Authority &
responsibility.

Gives Managers more freedom & independence in
Decision Making.

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Promotes establishment & use of broad controls which
may increase Motivation.
 Makes comparison of performance of different
Organizational units possible.
 Facilitates setting up of Profit Centers.
 Facilitates Product Diversification.
 Promotes development of more capable Managers.
Because, Managers in a Decentralized structure often have to
adapt to & deal with difficult situations, they are assumed to
be excellently trained for Promotions into positions of
greater authority & responsibility. Decentralization aids in
adaptation to fast changing environment.

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Limitations of Decentralization :








Makes it more difficult to have a Uniform Policy.
Increases Complexity of Coordination of Decentralized
Organizational Units.
May result in loss of some control by Upper-Level Managers.
May be limited by inadequate Control Techniques.
May be constrained by inadequate Planning & control systems.
Can be limited by the availability of qualified & capable Managers.
Involves considerable expenses for Training Managers.
May not be favored by Economics of Scale of some Operations.
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The Extent of Decentralization :
To avoid problems, any program for decentralization of
Authority & Responsibility must consider thoroughly the
Advantages & the Limitations of Decentralization.

Strong forces in the Organization favor the practice of
Decentralization. But, at the same time, extensive
Decentralization is not to be blindly undertaken.

Perhaps, One Major Problem of Decentralization is loss
of Control. No enterprise can Decentralize to the extent
that its very existence is threatened & the achievement of
its Goals is frustrated.

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If Organizational Disintegration is to be avoided, Decentralization
must be tempered with selective Centralization in certain major
policy areas.

An enterprise with well balanced Decentralization will probably
centralize decisions at the Top on such things as given below :
1) Financing.
2) Overall Profit Goals & Budgeting.
3) Major Facilities & other Capital Expenditures.
4) Important New Product Programs.
5) Major Marketing Strategies.
6) Basic Personnel Policies.
7) Development & Compensation of Managerial Personnel.

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
A Well Organized enterprise always tries to balance
between Centralization & Decentralization. In, such an
Organization, Authority is retained at the very Top
for Major Policy & Program Decisions on matters
affecting the Soundness & Success of the entire
Company.

Thro Decentralization, however, once the Major
Programs & Policy Decisions have been made at
the Top, many Decisions involving their execution
are made at the Lower Levels in Various Depts of
the Organization.
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Management by Objectives (MBO) :
Introduction :
They are the End Points, towards which enterprises
activities are aimed. MBO is the philosophy of Management that
emphasizes the Development of Mutual Objectives by
Managers & their Subordinates & the use of these Objectives
as the primary bases of Motivation, Evaluation & Control
Efforts.
The Management process begins with a Mission
Statement & Setting up of Organizational Objectives.
Objectives give meaning & purpose to the Organization.
Without Objectives, without something to achieve,
Organization would be Purposeless & Chaotic.
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Good Management, therefore, is always Management by
Objectives. Objectives determine the Scope of Future Events.
They provide the Spotlight on the Routes over which
activities, are Organized.They serve as Reference Points to
Concentrate Resources & Efforts.They determine what
Action to take today to obtain Results Tomorrow.
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Mission :
Very Reason & Justification for the existence of the
enterprise.

It is usually expressed in terms of the benefits the
Firm provides to its Customers.
 An Organization’s Mission Statement states what it
is, why it exists, & the unique contribution it can
make.

Mission Statements are characterized by the
following (given below) :

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1) Customer Oriented :
The purpose of a Business according to Peter F Drucker is
“to create a Customer” . Mission Statements, therefore, are
directed at serving the Customers in useful way.
2) Future Oriented :
Mission Statements must be indicative of what the Business
is going to be in the years to come. The Statement must be Valid
for at least some years to come.
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3)
Dynamic :
The Concept of Mission is Dynamic & not a Static One. It
must strike a Happy Balance between the Narrow & Broad
Ways of doing things in the Years ahead ; between the present
requirements & future expectations.
It is worth remembering that the future of a Business is
usually determined by the way it defines its Business Today.
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Example of a Mission Statement :
Name of the Company : The Tata
Group
Mission Statement : “ At the Tata Group, our
purpose is to improve the quality of life of the
communities we serve. We do this thro Leadership,
in Sectors of Leadership, in Sectors of National
Economic Significance to which the Group brings in
a Unique Set of Capabilities. This requires us to grow
aggressively in focused areas of Business.”
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“Our Heritage of returning to Society what we earn,
evokes confidence & trust among Consumers, Employees,
Shareholders & the Community. This heritage will be
continuously enriched by formalizing the high standards of
behavior expected from employees & the company” etc.
Objectives & Goals :
The terms “Objective” & “Goal” indicate end results to be
sought & accomplished. Both of them have Value
Orientations & indicate conditions considered necessary to
improve the Overall Performance of the Organization. Three
important definitions of Objectives are given below :
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1) Objectives are Goals established to guide the efforts of the
Company & each of its Components.
2) An Organizational Goal is a desired state of affairs which
the Organization attempts to realize.
3) They indicate the “End Point of a Management
Programme”.
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MBO
MBO also called “Appraisal by Result”, “Planning by
Objectives”, “Goal Management”, “Work Planning &
Review”, “Joint Target Setting” etc is an overall philosophy of
management that concentrates on measurable goals & end
results.

It provides Systematic & Rational Approach to
Management & helps prevent Management by Crisis.

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MBO is based on the assumption that people perform
better when they know what is expected of them & can relate
their Personal Goals to the Organizational Objectives.

It also assumes that people are interested in the Goal
Setting Process & in evaluating their own performance
against the Target.

MBO is a “Process where the Superior & Subordinate
Managers of an Organization jointly identify its Common
Goals, define each Individual’s Major areas of Responsibility in
terms of results expected of him, & use these measures as
Guides for operating the Unit & assessing the Contribution of
each of its Members.”

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Features of MBO :

It emphasizes participation in Setting Goals that are
Tangible,Verifiable & Measurable.

It focuses attention on what must be accomplished (Goals)
rather than how to accomplish it !

MBO, by concentrating on Key Result Areas translates the
abstract philosophy of Management in an attempt to concretize it.
Further, it is “ A Dynamic System which seeks to integrate the
Company’s need to achieve its Profit & Sales Growth with the
Manager’s need to contribute & develop himself.
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
MBO is a Systematic & Rational Technique that allows
Management to attain Maximum Results from available
Resources by focusing on Achievable Goals. It allows the
Subordinates with plenty of room to be more creative in their
Decision Making.
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Management by Exception (MBE):
Introduction :
Control is an essential part of every Organization. It is a Process
of Comparing Actual Performance with established Standards, for the
purpose of taking Action to Correct Deviations.
It is only thro this Process of Control, that Management is able to
maintain the “Equilibrium between Ends & Means, Output &
Effort”. In a Large, Multi - Product, Multi -Plant & Multi –
Location Organization, it is impossible to check everything & initiate
timely, remedial steps whenever things go off the track. Manager’s
therefore, focus attention on Key or Critical Areas which have a
Significant Bearing on the performance of Various Depts in an
Organization. One of the Ways that have been found to be relevant in
this regard is Management by Exception (MBE).
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MBE
MBE tries to focus attention on exceptionally serious
deviations from the Plans & Standards.
According to this principle, a Manager should give more
attention to unusual or exceptional items only.
Only very important deviations from Established
Standards should be brought to the Notice of Management.
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If the Actual Performance is within an acceptable range of
deviation from the Standard (Say 5%), it need not be reported to
Management, as no Remedial Action is reqd.
However, in Case of Major Deviation from the Standard,
the Matter has to receive the immediate attention of the
Management on priority basis. The principle highlights the
importance of the Statement that, if you want to Control
everything, you will end up Controlling Nothing.
So better focus on Key Deviations & leave the minor ones to
be taken care of by the Lower Levels. That is, the Top
Management must focus on Important issues & leave the routine
things to people at Lower Levels.
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The importance of MBE stems from the enormous size of
Business & the Consequences of Complexity in Operations. It is
a Very Effective Approach in Controlling Modern Organizations.
1)
2)
3)
4)
MBE offers the Following Benefits :
It saves Time.
It identifies Critical Problem Areas.
It stimulates Communication.
Reduces Frequency of Decision Making.
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5) It leads to Concentration of efforts on Important things.
6) Makes use of more Knowledge & Data.
7) It is necessary in Big Organizations.
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Nature & Importance of Staffing :

Introduction :
People are very Vital for the effective Operation of an Enterprise.
All managers often say, “Our people are our most important
Asset.”
The Managerial function of Staffing is defined as filling & keeping
filled, various positions, in the Organization Structure. This includes
identifying Work Force requirements, inventorying the People
available, & Recruiting, Selecting, Placing, Promoting, Appraising,
Planning the Careers of, Compensating & Training or otherwise
developing both Candidates & Current Job Holders to accomplish
their tasks effectively & efficiently etc.
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It is therefore, clear that Staffing must be closely
linked to Organizing, that is, to the setting up of
Intentional Structures of Roles & Positions.
All Managers have a Responsibility for Staffing. The
board of Directors performs the Staffing Function by
selecting the Chief Executive. The Chief Executive in turn,
discharges this Function by selecting Managers for
different Depts, viz; Production, Marketing, Finance etc.
The Managers do likewise when they select their
Subordinates. Even the Foremen or Supervisors have a
Staffing Responsibility when they Recruit & Select
Workers.
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Importance & Need for Proper
Staffing :

Direct Labor Costs account for nearly 15 to 20 %
Cost of Production in a Manufacturing Enterprise.
Therefore, a Business Enterprise needs Right Kind of
People at Various Important Positions in the
Organization Structure to manage the affairs of the
enterprise efficiently & successfully.

There are a Number of Advantages of Proper &
efficient Staffing. They are described below :
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Advantages of Staffing :

Helps in choosing the right kind of Personnel for
different important positions in the Organizational Structure.

Helps in identifying Talented & Competent People,
grooming them, develop them to help move up the
Organization Ladder.

Ensures higher Productivity by placing the Right Man in
the Right Job.
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
Helps to avoid disruption of Production Schedules
due to shortage of personnel by proper indication in
Advance.

Helps to prevent Under Utilization of personnel
thro Over manning & the Resultant High Labor Costs &
Low Profit Margins.

It provides Information to Management for the
Internal Promotion of Managerial Personnel in the
event of an Unanticipated Staff Turn over.
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The Function of Staffing :
The Function of Staffing involves Proper Manpower
Planning .
Manpower Planning includes Forecasting, Developing
& Controlling is the Process by which an Enterprise ensures
that it has the Right Number of People & the Right
Kind of People at the Right Time doing work for which
they are Economically most useful.
The Managerial Function of Staffing & in turn
Manpower Planning relates to the Total Management System
as depicted in Figure Given Below :
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As Shown in the Figure, Enterprise Plans become the basis for
Organization Plans.
The Present & Projected Organization Structure determines the
Number & Kinds of Managers reqd.
These demand for Managers are compared with the available
talent thro the Management Inventory. On the basis of this
Analysis, External & Internal Sources are utilized in the process of
Recruitment, Selection, Placement, Promotion & Separation.
Other essential aspects of Staffing are Appraisal, Career
Strategy & Training & Development of Managers.
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Important Points in Staffing :
1) Staffing affects Leading & Controlling.
2) Well trained Managers creates an environment in
which people, working together in Groups, can Achieve
enterprise Objectives, at the same time accomplish
Personal Goals. It facilitates Leading.
3) Similarly selecting Quality Managers affects
Controlling ( it assists Controlling ) by preventing any
undesirable deviation from becoming Major Problems.
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4) Staffing requires an Open System Approach. It is carried
within the Enterprise, which in turn is linked to the External
Environment.
5) Therefore, Internal Factors of the Enterprise, such as
Personnel Policies, the Organizational Climate, & the
Reward System must be taken into Account.
6) It is certain that without adequate Rewards, it is not
possible to attract & keep Quality Managers.
7) The External Fast Changing Environment is also
equally important. High Technology demands Well Trained,
Well Educated & Highly Skilled Managers. Inability to meet
this Demand for such Managers may prevent an Enterprise
from growing at the Desired Rate.
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Process of Selection &
Recruitment :
What is Recruitment :
The Process of Recruitment starts after
Estimating the Manpower Requirements for Various
Positions in the Organization Structure.
It can be defined as the Process of Identifying
the Sources for Prospective Candidates & to
Stimulate them to Apply for the Jobs.
In other words, Recruitment is the Process of
Attracting Potential Employees to the Company.
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The Management should have a Proper Plan of Recruiting the
Number & Qualification of Personnel required & also the Time
Frame when it is needed.
The Process of Recruitment & the Cost involved in it
depends on the Size of the Enterprise & the Type of the Persons
to be recruited.
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Sources of Recruitment :
They can be both Internal & External. Internal Sources
refer to Present Working Force of the Company. Vacancies
other than at the Lowest Level may be filled by selecting
Competent Individuals from amongst the Existing Employees
of the Organization.
External Sources of Recruitment are as Follows :
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
Re-Employing Former Employees.

Friends & Relatives of Present Employees.

Applicants at the Gate.

Educational Institutions – Tech, Management & the Others.

Employment Exchanges.

Advertising for Vacancies in Leading Newspapers.
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1)
Re-Employing Former Employees :
Those Employees who have been laid off or have
left for Personal Reasons may be employed. Such
Employees may require very Less Training compared to
the New People to the Company.
2) Friends & Relatives of Present Employees :
Some Companies encourage their Existing
Employees to recommend their Friends & Relatives for
appointment to fill the Existing Vacancies.
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3) Applicants at the Gate :
Unemployed Persons who call at the Gate of the
Enterprise are considered, after Proper Selection Process,
for filling up different Vacancies in the Organization.
4) Educational Institutions – Technical, Management
& Others :
Many Big Enterprises remain in touch with Leading
Technical, Management, & Other Colleges & Young,
Talented Candidates are Recruited from Campus Selection
Process.
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5) Employment Exchanges :
They also serve as an Important Source of
Recruitment for a Number of Business Enterprises.
6) Advertising forVacancies in Leading News Papers
:
This is a Very Important Source for many of the
Bigger Enterprises requiring the Services of Persons
possessing Certain Special Skills & Qualifications. Small
Enterprises generally resort to Advertising for Vacancies in
Classified Columns in Leading Newspapers.
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SELECTION :
Under Recruitment, the enterprise identifies the
Sources for prospective candidates & encourages them to
apply for Various Openings in the Organization Structure.
Under Selection, Candidates are evaluated with respect
to their qualifications & the Job requirements & those who
do not satisfy the requirements are Rejected.
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There are some Variations of the Specific Steps in the
Selection Process. For Eg : The Interview of a Candidate
for a First Level Supervisory Position may be relatively
simple when compared with the Rigorous Interviews for
Top Level Managers. However, the Following Steps are
indicative of the Typical Selection Process :
1) The Selection Criteria : They are usually established
on the Basis of Current & Sometimes Future Job
Requirements. These Criteria include Educational
Qualification, Knowledge, Skills & Experience.
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2) Application Form :
Candidates are reqd to complete an Application Form. In
this form, the Applicant gives relevant Personal Data such as his
Qualification, Specialization, Experience, Firms in which they
have worked etc. The Application Forms are carefully scrutinized
to decide the suitable applicants to be called for Interview.
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3) Screening Interview :
Those who are selected for Interview on the basis of
particulars furnished in the application form are called for initial
screening interview to identify the more promising candidates.
The Interview is the most important means of evaluating
the poise or appearance of the Candidate.
It is also used for obtaining additional information
or clarification given in the Application Form & also to Check
References.
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4)
Employment Tests :
For Further Assessment of Candidates Nature &
Abilities, some Tests are conducted in the Selection Process.
The Primary aim of Testing is to obtain Data about
Applicants that help predict their Probable Success as
Managers.
Some of the Advantages from Testing include
finding the Best Person for the Job, obtaining a High
Degree of Job Satisfaction for the Applicant & reducing
Staff Turnover. The most Commonly used Tests can be
classified as follows :
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i) Intelligence Tests : They are designed to measure
Mental Capacity & to Test Memory, Speed of Thought, &
Ability to see Relationships in Complex Problem
Situations.
ii) Proficiency & Aptitude Tests : They are designed
to Discover interests, Existing Skills & Potential for
Acquiring Skills.
iii) Vocational Tests : They are designed to show a
Candidate’s most suitable Occupation or the areas in
which the Candidate’s Interests match the interests of
the People working in that Occupation.
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iv) Personality Tests :
They are designed to reveal Candidate’s Personal
Characteristics & the way Candidates may interact with others,
thereby giving a measure of Leadership Potential.
5) Group Discussion : Candidates found satisfactory in the
Screening Interview & Employment Tests are further short
listed for GD Test. Many Companies conduct this test to assess
the Candidates Communication & Presentation Skills,
Interpersonal Skills, Leadership Qualities & ability to pull on
in Team Work.
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6) Checking References :
If a Candidate has been found satisfactory in the GD, the Employer
would like to get some important Personal Data about the Candidate, such
as his Character, Past History, Background etc., verified from the people
referred to in the Application Form.
7) Physical or Medical Examination : A Physical Examination of the
Candidate is carried out to check the Physical Fitness of the Applicant for
the Position/Job applied for.
8) Final Interview : This is conducted for those who are ultimately
selected for Employment. In this Interview, the selected candidates are
given idea about their future prospects within the Organization.
9) Appointment Order : Appointment Orders are given to the finally
Selected Candidates giving the Position Offered, Scale of Pay and, Terms
& Conditions of Employment.
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