PLANNING –
• NATURE AND DEFINITION
• IMPORTANCE OF PLANNING
• STEPS IN PLANNING
• TYPES OF PLANS
• OBJECTIVES AND MBO
• FORECASTING AND DECISION MAKING
• POLICY AND STRATERGY
ORGANIZING –
• NATURE AND PURPOSE
• PRINCIPLES OF ORGANIZATION
• TYPES OF ORGANIZATION
• DEPARTMENTALIZATION
• COMMITTEES
• AUTHORITY & RESPONSIBILITY
• CENTRALIZATION vs
DECENTRALIZATION
PLANNING is the beginning of the management process. Every manager and all forms of
enterprise require planning. In this rapidly changing environment and globalisation, planning is
considered as a strategic area of management.
DEFINITION –
Planning refers to the process of setting objectives for a given time period, formulating various
courses of action to achieve them, and then selecting the best possible alternative from among
the various courses of action available.
So, the main aspects in the concept of planning are –
• Setting objectives for a given time period.
• Formulating various courses of action to achieve them.
• Selecting the best possible alternative from among the various courses of action available.
Achieving
Objectives
• Planning focuses on achieving
objectives.
• Planning is the primary function of
management.
Mental
Exercise
Primary
Function
• Planning is all pervasive.
• Planning is a continuous process.
• Planning is futuristic.
Pervasive
Decision
Making
Continuous
Process
• Planning involves decision-making.
• Planning is mental exercise.
Futuristic
• It focuses on achieving objectives –
Every organization is set up to achieve
predetermined goals. Specific goals are set out in the plans along with the
activities to be undertaken to achieve goals. Hence, planning is purposeful.
Planning has no meaning unless it positively contributes for achievement of such
predetermined goals.
• It is a primary function of management – Planning lays down the base for other
functions of management. All other managerial functions are performed within the
framework of the plans drawn. Thus, planning precedes other functions and it is
also referred to as the primacy of planning. By setting up objectives in advance,
planning directs all other managerial functions towards their attainment.
• Planning is pervasive – Planning is required at all levels and in all departments of
the organization. It is not the exclusive function of top management or a particular
department. Rather, it is performed by all managers at various levels. However, the
nature and extent of planning may vary. For example, top management undertakes
strategic planning and middle and lower management are involved in
departmental planning and operational planning respectively.
• Planning is continuous – Plans are prepared for a specific period of time. At the
end of that period, there is a need for a new plan on the basis of new situations and
conditions. Moreover, due to ever changing environment, planning becomes a
continuous responsibility of management. Continuity of planning is related with
the planning cycle. It means that a plan is framed, it is implemented and is
followed by another plan and so on.
• Planning is futuristic – Planning aims to look into future, analyze it and predict it
to the best advantage of an organization. So, planning is regarded as a forward
looking function based on forecasting. Through forecasting, future events and
conditions are anticipated and plans are drawn accordingly. In short, planning
involves thinking about future for doing actions in present. For example, a
business firm prepares its annual plan for production and sales on the basis of
sales forecasting.
• Planning involves decision-making – Planning involves proper and careful
analysis of various alternatives and selecting the best possible alternative. The
need for planning arises only when alternatives are available and in actual practice,
planning presupposes the existence of alternatives. Thus, decision-making is an
integral part of planning as it involves choice from various alternative courses of
action. But, if there is only one alternative, then there is no need for planning.
•Planning is a mental exercise –
Planning requires application of mind involving
foresight, intelligent imagination and sound
judgement. So, planning is an intellectual activity of
thinking rather than doing as it determines the action
to be taken. Planning requires logical and systematic
thinking instead of guess work.
• Planning provides directions
• Planning reduces the risks of uncertainty
• Planning reduces overlapping and wasteful activities
• Planning promotes innovative ideas
• Planning facilitates decision-making
• Planning establishes standards for controlling
1.
• By stating the objectives in advance, planning provides direction for action.
• Planning ensures that the goals or objectives are clearly stated so that they act as a
guide for deciding the future course of action.
• When goals are well defined, employees know in advance what organization has to od
and what they must do to achieve those goals.
• Departments and individuals in the organization are able to work in coordination.
• In the absence of planning, employees would be working in different directions and the
organization would not be able to achieve its desired goals.
2.
• Planning enables a manager to look ahead and anticipate changes and prepare for the
risks by making necessary provisions.
• By deciding in advance the tasks to be performed, planning helps to deal with changes
and uncertain events.
• The uncertainties cannot be eliminated, but they can be anticipated and managerial
responses for them can be developed.
• Planning makes an earnest attempt to make uncertain future events certain, to certain
extent.
3.
• Planning coordinates the efforts of different divisions, departments and
individuals.
• Planning ensures clarity in thought and action and work is carried on
smoothly without interruptions.
• It helps in avoiding confusion, misunderstanding and minimizing useless
activities.
• Planning also makes it easier to detect inefficiencies and take corrective
measures to deal with them.
 While planning, many new ideas arise and it results into
creative, innovative and foresighted attitude among the
managers. Such new ideas can take the shape of concreate
plans. Planning is the most challenging activity for the
management as it guides all future actions leading to
growth and prosperity of the business.
 Planning helps the manager to look into the future and
make choice from amongst various alternative and
select the best one. Planning helps in taking rational
decisions by setting targets and predicting future.
6.
• Controlling involves comparison of actual performance with the pre-determined standards.
• Planning provides the standards against which the actual performance is evaluated.
• By comparing actual performance with the standards, managers can know whether they have
actually been able to attain the goals or not.
• In case of any adverse deviations, the management can take remedial measures to improve the
results. The nature of corrective action required depends upon the extent of deviations from
the standard.
• In the absence of plans, a manager will have no standards for controlling the actual
performance.
• In short, planning provides the basis of control, i.e., Controlling is not possible without
planning.
Setting
Objectives
Developing
Premises
Identifying
alternative
courses of
action
Selecting an
alternative
Implement
the plan
Follow-up
action
Evaluating
alternative
courses
I.
• This is perhaps the most important step of the planning process. Here we
establish the objectives for the whole organization and also
individual departments. Organizational objectives provide a general
direction, objectives of departments will be more planned and detailed.
• Objectives can be long term and short term as well. They indicate the end
result the company wishes to achieve. So objectives will percolate down
from the managers and will also guide and push the employees in the
correct direction.
II.
• Planning is always done keeping the future in mind, however, the future is always
uncertain. So in the function of management certain assumptions will have to be made.
These assumptions are the premises. Such assumptions are made in the form of
forecasts, existing plans, past policies, etc.
• These planning premises are also of two types – internal and external. External
assumptions deal with factors such as political environment, social environment,
the advancement of technology, competition, government policies, etc. Internal
assumptions deal with policies, availability of resources, quality of management, etc.
• These assumptions being made should be uniform across the organization. All managers
should be aware of these premises and should agree with them.
III.
• The fourth step of the planning process is to identify the alternatives available to
the managers. There is no one way to achieve the objectives of the firm, there is a
multitude of choices. All of these alternative courses should be identified. There
must be options available to the manager.
• Maybe he chooses an innovative alternative hoping for more efficient results. If
he does not want to experiment he will stick to the more routine course of action.
The problem with this step is not finding the alternatives but narrowing them
down to a reasonable amount of choices so all of them can be thoroughly
evaluated.
IV.
• The next step of the planning process is to evaluate and closely examine
each of the alternative plans. Every option will go through an examination
where all there pros and cons will be weighed. The alternative plans need
to be evaluated in light of the organizational objectives.
• For example, if it is a financial plan. Then it that case its riskreturn evaluation will be done. Detailed calculation and analysis are done
to ensure that the plan is capable of achieving the objectives in the best and
most efficient manner possible.
V.
• Finally, we reach the decision making stage of the planning process. Now
the best and most feasible plan will be chosen to be implemented. The
ideal plan is the most profitable one with the least amount of negative
consequences and is also adaptable to dynamic situations.
• The choice is obviously based on scientific analysis and mathematical
equations. But a manager’s intuition and experience should also play a big
part in this decision. Sometimes a few different aspects of different plans
are combined to come up with the one ideal plan.
VI.
• Once you have chosen the plan to be implemented, managers will have to come up with
one or more supporting plans. These secondary plans help with the implementation of
the main plan. For example plans to hire more people, train personnel, expand the office
etc. are supporting plans for the main plan of launching a new product. So all these
secondary plans are in fact part of the main plan.
• And finally, we come to the last step of the planning process, implementation of the plan.
This is when all the other functions of management come into play and the plan is put
into action to achieve the objectives of the organization. The tools required for such
implementation involve the types of plans- procedures, policies, budgets, rules, standards
etc.
VII.
• The last step in the planning process is to see whether plans are being
implemented and activities are performed according to schedule.
Monitoring the plans is important to ensure that objectives are
achieved.
• For example, if target of a company is to produce 12,000 cars per
year, then company must ensure that at least 1,000 cars are produced
per month. In case of any shortage, necessary actions must be taken.
Corporate –
Strategic &
Operational
I.
Corporate planning- Strategic
and Operational
II. Proactive and Reactive
planning
III. Formal and Informal planning
IV. Automated planning
Automated
Types
of
Plans
Formal
&
Informal
Proactive
&
Reactive
I.
• Corporate Planning includes setting of objectives, organizing the work, people and
systems to enable those objectives to be attained, motivating through the planning
process and through the plans, measuring performance and so controlling progress of the
plan and developing people through better decision making.
• Corporate planning is of two types –
• Strategic planning- Strategic planning lays out the long-term, broad goals that a business or
individual wants to achieve.
• Tactical planning-
Tactical planning outlines the short-term steps and actions that should be
taken to achieve the goals described in the strategic plan.
II.
• Proactive – Proactive strategies are designed to anticipate challenges, threats and opportunities.
A proactive approach is focused on planning for the future. Furthermore, it helps to recognize
and prevent potential hazards before they appear. Thus, it can predict the future and achieve
better outcomes. Moreover, proactive strategies will often look at the organization from a more
analytical point of view. Therefore, they consider many factors- accidents, customer complaints,
claims, high labor turnovers, and unnecessary expenses.
• Reactive – Reactive strategy refers to dealing with problems after they arise, without planning
ahead for the long term. In certain cases, unexpected problems may arise, either internally or
externally. In such cases, the company needs to respond fast. And, this is when companies
commonly use reactive strategies.
III.
• Formal – Formal planning is an articulated, written form of
planning that states particular objectives and methods.
• Informal – Informal planning is closer to the reality of day-today execution.
IV.
• Automated planning is a branch of artificial intelligence that
concerns the realization of strategies or action sequences.
• This type of planning is usually available in
advanced organization.
• Unlike classical control and classification problems the solutions
are complex unknown and have to be discovered and
optimized in multi dimension space​.
• Management by Objectives (MBO) is a strategic
management model that aims to improve the performance of an
organization by clearly defining objectives that are agreed by both
management and employees. According to the theory, having a say
in goal setting and action plans encourages participation and
commitment among employees, as well as aligning objectives
across the organization.
• Allocation of resources: Setting of the objectives is pointless if not matched with proper
resources. The allocation of resources should be done in consultation with the subordinates.
• Recycling objectives: In recycling, subordinates at every level are involved in goal setting and
they influence it considerably. Thus, the subordinates set goals for themselves which create the
feeling of commitment and people involved are more likely to meet their targets.
• Review and appraisal of performance: There should be periodic reviews of progress between
a manager and the subordinates. The reviews determine if there is satisfactory progress.
Performance appraisal should be conducted upon fair and measurable standards. These reviews
and appraisals will assist the manager and the subordinate to modify the objectives or methods.
I. Improved performance
II. Greater sense of identification
III. Maximum utilization of human resources
IV. No role ambiguity/lack of clarity
V. Improved communication
VI. Result based performance evaluation
Resentful attitude of
subordinates
Costly and time consuming
process
Lack of adequate skills &
training
Lack of follow-up
Inflexibility
• Policies provide guide to action. Objectives set the target where we want to go and
policies point out how we can go there. A policy is a general statement which
guides thinking, decision making and action in the organization.
• Policies decide the limits within which management can take decisions.
• Usually we come across certain policies such as personal policy recruitment policy, price
policy, promotion policy etc.
• Definition according to Koontz and O Donnell: Policies are general statements or
understandings which give or channel thinking in decision making of subordinates.
• Basic policies: Policies which are followed by top management level are called as basic policies. For example,
the branches will be opened in different places where the sales exceed Rs. 5 lakhs.
• Middle management policies: These policies are called general polices and they affect large part of
the organization. For example, purchase policy of a business unit may be to buy goods from the local market if
goods are available.
• Departmental policies: A departmental policy applies to routine activities of a department and it is used by the
lower management such as supervisors. For example, worker may have to apply 15 days in advance if they wat to
go on long leave.
• Written and unwritten policies: A policy which is written in the form of a statement is called a written
policy. Policy which is orally communicated is called unwritten policy. Some companies purposely do not write
their policies.
• Implied policy: Implied policy is meant policies which emanate from conduct. It also originates where
existing policies are not enforced. Again, guidelines may be provided by the decision makers unconsciously and
become implied policies.
• Corporate level strategy: The top management team is responsible for formulating
the corporate strategy. This strategy defines the business areas in which
the organization operates.
• Business level strategies: These are formulated for specific strategic business units
(SBU) and relate to a distinct product-market area. It involves defining the competitive
position of a strategic business unit.
• Functional level strategies: These relate to the different functional areas which a
strategic business unit has, such as marketing, production and operations, finance, and
human resources. These strategies are formulated by the functional heads along with
their teams and are aligned with the business level strategies.
• “A decision can be defined as a course of action consciously chosen from available alternatives
for the purpose of desired result”
- George R. Terry
• “A decision is an act of choice, wherein an executive forms a conclusion about what must be
done in a given situation. A decision represents a course of behavior chosen from a number of
possible alternatives”
- McFarland
• It is a selection process
• Aimed at achieving a goal
• Requires detailed study of each alternative to finalize one
• It leads to commitment
1. Programmed and Non-programmed decisions -
• Programmed decisions are concerned with the problems of repetitive nature or routine
type matters. A standard procedure is followed for tackling such decisions. These
decisions are taken generally by lower level managers. Decisions of this type may pertain
to, E.g. Purchase of raw material, granting leave to an employee and supply of goods and
implements to the employees, etc.
• Non-programmed decisions are non-repetitive in nature and there is no standard
procedure to follow during decision making. These decisions are normally taken at the
higher level. For example, opening of a new branch of the organization or a large number
of employees leaving the organization or introducing new product in the market, etc. are
the decisions which are normally taken at the higher level.
2. Routine and Strategic decisions:
• Routine decisions are related to the general functioning of the organization.
They do not require much evaluation and analysis and can be taken quickly.
Ample powers are delegated to lower ranks to take these decisions within
the broad policy structure of the organization. For example, restock on office
materials when the supplies are low
• Strategic decisions are important which affect objectives, organizational goals
and other important policy matters. These decisions usually involve huge
investments or funds. These are non-repetitive in nature and are taken
after careful analysis and evaluation of many alternatives. These decisions are
taken at the higher level of management.
3. Tactical (policy) and Operational decisions:
• Policy/Tactical decisions: The decisions pertain to various policy matters
of the organization are policy decisions. These are taken by the top
management and have long term impact on the functioning of
the concern. For example, decisions regarding location of plant, volume
of production and channels of distribution (tactical) policies, etc. are policy
decisions, payment of bonus to employees etc.
• Operating decisions relate to day-to-day functioning or operations of
business. Middle and lower level managers take these decisions. For
example, calculation of bonus in respect of each employee is an operating
decision.
4. Organizational and Personal decisions:
• When an individual takes decision as an executive in the official capacity, it is known as
organizational decision.
• If decision is taken by the executive in the personal capacity thereby affecting his
personal life, it is known as personal decision.
5. Major and Minor decisions:
• Decisions which majorly effects the organization are major decisions. Decision
pertaining to purchase of new factory premises is a major decision. Major decisions are
taken by top management.
• Decisions that does not effect the organization majorly are minor decisions. Purchase of
office stationery is a minor decision which can be taken by office superintendent.
6. Individual and Group decisions:
• When the decision is taken by a single individual, it is known as
individual decision. Usually routine type decisions are taken by
individuals within the broad policy framework of the organization.
• Group decisions are taken by group of individuals constituted in the form
of a standing committee. Generally very important matters for
the organization are referred to this committee. The main aim in taking
group decisions is the involvement of maximum number of individuals
in the process of decision- making.
Defining
&
Analyzing
the
problem
Follow-up
Developing
alternative
solutions
Implement
-ing the
Decision
Evaluating
the
alternative
solutions
Selecting
the best
solution
ORGANIZING in management refers to establishing relationship between people, work
and resources used to achieve the common objectives.
DEFINITION –
“Organizing is the process of defining and grouping the activities of the enterprise and
establishing the authority relationships among them.” – Theo Haimann
“Organizing is the process of identifying and grouping the work to be performed,
defining and delegating responsibility and authority and establishing relationships for
the purpose of enabling people to work most effectively together in accomplishing
objectives.” – Louis Allen
• It is a group of individuals which may be large or small
• The group in the organization works under the executive leadership
• It is a machine or mechanism of management
• It has some directing authority or power which controls the concerted efforts of the group
• The division of labour, power and responsibilities are deliberately planned
• It implies a structure of duties and responsibilities
• It is established for the accomplishment of common objectives
• It is a functional concept
 Organization as a process –
• Determining activities necessary for the accomplishment of the business
objectives
Division of work
•
• Grouping of inter-related activities
• Assigning duties to persons with requisite competence
• Delegation authority
• Coordinating the efforts of different person and group
 Organization as a structure –
• As structure, organization is a network or internal authority and
responsibility relationships.
• It is a framework of relationship of person operating at various levels, to
accomplish common objectives
• It is systematic combination of people, functions and physical facilities
• It constitutes a formal structure with definite authority and clear cut
responsibility
• Determine the channels of communication and flow of authority
According to Bertram M. Gross, a purpose refers to commitment to a desired
future.
• Effective management at minimum cost
• Maximum production at minimum cost
• Sustained growth and diversification
• Cooperating or employees
• Discharging social responsibilities
According to Bernard, the elements of organization are:
• Communication
• Willingness to serve
• Common purpose
Hodge and Johnson’s essential components are:
•
•
•
•
•
•
•
Objectives
Membership groups
Proper work divisions
Physical assets
Policies and procedures
Authority
Lines of communication
Identification and classification of required activities
Grouping of activities necessary to attain the
objectives
Assignment of each grouping to a manager with the
authority necessary to supervise it
Provision for co-ordination horizontally and
vertically in the organizational structure
Organization involves the following activities:
• Bring together resources to achieve desired goals and outcomes
• Produce goods and services efficiently
• Facilitate innovation by using modern manufacturing and information
technologies
• Adapt to and influence a changing environment
• Create value for owners, customers and employees
• Accommodate ongoing challenges for diversity, ethics, and the motivation and
coordination of employees
• Division of Work/Specialization: According to Henri Fayol, specialization
promotes efficiency of the workforce and increases productivity. In addition, the
specialization of the workforce increases their accuracy and speed.
• Span of Control: Refers to number of subordinates reporting directly to an
executive/manager.
• Scalar Chain: The line of authority from top management to the lowest ranks
represents the scalar chain.
• Unity of Command: The principle requires that each employee should receive
instructions about a particular work from one superior only.
 Delegation
Delegation
 Management by
Exception
•
•
The Delegation
of Authority is a
process through which
a manager assigns
responsibility to the
subordinates to carry
out the work on his
behalf.
This principles
states that problem of
unusual nature only
should be referred by
the Top management
whereas routine
problems should be
passed on to the lower
levels and resolved.
 Decentralization
•
If employees
are given more role
and importance in
decision making, it is
Decentralization.
• Formal organization: This structure clearly spells out the job to be performed
by each individual, the authority, responsibility assigned to every individual, the
superior-subordinate relationship and the designation of every individual in the
organization. This structure is created intentionally by the managers for
achievement of organizational goal.
• Informal organization: This structure is a network of personal and social
relations not established/required by the formal organization but arising
spontaneously as people associate with one another.
Formal
Informal
• Tall organization: In its simplest form, a tall structure results in one long chain
of command similar to the military. As an organization grows, the number of
management levels increases and the structure grows taller. In a tall structure,
managers form many ranks and each has a small area of control.
• Flat organization: A flat organization refers to an organization structure with
few or no levels of management between management and staff level employees.
The flat organization supervises employees less while promoting their increased
involvement in the decision-making.
Tall Organization
Flat Organization
Based on an organization’s application of the common elements - common purpose,
division of labor, hierarchy of authority, as well as centralization/decentralization and
formalization – the resulting structure will typically exhibit one of four broad departmental
structures:
• Functional structure
• Product based structure
• Customer based structure
• Geographic structure
• As sales increase, organizations generally adopt a functional structure.
• This structure groups employees into functional areas based on their
expertise.
• These functional areas often correspond to stages in the value chain such as
operations, research and development, and marketing and sales. They also
include support areas such as accounting, finance and human resources.
• Product organizational structure is a framework in which a business is organized in
separate divisions, each focusing on a different product or service and functioning as an
individual unit within the company.
• Companies with diversified product lines frequently structure based on the product or
service.
• Product structure work well where products are more technical and require more
specialized knowledge.
• These product divisions are supported by centralized services, which include: public
relations, business development, legal, global research, human resources, and finance.
Research &
Development
Research &
Development
Research &
Development
Human Resources
Manufacturing
Manufacturing
Manufacturing
Procurement
Finance
Finance
Finance
Marketing
Marketing
Communications
Customer Service
Customer Service
Training/Safety
Finance
Marketing
Customer Service
Legal
•
•
•
•
•
Companies that offer services, such as health care, tend to use a customer-based structure.
While similar to the product structure, the different business segments at the bottom are each
split into a specific customer group – for example, outpatient, urgent care, and inpatients.
Since the customers differ significantly, it makes sense to customize the service.
Employees can specialize around the type of customer and be more productive with that type of
customer.
The directors of each customer center would report directly to the chief medical officer or the
hospital CEO.
Urgent
Care
Emergency
Care
Human
Resource
Impatient
Care
Finance &
Accounting
Outpatient
Services
Community
Relations
• If an organization spans multiple geographic regions, and the product or service
needs to be localized, it often requires organization by region. Geographic
structuring involves grouping activities based on geography.
• Geographic structuring is especially important if tastes and brand responses differ
across regions, as it allows for flexibility in product offerings and marketing
strategies.
• Also, geographic structuring may be necessary because of cost and availability of
resources, distribution strategies, and laws in foreign countries.
Production/Sales/
After sales
Production/Sales/
After sales
Production/Sales/
After sales
Production/Sales/
After sales
• Where two dimensions are critical, companies will use a matrix
structure.
• Employees may be organized according to the product and
geography, and have two bosses.
• The idea behind this type of matrix structure is to combine the
localization benefits of the geography structure with those of the
functional structure.
Manager
Project A
Manufacturing
Unit
Sales Unit
Finance Unit
Human Resources
Unit
Manager
Project B
Manufacturing
Unit
Sales Unit
Finance Unit
Human Resources
Unit
Manager
Project C
Manufacturing
Unit
Sales Unit
Finance Unit
Human Resources
Unit
•
•
•
Weak matrix organization: This type of matrix organizational structure is most similar to a traditional
workplace hierarchy. A functional manager oversees all aspects of a project and acts as the primary source
of decision making. While there is a project manager who also acts as a point of authority, they ultimately
answer to the functional manager.
Balanced matrix organization: In this type of matrix organizational structure, more authority is given to
the project manager. While there is still a functional manager who is the primary authority, employees also
report to the project manager.
Strong matrix organization: A strong matrix organization provides the project manager with equal or
more power than the functional manager. The project manager has primary control over resources and
distribution of tasks.
• Increased communication efficiency
• Improved employee motivation
• Increased teamwork
• Maximizes resources usage
• Increased employee professional development
• Potential conflict between managers and projects
• Authority confusion
• Reduced employee effectiveness
• Increased management overhead costs
•
•
•
•
•
The concept of virtual organization or corporation has entered the field of management very
recently.
It is a networked organization and its various components are linked through communication
network only.
Virtual Corporation is a temporary network of independent companies, suppliers, customers,
even rival linked by information technology to share skills, costs and access to one another’s
markets.
It neither has a central office nor organization chart. It has no hierarchy, no vertical integration.
The basic aim behind creating a virtual organization is to generate synergy through temporary
alliances.
What is Authority?
• Authority is merely the degree of discretion conferred on people to make it
possible for them to use their judgement by giving them the power to make
decisions and issue instructions.
• Authority is the key to the managerial job.
• Without authority no manager can function.
• According to Henry Fayol, “Authority is the right to give orders and the
power to extract obedience.”
• Legal authority – Also called formal authority
According to this theory, authority is based upon the rank or position of the person.
And, this authority may be given by law or by social rules and regulations protected
by law. For example, CEO take action against employee for not complying.
• Traditional authority – In a family system, father exercises traditional authority
over members of the family. The traditional authority is generally followed by
Indian family system. It is the father who guides the activities of the family and
others obey out of respect and traditions. There is no law binding it.
• Acceptance theory: The authority has its source in the acceptance of the subordinates. The
authority of the superior has no meaning unless it is accepted by the subordinates. Chester
Bernard was of the view that it is the acceptance of authority which is more important.
• Competence theory: According to this, authority has its source in the technical competence
of the superior. The manager, according to this theory, has no authority but his words are
heard and orders are obeyed only because of his intelligence, knowledge, skill competence
and experience. For example, doctor advise, car mechanic.
• Charismatic authority: The charismatic authority rests on the personal charisma of a
leader who commands respect of his followers. The personal traits such as good looks,
intelligence, integrity to influence others and people follow the dictates of their leaders
because of such traits.
What is Responsibility?
• Responsibility refers to an obligation to do something. It is the duty of the
subordinate to perform in origination tasks, functions or activities assigned
to him.
• When authority is delegated then some responsibility for getting the
assigned task is also fixed. One can delegate authority but not responsibility.
• According to Koontz and O’ Donnel, “Responsibility is the obligation of a
subordinate to carry out the duties assigned to him.”
• It comes from superior subordinate relationship
• It always flows upward from juniors to seniors
• It arises from duty assigned
• It cannot be delegated
• It is the obligation to complete the job as per instruction
Meaning
Basis
Delegation
Duration
It is the right of a superior to
give orders and instructions
to subordinates
It generally rises either from
legal provisions and formal
contract
Can be delegated from a
superior to a subordinate
It is the obligation of a
subordinate to perform an
assigned task
It arises from superior
subordinate relationship
It may continue for a long
period
It stops when the assigned
task is completed
It cannot be delegated
 Introduction
•
•
•
The main managerial function is concerned with the responsibility of decision making.
Centralization and Decentralization describe the manner in which decision making responsibilities are
divided among executives at different hierarchical levels.
Centralization and Decentralization constitute an important problem in an organization and relates to
whether authority should be concentrated or dispersed throughout the organizational structure.
 Centralization
•
•
•
Meaning – The executive reserves the work for himself instead of delegating to his subordinates and
ultimately reserves authority.
But where he is forced to delegate the work, he may do so by not delegating adequate authority so that the
subordinate must approach him to arrive at the appropriate decision.
According to Fayol, “It is the organization where the role of the subordinates is reduced.”
 Factors determining Centralization
• Facilitates personal leadership – In a small company, centralization is desirable since the
leader has to take quick decision.
• Less skilled subordinates – An enterprise running on the lines of centralization need not
have highly skilled subordinates.
• Handling emergencies – In the centralized organization, emergencies can be handled
promptly.
• Integration of total operation – In highly decentralized entrepreneurial units, it is very
difficult to integrate the total operations of the enterprise.
• Uniformity of action – Centralization of decision making is essential in case of multiunit or multi-branches of a company so that there is an uniformity of action.
 Limitations of Centralization
• Over burden of few – Centralization of authority increases the burden of the top
executives and little time is left for them for attending the important functions of
administration like planning, organization, coordinating, and controlling.
• Hampers the growth of subordinates – Centralization hampers the growth and
development of subordinates as they are not given authority to take independent
decision.
• Slows down the operations – Centralization tends to slow down the operations as most
of the decisions are not taken at a point where the work is carried out but at a point
higher in the organization.
• No scope for specialization – Centralization restricts the scope for specialization of the
subordinates.
 Decentralization
• Decentralization can be viewed as an extended form of delegation. When a part
of the work is entrusted to others, it is known as delegation.
• It is an important segment of delegation and extends to the lowest level of the
organization.
 Features of Decentralization
• It is an extended form of delegation
• It gives importance to the role of subordinates
• This is a process applicable to the entire organization
• It reduces the work load of the managers in the top hierarchy
• Under this, decisions are taken by those employees who implement them.
 Advantages
 Disadvantages
• Reduces the burden on top executive • Uniform policies not followed
• Facilitates diversification
• Problem of coordination
• To provide product and market
• More financial burden
emphasis
• Requires qualified personnel
• Executive development
• Conflict
• It promotes motivation
• Quick decision making
Presented by –
Aditi Suvarna
Kushi H.
Vaishnavi A.
Vaishnavi Monteiro
Aditya I. Sharma
Gaurav Kumar
Harsh Raj
Shikhar Pal