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CONTEMPORARY
BUSINESS
MANAGEMENT
FRANCIS
MBAH TAKWI
This book is printed on acid-free paper. ∞
First published 2014
Copyright © 2014 by Francis Mbah Takwi, Inc. All rights reserved
Published by McDavid consulting group, Inc., Bonn, Germany
Francis Mbah Takwi
President McDAVID Wirtschaftsberatung
franckmbah@yahoo.com
www.mcdavid.com
All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or
mechanical, including photocopying or recording, or by any information storage and retrieval system, without permission
in writing from the author. This material has been written and published solely for educational purposes. The author and
the publisher shall have neither liability or responsibility to any person or entity with respect to any loss, damage or
injury caused or alleged to be caused directly or indirectly by the information contained in this book.
Millennium Edition
LCCN: 2007931427
Soft Cover ISBN: 978-1-4218-9996-1
Hard Cover ISBN: 978-1-4218-9997-8
eBook ISBN: 978-1-4218-9998-5
For information on all McDavid consulting group publications
visit our web site at www.mcg.com
Printed and bound in Kamerun
ii
CONTEMPORARY
BUSINESS
MANAGEMENT
MILLENNIUM EDITION
FRANCIS MBAH TAKWI
UNIVERSITY OF BONN, GERMANY
@McDAVID WIRTSCHAFTSBERATUNG 2014
iii
DEDICATION
This book is dedicated to our daughter,
Angel Ariel —
A good Person and a good Manager
Francis Mbah Takwi
“Le style c’est l’homme”
iv
PREFACE
The first thing is that management, that is, the organ of leadership, direction, and decision in our social institutions,
and especially in business enterprise, is a generic function which faces the same basic tasks in every country and,
essentially, in every society. Management has to give direction to the institution it manages. It has to think through the
institution‘s mission, has to set its objectives, and has to organize resources for the results the institution has to
contribute. Management is, indeed, ―entrepreneur‖ and responsible for directing vision and resources toward greatest
results and contributions. In performing these essential functions, management everywhere faces the same problems. It
has to organize work for productivity, it has to lead the worker toward productivity and achievement. It is responsible for
the social impact of its enterprise. Above all, it is responsible for producing the results—whether economic
performance, student learning, or patient care—for the sake of which each institution exists
In the quest to prepare themselves for future entrepreneurial activities, today's students need, and want,
more than standard textbook coverage of contemporary business managerial issues. Cognitive learning must be
creatively applied and emotionally experienced to provide a well-rounded educational experience.
Entrepreneurship is a fascinating practical and academic area of study. Experiences in contemporary Business
management and Entrepreneurship and is aimed at enriching the student's learning experience in courses
concerned with initiating and managing small business ventures. Given the increasingly competitive nature of most
businesses and the advent of global markets, a reactive approach to strategy formulation may be a recipe for failure.
Which organizations will be best positioned for the future? Will it be those who base their company and product
strategies on past successes, customer complaints, competitors‘ actions, internal objectives or a desire to do something
different? Or will it be those who systematically use facts, structure and process to formulate strategies and solutions
that address the unique aspects of their situation and enhance their ability to create customer value?
The business climate today is in a state of flux, evolving in many ways, but essentially from the forms familiar to
managers and workers during the Second Industrial Revolution into new ones. This book is also a ‗how-to-do-it‘ text,
synthesising good management practice for entrepreneurs involved in start-ups and growing firms. It is informed by
research and based on thirty years experience of working with small firms and small firm advisors. Management in
small firms is a holistic activity, so the skills developed include marketing, accounting, finance, people management and
strategy development. This book is written to motivate students at the same time as providing frameworks to nurture
these precious skills in a systematic way. There is also a chapter on the most interesting entrepreneurial development
of the moment –e-business. The book contains extensive teaching materials. Each chapter has essays and discussion
topics as well as practical exercises and assignments.
Throughout the text, our purpose had always been to continuously provide the readers with an understanding of
the roles which a sound knowledge of modern management techniques and tools plays in organizations, irrespective of
their scope or size, orientation, purpose and even sector in which they operate. Written with the needs of the layman in
mind, the volume is written in simple and plain language and this would help in the process of understanding for
beginners in the domineer of managerial studies and likewise for other users. Consequently, the book is of great
relevance to the doctoral, masters and undergraduate students of Management Studies, Small Business Management,
Entrepreneurship, Business Administration, Public Administration, Accountancy, Economics, Banking and Finance,
Psychology, Sociology, Education and allied disciplines. For the Professionals and Consultants, this text will serve as a
reference source, an interpreter of the arcane and translator of the specialized terminologies in various aspects of
contemporary business management practices and research
This book is intended to acquaint you with basic management principles, concepts and the practices that
managers employ or carry out in accomplishing organisational set targets. This book introduces you to the Meaning of
management, the evaluation management thought ,The planning process, The functions of management, Managerial
roles , the managerial practice ,The business environment, Organizational Structure , Leadership ,Organization change
and development strategic business planning, organising ,scheduling and control, managerial communications,
Decision making in organizations ,Making organizations more effective , record keeping, ,Corporate social
Responsibility and global business management The book is divided into five parts giving you a full grasp of all
contemporary business management issues.
Management is work, and as such it has its own skills, its own tools, its own techniques. A good many skills, tools,
and techniques are discussed in this book, a few in some detail. For management is the organ, the life-giving, acting,
dynamic organ of the institution it manages. Without the institution, e.g., the business enterprise, there would be no
management. But without management there would also be only a mob rather than an institution.
v
BRIEF CONTENTS
PART ONE
THE CHANGING FACE OF BUSINESS
CHAPTER ONE
INTRODUCTION TO BUSINESS
CHAPTER TWO
ENTREPRENEURSHIP AND SMALL BUSINESS DEVELOPMENT
CHAPTER THREE
PRINCIPLES OF MANAGEMENT
CHAPTER FOUR
EVOLUTION OF MANAGEMENT THOUGHT
PART TWO
THE FUNCTIONS AND RESPONSIBILITIES OF MANAGEMENT
CHAPTER FIVE
PLANNING
CHAPTER SIX
MANAGERS AS DECISION MAKERS
CHAPTER SEVEN
ORGANIZING
CHAPTER EIGHT
LEADERSHIP
CHAPTER NINE
DIRECTING AND CONTROLLING
CHAPTER TEN
BUSINESS COMMUNICATION
PART THREE
THE FUNCTIONAL AREAS OF BUSINESS
CHAPTER ELEVEN
HUMAN RESOURCE MANAGEMENT
CHAPTER TWELVE
ORGANIZATIONAL BEHAVIOUR
vi
CHAPTER THIRTEEN
PRODUCTION AND OPERATIONS MANAGEMENT
CHAPTER FOURTEEN
MARKETING MANAGEMENT
CHAPTER FIFTEEN
FINANCIAL MANAGEMENT
CHAPTER SIXTEEN
MANAGEMENT INFORMATION SYSTEM
PART FOUR
CONTEMPORARY MANAGEMENT
CHAPTER SEVENTEEN
STRATEGIC MANAGEMENT AND BUSINESS POLICY
CHAPTER EIGHTEEN
GLOBAL BUSINESS MANAGEMENT
CHAPTER NINETEEN
PROJECT MANAGEMENT
CHAPTER TWENTY
MANAGEMENT TRENDS
vii
CONTENTS
PART ONE
THE CHANGING FACE OF BUSINESS
CHAPTER ONE
INTRODUCTION TO BUSINESS
Learning Objectives; Introduction ; Meaning Of Business ; Nature Of Business ; Functions Of Business; What Is Our
Business?; The Practice Of Business Management; Economics; The Changing Face Of Business; Chapter Summary;
Review Questions
CHAPTER TWO
ENTREPRENEURSHIP AND SMALL BUSINESS DEVELOPMENT
Learning Objectives; Introduction; Four Key Elements Of Entrepreneurship; Traits Of An Entreprenuer; Who Is An
Entrepreneur?; Why Entrepreneurship; Intrapreneurship; Owner-Managers; Entrepreneurship – Creativity And
Innovation; Entrepreneurial Opportunities; Business Start Up ; The Business Plan; Doing Business In Cameroon ;
Keeping Wealth In The Family ; Creating A Family Legacy ; The Exit; Ohada Law; Chapter Summary; Review
Questions
CHAPTER THREE
PRINCIPLES MANAGEMENT
Learning Objectives; Introduction; Definition Of Management; Levels Of Management; Nature Of Management;
Management Functions /Process Of Management; Managerial Skills; The Manager And His Job; Role Performed By
Managers; Principles Of Management; Significance Of Management; Chapter Summary; Review Questions
.
CHAPTER FOUR
EVOLUTION OF MANAGEMENT THOUGHT
Learning Objectives; Introduction; A Framework For The Management Thoughts ; Early Management; Major
Approaches To Management; Classical Approach; Scientific Management; General Administrative Theory; Behavioral
Approach; Quantitative Approach; Contemporary Approaches; Chapter Summary; Review Questions
PART TWO
THE FUNCTIONS AND RESPONSIBILITIES OF MANAGEMENT
CHAPTER FIVE
PLANNING
Learning Objectives; Introduction; Nature Of Planning; Importance Of Planning; Types Of Planning; Corporate And
Functional Planning; Strategic And Operational Planning; Long And Short Term Planning; Proactive And Reactive
Plans; Formal And Informal Planning; Types Of Plans; Mission And Purpose; Objectives; Strategies; Standing Plans;
Policies; Procedures; Single Use Plans; Programme; Budgets; Steps In Planning; Chapter Summary;
Review Questions
CHAPTER SIX
MANAGERS AS DECISION MAKERS
Learning Objectives; Introduction; The Decision-Making Process; Managers Making Decisions; Making Decisions:
Rationality; Making Decisions: The Role Of Intuition; Making Decisions: The Role Of Evidence-Based Management;
Types Of Decisions; Structured Problems And Programmed Decisions; Unstructured Problems And Nonprogrammed
Decisions ; Decision-Making Conditions; Certainty ; Risk ; Uncertainty; Decision-Making Styles; Decision-Making
Biases And Errors; Overview Of Managerial Decision Making; Effective Decision Making In Today‘s World; Chapter
Summary; Review And Discussion Questions
viii
CHAPTER SEVEN
ORGANIZING
Learning Objectives; Introduction; Steps In Organizing; Nature Of Organization; Organization Structure; Purpose Of
Organization; Principles Of Organization; Departmentation; Types Of Organization; Line, Military Or Scalar
Organization; Functional Organization; Line And Staff Organization; Committee Organization; Span Of Control;
Authority, Power And Responsibility; Delegation Of Authority; Centralization And Decentralization; Delegation Vs
Decentralization; Management By Objectives [MBO]; Chapter Summary; Review Questions
CHAPTER EIGHT
LEADERSHIP
Learning Objective; Introduction; What Is Leadership ?; Leadership Is Everyone‘s Business ; Focus On The Leader;
Leadership And Values; What Are Values?; Types Of Leadership; Traits Of Leadership; Theories Of Leadership;
Leadership Styles; Personal Characteristics Of Leaders; Leadership And Power; Leader As Manager; Chapter
Summary ;Review Questions
CHAPTER NINE
DIRECTING AND CONTROLLING
Learning Objectives; Concept Of Direction; Elements Of Direction; Concept Of Supervision; Coordination; Managerial
Control; The Management Control System ; Auditing ; Steps In Controlling ; Management Audit; Traditional Control
Techniques; Non Traditional/Modern Control Techniques; Planning And Control; Chapter Summary; Review Questions
CHAPTER TEN
BUSINESS COMMUNICATION
Learning Objectives; Business Communication And Its Scope For Business; Defining Communication; The Importance
And Scope Of Communication; Communication Process Model; Communication In Context; Intrapersonal
Communication; Interpersonal Communication; Group Communication; Public Communication; Mass Communication;
Communication Theory; Media And Modes Of Communication; Internet; Media Of Mass Communication ;Computer
Networks; Barriers To Communication; Categorisation Of Barriers; Language Can Be An Obstacle To Communication;
Overcoming The Barriers In Communication; Business Correspondence – Letters; Different Types Of Letters; Essentials
Of A Commercial Letter; Letters Of Application, Enquiries, Complaints And Sales Promotion ; Non Verbal
Communication ; Classification Of Non Verbal Communication; Conducting Meetings, Seminars And Conferences;
Speech - Oral Presentation; Chapter Summary; Review Questions
PART THREE
THE FUNCTIONAL AREAS OF BUSINESS
CHAPTER ELEVEN
HUMAN RESOURCE MANAGEMENT
Learning Objectives; Introduction; Human Resource Planning; Job Analysis And Job Design; Job Specification;
Recruitment; Process Of Recruitment; Sources Of Recruitment; Methods Of Recruitment; Selection; Contracts Of
Employment; Induction And Placement ; Employee Training; Employee Development ; Team Building; Managing
Organizational Teams; Performance Appraisal; Methods Of Performance Appraisal; Grey Areas In Performance
Appraisal; Performance Management; Psychological Contract; Wage And Salary Administration; Motivation And
Rewards; Grievance And Disciplinary Procedures; Conflict Management ; Health And Safety; Industrial Relations;
Termination, Outplacement And Re-Enlistment; Strategic Human Resource Management; Human Resource
Accounting; International Human Resource Management; Emerging Issues In HRM; Chapter Summary; Review
Questions
CHAPTER TWELVE
ORGANIZATIONAL BEHAVIOUR
Learning Objectives; Introduction; Definitions; Contributing Fields To Organizational Behaviour; Behaviour Model For
Organizational Efficiency; Organizational Components That Need To Be Managed; Individual Dimensions Of
Organizational Behaviour; Personality; Learning; Value, Attitude And Job Satisfaction; Effect Of Job Satisfaction On
ix
Performance; Organizational Commitment; Interpersonal Behaviour (Transactional Analysis); Foundation Of Group
Behaviour ; Stress Management ; The Dynamics Of Communication ; Power And Politics; Organizational Development ;
Organizational Culture And Climate; Chapter Summary; Review Questions
CHAPTER THIRTEEN
PRODUCTION AND OPERATIONS MANAGEMENT
Learning Objectives; Introduction; Production And Operations Management; Production System; Productivity; Scope Of
Operations Management; Facility Location And Layout; Plant Layout; Design Of Product Layout; Service Layout; Office
Layout; Forecasting ; Production Planning And Control; Components Of Operations Planning And Scheduling System;
Capacity Planning; Scheduling; Quality; Inspection; Quality Control; Seven Tools For Quality Control; Quality Circles;
Total Quality Management; Materials Management; Purchasing; Special Purchasing Systems; Stores Management;
Techniques Of Inventory Control; Ergonomics (Human Engineering); Just-In-Time (JIT) Manufacturing; Maintenance
Management; Maintenance Planning; Automation; Chapter Summary; Review Questions
CHAPTER FOURTEEN
MARKETING MANAGEMENT
Learning Objectives; Introduction ; Core Concepts Of Marketing; Definition Of Marketing; Marketing Environment;
Evolution Of Marketing; The Production Concept; The Product Concept; The Selling Concept; The Marketing Concept;
Contemporary Marketing ; Integrated Marketing; The Marketing Management Process; Marketing Functions ; Scope Of
Marketing; Marketing Mix For Services; Understanding Consumer And Industrial Markets ; Marketing Research And
Marketing Information System; Market Segmentation, Targeting And Positioning ; Product Decisions: Product Life Cycle
And Product Mix; New Product Development; Branding; Packaging; Labelling; Channel Management; Types Of
Marketing Channels; Supply Chain; Pricing Decisions; Pricing Strategies; Promotion Mix; Marketing Communications;
Advertising Management; Personal Selling; Direct Marketing; Sales Promotions; Public Relations; Marketing
Organisation And Control; Chapter Summary; Review Questions
CHAPTER FIFTEEN
FINANCIAL MANAGEMENT
Learning Objectives; Introduction; Meaning Of Finance; Types Of Finance; Major Areas & Concepts Of Financial
Management ; Functions Of The Finance Manager; Business Accounting; Accrual Basis And Cash Basis Of Accounting
; Generally Accepted Accounting Principles; Branches Of Accounting; Financial Accounting; Double-Entry–Accrual
Accounting; The Ledger Account; Double-Entry Bookkeeping; Accounting For Inventory; Financial Statements; Trial
Balance; Bringing The Statements Together; Preparation Of Final Accounts; Form And Presentation Of Profit And Loss
Account / Income Statement; Balance Sheet; Financial Statement Analysis; Techniques Of Financial Statement
Analysis; Management And Cost Accounting; Budgeting And Budgetary Control; Sources Of Finance; Money And
Banking; Financial System; Taxation; Chapter Summary; Review Questions
CHAPTER SIXTEEN
MANAGEMENT INFORMATION SYSTEM
Learning Objectives; Introduction; Information Concepts; MIS Definition; Characterizing An Effective MIS; Elements Of
An MIS; Information Management; Development Of A Computerized MIS; Step 1: Investigate The Current System; Step
2: Analyze The System;. Step 3: Design The System; Step 4: Implement The System; Step 6: Review The System;
Management Issues; Decision Support Systems; Types Of Decision Support System; Chapter Summary;Review
Questions
x
PART FOUR
CONTEMPORARY MANAGEMENT
CHAPTER SEVENTEEN
STRATEGIC MANAGEMENT AND BUSINESS POLICY
Learning Objectives; Introduction; Concepts Of Strategy; Defining Strategy: The Five Ps; Intended, Emergent, And
Realized Strategies; Strategy In Ancient Times; Lessons Offered By Military Strategy; Leading Strategically;
Organizational Vision And Mission; Organizational Goals And Objectives; Organizational Policies; The Strategic
Management Process; The Nature Of An External Audit; Strategic Planning; Operational Planning; Managing The Firm
Resources; Industrial Organization; Resource-Based Theory; Contingency Theory; The Strengths-WeaknessesOpportunities-Threats (Swot) Matrix; Corporate Governance And Boards Of Directors ; Strategic Analysis And Choice;
The Parameters Of Competitive Strategy; Strategic Levels In Organisations; Corporate-Level Strategies; The Portfolio
Approach; Business-Level Strategies; Generic Strategies; Innovative Strategies; Competition In International Markets;
Value Chain Analysis; Executing Strategy Through Organizational Design; Implementing Strategies: Management And
Operations Issues; Implementing Strategies: Marketing, Finance/Accounting, R&D, And Mis Issues; Strategy Review,
Evaluation, And Control; Chapter Summary; Review Questions
CHAPTER EIGHTEEN
GLOBAL BUSINESS MANAGEMENT
Learning Objectives; International Business ; Need For International Business ; Reasons For Going Abroad; Barriers To
International Trade; Globalization; The Globalization Of Markets; The Globalization Of Production; Drivers Of
Globalization; Foreign Direct Investment (FDI); Political –Economy Of International Trade; Instruments Of Trade Policy;
Tariffs; Subsidiaries; Arguments For Trade Intervention; Entering International Markets; International Business Entry
Decision; Free Trade Zones; Chapter Summary; Review Questions
CHAPTER NINETEEN
PROJECT MANAGEMENT
Learning Objectives; Introduction; Functions And Viewpoints Of Management ; What Is Project Management?; The
Project Life Cycle; PMBOK; Project Analysis And Appraisal ; Financial Feasibility ; Methods Of Appraisal; Nonfinancial
Criteria; Project Financing ; Risk Analysis ; Project Planning Techniques ; Project Charter; The Project Proposal; Project
Contracting; Project Definition; Step 1: Defining The Project Scope; Step 2: Establishing Project Priorities; Step 3:
Creating The Work Breakdown Structure; Step 4: Integrating The WBS With The Organization; Step 5: Coding The
WBS For The Information System; Planning Fundamentals; Planning Steps; The Project Master Plan; Integrating WBS
And Project Organization; Responsibility Matrix; Scheduling; Events And Milestones; Project Time Planning And
Networks; Networks Diagrams; The Critical Path; Planning And Scheduling Charts ; Scheduling With Resource
Constraints; Cost Estimating And Budgeting; Procurement Management ; Project Management Information Systems;
Project Roles, Responsibility, And Authority; Project Quality Management; Managing Risks In Projects; Project
Execution And Control; Project Evaluation; Project Terminating And Closeout; Post-Completion Project Review;
International Project Management; Summary; Review Questions
CHAPTER TWENTY
MANAGEMENT TRENDS
Learning Objectives ; Introduction; Management Of Change; Understanding Change; Organizational Growth As A Kind
Of Change; Forces Of Change; Force Field Analysis; Kurt Lewin Change Process; Mckinsey Seven S-Framework;
Levels Of Change; Types Of Change; The Scope Of Change; Logical Incrementalism ; Steps In Managing Change;
Change Agents; Resistance To Change; Managing Resistance To Change; Social Networks; Concept Of Crisis
Management; Total Quality Management; Concept Of Risk Management; Global Practices/International Business;
Business Ethics; Chapter Summary; Review Questions
xi
PART ONE
THE CHANGING
FACE OF
BUSINESS
1
CHAPTER ONE
INTRODUCTION TO BUSINESS
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
 know what business is
 explain your relationship with business
 explain the benefit you derive from business terms of business.
 Understand the Nature and scope of a business
 Know functions of business
INTRODUCTION
The subject of Business Organization and Management has acquired an important status in the field of business studies at the
under- graduate level. It embraces the study of the methods, techniques and practices of efficient organizations and management
of business. The knowledge of this subject is essential not only for the commerce students, but also for all those who want to enter
into any line of business.
What is Need and Want?
You can‘t know what business is except you know some basic concepts.
Wants - these are things you wish you could have for instance you wish to have a jeep car, a job in Ecobank, to be a governor.
Needs – these are necessities of life. You cannot do without them; they include food, shelter and clothing Your needs and wants
are translated into goods and services.
Goods – they can be physically weight or measured e.g. bicycle.
Services – are tasks that people or machine performs. For example, A doctor attending to your health problem.
You know that your resources are not enough to attend to all your problem. Resources mean anything you can use to value or
obtain, what you need and want i.e. salary, influence etc.
Making Choices
In making your choice between the list of goods and services, it means that there is cost attach to it. For instance of you have
5,000,000 frs CFA to buy either a buy a car or build a house. If you decide to see a build a house and not buy a car, then you have
given up the later which is an opportunity cost. Opportunity cost could be in term of money or another item. In making your choices
you attach value and goals to the goods and services. The value differs from product to product. While your goal equally
determine your choices of products.
MEANING OF BUSINESS
A business may be defined as an institution organized and operated to provide goods and services to the society with the
objective of earning profit. L.R. Dickson has defined business as a form of activity pursued primarily with the object of earning profit
for the benefit of those on whose behalf the activity is conducted. ―Business involves production and/or exchange of goods and
services to earn profits or in a broader sense, to earn a living. Profit is not the sole objective of the business. It may have other
objectives like promotion of welfare of the workers and the general public. Business activities include production and distribution of
goods and services which can satisfy human wants.
The term business should be used to convey the same meaning as the term trade simply denotes purchase and sale of goods
whereas ‗business‘ includes all activities form production to distribution of goods and services. It embraces industry, trade and
other activities like banking, transport, Insurance and warehousing which facilitates production and distribution of goods and
services. According to F.C. Hopper ―The whole complex field of commerce and industry which includes the basic industries,
processing and manufacturing industries, and the network of ancillary services: distribution, banking, insurance transport and so
on, which serve and inter penetrate the world of business as a whole‖ are called business activities.
NATURE OF BUSINESS
A business enterprise has the following characteristics :
(i) Dealing in Goods and Services : The first basic characteristic of a business is that it deals in goods and services. Goods
produced or exchanged may be consumer goods such as bread, rice, cloth, etc., or capital goods such as machines, tools, etc.,
The consumer goods are meant for direct consumption either immediately or after undergoing some processes ,whereas the
capital goods are meant for being used for the purpose of further production. Capital goods are also known as producer‘s goods.
Services include supply of electricity, gas, water and finance, insurance, transportation, warehousing, etc.
(ii) Production and Exchange: Every business is concerned with production and exchange of goods and services for value
(prices). Thus, goods produced or purchased for personal consumption (or) for presenting to others as gifts do not constitute
business because there is no sale or transfer for value involved. If, for example ‗A‘ buys a T.V. Set in Tokyo to be gifted to his
2
brother on his return to New Delhi, it will not amount to business. But if the same person realize the price of the T.V. Set, it will
come under the scope of business in a limited way provided the other conditions are also satisfied which are given below.
(iii) Regularity and Continuity in Dealings : One sale transaction cannot strictly constitute a business. A sale of a product can be
called a business if it is undertaken frequently. If other essential characteristics of business are present and the production of
goods or rendering of services for a price is undertaken regularly and continuously, this activity will be called a business.
(iv) Uncertainty or Risk : Business activities, as we have formed some definite ideas about it by now, carry an element of
uncertainty or risk. It is true that the element of risk is present in almost all economic activities in a small or great measure. But it is
certainly more significantly present in business activities. Risk involves the possibility of loss or what may be called uncertainty of
return on investment made in the business due to a variety of factors over which the business enterprise has practically no control.
(v) Profit Motive :Human- beings are engaged in business primarily with a view to earn profits and acquire wealth. This is not in
any way reduce the importance of service motive in business. As a matter of fact, there is a positive relationship between proper
and satisfactory services to the customers and to the society and the extent of profit. Normally, better services are accompanied by
higher profits, but it may not always be so. Profit motive is also accepted as a desirable objective even for the Government
enterprises engaged in business. It is called surplus instead of Profit in case of Government enterprises.
FUNCTIONS OF BUSINESS
In order to achieve its objectives, a business enterprise performs many functions which may be broadly grouped under the
following headings: Production, Marketing, Finance and Personnel. In big business organisations, there are separate departments
to look after these functional areas. It may be noted that these functions are inter-dependent and inter- related. For instance,
production department depends upon marketing department to sell its output and marketing departments depends upon production
department for the products of required quality to satisfy its customers. Thus, there must be proper integration of various functional
areas of business to achieve its objectives. This can be achieved by the management of the enterprise by effective planning,
organization, direction and control. The important functions of a business are briefly discussed below.
(I) PRODUCTION FUNCTION: It is concerned with the transformation of inputs like manpower, materials, machinery, capital,
information and energy into specified outputs as demanded by the society. The production department is entrusted with so many
activities such as production planning and control, quality control, procurement of materials and storage of materials.
(II) MARKETING FUNCTION: It is concerned with distribution of goods and services produced by the production department. It
can perform this function efficiently only if it is able to satisfy the needs of the customers. For this purpose, the marketing
department guides the production department in product planning and development. It fixes the prices of various products
produced by the business. It promotes the sale of goods through advertisement and sales promotion devices such as distribution of
samples and novelty items, holding contests, organizing displays and exhibitions, etc.
(III) FINANCE FUNCTION : It deals with arrangement of sufficient capital for the smooth running of business. It also tries to ensure
that there is proper utilization of resources. It takes many important decisions such as sources of finance, investment of funds in
productive ventures, and levels of inventory of various items.
(IV) PERSONNEL FUNCTION :This function is concerned with finding suitable employees, giving them training, fixing their
remuneration and motivating them. The quality of human resource working in the enterprise is a critical factor in the achievement of
business objectives. Therefore it is necessary that the work force is highly motivated and satisfied with the terms and conditions of
service offered by the enterprise.
WHAT IS OUR BUSINESS?
To answer this question, Drucker posed a series of additional questions:
• Who is the customer?
• What is value to the customer?
• What will our business be?
• What should our business be?
We have seen how Statler and the Stouffer brothers, in different areas, thought through the needs of the emerging American
middle-class market—a market that really constituted a ―new‖ customer. The developers of franchise systems, such as Johnson,
Sanders, Kroc, Barshop, and Wilson, established organizations that harnessed the interests of ownership to serve a common
organizational purpose. Each of these pioneers then used the field of management to serve that market efficiently. Let‘s illustrate
Drucker‘s frame of analysis with some examples from the service industry: community nutrition programs, the community service ,
and franchised service chains.
WHO IS THE CUSTOMER ?
The answer to this question is complicated by the fact that there are usually at least two customers, and generally more. Recall
that the school lunch program got its start as a national program not only to fill the needs of hungry students but also to use up
surplus farm commodities and help solve the nation‘s unemployment problem during the Great Depression. Although we can‘t
trace the process exactly, we know that the great expansion in the school lunch program was a response to the growing
participation of women in the workforce. Indeed, the development of preschool feeding and the school breakfast pro-gram are more
recent innovative responses to the twin problems of working mothers and poor families. Although the customer is the child who
3
eats and the parents who need no longer remain home to prepare a meal, the buying decision is made by Congress and other
state and local funding agencies, and the ultimate customer is the American people. Much the same can be said for congregate
feeding programs for the aging. It is hardly possible to identify the single ―entrepreneur‖ responsible for the growth of community
nutrition programs. They have resulted from the work of many people, both within and outside the school lunch program and other
service programs. This revolution in the way social obligations are arranged to provide nutrition is still going on—a dramatic
example of identifying customer needs and innovating to fill those needs, with people at all levels of many operations involved in
the work. Neither community nutrition programs nor any of their elements—school lunch, preschool feeding, congregate meals—is
the work of an unternehmer.
On a smaller scale, community service promoters discover every generation or so that town leaders in smaller communities
can benefit from a small first-class service . The guest is also an important customer, but, many community service s would never
have been built were it not for the positive influence (expected or real) of these service s on real estate values, employment, and
community growth in a small town. Thus, community leaders are important customers for community service developers, in many
ways as important as the guests the service is built to serve. The franchise systems we discussed earlier illustrate the notion of
multiple levels of customers. The guest who buys the product or service is an important customer, but so is the potential
franchisee. The franchise organization must not only satisfy the guest but also develop a system that fills the needs of local
investors and entrepreneurs who want to run a successful business in their community.
WHAT IS VALUE TO THE CUSTOMER?
Each customer has different values to be fulfilled. The guest at a Holiday Inn values a standard level of product and service that
is conveniently located and priced within his or her means. (These means are defined by the American middle class, to which the
guest almost invariably belongs.) Franchise holders, for their part, buy a familiar service brand name, national advertising, and a
referral system. Value to the guest in a community service is clean, comfortable accommodations. Value to the local investors,
however, results from factors such as improved property values and a community that can more readily attract other employers
with new local job opportunities.
The value of community nutrition programs to students, young children, and senior citizens is adequate nutrition and a
palatable meal. Government supports such programs for these reasons. However, we can speculate that perhaps even more
significant is the fact that these programs solve other problems. They fill the needs of families in which the parent works and can no
longer serve a midday meal (or sometimes even breakfast). Congregate feeding for elderly persons also supplies services that
families no longer provide for their aging members. The flip side of this is also true: Congregate feeding often frees elderly people
from dependence on their children.
WHAT WILL OUR BUSINESS BE ?
This question recognizes the simple fact that the only constant is change—that for organizations to survive in a changing
environment, they must change with it. Holiday Inn was originally and for many years a company of roadside inns located on the
outer edges of cities, along expressways, or near airports. As urban renewal began to revitalize downtowns, and as many
downtown service s continued to deteriorate or even closed their doors, a large new market began to emerge. Accordingly, the
company developed prototype properties to serve urban centers and changed from strictly a motel company to a service -motel
company.
WHAT SHOULD OUR BUSINESS BE ?
Drucker began his discussion of the question in this way:
―What will our business be?‖ aims at adaptation to anticipated changes. It aims at modifying, extending, developing the existing,
ongoing business. But there is a need also to ask ―What should our business be?‖ What opportunities are opening up or can be
created to fulfill the purpose and mission of the business by making it a different business?
The school lunch program began by serving children in public schools. As public service programs expanded to include
preschool children, however, many officials of the school lunch program started to wonder whether their organization could be
expanded to embrace other community service programs, such as congregate meals for elderly people. The school lunch program
in every community already has a production plant. Moreover, it maintains central service facilities in lunchrooms unused except
during the noon recess (and, perhaps, the early morning). It also has skilled workers and managerial and nutritional savvy, and it is
genuinely community-based. Thus, the question ―What should our business be?‖ is properly raised by school lunch leaders. It will
be interesting to watch how service answers these four questions in the next generation.
IN BUSINESS FOR YOURSELF?
Some students plan to enter business for themselves. Those who succeed will remember the key questions we have just
reviewed. Students whose careers involve working as supervisors and managers for others must realize that they are also, in a
sense, in business for themselves—selling their services and making a career based on their reputation for effectiveness. If this is
your choice, the analysis we have just offered serves you too: You must answer the questions of who your customers are and what
value means to them. The patrons of your operation are obviously customers, and their needs and wants must be satisfied. The
employer is your customer, and in an important way, especially for junior managers and supervisors, the employees you direct are
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also your customers. If they were not there, there would be no need for a supervisor. The balancing of the needs of all these
―customers,‖ properly done, will require creative marketing and innovation on your part. What will your business be? And what
should it be?
Business Management has been conceptualized as the social process by which managers of an enterprise integrate and
coordinate its resources for the achievement of common, explicit goals. It has developed into a body of knowledge and a separate
identifiable discipline during the past six decades. Practice of management as an art is, of course, as old as the organized human
effort for the achievement of common goals. Management has also acquired several characteristics of profession during recent
times. Large and medium-sized enterprise in Cameroon and elsewhere are managed by professional managers – managers who
have little or no share in the ownership of the enterprise and look upon management as a career.
THE PRACTICE OF BUSINESS MANAGEMENT
In order to better understand the management function, one must understand the nature of work and the organization. Let us
look at the basic work of a business (or any other organization, be it a hospital, nursing home, or school cafeteria). Peter Drucker,
the economist and management consultant, stated that the basic purpose of business is to ―create a customer,‖ that is, to
determine unfulfilled consumer needs and find a way to fill them. Drucker argued that the customer determines what a business is
and that the central functions of a business are innovation and marketing. Before discussing Drucker‘s theory and applying it to our
industry, we should pause for a moment to consider whether his line of reasoning applies to all of us in management and
supervision. Some, for instance, would argue that marketing is an activity of the sales department. However, marketing is,
basically, determining what the customer wants and then providing it in a way that makes it reasonably easy for the customer to
obtain, while pricing it to recover the cost and make a profit. The specific work of marketing is usually handled by a separate
department. Marketing, however, also includes a way of thinking about problems that is often the hallmark of the successful
manager. Drucker put it this way:
Organizations need managers. An organizationis a deliberate arrangement of people to accomplish some specific purpose.
Organizations share three common characteristics: (1) Each has a distinct purpose (2) Each is composed of people (3) Each
develops some deliberate structure so members can do their work. Although these three characteristics are important in defining
what an organization is, the concept of an organization is changing. The characteristic of new organizations of today include:
flexible work arrangements, employee work teams, open communication systems, and supplier alliances. The importance of
studying management in today‘s dynamic global environment can be explained by looking at the universality of management, the
reality of work, and the rewards and challenges of being a manager.
ECONOMICS
Economics is the study of how people allocate their scarce resources among unlimited wants. Economics is the study of
how people utilize their scarce resources to produce goods and services to satisfy their wants. Economics is the science of
allocating scarce resources among alternative uses. In the third definition, economics is referred to as a science because it uses
scientific method to analyze economic issues. Scientific method is objective and can be repeated over and over to attain the same
results. It involves five steps: problem identification or recognition, making assumptions about the problems, building models,
making predictions and testing the models. In the process of economics thinking, people make choices based on their rational selfinterest. They take rational decisions to achieve their individual self-interests. In the process they serve the good of the society.
Managers like other business people have unlimited wants. For example, which farmer would not like to grow thousands of tons
of a certain crop or rear hundreds of cows every year? These desires are not rational. This is because the resources which
Managers use for producing crops and livestock are not available in unlimited quantities. Managers understand that resources are
scarce; for example, there is not an unlimited supply of seeds, fertiliser and water. Resources are limited and have to be used
carefully; Managers will have to economise in their use. The study of using limited resources is called economics.
A manager will have certain limited resources that s/he will have to use for producing. Thus (as we saw in the previous section)
the manager 's basic economic decisions/choices will be:
 ? what to produce ? how to produce? what methods to use? how much to produce? for whom to produce?
Managers' decisions will be about economising the use of scarce resources on the farm and getting the most out of them. That is
what in economics is referred to as efficiency. Efficiency is the art of get-ting the most out of the least. For example, a farmer who
gets a big crop output from little input is said to be efficient. At the heart of farm management lie basic principles of economics.
Knowledge of these principles is important for good decision-making. Most Managers use economic principles every day of their
lives in their farm operations without consciously knowing that they are doing so. The field of economics is divided into two
subfields: microeconomics and macroeconomics. Micro economists study decision making by households and firms and the
interaction among households and firms in the marketplace. Macroeconomists study the forces and trends that affect the economy
as a whole.
THE CHANGING FACE OF BUSINESS
A business develops in course of time with complexities. With increasing complexities managing the business has become a
difficult task. The need of existence of management has increased tremendously. Management is essential not only for business
concerns but also for banks, schools, colleges, hospitals, hotels, religious bodies, charitable trusts etc. Every business unit has
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some objectives of its own. These objectives can be achieved with the coordinated efforts of several personnel. The work of a
number of persons are properly co-ordinated to achieve the objectives through the process of management is not a matter of
pressing a button, pulling a lever, issuing orders, scanning profit and loss statements, promulgating rules and regulations. Rather it
is the power to determine what shall happen to the personalities and happiness of entire people, the power to shape the destiny of
a nation and of all the nations which make up the world." Peter F. Drucker has stated in his famous book "The Practice of
Management" that, "the emergence of management as an essential, a distinct and leading social institution is a pivotal event in
social history. Rarely in human history has a new institution proved indispensable so quickly and even less often as a new
institution arrived with so little opposition, so little disturbance and so little controversy?"
Management is a vital aspect of the economic life of man, which is an organised group activity. It is considered as the
indispensable institution in the modern social organization marked by scientific thought and technological innovations. One or the
other form of management is essential wherever human efforts are to be undertaken collectively to satisfy wants through some
productive activity, occupation or profession. It is management that regulates man's productive activities through coordinated use
of material resources. Without the leadership provided by management, the resources of production remain resources and never
become production. Management is the integrating force in all organized activity. Whenever two or more people work together to
attain a common objective, they have to coordinate their activities. They also have to organize and utilize their resources in such a
way as to optimize the results. Not only in business enterprises where costs and revenues can be ascertained accurately and
objectively but also in service organizations such as government, hospitals, schools, clubs, etc., scarce resources including men,
machines, materials and money have to be integrated in a productive relationship, and utilized efficiently towards the achievement
of their gals. Thus, management is not unique to business organizations but common to all kinds of social organizations.
Management has achieved an enviable importance in recent times. We are all intimately associated with many kinds of
organizations, the most omnipresent being the government, the school and the hospital. In fact, more and more of major social
tasks are being organized on an institution basis. Medical care, education, recreation, irrigation, lighting, sanitation, etc., which
typically used to be the concern of the individual or the family, are now the domain of large organizations. Although, organizations
other than business do not speak of management, they all need management. It is the specific organ of all kinds of organizations
since they all need to utilize their limited resources most efficiently and effectively for the achievement of their goals. It is the most
vital forces in the successful performance of all kinds of organized social activities. The significance of management in business
activities is relatively greater. The inputs of labour, capital and raw material never become productive without the catalyst of
management. It is now widely recognized that management is an important factor of growth of any country.
CHAPTER SUMMARY
Business activities include how to identify your needs and wants and make choices among the numerous options. As a
consumer you have an effect on any services whether you patronize them or not. Both government, consumer, general public
benefit from a business concern once the location is within their territory. Business plays an important role in our lives. Business
helps in job creations and produces goods and services. Business includes those activities in which others endeavour to produce
and to distribute the goods and services that are important to the well- being, comfort and happiness of individuals, and for the
benefit of a society as a whole. The owners of business are usually motivated in their activities not only by the need for the material
contributions to the welfare of communities of which they are a part, but also by the desire to make a profit. Business activities
include how to identify your needs and wants and make choices among the numerous options. As a consumer you have an effect
on any services whether you patronize them or not. Both government, consumer, general public benefit from a business concern
once the location is within their territory. You have learnt in this chapter what business is, its function and its benefit to all and the
society. Business therefore is how to better the life of all within a given society by providing them with qualitative goods and
services.
REVIEW QUESTIONS
1. Define wants, needs, goods, services and resources with examples.
2. What costs do you encounter when you give up one choice in favour of another? Give practical example.
3. What is Business and What are the benefits that can be derived from a business?
4. In identifying a small business, we discussed four criteria to distinguish a small business from a big business.
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CHAPTER TWO
ENTREPRENEURSHIP AND SMALL BUSINESS DEVELOPMENT
LEARNING OBJECTIVES
On completing this chapter, depending on which pathway they took, a student should:
 Have a clear understanding of the environment in which small firms operate and how it impacts on them;
 Have a clear understanding of how small firms develop, grow and, in particular, how the role of the entrepreneur changes;
 Have a clear understanding of the nature of entrepreneurship;
 Have a sound knowledge of the sources of finance that are available for start-ups and growth businesses;
 Have the ability to carry out the preparatory work necessary to develop a business idea, draw up a business plan and present
it to a provider of finance;
 Have an ability to set up the appropriate information systems to control a start-up business;
I also hope that any entrepreneur using this book would have a better chance of success!
INTRODUCTION
Entrepreneurship is central for enhancing the economic opportunity of nations and organizations. Entrepreneurs create and
exploit change, are innovative and have the ability to mobilize resources to create value by invention of, or improvement of existing
products or services. One reason for the emerging need of Entrepreneurship is because it constitutes, in many respects, the
factors requisite for economic development. The idea of starting a business is appealing to many people. This is the trait for
entrepreneur temper. Entrepreneurs must be able to sustain the drive and energy required to form something new and to manage
the new enterprise. McClelland concluded that a high need for achievement leads individuals to engage in entrepreneurial
behavior. This is where this lesson on entrepreneurship will help develop entrepreneurial learning among students either entering
industry or setting up their own businesses. Entrepreneurial learning concerns knowledge, skills, abilities and attitudes of actual or
potential entrepreneurs. It concerns the development of entrepreneurial capabilities through life and work.
Entrepreneurship is one of the driving forces of the modern global economy. It is a primary source of job creation, prosperity,
and economic competitiveness. Economy, if it is to remain competitive, needs more entrepreneurial people. In particular, it needs
the creativity of people of the economy. Entrepreneurship, in its widest sense, is any enterprise or effort that adds value to the lives
of the people on whom, it has an impact. Change that adds value to peoples‘ lives, lies at the heart of entrepreneurship.
Entrepreneurship is popularly understood as the setting up new business ventures. In this context, the emphasis is on business
start-ups and on identifying and helping those with the determination so as to develop the competencies to set up and manage a
business enterprise. Entrepreneurial people are innovative problem solvers. Everything all around us in some way has its roots in
entrepreneurship. Products, systems, and ideas are all part of an entrepreneurial ecosystem. No society can exist without
entrepreneurship. Every society depends on entrepreneurs. Entrepreneurship is defined as the process of making money, earning
profits and increasing the wealth while posing characteristics such as risk taking, management, leadership and innovation. The
term Entrepreneurship is a complicated term and gives various meaning depending on the situation. The word entrepreneur has a
French origin. It originated during the Middle Ages when the term entrepreneur was applied to ―the man in charge of the great
architectural works: castles and fortifications, public buildings, abbeys and cathedrals
‖. It is derived from the French word, entreprendre , which means ―to undertake.‖ In a business context, it means to undertake a
business activity or simply to start a business. The Merriam tebster Dictionary defines an entrepreneur as ‗one who organizes,
manages, and assumes the risks of a business or enterprise‘. The concept of Entrepreneurship has wide range of meanings. On
one extreme an entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a
very small fraction of the population. On the other extreme, anyone who wants to work for himself is considered to be an
entrepreneur. That is, entrepreneurship is equated to simply starting one‘s own business. Most economists believe it is more than
that. To some economists, the entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for
profit. Others emphasize the entrepreneur plays a role of an innovator who markets his innovation. Still other economists say that
entrepreneurs develop new goods or processes that the market demands and are not currently being supplied.
The concept of entrepreneurship was first established in the 1700s, and the meaning has evolved ever since. Various
economists and philosophers termed this differently in their own unique ways. Cantillon referred entrepreneurs as one of the
classes of ‗landowners‘ who are financially independent aristocrats. For him; individuals who purchased a good at a certain price,
used that good to produce a product and then sold that product at an uncertain price could be considered ‗entrepreneurs‘. Risk and
uncertainty play central parts in his theory of the economic system. Successful entrepreneurs were those individuals who made
better judgments about changes in the market and who coped with risk and uncertainty better than their counterparts. The
entrepreneurial motivation is one of the most important factors which accelerate the pace of economic development by bringing the
people to undertake risk bearing activities.
FOUR KEY ELEMENTS OF ENTREPRENEURSHIP
– Innovation
– Risk taking
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– Vision
– Organising skills
In many of the developing countries a lot of attention is being paid to the development of entrepreneurship because it is not the
proprietary quality of any caste and community. The entrepreneurship is usually understood with reference to individual business.
Entrepreneurship has rightly been identified with the individual, as success of enterprise depends upon imagination, vision,
innovativeness and risk taking. The production is possible due to the cooperation of the various factors of production, popularly
known as land, labour, capital, market, management and of course entrepreneurship. The entrepreneurship is a risk taking factor,
which is responsible for the end result in the form of profit or loss.
In the 20th century, economist Joseph Schumpeter (1883-1950) focused on how the entrepreneur‘s drive for innovation and
improvement creates upheaval and change. Schumpeter viewed entrepreneurship as a force of ―creative destruction.‖ The
entrepreneur carries out ―new combinations,‖ thereby helping render old industries obsolete. Established ways of doing business
are destroyed by the creation of new and better ways to do them. According to A Schumpeter ―The entrepreneurship is essentially
a creative activity or it is an innovative function‖. After the Second World War, entrepreneurship received new meaning for attaining
economic development within the shortest possible time; as concern for economic development became all-pervasive. There was a
growing concern for economic development and this strengthened interest in enterprises.
Business expert Peter Drucker (1909-2005) took this idea further, describing the entrepreneur as someone who actually
searches for change, responds to it, and exploits those changes as an opportunity. For instance; a change converted from
typewriters to personal computers to the Internet. According to Peter P Drucker, ―Entrepreneurship is neither a science nor an art.
It is a practice. It is knowledge based. Knowledge in entrepreneurship is a means to an end, that is, by the practice.‖
The culture of a community also may influence how much entrepreneurship there is within it. Different levels of
entrepreneurship may stem from cultural differences that make entrepreneurship more or less rewarding personally. A community
that accords the highest status to those at the top of hierarchical organizations or those with professional expertise may discourage
entrepreneurship. A culture or policy that accords high status to the ―self-made‖ individual is more likely to encourage
entrepreneurship. In crux these are various interchangeable meanings of what is entrepreneurship.
TRAITS OF AN ENTREPRENUER
– He is a person who develops and owns his own enterprise.
– He is a moderate risk taker and works under uncertainty for achieving the goal.
– He is innovative.
– He peruses the deviant pursuits.
– Reflects strong urge to be independent.
– Persistently tries to do something better.
– Dissatisfied with routine activities.
– Prepared to withstand the hard life.
– Determined but patient.
– Exhibits sense of leadership.
– Also exhibits sense of competitiveness.
– Takes personals responsibility.
– Oriented towards the future.
– Tends to persist in the face to adversity.
– Convert a situation into opportunity.
WHO IS AN ENTREPRENEUR?
Entrepreneurship is a very famous word amongst the business community life. But, there are many common people still cannot
get the definition and the meaning for who is the entrepreneur. ‗One who undertakes an endeavor‘ is the meaning of the French
word entrepreneur. There is no one definitive profile. Successful entrepreneurs come in various ages, income levels, gender, and
race. They differ in education and experience. But research indicates that most successful entrepreneurs share certain personal
attributes, including: creativity, dedication, determination, flexibility, leadership, passion, self-confidence, and ―smarts.‖ Creativity is
the spark that drives the development of new products or services or ways to do business. It is the push for innovation and
improvement. It is continuous learning, questioning, and thinking outside of prescribed formulas. Dedication is what motivates the
entrepreneur to work hard, 12 hours a day or more, even seven days a week, especially in the beginning, to get the endeavour off
the ground. Planning and ideas must be joined by hard work to succeed. Dedication makes it happen.
Determination is the extremely strong desire to achieve success. It includes persistence and the ability to bounce back after
rough times. It persuades the entrepreneur to make the 10th phone call, after nine have yielded nothing. For the true entrepreneur,
money is not the motivation. Success is the motivator; money is the reward. Flexibility is the ability to move quickly in response to
changing market needs. It is being true to a dream while also being mindful of market realities. A story is told about an
entrepreneur who started a fancy shop selling only French pastries. But customers wanted to buy muffins as well. Rather than
risking the loss of these customers, the entrepreneur modified her vision to accommodate these needs.
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Leadership is the ability to create rules and to set goals. It is the capacity to follow through to see that rules are followed and
goals are accomplished. Passion is what gets entrepreneurs started and keeps them there. It gives entrepreneurs the ability to
convince others to believe in their vision. It can‘t substitute for planning, but it will help them to stay focused and to get others to
look at their plans. Self-confidence comes from thorough planning, which reduces uncertainty and the level of risk. It also comes
from expertise. Self-confidence gives the entrepreneur the ability to listen without being easily swayed or intimidated.
―Smarts‖ consists of common sense joined with knowledge or experience in a related business or endeavour. The former gives
a person good instinct, the latter, expertise. Many people have smarts they don‘t recognize. A person who successfully keeps a
household on a budget has organizational and financial skills. Employment, education, and life experiences all contribute to smarts.
Every entrepreneur has these qualities in different degrees. But what if a person lacks one or more? Many skills can be learned.
Or, someone can be hired who has strengths that the entrepreneur lacks. The most important strategy is to be aware of strengths
and to build on them.
CHARACTERISTICS OF AN ENTREPRENEUR
(i) Mental Ability: entrepreneur must have creative thinking and must be able to analyse problems and situations. He should be
able to anticipate changes.
(ii) Business Secrecy: he should guard his business secrets from his competitors.
(iii) Clear Objectives: he must have clear objectives as to the exact nature of business or the nature of goods to be produced.
(iv) Human Relation: he must maintain good relations with his customers, employees etc. to maintain good relationship he should
have emotional stability, personal relations, tactfulness and consideration.
(v) Communication Ability: he should have good communication skills means both the sender and the receiver should
understand each other‘s message.
WHY ENTREPRENEURSHIP
What leads a person to strike out on his own and start a business? The answer lies in the advantages of entrepreneurship.
1. Doing What You Love
If an entrepreneur is going to start his business it is assured he will get better odds to succeed if he is doing something he loves.
Why? Because, passion is the fuel that is needed to face all the obstacles. It is natural to feel fearful to fail. But to start with ones
own business is like leaving Comfort Zone and entering a Twilight Zone. It is an activity where it should be ensured to strike
balance between the business what you love to do and which is profitable as well. Additionally in the business jungle; it is of utter
most importance to survive being one of the best and that is easier if the entrepreneur is passionate about what he is doing.
Therefore, one of the advantages of being an entrepreneur is doing what one loves. ―Choose a job that you like and you will never
have to work a day in your life.‖– Confucius
2. Independence and Freedom
Entrepreneurship allows undertaking the activities of one‘s choice and comfort which offers independence and freedom in return.
Many people think independence and freedom means going to work or take vacations when you want or need. The truth is that is
not possible at least in the earlier years of business. On the other hand, when business is mature, strong and self sufficient, it
begins to offer independence and financial freedom. ―Entrepreneurship is living a few years of your life like most people won‘t, so
that you can spend the rest of your life like most people can‘t‖ – A Student in Warren G. Tracy‘s Class
3. Recognition and Self Fulfilment
Entrepreneurship provides the ability to be involved in the total operation of the business, from concept to design and creation,
from sales to business operations and customer response. It offers the prestige of being the person in charge. In line with the
Maslow‘s hierarchy of needs, it is human to desire for recognition and strive for self fulfillment and achievement. Entrepreneurship
offers excitement compared to being regular employees. Entrepreneurs enjoy much excitement beginning from the planning stage
of the business up to development and realization. Thrill-seekers obviously love being entrepreneurs as they are exposed to too
much risk.―What a man can be, he must be. This need we call self actualization.‖ – Maslow ―I have wandered all my life, and I have
also traveled; the difference between the two being this, that we wander for distraction, but we travel for fulfillment.‖ – Hilaire Belloc
4. Income Potential
Entrepreneurship offers a greater possibility of achieving significant financial rewards than working for someone else. This is a big
one because when you‘re an entrepreneur you can create a direct relationship between your efforts and your income. In other
words: if your efforts are higher your reward should be higher too. Of course that happens if your efforts are well planned, effective
and well focused. Many people really believe that of all the advantages of being an entrepreneur this is the best. That‘s probably
because in comparison to a job where employer, the company‘s financial budget, the Board and the economy decides salary. In
case of an entrepreneur nobody except the market forces defines returns and income. ―A large income is the best recipe for
happiness I ever heard of.‖ – Jane Austen quotes
5. Own Boss
Entrepreneurs are their own bosses. They make the decisions. They choose whom to do business with and what work they will do.
They decide what hours to work, as well as what to pay and whether to take vacations. ―Your real boss is the one who walks
around under your hat.‖ –Napoleon Hill
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6. Innovation
Entrepreneurship creates an opportunity for a person to make a contribution. Most new entrepreneurs help the local economy. A
few – through their innovations – contribute to society as a whole. One example is entrepreneur Steve Jobs, who co-founded Apple
in 1976, and the subsequent revolution in desktop computers. It gives an individual the opportunity to build equity, which can be
kept, sold, or passed on to the next generation.
INTRAPRENEURSHIP
A dictionary meaning to word provides that, ―A person within a large corporation who takes direct responsibility for turning an
idea into a profitable finished product through assertive risk-taking and innovation is an intrapreneur.‖
It is derived as INTRA (corporate) + (entre) PRENEUR].
The word intrapreneur is the recently coined corporate counterpart to long existing term entrepreneur. This coinage is
generally attributed to management consultant Gifford Pinchot, author of the 1985 book entitled Intrapreneuring. Since inception of
this term in the scant number of years, intrapreneur has gained momentum and currency very rapidly. Intrapreneurship is a
combination of entrepreneurship and management skills. In simple words, Intrapreneurship is the practice of entrepreneurship by
employees within an organization. The trend today is such that everyone who is capable of managing others business is himself
indulging in entrepreneurship. This is resulting in inadequacy of management staff. In the emergence of this changing pattern, the
concept of intrapreneurship is originated where the intrapreneur (i.e. Manager) is made the head of a given business unit and
asked to manage it for the organization while employing innovative skills. As an example, when a company seeks for diversification
options, they can appoint one of their managers as an intrapreneur to launch the business venture while allowing him to share the
part of the profits made by the new business venture.
OWNER-MANAGERS
Owner-managers and entrepreneurs are both born and made. They have certain personal character traits that they are born
with and are influenced by antecedent factors as well as the culture into which they are born. The issue of linking the character
traits of an individual to the success of a business – picking winners –needs to be approached with caution because it is not always
possible to link individuals. Success or failure in business comes from a mix of many different things. The character traits of the
manager is just one factor in the equation. What is more there are a number of methodological problems associated with trying to
measure personality traits:
● They are not stable and change over time.
● They require subjective judgements.
● Measures tend to ignore cultural and environmental influences.
● The role of education, learning and training is often overlooked.
● Issues such as age, sex, race, social class and education can be ignored.
Owner-managers have the following character traits:
● Need for independence.
● Need for achievement, strongest in entrepreneurs like Brent Hoberman and Charles Muirhead.
● Internal locus of control, that is a belief that they can control their own destiny.
● Ability to live with uncertainty and take measured risks, unlike Jean Young.
In addition, entrepreneurs have the following character traits, however, some more entrepreneurial owner managers might exhibit
them, albeit to a lesser degree:
● Opportunistic, creating or exploiting change for profit
● Innovative, using innovation as their prime tool to create or exploit opportunity.
● Self-confident, like Richard Thompson.
● Proactive and decisive with high energy, like Tom Farmer.
● Self-motivated, like Martha Lane Fox.
● Vision and flair.
● Willingness to take greater risks and live with greater uncertainty.
ENTREPRENEURSHIP – CREATIVITY AND INNOVATION
Innovation is tool of entrepreneurship. In addition, both of the stated demands creativity. Creativity and innovation by definition
involves the creation of something new which is central to the entrepreneurial process. Creativity and innovation are considered
inseparable from entrepreneurship, which is in turn manifested in the act of starting up and running an enterprise. Entrepreneurs
and their start-ups are considered to be important agents of innovation, not simply in terms of the products and services they
provide, but also in terms of the technologies and processes that they utilize. Start-up entrepreneurs could, thus be argued to be,
by their very nature, the essence of creativity and innovation. Creativity is applied because it connects, innovation is required
because it implies progress and both play role in entrepreneurship. These fill in the vacuum created between an idea and an
opportunity. This lesson explores ways in which start-up entrepreneurs are creative and innovative, the ways in which such
innovation and creativity can be explored better to derive entrepreneurial motivation which helps in setting up a business. People
always overestimate how complex business is. This isn‘t rocket science; we‘ve chosen one of the world‘s more simple professions.
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Innovation is the tool of entrepreneurship. In addition, both innovation and entrepreneurship demand creativity. Creativity is a
process by which a symbolic domain in the culture is changed. Creativity is the ability to make or otherwise bring into existences
something new, whether a new solution to a problem, a new method or device, or a new artistic object or form. Creativity is moving
from the known to the unknown. No entrepreneur or enterprise, however successful and big, can continue to hold a place of
leadership unless it recognizes that modern business operates in a world of galloping change which creates new problems, risk
and opportunities and for which they have to mobilize the enterprise‘s resources before changes make their impact felt. All
innovation begins with creative ideas. Creativity is the starting point for innovation. Creativity is however necessary but not
sufficient condition for innovation. Innovation is the implantation of creative inspiration.
CREATIVITY
Creativity is marked by the ability to create, bring into existence, to invent into a new form, to produce through imaginative skill,
to make to bring into existence something new. Creativity is not ability to create out of nothing but the ability to generate new ideas
by combining, changing, or reapplying existing ideas. Every being has a creative side but is not realized. Creativity is an attitude,
the ability to accept change and newness, a willingness to play with ideas and possibilities, a flexibility of outlook, the habit of
enjoying the good, while looking for ways to improve it. Creativity is also a process. Creative people work hard to improve ideas
and solutions, by making continuous and gradual alterations and refinements to their works. Creativity requires passion and
commitment.
People become creative when they feel motivated primarily by the interest, satisfaction, and challenge of the situation and not by
external pressures; the passion and interest – a person‘s internal desire to do something unique; the person‘s sense of challenge,
or a drive to prove something no one else has been able to. Within every individual, creativity is a function of three components:
– Expertise
– Creative Thinking Skills
– Motivation
Expertise encompasses everything that a person knows and can do in the broad domain of his or her work-knowledge and
technical ability.
Creative thinking refers to how you approach problems and solutions- the capacity to put existing ideas together in new
combinations. The skill itself depends quite a bit on personality as well as on how a person thinks and works. Expertise and
creative thinking are the entrepreneur‘s raw materials or natural resources.
Motivation is the drive and desire to do something, an inner passion and interest. When people are intrinsically motivated, they
engage in their work for the challenge and enjoyment of it. Entrepreneurial activity depends on the process of innovation following
creativity, not on creativity alone.
INNOVATION
Innovation is the process of bringing the best ideas into reality, which triggers a creative idea, which generates a series of
innovative events. Innovation is the creation of new value. Innovation is the process that transforms new ideas into new value. No
innovation is possible without creativity. Innovation is the process that combines ideas and knowledge into new value. Without
innovation an enterprise and what it provides quickly become obsolete. Joseph Schumpeter (1934) believes that the concept of
innovation, described as the use of an invention to create a new commercial product or service, is the key force in creating new
demand and thus, new wealth. Innovation creates new demand and entrepreneurs bring the innovations to the market. This
destroys the existing markets and creates new ones, which will in turn be destroyed by even newer products or services.
Schumpeter calls, this process, ‗creative destructions‘.
Innovation requires a fresh way of looking at things, an understanding of people, and an entrepreneurial willingness to take
risks and to work hard. People involved in innovation are guided by certain principles of innovation. These vary among different
entrepreneurs; organisation; philosophers; but the basic framework remains the same. Steve Jobs has given 7 principles largely
responsible for success through innovation.
ENTREPRENEURIAL OPPORTUNITIES
Most people usually base their business upon skills, experience or qualifications that they have already gained from a previous
job, or through a hobby. Often they think that their employer is not making the most of some opportunity. Sometimes they have an
idea but cannot persuade their employer to take it up, so they decide to try it themselves. Often they have contacts in the industry
they believe they can exploit to their own advantage. Other people spot gaps in the market: opportunities that are not being taken
by existing businesses. The entrepreneur has been distinguished from the owner-manager as being a person who is likely to spot
these opportunities and be innovative in the way they take them up. Motivations may appear little different at start-up but how
entrepreneurs spot opportunities and find ways of exploiting them starts to set them apart even at this early stage.
Gaps in markets come from change. Think of changes that are taking place and the implications they may have; for example:
● Products or services that you have seen but are not available in your area can mean there are opportunities. Experience of
overseas countries and markets is always valuable.
● Changes in customer demands or fashions can mean needs are not being met.
● Changes in markets can lead to opportunities; for example, the opening up of new retail outlets or shopping areas.
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● Changes in legislation can create opportunities; for example, changes in Health and Safety at Work regulations and Food
Hygiene regulations have created opportunities in the past.
Of course you can create your own change and your own opportunity through innovation; for example, innovation could mean:
● Invention. Although, as we saw in the previous chapter, this is not necessarily the same thing as innovation. Often inventors are
best advised to sell-on their idea rather than to try to exploit it themselves.
● Ways of doing things better or cheaper. Better is good; cheaper, as we shall see, can lead to problems.
● New developments in technology; for example computers and e-commerce.
● New ways of getting goods or services to markets; for example, direct selling via telephone or internet.
Bolton and Thompson (2000) suggest that there are three basic approaches to innovation in this context, which are not mutually
exclusive:
1. Have a problem and seek a solution. They cite as an example Edwin Land's invention of the Polaroid camera because his young
daughter could not understand why she had to wait to have pictures of herself printed.
2. Have a solution and seek a problem. They cite 3M's Post-It notes as an example of a product with loosely sticking qualities that
was applied to the need to mark pages in a manuscript.
3. Identify a need and develop a solution. The example they cite is James Dyson's dual cyclone cleaner that he developed because
of his frustration with the inadequate suction provided by his existing vacuum cleaner when he was converting an old property.
There are many sources of potential business ideas. They could come from:
● Existing businesses; Existing franchises; Innovations; Patents; Licences; Research institutes; Industry and trade contacts;
Industry and trade shows; Newspapers and trade journals; Business networks and contacts; Television and radio.
Inventors of board games are usually best advised to sell their idea on to companies with an existing range of games. However,
there are exceptions. One significant factor, of course, will be the sectors and markets in which small firms are currently growing
most quickly, for example, e-commerce. It is here where opportunities currently exist. But will you be able to capitalise on these
developments as quickly as existing firms?
We are now starting to understand how the creative process works. The brain has two sides that operate in quite different
ways. The left side performs rational, logical functions. It tends to be verbal and analytic, operating in a linked, linear sequence.
The right side operates intuitive and non-rational modes of thought. It is non-verbal linking images together to get a holistic
perspective. A person uses both sides, shifting naturally from one to the other. However, the right side is generally thought to be
the creative side. The implication of this is that to encourage creative thinking you need to encourage the right side.
Mintzberg (1976) makes the interesting suggestion that the very logical activity of planning is essentially a left-brain activity
whilst the implementation of the plan, that is the act of management, is a right-brain activity. He bases this claim on the
observation that managers split their attention between a number of different tasks, preferring to talk briefly to people rather than to
write, reading non-verbal as well as verbal aspects of the interaction, take a holistic view of the situation and rely on intuition. He
argues that truly effective managers are those that can harness both sides of the brain. The point being that you need to develop
right-brain activity and try to be creative. To overcome the habit of logic it is necessary to deliberately set aside this ingrained way
of thinking. Creative or lateral thinking is different in a number of dimensions to logical or vertical thinking. .
One technique for encouraging creative thinking is called brainstorming, which is practised in a group. In the session you do
not question or criticise ideas; the aim is to encourage their free flow. Participants encourage and copy ideas down as they come
by facilitating all the dimensions of creative thinking. This allows the right side of the brain full rein, and the left brain is only
engaged later on to analyse the ideas that have come up.
The important thing with ideas is to write them down; all too often good ideas are forgotten. But a good idea is not necessarily a
good commercial opportunity; it must be linked to market demand. And often the first attempt at putting that product or service
together in a marketable way fails, so what may be necessary is a series of trial-and-error iterations.
BUSINESS START UP
Many people have business ideas but few start up their own business. The blocks to doing so include the need for regular
income to support a family, the lack of capital and self-doubt. What is needed is a trigger. This can be a push factor such as
unemployment or a pull factor such as a desire to make money. It can be a combination of these factors. Generally businesses set
up for positive motives or pull factors are most likely to grow. Influences upon this decision can be antecedence such as family, the
incubator organisation in which they have worked or other environmental factors, such as general economic conditions. Often
seeds of entrepreneurship can be seen at an early age. To start a business, not only do you need an idea, you also need certain
personal attributes, customers, an ability to deal with competitors, a launch strategy and finally resources. Business ideas can
come from many sources. They can come from an individual's skills and experiences, from spotting gaps in the market You need
to brainstorm ideas in an uncritical way, remembering to write them down, before exploring them in more detail.
To run your own firm you must be willing to work hard for long hours. You must be committed and dedicated. Like Bill Gates
you must be opportunistic, able to bounce back in adversity, motivated to excel and tolerant of risk. An idea is of no use unless it is
linked to market demand. There must be a need for the product or service in the market place that is capable of being exploited.
You need to know who your customers will be and why they will buy from you rather than competitors. Careful research needs to
be undertaken into the sector or industry that you are launching the business. You are most likely to succeed where there is little
direct competition. However, even if there are few competitors, if they are large firms you might still face an uphill struggle. Porter's
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Five Forces is a useful way of making judgements about the degree of competition in a market. It looks at the power of buyers and
suppliers, the threat of new entrants and substitutes and the competitive rivalry within the industry.
You need a launch strategy for your business, but you first need to understand that there are only three fundamental ways of
achieving sustainable competitive advantage:
● Low price;
● High differentiation;
● Customer focus.
These combine to provide four generic marketing strategies:
● Commodity supplier: where you are selling a commodity on price alone. You therefore need to be the lowest cost producer,
making the most of any economies of scale that are available.
● Market trader: where you are still selling on price but using economies of small scale, in particular low overheads, to keep costs
low. However, in these circumstance you must be aware of the limitations to the size of your market and the risks you face in trying
to grow the business.
● Niche player: selling a differentiated product or service to a targeted, narrow market segments. This strategy offers the best
chance of success for a small firm
● Outstanding success: sometimes niche firms become outstanding successes as the market they originally sold to expands
beyond their expectations. Most business start-ups require a broad range of resources and acquiring them can be a problem
because of the lack of credibility of the entrepreneur. What is more, it is important for most businesses that overheads and the
break-even point are kept as low as possible.
Finally, the start-up needs to be thought through and the business plan is a vital tool in allowing you to do this. It can be no more
than a brief, working document that allows you to marshal your ideas in a systematic way, however, if you need it to raise finance it
will have to be more comprehensive and much more of a ‗selling document‘.
1. COMPONENTS OF BUSINESS IDEA GENERATION
A sound business idea generation is fundamental for your business future - one mistake will have a negative effect on your whole
business activity. Take time and discuss your ideas and findings with friends and experts.
PHASE 1: BUSINESS IDEA GENERATION
2. COMPONENTS OF INFORMATION SEEKING
You as a business start-up should have sufficient information and seek additional information on various factors that are relevant to
your intended new business activity. The different types of information required are indicated in the following diagram.
PHASE 2: INFORMATION SEEKING
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PHASE THREE: STARTING UP YOUR BUSINESS
To start your business, you need to have an action plan that shows a list of activities to be undertaken and when to do them. The
following simplified action plan format is presented for your reference. Follow the graphic presentation and put all the necessary
steps into the action plan including the timetable, responsibilities and institutions or persons to be contacted.
Example of Action Plan
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A. BUSINESS PLANNING FOR START-UPS
Business plans for start-ups are based on a business idea and initial market estimation and mainly use estimations and financial
projections instead of existing enterprise data.
THE BUSINESS PLAN
TITLE PAGE
All contact and ownership information is included on the title page. Some entrepreneurs like to add a very brief business
description, slogan or mission statement.
a. Business name, address, telephone, e-mail and web site
b. Name of owner(s)
TABLE OF CONTENTS
Include a list of all sections of the business plan and the appropriate page numbers. Graphs, diagrams and other visual
representations should also be identified. Items included as exhibits at the end of the plan (example: owner resume) should be
clearly identified so that the reader can reference them while reviewing the plan.
EXECUTIVE SUMMARY
An overview of the content of your business plan allows managers, strategic partners, investors or lending agencies to quickly
grasp your concept and business direction, so that as they read the pages that follow, they have a clear idea of your intentions.
Because the plan encompasses so many activities, the reader could fail to extract the owner‘s view of the most important
information. You will find many uses for this summary as you move forward to promote your company, network in the business
community and work with vendors of business products and service.
a. Brief description of the company history
e. Customers
b. Purpose of the plan
f. Management team experience
c. Goals of the business
g. Amount required from lender*
d. Description of the products and services
h. Other sources of funds/collateral*
i. Method of repayment*
(*) Items marked with an asterisk are added to the business plans being used to secure financing.
MISSION STATEMENT
The mission statement should describe why your company exists in the marketplace. Some companies use this statement as a
foundation for management decision-making, and publicly display it on promotional literature and in the place of business. Many
entrepreneurs find it useful to make the mission statement brief and general enough to allow potential growth of product lines and
services. Consider the difference between describing yourself as a company in the ―automobile‖ business, and a company in the
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―transportation business.‖ The mission statement is usually not changed for five years or more and so it is important for it to
adequately portray your firm‘s identity and philosophy.
a. Description of company purpose
b. Identification of those served
INDUSTRY STATUS
This is the part of your plan that discusses the business environment in which you will be operating. Entrepreneurs often wish to
gloss over this section because the factors are considered external to the company and uncontrollable. Gathering this information
is important, however, because it can help you determine limitations or opportunities impacting your profit. You may even discover
information that changes the type of business you are starting, or the ways in which you expand operations. Be sure to study both
positive and negative factors.
a. National/Regional economic growth or decline
d. Regulatory environment
b. Industry outlook
e. Technological influences
c. Projected opportunities
TARGET MARKET/CUSTOMER BASE
An error in the determination of your target market(s) will not only adversely affect all other sections of your business plan, it will
most certainly increase your advertising and promotion expense. For some businesses it is the difference between success and
failure. In this section of the plan describe the most likely customers for your product or service. Who are they? Where are they?
When and why will they buy from you? To be thorough you must also describe the target market between you and the end user of
your offerings. For example, if you are a manufacturer, you may need a retailer or distributor. Without the retailer or distributor
purchasing your product, the end user will never have the opportunity to purchase. You may need promotional literature such as
product and price sheets for this ―middle‖ market and you may even need sales assistance. Overlooking this market could result in
underestimated expense. Often your entire market of purchasers can be divided into segments, or groups of purchasers with
common needs. Segmenting your market allows you to define and describe buyers‘ needs and habits as completely as possible.
Accurate information about the size of your market and expected market share helps you predict potential income.
a. Characteristics of the target market:: Demographic profile (age, income, sex, education), Business customer (industry, size,
purchaser), Geographic parameters
b. Size of the market/expected market share
c. Market segmentation
d. Customer buying habits (seasonality, quantity, average expenditure)
MARKETING PLAN
The marketing plan describes all activities involved in selling. It sets annual sales goals and examines the competitors‘ products
and services and how your offerings are unique. Marketing is not simply advertising and promotion activities. Although these
communication elements are extremely important, they are ineffective if you have not chosen products and services wanted and
needed by your potential customers. The marketing plan should include a complete description of all offerings. Names, colors,
assortments and other details are important to customer choice. If you have multiple products for multiple target markets, this is the
section where those distinctions must be made.
If you are tempted to dismiss competition, ask yourself how your potential customer currently solves the same problem your
offerings are intended to solve. What are the customers‘ choices when spending their financial resources? It can be helpful to
develop a matrix that lists all your major competitors, their products and services, prices, methods of promotion and location. By
incorporating your own marketing information on the matrix, you can identify your firm‘s strengths and weaknesses. Your marketing
section includes customer service policies. Small businesses often have an opportunity to compete with larger firms by offering
flexible, courteous, customer-centered services.
The pricing of your product must consider competition and customer expectations, but it must also consider all expenses. It is
not uncommon for early stage businesses to: (1) believe they can sell at the lowest price; (2) misunderstand the importance
establishing price policies at levels other than the end user level; and (3) overlook the relationship between pricing and other
elements of marketing.
Few businesses exist without advertising expense. The choices of strategy and media are many, but the choice to eliminate
advertising says the entrepreneur cannot afford to communicate with customers. A lack of communication is directly related to a
lack of customer spending and a lack of customer spending critically impairs the business‘s survival. Since advertising and other
elements of promotion are legitimate business expenses, they must be incorporated in the price of the products and services.
a. Sales goals
b. Description of all products and services
c. Direct and indirect competition
d. Pricing objectives/methods: Wholesale and retail , Discounts and special allowances, Seasonality in pricing, Credit terms
e. Location:
Where products/services will be sold, Analysis of advantages/disadvantages, Plant/store atmosphere,
Transportation
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f. Promotion activities : Advertising, Public relations, Publicity, Trade or business shows, Web site
g. Packaging
h. Customer service policies
i. Sales training, management and methods
j. Growth strategies
PRODUCTION AND OPERATIONS PLAN
A lack of production and operations planning causes entrepreneurs to underestimate start-up, maintenance and growth
expenses. The decisions in this section of the plan consider the ―physical‖ health of the business. If the business is started at
home, the entrepreneur should set criteria such as income, number of employees or product expansion that will necessitate
moving to a business site. Decisions made in this section affect the extent of company indebtedness, as well as the collateral of the
business when it seeks out loans or investments.
a. Facility: Lease or purchase, Size and floor plan, Zoning, local regulations, taxes, Renovation/expansion plans
b. Equipment: Machines/tools owned/needed, Lease or purchase, Maintenance procedures and costs, Vehicles,
Telecommunications and data
c. Production process and costs d. Suppliers/credit terms e. Transportation and shipping access and equipment
f. Scheduling for completion of research and development
RISK MANAGEMENT
By definition, entrepreneurs are risk takers. They launch a new enterprise in a competitive environment with less than adequate
capital and work more hours in the day than their corporate employee counterparts. Once the decision has been made to become
an entrepreneur, risk management becomes a part of the job description. As a firm grows, the wise entrepreneur develops a risk
management program with advice from an attorney, accountant and insurance agent. Young firms are vulnerable and protection
comes from evaluating and prioritizing risks and insuring against them. You can start by making a list of the perils your business
faces. Identify which are most catastrophic, such as loss of life, damage to property, employee or customer injury resulting from a
faulty piece of equipment or product. Take action to protect your business against these catastrophes first. Risks differ related to
your industry and specific offerings, and gaps in coverage can occur as the business grows. Your risk management program
should be evaluated annually.
a. Product liability
f. Workers‘ compensation
b. Personal/business liability
g. Unemployment
c. Business interruption
h. Fire
d. Vehicle
i. Theft
e. Disability
MANAGEMENT AND HUMAN RESOURCES PLAN
The people in any business are an important and expensive resource. Before developing this section of the plan, the
entrepreneur must identify how the business will grow and what skills will be needed for that growth. If additional locations are
planned, new managers will need to be hired or trained. If growth comes from development of new products, researchers and
engineers may be needed. If growth will result from selling intensively to a small number of clients who buy on multiple occasions,
employees that are capable of developing good relationships and delivering excellent customer service are needed. The obvious
expense of human resources is salary and benefits. Less obvious is the cost of recruitment, selection and training when turnover
occurs. This section requires knowledge of state and federal regulations governing employer and employee relationships.
a. Key managers: responsibilities, training, reporting procedures
b. Personnel: number of full- and part-time employees, special skills/education required/continuing education, job descriptions
and evaluation methods, benefits, wages, commissions, bonus plans, use of subcontracted personnel, policies
c. Organizational chart
d. Lists of stockholders and board members
e Amount of authorized stock and issued stock
f. Professional assistance (attorney, accountant, banker, insurance representative, etc.)
FINANCIAL PLAN
Books and software packages can be purchased with formatted worksheets to produce the documents you need for your
financial plan. The numbers used for each expense should be as accurate as possible based on current research. Identify any
fluctuations that can be predicted such as increases in raw materials, lease or utilities in year two or three of your business.
Estimate the month and year when additional employees will be hired and what they will be paid. A break-even analysis helps you
understand at what point the business becomes profitable and allows you to set goals realistically. Without a financial plan you will
find it nearly impossible to interest lenders or investors in helping you start and grow, because you have no facts to back up your
enthusiasm and commitment to your venture.
a. Start-up costs (all one-time expenses such as equipment, deposits, fees, etc.)
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b. Monthly expenses (ongoing expenses for lease, insurance, utilities, etc.)
c. Sources and uses of funds*
d. Balance sheets (opening day and projected three years)
e. Projected cash flow (monthly first year, quarterly year two and three)
g. Break-even analysis
h. Existing business (historical statements for three years*)
i. Personal financial statement of owner(s)*
j. Assumptions used in preparation of financial projections
ATTACHED EXHIBITS
a. Managers‘ resumes
f. Marketing research
b. Advertisements, and other promotional documents g. Patents, trademarks, copyrights, license agreements
c. Contracts, leases, and filing documents
h. Income tax returns (three years)*
d. Letters of support
i. Invoices or estimates for facility or equipment purchases*
e. Pictures of the product or service
(*) Items marked with an asterisk are added to the business plans being used to secure financing.
OVERVIEW ON THE ASPECTS OF BUSINESS PLANNING
LEGAL ISSUES
You as a business owner have a legal obligation to adhere to existing laws and regulations. These responsibilities include paying
taxes, respecting regulations regarding employees, getting licenses and permits, adhering to lease and contractual agreements.
Paying taxes is part of running a business and it applies to everyone unless you get short-term preferential treatment from the
government. It is, therefore, your responsibility to learn about the legal requirements that concern you as a business person. Laws
and regulation, legal forms of business and business registration in most cases are similar but nevertheless a country specific
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matter. The legal forms of business are ; the sole proprietorship, the partnership, the cooperative, the private limited company,
public limited company and the multinational company
BUSINESS REGISTRATION
After selecting one of the above forms of business organisations, the next procedure is to register your business with the
Registrar-General at the Registrar-General‘s Department. Application for registration of a company is made directly, or through
agents or solicitors, to the Registrar-General. A company is duly registered after the company's regulations have been submitted to
the registrar of companies and a certificate of incorporation issued. A specified fee is paid on presentation of the regulations. The
information required includes:
Procedure for Registration: A statement should be prepared stating the following particulars.
( i) Name of the firm
(ii) The principal place of business
(iii) Name of other places where also the firm carries on business.
(iv) Name and addresses of all the partners.
(v) The date on which each partner joined the firm.
This statement, signed by all the partners should send to the Register of firm along with the necessary registration fee.
DOING BUSINESS IN CAMEROON
Cameroon is the largest economy in the Central African Economic and Monetary Community (CEMAC) owing to its demography (a
little over 20 million inhabitants), a surface area of 475 442 KM² , its geographical situation, and its diversified economy
(agriculture, oil & gas sectors etc). Moreover, Cameroon enjoys peace and political stability. As a member of the Franc zone, the
country benefits from the stability of the currency, CFA Franc (XAF) which is pegged to Euro at a fix rate. Economic growth is
expected to accelerate over the next five years period, from an official estimate of 4.1% in 2011 to an average of 4.5% in 2012-16,
as the country is in the implementation process of the first phase of its longterm development plan Vision Cameroon 2035.
FOREIGN INVESTMENT REGIME IN CAMEROON
Cameroon‘s government seeks to promote private investments. Private sector is viewed as the main driving force to economic
growth and employment. There is a reform process underway, aiming at improving business environment and attracting more
investments into Cameroon:
• Any person ( being an individual or a moral entity) can undertake business in Cameroon no matter his place of residence.
• Investors are free to hire and lay off
• Investors are free to enter into any contract guaranteeing their commercial and financial interests
• Investors are free to transfer their benifits where ever they want
• Private property is guaranteed
• Investors circulation rights in and out and within country are guaranteed
• Right to open and hold bank accounts in foreign currencies locally.
Investments in Cameroon are protected. The country is member of MIGA and is party to the following conventions:
1. The New York convention on recognition and enforcement of international arbitrage rules
2. Washington convention setting up the International Center for Settlement of Investment Disputes (ICSID).
INVESTMENT CODE IN CAMEROON
Cameroon investment charter was promulgated into law on April 19th 2002, under law N°2002/004. Some changes were made
leading to law N° 2004/020 on 22nd July 2004. This investment charter puts the investor, the private entrepreneur and private
company at the cornerstone of the economic growth. The role of the state is to create an enabling environment allowing
businesses to flourish, innovate and create jobs, environmental protection and ensuring fair and transparent competition.
Two categories of incentives: general and specific
General incentives:
• Promotion: marketing of Cameroon business potential, trade fair organisation, promotion of joint ventures etc.
• Facilitation: mainly assistance in handling process and application leading to investment or business incorporation into Cameroon
• Investment support: technical and financial support to business creation or rehabilitation and export of goods from Cameroon
Specific Incentives:
Specific incentives include business regime, sectorial code and economic zones.
• Business regimes
Business and investors in Cameroon might operate automatically, under a declaration or under an agreement
• Sectorial code:
This are incentives linked to one or more economic activities. There exist actually a mining code, a petroleum code, a gas code, a
power code ( electricity law).
• Economic zone:
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There are set up when and where needed to boost economic growth of an area.
All these incentives are managed by a unique counter and the newly created Investment Promotion Agency located in Douala can
provide more information and support in this regard.
ESTABLISHING A BUSINESS IN CAMEROON
A foreign company may carry on activities in Cameroon in the form of a branch or through an entity incorporated under local laws.
The business law in force in Cameroon since 1st January 1998 results from the OHADA (Organisation for the Harmonisation of
Business Law in Africa) Treaty which was signed in Port Louis – Mauritius on 17 October 2003. The Uniform Act relating to
Commercial Companies and Economic Interest Groups came into force on 1st January 1998. The formation of a company or of a
subsidiary shall be subject to the fulfilment of a certain number of legal requirements, namely:
• submission of the Articles of Association to the commercial court;
• registration with the Trade and Personal Property Credit Register;
• publication of an opening notice in a newspaper empowered to publish legal notices;
• procurement of a taxpayer‘s number;
• declaration of existence to the revenue and registry offices;
• entry into the roll of licences;
• declaration of existence to the National Social Insurance
Fund;
The State is working to bring the whole incorporation process to 3 days from actually 14 days.
CHOICE OF A LEGAL STRUCTURE
FORMS OF BUSINESS ORGANISATION
Forms of business organization are legal forms in which a business enterprise may be organized and operated.
These forms of organization refer to such aspects as ownership, risk bearing, control and distribution of profit.
The most important forms of business organisation are as follows:
– Sole Proprietorship
– Partnership
– Company
– Statutory Bodies and Corporations
– Co-Operatives, Societies and Trusts
– Limited Liability Partnership
Any one of the above mentioned forms may be adopted for establishing a business, but usually one form is more suitable than
other for a particular enterprise. The choice will depend on various factors like the nature of business, the objective, the capital
required, the scale of operations, state control, legal requirements and so on.
CHOICE OF AN APPROPRIATE FORM OF BUSINESS
A business enterprise can be owned and organized in several forms. Each form of organisation has its own merits and demerits.
The ultimate choice of the form of business depends upon the balancing of the advantages and disadvantages of the various forms
of business. The right choice of the form of the business is very crucial because it determines the power, control, risk and
responsibility of the entrepreneur as well as the division of profits and losses. Being a long term commitment, the choice of the form
of business should be made after considerable thought and deliberation. There are a number of factors to be considered while
selecting an appropriate form of business organisation. Let us look into those factors one by one which are inter-related and interdependent as well.
(i) Nature of Business: The selection of a particular form of organisation is dependent upon the nature of business activity.
Businesses providing direct services like tailors, restaurants and professional services like doctors, lawyers are generally organized
as proprietary concerns. While, businesses requiring pooling of skills and funds like accounting firms are better organized as
partnerships. Manufacturing organizations of large size are more commonly set up as private and public companies.
(ii) Volume of Business: If the volume of business or scale of operation is small, a sole proprietorship or partnership form is ideal.
But if the volume of business is on a large scale, company form is the best. Large scale enterprises catering to national and
international markets can be organized more successfully as private or public companies. Small and medium scale firms are
generally set up as partnerships and proprietorship.
(iii) Area of Operation: Where the area of operations is wide spread (national or international), company ownership is appropriate.
But if the area of operations is confined to a particular locality, partnership or proprietorship will be a more suitable choice.
(iv) Finance: Where the initial as well as the working capital required carrying on the business is very large, one has to opt for a
company form. In other cases one can go for any other form.
(v) Ownership and Control: A person, who desires direct control of business, prefers proprietorship, because a company involves
separation of ownership and management.
(vi) Liability: A person who can bear the unlimited liability of business can go for sole proprietorship or partnership form, but if he
does not have the capability to shoulder the burden of unlimited liability, he may opt for either company or co-operative form.
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(vii) Independence: The company or co-operative organizations are subject to strict government regulations. So if the entrepreneur
wants to have a freedom in business with little governmental interference, he has to go for either sole proprietorship or partnership.
SCALE OF BUSINESS
People engaged in business undertake their activities regularly and thereby earn profit. Although, all these businesses have a
common objective of earning profit, they differ from each other with respect to their size, nature, volume of transaction,
management and ownership, etc. Thus, structurally they are different. Broadly business may be classified on basis of size,
functions and ownership. But, when we talk about Scales of business, we in a nutshell refer to size of the business. Micro and
small is well, small; a store or shop or self employed business. Large, on the other hand, would be business with wide coverage.
MNCs, therefore have a coverage beyond one nation. It is a global concept. The world is integrating into one unit with technological
progress and new inventions like internet,etc. making even small firms to operate over a wider geographical area. The good
business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.
Business ranges in size from the single proprietor at one extreme to the large multinational at the other which employs thousands
of people over several countries. The structure of these businesses will be very different and the problems they face will vary as a
result of the differences in size. The size structure of business will depend on many factors range from choice to external factors
which are beyond the control of the firm.
FISCAL ENVIRONMENT
The tax system under ordinary law for companies established in the Republic of Cameroon is codified in the General Tax Code.
The Republic of Cameroon also concluded agreements which aim at avoiding double taxation with the CEMAC member States.
The general tax system for companies established in Cameroon is codified in the General Tax Code.
Corporate Income Tax
According to the provisions of Section 3 of the General Tax Code, the following shall basically be liable to Corporate Income Tax:
• Companies with share capital, cooperative societies, public establishments or bodies with financial autonomy carrying out gainful
activities;
• Partnerships which have opted for Corporate Income Tax. The rate of the Corporate Income Tax applicable shall be 35%.
However, such tax amount shall be increased by 10% as levy for additional council tax on a basis represented by the principal of
the Corporate Income Tax. The overall tax rate thus calculated shall be 38.50%. The amount of tax owed by each company shall
not be lower than a minimum assessed in a percentage of the turnover (minimum tax).The minimum tax rate increased by the
council tax shall be 1.1%. The period of assessment shall be the Cameroon financial year that goes from 1 January to 31
December.
Value Added Tax
This tax came into force in Cameroon on the 1st of January 1999, replacing the turnover tax from which it retained most
mechanisms. The Value Added Tax (VAT) shall be levied on natural persons or legal entities, including authorities and bodies
governed by public law which, usually or occasionally carry out taxable transactions. These persons shall be liable for VAT
regardless of their turnover achieved, their situation in relation to other taxes and the nature or form of their activities. There are
two rates of the VAT:
• General rate: 19.25% including additional council taxes;
• Zero rate: 0%. (For exportation sales).
Income Tax from Stocks Shares
This category includes the following:
• Proceeds from shares, stocks and similar income;
• Income from bonds;
• Income from debts, deposits, guarantees, and current accounts;
• Profit from sale of shares, bonds and other interests in capital.
The rate is 16.50% including additional council taxes.
Special Income Tax
According to the provisions of Section 225 of the General Tax Code, companies established in Cameroon are not concerned by
such taxation. This concerns foreign companies providing for Cameroonian companies‘ needs and the State, the local and regional
authorities as well. Under ordinary law the rate of the Special Income Tax shall be 15%. As for technical assistance expenses paid
to a French company, this rate shall be 7.5% under the provisions of the French-Cameroonian Tax Convention.
Personal Income Tax and Social Security Contributions
Personal Income Tax
Personal Income Tax shall be payable by any natural person who has his/her habitual residence in Cameroon. The Personal
Income Tax shall be assessed by application of the schedule below on the overall net income rounded down to the nearest
thousand of XAF:
Social environment
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The regulations in force relating to the relations between employers and employees in the Republic of Cameroon result from the
law No 92/007 of 14 August 2002 to institute the Labour Code, and from its implementation texts. Several collective agreements
govern in a parallel manner, according to the economic sectors considered, the relations between the employers and their staff.
Among the existing collective agreements, the following may be noted:
• collective agreement on automotive industries and ancillary activities;
• collective agreement on sea carriers, forwarding agents and transport auxiliaries;
• collective agreement on firms involved in road and urban transports;
• collective agreement on hotel industry, restaurants, cafés, public dance-halls;
• collective agreement on public works and building firms;
• collective agreement on polygraphic industries;
• collective agreement on bakeries, pastry and biscuit trades and ancillary activities;
• collective agreement on commerce and trade;
• collective agreement on insurance companies;
• collective agreement on banks;
• collective agreement on pharmaceutics;
• collective agreement on air transports;
• collective agreement on processing and light industries;
• collective agreement on forest firms;
• collective agreement on agricultural firms and related activities.
Our main concern in this brochure is not to deal with the labour law in general, but to specify the employment conditions in
Cameroon of foreign labour as well as the nature of social security contributions due by the employers and the salaried employees.
CONTRACT OF EMPLOYMENT
Subject to some exceptions, the contract of employment in Cameroon shall not necessarily be established in writing. The drawing
up of a written document shall be however advisable in order to avoid any dispute in future. The main mandatory information in the
contract of employment shall be the following:
• Employer‘s name and address;
• Worker‘s surname, given names, date and place of birth, affiliations, habitual residence, nationality and profession;
• Reference to the collective agreement applicable where one exists;
• Nature of contract (fixed-term duration or permanent duration);
• Effective date of recruitment;
• Duration of the notice of termination in case of a permanent contract;
• Nature of the employment occupied, with the description of the worker‘s duties and responsibilities;
• Place of execution of the contract;
• Work category and grade attributed to the worker;
• Amount of the actual salary and in where necessary, methods of assessment and allocation of permanent bonuses, allowances
and benefits in kind granted to the worker;
• In case of need, duration and methods of execution of the trial period;
• Duration of actual service which shall give a right to leaves, as well as the duration of such leaves;
• Employer‘s affiliation number to the National Social Insurance Fund;
• Membership of the worker‘s family;
• Methods of execution of the legal, regulatory or conventional provisions relating to travels and transports;
• Methods of distribution of housing units or of housing allowances provided for by the Labour Code.
Social Insurance
Social security contributions
The rate and basis of social security contributions in force shall be as follows:
Contribution Rate Basis To Be Paid By The Employer
Family benefits
Public plan: 7.00%
Agricultural Plan: 5.65%
Teaching plan: 3.70%
Gross salary plus benefits in kind and Cash benefits, less professional expenses to the extent of the ceiling of 3,600,000 CFA
F/year (or 300,000 CFA F/month) Old age 4.80% Idem
To Be Paid By The Salaried Employee
The basis of social insurance contributions to be paid by the employer, shall be limited to a maximum amount of 300,000 CFA F
per month or 3 600,000 CFA Francs per year.
For the establishment of the contributions for work accidents, firms shall be classified into three groups:
• Group A: low risks (agriculture, commerce and trade, banking, insurance, hotel trade, etc.);
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• Group B: moderate risks (industry, buildings and constructions, transports with the exception of railway transports, etc…);
• Group C: high risks
Social security benefits
The above-mentioned contributions shall be for the purpose of financing the various fields of the National Social Insurance Fund
plan:
• family benefits( prenatal, family, and maternity allowances),
• retirement and disability pensions and benefits,
• Hospitalisation and indemnification in case of work accidents.
THE BANKING AND FINANCIAL SECTOR IN CAMEROON
It is characterized by a great number of commercial banks with 14 institutions presently registered. The bancarization rate is
estimated at less than 5%. Some banks are subsidiaries of French groups: SGBC (Société Générale), BICEC (Groupe Banque
Populaire) and Crédit Agricole SCB (Crédit Agricole) which has been recently sold to a Moroccan group Attijariwafa Bank. Other
banks are of Anglo-Saxon origin : Standard Chartered, Citibank. Most of the other banks are local or regional: Afriland, UBA,
Ecobank, BGFI,UBC, NFC, Banque Atlantique, etc. There are two investment banks: BMCE Capital and EDC Ecobank
Development Corporation ( Ecobank group) . Two Investment Funds: ECP Central Africa -Emerging Capital Partnership and
CENAINVEST ( part of Afriland First Bank Group). There are also two leasing companies: ALIOS Finance and ALC ( part of
Afriland First Bank Group) IFC ( private sector investment arm of the world Bank group) and Proparco ( Private sector investment
arm of French AFD) do have offices in Cameroon, mainly in Douala. Beside the traditional banks and investments funds, there is
also the Douala Stock Exchange DSX, where companies can get access to finance. Actually the Douala Stock Exchange has 03
companies and bonds compartment included the IFC ( International Finance Corporation of the World Bank Group) and Cameroon
State 200 Billion XAF bonds. Additional incentives were put in place to encourage companies to use the DSX .
Formalities for opening an account
Opening an account in a bank is quite easy. For a company which is being set up: it is important to present a copy of the project of
memorandum of association and statues as well as copies of identity papers of main executive members.
For a company that has already been created, the following documents must be presented :
• Copy of a memorandum and articles of association;
• Copy of business license
• Copy of tax payer‘s card
• Copy of certificate of incorporation
• Copy of identity of signatories and trustee
• Copy of powers of managers authenticated by notary
• Official journal publication extract
As well as account opening documents and signature sheet completed. Once all of these documents are presented, opening
usually takes 24 hours. Except express and nominal derogation granted by the Ministry of Finance, Cameroonian residents can
only have account in FCFA. In case an account is opened abroad, exchange regulations compel to a transfer of funds in foreign
currency held abroad within a limit of 30 days.
Importing goods into Cameroon
Government is taking measures to reduce the transit time of containers in the Douala port. Actually on import operation, lead time
is 7 days and 3 days on export operation. It‘s quite sure that, with the new Kribi deap sea port, the lead time would be quite
different and more close to international standards. Kribi is expected to be operational by end of 2014. Freight transport cost is
around 0,13 USD / Ton / kilometer.
Business and Investors support network:
Various institutions in Cameroon are involved in providing support to business:
EITI- Extractive Industry Transparency Initiative-Cameroon Branch. Cameroon has became a member of ITEI process since 2005
during the London conference. It‘s status is still a candidate country and local ITEI committee and is working hard to become a
compliant member.
STARTING (REGISTERING) A BUSINESS IN CAMEROON
Starting a business in Cameroon takes approximately 34 days as compared to about 46 days for the Sub-Saharan Africa
region. This piece outlines the general technical procedures for starting a business in Cameroon, according to the
Doingbusiness.org database by the World Bank. It includes details and requirements to be in good standing with all relevant
agencies beyond the company registrar like social security agencies.
Use this as a guide while you complete the process and consult with agents carrying out work on your behalf. Additional notes
may be found here.
Technical Procedures
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The steps involved in starting a business [Limited Liability Company, Societe a Responsabilite Limite (SARL)] in Cameroon are:
1. Have a notary public verify and reserve the proposed company name by filing a motion with the African Intellectual
Property Organization‘s office in Yaounde.
2. Deposit the initial capital in a bank and obtain a receipt.
3. Present the physical location plan to the tax department and obtain an attestation of businesses premises.
4. Have an attorney/notary public draft the memorandum and articles of association.
5. Sign company bylaws before a notary public.
6. Have the signed bylaws duly registered with the Registration and Stamp Duty Office of the Department of Taxation.
7. File an application to the Registrar of Companies in the court of the first instance.
8. Publish the incorporation of the company in the legal journal (Cameroun Tribune).
9. Obtain a taxpayer card with the Inspectorate in the area where the enterprise is located.
10. Declare the existence of the company before the authorities in charge of the industry.
11. Declare the existence of the company to the local office of the Department of Labor.
12. Register workers with health administration.
13. Declare the existence of the company and personnel employed before the National Social Insurance Fund (Caisse
Nationale de Prevoyance Social NSIF/CNPS).
Note: Just before you begin the process to start a business, confirm details with knowledgeable entities. Policies and procedures
may alter between the time of this publication and when you start the process. The World Bank provides a list of local partners that
helped collect and document business-related procedures
.
KEEPING WEALTH IN THE FAMILY
CREATING A FAMILY LEGACY
For most wealthy families, preserving and enhancing their wealth, and leaving a legacy to future generations are primary goals.
Though you may not think of your family as a multi-generational enterprise, you probably have hopes and dreams for your children
and grandchildren. Through a strong sense of shared purpose and careful stewardship of wealth, you can help ensure that your
family legacy continues long after you‘re gone. However, there are many threats to the preservation of wealth and its transfer to the
next generation. Nearly every culture in the world has a proverb about the creation and dissipation of wealth between generations:
The reasons behind this phenomenon are complex and vary between families, but reasons include high estate and tax burdens;
unmotivated or ill-prepared heirs; conflicts and fragmentation among members of future generations; poor financial management;
and changes in business environments. We developed this paper to help affluent families successfully create a family legacy for A
family‘s wealth can be thought of in three different ways:ii
Its human capital, which is made up of all the members of the family.
Its intellectual capital, which is the knowledge, skills, values, and dreams of those members.
Its financial capital, the physical and financial assets that the family owns.
MANAGE WEALTH FOR THE FUTURE
Discuss ideas about the family‘s identity, values, and priorities for the future with your family. Ask each family member to create a
list of important actions and events in family history and what they wish to be remembered for Craft a family mission statement that
explicitly states your shared family purpose and direction. Think about how your mission and purpose affect your legacy and
philanthropic goals. Meet with family office advisors to discuss supporting your mission statement through wealth management,
philanthropic planning, and other areas. dropped from the list because of death, large philanthropic gifts, or the dilution of their
estate among many family members.
However, an alarming number drained their wealth through issues like over-spending, too much leverage, family discord, and
taxes. Another issue that many wealthy families face is the problem of over-concentration of family assets within a business or
industry. It‘s very common for entrepreneurial founders who have built their wealth through a deep understanding of business to
want to keep their assets within an area that they understand well. However, this can leave your family‘s wealth at risk of
unexpected events.
There are also business advantages to separating family capital. When too much family wealth is invested in a business, it can
promote excessive risk aversion and hamper growth. Diversification at a family level can simplify transfers of control and liquidity
events by avoiding the need for family members to take money out of the business.
A proper diversification strategy can also help reduce market risk after key liquidity events. One of the biggest threats to your
family‘s financial future can occur after a successful business exit. Businesses are most commonly sold during bull markets, when
buyers have liquidity and a greater willingness to take risks. After a liquidity event, family members may find themselves with a
large fortune and will be looking for opportunities to invest.
To paraphrase Gregory Curtis, author of the well-regarded book The Stewardship of Wealth, the best way to avoid losing your
fortune is to avoid jumping into markets with both feet. Our experience suggests that a prudent long-term plan, driven by a shared
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family mission, well-conceived wealth objectives, and a holistic view of your total financial picture yield better outcomes over the
long-term.
ACTIONS YOU CAN TAKE NOW
Preparing your children for the weight and responsibility of managing family wealth helps reduce the risk of dissipation and
mismanagement. Starting the process early helps ensure that your children grow up with the right attitude towards money and the
tools they need to protect themselves.
We believe that one of the best values you can teach the next generation is the concept of stewardship. By teaching your children
and grandchildren about the value of money, the history behind your family‘s wealth, and how your family chooses to spend
money, you help them understand the importance of developing good financial habits. In our experience, many heirs are illprepared for managing financial affairs. Comprehensive financial education is a key best practice for enduring families. Education
should be a key piece of your legacy because it promotes responsible wealth management, engagement, and greater appreciation
for family wealth and the opportunities it provides. We advise viewing education not as a single event, but as a lifelong journey.
Another important aspect of preparing your children for the future is helping them discover their own path in life. It‘s very common
for affluent parents to want their children to have deeply held beliefs about what their children should do with their lives. However,
by empowering your heirs to choose their own destiny, and supporting their search for happiness, you create a powerful legacy of
freedom and individual responsibility that will yield dividends later in life.
THE EXIT
Most firms are born to stagnate or die – not to grow to any size. There are three sorts of exit:
● Cessation of trade – where the business just winds up without creditors being owed any money. Most exits are of this form.
● Failure – which involves liquidation of insolvent companies and personal bankruptcy.
● Harvest – which involves selling the business on as a going concern.
In the USA investors see failure as part of the entrepreneurial learning process. However, in the UK, it is not always viewed in
the same way and can cause entrepreneurs problems when it comes to raising cash for future ventures. The main factors
influencing the statistical likelihood of failure are age and size of business, past growth and sector. The main managerial causes of
failure involve poor management (accounting, marketing, financing and other factors), behavioural characteristics of the ownermanager and external factors. Companies like The Good Book Guide may face difficulties outside their control but it does not
necessarily lead to failure. The recipe for failure involves a coincidence of four factors which interact like a complex chemical
reaction. These are:
● Entrepreneurial character – particularly ‗control freak‘ behaviour, delusional behaviour and the need for achievement;
● Business decisions – such as inability to delegate or the `big project';
● Company weaknesses – accounting controls and overdependence on a small number of customers are common. As with
Imperial Board Products, lack of adequate finance is another common problem;
● External environment – for example, Porter's Five Forces measures the degree of competition in the industry.
Many weaknesses stem from bad business decisions, which in turn may stem from some inherent character traits of the
entrepreneur. Often events in the external environment trigger the chemical reaction that causes the decline into failure. Luck plays
a part but, it is not always clear what is luck or bad judgement.
The harvest involves selling the business as a going concern either to a trade buyer, a management buy-out or management
buy-in. This needs careful planning and professional advice. Another option to raise liquidity may be ‗going public‘, but the
entrepreneur will find it difficult to exit in the short term. What is more, the Stock Market can exert strong short-term pressures that
constrain the actions of management.
Company valuation is not a science. It depends on what a buyer is willing to pay, and therefore how important the purchase is to
them. There are two commonly used methods of valuation – market value of assets and a multiple of profit. Multiples depend on
the quality of earnings, the quality of management, the industry sector and the general economic climate. Few private companies
command a multiple into double figures. The never ending cycle of start-up and exit is part of the dynamic of the small-firm sector
that shows it is responding to the changing demands of the market place. However, behind every exit there is a personal story.
Small firms have three distinguishing characteristics – the uncertain, risky environment they operate in and the central influence
of the entrepreneurs and their families. Their approach to this environment is opportunity-driven, innovative, involving short-term
incremental decisions and strategies that are flexible, adaptive and emerge from previous action. Ultimately they are concerned
about the personal implications of failure. Their approach to management is hands-on, informal and relationship-based. They are
adept at handling risk, uncertainty and ambiguity and good at resolving conflict. They develop networks and are good at
relationship marketing.
OHADA LAW
OHADA is a system of business and implementing institutions adopted by sixteen West and Central African nations. OHADA is
the French acronym for "Organisation pour l'Harmonisation en Afrique du Droit des Affaires," or English, "Organization for the
Harmonization of Business Law in Africa.‖ The objective of the project is to improve the quality and effectiveness of the OHADA
legal and institutional framework, and help the 16 countries become more attractive destinations for domestic and foreign private
investment. The primary function of the Organization for the Harmonization of Business Law in Africa (OHADA) is to modernize
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and harmonize the business laws of member states. The wider objective of OHADA is to attract foreign investment into the OHADA
zone and to achieve economic integration in Africa as whole, as other African countries join OHADA. More specifically, the project
will bring about seven improved regional laws in the next three years: General Commercial law, Secured Transactions law,
Company law and Insolvency law, Debt Recovery law, Arbitration law, and the Law on the Transport of goods by road. In addition,
the project supports the modernization (including computerization) of the OHADA registries for companies and secured
transactions.
CHAPTER SUMMARY
Entrepreneurship is defined as the process of making money, earning profits and increasing the wealth while posing
characteristics such as risk taking, management, leadership and innovation. The term Entrepreneurship is a complicated term and
gives various meaning depending on the situation. The concept of entrepreneurship was first established in the 1700s, and the
meaning has evolved ever since. The entrepreneurial motivation is one of the most important factors which accelerate the pace of
economic development by bringing the people to undertake risk bearing activities.
Four Key Elements of Entrepreneurship:
•Innovation •Risk taking •Vision •Organising skills
One who undertakes an endeavour is an Entrepreneur. Most successful entrepreneurs share certain personal attributes, including:
creativity, dedication, determination, flexibility, leadership, passion, self-confidence, and smarts. What leads a person to strike out
on his own and start a business:
•Doing What You Love •Independence and Freedom •Recognition and Self Fulfilment •Income Potential and getting rich
•Own Boss •Innovation
Each entrepreneur personality type can succeed in the business environment if it is true to character. Identifying strong traits is
essential and can act as a compass for the business. The terms Entrepreneur and Manager are considered same; but these have
different meanings altogether. These cannot be used interchangeably. Intrapreneurship is a combination of entrepreneurship and
management skills. Intrapreneurship is the practice of entrepreneurship by employees within an organization. No entrepreneur or
enterprise, however successful and big, can continue to hold a place of leadership unless it recognizes that modern business
operates in a world of galloping change which creates new problems, risk and opportunities and for which they have to mobilize the
enterprise‘s resources before changes make their impact felt. Creativity is marked by the ability to create, bring into existence, to
invent into a new form, to produce through imaginative skill, to make to bring into existence something new.
– Within every individual, creativity is a function of three components:
•Expertise •Creative Thinking Skills •Motivation
– Expertise encompasses everything that a person knows and can do in the broad domain of his or her work- knowledge and
technical ability. Creative thinking refers to how you approach problems and solutions- the capacity to put existing ideas together in
new combinations. Motivation is the drive and desire to do something, an inner passion and interest. Innovation is the process of
bringing the best ideas into reality, which triggers a creative idea, which generates a series of innovative events. Joseph
Schumpeter believes that the concept of innovation is process of ―creative destructions.‖ Innovation requires a fresh way of looking
at things, an understanding of people, and an entrepreneurial willingness to take risks and to work hard. Steve Jobs has given 7
principles largely responsible for success through innovation. Entrepreneurship is, therefore, the innovatory process involved in the
creation of an economic enterprise based on a new product or service which differs significantly from products or services offered
by other suppliers in content or in the way its production is organized nor in its marketing. Environmental scanning is a concept
from business management by which businesses gather information from the environment, to better achieve a sustainable
competitive advantage.
REVIEW QUESTIONS
 What are the important elements for an entrepreneurial venture?
 Explore the nature of strategic planning.
 What are the key dimensions that influence a firm‘s planning process.
 Before starting a small business, individuals need to ensure that they have certain essential characteristics. Discuss the
personal characteristics that are required from an entrepreneur to ensure their success
 What do you understand by the term ―Small Business‖?
 In identifying business opportunities, a study of the population is very important. What aspects of a population do you think
are very important to the entrepreneur?
 What are the key elements of a business plan?
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CHAPTER THREE
PRINCIPLES OF MANAGEMENT
LEARNING OBJECTIVES
The objectives of this lesson are to enable to define management; to describe the nature and scope of management; to know
the difference between management and administration; to understand various levels of management; and to describe the various
skills that are necessary for successful managers. At the end of this chapter , you should be able to:
 To introduce the concept and definitions of management.
 Present the characteristics of management.
 Understand the functions of management.
 Understand the functional areas of management.
 Distinguish administration and management.
 Introduce the role of management.
 Present the levels of management.
 Trace the development of management thought.
INTRODUCTION
Students ―manage‖ their studies; Parents ―manage‖ a family; and, Business Tycoons ―manage‖ their Businesses. Unlike these
familiar uses of this word, ―management‖ in this part is about understanding of the various management concepts. Management
textbooks since long have tended to obscure the ―wealth creation‖ aspect of management by focusing narrowly on what managers
do: planning, organizing, directing, coordination, and controlling or emphasizing its social character: ―the function of getting things
done through others‖ (Harold Koontz and Cyril O‘Donnell).
What these definitions fail to capture is that the concept of ―management‖ develops with the modern business organisations and
that it is a unique and a specific idea. As Peter Drucker has observed, management is universally popular as a discipline to study.
Management as a profession has expanded its impact beyond business into non-profit and government organizations as well.
Simply put, management has been responsible for developing new businesses and for building global firms. Management has
been the instrument for wealth creation of great nations. The economic environment around us consists of three basic entities –
Households (the consumers), Firms (the producers) and Government (the co-coordinator). In the present-day society, every
household engages into some or the other economic activity in a firm to earn a livelihood in order to attain the ultimate objective ‗satisfaction of human wants‘. Households and firms are inter-related as:• households provide their service to firms and get paid for the same in the forms of wages/salaries, whereas,
• firms provide goods and services to the household and get paid in the form of prices.
This mutual give-n-take becomes a complex phenomenon if there is no one to overlook the activities of these entities. To be
effective with minimum adverse consequences, it is essential that group efforts are properly organized, directed and coordinated,
i.e., there is a need for management. This role is played by the third entity – the government.
The word ―management‖ derives its origin from a Greek word ‗nomos‘ which means ‗management‘. It is concerned with human
beings whose behavior is highly unpredictable. Ever since people began forming groups to achieve individual goals, management
has been the essence coordinating the individual efforts. It denotes not only a function but also the people who discharge it. A
group of people, who accept the responsibility to run an organization and direct its activities, form the management of the
organization. It denotes not only a special position and rank but also a discipline and field of study. It is the management that
provides planning, organization and direction which are necessary for business operations. In a more important sense,
management is a vital function concerned with all aspects of the working of an enterprise. Management, in this sense, may be
defined as the art of getting things done.
A business develops in course of time with complexities. With increasing complexities managing the business has become a
difficult task. The need of existence of management has increased tremendously. Management is essential not only for business
concerns but also for banks, schools, colleges, hospitals, hotels, religious bodies, charitable trusts etc. Every business unit has
some objectives of its own. These objectives can be achieved with the coordinated efforts of several personnel. The work of a
number of persons are properly co-ordinated to achieve the objectives through the process of management is not a matter of
pressing a button, pulling a lever, issuing orders, scanning profit and loss statements, promulgating rules and regulations. Rather it
is the power to determine what shall happen to the personalities and happiness of entire people, the power to shape the destiny of
a nation and of all the nations which make up the world." Peter F. Drucker has stated in his famous book "The Practice of
Management" that, "the emergence of management as an essential, a distinct and leading social institution is a pivotal event in
social history. Rarely in human history has a new institution proved indispensable so quickly and even less often as a new
institution arrived with so little opposition, so little disturbance and so little controversy?"
Management is a vital aspect of the economic life of man, which is an organised group activity. It is considered as the
indispensable institution in the modern social organization marked by scientific thought and technological innovations. One or the
other form of management is essential wherever human efforts are to be undertaken collectively to satisfy wants through some
productive activity, occupation or profession.
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It is management that regulates man's productive activities through coordinated use of material resources. Without the leadership
provided by management, the resources of production remain resources and never become production.
Management is the integrating force in all organized activity. Whenever two or more people work together to attain a common
objective, they have to coordinate their activities. They also have to organize and utilize their resources in such a way as to
optimize the results. Not only in business
enterprises where costs and revenues can be ascertained accurately and objectively but also in service organizations such as
government, hospitals, schools, clubs, etc., scarce resources including men, machines, materials and money have to be integrated
in a productive relationship, and utilized efficiently towards the achievement of their gals. Thus, management is not unique to
business organizations but common to all kinds of social organizations.
Management has achieved an enviable importance in recent times. We are all intimately associated with many kinds of
organizations, the most omnipresent being the government, the school and the hospital. In fact, more and more of major social
tasks are being organized on an institution basis. Medical care, education, recreation, irrigation, lighting, sanitation, etc., which
typically used to be the concern of the individual or the family, are now the domain of large organizations. Although, organizations
other than business do not speak of management, they all need management. It is the specific organ of all kinds of organizations
since they all need to utilize their limited resources most efficiently and effectively for the achievement of their goals. It is the most
vital forces in the successful performance of all kinds of organized social activities.
Importance of management for the development of underdeveloped economies has been recognized during the last one and a half
decade. There is a significant gap between the management effectiveness in developed and underdeveloped countries. It is rightly
held that development is the function not only of capital, physical and material resources, but also of their optimum utilization.
Effective management can produce not only more outputs of goods and services with given resources, but also expand them
through better use of science and technology. A higher rate of economic growth can be attained in our country through more
efficient and effective management of our business and other social organizations, even with existing physical and financial
resources. That is why it is now being increasingly recognized that underdeveloped countries are indeed somewhat inadequately
managed countries.
The emergence of management in modern times may be regarded as a significant development as the advancement of modern
technology. It has made possible organization of economic activity in giant organizations like the Steel Authority of India and the
Life Insurance Corporation of India. It is largely through the achievements of modern management that western countries have
reached the stage of mass consumption societies, and it is largely through more effective management of our economic and social
institutions that we can improve the quality of life of our people. It is the achievements of business management that hold the hope
for the huge masses in the third world countries that they can banish poverty and achieve for themselves decent standards of
living.
DEFINITION OF MANAGEMENT
Although management as a discipline is more than 100 years old, there is no common agreement among its experts and
practitioners about its precise definition. In fact, this is so in case of all social sciences like psychology, sociology, anthropology,
economics, political science etc. As a result of unprecedented and breath-taking technological developments, business
organizations have grown in size and complexity, causing consequential changes in the practice of management. Changes in
management styles and practices have led to changes in management thought. Moreover, management being interdisciplinary in
nature has undergone changes because of the developments in behavioural sciences, quantitative techniques, engineering and
technology, etc. Since it deals with the production and distribution of goods and services, dynamism of its environments such as
social, cultural and religious values, consumers' tastes and preferences, education and information explosion, democratization of
governments, etc., have also led to changes in its theory and practice. Yet, a definition of management is necessary for its teaching
and research, and also for improvement in its practice.
Many management experts have tried to define management. But, no definition of management has been universally accepted. Let
us discuss some of the leading definitions of management:
Peter F. Drucker defines, "management is an organ; organs can be described and defined only through their functions".
According to Terry, "Management is not people; it is an activity like walking, reading, swimming or running. People who perform
Management can be designated as members, members of Management or executive leaders."
Ralph C. Davis has defined Management as, "Management is the function of executive leadership anywhere."
According to Mc Farland, "Management is defined for conceptual, theoretical and analytical purposes as that process by which
managers create, direct, maintain and operate purposive organization through systematic, co-ordinated co-operative human effort."
Henry Fayol, "To manage is to forecast and plan, to organize, to compound, to co-ordinate and to control."
Harold Koontz says, "Management is the art of getting things done through and within formally organized group."
William Spriegal, "Management is that function of an enterprise which concerns itself with direction and control of the various
activities to attain business objectives. Management is essentially an executive function; it deals with the active direction of the
human effort."
Kimball and Kimball, "Management embraces all duties and functions that pertain to the initiation of an enterprise, its financing, the
establishment of all major policies, the provision of all necessary equipment, the outlining of the general form of organization under
which the enterprise is to operate and the selection of the principal officers."
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Sir Charles Reynold, "Management is the process of getting things done through the agency of a community. The functions of
management are the handling of community with a view of fulfilling the purposes for which it exists."
E.F.L. Brech, "Management is concerned with seeing that the job gets done, its tasks all centre on planning and guiding the
operations that are going on in the enterprise."
Koontz and O'Donnel, "Management is the creation and maintenance of an internal environment in an enterprise where individuals,
working in groups, can perform efficiently and effectively toward the attainment of group goals. It is the art of getting the work done
through and with people in formally organized groups."
James Lundy, "Management is principally a task of planning, coordinating, motivating and controlling the efforts of other towards a
specific objective. It involves the combining of the traditional factors of production land, labour, capital in an optimum manner,
paying due attention, of course, to the particular goals of the organization."
Wheeler, "Management is centered in the administrators or managers of the firm who integrate men, material and money into an
effective operating limit."
J.N. Schulze, "Management is the force which leads guides and directs an organization in the accomplishment of a pre-determined
object."
Oliver Scheldon, "Management proper is the function in industry concerned in the execution of policy, within the limits set up by the
administration and the employment of the organization for the particular objectives set before it."
Keith and Gubellini, "Management is the force that integrates men and physical plant into an effective operating unit."
Newman, Summer and Warren, "The job of Management is to make co-operative endeavour to function properly. A manager is
one who gets things done by working with people and other resources in order to reach an objective."
G.E. Milward, "Management is the process and the agency through which the execution of policy is planned and supervised."
Ordway Tead, "Management is the process and agency which directs and guides the operations of an organization in the realizing
of established aims."
Mary Parker Follett defines management as the "art of getting things done through people". This definition calls attention to the
fundamental difference between a manager and other personnel of an organization. A manager is one who contributes to the
organization‘s goals indirectly by directing the efforts of others – not by performing the task himself. On the other hand, a person
who is not a manager makes his contribution to the organization‘s goals directly by performing the task himself.
Sometimes, however, a person in an organization may play both these roles simultaneously. For example, a sales manager is
performing a managerial role when he is directing his sales force to meet the organization‘s goals, but when he himself is
contacting a large customer and negotiating a deal, he is performing a non-managerial role. In the former role, he is directing the
efforts of others and is contributing to the organization‘s goals indirectly; in the latter role, he is directly utilizing his skills as a
salesman to meet the organization‘s objectives.
A somewhat more elaborate definition of management is given by George R. Terry. He defines management as a process
"consisting of planning, organizing, actuating and controlling, performed to determine and accomplish the objectives by the use of
people and other resources".
According to this definition, management is a process – a systematic way of doing things. The four management activities included
in this process are: planning, organizing, actuating and controlling. Planning means that managers think of their actions in advance.
Organizing means that managers coordinate the human and material resources of the organization.
Actuating means that managers motivate and direct subordinates. Controlling means that managers attempt to ensure that there is
no deviation from the norm or plan. If some part of their organization is on the wrong track, managers take action to remedy the
situation.
To conclude, we can say that various definitions of management do not run contrary to one another. Management is the sum-total
of all those activities that (i) determine objectives, plans, policies and programmes; (ii) secure men, material, machinery cheaply (iii)
put all these resources into operations through sound organization (iv) direct and motivate the men at work, (v) supervises and
control their performance and (iv) provide maximum prosperity and happiness for both employer and employees and public at
large.
LEVELS OF MANAGEMENT
An enterprise may have different levels of management. Levels of management refer to a line of demarcation between various
managerial positions in an enterprise. The levels of management depend upon its size, technical facilities, and the range of
production. We generally come across two broad levels of management, viz. (i) administrative management (i.e., the upper level of
management) and (ii) operating management (i.e., the lower level of management). Administrative management is concerned with
"thinking" functions such as laying down policy, planning and setting up of standards. Operative management is concerned with the
"doing" function such as implementation of policies, and directing the operations to attain the objectives of the enterprise. But in
actual practice, it is difficult to draw any clear cut demarcation between thinking function and doing function. Because the
basic/fundamental managerial functions are performed by all managers irrespective of their levels or, ranks. For instance, wage
and salary director of a company may assist in fixing wages and salary structure as a member of the Board of Directors, but as
head of wages and salary department, his job is to see that the decisions are implemented. The real significance of levels is that
they explain authority relationships in an organization. Considering the hierarchy of authority and responsibility, one can identify
three levels of management namely:
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(i) Top management of a company consists of owners/shareholders, Board of Directors, its Chairman, Managing Director, or the
Chief Executive, or the General Manager or Executive Committee having key officers.
(ii) Middle management of a company consists of heads of functional departments viz. Purchase Manager, Production Manager,
Marketing Manager, Financial controller, etc. and Divisional and Sectional Officers working under these Functional Heads.
(iii) Lower level or operative management of a company consists of Superintendents, Foremen, Supervisors, etc.
1. Top management : Top management is the ultimate source of authority and it lays down goals, policies and plans for the
enterprise. It devotes more time on planning and coordinating functions. It is accountable to the owners of the business of the
overall management. It is also described as the policy making group responsible for the overall direction and success of all
company activities. The important functions of top management include :
(a) To establish the objectives or goals of the enterprise.
(b) To make policies and frame plans to attain the objectives laid.
(c) To set up an organizational frame work to conduct the operations as per plans.
(d) To assemble the resources of money, men, materials, machines and methods to put the plans into action.
(e) To exercise effective control of the operations.
(f) To provide overall leadership to the enterprise.
2. Middle management : The job of middle management is to implement the policies and plans framed by the top management. It
serves as an essential link between the top management and the lower level or operative management. They are responsible to
the top management for the functioning of their departments. They devote more time on the organization and motivation functions
of management. They provide the guidance and the structure for a purposeful enterprise. Without them the top management's
plans and ambitious expectations will not be fruitfully realized. The following are the main functions of middle management :
(a) To interpret the policies chalked out by top management.
(b) To prepare the organizational set up in their own departments for fulfilling the objectives implied in various business policies.
(c) To recruit and select suitable operative and supervisory staff.
(d) To assign activities, duties and responsibilities for timely implementation of the plans.
(e) To compile all the instructions and issue them to supervisor under their control.
(f) To motivate personnel to attain higher productivity and to reward them properly.
(g) To cooperate with the other departments for ensuring a smooth functioning of the entire organization.
(h) To collect reports and information on performance in their departments.
(i) To report to top management
(j) To make suitable recommendations to the top management for the better execution of plans and policies.
3. Lower or operative management: It is placed at the bottom of the hierarchy of management, and actual operations are the
responsibility of this level of management. It consists of foreman, supervisors, sales officers, accounts officers and so on. They are
in direct touch with the rank and file or workers. Their authority and responsibility is limited. They pass on the instructions of the
middle management to workers. They interpret and divide the plans of the management into short-range operating plans. They are
also involved in the process of decisions-making. They have to get the work done through the workers. They allot various jobs to
the workers, evaluate their performance and report to the middle level management. They are more concerned with direction and
control functions of management. They devote more time in the supervision of the workers.
NATURE OF MANAGEMENT
Management has been conceptualized earlier in this Chapter , as the social process by which managers of an enterprise integrate
and coordinate its resources for the achievement of common, explicit goals. It has developed into a body of knowledge and a
separate identifiable discipline during the past six decades. Practice of management as an art is, of course, as old as the organized
human effort for the achievement of common goals. Management has also acquired several characteristics of profession during
recent times. Large and medium-sized enterprise in India and elsewhere are managed by professional managers – managers who
have little or no share in the ownership of the enterprise and look upon management as a career.
The nature of management as a science, as art and as a profession is discussed below :
Management as a Science : Development of management as a science is of recent origin, even though its practice is ages old.
Fredrick W. Taylor was the first manager-theorist who made significant contributions to the development of management as a
science. He used the scientific methods of analysis, observation and experimentation in the management of production function. A
perceptive manager, as he was, he distilled certain fundamental principles and propounded the theory and principles of scientific
management. His work was followed by many others including Gantt, Emerson, Fayol, Barnard, etc. During the last few decades,
great strides have been made in the development of management as a systematized body of knowledge which can be learnt,
taught and researched. It has also provided powerful tools of analysis, prediction and control to practicing managers. The scientific
character of management has been particularly strengthened by management scientists who have developed mathematical
models of decision making.
Another characteristic of science in management is that it uses the scientific methods of observation, experimentation and
laboratory research. Management principles are firmly based on observed phenomena, and systematic classification and analysis
of data. These analyses and study of observed phenomena are used for inferring cause-effect relationships between two or more
variables. Generalizations about these relationships result in hypotheses. The hypotheses when tested and found to be true are
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called principles. These principles when applied to practical situations help the practitioner in describing and analyzing problems,
solving problems and predicting the results.
Even though management is a science so far as to possess a systematized body of knowledge and uses scientific methods of
research, it is not an exact science like natural sciences. This is simply because management is a social science, and deals with
the behaviour of people in organization. Behaviour of people is much more complex and variable than the behaviour of inanimate
things such as light or heat. This makes controlled experiments very difficult. As a result, management principles lack the rigour
and exactitude which is found in physics and chemistry. In fact, many natural sciences which deal with living phenomena such as
botany and medicine are also not exact. Management is a social science like economics or psychology, and has the same
limitations which these and other social sciences have. But this does not in any way diminish the value of management as a
knowledge and discipline. It has provided powerful tools of analysis, prediction and control to practicing managers and helped them
in performing their material tasks more efficiently and effectively.
Management as an art : Just as an engineer uses the science of engineering while building a bridge, a manager uses the
knowledge of management theory while performing his managerial functions. Engineering is a science; its application to the
solution of practical problems is an art. Similarly, management as a body of knowledge and a discipline is a science; its application
to the solution of organizational problems is an art. The practice of management, like the practice of medicine, is firmly grounded in
an identifiable body of concepts, theories and principles. A medical practitioner, who does not base his diagnosis and prescription
on the science of medicine, endangers the life of his patient. Similarly, a manager who manages without possessing the knowledge
of management creates chaos and jeopardizes the well-being of his organization.
Principles of management like the principles of medicine are used by the practitioner not as rules of thumb but as guides in solving
practical problems. It is often said that managerial decision making involves a large element of judgement. This is true too. The
raging controversy whether management is a science or an art is fruitless. It is a science as well as an art. Developments in the
field of the knowledge of management help in the improvement of its practice; and improvements in the practice of management
spur further research and study resulting in further development of management science.
Management as a Profession : We often hear of professionalisation of management in our country. By a professional manager,
we generally mean a manager who undertakes management as a career and is not interested in acquiring ownership share in the
enterprise which he manages. But, is management a profession in the true sense of the word? or, is management a profession like
the professions of law and medicine? According to McFarland a profession possess the following characteristics : (i) a body of
principles, techniques, skills, and specialized knowledge; (ii) formalized methods of acquiring training and experience; (iii) the
establishment of a representative organization with professionalisation as its goal; (iv) the formation of ethical codes for the
guidance of conduct; and (v) the charging of fees based on the nature of services.
Management is a profession to the extent it fulfils the above conditions. It is a profession in the sense that there is a systematized
body of management, and it is distinct, identifiable discipline. It has also developed a vast number of tools and techniques. But
unlike medicine or law, a management degree is not a prerequisite to become a manager. In fact, most managers in India as
elsewhere do not have a formal management education. It seems reasonable to assume that at no time in the near future, the
possession of a management degree will be a requirement for employment as a career manager.
Management is also a profession in the sense that formalized methods of training is available to those who desire to be managers.
We have a number of institutes of management and university departments of management which provide formal education in this
field. Training facilities are provided in most companies by their training divisions. A number of organizations such as the
Administrative Staff College of India, the Indian Institutes of Management, Management Development Institute, the All India
Management Association, and the university departments of management offer a variety of short-term management training
programmes.
Management partially fulfils the third characteristic of profession. There are a number of representative organizations of
management practitioners almost in all countries such as the All India Management Association in India, the American
Management Association in U.S.A., etc. However, none of them have professionalisation of management as its goal.
Management does not fulfill the last two requirements of a profession. There is no ethical code of conduct for managers as for
doctors and lawyers. Some individual business organizations, however, try to develop a code of conduct for their own managers
but there is no general and uniform code of conduct for all managers. In fact, bribing public officials to gain favours, sabotaging
trade unions, manipulating prices and markets are by no means uncommon management practices. Furthermore, managers in
general do not seem to adhere to the principle of "service above self". However little regard is paid to the elevation of service over
the desire for monetary compensation is evidenced by switching of jobs by managers. Indeed, such mobile managers are regarded
as more progressive and modern than others.
It may be concluded from the above discussion that management is a science, an art as well as a profession. As a social science,
management is not as exact as natural sciences, and it is not as fully a profession as medicine and law.
MANAGEMENT VS. ADMINISTRATION
The use of two terms management and administration has been a controversial issue in the management literature. Some writers
do not see any difference between the two terms, while others maintain that administration and management are two different
functions. Those who held management and administration distinct include Oliver Sheldon, Florence and Tead, Spriegel and
Lansburg, etc. According to them, management is a lower-level function and is concerned primarily with the execution of policies
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laid down by administration. But some English authors like Brech are of the opinion that management is a wider term including
administration. This controversy is discussed as under in three heads:
(i) Administration is concerned with the determination of policies and management with the implementation of policies. Thus,
administration is a higher level function.
(ii) Management is a generic term and includes administration.
(iii) There is no distinction between the terms management and administration and they are used interchangeably.
(i) Administration is a Higher Level Function : Oliver Shelden subscribed to the first viewpoint. According to him, "Administration
is concerned with the determination of corporate policy, the coordination of finance, production and distribution, the settlement of
the compass of the organization and the ultimate control of the executive. Management proper is concerned with the execution of
policy within the limits set up by administration and the employment of the organization in the particular objects before it...
Administration determines the organization; management uses it. Administration defines the goals; management strives towards it".
Administration refers to policy-making whereas management refers to execution of policies laid down by administration. This view
is held by Tead, Spriegel and Walter. Administration is the phase of business enterprise that concerns itself with the overall
determination of institutional objectives and the policies unnecessary to be followed in achieving those objectives. Administration is
a determinative function; on the other hand, management is an executive function which is primarily concerned with carrying out of
the broad policies laid down by the administration.
(ii) Management is a Generic Term : The second viewpoint regards management as a generic term including administration.
According to Brech, "Management is a social process entailing responsibility for the effective and economic planning and regulation
of the operation of an enterprise in fulfillment of a given purpose or task. Administration is that part of management which is
concerned with the installation and carrying out of the procedures by which the programme is laid down and communicated and the
progress of activities is regulated and checked against plans". Thus, Brech conceives administration as a part of management.
Kimball and Kimball also subscribe to this view. According to them administration is a part of management. Administration is
concerned with the actual work of executing or carrying out the objectives.
(iii) Management and Administration are Synonymous: The third viewpoint is that there is no distinction between the terms
'management' and 'administration'. Usage also provides no distinction between these terms. The term management is used for
higher executive functions like determination of policies, planning, organizing, directing and controlling in the business circles, while
the term administration is used for the same set of functions in the Government circles. So there is no difference between these
two terms and they are often used interchangeably.
It seems from the above concepts of administration and management that administration is the process of determination of
objectives, laying down plans and policies, and ensuring that achievements are in conformity with the objectives. Management is
the process of executing the plans and policies for the achievement of the objectives determined by an administration. This
distinction seems to be too simplistic and superficial. If we regard chairmen, managing directors and general managers as
performing administrative functions, it cannot be said that they perform only planning functions of goal determination, planning and
policy formulation, and do not perform other functions such as staffing functions of selection and promotion, or directing functions
of leadership, communication and motivation. On the other hand, we cannot say that managers who are responsible for the
execution of plans and formulation of plans and policies, etc. do not contribute to the administrative functions of goal determination,
and formulation of plans and policies. In fact all manages, whether the chief executive or the first line supervisor, are in some way
or the other involved in the performance of all the managerial functions. It is, of course, true that those who occupy the higher
echelons of organizational hierarchy are involved to a greater extent in goal determination, plans and policy formulation and
organizing than those who are at the bottom of the ladder.
MANAGEMENT FUNCTIONS /PROCESS OF MANAGEMENT
There is enough disagreement among management writers on the classification of managerial functions. Newman and Summer
recognize only four functions, namely, organizing, planning, leading and controlling.
Henri Fayol identifies five functions of management, viz. planning, organizing, commanding, coordinating and controlling. Luther
Gulick states seven such functions under the catch word "POSDCORB' which stands for planning, organizing, staffing, directing,
coordinating, reporting and budgeting. Warren Haynes and Joseph Massie classify management functions into decision-making,
organizing, staffing, planning, controlling, communicating and directing. Koontz and O'Donnell divide these functions into planning
organizing, staffing, directing and controlling.
For our purpose, we shall designate the following six as the functions of a manager: planning, organizing, staffing, directing,
coordinating and controlling.
1. Planning : Planning is the most fundamental and the most pervasive of all management functions. If people working in groups
have to perform effectively, they should know in advance what is to be done, what activities they have to perform in order to do
what is to be done, and when it is to be done. Planning is concerned with 'what', 'how, and 'when' of performance. It is deciding in
the present about the future objectives and the courses of action for their achievement.
It thus involves:
(a) determination of long and short-range objectives;
(b) development of strategies and courses of actions to be followed for the achievement of these objectives; and
(c) formulation of policies, procedures, and rules, etc., for the implementation of strategies, and plans.
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The organizational objectives are set by top management in the context of its basic purpose and mission, environmental factors,
business forecasts, and available and potential resources. These objectives are both long-range as well as short-range. They are
divided into divisional, departmental, sectional and individual objectives or goals. This is followed by the development of strategies
and courses of action to be followed at various levels of management and in various segments of the organization. Policies,
procedures and rules provide the framework of decision making, and the method and order for the making and implementation of
these decisions.
Every manager performs all these planning functions, or contributes to their performance. In some organizations, particularly those
which are traditionally managed and the small ones, planning are often not done deliberately and systematically but it is still done.
The plans may be in the minds of their managers rather than explicitly and precisely spelt out: they may be fuzzy rather than clear
but they are always there. Planning is thus the most basic function of management. It is performed in all kinds of organizations by
all managers at all levels of hierarchy.
2. Organizing : Organizing involves identification of activities required for the achievement of enterprise objectives and
implementation of plans; grouping of activities into jobs; assignment of these jobs and activities to departments and individuals;
delegation of responsibility and authority for performance, and provision for vertical and horizontal coordination of activities. Every
manager has to decide what activities have to be undertaken in his department or section for the achievement of the goals
entrusted to him. Having identified the activities, he has to group identical or similar activities in order to make jobs, assign these
jobs or groups of activities to his subordinates, delegate authority to them so as to enable them to make decisions and initiate
action for undertaking these activities, and provide for coordination between himself and his subordinates, and among his
subordinates. Organizing thus involves the following sub-functions :
(a) Identification of activities required for the achievement of objectives and implementation of plans.
(b) Grouping the activities so as to create self-contained jobs.
(c) Assignment of jobs to employees.
(d) Delegation of authority so as to enable them to perform their jobs and to command the resources needed for their performance.
(e) Establishment of a network of coordinating relationships.
Organizing process results in a structure of the organization. It comprises organizational positions, accompanying tasks and
responsibilities, and a network of roles and authority-responsibility relationships. Organizing is thus the basic process of combining
and integrating human, physical and financial resources in productive interrelationships for the achievement of enterprise
objectives. It aims at combining employees and interrelated tasks in an orderly manner so that organizational work is performed in
a coordinated manner, and all efforts and activities pull together in the direction of organizational goals.
3. Staffing : Staffing is a continuous and vital function of management. After the objectives have been determined, strategies,
policies, programmes, procedures and rules formulated for their achievement, activities for the implementation of strategies,
policies, programmes, etc. identified and grouped into jobs, the next logical step in the management process is to procure suitable
personnel for manning the jobs. Since the efficiency and effectiveness of an organization significantly depends on the quality of its
personnel and since it is one of the primary functions of management to achieve qualified and trained people to fill various
positions, staffing has been recognized as a distinct function of management. It comprises several subfunctions
:(a) Manpower planning involving determination of the number and the kind of personnel required.
(b) Recruitment for attracting adequate number of potential employees to seek jobs in the enterprise.
(c) Selection of the most suitable persons for the jobs under consideration.
(d) Placement, induction and orientation.
(e) Transfers, promotions, termination and layoff.
(f) Training and development of employees.
As the importance of human factor in organizational effectiveness is being increasingly recognized, staffing is gaining acceptance
as a distinct function of management. It need hardly any emphasize that no organization can ever be better than its people, and
managers must perform the staffing function with as much concern as any other function.
4. Directing : Directing is the function of leading the employees to perform efficiently, and contribute their optimum to the
achievement of organizational objectives. Jobs assigned to subordinates have to be explained and clarified, they have to be
provided guidance in job performance and they are to be motivated to contribute their optimum performance with zeal and
enthusiasm. The function of directing thus involves the following sub-functions :
(a) Communication
(b) Motivation
(c) Leadership
5. Coordination : Coordinating is the function of establishing such relationships among various parts of the organization that they
all together pull in the direction of organizational objectives. It is thus the process of tying together all the organizational decisions,
operations, activities and efforts so as to achieve unity of action for the accomplishment of organizational objectives.
The significance of the coordinating process has been aptly highlighted by Mary Parker Follet. The manager, in her view, should
ensure that he has an organization "with all its parts coordinated, so moving together in their closely knit and adjusting activities, so
linking, interlocking and interrelation, that they make a working unit, which is not a congeries of separate pieces, but what I have
called a functional whole or integrative unity". Coordination, as a management function, involves the following sub-functions:
(a) Clear definition of authority-responsibility relationships
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(b) Unity of direction
(c) Unity of command
(d) Effective communication
(e) Effective leadership
6. Controlling : Controlling is the function of ensuring that the divisional, departmental, sectional and individual performances are
consistent with the predetermined objectives and goals. Deviations from objectives and plans have to be identified and
investigated, and correction action taken. Deviations from plans and objectives provide feedback to managers, and all other
management processes including planning, organizing, staffing, directing and coordinating are continuously reviewed and
modified, where necessary.
Controlling implies that objectives, goals and standards of performance exist and are known to employees and their superiors. It
also implies a flexible and dynamic organization which will permit changes in objectives, plans, programmes, strategies, policies,
organizational design, staffing policies and practices, leadership style, communication system, etc., for it is not uncommon that
employees failure to achieve predetermined standards is due to defects or shortcomings in any one or more of the above
dimensions of management.
Thus, controlling involves the following process :
(a) Measurement of performance against predetermined goals.
(b) Identification of deviations from these goals.
(c) Corrective action to rectify deviations.
It may be pointed out that although management functions have been discussed in a particular sequence-planning, organizing,
staffing, directing, coordinating and controlling – they are not performed in a sequential order. Management is an integral process
and it is difficult to put its functions neatly in separate boxes. Management functions tend to coalesce, and it sometimes becomes
difficult to separate one from the other. For example, when a production manager is discussing work problems with one of his
subordinates, it is difficult to say whether he is guiding, developing or communicating, or doing all these things simultaneously.
Moreover, managers often perform more than one function simultaneously.
MANAGERIAL SKILLS
A skill is an individual's ability to translate knowledge into action. Hence, it is manifested in an individual's performance. Skill is not
necessarily inborn. It can be developed through practice and through relating learning to one's own personal experience and
background. In order to be able to successfully discharge his roles, a manager should possess three major skills. These are
conceptual skill, human relations skill and technical skill. Conceptual skill deals with ideas, technical skill with things and human
skill with people. While both conceptual and technical skills are needed for good decision-making, human skill in necessary for a
good leader.
The conceptual skill refers to the ability of a manager to take a broad and farsighted view of the organization and its future, his
ability to think in abstract, his ability to analyze the forces working in a situation, his creative and innovative ability and his ability to
assess the environment and the changes taking place in it. It short, it is his ability to conceptualize the environment, the
organization, and his own job, so that he can set appropriate goals for his organization, for himself and for his team. This skill
seems to increase in importance as manager moves up to higher positions of responsibility in the organization.
The technical skill is the manager's understanding of the nature of job that people under him have to perform. It refers to a person's
knowledge and proficiency in any type of process or technique. In a production department this would mean an understanding of
the technicalities of the process of production. Whereas this type of skill and competence seems to be more important at the lower
levels of management, its relative importance as a part of the managerial role diminishes as the manager moves to higher
positions. In higher functional positions, such as the position of a marketing manager or production manager, the conceptual
component, related to these functional areas becomes more important and the technical component becomes less important.
Human relations skill is the ability to interact effectively with people at all levels. This skill develops in the manager sufficient ability
(a) to recognize the feelings and sentiments of others; (b) to judge the possible actions to, and outcomes of various courses of
action he may undertake; and (c) to examine his own concepts and values which may enable him to develop more useful attitudes
about himself. This type of skill remains consistently important for managers at all levels.
At the top level, technical skill becomes least important. That is why, people at the top shift with great ease from one industry to
another without an apparent fall in their efficiency. Their human and conceptual skills seem to make up for their unfamiliarity with
the new job's technical aspects.
THE MANAGER AND HIS JOB
Management performs the functions of planning, organizing, staffing, directing and controlling for the accomplishment of
organizational goals. Any person who performs these functions is a manager. The first line manager or supervisor or foreman is
also a manager because he performs these functions. The difference between the functions of top, middle and lowest level
management is that of degree. For instance, top management concentrates more on long-range planning and organization, middle
level management concentrates more on coordination and control and lowest level management concentrates more on direction
function to get the things done from the workers.
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Every manager is concerned with ideas, things and people. Management is a creative process for integrating the use of resources
to accomplish certain goals. In this process, ideas, things and people are vital inputs which are to be transformed into output
consistent with the goals.
Management of ideas implies use of conceptual skills. It has three connotations. First, it refers to the need for practical philosophy
of management to regard management as a distinct and scientific process. Second, management of ideas refers to the planning
phase of management process. Lastly, management of ideas refers to distinction and innovation. Creativity refers to generation of
new ideas, and innovation refers to transforming ideas into viable relations and utilities. A manager must be imaginative to plan
ahead and to create new Ideas.
Management of things (non-human resources) deal with the design of production system, and acquisition, allocation and
conversion of physical resources to achieve certain goals. Management of people is concerned with procurement, development,
maintenance and integration of human resources in the organization. Every manager has to direct his subordinates to put the
organizational plans into practice.
The greater part of every manager's time is spent in communicating and dealing with people. His efforts are directed towards
obtaining information and evaluating progress towards objectives set by him and then taking corrective action. Thus, a manager's
job primarily consists of management of people. Though it is his duty to handle all the productive resources, but human factor is
more important. A manager cannot convert the raw materials into finished products himself; he has to take the help of others to do
this. The greatest problem before any manager is how to manage the personnel to get the best possible results. The manager in
the present age has to deal efficiently with the people who are to contribute for the achievement of organizational goals.
Peter F. Drucker has advocated that the managerial approach to handle workers and work should be pragmatic and dynamic.
Every job should be designed as an integrated set of operations. The workers should be given a sufficient measure of freedom to
organize and control their work environment. It is the duty of every manager to educate, train and develop people below him so that
they may use their potentialities and abilities to perform the work allotted to them. He has also to help them in satisfying their needs
and working under him, he must provide them with proper environment. A manager must create a climate which brings in and
maintains satisfaction and discipline among the people. This will increase organizational effectiveness.
Recently, it has been questioned whether planning, organizing, directing and controlling provides an adequate description of the
management process. After an intensive observation of what five top executive actually did during the course of a few days at
work, Henry Mintzberg concluded that these labels do not adequately capture the reality of what managers do. He suggested
instead that the manager should be regarded as playing some ten different roles, in no particular order.
ROLE PERFORMED BY MANAGERS
1. Interpersonal Roles
Figurehead : In this role, every manager has to perform some duties of a ceremonial nature, such as greeting the touring
dignitaries, attending the wedding of an employee, taking an important customer to lunch and so on.
Leader : As a leader, every manager must motivate and encourage his employees. He must also try to reconcile their individual
needs with the goals of the organization.
Liaison : In this role of liaison, every manager must cultivate contacts outside his vertical chain of command to collect information
useful for his organization.
2. Informational Roles
Monitor : As monitor, the manager has to perpetually scan his environment for information, interrogate his liaison contacts and his
subordinates, and receive unsolicited information, much of it as result of the network of personal contacts he has developed.
Disseminator: In the role of a disseminator, the manager passes some of his privileged information directly to his subordinates
who would otherwise have no access to it.
Spokesman : In this role, the manager informs and satisfies various groups and people who influence his organization. Thus, he
advises shareholders about financial performance, assures consumer groups that the organization is fulfilling its social
responsibilities and satisfies government that the origination is abiding by the law.
3. Decisional Roles
Entrepreneur : In this role, the manager constantly looks out for new ideas and seeks to improve his unit by adapting it to
changing conditions in the environment.
Disturbance Handler : In this role, the manager has to work like a fire fighter. He must seek solutions of various unanticipated
problems – a strike may loom large a major customer may go bankrupt; a supplier may renege on his contract, and so on.
Resource Allocator : In this role, the manager must divide work and delegate authority among his subordinates. He must decide
who will get what.
Negotiator : The manager has to spend considerable time in negotiations. Thus, the chairman of a company may negotiate with
the union leaders a new strike issue, the foreman may negotiate with the workers a grievance problem, and so on.
In addition, managers in any organization work with each other to establish the organization‘s long-range goals and to plan how to
achieve them. They also work together to provide one another with the accurate information needed to perform tasks. Thus,
managers act as channels of communication with the organization.
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CHARACTERISTICS OF PROFESSIONAL MANAGERS
1. Managers are responsible and accountable : Managers are responsible for seeing that specific tasks are done successfully.
They are usually evaluated on how well they arrange for these tasks to the accomplished. Managers are responsible for the actions
of their subordinates. The success or failure of subordinates is a direct reflection of managers' success or failure. All members of
an organization, including those who are not managers, are responsible for their particular tasks. The difference is that managers
are held responsible, or accountable, not only for their own work, but also for the work of subordinates.
2. Managers balance competing goals and set priorities : At any given time, the manager faces a number of organizational
goals, problems and needs all of which compete for the manager's time and resources (both human and material). Because such
resources are always limited, the manager must strike a balance between the various goals and needs. Many managers, for
example, arrange each day's tasks in order of priority the most important things are done right away, while the less important tasks
are looked at later. In this way, managerial time is used effectively.
A manager must also decide who is to perform a particular task and must assign work to an appropriate person. Although ideally
each person should be given the task he would most like to do, this is not always possible. Sometimes individual ability is the
decisive factor, and a task is assigned to the person most able to accomplish it. But sometimes a less capable worker is assigned a
task as a learning experience. And, at times, limited human or other resources dictate decisions for making work assignments.
Managers are often caught between conflicting human and organizational needs and so they must identify priorities.
3. Managers think analytically and conceptually : To be an analytical thinker, a manager must be able to break a problem down
into its components, analyze those components and then come up with a feasible solution. But even more important, a manager
must be a conceptual thinker, able to view the entire task in the abstract and relate it to other tasks. Thinking about a particular task
in relation to its larger implications is no simple matter. But it is essential if the manager is to work towards the goals of the
organization as a whole as well as towards the goals of an individual unit.
4. Managers are mediators : Organizations are made up of people, and people disagree or quarrel quite often. Disputes within a
unit or organization can lower morale and productivity, and they may become so unpleasant or disruptive that competent
employees decide to leave the organization. Such occurrences hinder work towards the goals of the unit or organization; therefore,
managers must at times take on the role of mediator and iron out disputes before they get out of hand. Setting conflicts requires
skill and tact. Managers who are careless in their handling conflicts may later on find that they have only made matters worse.
5. Managers make difficult decisions : No organization runs smoothly all the time. There is almost no limit to the number and
types of problems that may occur : financial difficulties, problems with employees, or differences of opinion concerning an
organization policy, to name just a few. Managers are expected to come up with solutions to difficult problems and to follow through
on their decisions even when doing so may be unpopular. This description of these managerial roles and responsibilities shows
that managers must 'change hats' frequently and must be alert to the particular role needed at a given time. The ability to recognize
the appropriate role to be played and to change roles readily is a mark of an effective manager.
PRINCIPLES OF MANAGEMENT
A body of principles of management has been developed by Henri Fayol, the father of modern management. Fayol wrote
perceptibly on the basis of his practical experience as a manager. Although, he did not develop an integrated theory of
management, his principles are surprisingly in tune with contemporary thinking in management theory.
Fayol held that there is a single "administrative science", whose principles can be used in all management situations no matter
what kind of organization was being managed. This earned him the title of "Universality". He, however, emphasized that his
principles were not immutable laws but rules of thumb to be used as occasion demanded. Fayol held that activities of an industrial
enterprise can be grouped in six categories : (i) technical (production), (ii) commercial (buying, selling and exchange), (iii) financial
(search for and optimum use of capital), (iv) security (protection of property and persons), (v) accounting (including statistics); and
(vi) managerial. However, he devoted most of his attention to managerial activity. He developed the following principles underlying
management of all kinds of organizations :
1. Authority and Responsibility are Related : Fayol held that authority flows from responsibility. Managers who exercise
authority over others should assume responsibility for decisions as well as for results. He regarded authority as a corollary to
responsibility. Authority is official as well as personal. Official authority is derived from the manager's position in organizational
hierarchy and personal authority is compounded of intelligence, experience, moral worth, past services, etc.
A corollary of the principle that no manager should be given authority unless he assumes responsibility is that those who have
responsibility should also have commensurate authority in order to enable them to initiate action on others and command
resources required for the performance of their functions. This aspect of relationship between responsibility and authority is
particularly relevant in India where authority tends to be concentrated in higher echelons of management.
2. Unity of Command : This principle holds that one employee should have only one boss and receive instructions from him only.
Fayol observed that if this principle is violated authority will be undermined, discipline will be jeopardy, order will be disturbed and
stability will be threatened. Dual command is a permanent source of conflict. Therefore, in every organization, each subordinate
should have one superior whose command he has to obey.
3. Unity of Direction : This means that all managerial and operational activities which relate a distinct group with the same
objective should be directed by "one head and one plan. According to Fayol, there should be, "one head and one plan for a group
of activities having the same objective". It, however, does not mean that all decisions should be made at the top. It only means that
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all related activities should be directed by one person. For example, all marketing activities like product strategy and policy,
advertising and sales promotion, distribution channel policy, product pricing policy, marketing research, etc., should be under the
control of one manager and directed by an integrated plan. This is essential for the "unity of action, coordination of strength and
focusing of effort". Violation of this principle will cause fragmentation of action and effort, and wastage of resources.
4. Scalar Chain of Command : According to Fayol scalar chain is the chain of superiors ranging from the ultimate authority to the
lowest ranks. The line of authority is the route followed via every link in the chain by all communication which start from or go to the
ultimate authority.
5. Division of Work : This is the principle of specialization which, according to Fayol, applies to all kinds of work, managerial as
well as technical. It helps a person to acquire an ability and accuracy with which he can do more and better work with the same
effort. Therefore, the work of every person in the organization should be limited as far as possible to the performance of a single
leading function.
6. Discipline : Discipline is a sine qua non for the proper functioning of an organization. Members of an organization are required
to perform their functions and conduct themselves in relation to others according to rules, norms and customs. According to Fayol,
discipline can best be maintained by : (i) having good superiors at all levels; (ii) agreements (made either with the individual
employees or with a union as the case may be) that are as clear and fair as possible; and (iii) penalties judiciously imposed.
7. Subordination of Individual Interest to General Interest : The interest of the organization is above the interests of the
individual and the group. It can be achieved only when managers in high positions in the organization set an example of honesty,
integrity, fairness and justice. It will involve an attitude and a spirit of sacrificing their own personal interests whenever it becomes
apparent that such personal interests are in conflict with organizational interests. It may, however, be emphasized that social and
national interests should have precedence over organizational interests whenever the two run counter to each other.
8. Remuneration : Employees should be paid fairly and equitably. Differentials in remuneration should be based on job
differentials, in terms of qualities of the employee, application, responsibility, working conditions and difficulty of the job. It should
also take into account factors like cost of living, general economic conditions, demand for labour and economic state of the
business.
9. Centralisation : Fayol believed in centralisation. He, however, did not contemplate concentration of all decision making
authority in the top management. He, however, held that centralisation and decentralisation is a question of proportion. In a small
firm with a limited number of employees, the owner-manager can give orders directly to everyone. In large organizations, however,
where the worker is separated from the chief executive through a long scalar chain, the decision making authority has to be
distributed among various managers in varying degrees. Here one generally comes across a situation of decentralisation with
centralised control. The degree of centralisation and decentralisation also depends on the quality of managers.
10. Order : Order, in the conception of Fayol, means right person on the right job and everything in its proper place. This kind of
order, depends on precise knowledge of human requirements and resources of the concern and a constant balance between these
requirements and resources.
11. Equity : It means that subordinates should be treated with justice and kindliness. This is essential for eliciting their devotion
and loyalty to the enterprise. It is, therefore the duty of the chief executive to instill a sense of equity throughout all levels of scalar
chain.
12. Stability of Tenure of Personnel : The managerial policies should provide a sense of reasonable job security. The hiring and
firing of personnel should depend not on the whims of the superiors but on the well-conceived personnel policies. He points out
that it takes time for an employee to learn his job; if they quit or are discharged within a short time, the learning time has been
wasted. At the same time those found unsuitable should be removed and those who are found to be competent should be
promoted. However, "a mediocre manager who stays is infinitely preferable to outstanding managers who come and go".
13. Initiative : It focuses on the ability, attitude and resourcefulness to act without prompting from others. Managers must create
an environment which encourages their subordinates to take initiative and responsibility. Since it provides a sense of great
satisfaction to intelligent employees, managers should sacrifice their personal vanity in order to encourage their subordinates to
show initiative. It should, however, be limited, according to Fayol, by respect for authority and discipline.
14. Esprit de Corps : Cohesiveness and team spirit should be encouraged among employees. It is one of the chief characteristics
of organized activity that a number of people work together in close cooperation for the achievement of common goals. An
environment should be created in the organization which will induce people to contribute to each other's efforts in such a way that
the combined effort of all together promotes the achievement of the overall objectives of enterprise. Fayol warns against two
enemies of esprit de corps, viz. (i) divide and rule, and (ii) abuse of written communication. It may work to the benefit of the
enterprise to divide its enemy but it will surely be dangerous to divide one's own workers. They should rather be welded in cohesive
and highly interacting work-groups. Overreliance on written communication also tends to disrupt team spirit. Written
communication, where necessary, should always be supplemented by oral communication because face-to-face contacts tend to
promote speed, clarity and harmony.
SIGNIFICANCE OF MANAGEMENT
Management is concerned with acquiring maximum prosperity with a minimum effort. Management is essential wherever group
efforts are required to be directed towards achievement of common goals. In this management conscious age, the significance of
management can hardly be over emphasized. It is said that, anything minus management amounts to nothing. Koontz and O'
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Donnel have rightly observed "there is no more important area of human activity than management since its task is that of getting
things done through others."
The significance of management in business activities is relatively greater. The inputs of labour, capital and raw material never
become productive without the catalyst of management. It is now widely recognized that management is an important factor of
growth of any country. The following points further highlight the significance of management :
1. Achievements of group goals : Management makes group efforts more effective. The group as a whole cannot realise its
objectives unless and until there is mutual co-operation and co-ordination among the members of the group. Management creates
team work and team spirit in an organization by developing a sound organization structure. It brings the human and material
resources together and motivates the people for the achievement of the goals of the organization.
2. Optimum utilization of resources : Management always concentrates on achieving the objectives of the enterprise. The
available resources of production are put to use in such a way that all sort of wastage and inefficiencies are reduced to a minimum.
Workers are motivated to put in their best performance by the inspiring leadership. Managers create and maintain an environment
conducive to highest efficiency and performance. Through the optimum use of available resources, management accelerates the
process of economic growth.
3. Minimisation of cost : In the modern era of intense competition, every business enterprise must minimise the cost of
production and distribution. Only those concerns can survive in the market, which can produce goods of better quality at the
minimum cost. A study of the principles of management helps in knowing certain techniques used for reducing costs. These
techniques are production control, budgetary control, cost control, financial control, material control, etc.
4. Change and growth : A business enterprise operates in a constantly changing environment. Changes in business environment
create uncertainties and risk and also produce opportunities for growth. An enterprise has to change and adjust itself in the ever
changing environment. Sound management moulds not only the enterprise but also alters the environment itself to ensure the
success of the business. Many of the giant business corporations of today had a humble beginning and grew continuously through
effective management.
5. Efficient and smooth running of business : Management ensures efficient and smooth running of business, through better
planning, sound organization and effective control of the various factors of production.
6. Higher profits : Profits can be enhanced in any enterprise either by increasing the sales revenue or reducing costs. To increase
the sales revenue is beyond the control of an enterprise. Management by decreasing costs increases its profits and thus provides
opportunities for future growth and development.
7. Provide innovation : Management gives new ideas, imagination and visions to an enterprise.
8. Social benefits : Management is useful not only to the business firms but to the society as a whole. It improves the standard of
living of the people through higher production and more efficient use of scarce resources. By establishing cordial relations between
different social groups, management promotes peace and prosperity in society.
9. Useful for developing countries : Management has to play a more important role in developing countries, like India. In such
countries, the productivity is low and the resources are limited. It has been rightly observed, "There are no under-developed
countries. They are only under-managed ones".
10. Sound organization structure : Management establishes proper organization structure and avoids conflict between the
superiors and subordinates. This helps in the development of spirit of cooperation and mutual understanding, and a congenial
environment is provided in the organization.
CHAPTER SUMMARY
Management is the force that unifies various resources and is the process of bringing them together and coordinating them to help
accomplish organization goal. Management is both, a science as well as art. It is an inexact science. However, its principles as
distinguished from practice are of universal application. Management does not yet completely fulfill all the criteria of a profession.
There are three levels of management - top, middle and lower. Managers at different levels of the organization require and use
different types of skills. Lower level managers require and use a greater degree of technical skill than high level managers, while
higher level managers require and use a greater degree of conceptual skill. Human skills are important at all managerial levels.
REVIEW QUESTIONS
1. "There is no important area of human activity than management since its task is that of getting things done through people".
Discuss.
2. "Management is both a science and an art". Discuss this statement, giving suitable examples.
3. Define Management. How does it differ from Administration?
4. What do you understand by the term "Levels of Management"? Explain with reference to an organization with which you are
familiar.
5. Briefly discuss the nature and scope of Management.
6. What are the functions of a Manager? Is mere knowledge of Management enough to become successful manager?
7. Discuss basic principles of Management along with their significance.
8. Discuss and illustrate the meaning, definition and characteristics of management in modern organizations.
9. What is Management? Explain the principles of management with suitable illustrations.
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CHAPTER FOUR
EVOLUTION OF MANAGEMENT THOUGHT
LEARNING OBJECTIVES
By the end of this chapter, you should be able to:
 List the approaches to or schools of thought on management.
 Explain clearly each approach or school of thought.
 Mention the advantage/contribution and limitation of each approach.
INTRODUCTION
The origin of management in the organized way can be traced as back as the origin of human beings. They earned their
livelihood by hunting that was carried out in groups. Later possession of land mass became important hence there arose conflict
between the groups. Local conflicts were resolved by power using primitive weapon system. Management practices were
undertaken in a scientific way early 18th century when industrial revolution took place. World War I saw a marked development in
evolution of management concepts. Management as a field of study was considered early 20th century. Management principles
like delegation of authority, empowerment, leadership, scalar chain, unity of command and motivation were clearly demonstrated in
Roman Umpire and their ability to organize can be seen from its expansion. Shivaji demonstrated above principles in 17th century.
People have displayed tremendous amount of ability and skill in planning, organising, and directing people as to what is to be
done, how it is to be done and anticipating future plans. They also evolved various models of controlling the planned work being
executed properly. Various wars have been fought where use of human resources, heavy weapon system, its procurement and
use and shifting it to various theatres of war based on threat perceptions are the examples of management. Great Wall of China
are the tangible examples where hundreds of thousands of people were involved in construction activity over a protracted period of
time. Every individual had a chain of command. He knew as to what is to be done, how it is to be done and the time frame within
which it is to be completed. These examples indicate that organizations have been in existence for thousands of years and
management was being practiced ever since. However, in the past several years, the management has undergone systematic
investigation, acquired common body of knowledge, formulated various models to deal with various phenomenon like handling
conflict or managing stress and thus became a formal discipline for study. Two landmarks are most important in the management
study.
A FRAMEWORK FOR THE MANAGEMENT THOUGHTS
In the past, the business houses, particularly corporate, did not have a high academic stature and position in the society and it
certainly compelled the scholars inculcate the academic interest in the study of business management so that its real fruits could
be realized for the stakeholders under reference. There was a widespread belief that management process consisted of hidden
tricks, mysterious clues and intuitive knowledge that could be mastered only by a few divinely gifted people. Moreover, the
businessmen were very much afraid that through the study of management their tricks and secrets would be exposed. But the
advent of industrial revolution and the introduction of large scale mechanized production and the resultant growth of trade, industry
and commerce necessitated the study of management. The evolution of management thoughts might be better approached
through the framework as depicted in the Figure below. In the beginning there were two classical schools of management thoughts.
These were- the scientific management school and the organizational school. Later on, behavioural school and the quantitative
school came into existence. These four schools merged into integration school which led to the contemporary school of
management thoughts.
Among the people who were in search of management principles, techniques and processes, a few emerged as outstanding
pioneers. These are-Urwick and Brech, Boulton and Watt, Robert Owen, Charles Babbage, Oliver Sheldon, Lyndall Urwick,
Herbert A. Simon, Frederick Winslow Taylor, H.S. Person, Henry L. Gantt, Frank Gilbreth, Harrington Emerson, H.P. Kendall, C.B.
Barth, F.A. Halsey, Henri Dennison, Mooney and Reiley, Chester I. Barnard, Elton Mayo, F.J. Roethlisberger and T.N.Whitehead,
Mary Parker Follett and Henry Fayol etc.
EARLY MANAGEMENT
Management has been practiced a long time. Organized endeavors directed by people responsible for planning, organizing,
leading, and controlling activities have existed for thousands of years. Let‘s look at some of the most interesting examples. The
Egyptian pyramids and the Great Wall of China are proof that projects of tremendous scope, employing tens of thousands of
people, were completed in ancient times.1 It took more than 100,000 workers some 20 years to construct a single pyramid. Who
told each worker what to do? Who ensured that there would be enough stones at the site to keep workers busy? The answer is
managers. Someone had to plan what was to be done, organize people and materials to do it, make sure those workers got the
work done, and impose some controls to ensure that everything was done as planned.
Another example of early management can be found in the city of Venice, which was a major economic and trade center in the
1400s. The Venetians developed an early form of business enterprise and engaged in many activities common to today‘s
organizations. For instance, at the arsenal of Venice, warships were floated along the canals, and at each stop, materials and
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riggings were added to the ship. Sounds a lot like a car ―floating‖ along an assembly line, doesn‘t it? In addition, the Venetians
used warehouse and inventory systems to keep track of materials, human resource management functions to manage the labor
force (including wine breaks), and an accounting system to keep track of revenues and costs
MAJOR APPROACHES TO MANAGEMENT
In 1776, Adam Smith published The Wealth of Nations, in which he argued the economic advantages that organizations and
society would gain from the division of labor (or job specialization)—that is, breaking down jobs into narrow and repetitive tasks.
Using the pin industry as an example, Smith claimed that 10 individuals, each doing a specialized task, could produce about
48,000 pins a day among them. However, if each person worked alone performing each task separately, it would be quite an
accomplishment to produce even 10 pins a day! Smith concluded that division of labor increased productivity by increasing each
worker‘s skill and dexterity, saving time lost in changing tasks, and creating laborsaving inventions and machinery. Job
specialization continues to be popular. For example, think of the specialized tasks performed by members of a hospital surgery
team, meal preparation tasks done by workers in restaurant kitchens, or positions played by players on a football team.
Starting in the late eighteenth century when machine power was substituted for human power, a point in history known as the
industrial revolution, it became more economical to manufacture goods in factories rather than at home. These large efficient
factories needed someone to forecast demand, ensure that enough material was on hand to make products, assign tasks to
people, direct daily activities, and so forth. That ―someone‖ was a manager: These managers would need formal theories to guide
them in running these large organizations. It wasn‘t until the early 1900s, however, that the first steps toward developing such
theories were taken.
In this module, we‘ll look at four major approaches to management theory: classical, behavioral, quantitative, and contemporary.
Keep in mind that each approach is concerned with trying to explain management from the perspective of what was important at
that time in history and the backgrounds and interests of the researchers. Each of the four approaches contributes to our overall
understanding of management, but each is also a limited view of what it is and how to best practice it.
CLASSICAL APPROACH
Although we‘ve seen how management has been used in organized efforts since early history, the formal study of management
didn‘t begin until early in the twentieth century. These first studies of management, often called the classical approach,
emphasized rationality and making organizations and workers as efficient as possible. Two major theories comprise the classical
approach: scientific management and general administrative theory. The two most important contributors to scientific management
theory were Frederick W. Taylor and the husband-wife team of Frank and Lillian Gilbreth. The two most important contributors to
general administrative theory were Henri Fayol and Max Weber. Let‘s take a look at each of these important figures in
management history.
SCIENTIFIC MANAGEMENT
If you had to pinpoint when modern management theory was born, 1911 might be a good choice. That was when Frederick
Winslow Taylor‘s Principles of Scientific Management was published. Its contents were widely embraced by managers around the
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world. Taylor‘s book described the theory of scientific management: the use of scientific methods to define the ―one best way‖ for
a job to be done.
Taylor worked at the Midvale and Bethlehem Steel Companies in Pennsylvania.
As a mechanical engineer with a Quaker and Puritan background, he was continually appalled by workers‘ inefficiencies.
Employees used vastly different techniques to do the same job. They often ―took it easy‖ on the job, and Taylor believed that
worker output was only about one-third of what was possible. Virtually no work standards existed and workers were placed in jobs
with little or no concern for matching their abilities and aptitudes with the tasks they were required to do. Taylor set out to remedy
that by applying the scientific method to shop-floor jobs. He spent more than two decades passionately pursuing the ―one best
way‖ for such jobs to be done. Taylor‘s experiences at Midvale led him to define clear guidelines for improving production
efficiency. He argued that these four principles of management (see Exhibit MH-2) would result in prosperity for both workers and
managers. How did these scientific principles really work? Let‘s look at an example.
Probably the best known example of Taylor‘s scientific management efforts was the pig iron experiment. Workers loaded ―pigs‖ of
iron (each weighing 92 lbs.) onto rail cars. Their daily average output was 12.5 tons. However, Taylor believed that by scientifically
analyzing the job to determine the ―one best way‖ to load pig iron, output could be increased to 47 or 48 tons per day. After
scientifically applying different combinations of procedures, techniques, and tools, Taylor succeeded in getting that level of
productivity. How? By putting the right person on the job with the correct tools and equipment, having the worker follow his
instructions exactly, and motivating the worker with an economic incentive of a significantly higher daily wage. Using similar
approaches for other jobs, Taylor was able to define the ―one best way‖ for doing each job. Overall, Taylor achieved consistent
productivity improvements in the range of 200 percent or more. Based on his ground breaking studies of manual work using
scientific principles, Taylor became known as the ―father‖ of scientific management. His ideas spread in the United States and to
other countries and inspired others to study and develop methods of scientific management. His most prominent followers were
Frank and Lillian Gilbreth.
1. Develop a science for each element of an individual‘s work to replace the old rule-of thumb method.
2. Scientifically select and then train, teach, and develop the worker.
3. Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has
been developed.
4. Divide work and responsibility almost equally between management and workers.
Management does all work for which it is better suited than the workers.
A construction contractor by trade, Frank Gilbreth gave up that career to study scientific management after hearing Taylor speak at
a professional meeting. Frank and his wife Lillian, a psychologist, studied work to eliminate inefficient hand-and body motions. The
Gilbreths also experimented with the design and use of the proper tools and equipment for optimizing work performance. Also, as
parents of 12 children, the Gilbreths ran their household using scientific management principles and techniques. In fact, two of their
children wrote a book, Cheaper by the Dozen, which described life with the two masters of efficiency.
Frank is probably best known for his bricklaying experiments. By carefully analyzing the bricklayer‘s job, he reduced the number of
motions in laying exterior brick from 18 to about 5, and in laying interior brick from 18 to 2. Using Gilbreth‘s techniques, a bricklayer
was more productive and less fatigued at the end of the day. The Gilbreths invented a device called a microchronometer that
recorded a worker‘s hand-and-body motions and the amount of time spent doing each motion. Wasted motions missed by the
naked eye could be identified and eliminated. The Gilbreths also devised a classification scheme to label 17 basic hand motions
(such as search, grasp, hold), which they called therbligs (Gilbreth spelled backward with the th transposed). This scheme gave
the Gilbreths a more precise way of analysing a worker‘s exact hand movements.
How today‘s managers use scientific management
Many of the guidelines and techniques that Taylor and the Gilbreths devised for improving production efficiency are still used in
organizations today. When managers analyze the basic work tasks that must be performed, use time-and-motion study to eliminate
wasted motions, hire the best-qualified workers for a job, or design incentive systems based on output, they‘re using the principles
of scientific management.
GENERAL ADMINISTRATIVE THEORY
General administrative theory focused more on what managers do and what constituted good management practice. We
introduced Henri Fayol because he first identified five functions that managers perform: planning, organizing, commanding,
coordinating, and controlling. Fayol wrote during the same time period as Taylor. While Taylor was concerned with first-line
managers and the scientific method, Fayol‘s attention was directed at the activities of all managers. He wrote from his personal
experience as the managing director of a large French coal-mining firm. Fayol described the practice of management as something
distinct from accounting, finance, production, distribution, and other typical business functions. His belief that management was an
activity common to all business endeavors, government, and even the home led him to develop 14 principles of management—
fundamental rules of management that could be applied to all organizational situations and taught in schools.
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Characteristics of Weber's Bureaucracy
Weber (pronounced VAY-ber) was a German sociologist who studied organizations. Writing in the early 1900s, he developed a
theory of authority structures and relations based on an ideal type of organization he called a bureaucracy—a form of organization
characterized by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships. Weber
recognized that this ―ideal bureaucracy‖ didn‘t exist in reality. Instead he intended it as a basis for theorizing about how work could
be done in large groups. His theory became the structural design for many of today‘s large organizations. Bureaucracy, as
described by Weber, is a lot like scientific management in its ideology. Both emphasized rationality, predictability, impersonality,
technical competence, and authoritarianism. Although Weber‘s ideas were less practical than Taylor‘s, the fact that his ―ideal type‖
still describes many contemporary organizations attests to their importance.
HOW TODAY‘S MANAGERS USE GENERAL ADMINISTRATIVE THEORY
Several of our current management ideas and practices can be directly traced to the contributions of general administrative theory.
For instance, the functional view of the manager‘s job can be attributed to Fayol. In addition, his 14 principles serve as a frame of
reference from which many current management concepts—such as managerial authority, centralized decision making, reporting
to only one boss, and so forth—have evolved. Weber‘s bureaucracy was an attempt to formulate an ideal prototype for
organizations. Although many characteristics of Weber‘s bureaucracy are still evident in large organizations, his model isn‘t as
popular today as it was in the twentieth century. Many managers feel that a bureaucratic structure hinders individual employees‘
creativity and limits an organization‘s ability to respond quickly to an increasingly dynamic environment. However, even in flexible
organizations of creative professionals—such as Microsoft, Samsung, General Electric, or Cisco Systems—some bureaucratic
mechanisms are necessary to ensure that resources are used efficiently and effectively.
BEHAVIORAL APPROACH
As we know, managers get things done by working with people. This explains why some writers have chosen to look at
management by focusing on the organization‘s people. The field of study that researches the actions (behavior) of people at work
is called organizational behavior (OB). Much of what managers do today when managing people—motivating, leading, building
trust, working with a team, managing conflict, and so forth—has come out of OB research.
EARLY OB ADVOCATES
Follett, and Chester Barnard. Their contributions were varied and distinct, yet all believed that people were the most important
asset of the organization and should be managed accordingly. Their ideas provided the foundation for such management practices
42
as employee selection procedures, motivation programs, and work teams. Exhibit MH-5 summarizes each individual‘s most
important ideas.
Without question, the most important contribution to the OB field came out of the Hawthorne Studies, a series of studies
conducted at the Western Electric Company Works in Cicero, Illinois. These studies, which started in 1924, were initially designed
by Western Electric industrial engineers as a scientific management experiment. They wanted to examine the effect of various
lighting levels on worker productivity. Like any good scientific experiment, control and experimental groups were set up with the
experimental group being exposed to various lighting intensities, and the control group working under a constant intensity. If you
were the industrial engineers in charge of this experiment, what would you have expected to happen?
It‘s logical to think that individual output in the experimental group would be directly related to the intensity of the light. However,
they found that as the level of light was increased in the experimental group, output for both groups increased. Then, much to the
surprise of the engineers, as the light level was decreased in the experimental group, productivity continued to increase in both
groups. In fact, a productivity decrease was observed in the experimental group only when the level of light was reduced to that of
a moonlit night. What would explain these unexpected results? The engineers weren‘t sure, but concluded that lighting intensity
was not directly related to group productivity, and that something else must have contributed to the results. They weren‘t able to
pinpoint what that ―something else‖ was, though.
In 1927, the Western Electric engineers asked Harvard professor Elton Mayo and his associates to join the study as consultants.
Thus began a relationship that would last through 1932 and encompass numerous experiments in the redesign of jobs, changes in
workday and workweek length, introduction of rest periods, and individual versus group wage plans. For example, one experiment
was designed to evaluate the effect of a group piecework incentive pay system on group productivity. The results indicated that the
incentive plan had less effect on a worker‘s output than did group pressure, acceptance, and security. The researchers concluded
that social norms or group standards were the key determinants of individual work behavior.
Scholars generally agree that the Hawthorne Studies had a game-changing impact on management beliefs about the role of
people in organizations. Mayo concluded that people‘s behavior and attitudes are closely related, that group factors significantly
affect individual behavior, that group standards establish individual worker output, and that money is less a factor in determining
output than are group standards, group attitudes, and security. These conclusions led to a new emphasis on the human behavior
factor in the management of organizations. Although critics attacked the research procedures, analyses of findings, and
conclusions, it‘s of little importance from a historical perspective whether the Hawthorne Studies were academically sound or their
conclusions justified. What is important is that they stimulated an interest in human behavior in organizations.
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HOW TODAY‘S MANAGERS USE THE BEHAVIORAL APPROACH
The behavioral approach has largely shaped how today‘s organizations are managed. From the way that managers design jobs to
the way that they work with employee teams to the way that they communicate, we see elements of the behavioral approach. Much
of what the early OB advocates proposed and the conclusions from the Hawthorne studies have provided the foundation for our
current theories of motivation, leadership, group behavior and development, and numerous other behavioral approaches
QUANTITATIVE APPROACH
Although passengers bumping into each other when trying to find their seats on an airplane can be a mild annoyance for them, it‘s
a bigger problem for airlines because lines get backed up, slowing down how quickly the plane can get back in the air. Based on
research in spacetime geometry, one airline innovated a unique boarding process called ―reverse pyramid‖ that has saved at least
2 minutes in boarding time.9 This is an example of the quantitative approach, which is the use of quantitative techniques to
improve decision making. This approach also is known as management science.
The quantitative approach evolved from mathematical and statistical solutions developed for military problems during World War II.
After the war was over, many of these techniques used for military problems were applied to businesses. For example, one group
of military officers, nicknamed the Whiz Kids, joined Ford Motor Company in the mid-1940s and immediately began using statistical
methods and quantitative models to improve decision making.
What exactly does the quantitative approach do? It involves applying statistics, optimization models, information models, computer
simulations, and other quantitative techniques to management activities. Linear programming, for instance, is a technique that
managers use to improve resource allocation decisions. Work scheduling can be more efficient as a result of critical-path
scheduling analysis. The economic order quantity model helps managers determine optimum inventory levels. Each of these is an
example of quantitative techniques being applied to improve managerial decision making. Another area where quantitative
techniques are used frequently is in total quality management.
HOW TODAY‘S MANAGERS USE THE QUANTITATIVE APPROACH
No one likes long lines, especially residents of New York City. If they see a long checkout line, they often go somewhere else.
However, at Whole Foods‘ first gourmet supermarkets in Manhattan, customers found something different—that is, the longer the
line, the shorter the wait. When ready to check out, customers are guided into serpentine single lines that feed into numerous
checkout lanes. Whole Foods, widely known for its organic food selections, can charge premium prices, which allow it the luxury of
staffing all those checkout lanes. And customers are finding that their wait times are shorter than expected. The science of keeping
lines moving is known as queue management. And for Whole Foods, this quantitative technique has translated into strong sales at
its Manhattan stores. The quantitative approach contributes directly to management decision making in the areas of planning and
control. For instance, when managers make budgeting, queuing, scheduling, quality control, and similar decisions, they typically
rely on quantitative techniques. Specialized software has made the use of these techniques less intimidating for managers,
although many still feel anxious about using them.
A quality revolution swept through both the business and public sectors in the 1980s and 1990s.10 It was inspired by a small
group of quality experts, the most famous being W. Edwards Deming (pictured at right) and Joseph M. Juran. The ideas and
techniques they advocated in the 1950s had few supporters in the United States but were enthusiastically embraced by Japanese
organizations. As Japanese manufacturers began beating U.S. competitors in quality comparisons, however, Western managers
soon took a more serious look at Deming‘s and Juran‘s ideas . .ideas that became the basis for today‘s quality management
programs.
Total quality management, or TQM, is a management philosophy devoted to continual improvement and responding to customer
needs and expectations. The term customer includes anyone who interacts with the organization‘s product or services internally or
externally. It encompasses employees and suppliers as well as the people who purchase the organization‘s goods or services.
Continual improvement isn‘t possible without accurate measurements, which require statistical techniques that measure every
critical variable in the organization‘s work processes. These measurements are compared against standards to identify and correct
problems.
CONTEMPORARY APPROACHES
As we‘ve seen, many elements of the earlier approaches to management theory continue to influence how managers manage.
Most of these earlier approaches focused on managers‘concerns inside the organization. Starting in the 1960s, management
researchers began to look at what was happening in the external environment outside the boundaries of the organization. Two
contemporary management perspectives—systems and contingency—are part of this approach. Systems theory is a basic theory
in the physical sciences, but had never been applied to organized human efforts. In 1938, Chester Barnard, a telephone company
executive, first wrote in his book, The Functions of an Executive, that an organization functioned as a cooperative system.
However, it wasn‘t until the 1960s that management researchers began to look more carefully at systems theory and how it related
to organizations.
A system is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole. The two basic
types of systems are closed and open. Closed systems are not influenced by and do not interact with their environment. In
contrast, open systems are influenced by and do interact with their environment.
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Today, when we describe organizations as systems, we mean open systems. Exhibit MH-7 shows a diagram of an organization
from an open systems perspective. As you can see, an organization takes in inputs (resources) from the environment and
transforms or processes these resources into outputs that are distributed into the environment. The organization is ―open‖ to and
interacts with its environment.
How does the systems approach contribute to our understanding of management? Researchers envisioned an organization as
being made up of ―interdependent factors, including individuals, groups, attitudes, motives, formal structure, interactions, goals,
status, and authority.‖ What this means is that as managers coordinate work activities in the various parts of the organization, they
ensure that all these parts are working together so the organization‘s goals can be achieved. For example, the systems approach
recognizes that, no matter how efficient the production department might be, the marketing department must anticipate changes in
customer tastes and work with the product development department in creating products customers want or the organization‘s
overall performance will suffer. In addition, the systems approach implies that decisions and actions in one organizational area will
affect other areas. For example, if the purchasing department doesn‘t acquire the right quantity and quality of inputs, the production
department won‘t be able to do its job.
Finally, the systems approach recognizes that organizations are not self-contained They rely on their environment for essential
inputs and as outlets to absorb their outputs. No organization can survive for long if it ignores government regulations, supplier
relations, or the varied external constituencies upon which it depends.
How relevant is the systems approach to management? Quite relevant. Consider, for example, a shift manager at a Starbucks
restaurant who must coordinate the work of employees filling customer orders at the front counter and the drive-through windows,
direct the delivery and unloading of food supplies, and address any customer concerns that come up. This manager ―manages‖ all
parts of the ―system‖ so that the restaurant meets its daily sales goals.
The early management theorists came up with management principles that they generally assumed to be universally applicable.
Later research found exceptions to many of these principles. For example, division of labor is valuable and widely used, but jobs
can become too specialized. Bureaucracy is desirable in many situations, but in other circumstances, other structural designs are
more effective. Management is not (and cannot be) based on simplistic principles to be applied in all situations. Different and
changing situations require managers to use different approaches and techniques. The contingency approach (sometimes called
the situational approach) says that organizations are different, face different situations (contingencies), and require different ways
of managing.
A good way to describe contingency is ―if, then.‖ If this is the way my situation is, then this is the best way for me to manage in this
situation. It‘s intuitively logical because organizations and even units within the same organization differ—in size, goals, work
activities, and the like. It would be surprising to find universally applicable management rules that would work in all situations. But,
of course, it‘s one thing to say that the way to manage ―depends on the situation‖ and another to say what the situation is.
Management researchers continue working to identify these situational variables. Exhibit MH-8 describes four popular contingency
variables. Although the list is by no means comprehensive—more than 100 different variables have been identified—it represents
those most widely used and gives you an idea of what we mean by the term contingency variable. The primary value of the
contingency approach is that it stresses there are no simplistic or universal rules for managers to follow.
Organization as an Open System
So what do managers face today when managing? Although the dawn of the information age is said to have begun with Samuel
Morse‘s telegraph in 1837, the most dramatic changes in information technology have occurred in the latter part of the twentieth
century and have directly affected the manager‘s job. Managers now may manage employees who are working from home or
working halfway around the world. An organization‘s computing resources used to be mainframe computers locked away in
temperature-controlled rooms and only accessed by the experts. Now, practically everyone in an organization is connected—wired
45
or wireless—with devices no larger than the palm of the hand. Just like the impact of the Industrial Revolution in the 1700s on the
emergence of management, the information age has brought dramatic changes that continue to influence the way organizations
are managed.
CHAPTER SUMMARY
Studying history is important because it helps us see the origins of today‘s management practices and recognize what has and has
not worked. We can see early examples of management practice in the construction of the Egyptian pyramids and in the arsenal of
Venice. One important historical event was the publication of Adam Smith‘s Wealth of Nations, in which he argued the benefits of
division of labor (job specialization). Another was the industrial revolution where it became more economical to manufacture in
factories than at home. Managers were needed to manage these factories and these managers needed formal management
theories to guide them. Frederick W. Taylor, known as the ―father‖ of scientific management, studied manual work using scientific
principles—that is, guidelines for improving production efficiency—to find the one best way to do those jobs. The Gilbreths‘ primary
contribution was finding efficient hand-and-body motions and designing proper tools and equipment for optimizing work
performance. Fayol believed that the functions of management were common to all business endeavors but also were distinct from
other business functions. He developed 14 principles of management from which many current management concepts have
evolved. Weber described an ideal type of organization he called a bureaucracy, characteristics that many of today‘s large
organizations still have. Today‘s managers use the concepts of scientific management when they analyze basic work tasks to be
performed, use time-and-motion study to eliminate wasted motions, hire the best qualified workers for a job, and design incentive
systems based on output. They use general administrative theory when they perform the functions of management and structure
their organizations so that resources are used efficiently and effectively.
The early OB advocates (Robert Owen, Hugo Munsterberg, Mary Parker Follett, and Chester Barnard) contributed various ideas,
but all believed that people were the most important asset of the organization and should be managed accordingly. The Hawthorne
Studies dramatically affected management beliefs about the role of people in organizations, leading to a new emphasis on the
human behavior factor in managing. The behavioral approach has largely shaped how today‘s organizations are managed. Many
current theories of motivation, leadership, group behavior and development, and other behavioral issues can be traced to the early
OB advocates and the conclusions from the Hawthorne Studies.
The quantitative approach involves applications of statistics, optimization models, information models, and computer simulations to
management activities. Today‘s managers use the quantitative approach, especially when making decisions, as they plan and
control work activities such as allocating resources, improving quality, scheduling work, or determining optimum inventory levels.
Total quality management—a management philosophy devoted to continual improvement and responding to customer needs and
expectations—also makes use of quantitative methods to meet its goals.
The systems approach says that an organization takes in inputs (resources) from the environment and transforms or processes
these resources into outputs that are distributed into the environment. This approach provides a framework to help managers
understand how all the interdependent units work together in order to achieve the organization‘s goals and that decisions and
actions taken in one organizational area will affect others. In this way, managers can recognize that organizations are not selfcontained, but instead rely on their environment for essential inputs and as outlets to absorb their outputs. The contingency
approach says that organizations are different, face different situations, and require different ways of managing. It helps us
understand management because it stresses there are no simplistic or universal rules for managers to follow. Instead, managers
must look at their situation and determine that if this is the way my situation is, then this is the best way for me to manage.
REVIEW QUESTIONS
1. Explain why studying management history is important.
2. What early evidence of management practice can you describe?
3. Describe the important contributions made by the classical theorists.
4. What did the early advocates of OB contribute to our understanding of management?
5. Why were the Hawthorne Studies so critical to management history?
6. What kind of workplace would Henri Fayol create? How about Mary Parker Follett? How about Frederick W. Taylor?
7. Explain what the quantitative approach has contributed to the field of management.
8. Trace out the evolution of management theories. Identify major landmarks in the process
9. How do systems theory and the contingency approach make managers better at what they do?
10. How do societal trends influence the practice of management? What are the implications for someone studying management?
.
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PART TWO
THE FUNCTIONS
AND
RESPONSIBILITIES
OF
MANAGEMENT
47
CHAPTER FIVE
PLANNING
LEARNING OBJECTIVES
By the end of this chapter you should be able to:
 To introduce the meaning and definitions of management.
 Analyze the nature and importance of planning.
 Discuss various types of planning.
 Understand types of plan.
 Present steps in planning.
 Understand the meaning and types of decisions.
 Discuss steps in rational decision making.
 Present decision environment.
INTRODUCTION
The management functions as discussed earlier are planning, organizing, staffing, direction and controlling. These functions are
essential to achieve organizational objectives. If objectives are not set then there is nothing to organize, direct and control. An
organization has to specify what it has to achieve. Planning is related with this aspect. Every person whether in business or not has
framed a number of plans during his life. The plan period may be short or long. One of the characteristic of human being is that he
plans. Planning is the first and foremost function of management. According to Koontz and O‘Donnel ―Planning is deciding in
advance what to do, how to do it, when to do it and who is to do it. It bridges the gap from where we are and to where we want to
go. It is in essence the exercise of foresight‖. According to M.S. Hardly ―Planning is deciding in advance what is to be done. It
involves the selection of objectives, policies, procedures and programmes from among alternatives. Heying and Massie define
―Planning is that function of the manager in which he decides in advance what he will do. It is a decision making process of a
special kind. It is an intellectual process in which creative mind and imagination are essential‖. Planning is an attempt to anticipate
the future in order to achieve better performance.
Plans derive the following benefits:
(1) Planning focus managers to think ahead.
(2) It leads to development of performance standards.
(3) Having to formulate plans forces management to articulate clear objectives.
(4) Planning makes organization to be better prepared for sudden developments.
On the basis of definitions of planning the following features can be identified.
(1) Planning is primarily concerned with looking into future. It requires forecasting the future.
(2) Planning involves selection of suitable course of action. It means there are several ways to achieving objectives.
(3) Planning is undertaken at all levels of the organization because managers at all level are concerned with determination of future
course of action.
(4) Planning is flexible. Planning involves selection of best course of action under specific environment. If environment changes an
adjustment is needed between various factors of planning.
(5) Planning is pervasive and continuous managerial function.
NATURE OF PLANNING
The nature of planning may be understood in terms of it being a rational approach, open system, flexibility and pervasiveness.
PLANNING: A RATIONAL APPROACH
Planning is a rational approach for defining where one stands, where one wants to go in future and how to reach there. Rationalist
denotes a manager chooses appropriate means for achieving the stated objectives rational approach fills the gap between the
current status and future status. The difference between two time periods T1 and T2 may be as long as 5 years or as short as one
year. The desired and the current results are usually expressed in terms of objectives, which can be achieved by an action or set of
actions. The actions required resources and the rational approach emphasis an appropriate use of resources.
Figure.5.1:Planning for bridging current & desired
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PLANNING: AN OPEN SYSTEM APPROACH
An organization is an open system because it accepts inputs from the environment and exports output to environment. Planning
adopt an open system approach. Open system approach indicates that the gap between current and desired status and the action
required to bridge this gap is influenced by a variety of environmental economic, legal, political, technological, socio-cultural and
competitive factors. These factors are dynamic and change with time. Therefore managers have to take into account the dynamic
features of environment while using open system approach.
FLEXIBILITY OF PLANNING
By flexibility of a plan is meant its ability to change direction to adopt to changing situations without undue cost. The plans must be
flexible to adapt to changes in technology, market, finance, personal and organizational factors. However flexibility is possible only
within limits, because it involves extra cost. Sometimes the benefit of flexibility may not be worth the cost.
PERVASIVENESS OF PLANNING
Planning is pervasive and it extends throughout the organization. Planning is the fundamental management function and every
manager irrespective of level, has a planning function to perform within his particular area of activities. Top management is
responsible for overall objectives and action of the organization. Therefore it must plan what these objectives should be and how to
achieve them. Similarly a departmental head has to devise the objectives of his department within the organizational objectives and
also the methods to achieve them. Thus planning activity goes in hierarchy as shown in figure 5.2.
Figure. 5.2:Planning at various levels
IMPORTANCE OF PLANNING
Planning is of great importance in all types of organization whether business or non business, private or public, small or large.
The organization which thinks much ahead about what it can do in future is likely to succeed as compared to one which fails to do
so. Without planning, business decisions would become random, ad hoc choices.
Planning is important because of the following reasons.
(1) Primacy of planning: Planning is the first and foremost function of management, other functions follow planning. What is not
planned cannot be organized and controlled. Planning establishes the objectives and all other functions are performed to achieve
the objectives set by the planning process as shown in figure 5.3.
Figure. 5.3:Primacy of planning
(2) To minimize risk and uncertainty: The organization continuously interacts with the external dynamic environment where there
is great amount of risk and uncertainty. In this changing dynamic environment where social and economic conditions alter rapidly,
49
planning helps the manager to cope up with and prepare for changing environment. By using rational and fact based procedure for
making decisions, manager can reduce the risk and uncertainty.
(3) To focus attention on objectives: Planning focuses on organizational objectives and direction of action for achieving these
objectives. It helps managers to apply and coordinate all resources of the organization effectively in achieving the objectives. The
whole organization is forced to embrace identical goals and collaborate in achieving them.
(4) To facilitate control: Planning sets the goals and develops plans to achieve them. These goals and plans become the
standards or benchmarks against which the actual performance can be measured. Control involves the measurement of actual
performance, comparing it with the standards and initiating corrective action if there is deviation. Control ensures that the activity
confirm to plans. Hence control can be exercised if there are plans. In order to assure successful plans
(5) To increase organizational effectiveness: Effectiveness implies that the organization is able to achieve its objectives within
the given resources. The resources are put in a way which ensures maximum contribution to the organizational objectives.
Effectiveness leads to success.
TYPES OF PLANNING
Though the basic process of planning is same yet there are several ways in which an organization can undertake planning
process. Planning can be classified on the basis of coverage of activities, importance of contents in planning, approach adopted in
planning process, time dimension and degree of formalization in planning process as shown in Table 5.1
Table 5.1:Types of planning
CORPORATE AND FUNCTIONAL PLANNING
The planning activities at the corporate level which cover the entire organizational activities are known as corporate planning. The
focus in corporate planning is to determine long term objectives as a whole and to generate plans to achieve these objectives
bearing in mind the probable changes in dynamic environment. This corporate planning is the basis for functional planning.
Functional planning which is derived from corporate planning is undertaken for each major function of the organization like
production, marketing, finance etc., Since functional planning is derived out of corporate planning and therefore it should contribute
to the corporate planning.
STRATEGIC AND OPERATIONAL PLANNING:
Strategic planning sets future directions of the organization in which it wants to proceed in future. Strategic planning involves a time
horizon of more than one year and for most of the organization it ranges between 3 and 5 years. Examples of strategic planning
may be diversification of business into new lines, planned grown rate in sales etc. Operational planning also known of tactical
planning on the other hand involves deciding the most effective use of resources already allocated to achieve the organizational
objectives. The time horizon in operational planning is less than one year. Operational planning is undertaken out of the strategic
planning. The examples of operational planning may be adjustment of production within available capacity, increasing the
efficiency of the operating activity by analyzing past performance etc. Table 9.2 gives the differences between strategic and
operational planning.
LONG AND SHORT TERM PLANNING:
The long term planning is strategic in nature and involves more than one year period and can extend to 15 to 20 years or so. Short
term planning usually covers one year. Short term plans are made with reference to long term plans because short term plans
contribute to long term plans.
PROACTIVE AND REACTIVE PLANS:
Planning is an open system approach and hence it is affected by environmental factors which keep on changing continuously. The
organization‘s response to these changes differs. Based on these responses planning may be proactive and reactive. Proactive
planning involves designing suitable courses of action in anticipation of likely changes of environment. Managers adopting
proactive changes do not wait for environment to change, but take action in advance of environmental changes. For this,
continuous scanning of environment is necessary. In reactive planning response comes after environmental changes take place.
By the time organization responds to change in environment there may be further change in environment. Hence this type of
planning is suitable in the environment which is fairly stable over a long period of time.
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FORMAL AND INFORMAL PLANNING:
Large organizations undertake planning in a formal way. Generally a separate corporate planning cell is formed at higher level. The
cell is staffed by people of different backgrounds like engineers, economists, statisticians etc., depending upon the nature. The cell
continuously monitors the environment. When environment shows some change the cell analysis the environment and suggest
suitable measures to take the advantage of the changing environment. This type of planning is rational, systematic, regular and
well documented. On the other hand informal planning is undertaken generally by small organizations. This planning process is
based on manager‘s experience, intuitions rather than based on systematic evaluation of environmental changes. This planning
process is part of manager‘s regular activity and is suitable for small organizations.
Table 5.2:Differences between strategic and operational planning. Strategic planning Operational planning
TYPES OF PLANS
Plans are classified into standing plans and single use plans as shown in figure 5.3. Standing plans provide guidelines for
further course of action and are used over a period of time. Standing plans are designed for situations that recur often enough to
justify a standardize approach. For example a bank designs a standing plan to process a loan application. Using this standing plan
the bank manager decides whether to approve or not a loan application depending upon the details furnished by the applicant.
Once formulated these plans are in operation for a long period unless there is change in these plans. Examples of such plans are
organizational mission, long term objective, strategies, policies, procedures and rules. On the other hand single use plans are
designed for specific end; when that end is reached, the plan is dissolved or formulated again for next end. Examples of such plans
are project, budgets, quotas, targets etc. Single use plans are generally derived from standing plans. Organization set their mission
and objectives, out of which strategic actions are determined. In order to put these actions into operations, projects, budgets etc.,
are prepared for specific time period.
Figure. 5.4:Types of plans
Figure. 5.5:Hierarchies of plans
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Various organizational plans discussed above are interlinked and may be arranged in hierarchy in which higher order plans helps
to derive lower order plans. In turn a lower order plan contributes to the achievement of the objectives of a higher order plans. The
hierarchical nature of various plans is represented in figure. 5.5.
MISSION AND PURPOSE
Setting organizational objectives is the starting point of managerial actions. Every organization is purposive creation, it has some
objectives; the end results for which the organization strive. These end results are referred to as mission, ‗purpose‘, ‗goal‘, ‗target‘
etc. which are often used inter-changeably. However there are differences in the contest in which these terms are used. In every
social system, enterprises have a basic function or task, which is assigned to them by society. The mission or purpose identifies
this basic function or task of the organization, for example the purpose of university. Mission and purpose are often used
interchangeably though there is difference between the two at least at theoretical level. Mission has external orientation and relates
the organization to the society in which it operates. A mission statement links the organization activities to the needs of the society
and legitimates its existence. Purpose is also externally focused but is relates the organization to that segment of the society to
which it serves; it defines the business which the company will undertake. The mission of the company says what it can be for the
country i.e., society in general and purpose suggest how this contribution can be made. However in general practice mission and
purpose are either used interchangeably or jointly.
OBJECTIVES
Every organization is established for the purpose of achieving some objectives. An individual who starts a business has the
objective of earning profits. A chartable institution which starts schools and colleges has the objectives of rendering service to the
public in the field of education. Though objectives may differ from one organization to another, yet each organization has its own
objective. According to Mc Farland, ―Objectives are the goals, aims or purposes that the organizations wish to achieve over varying
periods of time‖. George R Terry defines ―. A managerial objective is the intended goal which describes definite scope and
suggests direction to the efforts of a manager‖. Objective is the term used to indicate the end point of management programme, for
which an organization is established and tries to achieve.
Objectives have the following characteristics.
(1) Objectives are multiple in numbers: Every business enterprise has a package of objectives set in various key areas. Peter
Drucker has emphasized setting objectives in eight key areas namely market standing, innovation, productivity, physical and
financial resources, profitability, manager performance and development, worker performance and attitude, and public
responsibility.
(2) Objectives are tangible or intangible: Some of the objectives such as productivity, physical and financial resources are tangible;
whereas objectives in the areas of manager‘s performance, workers morale is completely intangible.
(3) Objectives have a priority: At a given point of time one objective may be important than another. For example maintaining
minimum cash balance is important than due date of payment.
(4) Objectives are generally arranged in hierarchy: It implies that organization has corporate objectives at the top and divisional,
departmental and sectional objectives at the lower level of organization.
(5) Objectives some time clash with each other: An objective of one department may clash with the objectives of other department.
For example the objectives of production of low unit cost achievement through mass production of low quality products may conflict
with goal of sales department selling high quality products.
STRATEGIES
‗Every organization has to develop plans logically from goals considering the environmental opportunities and threats and the
organizational strengths and weakness. A strategy is a plan which takes into these factors and provides an optimal match between
the firm and external environment. Two activities are involved in strategy formulation namely environmental appraisal and
corporate appraisal. Environmental appraisal involves identifying and analysis of the following factors:
(1) Political and legal factors: Stability of government, taxation and licensing laws, fiscal policies, restrictions on capital etc.
(2) Economic factors: Economic development, distribution of personal income, trend in prices, exchange rates etc.,
(3) Competitive factors: Identifying principal competitors and analysis of their performance, anti-monopoly laws, protection of
patents, brand names etc.
Corporate analysis involves identifying and analyzing company‘s strength and weakness. For example a companies strength
may be low cost manufacturing skill, excellent product design, efficient distribution etc.,. Its weakness may be lack of physical and
financial resources. A company must plan to exploit these strengths to maximum and circumvent it‘s weakness. The formulation of
strategy is like preparing for beauty contest in which a lady tries to highlight her strong points and hide her weak points. The
process of matching company‘s strength and weakness with environmental opportunities and threats is known as SWOT analysis.
STANDING PLANS
POLICIES
A policy is a general guideline for decision making. It sets up boundaries around decisions. Policies channelize the thinking of the
organization members so that it is consistent with the organizational objectives. According to George R Terry ― Policy is a verbal,
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written or implied overall guide, setting up boundaries that supply the general limits and directions in which managerial action will
take place‖. Although policies deal with ―how to do‖ the work, but do not dictate terms to subordinates. They only provide
framework within which decisions are to be made by the management in various areas. Hence an organization may have
recruitment policy, price policy, advertisement policy etc.,
Types of policies:
Policies may be classified on the basis of sources, functions or organizational levels as shown in figure 5.6.
Figure. 5.6:Classification of policies
Originated policies are policies which are established formally. These policies are established by top managers for guiding the
decisions of their subordinates and also their own and are made available in the form of manuals. Appealed policies are those
which arise from the appeal made by a subordinate to his superior regarding the manner of handling a given situation. When
decisions are made by the supervisor on appeals made by the subordinates, they become precedents for further action. For
example a books dealer offers a discount of 10% on all text books. Suppose if an institution requests for a discount of 15% and
prepared to pay full amount in advance, the sales manager not knowing what to do may approach his superior for his advice. If the
superior accepts the proposal for 15% discount, the decision of the superior become a guideline for the sales manager in future.
This policy is an appealed policy because it comes into existence from the appeal made by the subordinate to the superior. The
policies which are stated neither in writing nor verbally are known as implied policies. The presence of implied policies can be
ascertained by watching the actual behavior of various superiors in specific situations. For example if company‘s residential
quarters are repeatedly allotted to individuals on the basis of seniority, this may become implied policy. On the basis of business
function policies may be classified into production, sales, finance, personnel policies etc. Every one of these function may have a
number of policies. For example the personnel function may have recruitment policy, promotion policy and finance function may
have policies related to capital structure, dividend payment etc., On the basis of organizational level policies may range from major
company policies through major departmental policy to minor or derivative policies applicable to smallest segment of the
organization.
PROCEDURES
Policies are carried out by means of more detailed guidelines called procedures. A procedure provides a detailed set of
instructions for performing a sequence of actions involved in doing a certain piece of work. A procedure is a list of systematic steps
for handling activities that occur regularly. The same steps are followed each time that activity is performed. A streamlined,
simplified and sound procedure helps to accelerate clerical work without duplication and waste of efforts and other resources.
Difference between policies and procedures can be explained by means of an example. A company may adopt a policy of
centralized recruitment and selection through human resource department. The personnel department may chalk out the
procedure of recruitment and selection. The procedure may consist of several steps like inviting application, preliminary interview
aptitude and other tests, final interview, medical examination and issue of appointment orders. The following are advantages of
procedures.
(1) They indicate a standard way of performing a task.
(2) They result in simplification and elimination of waste.
(3) Procedure improves the efficiency of employees.
(4) Procedure serves as a tool of control by enabling managers to evaluate the performance of their subordinates.
METHODS
A method is a prescribed way in which one step of procedure is to be performed. A method is thus a component part of procedure.
It means an established manner of doing an operation. Medical examination is a part of recruitment and selection procedure,
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method indicate the manner of conducting medical examination. Methods help in increasing the effectiveness and usefulness of
procedures. By improving methods, reduced fatigue, better productivity and lower costs can be achieved. Methods can be
improved by eliminating wastes by conducting ―motion study‖.
RULES
The rules are the simplest and most specific type of standing plans. Every organization attempts to operate in an orderly way by
laying down certain rules. Rules are detailed and recorded instructions that a specific action must or must not be performed in a
given situation. Rules are more rigid than policies. Rules generally pertain to the administrative area of a procedure. For example
sanctioning overtime wages to workers, sanctioning travelling bills etc., need uniform way of handling them. These are all covered
by rules of the enterprises. A rule may not be part of procedure. For example ‗no smoking‘ is not related to any procedure. Rules
demand strict compliance. Their violation is generally associated with some sort of disciplinary action.
SINGLE USE PLANS
PROGRAMME
A programme is a sequence of activities directed towards the achievement of certain objectives. A programme is action based and
result oriented. A programme lays down the definite steps which will be taken to accomplish a given task. It also lays down the time
to be taken for completion of each step. The essential ingredients of every programme are time phasing and budgeting. This
means that specific dates should be laid down for the completion of each successive stage of programme. In addition a provision
should be made in the budget for financing the programme. A programme might include such general activity as purchasing new
machines or introducing new product in the market. Thus a programme is a complex of objective, policies, procedures, task
assignments, steps to be taken, resources to be employed and other elements to carry out a given course of action.
BUDGETS
A budget is a single use plan since it is drafted for a particular period of time. A budget is a statement of expected results
expressed in quantitative terms i.e. rupees, man hours, product units etc. Since it is a statement of expected results, it is also used
as an instrument of managerial control. It provides a standard by which actual operations can be measured and variation could be
controlled. One should not forget that making budget is clearly planning. The important budgets are sales budgets, production
budgets, cash budgets, and revenue and expenses budgets.
STEPS IN PLANNING
The planning process is different from one plan to another and one organization to another. The steps generally involved in
planning are as follows:
(1) Establishing goals/objectives: The first step in planning process is to determine the enterprise objectives. These are set by
upper level managers after number of objectives has been carefully considered. The objective set depends on the number of
factors like mission of the organization, abilities of the organization etc., Once the organizations objectives are determined, the
section wise or department wise objectives are planned at the lower level. Defining the objectives of every department is a very
essential one; then only clear cut direction is available to the departments. Control process is very easy if the objectives are clearly
defined.
(2) Establishing planning premises: This is the second step in planning which involves establishing planning premises that is the
conditions under which planning activities will be undertaken. Planning premises are planning assumptions—the expected
environmental factors, pertinent facts and information relating to the future such as general economic conditions, population trends,
competitive behavior etc.
The planning premises can be classified as below:
(1) Internal and External premises.
(2) Tangible and Intangible premises.
(3) Controllable and non-controllable premises.
Internal and External premises: Premises may exist within or outside the enterprise. Internal premises include sales forecasts,
ability of the organization in the form of machines, methods of design, behavior of the owners and employees etc., The external
premises exists outside the enterprise and include general business and economic environment, technological changes,
government policies and regulations, population growth etc.,
Tangible and Intangible premises: Tangible premises are those which can be quantified. They include population growth, industry
demand, capital and resources invested etc., On the other hand political stabilities, sociological factors, attitudes and behavior of
the owners etc., are intangible premises.
Controllable and non-controllable premises: Some of the planning premises are controllable and others are non-controllable. Some
examples of non-controllable factors are strikes, wars, natural calamity, legislation etc., Because of the presence of noncontrollable factors; organizations have to revise plans periodically in accordance with current development. The controllable
factors are availability of resources, skill of managers and labor etc.,
(3) Deciding the planning period: Once the long term objectives and planning premises are decided, the next task is to decide
the period of the plan. Some plans are made for a year and in others it will be decades. Companies generally base their period on
a future that can reasonably be anticipated. The factors which influence the choice of a period are:
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(a) Lead time in development and commercialization of a new product: An aircraft building company planning to start a new project
should have a planning period of five to ten years where as a small manufacturer of spare parts who can commercialize his idea in
a year or so makes annual plans.
(b) Time required for recovering capital investment or the payback period:
The payback period also influence the planning period. For example, if
a machine costs 50 dollars and generates cash inflow of 10 dollars a year, it has a payback period of 5 years. Therefore the plans
should also be for at least five years.
(c) Length of commitment already made: The plan period should be long enough to enable the fulfillment of already made
commitments. For example if a company has agreed to supply goods for five years, it needs to plan for the same period to fulfill its
commitments.
(4) Identification of alternatives: The fourth step in planning is identifying alternatives. A particular objective can be achieved
through various actions. For example an organization‘s objective is to grow further which can be achieved in several ways like
expanding in the same field of business or product line, diversifying in other areas, joining hands with other organization and so on.
With each category there may be several alternatives. For example, diversification may point out the possibility of entering into one
of the several fields.
(5) Evaluation and selection of alternative: Once the alternatives are identified the next step is to evaluate the alternatives in the
light of the premises and goals and to select the best course or courses of action. This is done with the help of quantitative
techniques and operations research. In addition software packages are available for evaluating alternatives.
(6) Developing derivative/supportive plans: Once the plan is selected, various plans are derived so as it support the main plan.
The derivative may be planning for buying equipments, buying raw material etc. These derivative plans are formulated out of the
main plan and therefore, they support.
(7) Measuring and controlling the process: One should not allow plan to run on its own without monitoring its progress.
Managers need to check the progress of their plans so that remedial action can be taken to make plan work or change the plan if it
is unrealistic. Hence process of controlling is a part of any plan.
CHAPTER SUMMARY
Planning is the first and foremost function of management Planning is deciding in advance what to do, when to do, how to do and
who is to do it. It is in essence the exercise of foresight. The nature of planning may be understood in terms of it being a rational
approach, open system, flexibility and pervasiveness. Planning can be classified on the basis of coverage of activities, importance
of contents in planning, proach adopted in planning process, time dimension and degree of formalization and so on. Plans are
classified into standing plans and single use plans. Single use plans (programmes, projects, budgets) are for non-repetitive
activities and standing plans (mission, objectives, strategies, policies and procedures) are for repetitive activities. The steps
involved in planning process are establishing goals/objectives, establishing planning premises, deciding the planning period,
identifying alternatives, evaluation and selection of alternative, developing derivative/supportive plans, and measuring and
controlling process. Decision making is selecting the best among alternative courses of action. Decisions may be classified as
programmed and non-programmed decisions, major and minor decisions, simple and complex decisions, strategic and operational
(tactical) decisions. The environment of decision may be of three types; certainty, risk and uncertainty.
REVIEW QUESTIONS
(1) Briefly discuss the nature of planning.
(2) Explain in brief the importance of planning.
(3) Discuss the strategic and tactical planning.
(4) Write a note on hierarchy of plan.
(5) Discuss the steps in planning.
(6) Explain in brief planning premises.
(7) Enumerate requirements of sound objectives.
(8) Write a note on characteristics of objectives.
(9) Explain in brief standing and single use plans.
(10) Discuss different types of decisions.
(11) Explain in brief the steps involved in rational decision making.
(12) Write a note on decision making environment.
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CHAPTER SIX
MANAGERS AS DECISION MAKERS
LEARNING OBJECTIVES
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Describe the steps in the decision-making process.
Explain the four ways managers make decisions.
Classify decisions and decision making conditions.
Describe different decision-making styles and discuss how biases affect decision making.
Identify effective decision-making techniques.
INTRODUCTION
Like managers everywhere, Thierry Coup needs to make decisions as he manages. Decision making is the essence of
management. It‘s what managers do (or try to avoid). And all managers would like to make good decisions because they‘re judged
on the outcomes of those decisions. In this chapter, we examine the concept of decision making and how managers make
decisions.
THE DECISION-MAKING PROCESS
It was the type of day that airline managers dread. A record-setting blizzard was moving up the East Coast, covering roads,
railroads, and airport runways with as much as 27 inches of snow. One of the major airlines that would have to deal with the storm,
American Airlines, ―has almost 80,000 employees who help make flights possible and four who cancel them.‖ Danny Burgin, who
works at the company‘s Fort Worth, Texas, control center, is one of those four. But fortunately for Danny, snowstorms are fairly
simple to deal with because they‘re usually ―easier to predict and airline crews can work around them quickly with deicers and
snowplows.‖ But still, even this doesn‘t mean that the decisions he has to make are easy, especially when his decisions affect
hundreds of flights and thousands of passengers! Although most decisions managers make don‘t involve the weather, you can see
that decisions play an important role in what an organization has to do or is able to do.
Managers at all levels and in all areas of organizations make decisions. That is, they make choices. For instance, top-level
managers make decisions about their organization‘s goals, where to locate manufacturing facilities, or what new markets to move
into. Middle and lower-level managers make decisions about production schedules, product quality problems, pay raises, and
employee discipline. Making decisions isn‘t something that just managers do; all organizational members make decisions that
affect their jobs and the organization they work for. But our focus in this chapter is on how managers make decisions.
Although decision making is typically described as choosing among alternatives, that view is too simplistic. Why? Because decision
making is (and should be) a process, not just a simple act of choosing among alternatives.3 Even for something as straightforward
as deciding where to go for lunch, you do more than just choose burgers or pizza. Granted, you may not spend a lot of time
contemplating your lunch decision, but you still go through the process when making that decision. This process is as relevant to
personal decisions as it is to corporate decisions. Let‘s use an example—a manager deciding what laptop computers to
purchase—to illustrate the steps in the process.
Step 1: Identifying a Problem
Your team is dysfunctional, your customers are leaving, or your plans are no longer relevant. Every decision starts with a problem,
a discrepancy between an existing and a desired condition. Also, keep in mind that problem identification is subjective. What one
manager considers a problem might not be considered a problem by another manager. In addition, a manager who resolves the
wrong problem perfectly is likely to perform just as poorly as the manager who doesn‘t even recognize a problem and does
nothing. As you can see, effectively identifying problems is important, but not easy.
Step 2: Identifying Decision Criteria
Once a manager has identified a problem, he or she must identify the decision criteria that are important or relevant to resolving
the problem. Every decision maker has criteria guiding his or her decisions even if they‘re not explicitly stated. In our example,
Amanda decides after careful consideration that memory and storage capabilities, display quality, battery life, warranty, and
carrying weight are the relevant criteria in her decision.
Step 3: Allocating Weights to the Criteria
If the relevant criteria aren‘t equally important, the decision maker must weight the items in order to give them the correct priority in
the decision. How? A simple way is to give the most important criterion a weight of 10 and then assign weights to the rest using
that standard. Of course, you could use any number as the highest weight.
Step 4: Developing Alternatives
The fourth step in the decision-making process requires the decision maker to list viable alternatives that could resolve the
problem. In this step, a decision maker needs to be creative. And the alternatives are only listed, not evaluated just yet.
Step 5: Analyzing Alternatives
Once alternatives have been identified, a decision maker must evaluate each one. How? By using the criteria established in Step
2. Keep in mind that these data represent an assessment of the eight alternatives using the decision criteria, but not the weighting.
When you multiply each alternative by the assigned weight, you get the weighted alternatives. The total score for each alternative,
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then, is the sum of its weighted criteria. Sometimes a decision maker might be able to skip this step. If one alternative scores
highest on every criterion, you wouldn‘t need to consider the weights because that alternative would already be the top choice. Or if
the weights were all equal, you could evaluate an alternative merely by summing up the assessed values for each one.
Step 6: Selecting an Alternative
The sixth step in the decision-making process is choosing the best alternative or the one that generated the highest total in Step 5.
Step 7: Implementing the Alternative
In step 7 in the decision-making process, you put the decision into action by conveying it to those affected and getting their
commitment to it. We know that if the people who must implement a decision participate in the process, they‘re more likely to
support it than if you just tell them what to do. Another thing managers may need to do during implementation is reassess the
environment for any changes, especially if it‘s a long-term decision. Are the criteria, alternatives, and choice still the best ones, or
has the environment changed in such a way that we need to reevaluate?
Step 8: Evaluating Decision Effectiveness
The last step in the decision-making process involves evaluating the outcome or result of the decision to see whether the problem
was resolved. If the evaluation shows that the problem still exists, then the manager needs to assess what went wrong. Was the
problem incorrectly defined? Were errors made when evaluating alternatives? Was the right alternative selected but poorly
implemented? The answers might lead you to redo an earlier step or might even require starting the whole process over.
MANAGERS MAKING DECISIONS
Although everyone in an organization makes decisions, decision making is particularly important to managers. In fact, that‘s why
we say that decision making is the essence of management. And that‘s why managers—when they plan, organize, lead, and
control—are called decision makers. The fact that almost everything a manager does involves making decisions doesn‘t mean that
decisions are always time-consuming, complex, or evident to an outside observer. Most decision making is routine. For instance,
every day of the year you make a decision about what to eat for dinner. It‘s no big deal. You‘ve made the decision thousands of
times before. It‘s a pretty simple decision and can usually be handled quickly. It‘s the type of decision you almost forget is a
decision. And managers also make dozens of these routine decisions every day, such as, for example, which employee will work
what shift next week, what information should be included in a report, or how to resolve a customer‘s complaint. Keep in mind that
even though a decision seems easy or has been faced by a manager a number of times before, it still is a decision. Let‘s look at
four perspectives on how managers make decisions.
MAKING DECISIONS: RATIONALITY
When Hewlett-Packard (HP) acquired Compaq, the company did no research on how customers viewed Compaq products until
―months after then-CEO Carly Fiorina publicly announced the deal and privately warned her top management team that she didn‘t
want to hear any dissent pertaining to the acquisition.‖ By the time they discovered that customers perceived Compaq products as
inferior—just the opposite of what customers felt about HP products—it was too late. HP‘s performance suffered and Fiorina lost
her job. We assume that managers will use rational decision making; that is, they‘ll make logical and consistent choices to
maximize value. After all, managers have all sorts of tools and techniques to help them be rational decision makers. But as the HP
example illustrates, managers aren‘t always rational. What does it mean to be a ―rational‖ decision maker?
ASSUMPTIONS OF RATIONALITY.
A rational decision maker would be fully objective and logical. The problem faced would be clear and unambiguous, and the
decision maker would have a clear and specific goal and know all possible alternatives and consequences. Finally, making
decisions rationally would consistently lead to selecting the alternative that maximizes the likelihood of achieving that goal. These
assumptions apply to any decision—personal or managerial. However, for managerial decision making, we need to add one
additional assumption—decisions are made in the best interests of the organization. These assumptions of rationality aren‘t very
realistic, but the next concept can help explain how most decisions get made in organizations.
MAKING DECISIONS: BOUNDED RATIONALITY
Despite the unrealistic assumptions, managers are expected to be rational when making decisions.10 They understand that ―good‖
decision makers are supposed to do certain things and exhibit good decision-making behaviors as they identify problems, consider
alternatives, gather information, and act decisively but prudently. When they do so, they show others that they‘re competent and
that their decisions are the result of intelligent deliberation. However, a more realistic approach to describing how managers make
decisions is the concept of bounded rationality, which says that managers make decisions rationally, but are limited (bounded) by
their ability to process information. Because they can‘t possibly analyze all information on all alternatives, managers satisfice,
rather than maximize. That is, they accept solutions that are ―good enough.‖ They‘re being rational within the limits (bounds) of
their ability to process information. Let‘s look at an example.
Suppose that you‘re a finance major and upon graduation you want a job, preferably as a personal financial planner, with a
minimum salary of $35,000 and within a hundred miles of your hometown. You accept a job offer as a business credit analyst—not
exactly a personal financial planner but still in the finance field—at a bank 50 miles from home at a starting salary of $34,000. If you
had done a more comprehensive job search, you would have discovered a job in personal financial planning at a trust company
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only 25 miles from your hometown and starting at a salary of $38,000. You weren‘t a perfectly rational decision maker because you
didn‘t maximize your decision by searching all possible alternatives and then choosing the best. But because the first job offer was
satisfactory (or ―good enough‖), you behaved in a bounded rationality manner by accepting it.
Most decisions that managers make don‘t fit the assumptions of perfect rationality, so they satisfice. However, keep in mind that
their decision making is also likely influenced by the organization‘s culture, internal politics, power considerations, and by a
phenomenon called escalation of commitment, which is an increased commitment to a previous decision despite evidence that it
may have been wrong. The Challenger space shuttle disaster is often used as an example of escalation of commitment. Decision
makers chose to launch the shuttle that day even though the decision was questioned by several individuals who believed that it
was a bad one. Why would decision makers escalate commitment to a bad decision? Because they don‘t want to admit that their
initial decision may have been flawed. Rather than search for new alternatives, they simply increase their commitment to the
original solution.
MAKING DECISIONS: THE ROLE OF INTUITION
When managers at stapler-maker Swingline saw the company‘s market share declining, they used a logical scientific approach to
address the issue. For three years, they exhaustively researched stapler users before deciding what new products to develop.
However, at Accentra, Inc., founder Todd Moses used a more intuitive decision approach to come up with his line of unique
PaperPro staplers.
Like Todd Moses, managers often use their intuition to help their decision making. What is intuitive decision making? It‘s making
decisions on the basis of experience, feelings, and accumulated judgment. Researchers studying managers‘ use of intuitive
decision making have identified five different aspects of intuition. How common is intuitive decision making? One survey found that
almost half of the executives surveyed ―used intuition more often than formal analysis to run their companies.‖
Intuitive decision making can complement both rational and bounded rational decision making. First of all, a manager who has had
experience with a similar type of problem or situation often can act quickly with what appears to be limited information because of
that past experience. In addition, a recent study found that individuals who experienced intense feelings and emotions when
making decisions actually achieved higher decision-making performance, especially when they understood their feelings as they
were making decisions. The old belief that managers should ignore emotions when making decisions may not be the best advice.
MAKING DECISIONS: THE ROLE OF EVIDENCE-BASED MANAGEMENT
Suppose you were exhibiting some strange, puzzling physical symptoms. In order to make the best decisions about proper
diagnosis and treatment, wouldn‘t you want your doctor to base her decisions on the best available evidence? Now suppose that
you‘re a manager faced with putting together an employee recognition program. Wouldn‘t you want those decisions also to be
based on the best available evidence? ―Any decision making process is likely to be enhanced through the use of relevant and
reliable evidence, whether it‘s buying someone a birthday present or wondering which new washing machine to buy.‖18 That‘s the
premise behind evidence-based management (EBMgt), which is the ―systematic use of the best available evidence to improve
management practice.‖
EBMgt is quite relevant to managerial decision making. The four essential elements of EBMgt are the decision maker‘s expertise
and judgment; external evidence that‘s been evaluated by the decision maker; opinions, preferences, and values of those who
have a stake in the decision; and relevant organizational (internal) factors such as context, circumstances, and organizational
members. The strength or influence of each of these elements on a decision will vary with each decision. Sometimes, the decision
maker‘s intuition (judgment) might be given greater emphasis in the decision; other times it might be the opinions of stakeholders;
and at other times, it might be ethical considerations (organizational context). The key for managers is to recognize and understand
the mindful, conscious choice as to which element(s) are most important and should be emphasized in making a decision.
TYPES OF DECISIONS AND DECISION-MAKING CONDITIONS
Restaurant managers in New York City make routine decisions weekly about purchasing food supplies and scheduling employee
work shifts. It‘s something they‘ve done numerous times. But now they‘re facing a different kind of decision—one they‘ve never
encountered—how to adapt to the new law requiring that nutritional information be posted.
TYPES OF DECISIONS
Such situations aren‘t all that unusual. Managers in all kinds of organizations face different types of problems and decisions as they
do their jobs. Depending on the nature of the problem, a manager can use one of two different types of decisions.
STRUCTURED PROBLEMS AND PROGRAMMED DECISIONS.
Some problems are straightforward. The decision maker‘s goal is clear, the problem is familiar, and information about the problem
is easily defined and complete. Examples might include when a customer returns a purchase to a store, when a supplier is late with
an important delivery, a news team‘s response to a fast-breaking event, or a college‘s handling of a student wanting to drop a
class. Such situations are called structured problems because they‘re straightforward, familiar, and easily defined. For instance,
a server spills a drink on a customer‘s coat. The customer is upset and the manager needs to do something. Because it‘s not an
unusual occurrence, there‘s probably some standardized routine for handling it. For example, the manager offers to have the coat
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cleaned at the restaurant‘s expense. This is what we call a programmed decision, a repetitive decision that can be handled by a
routine approach. Because the problem is structured, the manager doesn‘t have to go to the trouble and expense of going through
an involved decision process. The ―develop-the-alternatives‖ stage of the decision-making process either doesn‘t exist or is given
little attention. Why? Because once the structured problem is defined, the solution is usually self-evident or at least reduced to a
few alternatives that are familiar and have proved successful in the past. The spilled drink on the customer‘s coat doesn‘t require
the restaurant manager to identify and weight decision criteria or to develop a long list of possible solutions. Instead, the manager
relies on one of three types of programmed decisions: procedure, rule, or policy.
A procedure is a series of sequential steps a manager uses to respond to a structured problem. The only difficulty is identifying the
problem. Once it‘s clear, so is the procedure. For instance, a purchasing manager receives a request from a warehouse manager
for 15 PDA handhelds for the inventory clerks. The purchasing manager knows how to make this decision by following the
established purchasing procedure.
A rule is an explicit statement that tells a manager what can or cannot be done. Rules are frequently used because they‘re simple
to follow and ensure consistency. For example, rules about lateness and absenteeism permit supervisors to make disciplinary
decisions rapidly and fairly.
The third type of programmed decisions is a policy, which is a guideline for making a decision. In contrast to a rule, a policy
establishes general parameters for the decision maker rather than specifically stating what should or should not be done. Policies
typically contain an ambiguous term that leaves interpretation up to the decision maker. Here are some sample policy statements:
_ The customer always comes first and should always be satisfied.
_ We promote from within, whenever possible.
_ Employee wages shall be competitive within community standards.
Notice that the terms satisfied, whenever possible, and competitive require interpretation. For instance, the policy of paying
competitive wages doesn‘t tell a company‘s human resources manager the exact amount he or she should pay, but it does guide
them in making the decision.
UNSTRUCTURED PROBLEMS AND NONPROGRAMMED DECISIONS.
Not all the problems managers face can be solved using programmed decisions. Many organizational situations involve
unstructured problems, which are problems that are new or unusual and for which information is ambiguous or incomplete.
Whether to build a new manufacturing facility in China is an example of an unstructured problem. So, too, is the problem facing
restaurant managers in New York City who must decide how to modify their businesses to comply with the new law. When
problems are unstructured, managers must rely on nonprogrammed decision making in order to develop unique solutions.
Nonprogrammed decisions are unique and nonrecurring and involve custom-made solutions.
Lower-level managers mostly rely on programmed decisions (procedures, rules, and policies) because they confront familiar and
repetitive problems. As managers move up the organizational hierarchy, the problems they confront become more unstructured.
Why? Because lower-level managers handle the routine decisions and let upper-level managers deal with the unusual or difficult
decisions. Also, upper-level managers delegate routine decisions to their subordinates so they can deal with more difficult issues.
Thus, few managerial decisions in the real world are either fully programmed or nonprogrammed. Most fall somewhere in between.
DECISION-MAKING CONDITIONS
When making decisions, managers may face three different conditions: certainty, risk, and uncertainty. Let‘s look at the
characteristics of each.
CERTAINTY.
The ideal situation for making decisions is one of certainty, which is a situation where a manager can make accurate decisions
because the outcome of every alternative is known. For example, when North Dakota‘s state treasurer decides where to deposit
excess state funds, he knows exactly the interest rate being offered by each bank and the amount that will be earned on the funds.
He is certain about the outcomes of each alternative. As you might expect, most managerial decisions aren‘t like this.
RISK.
A far more common situation is one of risk, conditions in which the decision maker is able to estimate the likelihood of certain
outcomes. Under risk, managers have historical data from past personal experiences or secondary information that lets them
assign probabilities to different alternatives. Let‘s do an example.
Suppose that you manage a Colorado ski resort and you‘re thinking about adding another lift. Obviously, your decision will be
influenced by the additional revenue that the new lift would generate, which depends on snowfall. You have fairly reliable weather
data from the last 10 years on snowfall levels in your area—three years of heavy snowfall, five years of normal snowfall, and two
years of light snow. And you have good information on the amount of revenues generated during each level of snow. You can use
this information to help you make your decision by calculating expected value—the expected return from each possible outcome—
by multiplying expected revenues by snowfall probabilities. The result is the average revenue you can expect over time if the given
probabilities hold.
UNCERTAINTY.
What happens if you face a decision where you‘re not certain about the outcomes and can‘t even make reasonable probability
estimates? We call this condition uncertainty. Managers do face decision-making situations of uncertainty. Under these
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conditions, the choice of alternative is influenced by the limited amount of available information and by the psychological orientation
of the decision maker. An optimistic manager will follow a maximax choice (maximizing the maximum possible payoff); a pessimist
will follow a maximin choice (maximizing the minimum possible payoff); and a manager who desires to minimize his maximum
―regret‖ will opt for a minimax choice.
DECISION-MAKING STYLES
William D. Perez‘s tenure as Nike‘s CEO lasted a short and turbulent 13 months. Analysts attributed his abrupt dismissal to a
difference in decision-making approaches between him and Nike co-founder Phil Knight. Perez tended to rely more on data and
facts when making decisions, whereas Knight highly valued, and had always used, his judgment and feelings to make decisions.23
As this example clearly shows, managers have different styles when it comes to making decisions.
LINEAR–NONLINEAR THINKING STYLE PROFILE
Suppose that you‘re a new manager. How will you make decisions? Recent research done with four distinct groups of people says
that the way a person approaches decision making is likely affected by his or her thinking style.24Your thinking style reflects two
things: (1) the source of information you tend to use (external data and facts OR internal sources such as feelings and intuition),
and (2) whether you process that information in a linear way (rational, logical, analytical) OR a nonlinear way (intuitive, creative,
insightful). These four dimensions are collapsed into two styles. The first, linear thinking style, is characterized by a person‘s
preference for using external data and facts and processing this information through rational, logical thinking to guide decisions and
actions. The second, nonlinear thinking style, is characterized by a preference for internal sources of information (feelings and
intuition) and processing this information with internal insights, feelings, and hunches to guide decisions and actions. Look back at
the earlier Nike example and you‘ll see both styles described. Managers need to recognize that their employees may use different
decision-making styles. Some employees may take their time weighing alternatives and relying on how they feel about it while
others rely on external data before logically making a decision. These differences don‘t make one person‘s approach better than
the other. It just means that their decision making styles are different.
DECISION-MAKING BIASES AND ERRORS
When managers make decisions, they not only use their own particular style, they may use ―rules of thumb,‖ or heuristics, to
simplify their decision making. Rules of thumb can be useful because they help make sense of complex, uncertain, and ambiguous
information. Even though managers may use rules of thumb, that doesn‘t mean those rules are reliable. Why? Because they may
lead to errors and biases in processing and evaluating information. Let‘s look at each.
When decision makers tend to think they know more than they do or hold unrealistically positive views of themselves and their
performance, they‘re exhibiting the overconfidence bias. The immediate gratification bias describes decision makers who tend to
want immediate rewards and to avoid immediate costs. For these individuals, decision choices that provide quick payoffs are more
appealing than those with payoffs in the future.
The anchoring effect describes how decision makers fixate on initial information as a starting point and then, once set, fail to
adequately adjust for subsequent information. First impressions, ideas, prices, and estimates carry unwarranted weight relative to
information received later. When decision makers selectively organize and interpret events based on their biased perceptions,
they‘re using the selective perception bias. This influences the information they pay attention to, the problems they identify, and the
alternatives they develop. Decision makers who seek out information that reaffirms their past choices and discount information that
contradicts past judgments exhibit the confirmation bias. These people tend to accept at face value information that confirms their
preconceived views and are critical and skeptical of information that challenges these views. The framing bias is when decision
makers select and highlight certain aspects of a situation while excluding others.
By drawing attention to specific aspects of a situation and highlighting them, while at the same time downplaying or omitting other
aspects, they distort what they see and create incorrect reference points. The availability bias happens when decisions makers
tend to remember events that are the most recent and vivid in their memory. The result? It distorts their ability to recall events in an
objective manner and results in distorted judgments and probability estimates. When decision makers assess the likelihood of an
event based on how closely it resembles other events or sets of events, that‘s the representation bias. Managers exhibiting this
bias draw analogies and see identical situations where they don‘t exist. The randomness bias describes the actions of decision
makers who try to create meaning out of random events. They do this because most decision makers have difficulty dealing with
chance even though random events happen to everyone and there‘s nothing that can be done to predict them. The sunk costs
error occurs when decision makers forget that current choices can‘t correct the past. They incorrectly fixate on past expenditures of
time, money, or effort in assessing choices rather than on future consequences. Instead of ignoring sunk costs, they can‘t forget
them. Decision makers who are quick to take credit for their successes and to blame failure on outside factors are exhibiting the
self-serving bias. Finally, the hindsight bias is the tendency for decision makers to falsely believe that they would have accurately
predicted the outcome of an event once that outcome is actually known. Managers avoid the negative effects of these decision
errors and biases by being aware of them and then not using them! Beyond that, managers also should pay attention to ―how‖ they
make decisions and try to identify the heuristics they typically use and critically evaluate how appropriate those heuristics are.
Finally, managers might want to ask trusted individuals around them to help them identify weaknesses in their decision-making
style and try to improve on those weaknesses.
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OVERVIEW OF MANAGERIAL DECISION MAKING
It‘s in their best interests, managers want to make good decisions—that is, choose the ―best‖ alternative, implement it, and
determine whether it takes care of the problem, which is the reason the decision was needed in the first place. Their decisionmaking process is affected by four factors: the decision-making approach, the type of problem, decision-making conditions, and
their decision-making style. In addition, certain decision-making errors and biases may impact the process. Each factor plays a role
in determining how the manager makes a decision. So whether that decision involves addressing an employee‘s habitual tardiness,
resolving a product quality problem, or determining whether to enter a new market, remember that it has been shaped by a number
of factors.
EFFECTIVE DECISION MAKING IN TODAY‘S WORLD
Per Carlsson, a product development manager at IKEA, ―spends his days creating Volvostyle kitchens at Yugo prices.‖ His job is to
take the ―problems‖ identified by the company‘s product-strategy council (a group of globe-trotting senior managers that monitors
consumer trends and establishes product priorities) and turn them into furniture that customers around the world want to buy. One
―problem‖ recently identified by the council: the kitchen has replaced the living room as the social and entertaining center in the
home. Customers are looking for kitchens that convey comfort and cleanliness while still allowing them to pursue their gourmet
aspirations. Carlsson must take this information and make things happen. There are a lot of decisions to make—programmed and
nonprogrammed—and the fact that IKEA is a global company makes it even more challenging. Comfort in Asia means small, cozy
appliances and spaces, while North American customers want oversized glassware and giant refrigerators. His ability to make
good decisions quickly has significant implications for IKEA‘s success.
Today‘s business world revolves around making decisions, often risky ones, usually with incomplete or inadequate information, and
under intense time pressure. Most managers make one decision after another; and as if that weren‘t challenging enough, more is
at stake than ever before. Bad decisions can cost millions. What do managers need to do to make effective decisions in today‘s
fast-moving world? Here are some guidelines.
_ Understand cultural differences. Managers everywhere want to make good decisions. However, is there only one ―best‖ way
worldwide to make decisions? Or does the ―best way depend on the values, beliefs, attitudes, and behavioral patterns of the
people involved?‖
_ Know when it‘s time to call it quits. When it‘s evident that a decision isn‘t working, don‘t be afraid to pull the plug. For instance,
the CEO of L.L.Bean pulled the plug on building a new customer call center in Waterville, Maine—―literally stopping the bulldozers
in their tracks‖—after T-Mobile said it was building its own call center right next door. He was afraid that the city would not have
enough qualified workers for both companies and so decided to build 55 miles away in Bangor.30 He knew when it was time to call
it quits. However, as we said earlier, many decision makers block or distort negative information because they don‘t want to believe
that their decision was bad. They become so attached to a decision that they refuse to recognize when it‘s time to move on. In
today‘s dynamic environment, this type of thinking simply won‘t work.
_ Use an effective decision-making process. Experts say an effective decision-making process has these six characteristics: (1) It
focuses on what‘s important; (2) It‘s logical and consistent; (3) It acknowledges both subjective and objective thinking and blends
analytical with intuitive thinking; (4) It requires only as much information and analysis as is necessary to resolve a particular
dilemma; (5) It encourages and guides the gathering of relevant information and informed opinion; and (6) It‘s straightforward,
reliable, easy to use, and flexible.‖
_ Build an organization that can spot the unexpected and quickly adapt to the changed environment. This suggestion comes from
Karl Weick, an organizational psychologist, who has made a career of studying organizations and how people work. He calls such
organizations highly reliable organizations (HROs) and says they share five habits. (1) They‘re not tricked by their success. HROs
are preoccupied with their failures. They‘re alert to the smallest deviations and react quickly to anything that doesn‘t fit with their
expectations. He talks about Navy aviators who describe ―leemers—a gut feeling that something isn‘t right.‖ Typically, these
leemers turn out to be accurate. Something, in fact, is wrong. Organizations need to create climates where people feel safe trusting
their leemers. (2) They defer to the experts on the front line. Frontline workers—those who interact day in and day out with
customers, products, suppliers, and so forth—have firsthand knowledge of what can and cannot be done, what will and will not
work. Get their input. Let them make decisions. (3) They let unexpected circumstances provide the solution. One of Weick‘s better
known works is his study of the Mann Gulch fire in Montana that killed 13 smoke jumpers in 1949. The event was a massive, tragic
organizational failure. However, the reaction of the foreman illustrates how effective decision makers respond to unexpected
circumstances. When the fire was nearly on top of his men, he invented the escape fire—a small fire that consumed all the brush
around the team, leaving an area where the larger fire couldn‘t burn. His action was contrary to everything firefighters are taught
(that is, you don‘t start fires—you extinguish them), but at the time it was the best decision. (4) They embrace complexity. Because
business is complex, these organizations recognize that it ―takes complexity to sense complexity.‖
Rather than simplifying data, which we instinctively try to do when faced with complexity, these organizations aim for deeper
understanding of the situation. They ask ―why‖ and keep asking why as they probe more deeply into the causes of the problem and
possible solutions. (5) Finally, they anticipate, but also recognize their limits. These organizations do try to anticipate as much as
possible, but they recognize that they can‘t anticipate everything. As Weick says, they don‘t ―think, then act. They think by acting.
By actually doing things, you‘ll find out what works and what doesn‘t.‖
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Making decisions in today‘s fast-moving world isn‘t easy. Successful managers need good decision-making skills to plan, organize,
lead, and control.
CHAPTER SUMMARY
.A decision is a choice. The decision-making process consists of eight steps: (1) identify problem; (2) identify decision criteria; (3)
weight the criteria; (4) develop alternatives; (5) analyze alternatives; (6) select alternative; (7) implement alternative; and (8)
evaluate decision effectiveness. The assumptions of rationality are as follows: the problem is clear and unambiguous; a single,
well-defined goal is to be achieved; all alternatives and consequences are known; and the final choice will maximize the payoff.
Bounded rationality says that managers make rational decisions but are bounded (limited) by their ability to process information.
Satisficing happens when decision makers accept solutions that are good enough. With escalation of commitment, managers
increase commitment to a decision even when they have evidence it may have been a wrong decision. Intuitive decision making
means making decisions on the basis of experience, feelings, and accumulated judgment. Using evidence based management; a
manager makes decisions based on the best available evidence. Programmed decisions are repetitive decisions that can be
handled by a routine approach and are used when the problem being resolved is straightforward, familiar, and easily defined
(structured). Nonprogrammed decisions are unique decisions that require a custom-made solution and are used when the
problems are new or unusual (unstructured) and for which information is ambiguous or incomplete. Certainty is a situation in which
a manager can make accurate decisions because all outcomes are known. Risk is a situation in which a manager can estimate the
likelihood of certain outcomes. Uncertainty is a situation in which a manager is not certain about the outcomes and can‘t even
make reasonable probability estimates. When decision makers face uncertainty, their psychological orientation will determine
whether they follow a maximax choice (maximizing the maximum possible payoff); a maximin choice (maximizing the minimum
possible payoff); or a minimax choice (minimizing the maximum regret—amount of money that could have been made if a different
decision had been made).
A person‘s thinking style reflects two things: the source of information you tend to use (external or internal) and how you process
that information (linear or nonlinear). These four dimensions were collapsed into two styles. The linear thinking style is
characterized by a person‘s preference for using external data and processing this information through rational, logical thinking.
The nonlinear thinking style is characterized by a preference for internal sources of information and processing this information with
internal insights, feelings, and hunches. The 12 common decision-making errors and biases include overconfidence, immediate
gratification, anchoring, selective perception, confirmation, framing, availability, representation, randomness, sunk costs, selfserving bias, and hindsight. The managerial decision making model helps explain how the decision-making process is used to
choose the best alternative(s) either through maximizing or satisficing and then implement and evaluate the alternative. It also
helps explain what factors affect the decision-making process including the decision-making approach (rationality, bounded
rationality, intuition), the types of problems and decisions (well-structured and programmed or unstructured and nonprogrammed),
the decision-making conditions (certainty, risk, uncertainty), and the decision maker‘s style (linear or nonlinear).
Managers can make effective decisions by understanding cultural differences in decision making, knowing when it‘s time to call it
quits, using an effective decision-making process, and building an organization that can spot the unexpected and quickly adapt to
the changed environment. An effective decision-making process (1) focuses on what‘s important; (2) is logical and consistent; (3)
acknowledges both subjective and objective thinking and blends both analytical and intuitive approaches; (4) requires only
―enough‖ information as is necessary to resolve a problem; (5) encourages and guides gathering relevant information and informed
opinions; and (6) is straightforward, reliable, easy to use, and flexible. The five habits of highly reliable organizations are (1) not
being tricked by their successes; (2) deferring to experts on the front line; (3) letting unexpected circumstances provide the
solution; (4) embracing complexity; and (5) anticipating, but also recognizing, limits.
REVIEW AND DISCUSSION QUESTIONS
1. Why is decision making often described as the essence of a manager‘s job?
2. Describe the eight steps in the decision-making process.
3. Compare and contrast the four ways managers make decisions.
4. How might an organization‘s culture influence the way managers make decisions?
5. Explain the two types of problems and decisions. Contrast the three decision-making conditions.
6. All of us bring biases to the decisions we make. What would be the drawbacks of having biases? Could there be any advantages
to having biases? Explain. What are the implications for managerial decision making?
7. Would you call yourself a linear or nonlinear thinker? What are the decision-making implications of these labels? What are the
implications for choosing where you want to work?
8. ―As managers use computers and software tools more often, they‘ll be able to make more rational decisions.‖ Do you agree or
disagree with this statement? Why?
9. How can managers blend the guidelines for making effective decisions in today‘s world with the rationality and bounded
rationality models of decision making, or can they? Explain.
10. Is there a difference between wrong decisions and bad decisions? Why do good managers sometimes make wrong decisions?
Bad decisions? How can managers improve their decision-making skills?
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CHAPTER SEVEN
ORGANIZING
LEARNING OBJECTIVES
By the end of this chapter you should be able to:
 To introduce the meaning of organizing.
 Present the characteristics of organizing.
 Discuss the nature and purpose of organizing.
 Present the principles of organization.
 Understand departmentation.
 Discuss types of organization.
 Understand span of control.
 Present delegation of authority.
INTRODUCTION
Organization is the foundation upon which the whole organization is built. Without efficient organization, no management can
perform its function smoothly. Sound organization contributes greatly to the continuity and the success of organization. A poor
organization structure makes good performance impossible, no matter how good the individuals are. The term organization
connotes different things to different people. For example to the sociologists, organization means a study of interactions of people,
classes or hierarchy of an enterprise. To the psychologists organization means an attempt to explain, predict and influence the
behaviour of individuals in an enterprise. The word ‗organization‘ is also used widely to connote a group of people and the structure
of relationships. In order to understand the meaning and characteristics of organization, we shall study it under the following heads:
(1) Organization as a group of persons.
(2) Organization as a structure of relationship.
(3) Organization as a function of management.
(4) Organization as a process.
(1) ORGANIZATION AS A GROUP OF PERSONS:
Organization is viewed as a group of people contributing their efforts towards certain goal. The concept of organizing began at
the early stages of human civilization when two or more persons began to cooperate and combine together for fulfilling their basic
needs of food, clothing, shelter and protection of life. Organization begins when people combine efforts for some common purpose.
Chester I Barnard defined organization ―as an identifiable group of people contributing their efforts. An organization comes into
existence when there are a number of persons in communication and relationship to each other and are willing to contribute
towards a common Endeavour. The group of people lay down rules and regulations and the formal structure or relationship among
themselves‖.
(2) ORGANIZATION AS A STRUCTURE OF RELATIONSHIPS:
Some people view organization as a structure of relationship. Organization sets up the scope of activities of the enterprise by
laying down the structure of relationships. If organization is merely recognized as ‗structure‘, it will be viewed as a static thing used
to explain formal relationships. But an organization is a ‗dynamic‘ entity consisting of individuals, means, objectives and
relationships among the individuals. However, the use of the term structure to denote organization is not used independently, but is
combined with the term organization either in the form of organization structure or structure of organization.
(3) ORGANIZATION AS A FUNCTION OF MANAGEMENT:
Organization is one of the basic functions of management. It involves determination and provision of various resources for the
achievement of predetermined goal. Thus, organization is defined as a process of integrating and coordinating the efforts of
human, financial and other resources for the accomplishment of certain objectives. Like ‗planning‘, organizing is also applied in
every aspect of management, For example organization is necessary for planning, development, for formulation of plans and
policies.
(4) ORGANIZATION AS A PROCESS:
Organization is the process of establishing relationship among the members of the organization. Using this process organization
structure is crated. The relationships are created in terms of authority and responsibility. Each person in the organization is
assigned specific responsibility or duty to perform and is granted the corresponding authority to perform his duty.
According to Louise A Allen, ―Organization involves identification and grouping of activities to be performed and dividing them
among the individuals and creating authority and responsibility relationship among them for the accomplishment of organizational
objectives. Organizing being process, consists of departmentalization, linking of departments, defining authority and responsibility
and prescribing authority relationships. The organization structure is the result of this process.
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STEPS IN ORGANIZING
While organizing, a manager differentiates and integrates the activities of his organization. By differentiation is meant the process
of departmentalization or segmentation of activities on the basis of some homogeneity. Integration is the process of achieving unity
of effort among various departments, segments or subsystems.
Organization involves the following interrelated steps:
(1) CONSIDERATION OF OBJECTIVES:
The first step in organizing is to know the objectives of the enterprise. Objectives determine resources and the various activities
which need to be performed and the type of organization which needs to be built for this purpose. Objectives also serve as
guidelines for the management and workers. They bring about unity of direction in the organization.
(2) IDENTIFICATION AND GROUPING OF ACTIVITIES:
If the members of the group are to pool their efforts effectively, there must be proper division of the major activities. Each job
should be properly classified and grouped. This will enable the people to know what is expected of them as members of the group
and will help in avoiding duplication of efforts. For example, the total activities of an enterprise may be divided into major functions
like production, purchasing, marketing, finance etc., and such function is further subdivided into various jobs. For example, in
production department separate sections may be created for research, industrial engineering etc. The jobs then can be classified
and grouped to ensure the effective implementation of other steps.
(3) ASSIGNMENT OF DUTIES:
After classifying and grouping the activities into various jobs, they should be allotted to the individuals for ensuring certainty of work
performance. Each individual should be given a specific job to do according to his ability and made responsible for that.
(4) DELEGATION OF AUTHORITY:
Authority without responsibility is dangerous and responsibility without authority is an empty vessel. Hence, corresponding to the
responsibility authority is delegated to the subordinates for enabling them to show work performance.
NATURE OF ORGANIZATION
The nature of organization can be highlighted by studying the following features:
(1) Organization is always related to certain objectives: Whether it is organization of the entire enterprise or part of it,
organization is influenced by objectives. The operations are divided; authority and responsibility are determined to achieve
predetermined objectives.
(2) An organization connotes a group of people: Mc Farland has defined organization as ―an identifiable group of people
contributing their efforts towards the attainment of goals. People form groups or organizations to accomplish common objectives
and pool their efforts by defining and dividing various activities, responsibility and authority‖.
(3) Communication is the nervous system of organization: The organizational members are able to communicate with each
other and may coordinate their activities. No organization can survive without an efficient system of communication.
(4) Organizing is a basic function of management: Organizing is done in relation to all other functions of management, namely
planning, staffing, directing and controlling and in all the areas of business namely production, marketing, purchasing, personnel.
The organizing function is performed by all managers.
(5) Organization is a continuous process: It is not a one step function. Managers are continuously engaged in organizing and
reorganizing.
(6) Organization connotes a structure of relationship: The structure of relationship deliberately created by the management is
referred to as formal organization. An organization may also have a network of social relationships that arise between people
working together. Such relationships are known as informal organization. In formal organization people are able to communicate
with each other, are willing to act and share a purpose. In informal organization, people work together because of their likes and
dislikes.
(7) Organization involves a network of authority and responsibility relationship: Various positions are created; specific tasks
are assigned to them. To perform the task, each position is delegated adequate authority. Authority and responsibility relationships
throughout the organization must be clearly defined to achieve coordination and to avoid conflicts between individuals and
departments.
ORGANIZATION STRUCTURE
An organization structure shows the authority and responsibility relationship between the various positions of the organization by
showing who reports to whom. It is a set of planned relationships between groups of related functions and between physical factors
and personnel required for the achievement of organizational goal. The structure of an organization is generally shown on the
organization chart or a job task pyramid. It shows the authority and responsibility relationship between various positions in the
organization. A good organization structure should not be static but dynamic. It should be subject to change from time to time in the
light of changes in the business environment.
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PURPOSE OF ORGANIZATION
Organization means a form of human association for the attainment of common objectives. An industrial organization denotes a
type of associationship of persons in relationship to some economic activities. Obviously, the better the organization the fuller
would be the achievement of common objectives. Similarly, a loose organization implies an unhappy and dangerous state of
affairs. Organization is essential for the following purposes:
(1) To facilitate pattern of communication: Organization structure provide pattern of communication and coordination. By
grouping activities and people, structure facilitates communication between people centered on their job activities. People who
have joint problem often need to share information to solve the problem.
(2) To allocate authority and responsibility: Organization structure allocates authority and responsibility. It specifies who is to
direct whom and who is accountable for what results. The structure helps the organization members to know what his role is and
how it relates to others role.
(3) To locate decision centers: Organization structure determines the location of decision making in the organization. For
example, a departmental store may leave pricing decision to the lower level manager while in oil refinery pricing decision is at top
level.
(4) To create proper balance: Organization structure creates the proper balance and emphasis of activities. Those more critical to
the enterprises success might be placed higher in the organization. For example R&D in pharmaceutical company might be singled
out for reporting to the managing director. Activity of comparable importance might be placed at the lower level.
(5) To stimulate creativity: Sound organization stimulates independent, creative thinking and initiative by providing well-defined
areas of work with broad attitude of the development of new and improved ways of doing things.
(6) To encourage growth: The organization structure provide framework within which an enterprise functions. If the organization
structure is flexible, it will help in meeting challenges and creating opportunities for growth.
(7) To make use of technological improvements: A sound organization structure which is adoptable to changes can make the
best possible use of latest technology. It can modify the existing pattern of authority-responsibility relationships in the wake of
technological improvements.
PRINCIPLES OF ORGANIZATION
In order to facilitate the achievement of objectives, management thinkers have laid down certain principles of organization. The
principles are guidelines for planning organization structure. Therefore, thorough understanding of the principles of organization is
essential for good organization. The principles of organization are discussed below:
(1) Objectives: The objectives of the enterprise influence the organization structure. Every part of the organization and
organization as a whole should be geared to the basic objective determined by the enterprise.
(2) Specialization: Effective organization must promote specialization. The activities of the enterprise should be divided according
to functions and assigned to persons according to their specialization.
(3) Span of control: A manager can directly supervise only a limited number of executives. Hence, it is necessary to have a
proper number of subordinates answerable to a manager. A maximum of six may be prescribed for this purpose.
(4) Exception: This principle requires that organization structure should be so designed that managers are required to go through
the exceptional matters only. All the routine decisions should be taken by subordinates, where as problems involving unusual
matters and policy decision should be referred to higher levels.
(5) Scalar principle: This is also known as chain of command. There must be clear lines of authority running from the top to the
bottom. Authority is the right to decide, direct and coordinate. Every subordinate must know who his superior is and to whom policy
matters beyond his own authority must be referred for decision.
(6) Unity of command: Each subordinate should have only one supervisor whose command he has to obey. Dual subordination
must be avoided, for it causes uneasiness, disorder, and indiscipline and undermine of authority.
(7) Delegation: Proper authority should be delegated at the lower levels of the organization also. The authority delegated must be
equal to responsibility i.e., the manager should have enough authority to accomplish the task assigned to him.
(8) Responsibility: A superior should be held responsible for the acts of his subordinates. No superior should be allowed to avoid
responsibility by delegating authority to his subordinates.
(9) Authority: The authority is the tool by which a manager is able to accomplish the desired objective. Hence, the authority of
each manager must be clearly defined. The authority and responsibility must be co-extensive in the organization.
(10) Efficiency: The organization should be able to attain the mission and objectives at the minimum cost.
(11) Simplicity: The organization structure should be as simple as possible with minimum number of levels. A large number of
levels of organization means difficulty of effective communication and coordination.
(12) Flexibility: The organization should be flexible, should be adaptable to changing circumstances. It should permit expansion
and replacement without dislocation and disruption of the basic design. A sound organization must avoid complicated procedures,
red-tape and excessive complication of control so that it may adapt itself easily and economically to business and technical
changes.
(13)Balance: There should be reasonable balance in the size of various departments, between centralization and decentralization.
There must be balance in the formal structure as regards to factors having conflicting claims.
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(14)Unity of direction: There must be one objective and one plan for a group of activities having the same objective. Unity of
direction facilitates unification and coordination of activities at various levels.
(15)Personal abilities: As organization is a formal group of people there is need for proper selection, placement and training.
Organization structure must ensure optimum use of human resources.
DEPARTMENTATION
The horizontal differentiation of tasks or activities into discrete segments is called as departmentalization or departmentation.
Departmentation involves grouping of operating tasks into jobs, combining of jobs into effective work group and combining of
groups into divisions often termed as ‗departments‘. The aim is to take advantages of division of labour and specialization up to a
certain limit. There are several ways of Departmentation, each of which is suitable for particular corporate sizes, strategies and
purposes. The important methods of grouping activities may be summarized as below:
DEPARTMENTATION BY FUNCTIONS
This is the simplest and most commonly used base for Departmentation. Each major function of the enterprise is grouped into a
department. For example there may be production, finance, marketing and personnel department in an organization as shown in
figure.7.1. All functions related to production are grouped together to form production department, similarly other departments are
formed on the basis of function.
Figure. 7.1:Departmentation by functions
DEPARTMENTATION BY PRODUCT:
The grouping of activity on the basis of product or product lines is followed in multi-lines large scale organizations. All activities
related to a particular product line may be grouped together under the direction of a semiautonomous division manager as shown
in figure 7.2.
Figure. 7.2:Departmentation by product
DEPARTMENTATION BY CUSTOMERS:
This is used in the enterprises engaged in providing specialized services to different classes of customers. Management groups
the activities on the basis of customers to cater to the requirements of clearly defined customer groups. For example, an
automobile service company may organize its departments as heavy vehicles servicing division, car servicing division and scooter
servicing division. Similarly an educational institute may have departments for regular courses, evening and corresponding courses
etc.
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DEPARTMENTATION BY TERRITORY:
Under this classification, the market area is broken up into sales territories and a responsible executive is put in-charge of each
territory. The territory may be known as district, division or region. The field salesmen under respective regions report to their
corresponding sales supervisors, if any, who are reporting to their respective regional managers. The figure. 7.3 is quite
illuminating in this connection.
Figure. 7.3:Departmentation by territory
DEPARTMENTATION BY PROCESS:
Departmentation here, is done on the basis of several discrete process or technologies involved in the manufacture of a
product. For example, a vegetable oil company may have separate departments for crushing, refining and finishing. A textile mill
may have departments for ginning, spinning, weaving and dyeing. A work that would otherwise be done in several different
locations in an enterprise is done in one place because of special equipments used.
TYPES OF ORGANIZATION
According to Kimball and Kimball ―The problem of an organization is to select and combine the efforts of men of proper
characteristics so as to produce the desired results‖. Nature, scale and size of the business are the normal factors which determine
forms of internal organization. The following common types of organization find a place in the structure of internal organization.
LINE, MILITARY OR SCALAR ORGANIZATION
Line organization is the simple and oldest type of organization and is also known of scalar or military organization. The line
organization represents the structure in a direct vertical relationship through which authority flows. The line of authority (see fig 3.4)
flows vertically downward from top to bottom throughout the organization. The quantum of authority is highest at the top and
reduces at each successive level. Under line organization, each department is generally a complete self-contained unit. A separate
person will look after the activity of the department and has full control over the department. The superior communicates his
decision and orders to his subordinates. The subordinates, in turn, can communicate them to those who are immediately under
them. This type of organization is followed in military.
Line organization
FUNCTIONAL ORGANIZATION
The line organization does not provide specialists in the structure. Many jobs require specialized knowledge to perform them.
In functional organization the specialists are made available in the top positions throughout the enterprise. It confers upon the
holder of a functional position, a limited power of command over the people of various departments concerning their function.
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Functional authority remains confined to functional guidance of different department. Under functional organization, various
activities of the enterprise are classified according to certain functions like production, marketing, finance, personnel etc., and are
put under the charge of functional specialists. A functional incharge directs the subordinates throughout the organization in his
particular area of business operation. That means that subordinates receives orders and instructions not from one superior but
from several functional specialists.
Functional organization
LINE AND STAFF ORGANIZATION
In order to reap the advantages of both line organization and functional organization, a new type of organization is developed
i.e., line and staff organization. In line and staff organization, the line authority remains the same as it does in the line organization.
Authority flows from top to bottom. In addition, the specialists are attached to line managers to advise them on important matters.
These specialists stand ready with their speciality to serve line men as and when their services are called for to collect information
and to give help which will enable the line officials to carry out their activity better. The staff officials do not have any power of
command in the organization as they are employed to provide expert advice to the line manager. In most of the organization, staff
investigates and supplies information and recommendations to managers who takes decision. Specialized staff positions are
created to give counsel and assistance in each specialized field of effort.
:Line and staff organization
COMMITTEE ORGANIZATION
A committee is a body of persons appointed or elected to meet on an organized basis for the consideration of matters brought
before it. ―A committee is a group of persons performing a group task with the object of solving certain problems‖. The area of
operation of a committee is determined by its constitution. A committee may formulate plans, review the performance of certain
units or may only have the power to make recommendation. Committees help in taking corrective decision, coordinating the affairs
of different departments and meeting communication requirements in the organization. Committees can be broadly classified into
advisory committees and executive committees. Advisory committees have only a recommender‘s role and cannot enforce
implementation of their advice or recommendation. The examples of advisory committees are works committees, finance
committees etc., Whenever committees are vested with line authority, they are called as executive committees. Unlike advisory
committee, executive committees not only take decisions but also enforce decisions and thus perform a double role of taking
decision and ordering its executive. The board of directors of a company is an example of an executive committee.
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Advantages of Committees
(1) Committees provide a forum for the pooling of knowledge and experience of many persons of different skills, ages and
backgrounds.
(2) Committees are excellent means of transmitting information and ideas both upward and downward.
(3) Committees are impersonal in action and hence their decisions are generally unbiased and are based on facts.
(4) When departmental heads are members of committee, people get an opportunity to understand each other‘s problems and
hence improve coordination.
Weaknesses of Committees
(1) In case a wrong decision is taken by committee, no one is held responsible which may results in irresponsibility among
members.
(2) Committees delay action
(3) Committees are expensive form of organization.
(4) Decisions are generally arrived at on the basis of compromise and hence they are not best decision.
(5) As committee consists of large number of persons, it is difficult to maintain secrecy.
SPAN OF CONTROL
The span of control indicates the number of subordinates who can be successfully directed by a supervisor. It is often referred
to as span of management, span of supervision, span of authority. Span of management is important because of two reasons. First
is span of management affects the efficient utilization of managers and the effective performance of the subordinates. If the span is
too wide, managers are overburdened and subordinates receive little guidance. If the span of management is too narrow, the
managers are underutilized and subordinates are over controlled. The second reason is there is relationship between span of
management and organization structure. A narrow span results in tall organization with many levels of supervision between top
management and lowest organizational levels which creates more communication and cost problems. On the other hand, a wide
span for the same number of employees results in flat organization with fewer management levels between top and bottom.
Suppose a sales manager has 12 salesmen reporting to him, his span of management is 12. If he feels that he is not able to work
closely enough with each salesman and decides to reduce the span by adding three assistant managers – each to supervise four
salesmen then his span of management is three. In doing so, he has added a level of management through which communication
between him and salesmen must pass and he has added the cost of three additional managers.
Decrease in span of control increases the number of levels
Management experts suggest that the ideal number of subordinates is four in case of higher level management and eight to twelve
in case of lower level management.
Factors Affecting the Span of Management
The following are some of the factors which influence the span of management:
(1) Ability of the manager: Some managers are more capable than others and hence can handle a large number of subordinates.
(2) Ability of the employees: If employees are more competent, less attention from the managers is required and a larger span of
management can be used.
(3) Type of work: If employees are doing similar jobs, the span of management can be large. If their jobs are quite different, a small
span may be necessary.
(4) Geographic location: If all subordinates are located at the same place span of management can be large. If subordinates are
geographically distributed, a lower span is essential.
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(5) Well-defined authority and responsibility: Clear-cut authority and responsibility helps a manager to supervise large number of
subordinates.
(6) Level of management: The span of management is narrow at higher level of management, and span can be wider at lower
levels.
(7) Economic considerations: Narrow the span, taller is the structure is more is the cost. On the other hand, wider span reduces the
number of levels and cost.
AUTHORITY, POWER AND RESPONSIBILITY
In all organized efforts, managers actually do not perform the jobs; they simply get the things done by others. It means that the
managers should have some right by which they get the things done. This ‗right‘ is technically known as what we call ‗Authority‘,
which every manager must have to perform his function effectively. Without authority a manager cannot function. Authority is a
legal or rightful power, a right to command or to act. According to Henry Fayol ―Authority is the right to order or command and is
delegated from the superior to the subordinate to discharge his responsibilities. The authority may be exercised through
persuasions or sanctions. If the subordinates does not obey, the superior has right to take disciplinary action.
The power may be defined as the capacity or ability to influence the behaviour of other individuals. If a person has a power, it
means that he is able to influence the behaviour of others. The essence of power is control over the behavior of others. The
difference between authority and power are given in table 7.1.
Table 7.1:Difference between authority and power
Just an authority is the right of a superior to issue commands; responsibility is the obligation of a subordinate to obey those
commands. Responsibility is defined as the obligation of a subordinate, to whom a duty has been assigned, to perform the duty.
The essence of responsibility is then obligation. Responsibility arises from a superior subordinate relationship, from the fact that
someone has the authority to require specified service from another person. Responsibility may be specific or continuing. It is
specific when on being discharged by a subordinate, it does not arise again. Thus, a consultant‘s responsibility is specific, which
ceases when the assignment is completed. The responsibility of a foreman is however continuing nature. Responsibility cannot be
delegated or transferred. The superior can delegate to a subordinate the authority to perform and accomplish a specific job. But he
cannot delegate responsibility. Responsibility is divided into two parts namely operating responsibility and ultimate responsibility.
The subordinates assumes only operating responsibility and superior retains ultimate responsibility. If the subordinate fails to
perform the job (operating responsibilities) the superior is held responsible for this failure (Ultimate responsibility)
DELEGATION OF AUTHORITY
A manager in an enterprise cannot do all the tasks necessary for the accomplishment of group goals. His capacity to do the
work and to take decisions is limited. He therefore assigns same part of his work to his subordinates and grants them necessary
authority to make decisions within the area of their assigned duties. This downward pushing of authority to make decisions is
known as delegation of authority. According to Louis Allen ―If the manager requires his subordinate to perform the work, he must
entrust him with part of the rights and powers which he otherwise would have to exercise himself to get that work done‖. By
delegating authority, a manager does not surrender his authority or give this authority away. The delegating manager always
retains the overall authority which was assigned to him to perform his functions. It is something like imparting knowledge. Teacher
shares knowledge with student who then possess the knowledge, but still the teacher retains the knowledge. The following are the
advantages of delegation of authority.
(1) It relieves the manager of his heavy work load.
(2) It leads to better decision. This is because, the subordinates are closest to the situation and have the best view of the facts, are
in better positions to make decision.
(3) It speeds up decision-making.
(4) It helps to train the subordinates and builds moral.
(5) It helps to create formal organization structure.
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CENTRALIZATION AND DECENTRALIZATION
Centralization refers to systematic reservation of authority at central points within the organization. Centralization means
retention or concentration of managerial authority in few key managerial positions at the nerve centre of an organization i.e., at the
top level. Everything that goes to reduce the subordinate‘s role in decision making is centralization.
Decentralization means dispersal of decision-making power to lower levels of the organization. In decentralized setup, ultimate
authority to command and ultimate responsibility for the results is localized as far down in the organization. According to Allen
―Decentralization refers to the systematic effort to delegate to the lower levels all authority except that which can only be exercised
at central point‘s‖. In decentralized setup large number of decision, important decisions in large number of areas are made
consulting few people.
In the words of Henry Fayol, ―Everything that goes to increase the importance of subordinates role is decentralization and
everything that reduces it is centralization‖.
The following are the advantages in decentralization:
(1) It eases the burden of top level managers.
(2) Decentralization permits quicker and better decision making.
(3) With decentralization capable managers can be developed
(4) Promotes participation in decision making and improves morale and motivation.
(5) Decentralization facilitates diversification of products.
Disadvantages of decentralization:
(1) It increases administrative expenses.
(2) It may create problems in bringing coordination among various units.
(3) It may bring about inconsistencies in the company, because uniform procedures may not be followed for the same
type of work in various divisions.
DELEGATION VS DECENTRALIZATION
Delegation and Decentralization are not same; the differences between them are given below:
(1) Delegation is a process while decentralization is the end result of a deliberate policy of making delegation widespread in the
organization.
(2) Delegation takes place between a superior and a subordinate while decentralization is companywide delegation as between top
management and the departments or division of the organization.
(3) In delegation, delegator exercises supervision and control over the delegate,while in decentralization, top management
exercises broad minimum control.
MANAGEMENT BY OBJECTIVES [MBO]
Management by objectives or results is an important practice for accomplishing the objectives of an enterprise in an effective
way. The concept of MBO was introduced by Peter Drucker and later developed by various experts like John Humble, Dale and
George Ordiome. In recent years MBO has become philosophy of managing in many enterprises and is recognized as most
dynamic and exciting in the area of management. John Humble defined managing by objectives as a dynamic system which
integrates the company‘s need to achieve its goals for profit and growth with manager‘s need to contribute and develop himself. In
the words of George S. Ordiome the system of MBO can be described as a process whereby the superior and 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, and use these measures as guides for operating the unit and assessing the contribution of each of its
members. He also stressed that MBO is not a set of rules, a series of procedures or methods, but it is a way of thinking about
management. Management by objectives calls for regulating the process of managing in terms of meaningful, specific and variable
objectives at different levels of management hierarchy. MBO moulds planning, directing and controlling in a number of ways. It
stimulates meaningful action of better performance and higher accomplishment. It is closely associated with the concept of
decentralization because decentralization cannot work without the support of management by objectives.
FEATURES OF MBO
(1) An attempt is made by the management to integrate the goals of an organization and individuals. This will lead to effective
management.
(2) MBO emphasize not only on goals but also on effective performance.
(3) It pays constant attention to refining, modifying and improving the goals and changing the approaches to achieve the goals on
the basis of experience.
(4) It increases organizational capability of achieving goals at all levels.
(5) A high degree of motivation and satisfaction is available to employees through MBO.
(6) Recognizes the participation of employees in goal setting process.
(7) Aims at replacing the exercise of authority with consultation.
(8) Encourages a climate of trust, goodwill and a will to perform.
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STEPS IN MANAGEMENT BY OBJECTIVES
The following steps are involved in MBO—
(1) Setting of organizational objectives: The first step in MBO is defining organizational objectives. The definition of
organizational objectives states why the business is started and exists. Long-term objectives followed by short-term objectives are
framed taking into account the feasibility of achieving them. The objectives are framed on the basis of availability of resources.
(2) Setting departmental objectives: Objectives for each department, division and section are framed on the basis of overall
objectives of the organization. Period within which these objectives should be achieved is also fixed. Goals or objectives are
expressed in a meaningful manner.
(3) Fixing key result areas: Key result areas are fixed on the basis of organizational objectives premises. Key result areas are
arranged on the basis of priority. Key result areas indicate the strength of an organization. The examples of key result areas are
profitability, market standing, innovation etc.
(4) Setting subordinate objectives or targets: Departmental objectives are then set by departmental managers, and get them
approved by the top management. This process of setting the objectives is repeated at the lower levels of management. At each
level, objectives are set in verifiable unit so that performance of every department and individual may be reviewed after the end of
a particular period.
(5) Appraisal of activities: In this step, superiors periodically review the progress and the subordinate‘s performance is evaluated
against the specified standards and initiates corrective action. The superior should identify the reasons for failure of achieving
objectives and should tackle such problems.
(6) Reappraisal of objectives: An organization has to operate in a dynamic world. So the top management should review the
organizations objectives to frame the objectives according to the changing condition.
CHAPTER SUMMARY
Organization involves identification and grouping of activities to be performed and dividing them among individuals and creating
authority and responsibility relationship among them for the accomplishment of organizational objectives. An organization structure
shows the authority and responsibility relationship between the various positions in the organization. In order to facilitate the
achievement of objectives, management thinkers have laid down certain principles of organization which provide guidelines for
planning organization structure. The horizontal differentiation of tasks into discrete segments is known as Departmentation. There
are various methods of Departmentation namely Departmentation by functions, Departmentation by products, Departmentation by
process, Departmentation by customers and Departmentation by territory. Deferent types of organization are Line organization,
Functional organization and Line, Staff organization and Committee organization. The span of control indicates the number of
subordinates who can be successfully directed by a superior. The ability of manager, ability of employee, type of work,
geographical location and level of management affects the span of control.
The authority is the institutionalized right of a superior to command and compel the subordinates to perform a certain act. The
power is defined as the capacity or the ability of an individual to influence the behaviour others. The downward pushing of authority
to subordinates to make decisions is known as delegation of authority. Centralization refers to systematic reservation of authority at
few key managerial positions. Decentralization means the disposal of decision making power to the lower level of organization.
MBO is defined as dynamic system which integrates the company‘s need to achieve its goals for profit and growth with which
managers need to contribute and develop himself. Filling and keeping various positions of organization with right people is known
as staffing. The staffing function performs many sub functions namely manpower planning, recruitment, selection, training and
development, performance appraisal and compensation. Recruitment is the process of identifying the sources of prospective
candidates and to stimulate them to apply for the jobs. The sources of recruitment are divided into internal and external sources.
The basic purpose of selection process is choosing right type of candidates to man various positions in the organization.
REVIEW QUESTIONS
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Explain in brief the meaning of organizing.
Explain in brief the nature of organization.
Discuss the purpose of organization.
Write a note on principles of organization.
Explain in brief the various types of departmentation.
What do you mean by span of control? Explain the factors affecting span of it.
Distinguish between
o Authority and responsibility.
o Delegation and decentralization.
Explain in brief the centralization and decentralization.
Write a note on Management by objectives.
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CHAPTER EIGHT
LEADERSHIP
LEARNING OBJECTIVE
The objective of this lesson is to make the students learn about the concept of leadership, leadership
styles and theories.
• Characterize the nature of leadership
• Trace the early approaches to leadership
• Identify and describe contemporary situational theories of leadership
• Discuss leadership through the eyes of followers
• Identify and describe alternatives to leadership
• Describe the changing nature of leadership
• Identify and discuss emerging issues in leadership
INTRODUCTION
There is a profound difference between manager and leader, and both are essential in a sound management system. To
‗manage‘ means ―to bring about, to accomplish, to have charge of or responsibility for, to conduct‖. On the other hand the ‗Leading‘
is ―influencing, guiding in direction, course, action, opinion‖. The distinction is critical. Managers are people who do things right and
leaders are people who do the right thing. In this lesson, you‘ll learn that leadership is a very complex art that is essential for the
success in mission. In fact, your knowledge of effective leadership principles and concepts coupled with their application at your
work place may prove to be rewarding both professionally and personally.
Let‘s start with a simple definition of leadership. Leadership is the process of influencing an organized group towards a common
goal. This definition sounds easy, but the application can provide a real challenge. Your goal as a leader in the organization is to do
the best job you can at influencing your people towards a common goal. Since you are dealing with a very diverse group of people,
it is important to understand the different approaches to motivate them to meet their goals. Leadership style is the pattern of
behaviors you use when you are trying to influence the behaviors of those you are trying to lead. Each leadership style can be
identified with a different approach to problem solving and decision-making. Possessing a better understanding of the various
leadership styles and their respective developmental levels will help you match a given style for a specific situation. The challenge
is to master the ability to change your leadership style for a given situation as the person‘s development level changes.
How can you help your followers increase their development level? Here are some practical ideas:
1. Explain to them what you want to get done.
2. Provide the guidance they might need before they start.
3. Give them the opportunity to complete the task on their own.
4. Give them a lot of positive encouragement.
Your goal should be to help your followers increase their competence and commitment to independently accomplish the tasks
assigned to them, so that gradually you can begin to use less time-consuming styles and still get high quality results. Your
organization depends on positive, effective leaders at all levels to perform the mission. There is no single leadership style that is
appropriate in every situation; therefore, for you to be effective leaders you need to learn to understand your environment, your
situation and the circumstances to help you act accordingly. Remember, your success as a leader will depend on your assessment
of the situation and your ability to communicate what you want in such a way that others will do as you wish - that is the art of
leadership.
WHAT IS LEADERSHIP ?
It is difficult to define the term ―leadership‖. However, as a starting point, we may proceed with the workable definition that a
leader is one who leads others and is able to carry an individual or a group towards the accomplishment of a common goal. He is
able to carry them with him, because he influences their behaviour. He is able to influence their behaviour, because he enjoys
some power over them. They are willing to be influenced, because they have certain needs to satisfy in collaboration with him.
French and Raven have proposed the following bases of power for a person exerting influence:
1. Legitimate- That the targets of influence, followers or sub-ordinates understand that the power the leader enjoys is legitimate
and they should comply with his orders in order to meet their own goals.
2. Reward-That the followers know that the leader has the power to grant promotions, monetary inducements or other rewards if
his orders are complied with.
3. Coercive-That the followers know that if the leader‘s orders are not complied with, he has the power to hire, fire, perspire and
discharge the followers.
4. Expert- That the followers know that the leader possesses specialist‘s knowledge in the field they lack it.
5. Referent- That the followers feel attracted towards him because of his amiable manners, pleasing personality or they feel that
he is well connected with high-ups.
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It is apparent then that the first three power bases indicate positional power, which one derives from one‘s position. The other
two indicate personal power, which is based on the individual‘s own characteristics. In any case, the leader exercises his influence
because of one or more of these types of power and obtains compliance from the followers. How far he succeeds in his attempts
will depend upon several other factors that we will discuss during the course of this lesson.
Leadership is, therefore, regarded as the process of influencing the activities of an individual or a group in efforts towards goal
achievement in a given situation. This process, as Heresy and Blanchard suggest, can be explained in the form of the following
equation:
L = f (L, F, S,)
That is, the leadership is a function of the leader(L), the follower(F) and other situational variables( S). One who exercises this
influence is a leader whether he is a manager in a formal organization, an informal leader in an informal group or the head of a
family. It is undoubtedly true that a manager may be a weak leader or a leader may a weak manager, but it is also equally probable
that a manager may be a true leader or a leader may be true manager. A manager who is a true leader as well is always
desirable. Situational variables include the whole environment like the task, the group, organizational policies, etc.
LEADERSHIP IS EVERYONE‘S BUSINESS
Although many definitions of leadership exist, we define leadership as the process of influencing others toward achieving group
goals. Leadership is both a science and an art. Because leadership is an immature science, researchers are still struggling to find
out what the important questions in leadership are; we are far from finding conclusive answers to them. Even those individuals with
extensive knowledge of the leadership re-search may be poor leaders. Knowing what to do is not the same as knowing when,
where, and how to do it. The art of leadership concerns the skill of under-standing leadership situations and influencing others to
accomplish group goals. Formal leadership education may give individuals the skills to better understand leadership situations, and
mentorships and experience may give individuals the skills to better influence others. Leaders must also weigh both rational and
emotional considerations when attempting to influence others. Leadership some-times can be accomplished through relatively
rational, explicit, rule-based methods of assessing situations and determining actions. Nevertheless, there is also an emotional side
of human nature that must be acknowledged. Leaders are often most effective when they affect people at both the emotional level
and the rational level. The idea of leadership as a whole-person process can also be applied to the distinction often made between
leaders and managers. Although leadership and management can be distinguished as separate functions, a more comprehensive
picture of supervisory positions could be made by examining the overlapping functions of leaders and managers. Leadership does
not occur with-out followers, and followership is an easily neglected component of the leader-ship process. Leadership is
everyone‘s business and everyone‘s responsibility. Finally, learning certain conceptual frameworks for thinking about leadership
can be helpful in making your own on-the-job experiences a particularly valuable part of your leadership development. Thinking
about leadership can help you become a better leader than you are right now.
LEADERSHIP INVOLVES AN INTERACTION BETWEEN THE LEADER, THE FOLLOWERS, AND THE SITUATION
Leadership is a process in which leaders and followers interact dynamically in a particular situation or environment. Leadership
is a broader concept than that of leaders, and the study of leadership must involve more than just the study of leaders as
individuals. The study of leadership must also include two other areas: the followers and the situation. In addition, the interactive
nature of these three do-mains has become increasingly important in recent years and can help us to better understand the
changing nature of leader–follower relationships and the increasingly greater complexity of situations leaders and followers face.
Because of this complexity, now, more than ever before, effective leadership cannot be boiled down to a simple and constant
recipe. It is still true, however, that good leadership makes a difference, and it can be enhanced through greater awareness of the
important factors influencing the leadership process.
FOCUS ON THE LEADER
Leaders can use power for good or ill, and the leader‘s personal values may be one of the most important determinants of how
power is exercised or constrained. For example, a political leader may be able to stir a group into a frenzy (and become even more
popular) by identifying a scapegoat to blame for a community‘s or nation‘s problems, but would it be right? Is it ever right for a
political leader to stir a populace into a frenzy? And what standards should govern the application of such power? Or, a person
may be promoted to leadership positions of ever-greater responsibility and reward, but at a cost of broken relationships in his
family life; would you choose that trade-off? The mere possession of power, of any kind, leads inevitably to ethical questions about
how that power should and should not be used. The challenge of leadership becomes even more complex when we consider how
individuals of different back-grounds, cultures, and nationalities may hold quite different values yet be thrown into increasingly
closer interaction with each other as our world becomes both smaller and more diverse. This chapter will explore these fascinating
and important aspects of leadership.
LEADERSHIP AND VALUES
Leaders face dilemmas that require choices between competing sets of values and priorities, and the best leaders recognize
and face them with a commitment to doing what is right, not just what is expedient. Of course, the phrase doing what is right
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sounds deceptively simple. Sometimes it will take great moral courage to do what is right, even when the right action seems clear.
At other times, though, leaders face complex challenges that lack simple black-and-white answers. Whichever the case, leaders
set a moral example to others that be-comes the model for an entire group or organization, for good or bad. Leaders who
themselves do not honor truth do not inspire it in others. Leaders mostly concerned with their own advancement do not inspire
selflessness in others. Leaders should internalize a strong set of ethics, principles of right conduct or a system of moral values.
Both Gardner (1990) and Burns (1978) have stressed the centrality and importance of the moral dimension of leadership.
Gardner said leaders ultimately must be judged on the basis of a framework of values, not just in terms of their effectiveness. He
put the question of a leader‘s relations with his or her followers or constituents on the moral plane, arguing (with the philosopher
Immanuel Kant) that leaders should always treat others as ends in themselves, not as objects or mere means to the leader‘s ends
(which, however, does not necessarily imply that leaders need to be gentle in interpersonal demeanor or ―democratic‖ in style).
Burns (1978) took an even more extreme view regarding the moral dimension of leadership, maintaining that leaders who do not
behave ethically do not demonstrate true leadership.
Whatever ―true leadership‖ means, most people would agree that at a minimum it would be characterized by a high degree of
trust between leader and followers. Bennis and Goldsmith (1997) describe four qualities of leadership that engender trust. These
qualities are vision, empathy, consistency, and integrity. First, we tend to trust leaders who create a compelling vision: who pull
people together on the basis of shared beliefs and a common sense of organizational purpose and belonging.
Second, we tend to trust leaders who demonstrate empathy with us—who show they understand the world as we see and
experience it. Third, we trust leaders who are consistent. This does not mean that we only trust leaders whose positions never
change, but that changes are understood as a process of evolution in light of relevant new evidence. Fourth, we tend to trust
leaders whose integrity is strong, who demonstrate their commitment to higher principles through their actions.
Another important factor impacting the degree of trust between leaders and followers involves fundamental assumptions
people make about human nature. Several decades ago, Douglas McGregor (1966) explained different styles of managerial
behavior on the basis of their implicit attitudes about human nature, and his work remains quite influential today. McGregor
identified two contrasting sets of assumptions people make about human nature, calling these Theory X and Theory Y. In the
simplest sense, Theory X reflects a more pessimistic view of others. Man-agers with this orientation rely heavily on coercive,
external-control methods to motivate workers such as pay, disciplinary techniques, punishments, and threats. They assume people
are not naturally industrious or motivated to work. Hence, it is the manager‘s job to minimize the harmful effects of workers‘ natural
laziness and irresponsibility by closely overseeing their work and creating external incentives to do well and disincentives to avoid
slacking off. Theory Y, on the other hand, reflects a view that most people are intrinsically motivated by their work.
Rather than needing to be coaxed or coerced to work productively, such people value a sense of achievement, personal
growth, pride in contributing to their organization, and respect for a job well done. Peter Jackson‘s leadership was clearly
consistent with a Theory Y view of human nature. When asked, ―How do you stand up to executives?‖ Jackson answered, ―Well, I
just find that most people appreciate honesty. I find that if you try not to have any pretensions and you tell the truth, you talk to
them and you treat them as collaborators, I find that studio people are usually very supportive.‖ But are there practical advantages
to holding a Theory X or Theory Y view?
Evidently there are. There is evidence that success more frequently comes to leaders who share a positive view of human
nature. Hall and Donnell (1979) reported findings of five separate studies involving over 12,000 managers that explored the
relationship between managerial achievement and attitudes toward subordinates. Overall, they found that managers who strongly
subscribed to Theory X beliefs were far more likely to be in their lower-achieving group. One behavior common to many good
leaders is that they tend to align the values of their followers with those of the organization or movement; they make the links
between the two sets more explicit. But just what are values? How do values and ethical behavior develop? Is one person‘s set of
standards better or higher than another‘s?
WHAT ARE VALUES?
Values are ―constructs representing generalized behaviors or states of affairs that are considered by the individual to be
important‖ . When Patrick Henry said, ―Give me liberty, or give me death,‖ he was expressing the value he placed upon political
freedom. The opportunity to constantly study and learn may be the fundamental value or ―state of affairs‖ leading a person to
pursue a career in academia. Someone who values personal integrity may be forced to resign from an unethical company. Thus,
values play a fairly central role in one‘s overall psychological makeup and can affect behavior in a variety of situations. In work
settings, values can affect decisions about joining an organization, organizational commitment, relationships with co-workers, and
decisions about leaving an organization. It is important for leaders to realize that individuals in the same work unit can have
considerably different values, especially since we cannot see values directly. We can only make inferences about people‘s values
based on their behavior.
TYPES OF LEADERSHIP
There are mainly two types of leadership, namely: formal and informal leadership.
Formal Leadership
The formal leadership occurs when a person is appointed or elected as an authority figure. For example, anyone who is appointed
to the job of a manager is also given the authority to exercise formal leadership in relationship to his subordinates. Similarly, a
formally elected leader of a country or a state, acquires the authority of leadership and giving direction to the country or state.
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Informal Leadership
The informal leadership emerges when a person uses interpersonal influence in a group without designated authority or power.
These leaders emerge in certain situations, because of their charm, intelligence, skills or other traits, and to whom other people
turn to for advice, direction and guidance. Religious and civic leaders fit into this category. Successful managers, who exercise
their given authority in a formal way, are also capable of exercising informal leadership relationships with people both within as well
as outside the organisation.
TRAITS OF LEADERSHIP
A leader has certain inherent qualities and traits which assist him in playing a directing role and wielding commanding influence
over others. Some of these traits according to Jago (1982) are:
1. Energy, drive 2. Appearance, 3. A sense of cooperativeness 4. Enthusiasm 5. Personality – height and weight 6. Initiative
7. Intelligence 8. Judgement 9. Self-confidence 10. Sociability 11. Tact and diplomacy 12. Moral courage and integrity 13.
Willpower and flexibility 14. Emotional stability 15. Knowledge of human relations.
According to Stagdill (1957), who studied the subject of leadership most extensively, ―a person does not become a leader by virtue
of the possession of some combination of the traits, but the pattern of personal characteristics of the leader must bear some
relevant relationship to the characteristics, activities and goals of the followers. Some of the approaches to the study of leadership
including trait theory and behaviour are explained in detail.
THEORIES OF LEADERSHIP
1. The Trait Theory. The traditional approach has been to describe leadership in terms of personal traits and special
characteristics of leaders. These traits are not acquired, but are inherent personal qualities. The trait theory emphasises that
leaders are born and not made. This theory proposes that leadership is a function of these inborn traits. Some of these traits
include intelligence, understanding, perception, high motivation, socio-economic status, initiative, maturity, need for selfactualisation, self assurance and understanding of interpersonal human relations. The existence of these traits becomes a
measure of leadership. It holds that the possession of certain traits permits certain individuals to gain position of leadership. This
relationship between successful leadership and traits was extensively studied by Stogdill (1948). Stogdill (1974) believed that the
pattern of leadership trait is different from situation to situation. A person who becomes a leader in one situation may not become
one in a different situation. There is no single personality trait that would typify a leader and be applicable in all situations.
Leadership implies activity movement and getting the work done. The leader is a person who occupies a position of
responsibility in coordinating the activities of the members of a group. Hence, leadership must be conceived of in terms of
interactions – for one to lead – and others who want to be led. The trait theory of leadership has suffered from lack of
conclusiveness and over-simplifications. The critics have charged that the theory focuses attention only on the leader and
disregards the dynamics of the leadership process. Also, the theory ignores the situational characteristics which may result in the
emergence of a leader.
2. Behaviour Theory. This theory studies leadership by looking at leaders in terms of what they do. The leader effectiveness is
judged in terms of individual subordinate outcome. Research studies conducted by Katz, Maccoby and Morse (1957) suggested
that leadership behaviour be defined along employee-centred dimension and production centred dimension, both complementing
each other. This style is expected to show improvements in productivity. Further in-depth investigations into this approach have
been conducted at Ohio State University (Stogdill and Coons (1957). These studies isolate two particular factors affecting the
leadership dimension. These are:
(a) Consideration (of employees)
(b) Initiating structure (giving directions and orders).
Consideration connotes rapport between the leader and the group, a mutual warmth and trust, a concern for the needs of the
members of the work group, an attitude that encourages participative management, two way communication and respect for the
feedback of the followers.
Initiating structure involves creating a work environment, so that the work of the group is organised, coordinated, sequential,
organizationally relevant so that people know exactly what is to be done and how it is to be done. The structure involves having the
leader organise and define the role each member is to assume, assign tasks to them and push for the realisation of organisational
goals. An important discovery made by the Ohio studies was that the leader does not necessarily have to rate high both on
consideration as well as structure element. He could be high on one and low on the other and still lead the group successfully. One
advantage of this theory is that these two dimensions of leadership behaviour are tangible and observable and do account for a
major part of the leader behaviour. Even though a causal connection of these two dimensions has not been demonstrated, their
relationship to leadership effectiveness has been quite obvious.
3. Contingency Theory. This theory states, that an analysis of leadership involves not only the individual traits and behaviour but
also a focus on the situation. The leadership behaviour is used in combination with work group contingencies to predict outcomes.
The effectiveness of the leader behaviour is contingent upon the demands imposed by situation. There are three major
components that are significant for leadership effectiveness. These include individual differences among leaders, differences
among situations and the manner in which these two variables are related. While this approach emphasises that external
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pressures and situational characteristics determine the emergence and success of leaders in performing a given role, it is probably
a combination of both types of characteristics that sustains a leader over a long period of time. A leader is more successful when
his personal traits complement the situational characteristics.
4. The Path-Goal Theory. The Path-Goal model of leadership behaviour has been propounded by House and Mitchell (1974). This
model emphasises that the leader behaviour be such as to complement the group work setting and aspirations. This approach is
based upon the expectancy theory of motivation and reflects the worker‘s beliefs that efforts will lead to successful results. The
leader sets up clear path and clear guidelines through which the subordinates can achieve both personal and work related goals
and assists them in achieving these goals. This will make the leader behaviour acceptable and satisfying to subordinates since
they see the behaviour of the leader as an immediate source of satisfaction or as a source of obtaining future satisfaction.
This approach is largely derived from the path-goal approach to motivation (Hellreigel and Slocum, 1974). To motivate workers, the
leaders should:
(a) Recognise the subordinate‘s needs. (b) Arrange for appropriate rewards to his followers for goal achievement. (c) Help
subordinates in clearly establishing their expectations. (d) Demolish, as far as possible, the barriers in their path of goal
achievement. (e) Increase opportunities for personal satisfaction which are contingent upon satisfactory performance.
The path-goal model takes into consideration the different types of leadership behaviour. There are four such types of behaviour
that would support this approach, depending upon the nature of the situation. These are:
(a) Directive. When the demands of a task on hand are ambiguous, directive leadership is needed. But when the task is inherently
clear or clarification is otherwise available, then a high level of directive leadership is not required and may, in fact, impede
effective performance.
(b) Supportive. Supportive leadership is friendly and approachable and has the most positive effect on the satisfaction of the
followers working on unpleasant, stressful or frustrating tasks that are highly repetitive.
(c) Achievement oriented. This type of support helps the subordinates to strive for higher performance standards and increases
confidence in their ability to meet challenging goals. This is especially true for followers who have clear cut, non repetitive
assignments.
(d) Participative. This leadership approach encourages subordinate‘s participation in the decision making process. The leader
solicits subordinate‘s suggestions and takes the suggestions seriously into consideration before making decisions. In addition to
the various patterns of leadership, certain characteristics of subordinates themselves such as their ability, experience, motives,
dedication etc. and various aspects of the situation such as the structure of the work tasks, openness of communication, extent of
feedback provided etc., form important ingredients of the path-goal model.
5. Vroom-Yetton Model (1974).
This is a normative theory for it simply tells the leaders how they should behave in decision making. The focus is on the premise
that different problems have different characteristics and should therefore be solved by different decision techniques. The
effectiveness of the decision is a function of leadership which ranges from the leader making decisions himself to a totally
democratic process in which the subordinates fully participate and the contingencies which describe the attributes of the problem to
be dealt with. For a successful leader, it is imperative to know the best approach to solving the problem at hand and to know how
to implement each decision making method well when required. The model dictates that the decision reached should be high in
quality, should be accepted by the people who have to implement it and should be time efficient. The leader, while choosing a
strategy, decides which element he will focus on and which may be neglected to some extent. Studies performed to test the validity
of this theory concluded that the participative and democratic style of leadership was more appropriate and successful at higher
levels of an organisation, whereas directive decision making style were utilised at lower levels.
6. The Managerial Grid.
The managerial grid was developed by Robert Blake and Jane Mouton (1978) and plays an important part in managerial behaviour
in organisational development. It is built on two axes, one representing the ―people‖ and the other the ―task‖. Both the horizontal as
well as the vertical axis are treated as a scale from 1 to 9 where 1 represents the least involvement and 9 the most involvement, so
that the coordinates (1, 1) would indicated minimum standards and coordinates (9, 9) would indicate maximum dedication of the
workers and highly structured operations. Such an involvement would reflect upon the managerial orientation towards task and
towards workers who are expected to perform such tasks. Blake and Mouton have identified five coordinates that reflect various
styles of leader behaviour. The managerial grid figure and these styles are shown in the figure below:
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Coordinates (1, 1). The manager makes minimum efforts to get work done. Minimal standards of performance and minimum
worker dedication.
Coordinates (9, 1). Excellent work design. Well established procedures. Minimum worker interference. Orderly performance and
efficient operation.
Coordinates (1, 9). Personal and meaningful relationships with people. Friendly atmosphere and high morale. Loosely structured
work design.
Coordinates (5, 5). Satisfactory performance achieved by equating the necessity for performance and reasonable morale.
Coordinates (9, 9). Ultimate in managerial efficiency. Thoroughly dedicated people. Trustworthy and respectable atmosphere.
Highly organised task performances. This grid provides a reasonable indication of the health of the organisation as well as the
ability of the managers. It is the objective of all management to move as close to coordinates (9, 9) as possible. Accordingly,
managers should be carefully selected on the basis of their ability to coordinate people and tasks for optimum benefit.
LEADERSHIP STYLES
The leadership styles can be classified according to the philosophy of the leaders. What the leader does determines how well he
leads. A style leadership is a ―relatively enduring set of behaviours which is a characteristic of the individuals, regardless of the
situation‖ (Fiedler, et. al). Some of such styles are discussed below:
1. Autocratic or Dictatorial Leadership
Autocratic leaders keep the decision making authority and control in their own hands and assume full responsibility for all actions.
Also, they structure the entire work situation in their own way and expect the workers to follow their orders and …….. from their
orders. The autocrat ranges from tough to paternalistic, depending upon whether his motivational approach is threat and
punishment or rewards. The autocratic leader believes that his leadership is based upon the authority conferred upon him by some
source, such as his position, knowledge, strength or the power to punish and reward.
2. Participative or Democratic Leadership
In this type of leadership, the subordinates are consulted and their feedback is taken into decision making process. The leader‘s
job is primarily of a moderator, even though he makes the final decision and he alone is responsible for the results. The group
members are encouraged to demonstrate initiative and creativity and take intelligent interest in setting plans and policies and have
maximum participation in decision making. This ensures better management-labour relations, higher morale and greater job
satisfaction. This type of leadership is especially effective when the workforce is experienced and dedicated and is able to work
independently with least directives.
3. Laissez-faire or Free-reign Leadership
In this type of leadership, the leader is just a figurehead and does not give any direction. He acts principally as a liaison between
the group and the outside elements and supplies necessary materials and provides information to group members. He lets the
subordinates plan and organises and develops their own techniques for accomplishing goals within the generalised organisational
policies and goals. The leader participates very little and instead of leading and directing, he becomes just one of the members. He
does not attempt to intervene or regulate or control and there is complete group or individual freedom in decision making. This type
of leadership is highly effective when the group members are highly intelligent and are fully aware of their roles and responsibilities
and have the knowledge and skills to accomplish these tasks without direct supervision. This type of leadership is evident in
research laboratories where the scientists are fairly free to conduct their research and make their decisions. Similarly, in a
university or a college, the Chairperson does not interfere in the professor‘s teaching methods, but only assigns the courses to be
taught. From then onwards, the professors are very much their own leaders.
PERSONAL CHARACTERISTICS OF LEADERS
Leadership is an intangible quality and its effectiveness can best be judged by the behaviour and attitudes of followers. Even
though personal backgrounds and personalities differ widely, simply education, social status etc., are poor indicators of judgement
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of successful leaders. However, some behavioural characteristics may be common to most effective leaders. Some of these
characteristics are:
(1) Ability to inspire others. This may be an internal ―charisma‖ which is an inborn trait and may not be a learnable factor.
(2) Problem solving skills. An effective leader has developed the patience and ability to look at the problem from various angles
and get down to the cause of the problem and tries to solve the problem rather than the symptoms of the problem.
(3) Emotional maturity. They are self-confident, rational and emotionally mature. They do not lose temper quickly and are open
hearted towards differences in opinions and opposing viewpoints. They are warm and sensitive and not vindictive in nature.
(4) Ability to understand human behaviour. He must understand the needs, desires and behaviour of their subordinates and
show respect for such desires. He is emotionally supportive and is careful enough to avoid ego threatening behaviour. He must
give credit to subordinates when the efforts are successful.
(5) Verbal assertiveness. A leader must be an effective orator and must be confident of his opinions and views. He must
communicate his views honestly and in a straight forward manner without fear of consequences.
(6) Willingness to take risks. Routine work, no matter how well done never makes a leader. Good leaders always charter the
unknown. They must accept and seek new challenges. However, the risks must be calculated ones and the outcomes of actions be
reasonably predicted. Should these risks result in failure, a leader must take full blame and responsibility and not shift blame on
others, even though they may be operative factors. He must be willing to tolerate frustration and defeat and learn from it.
(7) Dedication to organisational goals. A leader must demonstrate his dedication and commitment to the organisation‘s mission,
goals and goals by hard work and self-reliance. He must make sure that his followers fully understand the organisational goals and
are equally dedicated and willing to work for these goals.
(8) Skill in the art of compromise. Settling differences is a vital part of leadership and genuine differences must be solved by
compromise and consensus. This will induce faith in the fairness of the leader. He must be willing to give in where necessary and
must be able to take criticism and defeat with grace. However, he must not compromise for the sake of compromising for smooth
sailing only and must be willing to take a stand on controversial issues and accept the consequences.
LEADERSHIP AND POWER
A formal leader cannot function without the authority and the power to make decisions and take actions. Some of the functions of
the formal leaders that require the power and authority to perform are:
(a) Setting of organisational goals within constraints of internal needs and external pressures.
(b) Integrates the activities of his group and develops its team spirit cohesiveness.
(c) Serves as a representative of group members and an official contact with other parts of the organisation and facilitates group
interaction.
(d) Gives out rewards and punishments or recommendations.
(e) Serves as a father figure and sometimes has a major impact on the norms, beliefs and values of the group.
(f) He is instrumental in resolving internal conflicts by bringing about a balance among conflicting interests.
(g) Serves as a model of behaviour for other members. These functions can only be exercised with a power base. Some of the
power bases classified by French and Raven (1960) are:
(1) Legitimate Power. This is the power that is vested in the leadership to take certain actions. This power may be designated by
a legitimizing agent, for example, the President of a company designating his assistant to make certain decisions. Similarly, the
power may be given to a particular leader who has been elected by the populace. For example, the President of a country or an
elected Mayor of a city has certain power and authority. This power may also be culturally specified. In many cultures, children
simply ―obey‖ their parents. In some other cultures, people of certain casts are highly respected. In Cameroon, old age brings with
it the power to command respect.
(2) Reward Power. This power is based upon the ability to give or influence the rewards and incentives for the subordinates.
These may be in the form of promotions, increase in pay, bonuses or other form of recognition for a job well done.
(3) Coercive Power. On the other end of the reward power is the coercive power which is the ability to influence punishment. This
is the power to reprimand, demote or fire for unsatisfactory execution of duties.
(4) Referent Power. This power is more of personal nature than a positional nature, in the sense that this power is not designated
or acquired because of a position, but because of personal ―charisma‖, leader. This is especially true in the case of film stars and
celebrities whose followers and fans follow what the celebrities do.
(5) Expert Power. This is also a personal power acquired by expertise in a field or area. For example, we generally follow our
doctor‘s or our accountant‘s instructions, because we believe in their ability and knowledge in those specified areas. If the
subordinates view their leaders as competent, they would follow him (Organ and Hammer, 1982).
(6) Connections. Some people have a lot of influence over others simply because of their ―connections‖ with the right people. A
person knowing the manager of a company can get a job for somebody or recommend a promotion for somebody and hence
commands considerable influence. Hence, this ―connected‖ person has ―clout‖ via the resources of his friendship with the right
people.
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LEADER AS MANAGER
Leading and managing are two activities that take place in all organizations, and the two terms are often used interchangeably. The
role of a leader is to create vision for organizations or units, promote major changes in goals and procedures, set and communicate
new directions, and inspire subordinates. Managing involves most of the kinds of activities that are included in a leader‘s role. A
person can be a leader and a manager. Leadership is a component of management, but management involves more than just
leadership. If leadership style is defined by characteristic behaviors and traits in various situations, then management applies these
items in the planning, organizing, staffing, and controlling of resources to achieve goals. In this context, rather than being part of
what defines management, leading dictates how management is carried out. In other words, good managers place more emphasis
on leadership and apply what they know and learn to the daily and long-term management of their departments.
CHAPTER SUMMARY
It is beyond doubt that your goal as a leader in the organization is to do the best job you can at influencing your people towards
a common goal. Leadership is an art of leading subordinates. Leaders are visionary and by sheer nature achieve willing obedience
of their subordinates. They take calculated risk and display devotion to duty and concern for employees. Leadership is about
influencing subordinates to act willingly towards achievement of organizational goals. A successful leader should have an ability to
use power successfully. They should be able to identify human needs and inspire them even in hopeless situation. A good leader
should arouse motivation among employees and create a climate conducive to work. There are various leadership theories. Traits
Theory of leadership is also called ―great man‘s theory‖. The theory suggests that to be leader, a person must possess certain
traits. Davis has identified that a good leader should have intelligence, social maturity, inner motivation, achievement orientation,
maturity and lastly the human relation‘s attitude. As far as the study of human skills is concerned every leader has human skill,
technical skill and conceptual skill in varying degree. There are various leadership styles based on authority. These are autocratic
leadership style, democratic leadership style free rein and laissez-faire leadership style. There is no one best style. It will depend
upon the prevailing situation in the organization.
The leader leads his team based on his personality, skill, ability and attitude towards work, employees and the organization he is
serving. Leader can use participative or authoritarian type of leadership depending upon the situation employees create. Situation
plays a decisive role in adoption of leadership style. Situation encompasses factors like human rights, ecology, social responsibility
apart from other environmental factors that have a bearing on the quality of decision a manager may make.
Path-Goal Theory is an amalgamation of contingency theory and expectancy theory of leadership. Based on subordinate attributes
and work setting attributes, Martin and Robert have suggested four types of leadership styles. These are one, supportive
leadership, two, participative leadership, three, directive leadership and lastly the achievement oriented leadership.
Charismatic leadership is a unique type of leadership style. A leader who practices this type of leadership has following
characteristics namely 1. leader has a vision. 2.he is a risk taker. 3. he displays sensitivity to environmental factors and follower
needs. 4. He displays distinct behavioural pattern based on situation. 5. The charismatic leader makes self-sacrifices and engages
in unconventional behaviour. Transformational leadership is based on stimulating follower to achieve organizational goals by
inspiring them. The individuals are so motivated that they can sacrifices themselves to protect honour, dignity and value system.
Management scholars have generally examined the effect of leadership style on subordinate behaviour and have rarely related
it to the leader reward behaviour. But whatever little research exists on this issue has shown the strength of the relationship
between the positive leader reward behaviour and subordinate satisfaction and performance to be significantly greater than that
reported for relationships involving the leader style components. Similarly, the use of negative rewards has been found to have
different effects on subordinates, depending on the individual‘s organizational level. At higher levels, because of ambiguous and
vague descriptions of the task, negative rewards are reported to be motivational, whereas at lower levels where tasks are clearly
defined, they cause dissatisfaction. Another interesting issue, though neglected, is whether subordinate behaviour of a particular
type is a consequence of leader behaviour or that leader behaviour is a consequence of subordinate behaviour of a particular type.
Ii it an outcome or a cause? Any efforts that examine these relationships will be of great interest to managers and behavioural
scientists.
Towards the conclusion of this lesson it can be summed up that there is no single leadership style that could be most
appropriate in every situation; therefore, for you to be effective leaders you need to learn to understand your environment, your
situation and the circumstances to help you act accordingly. Remember, your success as a leader will depend on your assessment
of the situation and your ability to communicate what you want in such a way that others will do as you wish - that is the art of
leadership.
REVIEW QUESTIONS
1. ―Effective leadership is a function of three factors: the leader, the led, and the situation‖. Discuss.
2. Explain and illustrate the various approaches accounting for leadership. Which is the best approach?
3. How you will define the leadership? Discuss the main leadership styles with their application.
4. Write short notes on the following: i.) Managerial Grid
ii.) Path- Goal approach.
iii.) Difference between a leader and manager.
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CHAPTER NINE
DIRECTING AND CONTROLLING
LEARNING OBJECTIVES
•
•
•
•
•
•
•
•
•
To understand the meaning and nature of direction.
Present leadership styles.
Present motivation theories.
Discuss the meaning and importance of communication.
Understand the types and forms of communication.
Understand the meaning, importance and techniques of coordination.
Present the meaning of controlling.
Discuss the essentials of sound control system.
Present methods of establishing control.
CONCEPT OF DIRECTION
In addition to planning, organizing and staffing, every manager must also direct his subordinates. An enterprise may have well knit
and co-ordinated plans; may have properly laid out activity-authority relations; and further be manned by properly selected and
able personnel; yet a manager must initiate organized endeavour so that plans are translated into effective action and enterprise
objectives accomplished through group efforts with minimum of inputs and unsought consequences. Directing is thus the initiating
function of management that actuates plans and the organization. Just as starting the motor of a car does not make it move unless
put into gear and the accelerator is pressed, in the same way organized actions are initiated in the enterprise only through the
directing function of management.
Directing: An Important Function
Directing is an important function of management which involves communicating and providing leadership to the subordinates and
motivating them to contribute to the best of their capability for the achievement of organizational objectives. It starts with issuing
orders and instructions to subordinates and ends with getting things done by satisfaction of various needs of subordinates.
Essential elements of the directing function of management are:
(i) Issuing orders and instructions.
(ii) Guiding, counseling and teaching the subordinates the proper way of doing the job.
(iii) Supervising the work of subordinates to ensure that their performance conforms to the plan.
(iv) Motivating the subordinates to direct their behaviour in a desired pattern.
(v) Maintaining discipline and rewarding effective performance.
Further, directing is a continuous function performed by managers at all levels of the organization. Thus, a supervisor or the
foreman must direct the workers just as the chief executive is to direct his immediate subordinate managers.
ELEMENTS OF DIRECTION
In directing the human effort towards organizational objectives, managers soon realise that they should think in
terms of the following elements:
– Supervision
– Motivation
– Leadership
– Communication.
CONCEPT OF SUPERVISION
Supervision refers to the direct and immediate guidance and control of subordinates in the performance of their work. It involves
observing the subordinates at work and ensuring that they are working according to the plans and policies of the organization.
George R. Terry and Stephen G. Franklin have defined supervision as ―Supervision is guiding and directing efforts of employees
and other resources to accomplish stated work outputs.‖
Features of Supervision
The following are the salient features of supervision:
(i)Supervision is done at all levels of management: Top management supervises the work of middle management which in turn
supervises the work of lower management.
(ii)Supervision is most pronounced at the lowest level of management: Although managers at all levels are generally
engaged in overseeing the work of their subordinates, the lowest-level managers have as their primary duty the supervision of
workers in basic operations. Depending upon the system of designation in an organization, these managers may be called
supervisors, foremen, superintendents, overseers or section officers.
(iii) Supervision aims at guiding subordinates in their work performance: To guide subordinates in their work performance,
the act of supervision involves preparing work schedules, assigning work and work facilities for employees, issuing orders and
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instructions for maintaining smooth work-flow, inspiring subordinates for better and higher performance by creating team spirit and
controlling work output by comparing actual performance with work targets and removing the gap between the two, if any.
COORDINATION
The basic function of coordination in an enterprise is the same as that of an orchestra conductor who directs the activities of the
orchestra party in such a manner that it produces harmony in music. Likewise the coordinator of an enterprise also directs the
activities of the group in such a manner that it brings harmonious and unified actions to achieve common purpose. Like the
orchestra conductor, a manager also performs the function of securing and maintaining unity of direction throughout the
organization. The management of a modern enterprise is based on the principles of division of labour and specialization. Jobs are
broken down into single repetitive tasks and are entrusted to individuals either working in the same department or in different
department of the enterprise. Mere application of specialization is not enough. With the jobs specialized and jobs divided among
units, coordination becomes necessary. Coordination is the management of interdependence in work situations. It is an orderly
synchronization of the interdependent efforts of individuals.
According to Terry, ―Coordination deals with the task of blending efforts in order to ensure successful attainment of an objective.
It is accomplished by means of planning, organizing directing and controlling‖. Terry considers coordination as a permeating
function of management passing through the managerial functions of planning, organizing, directing and controlling. In the words of
Mooney and Raley, ―Coordination is the orderly arrangement of group efforts to provide unity of action in pursuit of a common
purpose‖.
Some experts consider coordination as a separate management function. However, coordination might best be considered not as a
separate function, but as an essential part of all managerial functions of planning, organizing, directing and controlling. If a
manager performs these functions efficiently and expertly, coordination is generated automatically and there remains no need for
special coordination as such.
MANAGERIAL CONTROL
‗Control‘ is an important concept and process in management. In the past managers believed that the necessity of control
arose only when something went wrong. Then, the object of control was to find out the person responsible for these events and
take actions against him. This is only negative view of control. In modern management, the primary object of control is to bring to
light the mistakes or variations as soon as they appear between performance and standard laid down and then to take steps to
prevent such variations in future. The control is aimed at results and not people as such. Its purpose is to assure that intended
results occur and not that particular workers are reprimanded. Only a continuous control (and not occasional and emergency
control) can achieve the objective.
According to E F L Brech, ―Control is checking current performance against predetermined standards contained in the plans, with
the view to ensuring adequate progress and satisfactory performance‖. In the words of George R. Terry, ―Controlling is determining
what is being accomplished, that is, evaluating the performance and if necessary applying corrective measures so that the
performance takes place according to plans‖. To draw an analogy, it is like a thermostat in an air conditioning system which
ensures that predetermined temperature is maintained.
The concept of control is often confused with lack of freedom. The opposite of control is not freedom but chaos or anarchy. Control
is fully consistent with freedom. In fact they are interdependent. Without control freedom cannot be sustained for long. Without
freedom control becomes ineffective. Both autonomy (freedom) and accountability are embedded in the concept of control.
THE MANAGEMENT CONTROL SYSTEM
Then you change your method of exercising and you find that it works. You start shedding weight. This is weight control. It gives us
control over our body and its functioning. If such control is not exercised, we may not be able to do whatever we set out to do so. In
a similar way, organizations need to be in control of them. An organization lacking in controls is bad for its employees and hence,
bad for itself in the long run.
The purpose of all management and control systems is to achieve the goals and objectives of an organization with ease and at
least cost. The ultimate purpose of any system is that it should be ‗in control‘ instead of controlling people. It also aims at assisting
management in the coordination of the parts of an organization and the steering of those parts toward the achievement of its
overall purposes, goals and objectives. A control system is designed to bring unity out of the diverse activities of an organization
as it seeks to fulfil its overall purpose.
AUDITING
Auditing is a systematic and scientific examination of the books of accounts and records of business to enable the auditor to satisfy
himself that the profit and loss account and the balance sheet are properly drawn up so as to exhibit a true and fair view of the
financial state of affairs of the business and profit or loss for the financial period. The term auditing has been distinguished from
accounting and investigation The main point of distinction is that accountancy is concerned with the preparation of financial
statements whereas auditing is concerned with checking of these financial statements and reporting on the financial position and
result of operation of the organisation. Investigation is undertaken for some special purpose i.e. to determine the extent of fraud or
to determine the purchase price of the organisation and the like.
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Objectives of audit are broadly classified into a) primary objective and b) secondary objective. Primary objective of audit is to
substantiate the accuracy of the financial statements prepared by the accountant while the secondary objective is to detect and
prevent errors and frauds. A number of advantages can be derived from getting the accounts audited by a qualified auditor, such
as early detection of errors and frauds, reliability of accounts, statements of various types of claims, securing loans from banks and
other financial institutions, etc. Audit is classified into various types, viz., audit under statute, audit of accounts of private firm, audit
of accounts of private individuals, audit of trust accounts. An auditor can adopt any one of the modes to conduct his audit of an
organisation, viz. continuous audit or periodical audit or interim audit. Besides being a Chartered Accountant an auditor should
possess certain other qualities, such as knowledge of relevant laws, intelligence, tactfulness, vigilance, honesty and integrity
courage, impartiality, broadmindedness, patience, perseverance, maintaining secrecy of his client, commonsense etc.
STEPS IN CONTROLLING
The various steps in controlling may broadly be classified into four parts:
(i) establishment of control standards; (ii) measurement of performance, (iii) comparison between' performance and standards and
the communication, and (iv) correction of deviations from standards.
1. Establishment of Control Standards: Every function in the organisations begins with plans, which are goals, objectives, or
targets to be achieved. In the light of these, standards are established which are criteria against which actual results are measured.
For setting standards for control purposes, it is important to identify clearly and precisely the results which are desired. Precision in
the statement of these standards is important In many areas, great precision is possible. However, in some areas, standards are
less precise. Standards may be precise if they are set in quantities - physical, such as volume of products, man-hour or monetary,
such as costs, revenues, and investment. They may also be in other qualitative terms, which measure performance. After setting
the standards, it is also important to decide about the level of achievement or performance, which will be regarded as good or
satisfactory. There are several characteristics of a particular work that determine good performance. Important characteristics,
which should be considered while determining any level of performance as good for some operations are:
(i) output, (ii) expense, arid(iii) resources.
Expense refers to services or functions, which may be expressed in quantity, for achieving a particular level of output
Resources refer to capital expenditure, human resources, etc. After identifying these characteristics the desired level of each
characteristic is determined. The desired level of performance should be reasonable and feasible. The level should have some
amount of flexibility also, and should be stated in terms of range - maximum and minimum. Control standards are most effective
when they are related to the performance of a specific individual, because a particular individual can be made responsible for
specific results. However, sometimes accountability for a desired result is not so simply assigned; for example, the decision
regarding investment in inventory is affected by purchase, rate of production and sales. In such a situation, where no one person is
accountable for the levels of inventories, standards may be set for each step that is being performed by a man.
2. Measurement of Performance: The second major step in control process is the measurement of performance. The step
involves measuring the performance in respect of a work in terms of control standards. The presence of standards implies a
corresponding ability to observe and comprehend the nature of existing conditions and to ascertain the degree of control being
achieved. The measurement of performance against standards should be on a future basis, so that deviations may be detected in
advance of their actual occurrence and avoided by appropriate actions: Appraisal of actual or expected performance becomes an
easy task, if standards are properly determined and methods of measuring performance which can be expressed in physical and
monetary terms, such as production units, sales volume, profits, etc. can be easily and precisely measurable.
The performance, which is qualitative and intangible, such as human relations, employee morale, etc., cannot be measured
precisely. For such purposes, techniques like psychological tests and opinion surveys may be applied. Such techniques draw
heavily upon intuitive judgement and experience, and these tools are far from exact. According to Peter Drucker, it is very much
desirable to have clear and common' measurements in all key areas of business. It is not necessary that measurements are rigidly
quantitative. In his opinion, for measuring tangible and intangible performance, measurement must be
(i) clear, simple, and rational, (ii) relevant, (iii) direct attention and efforts, and (iv) reliable, self-announcing, and understandable
without complicated interpretation or philosophical discussions.
3. Comparing Actual, and Standard Performance: The third major step in control process is the comparison of actual and
standard performance. It involves two steps:
(i) finding out the extent of deviations, and
(ii) identifying the causes of such deviations.
When adequate standards are developed and actual performance is measured accurately, any variation will be clearly
revealed. Management may have information relating to work performance, data, charts, graphs and written reports, besides
personal observation to keep itself informed about performance in different segments of the organisation. Such performance is
compared with the standard one to find out whether the various segments and individuals of the organisation are progressing in the
right direction. When the standards are achieved, no further managerial action is necessary and control process is complete.
However, standards may not be achieved in all cases and the extent of variations may differ from case to case.
Naturally, management is required to determine whether strict compliance with standards is required or there should be a
permissible limit of variation. In fact, there cannot be any uniform practice for determining such variations. Such variations depend
upon the type of activity. For example, a very minute variation in engineering products may be significant than a wide variation in
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other activities. When the deviation between standard and actual performance is beyond the prescribed limit, an analysis is made
of the causes of such deviations.
For controlling and planning purposes, ascertaining the causes of variations along with computation of variations is important
because such analysis helps management in taking up proper control action. The analysis will pinpoint the causes, which are
controllable by the person responsible. In such a case, person concerned will take necessary corrective action. However, if the
variation is caused by uncontrollable factors, the person concerned cannot be held responsible and he cannot take any action.
Measurement of performance, analysis of deviations and their causes may be of no use unless these are communicated to the
person who can take corrective action. Such communication is presented generally in the form of a report showing performance
standard, actual performance, deviations between those two tolerance limits, and causes for deviations. As soon as possible,
reports containing control information should be sent to the person whose performance is being measured and controlled. The
underlying philosophy is that the person who is responsible for a job can have a better influence on final results by his own action.
A summary of the control report should be given to the superior concerned because the person on the job may either need help of
his superior in improving the performance or may need warning for his failure. In addition, other people who may be interested in
control reports are
(i) executives engaged in formulating new plans; and (ii) staff personnel who are expected to be familiar with control information for
giving any advice about the activity under control when approached.
4. Correction Of Deviations: This is the last step in the control process, which requires that actions should be taken to maintain
the desired degree of control in the system or operation. An organisation is not a self-regulating system such as thermostat which
operates in a state of equilibrium put there by engineering design. In a business organisation this type of automatic control cannot
be established because the state of affairs that exists is the result of so many factors in the total environment. Thus, some
additional actions are required to maintain the control. Such control action may be
(i) review of plans and goals and change therein on the basis of such review;
(ii) change in the assignment of tasks;
(iii) change in existing techniques of direction;
(iv) change in organisation structure; provision for new facilities, etc.
In fact, correction of deviation is the step in management control process, which may involve either all or
some of the managerial functions. Due to this, many persons hold the view that correcting deviations is not a step in. the control
process. It is the stage where other managerial functions are performed. Koontz and O‘Donnell have emphasised that the overlap
of control function with the other merely demonstrates the unity of the manager‘s job. It shows the managing process to be an
integrated system.
MANAGEMENT AUDIT
Traditional devices focus on non-scientific methods, whereas non-traditional devices are based on more of scientific methods and
are more accurate.
They are discussed below:
TRADITIONAL CONTROL TECHNIQUES
Despite the newer techniques of planning and control, some of the traditional techniques are still very popular because of their
special significance and continuing utility. Budgeting is one of the most important of such devices.
Budgetary Control
Budget as a plan represents a statement of anticipated inflows and expected outflows expressed numerically. Exercising control
over day-to-day operations of the enterprise for the purpose of executing budgets is known as budgetary control. The Institute of
Cost and Management Accountants of England and Wales defines a budget as ―a financial and/or quantitative statement prepared
prior to a defined period of time of the policy to be pushed during that period
for the purpose of attaining a good objective‖. The Institute of Cost and Management Accountants of England and Wales has
defined budgetary control as ―the establishment of objectives relating to the responsibilities of executives to the requirements of a
policy and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that
policy or to provide a basis for its revision‖.
Expected results in a budget may be expressed in financial terms, in terms of man hours, units of output, machine hours, or in any
other numerically measurable term. A budget may deal with operations, such as the expense budget; it may relate to capital
outlays, like the capital budget; or it may reflect flow of cash, as does the cash budget.
Full benefits of budgeting and budgetary control can be realised if different phases of all the operations of the company are
covered by budgets and comprehensive budgeting is in use. In such cases, planning is largely confined to budgeting. In a number
of enterprises, however, only important activities are planned and controlled by means of budgets, and only partial budgets are
prepared. Sales budgets are generally prepared in either case.
Elements of Budgetary Control
Basically, budgetary control involves the following steps:
– Determination of objectives to be achieved like higher profits, better finance position, better position in the market, etc.
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– Noting the steps necessary to achieve the objectives, i.e., laying down the exact and detailed course of action month by month
and over the whole period.
– Translating the course of action into quantitative and monetary terms.
– Constant comparison of the actual with the budget (again both physical achievement and the money values involved). Noting
deviations and rectifying the same to eliminate the gap between the budget planned and budget achieved.
Types of Budget
Budgets are drawn on the basis of plans and since an average enterprise has a large variety of plans, there are many types of
budgets currently in use in business organizations. The following are the important types of budgets.
– Sales budgets including selling and distribution costs budgets.
– Production and manufacturing budgets.
– Purchase Budget.
– Capital Expenditure Budget.
– Administration Expenses Budget.
– Research and Development Budget.
– Cash Budget.
A master budget is frequently prepared to combine all other budgets in a summary form. The components of the master budget are
the various functional budgets. The summary plan of master budget is generally divided into two parts- a forecast income
statement and a forecast balance sheet.
Benefits of Budgeting
A system of budgeting and budgetary control leads to the following advantages:
(i) Budgeting helps to express many diverse actions and things in terms of a common numerical denominator. It thus provides the
management with a means of making comparisons between dissimilar things.
(ii) Maximum efficiency is achieved by avoiding wastage and losses.
(iii) Expenditure beyond what is provided in budgets is not incurred without prior sanction. Thus, expenditure can be scrutinized
before it is incurred.
(iv) Budgets serve as a target. Therefore, objective judgement, rather than judgements depending upon personal ideas and whims,
is possible. The people concerned also know the standard against which their performance is supposed to be judged.
(v) Everyone knows what exactly he has to do. This means there will be no over-lapping and that there will be nothing left undone.
(vi) Management by exception is possible; comparison of actual and budgeted performance will show up spots where management
attention is needed the most
(vii) If budgets are drawn up on the basis of measured dynamism, the firm would be able to grow at a faster rate.
(viii) Budgeting is also very useful in ―profit planning‖ - setting targets for profits and related matters and then ensuring
accomplishment of targets through analysis of deviations and prompt corrective actions.
Standard Costing
Expenses/costs associated with every activity are recorded and classified and then compared with the standard or budgeted costs.
The concerned manager takes corrective action if any deviation is found. This technique helps in finding out which activity is
profitable and which is not.
Financial Ratio Analysis
All business organizations prepare Profit & Loss a/c and Balance Sheet. When a comparative study of these financial statements
are made, trends of changes in profits, assets, liabilities, turnover etc can be assessed. Further ratio analysis can be done to
compute and analyze financial statements. Ratio Analysis is the relation between various elements of financial statements
expressed in mathematical terms. It helps to understand profitability, liquidity, solvency of a firm
Internal Audit
It is another effective and widely used tool of managerial control. Internal auditing signifies regular and independent appraisal of the
accounting, financial, and other operations of a business by a staff of internal auditors. There is no denying the fact that internal
auditors mostly limit themselves to the integrity of accounts and corporate assets. But the horizon of internal auditing can be
widened just by bringing under them some more appraisal areas as - policies, procedures, methods, quality of management, etc.
But the primary limiting factor in this regard is that no management however broad it may be in outlook and attitude likes to give
these people so much of authority and respond to their queries regarding various aspects of management. Nevertheless, dearth of
qualified personnel to carry on such a broad-based audit is also a matter of significance.
Break- Even Analysis
Break-Even Analysis is a point of ‗no profit – no loss‘. For instance when a firm is able to sell 24,000 bags, it would be break-even.
It indicates that a sale below this level will cause a loss and any sale above this level will earn profits. It can be used a control
device as it provides a basis for collective actions to be taken to improve future performance
Statistical Control
In order to find out the causes for deviations, comparison of various ratios, averages, percentages of statistical data are
undertaken. Statistical reports compiled after the analysis are presented in the form of charts or graphs which can help in
visualizing the trend and weaknesses in the respective areas of operation and necessary remedial steps are suggested. Charts
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and diagrams are used by the production, sales, purchase, and personnel and even more frequently by the executive heads of
companies. In recent year‘s statistical data and information have become the most common means to aid planning and controlling
device.
NON TRADITIONAL/MODERN CONTROL TECHNIQUES
Following are the modern techniques of control:
Zero Base Budgeting
Zero base budgeting is a new approach to budgeting which was first introduced by Peter Pyhrr in 1970 in the United States. It is
defined as an operative planning and budgeting process which requires each manager to justify his entire budget in detail from
scratch (hence zero-base) and shifts the burden of proof to each manager to justify why he should spend any money at all.
The following steps are implied in zero-base budgeting.
First, managers at all levels have to define the objective of each programme of activity that they supervise, and prepare alternative
spending plans as ‗decision packages‘. There should be at least three, if not more, such packages:
– one involving expenditure of (say) 20% below the present level to expenditure or the minimum expenditure which will permit the
programme to be continued meaningfully;
– another package indicating resources in men, materials and money which will be needed to continue the present levels of
performance and objectives;
– and a third package indicating what more could be achieved if additional funds were available to the extent of (say) 10% or more.
The executives at the next higher level have then to consolidate these decision packages and rank them in order of priorities.
ZBB as a technique of budgeting based on continuous evaluation of the current activities. It provides a convenient reference plan
that can be used for controlling activities during the budget period. It is an effective managerial tool to ensure sound planning and
efficient budgeting. It can be used more meaningfully in those areas where there exists a direct relationship between the
expenditure on an activity and its benefit to the enterprise. However, the process of ZBB involves additional time and effort to be
devoted during the initial years.
Network Analysis
Network analysis is a technique for planning and controlling complex projects and for scheduling the resources required on such
products. It achieves this aim by analyzing the component parts of a project and assessing the sequential relationships between
each event. The results of this analysis are represented diagrammatically as a network of interrelated activities. Broadly speaking,
there are two network techniques.
(a) Critical Path Method
Critical Path Method, an important network technique for management control was developed by Walkar of Dupont to reduce time
for periodic maintenance. It is used for planning and controlling the most critical activities to accomplish any project. Under this
technique a project is broken into different operations or activities and their relationships are determined. These relations are
shown with the help of diagram known as network diagram. The Network diagram or flow plan may be used for optimizing the use
of resources and time. CPM technique is based on the assumption that activity times are proportional to the magnitude of
resources allocated to them and by making a change in the level of resources, the activity times and the project completion time
can be varied.
(b) Programme Evaluation and Review Technique (PERT)
PERT is an important technique in the field of project management. It involves basic network technique which includes planning,
monitoring and controlling of projects. In addition to its use in schedule planning and control the network concept in PERT provides
framework for treating a wide-range of project management problems. Thus, PERT system is directed towards the dynamic
management of projects.
Management Audit
Companies get their accounts audited at least once a year. This statutory audit is intended to ensure that the company‘s records
and reports reflect sound accounting principles. Such an audit looks to the past, to historical records of past performance.
However, some of the progressive companies appear to have recognized the importance and utility of management audits. And
management audits are becoming increasingly significant in connection with control of overall performance of the enterprise and its
management. Management audit may be defined as the systematic and dispassionate examination, analysis and appraisal of
management‘s overall performance. It is basically a procedure or a form of appraisal of management‘s total performance by means
of an objective and comprehensive examination of the organization structure or its components, such as a department, its plans
and policies, methods of operation, controls and its use of physical facilities and human resource. Thus, management audit
signifies critical assessment of management of the enterprise from the broadest possible point of view. Such an audit may be
undertaken by the management itself, or it may be carried out with the help of management consultants. In the same way, while a
comprehensive management audit may be recommended, companies may even apply it independently to some specific sections
of the organization. Thus, production efficiency or investment appraisal may well be the subject matter of management audit. It
may even be used to provide guidance on critical assessment of capital budgeting or profit performance.
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PLANNING AND CONTROL
Planning and controlling are closely linked to each other. They are called the siamese twins of management. Not surprisingly,
effective planning facilitates controlling, and controlling facilitates planning. The reciprocal relationship between planning and
controlling is depicted in the given Figure. Planning lays out a framework for the future and, in this sense, provides a blueprint for
control. A system of control presupposes the existence of certain standards. Planning provides the standards of performance which
serve as the basis of control. In this context, Koontz, O‘Donnell, and Weihrich rightly remark, ―Every objective, every goal of the
many planning programmes, every policy, every procedure, and every budget become standards against which actual or expected
performance might be measured.‖ Control systems, in turn, regulate the allocation and use of resources and, in doing so, and
facilitate the process of the next phases of planning. Control is meant to keep the plans on the right track and to keep away the
forces of disruption and distortion. The lessons of control are feedback to modify and reform future plans. Thus, planning and
controlling reinforce each other. Planning based on facts makes control easier, and adequate controlling improves future planning.
It is, however, important to remember that in today‘s complex organizational environment, both functions have become more
difficult to implement while they have become more important in every department of the organization
Planning is Looking Ahead and Controlling is Looking Back: A Critical Evaluation
While explaining the relationship between planning and controlling it is often said that, ―Planning is looking ahead and controlling is
looking back.‖ The view of planning and controlling expressed in the statement, though true, is incomplete. Planning is, no doubt, a
forward-looking activity as it involves deciding in advance the organization‘s objectives, strategies, major policies and programmes
and forecasting the future events as also their likely impact on the organization. And, controlling is a backward-looking activity as it
involves checking whether the plans are properly implemented, the plan results are achieved, and deviations are corrected. Surely,
it is a postmortem of events which have already taken place. Now, nothing can be done to undo the past.
However, the description of the processes and purposes of planning and controlling, though correct, is certainly not complete.
Planning is not merely forward-looking. Plans for the future are often partly the projections of the past and the present. Thus,
planning is based on past experience. The planner has to look back into the organization‘s past decisions, policies, programmes
and commitments to embark on future course of action. Similarly, controlling is not merely a looking back exercise. By identifying
deviations and initiating corrective steps, controlling attempts to improve work performance in future. The whole exercise of looking
back is meant to improve work performance in future. Feedforward controls, in particular, enable managers to take advance
preventive action against occurrence of deviations and distortions in plans, and thereby help in keeping the organization alert and
alive to the future environmental events. Thus, the early warning and rapid response processes are integral to all control systems
which make controlling forward looking.
CHAPTER SUMMARY
According to Koontz, direction is a complex function that includes all those activities which are designed to encourage
subordinates to work effectively and efficiently in both short and long term. The function of direction involves two major activities
namely giving orders to employees, leading and motivates them. Leadership is generally defined as influence, the art of process of
influencing people so that they will strive willingly towards achievement of group goals. A leader is one who guides and directs
other people. A leader is a guide, planner, arbitrator and administrator. On the basis of authority, leadership styles are divided into
three categories namely autocratic, democratic and free-rein. Motivating is inspiring the subordinates to contribute with zeal and
enthusiasm towards organizational goals. What can motivate people is explained by a number of motivational theories. The
important among them are Maslow‘s need hierarchy theory, Hertberg‘s two factors theory, Adam‘s equity theory, Mc Cleland‘s
need theory, Skinner‘s reinforcement theory and so on.
Communication is the process of exchange of information, ideas and opinions which bring about integration of interests, aims
and efforts among members of a group organized for achievement of predetermined goals. Communication process involves the
sender, the transmission of a message through a selected channel and the receiver. The communication may be formal or
informal. Based on the direction of flow of information, communication may be classified as upward, downward and horizontal.
Different forms of communication are oral, written and non-verbal.
Coordination deals with the task of blending efforts in order to ensure successful attainment of an objective.
Control is checking current performance against predetermined standards contained in the plans with view to ensuring adequate
progress and satisfactory performance. Control involves three steps namely establishing standards, measuring and comparing
actual performance with standards and taking corrective action.
REVIEW QUESTIONS
1. ―Control is a fundamental management function that ensures work accomplishment according to plans." Analyse this statement
and outline the various steps in control process.
2. Explain the importance of control in a business organisation. What are the requirements of an effective control system?
3. In what way are planning and control related to each other? Explain clearly the essential steps in control process.
4. What are the behavioural implications of control? Discuss some methods of overcoming the behavioural problems of control.
5. Planning is the basis, delegation is the key, information is the guide, and action is the essence of control." Discuss.
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CHAPTER TEN
BUSINESS COMMUNICATION
LEARNING OBJECTIVES
When you have finished studying the chapter, you should be able to:
 Define communication and identify its kinds, and characteristics;
 Explain the guides to effective communication;
 Name and describe the elements of effective communication;
 Outline the process of communication;
 Identify and describe the tools of communication;
 Demonstrate the writing of different forms of practical communication, namely, the letter and other forms of
correspondence, reports and minutes, and
 Write samples of oral presentations and show by practical
BUSINESS COMMUNICATION AND ITS SCOPE FOR BUSINESS
Communication means to create a common understanding. Communication is an important aspect of human behaviour. It
stands for natural activity of all human beings to convey opinions, feelings, information, and ideas to others through words (written
or spoken), body language, or signs. Communication is an integral part of life. From birth till death every living being is
communicating in his or her own way, be it birds, animals, trees or human beings.
The word Business stands for any economic activity undertaken with a view to earn profit. The communication
undertaken in the process of this activity is termed as business communication. From the very inception of the idea of the
Business, to run the day to day activities of the Business, communication is involved. It includes oral, written, formal, informal,
upward, downward, lateral, diagonal, inward outwards as well as non-verbal communication. Communication is the most vital
ingredient of an organization. In fact, an organization cannot be conceived of without communication. An organization is a group of
persons constituted to achieve certain specific objectives. The achievement of these objectives largely depends upon a proper coordination and integration of human effort in an organization. The people working in an organization are interrelated; their activities
are also interrelated because all activities are performed only to achieve the organizational objectives. Co-ordination and
integration of various human activities are possible only if there is an effective system of communication in the organization which
provides for exchange of information and sharing of various ideas. The more effective the system of communication, the better is
the relation between workers and the management. It is communication which gives life to the organization; so, it is rightly known
as the life blood of an organization
DEFINING COMMUNICATION
The root of the word ―communication‖ in Latin is communicare, which means to share, or to make common. communication is
defined as the process of understanding and sharing meaning. At the center of our study of communication is the relationship that
involves interaction between participants. This definition serves us well with its emphasis on the process, which we‘ll examine in
depth across this text, of coming to understand and share another‘s point of view effectively.
The first key word in this definition is process. A process is a dynamic activity that is hard to describe because it changes.
Imagine you are alone in your kitchen thinking. Someone you know (say, your mother) enters the kitchen and you talk briefly. What
has changed? Now, imagine that your mother is joined by someone else, someone you haven‘t met before—and this stranger
listens intently as you speak, almost as if you were giving a speech. What has changed? Your perspective might change, and you
might watch your words more closely. The feedback or response from your mother and the stranger (who are, in essence, your
audience) may cause you to re-evaluate what you are saying. When we interact, all these factors—and many more—influence the
process of communication.
The second key word is understanding: ―To understand is to perceive, to interpret, and to relate our perception and
interpretation to what we already know.‖ If a friend tells you a story about falling off a bike, what image comes to mind? Now your
friend points out the window and you see a motorcycle lying on the ground. Understanding the words and the concepts or objects
they refer to is an important part of the communication process.
Next comes the word sharing. Sharing means doing something together with one or more people. You may share a joint
activity, as when you share in compiling a report; or you may benefit jointly from a resource, as when you and several co-workers
share a pizza. In communication, sharing occurs when you convey thoughts, feelings, ideas, or insights to others. You can also
share with yourself (a process called intrapersonal communication) when you bring ideas to consciousness, ponder how you feel
about something, or figure out the solution to a problem and have a classic ―Aha!‖ moment when something becomes clear.
Finally, meaning is what we share through communication. The word ―bike‖ represents both a bicycle and a short name for a
motorcycle. By looking at the context the word is used in and by asking questions, we can discover the shared meaning of the word
and understand the message.
Communication is a complex process often involving reading, writing, speaking and listening. It may be verbal and non -verbal
(or a mixture of both), and it uses a variety of media (language, mass media, digital technology, etc.). Broadly speaking,
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communication is a transfer and reconstruction of information. More specifically, we may define communication as the transmission
and reception of ideas, feelings and attitudes – verbal and non-verbal – that produce a response.
A business Organization is a group of people associated to earn profit. Various kinds of activities have to be performed by
the people of an organization so as to earn profit. These activities need an effective and systematic communication. Without
efficient communication, one cannot even imagine to do work and hence will be unable to earn profit. Since the aim of business
organization is to earn profit, the organization will die without profit and this death is a result of the absence of
communication. This is why communication is called life blood of a business organization.
THE IMPORTANCE AND SCOPE OF COMMUNICATION
Communication is considered to be the most important and most effective ingredient of the management process.
Interpersonal communication is fundamental to all managerial activities. All other functions involve some form of directions and
feedback. Effective management is a function of effective communication. Many operations have failed because of poor
communication, misunderstood messages and unclear instructions. Even in life, in general, communication plays a very important
role among friends, within the family and in all social circles. ―Failure to communicate‖ is many times the cause for lost friendships,
divorces and distances between parents and children. ―My father does not understand me‖ is the common cry of a teenager.
Accordingly, communication plays an important role in all walks of human life as well as organisational life.
Communication is defined as ―the process of passing information and understanding from one person to another‖ (Kazmier,
1977). It means transmitting and sharing of ideas, opinions, facts and information in a manner that is perceived and understood by
the receiver of the communication. It is a meaningful interaction among people where the thoughts are transferred from one person
to another in a manner such that the meaning and value of such thoughts is same in the minds of both the sender as well as the
receiver of the communication. Effective communication is every essential for management to successfully perform its functions. It
is an essential ingredient in management-employee relations. According to W.R. Spriegal, ―most of the conflicts in business are not
basic but are caused by misunderstood motives and ignorance of facts. Proper communications between interested parties reduce
the points of friction and minimise those that inevitably arise‖. Accordingly, by proper communication and sharing of information,
the management takes the employees into confidence and makes them more knowledgeable about problems and policies of the
enterprise.
According to Peter Drucker (1954), a manager does not handle people; he motivates guides and organises people to
accomplish their goals. His effectiveness depends upon his ability to communicate well with the employees. Good communication
is the foundation of sound management. It is through communication that workers become aware of their own duties and
responsibilities as well as the instructions and orders from the upper levels of management hierarchy and also their own
suggestions, misunderstanding, confusion, distortions and bottlenecks and improves coordination and control. It improves
productivity by developing and maintaining good human relations in the organisation. It is a basic tool for motivation and improved
morale. Supervision and leadership are impossible without it. It was largely the work of Chester Barnard in the late 1930s which
highlighted communication as a dynamic force in shaping the organisational behaviour. He considered it as one of the three
important elements of an organisation along with common purpose and willingness to serve. He also linked communication with his
concept of authority. The authority flows down through the channel of communication. The authority can lose its meaning if the
channels of communication are blocked or if the communication is misunderstood or if the strength of communication is diluted.
COMMUNICATION PROCESS MODEL
A simple communication model which reflects communication as a dynamic interactive process has been proposed by David
Berdo (1960). His approach is based upon the following idea:
If we accept the concept of process, we view events and relationships as dynamic, ongoing, ever-changing, and continuous. When
we label something as a process, we also mean that it does not have a beginning, an end, a fixed sequence of events. It is not
static, at rest. It is moving. The ingredients within a process interact, each affects all the others. This model described as a series of
steps, consists of the following components:
MESSAGE
SENDER
CHANNEL/ MEDIA
RECEIVER
BARRIERS TO COMMUNICATION
ENCODES
The Communication Process
DECODES
FEEDBACK
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EIGHT ESSENTIAL COMPONENTS OF COMMUNICATION
In order to better understand the communication process, we can break it down into a series of eight essential components:
1. Source
2. Message
3. Channel
4. Receiver
5. Feedback
6. Environment
7. Context
8. Interference
Each of these eight components serves an integral function in the overall process. Let‘s explore them one by one.
Source
The source imagines, creates, and sends the message. In a public speaking situation, the source is the person giving the speech.
He or she conveys the message by sharing new information with the audience. The speaker also conveys a message through his
or her tone of voice, body language, and choice of clothing. The speaker begins by first determining the message—what to say and
how to say it. The second step involves encoding the message by choosing just the right order or the perfect words to convey the
intended meaning. The third step is to present or send the information to the receiver or audience. Finally, by watching for the
audience‘s reaction, the source perceives how well they received the message and responds with clarification or supporting
information.
Message
―The message is the stimulus or meaning produced by the source for the receiver or audience.‖ When you plan to give a speech or
write a report, your message may seem to be only the words you choose that will convey your meaning. But that is just the
beginning. The words are brought together with grammar and organization. You may choose to save your most important point for
last. The message also consists of the way you say it—in a speech, with your tone of voice, your body language, and your
appearance—and in a report, with your writing style, punctuation, and the headings and formatting you choose. In addition, part of
the message may be the environment or context you present it in and the noise that might make your message hard to hear or see.
Imagine, for example, that you are addressing a large audience of sales reps and are aware there is a World Series game tonight.
Your audience might have a hard time settling down, but you may choose to open with, ―I understand there is an important game
tonight.‖ In this way, by expressing verbally something that most people in your audience are aware of and interested in, you might
grasp and focus their attention.
Channel
―The channel is the way in which a message or messages travel between source and receiver.‖ For example, think of your
television. How many channels do you have on your television? Each channel takes up some space, even in a digital world, in the
cable or in the signal that brings the message of each channel to your home. Television combines an audio signal you hear with a
visual signal you see. Together they convey the message to the receiver or audience. Turn off the volume on your television. Can
you still understand what is happening? Many times you can, because the body language conveys part of the message of the
show. Now turn up the volume but turn around so that you cannot see the television. You can still hear the dialogue and follow the
story line. Similarly, when you speak or write, you are using a channel to convey your message. Spoken channels include face-toface conversations, speeches, telephone conversations and voice mail messages, radio, public address systems, and voice over
Internet protocol (VoIP). Written channels include letters, memorandums, purchase orders, invoices, newspaper and magazine
articles, blogs, e-mail, text messages, tweets, and so forth.
Receiver
―The receiver receives the message from the source, analyzing and interpreting the message in ways both intended and
unintended by the source.‖ To better understand this component, think of a receiver on a football team. The quarterback throws the
football (message) to a receiver, who must see and interpret where to catch the ball. The quarterback may intend for the receiver to
―catch‖ his message in one way, but the receiver may see things differently and miss the football (the intended meaning)
altogether.
As a receiver you listen, see, touch, smell, and/or taste to receive a message. Your audience ―sizes you up,‖ much as you might
check them out long before you take the stage or open your mouth. The nonverbal responses of your listeners can serve as clues
on how to adjust your opening. By imagining yourself in their place, you anticipate what you would look for if you were them. Just
as a quarterback plans where the receiver will be in order to place the ball correctly, you too can recognize the interaction between
source and receiver in a business communication context. All of this happens at the same time, illustrating why and how
communication is always changing.
Feedback
When you respond to the source, intentionally or unintentionally, you are giving feedback. Feedback is composed of messages the
receiver sends back to the source. Verbal or nonverbal, all these feedback signals allow the source to see how well, how
accurately (or how poorly and inaccurately) the message was received. Feedback also provides an opportunity for the receiver or
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audience to ask for clarification, to agree or disagree, or to indicate that the source could make the message more interesting. As
the amount of feedback increases, the accuracy of communication also increases.
For example, suppose you are a sales manager participating in a conference call with four sales reps. As the source, you want to
tell the reps to take advantage of the fact that it is World Series season to close sales on baseball-related sports gear. You state
your message, but you hear no replies from your listeners. You might assume that this means they understood and agreed with
you, but later in the month you might be disappointed to find that very few sales were made. If you followed up your message with
a request for feedback (―Does this make sense? Do any of you have any questions?‖) you might have an opportunity to clarify your
message, and to find out whether any of the sales reps believed your suggestion would not work with their customers.
Environment
―The environment is the atmosphere, physical and psychological, where you send and receive messages.‖ The environment can
include the tables, chairs, lighting, and sound equipment that are in the room. The room itself is an example of the environment.
The environment can also include factors like formal dress, that may indicate whether a discussion is open and caring or more
professional and formal. People may be more likely to have an intimate conversation when they are physically close to each other,
and less likely when they can only see each other from across the room. In that case, they may text each other, itself an intimate
form of communication. The choice to text is influenced by the environment. As a speaker, your environment will impact and play a
role in your speech. It‘s always a good idea to go check out where you‘ll be speaking before the day of the actual presentation.
Context
―The context of the communication interaction involves the setting, scene, and expectations of the individuals involved.‖ A
professional communication context may involve business suits (environmental cues) that directly or indirectly influence
expectations of language and behavior among the participants.
A presentation or discussion does not take place as an isolated event. When you came to class, you came from somewhere. So
did the person seated next to you, as did the instructor. The degree to which the environment is formal or informal depends on the
contextual expectations for communication held by the participants. The person sitting next to you may be used to informal
communication with instructors, but this particular instructor may be used to verbal and nonverbal displays of respect in the
academic environment. You may be used to formal interactions with instructors as well, and find your classmate‘s question of ―Hey
Teacher, do we have homework today?‖ as rude and inconsiderate when they see it as normal. The nonverbal response from the
instructor will certainly give you a clue about how they perceive the interaction, both the word choices and how they were said.
Context is all about what people expect from each other, and we often create those expectations out of environmental cues.
Traditional gatherings like weddings are often formal events. There is a time for quiet social greetings, a time for silence as the
bride walks down the aisle, or the father may have the first dance with his daughter as she is transformed from a girl to
womanhood in the eyes of her community. In either celebration there may come a time for rambunctious celebration and dancing.
You may be called upon to give a toast, and the wedding context will influence your presentation, timing, and effectiveness.
COMMUNICATION IN CONTEXT
Now that we have examined the eight components of communication, let‘s examine this in context. Is a quiet dinner
conversation with someone you care about the same experience as a discussion in class or giving a speech? Is sending a text
message to a friend the same experience as writing a professional project proposal or a purchase order? Each context has an
influence on the communication process. Contexts can overlap, creating an even more dynamic process. You have been
communicating in many of these contexts across your lifetime, and you‘ll be able to apply what you‘ve learned through experience
in each context to business communication.
INTRAPERSONAL COMMUNICATION
Have you ever listened to a speech or lecture and gotten caught up in your thoughts so that, while the speaker continued, you were
no longer listening? During a phone conversation, have you ever been thinking about what you are going to say, or what question
you might ask, instead of listening to the other person? Finally, have you ever told yourself how you did after you wrote a document
or gave a presentation? As you ―talk with yourself‖ you are engaged in intrapersonal communication. Intrapersonal communication
involves one person; it is often called ―self-talk.‖
INTERPERSONAL COMMUNICATION
The second major context within the field of communication is interpersonal communication. Interpersonal communication
normally involves two people, and can range from intimate and very personal to formal and impersonal. You may carry on a
conversation with a loved one, sharing a serious concern. Later, at work, you may have a brief conversation about plans for the
weekend with the security guard on your way home. What‘s the difference? Both scenarios involve interpersonal communication,
but are different in levels of intimacy. The first example implies a trusting relationship established over time between two caring
individuals. The second example level implies some previous familiarity, and is really more about acknowledging each other than
any actual exchange of information, much like saying hello or goodbye.
GROUP COMMUNICATION
Have you ever noticed how a small group of people in class sit near each other? Perhaps they are members of the same sports
program, or just friends, but no doubt they often engage in group communication. ―group communication is a dynamic process
where a small number of people engage in a conversation.‖ Group communication is generally defined as involving three to eight
people. The larger the group, the more likely it is to break down into smaller groups. To take a page from marketing, does your
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audience have segments or any points of convergence/divergence? We could consider factors like age, education, sex, and
location to learn more about groups and their general preferences as well as dislikes. You may find several groups within the larger
audience, such as specific areas of education, and use this knowledge to increase your effectiveness as a business communicator.
PUBLIC COMMUNICATION
In public communication, one person speaks to a group of people; the same is true of public written communication, where one
person writes a message to be read by a small or large group. The speaker or writer may ask questions, and engage the audience
in a discussion (in writing, examples are an e-mail discussion or a point-counter-point series of letters to the editor), but the
dynamics of the conversation are distinct from group communication, where different rules apply. In a public speaking situation, the
group normally defers to the speaker. For example, the boss speaks to everyone, and the sales team quietly listens without
interruption.
MASS COMMUNICATION
How do you tell everyone on campus where and when all the classes are held? Would a speech from the front steps work?
Perhaps it might meet the need if your school is a very small one. A written schedule that lists all classes would be a better
alternative. How do you let everyone know there is a sale on in your store, or that your new product will meet their needs, or that
your position on a political issue is the same as your constituents? You send a message to as many people as you can through
mass communication. Does everyone receive mass communication the same way the might receive a personal phone call? Not
likely. Some people who receive mass mailings assume that they are ―junk mail‖ (i.e., that they do not meet the recipients‘ needs)
and throw them away unopened. People may tune out a television advertisement with a click of the mute button, delete tweets or
ignore friend requests on Facebook by the hundreds, or send all unsolicited e-mail straight to the spam folder unread.
Mass media is a powerful force in modern society and our daily lives, and is adapting rapidly to new technologies. Mass
communication involves sending a single message to a group. It allows us to communicate our message to a large number of
people, but we are limited in our ability to tailor our message to specific audiences, groups, or individuals. As a business
communicator, you can use multimedia as a visual aid or reference common programs, films, or other images that your audience
finds familiar yet engaging. You can tweet a picture that is worth far more than 140 characters, and you are just as likely to elicit a
significant response. By choosing messages or references that many audience members will recognize or can identify with, you
can develop common ground and increase the appeal of your message.
COMMUNICATION THEORY
There are two major theories of communication: behavioural & mathematical.
on-verbal communication. First set forth by Dr. Jurgen Ruesch, a psychiatrist, it
postulates that communication is based on social situations in which individuals find themselves. Our participation in
communication with others must conform to established behavioural patterns involving
 social situations (culture, social class, time & place, etc.)
 roles (sex, professional, religious, etc.)
 status (authority, respect, social/class standing,
 rules (protocol, ethics, or code of behaviour)
 clues in non-verbal communication (gestures, touch, voice inflections, rate of delivery, etc.)
This theory identifies communication networks such as
 intrapersonal, i.e., communication with oneself,
 interpersonal, i.e., communication between individuals,
 group interaction, such as between clans, or organizations, and
 cultural, i.e., between distinct cultures, such as Islamic and Christian, or African, Anglo-Saxon and Spanish, etc. in
America.
MEDIA AND MODES OF COMMUNICATION
Medium is the means of transmitting a message. Some media carry written words and/or pictures/graphics and other media carry
the voice. Electronic media can carry both voice and words. The message can be transmitted by any suitable medium. Each
medium has its own characteristics which are advantageous in one situation and disadvantageous in another situation. Each
medium makes a different kind of impression and impact on the receiver.
CHOICE OF MEDIUM
The medium of communication is selected keeping in view the following Considerations:
1. Type of Audience: If the audience we want to reach is educated, then the written form of communication may be used, but in
case of uneducated audience, pictures, symbols or voice may be more suitable. Similarly, depending upon who is the receiver, the
medium of communication is selected.
2. Need for Secrecy: If confidentiality is required for the message to be transmitted, it cannot be sent by media like telex or fax,
even if the message is urgent. The choice of the media will definitely be influenced by the requirement of secrecy.
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3. Need for Accuracy: Need for accuracy in transmission is not the same for all the messages. The alphabetical data may not
need as much accuracy as the numerical data does, so the selection of media to send such data must be done with due
consideration.
4. Need for Reliability: Need for reliability of the medium is an important factor. Sending a message by hand delivery is more
reliable than ordinary mail; Similarly, registered post is more reliable than ordinary mail.
5. Speed/ Time Considerations: The pressure of time and the distance between the sender and the receiver influence the choice
of the medium. Media like telephone, telex, fax and email are the fastest in this case.
6. Cost of the Medium: Cost of the medium, keeping in view its urgency and relative importance is one major factor to be
considered. If the message is not very urgent or important, low cost media, like ordinary post, etc. may be chosen.
7. Availability of a Medium: A particular medium should be available to the sender as well as the receiver for the message to be
transmitted. The sender can send the message through telephone only if the receiver has this facility available.
8. Feedback Capacity: For some messages, immediate feedback is required. In such a case, that medium should be chosen,
which has the capacity for immediate feedback, like the telephone.
9. Availability of a Printed ( hard copy) for record: If a printed copy of the message is require for record, then the message
cannot be transmitted by oral or vocal mediums like telephone. In this case, letter, e mail or fax may be suitable.
10. Requirement of the Situation: Sometimes, a particular situation may create the need for a particular medium of transmission.
For example, to offer a formal note of thanks or to officially congratulate somebody, a written communication may be more suitable.
11. Intensity and complexity of the message: Many messages have an emotional content, or may be complex in nature or carry
an intense result with them. Care has to be taken while choosing the medium for such messages.
MODES OF COMMUNICATION
Conventional Modes
Media which have been in use for a long time and depend on traditional carriers are called conventional modes. These include the
following mediums:
1. Postal mail
2. Courier
3. Hand Delivery
POSTAL MAIL
The postal service uses rail, road and air transport, and is usually a government-owned network with links with all other countries.
Various types of mail services are available:
Ordinary Mail, Registered Mail which may include A.D. (Acknowledgement Due), Quick Mail Service (QMS), Express Delivery,
Under Certificate of Posting.
Speed post a special service offered by the post office, it ensures delivery of letters and parcels on the same day with in the city,
with 24 hours to certain cities in the country and within 48 hours to cities in other countries. This service is not available in all cities.
The post office now offers electronic media for new services like hybrid mail in some cities.
COURIER
Courier services are private; they collect and deliver packets door -to -door at any time during the day. Though the cost is high, this
is a very quick service for the delivery of letters and parcels. Courier services are limited to the cities where they maintain their
network. Their door -to -door service is a great advantage. Courier companies are recognized as commercial companies. Courier
services are the modernized, sophisticated form of the messenger or runner of the old days before the postal service.
HAND DELIVERY
Written messages and documents and parcels can be delivered within the city by an organization's delivery boys. The
effectiveness and speed of this method depends on the organization's own system of messengers. It requires a number of
employees for outdoor work, and may be expensive; but it ensures prompt delivery is necessary for the record, as the messenger
can bring back a signed copy, or an official receipt or a signature in the sender's peon book.
ELECTRONIC MODES
These are media which transmit signals instantly from any source to any destination in the world by modern electronic technology.
1. Telephone
2. Intercom
3. Cell Phone
4. Fax
5. e-Mail
6. e-Conferencing
7. Tele-Conferencing
8. Internet
9. Computer Networks - LAN, WAN, MAN
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TELEPHONE
This form of electronic communication has been around for nearly a century. It is the most useful and universal medium of oral
communication with a person who is not present at the same place as the sender. The telephone instrument has evolved, over the
years, into very sophisticated forms with many new facilities.
STD (Subscriber Trunk Dialling) allows a user to make call to a number in another city directly, without having to call the operator
at the telephone exchange. This service is available to almost all cities in the country. Every city has code number which you dial
before dialing the personal telephone number. The code number for Bonn Germany is 0228.
ISD (International Subscriber Dialling) allows the user to call a number to any of the major cities of the world, without calling the
operator at the telephone exchange. Every country has an international code number which you dial before dialling the required
city code and personal telephone number. The code for Germany is 0049.
STD and ISD facilities can be locked with a number code on telephones attached to electronic exchanges. On other telephones,
you may have to pay a fee and/or deposit to get the facilities activated. These facilities have made the telephone an instrument for
instant communication to any part of the world.
Technological advancement has made the telephone instrument so sophisticated that it is able to provide a number of services. An
answering machine can take a message if you cannot answer it. Caller identity device attached to the telephone can show the
number from which the incoming call is being made.
INTERCOM
The intercom is an internal telephone system which allows communication between persons in different parts of a building. It
eliminates the need for visiting another part of the office and the need for a peon to carry written notes and messages. Information
can be passed quickly from one person to another in the office. Some intercom instruments have facility to broadcast messages to
the entire office over all the internal lines or a particular location on one line.
CELLULAR PHONE
The cellular phone is based on a combination of the old radio technology and emerging telecommunication technology. Cellular or
mobile phones have some of the characteristics of the home phones but there are several differences. There are some boundaries
to cellular coverage outside metropolitan areas and away from major highways. An air time is charged by the minute on calls made
from and received by the cellular phone; a fraction of a minute is rounded off to the next higher minute. Calls made are charged
from the time the "send" button is pressed. When a cellular call is placed, a radio signal travels from the phone to a
receiver/transmitter within a cell. A cell is a geographic area ranging from less than a quarter mile to 20 miles in diameter, and
contains a fixed radio signal receiver/transmitter. Cellular phone instruments have facilities for storage of numbers, record of
missed calls (calls which were not answered), for receiving text messages, and for receiving information give by the network about
the weather, about conditions on the road, and other vital news needed while travelling. The mobile has freed many managers from
the confines of their offices as they can be in touch with the office from wherever they are. It has become possible to contact
persons who are travelling or are out in the open. A manager talking business on his mobile while relaxing on a beach may be a
depressing sight, but then, he might not have been relaxing on the beach at all but for the mobile, which allows him to stay in
touch.
FAX
The facsimile machine is a device for transmitting copies of printed images over telephone lines. The machine is connected to the
telephone through a modem (modulator - demodulator). The sender has to dial the receiver's fax number, insert the documents into
the machine and press the start button. The receiving machine decrypts the signals and uses its in -built printer to produce an
exact photocopy of the original page. The cost of the printout is borne by the receiver. Fax permits quick exchange of information
and documents between offices and organization and individuals. Important decisions and instructions can be quickly conveyed to
branches and other offices. Fax is used only for documents which are not confidential. The machine puts a printout which is open
and can be seen by any one. However, you can arrange (by telephone talk) to be alone with the machine, when a confidential
message is being sent.
The printout contains the time, date and the fax number of the sender's machine. The sender gets a confirmation printout
showing the receiver's fax number, the date and the time of transmission and the number of pages transmitted. Sometimes the
received copy is not clear. It is customary to telephone the receiver to make sure that the fax has been received. The fax machine
can be set to function as a telephone or as a voice mail answering machine) by pressing relevant buttons. It can also make one or
two photo copies of a document.
Fax can sent through a computer provide the required software and a modem are installed and a telephone line is connected to
it. Very recent models of computer have an in built modem, and software for fax is included as a part of windows. Fax though a
computer can transmit only messages which have been created on the computer; it cannot transmit a document as it is, as the fax
machine can. Faxes have been available for many years and are popular in business offices; newer fax machines are digital,
allowing communication via computer, and are much faster that the old ones.
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E-MAIL
Electronic mail requires a computer, a telephone line and a modem (if a modem is not in -built in the computer). The connection is
given by the Camtel, the MTN and other email and internet Service Providers (ISP) like Yahoo, Gmail. E.mail is the most frequently
used application of the internet.
Name and address on e.mail:
In order to send an e.mail, you must know the recipient's "name," that is, computer I.D. and address. This has the form: someone
@someplace; "someone" could be the person's real name like francis or it may be a world/letters chosen by the person, like
bonn2love or FMT or anything else; "someplace" is the address of the computer and network on which the person has an
account, like hotmail.com, yahoo.com, gmail.com or uni-bonn.de or catuc.org.
How e.mail is different from fax:
In the 1980s faxing became a popular way to send letters and documents without the delays of regular mail (nick-named snail
mail). Email has the immediacy of a fax and is much more efficient and economical. Fax, like telephoning, sets up a temporary
circuit between the origin and the destination of the call, for which you have to pay regular phone rates. Email uses "packet
switching" technology which makes efficient use a network of permanently open lines; there is no additional cost in sending e.mail
even long distances and you do not need STD or ISD connection to send e-mail to any country in the world. e-mail does not have
incremental costs once an organization has paid the fee for network access. Besides issues of speed and cost, fax only sends a
"photo" of the document, while e.mail provides the recipient with text which can be edited by using any word processing program.
TELECONFERENCING
Teleconferencing can be defined in several ways but most people agree that it can be defined simply as "bringing people together
without having to spend time and money on travel."
Teleconferencing is a rapidly developing technology that has changed the way companies do business.
There are three types of teleconferencing:
(a) Audio teleconferencing
(b) Audio graphics teleconferencing
(c) Video teleconferencing.
Audio teleconferencing provides the interactive element of the telephone; it is the most frequently used most productive and
inexpensive medium. It is also called "phone meeting"; it does not need any special equipment other than the ordinary telephone.
The main factors for its wide spread acceptances are:
_ Easy to use -everyone can use a telephone
_ Easily available -telephones are available anywhere
_ Easy to participate from any telephone line in the world
_ Takes only a few minutes to set up a conference call
_ Costs little
Audio graphics teleconferencing provides the facility to move text, computer –generated image, photographs and large files over
ordinary telephone lines (like the Internet). It is not as expensive as video conferencing but still requires going to the location that
has the equipment or investing in the equipment.
INTERNET
The Internet is a world-wide collection of computer networks that co -operate with one another by using a common software
standard. It conveys data through satellite links and telephone wires. There is no single owner or central authority that operates or
controls the Internet. But the internet is bound by few rules and oversees the system and protocols involved. But the internet is
bound by few rules and does not answer to any single organization.
The speed of the internet has changed the way people receive information. The size, scope and design of the Internet enable
users to:
_ Connect easily through an ordinary personal computer and local telephone line;
_ Exchange electronic mail with friends, colleagues, customers (with internet accounts) and also attach files which are on their
computer;
_ Share business and research data among colleagues;
_ Request and provide help with problem and questions;
_ Post information for others to access, and update the information regularly;
_ Publicize and market goods and services;
_ Gather valuable feedback and suggestions from customers and business partners;
_ Access multimedia information which includes photographic images, sounds, and video;
_ Join group discussions on any subject;
_ Subscribe to mail lists on topics of interest and receive views expressed by members of the group on the topic.
Since the Internet consists of not one but multiple data systems, which were developed independently, it allows users to access a
variety of services. The most important and popular ones are:
_ e-mail for exchange of electronic mail;
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_ Internet Relay Chat (IRC) for sending private and public messages to other users and real time (that is, your messages appears
on the recipient's computer screen as soon as you type it);
_ USENET newsgroups for posting and answering messages on public "bulletin board";
_ File Transfer Protocol (FTP) for storing and retrieving data files on large computer systems;
_ CU-See Me, a video conferencing system which allows users to send and receive sound and pictures simultaneously over the
internet.
Over the following 20 years, the network developed and became useful for academic institutions, scientists, and government
bodies for research. It enabled distant and unrelated organizations to share information and contact to one another's data bases
and computing system. The nature of the Internet changed dramatically in 1992. A new computer program called NCSA Mosaic
was developed at the National Center for Supercomputing Applications (NCSA) at the University of Illinois. This was the first Web
browser. With the browser it was easier to access the different web site, and soon the Web sites began to include video files and
sound files.
In Cameroon, Camtel began to give Internet connections in 1995. The growth in Cameroon has been astonishing in the last
one year. The expansion of the Internet has coincided with the coming of powerful yet reasonably priced personal computers and
easy to use graphical operating systems. For those who do not own a computer, there are cyber cafes and other commercial
centers that rent internet facilities by the hour.
MEDIA OF MASS COMMUNICATION
Mass communication is communication to many. The messages are prepared by teams ( as in newspapers, radio, TV, Cinema)
and reach a large number of people all over the world. The distance between the sender and the audience is very massive.
Modes of Mass Communication:
1. Newspapers/Magazines
2. Notice board
3. Hoardings and bill boards
4. Radio
5. Television
6. Film
7. Internet
1 NEWSPAPERS AND MAGAZINES
Newspapers and magazines are the most common means of mass communication. These media of mass communication are used
by business houses for inviting tenders, for recruitment information and other public notices and advertisements.
2 NOTICE BOARD
Notice board and bulletin board are media for public communication within the organization. A notice board is placed at a location
where it can be seen by persons for whom it is meant. Notice Boards need care and attention. They must be attractively laid out.
Overlapping and overcrowded Notice Boards give a very poor appearance and make it very difficult to read. An up to date notice
board, which is neatly laid out gives a good impression about the organisation.
3 HOARDINGS AND BILL BOARDS
These are meant for mass communication like advertisements. They are used for displaying posters conveying simple ideas. They
usually have a short message in large letters and also include pictures. Location of the boards is important; they are usually placed
high up and can be seen from a distance. Most recently, hoardings made up of flex are commonly used. They are lighted up at
night and make the roads look more attractive.
4 RADIO
The radio is a medium of mass oral communication. News, notices, advertisements and entertainment programmes are transmitted
to the general public by radio. Like other means of mass media, it allows only one way communication. Radio was mostly a tool of
communication for rural areas; but recently, with the renewal of FM and bands like Radio Mirchi, Red FM, etc, it has once again
become popular in cities.
5 TELEVISION
Television is a powerful medium of communication. It is the audio visual medium. Its ability to transmit live events as they are going
on makes it the most powerful medium for mass communication. With teleconferencing, television can transmit things happening at
more than one place at once. A news reader in Mumbai can take the audience to a view of what is happening in Australia or hold a
live discussion with a reporter in New Zealand. With the advent of Cable TV and a variety of channels at the disposal of the viewer,
TV, known as the Small Screen, has become the most utilized channel for advertisement, news and entertainment.
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6 FILM
Film is also a very powerful medium of communication. It is the audio visual medium which combines all possible forms: written,
oral, non verbal, visual or auditory. A film can be shown in the Cinema theatre or projected on a small screen in a room with a film
projector or transmitted through Television. It can also be viewed on computer monitor through CD or internet. The film is a highly
versatile medium and can be used for many purposes and adapted to different conditions. This is one medium through which even
the uneducated public can be influenced.
7 INTERNET
This is the most recent of all the Mediums and is most popularly used in today's globalised scenario. Though, its use is still limited
to the educated and computer friendly class of people. The website addresses to be visited are publicized through other media like
magazines and newspapers. Internet is still in the process of being most widely used and a media for mass communication.
COMPUTER NETWORKS
The computer is a versatile electronic instrument which can combine various media functions. The trend of technology is towards
convergence of various technologies so that the computer will become the single multi-task equipment for all kinds of transmission.
Computer software development is rapidly making the computer take over more and more tasks and functions both in business
and at home. The word processor help in the preparation of letters, reports, meeting agenda, by guiding you through the steps of
the layout. It ensures that the document is neatly laid out in a few commands. It enables you to prepare a circular and personalize it
for several persons and addresses by mail merge. Electronic mail, voice mail, Video conferencing, and multimedia facility are forms
of communication to be transmitted. Fax and telex can also be sent through the computer. The use of Accounting software in many
offices is that account books do not have to be written manually. Various financial reports can be prepared within a short time by
using the accounting software packages. Software programs are being written for almost all activities in business. You should keep
a close watch on the advertisements that announce new programs. A computer technology is the fastest growing field; advances
are made rapidly, and users can upgrade their equipment and buy the latest software for more advanced tasks.
BARRIERS TO COMMUNICATION
Communication is the process of transfer of ideas and expressions from one person to another. It is the way of self-expression.
The information to be communicated should be clear and accurate. If an individual sends the message, and the other one receives
it and interprets it in the same way as the sender had intended to express, the process of communication is said to be complete
and successful. However, Communication is not always successful. Certain barriers in communication affect the clarity, accuracy
and effectiveness of the message. These barriers hamper the growth of communication and relegate it to the status of a
conversation where feedback is not expected. If either the speaker or the listener has problems in adjusting his frequency with the
co-interactants, barriers would automatically be erected. Several things can prevent the message from reaching the intended
recipient or from having the desired effect on the recipient. There may be some fault in the communication system which may
prevent the message from reaching. Some of these defects are in the mechanical devices used for transmitting, that is, the
medium; some are in the tools we use for communicating, that is, language or other symbols used for encoding; Some are related
to the sender or the receiver.
CATEGORISATION OF BARRIERS
The Barriers or negative forces may affect the effectiveness of communication by acting upon any or all of the basic elements of
communication process and sender/receiver/channel. As the barriers to communication influence the major variables in the
communication process, they may be categorized on various bases. Though the list of Barriers is exhaustive and there are many
ways in which the Barriers can be categorized, one of the oldest categorization of barriers is stated below:
1. Semantic barriers: Different people assign different meanings to one specific message. This is due to the problems with
meaning, significance, and the sending and reception of the meaning and content of the massage.
2. Organizational barriers: This type of barrier develops due to the problems with physical distance between members with
respect to their functional specialization of tasks, power, authority and status relationship, values held, and ownership of
information.
3. Interpersonal barriers: These barriers also develop in the process of communication. They are based upon the relationships,
values held, and attitudes of the participants in the process of communication.
4. Individual barriers: These are also called psycho-sociological barriers. The problem of this barrier arises due to differences in
individual competencies to think and act, which would include physical ailments or handicaps. It is also because of individual skills
in receiving and transmitting information, which would include poor listening and improper reading skills and adverse psychological
conditions.
5. Cross Cultural (geographic) barriers: Culture is a shared set of values and attributes of a group. The communication barriers
are also seen because of time, geographic locations, and the effects of time upon reception of the message and other cross
cultural factors.
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6. Physical Barriers/Channel and media barriers: The effectiveness and accuracy of communication is also affected by the
physical barriers like distance, noise or channel and the media used in the process. In this category, problems that confront the
media used in the process. In this category, problems that confront the issue of how best to communicate a message are included.
(For example, it is best to transmit a massage face to face rather than in writing).
7. Technological barriers: They are barriers which arise due to technological advancements in the field of communication.
Technology generates lot of information, which is beyond the capacity of the recipient.
Further, the media advancements on account of technological process increase the barriers. The ideas and massage have to
reach from the transmitter to receive in the same sense. If it does not happen, it is on account of barriers in communication.
LANGUAGE CAN BE AN OBSTACLE TO COMMUNICATION
As you use language to make sense of your experiences, as part of our discussion, you no doubt came to see that language and
verbal communication can work both for you and against you. Language allows you to communicate, but it also allows you to
miscommunicate and misunderstand. The same system we use to express our most intimate thoughts can be frustrating when it
fails to capture our thoughts, to represent what we want to express, and to reach our audience. For all its faults, though, it is the
best system we have, and part of improving the communication process is the clear identification of where it breaks down.
Anticipate where a word or expression may need more clarification and you will be on your way to reducing errors and improving
verbal communication. Our goals of effective and efficient business communication mean an inherent value of words and terms
that keeps the bridge clear and free of obstacles.
Cliché
A cliché is a once-clever word or phrase that has lost its impact through overuse. If you spoke or wrote in clichés, how would your
audience react? Let‘s try it. How do you react when you read this sentence: ―A cliché is something to avoid like the plague, for it is
nothing but a tired old war horse, and if the shoe were on the other foot you too would have an axe to grind‖? As you can see, the
problem with clichés is that they often sound silly or boring. Clichés are sometimes a symptom of lazy communication—the person
using the cliché hasn‘t bothered to search for original words to convey the intended meaning. Clichés lose their impact because
readers and listeners tend to gloss over them, assuming their common meaning while ignoring your specific use of them. As a
result, they can be obstacles to successful communication.
Jargon
Let‘s pretend you‘ve been assigned to the task of preparing a short presentation on your company‘s latest product for a group of
potential customers. It‘s a big responsibility. You only have one opportunity to get it right. You will need to do extensive planning
and preparation, and your effort, if done well, will produce a presentation that is smooth and confident, looking simple to the casual
audience member. What words do you use to communicate information about your product? Is your audience familiar with your
field and its specialized terms? As potential customers, they are probably somewhat knowledgeable in the field, but not to the
extent that you and your coworkers are; even less so compared to the ―techies‖ who developed the product. For your presentation
to succeed, your challenge is to walk a fine line between using too much profession-specific language on the one hand, and
―talking down‖ to your audience on the other hand.
While your potential customers may not understand all the engineering and schematic detail terms involved in the product, they do
know what they and their organizations are looking for in considering a purchase. Your solution may be to focus on common
ground—what you know of their past history in terms of contracting services or buying products from your company. What can you
tell from their historical purchases? If your research shows that they place a high value on saving time, you can focus your
presentation on the time-saving aspects of your new product and leave the technical terms to the user‘s manual.
Jargon is an occupation-specific language used by people in a given profession. Jargon does not necessarily imply formal
education, but instead focuses on the language people in a profession use to communicate with each other. Members of the
information technology department have a distinct group of terms that refer to common aspects in their field. Members of the
marketing department, or advertising, or engineering, research, and development also have sets of terms they use within their
professional community. Jargon exists in just about every occupation, independent of how much formal education is involved—
from medicine and law; to financial services, banking, and insurance; to animal husbandry, auto repair, and the construction trades.
Whether or not to use jargon is often a judgment call, and one that is easier to make in speaking than in writing. In an oral context,
we may be able to use a technical term and instantly know from feedback whether or not the receiver of the message ―got it.‖ If
they didn‘t, we can define it on the spot. In written language, we lack that immediate response and must attend more to the context
of receiver. The more we learn about our audience, the better we can tailor our chosen words. If we lack information or want our
document to be understood by a variety of readers, it pays to use common words and avoid jargon.
Slang
Think for a moment about the words and expressions you use when you communicate with your best friends. If a coworker was to
hang out with you and your friends, would they understand all the words you use, the music you listen to, the stories you tell and
the way you tell them? Probably not, because you and your friends probably use certain words and expressions in ways that have
special meaning to you. This special form of language, which in some ways resembles jargon, is slang. Slang is the use of existing
or newly invented words to take the place of standard or traditional words with the intent of adding an unconventional, nonstandard,
humorous, or rebellious effect. It differs from jargon in that it is used in informal contexts, among friends or members of a certain
age group, rather than by professionals in a certain industry.
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Sexist and Racist Language
Some forms of slang involve put-downs of people belonging to various groups. This type of slang often crosses the line and
becomes offensive, not only to the groups that are being put down, but also to others who may hear it. In today‘s workplace there is
no place where sexist or racist language is appropriate. In fact, using such language can be a violation of company policies and in
some cases antidiscrimination laws.
Sexist language uses gender as a discriminating factor. Referring to adult women as ―girls‖ or using the word ―man‖ to refer to
humankind are examples of sexist language. In a more blatant example, several decades ago a woman was the first female sales
representative in her company‘s sales force. The men resented her and were certain they could outsell her, so they held a ―Beat
the Broad‖ sales contest. (By the way, she won.) Today, a contest with a name like that would be out of the question.
Racist language discriminates against members of a given race or ethnic group. While it may be obvious that racial and ethnic
slurs have no place in business communication, there can also be issues with more subtle references to ―those people‖ or ―you
know how they are.‖ If race or ethnicity genuinely enters into the subject of your communication—in a drugstore, for example, there
is often an aisle for black hair care products—then naturally it makes sense to mention customers belonging to that group. The key
is that mentioning racial and ethnic groups should be done with the same respect you would desire if someone else were referring
to groups you belong to.
Euphemisms
In seeking to avoid offensive slang, it is important not to assume that a euphemism is the solution. A euphemism involves
substituting an acceptable word for an offensive, controversial, or unacceptable one that conveys the same or similar meaning. The
problem is that the audience still knows what the expression means, and understands that the writer or speaker is choosing a
euphemism for the purpose of sounding more educated or genteel. Euphemisms can also be used sarcastically or humorously—
―H-E-double-hockey-sticks,‖ for example, is a euphemism for ―hell‖ that may be amusing in some contexts. If your friend has just
gotten a new job as a janitor, you may jokingly ask, ―How‘s my favorite sanitation engineer this morning?‖ But such humor is not
always appreciated, and can convey disrespect even when none is intended. Euphemistic words are not always disrespectful,
however. For example, when referring to a death, it is considered polite in many parts of the United States to say that the person
―passed‖ or ―passed away,‖ rather than the relatively insensitive word, ―died.‖ Similarly, people say, ―I need to find a bathroom‖
when it is well understood they are not planning to take a bath.
Still, these polite euphemisms are exceptions to the rule. Euphemisms are generally more of a hindrance than a help to
understanding. In business communication the goal is clarity, and the very purpose of euphemism is to be vague. To be clear,
choose words that mean what you intend to convey.
Doublespeak
Doublespeak is the deliberate use of words to disguise, obscure, or change meaning. Doublespeak is often present in bureaucratic
communication, where it can serve to cast a person or an organization in a less unfavorable light than plain language would do.
When you ask a friend, ―How does it feel to be downsized?‖ you are using a euphemism to convey humor, possibly even dark
humor. Your friend‘s employer was likely not joking, though, when the action was announced as a ―downsizing‖ rather than as a
―layoff‖ or ―dismissal.‖ In military communications, ―collateral damage‖ is often used to refer to civilian deaths, but no mention of the
dead is present. You may recall the ―bailout‖ of the U.S. economy in 2008, which quickly came to be called the ―rescue‖ and finally
the ―buy in‖ as the United States bought interests in nine regional and national banks. The meaning changed from saving an
economic system or its institutions to investing in them. This change of terms, and the attempt to change the meaning of the
actions, became common in comedy routines across the nation.
Doublespeak can be quite dangerous when it is used deliberately to obscure meaning and the listener cannot anticipate or predict
consequences based on the (in)effective communication. When a medical insurance company says, ―We insure companies with up
to twenty thousand lives,‖ is it possible to forget that those ―lives‖ are people? Ethical issues quickly arise when humans are
dehumanized and referred to as ―objects‖ or ―subjects.‖ When genocide is referred to as ―ethnic cleansing,‖ is it any less deadly
than when called by its true name? If the meaning was successfully hidden from the audience, one might argue that the
doublespeak was in fact effective. But our goal continues to be clear and concise communication with a minimum of
misinterpretation. Learn to recognize doublespeak by what it does not communicate as well as what it communicates.
Each of these six barriers to communication contributes to misunderstanding and miscommunication, intentionally or
unintentionally. If you recognize one of them, you can address it right away. You can redirect a question and get to essential
meaning, rather than leaving with a misunderstanding that impacts the relationship. In business communication, our goal of clear
and concise communication remains constant, but we can never forget that trust is the foundation for effective communication. Part
of our effort must include reinforcing the relationship inherent between source and receiver, and one effective step toward that goal
is to reduce obstacles to effective communication.
OVERCOMING THE BARRIERS IN COMMUNICATION
Constant effort is required to overcome the barriers which unconsciously creep up in the process of Communication. Barriers
can be overcome if sufficient effort is put into the communication process and it is desired that communication be effective and
efficient. One way of reducing the effects of these barriers is to check continuously during the communication process what the
massage really is. The actions to be taken by the Sender, Receiver and together the two of them, to achieve this.
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MEASURES TO OVERCOME BARRIERS IN COMMUNICATION
Following are some of the additional measures to overcome the barriers to communication:
1. Fostering good relationship: Strong relationships must be fostered between the employer and the employee in order to avoid
misunderstanding and accept each other's viewpoints in order to remove the barriers and to facilitate proper communication in the
organization.
2. Purposeful and well focused Communication: Communication should be purposeful and directed to an individual. At the end
of the Communication, the receiver should not be left to feel that communication had been meaningless or useless.
3. Coordination between superior and subordinates: In case the superior thinks on one line, which is different from the
subordinate and vice versa, it will affect the effectiveness of communication. Therefore, there should be good and proper
coordination and cooperation between the superior and subordinate for effective communication.
4. Avoid technical language: The specialized language should be avoided. There should be all efforts to use the language
commonly understood by the receiver and sender of the message. There should be least use of technical jargons in
communication process.
5. Feedback: The selective perception of receiver should be minimized through proper feedback. The drawback of the selective
perception should be explained to minimize the barriers.
6. Accuracy: There should be accuracy in the message to be transmitted between parties to the communication to improve its
effectiveness.
7. Clarity in message: The message to be transferred should be clear, practical accurate and without any ambiguity.
8. Communication of organizational philosophy: Efforts have to be made in a planned way to sensitize people with the
organizational philosophy. It should be properly communicated to its employees so that they give proper attention to their day to
day communication.
9. Flat organizational structure: The organization should have clear cut and simple organization structure. Tall hierarchical
structure should be removed, and it should be changed to flat structure to avoid excessive control of information. Wrong
information to be transferred to anyone in the organization will prove detrimental. Proper redesign of organizational structure will
reduce the status gap. Status effect can occur when one person is considerably higher in the hierarchy than another.
10. Division of labour: There should be proper division of labour between the persons in order to reduce information overload and
prevent delay in information transfer.
11. Organization policies: The organization should formulate their policies in such a way that it will give full advantage to all
members of the organization. It should be flexible and easy to implement. While organization's goal must be clear, everyone must
know about his position, his right in the organizational communication. The network has to be fully developed so that no such type
of barriers exists. Moreover, there should be consistency when message a passed from sender to receiver. One should not
introduce his own view in the message. It must be clear and understood by everyone easily. Timeline in message should be there.
If it is not passed in time, such message will be of no use.
12. Minimize semantic problem: People use either the same word in different ways or different words in the same way. One will
be surprised to know that there are 15 different meanings of the word 'charge' in the English language. They also occur when
people use jargons or professional shorthand which they expect other to understand, or language which is outside the other's
vocabulary.
13. Proper communication channels: If one wants immediate action from the receiver, there is not need to send a lengthy
discussion report. One would probably pick up the telephone or go to his office to tell him what to do. Remember also that one
picture is worth a thousand words, and in this age of computer graphics, the information can be produced more quickly in this way
too.
14. Right feedback: Although one -way communication is quicker, two –way communication is more accurate. In complex
situations, it helps both sender and receiver to measure their understanding and improves their joint commitment to the task. It
enables both parties to identify and correct misunderstanding leading to a higher quality of reception and acceptance. To
communicate effectively, we need to overcome all the barriers and own skills to improve the existing communication abilities.
BUSINESS CORRESPONDENCE - LETTERS
The world of business is replete with various types of written communication. Written communication is so much a part of
everyday business that one cannot think of a business without related correspondence. Think of any organization or institution
bank, electric company, hotel, college, library, etc. Dealing with people and there is obviously some written correspondence. It may
be handwritten, typewritten, or printed. In the olden days, there were people who were specially assigned the job of taking care of
correspondence, even in small businesses. Such persons were popularly referred to as 'writers.' Business Letters are also called
Commercial Letters. Letters form the most important form of business correspondence. There are various kinds of letters following
in and out of a business organization. The simple reason is that the organization has to keep in touch with the world outside that
comprises its suppliers, customers, government departments, banks, insurance agencies, transporters, job-seekers and so on.
Then there are different occasions/contexts for which suitable letters have to be written. The writers of the letters are in different
departments of the organization. In a way every letter is a unique piece of communication. And yet there are certain time-honoured
conventions/ ways of writing that are supposed to be followed. Over the years quite some changes in styles of writing have been
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introduced by imaginative writers. Even then the basic aims remain the same. A systematic study of the art of letter writing requires
that we classify them according to their functions, stricture, tone and approach.
DIFFERENT TYPES OF LETTERS
As letter – writing is a vast area of communication and it is not so easy to classify letters. Our task becomes easier if we lay down
certain criteria for classification. Various Classification of the business letters are:
1. L. Gartside in 'Modern Business Correspondence' classifies business letters as follows:
(a) Information Letters:
(i) Routine Letters : * Enquiries * Quotations * Orders * Payment Letters
(ii) Special Purpose Letters
(b) Sales Letters: * Offers
(c) Problem Letters : * Complaints * Overdue Accounts
(d) Goodwill Letters: * Greetings * Thanks
This is indeed a nice and widely accepted classification of Commercial letters. But there may arise a situation for which a suitable
letter does not fall in any of these categories. For example, application letters and letters to the press do not easily figure in this
classification
2. We may classify business/ Commercial letters on the basis of our approach(a) Direct: All good news letters, offers of appointment, enquiries, orders, promotion, intimation etc. will fall in the category of direct
approach letters.
(b) Indirect: All 'bad news' letters like adjustment refusals, request refusals, rejecting a job applicant etc. will fall in the category of
indirect approach letters.
(c) Persuasive: Offers of sales and services, job applications that have been regarded as similar to sales letters fall in the category
of persuasive letters. In this way we see that our approach to the letter problems/ situation is an important criterion for
classification.
3. Letters can also be classified as :
(a) Official letters: Official letters are the ones we write to government or semi government departments/ offices/bodies
(b) D.O.'s (Demi-Official letters): D.O.'s or Demi-Official letters are essentially official in purpose but addressed to an official by
name and not just sent to him by designation. We are advised to send a D.O. to guard the confidential nature of the matter
concerned. Moreover they invite personal attention of the addressee.
(c) Form letters: Form letters are used for correspondence of routine nature. Acknowledgement, reminders, interviews, notice,
appointment etc. fall in the category of form letters.
(d) Internal letters: Internal letters or memos are used in government offices as well as business organization for internal
communication.
4. Letters can easily be classified on the basis of their subject, viz, enquires, credit information, collection of dues, complaint, sales
promotion, sales circulars, appointment of personnel, agencies etc.
5. Letters can also be classified on the basis of the correspondence of different department of an organization. For example the
personnel department of an organization invites applications, calls candidates for written test/interview, sends interview letters,
offers appointment letters, gives charge-sheet etc. The purchase department sends requests for quotations/ invites tenders, places
orders, and sends letters of complaints. The sales department on the other hand, sends sales circulars, advertisement etc. For the
sake of convenience, therefore, we can divide various kinds of Commercial letters on the basis of the purposes for which the
department of an organization send them.
Given below are some important kinds of letters.
(a) Enquiries, orders, complaints and responses to them etc.
(b) Sales letters, circulars etc.
(c) Job applications , resume'
(d) Letters of personnel department.
(e) Letters of accounts department like correspondence with customers, insurance agencies, banks etc.
(f) Letters of administration, public notices, invitations, correspondence with central and state governments etc.
(g) Letters to the editor, press releases etc.
ESSENTIALS OF A COMMERCIAL LETTER
"An effective business letter can act as your relationship officer"
Commercial letters, to be good and effective, must contain certain essentials. In other words, Commercial letters should confirm to
certain minimum standards of letter writing. The language, content, style, context, length, structure, layout, tone and purpose
orientation of a letter are some of the characteristics of a letter. Any letter is amenable to description in terms of these
characteristics or features. To qualify, the letter should measure up as good when viewed from any of the considerations. It may or
may not encompass all these features. Nevertheless, a good letter writer should have a clear understanding of all the
characteristics that make the letter effective. A good Commercial letter has to create, nurture and sustain a good business
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relationship. Before discussing the essentials of a good business letter, it would be desirable to keep in view what such a letter can
achieve for business. A good business letter can address the prospect and set the sales pitch. A good business letter can, thus act
as your relationship officer. A good business letter can make announcements, share relevant information and keep you in touch
with people who matter. In this way a good business letter can be your public relations officers (PRO). This is true especially for
small business, which cannot afford to employ people specifically for crying out these functions.
THE LAY-OUT OF A BUSINESS LETTERS
As a significant form of written communication, a business letter is supposed to have a lay-out that impresses. Its physical
appearance, that includes the quality of the paper, the arrangement of the types/ printed matter, the way it is folded and kept in the
envelope, the envelope itself with the addressee's name and address and stamping – everything communicates and passes
through the receiver's mental filter. It, therefore, cannot be taken casually. As has been well said, a letter's appearance is a part of
its message. That is why most reputed companies choose the best quality stationery and send out carefully written letters.
Appearance of a Business Letter
A letter makes a visual impression before it is read, and the first impression is often decisive. The appearance of a letter depends
on all the things that make up the letter:
_ Stationery should be of good quality.
_ The printers and typewriters must be maintained well so that there is no dirt or dust when the letter is to be printed.
_ Good quality carbon paper must be used to make copies.
_ Typing must be neat with equal spacing between words and between lines. The letter should be placed carefully on the page,
leaving proper margins on both sides.
_ Paragraphing should be done for breaking up the letter into readable, progressive and logical units as well as to create a pleasing
appearance.
_ Folding of the letter must be neat. It makes a poor impression if it is badly folded.
The size of the folded letter must be such as to fit in the envelope leaving enough space for cutting the envelope open.
_ Address on the envelope should be typed clearly. It should be typed half way down and one third inward from the left to ensure
that the post office stamping does not efface it.
Stationery
Most organizations keep standard stationery required for their correspondence. The sizes of the sheets and envelopes are
standard, but some organizations have distinct sizes. The quality of the stationery, the designing of the letterhead, the layout and
printing together make the first visual impression on the receiver.
_ Letterheads: Letterheads can be got in several sizes. Most companies have letterheads of standard size. The appearance and
quality of the letterhead should be good and impressive.
_ Continuation Sheets: A continuation sheet is used if a letter does not fit in the single sheet of the letterhead. The continuation
sheet must be of the same size and quality as the letterhead.
_ Envelopes: Companies have envelopes of various sizes for use according to the size of the material to be dispatched. The
company's name and address should be printed on the envelopes. The quality of the paper and the colour must match those of the
letterhead. Window Envelopes have a transparent panel in the place where the receiver's address is to be written, so that it can be
seen through the window of the envelope.
Parts of a Letter
1. Heading: The heading is printed on the top of the letter and is also called 'letterhead'. It contains the name of the firm/company,
its emblem, postal, telegraphic and email address as well as telephone numbers. It is usually given at the top centre or top right
side of the paper.
Example:
MANKAH AND SONS ENTERPRISE LIMITED
Commercial Avenue 13, Evidence Building, P.O. Box 49, Bamenda,
Northwest Region Cameroon
Email: mankah@yahoo.com
Phone : 00237-76669339, Fax: 00237-76668228
2. Reference Number: Every business letter usually carries a reference number to which the receiver may refer in all future
correspondence. It serves the useful purpose of quick reference and linking up the chain of letters going out of the organization or
identifying the memos issued by a department within the organization.
Example: The reference number may look like this:- Ref: 25/PD/67
In this reference number '25' stands for the number given to the department 'PD' is a code for the personnel department and '67' is
the number allotted to the person addressed.
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Date: The date of the letter is of crucial importance. Every official document must be dated. The date provides an important
reference in further correspondence. It is usually written on the right hand side, parallel to the reference number as shown below:
25/PD/67 June 18, 2006
Abbreviated forms of date such as 18.4.2003 or 04.18.2003 or 04.18.2003 or April, 18.03 or 18 April, 03 should be avoided as they
do not leave a good impression on the mind of the receiver. The practice of writing ordinal numbers 1st, 2nd, 3rd, etc. has fallen
out of use.
Inside Address: It contains the name and address of the organization or the individual to whom the letter is being sent (receiver).
It should be written below the Reference Number line, leaving some space. It should be complete and can be written in either of
the two ways (indented form and block form) as shown:
(a) Allied Engineers Ltd,
Treasury Street,
Bamenda, Cameroon
(b) McDavid Consulting Group
Churchstreet Buea
P.O.Box 125
South West Region , Cameroon
_ Open punctuation
_ Blocked lines (i.e. not indented)
_ If well-written, it is a neat and uncluttered addressed layout.
Mode of address
(a) Addressing individuals: If the letter is being sent to an individual we have to be sure about the prefixing of the addressee.
(i) 'Mr' or 'Sir' is used for addressing a man.
(ii) 'Miss' is used for an unmarried woman.
(iii) 'Mrs' or 'Madame' is used for a married woman.
(iv) 'Ms' is used for a woman whose marital status is not known. Most women now prefer the use of 'Ms'.
(v) 'Messrs' is a plural for 'Mr' and is used while addressing a partnership firm. It can best be sued when the name of the firm
contains personal name of names as, for example.
(vi) Titles/ranks such as 'Colonel', 'Professor', 'Doctor', 'Reverend' etc are used as follows
Col. R.L Davis
Capt. R.N. Francis
Prof. F.T. Mbah
Dr. F.M. Takwi
Rev. P.T. Joseph
Dr. (Mrs.) S. Johnson
(b) Addressing by designation: When a particular person is addressed by his designation, 'Mr.' or 'Messrs' (in case of a limited
company) is not used. The Personnel Manager
Larson and Turbo.
Attention line
Attention line is used only if, from previous communication, you know the name of the person in the organization who is handling
the matter about which you are writing. The letter is addressed to the organization, but directed to the attention of the individual, by
name, so that the letter is sent to that person without delay. The Attention line is placed between the inside address and the
salutation, either at the margin or in the centre. It does not affect the salutation. The salutation must match the first line of the inside
address, e.g.,
King Investments
Boulevard de la Liberté
Bonaberi Douala
Dear sir/Madame,
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If the letter is addressed by name to an individual in the company, there is no attention line. It is used only when the letter is
addressed to the company or a department in general.
Subject line
Subject line gives a brief and quick indication of the subject of the letter. It adds to the clarity of the letter, especially if the letter is
long. It helps to classify and file the letter. It is placed either above or below the salutation at the centre; in full block form, it is
placed at the left margin. When there is an Attention line, the Subject line is placed after the Salutation.
It is introduced by the word Subject: or Sub. Or the Latin word Re: for example:
Subject: Your insurance policy no. 887365
Dear Sir,
Or
Gentlemen:
Sub: Your order no. YA-42
(Re is a Latin word which means "in the matter of" or "in the case of"; it is not the short form of any English word; it is not correct to
write ref. or reg. for the subject line.) In more modern practice, the subject line is placed at the margin below the salutation, without
any introductory word. It may be in capitals or initial capitals and underlined; e.g.
Dear Mr. Bhalla
ORDER NUMBER 5476
Salutation
The Salutation begins at the margin, two line spaces below the inside address. It is followed by a comma. In American practice it is
followed by a colon; in full block style it has no punctuation mark. The salutation matches the first line of the inside address. If the
letter is addressed to an organization, the salutation is plural: Gentlemen or Dear Sirs or Sirs. If the letter is addressed to a
particular official mentioned only by designation, e.g., "The Sales Manager" the salutation is singular: Sir or Dear Sir. If the official
is a lady, the salutation is Madam or Dear Madam. It is quite common, now, to address business letters to an official by name and
designation, e.g., Mr. A.P. Takwi, Sales Manager, or Ms Tina, Finance Manager.
Complimentary Close
The complimentary close is written two line spaces below the last line of the text of the letter; it is placed on the left and is
followed by a comma. The first world begins with a capital letter. The most common form is: Yours faithfully; other common forms
are:
Faithfully Yours, Yours truly, Truly Yours. If the addresses name and is used in the salutation, the complimentary close is Yours
sincerely, or Sincerely yours. Respectfully is used only when writing to a high public official.
Signature
The signature is placed just below the complimentary close. The name of the signatory is typed in brackets three or four line
spaces below (to leave space for the actual signature), and the designation/title is typed below the name. The complete signature
includes the name of the company, either above or below the name and designation of the person who signs; but many companies
do not put the company's name in the signature as it is already in the heading.
The following styles are in common use:
Yours truly Yours truly
ABC Publishers (Manan Lamba)
(Manan Lamba) Sales Manager
Sales Manager ABC Publishers
Per pro (Per procurationem) signature is used when the person who signs is not personally liable but has been given power of
attorney to sign on behalf of the person or company who will be responsible. The words per pro or P.P. are put before the name of
the person or company on whose behalf the letter is sent.
Reference section
The reference section includes: enclosures, names of "to receive copies", the type of delivery service to be used and initials of the
persons who dictated and typed the letter. Most of the details are for the convenience of the dispatch department. They are placed
at the left margin after the signature.
(a) Enclosures: Enclosures are related documents sent with a letter; cheques, quotations, brochures, price-lists, etc, which have
been mentioned in the letter are sent as enclosures. They are folded and placed behind the letter in the envelope. If there are
many enclosures, they are numbered and placed in the order of their serial number. The enclosures are indicated in the letter by
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writing Enc(s) or Encls at the bottom corner of the letter, after the signature. If there is more than one, the number is also indicated,
e.g. Encls: 2. Sometimes the enclosure is named, e.g. Encls: proforma invoice.
(b) Courtesy Copies: When a matter concerns more than the two parties, a copy of a letter related to the matter is sent for
information to the other parties who are concerned. This is indicated by writing:
c.c.: Mr. F.M. Takwi
Or
c.c.: 1. Mr. B.C. Mbah
2. Accounts Manager, ABC Transport Service
Note that, cc also stands for "carbon copy."
(c) Delivery service: The type of delivery service to be used is indicated as Air Mail, Registered Mail, Express Delivery, Hand
Delivery, Courier, Fax, etc.
(d) Initials: The dictator's and the typist's initials are placed at the bottom. This is for future reference in the sender's office; the
person who prepares or dictates a letter is not necessarily the person who signs it. The letter may be dictated by a senior clerk or a
junior officer; it will be signed by the manager or a person who is authorized to sign for the company.
Postscript
Postscript is a bit of writing, not more than three lines, added to the letter after the signature and after enclosures; it is signed again
without the complementary close, by the same person. It is used for conveying a small bit of information which is not a part of the
main message of the letter; it is an extra or unrelated point and is often written in hand at the time of signing the letter. The
postscript can be used to add a friendly personal note to a formal letter; it may be just a line, but it can successfully establish
personal contact by referring to some common experience or by making a friendly personal enquiry. For instance:
P.S : It was nice meeting you at the dinner last Sunday.
P.S : How's your new venture in Yaounde? Wish you the best of success.
The post script can be used effectively in a sales letter to impress an "action incentive" sentence on the reader's mind.
PS : There's an early bird prize for the first seven orders.
It can also be used to make an impact at the end of a "stunt" collection letter.
PS : Do clear your account before the fast approaching festival season.
Remember : Post Script is not used to write something which you might have forgotten in the letter.
Style of Layout
Layout means the design in which the different parts of the letter are placed on the letterhead. The parts are placed in the same
order from top to bottom in all forms or styles; the variation is in the indention and the paragraph styles. Many companies choose
their own lay-out. But the differences in lay-out are not as many as the similarities. The differences occur due to the typing/printing
conventions, indenting, spacing etc
Indented From
This is the oldest style and is now outdated. In this form, address is in indented style and every paragraph begins three to five
spaces away from the left margin. The indention causes the letter to look uneven at the left margin. Besides, it takes more time to
type because of the indenting. This style is not used today.
Full Block Form
This is the most modern style. There is no indentation from the left margin at all; every line, including the date and complimentary
close, begins at the left margin. The address has no punctuation at the end of the line. The salutation and the complimentary close
do not have a comma at the end. There is double line space between the parts and between the paragraphs. Typists find this style
as the easiest as there is no confusion and no time needed for indentation. This style looks heavy on the left and the right side
looks blank. Moreover when this letter is filed, it is difficult to see the signature and date unless the file is completely opened.
Modified Block Form
This style is a modification of the full block form. It eliminates the shortcomings of the full block style by keeping the date and the
complimentary close on the right in their usual position. The inside address is in block form. The salutation and the complimentary
close are followed by a comma. All the paragraphs begin at the left margin, and there is double space between the paragraphs.
This is the most popular form as it has many of the advantages of the full block form without its disadvantages. Its appearance is
streamlined and neat.
Semi -indented Form
This form is also called Semi -block form. It has the inside address in block form but the beginning of every paragraph is indented.
The date and the complimentary close are on the right side. The salutation and the complimentary close are followed by a comma
as in the traditional style.
NOMA Form
This is the most recent experiment in layout style. It is recommended by National Office Management Association of America (the
name NOMA is an acronym). It has been accepted in the UK by the Institute of office management. It has most of the features of
Full block form: all lines begin at the left margin and the inside address is in block form.
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LETTERS OF APPLICATION, ENQUIRIES, COMPLAINTS AND SALES PROMOTION
The most common letters in business are buyers' enquiries about goods and services and sellers' replies giving information and
quotations. Enquiries generally figure in the first category of letters sent by an organization or an individual. They are, first and
foremost, information-seeking letters. The writer may however, also give valuable information about himself or the organization, his
or the organization's requirements, expectations etc. In this way a letter of enquiry triggers off a two-way communication or
information exchange process. When, for example, a buyer seeks information about the price, quantity, availability of goods to be
purchased or about the terms and conditions of sale he sends a letter of enquiry to the seller. In such a letter, direct approach is
used to save time. The letter is short; formalities are not required. Further, the business letters may include customer complaints or
complaints sent to vendors or suppliers, sales promotion letters, orders, replies to orders, and so on.
RESUME/ CURRICULUM VITAE
Curriculum Vitae: an outline of a person's educational and professional history, usually prepared for job applications (L, lit.: the
course of one's life). Another name for a CV is a résumé. The success of employment search largely depends on a candidate's
ability to design a persuasive resume and an effective job application A resume is a selective record of an individual's background.
It is basically a professional employment-seeking document that presents a summary of an individual's education, professional
experience, skills, abilities, achievements, and references. It introduces the individual to a potential employer. Writing an effective
resumes that represents one's current skills, abilities, and background is a challenge faced by all candidates.
RESUME DESIGN
The design of a resume largely depends on a person's background, employment needs, career goals, and professional
conventions in the area of specialization. For best results, a resume must be designed to reflect the candidate's personality,
employment goals and his or her career aspirations. A resume should be original.
However, whatever the resumes design, the resume must answer the following questions:
(a) How can the employer contact the candidate?
(b) What are his/her career objectives?
(c) Which institution has been attended?
(d) What courses (academic or professional) has been completed?
(e) What is his/her work experience?
(f) What are his/her career achievements?
(g) What are his/her special skills or capabilities?
(h) What are the/her awards or honors that he/she has received?
(i) What are his/her activities/special interests/hobbies?
(j) Who are his/her references?
The standard elements of a resume include the heading;
position sought, career objective, education, work experience, specific skills, achievements, activities, interests, and references.
1 Heading
The heading of a resume includes contact information, which contains the applicant's name, full postal address with pin code,
telephone number with area code, fax number, and e-mail address.
.2 Position Sought
If applying for a solicited job position, the position sought should be mentioned so that the employer is able to distinguish the
application from those who might have applied for other positions available in the company/organisation. However, it is not
necessary to include this part in the r6sum6 if the application is for an unsolicited job position.
3 Career Objective
Career objective is a special part in a resume. It occurs just above the main experience and education parts. If responding to an
advertised job position, the resume should include the applicant‘s career objective, which should be tailored to the position he/she
is seeking. Thus, it should be & specific one-sentence focused statement expressing his career goals in relation to the targeted
position. It should convey his/her motivation and interest in the job he/she is seeking. It would just express your general career
goals and tell the potential employer the sort of work you are hoping to do.
4 Professional Summary
Some resumes may include a professional summary in place of career objective. It is a one-sentence statement listing the
applicant's most important qualifications, his/her skills, and his/her key work experience. This part should be included in the resume
if the wishes to highlight the relevance of his/her qualifications, special skills, and key work experience position he/she is applying
for. Four years of experience as a accounts manager.
.5 Education
In this part of the resume, specific details regarding the applicant's education and professional training must be included. The name
and location of the school/ college/university/institution attended, dates of attendance, major areas of study, degrees/certificates
received should be mentioned applicant's grade point average/class/division if it is on the higher side may also be mentioned. The
training programmes, special courses, seminars and workshops that the applicant might have co attended, or conducted should
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also be included. Reverse chronological order is used to list educational information that is, starting from the most recent
educational information.
6 Work Experience
This part of the resume should provide a brief and specific overview of the work and professional experience. As prior work
experience is a vital part of any hiring decision applicant must draft this part of the resume very carefully. If he/she has impressive
work experience relevant to the position he/she is seeking, it makes more sense to mention it before providing the educational
information.
7 Special Skills, Abilities, and Aptitudes
In this part of the resume, the applicant's special abilities and aptitudes that are of significance and of direct relevance to the job
applied for are examples of learned skills include computer programming, computer programming, and data processing. Foreign
languages, accounts handling, consulting, drafting, commercial writing, and so on must be included. It is necessary to be selective
and specific, highlighting only those skills and talents that are relevant to the targeted job.
8 Activities and Interests
Extra-curricular, co-curricular, professional activities, and hobbies and interest must be mentioned. These activities must show that
the applicant is a dynamic and energetic person who can accept challenges. Companies prefer such people.
9 Achievements/Accomplishments/Honours
The applicant's achievements, accomplishments, and distinguish him from the rest. They convince the employer that he/she is an
achiever and there-worth hiring. This part should include scholarships, fellowships, awards, distinctions, commendation certificates,
or anything that shows achievement or recognition.
9 References
Some employers need references from persons who know the applicant's work or professional and competence through formal
and professional interaction with him/her. When applying for a solicitation position where the employer wants references, the
names of three persons who can give letters of recommendations or references should be mentioned.
COVER LETTERS
The covering letter is a companion to your CV, but is written entirely separate from it. Its purpose is to introduce briefly you as a
candidate, indicating your career goals and objectives. Essentially, it is a slightly longer version of the profile section of your CV,
but it should not be overly verbose, ideally remaining under 100 words. We recommended that your covering letter include the
following information:
 The exact position for which you are applying.
 How you came to apply for the position, as this can be useful to the organisation in terms of assessment of recruitment
procedures.
 Long and short-term job objectives, with brief reference to information contained in the CV.
 Behavioural and other strengths that especially equip you to do the job well.
In the attempt to fit this information in such a small space, we recommend that you adopt the following policies with regard to the
writing style of your cover letter:
 Impress your suitability for the role upon the reader by describing your character and experience in a way that matches
those characteristics described in the job advertisement.
 Vary your vocabulary carefully to avoid repetitions and overuse of any one word or phrase.
 Always write in complete and grammatically correct sentences e.g. ' I look forward to hearing from you'.
 Keep your style simple and your tone business-like and friendly, just as you would if you were speaking to the reader of
the letter
 The interviewer is looking to employ you in the future, not your past, so orient everything you write with a bias to the future
SALES PROMOTION LETTERS
Sales promotion letters are those letters which the organizations or firms send to their perspective customers, to invite them to
buy their products, or to their existing customers, to tell them about some new products and offers. As the name indicates, these
letters are written to increase the sales of the company. The offers, which are given through these letters are limited to a certain
period. These are a form of advertisement. In the competitive world of today, every company has to use many forms of advertising
means and sales promotion letters are one of them. An example of Sales promotion letters is, anyone who has an account with a
private bank, say ICICI Bank, they keep sending them letters, telling about different types of accounts, Debit or Credit Cards, Gold
coins, etc. Many times, publishers of magazines, like business today, send sales promotion letters to the customers, telling them
the offers/ free gifts available with the one year or more subscriptions.
NON VERBAL COMMUNICATION
The word "Non Verbal Communication" means Communication not involving speech or words. By non-verbal communication,
we mean all communication that involves neither written nor spoken words but occurs without the use of words. Thus, this is the
wordless message received through the medium of gestures, signs, body movements, facial expressions, tone of voice, colour,
time, space, style of writing and choice of words. Animals communicate their deepest feelings through gestures, cries, whistling,
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cooing and many other signals known to each other. It is we human beings, who have evolved the language of words to convey
our thoughts in a structured manner. Still, many a times, we tend to convey many of our feelings by smiling, patting, frowning,
shouting or other such wordless clues. At other times, we also lace our words with different tones, gestures and facial expressions,
to give a deeper meaning to our words. The verbal and non verbal messages together form the total meaning of the message
communicated. There is something said and something implied with every message communicated. For a full understanding of the
message, we should know what has been communicated through words and without them.
Nonverbal communication is expressed through nonlinguistic means. It is the actions or attributes of humans, including their
appearance, use of objects, sound, time, smell, and space, that have socially shared significance and stimulate meaning in others.
It includes visual/kinesic cues such as facial expressions, eye movements, gestures, and body orientation; vocal/paralinguistic
cues such as volume, pitch, rate, and inflection; proxemic cues such as space and distance; olfactory or smell cues; cues provided
via artifactual communication and appearance; cues sent via color; and chronemic or time cues.
CHARECTERISTICS OF NON VERBAL COMMUNICATION
1. It is instinctive in nature: Non Verbal Communication is quite instinctive in nature, that is, it indicates the attitude, instincts and
feelings of the speaker.
2. It is less conscious: Words are spoken after due thinking and with conscious effort. Depending on the situation we have to make
a more or less conscious effort in these/choice of words. The nonverbal part of communication, on the other hand, is less
deliberate and conscious as most of the expressions, gestures, etc included in Non Verbal Communication are mostly
unconsciously expressed, as the speaker may not even be aware of these signs.
3. It is subtle in nature: Spoken and written words are quite obvious and easy to see, listen and understand, whereas, Non Verbal
Communication is very subtle, and needs skill to be understood and expressed.
4. It is complimentary to Verbal Communication: Non Verbal Communication does not stand alone on its own and neither does it
completely substitute Communication with words; it complements Verbal Communication and makes it more effective. As an
example, when we watch a movie, the dialogues are made more impressive by the way they are delivered, with the modulations in
the voice, other gestures and signals.
5. It forms the larger part of the overall communication activity: On scientific analysis it has been found that the different aspects of
communication account for percentages stated below
Types of Nonverbal Cues
CLASSIFICATION OF NON VERBAL COMMUNICATION
Exchange of messages without words, which take place between two parties, fall within the category of non verbal
communication. It includes all wordless signs, symbols, gestures, facial expressions, colours, setting of the surroundings, time, and
so on. The Non Verbal Communication can be classified into the following categories:
1. Kinesics : Body Language
2. Proxemics : Space Language
3. Time Language
4. Paralanguage
5. Sign Language
KINESICS OR BODY LANGUAGE
'Kinesics' literally means 'body movements'. Bodily movements, gestures and body language is an important factor, especially in
face to face communication, as here the message is communicated by a number of factors like facial expressions, eye movements,
gestures. Body language is the reflection of thought, feelings and position. All bodily movements, postures, gestures etc. are
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guided by our thought processes, emotions etc. By nodding our head, blinking our eyes, waving our hands, shrugging our
shoulders and various other ways we send out signals and messages that often speak louder than words. That is why this area of
enquiry has been called 'body language'. Just as language uses sets of symbols to convey meaning, our body, consciously as well
as unconsciously or instinctively, carries messages, attitudes, status relationships, moods, warmth/indifference, positive/negative
feelings and so on. We have, however, to infer these meanings from body symbols. We look for these symbols in the face and
eyes, gestures, posture, and physical appearance each of which has its own functions.
Importance of Body Language
Regarding the importance of body language, management consultant Nancy Austin says.
"When people don't know whether to believe that they are hearing or what they are seeing, they go with the body language- it tells
the truth. You can play fast and loose with words, but it's much more difficult to do that with gestures." Psychologist Paul Ekman
says, "We talk with our vocal cords, but we communicate with our facial expressions, our tone of voice, our whole body".
Understanding body language has immense practical use. In this regard education psychologist Marilyn Maple says, "When
you can consciously 'read' what others are saying unconsciously, you can deal with issues-at work and at home-before they
become problems". It has been observed that most of the nonverbal communication at workplace centers on a single theme: power
and power gives one status consciousness. On careful observation, in a meeting, we can look around and see who has the highest
status. In every species and society, those who are in control try to appear large, strong and fearless. Professor Albert Mehrabian
has very aptly illustrated this point by giving the example of office soldier relationship in army. He says, "Status manifests itself
subtly in a relaxed posture and way of interacting. The classic example is the solider standing at attention in the presence of a
superior officer. His body is extremely tense and in perfect symmetry signs of subservience". Almost the same situation prevails in
any
other organization when a junior worker has to appear in the presence of a senior executive/officer. It is their status and
role-relationship that is reflected in this way.
Kinesics or Body Language includes:
a) Facial Expressions
b) Eye Contact
c) Gestures
d) Body Shape and Posture
e) Appearance
Facial Expressions
A popular saying goes like this. "The face is the index of the heart". Whatever we feel deep within ourselves is at once reflected
in the face. It is very important in any face-to face communication event. We convey so much without speaking a word. For
example, let us consider the facial expressions generally associated with happiness, surprise, fear, anger, sadness, bewilderment,
astonishment and contentment. Let us also consider a smile, different kinds of smile, a frown, corners of lips the position of the eye
brows, the cheeks-whether drawn up or back or dropping, the jaw, nose/nostrils and the chin. We can easily mark all the signals
sent through these parts of the face by others and observe our own expressions by looking at ourselves in a mirror. Every facial
muscle is an instrument of communication.
The face and eyes are the most expressive means of body communication. Dale leather has found that 10 basic classes of
meaning can be communicated by facial expression. These are
_ Happiness _ Surprise_ Fear_ Anger_ Sadness_ Disgust_ Contempt_ Interest_ Bewilderment_ Determination
Eye Contact
The eyes play an important role in face to face communication. Eye contact is one of the most powerful forms of non -verbal
communication. When we look at somebody's face we focus primarily on his eyes and try to understand what he means. The eyes,
along with the eyebrows, eyelids and the size of pupils convey our innermost feelings Authority relationships as well as intimate
relationships are frequently initiated and maintained with eye contact. Eye contact builds emotional relationship between the
listeners and speaker.
_ Eyebrows and eyelids raised and combined with dilated pupils tell us that the person is excited, surprised or frightened.
_ Eyebrows with upper and lower eyelids closed and combined with constricted pupils tell us that the person is angry or in pain.
_ Looking at somebody for a long time shows the intensity of our interest in him. If the eye contact is brief, or we take our eyes off
the person very soon, it indicates nervousness of embarrassment on our part. Prolonged eye contact can signal admiration.
_ Direct eye contact of more than 10 seconds can create discomfort and anxiety.
_ Generally people's eyes approach what they like and avoid what they do not like. Eye contact between a speaker and audience
increases the audience's assessment of the speaker as a credible source.
_ People generally maintain more eye gaze and mutual eye gaze with those whose approval they want, those to whom they bring
good news, and those to whom they like. They also do so with people towards to whom they feel positive and whom they know and
trust.
_ Averted eyes show anger, hurt feelings, and a hesitancy to reveal the inner self.
They also reveal negativism and the need to increase psychological distance as in an elevator, waiting room, or other small space.
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Eye behaviour communicates in many ways. It shows emotions. It establishes conversational regulators. It also monitors
feedback. It serves as a reminder. The eyes not only supply information, they receive it as well. Major aspects of communication
are covered through eyes. Of course, eye contact and eye movements convey-their meaning in combination with other facial
expressions.
Gestures
In addition to facial expressions and eye contact, another import element of kinesics is the use of gestures. Gestures are the
physical movements of arms, legs, hands, torso and head, made to express or help to express thought or to emphasize speech.
They play a very important role in conveying meaning without using words.
Ekman and Friesen have identified five types of body gestures:
(a) Emblems: A large number of body movements have come to be identified as a substitute for verbal translations. They often
replace verbal message entirely. Such symbols become emblems. The list is long and comprehensive and it includes about
seventy of such emblems. A few examples in this regard are as follows:
_ Patting the stomach -"I'm full of food".
_ Nodding the head up and down -"Yes" or "I agree".
_ Patting the adjacent seat -"Sit besides me"
_ Shaking fist -"I' m angry"
_ Yawning -"I'm bored" or "I'm angry"
_ Cupping hand behind ear -"I can't hear you"
_ Clapping hands -"I approve"
_ Placing first finger on lips -"Be silent"
_ Circling the first finger parallel with the side of the head -"that person's crazy" or "that person's stupid"
_ Forming the first and second finger in the shape of a "V" -"Peace" or "Victory"
_ Shrugging shoulders and raising palms of hand upward -"I don't know"
_ Scratching the head -frustration.
_ Tapping finger against skull -"I'm thinking"
_ Taping finger on own chest -"Me"
_ Standing at side of road and pointing thumb in direction of traffic -"I'd like a ride" (hitchhiking)
_ Waving -"Hello," "Good bye," Come here," "Here I am."
(b) Illustrators: They are directly tied to verbal language. These gestures illustrate the words, which a speaker is saying. When a
speaker says, "My third and final point is…" and holds up three fingers, this gesture is an illustrator.
(c) Regulators: Regulators control oral communication by alerting the sender to the need to hurry up, slow down, or repeat
something. Examples are frequent glances at the watch or drumming finger on the table when someone is talking with other. When
someone is delivering a long speech and the other person wants to restrict him, the other person may show his watch to regulate
the other person.
(d) Displays: These indicate emotional states, such as anger or embarrassment, and usually occur in facial expressions. Display
differs from the three previous types in that people have for less control over them. Many people, for example, have felt their faces
turning red because they were angry or embarrassed. However, there is little, which they can do to control this effect display.
(e) Adaptors: They are the gestures over which people have little control. Frequently people are not conscious of performing such
gestures. Stifling a yawn or clasping the hands to the face in fear are adaptor gestures. They are automatic and are not planned.
It is important to note that gestures are not used individually but in relation to another person, and acquire meaning at particular
times. Speech and gestures go together, and, therefore, have to be properly coordinated. In the absence of speech-gesture-coordination, we experience confusion and discomfort.
Although Gestures are spontaneous, we can learn to monitor and use the positive gestures and minimize the negative ones.
Positive Gestures
Positive Gestures are body signals which make us look relaxed, confident and polite.
1. Positive listening gestures include:
_ Leaning a little towards the speaker.
_ Tilting the head
_ Eye contact with the speaker
_ Gently nodding the head in agreement
2. Good speaking Gestures include keeping the hands open. Avoiding to clutch them or fold them across the chest.
3. Walking with the head upright, hands swinging freely by the sides
Negative Gestures
Negative gestures include body movements which give a negative impression about us.
These are categorized as below:
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1. Signs of Nervousness:
2. Gestures Showing Aggressiveness:
3. Gestures Showing Rudeness:
4. Gestures Showing Lack of Good Sense:
Head, Body Shape and Posture
Head: In any face-to-face communication or meeting or interview the way we hold our head is very important. Everybody is aware
of the age-old saying. "Hold your head high". It is a sign of honour and self-respect, confidence, integrity and interest in the
person/persons before us. A head bent low, depending upon the situation, would show modesty, politeness or quietness. On the
other extreme a head drawn too far backwards or stiffly held straight up indicates pride or haughtiness. Head jerks indicate
insolence, rejection or agreement, depending upon the context and personality of the person concerned. Nodding the head side
way or back and forth conveys the intended meaning more eloquently than words.
Body Shape: Behaviourial scientists have studied the shapes of our bodies and have broadly put them in the following types:
_ Ectomorph: thin, youthful and tall,
_ Mesmorph: strong, athletic, muscular, and bony.
_ Endomorph: fat, round and soft.
We cannot do much about the shape of our body, but we can no doubt put it to effective use. Both our body shape and posture
affect what we think about ourselves, how we relate to others and how others relate to us or respond to our moves. Mostly we act
spontaneously, whether we meet a friend or participate in a meeting. But we do become self-conscious while appearing for an
interview or making a presentation. On such an occasion we try to make the best possible impression.
Posture: A person's general posture, even without specific gestures, communicates meaning. The body position of an individual
conveys variety of messages. It is the position of the body or of body parts. For example, superiors usually take a more relaxed
posture than their subordinates. Posture is also a way to demonstrate interest in another person. Several writers have concluded
what when you lean forward to the persons to whom one is speaking with, you demonstrate interest in that person. Sitting back, on
the other
hand may communicate lack of interest. It is difficult to assess exactly the meaning of postures. Warren Lamb says that a person's
posture and gesture can tell much about how effectively the person will perform in an organization.
Appearance
Appearance, for our purpose, includes clothing, hair, jewellery, cosmetics etc. All these may seem unrelated to body language, but
on having a closer look we find that they are very meaningfully related to our face, eyes, gesture etc. A famous writer has said that
a man is recognized by his "dress and address"; "Dress" does not need any explanation. By address he means the way a person
speaks to other. Every occasion has its own particular type of dress. It may be formal or informal. It is normally a part of an
organization's work rules to have a formal suit for the working hours. Certain organizations have a uniform for all levels of workers.
If one changes from the formal dress to informal or casual he is easily noticed, and his dress speaks volumes about his attitude to
life, to work, to his colleagues and his own feelings. It is not just the dress or clothes that are important for any occasion but also
shoes, hair style, perfume etc that convey 'meaning' in nonverbal form.
Effective use of Body Language
If Kinesics or body language is so important, the question is-how to make effective use of it. Given below are some useful tips in
this regard:
Mind the body-talk: In our day-top-day communication we should carefully notice details about the way we speak and move.
_ When standing we should keep our shoulder erect, our body open and or weight evenly balanced on both feet. But we should
guard against giving the appearance of a ramrod-straight posture. Such a still posture shows rigidity in thought
_ We should carefully identify the little things that people do when they are tense. Some people play with their lock of hair or a pen
in their hand. Such behaviour, according to psychologist, undermines the strength of what we want to say.
_ In order to look confident and in charge we should sit squarely in a chair, feet on the floor and shoulders straight. Austin says,
"Rest your forearms on the table. This posture conveys the message "I will not move". If we slouch or jiggle our feet, we will give
the impression of being indifferent, uninterested.
_ Be careful with the handshake: In the business world, handshakes are very important. It conveys crucial messages about
power, status and concern for the person we meet. The handshake that really conveys confidence is firm and dry, with strong but
not excessive pressure. Bending the wrist or gripping only the fingers gives wrong signals.
_ Establish good eye contact: According to Austin, "Eye contact is the most remembered element in forming an impression of
someone. _ You must acquire the ability to sustain direct eye contact if you want to be taken seriously.
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_ The dominant person always has the right to look and keep looking: the subordinate is supposed to look away. If you maintain
eye contact so intently that your boss feels uncomfortable, he will sense that you're challenging his authority-even if that is not what
you intended.
_ Communicate at the level of the person before you: The way we hold our body can show the person before us where we-had
he/they-stand. If we fold our arms across our chest our cross our legs while we talk, we are closing off communication. If we tap
our foot/feet, it shows that we are impatient.
_ With young children we should kneel or bend down so that we are able to look into their eyes. With older people we should lean
against a wall or counter, put our weight our one foot and keep our arms at our side so as to appear open to their needs. With
people in higher position a straight posture shows respect.
_ We must be ourselves: Maple says, "Non-verbal messages come from deep inside you, from your sense of self-esteem. To
improve your body language, you have to start from inside and work out. If you're comfortable with yourself, it shows. People who
know who they are have relaxed way of talking and moving. They always come across well. "So, avoiding all tension, we must
relax and be ourselves, not try to be, or show off to be, what we are not.
_ Graceful movements and confident posture improve the atmosphere at the workplace: With only a little care we can look
pleasant, send out right signals, enthuse the workers and make the other people interested in us.
2 PROXEMICS OR SPACE LANGUAGE & SURROUNDINGS
Just as 'Kinesics' is the study of body language, 'Proxemics' is the study of how we communicate with the space around us.
Proxemics is made from "Proximity", which means nearness, and includes the space around us and our physical environment or
surroundings. It is a complicated matter indeed, but in order to make our communication effective we must take all these factors
into account and put them to the best possible use. Scientific studies have been made in respect of all these factors separately as
well as how they influence each other. Any organization or individual, critically influenced due to communication can draw great
benefit from the findings of these studies.
The space around its contents and us convey a definite meaning. Of course, it requires quite some effort on our part to arrange
them meaningfully, and on the part of others to understand or interpret the meaning . In other words, it tells that how people
communicate with space. How close or far they stand in relation to another person, where they sit in a room, or how they arrange
the office furniture which has a real impact on communication. One of the major writers on this type of communication is
anthropologist Edward T. Hall. He has identified three major types of space: feature -fixed space, semi –fixed feature space, and
personal space.
1. Feature -fixed space: Feature -fixed space refers to buildings and other fairly permanent structure, such as walls. The manner
in which buildings are laid out and the sequence of rooms and offices have a considerable influence on communication. The
person will probably communicate more with those individuals whose offices are closer to his own rather than with those further
from him. There are evidences which reveal that bigger the fixed place, the higher will be the status of the individual in an
organization.
2. Semi -fixed feature space: The placement and arrangement of moveable objects, such as desk and chairs, is referred to as
semi -fixed feature space. Currently, a great deal of emphasis is placed on how business offices are arranged. In addition, the
quality of furniture has considerable influence on the status of the individuals and this is clearly communicated non -verbally.
Frequently, the superior person will come from behind the desk and his face -to -face with the subordinate to make it easier to
communicate.
3. Personal space: Our interaction with the people around us has rather a well defined or well-understood spatial dimension.
Conversely we can say that the spatial dimension or distance between us and other people tells us something important about our
relations and the nature of our communication with them. This branch of Proxemics has come to be regarded as "personal space
language". Edward T. Hall has done very useful and interesting work in this area. Placing ourselves in the centre we can present
the space around us in the form of the following concentric circles::
(i) Intimate zone -physical contract/touch to 18 inches.
(ii) Personal zone - 18 inches to 4 feet.
(iii) Social zone - 4 to 12 feet.
(iv) Public zone- 12 feet to as far as we can see and hear.
_ Intimate distance/zone: This ranges from actual physical contact to about 18 inches from another person. Communication and
interaction within this distance are intimate activities. Mostly, only our family members, closest friends and selected people enter
this area. Those selected people are indeed 'special'
people, whatever the reasons for their special status. It has special significance for our communication with these people . In the
language used within this small, intimate, perhaps private circle, not many words are used In organizations, confidential information
is often communicated with in the intimate distance. When two friends meet each other after a long gap, they hug each other. Eye
contact, handshake, pat on the back or shoulders is quite noticeable The major form of intimate contact in business organization is
of course, the handshake. Most people respond positively to men who give a firm handshake.
_ Personal distance/zone: This range from 18 inches to four feet. Interaction in this zone includes causes and friendly
conversation including conversation with close friends, colleagues, associates and visitors. Here we rise above the closed circle of
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intimacy around us. Although communication in this circle is also mostly personal in nature, it is relaxed and casual for most of the
time. It permits spontaneous unprogrammed talking or discussion. However, certain important decisions may be taken in this circle.
_ Social distance/zone: It ranges from four feet to about twelve feet and has very aptly been called the social space. We use this
space mostly for formal purposes, and the relationships within this circle are more official. We do most of our business within this
area. While feelings, emotions, shared likes and dislike may come up in the intimate and 'personal' space, more reason and
planning are used in the 'social space. It is therefore, of paramount importance in business. Much of the communication in
organizations is done in the social zone.
_ Public distance/zone: It ranges from 12 feet to the limits of visibility and hearing. Communication at public distance is
considered in public speaking. A good deal of communication within and outside an organization takes place at this range. We can
very well imagine the nature of communications/speaking in this space becomes even more formal. The attachment of the
'intimate' and 'personal' space is substituted by the detachment of perception, objectivity of approach and formality of
communication /speaking. We have to raise our voice so as to be heard by others whose group is almost always larger in this
space. That is why it has been called 'public' space
Space Use
Proxemics is also concerned with the use of space by groups of people. The ways groups of people use the space assigned to
them determines their respective places and inter action patterns. For example, people who begin conversation and those seated
at the front are usually considered leaders of the group. If the same people are seated in a row their communication pattern will be
of a different nature. People seated around / oval table they will most likely communicate in the form of a conference. Everyone is
aware of some of the ways space is used to communicate in business organizations. Experts have identified three basics principles
about the use of space as it relates to status within the organization:
1. For higher status people in the organization, more and better quality space is allotted. In many organizations, the president has
the most attractive office, while the vice president, the department's heads, and lower level employees have succeeding smaller
offices. The number of windows in the office and the way the office is furnished are also commensurate with rank of position. This
is clearly evident that better the quality place, the higher will be position or status of the individual.
2. The higher people in the organization are being protected within their territory. Their territories are closed. Many times the more
status a person has in the organization, the more difficult it is to see that person. Outer offices and secretaries often are used to
protect the high -status person. Even gates are manned with security people of such people.
3. For higher people in the organization, it is easier to invade the territory of lower status personnel. The superiors usually can
enter the subordinate's office at will. The supervisor also has the ability to phone the subordinate at almost any time. This is the
privilege. However, the subordinate usually does not have his access to the supervisor.
Surroundings
Our surroundings or physical environment speak their own nonverbal language. It is a vast area. It is, therefore, worthwhile to
cover only two important aspects of our physical context-colour and layout or design for the purpose of nonverbal communication.
Through our sensory perception we get meaning from our surroundings, in the same way as through our choice of colour and
design we send out definite signals to others.
Colours
Most of us know that different colours are associated with different behaviour patterns, attitudes and cultural backgrounds. People
make serious efforts to choose the right colour for any significant moment and indifference to choice of colour is regarded as lack
of cultivation. Some colours are universally known to be associated with gaiety, cheerfulness or pleasant circumstances. Pink,
yellow, red, purple, blue, green are gay colours. Black and gray, on the other had, are associated with negative feelings,
melancholy or sombre mood. White is generally associated with purity or peace. All this shows that there exists what we
may call a 'colour language'. For successful communication it is important to have the right choice of colour of our clothing, home
and office interiors, upholstery and decoration pieces.
Layout and Design
Like 'colour language', there is also a 'layout and design language' as a part of nonverbal communication. The space arrangement
of an office, carpeting or its absence, the furniture and its design everything conveys a meaning. Everybody is impressed by a
'tastefully' furnished office, the layout of a lobby/dining hall/conference room/reception desk. It is for this very reason that so much
attention is being paid to the architecture and furnishing of offices/ hotels/houses of executives in modern times. All this is aimed at
conveying the mood/personality/outlook/vision of the organization. Behind all this is the vision of the successful communicators.
3 CHRONEMICS: THE COMMUNICATIVE VALUE OF TIME
Chronemics is the study of how we use time to communicate. Some of us are preoccupied with time, while others regularly waste
it. Some of us are typically early, while others are chronically late. Some of us approach life with a sense of urgency, while others
prefer a more leisurely pace. Some of us are early birds, functioning best in the morning, while others, night owls, perform best at
night.
Time language is another type of nonverbal communication. In it we communicate with others in terms of time by showing
them, in our own cultural way, what time means to us. We do this mostly by symbolizing time, and by sending out signals regarding
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the importance of time and so on. In this connection, it is important to note that 'time management' is now one of the most
important parts of the overall management. TMI (Time Managers International) is one of the most important American consultancy
companies. It renders valuable advice to business organizations in respect of optimal use of time. Business community all over the
world knows the worth of time. It has been pointed out that "scientific managers of the late 1800's equated the worth of time with
money." And then we are reminded repeatedly that "time is money". It is this consciousness of the worth or importance of time and
its crucial role in productivity that has led to the invention of many time saving devices. In fact time pervades our thinking and
dominates our communication. All communication is meant to be suitably timed. We get/send out/covert signals about whether
anybody/anything is early or late. While people in the West are very much time conscious and attach highest importance to
punctuality, people in the East have a more relaxed attitude to it. The way we use and structure time can send intentional and
unintentional message about what we value and whom we considered important. This is called chromatics.
4 PARA LANGUAGE
Closer to actual verbal (oral) communication, and always accompanying body language, is paralanguage. It is nonverbal
because it does not comprise words. But without it words do not convey their intended meaning, 'Para' means 'like'. Hence,
'paralanguage 'literally means' like language' and 'paralinguistic' is the systematic study of how a speaker verbalizes his
words/speech. It is defined as "a type of non -verbal communication that includes articulation, pronunciation, rate, pitch, volume,
pauses and other vocal qualities. While verbal communication consists of the 'what' or the content of words, paralanguage involves
the 'how' of a speaker's voice or the way in which the speaker speaks. On careful observation and analysis we find that a speaker
intentionally as well as unintentionally uses a vast range of hints and signals.
If someone asks his friend to go to movie or to a particular restaurant for dinner –one may respond, 'Yes, I would love to go" but
let his tone of voice betrays his words and convey that he has little or no interest in going. The reaction of his friend to the response
will communicate the message is right direction. At times people mean to communicate a particular message through the use of
paralanguage. For example, the phrase "I would like to help you" can convey several meanings, depending upon the paralanguage
employed. By changing emphasis on each of the words of this sentence, different meaning may be drawn
Voice
The first signal we receive or use is our voice. Everybody knows how important voice is. It tells us so much about the speaker's
sex, background, education, training and temperament. There are all kinds of voices-clear, musical, raucous, cultivated, pleasant,
unpleasant and so on. Unless damaged by some injury to the vocal cords or some neurological problem, the human voice normally
does a satisfactory job. In, other words it conveys the meaning of the message. In certain jobs it is absolutely necessary for the
applicant or employee to have a clear and pleasant voice. For example, jobs involving the use of telephone, announcing, taperecording etc. require very clear voice. The message, however, may not be effectively conveyed if we do not take care of the
following points in the use of our voice:
(a) Pitch Variation: Most of us introduce wide variations in pitch while speaking. It is necessary to catch the listener's attention and
to keep him interested in us. Those who speak in monotones (single tone, without variation) fail to keep the listener's attention.
That is why the word 'monotonous' has come to be used as a synonym for 'boring'. Many speakers are not aware of this weakness
on their part. Once they become aware of it, the problem can be solved. A high pitch may indicate nervousness, anxiety, tension,
fear, surprise, dynamism, anger, joy, cheerfulness, or impatience. A low pitch may show affection, sadness, boredom,
pleasantness, intimacy or empathy. Most of us, when excited speak in a high-pitched voice and express anger or anxiety in this
manner. A situation like this sparks off a heated discussion in which we hear voices at different pitch levels. Quite often we hear,
"Raising your voice is not going to convince me". Or "You can't convince me by your shouting." It is equally important to keep up a
pitch at which the listener gets our point comfortably.
(b) Speaking speed: Fluency in a language is not the same thing as the speed of speaking. We do, however, speak at different
speeds on different occasions and while conveying different parts of message. As a general rule we should present the easy parts
of a message at a brisk pace because it is likely to be understood easily and soon. On the other hand, the difficult, complicated,
highly technical part of information should be conveyed at a slower pace. Easy information, if conveyed slowly, becomes irritating.
Hard or complicated information presented rapidly will be difficult to understand. Similarly, an increase in rate could indicate
impatience, urgency or anxiety from the person sending the message while decrease in rate can indicate thoughtfulness or a
reflective attitude. When we are relaxed we speak at a comfortable speed.
(c) Pause: The pace or speed of speaking is also accompanied by pause. We cannot, and should not, go on speaking without
pausing voluntarily or involuntarily. But the pauses have to be at the right moments. Incorrect use of pauses can create problems.
A pause can be highly effective in emphasizing the upcoming subject and in gaining the listener's attention. But it must also be
noted that frequent, arbitrary pauses spoil the speech and distract the listener's attention. It is, therefore, very important for a
speaker to carefully monitor his pauses.
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(d) Nonfluencies: Speech is not always a continuous string of meaningful words. There are, as we have noted above, pauses
scattered at intervals. These pauses are very often inserted with sounds or utterances like 'ah', 'oh', 'uh', 'um', 'you know', 'ok' etc.
They are also sometimes inserted with laughing, yawning or
chuckling. Sometimes they may be effective by inviting the listener's attention or by giving a nonverbal edge to the verbal
communication. They are called 'nonfluencies'. It is rather interesting to see that carefully and sparingly used they add to the
fluency of the speaker, give him time to breathe or relax, make the listener more alert and get the message conveyed overtly or
covertly. But too frequent insertion of these Nonfluencies irritates the listener.
(e) Volume variation: Volume is another voice quality that frequently conveys meanings, especially in conjunction with rate We
must speak loud enough for all of our audience to hear, but not too loud. The loudness of our voice should be adjusted according
to the size of our audience. As somebody has very well said, "The contrast provides the emphasis; Volume variation puts life into
our speaking." If a supervisor
says softly, "I would like to talk with you in my office," you might feel somewhat at ease, but if your supervisor said loudly, "I would
like to talk with you in my office!" you would feel disturbed and uncomfortable. Softness and loudness in volume determines the
meaning specifically. Voice volume tends to vary with emotional and personality characteristics. Loudness of voice seems to occur
in conjunction with anger, cheerfulness, joy, strength, fearlessness, activity, and high status, Softness in volume appears with
affection, boredom, sadness, intimacy, empathy, fear, passivity, weakness, and low status
(f) Pronunciation: People pronounce words differently. There variations in pronunciation convey different meanings to different
people.
Word Stress
Word stress is of crucial importance in communication or transmission of the intended meaning. By putting stress or emphasis on a
word here or a word there in the same sentence or utterance we can change the whole meaning. For example, let us read the
following series of statements, emphasizing the underlined word in each:
Violet sings like a nightingale.
Violet sings like a nightingale.
Violet sings like a nightingale.
Violet sings like a nightingale.
Even though the same words are used in these sentences/statements, we give different meaning to them by concentrating on the
underlined words. It is not always whole words that are emphasized in this way. Stressing or emphasizing syllables or parts of
spoken words also changes the meaning as, for example, in the following words:
Conduct (Noun) Conduct (Verb)
Accent (Noun) Accent (Verb)
This way of looking at language takes us into the area of phonetics that is the science of speech sounds. Every educated speaker
knows how important it is to put stress or force or emphasis on the word or part of word concerned.
Mixed Signals: Very often problems arise because of 'mixed signals -saying one thing in one way and using words that convey the
opposite meaning. It should be our constant effort to make sure that the 'what' and the 'how' of our message are in harmony. As
receivers, we should concentrate on how the message is sent and the meaning of the words. All communication takes place within
a matrix of role-relationships, particular contexts, at particular times, in a particular language or a dialect of that language, at
regional, national or international levels, and so on. All these factors influence the paralinguistic character of the communication. If
the signals get mixed up, the intended message will not be conveyed, or will be wrongly or inadequately interpreted. Any properly
educated person is careful about his voice quality, stress, production of vowel and consonant sounds, consonant-clusters, sound in
connected speech, suitably spaced pauses and so on. There must be consistency between what is intended and what is conveyed.
Nonverbal communication includes some sounds, as long as they are not words.
• Nonword sounds:―mmh,‖ ―huh,‖ ―ahh,‖ and the like, as well as pauses or the absence of sound used for effect in speaking.
• Pronunciation: whether or not you say a word correctly.
• Articulation: whether or not your mouth, tongue, and teeth coordinate to make a word understandable to others (such as a lisp).
• Enunciation: whether or not you combine pronunciation and articulation to produce a word with clarity and distinction so that it
can be understood. A person who mumbles has an enunciation problem.
• Silence: the lack of sound.
These vocal cues are important because they are linked in our minds with a speaker‘s physical characteristics, emotional state,
personality characteristics, gender characteristics, and even credibility. In addition, vocal cues, alone, have a persuasive effect for
people when they are as young as 12 months. According to Kramer (1963), vocal cues frequently convey information about the
speaker‘s characteristics, such as age, height, appearance, and body type. For example, people often associate a high-pitched
voice with someone who is female, younger, and/or smaller. You may visualize someone who uses a loud voice as being big or
someone who speaks quickly as being nervous. People who tend to speak slowly and deliberately may be perceived as being
high-status individuals or as having high credibility. A number of studies have related emotional states to specific vocal cues. Joy
and hate appear to be the most accurately communicated emotions, whereas shame and love are among the most difficult to
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communicate accurately. Joy and hate appear to be conveyed by fewer vocal cues, and this makes them less difficult to interpret
than emotions such as shame and love, which are conveyed by complex sets of vocal cues. ―Active‖ feelings such as joy and hate
are associated with a loud voice, a high pitch, and a rapid rate. Conversely, ―passive‖ feelings, which include affection and
sadness, are communicated with a soft voice, a low pitch, and a relatively slow rate.
Personality characteristics also have been related to vocal cues. Dominance, social adjustment, and sociability have been
clearly correlated with specific vocal cues. Irony, on the other hand, cannot be determined on the basis of vocal cues alone.
Although the personality characteristics attributed to individuals displaying particular vocal cues have not been shown to
accurately portray the person, as determined by standardized personality tests, our impressions affect our interactions. In other
words, although you may perceive loud-voiced, high-pitched, fast-speaking individuals as dominant, they might not be measured
as dominant by a personality inventory. Nonetheless, in your interactions with such people, you may become increasingly
submissive because of your perception that they are dominant. In addition, these people may begin to become more dominant
because they are treated as though they have this personality characteristic.
Vocal cues can help a public speaker establish credibility with an audience and can clarify the message. Pitch and inflection
can be used to make the speech sound aesthetically pleasing, to accomplish subtle changes in meaning, and to tell an audience
whether you are asking a question or making a statement, being sincere or sarcastic, or being doubtful or assertive. A rapid
speaking rate may indicate you are confi dent about speaking in public or that you are nervously attempting to conclude your
speech. Variations in volume can be used to add emphasis or to create suspense.
Enunciation is especially important in public speaking because of the increased size of the audience and the fewer
opportunities for direct feedback. Pauses can be used in a public speech to create dramatic effect and to arouse audience interest.
Vocalized pauses—―ah,‖ ―uh-huh,‖ ―um,‖ and so on—are not desirable in public speaking and may distract the audience.
Silence is a complex behavior steeped in contradictions. To be sure, silence is far better than vocalized pauses in public
speaking. Too, silence may signal respect and empathy when another person is speaking or disclosing personal information. One
observer notes: ―Sometimes silence is best. Words are curious things, at best approximations. And every human being is a
separate language. . . . [Sometimes] silence is best‖ (Hardman, 1971). On the other hand, silence may signal the dark side of
communication. People in power, in dominant cultures, or in positions of authority may silence others. Those with whom they
come in contact may be marginalized or embarrassed and feel that they must remain silent because of sexism, racism, taboo,
incidents of violence or abuse, shame, or a hostile environment
CLOTHING AND OTHER ARTIFACTS
Objectics,or object language, refers to the study of the human use of clothing and other artifacts as nonverbal codes. Artifacts. are
ornaments or adornments you display that hold communicative potential, including jewelry, hairstyles, cosmetics, automobiles,
canes, watches, shoes, portfolios, hats, glasses, tattoos, body piercings, and even the fillings in teeth. Your clothing and other
adornments communicate your age, gender, status, role, socioeconomic class, group memberships, personality, and relation to the
opposite sex. Dresses are seldom worn by men, low-cut gowns are not the choice of shy women, bright colors are avoided by
reticent people, and the most recent. Clothing also communicates authority and people‘s roles. Physicians have historically worn a
white coat to indicate their role. For many people the white coat signified healing and better health. As the white coat has begun to
be phased out, however, the physician‘s ability to persuade patients to follow advice may have declined as well. Thus the physician
may need to learn alternative symbolic means of persuasion
5 SIGN LANGUAGE
Communication is a process involving the use of mutually understood signs/symbols between the sender and the receiver of a
message or piece of information. Language is the most sophisticated or systematic set of symbols. The evolution of any language
takes a long time, normally running in centuries. But communication has always been taking place. From time immemorial man has
been using signs and symbols mutually understood between at least two persons, and more usually among people belonging to a
group or tribe, or trade. These signs, symbols, signals and indicators have generally been of two types-visual and audio or sound
signals. Smell, touch and taste also communicate because sensory perception and impressions are a necessary part of human
existence. But the most powerful or effective of them is the visual element. That is why we have the Chinese proverb, "A picture is
worth a thousand words". The reason is that we take much of our information - more than 50 percent - through the gateway of our
eyes.
Visual Signs
Regarding the importance of visual element in communication, Lesikar and Pettit say,
"As we know from our study of communication theory, words are imprecise conveyors of meaning. Thus, it is little wonder that we
frequently have difficulty communicating through words…You will need to use pictures of some kind to help communicate your
information."
_ How effectively pictures communicate becomes clear from the paintings, murals and engravings found on the walls of ancient
caves, temples and such other buildings. They tell us a lot about the tribes or races or rulers or traders, their religion, their hunting
or other adventurous deeds, their art and so on. Their symbolic and communicative value has been a subject of serious study.
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_ The tradition of drawing pictures for communicative purpose continues. Posters and pictures-big and small, real-life drawings as
well as cartoons/caricatures, statues and effigies are freely used for general information as also for business purposes. Everybody
is familiar with the picture of ghastly, skeletal paws symbolizing the deadly, grip of drugs and so on.
_ Maps and diagrams are an essential part of a book of geography, science, economics and history in the same way as no
pamphlet of tourism and hotel industry, oil refinery or motor company is complete without nice-looking colourful photographs.
_ In the same way lights-green or red at traffic points, railway stations and airports, a red bulb outside the operation theatre of a
hospital, a neon hoarding, a revolving light an top of a VIP vehicle or an ambulance serve their purpose very effectively without
using words. Lights are also used to indicate whether somebody is in or out, and to mark the celebration of a special occasion.
Colours of flags, white or black and the colours of flowers in a vase or bouquet speak volumes about the feelings of the
communicator. Many of these drawings and photographs have a local or somewhat limited appeal in the sense that, at a time, only
a particular section of people will be interested in them. But a very much larger number of signs, and symbols speak a 'universal
language' understood by anybody anywhere.
Audio/Sound Signals
Side by side with visual, signals, audio or sound signals have always been in use since the very beginning or civilization, and have
very conveniently been adopted by the world of business. Different kinds of drumbeat were used by people living in jungles in
olden times, as we are told in our history and geography books. But drumbeating is very much in use in modern times also to
convey or share different kinds of feelings on different occasions or celebrations. In one way or another drumbeating is essential
part of many communities' culture. Its immediate impact is to arouse and gather the hearers. Closely allied to drumbeats, so for as
volume is concerned, are the alarm signals. There are various kinds of alarm signals, fire alarms, accident, casualty alarms, air raid
or assault alarms, VIP motorcade alarms, machine breakdown alarm and so on. Various kinds of sirens, hooters, whistlers etc are
used for these purposes. The main idea is to caution the listener and take the right step. Blowing a horn serves a similar purpose.
A clock or watch alarms makes us aware of time and programme our schedule. No office is complete without a buzzer, press
button bell, electrically operated bell and other such sound signalling systems. They put the concerned people on alert, send out
signals whether a visitor is welcome or whether it is time to leave.
Touch
This mode of communication is our earliest means of making contact with others. It has actually become essential to human
development. Babies and children need to be touched in order to grow, flourish, and avoid numerous health problems. Touch even
seems to improve a child's mental functioning as well as physical health. In our life touch plays an important role in how we
respond to others and to our environment, and it can communicate many messages. When we appreciate someone, we pat on his
back. Parents and alders bless their younger ones by touching their head. Younger people express respect by touching the feet of
elderly people. By shaking hands, we show our warmth and affection to each other. When two friends after a long gap hug each
other, it shows their warmth and affection.
Touching can show tenderness, affection, encouragement and the full range of emotions. The infant begins its communicative
life largely through the sense of touch. As the baby is a hugged, kissed, cradled, cuddled and stroked, human exchange being to
unfold. Psychologists contend that the denial of extensive touching can have untold negative impact upon the infant's development.
Touching actions serve as regulators. They act as both conveyors and elicitors of positive as well as negative feelings. Touching
conveys the total range from highly impersonal to highly personal meanings. The touch will be of four types:
_ Intimate touch: A child and mother usually touch to each other to shower affection. Two friends/brothers meet each other after a
long gap is also an intimate touch.
_ Friendly touch: When two people meet, they touch their shoulders and back to show their warmth and it is a friendly touch.
_ Professional touch: Doctor examines their patients by touching. Surgeons operate their patients.
_ Social touch: Handshake is one of the commonest forms of this kind of touch. When a teacher touches his student to encourage
him, it is social touch. By touching the head of younger ones, blessings are bestowed by the elder ones.
GENDER AND NONVERBAL BEHAVIOR
Just as we learn language from others, we pick up the proper use of nonverbal cues from them as well. In fact, our nonverbal
interaction style likely contributes to our gendered identity, because the preferred styles of men and women tend to reflect a
number of gendered patterns. Researcher Judith Hall suggests that ―‗male‘ and ‗female‘ are roles, each with its set of prescribed
behaviors.‖ As a result, men and women commonly use nonverbal communication in ways that reflect societal expectations. For
example, men are expected to exhibit assertive behaviors that demonstrate their power and authority; women, in contrast, are
expected to exhibit more reactive and responsive behavior. Thus, it should not surprise us that men talk more and interrupt women
more frequently than vice versa. Men are also more apt to be dominant during interactions. The measurement of visual dominance
involves comparing the percentage of time spent looking while speaking with the percentage of time spent looking while listening.
When compared with women, men display higher levels of looking while speaking and lower levels of looking when listening.
Thus, the visual dominance ratio of men usually is higher than that of women, again reflecting the ability of nonverbal cues to
reinforce perceptions of social power.
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Men and women also differ in how they use space and touch. Men tend to use space and touch to assert their dominance over
women. As a result, men are much more likely to touch women than women are to touch men. Women thus are more apt to be the
recipients of touching actions than they are to be the initiators. Men usually also claim more personal space than do women, and
when they walk with women, they are more likely to take a position in front of the women than behind them. Thus, usually, males
are the ―touchers‖ and not the ―touchees‖ and are the leaders rather than the followers. In general, when it comes to same-sex
touch, it is considered more appropriate for women to touch other women than for men to touch other men. Men, it appears, have
more of a concern with being perceived as homosexual than women do.
One of the nonverbal behaviors that women display more than men is smiling. Accustomed to using a smile as an
interactional tool, women even smile when under stress. In contrast, men, who are customarily taught to display less emotion than
women, are likely to suppress their facial expressions, thereby conveying their sense of reserve and self-control. Gender
differences in behaviors such as smiling do not necessarily cross over to cocultures. Unlike their Caucasian counterparts, African
American women do not tend to smile more than African American men. Feminine socialization functions differently in the African
American community. Women also commonly display their feelings more overtly than do men. In general, women are more
expressive and exhibit higher levels of involvement during person-to-person interaction. Women also use nonverbal signals to
draw others into conversation to a greater extent, perhaps smiling at them or opening their hands in the direction of others to
solicit comments. While women characteristically demonstrate an interest in affiliation, men generally are more interested in
establishing the strength of their ideas than in sharing the floor.
On the other hand, women tend to be better interpreters of nonverbal messages. When it comes to use of artifacts, use of
color, and clothing, men and women are likely to reflect the stereotyped characteristics attributed to the sexes. For instance,
women use artifacts such as jewelry, cosmetics, and hair adornments that help reinforce the image of a woman as a decorative
object. Similarly, men‘s clothing tends to be less colorful and more functional than women‘s clothing. Men‘s clothing is more likely
than women‘s to promote utility, activity, and ease of movement, and it does not call the same kind of attention to the body as
does women‘s clothing. Consequently, women are perceived as more sexual. Despite these habitual proclivities, in recent years
some men have taken to wearing heels and some women have taken to wearing classic male oxfords. In fact, in France, the
wearing of high-heeled shoes, by men as well as women, used to be perceived as a sign of nobility.
CONDUCTING MEETINGS, SEMINARS AND CONFERENCES
"Conferences, Seminars and meetings refer to an assembly of persons who come together and deliberate on topics and issues
of communicable interest". Meetings and conferences have become an integral part of business life. They facilitate exchange of
views and as such constitute an important means of interactive communication. Both these interactive forums facilitate face -to face discussions that take place at various levels. They may be employer -employee meetings, employee - employee meetings and
conferences, employee customers meetings and so on. Seminars are conducted once in a while. A Seminar is a gathering of
people, in which, one or more persons give their presentation on a particular topic, to enrich the knowledge of the participants of
the Seminar. While, in a conference, all the participants usually express their views on the topic, in a Seminar, there are a few
speakers, who are experts in their own field, give their views and the audience is gained by the same.
Meetings take place more often than conferences, and also relate to fewer persons. While there can be a meeting of even two
persons, a conference normally connotes an assembly of a large number of people. Similarly, meetings may take place any
number of times during a day or a week while conferences are normally scheduled annually, bi - annually and so on. While
meetings can be both pre -planned and impromptu, conferences are, by and large, planned in advance.
"Meeting is part of everybody's life‖
While some distinction has been made here between meetings and conferences as commonly followed in practice, the
distinction is by no means very rigid. There is a certain overlap between the two in actual practice. One may say, for example that
the Chief Executive is in conference with the General Managers. The dictionary refers to a meeting as an assembly of persons,
especially for entertainment, workshop etc. Whereas a conference is described as a meeting of any organization, association, etc.
For consultation, deliberation and so on. Meetings, seminars and conferences, when effectively organized and conducted, can play
a significant role in business communication.
MEETINGS: MEANING AND IMPORTANCE
Meetings are the most popular method of interactive communication. They facilitate direct, face -to -face communication and
are essential at various levels in all organizations. When there are two or more persons, there is a meeting, structured or
otherwise. They serve the valuable objective of facilitating exchange of information, fostering of team spirit and commitment to
common goals and objectives. More importantly, they help in elaborating ideas, clarifying concepts and clearing confusion, if any,
created on account of ambiguous and incomplete verbal or written message. Misunderstandings arising from unclear memos,
circulars, directives, targets, etc. can be cleared through meetings with the people concerned.
"Meetings are the most popular method of interactive communication"
Meetings of marketing people with prospective customers while launching a new product or service help in clearly bringing out
the significant future of the product by clarifying the finer points. Similarly, meetings with the computer or EDP personal facilitate
detailed and effective planning of connectivity; networking etc. these are just two examples of the ways in which meetings can be
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of use to serve a vital communication need in an organization. In fact, on a regular basis, there can be customer meets, dealer
meets, managers' meets, staff meetings, association meetings, business meets, review meets and so on.
Like their western counterparts, Indian executives too, in most organizations spend a large part of their working day in company
meetings. In the United States, it is pertinent to note, decisions are made by groups of managers or executives rather than by
individual top management functionaries. Similarly, in India too, we have various committees in the organizations like the Purchase
Committee, Audit Committee, Executive Committee, Management Committee, Promotions Committee, Systems Committee, Credit
Committee, Recovery Committee, and Legal Committee which take decisions, and that is why it necessary to organize so many
meetings.
"High level executive in business organizations spend much time in committees and meetings"
While meetings, which are effective, contribute to decision -making and result in positive outcome, ill conceived and
indifferently conducted meetings entail enormous waste of time, effort and resources. They may even lead to chaos and confusion.
It would, therefore, be imperative to give attention to certain details while convening meetings. The preparation for an effective
meeting starts well in advance and there is much that needs to be attended to on the day of the meeting, during the meeting and
thereafter, till the minutes are drawn up and sent.
CONDUCTING MEETINGS
As meetings are an imperative part of any organization, much effort needs to be done to conduct meetings successfully. It is an
important skill which each manager needs to acquire. Conducting meetings requires some prior preparations, like the time, place,
venue, etc and other documents relating to meeting. While the meeting is actually going on, it goes through the stages of
beginning, leading, conducting and closing. The role of the Chairperson is also quite significant in the meeting. These are the
aspects to be covered in conducting a meeting.
1 Preparation for a Meeting
The following are the broad areas where preparatory work relating to meeting is required:
The Domestic Arrangements:
_ Where will the meeting be held, i.e. venue?
_ At what time and day it will be held?
_ What will be the duration of the meeting?
_ Who will be invited to attend?
_ Who will chair the meeting?
_ Who will be called upon to formally speak?
_ Whether lunch/dinner is arranged?
Paperwork: The paperwork for the following will be completed:
_ Minutes of the previous meeting and related records
_ Reports to be read beforehand along with office notes
_ Agenda and related papers
_ Written reports or graphics required at the time of the meeting
Purpose:
_ What do you want to accomplish?
_ What kind of meeting is it?
_ Does the leader need to acquire specialist advice on any subject?
_ Is the leader conversant with the reason for the meeting?
_ Do you need to discuss any of the contents of the meeting with anyone in a higher management position?
Support:
_ Is there a need to use advanced visual aids for better presentation?
_ Is a written report required?
_ How much general knowledge and awareness is required?
_ Do you use mike or other audio aids?
Code for meetings: A meeting code is prepared for effective meetings. A few aspects in this regard are as follows:
_ Start and end on time
_ Be present on time and be prepared mentally
_ Establish Objectives
_ Set an agenda
_ Be brief and precise
_ Don't dominate the discussion
_ Listen to others
_ Encourage participation for ideas
_ Don't interrupt unnecessarily
_ Don't evaluate presentations
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_ Give full attention to discussions
_ Stay close to the subject
_ Don't have side conversations
_ Resolve related conflicts and issues
_ Decide on follow-up action
_ Record ideas/discussions
_ Assess the outcome in the end
Important Preparatory Points
The Important Preparatory Points of the meeting are as follows
(a) Agenda: Agenda is the list of items to be taken up for discussion during the meeting. It provides the reason for calling a
meeting. It should be ensured that there are adequate numbers of worthwhile issues which need deliberation at the meeting. All
topics and issues that will be taken up at the meeting call for advance efforts. The item stated in the Agenda should be relevant
and appropriate, keeping in view the
purpose of the meeting and the expertise of the members who will be participating in the meeting. Calling a meeting for the sake of
it, without any serious agenda, or just to ensure that the pre -determined periodicity is met, entails a waste of time and resources.
(b) Background papers: Every meeting of some importance will have a set of background papers, which are sent in advance to
the members who will participate in the meeting. These background papers relate to the items listed in the agenda, and provide
glimpses of the issues involved. Background papers are normally prepared by the concerned functionaries or departments seeking
a decision on the issue or a deliberation on the subject matter. Background paper should cover all relevant details that are
germane to effective deliberation. This would normally include facts, figures, different views, expert opinion, latest position, and so
on. Minutes of the previous meeting are also sent along with the first lot of background papers since they are always the first item
on the agenda. They are taken up for confirmation before proceeding to the other items. Background papers ensure that
deliberations are focused and cover all relevant dimensions of the subject under discussion.
Background papers, it should be noted, are to be sent to all the members and invitees well in advance to enable them to come
prepared with their views and suggestions. In fact, if the subject matter is of a serious nature and if sufficient time has not been
provided for advance consideration, there is every likelihood of the agenda item being deferred by the committee for consideration
in the next meeting. At the same time, it is worth noting that whenever there are some important developments which are to be
brought before the committee members, or when there are urgent decisions called for, and the matter is so urgent that it is not
desirable to wait till the next meeting, there is a system of submitting what are called 'table items.' Such items are tabled at the time
of the meeting and are not sent in advance. If the chairperson and members agree, such items are also taken up for deliberation at
the day's meeting. As a general rule, however, table items should be put up as an exception and only when warranted.
(c) Whom to invite: To be effective, deliberations at the meeting should involve all the concerned functionaries. Regular members
of the committees, wherever formally constituted, will have to be invariably invited. At the same time, in the absence of a formal list,
it would be essential to identify people whose presence would be essential to identify people whose presence would be of
significance when subjects are taken up for deliberation. In some cases, senior functionaries will have to be necessarily invited to
lend authority to the decision-making process, whereas some junior level functionaries and subjects matter specialists will have to
be present to provide technical details and other relevant papers. Persons to be invited to the meeting, wherever not specifically
stated, are best decided in consultation with the chairperson and other senior functionaries on whose behalf the meeting is
convened.
Invitation for the meeting is to be clearly drawn up indicating the day, date, time and venue of the meeting. Invitations have to
be sent well in advance to ensure that outstation participants have sufficient time to make appropriate travel plans. Meeting notices
will have to clearly indicate who should attend the meeting. Sometimes, people in organizations receive notices, which do not
clearly indicate whether they are sent as an invitation or just as intimation. The meeting notice should also state wherever
appropriate, whether the addressee may bring one or two other colleagues dealing with the subject or, the alternative if one is not
in a position to attend, whether some else can be deputed on one's behalf. Though most of these requirements look obvious, they
are often overlooked.
(d) Timing and venue: Care should be taken in fixing up the meeting in a manner that is convenient to most of the members or
participants. A notice, well in advance, will ensure that participants get adequate opportunity to schedule or reschedule their
engagements. The date and time should be fixed taking into account holidays, other important events and functions which may
clash with the meeting dates and time, and make it difficult for the members to choose between one or the other. It is generally
expected that the person convening the meeting will take some trouble to ensure that most of the members, if not all, are in a
position to attend and contribute. While it may not be possible to totally avoid overlapping in all cases, some advance planning and
enquiries will certainly help achieve better attendance at meetings. Indication of the duration of the meeting will also be helpful so
that participants would know how much time they have to allot for attending the meeting. Further, details such as arrangements
made, if any for breakfast, lunch, accommodation, travel, etc. need to be mentioned.
The venue of the meeting should be fixed up, obviously well before the meeting notice are dispatch. With so many meeting
taking place in organizations, there is bound to be considerable demand for meeting halls and conference rooms. The meeting
venue should have all the required physical facilities -fans, air conditioners, microphones, projectors toilets, etc. hinder the
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effectiveness of communication. It is not uncommon in organizations to come across instances where the availability of the venue
is not confirmed, or time as a result of which either meeting are delayed or participants are made to move from one venue to the
other. A little extra care will avoid embarrassment and inconvenience at the time of the meeting. There are occasions when the
Chief Executive or other senior functionary may decide to convene impromptu or emergency meetings with very short notice, in
which case the availability of the venue, physical facilities and other arrangements for refreshments, etc. will have to be attended to
on priority. Any meeting where the deliberations have concluded, and yet refreshment or lunch is not ready, speaks of poor
planning and has to be assiduously avoided. The participants' time, it is to be noted, is valuable and cannot be taken for granted.
(e) Punctuality: Starting the meeting on time is an area that calls for conscious effort. Keeping the venue open and ready well in
time, reminding the chairperson and other members, ensuring that all papers have reached the participants, table items are placed,
and ensuring that the conveners and organizers are at the venue well before the scheduled time are all a must in making meetings
time bounds and purposeful. A situation where the convener is still in consultation with the chairperson of the meeting well past the
scheduled starting time, while the participants are waiting in the venue, unattended and not knowing when and if at all the meeting
would start, is the kind of situation that speaks of indifferent attitude towards the meeting and must be avoided.
(f) Time management: Time management is of essence in ensuring the effectiveness of meetings at all levels. Meetings, which
start on time, end on time and provide adequate time for purposeful deliberation of all the listed items, ensure cost effectiveness.
One can indeed, assess the level of efficiency of the organization in terms of effectiveness of the meetings conducted at various
levels. In the exhibit carried under this chapter, we have noted that executives tend to spend much of their time in attending
meetings. Unless every effort is made to make the meetings business -like and focused, organizational effectiveness gets
impaired.
(g) Check for Meetings: The convener or the secretariat for the meetings will have to take responsibility for the success or
effectiveness of the meetings. They have to invariably give attention to every small detail and ensure that everything is in order. It
would be desirable to maintain a checklist of items relevant to various stages, i.e., before, during and after the meeting.
This kind of attention to all relevant details by the convener or the secretariat brings in a professional approach in conducting
meetings.
2 Steps in Conduct of Meetings
The process of conduct of meetings can be divided into: Beginning, Leading, Conducting and Closing
Beginning: The beginning of the meeting must take the following into account:
_ Establish the right tone - usually serious, polite and positive.
_ Be sure to identify participants who are not known to the group.
_ Offer background information and comments that might prove useful to the group.
_ Review the objectives of the meeting in terms of items on the agenda.
_ Identify time constraints not expressed on the agenda.
_ Prepare oneself for arguments and counter arguments
Leading: The following is the checklist of the principal tasks for leading a meeting:
_ Arrive early and start on time.
_ Remain impartial and objective
_ Restate the purpose and objectives periodically.
_ Listen attentively to the other group members.
_ Summarize the group's decisions or progress at intervals during the meeting
_ End with the summary of the decisions made.
_ Highlight the action to be taken and decide who is responsible for it.
Conducting: The following steps are to be followed in conducting the meeting:
_ Preparing the plan, including agenda, sitting arrangements, physical facilities, etc.
_ Implementing the plan by keeping the discussions on track and constantly monitoring them.
_ Monitoring the time of the meeting, in case of limited availability of time.
_ Encouraging less confident participants to speak up and share their views and participate in the meeting.
_ Summarizing the key items of the meeting at regular intervals.
Closing:
_ Meetings should end on time.
_ All decisions taken are summarized.
_ Follow up of the decisions made during the meeting should be done.
3 Role of the Chairperson
The chairperson, the convener or the secretary and the senior members have a vital role to play in conducting the meetings
effectively. They have to ensure punctuality and effective the management. While providing freedom to the members for
expressing their views on the items taken up for deliberation, the Chairperson also ensures that the discussion does not stray. The
Chairperson also ensures that as far as possible, all the agenda items stated for discussions are duly taken up for deliberation.
Through experience, wit and wisdom, the Chairperson brings in authority and decisiveness to the deliberations. If during the course
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of deliberations, members get into a war of words, or a personal clash, the Chairperson or the convener, who should play a
complementary role in conducting the meetings should intervene, and bring in the much needed sense of proportion in the
deliberations.
The Chairperson must work up the agenda before the meeting, and check that all the requirements are made available in the
meeting room, and that the needed staff is in full attendance, to assist at the meeting. The leader has to carry out the task of
guiding the discussion, keeping it on track and arriving at a useful conclusion at the end of the given time. The meeting leader
should ensure that there is someone to take notes; if one has not been arranged for, someone from among the participants can be
appointed to be the reporter; in a large meeting it is better to have two or three persons appointed for the purpose. The success of
the meeting depends, in a large measure, on the Chairperson of the meeting.
WRITTEN DOCUMENTS RELATED TO MEETING:
NOTICE, AGENDA AND MINUTES
An official meeting is supported by several written documents. For the smooth functioning of a meeting, the supporting documents
must be prepared carefully. Usually, they are prepared by the Secretary, in consultation with the Chairman. Some documents like
the Notice of the meeting are routine documents and there is little change in the wordings every time, like the date, time, venue and
purpose of the meeting. The other documents like Agenda, Minutes and Resolutions need to be prepared as per the need of each
meeting. The most essential documents are: Notice of the meeting, Agenda, and Minutes. The notice of the meeting and the
agenda, together with the minutes of the previous meeting rules of different bodies lay down the number of days of notice required
to be given for a meeting.
CONFERENCES AND SEMINARS
A Conference or Seminar is a meeting of a large group of persons assembled for the purpose of discussing common
problems or activities. The number of participants may be anything from 50 to 500 or more. A large Conference is divided into
small groups for the purpose of discussions. The participants may not be from the same organization. In a Seminar, however, there
are a few expert speakers and the other participants benefit from their knowledge and expertise. It may be imprudent to draw a
rigid line of distinction between meetings, seminars and conferences. Organizations do have 'conference halls' where meeting take
place regularly. Conference, seminars as well as meetings are also conducted in hotels and other large venues. The word
"Conference" is normally used to describe a gathering of a larger scale, for a specific purpose. One usually refers to Annual
Conference or Bi –annual Conference, Zonal or Regional Conference, Two Day Conference and so on, suggesting longer duration
and larger participation than a meeting. Business Plan Conferences are regularly held in business organizations. The advent of
innovative methods like Teleconference and Video Conferencing has facilitated interactive communication between participants,
without necessitating physical presence of all concerned at one venue.
The type of preparations and attentions for details in relation to the conferences are by and large, the same as those of
meetings. Sometimes, the conferences or Seminars may also have the features of a function, in which case, presence of a Chief
Guest, introduction of the speaker or the dignitary, invocation, lighting of the lamp, presentation of bouquets, and distribution of
brochures and other details become relevant. The check list for meetings suggested earlier will have to be suitably modified to plan
for and accommodate all details. We also normally come across words like 'Summit' to describe a meeting of the heads of the
states and 'Retreat' to describe temporary retirement from serious business meetings. Viewed in that context, Meeting, Meet,
Conference, Workshop, Seminar, Study Circle, etc. are by their nature, platforms facilitating interactive communication and the
most appropriate terms may have to be used.
A Seminar or Conference is a tool of learning and training and development; members pool together and share their
knowledge and experience, and discuss their problems. It is an enriching activity. It does not have a task to complete; and
conclusions that are arrived at during the discussions are included in a report of the Conference. Copies of the reports are given to
participants and their organizations and may also be sent to various authorities concerned with the subject of the Conference. A
Conference does not have any authority but it may make recommendations since the participants are persons who have
experience and are engaged in the activity and are directly affected by the state of affairs in the field.
SPEECH - ORAL PRESENTATION
Though talking informally is most common among people and is loved by all, most people feel uncomfortable in presenting a
formal speech; Reason being lack of skills to speak in Public. There are various occasions when one has to face the public and
express his or her views/ideas. With efforts, we can improve our ability with respect to Public Speaking. We can do this by learning
effective techniques of public speaking. Then we may put these techniques into practice. Public speaking is a form of
communication in which a person speaks face -to -face to a relatively large audience. In public speaking, the speaker speaks in a
fairly continuous manner. Further, the focus of the event seems to be on a single product, which is the speech itself. Those who
communicate with large audiences most effectively, however, recognize that they are involved more with a process than simply
with a product.
Activities Involved in Public Speaking
Developing public speaking skill requires attention to the following activities:
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_ Selection of the topic
_ Audience analysis
_ Researching the topic
_ Planning and drafting the speech
_ Organizing the speech.
_ Presenting the speech (verbal and non -verbal)
_ Developing confidence and overcoming fear.
It is important to remember that although these are parts of a process, but there are no specific steps to follow in exact order.
Ordinarily, the speaker will not begin with one, finish that part, go on to two, finish that, and so on to six. Instead, he might begin by
analyzing the audience, than choose a tentative topic and purpose, do some planning and research, narrow the topic, think of a
good idea for an introduction and write out a draft of it, go back and analyze the audience. Once again more carefully, do some
more research, and so on.
PRESENTING THE SPEECH
A well prepared speech can go waste if it is not presented well. The success of all the efforts put in by the Speaker depends on
how skilfully he presents it. At this time, he will need to decide on his method of presentation. There are three methods or ways of
presenting a speech - presenting it extemporaneously, or by reading it, or by memorizing it.
Ways of Delivering the Speech
1. Extemporaneous presentation: It is the most popular and effective method of presentation. Using this method, the speaker
initially thoroughly prepares his speech. Then he prepares notes and presents the speech from them. This allows him to have a
good eye contact, while he may feel confident, having the support of the
Notes with him
2. Memorized presentation: It is the most difficult method of presentation for most of us. Probably, a few speakers actually
memorize an entire speech. Memorized speech does have poor display of non -verbal cues. The fear of forgetting the speech in
between is a big hurdle and does not allow the speaker to be at ease. Instead, memorizing key parts and using notes to help
through the presentation is a better option.
3. Presentation by reading: Usually, the inexperienced speakers use this method, as lack of confidence does not allow them to
memorise even a part of the speech. Unfortunately, most of us do not read aloud well. We tend to read in a dull monotone voice,
producing a most uninteresting effect. We fumble over words that lose our place, miss punctuation marks and such other lapses.
Of course, many speakers overcome this problem and with effort, this can be eliminated. Using any of these methods of presenting
the speech, the speaker also has to be aware of how his audience is reacting towards his speech. As has already been discussed
in the section about Audience Analysis, the speaker's eyes and ears will give him feedback information. For example, facial
expressions of the audience members will tell him how they are reacting to his message. From smile, blind stares and movements,
the speaker will get an indication whether the listeners understand or agree with his message. Wording includes non -verbal
content.
Other Important Aspects Related to Presentation of Speech:
A few other aspects relating to presentation of the speech, which the speaker should be aware of, are as follows:
1. Appearance and bodily actions: As his listeners hear his words, they are looking at him. What they see is part of the message,
and it can have real effect on the success of his speech. What his audience sees, of course, is the speaker; they also see what
surrounds the speaker. Thus, in his efforts to improve the effects of his oral presentations, the speaker should also pay attention to
his appearance and bodily actions.
2. The communication environment: Much of what his audience sees is all that surrounds him as he speaks -everything that
tends to add to a general impression. This includes the physical things -the stage, lighting, background etc. his own experience as
a listener will tell him what is important.
3. Personal appearance: The personal appearance of the speaker is part of the message. The audience, from the personal
appearance of the speaker receives most of the non -verbal cues. All that is necessary is that he uses appropriately what he has.
Specifically, he should dress appropriately for the audience and the occasion.
4. Posture: Posture or body position is likely to be the most obvious thing, which his audience sees in him. Even if listeners cannot
be close enough to detect facial expressions and eye movements they can see in general the structure and state of the body. The
speaker probably thinks that one should tell him what good posture is. He may know it when he sees himself. He should keep his
body erect without appearing stiff and uncomfortable. His deportment should be poised, alert, and communicative. He should do all
this naturally. The greatest danger with posture is appearing artificial. People may become too much artificial by reading books on
communication.
5. Walking: The way the speaker walks before his audience also makes an impression on his listeners. A strong and sure walk of
the speaker gives an impression of confidence. Walking during the presentation can be good or bad, depending on how the
speaker does it. In public speech, we rarely find speakers walking.
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6. Use of voice: Good and effective voice is an obvious requirement of good speaking. Like bodily movements, the voice should
not hinder the listener's concentration on the message. Voices that cause such difficulties generally fall into four areas of fault.
While actually delivering the speech, the Speaker may make use of Visual Aids, Notes or his own Manuscript. The guidelines for
using them have already been discussed in Organising the Speech.
DEVELOPING CONFIDENCE AND OVERCOMING FEAR
All steps narrated above regarding public speaking will not give any results if the speaker has the fear to face the audience. The
speaker observes some signs of discomfort like increase in the Heart Rate, rise in the blood pressure, rise in the body temperature,
shivering of legs and hands, fumbling of words, sweating of palms. These are signs of nervousness and lack of self confidence.
The reviews should help him to pinpoint the problem areas and give him some practical suggestions to overcome them.
Public Speaking is a part of Oral Communication, which requires specific skills to be possessed by the speaker. The speaker
should select the Topic of the speech as per the requirement of the Audience, Occasion and his own knowledge on the topic. The
purpose of the speech may be to inform, to persuade, encourage or to entertain. The speaker needs to Analyse his audience as
per the age, gender, educational background and other factors, so that he may prepare himself to face them. After selecting the
topic, the speaker must Research the topic, so that his knowledge on the topic is complete. The speaker should carefully draft his
speech, after gathering all the main points through his research. The draft of the speech is divided into: Introduction, Body and
Conclusion. The speaker must organize his speech in a logical sequence and prepare his speaking notes, manuscript and visual
aids with thorough planning. There are three ways to delivering a speech: Reading, Memorised Speech and Extemporaneous
Speech. The Speaker has to be aware about his Appearance, Body Language, Environment, Feedback of the audience, etc, while
presenting his speech. The Speaker must possess qualities like Friendliness, Confidence, Sincerity, Humour and Honesty to be a
good speaker. In order to overcome stage fear, the speaker must practice his speech several times, show enthusiasm in his
speech, breathe deeply before delivering his speech and Handle the queries of the audience in an amicable manner.
CHAPTER SUMMARY
Indispensable to Human Behaviour or the art of dealing or interacting with people is communication. When one relates with
people, he has to communicate with them, either through verbal or non-verbal language, or both. Verbally, one communicates by
using words, figures and symbols. Non-verbally, he communicates through gestures, facial expressions and other forms of body
language. Clarity is one of the essential ingredients to effective communication. Thus, care in the proper choice of words is crucial
towards enhancing mutual understanding, rapport and support. Communication is a complex two-way process, involving the
encoding, translation and decoding of messages. Effective communication through commercial letter requires the communicator to
translate their messages in a way that is specifically designed for their intended audience. Creating and drafting an effective
commercial letter requires a basic understanding of the communication process. Most commercial letters require the clear and
unambiguous communication of a message in a way that can be clearly understood by the recipient. It is human nature to assume
that when we communicate we are doing so effectively, and that if anything goes wrong consequently the responsibility for that
must rest with the recipient. Communication is defined as ―The flow of material information perception, understanding and
imagination among various parties‖.
Business includes those organizations, which are engaged in the production and distribution of goods and services to earn
profit. Therefore Business communication means, ―Flow of information, perception etc. either within a business organization or
outside the organization among different parties‖. Communication is the basis of everything and is thus the key to effective office
management. Communication is the means linking members of the organization for the purpose of achieving common objectives.
In essence, if there is no communication, there are no objectives to achieve. Communication is at the heart of management and is
the determining factor of efficiency. Without a common basis for communication, any office is bound to fail. Communication is the
primary basis for acquiring knowledge about the task at hand. Communication is the basis for office performance in any
organization. Information is power, and those who have it will hold the key to office success. Information is transmitted through
effective communication. In the present information-drive society, having access to office information paves the way for every
individual‘s contribution. Collaboration and Unified Communications Effective communication and collaboration are two important
factors of organizational success.
REVIEW QUESTIONS
 Define communication and discuss its importance in business
 With the aid of a diagram, explain the communication process model
 Draft, in correct formats, specimens of the following business letter: A letter inviting a named company to display goods at a trade fair which your company is going to organize
 Draft an advert for the sale of new exercise books produced by the school textbooks company limited. School notebooks
co. Ltd.
 List the eight steps in preparing a public speech. Describe fully the actions involved in preparing the notes for the speech
as one of the eight steps.
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PART THREE
THE FUNCTIONAL
AREAS OF
BUSINESS
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CHAPTER ELEVEN
HUMAN RESOURCE MANAGEMENT
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
 describe the human resource management challenges posed by Organizations
 list and describe the key steps in the human resource planning process for Organizations
 describe approaches to determining human resource needs for Organizations
 list areas, in the context of Organizations, where human resource policies and procedures might be required
 describe Organization staff and volunteer recruitment and selection processes
 describe approaches to training and professional development relevant in an Organization context
 discuss staff supervision and evaluation practices in which an Organization manager might engage
 describe practices associated with the termination, outplacement and re-enlistment of Organization staff and volunteers
 describe approaches that can be employed to motivate Organization staff
 describe general legal considerations associated with human resource management in an Organization context.
INTRODUCTION
Effective planning and management of human resources is at the core of any successful Organization. Ensuring an
Organization is adequately staffed with the right people, who are appropriately trained and motivated to meet its objectives, is
fundamental to the Organization management process. This chapter seeks to provide an overview of the key aspects of human
resource planning and management with which an Organization manager should be familiar. It begins by examining considerations
associated with human resource management in the context of Organizations. It then moves on to propose a model of the human
resource management process for Organizations and to discuss each of the major steps in this model. Selected theories
associated with employee/volunteer motivation are then described, followed by a brief examination of techniques for staff and
volunteer team building. The final part of this chapter deals with legal considerations associated with human resource
management. Issues associated with volunteer management receive significant coverage in this chapter, given the role volunteers
play in the conduct of many types of Organization.
HUMAN RESOURCE PLANNING
As told in the last chapter Human resource management has started to play a significant role in the overall strategic
development of the organization. At present HR strategies are designed in tune with the overall business strategy of the
organization. HR strategy should sub serve the interest of the organization , translating firm‘s goals and objectives into a
consistent, integrated and complimentary set of programmes and policies for managing people. First part of Human resource
strategy is HRP – Human Resource Planning. All other HR activities like employee hiring, training and development, remuneration,
appraisal and labour relations are derived from HRP.HR planning is important in a wide variety of industries and firms. HR
planning affects what employers do when recruiting, selecting, and retaining people, and of course these actions affect
organizational results and success. The challenges caused by changing economic conditions during recent year‘s show why HR
workforce planning should occur.
Staffing an organization is an HR activity that is both strategic and operational in nature. As the HR Headline indicates, HR
planning is important in a wide variety of industries and firms. HR planning affects what employers do when recruiting, selecting,
and retaining people, and, of course these actions affect organizational results and success. Human Resources planning mean
different means to different organizations. To some companies, human resources planning mean management development. It
involve helping executives to make better decisions, communicate more effectively, and know more about the firm. The purpose of
HRP is to make the manager a better equipped for facing the present and future.
Human resource planning is important for helping both organizations and employees to prepare for the future. The basic goal of
human resource planning is to predict the future and based on these predictions, implement programmes to avoid anticipated
problems. Very briefly humans resource planning is the pro cess of examining an organization‘s or individual‘s future human
resource needs for instance, what types of skills will be needed for jobs of the future compared to future human resource
capabilities (such as the types of skilled employees you already have) and developing human resource policies and practices to
address potential problems f or example, implementing training programmes to avoid skill deficiencies.
HRP is a Four-Phased Process.
forecasts,
ts of establishing manpower objectives and policies and gaining top management approval of these.
designing and implementing plans and promotions to enable the organization to achieve its manpower
objectives.
concerned with control and evaluation of manpower plans to facilitate progress in order to benefit both the
organization and the individual. The long run view means that gains may be sacrificed in the short run for the future grounds. The
planning process enables the
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organization to identify what its manpower needs is and what potential manpower problems required current action. This leads to
more effective and efficient performance.
Human resource planning is the process of analyzing and identifying the availability and the need for human resources so that the
organization can meet its objectives. The focus of HR planning is to ensure that the organization has the right number of human
resources, with the right capabilities, at the right time s, and in the right places. In HR planning, an organization must consider the
availability and allocation of people to jobs over long periods of time, not just for the next month or the next year . HRP is a sub
system in the total organizational planning. Actions may include shifting employees to other jobs in the organization, laying off
employees or otherwise cutting back the number of employees, developing present employees, and/or increasing the number of
employees in certain areas. Factors to consider include the current employees ‘ knowledge, skills, and abilities and the expected
vacancies resulting from retirements, promotions, transfers, and discharges. To do this, HR planning requires efforts by HR
professionals working with executives and managers.
HRP exists as a part of planning process of business. This is the activity that aims to coordinate the requirements for the
availability of the different types of employers. The major activities are the forecasting, (future requirements), inventorying (present
strength), anticipating (comparison of present and future requirements) and planning (necessary program to meet the
requirements). The HR forecasts are responsible for estimating the number of people and the jobs needed by an organization to
achieve its objectives and realize its plans in the most efficient and effective manner. HR needs are computed by subtracting HR
supplies or number of the employees available from expected HR demands or number of people required to produce a desired
level of outcome. The objective of HR is to provide right personnel forth e right work and optimum utilization of the existing human
resources. HRP effectively involves forecasting personnel needs, assessing personnel supply and matching demand –supply
factors through personnel related programmes. The HR planning process is influenced by overall organizational objectives and
environment of business.
Today, human resource planning is viewed as the way management comes to grasp the ill-defined and tough-to-solve human
resource problems facing an organization. Human resource planning is the process of determining the human resources required
by the organization to achieve its goals. Human resource planning also looks at broader issues relating to the ways in which people
are employed and developed, in order to improve organizational effectiveness. HRP is a decision making process that combines
activities such as identifying and acquiring the right number of people with the proper skills, motivating them to achieve high
performance and creating interactive links between business objectives are resource planning activities. HRP sets out
requirements in both quantitative and qualitative terms. Accurate manpower plan is a dream. A common error of many managers
is to focus on the organization‘s short term replacement needs. Any human resource plan, if it is to be effective, must be derived
from the long term plans and strategies of the organization. The various approaches to human resource planning under which a
number of major issues and trends in today‘s work plan that will affect organization and employees are (1) Examine external and
internal issues, (2) Determining future organizations capabilities, (3) Determining future organizational needs, and (4) Implementing
human resources programmes to address anticipated problems. Although change is occurring very rapidly in the work world it is
important for both organizations and employees to monitor issues and events continuously and consider t heir potential effects.
JOB ANALYSIS AND JOB DESIGN
Manpower planning is concerned with determination of quantitative and qualitative requirements of
manpower for the organization. Determination of manpower requirements is one of the most important problems in manpower
planning. Job analysis and job design, provide this knowledge. Before going through the mechanism of job analysis and job design,
it is relevant to understand the terms which are used in job analysis and job design.
A position consists of a particular set of duties assigned to an individual. Decenzo and P. Robbins define other terms as follows:
Job: A job may be defined as a ―collection or aggregation of tasks, duties and responsibilities which as a whole, are regarded as a
regular assignment to individual employees,‖ and which is different from other assignments, In other words, when the total work to
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be done is divided and grouped into packages, we call it a ―job.‖ Each job has a definite title based upon standardized trade
specifications within a job; two or more grades may be identified, where the work assignment may be graded according to skill, the
difficulty of doing them, or the quality of workmanship. Thus, it may be noted that a position is a ―collection o tasks and
responsibilities regularly assigned to one person;‖ while a job is a ―group of position, which involve essentially the same duties,
responsibilities, skill and knowledge.‖
JOB ANALYSIS DEFINED
Developing an organizational structure, results in jobs which have to be staffed. Job analysis is th e procedure through which you
determine the duties and nature of the jobs and the kinds of people (in terms of s kills and experience) who should be hired for
them.‘ It provides you with data on job requirements, which are then used for developing job descriptions (what the job entails) and
job specifications (what kind of people to hire for the job).
JOB DESCRIPTION
Job description is the immediate product of job analysis process; the data collected through job analysis provides a basis for job
description and job specification. Job Description: is a written record of the duties, responsibilities and requirements of a particular
job. It is concerned with the job itself and not with the job holders. It is a statement describing the j ob in such terms as its title,
location, duties, working conditions and hazards.
WRITING JOB DESCRIPTION
A Job description is a written statement of what the job holder actually does, how he or she does it, and under what conditions the
job is performed. This information is in turn used to write a job specification. This lists the knowledge, abilities, and skills needed to
perform the job satisfactorily. While there is no standard format you must use in writing a job description, most descriptions contain
at least sections on:
1. Job Identification:
2. Job Summary:
3. Duties and Responsibilities:
4. Supervision:
5. Relation to Other Jobs:
6. Machine, tools and equipment
7. Working Conditions:
8. Social Environment:
JOB SPECIFICATION
The job specification states the minimum acceptable qualifications that the incumbent must possess to perform the job
successfully. Based on the information acquired through job analysis, the job specification identifies the knowledge, skills, and
abilities needed to do the job effectively. Individuals posses sing the personal characteristics identified in the job specification
should perform the job more effectively than individuals lacking these personal characteristics. The job specification, therefore, is a
important tool in the selection process, for it keeps the selector‘s attention on the list of qualifications necessary for an incumbent to
perform the job and assists in determining whether candidates are qualified.
A Job Specification should include:
(i) Physical characteristics, which include health, strength, endurance, age, height, weight, vision, voice, eye, hand and foot coordination, motor co-ordination, and colour discrimination.
(ii) Psychological and social characteristics such as emotional stability, flexibility, decision making ability, analytical view, mental
ability, pleasing manners, initiative, conversational ability etc.
(iii) Mental Characteristics such as general intelligence, memory, judgement, ability to concentrate, foresight etc.
(iv) Personal Characteristics such as sex, education, family background, job experience, hobbies, extracurricular activities etc.
All these characteristics must be classified into three categories:
 Essential attributes which a person must possess.
 Desirable attributes which a person ought to posses.
Contra indicators which will become a handicap to successful job performance.
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Figure 11.1 : Uses of job Analysis
STEPS IN JOB ANALYSIS
The six steps of job analysis are shown in figure 11.2:
Figure 11.2 : Job Analysis Process
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JOB DESIGN
Job design is of comparatively recent origin. The human resource managers have realized that the design of a job has
considerable influence on the productivity and job satisfaction; poorly designed jobs often result in boredom to the employees,
increased turnover, job dissatisfaction, low productivity and an increase in overall costs of the organization. All these negative
consequences can be avoided with the help of proper job design.
METHODS OF JOB DESIGN
The various techniques of job design and redesign are discussed below:
1. Job Simplification: In job simplification, the complete job is broken down into small subparts; this is done so that employee can
do these jobs without much specialized training. Moreover, small operation s of the job can also be performed simultaneously so
that the complete operation can be done more quickly . For job simplification, generally time and motion studies are used.
2. Job Rotation : Another technique designed to enhance employee motivation is job rotation, or periodically assigning
employees to alternating jobs or tasks. For example, an employee may spend two weeks attaching bumpers to vehicles and the
following two weeks making final checks of the chassis. During the next month, the same employee may be assigned to two
different jobs. Therefore, the employee would be rotated among four jobs. The advantage of job rotation is that employees do not
have the same routine job day after day. Job rotation only addresses the problem of assigning employees to jobs of limited scope;
the depth of the job does not change. The job cycle of the actual daily work performed has not been lengthened or changed.
Instead, employees are simply assigned to different jobs with different cycles. Because job rotation does not change the basic
nature of jobs, it is criticized as nothing more than having an employee perform several boring and monotonous jobs rather than
one. Some employees dislike job rotation more than being assigned to one boring job because when they are assigned to one job
they know exactly where to report and what work to expect each day. Workers quickly realize that job rotation does not increase
their interest in their work.
Although it seldom addresses the lack of employee motivation, it give manages a means of coping with frequent absenteeism
and high turnover. Thus when absenteeism or turnover occurs in the work force, managers can quickly fill the vacated position
because each employee can perform several jobs. Job rotation is often effectively used as a training technique for new,
inexperienced employees. At higher organizational levels, rotation also helps to develop managerial generalists because it
exposes them to several different operations.
3. Job Enlargement: Another means of increasing employee‘s satisfaction with routine jobs is job enlargement, or increasing the
number of tasks performed (i.e. increasing the scope of the job). Job enlargement, like job rotation, tries to eliminate short job
cycles that create boredom. Unlike job rotation, job enlargement actually increases the job cycle. When a job is enlarged, either the
tasks being per formed are enlarged or several short tasks are given to one worker. Thus, the scope of the job is increased
because there are many tasks to be performed by the same worker. Job enlargement programs change many methods of
operation- in contrast to job rotation, in which the same work procedures are used b y workers who rotate through work stations.
Although job enlargement actually changes the pace of the work and the operation by reallocating tasks and responsibilities, it
does not increase the depth of a job.
The focus of designing work for job enlargement is the exact opposite of that for job specialization . Instead of designing jobs to
be divided up into the fewest of tasks per employee, a job is designed to have many tasks for the employee to perform. An
enlarged job requires a longer training period because there are more tasks to be learned. Worker satisfaction should increase
because is reduced as the job scope is expanded. However, job enlargement programs are successful with jobs what have
increased scope;
such workers are less prone to resort to absenteeism, grievances, slowdowns and other means of displaying job dissatisfaction.
Enlargement is done only on the horizontal level. Thus, the job remains the same, but becomes of a larger scale than before. In the
words of Geroge Strauss and L.R. Sayles ―Job enlargement implies that instead of assigning one man to each job, a group of men
can be assigned to a group of jobs and then allowed to decide for themselves how to organize the work. Such changes permit
more social contacts and control over the work process
4. Job Enrichment: The concept of job enrichment has been derived from Herzberg‘s two-factor theory of motivation in which he
has suggested that job content is one of the basic factors of motivation. If the job is designed in such a manner that it becomes
more interesting and challenging to the job performer and provides him opportunities for achievement, recognition, responsibility,
advancement and growth, the job itself becomes a source of motivation to the individual.
RECRUITMENT
Successful human resource planning should identify our human resource needs. Once we know these needs, we will want to do
something about meeting them. The next step in the acquisition function, therefore, is recruitment. This activity makes it possible
for us to acquire the number and types of people necessary to ensure the continued operation of the organization. Hallett says, ―It
is with people that quality performance really begins and ends.‖ Robert Heller also says, ―If people of poor calibre are hired, nothing
much else can be accomplished and Gresham‘s law will work: the bad people will drive out the good or cause them to deteriorate.‖
Recruiting is the discovering of potential candidates for actual or anticipated organizational vacancies. Or, from another
perspective, it is a linking activity-bringing together those with jobs to fill and those seeking jobs.
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Recruitment forms a step in the process which continues with selection and ceases with the placement of the candidate. It is the
next step in the procurement function, the first being the manpower planning. Recruiting makes it possible to acquire the number
and types of people necessary to ensure the continued operation of the organisation. Recruiting is the discovering of potential
applicants for actual or anticipated organisational vacancies
PROCESS OF RECRUITMENT
Recruitment process passes through the following stages:
nt from any department of the
company, The personnel requisitions contain details about the position to be filled, number of persons to be recruited, the duties to
be performed, qualifications expected from the candidates, terms and conditions of employment and the time by which the persons
should be available for appointment etc.
ntifying the prospective employees with required characteristics.
market may be one technique.
The publicity about the company being a good employer may also help in stimulating candidates to apply. There may be others of
attractive salaries, proper facilities for development etc.
Personnel recruitment process involves five elements, viz., a recruitment policy, a recruitment organisation, a forecast of
manpower, the development of sources of recruitment, and different techniques used for utilising these sources, and a method of
assessing the recruitment programme. The explanation of these is described below:
1. . Recruitment Policy: It specifies the objectives of recruitment and provides a framework for the implementation of the
recruitment programme. It also involves the employer‘s commitment to some principles as to find and employ the best qualified
persons for each job, to retain the most promising of those hired, etc. It should be based on the goals, needs and environment
of the organisation.
Figure 11.3.: Place of Recruitment in Selection System
2. Recruitment Organisation: The recruitment may be centralised like public sector banks or decentralised. Both practices have
their own merits. The choice between the two will depend on the managerial philosophy and the particular needs of the
organisation.
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3. Sources of Recruitment: Various sources of recruitment may be classified as internal and external. These have their own
merits and demerits.
4. Methods of Recruitment: Recruitment techniques are the means to make contact with potential candidates, to provide them
necessary information and to encourage them to apply for jobs.
5. Evaluation of Recruitment Programme: The recruitment process must be evaluated periodically. The criteria for evaluation
may consist of cost per applicant, the hiring ratio, performance appraisal, tenure of stay, etc. After evaluation, necessary
improvements should be made in the recruitment programme
SOURCES OF RECRUITMENT
After the finalisation of recruitment plan indicating the number and type of prospective candidates, they must be attracted to offer
themselves for consideration to their employment. This necessitates the identification of sources from which these candidates can
be attracted. Some companies try to develop new sources, while most only try to tackle the existing sources they have. These
sources, accordingly, may be termed as internal and external
INTERNAL SOURCES
It would be desirable to utilise the internal sources before going outside to attract the candidates . Yoder and others suggest two
categories of internal sources including a review of the present employees and nomination of candidates by employees. Effective
utilisation of internal sources necessitates an understanding of their skills and information regarding relationships of jobs. This will
provide possibilities for horizontal and vertical transfers within the enterprise eliminating simultaneous attempts to lay off
employees in one department and recruitment of employees with similar qualification for another department in the company.
Promotion and transfers within the plant where an employee is best suitable improves the morale along with solving recruitment
problems. These measures can be taken effectively if the company has established job families through job analysis programmes
combining together similar jobs demanding similar employee characteristics. Again, employees can be requested to suggest
promising candidates. Sometimes, employees are given prizes for recommending a candidate who has been recruited. Despite the
usefulness of this system in the form of loyalty and its wide practice, it has been pointed out that it gives rise to cliques posing
difficulty to management. Therefore, before utilising this system attempts should be made to determine through research whether
or not employees thus recruited are effective on particular jobs. Usually, internal sources can be used effectively if the numbers of
vacancies are not very large, adequate, employee records are maintained, jobs do not demand originality lacking in the internal
sources, and employees have prepared themselves for promotions
EXTERNAL SOURCES
Occasionally, it may be necessary to bring in some ‗new blood‘ to broaden the present ideas, knowledge, and enthusiasm.‖ Thus,
all organisations have to depend on external sources of recruitment. Among these sources are included:
 Employment agencies.
 Educational and technical institutes. and
 Casual labour or ―applicants at the gate‖ and nail applicants.

METHODS OF RECRUITMENT
Methods of recruitment are different from the sources of recruitment. Sources are the locations where prospective employees are
available. On the other hand, methods are way of establishing links with the prospective employees.
Table 11.2: Methods of Contacting Prospective Candidates
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SELECTION
Human resource selection is the process of choosing qualified individuals who are available to fill positions in an organization. In
the ideal personnel situation, selection involves choosing the best applicant to fill a position. Selection is the process of choosing
people by obtaining and assessing information about the applicants with a view to matching these with the job requirements. It
involves a careful screening and testing of candidates who have put in their applications for any job in the enterprise. It is the
process of choosing the most suitable persons out of all the applicants. The purpose of selection is to pick up the right person for
every job. It can be conceptualised in terms of either choosing the fit candidates, or rejecting the unfit candidates, or a combination
of both. Selection involves both because it picks up the fits and rejects the unfits. In fact, in Cameroonian context, there are more
candidates who are rejected than those who are selected in most of the selection processes. Therefore, sometimes, it is called a
negative process in contrast to positive programme of recruitment. Thus, the selection process is a tool in the hands of
management to differentiate between the qualified and unqualified applicants by applying various techniques such as interviews,
tests etc. The cost incurred in recruiting and selecting any new employee is expensive. The cost of selecting people who are
inadequate performers or who leave the organisation before contributing to profits proves a major cost of doing business. ―Proper
selection of personnel is obviously an area where effectiveness - choosing competent workers who perform well in their positioncan result in large saving.‖ According to them, selection has two objectives: (1) to predict which job applicants would be successful
if hired and (2) to inform and sell the candidate on the job and the organization. Satisfaction of employee needs and wants as well
as the fullest development of his potential are important objectives of selection.
SELECTION PROCEDURE
The basic objective of a selection process is to collect as much relevant information about the candidates as is possible so that
the most suitable candidates are selected. A comprehensive selection process involves the various steps as shown in Figure 11.4.
Figure 11.4.Steps in Selection Process
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CONTRACTS OF EMPLOYMENT
It is in the interest of organisations to know how many employees they have available at any one time in both internal and external
labour. Organisations also need to have an idea about the extent to which they can both attract and acquire these employees and,
having employed them, require these employees to make a value-adding contribution to the organisation‘s activities. In other
words, organisations need to balance their attention to labour markets with their internal processes for valuing work.
Consequently, having predicted the number and types of jobs required and taken steps to acquire or hire the staff needed to
achieve the organisational objectives, employers generally seek to establish and define the type of relationship that should obtain
between the people they recruit and hire (the employees) and the organisation itself. Assuming the organisation has a legal
identity, the nature of this relationship becomes defined in the form of a contract of employment.
Key elements in contract design
Applying a UK model the key terms of a contract of employment typically include:
• Job title
• Duties, preferably making explicit the extent to which these might need to be flexible, e.g. in terms of work time and place
• Date when continuous employment commences and (where relevant) when it is due to end
• Rate of pay, including allowances and so on, together with method of payment
• Hours of work, including allowable break times
• Holiday arrangements (paid and unpaid allowances)
• Sickness, e.g. days allowable (paid and unpaid); deduction of National Insurance (UK) and other benefit contributions
• Length of notice available to both employer and employee
• Grievance procedures
• Work rules and regulations specific to the particular employment, e.g. trade union membership
• Regulations for confidentiality, intellectual property rights.
Beyond the UK context, local, national and (perhaps) universal rights of employer and employee influence the design and content
of employment contracts and/or the expectations that one or other party brings to them. One influence is the core labour standards
benchmark set out by the International Labour Organisation. However, and as with all ‗benchmarks‘, these might soon be
perceived as superseded or ‗inappropriate‘ and in reality maintain their significance more as a consequence of breach than of
compliance. Despite the emphasis given above to ‗key‘ design elements, actual contracts in the UK and elsewhere will vary. As a
minimum requirement, however, a contract of employment in the UK must be a written agreement, although verbal agreements will
be recognised for the first month of employment. The contract must refer to any agreement, for example, with a specified trade
union:
a ‗closed shop‘ of compulsory trade union membership and subscription levy for employees might obtain. The contract might
invoke a set of regulations, such as an employee handbook within which it operates. The similarity here is that the contract of
employment stands as a formally prepared, signed and dated document; it is and can be taken to hand should misunderstandings
or disputes over conditions of employment arise. This insight distinguishes the employment contract to what is elsewhere
discussed in this book as the psychological contract. As outlined above, the contract must specify matters such as the parties
involved (employer and employee), rate of pay, holiday entitlement and (where relevant) entitlement to breaks during the work
time. The work location and various other matters are included in the contract.
Legal status
It is important that specialist employment lawyers prepare or examine the proposed contract, although many employers save costs
by using contract templates or using their own contract design. For international assignments, legal specialists commonly check
what is or is not considered legal or customary – or, indeed, ethical – in local employment contexts. As employment law is complex
and regularly changing in every national context, a decision to avoid using lawyers can result in substantial costs if the employment
relationship is terminated in difficult circumstances. It is also important that both parties adhere to the contract despite the
temptation to introduce flexibility and apparently mutual benefits from making adjustments. One example is increasing work hours
beyond the maximum allowed by legislation in return for higher pay. Adjustments that may look beneficial are anything but when,
for example, a health and safety issue arises.
The contract as process
The UK sociologist Anthony Giddens (2006) reminds us that institutions once seen as adding stability to people‘s experience of
social life (including employment) are becoming perceived as more fluid and processual in modern times. This is true also of
contracts of employment that are ‗settled‘, i.e. designed, dated and signed. This process perception of contracts actually begins at
the initial stage and supports the claim made by some HRM scholars that, in routine and practical terms, the psychological
contract is more important to employees and employers than the more formalised or written version. It is often only in moments of
perceived dispute or crisis that employees check again the specific terms of the employment contract they once signed. For, when
employers have identified suitable candidates, both parties negotiate and seek agreement on the employment contract: it is the
process of negotiating and re-negotiating the terms of agreement that make ‗the employment contract‘ relevant and vivid. Usually
the scope for negotiations is limited by employment law or by existing trade union agreements. Even when external regulation or
other parties are not directly involved in negotiations the impact of an agreement on other employees both current and potential –
has to be considered. Examples of adverse impacts of negotiated agreements are when the negotiator has a contract, which is of
greater or lesser benefit than those negotiated by other employees differentiated in terms of gender, ethnicity or age – a process
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discussed elsewhere in this book under discrimination. If this is the case, other employees (including new recruits), have tangible
evidence in support of claims for unfair HRM practices – a process described elsewhere as grievance and disciplinary
procedures. Thus, key features of the contract of employment tend to include indication of how and when issues relating to
discipline, grievance and termination become operative. The first two matters are often detailed in the other agreements such as a
staff handbook. This is because the employer does not usually choose to highlight problems in an initial negotiated document of
employment. However, it is necessary to include conditions relating to termination of employment within the contract: minimum
terms of notice, and so on. In fact, all employment contracts come to an end sometime as an employee, for example, opts for a
better offer elsewhere, is made redundant, retires, or dies.
Markets for employment
As indicated above in our discussion, the content and design of employment contracts evolve over time in response, for example,
to emerging notions of best practice and as labour markets or markets for employment evolve generally and specifically to
particular business sectors. Legal aspects of employment and contract negotiation also change over time. Anecdotally, people
might talk about an employer‘s or an employee‘s market depending on which contract party appears to be the stronger at any one
time.
INDUCTION AND PLACEMENT
INDUCTION
When an individual successfully clears all the steps involved in selection, he is selected. Induction is concerned with the problem
of introducing or orienting a new employee to the organization. It consists of familiarizing new employees with their jobs,
introduction with his fellow workers, company policies etc. It is considered as a part of the selection process. "A good orientation
programme will leave the employee firmly established in the new job, comfortable and relaxed in his relations with other members
of the department and content with his position in the firm. Though orientation takes a small amount of time from productive
activity, it repays the firm many times over in better personnel relations". (Layman and Gubellini). There are two phases of
induction training programme. The first phase is generally conducted by the personnel department. It is concerned with giving the
new employee a friendly welcome briefing him in the matters concerned with the company's background, products, health and
welfare plans. He may be taken around the factory and introduced to the security officer, time keeper and cashier. The employee
may then be asked to report to the department concerned. The second phase of the induction programme is conducted by the
head of the department in which he is to work. The employee is given information regarding production process, work rules,
working conditions etc. The employee is then informed about the customs prevalent in the organization such as dress, lunch,
refreshments, etc. Good induction is a good business for the firm and a basic desire of most, if not all the new employees. If the
new employee is allowed to sink or swim, the adjustment period either is considerably lengthened with consequent losses in
productivity, or it is eliminated altogether by resignation, with consequent losses in turnover costs.
OBJECTS OF SYSTEMATIC INDUCTION
(a) To promote a feeling of belongingness and loyalty among the employees.
(b) To provide information to the employee regarding policies of the organization.
(c) To give information to the new employee as to leave rules, location of canteen etc.
(d) To build confidence in the new employee so that he can become an efficient worker.
The success of induction programme mainly depends on the ability of the persons who conduct it. A comprehensive induction
programme usually covers the following :
(a) The company and its products.
(b) The geography of the plant.
(c) The structure of the organization and the functions of the various departments.
(d) Terms and conditions of employment, amenities and welfare facilities available.
(e) Standing orders including grievance and disciplinary procedures.
(f) Accident prevention
(g) Personnel policy and source of information.
(h) Working routines and production
(i) Employee's own department and job and how it fits into the general organization.
(j) Organizational culture and ethos
PLACEMENT
The candidates selected for appointment are to be offered specific jobs. There should be a perfect matching of the
requirements of the job and the abilities/skills of the employee concerned. Only then effective placement will take place. In practice,
right placement is not an easy task. It may take a long time before a candidate is placed on the right job. Generally, the candidate
is appointed on probation of one year or so. During this period, he is tried on different jobs. If his performance is satisfactory, he will
be offered a permanent post and placed on the job for which he is most suitable. He may need some training to do the job better.
Therefore, his training needs must also be identified during the probation period. If during the probation period, an employee is not
found suitable, the management may transfer him to some other job to which he may be expected to do justice. But if the
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management cannot offer him a job which he can do well, it may sack him or give him time and training to improve himself to do
the job better.
EMPLOYEE TRAINING
After the selection of people for various jobs, the next function of staffing is to arrange for their training and development. This is
because a person, however carefully selected is not moulded to specifications and rarely meets the demands of his job adequately.
Earlier, it was thought that the training of personnel was unnecessary on the ground that the new Subject: Management Concepts
and employees would gradually pick up all the particulars of the job. But as the processes and techniques of production are
becoming more and more complicated, it is being increasingly realized that the formal training is important not only for new recruits
but also for existing employees. Training function, in fact, has become the corner stone of sound management.
According to Flippo, "Training is the act of increasing the knowledge and skills of an employee for doing a particular job."
Training involves the specific job. Its purpose is to achieve a change in the behaviour of those trained and to enable them to do
their jobs better. Training makes newly appointed workers fully productive in the minimum of time. Training is equally necessary for
the old employees whenever new machines and equipment are introduced and/or there is change in the techniques of doing the
things. In fact, training is a continuous process. It does not stop anywhere. The managers are continuously engaged in training
their subordinates. Training is different from education. Training is the act of increasing the knowledge and skill of an employee for
doing a particular job. It is concerned with imparting specific skills for particular purposes. On the other hand, education is a
broader term concerned with increasing the general knowledge and understanding of the employee's total environment. Thus,
when we teach a person how to assemble two objects and tighten a nut, we are training him to do a specific job but when we are
giving him a course in engineering, it is education. The distinction between the two is like the distinction between applied and pure
sciences.
PURPOSE OF TRAINING
Training is the act of enhancing the knowledge and skills of an employee for performing a particular job. The main objective of
training is to achieve a change in the behaviour of the trainees. In order to achieve this objective, any training programme should
try to bring positive changes in :
(i) Knowledge (ii) Skills ; and (iii) Attitudes.
An attempt to increase the knowledge of a trainee would help him know facts, policies, procedures and rules and regulations
pertaining to his job. An attempt to increase his skills would help him learn technical and manual skills necessary to do his job
efficiently. The training programme should also mould the attitude of a worker towards other co-workers, supervisor and the
organization. It should also create in him a sense of responsibility, interest in his job and appreciation of enterprise's goals and
policies.
TYPES OF TRAINING
Various types of training programmes are not mutually exclusive, but invariably overlap and employ many of the same techniques.
Some of the more common types of training programmes are examined below :
It is a training programmes used to induct a new employee into the new
1. Induction or Orientation Training social setting of his work.
The new employee is introduced to his job situation, and to his co-employees. He is also informed about the rules, working
conditions, privileges and activities of the company, what the company does, how it serves the community and other particulars
pertaining to the company. Most of the information is likely to be embodied in an employee handbook which is distributed to all
employees, and in the case of a rank and file workers, the orientation may consist only of a brief explanation by a member of the
personnel department or the supervisor under whom the employee will work. Induction training can, however, be more elaborate,
particularly in the case of supervisory and management employees. Some companies show movies explaining company activities,
others arrange for a lecture or a series of lectures on the company and its practices. In some cases, the new employee spends
anywhere from a day to several moths in each department to gain first-hand experience in the various types of work and an overall
view of how the activities of one department affect those of other departments. In the new employee is an unskilled or a semiskilled worker, for example a machine operator, he may be asked to spend some time on the shop-floor in order to familiarize
himself with the machines, equipment and working conditions. In some companies the complete induction programme is divided
into two phases. In the first phase, induction is done by the personnel department which supplies to the new employee all sorts of
information relating to the company. In the second phase, induction is done by the supervisor. He has the responsibility of seeing
that both the newcomer and the work team accept each other.
2. Refresher Training
As the name implies, the refresher training is meant for the old employees of the enterprise. The basic purpose of refresher training
is to acquaint the existing workforce with the latest methods of performing their jobs and improve their efficiency further. Retraining
programmes are designed to avoid personnel obsolescence. The skills with the existing employees become obsolete because of
technological changes and because of the tendency of human beings to forget. Thus, refresher training is essential because of the
following factors :
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(a) Rapid technological changes make even the most qualified workers obsolete in course of time because new technology is
associated with new work methods and job requirements. Existing workers need to learn new work methods to use new techniques
in doing their jobs.
(b) Workers require training to bring them up-to-date with the knowledge and skills and to relearn what they have forgotten.
(c) Refresher training becomes necessary because many new jobs which are created due to changes in the demand for goods and
services are to be manned by the existing employees.
The existing talented employees may also be given adequate training to make them eligible for promotion to higher jobs in the
organization. It is known as 'training for promotion'. The purpose of training for promotion is to develop the existing employees to
make them fit for undertaking higher job responsibilities. This serves as a motivating force to the employees.
3. Job Training
The object of job training is to increase the knowledge of workers about the jobs with which they are concerned, so that their
efficiency and skill of performance are improved. In job training, workers are enabled to learn correct methods of handling
machines and equipment, avoiding accidents, removing bottlenecks, minimizing waste, etc.
4. Promotional Training
Many concerns follow a policy of filling some of the vacancies at higher levels by promoting existing employees. This policy
increases the morale of workers. They try to put up maximum efficiency so that they may be considered for promotion. When the
existing employees are promoted to superior positions in the organization, they are required to shoulder new responsibilities. For
this, training has to be given to them so that they may not experience any difficulty to shoulder the responsibilities of the new
position to which they have been promoted.
METHODS OF TRAINING
There are many methods of training. The method selected should be best suited to a specific organization‘s needs. The various
factors generally considered for selecting a method include - skills required, qualifications of candidates, cost, time available, depth
of knowledge required etc. The following methods are usually employed for training :
1. On the Job Training
Under this method an employee is instructed by some experienced employee, a special instructor or supervisor. The success of
this type of training mainly depends on the qualified trainers. Usually training in crafts, trades, technical areas etc., is given by
keeping the unskilled or semi-skilled worker under the guidance of some skilled workers. The increasing labour costs in industry
have made it essential that even the simplest job should be carried out in a most economical manner. Therefore, training in
improved methods can be given to the new employees.
2. Apprentice Training
In many industries such as metal, printing and building construction, this system of training is widely in use. The apprentice training
may last for four to five years. The worker is usually absorbed by the concerned industry after training period is over. They get
practical knowledge on the job and theoretical knowledge in the classroom lecture. The workers get some stipend during their
training period. It is the oldest and most common method of training in creates, trades and technical areas.
3. Vestibule Training (Training Centre Training)
Vestibule means a passage or room between the outer door and the interior of a building. In order to reach the inner of a house,
one must pass from vestibule. Under vestibule training, workers are trained on special machines in a separate location i.e.
classrooms. The vestibule school is run by the personnel department. Training is given in artificial conditions which are
just like the real life situations.
4. Internship Training
In this method of training students get practical training while they study. A proper liaison is established between the technical
institutions and business houses where students are sent during their vacations. Thus, there is a balance between theory and
practice and students get practical knowledge while studying.
5. Learner Training
Learners are those persons who are selected for semi-skilled jobs and lack even the basic knowledge of industrial engineering.
These learners are first given education in vocational schools where they get knowledge of arithmetic, workshop mathematics and
learn the operation of machines. They can be assigned regular jobs after training.
EMPLOYEE DEVELOPMENT
Executive or management development is a continuous process of learning and growth designed to bring behavioural change
among the executives. It implies that there will be a change in knowledge and behaviour of the individuals undergoing development
programme. The individual will be able to perform his present assignment better and also increase his potential for future
assignments through the acquisition, understanding and use of new knowledge, insights and skills. The learning process involves
the implication that there will be changed behaviour on the part of the individuals given the adequate training and education.
Managers develop not only by participating in formal courses of instruction drawn by the organization, but also through actual job
experience in the organization. It should be recognized that it is for the organization to establish the developmental opportunities
for its managers and potential managers. But an equal, perhaps more important, counterpart to the efforts of the organization are
those of the individuals. Self-development is an important concept in the whole programme of management development.
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TEAM BUILDING
It is essential for task performance. It is a family concept helping all the members of the corporation for improving the
performance. Special task force (for task accomplishment), field force (identifies role and goal setting) and financial teams
(relationship between resources and manpower allocation) are examples of teams associated with corporate development. The
structure, task, relationship, process, role analysis and role identification are analyzed under team building process. The basic
ingredients of team building are supportive environment, skills and role clarity, super ordinate goals and team rewards. The
potential team problems are overcome for its successful building. The benefits of team building are greater motivation, increased
productivity, better quality of work, higher job satisfaction, better resolution of conflict and increased willingness to change.
MANAGING ORGANIZATIONAL TEAMS
The magic and power of teams is captured in the term ―synergy,‖ which is derived from the Greek word sunergos: ―working
together.‖ There is positive and negative synergy. The essence of positive synergy can be found in the phrase ―The whole is
greater than the sum of the parts.‖ Conversely, negative synergy occurs when the whole is less than the sum of the parts. Synergy
perhaps can best be seen on a basketball court, a soccer pitch, or a football field where teammates play as one to defeat a
superior foe . Although less visible than in team sports, positive and negative synergy can also be observed and felt in the daily
operations of organization teams.
The following is a set of characteristics commonly associated with high-performing teams that exhibit positive synergy:
1. The team shares a sense of common purpose, and each member is willing to work toward achieving organization objectives.
2. The team identifies individual talents and expertise and uses them, depending on the organization‘s needs at any given time. At
these times, the team willingly accepts the influence and leadership of the members whose skills are relevant to the immediate
task.
3. Roles are balanced and shared to facilitate both the accomplishment of tasks and feelings of group cohesion and morale.
4. The team exerts energy toward problem solving rather than allowing itself to be drained by interpersonal issues or competitive
struggles.
5. Differences of opinion are encouraged and freely expressed.
6. To encourage risk taking and creativity, mistakes are treated as opportunities for learning rather than reasons for punishment.
7. Members set high personal standards of performance and encourage each other to realize the objectives of the organization.
8. Members identify with the team and consider it an important source of both professional and personal growth.
High-performing teams become champions, create breakthrough products, exceed customer expectations, and get organizations
done ahead of schedule and under budget. They are bonded together by mutual interdependency and a common goal or vision.
They trust each other and exhibit a high level of collaboration.
THE FIVE-STAGE TEAM DEVELOPMENT MODEL
Just as infants develop in certain ways during their first months of life, many experts argue that groups develop in a predictable
manner. One of the most popular models identifies five stages (see Figure 6.14) through which groups develop into effective
teams:
1. Forming. During this initial stage the members get acquainted with each other and understand the scope of the organization.
They begin to establish ground rules by trying to find out what behaviors are acceptable with respect to both the organization (what
role they will play, what performance expectations are) and interpersonal relations (who‘s really in charge). This stage is completed
once members begin to think of themselves as part of a group.
2. Storming. As the name suggests, this stage is marked by a high degree of internal conflict. Members accept that they are part
of an organization group but resist the constraints that the organization and group put on their individuality. There is conflict over
who will control the group and how decisions will be made. As these conflicts are resolved, the organization manager‘s leadership
becomes accepted, and the group moves to the next stage.
3. Norming. The third stage is one in which close relationships develop and the group demonstrates cohesiveness. Feelings of
camaraderie and shared responsibility for the organization are heightened. The norming phase is complete when the group
structure solidifies and the group establishes a common set of expectations about how members should work together.
4. Performing. The team operating structure at this point is fully functional and accepted. Group energy has moved from getting to
know each other and how the group will work together to accomplishing the organization goals.
5. Adjourning. For conventional work groups, performing is the last stage of their development. However, for organization teams,
there is a completion phase. During this stage, the team prepares for its own disbandment. High performance is no longer a top
priority. Instead attention is devoted to wrapping up the organization. Responses of members vary in this stage. Some members
are upbeat, basking in the organization team‘s accomplishments. Others may be depressed over loss of camaraderie and
friendships gained during the organization‘s life. This model has several implications for those working on organization teams. The
first is that the model provides a framework for the group to understand its own development. Organization managers have found it
useful to share the model with their teams. It helps members accept the tensions of the storming phase, and it directs their focus to
moving toward the more productive phases. Another implication is that it stresses the importance of the norming phase, which
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contributes significantly to the level of productivity experienced during the performing phase. Organization managers, as we shall
see, have to take an active role in shaping group norms that will contribute to ultimate organization success.
PERFORMANCE APPRAISAL
Performance appraisal is one of the important sub-functions of staffing function in management. Human behaviour is a complex
phenomenon because no one can anticipate accurately what exactly a man is going to do. The individual joins an organization to
satisfy his objectives. But the organization also has its own goals, which need not to be in conformity with the individual goals. If the
goals of the individual and organization are extremely contradictory, a conflict will arise which either result into suppression of
human personality or a complete will set back to his work. It is not desirable that individual‘s personality be suppressed but at the
same time organization goals should also be achieved. For monitoring this process of achieving organizational goals, the
performance of an individual needs to be assessed after a regular interval so that the desired behaviour could be maintained. This
will also help the organization to satisfy the needs and the aspiration of the individual by providing him more facilities, improved
working condition and carrier advancement.
According to Heyel, ―the performance appraisal is the process of evaluating the performance and competencies of an employee
in term of the requirements of the job for which he is employed, for the purpose of administration including placement, selection for
promotions, providing financial rewards and other actions which require differential treatment among the members of a group as
distinguished from action affecting all members equally‖.
Performance appraisal may also be defined as a process that involves: (i) Setting work standard;
(ii) Assessing the employees actual performance relative to these standards; and
(iii) Providing feedback to employee with the aim of motivating that person to eliminate performance deficiencies or to
continue to perform above par.
Counseling: Counseling follows performance appraisal. It covers two aspects i.e. ‗tell and sell‘ where the boss tells his
subordinates where they stand. He adopts the method of criticism and persuasion. These two are the fundamental tools for
counseling. In counseling, the boss discusses the future development by encouraging his subordinates to appraise themselves.
Here, the give and take problem-solving approach may be used throughout the counseling meeting. The aim of the counseling is
not just to tell the subordinates what they have done wrong. Instead, the boss reveals the root cause of the problem and secures
constructive solution.
METHODS OF PERFORMANCE APPRAISAL
Performance appraisal methods are categorized in two ways traditional and modern methods. Each organization adopts a different
method of performance appraisal according to the need of organization. In small organization, it may be on an informal basis where
personal opinion of a superior about his subordi-nates may consider for appraisal.
Table 14.2 Methods of Performance Appraisal
THE PERFORMANCE APPRAISAL PROCESS
The performance appraisal system of one organization may vary from other organizations, though some of the specific steps that
an organization may follow are as follows:
1. Establish Performance Standards: It begins by establishing performance standards i.e. what they expect from their employee
in terms of outputs, accomplishments and skills that they will evaluate with the passage of time. The standards set should be clear
and objective enough to be understood and measured. The standards which are set are evolved out of job analysis and job
descriptions. Standards set should be clear and not the vague one. The expectation of the manager from his employee should be
clear so that it could be communicated to the subordinates that they will be appraised against the standards set for them.
2. Communicating the Standards Set for an Employee: Once the standards for performance are set it should be communicated
to the concerned employee, about what it expected from them in terms of performance. It should not be part of the employees‘ job
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to estimate what they are expected do. Communication is said to be two ways street, mere passing of information to subordinate
does not mean that the work is done. Communication only takes place when the information given has taken place and has been
received and understood by subordinate.. If necessary, the standards may be tailored or revised in the light of feedback obtained
from the employees.
3. Measuring of the Actual Performances: It is one of the most crucial steps of performance appraisal process. It is very
important to know as how the performance will be measured and what should be measured, thus four important sources frequently
used by managers are personal observation, statistical reports, oral reports, and written reports. However, combination of all
these resources gives more reliable information. What we measure is probably more critical to the evaluation process than how we
measure. The selection of the incorrect criteria can result in serious consequences. What we measure gives an idea about what
people in an organization will attempt to achieve. The criteria which are considered must represent performance as stated in the
first two steps of the appraisal process.
4. Comparing Actual Performance with Standards Set in the Beginning: In this step of performance appraisal the actual
performance is compared with the expected or desired standard set. A comparison between actual or desired standard may
disclose the deviation between standard performance and actual performance and will allow the evaluator to carry on with the
discussion of the appraisal with the concerned employees.
5. Discussion with the Concerned Employee: In this step performance of the employee is communicated and discussed. It
gives an idea to the employee regarding their strengths and weaknesses. The impact of this discussion may be positive or
negative. The impression that subordinates receive from their assessment has a very strong impact on their self esteem and, is
very important, for their future performances.
6. Initiate Corrective Action: Corrective action can be of two types; one is instant and deals primarily with symptoms. The other is
basic and deals with the causes. Instant corrective action is often described as ―putting out fires‖, where as basic corrective action
gets to the source from where deviation has taken place and seeks to adjust the differences permanently. Instant action corrects
something right at a particular point and gets things back on track. Basic action asks how and why performance deviated. In some
instances, managers may feel that they do not have the time to take basic corrective action and thus may go for ―perpetually put
out fires.
GREY AREAS IN PERFORMANCE APPRAISAL
The ideal approach to performance evaluation is that in which evaluator is free from personal biases, prejudices and
idiosyncrasies. This is because when evaluation is objective, it minimizes the potential capricious and dysfunctional behaviour of
the evaluator, which may be detrimental to the achievement of the organizational goals. However a single foolproof evaluation
method is not available. Inequities in evaluation often destroy the usefulness of the performance system—resulting in inaccurate,
invalid appraisals, which are unfair too. There are many significant factors, which deter or impede objective evaluation. These
factors are:
Some of the problems faced in appraising employees are biasness of rater which may include: (a) halo effect, It occurs when the
rater allows one aspect of a man‘s character or performance to influence his entire evaluation. It is the tendency of many raters to
set their rating is excessively influenced by one characteristic rather than on all subsequent characteristics. (b) central tendency
error, (c) the leniency and strictness biases, (d) personal prejudice, and (e) the recent effect etc.
PERFORMANCE MANAGEMENT
Organisations vary in the extent to which they emphasise individual accountability for job performance, typically expressed in
the performance management process. Traditionally, performance appraisal (PA) or assessment has been the responsibility of the
immediate supervisor. However, changes in the workplace, such as decentralised workforces and remote work sites, have made it
harder for supervisors to be effective managers of others‘ performance. Performance management (PM) and valuing and
evaluating performance, can all have significant cultural dimensions. The performance of a company depends upon the quality of
its managers. Companies with similar raw materials, equipments and technical know-how show different results because of the
quality of their executives. Quality of management explains the difference in price policy, inventory policy, production policy,
marketing policy and labour policy of the organization. Thus, better the management, better are the results of the organization.
Executive development, therefore, is of paramount importance to have effective and desired managerial talents to meet the
organization‘s demands.
PSYCHOLOGICAL CONTRACT
Although the concept of the psychological contract originates from outside employment relations, it has nevertheless become an
important analytical tool to articulate both the indeterminacy of the employment relationship, and the limitations of the legal view of
employee relations. Argyris (1960) used the term ‗psychological work contract‘ to describe a set of expectations about what each
party (employer and individual employee) can expect from the employment relationship. Significantly, this earlier literature
illustrates the point that the employment relationship is shaped and influenced as much by a social as well as an economic
exchange. Psychological contract is ‗a series of mutual expectations of which the parties to the relationship may not themselves be
dimly aware but which nonetheless govern their relationship to each other‘. Expectations between employer and employee do not
only cover how much work is to be performed for how much pay, but also a whole set of obligations and anticipated rights. Thus
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the psychological contract can be defined as a set of ‗unvoiced expectations, promises and obligations‘ of the parties, neither of
whom can be fully aware of these until they are not met. Consequently, this definition alerts us to the idea that conflicts in
employment relations may be due to violations of the psychological contract, such as employee dissatisfaction or disagreements
over pay, working hours or conditions of employment. The psychological contract is therefore a concept that seeks to capture the
intangible needs and wants of individuals, the details of which are difficult to specify.
WAGE AND SALARY ADMINISTRATION
Employees‘ compensation is one of the major determinants of employee satisfaction in an organization. The compensation
policy and the reward system of an organization are viewed by the employee as a indicators of the management‘s attitude and
concern for them. It is not just the compensation, but its fairness as perceived by the employees that determines the success of a
wage and salary administration system. Hence, it very important for the management to design and implement its compensation
system with utmost care and tact. A good wage and salary administration should be able to attract and retain employees, give
them fair deal, keep the organization competitive and motivate employees to perform their best. Wage and salary determination
and its administration has always remains sensitive issue for an organizational management, since employees moral, motivation,
productivity and their relationship with the management more or less associated with the compensation management system.
Furthermore compensation has always remain as a major yardstick for the success or failure or concern for the employees by an
organization. Traditionally, pay scales in companies reflected the importance of the work and the responsibility level. Today
organization tries more to assess the worth of an individual in terms of his performance and contribution to the organization. With
the growing demands of the workforce and the constant challenges in the business environment, organizations have to evolve an
accurate system for evaluating jobs and assessing their worth. Job evaluation helps to determine the relative worth of job in an
organization in a systematic, consistent and accurate manner. It also helps in estimating the basic pay for each job in accordance
with the importance of the job in the organizational hierarchy. Once basic pay is determined, the rewards , incentives and benefits
attached with the pay, position and performance are also determined. The basic wage, incentives and rewards and benefits,
together from compensation package of an employee.
FACTORS AFFECTING WAGE AND SALARY ADMINISTRATION
The term employees remuneration includes both wages and salaries. Wages are commonly considered as the price of labor
paid to the workers for the services rendered to the organization employing them. Where quantum of services rendered is difficult
to measure the payment is called salary. Normally, payment made to workers is referred to as wages, and remuneration paid
periodically to persons whose output cannot be measured such as clerical, supervisory and managerial staff, is called salary. Wage
and salary administration is affected by so many factors and most of them are uncontrollable in nature so probably, this decision is
more crucial and critical.
There are some of the major considerations based on which it can go for compensation determination like demand and supply of
skill, organizational ability to pay, prevailing market rate, employees productivity, cost of living, trade union‘s bargaining power, job
requirements management attitude, productivity, psychological and social factors and legislative considerations. Organization can
adopt either ‗Time Rate‘ or ‗Piece Rate‘ method for wage payments, both are having their own merits and demerits and suitability.
Organization can go for combination of the both also. There may be s standard scientific process also for wage determination,
which consists of steps like job analysis and job evaluation, determination of performance standards and wage surveys and
deciding wage structure and rules and policy for effective wage administration.
COMPENSATION AND INCENTIVES
In layman‘s language the word ‗compensation‘ means something, such as money, given or received as payment for service. The
word compensation may be defined as money received in the performance of work, plus the many kinds of benefits and services
that organization provides their employee. It refers to wide range of financial and non-financial rewards to employee for their
service rendered to the organization. It is paid in the form of wages, salaries , special allowance and employee benefits such as
paid vacation, insurance, maternity leaves, free travel facility , retirement benefits etc
VARIOUS MODES OF COMPENSATION
Various modes of compensation are as followsa) Wages and Salary-Wages represent hourly rates of pay and salary refers to monthly rate of pay irrespective of the number of
hours worked. They are subject to annual increments. They differ from employee to employee and depend upon the nature of jobs,
seniority and merit.
b) Incentives- These are also known as payment by results. These are paid in addition to wages and salaries. Incentive depends
upon productivity, sales, profit or cost reduction efforts. Incentive scheme are of two types:
 Individual incentive schemes.
 Group incentive schemes.
c) Fringe Benefits-These are given to employees in the form of benefits such as provident fund, gratuity, medical care,
hospitalization, accident relief, health insurance, canteen, uniform etc.
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d) Non- Monetary Benefits-They include challenging job responsibilities, recognition of merit, growth prospects, competent
supervision, comfortable working condition, job sharing and flexi time.
MOTIVATION AND REWARDS
There have been discussions over the years about whether money can motivate employees to increase their performance.
Maslow, Herzberg, and modern critics such as Alfie Kohn (Kohn, 1993) argue either that money does not motivate work
performance or that it motivates people to focus on money rather than performance. Most rewards scholars argue that money does
in fact motivate performance and that properly designed reward systems will motivate employees to organisationally desirable
performance levels..
MOTIVATION THEORIES
Not all motivation theories are included in this review. Coverage is restricted to those theories that purport to explain work-related
motivation and have been traditionally tied to rewards systems. Maslow‘s and Herzberg‘s theories are classified as needs theories;
that is, they argue that innate needs drive behaviour. While some have argued that rewards can serve to meet many different
needs (e.g. a large bonus might satisfy self-esteem needs), both Maslow and Herzberg argued that money was not motivating in
terms of work performance. If in fact rewards could meet all needs, then the theory is not very useful to rewards specialists in
designing and implementing rewards systems. Equity theory, expectancy theory and goal-setting theory are process theories, that
is, they focus on the process whereby workers may be motivated without specifying which need may be satisfied. Reinforcement
theory specifies neither need nor process.
Traditional wage systems (where most of an employee‘s reward is given in base pay founded on job planning and evaluation and
labour market benchmarks, with increases given through merit pay systems) are founded on notions of equity. These systems
rarely utilise the findings of expectancy, goal-setting or reinforcement theories. This is one reason that as motivation theory and
rewards systems have evolved, newer rewards systems try to make use of the findings of motivational research.
Incentive pay
The newer forms of rewards are usually referred to as incentive pay. Incentive schemes are generally divided into long-and shortterm plans, with one year being the dividing line between the two. All have one thing in common: any reward received is not added
to base pay, and must be re-earned every year. When properly designed, all (but the lump-sum bonus) are self-funded; that is,
there is no payout unless the metrics driving the reward are achieved.
Motivation and rewards
A rating of ‗high‘ indicates that most of the motivational conditions proposed by the theory are met. Thus, base pay, merit pay, lump
sum bonuses and benefits programmes generally meet the conditions set forth under equity theory. No rewards programme meets
the conditions set out by Maslow‘s Hierarchy of Needs, thus that theory is ‗n.a.‘ or not applicable. Goals-setting theory has only
limited application to base pay, thus base pay is marked ‗low‘ in that category. A ‗mixed‘ rating may occur because different kinds
of a particular incentive scheme may be high while others are low. Some small-group incentive schemes, for example, might
include formal goal-setting procedures while others would not. Other bonuses are marked ‗mixed‘ with respect to equity theory
because such programmes rarely apply to all employees, and those not eligible might feel they have valuable inputs not
recognised by the programme. In spite of the comments of critics of incentive rewards, most organisational rewards specialists,
along with academic researchers, understand that establishing incentive schemes is a critical part of motivating employees to
achieve high individual, group and organisational performance.
NON-MONETARY REWARDS
Non-monetary rewards are known by many names: recognition awards, low cost/no cost awards, and ‗hugs and mugs‘ are just
several of the many titles given to this kind of reward programme. In some cases, money is a part of the reward, but the emphasis
is on the recognition received by the employee rather than the nominal amount of money involved. The earliest non-monetary
rewards were perquisites or ‗perks‘, i.e. special rewards that were related to job status and which reinforced status differences in
the organisation. The great strength of non-monetary rewards is their immediacy. An award can be given to an employee
immediately following the triggering performance, reinforcing the employee‘s commitment to that level of performance in the future.
Similarly, because an integral part of many non-monetary rewards is celebration of the performance and presentation of the reward
in front of work groups it strengthens contingencies between performance and rewards among other employees. While nonmonetary awards have always existed in organisations, they have typically been arbitrary, capricious, and not integrated in any
way with the rest of the rewards system. From an HRM perspective, the change in recent years has been not so much towards an
increase in the number of awards or the amount of individual awards.
Rather, change has been concentrated on the rationalisation of non-monetary rewards programmes and their integration into the
rest of an organisation‘s rewards system. This discussion focuses on the range of non-monetary rewards that exist in organisations
today and the way organisations are attempting to integrate them with other parts of the reward system. Integration is not
necessarily a simple issue. Most rewards are designed and administered by the HR department, with input from other (e.g. line-)
managers. HR may design most non-monetary rewards. However, implementation and administration is much more in the hands of
other managers. Since performance celebration is a critical part of non-monetary rewards, managerial behaviour can make or
break the effectiveness of these rewards.
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GRIEVANCE AND DISCIPLINARY PROCEDURES
Grievance and disciplinary procedures seldom make headlines in standard HRM texts. They are what happen when things go
wrong. Either the organisation or the employee has failed. The modern high-performing organisation with highly committed workers
might expect to have little concern with discipline or grievance issues. HRM texts, for example, make scant reference to either
issue. However, this appears to be a mythical world. In the real world – and regardless of whether it is a high-performing
organisation or not –HR professionals are likely to be dealing with such issues on a regular basis.
Defining key terms
Let us define some terms. Policies and procedures are ‗formal, conscious statements‘ that support organisational goals. However,
there is a difference between a ‗policy‘ and a ‗procedure‘, as Dundon (2002) notes: policies are written documents that outline
defined rules, obligations and expectations for managers and employees. Typically, policy statements cover areas such as
discipline, grievance redundancy, reward, recruitment or promotion. Procedures outline the details of how to enact a policy. For
example, having a policy of ‗rewarding high achievers‘ or ‗talent‘ would require some guidance on how managers implement the
policy, such as the criteria for promotion or how much they can reward an individual. Similarly, a discipline procedure would outline
possible sanctions, areas of conduct, and so on.
An interest in this area stems from industries which were prone to industrial problems and hence a lack of proper procedures was
identified as a major cause of industrial disputes. But while the modern organisation may regard an emphasis on rules and
procedures as outdated as workers work beyond contract, it is not apparent that a belief in consistency and fairness is irrelevant to
gaining the commitment of employees. Indeed, what may appear as flexibility to managers may seem unfair and arbitrary treatment
to an employee. Pluralism suggests we need rules of engagement – a perspective discussed in more detail under the concept
entry employment relations.
Managing problem behaviour
Despite the rhetoric of high commitment management and people being an important resource such that organisations would like
to think they are only dealing with the motivated who are expending discretionary effort, organisations still spend time on these
issues. Managers from different sectors report having to deal with an extensive list of problem behaviour. This list includes such
issues as chemical dependency, employees with weak ethical standards, managers that are personally abusive, employees whose
performance is spiralling downward for no obvious reason, and employees who are unwilling to change their behaviour in response
to changing conditions Problem behaviour is a feature of organisational life that rarely lends itself to easy solutions. Managers
frequently struggle with questions about whether they should just look the other way, whether they need to give a problem
employee a chance to improve, and whether treating a problem employee fairly puts the organisation at undue risk.
Thus regardless of the approach employers undertake in adopting HRM, there is a case for using procedures to ensure
consistency, equity and fairness. These take different forms:
Specifically, the notion of unfair dismissal has emerged as the main objective of any procedure in establishing an agreed set of
rules, so as designed to channel any discussion or discontent through the appropriate mechanisms for its resolution. However,
procedures cannot solve the underlying causes of conflict. For further detailed discussion on this theme, see the concept entry
conflict management.
Why have grievance and disciplinary procedures?
There are a number of reasons why employers implement employment relations procedures. These are:
• They help to clarify the relationship between the two parties and recognise explicitly the right of employees to raise grievances. In
short, it can create a framework for good employment relations.
• They provide a mechanism for resolution by identifying the post-holders to whom the issue should be taken initially, and by
specifying the route to be followed should there be a failure to agree at that level.
• They act as a safety valve and provide time within which to assess the issue that has been raised.
• They help to ensure greater consistency within the organisation. They can reduce reliance on word of mouth or custom and
practice, and minimise arbitrary treatment.
• They lead to more systematic record keeping, and consequently to improved management control and information systems.
• If written down, applied appropriately, and meeting the criteria of natural justice, they are important in employment tribunal cases.
• The process of drawing up procedures involves both parties working together to decide on the agreed mechanisms. Thus, joint
ownership of the procedure may indicate a willingness to make the agreed procedure work. It is likely that different levels of
management have conflicting perspectives about the utility of such procedures. Many line managers regard procedures as little
more than interference in their primary role of production or service and feel that the disciplinary process is long-winded, for
example by taking too much time to get rid of unsatisfactory employees. This attitude might translate into distinct management
styles. Senior managers and HR professionals need to train and develop line managers both in how to use such procedures and
in how to explain their value. For example, it can be stressed that arbitrary or hasty action can lead to unfair dismissal claims and
damage existing notions of the psychological contract in the organisation.
Examples of grievance procedures
Grievance is a complaint made by an employee about management behaviour. The term ‗grievances‘ tend to be used widely and
cover both collective and individual issues reflecting the idea that the line between grievance (individual) and dispute (collective)
can be blurred. In general, grievance procedures are used for handling individual issues, while collective issues are usually dealt
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with by disputes procedures. In practice some organisations have a combined procedure that reflects the fact that grievances are
often likely to affect more than one employee, and others allow for grievances that can be referred to the collective disputes
procedure. Thus, a grievance procedure is a parallel mechanism to the disciplinary procedure. Here we focus on individual
grievances.
The aim of a grievance procedure is to prevent issues and disagreements leading to major conflict. This can include employee-toemployee grievances as in cases of racial or sexual harassment with the grievance taken against management for failing to
provide protection. As with discipline, the spirit with which the grievance procedure is approached is significant. It may be easy for
management simply to follow the letter of the procedure, making it a hollow sham, but once this is known employees will not bother
to refer issues to the procedure. Consequently, it is important that HR professionals encourage the proper use of procedures to
uncover any problems particularly where line managers wish to hide them because of fear that it portrays them in a bad light.
Open-door systems operate in some organisations that allow workers to take up grievances with managers directly rather than
follow a lengthy procedure. However, this relies on managers taking the system seriously and being prepared to devote time and
effort to keep it going.
In the US, grievance processes are to be influenced by a union-avoidance motive. By providing employees with an effective voice
mechanism, employers are able to reduce the appeal of unionisation. Use of procedures such as peer review has been found to be
more likely in firms thought to be facing a greater threat of unionisation. In addition to these external pressures, firms are also likely
to be motivated by internal factors. Providing employees with a voice to challenge management decisions regarding discipline and
other matters is generally viewed as consistent with high involvement work practices. Providing employees with the right to
challenge management decisions is thought to enhance procedural justice perceptions among employees which, in turn, is likely to
positively affect other practices designed to affect employee motivation and commitment. For further discussion about employee
‗voice‘ and participation in managing grievance procedures, see the concept entry employee involvement and participation.
Generally, grievances should be dealt with quickly and fairly at the lowest possible level in the organisation. Research has found
conflict between the perspectives held by HR specialists and line managers. Thus, an HRM policy that appears well formulated,
and ensures uniformity and consistency may appear very differently when viewed from the position of the line manager under
operational pressures. Here, HRM specialists need to be able to persuade line managers that procedures are valuable tools not
nuisances and that the disciplinary procedure represents a useful and necessary guide for managers, encouraging them to follow
actions they should be taking. Moreover, by not following procedure they potentially lay themselves and their employer open to the
likelihood of appeals, time spent at an employment tribunal, and ultimately financial penalties as well as low workplace morale if
members of the workforce perceive unfairness in management‘s actions.
CONFLICT MANAGEMENT
In the real world, conflict is quite normal and the management of conflict is embedded in organisational life. In almost all companies
workers and managers can have very divergent interests. This means they often have competing priorities as to what are the most
important objectives at any moment in time. For example, managers may require increased flexibility from among their employees
in order to carry out a whole range of job tasks. In contrast, workers may be concerned that flexible work practices may dilute their
skill and weaken their position in labour markets. Thus workers and managers will deploy different tactics in order to protect their
concerns and priorities at a given moment in time. Because the employment relationship is an indeterminate relationship, with the
potential co-existence of antagonism and co-operation, conflict is often hidden and tends to develop beneath the surface. It is
therefore both a complex and emotional issue in employment relations. For many employers the idea that conflict is something
that is normal in their organisation is often misunderstood. Managers tend to view all forms of conflict as dysfunctional; something
which diverts attention away from productive relationships and company efficiency. This is often because many managers adopt a
unitarist perspective to employment relations and assume that employees are all working towards the achievement of a common
goal. In contrast, a pluralist view would regard some forms of industrial action as dysfunctional while other conflictual episodes can
be quite normal and may even lead to functional or productive outcomes. Because workers, managers and trade unions have
different objectives, conflict is something that ought to be managed through efficient employment relations policies. These include
grievance and disciplinary procedures or dispute settlement agreements. In this view it is recognised that conflict is inevitable
some of the time. Thus conflict may be good or bad but it cannot be eliminated completely.
The claim that conflictual episodes may result in functional outcomes rests on the idea that a degree of diversity in employment
relations means policies and procedures become more robust and relevant to each of the stakeholders. For example, by
incorporating divergent interests into the decision-making process, more creative ideas can emerge than under the unitarist
assumption that all organisational members are supporting the same objective. A pluralist viewpoint would argue that
disagreements can lead to stronger solutions which in turn support and improve managerial systems for employment relations.
These diverse perspectives and viewpoints are discussed elsewhere in this book under the heading frames of reference.
HEALTH AND SAFETY
Health and safety or, more precisely, occupational health and safety (OHS) – is concerned with the management of workplace risk
that may lead to accidents, injury or ill health. Focusing on safety, the origins of the modern HRM concept emerged during the
industrial revolution when the simple belief that workplace accidents were inevitable was replaced with a demand for them to be
controlled. The need to manage OHS was – and continues to be – emphasised with major incidents such as the Bhopal toxic gas
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leak in India; the Chernobyl nuclear disaster in the former USSR; the Piper Alpha gas explosion in the UK; and both the Space
Shuttle Challenger disaster and the Texas City oil refinery explosion in the USA, and the BP oil spill disaster in the Gulf of Mexico.
These major accidents show the potential scale of workplace risk and that incidents are not industry or country specific. It was with
these observations that the emphasis on managing OHS strengthened at a global level.
INDUSTRIAL RELATIONS
Generally, industrial relations can be viewed as all about employee – employer relationship in the work place, the essence of
which is to enhance employee satisfaction, and the furtherance of industrial peace and organisational growth. Another dimension
to industrial relation is its tripartite nature as a relationship that exists between workers, employers and government. The position of
the government is that of a regulator and protector of the workers‘ rights.
The legality of industrial relations derives from government‘s recognition of employer and employees as partners in the production
of goods and services. In the same token, there is a range of government legislation regulating their (the employer and the
employees) day-to-day activities. It implies that the position of government in industrial relations is one of acting as the watch-dog
over the relationship between the employer and employees in the workplace. The essence of industrial relations revolves around
the determination of general conditions of service, discipline, maintaining a stable work Force, maintaining an ideal level of
productivity, and providing welfare facilities for workers, among other issues in the workplace. The existence of unions is to allow
workers to participate in the determination of policies under which they will consent to work. The principal interest of the employer
on the other hand, is to maintain control of the organisation, especially by monitoring allocation of organisation‘s resources. While
the trade union demands, for instance, represent extra cost to the employer, the employer in order to remain in business, will
introduce some measures to cut down costs by all means so as to make the maximum profit margin. The result is that there is this
latent and often manifest antagonism among the two parties, occasioned by the fact that their respective interests are at variance
except in their bid to ensure continuity of production which fosters their dependence on each other for survival.
There will be effective industrial relations in an organisation if the following conditions exit:
highest degree of workers identification with the economic objective of the enterprise
In the narrow sense, the term ―Industrial Relation‖ refers to the nature of relationship between the employers and employees
in an Industrial enterprise. In the broad sense, industrial relation refers to all types o f relationship between all the parties
concerned with the industry. Examples are:
 Individual relations
 Relationship between employers and workers at the place of work or workers participation in management.
 Collective bargaining
 Trade union
 Machinery for settlement of industrial disputes
 Unfair labor practices
 Individual grievance and disciplinary policy and practice.
 State participation in industrial Relation.
Another related term is ‗employee relations‘ or ‗human relation‘.
The relationship between Employer and employee or trade unions is called Industrial Relation. The trade union is an
association, either of employees or employers or of independent workers. It is a relatively permanent combination of workers and is
not temporary or casual. It is an association of workers engaged in securing economic benefits for its members.
Harmonious relationship is necessary for both employers and employees to safeguard the interests of the both the parties of the
production. In order to maintain good relationship with the employees, the main functions of every organization should avoid any
dispute with them or settle it as early as possible so as to ensure industrial peace and higher productivity. Personnel management
is mainly concerned with the human relation in industry because the main theme of personnel management is to get the work done
by the human power and it fails in its objectives if good industrial relation is maintained. In other words good Industrial Relation
means industrial peace which is necessary for better and higher productions.
Industrial disputes are organised protests against existing terms of employment or conditions of work. In practice, Industrial dispute
mainly refers to the strife between employers and their employees. An Industrial dispute is not a personal dispute of any one
person. It generally affects a large number of workers‘ community having common interests.
FORMS OF INDUSTRIAL DISPUTE:
The outcome of industrial dispute is locking out from the employer side and workers may resort to strike, Gherao, picketing etc.
1. Strike: - Strike is quitting work by a group of workers for getting their demands accepted by the employer. It is a powerful tool
used by the trade unions to pressurize the management to accept their demands. Various types of strikes are
Economic Strike: - Strike in concern with economic reason like wages bonus or working conditions.
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Sympathetic Strike: - Strike to support the other group of workers on strike within the organization or for the sympathy to union
workers on strike in other industries.
General Strike: - Strike of all the unions in a region or workers of a particular industry for the common demands of the workers
concerned.
Sit down Strike: - When workers stop doing the work but also do not leave the place of work. It is also known as tool down or
pen down strike
Slow Down strike: - When workers remain on their jobs but slow down the output of their work.
2. Lock Out: - Lockout is the step taken by the employer to put pressure on workers. Employer close down the workplace until the
workers agree to continue the work on the terms and conditions as given by the employer
3. Gherao: - Gherao is the action taken by workers under which they restrict the employer to leave the work premises or residence.
The person concerned is put away in a ring made of human beings i.e. workers. Gheraos are also being adopted by educational
and others institutions. It is an illegal act according to the Law.
4. Picketing: - When workers are not allowed to report for the work by deputing some men at the factory gates. If picketing does
not involve any violence it is perfectly legal. It is done to bring into the notice of public that there is dispute between workers and
management.
The term industrial unrest is used to describe activities undertaken by the labour and other working people when they feel
grievances and protest against pay or conditions of their employment. Industrial unrest can also be defined as the total range of
behaviours and attitudes that express opposition and divergent orientations between industrial owners and managers, on the one
hand, and working people and their organisations on the other.
Industrial unrest is caused by a clash between employers and employees. Generally, the causes of industrial conflict fall into
categories such as working conditions, wage demands, work practices, political disputes and social concerns.
Different forms of unrest organised unrest:
- Collective in nature, involves groups of employees or trade unions, Open (or overt), obvious to all that it is occurring, takes the
form of:
*Strikes *Lockouts *Overtime bans, working to rule, restrictions on output *Political action *Go slow *Sit-in
Unorganised unrest:
Individual in nature, only involves single employees, Hidden (or covert), not obvious it is occurring,- takes the form of
- Absenteeism - Labour turnover - Low productivity - Acts of indiscipline and sabotage - Working without enthusiasm
TERMINATION, OUTPLACEMENT AND RE-ENLISTMENT
Whether employing staff on contract or as permanent employees, Organization managers are occasionally faced with the need
to terminate the services of an individual. This action may be necessary in instances where an employee breaches the employment
contract (for example, repeatedly arriving at the workplace intoxicated) or continually exhibits unsatisfactory performance. This
need may also arise when economic or commercial circumstances of the organization conducting the Organization require it to
shed staff (such as when there is insufficient revenue due to poor ticket sales).Various legal issues surrounding termination need to
be understood by those involved in Organization management. In UK, these issues relate to unfair or unlawful dismissal, and are
spelt out in employment legislation. Essentially, employers are required to give employees an opportunity to defend themselves
against allegations associated with their conduct; in cases of unsatisfactory performance, they must warn and counsel the
employee before terminating his or her service. These requirements do not apply to contracted or casual employees, or to staff on
probation. A need can also arise to dismiss volunteers; for this purpose, Getz (2005) suggests a variety of approaches. These
include making all volunteer appointments for fixed terms (with volunteers needing to re-apply and be subjected to screening each
time the Organization is conducted) and using job descriptions and performance appraisals to underpin appropriate action.
Outplacement is the process of assisting terminated employees (or indeed volunteers), or even those who choose to leave the
Organization organization voluntarily, to find other employment. By performing this function the Organization organization is
providing a benefit to employees for past service, as well as maintaining and enhancing its image as a responsible employer. In the
case of an Organization organizing company that decides to downsize, as many did after the 11 September 2001 (9/11) terrorist
attacks, this process could lead to staff being aided to take up positions with, for example, other companies operating their own
Organization divisions or large Organizations that maintain a full-time staff year round. Even volunteers who are no longer needed
can be helped into other positions by being put in contact with volunteer agencies or other Organizations.
Organization managers should also keep in mind that staff will often leave of their own accord. The involvement of such staff in
exit interviews can provide valuable information that could be used to fine tune one or more aspect of an Organization‘s human
resource management process. A study of volunteers at a jazz festival (Elstad, 2003), for example, found the main reasons (in
order) that volunteers quit were:
(1) their overall workload, (2) a lack of appreciation of their contribution, (3) problems with how the festival was organized, (4)
disagreement with changing goals or ideology, (5) wanting more free time for other activities, (6) a lack of a ‗sense of community‘
among volunteers, (7) family responsibilities, (8) the festival becoming too large, (9) the inability to make decisions regarding their
own position, (10) a dislike for some of their responsibilities, (11) lack of remuneration and (12) moving out of the festival‘s
geographic area.
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STRATEGIC HUMAN RESOURCE MANAGEMENT
The future viability of an organization and its human resources capabilities are interrelated and must be considered together.
HRM must be vertically integrated with strategic planning and horizon-tally integrated with other human resources functions such
as training and development, compensation and benefits, recruitment and selection, labor relations, and the evaluation of the
human re-sources planning process, to allow for adjustments to be made to confront rapidly changing environmental conditions.
SHRM guides management in identifying and implementing the appropriate human resources learning activities for resolving
organizational problems or adapting to meet new opportunities. SHRM determines the human resources needs of the agency and
ensures that qualified personnel are recruited and developed to meet organizational needs. Should there be a shift in demand for
services, agencies must know whether there are potential employees with the requisite skills available to provide these services
and whether the agency‘s finances can afford the costs associated with additional compensation and benefits. Forecasting an
agency‘s human resources supply reveals the characteristics of its internal supply of labor; it also helps assess the productivity of
incumbent employees, implement succession planning and salary planning, and identify areas where external recruitment or
training and development are necessary.
Training and development are essential to the effective use of an organization‘s human resources and are an integral part of its
human resources planning. Training is used to remedy immediate needs, while development is concerned with long-term
objectives and the ability to cope with change. Training and development should be viewed as continuous processes. There will
always be new employees, new positions, new problems, changes in technology, and changes in the external and internal
environments that re-quire a planned approach to training and development and their integration with other HRM functions.
Training and development influence recruitment, selection, career planning, and the compatibility between agency goals and
employee aspirations. Training and development programs must be integrated to complement the organization‘s mission and
operations. Organizations should use employees wisely with respect to the strategic needs of the organization.
Turnover, including retirements, must be anticipated and planned for. HRM departments must track the skills of incumbent
employees and keep skill inventories. Recruitment and training must be tied to the organization‘s mission. The availability and
stability of financial support; the advancement of technological changes, legal regulations, and social and cultural changes; and the
evolution of human resources requirements must be considered when developing strategic plans. Organizations once hired
employees to fit the characteristics of a particular job. Now it is important for organizations to select employees who fit the
characteristics not only of the position but also of the organization. HRM professionals must serve as internal consultants working
with managers to assess human resources needs. Together they must project the demand for services, develop new resources,
and determine the appropriate reallocation of services. The SHRM process, once established, can anticipate and prepare for major
changes affecting the workplace.
Effective strategic human capital management approaches serve as the foundation of any serious HRM initiative. They must be
at the center of efforts to transform the cultures of agencies so that they become results-oriented and externally focused. To
facilitate these changes, HRM personnel and department managers must acquire new competencies to be able to deliver HRM
services and shift toward a more consultative role for HR staff. Like service industries and new-economy companies, public and
nonprofit organizations are driven by the knowledge and skills their employees possess. It is shortsighted for elected officials,
board members, funders, executives, and other agency leaders to dismiss or downplay SHRM. Equally important, organizations
must reinforce the value of human capital and the contribution knowledge management makes to the effective delivery of services.
HRM departments must have the knowledge, skills, and authority to identify and facilitate changes that may be necessary.
HUMAN RESOURCE ACCOUNTING
Human resources is an old field of research in economics. Without human resources , the other resources cannot be effective ,
thus we can say human resources mobilizes all the other resources. The evolution of service based economies from the past few
decades has shifted the importance from physical assets to knowledge & attitudes of employees working in service providing firms.
The total value of any organization depends essentially on the skill set of its employees and the services they deliver. Therefore,
the survival of these organization is dependent on the quality of their human resources, its knowledge, expertise, capability and
perception of the organizational culture.. Human Resource Accounting facilitates the management of people as organizational
Resources. Human Resource Accounting in application of accounting concepts & methods to management of Human Resources it
deals with investments in people and with economic results of those investments. Human Resource Accounting field underwent a
number of stages beginning from 1960 to till date to assume the status of a fully fledge d subject. It greatly helps the management
of the business organizations in acquiring, placing and in making effective utilization of human resources. Human Resource
Accounting has its number of models under the purview of monetary , non - monetary and statistical methods.
INTERNATIONAL HUMAN RESOURCE MANAGEMENT
Increasing competition in global business has created new challenges for multinational corporations (MCs) on how human
resources are best managed. Globalisation has also meant that international business has to be managed in a diverse multicultural
environment comprised of different infrastructural systems, levels of economic development, religions, values, ideologies,
education, and social structures. However, even domestic organisations cannot operate without the influence of globalisation,
which calls for an adjustment of ‗the way things are done at home‘ in order to remain competitive within a global context. The
continuing growth of world markets, increased availability of management and technological know-how in different countries,
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advances in telecommunications, and greater regional political and economic integration are just some of the factors that are
increasingly leading to the globalization of many MNCs. Resultantly, the contemporary business is increasingly global and this is
important in a number of ways. As more and more tourism and service MNCs are now selling their products outside their home
countries they face a number of issues in terms of how they approach a range of HRM issues. For example, to what extent will they
try to transfer policies and practices that are successful in the home country to host countries? In thinking about the mix between
parent country and local managers, how will they staff their units overseas? The globalization of business is making it increasingly
important to understand how multinational enterprises can operate more effectively in seeking to answer these types of questions.
As they cross national boundaries tourism and service MNCs face many challenges related to issues like: language, culture,
economic and political systems, legislative frameworks, management styles and conventions. To assess some of these issues we
will consider the emergence of IHRM; and related the issue of comparative HRM. In many respects the former aspect is largely
concerned with how MNCs manage their geographically dispersed workforce. The latter aspect is more about why and in what
ways HR practices and policies may differ in a variety of different countries. Of course, these two aspects are very much
intertwined.
CHAPTER SUMMARY
Organization managers should approach the task of human resource management not as a series of separate activities but as
an integrated process involving a number of steps, taking the Organization organization‘s mission, strategy and goals as their
starting points. These steps have been identified in this chapter as: (1) the human resource strategy and objectives; (2) policies
and procedures; (3) recruitment; (4) training and professional development; (5) supervision and evaluation; (6) termination,
outplacement and re-enlistment; and (7) evaluation and feedback. These steps have application to the employment of both paid
and volunteer staff, as well as to Organizations of varying size and type. This chapter has also dealt with the issue of motivation,
examining two broad theoretical perspectives on the matter, process and content theories. The final sections of this chapter dealt
with mechanisms for developing task teams to conduct Organizations, and with the legal considerations associated with human
resource management.
Organization managers often work under less-than-ideal conditions to develop a cohesive team committed to working together
and completing the organization to the best of their abilities. They have to recruit personnel from other departments and manage
the temporary involvement of team members. They have to bring strangers together and quickly establish a set of operational
procedures that unite their efforts and contributions. They have to be skilled at managing meetings so that they do not become a
burden but rather a vehicle for progress. Organization managers need to forge a team identity and a shared vision, that command
the attention and allegiance of participants. They need to use group incentives to encourage teamwork while recognizing when it is
appropriate to single out individuals for special recognition. Organization managers have to encourage functional conflict that
contributes to superior solutions while being on guard against dysfunctional conflict that can break a team apart. In doing these
things, they have to be careful not to do too good a job and avoid the pitfalls of excessive group cohesion. While agendas,
charters, visions, rewards, and so forth are important tools and techniques, it has been emphasized that the most important tool an
organization manager has to build an effective organization team is his or her own behaviour. Just as the founding members of an
organization shape the culture of the organization, the organization manager shapes and influences the internal culture of the
organization team. A positive example can define how team members respond to changes, how they handle new tasks, and how
they relate to one another and the rest of the organization. There is no easy way to lead by example. It requires personal
conviction, discipline, sensitivity to team dynamics, and a constant awareness of how personal actions are perceived by others.
REVIEW QUESTIONS
1. Interview the manager of an Organization of your choice and ask him or her what legal/statutory requirements have an
impact on human resource management processes and practices.
2. In the context of a specific Organization, identify the policies and procedures regarding human resource management.
Collect examples of forms and other material that support them.
3. Develop a job specification for the position of Organization manager for an Organization of your choice.
4. List the questions that you would ask a candidate during an interview for the position given in question 3.
5. Undertake a job analysis for an Organization of your choice.
6. What are the differences between the five-stage model of team development and the punctuated equilibrium model?
7. What are the elements of an effective organization vision? Why are they important?
8. Why should an organization manager emphasize group rewards over individual rewards?
9. What is the difference between functional and dysfunctional conflict on an organization?
10. When would it be appropriate to hold a formal team-building session on an organization?
11. What are the unique challenges to managing a virtual organization team?
12. What can an organization manager do to avoid some of the pitfalls of a highly cohesive organization team?
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CHAPTER TWELVE
ORGANIZATIONAL BEHAVIOUR
LEARNING OBJECTIVES
After reading this chapter, you should be able to do the following:
 What is organizational behaviour (OB)?
 Why does organizational behaviour matter?
 Understand organizational culture and climate
 Define personality and describe how it affects work behaviours.
 Describe the consequences of job satisfaction and organizational commitment
 Describe motivation and conflict management
INTRODUCTION
The study of Organizational Behaviour (OB) is very interesting and challenging too. It is related to individuals, group of people
working together in teams. The study becomes more challenging when situational factors interact. The study of organizational
behaviour relates to the expected behaviour of an individual in the organization. No two individuals are likely to behave in the same
manner in a particular work situation. It is the predictability of a manager about the expected behaviour of an individual. There are
no absolutes in human behaviour. It is the human factor that is contributory to the productivity hence the study of human behaviour
is important. Great importance therefore must be attached to the study. Researchers, management practitioners, psychologists,
and social scientists must understand the very credentials of an individual, his background, social framework, educational update,
impact of social groups and other situational factors on behaviour. Managers under whom an individual is working should be able
to explain, predict, evaluate and modify human behaviour that will largely depend upon knowledge, skill and experience of the
manager in handling large group of people in diverse situations. Pre-emptive actions need to be taken for human behaviour
forecasting. The value system, emotional intelligence, organizational culture, job design and the work environment are important
causal agents in determining human behaviour. Cause and effect relationship plays an important role in how an individual is likely
to behave in a particular situation and its impact on productivity. An appropriate organizational culture can modify individual
behaviour. Recent trends exist in laying greater stress on organizational development and imbibing a favourable organizational
culture in each individual. It also involves fostering a team spirit and motivation so that the organizational objectives are achieved.
There is a need for commitment on the part of the management that should be continuous and incremental in nature. The scope of
the organizational behaviour is as under:
(a) Impact of personality on performance (b) Employee motivation (c) Leadership
(d) How to create effective teams and groups (e) Study of different organizational structures
(f) Individual behaviour, attitude and learning (g) Perception (h) Design and development of effective organization
(i) Job design (j) Impact of culture on organizational behaviour (k) Management of change
(l) Management of conflict and stress (m) Organizational development (n) Organizational culture
(o) Transactional analysis (p) Group behaviour, power and politics (q) Job design r) Study of emotions
The field of the organizational behaviour does not depend upon deductions based on gut feelings but attempts to gather
information regarding an issue in a scientific manner under controlled conditions. It uses information and interprets the findings so
that the behaviour of an individual and group can be canalized as desired. Large number of psychologists, social scientists and
academicians have carried out research on various issues related to organization behaviour. Employee performance and job
satisfaction are determinants of accomplishment of individual and organizational goals. Organizations have been set up to fulfill
needs of the people. In today‘s competitive world, the organizations have to be growth-oriented. This is possible when productivity
is ensured with respect to quantity of product to be produced with zero error quality. Employee absenteeism and turnover has a
negative impact on productivity. Employee who absents frequently cannot contribute towards productivity and growth of the
organization. In the same manner, employee turnover causes increased cost of production. Job satisfaction is a major factor to
analyse performance of an individual towards his work. Satisfied workers are productive workers who contribute towards building
an appropriate work culture in an organization. Organizations are composed of number of individuals working independently or
collectively in teams, and number of such teams makes a department and number of such departments make an organization. It is
a formal structure and all departments have to function in a coordinated manner to achieve the organizational objective. It is
therefore important for all employees to possess a positive attitude towards work. They need to function in congenial atmosphere
and accomplish assigned goals. It is also important for managers to develop an appropriate work culture. Use of authority,
delegation of certain powers to subordinates, division of labour, efficient communication, benchmarking, re-engineering, job redesign and empowerment are some of the important factors so that an organization can function as well-oiled machine. This is not
only applicable to manufacturing organizations but also to service and social organizations.
DEFINITIONS
―Organizational behaviour is a field of study that investigates the impact that individuals, groups and organizational
structure have on behaviour within the organization, for the purpose of applying such knowledge towards improving an
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organizational effectiveness‖. The above definition has three main elements; first organizational behaviour is an investigative
study of individuals and groups, second, the impact of organizational structure on human behaviour and the third, the application
of knowledge to achieve organizational effectiveness. These factors are interactive in nature and the impact of such behaviour is
applied to various systems so that the goals are achieved. The nature of study of organizational behaviour is investigative to
establish cause and effect relationship. OB involves integration of studies undertaken relating to behavioural sciences like
psychology, sociology, anthropology, economics, social psychology and political science. Therefore, organizational behaviour is a
comprehensive field of study in which individual, group and organizational structure is studied in relation to organizational growth
and organizational culture, in an environment where impact of modern technology is great. The aim of the study is to ensure that
the human behaviour contributes towards growth of the organization and greater efficiency is achieved.
Organizational behaviour can be defined as – ―the study and application of knowledge about human behaviour related to
other elements of an organization such as structure, technology and social systems (LM Prasad). Stephen P Robins defines
―Organizational behaviour as a systematic study of the actions and attitudes that people exhibit within organizations.‖ It
has been observed that we generally form our opinion based on the symptoms of an issue and do not really go to the root cause of
the happening. Science of organizational behaviour is applied in nature. Disciplines like psychology, anthropology and political
science have contributed in terms of various studies and theories to the field of organizational behaviour. A leader should be able
to communicate with his subordinate and keep them in picture as to the happenings in the organization. People promote
organizational culture for mutual benefit. Politics is often used to create conflict with the aim of enlarging self-power base to the
detrimental of organizational growth. Politics, in Cameroonian context has made inroads based on religion, caste system in the
decision making process which has led to formation of informal groups in the organization that often exploit the organization for
fulfillment of personal goals at the cost of organizational goals. Conflict and manipulating power bases need to be handled in an
appropriate manner to modify human behaviour and stimulate various individuals towards achieving higher productivity. Power
dynamics plays a significant role in organization situations in different environment.
CONTRIBUTING FIELDS TO ORGANIZATIONAL BEHAVIOUR
Psychology: Psychology is an applied science, which attempts to explain human behaviour in a particular situation and predicts
actions of individuals. Psychologists have been able to modify individual behaviour largely with the help of various studies. It has
contributed towards various theories on learning, motivation, personality, training and development, theories on individual decision
making, leadership, job satisfaction, performance appraisal, attitude, ego state, job design, work stress and conflict management.
Studies of these theories can improve personal skills, bring change in attitude and develop positive approach to organizational
systems. Various psychological tests are conducted in the organizations for selection of employees, measuring personality
attributes and aptitude. Various other dimensions of human personality are also measured. These instruments are scientific in
nature and have been finalized after a great deal of research. Field of psychology continues to explore new areas applicable to the
field of organizational behaviour. Contribution of psychology has enriched the organizational behaviour field.
Sociology: Science of Sociology studies the impact of culture on group behaviour and has contributed to a large extent to the field
of group-dynamics, roles that individual plays in the organization, communication, norms, status, power, conflict management,
formal organization theory, group processes and group decision-making.
Political science: Political science has contributed to the field of Organizational behaviour. Stability of government at national level
is one major factor for promotion of international business, financial investments, expansion and employment. Various government
rules and regulations play a very decisive role in growth of the organization. All organizations have to abide by the rules of the
government of the day.
Social psychology: Working organizations are formal assembly of people who are assigned specific jobs and play a vital role in
formulating human behaviour. It is a subject where concept of psychology and sociology are blend to achieve better human
behaviour in organization. The field has contributed to manage change, group decision-making, communication and ability of
people in the organization, to maintain social norms.
Anthropology: It is a field of study relating to human activities in various cultural and environmental frameworks. It understands
difference in behaviour based on value system of different cultures of various countries. The study is more relevant to
organizational behaviour today due to globalization, mergers and acquisitions of various industries. The advent of the 21st century
has created a situation wherein cross-cultural people will have to work in one particular industry. Managers will have to deal with
individuals and groups belonging to different ethnic cultures and exercise adequate control or even channelize behaviour in the
desired direction by appropriately manipulating various cultural factors. Organization behaviour has used the studies on
comparative attitudes and cross-cultural transactions. Environment studies conducted by the field of anthropology aims to
understand organizational human behaviour so that acquisitions and mergers are smooth. Organizations are bound by its culture
that is formed by human beings.
BEHAVIOUR MODEL FOR ORGANIZATIONAL EFFICIENCY
Organizational behaviour is a study and application of managerial skills and knowledge to people in the organization to investigate
individual and group behaviour. Various concepts and models in the field of organizational behaviour attempt to identify, not only
the human behaviour but also modify their attitude and promote skills so that they can act more effectively. This is done
scientifically; therefore, organizational behaviour field is a scientific discipline. The knowledge and models are practically applied to
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workers, groups and organizational structure that provide tools for improved behaviour and dynamics of relationship. The field of
organizational behaviour also provides various systems and models for international relationship that are applied to organizations.
Leaders must look for indicators (effects) of individual behaviour and of groups in any organization. Indicators have a root cause
beneath. As a leader, it is that symptom, which must be evaluated, and cause of human behaviour established so that if the
behaviour is good, the manager can establish the norms of behaviour. If the behaviour is not conducive to achieve the
organisastional objective then suitable alternative model can be applied to channelize individual behaviour towards an appropriate
organizational value system and thus individual behaviour modified. An organization has three basic elements namely, people,
structure, and technology. An organization must have suitable organizational structure, with appropriate number of tier and
reporting system properly explained. Principle of unity of command, delegation of authority and responsibility, formulation of
objectives and its allotment to various groups is very important so that workers achieve a required level of job satisfaction. They
must be trained to handle sophisticated machines and equipment. It is the people, their value system, and faith in the leadership
that make an organization. Leader must be able to describe, understand, predict and control individual behaviour in the
organization. This is explained in the succeeding paragraphs.
(a) Describe: Study of organizational behaviour is based on scientific methods, which have been applied on human beings. It is a
science, that analyses as to how people behave in different situations in the organization. A manager should be able describe the
behaviour of each of the individuals under his command, identify attitude, and be able to pinpoint his behaviour so that the situation
in the organization is under control.
(b) Understand: Leaders must understand human behaviour as to why people behave in particular manner and try to identify
reasons so that corrective actions can be taken.
(c) Predict: By frequent closer interaction, a leader is in a position to identify the nature of workers. Some are more productive
while the others are tardy and disruptive. In such situation, a leader should be able to handle each individual differently so that his
or her actions can be channalized to higher productivity.
(d) Control: Managers in the organizations should train their subordinates continuously; aim being development of skills,
promotion of productivity and improvement of individual behaviour. It is a continuous process on the part of manager. He must lay
down control measures so that the energy of workers is diverted towards organizational objectives. Communication should be used
to ensure that the behaviour of individual is controlled. Environment has a great impact on human behaviour. Appropriate internal
environment would help organizations to built favourable work environment that will help individuals and groups within
organizations to work effectively towards higher productivity.
ORGANIZATIONAL COMPONENTS THAT NEED TO BE MANAGED
People
People are the main component of any organization that has to be managed. Every individual has a personal goal to be achieved.
Organizations must identify the need spectrum of individuals and take suitable steps for its fulfilment to enable them to perform
effectively so that they complete their allotted task in time. Relationship between the workers, with subordinates and superiors
should be established based on full understanding and complete faith based on mutual trust so that it is easy to communicate and
understand each other‘s views. Work teams and Groups play a vital role in the organization. Individual may have to keep his
personal interest aside if it conflicts with team or group goals. It is the team goals, accomplishment of which contribute towards
achieving organizational goals. Apart from managing internal workforce, it is also important to manage customers who are the end
persons using organization‘s products or services. Utmost interest of stakeholders, government, employees, social groups and
non-governmental organizations (NGOs) must be kept in mind as they play a dominant role in the society. Apart from the above,
adequate consideration should also be given to competitors, regulatory agencies, labour force, suppliers and resource persons.
Structure
There are two types of organizations, formal and informal. Informal organizations do not have a specified structure. Formal
organizations are build based upon the objective set for it. Organizational structure in such organization is hierarchical in nature,
with people at each level having their own objectives, which contributes towards fulfilment of overall organizational objectives. In
such organisation people at lower levels report to higher level managers. The tier system has the principle of unity of command
inbuilt in it. The organization structure may depend upon the size, number of products/services produced, skill and experience of
the employees, managerial staff and geographical location of the organization. An organization may have several levels and
pyramid like organizational structure or flat structure. The efficiency of the organization will depend upon the free flow of the
information, efficient communication system prevailing in the organization, well-defined authority and responsibility supported by
detailed policies, rules and regulations. The organization must have well laid out systems, which are understood by workers,
supervisors and managers. The leader must keep open mind while dealing with subordinates and exercise full control over various
systems, levels and ensure planned productivity and achieve high level of job satisfaction.
Technology
Managing technology is an important job of any management. It is an important element of any unit. Selection of technology,
procurement, installation, operation and maintenance is important and no compromise should be made in procuring latest or
advanced technology. Various systems and sub- systems should support technology that exists in an organization. Based on the
technology, an organization should formulate job structure and resultant procurement of human resource so that they are
complimentary to each other. Adequate attention is also be paid to service industry. For example an appropriate drill, procedures
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are installed in hospital industry to ensure that the patients‘ record is maintained properly. On line operations of all systems relating
to admission record, past treatment, drugs, availability of beds, schedule of operations maintained so that the level of patients
satisfaction is raised. In minimum number of days, maximum numbers of patients should be treated. Various processes required to
regulate these functions form the important part of service industry.
Jobs
Job is an assignment assigned to an individual. It encompasses various tasks within it. For example, Personnel manager wants to
fill up twelve vacancies in production department within three months. Job will have various tasks inbuilt in it like designing of job
specification, selection of media, advertising vacancies, scheduling of selection and recruiting process. Manager, therefore have to
manage various tasks to accomplish a particular job. This may form a part of managerial functions. Adequate delegation,
supervision, application of various control techniques makes the job simpler for the manager. Introduction of computers have made
managerial functions simpler, as required information is available for decision making.
Processes
Management of processes and its inter-dependence is very crucial to high productivity and higher job satisfaction. What is
important for a manager is to ensure high morale of the work force. To ensure this, he must identify various managerial dictums.
Select appropriate subordinates to carry out a job based on aptitude, personality traits, mental build up and attitude. He should also
involve himself and lead subordinates by personal example. In defence services, it is the quality of leadership, that motivates
troops to achieve near impossible task where everything appears to be going wrong. Various role models assist leaders in
identifying as to which process, method or approach would be suitable to mould subordinates in suitable frame that may be
required by any organization. Nothing motivates workers better if you give them their entitlements in full and train them to take up
higher jobs. By doing so, manager must develop and build an organizational culture that will bind employees to a common cultural
bond. During day-to-day functions, managers must be transparent and maintain a high degree of value system and display ethical
behaviour. There are no short cuts to this and will pay rich dividends in times to come.
External Environment
What we have so far discussed is various components of an organization that should be managed properly. External environment
also plays an important role in managing the points discussed above. When we talk about managing people in the organization,
what we have to study and manage is the influence of culture and its impact on the individual. A manager should examine as to
how he is going to cope with the changes. Study of external environment is very wide and encompasses economic, cultural, social,
government rules and regulations, legal aspects, political climate, demographics and its impact. If one scans the external
environment that is prevailing in Cameroonian context, one will find that individuals are racing to catch up the upper class as it
relates to standards of living, material possession, higher education, attempt to copy western culture, food habits, dressing pattern
and the like. Beauty parlors, pubs and cyber cafes around each corner are an ample evidence of the impact of external
environment. This trend has an impact on what products or services are on priority in the society and indicates the behaviour of an
individual. If the above factors are evaluated appropriately, a manager will be able to examine and predict human behaviour in the
organization. It is therefore important to evaluate market situation, competitors, and availability of raw material, technology,
availability of skilled, semi-skilled and non-skilled personnel. In addition, evaluate prevailing culture and how individuals are likely to
respond to the call of the organization. Some factors like government rules, and political stability keep changing, the organizations
must cater for such contingencies. Manager must therefore keep in mind the internal and external factors and make the best
amalgam and work to achieve organizational effectiveness.
INDIVIDUAL DIMENSIONS OF ORGANIZATIONAL BEHAVIOUR
Study of human behaviour is very complex. It is affected by various environmental factors. It is based on various cultural
factors in which an individual is brought up and various social systems in which he is working. Every individual behaves in a
different manner, his behaviour is individualistic in nature, and therefore cannot be changed easily without any strong stimuli. There
exists a cause and effect relationship in individual behaviour. For example if an organization pays good dividends to its employees,
the productivity can be improved. This means that the increased productivity is an effect of receipt of handsome dividends by the
workers. These are monetary in nature which is extrinsic value addition. People are more prone to change in behaviour due to
intrinsic value addition like recognition or change in status. It is therefore necessary for the managers to identify ―need‖ of individual
employee and evolve such strategies that would give an employee an intrinsic value satisfaction so that the productivity is
increased and individuals are satisfied with the job they have been assigned to. An individual may be satisfied with subsidized
lunch the organization provides, while the other may be dissatisfied with the menu, preparation or the method or even timings of
the lunch. Human activities are innumerable. It may be maintenance of machines, delegation of authority, or writing a report on
appraisal system. In general it could be both mental and physical process. All the activities of human beings cannot be measured,
what goes psychologically or inside the thought process of an individual cannot be observed. Individual behaviour cannot be easily
predicted due to interplay of various variables, that are very complex to examine and implement. The job of a manager therefore is
to predict the behaviour based on knowledge of individual his experience with him in an identical situation and behaviour pattern
prevailing, based on the organizational culture. A manager at best can generalize a situation and should implement his managerial
skills so that workers satisfaction level is increased. No two individuals are alike and they behave different in similar situations
Individual behaviour is very complicated. An individual behaves differently in various situations. It is necessary for a manager to
identify ―needs‖ of the individual and evolve such strategies that satisfy them. Based upon knowledge, skill and experience, a
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manager should be able to predict individual behaviour. Motivation of individual differs when intrinsic and extrinsic rewards are
given to him. He reacts in a different way as it relates to compensation. Individual behaviour is founded on
1) biological and individual factors that include Physical attributes, age, gender, marital status, number of dependants and
experience/tenure.
2) emotional intelligence of the individual and
3) learned characteristics that include personality, attitude, perception and value system of the person.
Emotional intelligence is now considered as a measure of one‘s feelings and application of social skill. Learned optimism is an
ability of an individual to perform. There are two types of persons. They are either optimist or pessimist. An optimist makes specific,
temporary natured external causal attributions while pessimist makes global, permanent external attributions. Goleman states that
emotional intelligence is bedrock of individual competencies. He further clarifies that ―emotional competency refers to personal and
social skills that are based on emotional intelligence. These are further classified into self-awareness, social awareness, selfmanagement and relationship management competencies‖. Learned characteristics include personality, culture, heredity, attitude
and values. These have tremendous effect on job performance growth and job satisfaction. These characteristics and emotional
intelligence factors that have a direct impact on productivity, Job satisfaction, absenteeism and turnover. The latter are therefore
called dependant variables. Various organizational models are fuedal model, autocratic model, supportive model, collegial model,
human value model and lastly the contingency model.
PERSONALITY
Personality is a very complex and multidimensional construct of a human being. No common definition of personality has so
far been arrived at. Every individual defines personality in different way which includes trait factors and physical appearance.‖
Personality is a dynamic organization within an individual of those psychological systems that determines his unique adjustment
with the environment. It is a sum total of ways in which an individual reacts and interacts with others.‖ As far as physical aspect is
concerned it relates to individual charm, attitude while dealing with others and smiling face can also be included into personality.
Uma Sekaran states that one can examine personality in terms of a set of relatively stable characteristics and tendencies that
determine our thoughts, feelings and behaviour and which have some continuity or consistency over time. Maddi (1980) defines
personality thus: Personality is a stable set of characteristics and tendencies that determine those commonalities and differences in
the psychological behaviour (thoughts, feelings, and actions) of people that have continuity in time and that may not be easily
understood as the sole result of the social and biological pressures of the moment. The above definitions indicate the commonality
of characteristics and human tendencies amongst people who display consistency in their behaviour over time. Maddis definition
suggests that people do change due to biological and social pressures. Thus by understanding certain dimensions of personality
one can predict human behaviour to a great extent.
LEARNING
Learning brings relatively permanent change in human behaviour that occurs as a result of experience. All complex behaviour is a
learned behaviour. If we want to predict and explain behaviour, we must understand how people learn. Learning involves change in
behaviour. It is continuous process, which occurs all the time. We cannot see learning but we can see changed behaviour as a
consequence of learning. Learning changes attitude of individuals to a large extent. An individual reacts to any situation or
responds to instructions in particular fashion, that fashion or style is caused due to learning. Theoretical approach to learning
incorporates behaviourist, cognitive and newly emerging social learning theories. Understanding of these theories is important
to the study of organizational behaviour.
Learning refers to permanent change in behaviour of the individual. It is a continuous process. Ivan Pavlov has suggested
classical conditioning theory of learning where stimulus – response (S-R) concept has been applied. Pavlov suggests that S – R
phenomenon can be applied in the management and employees should be so trained that they act in a desired manner. Skinner on
the other hand recommends Response – Stimulus (R-S) concept. The researcher believes that an individual behaves because of
higher probability of response. Edward Tolman has propagated Cognitive Theory of learning. He explains the relationship of
environment and expectations. In the recent times social learning has been quite popular because of its simplicity. It is related to
modification of behaviour based on observation. The change in behaviour is based on the attention process, retention process,
motor reproduction process and lastly the reinforcement process. For behavioural change reinforcement plays a vital role.
Managers must apply positive reinforcement based on various schedules. Negative reinforcement deals with the restrictions like
preventing promotion etc. Punishment is also considered as a factor for behaviour modification. Punishment must be timely,
awarded only by the competent authority. This has a salutary effect on employee behaviour. Learning process must be planned
properly and executed sincerely in the organization. Use of incentives, training and development schedules, mentoring
programmes, self-management and laying down minimum disciplinary standards are some of the learning strategies that may be
adopted by organizations.
VALUE, ATTITUDE AND JOB SATISFACTION
Value, attitude and behaviour are interlinked with each other. All these factors decide the personality of an individual. Value
represents individual‘s standards, faith, ideals or even events and activity. When we say that the individual should be loyal to the
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organization one serves, is an expression on individual‘s standard, faith or an ideal he carries with him as a part of his personality.
Attitude can be defined as ―individual‘s feelings about or
inclinations towards other persons, objects, events or activities.‖ Attitude encompasses such affective feelings as likes and dislikes
and satisfaction and dissatisfaction. Our needs, past experience, self-concept and personality shape the beliefs, and opinions we
hold towards the perceived world.
Value shapes our attitude and behaviour. For example all employees must be truthful (value) and I find Mr. X is not speaking the
truth in a particular situation and if he persists in lying, I therefore do not like Mr. X [my perception] and do not take him at the face
value [attitude]. When an opportunity arises, I try to get rid of him [Behaviour]. It is therefore necessary that our attitude is not
formed on the basis of wrong inputs and the behaviour is controlled. Attitude is either favourable or unfavourable, concerning
object or people. When I say, ―I like my job‖, what I am doing is expressing my attitude towards the job I do. Parents, teachers and
peers shape an individual‘s attitude. We try and behave as our parents, teacher or peers do. We try to imitate them throughout our
lives. Value is very important constituent of an individual‘s life. It is the broad frame of behaviour. Values are imbibed by an
individual based on inheritance and environment. Value is more permanent while the attitude is less stable and can be changed.
Advertising agencies do precisely the same and attempt to alter your attitude towards a particular product or services. In an
organization, attitude is more important because it affects the job behaviour.
JOB SATISFACTION
The study of Job satisfaction is one of most important factors in the study of human behaviour in the organization. Job satisfaction
focuses on employee attitude towards his job. It has three important dimensions:
(a) Job satisfaction can be measured by the emotional response to a job situation, hence it cannot be seen, and it can only be
inferred.
(b) Job satisfaction is related to what you actually get as reward and what you expect to get. If the difference between the actual
reward and expectation is minimum or negligible them a person will display a positive attitude and if there is wide difference
between the two, a person will display a negative attitude towards his job and therefore the satisfaction level will be low.
(c) Job satisfaction is related to job dimensions. These can be expressed in terms of job content, remuneration, attitude of coworkers, and opportunity of growth that job is able to provide in terms of promotion and last but not the least the expert loyal and
experienced leadership is available in terms of supervision.
Factors determining job Satisfaction
There are number of dimensions which effect job satisfaction. Value system possessed by an individual and the culture supporting
the value system in the organization can be called as an important and basic for job satisfaction. However some of the important
factors that determine job satisfaction of the employees in the organization is as under: 1. Work Content: Content of the work itself is a major source of satisfaction. The work must be challenging. It should lend itself
opportunities to use employee skills, ability and experience. The content of the work should be encouraging and interesting and
have variety inbuilt in it so that it is not boring. Positive feedback from the job and autonomy has been considered to be important
for motivation of employees. Too tough or job having two little challenge brings frustration and feeling of failure hence the job
should be moderately tough so that the individual has to stretch his ability, imagination and skills. Once such job is completed
successfully, the workers get a great sense of satisfaction.
2. Pay and promotion policy: Salary and wages play decisive part in the study of job satisfaction. Equitable rewards is
multidimensional in nature. The benefits are of varied nature namely pay, perks and rewards are associated with motivation of
employees. Pay system and promotion policy of the organization must be just, unambiguous and in line with the prevalent industry
norms and employee expectations. Employee wages and salary must ensure him the social status and should be able to fulfil the
expectations. Individual must perceive salary administration and promotion policy as being fair. Organization should ensure that
their policies are growth oriented and incremental in nature so that employees take on an additional responsibility voluntarily. Apart
from financial benefits, organization must provide adequate perks and non-financial benefits so that they
are motivated and display high level of satisfaction.
3. Supportive working condition: Working conditions have a modest but lasting effect on job satisfaction. Due to fast
development of technology, it is necessary that the organizations are operating on upgraded technology, latest systems and
procedures. The layout of work place must be ideally suited from operational point of view and the employees should display great
degree of satisfaction. The place should be neat and clean with necessary facilities as per Factories Act. Light, ventilation,
cleanliness, enough space for work, immediate availability of supervision, adequate latest tools and generally good surrounding will
definitely add to job satisfaction. If the work place were closer to home, it would add to employee retention.
4. Work group: The concept of work group and work teams is more prevalent today Work group of multi skilled persons with one
goal will be able to function effectively if they are friendly and co-operative. The work group serves as a source of support, comfort,
advice and assistance to individual worker. A good work group makes the job more enjoyable. The factor of work group support is
essential for job satisfaction. If the reverse conditions prevail, the people may not be able to get along with each other and the level
of job satisfaction will be reduced.
5. Supervision: Supervision is one of the moderate factors, which affect job satisfaction. Qualified supervisors should be available
for advice, guidance and problem solving. Supervisors should be placed close to the place of work and should be available. They
should take personal interest in the affairs of employees both on personal and official level. Supervision is related to leadership. In
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Defence Services the leadership is so proactive that the leader carry on him details of each soldier under his command. The details
include dependants of soldier‘s family, their economic position, details of children, the class they study, home address and other
demographic details, soldier take his boss as guide and philosopher who is always available to him for advice. Such supervision
improves the morale and job satisfaction of employees. The concept of supervision has changed. What is in vogue and in practice
today is self-serviced teams and work group. The group prefer more freedom of work in relation to work hours, time management,
frequent breaks between work hours and autonomy as long as job is completed in time. Flat organizational structure therefore has
come into practice. Steps in command structure has reduced. There is a participative management and work has to meet the
established standards in terms of quality and quantity. The levels might have been reduced but not the value of supervision as a
factor of job satisfaction.
6. Personality job fit: Individuals should be assigned the job, that suit their interest. Recently it has been seen that MBA
graduates are satisfied with their job if they get the job related to the ―specialisation‖ they have chosen during the MBA degree.
Persons having analytical approach should be assigned job in R&D department so that their level of job satisfaction increases.
EFFECT OF JOB SATISFACTION ON PERFORMANCE
1. Satisfaction and productivity
Based on research carried out in Hawthorne studies, further research to prove that ―happy workers are productive‖ was carried out,
which has been proved negative. Based on the conclusion of Hawthorne studies, managers began their efforts to make their
employees happier by improving work conditions, providing Laissez-faire type of leadership, expanding various facilities to the
workers, but it has been found that there is no direct relationship between happiness and productivity. Robins concluded that
productive workers are likely to be happy workers. Further research on the subject suggests that organization having happy
workers might have increased productivity. On individual level it may not be true due to complexity of environment, work
processes, various systems and sub systems having impact on the individual employee. But it can be said from organizational
point of view that organization that are able to evolve such policies that make employees happy bound to have improved
productivity. V.H. Vroom3. Productivity is considered as reward for hard work which is due to high level of satisfaction. However
globalisation, speed of machines and knowledge explosion, impact of media on workers, social awareness and high expectations
of employees to meet social obligations are important factors to ensure high satisfaction level of employees. While evolving
industrial practices, above factors should be considered favourably and employee growth achieved so that organizations grow
automatically.
2. Satisfaction and absenteeism
There is an inverse relationship between satisfaction and absenteeism. When workers are more satisfied the absenteeism is low.
When satisfaction level is low absenteeism tends to be high. There are certain moderating variables like sick leave and degree to
which people feel that their jobs are important. Where there is a provision for sick leave, employees would take the benefit and
absent themselves. As far as the importance of work is concerned, it has been observed that people attend to their work when it is
important to accomplish. Employees having high satisfaction would not necessarily result in to low absenteeism but those having
low satisfaction level would definitely have high absenteeism.
3. Satisfaction and turnover
It has been found that employees who are not satisfied with their jobs will have high turnover. Employees who are satisfied will not
have high turnover. Satisfaction is also negatively related to turnover but the co-relation is stronger than what we found in
absenteeism. Employee performance is a moderating factor of the satisfaction—Turnover relationship. In recent times a
phenomenon amongst the software engineers whose performance is high, their turnover has been noticed as high because of
competition for personal growth. Organization lures the competent person for their organizational growth. Organization cares for
such high performers and their retention. Poor performers do not leave the organization for fear of lack of job opportunity outside.
Dissatisfied workers may express their satisfaction as given in Figure 12.1 below. The responses are based on two dimensions i.e.
constructive/destructive and activity/passivity.
Fig. 12.1. Expression of dis-satisfaction
Exit – individual starts searching a new job and resign from the current job.
Voice – employees tries to improve working conditions. In the process suggestion to management are submitted, increased union
activates and communication is important.
Loyalty– workers behave passively in situation like external criticism. They wait for things to improve on their own.
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Neglect – deliberately and consciously allow conditions to worsen by long absenteeism, lack of interest
for quality control, targets, quota, etc. They put in reduced efforts and display lack of interest.
ORGANIZATIONAL COMMITMENT
Organizational commitment is defined as (a) a strong desire to remain member of a particular organization (b) willingness to exert
high level of efforts on behalf of the organization, and (c) a definite belief in and acceptance of value and goals of the organization..
In other words, employees display an attitude of belonging to the organization, a sense of ―MY‖ organization. They continue to do
so even after they leave the organization. Of late a concept of organizational citizenship is used. It indicates a sense of belonging
to a particular organization as if you were citizen of that organization, but it depends as to the contribution made by organization to
have developed such feelings.
TRANSACTION ANALYSIS (TA)
Study of human behaviour is very complex. Human behaviour is affected by behaviour of others. It is based on basic
psychological facts like perception, learning, motivation and personality of the individuals interacting with each other. Interpersonal
behaviour could be mutually cooperative where complementary transactions take place, such behaviour is possible where there
is mutual trust, respect for each other‘s view point and ideas, concern for each other‘s needs and when both have a
complementary ego state. Such behaviours are mutually gratifying to each other. On the other hand, interpersonal behaviours can
be conflicting. Reasons for such behaviour can be attributed to personality differences, different value system, and conflict of
interest and last but not the least role ambiguity between the two individuals. Transactional analysis is the study of individual in the
organization when he is interacting with other individual on social front or professional front. Eric Berne is credited to the movement
for psychotherapy, which he started in 1950s. He observed that there are several persons within one person and therefore an
individual transacts in different ways with different persons in different situations. People spend considerable time interacting with
each other. They transact in a way that may provide connecting tissues between two individuals, which may hold them together.
This type of pair relationship is called Dyadic relationship. Transactional analysis offers a mode of expression of personality and
dynamics of self and its relationship with others. It is a method of analyzing and understanding inter personal behaviour.
Transactional analysis involves the analysis of the following factors:(a) Study of awareness
(b) Ego State
(c) Analysis of transactions
(d) Life Script
(e) Psychological games
(f) Study of life positions
(g) Stroking
(h) Games analysis
Definitions
―Transactional analysis is a technique used to help people better understand their own and other‘s behaviour, especially
in interpersonal relationship.‖ Johari Window
Joseph Luft and Harrington Ingham have developed a model to look at one‘s personality that can be known and unknown to self
and known and unknown to others. The concept known as Johari Window is shown in Figure 5.5 below. It is a technique to analyse
and improve interpersonal - Transaction.
Fig. 12.3. Johari Window
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The above figure indicates that there are four parts (self) in all of us that has been indicated by four quadrants. These are
explained below:
(a) Open Self: Open Self is known as Public area. This quadrant indicates information about self is known to oneself and also to
others. The information relates to feelings, motivation and behaviour of an individual, which he is willing to share with those whom
he comes in contact. The individual behaves in a straight forward manner
and is sharing. In an organizational setting, because of the openness of the individual the chances of conflict are reduced to
minimum.
(b) Blind Self: This quadrant is related to information is not known to self but known to others, who interact with you, know more
about you. This is known as blind area. It is important that an individual should reduce blind area to the minimum by interacting with
people more intimately and by asking questions about self. For
example, an individual may not be aware of the fact that he is extremely task oriented and employees do not like it. In other words,
others know and perceive the individual as a hard taskmaster and dislike him because of this. This is blind area that a person is
blind to the fact that he interacts with others in the professional manner. This situation is likely to create an unpleasant atmosphere
in the organization. Individual therefore should reduce blind area and increase public area. This will reduce conflict situations to a
great extent in interpersonal behaviour.
(c) Hidden Self: Certain aspect of personality has formed this quadrant. Self knows information but others do not know it. There
are certain aspects, which are private. Individual therefore does not want to share it with subordinates and wants to keep hidden.
The area is also called Private Area.
(d) Unknown Self: This area is characterized by facts unknown to the self and to others. This is dark area, which is not pregnable.
There is nothing much that can be done about it. It should be an endeavour to improve upon oneself by obtaining feedback from
others about self. Individual should carry out improvement and perceive oneself correctly so that one perceives each person in the
right manner.
FOUNDATION OF GROUP BEHAVIOUR
When we study management, we carryout planning for the organization. One of the most important elements of planning is to
set objectives depending upon the resources available. The organizational objectives are later categorized into departmental
objectives and group objectives. What we have done in the process is division of work. To accomplish the organizational objective,
each group has to accomplish its group objective so that a ―whole‖ can be achieved by co-ordinating various activities of groups. It
is therefore division of work and coordination, that provides synergy to the organization. Let us take an example of automobile
industry for which the yearly target is producing 10,000 cars. The engine department has to produce 10,000 engines, body
manufacturing department has to make 10,000 car bodies. chassis manufacturing department have to make equal number of
chassis. This work is also divided into monthly, weekly and daily basis and further broken down to group levels. It is therefore
important that at lower level, the accomplishment of group objective will contribute towards achievement of organizational
objectives. If there is lack of coordination of various group activities, an end product cannot be attained and the organizational
goals cannot be effectively achieved. Thus as Uma Sekaran1 has stated that ―the synergy is a function of both division of labour
and coordination of activities in organizations since group provide synergy through specialization and coordination, they are
integral to the organizations functioning. There are socio psychological factors which come into play when a particular work is
undertaken by the group. Personal objectives or interest have to be kept aside for the overall group objectives.‖
Understanding Group
A work group is collection of two or more individuals, working for a common goal and are interdependent. They interact significantly
to achieve a group objective. For a manager it is difficult to manage group because of varied nature, personality traits, attitude of
individuals and personal interest in the group job the group members display. It is therefore important for managers to understand
group member behaviour and deal effectively with the group because of the synergy they provide. Manager should be able to
achieve not only group objective but should be able to fulfil individual objectives within the overall organizational frame work.
Group members should be able to achieve greater (volume and quality) than the sum total of individual contribution. This is
achieved by joint idea generation, finding out various courses open, and selecting and implementing the best course of action.
Because of the joint efforts of the group, it possible to use skill, knowledge and experience of group members to achieve quality
decisions and achieve group goals. Fred Luthans states that if a group exists in an organization, its members :– Are motivated to join
– perceive a group as unified unit of interacting people
– contribute to various amounts to the group processes
– reach agreement and disagreements through various forms of interaction.
Types of Groups
1. Formal Group
Formal group is designated work group defined by the organizational structure. It is collection of employees who work together to
contribute towards achievement of organizational objective. For example aircrew. Formal groups are formed based on the work
and human resources required by skill, knowledge and experience to achieve organizational task. In a manufacturing unit, the
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organizational task is sub divided into groups and teams. Each group is composed of various members based on the human
resource requirement. The members of the group report to a designated leader. They interact with each other on official level.
2. Command Group
It is formed to carry out a specific task. There is a leader in a group who is also designated by the organization. He receives orders
from his superior and reports to him about group activities and performance. A task group is made up of individuals from across the
functional areas. They work together to complete a job/task. Task group boundaries are not limited to its hierarchical superior.
Once the task is complete the group members fall back to their respective parent groups/units.
3. Committee
The other form of formal group is committee. It can be of permanent or temporary nature. Planning committee, finance committees
are of permanent nature, they keep working all along and have a designated authority to control the work. There are temporary
committees, which are formed to accomplish a one-time works like committees formed at district levels to issue identity cards to
citizens. They are formed for specific work and disbanded once they have completed their work.
Informal Groups
Informal groups are groups that are not formally organized in the work system to get the job done but develop on their own
randomly at workplaces because of common interest and mutual liking of the group members. For example members of production
department, body manufacturing department, HR department members and few individual from finance dept may form a friendship
group. This development takes place because of the interaction they have with each other during the official work. Members from
within one group or members from different departments or even an organization can form an informal group.
A typical group layout is given at Figure 12.3 below:
Fig. 12.4. Types of groups
Psychological Groups
We had earlier discussed ‗emergent‘ behaviour that is related to behaviour of group members in informal group and involving
themselves in various activities, interactions and sentiments based on common interests, value system and social bondage they
develop. When such informal group members develop highest level of sentiments or affinity among themselves and become aware
of each-others needs and potential contribution to further group objectives. these groups are called psychological groups. The
distinct feature of such informal group is that the members become close knit, develops strong feeling of togetherness and get
identified by the group. A feeling that ‗we‘ belong to a particular group sets in deep into the behaviour pattern of all group members.
At times the strength of informal group identity becomes so strong that the members are more loyal to their friendship group as
compared to their normal group. The managers restructuring the task activities and using appropriate group processes should
channel the emergent behaviours in such a way that will help organizations to achieve its goal. This phenomenon can be used
effectively for the betterment of organizations.
Concept of group came in existence along with division of work. The group is collection of two or more individuals working for a
common goal and are inter dependent. To achieve organizational objective the group has to accomplish its (group) objective so
that the ‗whole‘ is achieved. The same can be achieved by co-ordination group activities. It is difficult for a manager to understand
each individual because of different behavioural patterns of the members. Concept of Group dynamics was first introduced by Kurt
Lewin in 1930s. There are two types of groups. These are formal group of which command group, task group and committee form
the part. The second type of group is informal group. This contains interest group, clique and psychological group. There are
various theories of group behaviour. Homes proposed Propinquity theory of group behaviour. The theory deals with activities,
interactions and sentiments of individuals that leads to affiliation caused due to spatial or geographical proximity. It has been
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observed that individuals display required or emergent behaviour in work environment. Second theory of group behaviour was
introduced by Theodore Newcomb called ‗balance theory‘. The theory explains as to how people are attracted to each other based
on common attitude and value system. This may include life style, work, authority, religion and politics. Exchange theory deals with
affiliation that takes place based on cost-reward relationship that is measured by psychological aspects like feelings anxiety and so
on.
Following concepts are relevant for the study of group dynamics. These are as under:
Norms are set of beliefs, feelings, attitudes commonly shared by group members. Norms are of various types. These are
performance norms, appearance norm and behaviour norms. Development of norms is a continuous process and are based on
behaviour displayed by various members of the group on various occasions. These include explicit statement made by group
members, critical events in the life of the group, primacy of behaviour and the past experience.
Status and cohesiveness. Cohesiveness identifies the strength of the members‘ desire to remain in the group and degree of
commitment displayed by them. Cohesiveness of a group can be developed by conforming to the group norms by according
secondary position to individual interests as against the group interests. Groupthink is a phenomenon in which norms overrides any
alternative course of action if a group is required to be strong. Togetherness, group size, entry norms and ability of group members
to face threats and challenges posed by various situations. Degree of participation in group activities, attitude and value displayed
by the group members are also important for group cohesiveness.
There is a close relationship between cohesiveness, performance norms and productivity. For high productivity a group must
ensure high cohesiveness and high performance norms. Low performance norms will lead to low or moderate productivity. A highly
cohesive group displays, greater participation in group activities, higher productivity, more influence among group members,
effective communication, more success in the organizational mission and above all a higher job satisfaction.
MOTIVATION
Motivation is inner burning or passion caused by need want and desire. Stronger the need higher would be efforts on the part of an
individual and therefore the performance would also be higher. Performance therefore can be put as under:
Performance= ability × Motivation
Motive can be defined as ―an inner state that energises, activates and directs the behaviour of the individuals to achieve goals‖.
Motive is a strong need. When one need gets fulfilled another need arises and again individual attempts to satisfy the same. This is
a continuous process. It is the responsibility of a manager to create such environment that individual is motivated to achieve higher
goals. Motivation is therefore is a way in which individual strives to fulfill desires, urges and aspirations that explains the individual
behaviour. Motivation is inner passion that propels an individual. It is a psychological phenomenon. Motivation should be
continuous process. It is caused due to anticipated value. Motivation is intrinsic in nature and therefore caused by non-monetary
incentives. Monetary incentives keeps the minimum level of motivation amongst the employees. Motivation is probably is the single
most important factor that a manager is required to do in the organization. It may be noted that high motivation leads to greater
performance, higher cohesiveness and leads to higher job satisfaction. Employees accepts change that leads to increased
organizational image low turnover and absenteeism. Abraham Maslow, the pioneer in the studies of motivation has suggested that
every individual has a complex set of needs and his behaviour is determined by the strongest need existing at a particular moment.
He propagated need hierarchy theory of motivation and classified human needs into five categories namely physiological needs,
safety needs, social needs, esteem needs and self-actualisation needs. He states that needs are hierarchal in nature. Only one
need is strongest at any one time and that an individual attempts to fulfil the same. Once that need is fulfilled the second need
arises as strongest need and individual keeps on fulfilling each need as it arises. Maslow has taken deprivation – gratification
approach to need satisfaction. Once one level of needs is gratified, the next level of need will emerge as the deprived need seeking
to be gratified.
Fredrick Herzberg and his associates developed motivation theory based on two main factors. The theory is therefore called two
factor theory. The first factor is ―motivation factor‖ which includes a set of job conditions which primarily operates to build strong
motivation and job satisfaction. The other factor is called ―maintenance factor or hygiene factor.‖ This include job conditions that
dissatisfy when these are absent and do not in any way increase satisfaction when they are present. They however maintain a
certain level of job satisfaction. These factors are not intrinsic part of a job. The theory has been widely criticized as being method
bound and inconclusive. Douglas McGregar introduced Theory X and Theory Y. Theory X states that managerial actions are
contingent to human behaviour. As regards to human nature McGregar states that human nature is indolent, does not like to work,
he is lazy, resist change, does not take responsibility, lacks ambition, prefers to be led and gullible and not very bright. As far
Theory Y is concerned, human being takes work as natural as play, display selfcontrol, they can be self-directed and creative.
Clayton Aldefer carried out further studies on motivation theory of Maslow. He identified basic three needs of human being. These
are: existence need, relatedness need and growth needs. Aldefer recommends satisfaction-progression pattern of need. Vroom
has put forth Expectancy theory of motivation. The theory is based on efforts, performance and reward relationship. He believes
that employee is motivated to exert high level of efforts when he believes that effort will lead to good performance appraisal and
therefore organizational rewards that will satisfy personal goals. Porter and Lawler have presented a motivational model which is a
step ahead of Vroom‘s theory of motivation. They have related satisfaction of employees with traits, skills, efforts, performance and
its relationship with the reward system. Managers can effectively implement this model in their organizations.
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STRESS MANAGEMENT
People experience stress in private life and at work place. People have to work effectively against time and within the
parameter of various rules and regulations. It is not always possible to create an organizational climate conducive to work. Various
departments, groups and external environment factors affect individual behaviour. Minimal level of stress is required for
organizations to operate effectively. Excessive stress is harmful for the individual as it causes mental and physical disequilibrium
and subsequently leads to physical and mental disturbance. People suffer from high blood pressure, heart attack when stress is
beyond control of the human beings. It is therefore necessary to identify causes of stress and modify behaviour so that the
individual energy is directed towards organizational productivity and healthy organization climate is created. Hans Selye, a medical
researcher first used term ―Stress‖ to describe the body‘s biological response mechanism. He defined stress as ―the nonspecific
response of the body to any demand‖. He views that stress is the spice of life, the absence of stress is death. Stress is usually
considered to be negative and caused due to something bad. Thus stress refers to distress. Ivancevich and Matterson define
stress as ―the interaction of the individual with the environment‖ According to Beehr and Newman2, stress is a condition arising
from the interaction of people and their jobs and characterised by changes within people that force them to deviate from their
normal functioning. Stress is a dynamic condition in which a person is faced with lot of constraints while functioning in the
organiation. Stress causes discomfort, which leads to disequilibrium in the individual‘s mind set. Stress is not always negative in
nature. In a broader sense it is discomfiture whether it creates problems. Stress is also a source of inspiration. When there is a
stress for any work it leads to higher performance. When stress is gravest, it reduces employee productivity. But there are example
where people may get immune to stress having no negative effect on their performance. Such people do not get tense. This type of
immunity is achieved through constant experience and training. John M. Ivancevich and Michael T. Matterson have defined stress
as ―adoptive response, mediated by individual characteristics and/ or psychological processes, that is a consequence of
any external action, situation or event that places special physical and/or psychological demands upon a person‖.
As it is clear from the definition that stress is caused due to external factors, situations or events. These have adverse impact on
the individual characteristics and psychological processes. These together put an additional burden or demands on individual,
hence the stress. External factors may include social setting, work ethics in the organization, leadership styles, availability of
resources, workload, level of technology and the work environment. The internal factors that are effected are psychological in
nature and includes emotions, ego state, attitude, perception, motivational factors, need and demographics. If employees feel that
external factors are of not much consequence and have no compelling effect the stress is not formed within the minds of
individuals. High desire, uncertainty, result of promotion examination, unrealized ambition may cause stress to the individual.
Stress should not be confused with anxiety or nervous tension and damaging. They occur as regular features in many cases and
have no long – lasting impact on the working capacities of the employees. Mishra (2003)3 has very aptly explained that anxiety
may remain purely psychological and may not cause any physical impact. Similarly, only physical impacts will not be stress unless
it is felt by the mind and heart. The psychological and physical impacts are visible in the form of stress. Anxiety is the cause of
stress but not stress itself. Symptoms of stress are given in Figure 12.4 below:
Symptoms of Stress
Fig. 12.4. Symptoms of stress
Stress is generally of a mild nature and one recovers from it easily. Once a person gets used to environmental factors and
people with whom one generally works on a daily basis, there is no existence of stress. It is the work environment, plant, people
and situations, which one is not used to, creates tension and resultant stress. The stress diminishes gradually when one get used
to it. However the stress can be mild, stiff and chronic in nature. Mild stress is visible when person develops lack of appetite and
high blood pressure. The stress becomes stiffer if these are not carefully countered. When stress attains a chronic stage, where a
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person develops instability, frustration and feel uncomfortable and cannot cope up with problems. It affects physical efficiency and
subsequently a psychological strength.
This stage is called ―Burn out‖. In this stage individual is emotionally weakened. The stage of burn-out is reached when an
individual fails to achieve his objective. He exhibits irritation, errors, frustration and apathy. Executives are highly prone to burn out
due to high pressure in the work environment. In such situation they resort to change the job that further adds to existing chronic
burn-out situation as they are not able cope up with the changed environment. In such situation employees should resort to neuro –
psycho treatment. In case of aggravation of this situation a state of ―Trauma‖ is reached.
Trauma is a very serious form of stress. It occurs in the organization where employees find it difficult to adjust. This may be
caused due to pressure of work, late working hours, inability of employees to fulfill social obligation and poor time management.
The work place trauma is carried home by employees where they develop various psychological disorder. Non adjustment in work
place for a long time leads to suspension and firing of employee. Stress can be avoided by adopting an approach of co-operation,
help the fellow employee in distress and social interaction with affected individuals.
Stress is non-specific response of the body to any demand. Employees experience stress due to organizational climate and work
environment. Excessive stress causes physical and mental disturbance. The external factors responsible for individual stress are
social setting, work ethics, leadership style, availability of resources, workload, technology and work environment. Internal factors
are psychological in nature and may include emotions, ego state, attitude, perception and level of motivation. These put together
cause imbalance and disequilibrium and lead to stress. Hans Selve has referred to general adaptation syndrome (GAS) which has
three stages namely alarm stage, resistance and exhaustion stage. Ivancevich and Matterson have identified social, economic,
financial, cultural, familial and technological factors which have tremendous impact on mental health of the employees. Stress
causes frustration and anxiety. The job related stress includes role ambiguity, role conflict, burnout, and role overload/underload. It
is important to reduce stress so that the efficiency of the employees is improved. Stress can be managed by achieving physical
fitness, biofeedback, yoga, meditation, time management, and by living a simple life. Organizations play a vital role in combating
stress. The factors include among others are setting up of realistic goals, well defined organizational policy, restructuring
organizational structure when needed, corporate policy update, healthy work environment and empowerment.
THE DYNAMICS OF COMMUNICATION
Effective management is an output of effective communication. Poor communication or ineffective communication is a source
of frustration, interpersonal conflict and stress. It plays an important role in strengthening relationship between friends, relatives
and family members since we spend nearly seventy percent of our time interacting with them by way of speaking, listening, reading
and writing. Poor communication leads to unpleasant situations and breaking up of relationships. Oral and written communication
is very important not only to get a job but to retain it. Oral communication is the most effective way of communication and
considered to be the most important skill that an individual possesses. Effective communication is essential for management to
successfully perform its functions. It is an essential ingredient in management – employee relationship. The best business plan is
meaningless unless everyone is aware of it and is willing to put energy together to achieve its objectives. Communication is
essential to keep entire organization functioning at optimum levels and to achieve maximum output of our greatest management
resource – the people. It is the responsibility of the management to keep employees posted with latest information about the above
factors by resorting to greater interaction with them. Chester Barnard (1930) highlighted communication as a dynamic force in
shaping organizational behaviour. He considered it as one of the three important elements of an organization along with common
purpose and willingness to serve. He also linked communication with the concept of ‗authority‘ which flows down through channels
of communication, in a classical organization. The authority can lose its meaning if channels of communication are blocked or if the
communication is misunderstood or if the strength of communication is diluted. Accordingly, he proposed seven communication
factors which are indeed functions of objective authority.
POWER AND POLITICS
Study of power is important in the corporate environment. Power depends from person to person and its use depends upon
the attitude of an individual. Power in public life is different than corporate world. While former is situational the latter is object
oriented. In public life, its promises may or may not work as desired. Proper use of power in organization is necessary so that the
sources of power is not misused and directed towards attainment of organizational goal. It is important to understand the manager
who uses power to understand employee behaviour, because methods of using power are different for different managers in the
organization. It is therefore essential to allow minimum power that may be necessary to maintain peaceful environment. The study
to understand how power is acquired and used for attainment of organizational goals is essential.
Power is derived from the official position one holds. Those in power are able to marshal resources to their advantage. Power,
authority and responsibility are inter-related. French and Raven have identified six bases of power. These are reward, coercive,
legitimate, referent, expert and information power. Effectiveness of power depends upon the situation, perceived differences
between the power of involved parties and its acceptance of legitimacy. Power can also be enjoyed by the people having
charismatic personality. In organizational setting power base can be enhanced by using knowledge and other resources. Managers
can improve their importance by delaying decision making and creating power centers. Creation of dependency, resorting to
centrality of resources, creating scarcity of resources and uncertainty leads to a feeling of an enhanced authority. For efficient
working, it is necessary to delegate power to subordinates, resort to division of work to the maximum extent, modify organization
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structure if required and give functional powers to all the individuals so that they feel empowered and develops a sense of
responsibility.
Politics is about access to power. Power is the property of systems at rest while politics is the study of power in action. It is the
dependency between departments, the power relationship is expressed. Managers can play power to their advantage by creating
scarcity of resources, resorting to non-programmed decisions, setting ambiguous goals, introducing organizational changes in vital
areas and managing external environment. There are various techniques of political play. These include to cultivate right allies,
being positive in dealing with others, being reciprocal and persuasive thus building a right image. Niccolo Machiavelli (1469-1527)
has formulated a set of behaviour for maintaining political power. Christie and Geis have formulated an attitude scale in conformity
with Machiavelli‘s teaching. The scale is known as ‗Mach Scale‘. Machiavelli suggest that end justifies the means and that the job
must be accomplished at any cost. He has suggested various techniques of manipulating power. Pettigrew has identified some
behavioral patters that executive generally follow to influence management process. Among other things it includes rejection,
mobilizing political support, questioning of minor details with a aim to discredit the individual. Avoidance, deflecting the main issue
and making a person scapegoat if situation demands. Baddeley and James have suggested a model of reading political situations.
They have classified individuals as clever, wise, inept and innocent depending upon the political awareness a person has and his
ability to read situations and their propensity to play games or to act with integrity.
ORGANIZATIONAL DEVELOPMENT
―Organizational development is a long term efforts, led and supported by top management to improve an organization‘s
visioning, empowerment, learning and problem solving processes, through an ongoing, collaborative management or
organization culture – with special emphasis on the culture of intact work teams and other team configurations – utilising
the consultant – facilitator role and the theory and technology of applied behavioural science, including action research.‖
Growth oriented organizations have to study the internal and external environment and make suitable changes. Introduction of
information technology, knowledge revolution, technology advancement, competition due to global market scenario, high
expectations of customers due to social revolution, and last but not the least the work pressure an employee
is facing has made it necessary to carry out organizational development in a planned way. It is imperative to improve organizational
culture, redesign and redefine jobs and accord full freedom of action and autonomy to workers so that the organization is always a
learning organization. Organization development therefore is a planned process of change in an organization‘s culture through
utilization of behavioural science technologies. Basic organizational development objectives are individual, group development that
involves cultural transformation, social change, improvement of processes, and achieving growth and competitive edge by human
inputs. Organizational development assumptions need to be studied before worthwhile change programme is initiated. Study of
individual behaviour is necessary. Achievement of quality of work life is important as it propels the individual towards selfinvestment. Organizational development is classified into four categories 1. Strategies which are related to individuals. 2. Job
related interventions. 3. Socio-technical interventions and 4. Structural interventions. Creativity and innovation is concurrent in
nature and management should promote their employees in this aspect. No investment is large for this purpose as it pays rich
dividends in the long run. Organization should always train their employees, adopt latest technology and processes, be alert and
scan the environment carefully and be pro-active to implement the changes so that you are ahead of the rest and be competitive.
Organization development is a continuous process and management support is prerequisite.
ORGANIZATIONAL CULTURE AND CLIMATE
Achieving and maintaining quality of product and customer satisfaction are two most important factors of successful organization.
To achieve these twin objectives, an organization has to marshal various resources, plan its use over a period of time and produce
a product or service, which meets the consumer needs, desire and aspirations. For an entrepreneur, the most important and
difficult task is to manage human resource. The task becomes more pronounced if the employees are from different geographical
areas having different culture. In such situations, manager should evolve a technique where a strong organizational culture is
established. Culture is invisible power of any organization. When thinking and actions of employees are institutionalized, an
organizational culture is deemed to have taken birth. It guides the employees. Edgar Schein defined culture as
―A pattern of basic assumptions invented, discovered or developed by given group as it learns to cope with its problems
of external adoption and internal integration worked well enough to be considered valuable and therefore, to be taught to
new members as a correct way to perceive, think and feel, in relation to those problems.‖ Wagner III and Hollenbeck have
defined organizational culture as ―the shared attitude and perceptions in an organization that are based on a set of
fundamental norms and values and help members understand the organization.‖
Organizational culture is not inborn. It has to be invented and later developed over a period of time. It enables employees to
perform within the framework of the organization‘s culture. Environment plays a dominant role in developing the culture and so
does demographic factors. That is why we generally refer to Japanese culture or Cameroonian culture. It is therefore environment
specific in nature. On examination it reveals that the organization‘s culture is informal in nature and relates to shared way of living.
It is a common binding factor in the organization. Organization culture help develop professionalism among its employees. Value
system is the corner stone of the organization culture. It promotes standardization in various systems and sub-systems, which
reduce role conflict to a great extent. Once the culture is developed, it virtually becomes a people‘s organization from a functional
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point of view that promotes risk-taking among managerial cadre and generates novel ideas. It promotes communication that
improves productivity and job satisfaction. Cameroon is a multi-religious, multi-lingual multi-cultural society. Organization culture
promotes equality and work culture. The corporate culture ―consists of norms, values and unwritten rules of conduct of an
organization as well as management styles, priorities, belief and interpersonal behaviours that prevail. Together they
create climate that influences how well people communicate, plan and make decisions‖
Organizational culture originates from the founders of the organization based on value system held by them. It is further passed
on, down the line. Organizational culture is also a function of the nature of work and goals of the organization. It is visible from the
organizational structure. Centralized command and control, strict hierarchy and fixed communication are indicative of formal culture
with little freedom of action and with scant attention to innovation and creativity. While decentralized work culture will promote
autonomy that will lead to greater job satisfaction. Peters and Waterman state, ―Without exception, the dominance and coherence
of culture proved to be an essential quality of the excellent companies. Moreover, the stronger the culture and more it was directed
towards the market place, the less need was there for policy manuals, organization charts and detailed procedures and rules. In
these companies, people, way down the line know what they are supposed to do in most situations because the handful of guiding
values is crystal clear.
Achieving required quality of product and managing customer satisfaction are important factors in running a growth oriented
organization. While all the resources can be managed, it is difficult to manage human resource especially when globalisation is the
order of the day in all facet of our life. Therefore culture plays a decisive role in running of an organization smoothly. Culture is an
invisible power of any organization. When the thinking and actions of employees are institutionalized, an organizational culture is
deemed to have been formed. Organizational culture is a pattern of basic assumptions invented or discovered by the people of the
organization. Organization culture deemed to have been born when people have learned to cope up with problems of external
adoption of various systems, processes and technology. Organizational culture is required to be passed on to new members as
correct way of thinking, perceiving and behaving. Organizational culture is not inborn, it has to be invented over a period of time
and nurtured by all members of the organization. The corporate culture consist of values, norms, unwritten rules of conduct and the
style of governance. Following are functions of organizational culture: (a) It gives members an organizational identity. (b) It
facilitates collective commitment. (c) It promotes systems stability. (d) It shapes behaviour by helping members make sense of their
surroundings. (e) organizational culture help develop professionalism among its employees.
Edgar Schein who has carried out in-depth study on the subject has identified three levels of culture. They are observable artefacts
of culture and include organizational heroes, rites and rituals, dress and logo. These are organizational symbols of culture in the
physical and social work environment. They are visible and most accessible. Second is shared values and the third level of culture
is common assumptions that actually fall out of shared value system. Myth may also be considered as one of the cultural aspect as
the Cameroonians are having faith in these type of happenings. Every organization has a dominant culture and each of the group
of workers or department may have its sub-culture. It is the responsibility of the management to evolve, initiate and promote its own
philosophy. It is necessary because 1) it establishes boundaries of operations for each member. 2) It provides the way that
situations can be effectively handled and 3) it provides unity of thoughts and known path towards success. Management must pay
proper attention to selection and socialization of employees. While carrying out social adaptation activity a newly recruited
individual passes through pre-arrival stage, encounter stage and metamorphosis stage.
CHAPTER SUMMARY
The Study of organizational behaviour is very interesting. It is the art on the part of manager to understand, describe, forecast
and modify individual behaviour. Lot of studies have been undertaken in the field of organizational behaviour and vast literature is
available, which need to be studied by practictioners in the field of managing human resources. Various models and research
instruments are available to investigate human behaviour. Various fields like psychology, social psychology, anthropology,
sociology, politics, economics, and medical sciences have contributed to the field of organization behaviour. Various models in the
above fields have enriched the study of organization behaviour. It is the field of study that investigates the impact on individuals,
groups and organizational structure have on individual behaviour so that the knowledge so achieved can be suitably modified and
applied for organizational effectiveness. The study of organizational behaviour relates to the study of attitude, perception, learning,
values at individual level. The study is undertaken pertaining to managing stress, conflicts, intergroup behaviour, decision making
at group level. Management of change, development of organizational culture, designing and redesigning of jobs, and various
organizational development strategies are required to be undertaken by leaders for organizational effectiveness. It is the
responsibility of the managers to evolve appropriate strategies to study organizational components. The first component is people.
REVIEW QUESTIONS
1.
2.
3.
4.
5.
6.
7.
Define organizational behaviour.
What are various factors that are considered to regulate individual behaviour?
What are the factors that determine job satisfaction
Define motivation and explain the different techniques of motivation
What are various fields that have contributed to the field of organizational behaviour. Explain their contributions.
Explain various components that should be taken care of while studying organizational behaviour.
Describe what is meant by organizational culture and climate.
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CHAPTER THIRTEEN
PRODUCTION AND OPERATIONS MANAGEMENT
LEARNING OBJECTIVES
After going through this chapter, you should be able to:
• explain the concept and scope of production
• identify the key principles, practices and techniques of production
• state the constraints of production policy.
• explain operations planning
• state the aims of scheduling
• identify various types of operations control.
INTRODUCTION
Operation is that part of as organization, which is concerned with the transformation of a range of inputs into the required output
(services) having the requisite quality level. Management is the process, which combines and transforms various resources used in
the operations subsystem of the organization into value added services in a controlled manner as per the policies of the
organization. The set of interrelated management activities, which are involved in manufacturing certain products, is called as
production management. If the same concept is extended to services management, then the corresponding set of management
activities is called as operations management.
OPERATIONS MANAGEMENT CONCEPTS
Operation is that part of as organization, which is concerned with the transformation of a range of inputs into the required output
(services) having the requisite quality level. Management is the process, which combines and transforms various resources used in
the operations subsystem of the organization into value added services in a controlled manner as per the policies of the
organization. The set of interrelated management activities, which are involved in manufacturing certain products, is called as
production management. If the same concept is extended to services management, then the corresponding set of management
activities is called as operations management.
HISTORICAL DEVELOPMENT
For over two centuries operations and production management has been recognized as an important factor in a country‘s
economic growth. The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised
the economic benefits of specialization of labour. He recommended breaking of jobs down into subtasks and recognises workers to
specialized tasks in which they would become highly skilled and efficient. In the early twentieth century, F.W. Taylor implemented
Smith‘s theories and developed scientific management. From then till 1930, many techniques were developed prevailing the
traditional view.
Production Management becomes the acceptable term from 1930s to 1950s. As F.W. Taylor‘s works become more widely
known, managers developed techniques that focused on economic efficiency in manufacturing. Workers were studied in great
detail to eliminate wasteful efforts and achieve greater efficiency. At the same time, psychologists, socialists and other social
scientists began to study people and human behaviour in the working environment. In addition, economists, mathematicians, and
computer socialists contributed newer, more sophisticated analytical approaches. With the 1970s emerge two distinct changes in
our views. The most obvious of these, reflected in the new name Operations Management was a shift in the service and
manufacturing sectors of the economy. As service sector became more prominent, the change from ‗production‘ to ‗operations‘
emphasized the broadening of our field to service organizations. The second, more suitable change was the beginning of an
emphasis on synthesis, rather than just analysis, in management practices.
CONCEPT OF PRODUCTION
Production function is ‗the part of an organisation, which is concerned with the transformation of a range of inputs into the
required outputs (products) having the requisite quality level‘. Production is defined as ‗the step-by-step conversion of one form of
material into another form through chemical or mechanical process to create or enhance the utility of the product to the user‘. Thus
production is a value addition process. At each stage of processing, there will be value addition.
Edwood Buffa defines production as ‗a process by which goods and services are created‘. Some examples of production are:
manufacturing custom-made products like, boilers with a specific capacity, constructing flats, some structural fabrication works for
selected customers, etc., and manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.
PRODUCTION MANAGEMENT
Production management is ‗a process of planning, organising, directing and controlling the activities of the production function. It
combines and transforms various resources used in the production subsystem of the organization into value added product in a
controlled manner as per the policies of the organization‘.
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E.S.Buffa defines production management as follows:
‗Production management deals with decision-making related to production processes so that the resulting goods or services are
produced according to specifications, in the amount and by the schedule demanded and out of minimum cost‘.
Objectives of Production Management
The objective of the production management is ‗to produce goods and services of Right Quality and
Quantity at the Right time and Right manufacturing cost‘.
1. Right Quality: The quality of product is established based upon the customers need. The right quality is not necessarily being
the best quality. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements.
2. Right Quantity: The manufacturing organisation should produce the products in right number. If they are produced in excess of
demand the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to shortage of
products.
3. Right Time: Timeliness of delivery is one of the important parameter to judge the effectiveness of production department. So,
the production department has to make the optimal utilization of input resources to achieve its objective.
4. Right Manufacturing Cost: Manufacturing costs are established before the product is actually manufactured. Hence, all
attempts should be made to produce the products at pre-established cost, so as to reduce the variation between actual and the
standard (pre-established) cost.
OPERATIONS MANAGEMENT
Joseph G .Monks defines Operations Management as the process whereby resources, flowing within a defined system, are
combined and transformed by a controlled manner to add value in accordance with policies communicated by management.
10 The operations managers have the prime responsibility for processing inputs into outputs. They must bring together under
production plan that effectively uses the materials, capacity and knowledge available in the production facility. Given a demand on
the system work must be scheduled and controlled to produce goods and/or services required. Control must be exercised over
such parameters such as costs, quality and inventory levels. The definition of the operations Management contains following
keywords: Resources, Systems, transformation and Value addition Activities.
RESOURCES
Resources are the human, material and capital inputs to the production process. Human resources are the key assets of an
organisation. As the technology advances, a large proportion of human input is in planning and controlling activities. By using the
intellectual capabilities of people, managers can multiply the value of their employees into by many times. Material resources are
the physical facilities and materials such as plant equipment, inventories and supplies. These are the major assets of an
organisation. Capital in the form of stock, bonds, and/or taxes and contributions is a vital asset. Capital is a store of value, which is
used to regulate the flow of the other resources.
Fig. 13.4 General model for managing operations
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SYSTEMS
Systems are the arrangement of components designed to achieve objectives according to the plan. The business systems are
subsystem of large social systems. In turn, it contains subsystem such as personnel, engineering, finance and operations, which
will function for the good of the organisation. A systems approach to operations management recognises the hierarchical
management responsibilities. If subsystems goals are pursued independently, it will results in sub-optimization. A consistent and
integrative approach will lead to optimization of overall system goals.
The system approach to specific problems requires that the problem first be identified and isolated from the maze of the less
relevant data that constitute the environment. The problem abstracted from the overall (macro) environment. Then it can be broken
into manageable (micro) parts and analysed and solutions proposed. Doing this analysis is advantageous before making any
changes. If the solution appears to solve the problem in a satisfactory way, changes can be made to the real system in an orderly
and predictable way.
The ability of any system to achieve its objective depends on its design and its control. System design is a predetermined
arrangement of components. It establishes the relationships that must exist between inputs, transformation activities and outputs in
order to achieve the system objectives. With the most structured design, there will be less planning and decision-making in the
operations of the system. System control consists of all actions necessary to ensure that activities conform to preconceived plans
or goals. It involves following four essential elements:
1. Measurement by an accurate sensory device.
2. Feedback of information in a timely manner.
3. Comparison with standards such as time and cost standards.
4. Corrective actions by someone with the authority and ability to correct.
A closed loop control system can automatically function on the basis of data from within its own system.
TRANSFORMATION AND VALUE ADDING ACTIVITIES
The objective of combining resources under controlled conditions is to transform them into goods and services having a higher
value than the original inputs. The transformation process applied will be in the form of technology to the inputs. The effectiveness
of the production factors in the transformation process is known as productivity. The productivity refers to the ratio between values
of output per work hour to the cost of inputs. The firms overall ratio must be greater than 1, then we can say value is added to the
product.
Operations manager should concentrate improving the transformation efficiency and to increase the ratio.
Fig. 13.5 Schematic model for operations/production system
PRODUCTION PLANNING AND CONTROL
Production planning and control can be defined as the process of planning the production in advance, setting the exact route of
each item, fixing the starting and finishing dates for each item, to give production orders to shops and to follow up the progress of
products according to orders. The principle of production planning and control lies in the statement ‗First Plan Your Work and then
Work on Your Plan‘. Main functions of production planning and control includes planning, routing, scheduling, dispatching and
follow-up.
Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we
are, to where we want to go. It makes it possible for things to occur which would not otherwise happen.
Routing may be defined as the selection of path which each part of the product will follow, which being transformed from raw
material to finished products. Routing determines the most advantageous path to be followed from department to department and
machine to machine till raw material gets its final shape.
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Scheduling determines the programme for the operations. Scheduling may be defined as ‗the fixation of time and date for each
operation‘ as well as it determines the sequence of operations to be followed.
Dispatching is concerned with the starting the processes. It gives necessary authority so as to start a particular work, which has
already been planned under ‗Routing‘ and ‗Scheduling‘. Therefore, dispatching is ‗release of orders and instruction for the starting
of production for any item in acceptance with the route sheet and schedule charts‘.
The function of follow-up is to report daily the progress of work in each shop in a prescribed proforma and to investigate the
causes of deviations from the planned performance.
PRODUCTION SYSTEM
The production system is ‗that part of an organisation, which produces products of an organisation. It is that activity whereby
resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with
the policies communicated by management‘.
A simplified production system is shown below:
Fig.13.1 Schematic production system
The production system has the following characteristics:
1. Production is an organised activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organisation system.
4. There exists a feedback about the activities, which is essential to control and improve system performance.
CLASSIFICATION OF PRODUCTION SYSTEM
Production systems can be classified as Job-shop, Batch, Mass and Continuous production systems.
Fig. 13.2 Classifications of production systems
1 Job-Shop Production
Job-shop production are characterised by manufacturing one or few quantity of products designed and produced as per the
specification of customers within prefixed time and cost. The distinguishing feature of this is low volume and high variety of
products.
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A job-shop comprises of general-purpose machines arranged into different departments. Each job demands unique technological
requirements, demands processing on machines in a certain sequence.
Job-shop Production is characterised by
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order
priorities.
2 Batch Production
American Production and Inventory Control Society (APICS) defines Batch Production as a form of manufacturing in which the job
pass through the functional departments in lots or batches and each lot may have a different routing. It is characterised by the
manufacture of limited number of products produced at regular intervals and stocked awaiting sales.
Batch Production is characterised by
1. Shorter production runs.
2. Plant and machinery are flexible.
3. Plant and machinery set up is used for the production of item in a batch and change of set up
is required for processing the next batch.
4. Manufacturing lead-time and cost are lower as compared to job order production.
3 Mass Production
Manufacture of discrete parts or assemblies using a continuous process are called Mass Production. This production system is
justified by very large volume of production. The machines are arranged in a line or product layout. Product and process
standardisation exists and all outputs follow the same path.
6 Operations Management
Mass Production is characterised by
1. Standardisation of product and process sequence.
2. Dedicated special purpose machines having higher production capacities and output rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.
4 Continuous Production
Production facilities are arranged as per the sequence of production operations from the first operations to the finished product.
The items are made to flow through the sequence of operations through material handling devices such as conveyors, transfer
devices, etc.
Continuous Production is characterised by
1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.
PRODUCTIVITY
Productivity is defined in terms of utilization of resources, like material and labour. In simple terms, productivity is the ratio of output
to input. For example, productivity of labour can be measured as units produced per labour hour worked. Productivity is closely
inked with quality, technology and profitability. Hence, there is a strong stress on productivity improvement in competitive business
environment. Productivity can be improved by (a) controlling inputs, (b) improving process so that the same input yields higher
output, and (c) by improvement of technology. These aspects are discussed in more detail in the lesson on Productivity
Management. Productivity can be measured at firm level, at industry level, at national level and at international level.
1 Modern Dynamic Concept of Productivity
Productivity can be treated as a multidimensional phenomenon. The modern dynamic concept of productivity looks at productivity
as what may be called ―productivity flywheel‖. The productivity is energized by competition. Competition leads to higher
productivity, higher productivity results in better value for customers, this results in higher share of market for the organization,
which results in still keener competition. Productivity thus forms a cycle, relating to design and products to satisfy customer needs,
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leading to improved quality of life, higher competition i.e. need for having still higher goals and higher share of market, and thereby
leading to still better designs.
2 Factor Productivity and Total Productivity
When productivity is measured separately for each input resource to the production process it is called factor productivity or partial
productivity. When productivity is measured for all the factors of production together, it is called total factor productivity. Generally
factor productivity calculations are required at firm level and industry level, whereas total factor productivity calculations are made
for measuring productivity at national and international level. Productivity of materials can be measured as output units per unit
material consumed. It can also be measured in terms of value generated per unit expenditure in materials. For measuring
productivity of different groups of operatives, different ratios can be used, which are indicative of output/input relationship. For
example, the productivity of assembly line work can be measured as output units per man-hour or alternatively, the value of good
produced per cost of labour on assembly line.
3 Productivity Analysis
For the purposes of studies of productivity for improvement purposes, following types of analysis can be carried out:
1. Trend analysis: Studying productivity changes for the firm over a period of time.
2. Horizontal analysis: Studying productivity in comparison with other firms of same size and engaged in similar business.
3. Vertical analysis: Studying productivity in comparison with other industries and other firms of different sizes in the same
industry.
4. Budgetary analysis: Setting up a norm for productivity for a future period as budget, based on studies as above, and planning
strategies to achieve it.
WORK STUDY (TIME AND MOTION STUDY)
Productivity has now become an everyday watch word. It is crucial to the welfare of industrial firm as well as for the economic
progress of the country. High productivity refers to doing the work in a shortest possible time with least expenditure on inputs
without sacrificing quality and with minimum wastage of resources.
Work-study forms the basis for work system design. The purpose of work design is to identify the most effective means of
achieving necessary functions. This work-study aims at improving the existing and proposed ways of doing work and establishing
standard times for work performance. Work-study is encompassed by two techniques, i.e., method study and work measurement.
―Method study is the systematic recording and critical examination of existing and proposed ways of doing work, as a means of
developing and applying easier and more effective methods and reducing costs.‖
―Work measurement is the application or techniques designed to establish the time for a qualified worker to carry out a specified
job at a defined level or performance.‖
There is a close link between method study and work measurement. Method study is concerned with the reduction of the work
content and establishing the one best way of doing the job whereas work measurement is concerned with investigation and
reduction of any ineffective time associated with the job and establishing time standards for an operation carried out as per the
standard method.
SCOPE OF OPERATIONS MANAGEMENT
Operations Management concern with the conversion of inputs into outputs, using physical resources,
so as to provide the desired utilities to the customer while meeting the other organizational objectives
of effectiveness, efficiency and adoptability. It distinguishes itself from other functions such as personnel, marketing, finance, etc.
by its primary concern for ‗conversion by using physical resources‘. Following are the activities, which are listed under Production
and Operations Management functions:
1. Location of facilities.
2. Plant layouts and Material Handling.
3. Product Design.
4. Process Design.
5. Production Planning and Control.
6. Quality Control.
7. Materials Management.
8. Maintenance Management.
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Fig. 13.3 Scope of production and operations management
FACILITY LOCATION AND LAYOUT
Plant location or the facilities location problem is an important strategic level decision making for an organisation. One of the
key features of a conversion process (manufacturing system) is the efficiency with which the products (services) are transferred to
the customers. This fact will include the determination of where to place the plant or facility. The selection of location is a keydecision as large investment is made in building plant and machinery. It is not advisable or not possible to change the location very
often. So an improper location
of plant may lead to waste of all the investments made in building and machinery, equipment. Before a location for a plant is
selected, long range forecasts should be made anticipating future needs of the company. The plant location should be based on
the company‘s expansion plan and policy, diversification plan for the products, changing market conditions, the changing sources
of raw materials and many other factors that influence the choice of the location decision. The purpose of the location study is to
find an optimum location one that will result in the greatest advantage to the organization.
FACTORS INFLUENCING PLANT LOCATION/FACILITY LOCATION
Facility location is the process of determining a geographic site for a firm‘s operations. Managers of both service and
manufacturing organizations must weigh many factors when assessing the desirability of a particular site, including proximity to
customers and suppliers, labour costs, and transportation costs.
Location conditions are complex and each comprises a different Characteristic of a tangible (i.e. Freight rates, production costs)
and non-tangible (i.e. reliability, Frequency security, quality) nature. Location conditions are hard to measure. Tangible cost based
factors such as wages and products costs can be quantified precisely into what makes locations better to compare. On the other
hand non-tangible features, which refer to such characteristics as reliability, availability and security, can only be measured along
an ordinal or even nominal scale. Other non-tangible features like the percentage of employees that are unionized can be
measured as well. To sum this up non-tangible features are very important for business location decisions. It is appropriate to
divide the factors, which influence the plant location or facility location on the basis of the nature of the organisation as:
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1. General locational factors, which include controllable and uncontrollable factors for all type of organisations.
2. Specific locational factors specifically required for manufacturing and service organisations.
Location factors can be further divided into two categories:
Dominant factors are those derived from competitive priorities (cost, quality, time, and flexibility) and have a particularly strong
impact on sales or costs. Secondary factors also are important, but management may downplay or even ignore some of them if
other factors are more important.
1 GENERAL LOCATIONAL FACTORS
Following are the general factors required for location of plant in case of all types of organisations.
CONTROLLABLE FACTORS
1. Proximity to markets
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
6. External economies
7. Capital.
UNCONTROLLABLE FACTORS
8. Government policy
9. Climate conditions
10. Supporting industries and services
11. Community and labour attitudes
12. Community Infrastructure.
LOCATION THEORIES
ALFRED WEBER‘S THEORY OF THE LOCATION OF INDUSTRIES
Alfred Weber (1868–1958), with the publication of Theory of the Location of Industries in 1909, put forth the first developed general
theory of industrial location. His model took into account several spatial factors for finding the optimal location and minimal cost for
manufacturing plants. The point for locating an industry that minimizes costs of transportation and labour requires analysis of three
factors:
1. The point of optimal transportation based on the costs of distance to the ‗material index‘—the ratio of weight to intermediate
products (raw materials) to finished product.
2. The labour distortion, in which more favourable sources of lower cost of labour may justify greater transport distances.
3. Agglomeration and degglomerating.
Agglomeration or concentration of firms in a locale occurs when there is sufficient demand for support services for the company
and labour force, including new investments in schools and hospitals. Also supporting companies, such as facilities that build and
service machines and financial services, prefer closer contact with their customers.
Degglommeration occurs when companies and services leave because of over concentration of industries or of the wrong types
of industries, or shortages of labour, capital, affordable land, etc. Weber also examined factors leading to the diversification of an
industry in the horizontal relations between processes within the plant. The issue of industry location is increasingly relevant to
today‘s global markets and transnational corporations. Focusing only on the mechanics of the Weberian model could justify greater
transport distances for cheap labour and unexploited raw materials. When resources are exhausted or workers revolt, industries
move to different countries.
LOCATION MODELS
Various models are available which help to identify the ideal location. Some of the popular models are:
1. Factor rating method
2. Weighted factor rating method
3. Load-distance method
4. Centre of gravity method
5. Break-even analysis.
LOCATIONAL ECONOMICS
An ideal location is one which results in lowest production cost and least distribution cost per unit. These costs are influenced by a
number of factors as discussed earlier. The various costs which decide locational economy are those of land, building, equipment,
labour, material, etc. Other factors like community attitude, community facilities and housing facilities will also influence the
selection of best location. Economic analysis is carried out to decide as to which locate best location. The following illustration will
clarify the method of evaluation of best layout selection.
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PLANT LAYOUT
Plant layout refers to the physical arrangement of production facilities. It is the configuration of departments, work centres and
equipment in the conversion process. It is a floor plan of the physical facilities, which are used in production.
According to Moore ―Plant layout is a plan of an optimum arrangement of facilities including personnel, operating equipment,
storage space, material handling equipment and all other supporting services along with the design of best structure to contain all
these facilities‖.
CLASSIFICATION OF LAYOUT
Layouts can be classified into the following five categories:
1. Process layout
2. Product layout
3. Combination layout
4. Fixed position layout
5. Group layout
1 Process Layout
Process layout is recommended for batch production. All machines performing similar type of operations are grouped at one
location in the process layout e.g., all lathes, milling machines, etc. are grouped in the shop will be clustered in like groups. Thus, in
process layout the arrangement of facilities are grouped together according to their functions. The flow paths of material through
the facilities from one functional area to another vary from product to product. Usually the paths are long and there will be
possibility of backtracking. Process layout is normally used when the production volume is not sufficient to justify a
product layout. Typically, job shops employ process layouts due to the variety of products manufactured and their low production
volumes.
2 Product Layout
In this type of layout, machines and auxiliary services are located according to the processing sequence of the product. If the
volume of production of one or more products is large, the facilities can be arranged to achieve efficient flow of materials and lower
cost per unit. Special purpose machines are used which perform the required function quickly and reliably. The product layout is
selected when the volume of production of a product is high such that a separate production line to manufacture it can be justified.
In a strict product layout, machines are not shared by different products. Therefore, the production volume must be sufficient to
achieve satisfactory utilisation of the equipment.
3 Combination Layout
A combination of process and product layouts combines the advantages of both types of layouts. A combination layout is possible
where an item is being made in different types and sizes. Here machinery is arranged in a process layout but the process grouping
is then arranged in a sequence to manufacture various types and sizes of products. It is to be noted that the sequence of
operations remains same with the variety of products and sizes.
4 Fixed Position Layout
This is also called the project type of layout. In this type of layout, the material, or major components remain in a fixed location
and tools, machinery, men and other materials are brought to this location. This type of layout is suitable when one or a few pieces
of identical heavy products are to be manufactured and when the assembly consists of large number of heavy parts, the cost of
transportation of these parts is very high.
5 Group Layout (or Cellular Layout)
There is a trend now to bring an element of flexibility into manufacturing system as regards to variation in batch sizes and
sequence of operations. A grouping of equipment for performing a sequence of operations on family of similar components or
products has become all the important.
Group Technology (GT) is the analysis and comparisons of items to group them into families with similar characteristics. GT can be
used to develop a hybrid between pure process layout and pure flow line (product) layout. This technique is very useful for
companies that produce variety of parts in small batches to enable them to take advantage and economics of flow line layout.
The application of group technology involves two basic steps; first step is to determine component families or groups. The second
step in applying group technology is to arrange the plants equipment used to process a particular family of components. This
represents small plants within the plants. The group technology reduces production planning time for jobs. It reduces the set-up
time.
Thus group layout is a combination of the product layout and process layout. It combines the advantages of both layout systems.
If there are m-machines and n-components, in a group layout (Group-Technology Layout), the m-machines and n-components will
be divided into distinct number of machine-component cells (group) such that all the components assigned to a cell are almost
processed within that cell itself. Here, the objective is to minimize the intercell movements. The basic aim of a group technology
layout is to identify families of components that require similar of satisfying all the requirements of the machines are grouped into
cells. Each cell is capable of satisfying all the requirements of the component family assigned to it.
The layout design process considers mostly a single objective while designing layouts. In process layout, the objective is to
minimize the total cost of materials handling. Because of the nature of the layout, the cost of equipments will be the minimum in
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this type of layout. In product layout, the cost of materials handling will be at the absolute minimum. But the cost of equipments
would not be at the minimum if the equipments are not fully utilized. In-group technology layout, the objective is to minimize the
sum of the cost of transportation and the cost of equipments. So, this is called as multi-objective layout.
DESIGN OF PRODUCT LAYOUT
In product layout, equipment or departments are dedicated to a particular product line, duplicate equipment is employed to avoid
backtracking, and a straight-line flow of material movement is achievable. Adopting a product layout makes sense when the batch
size of a given product or part is large relative to the number of different products or parts produced.
Assembly lines are a special case of product layout. In a general sense, the term assembly line refers to progressive assembly
linked by some material-handling device. The usual assumption is that some form of pacing is present and the allowable
processing time is equivalent for all workstations. Within this broad definition, there are important differences among line types. A
few of these are material handling devices (belt or roller conveyor, overhead crane); line configuration (U-shape, straight,
branching); pacing (mechanical, human); product mix (one product or multiple products); workstation characteristics (workers may
sit, stand, walk with the line, or ride the line); and length of the line (few or many workers). The range of products partially or
completely assembled on lines includes toys, appliances, autos, clothing and a wide variety of electronic components. In fact,
virtually any product that has multiple parts and is produced in large volume uses assembly lines to some degree.
A more-challenging problem is the determination of the optimum configuration of operators and buffers in a production flow
process. A major design consideration in production lines is the assignment of operation so that all stages are more or less equally
loaded. Assembly-line systems work well when there is a low variance in the times required to perform the individual
subassemblies. If the tasks are somewhat complex, thus resulting in a higher assembly-time variance, operators down the line may
not be able to keep up with the flow of parts from the preceding workstation or may experience excessive idle time. An alternative
to a conveyor-paced assembly-line is a sequence of workstations linked by gravity conveyors, which act as buffers between
successive operations.
BEHAVIOURAL FACTORS
The most controversial aspect of product layout is behavioural response. Studies have shown that paced production and high
specialization lower job satisfaction. One study has shown that productivity increased on unpaced lines. Many companies are
exploring job enlargement and rotation to increase job variety and reduce excessive specialization. In manufacturing, at its plant in
Kohda, Japan, Sony Corporation dismantled the conveyor belts on which as many as 50 people assembled camcorders. It set up
tables for workers to assemble an entire camera themselves, doing everything from soldering to testing. Output per worker is up 10
per cent, because the approach frees efficient assemblers to make more products instead of limiting them to conveyor belt‘s
speed. And if something goes wrong, only a small section of the plant is affected. This approach also allows the line to match
actual demand better and avoid frequent shutdown because of inventory buildups.
NUMBER OF MODELS PRODUCED
A mixed-model line produces several items belonging to the same family. A single-model line produces one model with no
variations. Mixed model production enables a plant to achieve both high-volume production and product variety. However, it
complicates scheduling and increases the need for good communication about the specific parts to be produced at each station.
CYCLE TIMES
A line‘s cycle time depends on the desired output rate (or sometimes on the maximum number of workstations allowed). In turn, the
maximum line efficiency varies considerably with the cycle time selected. Thus, exploring a range of cycle times makes sense. A
manager might go with a particularly efficient solution even if it does not match the output rate. The manager can compensate for
the mismatch by varying the number of hours the line operates through overtime, extending shifts, or adding shifts. Multiple lines
might even be the answer.
DESIGN OF PROCESS LAYOUT
The analysis involved in the design of production lines and assembly lines relates primarily to timing, coordination, and balance
among individual stages in the process. For process layouts, the relative arrangement of departments and machines is the critical
factor because of the large amount of transportation and handling involved.
PROCEDURE FOR DESIGNING PROCESS LAYOUTS
Process layout design determines the best relative locations of functional work centres. Work centres that interact frequently, with
movement of material or people, should be located close together, whereas those that have little interaction can be spatially
separated. One approach of designing an efficient functional layout is described below.
1. List and describe each functional work centre.
2. Obtain a drawing and description of the facility being designed.
3. Identify and estimate the amount of material and personnel flow among work centres
4. Use structured analytical methods to obtain a good general layout.
5. Evaluate and modify the layout, incorporating details such as machine orientation, storage area location, and equipment access.
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The first step in the layout process is to identify and describe each work centre. The description should include the primary function
of the work centre; drilling, new accounts, or cashier; its major components, including equipment and number of personnel; and the
space required. The description should also include any special access needs (such as access to running water or an elevator) or
restrictions (it must be in a clean area or away from heat). For a new facility, the spatial configuration of the work centres and the
size and shape of the facility are determined simultaneously. Determining the locations of special structures and fixtures such as
elevators, loading docks, and bathrooms becomes part of the layout process. However, in many cases the facility and its
characteristics are given. In these situations, it is necessary to obtain a drawing of the facility being designed, including shape and
dimensions, locations of fixed structures, and restrictions on activities, such as weight limits on certain parts of a floor or
foundation. To minimize transport times and material-handling costs, we would like to place close together those work centres that
have the greatest flow of materials and people between them.
SERVICE LAYOUT
The major factors considered for service providers, is an impact of location on sales and customer satisfaction. Customers usually
look about how close a service facility is, particularly if the process requires considerable customer contact. Hence, service facility
layouts should provide for easy entrance to these facilities from the freeways. Well-organized packing areas, easily accessible
facilities, well designed walkways and parking areas are some of the requirements of service facility layout. Service facility layout
will be designed based on degree of customer contact and the service needed by a customer. These service layouts follow
conventional layouts as required. For example, for car service station, product layout is adopted, where the activities for servicing a
car follows a sequence of operation irrespective of the type of car. Hospital service is the best example for adaptation of process
layout. Here, the service required for a customer will follow an independent path.
OFFICE LAYOUT
The main difference between office and factory layouts is the importance placed on information. However, in some office
environments, just in manufacturing, production relies on the flow of material. Office layout deals with grouping of workers, their
equipment, and spaces/offices to provide for comfort, safety, and movement of information. We should note two major trends in
case of office layout. First, technology, such as cellular phones, beepers, faxes, the Internet, home offices, laptop computers, and
PDAs, allows increasing layout flexibility by moving information electronically. The technological change is altering the way offices
function. Second, virtual companies create dynamic needs for space and services. These two changes require fewer office
employees on-site. Even though the movement of information is increasingly electronic, analysis of office layouts still requires a
task-based approach.
ORGANISATION OF PHYSICAL FACILITIES
The following are the most important physical facilities to be organised:
1. Factory building
2. Lighting
3. Climatic conditions
4. Ventilation
5. Work-related welfare facilities.
FORECASTING
Forecasts are essential for the smooth operations of business organizations. They provide information
that can assist managers in guiding future activities toward organizational goals. Forecasts are estimates of the occurrence, timing,
or magnitude of uncertain future events. Forecasts are essential for the smooth operations of business organizations. They provide
information that can assist managers in guiding future activities toward organizational goals. Operations managers are primarily
concerned with forecasts of demand—which are often made by (or in conjunction with) marketing. However, managers also use
forecasts to estimate raw material prices, plan for appropriate levels of personnel, help decide how much inventory to carry, and a
host of other activities. This results in better use of capacity, more responsive service to customers, and improved profitability.
Forecasting activities are a function of (1) the type of forecast (e.g., demand, technological), (2) the time horizon (short,
medium, or long range), (3) the database available, and (4) the methodology employed (qualitative or quantitative). Forecasts of
demand are based primarily on non-random trends and relationships, with an allowance for random components. Forecasts for
groups of products tend to be more accurate than those for single products, and short-term forecasts are more accurate than longterm forecasts (greater than five years). Quantification also enhances the objectivity and precision of a forecast.
PRODUCTION PLANNING AND CONTROL
Production planning and control is a tool available to the management to achieve the stated objectives. Thus, a production system
is encompassed by the four factors. i.e., quantity, quality, cost and time. Production planning starts with the analysis of the given
data, i.e., demand for products, delivery schedule etc., and on the basis of the information available, a scheme of utilisation of firms
resources like machines, materials and men are worked out to obtain the target in the most economical way. Once the plan is
prepared, then execution of plan is performed in line with the details given in the plan. Production control comes into action if there
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is any deviation between the actual and planned. The corrective action is taken so as to achieve the targets set as per plan by
using control techniques.
Thus production planning and control can be defined as the ―direction and coordination of firms‘ resources towards attaining the
prefixed goals.‖ Production planning and control helps to achieve uninterrupted flow of materials through production line by making
available the materials at right time and required quantity.
NEED FOR PRODUCTION PLANNING AND CONTROL
The present techno-economic scenario of India emphasize on competitiveness in manufacturing. Indian industries have to
streamline the production activities and attain the maximum utilisation of firms‘ resources to enhance the productivity. Production
planning and control serves as a useful tool to coordinate the activities of the production system by proper planning and control
system. Production system can be compared to the nervous system with PPC as a brain.
Production Control
In spite of planning to the minute details, most of the time it is not possible to achieve production 100 per cent as per the plan.
There may be innumerable factors which affect the production system and because of which there is a deviation from the actual
plan. Some of the factors that affect are:
1. Non-availability of materials (due to shortage, etc.);
2. Plant, equipment and machine breakdown;
3. Changes in demand and rush orders;
4. Absenteeism of workers; and
5. Lack of coordination and communication between various functional areas of business.
Thus, if there is a deviation between actual production and planned production, the control function comes into action. Production
control through control mechanism tries to take corrective action to match the planned and actual production. Thus, production
control reviews the progress of the work, and takes corrective steps in order to ensure that programmed production takes place.
The essential steps in control activity are:
1. Initiating the production,
2. Progressing, and
3. Corrective action based upon the feedback and reporting back to the production planning.
PHASES OF PRODUCTION PLANNING AND CONTROL
Production planning and control has three phases namely:
A. Planning Phase
B. Action Phase
C. Control Phase
1 PLANNING PHASE
Planning is an exercise of intelligent anticipation in order to establish how an objective can be achieved or a need fulfilled in
circumstances, which are invariably restrictive. Production planning determines the optimal schedule and sequence of operations
economic batch quantity, machine assignment and dispatching priorities for sequencing.
It has two categories of planning namely
1. Prior planning
2. Active planning.
PRIOR PLANNING
Prior planning means pre-production planning. This includes all the planning efforts, which are taking place prior to the active
planning.
Modules of pre-planning
The modules of prior planning are as follows:
1. Product development and design is the process of developing a new product with all the features, which are essential for
effective use in the field, and designing it accordingly. At the design stage, one has to take several aspects of design like, design
for selling, design for manufacturing and design for usage.
2. Forecasting is an estimate of demand, which will happen in future. Since, it is only an estimate based on the past demand,
proper care must be taken while estimating it. Given the sales forecast, the factory capacity, the aggregate inventory levels and
size of the work force, the manager must decide at what rate of production to operate the plant over an intermediate planning
horizon.
3. Aggregate planning aims to find out a product wise planning over the intermediate planning horizon.
4. Material requirement planning is a technique for determining the quantity and timing for the acquisition of dependent items
needed to satisfy the master production schedule.
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ACTIVE PLANNING
The modules of active planning are: Process planning and routing, Materials planning. Tools planning, Loading, Scheduling etc. 1.
Process planning and routing is a complete determination of the specific technological process steps and their sequence to
produce products at the desired quality, quantity and cost. It determines the method of manufacturing a product selects the tools
and equipments, analyses how the manufacturing of the product will fit into the facilities. Routing in particular prescribes the flow of
work in the plant and it is related to the considerations of layout, temporary locations for raw materials and components and
materials handling systems.
2. A material planning is a process which determines the requirements of various raw materials/subassemblies by considering the
trade-off between various cost components like, carrying cost, ordering cost, shortage cost, and so forth.
3. Tools‘ planning determines the requirements of various tools by taking process specification (surface finish, length of the job,
overall depth of cut etc.), material specifications (type of material used, hardness of the material, shape and size of the material
etc.) and equipment specifications (speed range, feed range, depth of cut range etc.).
4. Loading is the process of assigning jobs to several machines such that there is a load balance among the machines. This is
relatively a complex task, which can be managed with the help of efficient heuristic procedures.
5. Scheduling is the time phase of loading and determines when and in what sequence the work will be carried out. This fixes the
starting as well as the finishing time for each job.
2 ACTION PHASE
Action phase has the major step of dispatching. Dispatching is the transition from planning phase to action phase. In this phase,
the worker is ordered to start manufacturing the product. The tasks which are included in dispatching are job order, store issue
order, tool order, time ticket, inspection order, move order etc.
The job order number is the key item which is to be mentioned in all other reports/orders.
Stores issue order gives instruction to stores to issue materials for manufacturing the product as per product specifications. As
per tooling requirements for manufacturing the product, the tool order instruct the tool room to issue necessary tools. Time ticket
is nothing but a card which is designed to note down the actual time taken at various processes. This information is used for
deciding the costs for future jobs of similar nature and also for performing variance analysis, which helps to exercise control.
Job order is the official authorization to the shop floor to start manufacturing the product. Generally, the process sequence will
contain some testing and inspection. So, these are to be instructed to inspection wing in the form of inspection order for timely
testing and inspection so that the amount of rework is minimized. The manufacture of product involves moving raw
materials/subassemblies to the main line. This is done by a well-designed materials handling system. So, proper instruction is
given to the materials handling facilities for major movements of materials/subassemblies in the form of a move order. Movements
which involve less distance and fewer loads are managed at the shop floor level based on requests from operators
3 CONTROL PHASE
The control phase has the following two major modules:
1. Progress reporting, and 2. Corrective action.
1. PROGRESS REPORTING
In progress reporting, the data regarding what is happening with the job is collected. Also, it helps to make comparison with the
present level of performance. The various data pertaining to materials rejection, process variations, equipment failures, operator
efficiency, operator absenteeism, tool life, etc., are collected and analyzed for the purpose of progress reporting. These data are
used for performing variance analysis, which would help us to identify critical areas that deserve immediate attention for corrective
actions.
2. CORRECTIVE ACTION
The tasks under corrective action primarily make provisions for an unexpected event. Some examples of corrective actions are
creating schedule flexibility, schedule modifications, capacity modifications, make or buy decisions, expediting the work, preplanning, and so on. Due to unforeseen reasons such as, machine breakdown, labour absenteeism, too much rejection due to poor
material quality etc., it may not be possible to realize the schedule as per the plan. Under such condition, it is better to reschedule
the whole product mix so that we get a clear picture of the situation to progress further. Under such situation, it is to be reexamined for selecting appropriate course of action. Expediting means taking action if the progress reporting indicates deviations
from the originally set targets. Pre-planning of the whole affair becomes essential in case the expediting fails to bring the deviated
plan to its right path.
FUNCTIONS OF PRODUCTION PLANNING AND CONTROL
Functions of production planning and controlling is classified into:
1. Pre-planning function
2. Planning function
3. Control function
The functions of production planning and controlling are depicted in the Fig. 13.4.
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1. PRE-PLANNING FUNCTION
Pre-planning is a macro level planning and deals with analysis of data and is an outline of the planning policy based upon the
forecasted demand, market analysis and product design and development. This stage is concerned with process design (new
processes and developments, equipment policy and replacement and work flow (Plant layout). The pre-planning function of PPC is
concerned with decision-making with respect to methods, machines and work flow with respect to availability, scope and capacity.
Fig. 13.4 Functions of production planning and control
2. PLANNING FUNCTION
The planning function starts once the task to be accomplished is specified, with the analysis of four M‘s, i.e., Machines, Methods,
Materials and Manpower. This is followed by process planning (routing). Both short-term (near future) and long-term planning are
considered. Standardisation, simplification of products and processes are given due consideration.
3. CONTROL FUNCTION
Control phase is effected by dispatching, inspection and expediting materials control, analysis of work-in-process. Finally,
evaluation makes the PPC cycle complete and corrective actions are taken through a feedback from analysis. A good
communication, and feedback system is essential to enhance and ensure effectiveness of PPC.
PARAMETERS FOR PPC
The functions of PPC can be explained with the following parameters:
1. Materials: Raw materials, finished parts and bought out components should be made available in required quantities and at
required time to ensure the correct start and end for each operation resulting in uninterrupted production. The function includes the
specification of materials (quality and quantity) delivery dates, variety reduction (standardisation) procurement and make or buy
decisions.
2. Machines and equipment: This function is related with the detailed analysis of available production facilities, equipment down
time, maintenance policy procedure and schedules. Concerned with economy of jigs and fixtures, equipment availability. Thus, the
duties include the analysis of facilities and making their availability with minimum down time because of breakdowns.
3. Methods: This function is concerned with the analysis of alternatives and selection of the best method with due consideration to
constraints imposed. Developing specifications for processes is an important aspect of PPC and determination of sequence of
operations.
4. Process planning (Routing): It is concerned with selection of path or route which the raw material should follow to get
transformed into finished product. The duties include:
(a) Fixation of path of travel giving due consideration to layout.
(b) Breaking down of operations to define each operation in detail.
(c) Deciding the set up time and process time for each operation.
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5. Estimating: Once the overall method and sequence of operations is fixed and process sheet for each operation is available,
then the operations times are estimated. This function is carried out using extensive analysis of operations along with methods and
routing and a standard time for operation are established using work measurement techniques.
6. Loading and scheduling: Scheduling is concerned with preparation of machine loads and fixation of starting and completion
dates for each of the operations. Machines have to be loaded according to their capability of performing the given task and
according to their capacity.
7. Dispatching: This is the execution phase of planning. It is the process of setting production activities in motion through release
of orders and instructions. It authorises the start of production activities by releasing materials, components, tools, fixtures and
instruction sheets to the operator.
The activities involved are:
(a) To assign definite work to definite machines, work centres and men.
(b) To issue required materials from stores.
(c) To issue jigs, fixtures and make them available at correct point of use.
(d) Release necessary work orders, time tickets, etc., to authorise timely start of operations.
(e) To record start and finish time of each job on each machine or by each man.
8. Expediting: This is the control tool that keeps a close observation on the progress of the work. It is logical step after dispatching
which is called ‗follow-up‘. It coordinates extensively to execute the production plan. Progressing function can be divided into three
parts, i.e., follow up of materials, follow up of work-in-process and follow up of assembly. The duties include: (a) Identification of
bottlenecks and delays and interruptions because of which the production schedule may be disrupted.
(b) To devise action plans (remedies) for correcting the errors
(c) To see that production rate is in line with schedule.
9. Inspection: It is a major control tool. Though the aspects of quality control are the separate function, this is of very much
important to PPC both for the execution of the current plans and its scope for future planning. This forms the basis for knowing the
limitations with respects to methods, processes, etc., which is very much useful for evaluation phase.
10. Evaluation: This stage though neglected is a crucial to the improvement of productive efficiency. A thorough analysis of all the
factors influencing the production planning and control helps to identify the weak spots and the corrective action with respect to
pre-planning and planning will be effected by a feedback. The success of this step depends on the communication, data and
information gathering and analysis.
OPERATIONS PLANNING AND SCHEDULING SYSTEMS
Operations planning and scheduling systems concern with the volume and timing of outputs, the utilisation of operations capacity
at desired levels for competitive effectiveness. These systems must fit together activities at various levels, from top to bottom, in
support of one another, as shown in Fig. 5.3. Note that the time orientation ranges from long to short as we progress from top to
bottom in the hierarchy. Also, the level of detail in the planning process ranges from broad at the top to detail at the bottom.
COMPONENTS OF OPERATIONS PLANNING AND SCHEDULING SYSTEM
1. THE BUSINESS PLAN
The business plan is a statement of the organization‘s overall level of business activity for the coming six to eighteen months,
usually expressed in terms of outputs (in volume of sales) for its various product groups, a set of individual products that share or
consume common blocks of capacity in the manufacturing process. It also specifies the overall inventory and backlog levels that
will be maintained during the planning period. The business plan is an agreement between all functional areas—finance,
production, marketing, engineering, R & D—about the level of activity and the products they are committed to support. The
business plan is not concerned with all the details and specific timing of the actions for executing the plan. Instead, it determines a
feasible general posture for competing to achieve its major goals. The resulting plan guides the lower-level, more details decisions.
2. AGGREGATE PRODUCTION (OUTPUT) PLANNING
The process of determining output levels of product groups over the coming six to eighteen months on a weekly or monthly basis. It
identifies the overall level of outputs in support of the business plan. The plan recognizes the division‘s existing fixed capacity and
the company‘s overall policies for maintaining inventories and backlogs, employment stability and subcontracting.
3. AGGREGATE CAPACITY PLANNING
It is the process of testing the feasibility of aggregate output plans and evaluating overall capacity utilisation. A statement of desired
output is useful only if it is feasible. Thus, it addresses the supply side of the firm‘s ability to meet the demand. As for aggregate
output plans, each plant, facility, or division requires its own aggregate capacity plan. Capacity and output must be in balance, as
indicated by the arrow between them in Fig. 5.3. A capacity plan translates an output plan into input terms, approximating how
much of the division‘s capacity will be consumed.
Although these basic capacities are fixed, management can manipulate the short-term capacities by the ways they deploy their
work force, by subcontracting, or by using multiple work shifts to adjust the timing of overall outputs. As a result, the aggregate
planning process balances output levels, capacity constraints, and temporary capacity adjustments to meet demand and utilise
capacity at desired levels during the coming months. The resulting plan sets limits on the master production schedule.
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4. MASTER PRODUCTION SCHEDULING (MPS)
MPS is a schedule showing week by week how many of each product must be produced according to customer orders and
demand forecasts. Its purpose is to meet the demand for individual products in the product group. This more detailed level of
planning disaggregates the product groups into individual products and indicates when they will be produced. The MPS is an
important link between marketing and production. It shows when incoming sales orders can be scheduled into production, and
when each shipment can be scheduled for delivery. It also takes into account current backlogs so that production and delivery
schedules are realistic.
5. RESOURCE REQUIREMENT PLANNING
Resource requirement planning (rough-cut capacity planning) is the process of testing the feasibility of master production schedule
in terms of capacity. This step ensures that a proposed MPS does not inadvertently overload any key department, work centre, or
machine, making the MPS unworkable.
6. MATERIAL REQUIREMENT PLANNING
Material requirement planning (MRP) is a system of planning and scheduling the time phased material requirements for releasing
materials and receiving materials that enable the master production schedule to be implemented. Thus, the master production
schedule is the driving force for material requirements planning. MRP provides information such as due dates for components that
are subsequently used for shop floor control. Once this information is available, it enables managers to estimate the detailed
requirements for each work centres.
7. CAPACITY REQUIREMENT PLANNING
Capacity requirement planning (CRP) is an iterative process of modifying the MPS or planned resources to make capacity
consistent with the production schedule. CRP is a companion process used with MRP to identify in detail the capacity required to
execute the material requirement planning. At this level, more accurate comparisons of available and needed capacity for
scheduled workloads are possible.
8. SHOP FLOOR CONTROL
Shop floor control involves the activities that execute and control shop operations namely loading, sequencing, detailed scheduling
and expediting jobs in production. It coordinates the weekly and daily activities that get jobs done. Individual jobs are assigned to
machines and work centres (loading), the sequence of processing the jobs for priority control is determined, start times and job
assignments for each stage of processing are decided (detailed scheduling ) and materials and work flows from station to station
are monitored and adjusted (expediting).
9. LOADING
Each job (customer order) may have its unique product specification and, hence, it is unique through various work centres in the
facility. As new job orders are released, they are assigned or allocated among the work centres, thus establishing how much of a
load each work centre must carry during the coming planning period. This assignment is known as loading (sometimes called shop
loading as machine loading).
10. SEQUENCING
This stage establishes the priorities for jobs in the queues (waiting lines) at the work centres. Priority sequencing specifies the
order in which the waiting jobs are processed; it requires the adoption of a priority sequencing rule.
11. DETAILED SCHEDULING
Detailed scheduling determines start times, finish times and work assignments for all jobs at each work centre. Calendar times are
specified when job orders, employees, and materials (inputs), as well as job completion (outputs), should occur at each work
centre. By estimating how long each job will take to complete and when it is due, schedulers can establish start and finish dates
and develop the detailed schedule.
12. EXPEDITING
Expediting is a process of tracking a job‘s progress and taking special actions to move it through the facility. In tracking a job‘s
progress, special action may be needed to keep the job moving through the facility on time. Manufacturing or service operations
disruptions-equipments breakdowns, unavailable materials, last-minute priority changes, require managers to deviate from plans
and schedules and expedite an important job on a special handling basis.
13. INPUT/OUTPUT CONTROL
Input/output control related to the activities to monitor actual versus planned utilisation of a work centre‘s capacity. Output plans
and schedules call for certain levels of capacity at a work centre, but actual utilisation may differ from what was planned. Actual
versus planned utilisation of the work centre‘s capacity can be monitored by using input-output reports and, when discrepancies
exist, adjustments can be made. The important components of operations planning and scheduling system has been explained in
detail in the following paragraphs.
AGGREGATE PLANNING
Aggregate planning is an intermediate term planning decision. It is the process of planning the quantity and timing of output over
the intermediate time horizon (3 months to one year). Within this range, the physical facilities are assumed to –10 be fixed for the
planning period. Therefore, fluctuations in demand must be met by varying labour and inventory schedule. Aggregate planning
seeks the best combination to minimise costs.
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CAPACITY PLANNING
Design of the production system involves planning for the inputs, conversion process and outputs of production operation. The
effective management of capacity is the most important responsibility of production management. The objective of capacity
management (i.e., planning and control of capacity) is to match the level of operations to the level of demand.
Capacity planning is to be carried out keeping in mind future growth and expansion plans, market trends, sales forecasting, etc. It
is a simple task to plan the capacity in case of stable demand. But in practice the demand will be seldom stable. The fluctuation of
demand creates problems regarding the procurement of resources to meet the customer demand. Capacity decisions are strategic
in nature. Capacity is the rate of productive capability of a facility. Capacity is usually expressed as volume of output per period of
time.
MEASUREMENT OF CAPACITY PLANNING
The capacity of the manufacturing unit can be expressed in number of units of output per period. In some situations measuring
capacity is more complicated when they manufacture multiple products. In such situations, the capacity is expressed as man-hours
or machine hours. The relationship between capacity and output is shown in Fig. 5.6.
1. Design capacity: Designed capacity of a facility is the planned or engineered rate of output of goods or services under normal
or full scale operating conditions. For example, the designed capacity of the cement plant is 100 TPD (Tonnes per day). Capacity
of the sugar factory is 150 tonnes of sugarcane crushing per day.
2. System capacity: System capacity is the maximum output of the specific product or product mix the system of workers and
machines is capable of producing as an integrated whole. System capacity is less than design capacity or at the most equal,
because of the limitation of product mix, quality specification, breakdowns. The actual is even less because of many factors
affecting the output such as actual demand, downtime due to machine/equipment failure, unauthorised absenteeism.
The system capacity is less than design capacity because of long range uncontrollable factors. The actual output is still reduced
because of short-term effects such as, breakdown of equipment, inefficiency of labour. The system efficiency is expressed as ratio
of actual measured output to the system capacity.
System Efficiency (SE) =
Actual output
System capacity
3. Licensed capacity: Capacity licensed by the various regulatory agencies or government authorities. This is the limitation on the
output exercised by the government.
4. Installed capacity: The capacity provided at the time of installation of the plant is called installed capacity.
5. Rated capacity: Capacity based on the highest production rate established by actual trials is referred to as rated capacity.
ROUTING
Routing may be defined as the selection of path which each part of the product will follow while being transformed from raw
materials to finished products. Path of the product will also give sequence of operation to be adopted while being manufactured. In
other way, routing means determination of most advantageous path to be followed from department to department and machine to
machine till raw material gets its final shape, which involves the following steps:
(a) Type of work to be done on product or its parts.
(b) Operation required to do the work.
(c) Sequence of operation required.
(d) Where the work will be done.
(e) A proper classification about the personnel required and the machine for doing the work.
For effective production control of a well-managed industry with standard conditions, the routing plays an important role, i.e., to
have the best results obtained from available plant capacity. Thus routing provides the basis for scheduling, dispatching and followup.
TECHNIQUES OF ROUTING
While converting raw material into required goods different operations are to be performed and the selection of a particular path of
operations for each piece is termed as ‗Routing‘. This selection of a particular path, i.e. sequence of operations must be the best
and cheapest to have the lowest cost of the final product. The various routing techniques are:
1. Route card: This card always accompanies with the job throughout all operations. This indicates the material used during
manufacturing and their progress from one operation to another. In addition to this the details of scrap and good work produced are
also recorded.
2. Work sheet: It contains
(a) Specifications to be followed while manufacturing.
(b) Instructions regarding routing of every part with identification number of machines and work place of operation.
This sheet is made for manufacturing as well as for maintenance.
3. Route sheet: It deals with specific production order. Generally made from operation sheets. One sheet is required for each part
or component of the order. These includes the following:
(a) Number and other identification of order.
(b) Symbol and identification of part.
(c) Number of pieces to be made.
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(d) Number of pieces in each lot—if put through in lots.
(e) Operation data which includes:
(i) List of operation on the part.
(ii) Department in which operations are to be performed.
(iii) Machine to be used for each operation.
(iv) Fixed sequence of operation, if any.
(f) Rate at which job must be completed, determined from the operation sheet.
4. Move order: Though this is document needed for production control, it is never used for routing system. Move order is prepared
for each operation as per operation sheet. On this the quantity passed forward, scrapped and to be rectified are recorded. It is
returned to planning office when the operation is completed.
SCHEDULING
Scheduling can be defined as ―prescribing of when and where each operation necessary to manufacture the product is to be
performed.‖ It is also defined as ―establishing of times at which to begin and complete each event or operation comprising a
procedure‖. The principle aim of scheduling is to plan the sequence of work so that production can be systematically arranged
towards the end of completion of all products by due date.
TYPES OF SCHEDULING
Types of scheduling can be categorized as forward scheduling and backward scheduling.
1. Forward scheduling is commonly used in job shops where customers place their orders on ―needed as soon as possible‖
basis. Forward scheduling determines start and finish times of next priority job by assigning it the earliest available time slot and
from that time, determines when the job will be finished in that work centre. Since the job and its components start as early as
possible, they will typically be completed before they are due at the subsequent work centres in the routing. The forward method
generates in the process inventory that are needed at subsequent work centres and higher inventory cost. Forward scheduling is
simple to use and it gets jobs done in shorter lead times, compared to backward scheduling.
2. Backward scheduling is often used in assembly type industries and commit in advance to specific delivery dates. Backward
scheduling determines the start and finish times for waiting jobs by assigning them to the latest available time slot that will enable
each job to be completed just when it is due, but done before. By assigning jobs as late as possible, backward scheduling
minimizes inventories since a job is not completed until it must go directly to the next work centre on its routing.
SCHEDULING METHODOLOGY
The scheduling methodology depends upon the type of industry, organization, product, and level of sophistication required. They
are:
1. Charts and boards,
2. Priority decision rules, and
3. Mathematical programming methods.
QUALITY CONTROL
In any business organization, profit is the ultimate goal. To achieve this, there are several approaches. Profit may be maximized by
cutting costs for the same selling price per unit. If it is a monopolistic business, without giving much of importance to the cost
reduction programs, the price may be fixed suitably to earn sufficient profit. But, to survive in a competitive business environment,
goods and services produced by a firm should have the minimum required quality. Extra quality means extra cost. So, the level of
quality should be decided in relation to other factors such that the product is well absorbed in the market. In all these cases, to
have repeated sales and thereby increased sales revenue, basic quality is considered to be one of the supportive factors. Quality is
a measure of how closely a good or service conforms to specified standard. Quality standards may be any one or a combination of
attributes and variables of the product being manufactured. The attributes will include performance, reliability, appearance,
commitment to delivery time, etc., variables may be some measurement variables like, length, width, height, diameter, surface
finish, etc .Most of the above characteristics are related to products. Similarly, some of the quality characteristics of services are
meeting promised due dates, safety, comfort, security, less waiting time and so forth. So, the various dimensions of quality are
performance, features, reliability, conformance, durability, serviceability, aesthetics, perceived quality, safety, comfort, security,
commitment to due dates, less waiting time, etc.
QUALITY
Different meaning could be attached to the word quality under different circumstances. The word quality does not mean the quality
of manufactured product only. It may refer to the quality of the process (i.e., men, material, and machines) and even that of
management. Where the quality manufactured product referred as or defined as ―Quality of product as the degree in which it fulfills
the requirement of the customer. It is not absolute but it judged or realized by comparing it with some standards‖.
Quality begins with the design of a product in accordance with the customer specification further it involved the established
measurement standards, the use of proper material, selection of suitable manufacturing process etc., quality is a relative term and
it is generally used with reference to the end use of the product. Crosby defined as ―Quality is conformance to requirement or
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specifications‖. Juran defined as ―Quality is fitness for use‖. ―The Quality of a product or service is the fitness of that product or
service for meeting or exceeding its intended use as required by the customer.‖
FUNDAMENTAL FACTORS AFFECTING QUALITY
The nine fundamental factors (9 M‘s), which are affecting the quality of products and services, are: markets, money, management,
men, motivation, materials, machines and mechanization.
Modern information methods and mounting product requirements.
1. Market: Because of technology advancement, we could see many new products to satisfy customer wants. At the same time,
the customer wants are also changing dynamically. So, it is the role of companies to identify needs and then meet it with existing
technologies or by developing new technologies.
2. Money: The increased global competition necessitates huge outlays for new equipments and process. This should be rewarded
by improved productivity. This is possible by minimizing quality costs associated with the maintenance and improvements of quality
level.
3. Management: Because of the increased complex structure of business organization, the quality related responsibilities lie with
persons at different levels in the organization.
4. Men: The rapid growth in technical knowledge leads to development of human resource with different specialization. This
necessitates some groups like, system engineering group to integrate the idea of full specialization.
5. Motivation: If we fix the responsibility of achieving quality with each individual in the organization with proper motivation
techniques, there will not be any problem in producing the designed quality products.
6. Materials: Selection of proper materials to meet the desired tolerance limit is also an important consideration. Quality attributes
like, surface finish, strength, diameter etc., can be obtained by proper selection of material.
7. Machines and mechanization: In order to have quality products which will lead to higher productivity of any organization, we
need to use advanced machines and mechanize various operations.
8. Modern information methods: The modern information methods help in storing and retrieving needed data for manufacturing,
marketing and servicing.
9. Mounting product requirements: Product diversification to meet customers taste leads to intricacy in design, manufacturing
and quality standards. Hence, companies should plan adequate system to tackle all these requirements.
CONTROL
The process through which the standards are established and met with standards is called control. This process consists of
observing our activity performance, comparing the performance with some standard and then taking action if the observed
performance is significantly too different from the standards.
The control process involves a universal sequence of steps as follows:
1. Choose the control object
2. Choose a unit of measure
3. Set the standard value
4. Choose a sensing device which can measure
5. Measure actual performance
6. Interpret the difference between actual and standard
7. Taking action.
INSPECTION
Inspection is an important tool to achieve quality concept. It is necessary to assure confidence to manufacturer and aims
satisfaction to customer. Inspection is an indispensable tool of modern manufacturing process. It helps to control quality, reduces
manufacturing costs, eliminate scrap losses and assignable causes of defective work. The inspection and test unit is responsible
for appraising the quality of incoming raw materials and components as well as the quality of the manufactured product or service.
It checks the components at various stages with reference to certain predetermined factors and detecting and sorting out the faulty
or defective items. It also specified the types of inspection devices to use and the procedures to follow to measure the quality
characteristics. Inspection only measures the degree of conformance to a standard in the case of variables. In the case of
attributes inspection merely separates the nonconforming from the conforming. Inspection does not show why the nonconforming
units are being produced. Inspection is the most common method of attaining standardization, uniformity and quality of
workmanship. It is the cost art of controlling the production quality after comparison with the established standards and
specifications. It is the function of quality control. If the said item does not fall within the zone of acceptability it will be rejected and
corrective measure will be applied to see that the items in future conform to specified standards.
TYPES OF INSPECTION
Types of inspection are:
1. Floor inspection 2. Centralized inspection
3. Combined inspection 4. Functional inspection
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5. First piece inspection 6. Pilot piece inspection
7. Final inspection
1. FLOOR INSPECTION
In this system, the inspection is performed at the place of production. It suggests the checking of materials in process at the
machine or in the production time by patrolling inspectors. These inspectors move from machine to machine and from one to the
other work centres. Inspectors have to be highly skilled. This method of inspection minimize the material handling, does not disrupt
the line layout of machinery and quickly locate the defect and readily offers field and correction.
2. CENTRALISED INSPECTION
Inspection is carried in a central place with all testing equipment, sensitive equipment is housed in air-conditioned area. Samples
are brought to the inspection floor for checking. Centralised inspection may locate in one or more places in the manufacturing
industry.
3. COMBINED INSPECTION
Combination of two methods whatever may be the method of inspection, whether floor or central. The main objective is to locate
and prevent defect which may not repeat itself in subsequent operation to see whether any corrective measure is required and
finally to maintain quality economically.
4. FUNCTIONAL INSPECTION
This system only checks for the main function, the product is expected to perform. Thus an electrical motor can be checked for the
specified speed and load characteristics. It does not reveal the variation of individual parts but can assure combined satisfactory
performance of all parts put together. Both manufacturers and purchasers can do this, if large number of articles are needed at
regular intervals. This is also called assembly inspection.
5. FIRST PIECE OR FIRST-OFF INSPECTIONS
First piece of the shift or lot is inspected. This is particularly used where automatic machines are employed. Any discrepancy from
the operator as machine tool can be checked to see that the product is within in control limits. Excepting for need for precautions
for tool we are check and disturbance in machine set up, this yields good result if the operator is careful.
6. PILOT PIECE INSPECTION
This is done immediately after new design or product is developed. Manufacturer of product is done either on regular shop floor if
production is not disturbed. If production is affected to a large extent, the product is manufactured in a pilot plant. This is suitable
for mass production and products involving large number of components such as automobiles aeroplanes etc., and modification
are design or manufacturing process is done until satisfactory performance is assured or established.
7. FINAL INSPECTION
This is also similar to functional or assembly inspection. This inspection is done only after completion of work. This is widely
employed in process industries where there is not possible such as, electroplating or anodizing products. This is done in
conjunction with incoming material inspection.
METHODS OF INSPECTION
There are two methods of inspection. They are: 100% inspection and sampling inspection.
1. 100% INSPECTION
This type will involve careful inspection in detail of quality at each strategic point or stage of manufacture where the test is involved
is non-destructive and every piece is separately inspected. It requires more number of inspectors and hence it is a costly method.
There is no sampling error. This is subjected to inspection error arising out of fatigue, negligence, difficulty of supervision etc.
Hence, completer accuracy of influence is seldom attained. It is suitable only when a small number of pieces are there or a very
high degree of quality is required. Example: Jet engines, aircraft, medical and scientific equipment.
2. SAMPLING INSPECTION
In this method randomly selected samples are inspected. Samples taken from different patches of products are representatives. If
the sample proves defective, the entire concerned is to be rejected or recovered. Sampling inspection is cheaper and quicker. It
requires less number of Inspectors. It is subjected to sampling errors but the magnitude of sampling error can be estimated. In the
case of destructive test, random or sampling inspection is desirable. This type of inspection governs wide currency due to the
introduction of automatic machines or equipments which are less susceptible to chance variable and hence require less inspection,
suitable for inspection of products which have less precision importance and are less costly. Example: Electrical bulbs, radio bulbs,
washing machine etc.
QUALITY CONTROL
Quality Control (QC) may be defined as a system that is used to maintain a desired level of quality in a product or service. It is a
systematic control of various factors that affect the quality of the product. It depends on materials, tools, machines, type of labour,
working conditions etc. QC is a broad term, it involves inspection at particular stage but mere inspection does not mean QC. As
opposed to inspection, in quality control activity emphasis is placed on the quality future production. Quality control aims at
prevention of defects at the source, relies on effective feedback system and corrective action procedure. Quality control uses
inspection as a valuable tool. According to Juran ―Quality control is the regulatory process through which we measure actual quality
performance, compare it with standards, and act on the difference‖. Another definition of quality control is from ANSI/ASQC
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standard (1978) quality control is defined as ―The operational techniques and the activities which sustain a quality of product or
service that will satisfy given needs; also the use of such techniques and activities‖. Alford and Beatty define QC as ―In the broad
sense, quality control is the mechanism by which products are made to measure up to specifications determined from customers,
demands and transformed into sales engineering and manufacturing requirements, it is concerned with making things right rather
than discovering and rejecting those made wrong‖.
TYPES OF QUALITY CONTROL
QC is not a function of any single department or a person. It is the primary responsibility of any supervisor to turn out work of
acceptable quality. Quality control can be divided into three main sub-areas, those are:
1. Off-line quality control, 2. Statistical process control, and 3. Acceptance sampling plans.
1. Off-line quality control: Its procedure deal with measures to select and choose controllable product and process parameters in
such a way that the deviation between the product or process output and the standard will be minimized. Much of this task is
accomplished through product and process design.
Example: Taguchi method, principles of experimental design etc.
2. Statistical process control: SPC involves comparing the output of a process or a service with a standard and taking remedial
actions in case of a discrepancy between the two. It also involves determining whether a process can produce a product that meets
desired specification or requirements. On-line SPC means that information is gathered about the product, process, or service while
it is functional. The corrective action is taken in that operational phase.
This is real-time basis.
3. Acceptance sampling plans: A plan that determines the number of items to sample and the acceptance criteria of the lot,
based on meeting certain stipulated conditions (such as the risk of rejecting a good lot or accepting a bad lot) is known as an
acceptance sampling plan.
STEPS IN QUALITY CONTROL
Following are the steps in quality control process:
1. Formulate quality policy.
2. Set the standards or specifications on the basis of customer‘s preference, cost and profit.
3. Select inspection plan and set up procedure for checking.
4. Detect deviations from set standards of specifications.
5. Take corrective actions or necessary changes to achieve standards.
6. Decide on salvage method i.e., to decide how the defective parts are disposed of, entire scrap or rework.
7. Coordination of quality problems.
8. Developing quality consciousness both within and outside the organization.
9. Developing procedures for good vendor-vendee relations.
SEVEN TOOLS FOR QUALITY CONTROL
To make rational decisions using data obtained on the product, or process, or from the consumer, organizations use certain
graphical tools. These methods help us learn about the characteristics of a process, its operating state of affairs and the kind of
output we may expect from it. Graphical methods are easy to understand and provide comprehensive information; they are a viable
tool for the analysis of product and process data. These tools are effect on quality improvement. The seven quality control tools
are:
1. Pareto charts 2. Check sheets 3. Cause and effect diagram 4. Scatter diagrams 5. Histogram 6. Graphs or flow charts
7. Control charts
1. PARETO CHARTS
Pareto charts help prioritize by arranging them in decreasing order of importance. In an environment of limited resources these
diagrams help companies to decide on the order in which they should address problems. The Pareto analysis can be used to
identify the problem in a number of forms.
(a) Analysis of losses by material (number or past number).
(b) Analysis of losses by process i.e., classification of defects or lot rejections in terms of the process.
(c) Analysis of losses by product family.
(d) Analysis by supplier across the entire spectrum of purchases.
(e) Analysis by cost of the parts.
(f) Analysis by failure mode.
2. CHECK SHEETS
Check sheets facilitate systematic record keeping or data collection observations are recorded as they happen which reveals
patterns or trends. Data collection through the use of a checklist is often the first step in analysis of quality problem. A checklist is a
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form used to record the frequency of occurrence of certain product or service characteristics related to quality. The characteristics
may be measurable on a continuous scale such as weight, diameter, time or length.
3. CAUSE AND EFFECT DIAGRAM
It is sometimes called as Fish-bone diagram. It is first developed by Kaorv Ishikawa in 1943 and is sometimes called as Ishikawa
diagram. The diameter helps the management trace customer complaints directly to the operations involved. The main quality
problem is referred to Fish-head; the major categories of potential cause structural bones and the likely specific causes to ribs. It
explores possible causes of problems, with the intention being to discover the root causes. This diagram helps identify possible
reasons for a process to go out of control as well as possible effects on the process.
Fig. 13.5 Fishbone diagram
4. SCATTER DIAGRAM (SCATTER PLOTS)
It often indicates the relationship between two variables. They are often used as follow-ups to a cause and effect analysis to
determine whether a stated cause truly does impact the quality characteristics.
.
Fig. 13.6 Scatter diagram
Example: The above figure plots advertising expenditure against company sales and indicates a strong positive relationship
between the two variables. As the level of advertising expenditure increases sales tend to increase.
5. HISTOGRAM (OR) BAR CHARTS
It displays the large amounts of data that are difficult to interpret in their raw form. A histogram summarizes data measured on a
continuous scale showing the frequency distribution of some quality characteristics (in statistical terms the central tendency and the
dispersion of the data).
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Fig. 13.7 Histogram
Often the mean of the data is indicated on the histogram. A bar chart is a series of bare representing the frequency of occurrence
of data characteristics, the bar height indicates the number of times a particular quality characteristic was observed.
6. FLOW CHARTS (OR) GRAPHS
It shows the sequence of events in a process. They are used for manufacturing and service operations. Flow charts are often used
to diagram operational procedures to simplify the system. They can identify bottlenecks, redundant steps and non-value added
activities. A realistic flow chart can be constructed by using the knowledge of the person who are directly involved in the particular
process. The flow chart can be identifies where delays can occur.
Fig. 13.8 Flowchart
7. CONTROL CHARTS
It distinguishes special causes of variations from common causes of variation. They are used to monitor and control process on an
ongoing basis. A typical control chart plots a selected quality characteristic found from sub-group of observations as a function of
sample number. Characteristics such as sample average, sample range and sample proportion of non-conforming units are
plotted. The centre line on a control chart represents the average value of characteristics being plotted. Two limits known as the
upper control limit (UCL) and lower control limit (LCL) are also shown on control charts. These limits are constructed so that if the
process is operating under a stable system of chance causes, the problem of an observation falling outside these limits is quite
small.
Control chart shows the performance of a process from two points of view. First, they show a snapshot of the process at the
moment the data are collected. Second, they show the process trend as time progresses. Process trends are important because
they help in identifying the out of-control status if it actually exists. Also, they help to detect variations outside the normal
operational limits, and to identify the cause of variations. Fig. 13.9 shows a generalised representation of a control chart.
Fig. 13.9 Control charts
CAUSES OF VARIATION IN QUALITY
The variation in the quality of product in any manufacturing process is broadly classified as:
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(a) Chance causes
(b) Assignable causes.
(A) CHANCE CAUSES
The chance causes are those causes which are inherit in manufacturing process by virtue of operational and constructional
features of the equipments involved in a manufacturing process. They are difficult to trace and difficult to control, even under best
condition of production. Even though, it is possible to trace out, it is not economical to eliminate. The chance causes results in only
a minute amount of variation in process. Variation in chance causes is due to internal factors only the general pattern of variation
under chance causes will follow a stable statistical distribution (normal distribution). Variation within the control limits means only
random causes are present.
(B) ASSIGNABLE CAUSES
These are the causes which creates ordinary variation in the production quality.
Assignable cause‘s variation can always be traced to a specific quality. They occur due to—
1. Lack of skill in operation 2. Wrong maintenance practice 3. New vendors 4. Error in setting jigs and fixtures
5. Raw material defects
Variation due to these causes can be controlled before the defective items are produced. Any one assignable cause can result in a
large amount of variation in process. If the assignable causes are present, the system will not follow a stable statistical distribution.
When the actual variation exceeds the control limits, it is a signal that assignable causes extend the process and process should
be investigated.
STATISTICAL PROCESS CONTROL
Statistical process control (SPC) is the application of statistical techniques to determine whether the output of a process conforms
to the product or service design. It aims at achieving good quality during manufacture or service through prevention rather than
detection. It is concerned with controlling the process that makes the product because if the process is good then the product will
automatically be good.
CONTROL CHARTS
SPC is implemented through control charts that are used to monitor the output of the process and indicate the presence of
problems requiring further action. Control charts can be used to monitor processes where output is measured as either variables or
attributes. There are two types of control charts: Variable control chart and attribute control chart.
1. Variable control charts: It is one by which it is possible to measures the quality characteristics of a product. The variable
control charts are X-BAR chart, R-BAR chart, SIGMA chart.
2. Attribute control chart: It is one in which it is not possible to measures the quality characteristics of a product, i.e., it is based
on visual inspection only like good or bad, success or failure, accepted or rejected. The attribute control charts are p-charts, npcharts, c-charts, u-charts. It requires only a count of observations on characteristics e.g., the number of nonconforming items in a
sample.
QUALITY CIRCLES
The quality circles begun in Japan in 1960s. The concept of quality circles is based on the participating style of management. It
assumes that productivity will improve through an uplift of morale and motivations which are in turn achieved through consultation
and discussion in informal groups. One organizational mechanism for worker participation in quality is the quality circle. It is
typically an informal group of people that consists of operators, supervisors, managers and so on who get together to improve
ways to make the product or deliver the service. According to Juran, quality circle defined as ―a group of work force level people,
usually from within one department, who volunteer to meet weekly (on company time) to address quality problems that occur within
their department.‖
Quality circle members select the problems and are given training is problem-solving techniques. A quality circle can be an
effective productivity improvement tool because it generates new ideas and implements them. Where the introduction of quality
circle is capably planned and where the company environment is supporting they are highly successful. The benefits fall into two
categories: those are measurable saving and improvement in the attitudes and behaviour of people. Quality circles pursue two
types of problems, those concerned with the personal well-being of the worker and those concerned with the well-being of
company.
TOTAL QUALITY MANAGEMENT
Now-a-days, customers demand products/services with greater durability and reliability at the most economic price. This forces
producers to strictly follow quality procedures right from design till shipment and installation of the products. So that goal of any
competitive industry is to provide a product or service at the most economical costs, ensuring full customer satisfaction. This can
be achieved through Total Quality Management (TQM), because, quality is not a technical function, but a systemic process
extending throughout all phases of the business, e.g., marketing, design, development, engineering, purchasing,
production/operations.
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As per Feigebaum, ―Total Quality Management is an effective system of integrating the quality development, quality maintenance
and quality improvement efforts of various groups in an organization so as to enable marketing, engineering, production and
service at the most economical levels which allow for full customer satisfaction‖.
ISO 9000 SERIES
ISO stands for International Organization for Standardization. It is an international body, which consists of representatives from
more than 90 countries. The national standard bodies of these countries are the members of this organization. Bureau of Indian
Standards (BIS) are the Indian representative to ISO, ISO and International Electro Technical Commission (IEC)) operate jointly as
a single system. These are non-governmental organizations, which exist to provide common standards on international trade of
goods and services.
ISO 9000 standards expect firms to have a quality manual that meets ISO guidelines, documents, quality procedures and job
instructions, and verification of compliance by third-party auditors. ISO 9000 series has five international standards on quality
managements. They are:
1. ISO 9000 — Quality management and Quality assurance standards
2. ISO 9001 — Quality systems: Quality in design
3. ISO 9002 — Quality systems: Production and Installation
4. ISO 9003 — Quality systems: Final inspection and test
5. ISO 9004 — Quality management and systems
APPLICATION ISO 9000: ISO 14000 SERIES
The ISO 14000 series of environmental management standards are intended to assist organizations manage the environmental
effect of their business practices. The ISO 14000 series is similar to the ISO 9000 series published in 1987. The purpose of the
ISO 9000 series is to encourage organizations to institute quality assurance management programs. Although ISO 9000 deals with
the overall management of an organization and ISO 14000 deals with the management of the environmental effects of an
organization, both standards are concerned with processes, and there is talk of combining the two series into one.
Both series of standards were published by ISO, the International Organization for Standardization. The purpose of ISO is to
facilitate international trade and cooperation in commercial, intellectual, scientific and economic endeavors by developing
international standards. ISO originally focused on industrial and mechanical engineering standards. Now, it has ventured into
setting standards for an organization‘s processes, policies, and practices.
The environmental standards of ISO 14000 deal with how a company manages the environment inside its facilities and the
immediate outside environment. However, the standards also call for analysis of the entire life cycle of a product, from raw material
to eventual disposal. These standards do not mandate a particular level of pollution or performance, but focus on awareness of the
processes and procedures that can affect the environment. It should be noted that adherence to the ISO 14000 standards does not
in any way release a company from any national or local regulations regarding specific performance issues regarding the
environment.
Some of the standards in the ISO 14000 series are:
_ ISO 14001—Specification of Environmental Management Systems
_ ISO 14004—Guideline Standard
_ ISO 14010 through ISO 14015—Environmental Auditing and Related Activities
_ ISO 14020 through ISO 14024—Environmental Labelling
_ ISO 14031 through ISO 14032—Environmental Performance Evaluation
_ ISO 14040 through ISO 14043—Life Cycle Assessment
_ ISO 14050—Terms and Definitions
Although the ISO 14000 standards are similar to the ISO 9000 standards, the nature of the environmental standards creates a
need for people who are technical environment professionals in addition to those required to maintain the documentation
necessary for certification.
MATERIALS MANAGEMENT
Materials management is a function, which aims for integrated approach towards the management of materials in an industrial
undertaking. Its main objective is cost reduction and efficient handling of materials at all stages and in all sections of the
undertaking. Its function includes several important aspects connected with material, such as, purchasing, storage, inventory
control, material handling, standardisation etc.
SCOPE OR FUNCTIONS OF MATERIALS MANAGEMENT
Materials management is defined as ―the function responsible for the coordination of planning, sourcing, purchasing, moving,
storing and controlling materials in an optimum manner so as to provide a pre-decided service to the customer at a minimum cost‖.
From the definition it is clear that the scope of materials management is vast. The functions of materials management can be
categorized in the following ways: (as shown in Fig. 13.11.)
1. Material Planning and Control 2. Purchasing 3. Stores Management 4. Inventory Control or Management 5. Standardisation
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6. Simplification 7. Value Analysis 8. Erogonomics 9. Just-in-Time (JIT)
All the above mentioned functions of materials management has been discussed in detail in this chapter.
Fig. 13.10 Scope of materials management
1. Materials planning and control: Based on the sales forecast and production plans, the materials planning and control is done.
This involves estimating the individual requirements of parts, preparing materials budget, forecasting the levels of inventories,
scheduling the orders and monitoring the performance in relation to production and sales.
2. Purchasing: This includes selection of sources of supply finalization in terms of purchase, placement of purchase orders, followup, maintenance of smooth relations with suppliers, approval of payments to suppliers, evaluating and rating suppliers.
3. Stores management or management: This involves physical control of materials, preservation of stores, minimization of
obsolescence and damage through timely disposal and efficient handling, maintenance of stores records, proper location and
stocking. A store is also responsible for the physical verification of stocks and reconciling them with book figures. A store plays a
vital role in the operations of a company.
4. Inventory control or management: Inventory generally refers to the materials in stock. It is also called the idle resource of an
enterprise. Inventories represent those items, which are either stocked for sale or they are in the process of manufacturing or they
are in the form of materials, which are yet to be utilized. The interval between receiving the purchased parts and transforming them
into final products varies from industries to industries depending upon the cycle time of manufacture. It is, therefore, necessary to
hold inventories of various kinds to act as a buffer between supply and demand for efficient operation of the system. Thus, an
effective control on inventory is a must for smooth and efficient running of the production cycle with least interruptions.
5. Other related activities
(a) 3S
(i) Standardization: Standardization means producing maximum variety of products from the minimum variety of materials, parts,
tools and processes. It is the process of establishing standards or units of measure by which extent, quality, quantity, value,
performance etc. may be compared and measured.
(ii) Simplification: The concept of simplification is closely related to standardization. Simplification is the process of reducing the
variety of products manufactured. Simplification is concerned with the reduction of product range, assemblies, parts, materials and
design.
(iii) Specifications: It refers to a precise statement that formulizes the requirements of the customer. It may relate to a product,
process or a service.
(b) Value analysis: Value analysis is concerned with the costs added due to inefficient or unnecessary specifications and features.
It makes its contribution in the last stage of product cycle, namely, the maturity stage. At this stage research and development no
longer make positive contributions in terms of improving the efficiency of the functions of the product or adding new functions to it.
(c) Ergonomics (Human Engineering): The human factors or human engineering is concerned with man-machine system.
Ergonomics is ―the design of human tasks, man-machine system, and effective accomplishment of the job, including displays for
presenting information to human sensors, controls for human operations and complex man-machine systems.‖ Each of the above
functions are dealt in detail.
MATERIAL PLANNING AND CONTROL
Material planning is a scientific technique of determining in advance the requirements of raw materials, ancillary parts and
components, spares etc. as directed by the production programme. It is a subsystem in the overall planning activity. There are
many factors, which influence the activity of material planning. These factors can be classified as macro and micro systems.
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1. Macro factors: Some of the micro factors which affect material planning, are price trends, business cycles Govt. import policy
etc.
2. Micro factors: Some of the micro factors that affect material planning are plant capacity utilization, rejection rates, lead times,
inventory levels, working capital, delegation of powers and communication.
PURCHASING
Purchasing is an important function of materials management. In any industry purchase means buying of equipments, materials,
tools, parts etc. required for industry. The importance of the purchase function varies with nature and size of industry. In small
industry, this function is performed by works manager and in large manufacturing concern; this function is done by a separate
department. The moment a buyer places an order he commits a substantial portion of the finance of the corporation which affects
the working capital and cash flow position. He is a highly responsible person who meets various salesmen and thus can be
considered to have been contributing to the public relations efforts of the company. Thus, the buyer can make or mar the
company‘s image by his excellent or poor relations with the vendors.
PARAMETERS OF PURCHASING
The success of any manufacturing activity is largely dependent on the procurement of raw materials of right quality, in the right
quantities, from right source, at the right time and at right price popularly known as ten ‗R‘s‘ of the art of efficient purchasing. They
are described as the basic principles of purchasing. There are other well known parameters such as right contractual terms, right
material, right place, right mode of transportation and right attitude are also considered for purchasing.
1. Right price: 2. Right quality: 3. Right time: 4. Right source: 5. Right quantity: 6. Right attitude:
7. Right contracts: 8. Right material: 9. Right transportation: 10. Right place of delivery:
PURCHASING PROCEDURE
The procedure describes the sequence of steps leading to the completion of an identified specific task. The purchasing procedure
comprises the following steps.
1. Recognition of the need: 2. The Selection of the supplier: 3. Placing the order: 4. Follow-up of the order:
5. Receiving and inspection of the materials: 6. Payment of the invoice: 7. Maintenance of the records:
8. Maintenance of vendor relations:
SPECIAL PURCHASING SYSTEMS
The following are some of the important purchasing systems:
1. Forward buying: Forward buying or committing an organization far into the future, usually for a year. Depending upon the
availability of the item, the financial policies, the economic order quantity, the quantitative discounts, and the staggered delivery,
the future commitment is decided. This type of forward buying is different from speculative buying where the motive is to make
capital out of the price changes, by selling the purchased items. Manufacturing organizations normally do not indulge in such
buying. However, a few organizations do ‗Hedge‘, particularly in the commodity market by selling or buying contracts.
2. Tender buying: In public, all semblance of favouritism, personal preferences should be avoided. As such, it is common for
government departments and public sector undertakings to purchase through tenders. Private sector organizations adopt tender
buying if the value of purchases is more than the prescribed limits. The steps involved are to establish a bidders‘ list, solicit bids by
comparing quotations and place the order with the lowest bidder. However care has to be taken that the lowest bidder is
responsible party and is capable of meeting the delivery schedule and quality requirements. Open tender system or advertisement
in newspapers is common in public sector organizations. As advertising bids is costly and time consuming, most private sector
organizations solicit tenders only from the renowned suppliers capable of supplying the materials.
3. Blanket order system: This system minimizes the administrative expenses and is useful for ‗C‘ type items. It is an agreement to
provide a required quantity of specified items, over a period of time, usually for one year, at an agreed price. Deliveries are made
depending upon the buyer‘s needs. The system relieves the buyers from routine work, giving him more time for focusing attention
on high value items. It requires fewer purchase orders and thus reduces clerical work. It often achieves lower prices through
quantity discounts by grouping the requirements. The supplier, under the system maintains adequate inventory to meet the blanket
orders.
4. Zero stock: Some firms try to operate on the basis of zero stock and the supplier holds the stock for these firms. Usually, the
firms of the buyer and seller are close to each other so that the raw materials of one is the finished products of another.
Alternatively, the system could work well if the seller holds the inventory and if the two parties work in close coordination. However,
the price per item in this system will be slightly higher as the supplier will include the inventory carrying cost in the price. In this
system, the buyer need not lock up the capital and so the purchasing routine is reduced. This is also significantly reduces
obsolescence of inventory, lead time and clerical efforts in paper work. Thus, the seller can devote his marketing efforts to other
customers and production scheduling becomes easy.
5. Rate contract: The system of rate contract is prevalent in public sector organizations and government departments. It is
common for the suppliers to advertise that they are on ‗rate contract‘ for the specific period. After negotiations, the seller and the
buyer agree to the rates of items. Application of rate contract has helped many organizations to cut down the internal administrative
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lead time as individual firms need to go through the central purchasing departments and can place orders directly with the
suppliers. However, suppliers always demand higher prices for prompt delivery, as rate difficulty has been avoided by ensuring the
delivery of a minimum quantity at the agreed rates. This procedure of fixing a minimum quantity is called the running contract and
is being practised by the railways. The buyer also has an option of increasing the quantity by 25% more than the agreed quantity
under this procedure.
6. Reciprocity: Reciprocal buying means purchasing from one‘s customers in preference to others. It is based on the principle ―if
you kill my cat, I will kill your dog‖, and ―Do unto your customers as you would have them do unto you‖. Other things, like
soundness from the ethics and economics point of view being equal, the principles of reciprocity can be practiced. However, a
purchasing executive should not indulge in reciprocity on his initiative when the terms and conditions are not equal with other
suppliers. It is often sound that less efficient manufacturers and distributors gain by reciprocity what they are unable to gain by
price and quality. Since this tends to discourage competition and might lead to higher process and fewer suppliers, reciprocity
should be practised on a selective basis.
7. Systems contract: This is a procedure intender to help the buyer and the sellers to reduce administrative expenses and at the
same time ensure suitable controls. In this system, the original indent, duly approved by competent authorities, is shipped back
with the items and avoids the usual documents like purchase orders, materials requisitions, expediting letters and
acknowledgements, delivery period price and invoicing procedure, Carborandum company in the US claims drastic reduction in
inventory and elimination of 40000 purchase orders by adopting the system contracting procedure. It is suitable for low unit price
items with
STORES MANAGEMENT
Stores play a vital role in the operations of company. It is in direct touch with the user departments in its day-to-day activities. The
most important purpose served by the stores is to provide uninterrupted service to the manufacturing divisions. Further, stores are
often equated directly with money, as money is locked up in the stores.
FUNCTIONS OF STORES
The functions of stores can be classified as follows:
1. To receive raw materials, components, tools, equipment‘s and other items and account for them.
2. To provide adequate and proper storage and preservation to the various items.
3. To meet the demands of the consuming departments by proper issues and account for the consumption.
4. To minimise obsolescence, surplus and scrap through proper codification, preservation and handling.
5. To highlight stock accumulation, discrepancies and abnormal consumption and effect control measures.
6. To ensure good house keeping so that material handling, material preservation, stocking, receipt and issue can be done
adequately.
7. To assist in verification and provide supporting information for effective purchase action.
1 Codification
It is one of the functions of stores management. Codification is a process of representing each item by a number, the digit of which
indicates the group, the sub-group, the type and the dimension of the item. Many organizations in the public and private sectors,
railways have their own system of codification, varying from eight to thirteen digits. The first two digits represents the major groups,
such as raw materials, spare parts, sub-contracted items, hardware items, packing material, tools, oil, stationery etc. The next two
digits indicate the sub-groups, such as, ferrous, non-ferrous etc. Dimensional characteristics of length, width, head diameter etc.
constitute further three digits and the last digit is reserved for minor variations. Whatever may be the basis, each code should
uniquely represent one item. It should be simple and capable of being understood by all. Codification should be compact, concise,
consistent and flexible enough to accommodate new items. The groupings should be logical, holding similar parts near to one
another. Each digit must be significant enough to represent some characteristic of the item.
INVENTORY CONTROL OR MANAGEMENT
Inventory generally refers to the materials in stock. It is also called the idle resource of an enterprise. Inventories represent those
items which are either stocked for sale or they are in the process of manufacturing or they are in the form of materials, which are
yet to be utilised. The interval between receiving the purchased parts and transforming them into final products varies from
industries to industries depending upon the cycle time of manufacture. It is, therefore, necessary to hold inventories of various
kinds to act as a buffer between supply and demand for efficient operation of the system. Thus, an effective control on inventory is
a must for smooth and efficient running of the production cycle with least interruptions.
Reasons for Keeping Inventories
1. To stabilise production: The demand for an item fluctuates because of the number of factors, e.g., seasonality, production
schedule etc. The inventories (raw materials and components) should be made available to the production as per the demand
failing which results in stock out and the production stoppage takes place for want of materials. Hence, the inventory is kept to take
care of this fluctuation so that the production is smooth.
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2. To take advantage of price discounts: Usually the manufacturers offer discount for bulk buying and to gain this price
advantage the materials are bought in bulk even though it is not required immediately. Thus, inventory is maintained to gain
economy in purchasing.
3. To meet the demand during the replenishment period: The lead time for procurement of materials depends upon many
factors like location of the source, demand supply condition, etc. So inventory is maintained to meet the demand during the
procurement (replenishment) period.
4. To prevent loss of orders (sales): In this competitive scenario, one has to meet the delivery schedules at 100 per cent service
level, means they cannot afford to miss the delivery schedule which may result in loss of sales. To avoid the organizations have to
maintain inventory.
5. To keep pace with changing market conditions: The organizations have to anticipate the changing market sentiments and
they have to stock materials in anticipation of non-availability of materials or sudden increase in prices.
Sometimes the organizations have to stock materials due to other reasons like suppliers minimum quantity condition, seasonal
availability of materials or sudden increase in prices.
Inventory control is a planned approach of determining what to order, when to order and how much to order and how much to stock
so that costs associated with buying and storing are optimal without interrupting production and sales. Inventory control basically
deals with two problems: (i) When should an order be placed? (Order level), and (ii) How much should be ordered? (Order
quantity).
These questions are answered by the use of inventory models. The scientific inventory control system strikes the balance between
the loss due to non-availability of an item and cost of carrying the stock of an item. Scientific inventory control aims at maintaining
optimum level of stock of goods required by the company at minimum cost to the company.
TECHNIQUES OF INVENTORY CONTROL
In any organization, depending on the type of business, inventory is maintained. When the number of items in inventory is large
and then large amount of money is needed to create such inventory, it becomes the concern of the management to have a proper
control over its ordering, procurement, maintenance and consumption. The control can be for order quality and order frequency.
The different techniques of inventory control are: (1) ABC analysis, (2) HML analysis, (3) VED analysis, (4) FSN analysis, (5) SDE
analysis, (6) GOLF analysis and (7) SOS analysis.
The most widely used method of inventory control is known as ABC analysis. In this technique, the total inventory is categorised
into three sub-heads and then proper exercise is exercised for each sub-heads.
ECONOMIC ORDER QUANTITY (EOQ)
Inventory models deal with idle resources like men, machines, money and materials. These models are concerned with two
decisions: how much to order (purchase or produce) and when to order so as to minimize the total cost. For the first decision—how
much to order, there are two basic costs are considered namely, inventory carrying costs and the ordering or acquisition costs. As
the quantity ordered is increased,
the inventory carrying cost increases while the ordering cost decreases. The ‗order quantity‘ means the quantity produced or
procured during one production cycle. Economic order quantity is calculated by balancing the two costs. Economic Order Quantity
(EOQ) is that size of order which minimizes total costs of carrying and cost of ordering. i.e., Minimum Total Cost occurs when
Inventory Carrying
Cost = Ordering Cost.
Economic order quantity can be determined by two methods:
1. Tabulation method. 2. Algebraic method.
STANDARDIZATION
Standardization means producing maximum variety of products from the minimum variety of materials,
parts, tools and processes. It is the process of establishing standards or units of measure by which extent, quality, quantity, value,
performance etc., may be compared and measured.
SIMPLIFICATION
The concept of simplification is closely related to standardization. Simplification is the process of reducing the variety of products
manufactured. Simplification is concerned with the reduction of product range, assemblies, parts, materials and design.
VALUE ANALYSIS
Value engineering or value analysis had its birth during the World War II Lawrence D. Miles was responsible for developing the
technique and naming it. Value analysis is defined as ―an organized creative approach which has its objective, the efficient
identification of unnecessary cost-cost which provides neither quality nor use nor life nor appearance nor customer features.‖ Value
analysis focuses engineering, manufacturing and purchasing attention to one objective-equivalent performance at a lower cost.
Value analysis is concerned with the costs added due to inefficient or unnecessary specifications and features. It makes its
contribution in the last stage of product cycle, namely, the maturity stage. At this stage, research and development no longer make
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positive contributions in terms of improving the efficiency of the functions of the product or adding new functions to it. Value is not
inherent in a product, it is a relative term, and value can change with time and place. It can be measured only by comparison with
other products which perform the same function. Value is the relationship between what someone wants and what he is willing to
pay for it. In fact, the heart of value analysis technique is the functional approach. It relates to cost of function whereas others relate
cost to product. It is denoted by the ratio between function and cost.
ERGONOMICS (HUMAN ENGINEERING)
The word ‗Ergonomics‘ has its origin in two Greek words Ergon meaning laws. So it is the study of the man in relation to his work.
In USA and other countries it is called by the name ‗human engineering or human factors engineering‖. ILO defines human
engineering as, ―The application of human biological sciences along with engineering sciences to achieve optimum mutual
adjustment of men and his work, the benefits being measured in terms of human efficiency and well-being.‖ The human factors or
human engineering is concerned with man-machine system. Thus another definition which highlights the man-machine system is:
―The design of human tasks, man-machine system, and effective accomplishment of the job, including displays for presenting
information to human sensors, controls for human operations and complex man-machine systems.‖ Human engineering focuses on
human beings and their interaction with products, equipment facilities and environments used in the work. Human engineering
seeks to change the things people use and the environment in which they use the things to match in a better way the capabilities,
limitations and needs of people.
JUST-IN-TIME (JIT) MANUFACTURING
Just-in-Time (JIT) Manufacturing is a philosophy rather than a technique. By eliminating all waste and seeking continuous
improvement, it aims at creating manufacturing system that is response to the market needs. The phase just in time is used to
because this system operates with low WIP (Work-In- Process) inventory and often with very low finished goods inventory.
Products are assembled just before they are sold, subassemblies are made just before they are assembled and components are
made and fabricated just before subassemblies are made. This leads to lower WIP and reduced lead times. To achieve this
organizations have to be excellent in other areas e.g. quality.
According to Voss, JIT is viewed as a ―Production methodology which aims to improve overall productivity through elimination of
waste and which leads to improved quality‖. JIT provides an efficient production in an organization and delivery of only the
necessary parts in the right quantity, at the right time and place while using the minimum facilities‖.
Seven Wastes
Shiego Shingo, a Japanese JIT authority and engineer at the Toyota Motor Company identifies seven wastes as being the targets
of continuous improvement in production process. By attending to these wastes, the improvement is achieved.
1. Waste of over production eliminate by reducing set-up times, synchronizing quantities and timing between processes, layout
problems. Make only what is needed now.
2. Waste of waiting eliminate bottlenecks and balance uneven loads by flexible work force and equipment.
3. Waste of transportation establish layouts and locations to make handling and transport unnecessary if possible. Minimise
transportation and handling if not possible to eliminate.
4. Waste of processing itself question regarding the reasons for existence of the product and then why each process is necessary.
5. Waste of stocks reducing all other wastes reduces stocks.
6. Waste of motion study for economy and consistency. Economy improves productivity and consistency improves quality. First
improve the motions, then mechanise or automate otherwise. There is danger of automating the waste.
7. Waste of making defective products develop the production process to prevent defects from being produced, so as to eliminate
inspection. At each process, do not accept defects and makes no defects. Make the process fail-safe. A quantify process always
yield quality product.
MAINTENANCE MANAGEMENT
Past and current maintenance practices in both the private and Government sectors would imply that maintenance is the actions
associated with equipment repair after it is broken. The dictionary defines maintenance as ―the work of keeping something in
proper condition, upkeep.‖ This would imply that maintenance should be actions taken to prevent a device or component from
failing or to repair normal equipment degradation experienced with the operation of the device to keep it in proper working order.
Data obtained in many studies over the past decade indicates that most private and Government facilities do not expend the
necessary resources to maintain equipment in proper working order. They wait for equipment failure to occur and then take
whatever actions are necessary to repair or replace the equipment. Nothing lasts forever and all equipment has associated with it
some predefined life expectancy or operational life.
OBJECTIVES OF MAINTENANCE
Equipments are an important resource which is constantly used for adding value to products. So, it must be kept at the best
operating condition. Otherwise, there will be excessive downtime and also interruption of production if it is used in a mass
production line. Poor working of equipments will lead to quality related problems. Hence, it is an absolute necessity to maintain the
equipments in good operating conditions with economical cost. Hence, we need an integrated approach to minimize the cost of
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maintenance. In certain cases, the equipment will be obsolete over a period of time. If a firm wants to be in the same business
competitively, it has to take decision on whether to replace the equipment or to retain the old equipment by taking the cost of
maintenance and operation into account.
TYPES OF MAINTENANCE
The design life of most equipment requires periodic maintenance. Belts need adjustment, alignment needs to be maintained,
proper lubrication on rotating equipment is required, and so on. In some cases, certain components need replacement, e.g., a
wheel bearing on a motor vehicle, to ensure the main piece of equipment (in this case a car) last for its design life. Different
approaches have been developed to know how maintenance can be performed to ensure equipment reaches or exceeds its design
life. In addition to waiting for a piece of equipment to fail (reactive maintenance) the other approaches are preventive maintenance,
predictive maintenance, or reliability centered maintenance.
1 BREAKDOWN (REACTIVE) MAINTENANCE
Breakdown maintenance is basically the ‗run it till it breaks‘ maintenance mode. No actions or efforts are taken to maintain the
equipment as the designer originally intended to ensure design life is reached. Studies as recent indicate that, this is still the
predominant mode of maintenance. Our labour cost associated with repair will probably be higher than normal because the failure
will most likely require more extensive repairs than would have been required if the piece of equipment had not been run to failure.
Chances are the piece of equipment will fail during off hours or close to the end of the normal workday. If it is a critical piece of
equipment that needs to be back on-line quickly, we will have to pay maintenance overtime cost. Since we expect to run equipment
to failure, we will require a large material inventory of repair parts. This is a cost we could minimize under a different maintenance
strategy.
2 PREVENTIVE MAINTENANCE
Preventive maintenance can be defined as, ―Actions performed on a time or machine-run-based schedule that detect, preclude, or
mitigate degradation of a component or system with the aim of sustaining or extending its useful life through controlling degradation
to an acceptable level.‖ Preventive maintenance is a means to increase the reliability of their equipment. By simply expending the
necessary resources to conduct maintenance activities intended by the equipment designer, equipment life is extended and its
reliability is increased.
3 PREDICTIVE MAINTENANCE
Predictive maintenance can be defined as ―Measurements that detect the onset of a degradation mechanism, thereby allowing
causal stressors to be eliminated or controlled prior to any significant deterioration in the component physical state. Results
indicate current and future functional capability‖. Basically, predictive maintenance differs from preventive maintenance by basing
maintenance need on the actual condition of the machine rather than on some preset schedule. Preventive maintenance is timebased. Activities such as changing lubricant are based on time, like calendar time or equipment run time. For example, most
people change the oil in their vehicles every 3,000 to 5,000 miles travelled. This is effectively basing the oil change needs on
equipment run time. No concern is given to the actual condition and performance capability of the oil. It is changed because it is
time. This methodology would be analogous to a preventive maintenance task. If, on the other hand, the operator of the car
discounted the vehicle run time and had the oil analysed at some periodicity to determine its actual condition and lubrication
properties, he may be able to extend the oil change until the vehicle had travelled 10,000 miles. This is the fundamental difference
between predictive maintenance and preventive maintenance, whereby predictive maintenance is used to define needed
maintenance task based on quantified material/equipment condition.
.
MAINTENANCE PLANNING
Planning of maintenance jobs basically deals with answering two questions, ‗what‘ and ‗How‘ of the job; ‗what activities are to be
done?‘ and ‗how those jobs and activities are to be done?‘ While answering these two questions, other supplementary questions
are to be answered, e.g., ‗where the jobs is to be done?‘ and ‗why the job is to be done?‘ etc., but all these will be helping in
developing ‗what‘ and ‗how‘ of the job. It is very essential that engineering knowledge must be applied extensively to maintenance
jobs for development of appropriate job plans using most suited techniques, tools materials and special facilities etc. As the job
planning forms the basic foundations, over which the efficiency and cost of actions depends, persons responsible for job planning
should have adequate capabilities, such as, knowledge about jobs and available techniques, facilities and resources, analytical
ability, conceptual logical ability and judgmental courage etc.
MAINTENANCE SCHEDULING
Scheduling is the function of coordinating all of the logistical issue around the issues regarding the execution phase of the work.
Scheduled of maintenance jobs basically deals with answering two questions—‗Who‘ and ‗When‘ of job, i.e., ―who would do the
job‖ and ―when the job would be started and done‖.
Effective scheduling essentially needs realistic thinking, based on substantial data and records. Majority of scheduling work needs
to occur in areas such as overhead labour hours safety and toolbox meetings, break times and training times etc. Addition of
corrective and approved improvement actions as dictated by the prioritization system and operations plan etc.
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MAINTENANCE SCHEDULE TECHNIQUES
Different types of schedules are made suiting the respective job plans and different techniques are used for making and following
those schedules. The first step of all scheduling is to break the job into small measurable elements, called activities and to arrange
them in logical sequences considering the preceding, concurrent and succeeding activities so that a succeeding activity should
follow preceding activities and concurrent activities can start together.
Arranging these activities in different fashion makes different types of schedules. They are as follows:
1. Weekly general schedule is made to provide weeks‘ worth of work for each employee in an area.
2. Daily schedule is developed to provide a day‘s work for each maintenance employee of the area.
3. Gantt charts are used to represent the timings of tasks required to complete a project.
4. Bar charts used for technical analysis which represents the relative magnitude of the values.
5. PERT/CPM are used to find the time required for completion of the job and helps in the allocation of resources.
AUTOMATION
Automation is a technology concerned with the application of mechanical, electronic, and computerbased systems to operate and
control production. This technology includes automatic machine tools to process parts, automatic assembly machines, industrial
robots, automatic material handling and storage systems, automatic inspection systems for quality control, feedback control and
computer process control, computer systems for planning, data collection and decision-making to support manufacturing activities.
Automated production systems can be classified into three basic types:
1. Fixed automation,
2. Programmable automation, and
3. Flexible automation.
CHAPTER SUMMARY
Production is a central function in all organisations. It has a viable relationship with its environment. A good production policy is
desirable for efficient utilisation of resources. The method of production adopted by producers of goods depends on the product
and the quantity produced. There are three main types of production: • job production • batch production • flow production
Factory location is a key aspect of production that requires careful consideration in order to ensure cost effectiveness. Factors and
principles affecting these essential features must put into consideration before deciding to locate the factory in any chosen area.
Management must take some factors into consideration before selecting plant and equipment. Maintenance policy must be well
drawn out and allowance made for the movement of equipment and material at the outset. Failure to plan is planning to fail.
Management must take advantage of the object of planning and control for increased productivity. The production system is a
transformation process. It converts input into desirable output. The production system consists of input, process and output. Key
input are raw materials, people, energy, machines, fixed assets, method of working and information while process refers to the
conversion of input in combination to produce desirable output. Outputs are either desirable or undesirable. Productivity study is
primarily aimed at the best way to improve production at a reduced cost. Capacity measurement should take cognisance of
workers‘ performance through the use of time study. Our knowledge of standard and actual performance will help us not only to
capacity availability but also labour requirement. For easy mobility, a good factory layout is required. A good factory layout will
facilitate free-flow of movement of personnel and materials. Factory layout is the arrangement of machines, offices, equipment,
light electrical outlets, store room and all other facilities in the plant or office. The prime object of factory layout is to permit the
efficient flow of people and materials. The key function of production is to convert input into output. System design embraces
product design, forecasting demand, capacity planning, equipment design and work design which are key factors in management
production strategy. System operation is a key aspect of the production system. It consists of operation planning, operation control
and scheduling.
REVIEW QUESTIONS
1. Define Operations management. Explain the key concepts of Operations management with a schematic
diagram.
2. Distinguish between manufacturing and service operation with example.
3.What is strategic planning? Explain the role of models in strategic planning.
4. Define the term operations management. Briefly explain the strategic role of operations.
5. Write a note on system view of operations.
6. Define the term productive system.
7. Give two examples for the productive systems concerned to service and manufacturing respectively.
8. ―Operations strategy‖—A key element in corporate strategy. Briefly explain.
9. Differentiate between Production Management and Operations Management.
10. What are the various decisions and their applications made by operations manager in a POM system?
11. Explain the concept of productivity.
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CHAPTER FOURTEEN
MARKETING MANAGEMENT
LEARNING OBJECTIVES
This chapter deals with the learning and understanding of the principles of marketing. Students will be taught on the deeper part of
market targeting and marketing planning. By the end of this chapter, you should be able to:
 Differentiate between sales and marketing
 Appreciate the need for marketing planning.
 Describe the variables, techniques, and the processes used to segment markets.
 Develop Product and Pricing Strategy; types of marketing channels; Distribution and Promotion Strategies.
 Describe and integrate the relationships among the elements of the marketing mix.
INTRODUCTION
Change is occurring at an accelerating rate; today is not like yesterday, and tomorrow will be different from today. Continuing
today‘s strategy is risky; so is turning to a new strategy. Therefore, tomorrow‘s successful companies will have to heed three
certainties:
➤ Global forces will continue to affect everyone‘s business and personal life.
➤ Technology will continue to advance and amaze us.
➤ There will be a continuing push toward deregulation of the economic sector.
These three developments—globalization, technological advances, and deregulation—spell endless opportunities. But what
is marketing and what does it have to do with these issues?
Marketing deals with identifying and meeting human and social needs. One of the shortest definitions of marketing is ―meeting
needs profitably.‖ Whether the marketer is McDonald, which notices that people feel overweight and want tasty but less fatty food
and adds salad in their menu or IKEA, which notices that people want good furniture at a substantially lower price and creates
knock-down furniture—all illustrate a drive to turn a private or social need into a profitable business opportunity through marketing.
CORE CONCEPTS OF MARKETING
Marketing can be further understood by defining several of its core concepts.
NEEDS, WANTS AND DEMANDS
The marketer must try to understand the target market‘s needs, wants, and demands. Needs describe basic human
requirements. People need food, air, water , clothing and shelter to survive. People also have strong needs for recreation,
education, and entertainment. These needs become wants when they are directed to specific object that might satisfy the need.
An Cameroonian needs food but wants fufu, and vegetable . A person in Mauritius needs food but wants a mango, rice, lentils
and beans. Wants are shaped by one‘s society and culture . Demands are wants for specific products backed by an ability to pay .
Many people want a big & beautiful house; only a few are able and willing to buy one. Companies must measure not only how
many people want their product but also how many would actually be willing and able to buy it. These distinctions shed light on the
frequent criticism that ―marketers create needs‖ or ―marketers get people to buy things they don‘t want.‖ Marketers do not create
needs : Needs preexist marketers. Marketers, along with other societal influences, influence wants. Marketers might promote the
idea that a Mercedes would satisfy a person‘s need for social status. They do not, however, create the need for social status.
PRODUCT OR OFFERING
People satisfy their needs and wants with products. A product is any offering that can satisfy a need or want. We mentioned
earlier the major types of basic offerings : goods, services, experiences, events, persons, places, properties, organizations,
information, and ideas. A brand is an offering from a known source. A brand name such as McDonald‘ s carries many
associations in the minds of people: hamburgers, fun, children, fast food, Golden Arches. These associations make up the brand
image. All companies strive to build brand strength—that is, a strong, favorable brand image.
VALUE AND SATISFACTION
The product or offering will be successful if it delivers value and satisfaction to the target buyer . The buyer chooses between
different offerings on the basis of which is perceived to deliver the most value. We define value as a ratio between what the
customer gets and what he gives. The customer gets benefits and assumes costs. The benefits include functional benefits and
emotional benefits. The costs include monetary costs, time costs, energy costs, and psychic costs. Thus value is given by :
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Functional benefits + emotional benefits
Monetary costs + time costs + energy cost + psychic costs
EXCHANGE AND TRANSACTIONS
Exchange is only one of four ways in which a person can obtain a product. The person can self-produce the product or service, as
when a person hunts, fishes, or gathers fruit. The person can use force to get a product, as in a hold up or burglary . The person
can beg, as happens when a homeless person asks for food. Or the person can offer a product, a service, or money in exchange
for something he or she desires. Exchange, which is the core concept of marketing, involves obtaining a desired product from
someone by offering something in return. For exchange potential to exist, five conditions must be satisfied :
1. There are at least two parties.
2. Each party has something that might be of value to the other party .
3. Each party is capable of communication and delivery .
4. Each party is free to accept or reject the exchange offer .
5. Each party believes it is appropriate or desirable to deal with the other party .
Whether exchange actually takes place depends upon whether the two parties can agree on terms that will leave them both better
off (or at least not worse off) than before. Exchange is a value-creating process because it normally leaves both parties better off.
DEFINITION OF MARKETING
Numerous definitions were offered for marketing by different authors. Some of the definitions are as follows :
1. Creation and delivery of a higher standard of living.
2. Marketing is the process that seeks to influence voluntary exchange transactions between a customer and a marketer .
—William G . Zikmund and Michael d‘Amico
3. Marketing is the process of discovering and translating consumer needs and wants into products and services, creating demand
for these products and services and then in turn expanding this demand. —H.L. Hansen.
4. Marketing is the business process by which products are matched with markets and through which transfer of ownership are
affected. —Edward W . Cundiff
5. Marketing consists of the performance of business activities that direct the flow of goods and services from producers or
suppliers to consumers or end-users.—American Marketing Association
6. Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and
freely exchanging products and services of value with others. —Philip Kotler
7. Marketing is the performance of activities that seek to accomplish an organization‘ s objectives by anticipating customer or client
needs and directing the flow of need satisfying goods and services from producer to customer or client. —William D. Perreault and
E. Jerome McCarthy
MARKETING ENVIRONMENT
Marketing environment refers to all factors that have a direct or indirect bearing on the functioning of the business. Every
business firm encounters a set of internal and external factors. The internal environment consists of the factors which influence the
various strategies and decisions which happen within an organisation‘s boundaries. These factors include human resources,
company image, management structure, physical assets, technological capabilities, marketing resources, and financial factors. The
external environment comprises of micro and macro environmental factors. Micro environment is immediate environment of the
firm which include suppliers, consumers, competitors, intermediaries and publics. These factors are generally regarded as
controllable factors because the marketing department commands a fair amount of control over these factors and can modify or
alter as per the requirements of the organisation.
The businessmen must monitor the major macro environmental factors which include demographic, economic, political/legal,
technological and social/cultural factors. In the demographic environment, marketers must be aware of growth of population,
composition of age, educational levels and geographic shifts in population. In the economic arena, they need to focus on per capita
income, distribution of income, saving pattern and credit availability etc. In the technological factors, accelerating pace of
technological changes, opportunities for innovation and increased regulations of the government towards adopting technology are
the main concerns to be monitored. In the political/legal factors, businessmen must work within the laws and regulations so as to
protect their as well as society‘s interest. Finally, in the social/cultural environment, marketers must understand the prevalent
culture and its nature and must address the needs of different subcultures within a society. A continuous and vibrant monitoring of
the environment is indispensable for business growth.
MARKET
The term ―market‖ originates from the Latin word ―Marcatus‖ which means ―a place where business is conducted.‖ A layman
regards market as a place where buyers and sellers personally interact and finalise deals. According to Perreault and McCarthy ,
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market is defined as a group of potential customers with similar needs or wants who are willing to exchange something of value
with sellers offering various goods and/or services to satisfy those needs or wants. Of course, some negotiation will be needed.
This can be done face-to-face at some physical location (for example, a farmer ‘ s market). Or it can be done indirectly through a
complex network that links middlemen, buyers and sellers living far apart. Depending upon what is involved, there are different
types of markets which deals with products and/or services such as :
(1) Consumer Market: In this market the consumers obtain what they need or want for their personal or family consumption. This
market can be subdivided into two parts fast moving consumer goods market from where the consumers buy the products like
toothpaste, biscuits, facial cream etc. and services like internet, transportation etc. Another is durables market from where, the
consumers buy the products of longer life like motorcycles, cars, washing machines etc. and services like insurance cover , fixed
deposits in the banks and non-banking financial companies etc.
(2) Industrial/Business Market: In this market, the industrial or business buyers purchase products like raw materials (iron ore,
coke, crude oil etc.), components (wind-screen, tires, picture tubes, micro-processors etc), finished products (packaging machine,
generators etc.), office supplies (computers, pens, paper etc.) and maintenance and repair items (grease, lubricating oil, broom
etc.). Apart from products, now-a-days due to outsourcing the industrial buyers also require a number of services like accounting
services, security services, advertising, legal services etc. from the providers of these services.
(3) Government Market: In most of the countries central/federal, state or local governing bodies are the largest buyers requiring
and number of products and services. Government is also the biggest provider of services to the people, especially in a
developing country like India where army, railways, post and telegraph etc. services are provided by the Central Government and
State Govt. and local municipality provides services like roadways and police and sewage and disposal and water supply
respectively .
(4) Global Market: The world is rapidly moving towards borderless society thanks to information revolution and the efforts of WTO
to lower the tariff and nontariff barriers. The product manufacturers and service providers are moving in different countries to
sustain and increase their sales and profits. Although the global companies from the developed countries are more in number (A T
& T , McDonald‘s, Ford Motors, IBM, Sony , Citi Bank etc.); the companies from developing countries are also making their
presence felt in foreign countries
(5) Non-profit Market: On one hand the society is making progress in every field, on the other hand the number of problems that
it is facing are also increasing. Most of the people don‘t care for these problems due to variety of reasons such as—lack of
awareness, lack of time, selfish nature etc. So in order to fill the void, the non-profit organisations came into being. These
organisations support a particular issue or a charity and create awareness among the general public towards these issues and try
to obtain financial and non-financial support. For example there are NGOs who are working towards the conservation of flora and
fauna, etc. These non-profit organisations basically need monetary support from the individuals, institutions and governments to
promote a cause or a charity like old age home, free dispensary , free education, home for destitute etc.
These are the major markets which exist in country . These can also be different markets which deals in a particular
product or service.
EVOLUTION OF MARKETING
Once upon a time, when the needs and wants were satisfied by the barter trade, there was no need for marketing. Two parties
interested in each other‘s products simply negotiate with each other regarding the quantities of each product that must be
exchanged. Even at the time of industrial revolution when the demand for different products was far greater than the supply , even
in that scenario there was no need for marketing. In fact producers were focused on production aspects. With the advancement
of production technology and the increase in competition, the focus shifted through various functional areas towards marketing.
The evolution of marketing can be easily understood by understanding the company orientations toward the market place.
COMPANY ORIENTATIONS TOWARD THE MARKETPLACE
We have defined marketing management as the conscious effort to achieve desired exchange outcomes with target markets. But
what philosophy should guide a company‘ s marketing efforts ? What relative weights should be given to the interest of the
organization, the customers, and society ? Very often these interest conflict. Clearly , marketing activities should be carried out
under a well-thought-out philosophy of efficient, effective, and socially responsible marketing. However , there are five competing
concepts under which organizations conduct marketing activities : the production concept, product concept, selling concept,
marketing concept, and societal marketing concept.
THE PRODUCTION CONCEPT
The production concept is one of the oldest concepts in business. The production concept holds that consumers will prefer
products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high
production efficiency, low costs, and mass distribution. They assume that consumers are primarily interested in product
availability and low prices. This orientation makes sense in developing countries, where consumers are more interested in
obtaining the product than in its features. It is also used when a company wants to expand the market. Some service organizations
also operate on the production concept. Many medical and dental practices are organized on assembly-line principles, as are
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some government agencies (such as unemployment offices and license bureaus). Although this management orientation can
handle many cases per hour, it is open to charges of impersonal and poor-quality service.
THE PRODUCT CONCEPT
Other businesses are guided by the product concept. The product concept holds that consumers will favour those products that
offer the most quality , performance, or innovative features. Managers in these organizations focus on making superior products
and improving them over time. They assume that buyers admire well-made products and can appraise quality and performance.
However , these managers are sometimes caught up in a love affair with their product and do not realize what the market needs.
Management might commit the ―better-mousetrap‖ fallacy , believing that a better mouse-trap will lead people to beat a path to its
door . Product-oriented companies often design their products with little or no customer input. They trust that their engineers can
design exceptional products. Very often they will not even examine competitors‘ products. A General Motors executive said years
ago: ―How can the public know what kind of car they want until they see what is available?‖ GM‘s designers and engineers would
design the new car . Then manufacturing would make it. The finance department would price it. Finally , marketing and sales
would try to sell it. No wonder the car required such a hard sell ! GM today asks customers what they value in a car and includes
marketing people in the very beginning stages of design.
The product concept can lead to marketing myopia. Railroad management thought that travelers wanted trains rather than
transportation and overlooked the growing competition from airlines, buses, trucks and automobiles. That happened in America
and is likely to happen in India where middle class families are opting for their own vehicle. Slide-rule manufacturers thought that
engineers wanted slide rules and overlooked the challenge of pocket calculators. Colleges, departmental stores, and the post
office will assume that they are offering the public the right product and wonder why their sales slip. These organizations too often
are looking into a mirror when they should be looking out of the window .
THE SELLING CONCEPT
The selling concept holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organization‘ s
products. The organization must, therefore, undertake an aggressive selling and promotion effort. This concept assumes that
consumers typically show buying inertia or resistance and must be coaxed into buying. It also assumes that the company has a
whole battery of effective selling and promotion tools to stimulate more buying. The selling concept is practiced most aggressively
with unsought goods, goods that buyers normally do not think of buying, such as insurance etc. These industries have perfected
various sales techniques to locate prospects and hard-sell them on their product‘ s benefits.
The selling concept is also practiced in the non-profit area by fund-raisers, college admissions offices, and political parties.
A political party vigorously ―sells‖ its candidate to voters. The candidate moves through voting precincts from early morning to late
evening, shaking hands, kissing babies, meeting donors, and making speeches. Countless money is spent on radio and television
advertising, posters, and mailings. The candidate‘ s flaws are concealed from the public because the aim is to make the sale, not
worry about post purchase satisfaction. After the election, the new official continues to take a sales-oriented view . There is little
research into what the public wants and a lot of selling to get the public to accept the politician the party wants. Most firms practice
the selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the market wants. In
modern industrial economies, productive capacity has been built up to a point where most markets are buyer markets (the buyers
are dominant) and sellers have to scramble for customers.
Prospects are bombarded with TV commercials, newspaper ads, direct mail, and sales calls. At every turn, someone is trying
to sell something. As a result, the public often identifies marketing with hard selling and advertising. But marketing based on hard
selling carries high risks. It assumes that customers who are coaxed into buying a product will like it; and if they don‘t, that they
won‘t badmouth it or complain to consumer organizations and will forget their disappointment and buy it again. These are
indefensible assumptions. One study showed that dissatisfied customers may bad-mouth the product to 10 or more
acquaintances; bad news travels fast.
THE MARKETING CONCEPT
The marketing concept is a business philosophy that challenges the three business orientations we just discussed. Its central
tenets crystallized in the mid-1950s. The marketing concept holds that the key to achieving its organizational goals consists of the
company being more effective than competitors in creating, delivering, and communicating customer value to its chosen target
markets. Buyer determines the shape the ‗marketing mix‘ should take. What is to be offered as a product is determined by the
customer . The firm makes a ‗total product offering‘ that will match and satisfy the identified needs of the customer. The ‗product‘ is
the consequence of the marketing effort; the marketing effort leads to products that the customers actually want to buy in their own
interest. Emphasis on innovation in every sphere; on providing better value to the customer by adopting better technology .
Marketing communications is looked upon as the tool for communicating the benefits/satisfactions provided by the product.
Consumer determines price; price determines costs. They are seen as vital services to be provided to the customer , keeping
customer‘s convenience in focus. Emphasis is on integrated marketing; an integrated strategy covering product, promotion, pricing
and distribution. All departments of the business operate in a highly integrated manner, the sole purpose being generation of
consumer satisfaction.
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In firms practicing ‗marketing‘, marketing is the central function of the business; the entire company or business is organized
around the marketing function.
‗Marketing‘ views the customer as the very purpose of the business; sees the business from the point of view of the customer;
customer consciousness permeates the entire organisation—all departments and all people in the organisation— all the time.
―Putting people first.‖ (British Airways)
―Partners for profit.‖ (Milliken and Company)
Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing concepts:
Selling focuses on the needs of the seller; marketing on the needs of the buyer . Selling is preoccupied with the seller‘ s need to
convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the
whole cluster of things associated with creating, delivering and finally consuming it.
The marketing concept rests on four pillars : target market, customer needs, integrated marketing, and profitability. The
selling concept takes an inside-out perspective. It starts with the factory , focuses on existing products, and calls for heavy selling
and promoting to produce profitable sales. The marketing concept takes an outside-in perspective. It starts with a well-defined
market, focuses on customer needs, coordinates all the activities that will affect customers, and produces profits by satisfying
customers.
CONTEMPORARY MARKETING
A recent book, Radical Marketing, praises companies such as Harley-Davidson for succeeding by breaking all of the rules of
marketing. Instead of commissioning expensive marketing research, spending huge sums on advertising, and operating large
marketing departments, these companies stretch their limited resources, live close to their customers, and create more satisfying
solutions to customers‘ needs. They form buyers clubs, use creative public relations, and focus on delivering quality products to
win long-term customer loyalty. In fact, we can distinguish three stages through which marketing practice might pass:
1. Entrepreneurial marketing: Most companies are started by individuals who visualize an opportunity and knock on every door to
gain attention. Jim Koch, founder of Boston Beer Company, whose Samuel Adams beer has become a top-selling ―craft‖ beer,
started out in 1984 carrying bottles of Samuel Adams from bar to bar to persuade bartenders to carry it. For 10 years, he sold his
beer through direct selling and grassroots public relations. Today his business pulls in nearly $200 million, making it the leader in
the U.S. craft beer market.
2. Relationship marketing: As companies achieve success, they inevitably move toward more relationship marketing. Companies
build up long lasting relationship with their customers by carrying out different loyalty programs. It is easier to maintain an existing
customer than to gain a new one. The lifelong loyalty of a customer to the products of the company can be translated to higher
profits
3. Intrepreneurial marketing: Many large companies get stuck in formulated marketing, poring over the latest ratings, scanning
research reports, trying to fine-tune dealer relations and advertising messages. These companies lack the creativity and passion of
the guerrilla marketers in the entrepreneurial stage. Their brand and product managers need to start living with their customers and
visualizing new ways to add value to their customers‘ lives. The bottom line is that effective marketing can take many forms.
Although it is easier to learn the formulated side , we will also see how creativity and passion can be used by today‘s and
tomorrow‘s marketing managers.
4. The Societal Marketing Concept
Some have questioned whether the marketing concept is an appropriate philosophy in an age of environmental deterioration,
resource shortages, explosive population growth, world hunger and poverty and neglected social services. Are companies that do
an excellent job of satisfying consumer wants necessarily acting in the best long-run interests of consumers and society ? The
marketing concept sidesteps the potential conflicts among consumer wants, consumer interest, and long—run societal welfare
INTEGRATED MARKETING
When all the company‘s departments work together to serve the customer ‘ s interest, the result is integrated marketing.
Unfortunately , not all employees are trained and motivated to work for the customer .An engineer once complained that the
salespeople are ―always protecting the customer and not thinking of the company‘s interest‖! He went on to blast customers for
―asking for too much.‖ Integrated marketing takes place on two levels. First, the various marketing functions— sales forces,
advertising, customer service, product management, marketing research—must work together. Too often the sales force thinks
product managers set prices or sale quotas ―too high‖; or the advertising director and a brand manager cannot agree on an
advertising campaign. All these marketing functions must be coordinated from the customer‘ s point of view . Second, marketing
must be embraced by the other departments; they must also ―think customer .‖ According to David Packard of Hewlett-Packard :
―Marketing is far too important to be left only to the marketing department!‖
To foster teamwork among all departments, the company carries out internal marketing as well as external marketing.
External marketing is marketing directed at people outside the company . Internal marketing is the task of hiring, training, and
motivating able employees who want to serve customers well. In fact, internal marketing must precede external marketing. It
makes no sense to promise excellent service before the company‘ s staff is ready to provide it. Managers who believe the
customer is the company‘s only true ―profit center‖ consider the traditional organization chart—a pyramid with the president at the
top, management in the middle, and front-line people and customers at the bottom—obsolete. At the top are the customers; next
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in importance are the front-line people who meet, serve, and satisfy the customers; under them are the middle managers, whose
job is to support the front-line people so they can serve the customers well; and at the base is top management, whose job is to
hire and support good middle managers.
.
THE MARKETING MANAGEMENT PROCESS
Marketing is an ongoing process. It needs constant attention to be successful. Management must regularly obtain feedback
and use it to revise strategic plans. Management‘s role in the marketing effort is critical, for without diligent effort, the results will be
less than satisfactory. Large organizations normally have a director of marketing who is responsible for the management of all
marketing activities. However, in most firms, and especially in independent firms, the marketing function is the responsibility of an
operations manager who must be concerned with other functions as well. This, together with the lack of a sizeable budget, results
in a low priority for marketing in these situations.
MARKETING PLANNING
There are three basic questions that should be addressed during this process. The first question is ―Where are we now?‖ A
situation analysis should be performed to determine the company‘s strengths and weaknesses. This information is based on past
trends and historical performance, and it should include an analysis of the market and the competition. In addition, it is necessary
to scan the environment for opportunities and threats. Once the company has a good grasp of the situation, it is time to move on to
the next question.
The second question is ―Where do we want to go?‖ It is at this point that a company must set its goals and objectives for
operating in the future. These goals and objectives should be clear, concise, and measurable over a specific the marketing
management cycle time frame. All employees and stakeholders should be made aware of the strategic direction of the firm. Also,
these goals and objectives become targets for evaluating the performance of the company‘s employees. Finally, these goals and
objectives should be consistent with the company‘s mission statement.
The third question is ―How are we going to get there?‖ Once the company determines its direction for the future, it is necessary
to devise strategies and action plans that can serve as a road map. Basically, marketing managers develop marketing programs
that are consistent with the goals of the firm. The components of the marketing mix are under the direct control of managers, and
they can be used to form strategies that will help the company to reach its goals. The actions taken with price, the product-service
mix, promotion, and distribution should be integrated and lead to a common end.
MARKETING EXECUTION
Once the objectives and strategies are determined, the next step is to implement the action plans developed during the planning
process, using the specific timetable that was part of the marketing plan. This is accomplished using the promotional, advertising,
personal selling, and direct marketing materials and methods that were devised in the planning stage. Employees should be
informed about the company‘s plans for its service offerings and receive additional training if necessary. Unit managers and
franchisees should be made aware of the changes in the marketing plan so that they can implement them in their respective units.
MARKETING EVALUATION
The final step in the marketing management cycle is to monitor and control the elements of the marketing plan. Data are
collected and evaluated using a variety of marketing research methods and stored in forms that allow for easy retrieval.
Organizational performance needs to be analyzed in comparison with goals and objectives, looking for the underlying reasons for
the difference between stated performance goals and actual performance. Specifically, the company should analyze the
effectiveness of its marketing programs, including its strategies for pricing, promoting, and distributing its products and services.
The firm‘s performance can be evaluated relative to its competitors, using measures such as sales, market share, and customer
satisfaction. Finally, at this point, firms can return to the planning stage of the marketing management cycle and make any desired
changes in their objectives or their strategies.
MARKETING FUNCTIONS
A. Exchange Functions
1. Buying
2. Selling
B. Physical Functions
3. Storage
4. Transportation
5. Processing
C. Facilitating Functions
6. Standardisation
7. Financing
8. Risk Bearing
9. Market Intelligence
Each of these functions add value to the product and they require inputs, so they incur costs. As long as the value added to
the product is positive, most firms or entrepreneurs will find it profitable to compete to supply the service.
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EXCHANGE FUNCTIONS
Buying: The marketing concept holds that the needs of the customer are of paramount importance. A producer can be said to
have adopted a market orientation when production is purposely planned to meet specific demands or market opportunities. Thus a
contract farmer who wishes to meet the needs of a food processor manufacturing sorghum-based malted drinks will only purchase
improved sorghum seed. He/she will avoid any inputs likely to adversely affect the storage and/or processing properties of the
sorghum and will continually seek new and better inputs which will add further value to his/her product in the eyes of the customer.
In making his/her buying decisions his under laying consideration will be the effect upon the attractiveness of his/her output to the
markets he/she is seeking to serve.
The buyer's motive is the opportunity to maintain or even increase profits and not necessarily to provide, for example, the best
quality. Improving quality inevitably increases the associated costs. In some cases the market is insensitive to improvements in
quality, beyond some threshold level, does not earn a premium price. Under such circumstances, the grower who perseveres and
produces a ‗better product‘, is not market oriented since he/she is ignoring the real needs of the consumer. The most successful
agribusiness is the one which yields the largest difference between prices obtained and costs incurred.
Selling: Of the nine functions listed, this is probably the one which people find least difficulty in associating with marketing. Indeed
to many the terms marketing and selling are synonymous. Kotler suggests that:
―Most firms practice the selling concept when they have over capacity. Their immediate aim is to sell what they can make rather
than to make what they can sell.‖ There is no denying that ‗high pressure selling‘ is practiced, where the interests of the consumer
are far from foremost in the mind of the seller. This is not marketing. Enterprises adopt the marketing philosophy as a result of
becoming aware that their own long term objectives can only be realised by consistently providing customer satisfaction. Whereas
selling might create a consumer, marketing is about creating a customer. The difference is that marketing is about establishing and
maintaining long term relationships with customers. Selling is part of marketing in the same way that promotion, advertising and
merchandising are components, or sub-components of the marketing mix. These all directed towards persuasion and are
collectively known as marketing communications; one of the four elements of the marketing mix.
PHYSICAL FUNCTIONS
Storage: An inherent characteristic of agricultural production is that it is seasonal whilst demand is generally continuous
throughout the year. Hence the need for storage to allow a smooth and as far as possible, uninterrupted flow of products into the
market. Because he is dealing with a biological product the grower does not enjoy the same flexibility as his manufacturing
counterpart in being able to adjust the timing of supply to match demand. It would be an exaggeration to suggest that a
manufacturer can turn production on and off to meet demand - they too have their constraints- but they have more alternatives than
does the agricultural producer. A manufacturer can, for example, work overtime, sub-contract work, and over a longer time horizon,
the manufacturer can increase or decrease productive capacity to match the strength of demand.
In agriculture, and especially in Less Developed Countries, supply often exceeds demand in the immediate post-harvest
period. The glut reduces producer prices and wastage rates can be extremely high. For much of the reminder of the period before
the next harvest, the product can be in short supply with traders and consumers having to pay premium prices to secure whatever
scarce supplies are to be had. The storage function is one of balancing supply and demand. Both growers and consumers gain
from a marketing system that can make produce available when it is needed. A farmer, merchant, co-operative, marketing board or
retailer who stores a product provides a service. That service costs money and there are risks in the form of wastage and slumps in
market demand, prices, so the provider of storage is entitled to a reward in the form of profit.
Transportation: The transport function is chiefly one of making the product available where it is needed, without adding
unreasonably to the overall cost of the produce. Adequate performance of this function requires consideration of alternative routes
and types of transportation, with a view to achieving timeliness, maintaining produce quality and minimising shipping costs.
Effective transport management is critical to efficient marketing. Whether operating a single vehicle or a fleet of vehicles,
transportation has to be carefully managed, including cost monitoring - operations on different road types, fuel and lubrication
consumption and scheduled and remedial maintenance and repair. Skilful management of all aspects of vehicle operations can
also make a substantial contribution to efficient marketing especially with respect to optimum routing, scheduling and loading and
off-loading; maximisation of shift hours available, maintaining the vehicle fleet at an optimum size, taking account of time
constraints on delivery, and collection times and judicious management of vehicle replacement and depreciation. Transport
managers also have to weigh the advantages and disadvantages of owning, hiring or leasing transport.
Processing: Most agricultural produce is not in a form suitable for direct delivery to the consumer when it is first harvested. Rather
it needs to be changed in some way before it can be used. Kohls and Uhl observe that:
―The processing function is sometimes not included in a list of marketing functions because it is essentially a form changing
activity.‖ However, it is for this very reason that processing ought to be included as a marketing function. The form changing activity
is one of that adds value to the product. Changing green coffee beans into roasted beans, cassava into gari or livestock feed, full
fruit bunches into palm oil or sugarcane into Sugar increases the value of the product because the converted product has greater
utility to the buyer. How the form of produce is to be changed and the methods to be used in bringing about such changes are
marketing decisions. Of course, processing is not the only way of adding value to a product. Storing products until such times as
they are needed adds utility and therefore adds value. Similarly, transporting commodities to purchasing points convenient to the
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consumer adds value. In short, any action which increases the utility of the good or service to prospective buyers also adds value
to that product or service.
FACILITATING FUNCTIONS
The facilitating functions include product standardisation, financing, risk bearing and market intelligence. Facilitating functions are
those activities which enable the exchange process to take place. Marketing, in simple terms, is the act of supplying products to
someone in exchange for something perceived to be of equal or greater value, (usually, but not always, a given sum of money).
Facilitating functions are not a direct part of either the exchange of title or the physical movement of produce.
Standardisation: Standardisation is concerned with the establishment and maintenance of uniform measurements of produce
quality and/or quantity. This function simplifies buying and selling as well as reducing marketing costs by enabling buyers to specify
precisely what they want and suppliers to communicate what they are able and willing to supply with respect to both quantity and
quality of product. In the absence of standard weights and measures trade either becomes more expensive to conduct or
impossible altogether.
Quality differences in products arise for several reasons. Quality differences may be due to production methods and/or because
of the quality of inputs used. Technological innovation can also give rise to quality differences. In addition, a buyer's assessment of
a product's quality is often an expression of personal preference. Thus, for example, in some markets a small banana is judged to
be in some sense ‗better‘ than a large banana; white sugar is considered ‗superior‘ to yellow sugar; long stemmed carnations are of
‗higher quality‘ than short stemmed carnations; and white maize is ‗easier to digest‘ than yellow maize. It matters not whether the
criteria used in making such assessments are objective or subjective since they have the same effect in the marketplace. What
does matter in marketing is to understand how the buyer assesses ‗quality‘.
Financing: In almost any production system there are inevitable lags between investing in the necessary raw materials (e.g.
machinery, seeds, fertilizers, packaging, flavourings, stocks etc.) and receiving the payment for the sale of produce. During these
lag periods some individual or institution must finance the investment. The question of where the funding of the investment is to
come from, at all points between production and consumption, is one that marketing must address. Consider the problem of a food
manufacturer who wishes to launch a range of chilled products in a developing country where few retail outlets have the necessary
refrigeration equipment. This is a marketing problem. It might be solved by the food manufacturer buying refrigerators and leading
these to retailers (or arriving a hire-purchase arrangement with retailers).
A common marketing problem, in developing countries, is the low level of incomes leading to low levels of effective demand for
many products. The challenge to marketing is to somehow channel what income is available into effective demand. In the case of
agricultural equipment marketing this might involve offering hire-purchase schemes where the prospective buyer makes payment in
regular instalments.
Where a food item is being marketed, to a low income market, the seller can consider reducing the until price of the product by
making the pack or lot size smaller. Another tactic is to make the product more affordable by using cheaper ingredients and/or
packaging. Instant coffee can be sold at lower prices by substituting some of the coffee with chicory; the price of meat products is
reduced by increasing the percentage of cereals in these products and including less meat and/or making use of less expensive
parts of the animal such as entrails, offal, feet and head. Marketing is also concerned with the financing of the enterprise itself.
Here again some creative solutions can be developed. Where these sources of finance are considered inappropriate, or are simply
not available to a particular enterprise, a strategic alliance in the form of a joint venture could be the answer. These are
partnerships formed to exploit market opportunities more effectively and/or efficiently than either party can on its own. An
enterprise, in a developing country, may engage in a joint venture with either an indigenous partner and/or with a foreign partner.
The agreement between parties to a joint venture normally specifies their respective contributions of resources, share of
management control, profit and risk. Whatever the source of finance under consideration marketing has a role to play in evaluating
the appropriateness of that source as well as identifying it in the first place. A common requirement is that marketing proposals
include a forecast of the payback period. Those responsible for developing these proposals are best placed to evaluate the
compatibility between the market opportunity under consideration and the alternative modes of financing it. Of specific interest is
the prospect of the investment payback period matching the repayment schedule. Enterprises which finance long term investments
through short term sources of finance are either badly misinformed or have adopted a high risk strategy.
Risk bearing: In both the production and marketing of produce the possibility of incurring losses is always present. Physical risks
include the destruction or deterioration of the produce through fire, excessive heat or cold, pests, floods, earthquakes etc. Market
risks are those of adverse changes in the value of the produce between the processes of production and consumption. A change in
consumer tastes can reduce the attractiveness of the produce and is, therefore, also a risk. All of these risks are borne by those
organisations, companies and individuals. Risk bearing is often a little understood aspect of marketing. For example, when making
judgements as to whether a particular price is a ‗fair price‘ the usual reference point is the producer or supplier's costs. However
the risks borne are rarely taken into account by those passing judgement and yet, almost inevitably, there will be occasions when
the risk taker incurs losses. Stocks will spoil, markets will fall, cheaper imports will enter the country, and consumer tastes will
change, and so on. These losses can only be observed if adequate surpluses were generated in previous periods. Risk bearing
must be acknowledged as a cost since what is uncertain is not whether they will occur, but when they will occur.
Market intelligence: As for as is possible marketing decisions should be based on sound information. The process of collecting,
interpreting, and disseminating information relevant to marketing decisions is known as market intelligence. The role of market
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intelligence is to reduce the level of risk in decision making. Through market intelligence the seller finds out what the customer
needs and wants. The alternative is to find out through sales, or the lack of them. Marketing research helps establish what products
are right for the market, which channels of distribution are most appropriate, how best to promote products and what prices are
acceptable to the market. As with other marketing functions, intelligence gathering can be carried out by the seller or another party
such as a government agency, the ministry of agriculture and food, or some other specialist organisation. What is important is that
it is carried out.
SCOPE OF MARKETING
Marketing is typically seen as the task of creating, promoting and delivering goods and services to consumers and businesses. In
fact, marketing people are involved in marketing 10 types of entities : goods, services, experiences, events, persons, places,
properties, organizations, information and ideas. Marketing concepts can be used effectively to market these entities.
1. Goods—Good is defined as something tangible that can be offered to market to satisfy a need or want. Physical goods
constitute the bulk of most countries production and marketing effort. In a developing country like India fast moving consumer
goods (shampoo, bread, ketchup, cigarettes, newspapers etc.) and consumer durables (television, gas appliances, fans etc.) are
produced and consumed in large quantities every year .
2. Services—As economies advance, the share of service in gross domestic product increases. For example, in USA, service jobs
account for 79% of all jobs and 74% of GDP . A service can be defined as any performance that one party can offer to another
that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical
product. Services include the work of hotels, airlines, banks, insurance companies, transportation corporations etc. as well as
professionals like lawyers, doctors, teachers etc. Many market offerings consists of a variable mix of goods and services. At the
pure service end would be psychiatrist listening to a patient or watching movie in a cinema hall; at another level would be the
landline or mobile phone call that is supported by a huge investment in plant and equipment; and at a more tangible level would be
a fast food establishment where the consumer consume both a good and a service.
3. Experiences—By mixing several services and goods, one can create, stage and market experiences. For example water parks,
zoos, museums etc. provide the experiences which are not the part of routine life. There is a market for different experiences such
as climbing Mount Everest, river rafting, a trip to Moon, travelling in Trans Siberian Railways across five time zones etc.
4. Events—Marketers promote time–based, theme-based or special events such as Olympics, company anniversaries, sports
events, artistic performances, trade shows, award ceremonies, beauty contests, model hunts. There is a whole profession of event
planners who work out the details of an event and stage it. In India event management companies are growing and in case of
organizing
5. Persons—Celebrity marketing has become a major business. Years ago, someone seeking fame would hire a press agent to
plant stories in newspapers and magazines. Today most of football players like Messi , Ronaldo , Eto etc. are drawing help from
celebrity marketers to get the maximum benefit.
6. Places—Places–cities, states, regions and whole nations—compete actively to attract tourists, factories, company
headquarters and new residents. India and China are competing actively to attract foreign companies to make their production
hub. Cities like silicon valley in California, are promoted as centre for development of software. Kribi and Limbe and aggressively
promoting themselves to attract local as well as foreign tourists.
7. Properties—Properties are intangible rights of ownership of either real property (real estate) or financial property (share and
debt. instruments). Properties are bought and sold, and this requires marketing effort. Property dealers in Cameroon work for
property owners or seekers to sell or buy plots, residential or commercial real estate. Some builders both build and market their
residential and commercial real estates. Brokers and sub-brokers buy and sell securities on behalf of individual and institutional
buyers.
8. Organizations—Organizations actively work to build a strong, favourable image in the mind of their publics. We see ads of
Camtel which is trying to provide communication at lower rates. Companies can gain immensely by associating themselves with
the social causes. Universities and colleges are trying to boost their image to compete successfully for attracting the students by
mentioning their grades in the advertisements and information brochures.
9. Information—Information can be produced and marketed as a product. This is essentially what schools, colleges and
universities produce and distribute at a price to parents, students and communities. Encyclopaedas and most non-fiction books
market information. Magazines such as Fitness and Muscle provide information about staying healthy , Business India, Business
Today and Business World provide information about business activities that are taking place in various organizations.Outlook
Traveller provides information about various national and international tourist destination. There are number of magazines which
are focussed an automobiles, architecture and interior designing, computers, audio system, television programmes etc. which cater
to the information needs of the customers. We buy CDs and visit internet sites to obtain information. In fact, production,
packaging and distribution of information is one of the so