UNIT: 1
MANAGEMENT THEORY AND PRACTICE
Introduction:
During the last six-seven decades, management as a discipline
has attracted the attention of academicians and practitioners to a
very great extent. The basis reason behind this phenomenon is the
growing importance of management in day-to-day life of people.
Today, the society has large and complex institutions with many
people working together. The relationship between managers and
managed has changed as compared to the older master-servant
relationship making it more complex. People have greater
expectations from their jobs. In order to make all these things and
function properly, people have been trying to evolve some methods
and techniques. Such attempts have given the birth of management as
a separate discipline. It has been grown over the period of time
making itself one of the most respected disciplines. Today, the
study of management has become an important facet of human
life.
In order to satisfy his/her wants a person has to perform
numerous activities. An individual alone cannot perform all the
necessary activities. Therefore, human beings join or cooperate
together in the form of groups and organizations. Every
organization (a church, a government, an army, a family, a college,
a business enterprise) is basically a group of people seeking to
attain some common objectives. A central organ or agency is
required to coordinate the activities and efforts of various
individuals working together in an organization so that they can
work collectively as a team. Such an organ is called
management.
Concept (Meaning) of Management:-The term management conveys
different meanings depending upon the context in which it is used.
Being a new discipline, it has drawn concepts and principles form
economics, sociology, psychology, anthropology, history,
statistics, and so on. The result is that each group of
contributors has treated management differently. For example,
economists see management as a factor of production; sociologists
see it as a class or group of persons; practitioners of management
treat it as a process. Naturally, all these divergent groups view
the nature and scope of management from their own point of view.
Thus taking all these points of view together, it becomes difficult
to define management in a comprehensive way.
Definitions:Harold Koontz: Management is the art of getting
things done through and with people in formally organized
groups.Peter F. Drucker: Management is multipurpose organ that
manages a business and manages managers and manages worker and
work.Koontz and ODonnell: 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.
Salient Features (Nature of Management):-1. Management is
universal: Management is required in every form of group activity
whether it is a family, a club, a government, an army or a business
house. The approach and style of management may differ from one
organization to another. But in each case it involves marshalling
of human and physical resources towards the attainment of common
objectives. The fundamental principles of management are applicable
in all areas of organized effort. Managers at all levels perform
the same basic functions.2. Management is purposeful: Management
exists for the achievement of specific objectives. It is a means
towards the accomplishment of predetermined goals. All activities
of management are goal-oriented. The success of management is
measured by the extent to which the desired objectives are
attained. Management has no justification to exist in the absence
of objectives. Management is creative-a process of achieving
results. It makes things happen.3. Management is unifying force:
The essence of management lies in the coordination of individual
efforts into a team. Management reconciles the individual goals
with organizational goals. As a unifying force, management creates
a whole that is more than the sum of individual parts. It
integrates human and other resources.4. Management is a social
process: management is done by people through people and for
people. It is a social process because it is concerned with
interpersonal relations. Human factor is the most important element
in management. According to Appley, Management is the development
of people not the direction of things. A good manager is a leader
not a boss. It is the pervasiveness of the human element which
gives management its special character as a social process.5.
Management is multidisciplinary: Management has to deal with human
behavior under dynamic conditions. Therefore, it depends upon wide
knowledge derived from the several disciplines like engineering,
sociology, psychology, economics, mathematics, anthropology, etc.
The vast body of knowledge in management draws heavily upon other
fields of study.6. Management is a continuous process: Management
is a dynamic and on-going process. The cycle of management
continues to operate so long as there is organized action for the
achievement of group goals. 7. Management is intangible: Management
is an unseen or invisible force. It cannot be seen but its presence
can be felt everywhere in the form of results. However, the
managers who perform the functions of management are very much
tangible and visible.8. Management is situational: Efficient
management is always situational or contingency management because
there is not one best way of doing things. A successful manager
must take into account situational differences. This is what
management is all aboutthe application of knowledge realities in
order to attain desired results.9. Management is essentially an
executive function: It deals with the active direction and control
of the activities of people to attain predetermined objectives.
Management is a technique by means of which the objectives human
groups are determined, clarified and accomplished.10. Management is
an art as well as a science: Management contains a systematic body
of theoretical knowledge as well as the practical application of
such knowledge.
Scope of Management (Operative Functions of Management): The
scope of management is very wide. The various functional areas of
management may be classified into the following categories:1.
Production Management: Production or operations management is the
management of production and various operations in the organization
so as to produce the right goods, in right quality and quantity, at
the right time and at the right cost. It consists of the following
activities: a) designing the product, b) location and layout of
plant and buildings, c) operation of purchase and storage of
materials, d) planning and control of factory operations, e)
repairs and maintenance, f) inventory control and quality control,
and g) research and development, etc.2. Marketing Management:
Marketing management refers to the identification of consumers
needs and supplying them the goods and services which can satisfy
those wants. It involves the following activities: a) marketing
research to determine the needs and expectations of consumers,
b)setting appropriate prices, c) selecting the right channels of
distribution, d) promotional activities like advertising and
salesmanship to communicate with the customers.3. Financial
Management: Financial management seeks to ensure the right amount
and type of funds to business at the right time and at reasonable
cost. It comprises the following activities: a) estimating the
volume of funds required for both long-term and short-term needs of
business, b) selecting the appropriate sources of funds, c) raising
the required funds at the right time, d) ensuring proper
utilization and allocation of raised funds so as to maintain safety
and liquidity of funds and the creditworthiness and profitability
of business, and e) administration of earnings. Thus financial
management involves the planning, organizing and controlling of the
financial resources.4. Personnel Management: Personnel management
involves planning, organizing, directing and controlling the
procurement, development, compensation, maintenance, etc. of the
human resources in an enterprise. It consists of the following
activities: a) manpower planning, b) recruitment, and selection, c)
training and development, d) performance appraisal, e) compensation
and promotion, f) employee services and benefits, and g) personnel
records and research etc.
Management: Science or Art
The controversy with regard to the nature of management, as to
whether it is a science or art, is very old. This controversy,
however, is not very much in the air though the controversy is yet
to be settled. Specification of exact nature of management as
science or art or both is necessary to specify the process of
learning of management. It is to be noted that learning process in
science differs from that of art. Learning of science basically
involves the assimilation of principles while learning of art
involves its continuous practice. Much of the controversy of
management as science or art is on account of the fact that the
earlier captains of the industry and managers have used intuition,
hunches, commonsense, and experience in managing organizations.
They were not trained professional managers, although they were
very brilliant and had developed commonsense through which they
managed well.
Management as an Art:Art involves the practical application of
personal skills and knowledge to achieve concrete results. It is
the practical way of doing specific things. The function of the art
is to effect change and to achieve desired results. Art represents
how of human behavior or the know-how to do work. Art is a
personalized process and every artist has his own style. Art is
essentially creative and the success of an artist is measured by
the results he achieves. Thus the main elements of an art are: a)
personal skills, b) practical know-how, c) result-orientation, d)
creativity, and e) constant practice aimed at perfection.
Management is basically an art because of the following
reasons:a) Like any other artist, a manager applies his knowledge
and skills to coordinate the efforts of his people.b) Management
seeks to achieve concrete practical results, e.g., profits, growth,
social service, etc., in a given situation.c) Like any other art,
management is creative. It brings out new situations and converts
resources into output.d) Management is personalized process. Every
manager adopts his own approach towards problems depending upon his
perception and the environmental condition.e) Effective management
leads to realization of organizational and other goals. The success
of a manager is measured by the results he achieves. Mastery in
management requires a sufficiently long period of experience in
managing. The managerial art can be refined through continuous
practice.
Management as a Science:The essential elements of science are as
follows:a) Science is a systematized body of knowledge pertaining
to a particular field of inquiry. It is systematized in the sense
that it establishes cause and effect relationship between different
variables.b) It contains underlying principles and theories
developed through continuous observation, experimentation and
research.c) The principles have universal applicability. They can
be applied under different situations barring a few exceptions
which can be logically explained. The principles are verifiable and
lead to predictable results.d) The organized body of knowledge can
be taught and learnt in the classroom and outside. Physics,
Chemistry, Mathematics and Economics are some examples of
science.Management is a science because it contains all the
essentials of science:a) There is now a systematized body of
knowledge. Principles and theories are now available in every area
of management. b) Principles of management have been evolved
through practical experience and theoretical research over several
decades. c) Managerial principles have a wide and repetitive range
of application. d) Management theory and principles can be taught
in classrooms and in industry.
Thus, management is neither exclusively an art nor exclusively a
science but a combination of both. According to Koontz and
ODonnell, Essentially, managing is the art of doing and management
is the body of knowledge which underlies the art. Science without
art is sterile and art without science is blind. Every art is based
on an underlying body of knowledge and with every advancement in
science; art is freed from dependence on intuition and judgment. A
manager without any knowledge of underlying theory has to depend on
luck, precedents and intuition which are highly unreliable.
Management theory helps him to understand the problems correctly.
It provides insight to diagnose problems and opportunities. It
encourages systematic thinking and right perspective. Therefore,
management theory is a foundation to management practice.
Management theory cannot by itself lead to success in management.
Acquiring knowledge and skills in management is not an end in
itself. A person with an advanced degree or diploma in management
cannot be an effective manager unless he knows how to apply
management theory in real business situations. The science of
management may be learnt in the classroom but practice is required
to make its successful use. The practicing manager is like
goldsmith who has to cut, refashion and give a finish to the gold
of principles to meet specific situations faced by him. If the
existing body of knowledge does not provide the solution to his
problem, he will seek new solutions thereby adding to the science
of management.Thus, the theory (science) and practice (art) of
management go side by side for the efficient functioning of an
organization.
Management Vs. Administration:
There has been a controversy on the use of the two
termsmanagement and administration. Various authorities have
expressed divergent views. Many experts make no distinction between
administration and management and use them as synonyms. Several
American writers consider them as two distinct functions. A few
experts treat administration as a part of management. Then, three
points of view are explained here:1. Administration is above
management: According to this viewpoint administration is a
top-level function while management is a lower-level function.
Administration is a determinative (thinking) function concerned
with laying down basic objective and broad policies of an
organization. On the other hand, management is an executive (doing)
function involving the direction of human effort towards the
realization of such objectives. Therefore, managers are often
called executives. This view is held by eminent American experts on
management. Oliver Sheldon was the first person to make a
distinction between management and administration. According to
him, Administration is the function in industry concerned with the
determination of corporate policy, the coordination of finance,
production and distribution, the settlement of the compass
(structure of the organization), and ultimate control of the
executive. Management, on the other hand, is the function in
industry concerned with the execution of policy within the limits
setup by administration, and the employment of the organization for
the particular objective set before it. Administration defines the
goal, management strives toward it. Thus, this view considers
administration as superior to management.2. Administration is a
part of management: European School of thought holds that
management is a comprehensive term and administration is a part of
it According to E.F.L. Brech, Management is the generic term for
the total process of executive control involving responsibility for
effective planning and guidance of the operations of an enterprise.
Administration is that part of management which is concerned with
the installation and carrying out of the procedures by which the
program is laid down and communicated and the progress of
activities is regulated and checked against plans. Thus, the
European viewpoint is exactly opposite to the American viewpoint.3.
Administration and management are one: Henry Fayol, Georgy R.
Terry, Harold Koontz, William Newman and many other writers make no
distinction between administration and management. Fayol said, all
undertakings require the same functions and all must observe the
same principles. There is one common science which can be applied
equally well to public and private affairs. According to W. H.
NewMan, management or administration is the guidance, leadership
and control of the efforts of a group of individuals towards some
common goals.The distinction between administration and management
is superfluous and meaningless. In practice, the two terms are used
interchangeably because both involve the same principles and
functions. Somehow, the world management has become popular in
business enterprises where economic performance is of primary
importance. On the other hand, the term administration is preferred
in government departments, hospitals, religious trusts, educational
institutions, and other non-business organizations.
Levels of Management: In every company, there is a managerial
hierarchy or chain of command which consists of several levels of
authority. The number of management levels may differ from company
to company. In a big company, the management levels may be
classified as follows:1. Top management2. Middle management and 3.
Supervisory or Operating or First Line management1. Top management:
Top management consists of a Board of Directors and the Chief
Executive. Chief executive may be an individual, e.g., managing
director, general manager, chief operating officer etc. or a group
consisting of chairman and functional/executive directors. Board of
directors is accountable to the shareholders in the Annual General
Meeting of the company. It is basically an organ of overall review
and control. Chief executive is concerned with the overall
management of the companys operations. He maintains coordination
among different departments/subsidiaries/units of the company. He
also keeps the organization in harmony with its external
environment.Thus, the main functions of top management are:a) To
analyze and interpret changes in the external environment of the
company;b) To establish long-term corporate plans (goals, policies
and strategies) of the company.c) To formulate and approve the
master budget and departmental budgets.d) To design broad
organization structure.e) To appoint departmental heads and key
executives.f) To coordinate and integrate the activities of
different departments and divisions of the company.g) To provide
overall direction and leadership to the company.h) To exercise
overall review and control of the financial and operating results
of the company.i) To represent the company to the outside world
(public relations), and j) To decide the distribution of profits,
etc.
Intermediate Management: Intermediate or upper middle management
comprises departmental or divisional heads, e.g. works manager,
marketing manager, finance and HR managers etc. It is also known as
departmental or functional management. Every divisional or
departmental head is the overall in-charge of one particular
division or department. He is accountable for the performance of
his division or department to the chief executive. He performs the
usual managerial functions of planning, organizing, staffing,
directing and controlling in relation to one department. He
coordinates and controls the activities of all personnel working in
different branches or sections of his particular department.
2. Middle Management: Middle management or lower middle
management level consists of sectional heads, e.g., plant manager,
area sales manager, branch manager, office manager, etc. These
executives serve as a link between intermediate or top management
and the operating management. The main functions of middle level
managers are:a) To interpret and explain the plans and policies
formulated by top management;b) To monitor and control the
operating performance;c) To cooperate among themselves so as to
integrate the various activities of a departmentd) To train,
motivate and develop supervisory personnel, ande) To lay down rules
and regulations to be followed by supervisory personnel.
3. Supervisory or Operating Management: This is the lowest or
first level of management in an organization. It consists of
supervisors, foremen, sales officers, accounts officers, purchasing
officers etc. The distinguishing feature of supervisory management
is that it deals with non-managers, i.e., workers, whereas all
other levels deal with executives. Supervisors and operating
managers maintain close contacts with the rank and file workers and
supervise day-to-day operations. They serve as the channel of
communication between management and the workforce. They are
concerned with the mechanics of jobs. The functions of supervisory
management are as follows:a) To plan day-to-day production within
the goals laid down by higher authorities.b) To assign jobs to
workers and to make arrangements for their training and
development.c) To issue orders and instructions.d) To supervise and
control workers operations and to maintain personal contacts with
them.e) To arrange materials and tools and to maintain machinery.f)
To advise and assist workers by explaining work procedures, solving
their problems etcg) To maintain discipline and good human
relations among workers.h) To report feedback information and
workers problems to the higher authorities.
Skills of a Manager: The job of a manager has become very
challenging. Several skills are required in order to be a
successful manager. The skills of an effective manager may be
classified into four categories as given below:1. Technical Skills:
Technical skills refer to the ability and knowledge in using the
equipment, techniques and procedures involved in performing
specific tasks. These skills require specialized knowledge and
proficiency in the mechanics of a particular job. Ability in
programming and operating computer is a technical skill. There are
two things a manager should understand about technical skills. In
the first place, he must know which skills should be employed in
his particular enterprise and be familiar enough with their
potentiality to ask discerning questions of his technical advisers.
Secondly, a manager must understand both the role of each skill
employed and the interrelationships between the skills.2. Human
Skills: Human skills consist of the ability to work effectively
with other people both as individuals and as members of a group.
These are required to win co-operation of others and to build
effective work teams. Such skills require a sense of feeling for
others and capacity to look at things from others point of view.
Human skills are reflected in the way a manager perceives his
superiors, subordinates and peers. An awareness of the importance
of human skills should be part of a managers orientation and such
skills should be developed throughout the career. While technical
skills involve mastery of things, human skills are concerned with
understanding of people.
Conceptual Skills Human Skills Technical SkillsTop
Management
Middle Management
Operating Management
3. Conceptual Skills: Conceptual skills comprise the ability to
see the whole organization and the inter-relationships between its
parts. These skills refer to the ability to visualize the entire
picture or to consider a situation in its totality. Such skills
help the manager to conceptualize the environment, to analyze the
forces working in a situation and to take a broad and farsighted
view of the organization. Conceptual skills also include the
competence to understand a problem in all its aspects and to use
original thinking in solving the problem. Such competence is
necessary for rational decision making. Thus, technical skills deal
with jobs, human skills with persons and conceptual skills with
ideas.4. Diagnostic Skills: Diagnostic skills include the ability
to determine, by analysis and examination, the nature and
circumstances of a particular condition. It is not only the ability
to specify why something happened but also the ability to develop
certain possible outcomes. It is the ability to cut through
unimportant aspects and quickly get to the heart of the problem,
i.e., logical thinking, analytical reasoning and creativity.
Diagnostic skills are probably the most difficult ones to develop
because they require the proper blend of analytic ability with
commonsense and intelligence to be effective.
Technical skills are most important at the supervisory or
operating level where a close understanding of job techniques is
necessary to guide workers. Higher level managers deal with
subordinate managers and specialized technical knowledge is
comparatively less important and human and conceptual skills are
more important. Conceptual skills are very important for top
management in formulating long range plans, making broad policy
decisions, and relating the business enterprise to its industry and
the economy. Thus, the relative importance of conceptual skills
increases as we move to higher levels of management. Human skills
are equally important at all levels of management. This should be
self-evident as management is the process of getting things done
through people.
Roles of a Manager: The job of a modern manager is very complex
and multi-dimensional. Henry Mintzberg has identified ten roles of
a manager which are grouped into three categories. There is some
arbitrariness in this classification but it is a useful framework
for analyzing and understanding the managerial job. These roles are
inseparable and should, therefore, be viewed as an integrated
whole. For example, status, as manifested in the interpersonal
roles, brings information to the manager, and it is this
information (together with the status) that enables him to perform
the decision-making role effectively.A brief description of the ten
roles is given below:1. Figurehead: In this role a manager performs
symbolic duties required by the status of his office. Making
speeches, bestowing honors, welcoming official visitors,
distributing gifts to retiring employees are examples of such
ceremonial and social duties.2. Leader: This role defines the
managers relationship with his own subordinates. The manager sets
an example, legitimizes the power of subordinates and brings their
needs in accord with those of his organization.3. Liaison: It
describes a managers relationships with the outsiders. A manager
maintains mutually beneficial relations with other organizations,
governments, industry groups etc.4. Monitor: It implies seeking and
receiving information about his organization and external events.
An example is picking up a rumor about organization. 5.
Disseminator: It involves transmitting information and judgments to
the members of the organization. The information relates to
internal operations and the external environment. A manager calling
a staff meeting after business trip is an example of such a role.6.
Spokesman: In this role, a manager speaks for his organization
lobbies and defends his enterprise. A manager addressing the trade
union is an example.7. Entrepreneur: It involves initiating change
or acting as a change agent. For example, a manager decides to
launch a feasibility study for setting up a new plant.8.
Disturbance Handler: This refers to taking charge when the
organization faces a problem or crisis, e.g., a strike, feud
between subordinates, loss of an important customer. A manager
handles conflicts, complaints and competitive actions.9. Resource
Allocator: In this role a manager approves budgets and schedules,
sets priorities and distributes resources.10. Negotiator: As a
negotiator, a manager bargains with suppliers, dealers, trade
unions, agents, etc.
Importance of Management: The survival and growth of an
organization depends largely on the competence and character of its
management. Every organization needs repeated stimulus which only
managers can provide. Management is the dynamic life-giving element
in every organization. Without management the resources of
production remain resources and can never become output.
Organizations stand or fall on the quality of their managements
because sound management provides the following benefits: 1.
Achievement of group goals: Management enables an enterprise to
achieve its desired objectives through proper planning and control.
It decides what should be done and how. It lays down the long-term
and short-term goals keeping in mind the resources of the
enterprise. Management maintains order and coordination and without
it there will be utter chaos. Management also creates a sound
organization structure that prov8des specialization. Through a
well-organized system of direction and control, management keeps a
close watch on the activities of the organization. Thus, management
makes an organization successful through sound resource planning
and effective control. 2. Optimum utilization of resources:
Materials, machinery, and money are the physical factors of
production. The efficient use of these resources depends upon the
efficiency and motivation of workers. Management makes the workers
efficient and motivated through training, supervision and inspiring
leadership. Managers guide and motivate workers towards best
performance. They tell workers what to do and how to do their jobs.
Managers develop a spirit of mutual cooperation and a sense of
responsibility among workers.3. Fulfillment of social obligations:
Sound management monitors the environment of business and makes
necessary changes in business policies and practices so as to keep
the consumers and workers satisfied. In this way, managers help an
enterprise to fulfill its obligations towards different sections of
society. Management balances and integrates various interests in
group efforts.4. Economic growth: Management is the catalyst of
economic growth. We no longer talk of capital and labor but of
management and labor. Peter F. Drucker said, Development is a
matter of human energies rather than of economic growth, and the
generation of human energies is the task of management. Management
is the mover and development is the consequence.5. Stability:
Management ensures the survival of an organization in a fast
changing environment. It coordinates the activities of different
departments in an organization and maintains team spirit amongst
the personnel. Just as mind controls the body, similarly management
directs and controls the organization to keep it on the right
track.6. Human development: Management is not simply the direction
of things but the development of men. It improves the personality
and caliber of people to raise their efficiency and productivity. A
good manager serves as a friend and guide to his subordinates. 7.
Meets the challenge of change: Management is the catalytic force
that enables an organization to face the challenge of change. The
environment of business has become very turbulent. Managers
maintain a dynamic equilibrium between an enterprise and its
environment through innovation and creativity.
Thus, good management achieves both economic and social
objectives by making best use of human and material resources and
by providing satisfaction of people. In the words of John F. Mee,
Management is an art of securing maximum results with a minimum of
effort so as to ensure maximum prosperity for the employer and
employee and give the public the best possible service.In recent
years the role of management has increased due to the following
challenges:a) Growing size and complexity of businessb) Changing
technologyc) Need for optimum utilization of resources,d)
Cut-throat competition in the markete) Uncertain business
environmentf) Increasing expectations of social groups andg) Growth
of trade union movement.
Management as a Process:Process means a series of operations or
actions necessary to achieve certain results. A process has a
beginning and termination. It consists of some distinct stages or
steps which take place in a sequential manner. As a process
management refers to a series of interrelated elements or
functions. These are:a) Defining the aims or objectives of the
organization;b) Formulating policies, procedures, programs, etc. to
attain these objectives efficiently and economically;c) Bringing
together men, money, materials, machinery and other factors of
production;d) Assigning work or duties to people and defining their
authority and responsibility;e) Guiding and inspiring people to
perform the assigned tasks planned andf) Exercising control over
the performance of people.
Management
ProcessPlanningOrganizingStaffingDirectingControlling
Elements of the Management Process.
Nature or Features of the Process of Management: The process of
management is characterized by the following features: 1.
Continuity: Management is a continuous process. This process is
analyzed into several elements like planning, organizing, staffing,
directing and controlling. But this does not mean that the process
always begins with planning and comes to an end with controlling.
The elements or function are interrelated and interdependent. The
functions may be fused and the sequence may begin with any function
and the entire process cycle may be completed. It is therefore,
undesirable to insist that a manager must perform the functions
always in a definite chronological sequence. The management cycle
is never ending and is repeated over and over again. 2. Circular:
The managerial functions are interactive in nature. This means they
are contained within each other. For example, planning, organizing,
directing and controlling all may occur within the planning
process. In a way, all functions may be considered as sub-functions
of each other. A preceding element of the management process
influences all the success elements and is in turn influenced by
them. Therefore, management is circular and not a linear process.3.
Social: Management is a human and social process and not a
mechanical one. It influences significantly the people inside and
outside an organization and the society as a whole. Management has
far-reaching social consequences. Therefore, a manager while taking
decision must remember the likely impact of his decision on
society. Moreover, the management process is carried out by people,
through people and for people.4. Composite: All the managerial
functions must be considered in the totality because management
process is an organic and integrated whole. Each function makes a
distinct contribution to this process but cannot be considered in
isolation. All the functions contribute to the whole and derive
strength from each other. The final outcome is greater than the
aggregate of their individual contributions. A manager performs the
various functions simultaneously in a continuum.
Classification of Management Functions:The elements of
management process are known as functions of management. There is,
no single list of functions acceptable to all. Various authors have
classified these functions differently. Henry Fayol has classified
them into planning, organizing, commanding, coordinating and
controlling. R.C. Davis identified planning, organizing, and
coordination as parts of control. Luther Gullick has given keyword
POSDCORB which stands for Planning, Organizing, Staffing,
Directing, Controlling (Co), Reporting and Budgeting. Koontz and
ODonnell have suggested planning, organizing, staffing, directing
and controlling. Ernest Dale has in addition mentioned innovation
and representation.Broadly, management functions are two types: 1.
Managerial Functions2. Operative Functions
1. Managerial Functions: Managements managerial functions are
planning, organizing, staffing, directing, controlling. Though the
managerial functions are necessary at all levels of organization,
the relative significance of different functions may not be the
same at all levels of management. The time spent on planning and
control is more significant at higher levels of management. A brief
description of different managerial functions of management is
given below: a) Planning: Planning is the most basic or primary
function of management. It precedes other functions because a
manager plans before he acts. Planning involves determining the
objectives and selecting a course of action to achieve them. It
implies looking ahead and deciding in advance what is to be done,
when and where it is to be done, how and by whom it is to be done.
Planning is a mental process requiring the use of intellectual
faculties, foresight, imagination and sound judgment. It consists
of forecasting, decision-making and problem solving. A plan is a
predetermined future course of action. b) Organizing: Once plans
are formulated, the next step is that of organizing. Organizing is
the process of establishing harmonious authority-responsibility
relationships among the members of the enterprise. It is the
function of creating a structure of duties and responsibilities.
The network of authority-responsibility relationships is known as
organization structure. According to Henry Fayol, to organize a
business is to provide it with everything useful to its functioning
raw materials, tools, capital and personnel. The process of
organizing consists of the following steps:i) Determining and
defining the activities required for the achievement of planned
goals;ii) Grouping the activities into logical and convenient
units;iii) Assigning the duties and activities to specific
positions and people;iv) Delegating authority to these positions
and people;v) Defining and fixing responsibility for performance;
andvi) Establishing horizontal and vertical
authority-responsibility relationships throughout the organization.
c) Staffing: Staffing is the process of filling all positions in
the organization with adequate and qualified personnel. According
to Koontz and ODonnell, The managerial function of staffing
involves manning the organizational structure through proper and
effective selection, appraisal and development of personnel to fill
the roles designed into the structure. Staffing consists of
manpower planning, recruitment, selection, training, compensation,
integration and maintenance of employees. Staffing function has
become important with growing size of organization, technological
advancement and recognition of the human factor in industry.d)
Directing: Directing is the managerial function of guiding,
supervising, motivating and leading people towards the attainment
of planned targets of performance. In the process of directing his
subordinates, a manager takes active steps to ensure that the
employees accomplish their tasks according to the established
plans. Directing is the executive function of management because it
is concerned with the execution of plans and policies. Direction
initiates organized action and sets the whole organizational
machinery into action. It is the life spark of an organization.
Directing function of management embraces the following
activities:i) Issuing orders and instructions,ii) Supervising
people at work,iii) Motivation i.e. creating the willingness to
work for certain objectives,iv) Communication, i.e. establishing
understanding with employees regarding plans and their
implementation, and v) Leadership or influencing the behavior of
employees.e) Controlling: Controlling is the process of ensuring
that the organization is moving in the desired direction and that
progress is being made towards the achievement of goals. The
process of controlling involves the following steps: a)
establishing standards for measuring work performance; b)
measurement of actual performance and comparing it with the
standards; c) finding variances between the two and the reasons
therefore; and d) taking corrective action for correcting
deviations so as to ensure attainment of objectives.
2. Operative Functions of Management: These are: Production and
Operations Management Marketing Management Financial Management
Personnel or Human Resource ManagementSee for explanation: Scope of
Management heading in the previous chapter.
Principles of Management:A principle is a fundamental statement
of truth. It establishes a cause and effect relationship between
two or more variables. The principles of management are the result
of managers experience over a long period of time. Management
theory is a systematic grouping of interrelated principles of
management. Management principles are fundamental truths of general
validity which have value in predicting the results of managerial
action. These principles are helpful in providing the groundwork
for a science of management. A management principle refines and
organizes knowledge that has been built through experience and
research. Henry Fayol gave the following general principles of
management:1. Division of Work: The work of every person in the
organization should be limited as far as possible to the
performance of a single leading function. This helps to do more and
better work with the same effort.2. Authority and Responsibility:
Responsibility is a natural consequence of and a corollary to
authority. The two are coextensive and, therefore, parity should be
maintained between them. Authority is not being conceived of apart
from responsibility. Wherever authority is exercised responsibility
arises.3. Discipline: It implies respect for agreements designed to
secure obedience. It must prevail throughout an organization to
ensure its smooth functioning. Discipline requires clear and fair
agreements, good supervision and judicious application of
penalties. 4. Unity of Command: Every employee must receive orders
and be accountable to only one boss. It is necessary to avoid
conflicting orders and to ensure order and stability in the
organization. As soon as two supervisors wield their authority over
the same person uneasiness makes itself felt. 5. Unity of
Direction: There should be one head and one plan for a group of
activities having the same objective. This is essential to ensure
unity and coordination in the enterprise. Unity of command cannot
exist without unity of direction but does not necessarily flow from
it.6. Subordination of Individual to General Interest: Efforts
should be made to reconcile individual interests with common
interests. When there is conflict between the two, the interests of
the organization should prevail over individual interests. This
requires continuous and exemplary supervision and fair
agreements.7. Remuneration of Personnel: The amount of remuneration
and the methods of payment should be just and fair and should
provide maximum possible satisfaction to both employees and
employers.8. Centralization: According to Fayol, the question of
centralization and decentralization is a matter of finding the
optimum degree for the particular concern. The degree of
concentration of authority should be based upon optimum utilization
of all faculties of the personnel. It should be determined on the
basis of individual circumstances in each case.9. Scalar Chain:
Scalar chain refers to the chain of superiors ranging from the
ultimate authority to the lowest level in the organization. It
should be short-circuited and not carried to the extent it proves
detrimental to the organization. To prevent the scalar chain
bogging (unable to move) down action, Fayol gave the concept of
gang-plank as shown in the below figure: O P -- -- UO--- --- V R --
-- W S -- - - X T ----------Gang-Plank -----------Y
In the above figure, it is shown that if T wants to communicate
with Y, usually the message will flow from T to O via S, R, Q and P
and from O it will come down to Y through U, V, W and X. But if it
is essential to communicate immediately, a gang-plank (dotted line)
may be created between T and Y without weakening the chain of
command. This gang-plank allows the two employees to deal directly
with each other. But each must inform his superior of any action
taken by him.10. Order: This principle is concerned with the
arrangement of things and the placement of people. In material
order, there should be a place for everything and everything should
be in its proper place. Similarly in social order, there should be
an appointed place for everyone and everyone should be in his or
her appointed place. This kind of order requires precise knowledge
of human requirements and resources of the concern so that a proper
balance may be created between them.11. Equity: Equity implies that
employees should be treated with justice and kindness. Managers
should be fair and impartial in their dealings with subordinates.
They should adopt a sympathetic and unbiased attitude towards
workers. Equity helps to create cordial relations between
management and workers which are essential for the successful
functioning of every enterprise.12. Stability of Tenure of
Personnel: Employees cannot work efficiently unless job security is
assured to them. Time is required for an employee to get used to
new work and succeed in doing it well. An employee cannot render
worthwhile service if he is removed from the job before he gets
accustomed to it. Therefore, management must strive to minimize
employee turnover.13. Initiative: Employees at all levels should be
given the opportunity to take initiative and exercise judgment in
the formulation and execution of plans. Initiative refers to the
freedom to think for one self and use discretion in doing work. It
develops the interest of employees in their jobs and provides job
satisfaction to them.14. Esprit de Corps: This refers to harmony
and mutual understanding among the members of an organization.
Union is strength and unity in the staff is the foundation of
success in any organization. Management shuld not follow the policy
of divide and rule. Rather it should strive to maintain team-spirit
and cooperation among employees so that they can work together as a
team for the accomplishment of common objectives. Unity among the
personnel can be developed through proper communication and
coordination.
General EnvironmentTechnological International
Socio-culturalLegal/PoliticalEconomicEmployeesCultureManagementInternal
EnvironmentCustomersLabor MarketCompetitorsSuppliers
Managing for Competitive Advantage:
CORPORATE SOCIAL RESPONSIBILITY:
In the words of Bowen (1953), Social responsibility refers to
the obligations (of businessmen) to pursue those policies, to make
those decisions or to follow those lines of action which are
desirable in terms of the objectives and values of our society.
According to Koontz and ODonnell (1977), the definition of
social responsibility is: The personal obligation of the people as
they act in their own interests to assure that the rights and
legitimate interests of others are not infringed.Corporate social
responsibility is a commitment to improve community well-being
through discretionary business practices and contributions of
corporate resources (Kotler and Lee, 2005).
Causes of Growing Concern for CSR:
* Growing awareness due to education * Trade Union Movement*
Media & Consumer Organizations * Fear of Govt. Interference*
Public Image * Competitive Market Forces* Public Relations *
Managerial Skills
Managerial Ethics:
In a general sense, ethics is the code of moral principles and
values that governs the behaviors of a person or group with respect
to what is right or wrong. Ethics set standards as to what is good
or bad in conduct and decision making. Ethics deals with internal
values that are a part of corporate culture and shapes decisions
concerning social responsibility with respect to the external
environment. An ethical issue is present in a situation when the
actions of a person or organization may harm or benefit others.
Ethics can be more clearly understood when compared with behaviors
governed by laws and by free choice.
Managing Company Ethics and Social Responsibility:
Many managers are concerned with improving the ethical climate
and social responsiveness of their companies. As one expert on the
topic of ethics said, Management is responsible for creating and
sustaining conditions in which people are likely to behave
themselves. Managers can take active steps to ensure that the
company stays on an ethical footing.
The Three Pillars of an Ethical Organization:
1. Ethical Individuals: Managers who are essentially ethical
individuals make up the first pillar. These individuals possess
honesty and integrity, which is reflected in their behavior and
decisions. People inside and outside the organization trust them
because they can be relied upon to follow the standards of
fairness, treat people right, and be ethical in their dealings with
others. Ethical individuals strive for a high level of moral
development.
Being a moral person and making ethical decisions is not enough,
though. Ethical managers also encourage the moral development of
others. They find ways to focus the entire organizations attention
on ethical values and create an organizational environment that
encourages, guides, and supports and ethical behavior of all
employees. Two additional pillars are needed to provide a strong
foundation for an ethical organization:
2. Ethical Leadership: In a study of ethics policy and practice
in successful ethical companies, no point emerged more clearly than
the crucial role of leadership. A manager must be a role model,
uphold ethical values in the organization, communicate about ethics
and values, and reward ethical behavior, swiftly discipline
unethical behavior.
3. Organizational Structures and Systems: The third pillar of
ethical organizations is the set of tools that managers use to
shape values and promote ethical behavior throughout the
organization. Three of these tools are codes of ethics, ethical
structures, and mechanisms for supporting whistle-blowers.
a) Code of Ethics:A code of ethics is a formal statement of the
companys values concerning ethics and social issues. It
communicates to employees what the company stands for. Codes of
ethics tend to exist as two types: Principle based ethics and
Policy based statements.Principle-based statements are designed to
affect corporate culture; they define fundamental values and
contain general language about the company responsibilities,
quality of products, and treatment of employees. General statements
of principle are often called corporate credos.Policy-based
statements generally outline the procedures to be used in specific
ethical situations. These situations include marketing practices,
conflicts of interest, observance of laws, proprietary information,
political gifts, and equal opportunities. Examples of policy-based
statements are Boeings Business Conduct Guidelines, Chemical Banks
Code of Ethics, and Anti-Trust and Conflict of Interest Guidelines,
and Nortons Norton Policy on Business Ethics.b) Ethical Structures:
represent the various systems, positions, and programs a company
can undertake to implement ethical behavior. An ethics committee is
a group of executives appointed to oversee company ethics. The
committee provides rulings on questionable ethical issues. The
ethics committee assumes responsibility for disciplining
wrongdoers, which is essential if the organization is to directly
influence employee behavior. Ethics training programs also help
employees deal with ethical questions and translate the values
stated in a code of ethics into everyday behavior.c)
Whistle-Blowing: Employee disclosure of illegal, immoral, or
illegitimate practices on the employers part is called
whistle-blowing. No organization can rely exclusively on codes of
conduct and ethical structures to prevent all unethical
behavior.
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UNIT: 2
PERSPECTIVES ON MANAGEMENT
Approaches to Management:
A heterogeneous group of management practitioners, thinkers and
social scientists have contributed to the accumulation of knowledge
in management. Therefore, several approaches to the study of
management have emerged over the years. Some of these approaches
are described below:
1. Classical Approach: This is also known as traditional
approach, management process approach or empirical approach. The
main features of this approach are as fallows:a) Management is
viewed as a systematic network (process) of interrelated
functions.b) On the basis of experiences of practicing managers,
principles are developed. These principles are used as guidelines
for the practicing executive.c) Functions, principles and skills of
management are considered universal. They can be applied in
different situations. d) Formal education and training is
emphasized for developing managerial skills in would-be managers.
Case study method is often used for this purpose.e) Emphasis is
placed on economic efficiency and the formal organization
structure. f) People are motivated by economic gains. Therefore,
organizations control economic incentives. Uses: a) The
observational method of case study is helpful in drawing common
principles out of past experiences with some relevance for future
application. b) This approach focuses attention on what managers
actually do.c) This approach highlights the universal nature of
management.d) It provides scientific basis for management
practice.
Limitations: a) It offers a mechanistic framework that
undermines the role of human factor. b) The environmental dynamics
and their effect on management have been discontinued.c) There is a
positive danger in relying too much on past experiences because a
principle or technique found effective in the past may not fit a
situation of the future.d) The totality of the real situation can
seldom be incorporated in a case study.
2) Behavioral Approach: While the classical approach focused on
the jobs, the behavioral approach stresses the individuals
performing these jobs. Here attention is directed towards the human
aspects of management. The neglect of human factor and
over-emphasis on machines and materials led to the development of
this approach. Prof. Elton Mayo is considered to be the founder of
the behavioral school of thought. The behavioral science approach
is thus an improved and more modern version of the human relations
approach. It focuses on human behavior in organization and seeks to
promote verifiable propositions for scientific understanding of
human behavior in organizations. This approach draws heavily its
concepts from psychology and sociology. Motivation, leadership,
communication, group dynamics and participate management are the
core of this approach. The basic propositions of the behavioral
science approach are as follows:a) An organization is a
socio-technical system.b) A wide range of factors influence
interpersonal and group behavior of people in the organization.c)
There should be a fusion between organizational goals and human
needs.d) Several differences in the attitudes, perceptions and
values of employees exist and influence their behaviors and
performance.e) Some degree of conflict maybe inevitable and even
desirable in organization.
3. Quantitative Approach: Also known as management science
approach, mathematical approach, decision theory approach,
operations research approach, etc. This approach gained momentum
during and after World War II. During the war, interdisciplinary
groups of scientists were engaged to undertake applied scientific
research into strategic and tactical military operations. These
groups were expected to develop optimal decisions about deployment
of military resources. Mathematical model building was sought to be
applied to find optimal solutions to military and logistical
problems.
The main postulates of the quantitative approach are as
follows:a) Management is a series of decision-making. The job of a
manager is to secure the best solution out of a series of
interrelated variables.b) These variables can be presented in the
form of a mathematical model. The model is a prototype of the
decision situation. It consists of a set of functional equations
which set out the quantitative interrelationship of the
variables.c) If the model is properly formulated and the equations
are corrections solved, one can secure the best solution to the
model.d) Organizations exist for the achievement of specific and
measurable economic goals.e) In order to achieve these goals,
optimal decisions must be made through scientific formal reasoning
backed by quantification.f) Decision-making models should be
evaluated in the light of set criteria like cost reduction, return
on investment, meeting time schedules etc.g) The quality of
management is judged by the quality of decisions made in diverse
situations.
4. Systems Approach: The General Systems Theory was applied to
organization and management during the fifties. A system is a set
of distinguishable and interdependent and interrelated parts
operating in a logical manner or sequence in order to achieve a
goal. Each part affects the others and the system as a whole. Every
system operates within a wider system. A system is goal-oriented
and operates in a logical manner in accordance with some plans.
Each system is comprised of interrelated parts. Thus system denotes
order and arrangements.The basic postulates of the systems approach
are as follows:a) An organization is a system consisting of several
sub-systems. For example, in a business enterprise production,
sales and other departments are the sub-systems. All these
sub-systems are functionally interacting and interdependent. They
are tied together into an organic whole through goals, authority
flows, resource flows, and so on.b) The position and function of
each sub-system can be analyzed only in relation to other
sub-system and to the organization as a whole rather than in
isolation.c) An organizational system has a boundary which
separates it from other systems. The boundary determines which
parts are internal and which are external.d) An organization is a
dynamic system because it is responsive or sensitive to its
environment.
USES: a) The systems approach represents a refreshingly new
thinking on organization and management. b) It stresses that
managers avoid analyzing problems in isolation and should develop
the ability for integrated thinking. c) It provides a unified focus
to organizational efforts. It stresses the dynamic,
multi-dimensional and adaptive nature of organizations.d) It
provides a strong conceptual framework for meaningful analyses and
understanding of organizations. e) It recognized the interaction
and interdependence among the different variables of the
environment. It provides clues to the complex behavior of an
organization. f) It warns against narrow fragmented and piecemeal
approach to problems by stressing interrelations.g) It forces the
practicing manger to analyze and understand a particular element by
taking into account its interacting consequences with other
elements. h) A wide range of systems concepts and perspectives have
been developed for managers.
Limitations: a) The systems approach is often criticized as
being too abstract and vague.b) It cannot directly and easily be
applied to practical problems. c) It does not offer specific tools
and techniques for the practicing executive. d) Moreover, this
approach does not recognize differences in systems. e) It fails to
specify the nature of interactions and interdependencies
particularly between an organization and its external environment.
It fails to offer a unified body of knowledge. 5. Contingency and
Situational Approach: This approach is relatively new approach to
management. It is an extension of systems approach. The basic theme
of the contingency approach is that organizations have to cope with
different situations in different ways. There is no single best way
to managing applicable to all situations. In order to be effective,
the internal functioning of an organization must be consistent with
the demands of the external environment. The managers must keep the
functioning of an organization in harmony with the needs of its
members and the external forces. The main features of the
contingency approach are as follows:a) Management is entirely
situational. The application and effectiveness of any technique is
contingent on the situation.b) Management should, therefore, match
or fit its approach to the requirements of the particular
situation.c) Since managements success depends on its ability to
cope with its environment. It should sharpen its diagnostic skills
so as to anticipate and understand the environmental changes. d)
Managers should understand that there is no one best way to manage.
They must not consider management principles and techniques
universal.
6. Operational Approach: The operational or universalistic
approach to management attempts to draw together the relevant
knowledge of management by relating it to the managerial job.
Management is looked upon as an operational and dynamic process
consisting of certain elements which are common to all
organizations.This approach is an eclectic approach, i.e., it takes
the best from what is available in management thought and
integrates it with the central core of process framework to build
up a unified theory of management. It is simple and realistic and
deals with the whole subject of management from the viewpoint of
the practicing manager. Relevant contributions from other thoughts
and disciplines are integrated into the management process. Thus,
despite the multiplicity of approaches to management analysis,
there is some convergence among the various approaches. Such an
integrated approach more adequately clears the nature of modern
management.
Role of Communication in Management:
Communication is an indispensable element in human
relationships. Human beings interact with one another through
communication. It is the ability to communicate effectively that
has enabled people to build organizations and societies for
survival and better living. We communicate when we speak, write or
act. There is communication when we read a book or watch a film or
listen to a piece of music. A large part of the day is spent on
communication of one type or the other. Communication is all the
more important in management because the success of an enterprise
depends upon how effectively its employees understand one another.
Most of the problems of business can be attributed to poor
communication between management and labor. Communication is
perhaps the number one problem of management today.The term
communication is derived from the Latin word communis which means
common. Thus communication means sharing of ideas in common.
Therefore, communication may be defined as an exchange of facts,
ideas, opinions or emotions to create mutual understanding.
Communication is generally understood as spoken or written words.
According to Keith Davis, Communication is the process of passing
information and understanding from one person to another.According
to Koontz and ODonnell, Communication is a way that one
organization member shares meaning and understanding with
another.
Nature of Communication:1. Communication is a pervasive
function: It is required not only in direction function but in all
functions of management. Planning requires communication of
information. Organization involves transfer of information about
tasks, authority and responsibility. Selection, training, appraisal
etc. (staffing) require interchange of facts and ideas with
employees. Controlling involves feedback about performance. Thus,
communication is vital to all managerial functions. It is a
universal element in the management process.2. Communication is a
continuous process: Stop of communication means an end to human
activity. Just as regular circulation of blood is essential for
human life, on-going circulation of information and ideas is
essential for organizational activity. Organizations cannot exist
without communication.3. Communication is a two-way process: It is
not complete unless the message has been correctly understood by
the receiver and his response (feed-back) becomes known to the
sender. Communication is not merely the transmission of message but
also the correct interpretation and understanding of the message.4.
The basic purpose of communication is to create mutual
understanding and co-operative human relationships.
Role of Communication in Management:Communication is the
foundation of all group activity. It is the element which sets the
enterprise in motion and provides life to the dead structure.
Communication is essential not only in business but in all types of
organizations. In fact, it is difficult to imagine any kind of
inter-personal activity without communication. Koontz and ODonnell
said, It is no exaggeration to say that communication is the means
by which organization activity is unified. It is the means by which
behavior is modified, change is effected and goals are achieved. To
be specific, sound communication offers the following benefits:
1. Planning and Decision-Making: Communication provides to
managers the information and ideas necessary for sound planning.
The widest possible participation in planning is a precondition for
getting the task done. This can be effectively secured only through
the media of communication. Communication enables a manager to
diagnose the problem and to gather information for making sound
decisions.2. Implementation of Plans: Plans and decisions must be
effectively conveyed to those who can translate them into action.
Effective communication is the sine qua non (reason) for quick and
successful implementation of the management decisions. Managers
issue specific orders and instructions management decisions.
Managers issue specific orders and instructions through
communication. They inform employees about the goals, policies, and
procedures of the organization as well as about rationale of the
job. Communication is the artery through which decisions and
instructions flow downward. In order to get maximum results from
people, correct and detailed instructions must be given at the
right time. Similarly, the difficulties experienced by workers
should be conveyed to the managers so that they can amend or issue
new instructions. Without a rich flow of communication from his
boss, the subordinate cannot judge which direction he should be
going and how well he is doing. The subordinate knows his
responsibility and regulates his work from the communications sent
by his boss.3. Motivation and Morale: Managers use communication to
secure acceptance of their ideas and orders. They can improve the
job satisfaction of employees by providing feedback information on
their performance. Sound communication facilitates delegation and
decentralization. Communication plays a vital role in building up
high morale in the organization. As an influence process,
communication is an essential part of guidance, motivation and
leadership functions of management.4. Human Relations: In order to
secure maximum productivity with the minimum cost, there must be
perfect cooperation and trust among management and labor. Sound
communication enables workers to express their grievances which
reduce tension and industrial unrest. Most of the conflicts in
industry arise due to misunderstood motives and ignorance of facts.
Proper communications help to minimize friction and to maximize
mutual understanding and cooperation. Management can sell its ideas
and reduce resistance to change through effective communication.
Communication inspires change which is the moving symbol of living
organizations.5. Training and Development: Communication is vital
for the orientation and training of both workers and executives. In
modern industry training and development of personnel is an ongoing
process. The degree of learning depends not only on the contents of
the training program but on how effectively the knowledge and
skills are transmitted. Communication is knowledge and without
knowledge employees remain ignorant.6. Coordination: Communication
is a bridge of meaning between people. It ties people and structure
together. It links different departments and divisions of the
enterprise together. Need for integrating and unifying human
efforts has increased due to growing specialization. Communication
helps to create team work and integration and it serves as a
cementing force. According to Mary Cushing Niles, good
communications are essential to coordination. They are necessary
upward, downward and sideways, through all the levels of authority
and a device for the transmission, interpretation, and adoption of
policies, for the sharing of knowledge land information, and for
the more subtle needs of good morale and mutual understanding.7.
Public Relations: A business enterprise comes into contact with
several social groups, e.g., customers, investors, trade unions,
government and the local community. It must maintain cordial
relations with these groups in order to develop a favorable image.
It must continuously strive to convince the public that its actions
are in the interest of society. Otherwise the reality becomes
whatever customers, employees and government officials want to
believe.
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UNIT: 3PLANNINGMeaning and Nature of Planning:Planning is the
most fundamental function of management. It is basic to all other
management functions. It provides the foundation upon which
organizing, staffing, directing and controlling functions can be
carried out. Action follows planning and there is nothing to do
unless the goals and ways of achieving them are decided. Whenever a
number of individuals join together and decide to achieve a common
goal, planning becomes necessary. Planning has always been a
prerequisite to effective management. But need for planning has
increase due to frequent changes in technology, tastes and
fashions, government policies and competition.
Meaning of Planning: In simple words, planning is deciding in
advance what to do, how to do it, when to do it and who is to do
it. It involves anticipating the future and consciously choosing
the future course of action. A plan is a blueprint for the future
course of action. According to Haimann, Planning is the function
that determines in advance what should be done. It consists of
selecting the enterprise objectives, policies, programs,
procedures, and other means of achieving these objectives. In the
words of Koontz and ODonnell, Planning involves selecting
enterprise objectives, departmental goals, and programs and
determining the ways of reaching them. Planning thus provides a
rational approach. Planning is a process and a plan is the outcome
of this process.
Nature of Planning: 1. Planning is goal-oriented: Planning is
not an end in itself. Rather it is a means towards the
accomplishment of objectives. Planning has no meaning unless it
contributes in some way to the achievement of desired goals. All
plans derive from objectives. The goals may be implicit or explicit
but well-defined goals are essential for efficient planning. Thus,
planning is goal oriented.2. Planning is a primary function:
Planning is the basis or foundation of the management process. All
other functions of management are designed to attain the goals set
under planning. Planning provides the basis for efficient
organizing, staffing, directing and controlling. It precedes the
execution of all other functions. Without planning there is nothing
to organize, no one to actuate and no need to control.3. Planning
is all-pervasive: Planning is the function of each and every
manager irrespective of the level and area of his/her operation. It
is the job of all managers in all types of organizations. Planning
is an essential ingredient in management at all executive levels.
However, the scope, extent and the nature of a planning tend to
decrease as we descend towards the lower levels of management.
Managers at the top level prepare long-term plans for the company
as a whole; middle-level managers formulate departmental and
functional plans for medium term. At the lowest level, managers
prepare operating and short-term plans.4. Planning is an
intellectual or rational process: Planning is a mental exercise
involving imagination, foresight and sound judgment. It is not
guesswork or wishful thinking. It requires a mental disposition of
thinking before doing and acting in the light of facts, rather than
guess. Planning is the thinking process, the organized foresight
and vision based on facts and experience that is required for
intelligent action.5. Planning is a continuous process: Planning is
an on-going and dynamic exercise. As the assumptions and events on
which plans are based change, old plans have to be revised or new
ones have to be prepared. As a manager carries out his functions,
he continues to plan, revising his old plans and choosing
alternative plans as the need arises.6. Planning is
forward-looking: All planning is done with an eye on the future.
Planning involves anticipating the future course of events.
Therefore, forecasting is the essence of planning. Forecasting
involves assessing the uncertain future and making provisions for
it. A plan is really a synthesis of various forecasts. No plan can
be prepared without knowledge of future events. Planning is an
attempt to see through the uncertain future. Its essence is
futurity and it is anticipatory as it involves forecasting.7.
Planning involves choice: Planning is essentially decision-making
of choosing among alternative courses of action. Planning
presupposes the existence of alternatives. There is no need for
planning if there is only one way of doing something. Plans are
decisions made after evaluation of alternative courses of action. A
planning problem arises only when an alternative course of action
is discovered.8. Planning is an integrated process: Planning does
not just happen, it has to be initiated. Planning is a structured
process and different plans constitute a hierarchy. Different plans
are interdependent and interrelated. Every lower-level plan serves
as a means towards the need of higher plans. This is known as the
ends-means chain. Planning is a time-bound concept and every plan
has a definite time horizon.9. Planning is directed towards
efficiency: Planning has no relevance if it does not facilitate the
achievement of objectives economically and efficiently. It is a
deliberate and conscious process. The efficiency of plans is
measured by how much they contribute to the objectives.
Principles of Planning:1. Principle of contribution to
objectives: Every major and derivative plan should contribute
positively towards the accomplishment of enterprise objectives. 2.
Principle of efficiency of plans: The efficiency of a plan is
measured by the amount it contributes to objectives minus the costs
and other undesirable consequences involved in the formulation and
operation of the plans. This principle stresses upon economical use
of individual effort to achieve group goals.3. Principle of primacy
of planning: This principle emphasizes that the manager can hardly
perform other managerial functions without a road map of plans to
guide him. Planning is the primary requisite of other management
functions because these functions are designed to support the
accomplishment of enterprise objectives.4. Principle of planning
premises: Perhaps the main deficiency of planning arises from
poorly structured plans. A coordinated structure of plans can be
developed only when managers throughout the organization understand
and agree to utilize consistent planning premises.5. Principle of
policy framework: A consistent and effective framework of
enterprise plans can be developed if the basic policies that guide
thinking in decisions are expressed clearly and are understood by
managers who prepare the plans. The decisions which lead to plans
cannot be accurately focused on enterprise objective without a
framework of policies. 6. Principle of timing: When the plans are
structured to provide an appropriately timed, intermeshed network
of derivative and supporting programs, the plans can contribute
effectively and efficiently towards the attainment of enterprise
objectives. Both premises and policies are useless without proper
timing.7. Principle of alternatives: In choosing from among
alternatives, the best alternative will be that which contributes
most efficiently and effectively to the accomplishment of a desired
goal.8. Principle of limiting factor: While choosing from among
alternatives, the planner should focus on those factors which are
critical to the attainment of the desired goal. This will help in
selecting the most favorable alternative.9. Principle of
commitment: Logical planning should cover a time period necessary
to forecast the fulfillment of commitment involved in a decision.
This is necessary to make reasonably sure of meeting
commitments.10. Principle of flexibility: This principle deals with
the ability to change which is build into plans. The risk of loss
due to unexpected events can be reduced by building flexibility
into the plans. However, the cost of flexibility should be weighted
against the dangers of future commitments made.11. Principle of
navigational change: The manager should periodically check on
events and expectations and re-draw plans to maintain a course
toward the desired goal. Unless plans have in-built flexibility,
navigational change is difficult or costly. But in-built
flexibility should not be an excuse for periodic revision of plans,
if circumstances so warrant.12. Principle of competitive
strategies: While formulating plans, a manager should take into
account the plans of rivals or competitors. The plans should be
chosen in the light of what a competitor will do in the same
situation.Steps in Corporate Planning Process:Organizations differ
in term of their size and complexity. Therefore, there is no single
planning procedure applicable to all organizations. However, the
main steps in planning process are as follows:1. Identify Goals:
Plans are formulated to achieve certain objectives. Therefore, the
first step in the planning process is to identify the goals of the
organization. The objectives fixed must clearly indicate what is to
be achieved, where action should take place and who is to perform
it and when it is to be accomplished. Objectives set must be stated
clearly and in measurable terms. For example, quantity standards,
cost targets and quality specifications are measurable objectives.
Objectives should be established in all key areas where performance
affects the health of the organization. Objectives should be laid
down after an analysis of the external and internal environment of
the organization. 2. Develop Planning Premises: Planning is done
for future which is uncertain. Therefore, certain assumptions are
made about the future environment. These assumptions are known as
planning premises. Planning premises lay down the boundary or
limitations within which plans are to be implemented. In order to
develop good planning premises, it is necessary to collect data on
the current status of the organization and to forecast future
changes.Planning premises are of several types. Internal premises
refer to the resources of the enterprise, e.g., sales forecast,
capital investment, labor skills, technology etc. On the other
hand, external premises imply the external environment of the
organization, e.g., product market and factor market conditions,
government policy, population trends, etc. Controllable premises
are the policies and programs under the control of management.
Conditions beyond the control of management are known as
uncontrollable premises. Premises which can be quantified in terms
of money, time and units of output are called tangible premises.
Public relations, goodwill, employee morale and other qualitative
factors are known as intangible premises. These factors are very
important in planning process and management should not overlook
them just because they cannot be quantified. Premising involves
assessment of the future which is uncertain. Therefore, premises
should be limited to those aspects which are critical or strategic
to plan.
DetermineObjectivesDevelop Planning PremisesDetermine
Alternative Courses of ActionEvaluate the AlternativesSelect a
Course of ActionFormulate Derivative Plans3. Determine Alternative
Course of Action: Generally, there are alternative ways of
achieving the same goal. For example, in order to increase sales of
an enterprise may launch advertising campaign or reduce prices or
improve the quality of products. Therefore, alternative courses of
action should be determined. This requires imagination, foresight
and ingenuity. In determining alternatives the critical or limiting
factors must be kept in view. 4. Evaluate the Alternatives: Once
alternative courses of action have been determined, they must be
evaluated. Alternative courses of action can be evaluated against
the criteria of cost, risks, benefit and organizational facilities.
The strong and weak points of every alternative should be analyzed
carefully. Computer-oriented mathematical techniques may be used
wherever necessary.5. Select a Course of Action: The most
appropriate alternative is selected as the plan. This is the point
of decision where a plan is adopted for accomplishing identified
goals.6. Formulate Derivative Plans: The final step in planning
process is to develop sub-plans. In order to given effect to and
support and basic plan, several sub-plans are required. Once a
choice is made and the master plan is adopted, functional and
tactical plans and action programs are decided. The breakdown of
the master plan into departmental and sectional plans provides a
realistic picture of the actions to be taken in future. A time
sequence of activities should also be decided.
TYPES OF PLANS:The planning process cannot be effective unless
the types of plans are properly understood. It is easy to see that
a major program, such as one to build and equip a new factory, is a
plan. But a number of other courses of future action are also
plans. In fact plan can encompass any course of future action,
which clearly shows that plans are varied. Managers use strategic,
tactical, and operational goals to direct employees and resources
toward achieving specific outcomes that enable the organization to
perform efficiently and effectively. They take a number of planning
approaches, among the most popular of which are 1) Management by
Objectives (MBO)2) Single-use plans: a) Programb) Project3)
Standing plans: a) Policy b) Rules c) Procedure 4) Contingency
plans.
1. Management by Objectives (MBO):
2. Single-Use Plans: are developed to achieve a set of goals
that are not likely to repeat in the future. Most widely used
single-use plans are a) Program b) Projecta) Program: Plans for
attaining a one-time organizational goal Major undertaking that may
take several years to complete Large in scope; may be associated
with several projectsExamples: Building a new headquarters;
converting all paper files to digital b) Project: Also a set of
plans for attaining a onetime goal Smaller in scope and complexity
than a program; shorter in horizon Often one part of a larger
programExamples: Renovating the office; Setting up a company
intranet.
3. Standing Plans: are ongoing plans that provide guidance for
tasks performed repeatedly within the organization. These plans
generally pertain to matters such as employee illness, absences,
smoking, discipline, hiring, and dismissal. The primary standing
plans are organizational a) policies, b) rules, and c) procedures.
a) Policies: Broad in scope-general guide to action Based on
organizations overall goals/strategic plan Defines boundaries
within which to make decisionsExamples: Sexual harassment policies;
Internet and e-mail usage policies etc.b) Rules: Narrow in scope
Describes how a specific action is to be performed May apply to
specific settingExamples: No eating rule in areas of company where
employees are visible to the public.c) Procedures: Sometimes called
a standard operating procedure Defines a precise series of steps to
attain certain goalsExamples: Procedures for issuing refunds;
Procedures for handling employee grievances
4. Contingency Plans: define company responses to be taken in
the case of emergencies, setbacks, or unexpected conditions. To
develop contingency plans, managers identify important factors in
the environment, such as possible economic downturns, declining
markets, increases in cost of supplies, new technological
developments, or safety accidents. Managers then forecast a range
of alternative responses to the most likely high-impact
contingences, focusing on the worst case.
According to Harold Koontz, Heinz Weihrich and Ramachandra
Aryasri, planning types are:
1. Purpose or Mission: The mission or purpose identifies the
basic function or task of an enterprise or agency, or of any part
of it. Every kind of organized operation has, or at least should
have if it is to be meaningful, purposes or mission. In every
social system, enterprises have a basic function or task, which is
assigned to them by society. The purpose of a business is generally
the production and distribution of goods and services. The purpose
of a state highway department is the design, building and operation
of a system of state highways. The purpose of the courts is the
interpretation of laws and their application. The purpose of a
university is teaching, research, consultancy and training.
Some writers distinguish between purposes and missions. While a
business, for example, may have a social purpose of producing and
distributing goods and services, it can accomplish this by
fulfilling a mission of producing certain lines of products. The
mission of Indian Institute of Management, Ahmedabad is to
professionalize Indian management through teaching, research,
training, institution building and consulting. It also aims to
professionalize some of the vital sectors of Indias economy, such
as agriculture, education, health, transportation, population
control, energy and public administration. The mission of Reliance
Industries is to search for oil and to produce, refine and market
petroleum and a wide variety of petroleum products, ranging from
diesel fuel to chemicals. Hallmark, which has expanded its business
beyond greeting cards, defines its mission as the social expression
business.
2. Objectives: Objectives or goals are the ends toward which
activity is aimed, and every organization strives hard to achieve
them. They represent not only the end point of planning but the end
toward which other functions of management, i.e., organizing,
staffing, leading and controlling are aimed. While enterprise
objectives are the basic plan of the firm, a department may also
have its own objectives. Its goals naturally contribute to the
attainment of enterprise objectives. According to Allen, Objectives
are goals established to guide the efforts of the company and each
of its components. Objectives indicate the destination of an
organization. The planning process begins with the setting up of
objectives. Objectives may be defined as the ends, purposes or aims
which an organization wants to achiever over varying periods of
time.
3. Strategy: The concept of strategy in business has been
borrowed from military science where it implies the art of the
military general to fight the enemy. The term strategy began to be
used in business with increase in competition and complexity of
operations. A strategy may be defined as a special type of plan
prepared for meeting the challenge posed by the activities of
competitors and other environmental forces. Strategy is the complex
plan for bringing the organization from a given posture to a
desired position in a future period of time. It is essentially a
response to external environmental forces. In order to formulate an
effective strategy, management must anticipate accurately the plans
of competitors and look at them from the viewpoint of