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F9).' a.Com, Final students
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In accordance with the new syllabus of
The University 01 Karachi
NEW" "':'.
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MANAGEMENT"
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By
Prefessnr Mohammed Amin Khalil!
, B. Com. , MBA
Heed, Faculty 01 Cornmarca
Govemmant Islarnla CommeroeCollege
Karachi
Erstwhlla Teacher 6 Rasearch Associate
Institute of Buslnesa Administration
University 01 Karachi
Karachi

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Dedlceted to my father, ....
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'B. Com. Part II : III
""NAGEKEN'l'
1. Introduct i on to Management Developnent of
Kanagement Thought Early Stage of Managerial
CapitallSlll.
2. The J ob of Management Ef fect i ve Deci d on
Making-Rational Decision Making, Problem
Solving, Guidelines for Decis ion Making.
3.' The Planning Process, ' Choosing Objectives
(MOO), Conmunicating Objectives; Ident ify
Premi se3: , Survey - geeccrcee t Establish
Policies; 0100se Al ternatives and Take
Procedure and Rul es. Establish
Budgets: TilbQtable and Standards.
4. Qt'9anization for Action-Basic Elements of
Organization: Efficient' OCgan i zatioo.
5. ConceptS of Control-Phases, Types, Qlaracter-
i 8tics of Good COntrol System.
6. The People Pr<'lblem-Determlning the Needs of
Staff: selection and Recroitment: OrientathlO
and Training: Performance Appraisal.
7. 'l'he Human Dimensions of Management-Basic
Motives of People: Humanu tic Approad'l; selC-
actualizing person..
B . wor king: with Others-Groups; Mly focmed: How
they grow: Hc::lIW they fl ow.
9. Camudcation the Process; Philosphy of
Ccxrmunication; Comunicati on system.
10. 'l1le Mystique
Behaviour Mel
MotiVation.
of . Mot ivation
Motivation,
Personality,
Theories of
11. Ethics of Business: Christian Ethiics and
Muslim Ethics. The question of SOCial
ReSponsibility in Bus iness.. The dlanging
Envircnment of Management.
CONTENTS '
/ Chapter I
V MANAGEMENT 19
;DEFINITION, MANAGING, MANAGERS
MANAGEMENT AND DIFFERENT ERAS '0
1. B.C. Years 22
SUmerian Civilization. Egypt ian Civilization, Babylonian
Era, The Herbrewsl Bible Era (Bene Israel Era), Chinese
Civilization
2. Classical Era 25
Plato , Aristot le, Xenophon
3. Stages 01 Capitalism 28
, ,
EXAMINATION QUESTIONS
V CHAPTER 2
STAGES OF CAPITALISM
EARLYSTAGESOF 29
1. Prebuslness Capitalism,
2. Petty Capitalism
3. Protestam Gapitalism
INDUSTRIAL t
5
FINANCIAL CAPITALlS\1
Businl5S
Steinl Drawinlsm
31
NATIONAL 34
MANAGERIAL CAPITALISM 34
.RESULT-oRIE.'IoTED CAPITALISM
V' CHAPTER 3
DEVELOPMENT OF MANAGEMENT
THOUGHT 37
JIIANAGEMENT CHAIN 38
Management Theory
I. Charles Babbage
2. Frederick tv. Taylor
J. Henry L. Ganlt
4. 1he Gi/brrrhs
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v\(1'1'Human RcJ:uiolls Theory
1. Raben Owen
2. Dr. Hugo Munsterberg
3. Elton Mayo
4. Bernard
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44
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III Administration Theory 46
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" FUScnOI'S OF THE MANAGER
I. HtllTl FayoJ
2. Mary ParksrFoil," . '
3. Colonel Lyndall Urw/ck
4. R,C. Davis
.l. lIarold Koontz
COORDINATION
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EXAMINAnON QUESTIONS 61

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"LANNING . 6
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DEFINITION 63 ..
.: :.
, SfEPS IN PLANNING ,64
Determination of Objective '.. . ,"
';:' ..'Communication of Objective
..Determination of Premises :.
of Resources
Formationof Policies
\. Determination of Alternative"
Courses
Setting Procedures
Setting Rules'
Preparing Programs
."Making Budgets
Determining Programs
., Setting Standards
. Formulating Strategies 78
":id
EFFECTIVE DECISION MAKING 78
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CHAPTER 5
PERSONALOBJECTIVES 74
National Groupof Technique (NGll
Delphi Technique .
V CIIAPTER6
ORGANIZATlON
MBO and Perfonnance Appraisal 73
DIRECTIONAL PLANNING
TEN REASONS fOR FAIU';RE 75
DEFINITION OF DECISION MAKING
AND PROBLEM SOLVING
EXAMINATIONQUESTION B9
PREVF:NT/VE PROBLEM SOLVING 7.
PROBLEM SOLVING ANDITS STEPS 82
. GROUP DECISmS MAKING 84
TYPES OF PLANS 70
,_ ... MOO 71
. / . GUIDELINES fOR DECISION MAKING 85
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.1JEFINITION OF ORGANIZING 92 .
DEFINITION OF ORGANIZATION 93
DEFINITION OF FORMAL
ORGANIZATION 93
DEFINITION OF INFORMAL 94
ORGANIZATION
}:FFICIENT ORG.ANIZATION 95
BUREAUCRATIC MODEL OF
ORGANIZATION 96
Karl Marx's viewpoint
Max Weber's viewpoint
Busic Elements of Organlzatlon _ 97
1. Divisionof Labor 98
Advanrages.ofspecialtzatton
Dysfunctions of specialization
How to overcome Dysfunctions
2. Scalar and Functional Chain 100
3. Span of ControllManagement 104
4. Structure 112
DELEGATION OF AUTIIORITY
SIZE AND COMPLEXITY .. 115
DELEGATION OF AUTHORITY
SPAN OF CONTROLoR
MANAGEMENT 9
QUESTIONS
Chapter 7
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DEPARTMENTATION 120V
Advantages and disadvantages 01
departmantatlon 122
BASES FOR DEPARTMENTATION 123
DEPARTMENTATION BY.FUNCTIONS 123
DEPARTMENTATION BY PRODUCTS 124
DEPARTMENTATION BY TERRITORY 126
DEPARTMENTATION BY CUSTOMERS 127
DEPARTMENTATION BY PROCESS OR
EQUIPMENT 12a
DEPARTMENTATION BY SIMPLE NUMBERS 12!
DEPARTMENTATION BY TIME
DEPARTMENTATION BY PROJECTS 130
(MATRIX OF GRID ORGANIZATION)
CHAPTERS
WORKING WITH OTHER - GROUPS 133
DEflNITION 135 . '
CHARACTERISTI CS 136
WHY GROUPS FORM 138
HOW GROLl'S FORM/ROLES ..
OF GROUP 139
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HOW GROUPS GROWl
FLOURISHIPROGRESS 141
HOW GROUPS RANI\ 142
HOW GROUPS FLOWI
WORKISUCCEW 143
GROUP CONTROL 146
COMMIlTEE 148
EXAMINAnON QIJESTIONS 151
CIIAPTER 9
. IIUMAN RESOURSES
(PERSOJl."NEL MANAGF1..1El)
DEFINITION 154
STAFFING ACfIVITIES/STEPS 154
" 1. Dtermlnation of Needs
2. Selection and Recruiting
:. 3. Orientation andTraining
, Appraisal of Performance or
Personnel Audit. MBO
5. Compensation
6. Promotion
7. Separation
APPROACHES TO EVALUATE
JOBS 160
FAVORITE CHARACTERISTICS
OF TIlE CANDIDATE 163
NEGATIVE CHARACfERISTICS
OF TIlE CANDIDATE 164
TRAINING AND DEVELOPMEI\T 165
X ~ I I N T I O N QUESTIONS 168
' . BASIC CONTROL PROCESS 1 71
Establishing standards
Measuring Performance
Correcting Deviations
! PHASES OF CONTROL 172
Precontrol Phase
Concurrent Control Phase
Post Control Phase
Correct ion Phase
'. '. TYPES OF CONTROL 174
Production Control
Inventory Control
Quality Control
FinanciaJ Control
MANAGEMENT CONTROL 178
CHARACTERISTICS OF GOOD
CONTROL SYSTEM 182
BUDGETS 185
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Definition
Types of Budgets
Revenue and Expenditure Budgets
Capital Budgets
Cash Budgets
Time, Space, MateriaJ and Product Budgets
Balance Shoot Budgets
Master Budgets
Zero-base Budgeting (ZBB)
Milestone Budgeting
NON BUDGET;l.RY,CONTROL
DEVICES 187
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EXAMINATIONQUESTIONS 192
Chapler II '
MOTIVATION 193
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(Human -DImension of Management)
SELF ACCEPTANCE/SELF
IMAGE/SELF CONCEPT 201
HUMAN THE0J-IISTS 203
EXAMINATION QUESTIONS 206
Chapter 12
MOTIVATION THEORIES 207
(THE MYSTIQUE OF MOTIVATION)
Personality, Behavior, anti Motlvallon 208
Components of Personality 209
. / Theories of Motivation 209
The Content Theories 210
Classtcal Theory (Frederick Taylor)
2. Need or Humanlstla Theory (Abraham Maslow)
3. Need Theory (D.T. Han & K.E. Naugalm)
4. Two-Iactar Thaary (Frederick Herzberg)
S. Human Relations Theory (RenSls Likert)
The Process Theories 216
1. ClasSIcal Conditioning (Ivan Pavlov)
2. Operant Conditioning (B.F. Skinner)
3. Preferenc&oExpectation (Vietor Vroom)
4. Expanded Contingency Madel (Parter and la,,'er)
ar'Thaary at Eqully
Theory X and TheoryY (McGregor) 222
' . - .
Theory Z (Dr. William Ouchi) 223
Theory Z and Motivation
Money' and Motivation 226
Morale and Productivity 22" 14
examination Questions 229

Chapter 13
Communication 230
Dellnltlon 232
Process 01 Communication 234
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Communication Pitfalls andBarriers 235
Modes or Media of Communication 237
. Up and Down Communication 239
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Philosophies of Communication 241
Development Communication
Controlling communication
Rallnqulshlng Communicator
Withdrawn Communicator
Nine C's 01 Communication 243
Communication systems 248
Wheel Networt<
Cheln Netwo'" .
AIIChan",,' "alwort<
Transactional Analysis (TA) 250
The Child .
The Parent
The Adult
Motivating ~ TA
Life Positions 252
Ten Commandments lor Good Listening 253
Examination Questions 255
IS
Chapter
BUSINESS ETHICS 256
I DEFINITION ' "
I SOCIAL RESPONSIBILITY OF BUSINESS 258
<.1FACTORS OF SOCIAL .RESPONSIBILITY 25B
1. Models of Social Responsibility
Traditional Corporalion Th90ry : ;
Mstro Corporation Theory
2. Evolution of EmphasIs '
3. The levels of SocIal Responsibility
. . .. . .. . .
I ETHICAL PROBLEMS BY SHAPIRO 263
I BENEFITS OF ETHICAL CODE 264
Internal Benefits, Employee Benefits, Customer
Beneflts, Industry Benefits
I GUIDELINES IN DEVELOPING CODE OF
ETHICS 265
I MUSLIM ETHICS I NONMUSLIM ETHICS 267
I UNBELIEVERS' ETHICS I QUESTIONS
Chapter IS .
THE CHANGING ENVIRONMENTS 01'
MANAGEMENT 272
I TWENTIETHCl:NTURY - PAST AND
FUTURE 273
'1 CHANGING ENVIRONMENTS ' 274 '
I CHAl.l.ENGESOF THE 'NEXT DECAD, E
I QUESTIONS
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PREFACE
Although management as a subject is an American Invention
butthe traces of Its practice can be found in the oldest known
civilization. In the fast changing modern complex world, where
a human has now a deep intellect, and which is challenged
by rapid technological change and increasing phenomenon
of the competition the need for management cannot be
overemphasized.
Whether a small organization or giant, industrial or service,
commercial or welfare, profitable or nonprotltable. It cannot
be survived unless properly organized and managed. But the
question is whether the management principles are equally
beneficial and applicable though the world, there are two schools
of thought, one in favor, the other against. Why this difference
of opinion -althouqh all management experts are united to
agree 10 the importance of management.
The answer lies here: Science can be classified into two
groups. Firstly, physical sciences which are exact sciences
for they deal ~ t the things. If you act upon a thing, you can
exactly know or forecast its reaction. Hence dealing with things
is a physical science.
Secondly, social sciences thai are inexact sciences. They
are so because they deal with the humans whose reaction is
considerably unpredictable. Not only will a humans react
differently at different occasions and times, but also all hurnans
will or may react diversifiedly in response to a certain situation.
Hence, the social sciences are inexact, and management being
one of them is the most inexact of all social sciences.
Consequently, management scientists agree that there
can be no single best solution to a problem. There can always
be better than the best. Personal tactcrs cannot be ignQred
17
even in truly following management principles. Bul with the
incessant evolutionanddevelopment of human mind andculture
management will continue to improve to no limit.
This modern text is designed to prepare you for your
future managerial career. Though theories, ideas, techniques,
and data are dynamic, the information and material contained
in this volume will provide you a: quick and useful reference
as well as a guide for future learning for many years to come.
Since the book has been written in your language it will be
easy for you to comprehend and pass the in good grades.
The book has been oevlaedtor B. Com. Final students in
accordance with the new syllabus of lhe University of Karachi.
The purpose of the teaching of this subject is to prepare
managers tnereaefnciv required by industries, service,
commercial, and other types of organizations. The contents
of the book include introduction to management, stages and
development of management thought, planning, decision
making, organizing, human resources, groups, controlling,
motivation, communication, business ethics, and c ~ n g i n g
environment of management.
Professor Mohammed Amln Khalld
B. com.. MBA
Karachi, July 7, 1992
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Chapler 1
MANAGEMENT
. DEFINITION, MANAGING, MANAGERS,
ANAGEMENT AND DIFFERENT ERAS
1. B.C. Year.
sumertan Civltizatlon, Egypti an Civilization, Babytcman
Era, The HerbrewSiBible E' ra l Oene Israel Era'. Ctune se
Civilization
2. Classical Era
Plato, Aristotle, Xenophon
3. stages of Capitalism
EXAMINATION QUESTIONS
o DEFINITION
Management has been defined differently by various ~
management experts. dl
According to some e xpe ete
Manage ment is t he funct ion ot executive Ieaderahlp any where .
Others say thai
Management Is a technique by means of which the pur pose and
object ives of a parti cular h uman group are determined,
classified and effectuated.
According to D.S . Ca mbell
Manage ment embraces all duties and functiona that pertain to
the initiation of en enterprise.
-Accor ding to Terry
Management is a process used for accomplishment of desired
object ive. Management s ignifiu the process of pUllfng human
aims , knowledge, and skill in the effective actio ns. It is adecieive
and productive action tbnt leads to" euceeesful accomplish ment .
The ohjecti ves of an organization are achi eved by man aging
the use of rro sllll r('eS Le. money, men, rna t erta l et c. effective
a nd efficient ly.
Ma nagement ha s a iM> been define d as:
The performing of the functions viz.
1. Pl anning
2. Orga nizing
3. Staffmg
,4. m ~ t i n
5. Controlling
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Management may also be dellned as "GeUin.9 things done
Ihrough the effort s of other people and the lu nctional break
down 10 at least two major responsibilities on 01 which Is
" "PLANNING" and the ot her Is "CONTROLL.I NG".
According to some other people management
may be defined as
"The making of decisions and giving 01 orders so l hat
maximum of output could be obtained with the minimum of
input."
Management i s the body of organized knowledge which
underlines tne art.
Management is what the manager does. In short. managing
by lhe manager is managemenl.
MANAGING
Managingis the art of doing thinga and skilfuny treating others.
Knoont z defines managing as "t he design or creat ion and
maint enance or an internal envir onment in an enterpr iae where
individuals. worki ng together in unison. can perform efficieclJy
an d effectively toward t he attainment of group goals."
What a Manager Is
What does it mean to be a manager? A manager is the per son
who draws plans, determines cbtecnves and standards. and
rakes decisions. He is respcnslbte for t he work 01others.
A manage is many person. He Is able 10 peep into future.
He guides, persuades , motivates, communicates, leads. Th e'
manager does not create problems, rather solves them, He
receives aut nority from hIs superi ors. some amount 01which
he delegates to his subordinates, He plans, directs, coordinates,
end ccn'rcls tne acuvlties of his subordinat es. He commands
Ruthorl1y ovet them. The manager creates an environment
21
conducive 10 the efficient wOrking of the wor kers . He creates
team spiri1 among them. His all activlttas are directed tow ard
the accomplishment of the organiz at ion's goal s. He is many
person bec aus e he is logic ian, historian, mathematician. He
is master of contingencies and situations. The rnanaqer is
also a psychologist because he is able to study the minds 01
his subordinates and superiors. ! te acts also as social sctentrst
since he has to study envlror e ~ s prevailing within a'ld outside
the company. .
He Is logician because he establ ishes cause and eff ect
rel ationship. thai Is. he l ustltles his decision under a given
problem situati on. He is historian because he best uses his
past expenence in the present situation. He acts also as
mathemat ician lor he determines liquidity, profitability. financial
soundn ess. and nnure prospects of the organization.
MANAGEMENT AND DIFFERENT ERAS
From the manaqernent st andpoint eras may be divided into
the following categori es :
1. B. C. years (4000 B.C. - 400 B.C.)
2. Classical era (400 B.C. - 100 B.C.)
3, Stages 01 Capitali sm (50b - 1992)
The B. C. Years (Berore Capitalism)
4000 B.C. - 400 B.C.
From the viewpoint of management study the B. C. years can
be divided i nto foll owing eras :
1. Sumerian era
2. Egyptian era
3. Babyl onian era
4. Hebrew/Bible/ Bene Israe l era
5. Chinese era
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1.
2.
3.
4.
1. Sumerian Era - 3000 B. C.
Sumerian civilization existed 3000 B. C. The wnnen documents
recovered from temples exhibit the following facts.
The sumerian priests had authority and control over
wor ldly cocos.
Due 10 religious tax system the priests collected a
good deal 01 flocks, herds, revenues, and estates.
To have check and control over pri ests an elaborate
accounting system was inst itut ed.
Sumerians established managerial control system by
requi ring the priests to submit to the cnlet priest wr itten
reports 01 thei r wOrking.
5. Requi ting the pr epar ati on 01 manageri al r eport s
prompted the sumerians to i nvent and develop thei r
script.
6. They knev- and pract ised savings. storing, tr ade,
specialization of tabor, and sophisticated crall s and
architecture.
Alter 200 B.C. Sumer was gradually absorbed into
Babytonra .
2. Egyptians civilization - 4000 10 525 B. 'C.
The Egyptians recognized the Importance of organization and
administration. Thei r management prowess and ability can
be determined trom the folfowing tects.
a. They had expertise i n mammoth constructions. They
ccnsnuctec great and giant pyramids without cranes
and bulldozers. The area 01pyramids is Ihirteen acres
and contains 2,300,000 stone blocks each weighting
2 112 Ions and they were cut to size in quarries many
miles away from the place of pyramids. They managed
100,000 workers for lwenly years.
b. They demonstrated great skill In the mobilization and
use 01 human resources.
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c. T hey kept and mai ntained documents showing income,
expenditure. sources of income, and uses01 materials.
d. The milit ary, social , reli gious. and government aspect s
01 Egyptian rife were highly organized.
3. Babylonian Era - 2150275 B. C.
The Babylonians made use ct the mlnimJm wage rate principle
in about 1950 8 . C. The archaeological flndings show:
a. Their king Hammurabl authored a set of l aws known
as the code of Hammurabi .
b. The code covered family and labor laws. II included
laws regarding personal properl y. real estate. trade.
and business.
C. They dealt in sales. loans. contracts, pannersnlps.
agreements, and promissory not es.
d. They set laws regarding minimum wages, control,
responsibilil y. and relributlon.
e. They introduced color coding methods of production
conl rol.
f . The Babylonians motivated laborers by incentive wage
pl ans.
g. They established piece-rate pl an.
h. They had a sound and ettecttve system of textile
prcducucn.
4. The era of Bene Israel (Hebrews/Bi ble)
The Hebrews knew how to manage people and acti viti es.
The foll owi ng f act s show thei r signillcant managemenl
capabil ities.
a. Joseph, the messenger 01God, Introduced granaries
and warehousi ng system.
b. Moses led the exodus 01 over a milli on Jews.
c. Jews had the concept 01 span 01 management .
d. The bible described the rationali zation of the principle
of delegation.
5.
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e. They established the lower courts to handle simple
cases.
f. Joseph, Moses, and Solomon had managerial talents.
5. Chinese Civilization 1500 B. C.
The Chinese introduced the of principle 01 division 01 labor.
They divided the labor according to their skill. They are the
pioneers of specialization. They managed to elicit efficiency
of labor for the organization.
CLASSICAL ERA (400 B. C.-l00 B. C.)
The classical era ranging from 400 6. C. to 100 B. C. was
dominated by ~ Greeks and the Romans. The Greeks and
the Romansboth viewed traders, merchants and money-lenders
as necessary evils.
The Greek and Heman traders managed to prosper by
manufacturingand selling exotic and necessary goods. Effective
commercial institutions came into existence. Local markets
expanded. Banking system came into being. The era was
marked with competition. advertising, and public relations.
They also resorted to bankin9 advertising.
But both the nations haled trading. They loved philosophy
and law. Merchants were not allowed to own property in Greek.
Plato. and Aristotle both discarded merchant class.
But disliking of trade is not limited to Plates and Aristotle
01 the ancient eras. In 1776, in his book tilled Wealth of
Nations, Adam Smith, father of modern economics, expressed
his feelings against traders andcapitalists. Napoleon Bonaparte,
the king of France, hated trade and called the British a nation
or shopkeepers. Lord Bertrand Russel, a British Philosopher,
nlso disfavored traders and declared that the governing passion
lor' his life was longing for Jove, the search for knowledge,
and unbearable pity for mankind.
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Pl ato, (427 B.C. - 347 B.C.)
Pl at o looked down upon trade. He di dn't beli eve in commerce
and craftma nshi p. But he said that the buyers and seller s are
necessary t o exist to provide food, clothing, and housing. He
declared them as necessary evil.
Aristotl e (384 322 B.C. )
Aristotle equally disliked commerce and trade. His emphasis
was on social and economic philosophies. Under economic
philosophy,he solved economic quest ions like exchange, division
ofl&OOr. money, interest, and usury. .
Xe nophon (434 .355)
Xenopbon disagreed with Plato and Aristotle. His attitude
tewerd traders WBIl encouraging and realistic. lie viewed.
business as an Clpportunity ~ increasing state wealth . He
advocated fo:r t ~ bnpor t of t he goods available in . carcity and
expor t of surplus goods; He wanted t o allow fore ign ers to own
-Iand and construct ,buildings . He favored conscription for
foreigners . He sai d that the foreigners should be given funds for
shipll and venture.
26
Examination QueStions
1. Defin e management, managing, manager . Also
discuss differ ent eras wi th reference to managment.
2. Explain B.C. years and claselcel era.
3. Describe in your words early atagefl of capitalism.
4. Write nctee on the follQwing:
(a) Plato
(b) Babylonian era
(d) Chinese civilization
27
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CHAPTER 2
STAGES OF CAPITALISM
EARLY STAGES OF CAPITALISM
J. Prebusiness Capltallsm
2. Petty Capitalism
3. Protestam Capitalism
INDUSTRIAL CAPITALISM
FINAr\ ( AL CAPITALISM
Business Combinations
1. Holding Companies
2. Pools
3. Cartels
Social Drawinism
NATIOlliAL CAPITALISM
;\IASAGERIAL CAPITALl S;\l
RESULT-QRIENTED CAPITALISM
28
The s1ages capitalism may be divided into fOllowing eras.
1. Early stages 01 capitalism (500 - 1776)
a. Pre-business (500 - 1100)
b. Pelly business Capitalism (1100 - 1400)
c. Protestant Capitali sm & mercantilism (t4oo - 1776)
2. Industri al capaausm(1776 - 1890)
3. Financial Capitalism (1890 - 1933)
4, NatIonal Capitalism (1933 - 1950)
5, Managerial Capitalism (1950 - 1980)
6. Resurtor lend Capitalism (198 1 - )
1. EARLY STAGES OF
CAPITALISM/MIDDLE AGES
Early slage s are referr ed by men of our limes to as middle
ages. Middle ages may be divided. into three penece.
A. Pre-business Capitalism (SOO - 1100)
This era is dominated by teudat s and manors. Thi s era 1$ \
marked by three elements:
(i) Individual standi ng and stat ue could not be changed by
ilidlvidual effort s.
(li) Production was made for onl y personal consumption,
(iii ) In material aff airs ti me did 001count. Workers were bam
serts. They had 10 work for 24 hours . However , regular
patterns 01 work were developed. Talents of workers were
made necessary to IiII a Job, Feudal lords developed some
administrative , and accounting techniques.
B. Pelly Capitalism (1100 - 1400)
This era lmrcduced business to societ y, Production was'made
net only for personal consumption but also for exchanqe for
29
the first time in this era. People came 10know the concept of
b.uying needed goods and seiling surplus goods. This era not
only enjoyed barter system but also some common system of
exchange evolved. They realized the importance of time, work,
leisure, and specialization. People knew how to Invest capital.
They practised the following.
(i) Formation 01 partnership.
(Ii) Advancing loans and goods.
(iii) Making a charge on credit sales.
They learnt that status could be attained by performing
economic activity. They believed in economic independence.
Training and ercrenucesntp were given importance. The'
essence of this era was belief In democratic economic equality.
This period is marked by high price tor capital (usury) and
poor price for goods. But it was recognized ttret the merchant
should get fair price for his goods enabling him to maintain
his standard of living. Natural growth and expansion were
end result of this period.
C. Protestant Capitalism (1400 - 1776)
This period started at the end 01 middle ages and was connected
with the private enterprise system of the U.S. The era is
registered with foreign trade, manufacturing, colonialism,
shipping, marketing, and huge profits. Businessmen learned
techniques, policies, and practices. They hired people to work
for them.
Businessmen made a great deal of travelling within and
outside the country. Transportation, banking, import, export,
training, specialization, and hiring and firing of personnel, are
special features of this time. Some inventions were also made
putttnq a foundation stone lor industrial revolution.
30
2. INDUSTRIAL CAPITALISM
(1776 - 1890) ) / 4
Industrial revol uUon Is a unique event ollhls era. The Industrial
capit alists believed in speciali zing, streamlini ng, and delegating
task. They usedpower-driven machines and worked employees
hard. Their motto was 10 minimize cost and maximize' sale
and profit.
The Industrial revolution was the

result 01 the following
_.---_._ .. _..
k"p'lnnil'!.g machine run by h! fld.s..
...
3. .
.,"'..IJ.1e,
5. .
.f? .. Chlorioe_bleaching__
.__ ..
8. Interchangeabl e manufacture
.. --' .'-"-- --"- - - .
During Ihis period. Adam Smith put forward l and. labor,
and capital as three t eeters of production. J.B. Says Introduced
entrepreneurship as the fou rth factor. Smit h said that
specialization was the key to productivity. Productivity could
produce mcre fncome, high wages . large and prosperous
families. and Increased market.
3. FINANCIAL CAPITALISM
(1890 - 1933) /, '; <l '''''rt,
Financiers were unaware of production methods. But Ihey
were masters of financial juggling. Their emphasis was not
on speci alization. They believed in di versification and multiple
economic functions . Industrialists had always put back their
31
profits into new equipment. But tne financiers set the prollts
aside as cash reserves. Compet itton whk:h was severe in
this era was, overcome by cooperative competit ion. In this era
t here existed a workable rel ationship between the workers,
the consumers, the producers, and the investors. Many people
learned to dislike the financiers for usury. Perhaps due 10
this, this era faced I he Great Depression in 1930s.
A. Business Combinations
About the last quarter of the nineteenth centu ry, business
discover ed how 10 earn large prolits by combining major
competi ng units.
. Businessmen united lagathar to beat competihon. Bullhe
governmenl legislated t? protect the consumers and perpetuate
compet ition.
Business combinations included trusts, holding companies.
carters. mergers, amalgamalions, pools, and exclusive selling
agencies.
Trust
In 1776 Adam Smit h said, "People of the same trade seldom
meet together even in merriment and divers ion but the
conversation ends in a conspiracy against the publi c. or on
some contrivance to raise prices." It came true when the
businessmen discovered that larger prouts could be made
more easily if a monopoly could be attained by combining all
the competing units. The shareholders of severa l competing
companies turned their stock over to a group of trustees. The
trustees lhen controUed the separate organizalions and operated
them 10 maximize prolit and minimize competition. Such
organi zations were known as trusts . There were vot ing trusts
also In which stock holders transferred their voting rights to
the trust ees. Trusts were crippled by the pol it ical parties,
governments, and federal legislations in the U.S.
32
s
,
,
-,
e
,
s
"
e
e
>,
g
Holding CompanIes
Due 10 loopholes in antit rust laws holding companies came
Into being by comblnng compethlve companies aCtivities under
single leadership . The holding company.>is a company, Ihal
owns controlling interests In other companies known as
subsidiary compani es. It is sli ll legal today, and its use has
been steadily increasing.
Pools
,
Theyare written agreements. among several companies covering
one or' more phases of operations such as terruor tes. prices.
profits. output s, or patents. Prolil and price pools demand its
members 10 fi x minimum levels 01 prices and prouts lor their
goods. Territory pools divide areas among il s members to
avoid compeli tion. Output pools restrict abundant supply and
fixes production amount at small er levels 10 keep the goods
in scarcity. Pcota are now 11I egal in the U.S.
Cartels
Pools In other countries than US are referred to as cartel s.
They are legal outside the U.S.
-n
B. Social Darwinism
n Chartes Darwin ccocectoaneeethe blologlcal evolution according
.e which all organisms evolved from primill ve types through the
.e natural laws of survival.
,II
.g Spencer appl ied Darwin' s theory to social development.
e According 10 him the weaker soci al inslitutions and buslness :
o might have to be sacrlttced to develop the stronger movement s.
:h In other words he meant the survival of the Intest.
ts
:0
s,
J .l

4. NATIONAL CAPITALISM
(1933 - 1950) 17 0 e ? \ ~ 1
The abuses of Industrial capitalism gave rise I? national
capitalism whose pitfalls lad to managerial capitalism.
.Natlonal capitalism Is a national control 01 the capitalistic
system which the aim was to remedy Inequities created under
lndustrlal and" financial capitalism. Ownership 01 business
remained in private hands but In the Interest of public the
.ccvemment intervened. The principle 01 laissez tatre was
abandoned. The governments lightened controls and enacted
protective legislations
Aocordlng to Drucker, management boom has come to
an end and now the time of management work has ceme.
The large corporations blend the talents and abilities of a
great number of individuals. Now people manage rather than
own their companies.
. National capital givesthe lesson that the public must realize
the extreme importance of business in the .grcwth and
continuation of our way oflife. On the other hand,business must'
learn that responsibility for public well-being is not Justa
gimmick. Business must serve the public as well as make a
profit. Public eruetts a commodity to be earned and treasured
by business. " jVS
'1 ,1-" o,Jfl
5. Managerial Capitalism 0950 - ) ~
Managerial capitalism is a professional capitalism. There is a
shift from' family management. to professional management.
Now the businesses are in the hands professional and skilled
managers. Industrialists and capitalists are dependent of them.
Managerial capitalists must know the whole business. They
must be product oriented, prC?cess conscious, financially
responsible, and public spirited. They must ambitiously pursue
34
their own ends without endangering the goals of the company
as a whole.
According to Drucker, management boom.hee ended, and
now the time of management work has come, The large
corporations blend the talents and abilities of a great no. of
individuals, Now people manage rather than own their
companies,
6. RESULT ORIENTED CAPITALISM
(1981-) \1 ,}, : , i\\,
, t)!'
u
When Peter Drucker says that the manageriaJboom has come
to an end, he means the end of managerial power. In other
words, the managerial power has been subdued by the
subordinate. Newly developed concepts of participation, theory
Y and Z, and MBO compel managers to introduce pressures
and viewpoints of their subordinates into decisions, On the
other hand, the lop management is not interested in how
subordinate manaqers plan, organize, control, and how they
spend their time. Now it is Interested as to what are the net
short-and long-term results of the performance of the lower
level managers. So the current era is result-orientedcapitalism.
cut even in this era managerial power and authority in decision
making cannot be ignored.
]'j
I'
I:
)
,
,
,. ..
Examination Questions
t . Explain early stages 01 capitalism.
2. Define prebuslneas, petty , and Protestant capitalism
V Differentiate between industrial and financial capitalism.
4. What do you understand by social darwlnlsm? De you
agree with this theory? Why or why not?
S. What are holding companies, pools and cartel s? Would
you' like Pakistanis 10 establish cartels?
8. Differentiate between national and managerial capitali sm.
V What Is result-oriented capitalism? Ollferentlale it with
managerial capitalism.
36
n.
)U
Id
n.
-n
CHAPTERJ
DEVELOPMENT OF MANAGEME1',.
THOUGHT
MANAGEMENT CHAIN
I Scientific Management Theory
I . Oui des Babbage
2. Frederick W. Taylor
) . Henry L. Gantt
4. 1hL GUbre/hs
11 Human Relations Theory
I . Robert Owen
2. Dr. Hugo MUI1S1erberg
3. Elton Mayo
4. Chester Bernard
~ Administration Theory
I . Henri Fayoi
2. Mary Parker Follett
3. Colonel Lyndail Urwick:
4. R.C. Davis
5. HaroldKoontz
FUJIOCTIOJlOS OFTHEMAJIOAGER
COORDINATlO:-l
. EXAMI:-lATlON Q U S T O ~ S
37
o DEVELOPMENT
THOUGHT
OF MANAGEMENT
Management Chai n )
The evoluti on and development of management thought ca n be
explained in a chain of three links. All t he links of the chain are
80 important that the concept of management can not be
explained wit hout anyone or t hant . The chain is as follows:
1. Scientific Ma nage me n t ( P r odu cti on .. orien ted
management )
2. Human Relations manegement)
3
1
Administ ration (Production. a nd employee-o rient ed
management or result-oriented management)
I. SCIENTIFIC MANAGEMENT
Sclentiltc management conducts a business or allairs by
standards and norms establlshod by facl s, or truths inferred
from systemati c cbaervattons. experiences. or experiments.
The ' following four m.anagement experts advocated scientific
management:
1. Char les Dabbage
2. Fredrick W. Taylor
3. Henry L. Gantt
4. 'The Gilbe."ths
1. Charles Babbage
Professor Chnrles Babeege WQ!I not only t he pioneer of scientific
the father of computer. In 1822 he
inventWailferincemaChIne"whIch wasa calculator .
In 1833 he invented anothe r devi ce in the calculator which is
st ill II basicelement in the modem compctere. He wrote many
booka in wh ich "e n the Ec onomy of Mach inery and
Manufecturere" whi ch he wrote in ] 832 was the most popular
38
Charles Babbage advanced the foll owing principl es of
nlanagement :
t , Ul vlsfon of Labor: labor ShOuldbe dividedaecoming
to specialization to Increase etticlency.
, "
--.--
2. Management and productfon: Management
activities should be separated from techniques of production.
Scientific methods should be adopted in production. .. .
3. Management Problems: Managemenl shouldfQcus
its attentjcn on problems of production, employee relations,
time-saving, li me-study, control of weete, and use 01 ~
products.
4. Mar keting management: marketing management
should be effective. Advertising, selling, produci development,
and reduction in unIt price are necessary to capture market.
According 10 Charles Babbage the following are the
advantages of the division 01 labor:
1. SInce the worker learns only one skill learning and
training time Is reduced.
2. Shift from one trade or skill 10 another is possible in
less time.
3. Because 01 repetlUon of work, the worker can gaIn
proficiency and ettlciency quickly. I
4. Due 10 specification 01 each part 01 the Job, Ihe
development of special equipment and tool s are
f acilitated.
To evaluate its productivity and cost he developed the
lollowing questions:
39
1. What are the defects In t he product made by Ihe
machine '1
2. What are Inthe prod.Jet made by the machine 7
3. What is the prime cost 01 the machine ?
4. What is the malnienance and repairing cost of the
machine ?
5. What Is the operating cost of the machine ?
FrederIck W. Taylor
FrederiCk Taylor is popularly known as l at her 01 scientific:
llrrriiQi""mElnl.' ln -1875 he slaned hi s career as apprenuce. -in
l lJ71f.'li1lQlned' Mldvale Sleel Works, PhUadelphia, as machine
operator. Duringservice he continued his studies In the evening
and he obt ained his degree in doct or ate. Later he Ietched the
hIghest positron in Ihe same company. His contribution in
management is greal. He invented many ifllJrements and tools
usedin faclory. His experience as laborer. apprentice. machine
operator, foreman, head mechanic, and f inally as cnlet engineer
helpe d tl im understand the viewp oi nts, weaknesses, and
strenglhs of not only workers but also the management.
When he advanced his theory of sclentitlc management
he had to l ace a great opposition not onl y from the laborers
but also American eencreee. In 1912, he was call ed up by
the Congress to clarify his position. The charge against him
was that he wanted to over load the worke rs and wanted them
to be unemployed. There he clarified his pcsncn. and said.
management is not adevice 01perf orman ce. II
is not a new system to determine cost. It ls not a wage
payment scheme. It Is not a bonus system. Il ls not 31 premium
system. It Is not a piece-rate wage system. It is not a time
study or motion study.
. -actemue management is a mental revolution on the pan
01workers and managemenr. It teaches the workers 10 k now'
4(
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their duties, their co-workers and superiors. Management should
also know Its duties and responsibilities toward its workers."
Taylor's Principles 01 Management
Taylor advanced the following management ptlnclplee:
1. Management should scientifically develop what
constituted a day's work of each worker (determination
of each worker's duties by time and motion study). It
will help the management to get rid of the rule of
thumb method used in the determination nf nifties.
$clei'ltifiC selection andlrainlngof workers are necessary
for improving productivity.
Management and workers should cooperate with each
other, and they should abandon confrontation:
Managerial and non-manaqerlal work should be
separated. Planning, organizing, and directing
responsibilities should be performed by the managers
rather than the workers.
Like Professor Charles Babbage, Taylor also ignored the
human aspect 01 management. He was a stern person and
treated the workers as machines and tools. He wanted the
worker to be as stupid and dullard as an ox so that the
worker can work as much as the management desires.
It is interesting "to note that the rayrcra ecrenunc
management was so warmly accepted and welcomed and
hauntedby the manufacturers and businessmen that the Payers
principles 01 management were completely ignored. and
therefore delayed in their adoption. Had it not happened the
history of modern management would have advanced much
earlier.
Henry Ganll
Henry L. Gantt is another pioneer of scientific management.
As stated earlier that the main focus of screnunc management
41
I
-J
I
' I:
. Is on ~ maximization 01productivity ignoring human element,
a more important aspect of management.
Henry Ganll wee one 01. Taylor's coll eagues. He. unl ike
Char les Babbage and Taylor . introduced human factor in his
theory 01 ecientltlc manaqement. He gave due importance 10
sell-respect. ego, and morale of the workers. He related morale
altha worker wil t', ",noduetivity. He introduced bonus payment
system. He invented a chart known as Gantt t. hart which is
used even today. He put his particular attentlon on training to
improve performance of workers. He was utterly against
autocratic and Incompetent management. He favored an action
benefitting human cause: and opposed the one damaging It.
He believed in democratic relations in business and Indust.ry.
The Gilbreth.
Frank Gilbreth and tuswlte LIllian Gilbreth are among those
who strongly advocated sclentitic management. We wlll discuss
husband and wile separately in the lines 10 rollow.
Frank Gilbreth
Frank Gil breth is recognized as efli ciency expert. Hestarted
his career as br icklaying apprentice. Due to his ability and
deep knowledge of management he reached t ~ s t position -
of chief superintendent i n a construction company. Then he
abandoned the construction work and opened a management
consulting firm to improve human productivity and efficiency.
Frank Gilbreth put his emphasiS on tinding lPeone-best
way to do any job through time and motion study. He reduced
each lOb to its most bask: movements. He reduced bricklaying
movement s trom 1e 10 onry 5. Through motion stucles he eet
up work standards and controlled wasted motions and energy.
4 2
n, .
,.
is
'0
I.
11
is
o
st
1
. In 1907, he had a meet ing with Taylor. Impressed by hi m,
Glfbreth Impl emented pri nciples 0' ecrennnc management He
practised scient ific pri nci ples In his privat e life too. He shaved
hJs face wit h two blades and managed 10 save his 44 seconds.
BUI finally he gave up beca use one day he cut his Jhrcat .
He had to bandage his Iniury which look his two minutes.
According to him It was not hi s Injured throat that made him
leave using two blades. II was two minutes which he wasted
. .
Fr ank Gilbreth' s manaeenatprecuces were as foll ows:
1. He tried-to find one best way to do any work through
mot ion study.
2. He developed field rules for his employees eliminat ing
wasted time and shoe leather.
3. He developed rules. The promotions and higher pays
ware subject to their enforcement and observation.
4. He prohibited smoking during the work.
5. Record keeping was made compulsory.
6. Decision making was centralized at tho cnrce.
7. He allowed unions but its membership was subject to
his permission. Such a practise is nowknown as 'yellow
dog cont ract.'
8. He Introduced whistle syst em to start and stop the
work in unison.
. 9. Monthly performance reports were made essential and
were prerequisite lor promot ions.
10. He emphasized reward and respect for his employees
10 them 10 work efficiently.
..
Lillian Gilbreth
Ltlllan, the wife of Frank Gilbreth, stood by her husband In
the sclentlttc management movemeet. She pioneered In the
pers onnel management. She advocated scientifi c hir ing,
selectlcn.tpl acement. ori entation, and training of per sonnel.
She was the first lady in l hoUS t o receive a ph . D. ....tn.,
pSyChoio
QY
Yi, 191S.-'S}learid tle'( two
type's "or IMehlTves. ..
A
Dlrecl Incentlves
Oppcrtunltlea for pride. ambition , compelll ion, personal
recognition, and accomplishment
Indirect Incentlves
Promot Ion, pay, shorter working hours . allowances, and. etner
benetlt s.
Frank Gilbrel h' s emphasis was on human aspect of
manauement. but lillian's locus was on performance. Both
the tal ents have given new di mensions to the world 01
management.
II. HUMAN RELATIONS THEORY
Human relations aspect 01 management is \. Ie second link In
the manaqement Chain, as suggested by Robert M. Fulmer.
He says thai lhe discu ssion 01 management evolution is.
incomplete wit hout t hi s Important link. This aspect 01
management is human-orient ed, while scientific management
is prccocuc n and work-ori ented. The 'ollowlng authors are
l he pioneers of human rel ations in management.
1. Robert Owen
2. Dr. Hugo Munslerberg
3. Elton Mayo
4. Chesler Bernard
Robert Owen
Robert Owen supported the human aspect of management.
He was the successful manager 01 a textile mill i n Scotland
in 1800's. He valued his workers as essential machines. He
said that human machines are more impor tant than Inanimate
machines. Keeping humans in proper and working order Is as
necessary as machines. so thai they can penorm the work
44
ttii lCuwliy. 01 iocu slng his attentron on numen psycnolOgy,
needs, and moHvation he managed 10 receive more than fitly
percent return on the amount spent on his employees. According
10 him, expenditure over employees is actually Investment
which pays back itsell. II employees social and personal needs
are sattsl' ied. the company's overall prollt pcstrcn will improve.
Dr. Hugo Munslerberg
Or, Munsterberg is popularly known as father of industrial
psychology. He received his Ph. D. degree from the L1pzig
Universi1y01Germany in 1885. AI 27 years 01age he received
a medical degree in 1887. In 1892 he was " ",ad by Experimental
Psychology Department 01 Harvard University, USA. By 1908
he was the recipient of lhe highest salary 31 the University.
Americans treated him as the authority on everyt hing, He
wr ote thirt y books, articles, and monographs .
Dr. MunSlerberg's contribution to Industrial psychology and
management is 01 t remendous v a l u e ~ e focused his enenucn
s on the fo!lOwing PsyCholo:gical tactcr s of Ihe workers.
1. How to ttnd such people whose ability and capabili ties
e are In harmony with the demand and nature of work ?
2. What are t hose psychological factors under which a
worker perfo rms and ut il izes his potenti alit ies and
capabili ties besl ?
3. How can a business effect ~ worker 10 produce tne
maxi mum?
3. Ellon Mayo
Erion Mayo is t itled as the lather 01 human relati ons. He
1. became celebrated for his Hawthorne eepenrrent s. He strong ly
d advocated human sM:le 01 managemenl. He conducted many
e researches, experiments, and studies to find the impact of
e working conditions and environments on the elfi d ency and
IS Quality 01the worke rs. His these studies are popu larly known
1< as Hawthorne experiments. Under ' them he condu cted the
fallowing.
(1)/IIumlnatlon experiments
These experiments were conduct ed to know the rel ati ons
between the strength of light and the volume of work.
(II) Retay room experlmsnts
These were conducted to learn the impact of place of work ,
length of rest hours, length of working hours, method 01payment
and free lunch on the workers' productivily. These exper iments
lasted for live years.
(/II) Benk-wl rlng room experiments
This study staJ1ed in November 1931 and lasted till May 1932.
Its primary objective was to make an observational anafysls
ot the informal work group. The work group compr ised nine
wirers, thr ee seeerers. and t wo inspectors.
(Iv) Mass Interviewing at Hawthorne
Through the questionnaire the following Iactors were analyzed
In relattcn to productivity.
Absence, advancement, dirt , f atigue, furnitu re, l ans,
educ ation, worki ng hours, medical, overtime, monotony, light ,
Interest, thrift, vacatcn, ventilation, washrooms, welfare, working
space , and many more.
The results 01the stud ies at Hawthorne were as Icu ows:
(I) In business and Industri al matters human side Is tar
more ImpoJ1ant tnan the machi nes and mel hods.
(ii) Soclal laclors attect workers productivity . Busi ness is
a part of ever-ett social system.
(iii ) The efficie ncy of the working groups can be Improved
by effective leading, motivation, counseling,
communicati ng, and guiding.
(Iv) Special attention or behavior , whether pcsftlve or
negative, Improves productivity of the employee.
(v) Productivity is the result of employee behavior.
(vi) Respectful behavior with the subordinate will increase
his productlvlty.
The results of Hawthorne studies are referred to as
Howthorne effects.
4. Chester I. Bernard
Chester Bernard is the founder ofsyslems theory. System
has been defined as Ma set of things connected or
'Interdependent, and interacting se-as to term a complex unity."
A system Is a whole ccrnpceec of parts In orderly arrangement
according to some plan or scheme. The systems theory PUiS
that' the whole is greater than the sum of its' parts.
According to Bernard, no actlvlty can be effectively
performed until it is organized urider a 'system. Due to mental,
bloloqioat.llmltattons, a truman.canncroc things alene. These
limitations lead, him to achieve the cooperation of others. This
cooperation gives rise to formal or informal organization. Formal
organization is defined as a system of weu-detlned jobs with
a definite measure of authority, responsibility, and accountability,
the wnore consciously, designed. -tntcrmat organization is what
people de in terms of needs, emotions, and attitudes; not In
terms of procedures and
Bernard suggests that the survival of formal orqanlzatton
depends on the -following.
(i) People are able to' communicate: wilh one another,
(ii) The group interest is facilitated.
(iii) The members have the same objectives. Their
goals should not be contnctory.
A formal orcantaattcn should have the following
characteristics.
(I) It musl have a syslem 01 funct ions. as market ing,
accounting, pUrchasing, public relat ioning, odds and
sods. .
(Ii) There should be a motivation syst em, as salary, bcrws
al lowances, promot ion, commendation, etc.
(UI) 1ll&fe should be u ~ r t y and decision making systems.
Barnard concludes that people like to be org anized
and led rather than managed.
III. ADMINISTRATION
It Is the third link In the. management chain which centers on
results. According to Robert Fulmer, administrat ion is ettective
only with best workers, 10015, and coordination.
This school 01. thought is the resun 01 the studies 01 the
ronowing rnanaqement experts:
1. Henri Fayol
2. Mary Parker Follett
3. Colonel Lyndall Urwlck
4. R. C. Davis
5. Harold Koontz
1. Henrl Fayol
Henrt Fayal was a mining engineer and Indust riali st . He Is
referred to as the father of modem management. In 1888,
when he took charge of Commentary Fourchambault as its
managing director , it was nearly bankrupt In a short period
of time Fayc t managed to bail out the company and led it 10
yellow brick road (prosperity). The development of modern
management w as delayed because Fayol's teachings were
overshadowed by those of Tayl or until 1949.
Fayol divided activities 01 Industrial company Into shl
groups: (1) Technical (production); (2) Commerctal (marketing);
(3) Financi al (sources and uses 01 funds) : (4) Security (safety
01 life and propert y, and jOb) ; (5) Accounti ng, (audit i ng and
statistics); and (6) Managerial (planning, organizIng, directing,
coordinating, and controlling). He declared managerial functions
or acllvili es the elements of management
Managerial qualitlas
Fayol delermined the following essential qualities 01marJagers:
1. MenIal (mental vigor , ada ptabil it y, l udgment ,
understanding, and learning) .
2, PhySical (hearth, vigor, address, stature)
3. Moral (honesty, Iirmness, lnitlative. loyally, di gnity,
tecttumess. ability to assume responsibilit y).
4. TechnIcal (functional)
5. Educallonal (understanding general situauons)
6. Experience
In 1914, Henri Fayol advanced the followi ng fourteen
prlnclples 01 management which he-consi dered as ttexlbre
and universal regardless of changing environment.
PRINCIPLES OF MANAGEMI;NT
LISTED BY FAYOL
r . Division 01 Work
When an organization comes i nto exi stence work musl be
divided according to skill and soecranzeuon. Specialized activity
when performed increases the eulct ency 01t he organirati OIl.
2. AOthorily and Responsibility
According to Fayol authority must be delegated to gel tne
work. done. Authority is the combi nation 01 official and personal
factors. Ofl icial authority is the power which has been given
by Ihe company, and per sonal authority is the inl elligence,
experi ence, moral worth cIC., which are personal.
. 3. DIscipline
- Discipline is obedience and respect for agr eement leading to
company' s goals. discipline there will be chaos and
confusion. and company's goals will net be accompliShed.
DisCipli ne requir es good superiors at all level s.
4. Unity 01 Command
According to Fayct, employees should receive orders trom
only one superior who 15 lnvnediately above him in the line,
otherwise there will be a clash 01 authOrity and activities owing
to which the work will not be perfor med smoothly .
5. Unity 01 Dlractlon
According 10 it . each group of activities having lhe same
objecti ve must have one pl an and one head.
6. Subordination of Individuals 10 General
Interest
Whenthere is a crash between two employees the manayemenl
must reconcile their differences. otherwise it would be dillicult
to reach company goals.
7. Remuneration
Remunerat ion to the employees must be tair and based on
equity. Salaries and fringe benefits musl be to motivate
workers.
a"
By the principl e 01 centralizati on Fayol means that bow. much
authoril y should be delegated to the employ ees and retained
by t he super . The larger the organization the will be
the degree of delegation 01 authori ly. Decentrali zation Is the
division of work and delegation of authorfty.
10
00
ed.
m
e,
19
ne
m l
ull
on
lie
och
oed
be
the
g, Scalar Chain
Ther e should be a cha in 01 superiors down Irom the highest
to the lowest echelon. Super t -JOUS texcesslve) levels should
be avoid ed.
10. Order
By order Fayol refer s 10 matertat and social orde r. It means
a place!or every thing or everyone. andevery thing or everyone
in its or his pl ace
)1. Equity
" Management must maintain equity among the employees. Equity
will facilit ate 10 draw maximum loyall y Irom employees,
Vi. Stablllly 01 T.'!!'-'!re ,/.," , .
Job secu rity should be prov,fded 10 the empl oyees to gel thei r
maximum 01 output. High l abor turnover causes greater costs
and invol ves many hazards .
1
" , r: r
13. Inltlatlve tf ,.t.!; :;,. c t" c : ! l ' J, '--" ,- .:'
. -. - ' t (
II mean s thinking out and execut ing 411 pl an. Thos e whp are
high achievers and have lnitiative should be encouraged: They
get sati sfaction only when their ideas are honored.
, 14. Esprit De Corps .
11 reters to team work and ccnectlve force 01 emplo yees which
must be used in the best interest of the organi zation. Team
spi rit makes it possible to get maximum 01 output wll h a
minimum of input.
Why are Fayol 's principle, preferred to
Taylor's?
Fayol 's pr inciples are foll owed and pref erred all over the world
01 managemenl. Betore t um. Taylor' s principles of management
were accepted as the only key to management problems. But
alter-the Introduction of, Faycl'a prtnc'ples. Taylo r' s pri ncipl es
were abandoned. Americans, who liked and followed Taylor"s
principles, welcomed and preferred Payers. very enthusiastically.
"' . J
The reason behind it was the teet that Taylor's principles
covered only prcoucten vlewpclnt ct management and ignored
human aspect. On the other hand, savors principles take
into account not only production side but also human relations'
factor.
Payol's principles of management have great potentiality
to give greater productivity and create higher morale of the
worker than Taylor's.
2. Mary Parker Follett
Mary Parker Follett is popularly known as political philosopher
and social critic. She favored group lhinking, togetherness,
participation, creativity, humanitarianism, and other human
aspects of management. In 1920, she wrote a book titled The
New State centering on the leadership and management of
governments. She pinpointed many flaws and malpractices in
several trusted social and political spheres. Her.manaqernent
works can be interwoven into the three links of management
chain - scientific management, human relations and
administration. She Is the lady who developed now widely
accepted principles of coordtnatlcn. She clarified conditions
for developing harmonized efforts.
3. Colonel Lyndall Urwlck
The colonel worked successfully ,as a military officer, civil
servant, and management consultant. He was one of the
disciples of Henri Fayol and advanced his teachings and
philosophy of management. The colonel has a great contribution
to the field of modern and operation management pioneered
by Payol.
4. R. C. Davis
R. C. Davis had great knowledge because he thoroughly studied
at the library of congress everything on management including
all schools of thought evolved by several management authors.
52
,
j
,
,
y
e
'.
n
e
'I
n
"
"
d
Y
s
If
e
d
n
d
d
9
..
Out of his study 01management he developed a ccmpeehenewe
theory of functions and processes of management.
5. Harold Koontz
Harold Koontz is very popular among commerce and bus iness
administration students and teachers. He is also widely known
lor his Management Theory Jungle meaning so many diversilied
schools of and approaches to the study and concepts of
management that lead reader s and students 10confusion. He
says that It Is luWe 10 li nd one best possibl e approach 01
. management: Students should develop thei r own thoughl by
studying ditterent approaches 01 management. He asserts
that the dillerences and diversifications are only superficial,
not l iteral . All the school s 01 thought guide toward the
accomplishment of ooals with the minimum 01 inputs and
maximum 01 outputs. These d jnerences occur si mply because
of the lack 0' understanding 01 the readers. 11 is so because
they study these approaches cursor il y, not deeply.

Harold Koontz is the cc -authcr of lhe Worldfame book,

Principles of Management , tr anslated into 13 important
languages of the world incl uding Urdu.
FUNCTIONS OF MANAGER
Planning
It means selecti ng the objecll ves, formulating the poli cies ,
programs, and pr ocedure s to achieve the se cbj ecuv es.
Objectives are grouped into mose ot individuals, departmems.
and the enterprise. Planning Involves deci sion making and
selecting a defini te course 01 action from among various
altematives. The responsibility 01 planning goes on the sroujcers
of managers, whether they are at the top, middle or bottom
otthe organization structure. Ills looking ahead and concerned
wit h the future. Pl a1lning is whal to do. when 10 do. how 10
53
,
' I
do . who wh y is 10 do. It provide s yardstick against which
actual perfo rmance is measured.
Organi zing
The next function of the manager i s organizing. It Involves
the establ ishment 01 detmtt e structure of roles . It Includes
>-
01 activiti es, assignment of lhese acti vities 10
organizati onal groups, the delega',:on of authority and co-:
ordinati on of the authority oetecereo. Since one man can n I
perform all the runctions, the act' ,ilYmust be spill etr true
buying, selli r J. prcducf J, accounting to achi eve enterpri se
objectives. In organizing a business a full advantage 01
specializati on is enjoyed. The organi zal ion mus t lit l he t ask
anc . 101 vice versa. The or ganizat ion structure is net an end
In il sell but a means 10 an end.
Organizing creates or ganiza tion, and organization creates
management. Orga!llzation whi ch is a group 01 persons is
termed owing 10 time, physical , and ability ltmlt orlcns.
Staffi ng
It includes hiring, sel ecting, pl acing, transferring and flr ing. It
is the nmctlcn01a manager 10 define man power requirements
for the job to be done, determine workman's compe nsation
and train the worker s. The cbjeclive ot st aNing is II> create
such a team which is loyal to company and it s oblectives.
Wage and salary administration, pension, bonus, gratui:;' , group
Insurance, provi:l enl l und, employes welf are, transfer, promotion.
retirement, leave, medical come under tre purview 01personnel
admintstrauon. Personnel administrat ion is the new t erm. used
for staffing . St alling starts even belore .. iring and continues
eve n after firing .
Directing or
11 invelves guiding, supervising 01 sub-or dinates. The superi or
manager must teach his subcrdrnatee t he enterprise tradit ion.
history. objectives ~ n policies. Subordinates must learn the
organization structure, roreroepertrnenret retatonstup 01 acti vities
and respcnslbmttes. They should al so know their duties and
autncnues.
Directing improves the performance 01 the workers. It
moti vates them to work with zeal and ccnudence.' The
suoervlscr's leading, communicating. motivating, and persuading
come under the tuncttcn ol. di recting. Now bett er term leadIng
is used for direcllng.
" Conlrolllng
Controlli ng measures actual performance and corrects the
weakness in1M pencrmarce. II also ensures to accomplish
plans. Control competevent s 10take place according to plan.
Through controlling workers are made responsible lor the
errors they make and then they are corrected to improve the
performance. Cont rolling means 10 look back, while plannin g
is 10 look ahead . There are ttuee- bastc cont rol processes. :
(t) Establi shing standard
Iii) Measuring petformance
(ii i) Correcting deviations from standard and pl ans

COORDINATION
cocrcrnaucn is ever present al every level 01 managemenl ,
and pervades all managerial funct ions. It has been defined
as an orderly eynchrcnizatlon Of unilication of individual and
group ettorts . It tacllitat es harmonizatio n of individual and
group goals. The bigger tht,. .)fganizali on and t he resutec
complelCity, the more essentia l becomes til e cccrdlnatlon. .
Coordination is reconciling differences in approach, interpretation
of plans , liming. enons, and interests 01 i ndividual s,
subordinat es, compeers, and superiors.
~
PRINCIPLES OF COORDINATION
Mary .par ker Follett has gr eat contribution in the development
of coordination principles, These principles are:
1. Principle 01 Direct Contact
Direct contact prays a vital role in the acccmp ns hment of
coordinat ion. Direct contact may be lopdowri ; bcucm-up, and
horizontal. It facilit ates tece-te -tace communication ,
underst anding. exchange 01 ideas. and harmoni zed
interpretation of plans, policies' and
2. Principle of Achieving Coordination at Early
Stages
Coordination is necessary to achieve at an earty slage 01
planning. Unification 01 activit ies becomes difficult alt er plans
ar e put 10 ope ration .
3. Principle or Reciprocity 01 all Factors
According to this principle all factors, aliaIrs. mailers, or
problems are Interrelated In a given sltuatlcn. These factors
are sa much interwoven and correlated thai they cannot be
viewed and analyzed separately or they will mislead the
manager. .
4. Horizontal Coordination I. More Important
Than Vartlcal
Thls principle stales that vertical coordl nalion Is not so much
dill icult because 01 incessant, regular, and direct contact
between the boss and his subordinates. The real t est of
coordination is at horizont al level. Hor izontal coordfnailon is
necessary 10 Interchange informati on, interpret plans, imptement
ecnecuiee. accommodate the requirements 01 each other, and
smoolh the working 01the company as a whol e. All the heads
and personnel of dillerenl departments should maintain links
between themselves to exchange inlormaUon. know changed
situations and conditions, increase understanding, and make
it sure that plans are going ahead as per schedules.
TECHNIQUES OF COORDINATION
By the foll owi ng techniques t he manager can achieve
coordination:
1." Supervisor
Supervisors should teach their subordinates concept, principles
and appucancn of coordination. He should ensure that his
, , . ,
subordinates and their work are related with other Individuals
and groups.
2. Organization
Good organization Itsell is a good device to accomplish
coordination. Good organization means proper grouping of
aotMlles. clearly-defi ned jobs and dulles . clear-cui delegation
01 authority. di stinct correlation b..tween dilt erent divisions,
and a well directed system of responsibilities.
3. Wrillen COmmunication
Writlen communication is very useful and ettective 10 achieve
coordination. Writl en communicaHon Includes letters. memos,
reports, bulleti ns, pol icies, procedures, programs, and other
plans.
4. Group meelings
Group meetlnqs are conscious efforts to accomplish a high
quality of coordinati on. lis purpose is 10 facilitating unification
and relating the ell ens of various groups and departments.
57
5. LIaison OffIcer
like' Supervisor, li aison cmcer Is a good "medium for achieving
coordination. A liaisonofficer is appointed 10 unify departmental
and group activities. He keeps in touch wit h all depart ments
and convey necessary Information to 1hem.
,
OF MANAGEMENT
Dclinition;-
Allhough like medical and accour.. ing, management has not yet
achieved professional status, yet the techniques, pri nciples, and
process of mangement ere universal. UnlversaJityof management
refers tothetransferabll itycflts principl es, techniques, functions.
and skills from one time, place. or job to another. All these
management practices are equally practicable and applicable
everywhere in the world Irrespective of (he nature of the job,
dltferences in the customs, habit s, and social laws . Manageri al
funct ions. techniques can he pract ised in every or ganlzed effort .
Whether it is a business, shop, industry, government offlce,
educational, social, prof itable or nonprofit able organ ization ,

management principl es, functions and techniques are prufltahl y

and productively applied . A successful manager of a company
or a Held can he equally successful in the other . Th at is why a
manager 0"a company can he safely tr ansferred from one
department company. or area to another . A captain of a cricket
team can he succesful as a manager of tne hank. A reured army
can succcsfulty holt! a posit ion of chairman in a company
or president of a country . In Pakistan it is a routine pr actice of
transfertng bureaucrat s from one department,institu .ion to
another with quite different work.
Arguments fur Universality
Di fferent experts have thr own light favorab ly on the universal-
it)' of management whose poi nts an: as follows .
S8
I. Apart from the nature of the job, management level, industry,
,
company, or country, every manager performs the same
functions. He has to plan, organize, lead, and control, no
matter he is working in the capacity of a junior or senior
manager, head of an organization, army general, or president
of. the country..
II. According to Fayol and Urwlck, managemnt has some
principles, like unity of command or division of work which
can be ignored nowwhere.
III Every organized effort has some basic principles, factors,
and rules. Every business. educational, goverment or relig-
ious organization has common baslc managerial principles.
If there is a difference at all, it is that of a techntcal skill or
nature of a lob. Unversatity never means that one particular
job should beperformed by every manager. But it means thai
all jobs have principles ill common that must he followed h:-
every type of manager.
IV Universality of management can be.judged from the fact that
a hockey captain can become an efficient manager in a hank.
An army general can effectively hold a posit ionof a company
or a country.calthough the nature of technical work is quite
different in hoth the places; but the principles ofperforming
the Jobs are the same.
Arguments against Unlversnlhy
.
Thereare many management x t ~ who oppose management
principles as universal. Opposing arguments are as follows:
I. Though management functions, principles, techniques, and
practices are equally acceptable in diversified environment
and conditions, their practicability has some natural limita-
tions. As far as human, analytical, managerial skills, and
dcclslon making abilities <ire concerned these are of course
transferable. But if a job demands a particular technical skill,
59
it can be performed only by its expert or specialist. Doctors
arxl physicicns cannot do engineer jobs.The pilot of an air-
plane cannot steer a ship. An accountant cannot work as a
productionengineer. Amanager of one culture, environment.
or custom may not adapt to another.
2. Univerality of management refers to transferabilily of its
principles, techniques, functions, and skill from one time,
place. or job to anomer. But in actual situation it is not
practicable. An army general who has acquired austere
disciplineand rigidity cannot become a successful head of a
university. Applying Ibis principle. experience and rigid
discipline in the university will spoil the atmosphere of
soft-disciplined university. Inversely. if the disciplin of a
university Is appliedinthe army, what wltI happen?The army
will be destroyed.
3. Objectives of every company are different, They may not be
transferable. A manager. accustomedto a unique almosflhere
in 3 charitable institution which has a ttberat policy to dls-
tribute funds to the needy people, is sure to fail in a bank
which has to be austere and rigid in advancing loans.
4. Most management principles an; based on personal expert-
ences and have no scientific tooting. Hence, they are con-
tlictory or they have to be violated.
S. The prtncipleof functional authority is actually a violation of
the principle of unity of command. The first principle
necessitates two bosses of a subordinate. The second prin-
ciple. on the other hand, requires only one boss for a sul1-
ordinate. Matrix organizations is also a viclatkm of unity of
command. Matrix allows a subordinate to have IlS many as
flvc bosses ever .: him.
EXAMINATION QUESTIONS
1. What is management chain? What is it composed of?
Explain.
2. What is scientific management? Explain briefly the
theories advanced by scientific management theorists.
3. Compare views (if Taylor and his contemporary Gantt
;an the view of scientific management.
.'4';" Describe briefly the theories on human relations.
,YCompare scientific management with human relation
management. Which viewpoint do you prefer?
6. 'Had the work of Henri Fayel not been-overshadowed
by enthusiasm for Taylorlsm, the history of management
might well have been different and the prlncin1es of
general management would have advanced much
earlier." Discuss (Hint; Compare Taylor's scientific
management with Faycl'e administration).
, 7,/ Discuss administration theory from the viewpOints of
r
, the following management authors:
a} Fayol
'fb} Mary Parker follett
c) R. C. Davis
../. d} Colonel Lyndalt
e) Harold Koontz
\)/ What are the functions of the manager? Do you think
like coordination, planning is present rn nu other
managerial activities.
What is coordination? What are its principles and
techniques?
J,-Q":"OiSCUSS the contribution made by Henrt Fayol to the
development of management -thouqht. In what aspects
saver's contribution oruers from that of Taylor.
61
CIIAPTER4
PLAJ'1NING
DEFINITION
STEPS IN PLANNING
Determination of Objective
Communication of Objective
Determination of Premises
Survey of Resources
Formation of Policies
Determination of Alternative
Courses
Setting Procedures
Setting Rules
Preparing Programs
Making Budgets
Determining_Programs
Setting Standards _/
Formulating Strategies
TYPES OF PLANS
_MOO
MBO and Performance Appraisal
PERSONAL OBJ ECTIVES
DIRECTIONAL PLANNING
TEN REASONS FOR FAILURE
(,1
PLANNING AS A PROCESS
Those who don't plan are sure to fail. Those who don't plan
are leaving the things to chances. Operating on chances is
dangerous which an organization cannol alford. Planning is
the primary task of management. It precedes all other
managerial functions viz, organizing, staffing, leading, and
controlling. Failing to plan is planning to fail. Planning reduces
. . ..
the chances of failure.
Planning is more than forecasting. /I involves the process
of selectlnq objectives, determining a course and following
that Course in order 10 achieve objectives. It answers aft five
Ws (What, When, Why, Where, Who).
Planning makes things happen thai would not otnerw.sc
occur. It makes future happen the way we determine. It onsets
uncertainty and chances. Planning includes assessing future
and making provision for it, as sees Henri Fayot. Decisions
which are planning are made on ttie basis of assumptions or
premises. John McHale says, "The future of the future is in
the present". This means that the future depends upon the
soundness of the decisions made to-day.
Planning pervades all managerial Iuncncns. It exists in
organizing, stalling, leading. and contrOlling.
6J
PLANNING STEPS
,
l'
,
,
,
When planning we have to follow the undermentloned slaps:
,,"-
1, Choose objectives,
2. Communicate objectives.
3, Identify premises.
4. Survey resources.
5. Establish policies.
6.; Choose alternative courses.
7. Create procedures and rules.... \'
8. Establish budgets.
9. Establish lime tables/schedules.
10. Decide on standards.
1. Choose objecllves /)
Objectives are goals, purposes, or endpoints. Managerial
planning starts with settinq objectives. Planning involves
selection of enterprise and departmental goals, and.
determination of the means of attaining them. n t r p r i ~
objectives range from profit making to survival. According to
Peter F. Drucker, there are eight key areas in which objectives
of performance should be set:
a. Market standinq: High, medium, low or somewhere
between high and low standing.
v
I,
t
!
I,
t
b. Innovation: The company should
extent and what cost.
innovate to what
,
c. ProductiVity: How can the productivity of individuals
departments, arid the enterprise be increased and to wha
extent'?
d. Physical resources: . How much capital should b
allocated to tlxedassets, current assets'?.
,
s
P
b
Ie
64
"
5
d

o
5

at
b
e. Financial resources: Determination 01 the ratio 01
various linancial sources and their uses. Sources include capital.
loans, and retained earnings. Then howthese resources will
be used.
f. Human resources: Determination 01 size of
organization and its levels, number of employees. and their
job descriptions.
g. Profitability: Determination of expected profits,
Introduction 01 a new productor servIce, preparation of sales
budgets.
h. Social responsibility: Producing the goods and
services to satisfy the needs of the consumer at a price equally
acceptable to the producer, seller. and consumer.
Objectives are needed in every activity. The survival 01
the enterprise depends on the accomplishment of them. The
selling 01 objectives precedes any business activity.
2. Communicate objectives
Once oblectlveshava been set they must be communicated
10 every contributing member. It is a manager's responsibility
to coordinate and unify all diversified goals in order to com'bine
efforts. The predetermined goals cannot be accomplished unless
the efforts and actlvittes of the following parteotthe organization
are coordinated:
(I) top management, (II) production department, (iii)
l11arketing department, (iv) finance department, (v) managerial
stall. and of course (Vi) workers.
Objectives act as a yardstick against which actual
pertormanca is measured. On this concept MBO (Management
by objective) has been developed the paris of which are as
lollows:
65
B. MBnagtlrS are measured by what they accompl is
How they spend thei r li me is not taken into account .
b. Managers are in the knowle dge 01 their ob/eCl lves.
c. Managers and subordinates partlclpate in seil ing the
obj ectives.
3. Identify premises
Premises are assumptions 01 planning. Premi sing is mor
than forecasting. They are the assessment 01 future. Premise,
are ot lhree ki nds:
8. Uncontrollable premises: Th ey include l ega
environment , social and socccccer tectcrs. political conditions
technological change, compet njcn. and demographiC dynamiCS
These uncontrollable premi ses cannot be controlled by human
and tneretore. the businessmen have to adapt their oblecuve
and polic ies to the need 01 the ti me.
b. premises: These are premises
which can be controll ed only to some extent. Prouts . labor
unions, pr ice, and tabor turnover are semi-controllable tactcre.
c. Controllable Premises: The orpanlzatlcn commands
these premises. They include expansion of the cc rnpany,
introducti on 01 a new product. reduction Ll I a product line.
market research. and advert ising campaign.
Premi ses repl y 10 Ihe l ol lowing queslions:
What volume 01 sales?
Whal price s?
What tecnnlcal development?
What various policies?
What product? What its color , size, shape, model?
6 6
Whal cosls'?
Whal wage rates'?
How to finance needs?
Premi ses may be internal . external , tangibl e, intangibl e,
long term, or shon term
4. Survey resources
Selti ng 01 obj ect ives and identif yi ng premises depenljj on
avail able resources. If available resources are not taken Into
account, objectives will be Ideal and sure to fail. The objectives
and actlv!ties that have been determtned are reconsidered
and revised 10 the expediency of avai lable resources, and
existing situat ion. Limitation 01 staff , money. facilities , time,
markets, and environments pUt a bar on objectives. In short,
ideal object ives should not be made. Prospective celecuvee
should be accompllshable by Ihe available resources:
5. Establish Policies
are .. thaI
They deli mit area which explains whit to do. They
"confin's' "wers and authority. Policies uid thin in and aClion"' -
,_ e"y
M
pr6v, e __ within whi ch a de.cision is 10 b;t
made. Polici es sl rail j"aCke:i' maveriCks':' sell starters. and nigll" "

achievers. According to Fulmer. policies are subsurute l or
common sense ; They are deliberate, logical. and intel ligent
plans .
Policies may be l"1>li ed. originated. appeared. or externally
imposed, Implied pcncv is not st ated and Is adopted as a
routine. Originated policy is one issued by the top management.
Appeal ed pol icy i s one tor mutat ed on the request 01
subordinates. Externally urcoseu policy stems from Jabor unions,
governments, and social and traditional laws. Deliberate policy
prohibits illogical and unsound pressures. However, pol icies
should be flexible and l augh!. They are chart er of action.
-"..-"_.
6 7
6.. Choose Alternallves
When all possible courses 01 acttcn have been they
stIould be keenly evaluated and analyzed. Feasible and sultable
courseof action stlOuJd be singled Out. Feasibility is.determined
on lhe criteria 01cost. terre, riSk, and shoe leather. Decisions
have 10be made when there are anemanves. In the absence
01 alternatives, there is not cec tstcn making. On the extstence
-01 an obvious best course of action, no deli beration is needed.
A decision exists only where diff erent 'alternatives are Slightly
different from each other,'"
7. Creata procadures end rules
Procedures : :.-;
Procedur es est ablish a customary method or handling future
actvttres. They involve a select ion 01a cocrsect action . They
det all the exact manner in which a certain acti vit y must be
accomplished. Procedures are guide 10 action.
- .. .. .- - . ... _.-_. .- ---._._-- .-.....,.
They att Tt!!Lset a
sequence of steps 10 pertcrm en acllvity successfully and in
If aesfred-man
l1
er.-t fley a're policy"mailers'macfi"ir;-
'P rocedi.i res" refl eCI a practical aspect 01 plan. '
.. ---"- ..." .. _." ..
Rules:
.' codes QJ_
.ai.sclplioes.. ' They aCI . . .,yell-s
-:;' 8!!gD.reguired 10
be lollow.e.Q_under a:. point 'out- hoW"' a
specified and cseflnite actio nis 10 be taken in a certainecrc nc n.
They ' are non-changing and short orders. They reflect a
managerial decision and are followed without any sequence,
They are set in advance.
No smoking

No Ihoroughlare
No admission without permission
tio-ooi-cllslufb " "-" _.-.--"' .
.' , '.
8. Establish BUdgat s
jlu.dgalls a . of .
nemerlcat terms. Budgets are numbertaed programs, They
'" --...-
may be expressed eilhe r In financial terms or In the terms 01
man-hours. units of products. macnlne-nours. or any cftier
numericall y measurable terms. Budgel has also been defined,
as le,lIing'money where to go rather than asking It where n
went.
There Is always the career 01 overbudgellng. BUdgets
answer what. Where, .wnen and how much. In-:addi!l on 10
overbudgeli ng, there Is also a danger 01 inllexibility. Budgeting
strait jackets managers al all levels.
9. Programs
are a
.. _
are concern edwllh" t ime schedules. , -, ..
--..- .. '.... . ... .
Programs must be' supported by capital and bUdget, ' or
they will go tuttle. The)' may have their derlvatlons and
subdivis ions. Acompany ntd)' have a program of e'xpanSion.
purchase of building or machinery. hiring, renovation , or a
new product launching.
10. Dacldlng on standard s ,
Establishing .standards is very Imperative. Standards provide
_.'- _.--.... - --
.. ..
!s measured. Standards MEtRlans. also act as a controlling
devlCe."'tor appraisal standardsshould be practicable
- ,
and understandable. They may be quant itati ve or qualitative.
They sl mplily the task 01supervlslon. Adequate and clear-cut
standards incr ease the span 01 control. A supervisor can'
manage a gre ater number of persons working under him.
Future standards are plans and past standards are cont rols
69 ,
de.o (Ii ,, -./
. ....,1... ,
(
11. Formulallng strategies . b -;;. . , " - :
STRATEGIES (e'! f fr t ...
R.N. Anthony. detl" .Q!eus. proces of deciding
of .. on cl'iang"s j n
these . . used to @1.tJjn
these objectives, and deciding on the
govern "is'PositlOn resources.- _ _ ._ _ '_' h _ . _ . . . .. _ _
Samuel C. cenc defines strategy 8S, "a broatf and {leneral
ptan developed10
mJsloe consistent whh the gaals Or Ih4nirgarnzattOn.
...
In the formulation ot the strategy , the loUowlng questions
should be asked, as asserts Carto.
What are the .obJectlves of the organization?
Where Is the presently going?
'1'1 :what kind of envIronment does the organlzallon now
exist?
What canbe doneto better a,chleve organizalionaJ objectives
in t he tuturs?
StrategIes may be grand' or competitive.
M
Ma
em
Ha'
be.
Th'
are
lac
10 I
un<
Ml
Grand Strategtes
Their emphasIs Is on the type 01 basic goals and on the
pol icies to achieve I hese goals. They refl ect the nature of the
company and its business. .
Competitive Strategies .
These are prepared kJJ8plng in vi ew the policies and plans 01
competil ors. They are meant to dispel or neutralize the impact
of the policies 01 the competitor.
Types of plens
Objecli ves
Pol icies
70
Procedures
Programs/time tables/Schedules
Rules
Budgets
For details see Steps in Planning
MBO
Management by objective is the approach by whtch both
employeeand superior jolnlly set performance goals and duties.
Havingparticipated in the fixationof his own goals, the employee
becomes more involved, dutiful, and active in performance.
These so set are n'ot only mutually agreed upon but
are concrete, eennite. short-term, and measurable. MBO
lacilitates employees to adjust their time schedules tram time
10 time to attain Ihe goals In planned lime. II helps employees
understand objectives and duties clearly.
MBO has three elements
1. ..
'l.'!hat they rather thAn !heiL
time. In plain terms management should be result-
-oriented. MBO approach centers on not how you spend
your office hours, rather on how much you produce.
2. Manage'rs must be
Managers' objectlVesare their duties that Ihey,musl
perform. For proper and eltectlve performance it is
essential that they are In the knowledge of what they
are to perform and what are the plans and standards.
3. Managers and their subordinates should jointly set
Due to parUcipaiio'n in (he
fixation 01 their own goals, they become more involved
and duty-conscious. Participation is a good motivator
encouraging the worker to be more efficient.
7I
"JBO approach wlJl yield no resuits /I
(1) Goals are long-term.
(Ii) Employees have no partlclpattcn in goal ! setling.
(iii ) Objectives are not clearly defined.
(iv) Objectives are not ccmmunlcated to the rejevant
personnel .
Advantages of MBO
1. Organliatlon Is clearly defined'
In setting MBO. organization roles and structur e have 10 be
clearly cennec. . Clearly cennec authority is delegated. Key
resuns to be accomplished receive proper and due attention.
2. Better management
Thequalityof management is Improved becauseMBOfocuses
Its attention In planning, organizing, and controlling.
3. Personnel commitment
Since he has participated in the satl ilg 01 goals. the subordinate
is committed, .dutiful, and active.in pertcrruance.He
has, high morale.
4. Effective Control ,.
MBO net only facil itates planning but also sparks and i mproves
controlling Managers are sell di rected and ccntrcnee .
Dysfunctions of MBO
1. Danger of Inflexibility .
Subordinate managers are not-allowed 10 aoiust their goats
10 the need 01 time. If cond itions have the goals
may become obsolete.
2. Ignorance of long-term goels
Too much emphasis is concentrated as snort -term goals. wh!le
long-range plans are ignored .
72
3. Inability t o teach the philosophy 01 Mf!O
The conce pt and phi losophy MBO Is sell-direction which is
overlooked.
4. Dlfllculty In se/l/ng goals
Too much concern lor economic results make it difhcull to
set truly verifiable goal s,
5. MuCh papar work Involved
Detai led wntten goal s. thei r communication, and pertcrmance
evaluation Increases the volume 01 paper work.
M B 0 and Performance Apraisal
Pcrformaacc of tbc manager must be measuredin orderto determine
his efficncy or lack of it. The objectiveof appraisal is to
(1) allocate Of reallocate resources of enterprise.
(2) det ermine natu re and type of rewa rds to managers.
(3) provide quick and timelyfeedba ck for managers . .
(4) create a congenial at mospher e facilitating good b oss-subcrdlnere
.relationships. .
A modren approach bei ng used for the appraisal of perform
ance isthe concept of MBOAs anappraisal or controllingdevicc,MBO
facilitates
( I) performance and makes the worker conscious of the qualityand
amount of his work .
(2) mutual goal setting which leads the subordinate ma nager to
self commitment.
(3) concentration on goals which inturn allo....'s the subordinate to
judge hisown pote ntia! and skin and ut ilize themto their maximum.
A manager with a table clear (If papers etc. and just relaxing is
definitely more efficient" than the one nvcrly busy with much work
rendingbecause the former has alreadypulled his weight (completed
his part of job). By MBO managers arc not measured by how they
spendtheir time, rather bywhat theyaccomplish. Theyarc not ranked
by their loyalty and honesty. The personal and possibly biased
judgment is shifted 10 nonper sonal, unbiased, and objective cvalua.
tion. .
73
DIFlECTIONAL PLANNING
(PLANNING WITHOUT OBJECTIVES)
i Dillerence between Pl ennl ng with Objectives and
Planni ng without ObJecti ves
Oire<:tional planning refers to planning wllhoul ~ Planning
i ~ W i t h goal but atso withOut one. According to
Michael McCaskey some types of proposed wor k have no
distinct objectives until we get lnvotved wilh them. Here. first .
we start the work without specific r&SU't in mind, then alterwards
things begin 10 take shape pointing to some specluc end.
,
It 1s directed towards internal
ooatstA-f"e./; O"-\ c ...... $ .
Planning withoul Goals
74
Planning with Goats
1, It is directed towards
external and organ-
izational goalS.
Personal obJectlvos
Personal objecti ves "ra as jmccuam -as business or
organi zatio nal objectrves. Satisfacti on ot personal obJeclives
Is the sourceof relaxation. haPpiness, pleasure, and!essening
tension. Having and concenlrall ng on a lew and spacinc
objectives is far better than many. According to a study 01
52,000 readers of "Psychology Today, ~ "Happiness is the maner
of settlng personal standards, not chasing alter other people's."
However, to achieve such an evaluation, supenors musl be
dear, specif ic, and considerate about what their subordinates arc 10
do. If the goa ls are set by mutual understanding and properl y
communicated, and a regul ar fecdback is furnished. MBO will sure
fire prove10 be an effective and successful appraisal and controlling
device. Although the manager has a ve to power in bissubordlnetc's
1.: 11al setting, he rarely uses this power.
~
~
i'
,
I
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2. Goals are eieur et,
specific, measurable,
and rational.
3. 11 requires energy and
efforts.
Goals are not specific.
defined. and measurabl e.
u Is supertlclal and copious.
4. Planning and executing Planning and executing go
are separate, stages. . In unison. ... a>\1 \. \! "1
Aflwt.1., fX' , ... u
f M t..fJ v,,!tt ;' lx,y.d 'T't-<> . "'I,?\J.& tl ,
\. . 5. ,"""matlon s not -.NIl" li llor allon IS 16 6e
i ..... r&qul,." IQ be .-&Ralvzed:--
.(1f-';:: .
6. Spectrum of task Is Spectrum of task is wi de.
narrow.

.'lrle., .), r>r f" I'-'- ( ' :'f/<

7. Il ts -JGLJJ:t9i;e It Is bkHef-t hOs8' who
l; ' t " e- - n well. ' prefer variet y, change. and
defined obj ectives. complexity.
t;fo..J,t, I c ..t', {,.
8. It is useful for jobs and It is uselui for the J t )
companies which are measurable and stabl e. '< ,.'( 1 c r lI( t
JDiljW1[able. - --:- :,.. - "., fr,.' e. ,/ 1 t .
JI" t/(/r;..f /' tr. ;.-Icr l. (( ! ... rl.c. >.... (:<; v
"d'''ri ri 1i'h soNs FOR FAILU'RE .
Kjell A. Ringbakk made a survey by studying over 350 European
and American corporations to establish the reaS?ns for failure.
They are explained as under :
1. Corporate pla nning is not unif i ed into the lolal
management system. There is no coordination.
2, Plannlrig is not systemati c. II is 81 random. Managers
have no understanding of the dilferent aspects 01
planning.
3. All Jevels of management do nol plan.
7S
4. Responsibility for planning Is understood to be vested
solely In planning departments.
5. Management assumes that they will be hundred percent
successful because of planning. \
6. Too much is attempted at onetime.
7. Management plans its work, but fails to work its plans.
8. Extrapolation and financial planninrt are taken as
planning.
9. In planning adequate Information Is not obtained.
10. Too much attention is given on one aspect of planning
while others are overlooked.
76
1.
2.
3.
4.
5.
6.
7.
6.
9.
Examination Que.llons
1. Deline planning'? E:tplain steps Involved In It.
2. What are the types 01plans? Explain.
3. What is a budget? 00 you think budget Is not only a
plan but also a controlling device? Support your answer .
with sound reasons.
4. Define cblectlves. rules. schedules, and strategies.
5. What Is MBO? What are ns Ingredienls?
6. Wh111 is the import ance 01 personal objectives of the
manager in his organizational life?
7. What is directional planning? Compare it with planning
with goals.'
8. What are the l en reasons for failure?
9. Evaluat e the ut ility of MBO as a technique 01
performance appraisal. Also etscuss its disadvantages.
77
EFFECTIVE DECISroN-MAKING
National Group of Technique (NGl)
Delphi Technique
DEFINITION OF DECISION MAKING
AND PROBLEM SOLVING
,
,
)
CHAPTERS
78
PREVENTIVE PROBLEM SOLVING
PROBLEM SOLVING AND ITS STEPS
GROUP DECISION MAKING \
GUIDELINES FOR DECISION MAKING
EXAMINATION QUESTlO:-;
n ' . . _ . , ,JI " A '
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(: (' ktr,-."ta .t':) '...i.
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Decision making is different from problem-solving . Decision
making involves (1) premising (2) identifying alternatives, (3)
The evaluationof alternatives. and(4) selectionora best possible
coursefurmamongthesealternatives. Ontheother hand, problem
solving refers to identifying problems, analyzina: complex: situ-
atioos. and exploiting the opportunities. Actually. for dynami c
managers, problems are opportunities in disguise. Problem
solvingleads to decisionmaking, Problemsolvingis the means
to an end. and deci sion making is at' e!ld in.ltself.
PREVENTIVE PROBLEM SOLVING
Problems are blessi ngs i n disguise. Charles Kettering Says.
"Procl erns are the price 01 progress. Do,!'1bring me anylhlng ,
but trouble. Good news weakens me."
For tbose managers who lack Kellering's per severance
and dynamism may solve the lollowing queslions in order to
prevent problems:
79
1.. Whl.l Is right?
2. What can go wrong?
3. What could 'cause this problem to occur?
4. What preventive action can I take?
5. What is my contingency plan?
6. When will my alternative plan go into acllon?
1. What Is Right?
An efficient manager must remain alert to any problem that
candevelopto a great crisis. Some problems maygo unnoticed.
no mailer how important they are. Crises, like opportunities,
often go unrecognized. When problems go unnoticed then
they again appear In the form of a calamity. The manager
should be able to foresee potential problems. He must
distinguish between the right and the wrong.
To determine what is right following questions may be
asked:
Is the existing price level right? Is the promotion policy
proper? Are the product design, packaging, and ingredients
to the market standards'? Are the middlemen chosen right? Is
the salary structure updated? Determination of what is right
is actually an analytical approach to the prospective problem.
2. What Can Go Wrong?
Murphy's Law of management states that if anything can go
wrong, it will.
Managers should be pessimistic to 'expect the worst and
then making the most of it. A problem recognized is elready
half-solved, as claimed by Baker.
After a number 01 potential problems have been identified
they should be grouped. The ranking of the nature of the
problem is as follows and should be dealt with accordingly:
80
3.
Ac
ev
4.
Or
0'
Tr,
sir
Til
rer
sir
ex
he
5.
M:
un
pre
Illc
an
a. Serious problems that must be avoided at all COSt9.
b. Average problems t hat should be eliminated with
considerable efforts .
e. Minor and trivial problems that require cursory and
superfk:lal eueeucn.
3. What Gould Gause this Problems to Occu r?
According 10 Pierpont Morgan, "There are two reasons for
everything -the obvious reason and the real reason". The
manager must be able' to lind out the real reason 01 t he
problem. He sho-ud have in-depth thi nking. It a problem has
appeared H becomes easy 10 determine the reason. On the
other hand, lt is difficult 10 determine the causes 01pol enUal
problems. In such a case a manger should rely on experience
and jUdgment to Ji st possibl e causes 01 a given potential
problem. Timely idenlilicalion 01 the causes of the probtern
wi ll be like "Stncn in l ime saves nine."
4. What prevenllve Acti on?
Once theproblem has been toenimeo. remedy becomes easier.
Dilfi cull ies do nol come up before alert and vigilant persons.
Trouble is less likely to visi t a prepared A very
sftnple precautionary step would eliminate this potenuat problem.
The analysis 01 Ihe potennat problem enables a manager 10 :
reduce the chances of ' a problem development merel y by
simple steps and measures. Preventive acucn is just like
exercise which i s done to prevent obesity. blood pressure,
heart and other di seases.
5. What Is My Gontlngency Pl an?
M::l nagers are acvtsed to be ready lor any unexpected
unforeseen calamity even after he has the potential
problem. causes, and preventive act ion. Watchful and argus
li1anagers always have a contingency plan to face any sudden
nnd unexpected dilemma.
8 1
6. When Will My Alternative Plans Go Into
Act foa?
For contingencyactions a manager shOuld astablish a triggering
mechanism that shoul d wor1<. in lima and properly - 10 gel
over the crisis. Someti mes, individuals are credited w ~ pati ence
simply because they don't have the ability to make a deci sion.
Good managers know when to put tnetr alternative plan mtc
acttcn . Alt erna1ive courses 01act ions must be deve loped well
before the appearance 01the expected problem.
Problem sol"lng
The Steps in Problem SolvinglAnalysis
To analyze a problem the following steps should be taken:
1. State the problem
The problemshould be clearly and specificallystated and defined.
Clearly Slated and defined problems make soiut jcn easy.
2. Define th e present level
The present state of affairs and situationshouldbe clearly defined.
Definitionoftheproblemexplains what , why, who, when. where.
and how
3. State the objective
A manager should know where he is and where he wants to go.
The difference is the obj ective. Once the objectives are clearly
and concretely defined working for them becomes easier.
Objectives should be realistic so that they can be accomplished.
4. List t he possible causes
The planner must know and try to find out all possible causes of
the problem. Once the possible causes have been determined its
remedy can be adopted.
8>
5
A
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th
m
re
6.
n
na
dl,
co
7.
AI
co:
im
ret
d",
8.
De
aln
rea
an>
is .
opt
9.
Pia
t ~
he
We
a d
5. Select the most likely cause
After all the possible causes have been listed , a manager should
choosethemost important or most likelycauseof theproblem-so
that remedy may be determined accordingly. Identificationof the
more likely cause makes the prcblem-solver'ajeb easy. This step
requires to go deep down the problem.
64List alternatlve solution
The problem-sol ver should develop sound and workable alter-
native ways to solve the problem. Able menage ri es confine
thems elves 10 a few and relevant alternatives. They should
consider only fruitful and useful possibi lities.
7. Analyze alt ernative actions
Alternative courses should be weighed in terms of time, effort,
cost, and risk. One alternative may look more profitable but may
involvegreater risk. Another maybeexpensivebut entailsquicker
rerum. So analysis should be very careful and according tothe
demand of time.
8. Make the declslon
Deci sion process includes the selection of the best possible
alternative course of action. Best course is one that invo lves
reasonable amount of risk, time, effort, cost. After a carefu l
analysis of the alternative, make a decision confi dently. Decision
is the basis of future activity. Right decision in the right time
opens the venue for success .
9. Make an action plan
Planthe detailsof the events that will have to occur to follow the
alternative selected. Programs and objectives of each step should
he given proper attention In order to' accomplish the sotutlou
Workaholic lind dynamic managers get afoot after they hove 1J.l :td,.'
a decision.
8 3

10. Accept the-credit graciously
When the plans havebeen executed completely and successfully
the cred it, praise, and recognition from the colleagues and peers
should be accepted humbly and graclously. Successful managers
should not be over-bearing and blusteri ng on their success. They
should not start looking down upon managers
Group Decision
Two minds are better than one. This maxim is widely applied in
decision makingunder modern management system. Decisions
made hy a group rather than an individu al are far better . Group
deci sion making Improves morale and produ ctivity of subordinate
managers . If a group decisl ca comes to a fiasco, individual 's face
can he saved, Willi am Occhl . a Japanese-American management
expert and thecirst, favours employee participation in decision
making in his Th eory Z.
Group decl slon maki ng may be implemented in the following .
methods.
I . Nominal Group Technique (N.G.T.)
2. DelphiTechnique
NOMINAL GROUP TECHNIQUE
To follow this technique :1 committee is formed. During the
sess ion its members arc asked to put forward their written sug-
gestions to a certain pr oblem. At this mome nt no discussion is
made. Once thesuggestions from all members arc received they
Me written on a board or chart. If some suggestion is vague, it
;$ clarifi ed from the relevant person. At the second stage t hes e
suggesti ons ar e combined together and put into a list. Then starts
debate on these suggestions. f\l 0.1 is adopted because of the
fol lowing reasons:
64
1.' Participants come forward with maximum sugges-
tions.
2. Original suggestions are not biased with those or
others' .
3. People are not under presure In presenting or sup-
pressing their opinions . . ". ,_
4. Bias in the decision is minimized and controlled to
a good extent ,
.~ " .
. DELPHI TECHNIQUE
Delphi Is the old aort abandoned name of the ancient cit! in
Greece where the pnest and pr iestessused to receive divine
comnwncatjons. The Priest and Priestess 01Detptu atsc sent
thelr couriers to the wise and lnteuectuat wit h the errand to
send theIr expert c oi-ti on about a problem to help the termer
to make sound decisions . Hence. this type 01 group deci sion
making ~ S ~ l n e d as O&IJ:l hi technq ue.
:\ ," .,
Under the modem Delphi Iecrmlque a questionn aire is
prepared and sent tc several experts separately. These experts,
usuauv 'managers, are jnvtteo to answer the questi onnaire.
This survey with diff erent questionnaires is repeated usually
tour or five l imes untn tne experts' opi nions begin to agree on
the problem. .
Delphi technq ue discourages extremity 01 lhe view'Point
and encourages mi ldness. It also averts Ihe oisacvantaqee
and dysfunct ions 01 the commntee', ' .
GUIDELiNES FOR DECISION MAKING
Following guide!ines make the decision 'making process easy,
and sound decision becomes possible.
. 15
I
,
"
!
,
-1. Marshal the facts
2. Consult your feeling
3. Use wise timing
4. Don't infer 1'00 much
5. Get on the right wavelength
6. Keep the decision flexible
7. Follow through
8. Have courage
1. Marshal the facts
Decisions can not be sound if they are made without necessary
information and facts, Non availability of facts and data provides
a good excuse for the managers who just don't want to make
a dectslon
Managers well-acquainted with the necessary and relevant
internal and external data are always in a better posltton 10
make sound decisions. '
2. Consult Your Feeling
Freud once said thai in making important decisions we should
nol only consroe. the pros and cons but also the deep inner
needs of our nature. Power of intuition should also be utilized.
Doctslons without suflicient information may be made if the
predictive abtlttv is special, measurable, and dependable. Sixth
sense, premonition may come true. Sometimes material and
worldly information are outweighed by inner feelings. Strong,
inner feelings may make the manager to assume a great
arnourv of risk.
3. Use Wise Timing
Time factor is very important. Alter the lapse of proper lime
decision becomes void. Right action in the righi time brings
note fruits. Managers should avoid laxity, dullness, and
condescence in decision making. They should be out for'
opportunities.
86
4. Don't Inler t oo much
We should net depend too much on Interring or lntuit tcn.
Many l imes. the assumptions we make are 10 be good l or
nothing.
Inferring reters to drawing conclusions on the basis of
assumptions. In Inferring ccnctue'cne may be drawn without
directly seeing, heari ng, l eeling and gatheri ng tacts. Bul It is
necessary and desirable i n scientif ic study and research.
5. Get on the Right Wavel engt h
Right wavelength means right communlcalion 10 right man.
Communication skill is vual in deci sion making. There should
be skilful communication among the problem perceiver. data
collector, oeclacn maker, and executors. The best decision
wi ll be useless if il Is not property communicated. Barrier s In
communication shoukl be reduced to a mlnlmum.
6. Keep the Decision Flex ible
Thi ngs may change. They may not happen as planned. Barri ers
may come in the, way. To meet such a sftuatlo n declsl cns
may be changed - or their Implementation should be del ayed
lor some tuture dale . Inl1exible decis ion may cost hIgh and
result In irreparable sosses.
7. Follow Through
"Thinking", says Otto Fenichel,- is usually preparation for actlcn .
People who are atratd of acttons increase the prepatatlc n."
Once we have decided, we should come inlo action. Timely
act ions save costin terms 01 time, shoe leather, and money.
Soundness of actions also depends on our mood - and
temperament. When we are depressed and down in the dumps
our actions le nd 10 be aggressive, off ensive, and destruct ive.
8 7
-r-,
The-nne art of executi ve decision making consists in not
decidirio questions mat are not now pert inent , in not deck:ling .
prematurely, in not making decisions that t ~ r s shOuld make.
as says Chesler Bern ard.
8. Have Courage
"One person with courage makes majority," says Andr ew
Jackson. Managers should have cocraae. They should be
enterprising and promi sing. They shoutd have risk-tak ing
courage. When a deci sion has to be made. it is gOod to talk
to others. It takes courage 10 stand alone and take imllali ve
especially amidst OPPOsition. and to make others agree with
yOU : Courageous managers are high achieve rs with initiati ve.
' :.
88
Examination Quastlons
1. Deline decision m ~ l n and problem. Also dtscuss
preventive probiem solving.
2. Can you SlOP a problem trom happening? Why or
why not , and hOw?
3. When a prctnem has occurred, are you in aposition
to solve 1I? Ho:";'? ;
4. Whal is group decision making? What are its kinds?
Explai!1. , C _
5. What are the gUidclinas for decision making. Do you
t hink by following t hem you' can solve _a problem?
6. Can you difter enli ate between problem solving and
deci sion making?
., ' , )
89
, ;
;
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,
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CHAPTER 6
ORGANIZATION
DEFINITION OF ORGANIZING
DEFINITION OF ORGANIZATJOS
DEFINITION OF FORMAL
ORGANIZATION
DEFINITION OF INFORMAL
ORGANIZATION
Efflelenl
BUREAUCRATIC MODEL OF
ORGAlllZATION
Karl Marx's viewpoint
Max Weber 's viewpoint
Basic Elements orOrg.anjz.afion
I. Divisionof Labor
Advantages of specialization
DYsfunctions of specialization
How /0 overcome Dysfunctions
2. Scalar and Functional Chain
90
DELEGATION OF AUfHORITY
Some basis rules of delegation and
difficults attached to it
Personal Attitude and Delegation
SPA!'>' OF CO:vTROL OR
.
Definition
Factors of Span
Graicunas's Theory of Span of Control
Sir Jan Hamilton and Span
. Lyndall f . Urwick and Human limitation
4. Structure
Depanmentation
Job Anal ysis
Organization Levels
OrganizationChart
SIZE AND COMPLEXITY
Size
Complexity
Mechanistic System
Organic System
Worhty's studyof Sears Company
EXAMINATION QI'ESTlO"S
91
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ORGANIZING
Organizing creates is a grouping 01
aetlv!tieTl'fecessafYfoaccoiTIpUSh group's goals. In orde r 10
ecccrronsn goals, carry oul plans, and make. II possible lor
employees and managers 10 work eltl,eientl y. an intentional "
slruclure Is design ed. This Intentional stmcture designs and
specmes roles of perSons li tl ed in the
act ivity must be organized before it is performed. brganizi ng
Is tne of
"an ii j's a second 'fUnction 0' l ht'"'rnanager. ' frsl
'being planning.
Organizing process involves:
(i) DelerminalJon of acti vities
i ii) Grouping 01 activities
(iii) Assignment of activities
) iv) Delegation of authority l
(v) Unificat ion of all assigned activities (Ocordlnatlon) )
.'
92
ORGANIZATION
An organizalion.Js, a It is a system of
relationship In an undertaking. An organization may also be
reterred.tc as an enterprise itself-It is an intentional structure
of rotes for persons along with their authoritY.,ll i a coopera.tigg
of two or more pers0Q&.
-.-
When an individual alone is unable to pertcrm or complete
an activity he brings into being an organization. Organization
is the result of three limitations 01 an individual:
(1) Skill1imilalion
(2) Physical limitation
(3) Time limitation
These limitations compel him to make an organization 10
get the work done. 0w
an
,i
z
i1!iOn
or, It continues
to"s(i'i'vlve as long as it lias a goal or goals to accomplish.
After one goal is accomplished the other must appear or the
organization will or should come to an end.
Formal Organization
It may be defined in different way> as follows:
1. It is a systemof well-defined jobs with a definite measure"
V
of authority, responsibil ity, and accountability, the whole
con-sc'j'ouS"IY designee:- -- ..-.. ,.-.
/2. II is more or less arbitrary structure to which an individual
must adjust. It tells Ihe worker 10 obey orders and
..----,,,, ","-"-, '" "--, ."...._,."".."-,,,)
with
It is the retlectton ot organization chart.
,-..j,(' Formal organization is the creation 01 management.
93
\' ,.---
.. '
..
/
c
.1 J r.
[ \ ) .
'., )., t\ t , : ,'. 1' ; '"
.., .
/ ,(;;'
I l
\/
" .
- '\ .!. (
'. ' ( .
94
. [,
j ' " v1"." '.
, , .
'.,'
-,
:: .
. \ ,,', , ti.'i) "dl -."
,: , ... .... . , . , .
- :.,
v
,
I r i
;- ' .'
Informal.Orgbnlzatlon
If Iswhal people doinlerms_Qf needs. emotionst-and atiiludes,
not in terms of proc-ed::";; and
-- .- _..... .. .. "----_ -
together their personal likes {and aislikes. Informal
groups"maye'x ist' It 'h'a-s no ptace
in the organization chart. which
reSIJ..'t.9.'J}i!I21.io.OS.lr.i eods/1.IpJ, and harmonious hobbies
and ltllnklng. . ....._'"._ -
:. .'
\ ,..
.. .
.' . '" ...
-v
f ( '(' " ,/ ,.(> '
,- . ." .
(1't ('1r;f<"l r:0,
I '
I ' ; ;
\ "
1
ORGANIZATION VS. EFFICIENT ORGANIZ-
ATION
Organization :
It is merely getting people on one platform to accomplish cer-
,- -, , , - '." ' -,",.-
"
Emdent erganlzatlon :
It and people in such a way as to mini-
and.maximiitnlu'tiitiF.:------=:: -.-.
The differencebetween the two is elaborated in the following:
Organization Eflicent Organization
1. Grouping of people and Groupingof people and actl-
activitiesto achieve goals. vitles to achieve goals With a
minimum of cost.
2, It is like arranging a mess- It is like arranging a message
age in alphabatical order, not in alphabatical order,
e.g. AAEEGMMNTwhich rather in orderly and natural
has no relevant meaning. arrangement of letters giving
This alphabetical order does
clearly its relevant.meaning,
not define proper relation- e.g, MANAGAMENT, This
ship of letters of the mess-
orderly and meaningful
age, so organization does arrangement of letters esta-
not define proper blishes a proper relationship
relationships among its amongthem. Efficj.ent
parts.
organization defines proper
relationships among its parts,
3,
It exists when its all com-
It exists when its aU compo-
ponent parts exist. nent parts exist with most
productive. relationships
among one another.
'.
4, Groupsatisfaction is not the Group satisfaction is a must.
definite outcome.
95
KARL MARX
Max v'eber nas spec.ned the rorrowing characterist ics or
bureaucrecs as in ideal crqantaatlon.
Karl that bureaucracies. are used
_.-- .... ..-.-..-...." -.- ..' . -,
capital ist 10, controt ,I,he, o.lher,-<,'ower .scctar
According to him. bureaucracies are cha racterized by:
' t
1f -
(i!
r
MAX WEBER
r
Bureaucratic Mode' 01 Organization
Bure;avcrilC't is Q syslaW..2.f..gp"'9'mnent
;nly to Bure'aucracy"ls'a comp'oS'iie
w07cfol bureau, and Greek word ' x ratos', meani ng power. So
l!ureaucracy power 01 bureaucrats.
, - ' ' " -, _. , ,c.,..
(/) Spec/allzatloll ena tnvtston of Labor
Specialization an'd aivlsion of resutt:in duties.
These duties are dir ected toward the accompli shment 01
enterpri se goars

thought of bureaucr ac't as an ideal organi zation structu re.
According i"o is that t ype 01 organizali9n
..... _ -.n. . _ _ _, . .., ."
,

, L'q ! ,I /. , i C\ , " '(" "i ," .. tJl y\""'1

1/

,}./ :{l) Strict hierarchy and ctscipune

-) \ ". U ' ,'(ii} Veneration of author ity ,. ,' : J ,',' J
',.. ' ;' i
(tvl l ack of initiative and imagination
(v) Fear 01 responsibility
(vi) Process 01 self-aggrandi zement
,- ,
't
,I
I
!
"
,

Tbe organization of
This bureaucratlc characterlstlc forces control over every
membef IntnesliUCtUie. Acmrolngto Heme" SItt16n: 'Orhi'erarchy
inthe bureaucracy 15"' in the nalural order of things.
(iii) A system of Abstract Rules .
W.,9IJiAiALfM09]P.flS
He states that a rati onal approach to
organization requires a set of formal rules to ensure' unifor mity
and coordi nation 01 elfort . A ot-.
PJ.g;.:l des tnLB!WlJ1!XJM..... ,Rules . _"
persist, a.,s, fJ.er.soDs. ..
, ','

be" .
n(m-emo,tlonaJ. It should be based on ration,\l it,y anp .w.ithout
hahed, passion,' must avoId,
einOlional ahach'rm;';i' and'
II ", "
. " The most ccmmcn bureaucracy is tbatn
has red tape. !!..ed
tnvofved .- '
.
.
BASIC ELEMENTS OF ORGANIZATION
,":5... co . 9n.w.hicll
.
-" 1 . DivisiOn 01 labor
./ 2. scalar chain 01command
",''' 3. Span of control/Span of management
"4. Organization structure
A. DIVISION OF LABOR
t
Accordingto this faclor; an activity, once It has been deterrnhed.
must be divided according to specialization. Division 01 labor
and sptclalizatlon the concept of deLp.;rtme'ntaUon .
labo'r' the ._ .
1. Specializ ation .,
2. Oepartmentatlon
3. Horizontal Organization
. Delegation 01 authority
..It , Iso p.roduces lhe concept of scalar chain and span 'of
.cOntrol.,OiViS!oru>Uabor"!i'W
__ ..te!J' tM structure 01 organizat ion.
,. , '. . . . ._-- _.....-... , ... .'., '" .... ,._.... . ..
Adam Smith in 1776. and Charles Bab.b,ag.a. .111..J834
th6 'activity 10 get the
W9.rt\.ll<>ne. ellicienUy. ' '' _.,.... . . .
Advantages of Specialization, Division of Labor
By specleuaeucn tonoWing'ends are accomplished :
/ 1. Sklll and expertise of the worker expands.
,.../2, Time is saved when tile worker moves from one process
to another.
/ 3: It encourages Inventions and innovaUons.
4. Productivily is enhanced.
....5. It lacili1ates the preparation 0' job specif ication.
Dysfunctions of specialization
Division 01 labOr or specialization has negative aspect s 100.
,
They are as tol lows:
Specialization creates monotony, boredom, and
dissatisfact ion. Monotony, in the long run, results in
the downturn 01 fndividual productivity.
Another study shows that specializations makesthe worker
>"'.....,.,"..,." .' '."._.. .. "'_"v"'''_'''' W'
dull, pressure-ridden. and frustrating. . .,
-",'...,", .. ",,.,,.. ,,.,"".,,,.,,'"
/(1) Job enlargement
.. ",,;(2) Job Rotation
AS) Participation
It dehumanizes the activity performed' by the labor.
They have to wOrk as if they are robot. Workers dislike
mechanical pacing, and repetition of operation.
/2.
.
(1) Job eil/argemenf
II is just the opposite 01 dividing work. Different tasks are
combined into one so that the employee performs d'ifferent
operations. Job enlargement is the Increase in the span 01
control. jhat a
can.
How to overcome Dysfunctions of
Specialization
The cons of epeclaueatron can be overcome by.the following
strategies:
Ii IinpactslAdvantages of Job Enlargement
.....1. More training is needed.
/2. Boredom decreases, interest increases.
.;3; Efficiency increases as a result of more training and
tess boredom.
4. It heightens worker morale.
5. It brings down production cost.
.'1'5: ltimproves the quality of product.
7. Organizational levels may be reduced.
8. Close supervision becomes unnecessary. Job
enlargement should be to an optimum level. Alter that
extent it may cause absenteeism, and the Job may
become difficult or confusing.
(3) 'The parttclpatlon
,
Participation refers 10 giving worke rs the opportunity 10 have
a say In t he marking 01 a declsjcn. It means committing a
worker 10 a decision. Subordinates enjoy more voice about
their own job. Participation calls for the sacrifice of a part 01
authority by a superior . This sacrifice will p ay back in the
form 01 high morale and satisfaction 01 the employee.

B. SCALAR AND FUNCTIONAL CHAIN OF
COMMAND
The jOb should be constit uted ';,ijJtlJ cl ear-cut parts 01
Iho work process so that employees can clearlv see
the lucid results 01 thei r task.
The worker should be allowed to varY their speed 01
work according to their mood.
Each job shOuld have some chajterqe, skill. or j.Jdgmenl. .
(2) Job Rotation (
Job rot atl cn Is not only a method 01 managerial de velopment
and tr ainIng but also may be used as a device to overcome
the dysfunctions of specraurancn. In this method, an Individual
is nansterrec fromoneposition to another. It reducesdisinterest
and monotony - which Is created by Ihe repetition 01 Iha
lask. It lacilitates management 10 fill a suddenly vacant
positions by tho rotated personnel.
,!, lOb may also be made i nteresti ng by the following
guidelines:

{It is a second element of crqanlz atlo n without which it cannot
survive. It ref ers to a chai n 01command which for ces control >
over every memb er In the structure. Scalar Chai!J.
thats\.tb-QIdlnateS.s.tllWld .r ec.e i)l e. ,ordE,lri 'Tr.omone superi or
onlY' but this prlnclp'le Is viol ated in functional Scal ar
chain creates man agement levels which are toplevel . middl e
level, and low level 01 management. In other words. it creates
__ '" ," ,. "
. Delegation and Authority
!. Q!,legatton, tsan essential part of scalar Ch.atn_. Scalar chai n
cannot be possible wit hout "delegation. A manager cannol
delegate a hundred percent power because it wi ll drive him
out of the Organlzation)He cannot retefn a hundred percent
power and aut hori ty because he will be 100 overburdened 10
perform his real managerial task, and his subord inates wi ll
stand surplus.
( It
is asslgned through the whole organizalional struetur,Wfien
a person ;otns an flrganlzation he accept s the to
perform the 01the position.
According 10 Koontz and o'ocenen tne effective delegalJon
should have:
1. Recepliveness: Welcoming the tdeas, opinions, and
initi atives of subord inates.)
2. Willingness: ( Rel easing decision making power to
subordinates .
3. Bead/ness: To let others make mi stakes. Managers
snculd guide, counsels. mct fvate his subordinates.
4. Trust: The delegator should t rust his subordinates.
5. Broad -Control s: ' Control s be used to keep up the
work standard .
rhe. !. .alsa .s.uggest-s-lhe'prtnc1ple
01unIfQrmit y.oL.command, which ensures the order to come
Irom one superior onl y:
101
extent of determines the degree 01
centralization or"'dec'entraiiZ'aiion:} "- -'-"" "'.,_. "-,-
. , ," ,.,, ;,,-- ., .- r- <' . ( . . r , li e
r ' r I '1- ' ( .
.J ) /. 1\ -/ t. / .IIl1 -'; . ' . 0" " I .. .:
'{ .t .f .; !' t'r':: -. r, 1, .
Delegetlon 01 H v: -: -
tt refers to vesting of organization or right to tne decisions
In a. subordinate by a supervisor It Is a pillar of
The conClS!l Of organlzaUon stal es hat it comes extstence
to delegate authority 10 ,get ciOii-e:'oeiegation createS
super-subordi nate retaucnstup.
at the task is nOI without it.
_..... . .; ' , . . ." ' .-- -
Some Beslc Rules 01 Delegation and Difficulties
Alleched to It:
i ,( A hundred percent authorit y cannot be del egatecY or
the ,delegat inp superi or will l ose hi s job to hi s
subordinate.
2. A hundred percent authority cannot be retained. or it
will render the subordinate to become surplus. and
the superior will be.overburdened with managerial and
non manageri al tasks.
/' 3. No superior can deleqate authority he does 04." have.
4. Delegation of authority ts subject to be revoked by
tne .
5. 11 determines whether organization is centra lized or
decentralized.
__ 6. Ultimate responsibil ity cannot be delegated by the
superior.
, 7. The greater the number of decisions made lower down
the management chain, 't he more authority Is to be
oeiecateo.
1 , -
-'.
/
8. II wi' be only when;aUl horil y job are
clearty defined, ihbordlnates aretrained, controls
are established, and teed-back system is
enforced.
9. UsuaRy the superior does not wish 10. delegate "his
authority.
Personal Altlluda and Qelegatlon
Personal annceee have an Important bearing on delegation.
Personal attitude has the- following Impacts.
(I) Receptiveness
It is wnli ngness of the del egator to welcome the i deas 01his
subordinates. Usually the superior does not delegate because
he Is unaware 01the art princi ples: and requi rements 01(he
delegation.
(iI) Willingness to lei go
ThOdelegator must be willi ng to allow ot hers 10make decisiOns
in this place. Authority should be delegated 10t he subordinate
who Is well -versed into the problem. :
(ill) Willingness to trust subordinates
Usually a superior has no way out except to trust his
subcrdlnates In de,legating decision making authority , If the
subordinate Is not to be trusted becau se he Is not experienced.
unable fif Mild19peo j)l e-,-'a"Od uria618fo
ma
ke-souOd CJectsions
then It is' the duty of the 'supe,.;o;"isto traifl him:: -- .
.' -'" ,- - ' " -.'- .... .... -. ......_...
(Iv) WIllingness to let others make mistakes
Delegati ng means th at the superior is will ing to l ei his
SUbordinates makemistake. But it never means jumping blindl y
Into the well. It does mean to.CJPIID' control technique and to
QUide and feedback hiS subordinate: 'As a"truman-islo,":"s
'ccet as investment in 11'19 . empl oyee
ceveepment.
103
..
,
.
(v) Willingness to establish and apply cont rols
The delega'e.t must establish and use controls to ensure thai
the objective of delegat ion Is ecc-srcnsnec.
on th'it eqeierce 0' theirplans as objectives,
pOlicies. procedures and programs. -
Decentralization
Decentralization Is the to disperse declslcn - making::
authority In an organized structure, Harold Koontz suggests;
It Is inherent In tne delegation of authority. Decentralizat ion
and delegation are compulsory10 each other, and have direct
relationship. The grealer the decentralization. the arealer
wtll iiiUII.
. cmrity..o' pl ans... standards. effective
communlcatron techniques. and
.- --.. -.- .-._...._..-..-- - .. ...- . ...-
", / / C. SPAN OF CONTROL OR MANAGEMENT
'" ,f
Spanof m'any person can be supervl s
-. .. des.!gned
diUerent theories explainIng span 9t CQAllgL It has been
.' . ,, ''- ' -. , .,
observed that the upper the ladder ot management we go the
. .
fewer is the number of personnel supervised by the superior.
nurnt>e tes a
io u
eight subordinates at the upper lev8i of organizaUon and eight
to the, kuero..le.vits:"According 10 LYMan
OrWiCi<.a! lhe'iilQher and middle, wneresuperlors or managers
have to supervise others, the ideal number of subordinat es is
four. And-at the lowest level where only responsibility is j
delegated and nor authority the ideal number of subOrdinates
is twelv e. But In actual practice it has been obser ved lhrough
various surveys by Fisch and Whil e i n 1962 and 1963
104
105
Tna amounl ot nonrncytagedal work which a superior
has 10 perform and the extent to which he has to
make contacts wilh hls:;.su'bordinates.
The occurrence of new'prcblem within the purview 01
the superior.
The ability and skill of both the superior and the
subordinate.
Avanabnity ot standard controls and procedures wilhln
the
The extent to which activities are physically
decentralized.
The likeness of the aclivilles being supervised.
The extent of interact ion of lhe subordinates.
,
.,;. ..
The- Nature and extent of training of the subordinate.
The degree of delegation of .aut hority.
The extent to'Which plans , 'policies, Objectives, and
programs are determined.
The impetus 0' rate. 4f change In technology, policy ,
and envtronmente,..
Nature 01 commu,Q}c.atlon techniques established and
used. '
/ 6. Use or clearty defined and object ive standards .
/ . _ Extent and need of face-to -lace contacts wi ll
subordinates.
/7.
According to Koontz . the' factors 0' span ar" as follows:
......' 6.
<1-
,.- 2.
/ 3:
Factors 01 Span
National Industrial Conference Board of the U.S. suggest the
'onawing 'actors of span.
respectively IhaI'he number of SUborOinales at lOP level ranged
down from twelve to two. It was also established that as
.. !he 8..t
lhe lOp Jevel Increases and vice versa.
..........",..",. .."'..__.....

t ',; ", -I I.,]

(j , , U " 'J.,W[ / " IIp(j
1. Ira nlng:. s / n may it .
suboralnates are welltralrKl d. "
, '-
02,. of ButIJor(ty; Delegatior of
authority increases the span.
3. Planning Bnd definition of Job: If Jobs are Planned
- and denned, s"'Pii1'Can be increased. -
4. RattL0f ChS.Eg9! Increase In the rate 01 change In
teChnology, mark&\s, government laws.lashions. and national
and international cond"rtions narrows,the span.
5. Use of obJecllvItJitl'1,dards: Objective standards
. .. , ' . "
Increases the span.
6. Communication techniques: Efl ef;1 ive and
--- - - . --.:......---
technological communication techniques widen the span.
7. Amoun! of pgrsonallnteractions Bnd contacts
_.
needed: The more the personal contacts neededthe smaller
be.
The details 01 the above teeters 01 spen 01 control are
gl'1,8n In the following lines.
F/ .CTORS DETERMINING FREOUENCY OR SEVERITY
OF SUPERIORSUBORDINATE RELATIONSHIPS
Not only personal qualities including getti ng alongwith people,
commanding loyall y and respect, situali on, and
resourcefulness, but also managerial ability play an Important
role in det enninlng the number of subordinates that a manage:
can elf&Ctively supervise. ThIs ability varies from person 10
person, sitUatloo to situation, and job to job. - /
106
19F s: PA"- of
The following f actors help determine the span 01

or control.
1. Subordinate Training
The betterthotraining ol.lhe a,
Take of his superior to leadback. lj,g...Jitl!-_
(!SUire cOil fewer ...
will disturbIng his other managerial tasks,
the manager can supervise a greater s!Jbordinates
ihEi'"
other hand, narrowthe spanbecause they needmorefrequent
contacts with their superior. But there are managers who
usually the need tor the training of their subordinates
making their lobs unnecessarily dIfficult .
2. Delegation 01 Authority '
The amount of authoritydelegated to subordInate,manager
has an important bearing on the number of his contacts with
the superior. Oelegation affects lreqJency ,)r severitrof SuP9rior.
brlrlg
. about a fewer contacts of the subordinate with his super ior.
Inversely, Insufflcfent delegation requires more contacts of
the subordlnal e with the supertor. In Ihe lormer case a greater
span Is possible, and in the tatter. a smaller span will be
needed.
Inadequate or unclear delegati on of author ity stems from
poor organIzatio nal structure. Cl ear and right amount of
defegaUon will increase l he span facili tating the subordinate
to work etticlently without disturbing the manager tor seeking
clariHcallon or permission. '
107
3, Planning

job" Planned and well-defi ned jobs make the
of cOntrol ' wielet Ihan the unplanned jobs. Since the
subordinate 'undersl ands what to do or what nol to do, what
hts authOrity is, and what its limit is, he wiJI l;fo his task dfficlently
without the direct guidance of lhe superior"
4. Aat e of change
The world is confronting fast changes in teChnology, economy,
business, geography. politics. medical science, and almost
all other fields. There are certain Industries which are greatly
attected by sucn changes and development. In these industries.
the rate of meeti ng between the manager and the subordinate
wJII be high. .The Subordinate will have to contact time and
again In the light of changer pol icies, procedures,
circumstances, or technology, In such a case, the span should
be small so that .tht.
-- . ......_ _____._. _0-. .. "-
__. . - .
_. But in .wbere. the' , $.IQ1X.. tbe
epsn will b& greater because every SUbordinate can perform
hIli unchanged Ci rCUmstances.
operat ions, . procedures.
a. Use of Obj ectIve Standards
Standards Bre thOse..p,l ans Wi l lch act as yardsticks to measure
.. , ,." ....._ :.".. . . ..'4."
the The manager must know whether his
SUbordin"ates are worki ng according to pl ans, and their
performance is standardized. In the prese nce -of objective
standards tho performance can easily be checked and compared
wlth them, and therefore, the span will be wide.
108
6. Communication Techniques
The in corrmunicati0fl,
a.'taTechni,gues alsC! .. ..
Superiors must communicate policies, plans, Orders, feedback.
informatlon. --and guidance. II they are communicated with
eff ective and rnodern eleclronic devices the superiors less
lime will be spent, and therefore, the span will increase. His
ability to communicate plans and orders clearly and conctsely
also improves the span.
II t he plan , Instru ction, or inl ormat lon has ito be
communlcaled In person, t he manager's l ime will be heavily
burdened l ,ecessital ing to re.Juce me span.
Computers, faxes. mobiletelephones, pagers, and intercoms
have been successful in saving t he manager' s precious time
in communicati ng data, Information: plans. and policies to the
subordi nate. thereby. Widening the span.
7. Amounl or Personal Conlact Needed
There are many situations when written reports, memos, letters,
and pol ley statements cannot achieve desired results.
consecuenny.tsucb situations call for personal contacts that
consume 'more time and per sonal attention. In such a slat e
o! aff airs span will be narrowed:
When personal contact between the superior and t he
subordinate Is not rrro ort ant and w.men communication can
do better the manager s time 'will net be overburdened. and
consequently. the span of control will be widened.
109
V.A. Gralcunaswas a management consultant. In 1933,

and developed a
increaseas the nuffi6erof
tfilS forrrilila'rnaynot be It
proves to be a device determining a span of managem,e'iir
b9fter than any other. . -
....
According to the theaIYthere are three types of superior-

/ 1. Direct single relatlonehlpe
/,2. Direct group relationships
/,3'; , Cross relationships
1. The direct single re/etlOflshlp
It means that a superior deals with his subordinates directly
and In other

'a!!iP..Jbe"r.-;)YI.!! be e",g.
A with B" "
A with C
A with D
2. Direct Group Relatlonshlp
11 means that a superior with his subordinates
in of
Jh,t6:IL 1:lL-

B with C
B with 0
Cwith B
110
C with 0
o with B
o with C
'9 with C a'ld 0
C "tth B and 0
o with Band C
This relationship In nine ways can be put Intothe following
formula," 0'
- x(2nI2-1) 01 n(2n-l 1)
3. Cross Relationship
When subOrdinates musl one another. ClOSS
';ei ailons fi ip comes Into existence. II A'h;,iimiii'&2rd!nates,
the folloWing relationships will resutt:
,w_ ..>< ,_. "

00('1'8
1;)-10 C
In this case, mathematical formula will be n-1). From
, -
the. anayalsof all the three relationships Graicunas developed
the loilowlng formula to give the number of all possible types
of subonflnates-superlor relationships requIring managerial
attention:
n(2n12+nl) a 12+01 (n111
'Sl r Ian Hamilton and Span
Sir HamDt2n was a military Sl!neral fin U.K. army. He suggests
hu'"!.!!JLa.n
a number subordinates ranging from two to six. He asserts
be narrower
.. - - -"
.11
I
112
D. ORGANIZATION STRUCTURE
Departmentatlcu I 0/:'" ;' '" h ,'.,.,':- ,
Organization levels l , ) f,...rl' 1"(" " -' .'- ', U ,,/' ( f
Job Analysis ' I I
Organization Chart
,-ll.
........
1. Departmentatlon
'1L,reters todividing . be ._'
.,t9...!tut.JQ,Ul:'!'!t
r
:19: '
A struciure 01 organizafion gives rise 10 the following:
- _. _. _ - _._ _ .. ... _>_.. ,... -.. .
Urwlck who also served a military ofllce r and retired
as coroCI6L asserts.
- work or !I"PUI then f tve sUbordinates'whOse
work"interku:ks.
M
..
Organlzalion st!.Ucturo i s the result 01


..
A span should be limit'ed because a human has a
iiiTillf d"iftenlion span;;hk"h-iimits-the numb'af o'i-i1'&ms
- I
that can be attended tc simultaneously.
>-- Energy IImN.lion 01 humans caU tor limited control
,!?!n lor eHective
3. Time limllaH.on of human demand a narrow'span 01
or eO"ntro,'ln ;u;clrvelY counsel.
,--- -
..---.-"
\ I
i l yndall F. Urwlck and Human Llmltat" ns
I __
. Urwick's viewpoint of span of control is as follows: .
(vii) Department by
Shift, Night Shift.
, I
I '"
(i) Department by PROCESS flJ
weaving, dyeing,drying: pressing, -sanforlztng, marketing,
production 01 equipment
-
departmenlalion, electronic data processing may be created. n._ __ ._
/ (ii) Department by function: An organiiatigo is dlyide
d
prOJ!uction, stores, finance,
12
, (iii) Departmentatlon by customers:

" (Iv) Departmentatlon by area: East, west, south,
Europe, Japan, Middle East, Far East."
,___ .' .A_........... '
,--,
rtv) Departmentstion by product:
v
"',
(vi) Oepartmentatton by simple numbers:',lts
example is military organization: Platoon, battalion, brigade.
-i\f.. " .
Time: ..
I
". (viii) by Protect: Project A, Project B,

Thedetallsaregivenin next chapter
2. Organ.ization Levels
There are many levels of organization:
(I) Trustee level: T They are
QrJI:i:, .. --
__
holders.
"'--." ..,-
113
..,.( (ii) General mMaggrnen! leyel: II is .._e_)l ectJ
i l evel resl?onslble for 'he direction of Ihe- e
- "." .. -. .
-- -_._. .
./ (iii) Departmenllevel : II is the hlgheSl level 01manage
. responsIble act ual busIness pertormalice:-suc
Sales, prodJetion, finance, pybliC
__ (iv)) -A iddle leW J1. __ un
depart mental heads.
, (V) ieieFTt-hasfiring-line managers wno b
.. _.--
(he ultimate responsibility tor lhe accomplishmenl
,h"l ilob. They superviS;"iiOfl:m:iilagerlaTslal . "
. -..-_.- .... .._ --_ ., .
3. Job Analysis
Job analysis Is the combination of Job description and
specification. Job description describes the nature of j
.
In the performance 01 the JObs, andjob tiiie.-- -
... _ . ' , . , ._.- _. '" . _ .. . _ .
Job specification specifies personal qualities neces
l or educaHon", Hal oing, expe
physical and imoii
cMiaClerisiics, sensory"requiremenlS, suchas s
sign1.' etc:'
- , " ,.
4. Organization Chart
.tt is It is l he resu.\
organization design, An organizat ion chart snows the 10
rel aticnsmps among functions aod people who perform t
functions. Using the chart exhibits rigidity 01 the struct
However, it has the following advantages.
1. It shows authcnty relationship facilitating 10 know
" person responsible lor a partkutar tuncucn
...-,,2; II can show the weakness in an organization, if
3. It serves as a training device and as a guide in plah
lor future.
114

Chairman
Director Director Director Director Director
Production Purchase Marketing AccQunti'ng Finance
.
,
Manager Manager Manager
Sales Advertising Markel!ng
Research
,
Manager Manager Manager
Product A Product B Small loans Credit
Investigation
Skeleton of the organization
(Organization Chart)
Size and Complexily
Size
OrganizatiClnsize. attects mcrare,
"andcomp'iexi rge coO1PJlO mo;'edecistcn5
- .. ',' , ,- " -', '". " '.- .. ' "'-', .... > ,-,
10 be ,made,the more place where they are made, and the
'greater"authoriiy to be delegated, the harder it is to coorermata"
theWoveiafi""efforC'c-"", "-",,.'h._ ..' , ,"... __
In his Parklnsons Law, C. Northcole Parkinson asserts
that administrative site grows at a fixed annual rate which is
totally unrelated to the actual work load. In large Ilrms executives
determine their status in terms of the
.. ,
they supervise.
j I'i
2. Organic Systems
They have the foll owing aUributes:
. .
01',size. and complex;ity may be overcome
.by,,:Qrgal"! izalion,:de.... elopme.nt whiCh caltS lor ,HexibiJity ,
','" ' " , :' " ,'" '.- ",
1l6
"' ,:,'
. , " ",'
, ,, : ,
,, ",
, ' ,'
'rttEiehanis.fic eysl ems can be,differentiated "
as follows ; " i C' '.- .
"'.
Complexity
Organization. complexity naa an Important bearing on the
efficiency coordination,
....(1) Organization goals are considered 8SIhe end,Junctional ,
goals as- the-meeee- to accomplish them.
0' , < (H) Coordination Is' actne.... ed by verneat and ner contacts.
jlli) ,Guidelines, polici es. and work are ,Uexible.
.,,(ivl Direction Is as ccneuuatlon.mct ln the tcrm ot ccmmard.
According 10 Tom Burns and G.M. Stalker. industrial
-compli Xily can be v!!rtid two ways. - - -:--:-
c,:' ",l;;;;.; :.);0 fJ '; t. ;a.?
? .1. MecJfsnil fJc systems co. Jip '-"' f l' . i
.Theee types of complex orgaNzations are In
accordance with the IOllowing.
- _ (t) ( SPe: Clalizatlon, and divi sion 01 laborpccordlng to their
. '. 'expertise. .."... ,. . . .' .
.: (II) Coordinatlonl hrOugh functional departments
. . coordinatiOn) . .
...tlln Cla.My eeunee jobs.
_(.1v) Development 01 loyalty and conformity.
..-:tv) Vertical author ity relationship :md chain 01 command.
Characteri stics
.f'1. s pan 01control
: 2.
3. Time span of pert cr mance
,
4. Extent of centralization
,r 5. a
Interacti ons n9
de en1s
Organic
Organization
Wide
Few
l ong
Low
High
Mechanistic:
OrganlzaUon
Narrow
Many
Short
High
Low
6. No. of rules and regulations Low
r
/ 7. Welldefined joti ..s0als Low
..... ' -6. Type of commvnicali on Advisory
/ ,.. 9. No. of pay scales Narrow
""""'10. l evels of speci alization Narrow
on 8llportise High
..... fl ; " , . r_
! ...
12. Aul hori\y based on position low
High
High
Instructiona!
Wi de
Wide
Low
High
Worthy's St udy of Sear. Company
Jall1es C, Worthy a study determining the morale
.
.1hilij,,;>.'Y9'y.. Q.'.. 12 ye
was about l ollowing work environment: .-
" "A',"'"
117
1 18
Wo r,thy also conducted a st udy compari ng several "
organization struct ures and concl uded:
.',
' \ -.
'' i
..,,,-..
' ", . '
--- 1. The company itself
r": 2. The organizat ion
3. The management
. : 4. . Immediate supervisor
.. .5. FellOw employees
. .. Wolklng condiUons
The result s of the study were as rol lows:
--- 1. COl11'Iex organlzall on structure ' l ends to discourage
go&O-manageme,nt-ernplcyee....iH..boss -subo rdi naI I
relationships. .
.,..:.... 2. Excess ive oepartmentattc n and breaking down of the
work into fewer units will yield poor results and moral e.
....J 3. . Minutely deltned work calls for ctcse supervislcn which
adversely affect morale and prcductivftyot employees .
4. For highly specialized wO,rk ette ctlve coordination is a
r -.
must. Butdue to of the crqan'zatlon
that cl ose cc crdlnatlcn is, net possible in .i.t s' . riatural
way. . ;. "
5. Pressure tactics by Ihe supervisor are necessary in
the ccmprex and overorganizal ion.
1. Flat organizaJlon (lewer levels, wide r spans) i s less
complex than the vertical organization (more levels
and less spans).
2. Wide spans facililafe more delegation,
3. Flat crqanlzat lcn encourage better and tr ained
managemont personnel .
4. Flat organizati on reduces communication networks.
5. It also reduces the administrative distance between
management levels.
Examination Questions
1. Def ine organizing and organi zati on. Also dltte rentlate
between formal and info rmal /?rganizalion.
2. Descri be bureaucrali c model of organization. Also explain
the viewpoints of Karl Marx and Mall Weber. Whose
viewpoi nt do you lavor, andwny?
3. What are the baste element of organi zation? Discuss each
of them briefly."
4. Whal Is span of control? Explain the vi ews of Graicunas,
Hamilton. and u rwlck.
5. What are the factors 01 optimum span as suggested by
Nallonal Industrial Board?
6. What is delegation 01authortty? Why i s It difl icutt? What
are its basic rules?
7. What are theadvantages anddysfunctions01 spectanzat on?
How can the se dysfunctions be overcome?
8. Defi ne. scalar and functional chain. Also discuss size and
complexity' ot the organizalion. What is 1M impact 01size
and complexity?
9. Explain the following :
neperttnentauon
Organizational levels
Organi zation chart
10. Write the notes on (he followi ng:
a. MechanIstic system
b. Organic system
c. Worthy's ~ u y 01 Sears Company
11 9
-v
Chapter 7
DEPARTMENTAnON
Advantages and disadv'antages of
departmentation ,
BASES FOR DEPARTMENTATION
DEPARTMENTATION BY FUNCTIONS
DEPARTMENTATION BY PRODUCTS
DEPARTMENTATION BY TERRITORY
DEPARTMENTATION BY CUSTOMERS
DEPARTMENTATION BY ' PROCESS OR
EQUIPMENT
DrPARTMENTATION BY SIMPLE NUMBERS
DE PARTMENTATION BY TIME
I EPARTMENTATION BY PROJECTS
(MATRIX OFGRIO ORGANIZATION)
Advantages Advantages Advantages
1 20
Definition
To perform on acU'lily e!l ecl ively it Is necessary that if should
be grouped in accoedarce with speci alization. Thi s grouping
01 (he parts of on activity Is referred to departmentalion.
Departrnentation is the process bV which' department s come
into bei ng. The concept of departmenl ali on can also be referr ed
10 as division 01 labor. Rathe' than one indi vidual several
Individuals perform different parts ot the total activity. Accord ing
to samuel C. ce ne, -a department is a unique group 01
resources established by management to perform some
organization task". Departments show forma l relationshi p
between resources of on entorprtse.
There are many tcrces which continueallecting the natur e
and size of departments.
1, For ces In the manager which include his background,
percepti on, kncwl edqe. experience, and values ,
2. Forc es in the task being mtluenced by technotocy and
I'l l
size of business.
3. For.ces in the environment which are attected by
customers, suppliers, political conditions, population,
labor unions, and government laws.
4. Forces In the subordinates which include their skill,
initiative, ambitions, and desire for indendence.
.General Advantages ot Departmentatlon
Departmentation has the folloWing general advantages
1. By dividing the work (division 01 labor) specialization
is achieved. Specialization, in return, allows the manager
to go deep down the nature 01 work. Specialization
also facilitates Lnnovations and
2. Organizational inherent complexities are simplified
because depart mentation achieves the following:
are c;:leflrly defined.
(ii) Authority can be dele,2ated clear.!..
(Iii) of
(Iv) The
(v)
(vi) JCibS are clearly defined.
3. Departmantattcn may improve ,oordination if
departmental heads have direct and conlinuous contact
with each others.
4. Workers exactly know what they have to perform, and
hence the work is efficiently done. e _
5. The principle of scalar chain is facilitated resulting in
the establishmen-tof clear superior-subordinate
reretllonshlp.
--
6. The principle of unil.L9L9.ommand is also effectively
eXIHcisea:- ' -
1. Depart mentation makes II easy to deckre on lIal or
vertical organization. Flat organization has fewer levels.
while vertical organ!zation great er. .
Disadvantages
1. ((ost at the parts of !he acti vi ty is IncreaswL.
2. Coordination is dilflcull to achieve..
3. f3igidity i n the formal S1.WC1We...,comes in the way .
4. Individual workIng In one department is quite ignor ant
about t he wo rki ng of the other due to which
interdepartmenlal transfers and CJ2..Q.!wJlQo becpme
,Siilficu1b _ ... - ,
Bases 'or Oepartmentatlon
Depart mentalization can be broughl about on the !OIlOwing
bases .
1. By functions (by lype of activity)
2. By produc1 (by goods manufactured)
3. By l err!19ry (by work or market locations)
4. By customers (by types of buyers)
5. By manufactur ing process (by the seque nc e of,
production or by equipment)
6. By simple numbers
7. By lime .
8. By matri x or grid organiZation (project departmentalio n)
1. DEPARTMENTATION BY FUNCTIONS
When activities aregrouped by functlons" functional departments
come intoexistence. Functional departments become necessary
when the size and vol ume 01 the acuvales become large. II
has advantages and disadvantages.
123
......
2. DEPARTMENTATION BY PRODUCT
Duectcr
Production
Oirlllctor
Siore
Director
Purchase
Directcr
Sales
Disadvantages .
1. Here the need for coordination Is very s v ~ but thl
type of cepartmentauon makes it dillicult .10 acbtev
it.
2. Manager ial devel opment i s l imit ed because hi
kno..... ledge, experience is limited 10 his own oepartmer
only.
3. Overall objectives of Ihe company are ignored.
4. Environmental chanqes are adopted ver y stc..... ly.
5. Overspecialization is feared.
6. Profit responsibilify is shilled from departments to t
level management.
Advantages
1. Planning is l<h:j lit ated.
2. Fruil s 01 spectanaaticn are ripe.
3. Tra ining of managers is easily devi sed and i mparted
4. Manag erial control is effec tive.
5. Organlzaiional structure is clear -CUI .
This type 01 department Is neededwhencompany manutactu!
a number of products in large quantit ies. Usually large SC,
companies adopl this basis lor cepartmemaucn. Under (
method the top management delegat es 10 each depart ma
tunclional authority, power of sales. purcnase. productiO
service relating to relevant products. II has folkMing adva,ntsges
and disadvantages.
Prasident
Aug & Ca rpat Cotton Textil e Woollan Textilo
Divi sion Division Division
SynU'I"t;c Rayon Blenket
..
Division
Disadvantages
-, " 1. Top level management centro! over the cepanmems
is difUcul1.
, 2. Si nce' every ,department ,,'ls performing diversified
, _. func1iof'!s, spectajtzatlcn and etllciency are
adversely allected.
3. It re9Uires everyJ11anager to.havediversified managerial
abilities,
4. Every m'anager rrustbe 'div:ersilledly t rained.
. ' - ' , ' ' ,' , . , ' ,
- .dIi
..'.
J 2 5
Advantages
1. It facilit ates equal concentration on each produ ct.
2. It facilitates' managers 10 have independence In making
. decisionson thepurchases, sales, design 01 the product.
3. It In achieving functi onal coordinati on,
4. Growth. diverslly, addition Qr elimInation of the products
is compa rative ly eas y.
5. Eltl ci ency 01 each department is exactly measurable
In terms 01 expenditure and profits.
6. It make s possibl e use of apectallzed knowledge, sklll.
and facilities.
3. DEPARTMENTATION BY TERRITORY
~ r d i n g 10 Ihis depatmentall on activiti es are grouped 0
the bas is of matketlocatlcns. This method should be acccte
when act ivities are geographically dispersed or diversiii
Usually national and mult inational companies adopt this Iyp
of depanmentalizalion.
.
It has fanowing advantages and disadvantages.
' .
Managing
Dir"ctor
Europe East Asia
South Asia I
Department Depart ment Depar tment
,
I
Japan II
Middle East 1.
Depart ment Department
Advantages
1. Economies 01 local facillUes are achieved. t oea
economies may.lllClude tabor. raw material, l echnology
land and building, goods and services
2. C:-Ontrol over lower level managers is poss ible.
3. II focusesatterurcn on tM local markets and problems
4. It tacnnates communica1ion with local customers
suppliers. and governments.
5. . Training is facilitated accordi ng to local requirements
6. Every regional department has effective ccorcinanc
wil hin itself .
Di sadvantages
1. tnter-reqlonal coordination is poor.
2. Control over geographic department is dill icull .
;> f .
3. II requires a greater number 01managers wllh general
managerial abilities.
4. Better managers may net be available locally.
5. Managers may fail 10 accustom and adapt 10 Jocal
condit ions and environment,
4. DEPARTMENTATION BY CUSTOMERS
ThiS type 01 oepartmentatlcn focuses attention on serving
better the various classes of customers. This approach 10
departmentalizat ion lakes 'he form of wholesaling. retailing,
ladies, gents, and/or babies depart ments. tn Ihe eoucat jcnat
inslllutions it lak es the shape of groups of students according
to speci alized courses oftered.
P' liISidenf
Manager Manager Manager
Students' Who[osalo Ae!aU
Uniforms Department Oepartment
Department
Manager Manager
Bab;es' Ladies'
Prcducts Products
Department Jepartmenl
Advanlages '
1. Cusl omers can be served in a better way.
2. II facilitates better undorstanding between sellers and
buyers.
3. Specialized knowledge of customers is eocooraeec.
4. Training is tacnitated.
--4
.
Dlssllvsntsgss "
1. Understanding 01 customers problems by the selling
_. stall may be lacking.
2. Grouping 01 cust omers may be dillicult .
3. Coordination is dilllcuit.
5. DEPARTMENTATION BV PROCESS
OR EQUIPMENT
\
Manufacturing campania's f ind it easy to group their activities
by process or a type of equipment. A textile mill may have
weaving, dyeing, drying, pressing, santortri nq, marketing,
production and/or l inance departments. In the case of equipment
departmemauon. el ectronic dat a proc essing may be created.
PRESIDENT
Advant ages
1. Specialized know-how and technology are encouraged.
2. Economy 01 operati on i s th e" fruil of t his type of
Depertmentatic n.
3. Training is recuueree..'
4. C<n:x-",--'",J.'9F ~ h<.e...-.. <eeL-: ~
Disadv8nl aQU
1. Equipment departmentaticn may require a heavy capital
investment which may.not"be lustified in small enterprises.
2. In case ot a breakdown in one process. h ~ other precess
will be Slopped. causing an. i ncreased dowplime.
12 8
6. DEPARTMENTATIONBY SIMPLE NUMBERS

Thi s kind 01' departmlinl aiizall ol"f ,rs' qu-ii e: confffiotr'-lii artnta s.
'& It'ln tiuSlnesS:w-orlO it is''on;i ts W8J'::OUl :1I 1S'useful In
those 'organizations fa-t ; nothing.
l iiJ'.:l:'I \;t !'\, i \li r;
'A!ivsritages l ,:,:!t) !ri ;;:A,! . l ode! ;.
1. Diversified knowledge concent rales::rN'an' lnchvi duar.
'y.ar1pus __ '\
! l\ , H " ; ; n i "b
4. f\ f!J )
Dlssdvantllg8s1,; "{,>,c :- .':i:; tA Gl')'i _
::: 111,. r;-' ,-,,-:<:!::, .
' md\vldoal s in 'thetJi ' tiade .
3!: Overall is'tkif"easlly
achieved, -,,:.;'<
"H ,-" BY''TIME' o"
',' Y li -'>:..<; \,n,,: ,,1:(,; ',,''-. '' ;:::y ' :y"' -'. "': ',,1,', II>
.1;, \,! " .. : cccu ..jy >! :.,, :
1. Each machine and capital
a greater number of 'workers and for ronosr hours
2. Economy 01 operation is facili tated.
3 .Work can continue wit hout lmarruptlon for .24:hQUfS.
r. 4,.; Wo'rkers carr. reae -eut. ttme lot their . studies, ' and
. ' l-i' ' . ' ,::"" . '.':",
' I ,'
1 29
Disadvantages (
1, Coordination between the shifts is difficult.
2. Transfer of a worker from Dne shill to another is difficult:'
due to adjustment problems.
3. Night shift supervision is difficult.
4. Night shill labor rates are higher causing high cost of
production.
8. DEPARTMENTATION BY PROJECTS
(MATRIX OR GRID ORGANIZATION)
"
The word matrix refers to the cavity In which anything ls.
formed. Therefore,
a lem.n Jl,Jrl' Matrix':
.Ptoj.Q.QU
organization.
v.. .
To complete a projector projects professional experts
are borrowed from various departments who work under their';
respective project managers appointed. In this kind of
p.r.g.le.sSiao.als and work:
the.. of functjQMLllll.pi'Oaoc
within. the same
a After the projects are complete:
the organization chart reverts to its original position.
The following advantages and disadvantages may be cited;
in matrix organization.
Advantages
1. It-otters betler customer relations because of the:
combination ot functional and product departments.
2. It- claims better and ettlcfent control of a project.
3. Project is completed in shorter period.
4. It otters lower project costs.
130
DIsadvantages
t . It complicates and confuses Internal operations.
2. It creates difficult situations to manage.
3. II encourages inconsistency in the company poliCy.
4. It is difli cull for managers 10 learn and execute
somewhat dl1 leienl organizational roles.
5. The principle of unity 01 co...!!!ffiC!!l4j s yi_().l ale:d creating
problems and compiici t"kms.
131
____...,,4
Finance
AlC
Group
AIC
,Group
Accounts
Personnel
Group
Personnel
Functional Personnel for -Prelecte
Products
Group
PrO'duction
Facilities

Automobile

(
c."':-i;' ;\P'resident
1 , ?
Matrix Organlzat,ion
('Combination of Product and Functional Departmentation,
To Compl'ete 3 Projects)
Pro;eci
/ B
Projects
\'1M 'CHAm R'&' (-(; ;;
I Ff ; ) :,h X;'::' AHfi '/ i
WORKING WJTII OTHER - GROUPS
, DEFINITION
- _.-
, ",. 'CHAW,CTbtisnc s

WHY GROUPS FORM
.H
Economic
'Cb61ogical .
. Reasons - secuMVTieasons -Social
. Reasons - Esteem needs
Selr.'\4IitiMiia\\di1
. "" '''' ' :' ' . 'HOWGROuPS FORMJROLES
OF GROUP i \",,, ,, ,, ';
Interest Grnup Group ',
, .
,
,. nowGROUPS GROWl

Mutual Acceptance - Decision Making
Privilege - Motivation - Control
now GROUPS RANK
The Leader - TheStatus Seekers -
The Followers
:,:.
133
.-".;,
___ _ _ _ ,liII t Illl 4
now GROUPS FWWI
WORK/SUCCEED
A. Communication
Wheel Network - Chain Network-
Circle Network - All Cannel
Network.
B. Cohesiveness
Characteristics of a Successful
Group
GROUP CONTROL
Group Pressure-Group Enforcement -
Personal Values
O ~ I ~ I I T T E E
Definition
Classes
EXAMINATION QUESTIONS
134
r
,
I
I
:-;

,
i
I
I
l
r
,
,
f
.'

"
,
I
~
1

DEFINITION
Understanding nature, class, process, for mat ion of group is
essential (0 the study oforganizational behavior..Groups are .
defi ned differently in termofbow they form, why they form,
roles--: -charaet eristics , and how they &row 300 flow. ' .
One view suggests that a gr oup should he organized and
conducted through democratic leadership, member partici-
pation, andoverall cooper ation. Anotherview isthat it comes
into being with a 5tt of techniques, as role playing,
bralnstorming, buzz groups, leaderless group, learn build-
ing, transact ional analysis, group ther apy, etc. Another
school of thought suggests that the group s hould be vi ewed
in terms ofils nature , howit forms, its strud ure and process,
and how it functions.
AboutIts formati on many theories have been devel-
oped:
! ] 5
I
I
. I'.:
. ' .'
"
r,
' .', I , .
, '
,
Prcptnqulty thw ry : Itsuggests that it is the result of
geographical proximity. ': i - ' \ .
" .' --_. . _._.. ( ' " ,/ .. ,
, ,
Humans Theory: It decides that it is based on activities,
interactions, and sentilnents. .
- __ , iI
Batanee TIll.'tlry : II views the group as the result of
people's similar behavior and need for common goals.
t , , ""'" , , :
, , ' : . '" " 2).. .. ,', ,
'". Exchange Theor y : It suggest... reward-cost results of
interactions. Rewards lncludesattsfact lon ofneeds, and costs
are frustration, distress, stress, fatigue, embarrassment, or
disagreement. If rewards are greater than the costs, group
will survive.
'-. Organlzatlon 1111:ory According to it, groups are
formed for economic, securttyor soci.al factors.
The group gives "the ' conceptof synergy' meaning the
wholeis greater than th'e'"sumof its suggests ",',
that two is morepowerful than one piusone. . _,'
1
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/ Characterlstlcs/Dlflnitionsr How you Spot One
The author, Fulmer has defined a group on the basis of irs char-
acteristics.
According to him, a group is an association 'of two or more
individuals...
(I ) Interacting with the members on an individual or collec-
live basis,
,
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(2) Sharing one or more goals.

1 3 6
(3) Having a behavioral system ,
" , . "
_ I"," ,.
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(5) Forming subgroups within the group tend to co me into , .'
exis tence.
The det ails ar e as follow
'.<, 7" " " - '. _
1. Int eractions .
People interact with,each other. Members of group per form different
things'ioge'itieLTIley'interact through'a system harmoniously; They
have t:ffed,iv,e 'system .'." ' :"'." __'. . ',,,
2. Shared Goals
Members 'of a group hav objectives. A cdelcet team, a
company, or a production group work together to accomplish
common goals.
3. Behavioral System
A grouphas a fr amework. within which it has to It has
limited powers . Member s must yield to rules'and' norms"fo get'group
membership. " ," . . .
..,
, . -.'
4. Subgroups
Due to natural tendency to differ from others , individual s tend to
form subgroups in a group. Individual differences create politics '
which in turn forms subgroups. The natureofsuJ}grc.-itips isinfonnm
wliidifadlhares grape vine,' -li: k1ikfo( qulc,,communiCation." .,"-'
S. Statbl e Role Relati onship
Wheth er the groupis organized forma lly or informally, its membe rs
must have certain roles to play. Role-playing galvanizes the group.
A person ceases to continue as a member of the group once his rotc
or work. is no longer required. The members have to work within
the framework set by the group,
137
V WHY GROUPS FORM .. REASONS
Group_are success.tblif there are reasons for their existence. There
are physical, economic, sociopsychological, security and soctsf"
reasons tor group formation. All reasons are related to the group's
goal and enthusiasm. .
Details are given below:
1. Geographic/Physical Reasons:
It is verycommon reason. Nearness to each otherestablishes group
relationship. People living and working together automatically form
a group. ~ geographic requirement for group formation have
limitations for two reasons:
(a) Technological developments in the fields of transportation and
communication have weakened the location factor.
(b) Common interests and shared goals have brought people together
irrespective of their location.
2. Economic Reasons:
Economic factors gtve rfse to groups. Individuals have limited ability
hofu physical and mental or professional. They cannot do every thing
as an individual. An employer or capualisthas physical, professional,
amd time limits. Therefore, he hires employees in order to form a
group that performs economic activity.
3. Sociopsychological factors:
There are other reasons for group formation. Workers as members
of a group perform their duties to satisfy their various needs. Their
needs are physical, security, social, esteem, and self-actulaization.
138
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4. Securily Needs
Individuals are less secured than a group. An.organization, or
institution is far much stronger than an individual. Unlons, man-
aild governments are very strong_ Military is
example. Individuals gettheir strength, authority, or power
group they belong to. A' whole is always greater than the sumof Its
parts.GroupsJ'!(Jvidesocial , final'lCial , life. propeny
security which tW? is stronger
"pl usone."
5. Social Needs
.
Humans are They want to marry, friends, play
work tcgether.. For a person'solitary is' :ih
eiireme punishment. 'He wantS'lo"bef(ing' (0 want. .. tv':-
ogiiit"iOn'" He hi" instinct to move ebout in a society.
/ - . >
J-' ( .. . "r. " ' I:I
6. The Esteem Needs l . i",j f ' .' r , ,', i , ; , .. ;
If a person is socially and economically safe, then he has a desire
'-for'sel f-esleem. He becomes status-seeker. H wants 10 accomplish
social standing. He wants a title, a secretary. and the like,
7. Self-Actualization Needs
Thisneed leads persons to professional paths.
in a g!'1?up. a.nd .
m a group. Personal growth aoo aceompTistimem will
emerge frOm-the rricmbcrship of a group", -- .. ,..' -
v'illE ROLES OF GROUPS ANDHOW TIl EY GROUP
According to roles, the the group rna)' he divided into the follow-
ing categories, as suggested by l eonard Sayles,
I. Command Group
2. Task Group
3, Interest Group
4. Ftiendshi(l Group
139

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1. Command Group (,A'; i 1,0' ! r .. ,.{ or'
, .,. ".... .... .... f,_ .. ,' '.
of ..Formal organization
is

Ul,lpg:UJ9T!,e. The' compl lance ill
order is ,essenti,ll in-,a formal group. Thisgroo.p is manage-
meet-centered and work-oriented. ,-,,,, ,,;,,, ..
c, ,.'" ..'".;,.,..
2. Task Group
When a project is,to be completed a task group is.(QrmtXI.flS
'fhe"tasI-group is lesS form:\'\ and
Oncea must -iiirierge,
or the
-, --":,,,",, ,."., ,-",'"
It has efficientcommunication.and coordination,systems. The
group'Is more proouCf:WiHll'aii-thetradiHona:f commaiidgroup.
3! Interest Group
The It,mayhaye.. a
! ciiain,.9f.,a.,hie,(8,I'i;Py, 9f .. The group, 'Of
an .accomplish. The group may have permanent.
short-term or long term, formal or informal, or line 01' staff.
C-,Y ",,'ti'i' ;' ... ';." ,
; .. ' .(/ ""
4. The Fr lendshlp Group
This is
c?nlmon' sch99l" A
of dissimilar' naru're, such as, dis-
'
" .. ',," ,..,."-- " ...... ,., .. ,
/ According to Fulmer, groups may be classified according to,
!their behavior and process , as follows:
(i) Th, degree of formality
}, l )
(ll) Intimacy of their emotional involvement
I
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(iii) Main goal ",
140
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, {lv] Size of lite group
'(v) Complexity
(vi) Degree of voluntarism ) ..
". / " .
V HOW GROUPS GROW
,
.r.
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In congenial atmosphere continue growing. People work .
effectively 800 efflclentlywlth other people for the following rea-
sons: . ,',' .'. ' ".
1. Mutual Acceptance .-
2. Decision-making Privileges
3. Motivation
4. Control '
1. Mutual Acceptance
Agroupc.annot formor contincetogrowunless members havemutual
acceptance. The new comer also needs group <acceptance. SAARC,
ASEAN, and Common wealths are the result of mutual acceptance.
Mutual respect, trust , confldencce, <and Interactions are requtslres of
groups. Marriages are another exampl e.
2. .'
The group becomes stronger if the members have privilege for,,'
participation to make a decision. Groop participation tee the
gruup grow. ..;,',
3. Mcttvatlon
A leader motivates, communicates, leads, counsels, advises, and
guides. A motive is a 'need, want. drive, desire. Motivation is a
restless ness or willingness to expend energy toaccomplish a goal or
a reward. Motivation' makes workers -.keep going. Motivated
members make thegroup stronger.
....
.:' '."
141
"."
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4. Cont r ol
If the members of a group are matur e and realize their dut ic-s and
obligations they become self-directed and control led. Mot ivation
plays an important role in getting the members self- contr olled
HOW GROUP MEMBERS RANK
An actlvhy must he c rgenlzed before it can be performed.
creates super-subordinate relalion:-hip, a.or.sign.<; tasks. ddegah:!'.
aulhorit y, and unifies the work of individuals and departments . In
other wor d, organizi ng cr eates ranking of group members according
to their qualification, specialization, skills , eblllttes, and seniority.
In the absence of ranking nothinghut chaos and confusion will result .
Ranks. in the group is a natural pbeoomeeon,
The group members may beranked accor ding to the foll ow-
ing:
1. Th e leader
2. The status seekers
3. The followers
4. Group control
1. l11e leaders
A leader is the penon who steers the group toward a goal. No group
can survive without a leader . A formal organization must have a
leader . TIle leader infl uences the behavior of his followers . Managers
ar e leaders . People llke to be let! rather than managed . A good
managers his tea mbuy leading. He m:IY Impel his. workers by several
devices such as persuaslon, influence, power, threat of for ce, and
appeal to right . He talks their language.
A leader may he formal, informal, elected, or appoi nt ed. Labor
\Jninos, service cl ubs, professional soc iet ies, soc tat clubs, political
groups , and vete ran soctenes have elected leaders.
A supervisor , foreman, plant manager, or department head is .1
formal and appo inted leader. Such ptrsons are not elected oy the ir
followers (subordtnates) . Here the leaders do nolg(,vcm wit h consent
l ,f the governed. They enjoy a position of forma l command .
14 2
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A manager may be task-oriented or group-oriented. Task-

oriented leaders are likely to give less production than the
group-oriented managers in the long-run. A manager is the person
who is responsible for the work of others.
2. The status seekers
These are the leaders who don't lead but serve only their personal
ego. They want to become a leader just to enjoy a status. They are
neither group- oriented nor task-oriented. They are self-oriented.
They want just to establish themselves.
3. The followers
These are the persons who are led by others. They are not willing
to accept responsibility. They have no or little ability to plan,
communicate, and control. Some followers have initiative and
self-confidence. Others require close guidance and cannot work
independently. The followers have less knowledge, endurance,
resourcefulness, and helpfulness to others than their leaders. Average
person has the tendency to be led rather than managed.
/
vhow GROUPS FLOW/WORK/SUCCEED
o
The ultimate value of the group depends upon how the group works
or succeeds. The success of the group depends upon (1) Effective
communication and (2) Cohesiveness. The nature of the communi-
cation and cohesiveness depends upon the nature and type of the
group.
1,13
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~ COInnmnicalion
-- ' -
Communication is afunetion of leooership. Leaders must bave skill
in motivating. counselling, leading and communicating. The success
of business depends upon effective cornmunicatk mnetworks.
. .
A network is a structure situation in which people transmit
information in a specific panemNetworks may be of the following
types.
I. Wheel net -ork
Each of the four persons communicates with the person at the
nucleus. All the persons are subordinates 10 lbe person in the
centre.
2. Chain network
Here are two sets of persons. each comprisingt\110 persons. The two
members of eachset commcmcare wlrheachother andwiththe person
between them in the centre.. It reflects the chain of command prin-
clple. -
3. Ci rcle network
Each person can only communicate with two other above and below
him, It reflects highly decentralizedpattern. It encourages grapevine.
4. 'AII-dla nnel network
People are h h ~ t o communicate frecly with one another. Free flow
(If communication contributes to the solution of problems. It also
encourages creativity and innovationto solutions. It is decentralized.
u, Cobcslveness
It is the attraction of members to the group . The attraction depends
upon the qualityof the product it delIvers. The existence and survival
of the group lies on the nature and extent of cohesiveness. It is a
govemtng factor of the unification of the individuals of the group .
14 4
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DIAGRAM OF TIl E CONCEPT OF TilE GROUP
Needs of Group
Basic Safet y Self Self
esteem llctualizatin
Fonnation
Mutual Decision
aceept.ance Making Motivation Control
of Group
Sbble role I . Communi cation Subgroups
Interaction Shared Sl.1llus 2.Cohesinn
"'"
Goo"
relat ionsh ip 1.Task networks
4.Maintenance
Standard of Effecti vene;s
Group size Dependence Personal Success Status Matenal
on group of Group of GrOltp
'""""""

Putentill l Results
Membership Satisfaction Accomplishment of Objectives
14 5
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Group Control
All groups work under some controls which are as follows:
I. Group pressure
2. Group enforcement
3. Personal values
1. Group Pressure
Group pressure is oneofthe strongest motivatorsby which people
are compelled to adopt a particular behavior. You are inclined to
adopt that behavior, way of life, or deed which is socially
approved, and avoid those socially disapproved. People cannot
resist group pressure and tend to submit to it.
2. Group Enforcement
Under this type of group control, nonconformist is not tolerated
on the plea that he is violating discipline and generally accepted
group norms. To fix the nonconformist up two types of actions
may be taken.
(I) Soft action such as rebuke, reprimand, or explusion form
the group.
(II) Rigid actions which may lead to sabotage the performance
of the nonconformist or turncoat.
Group enforcement in the mind of individuals is also the
result of merely imagined and unreal fear.
3. Personal Values
People tend to follow the norms and principles established by the
society. GrOtH') pressures and enforcements overcome personal
principles and values. Individuals usually findthemselves morally
and ethically bound to agree to and follow the opinions and
objectivesset by the group. They have to harmonize their behavior
to that of the group.
146
Characteristi cs of a successful group
Douglas Mcgregor has suggested the following characteris tics
of a successful and creati ve group .
Successful groups tend to be infor mal and comfortabl e.
2 Probl ems are solved by the parti cipat ion of all indi viduals .
3 Ohj eclives are formulated unanimous ly. Gr oup members
understand and accept their duties, tasks , and goals .
4 Th ings are not imposed upon. Everybody has a -say- in the
discussion: Everyone likes to listen and to be listened to,
Op inions of all indi viduals ar e given proper and due import-
ance.
5 Successful groups do have disagreements. They are oot sup--
pressed. Disagreement s ar e carefull y analyzed in orde r to
resolve them.
6 Due 10 everyone's participation, most decisions tend to be
unani mous. Formal voti ng is rare.
7 There is cr iticism. But it is tolerable, ge nuine, and cand id. It
is not bi ased . Personal attacks and reservations are avo ided.
8 Members have leave (II express t l l ~ r feet II,gS, oei nions, and
ideas.
)
igl
' k:
..,
;Jl1, ,"
-1)'
10 '[b e chairman of the grour lines -_thr r upon or dictate.
. Chairmanship may shi f frum one ;,crSOll to another,
11 The group is well aware of its per formance.
147
COMMITIEES
People against committee observe that:
J. A camel is a horse put together by a committee.
2. A best committee is a five-member committee with four
members absent.
3. In a committee, minutes are taken and hours are wasted .
Those who favor commluee observe:
I . It facilitates reflection and judgment.
2. It provides an opportunity to Interested groups to make their
representation. .
3. A committee is a useful device 10 coordinate.
4. It may be used to exchange views, information, an experi-
ences.
5. Motivation is Iaclt hated.
Definition
A committee Is an association of persons 10 whom some matter
isjoinlly committed. Acommiuee may havethe following forms:
task group. commissions, board, congress, conference,
cabinet , assembly, team, etc.
Classes
A committee may have the following kinds:
I. Managerial committee
It is a group of managers who collectively perform managerial
function. as planning, organizing, leading , controlling.
2. Decision eommiuee
It has the authority to collect, classify, and deliberate data and
mate decisions.
J . Recommendation committee
After nursing over the situation it can only forward irs rec-
ommendations . It has no authority to make decisions. Its
example is advisory committee, pay committee.
4. Striff commiuer
Like advisory committee it can only recommemd.
5. Line committee
It is composed of managers enjoying line authority. It '
makes decisions, and may accept or reject suggestion form
the staff.
6. Formal committee
When it is a part of organization structure 31x1 has been del -
egated authority and responslbiliry, it is referred to as formal
committee. A board of direct ors is a formal and permanent
committee.
7. Infonnal committee
It is not a part of organization struct ure. II is a group of
specialists to whom a particular problem is committed. Its
life is limited.
8. Permanent eommluee
It is a permanent part oftheorganization, as boardof dlrecrors.
-I It is alsoknownas a standingcommirree. It is usuallya furmul
committee.
149
'. Temporary committee
It comes into being to ponder over a certain prohlem or
problems and stands disbanded afterward, as pay committee
appointed by the government foren time to time.
1 50
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3
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6
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Examination Questions
Define groups. Explain their characteristics?
2 Why and how do groups form?
3 How would you rank groups? How do they succeed?
4 What is the importance of communication in making the
group succeed?
5 What is a committee? What are its classes?
6 What is a group control? What are its forms?
7 Identify four types of groups. Which type of group do you
belong 10?
8 What are the factors that lead to form groups?
151

CHAPTER 9
HUMAN RESOURSES
. (PERSONNEL MANAGEMET)

,
,
DEFINITION

,
I

STAFFING ACTIVITIES/STEPS
,
,

I. Dtermination of Needs
,

2. Selection and Recruiting

3. Orientation and Training
..
4. Appraisal of Performance or
,
Personnel Audit, MBO

5:Compensation
I
6. Promotion
,
7. Separation ' .
..
,
Resignation
.,.
Layoff
Retirement
Retrenchment
,
Termination
,
,.
Death
,.,
I ,
. API'ROACIIES TO EVALUATE
, .,.
JOBS
Jobs Description
Job Specification
Inventory Chart
Ranking Method
Job Factor Method
Time - Span of Discretion Method
Comparison Method
152
I

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FAVORITE CIiARACTt:RISTICS
OF TIlE CANDIDATE
NEGATIVE CIIARACTERISTICS
OF TilE CANDIDATE
TRAINING AND DEVELOPMID.7
Methods, Approaches to
Managerial Training
EXAMINATION QUESTIONS
153
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....:: ..(',. ,. ",. ' " ,"", I
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i_" '. '-/l{f,-' " I'
I - ; ,.
i - -' -. - I
>j
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\. - - J
' '':'.:
,. ,
..
,.... .:
s
DEFI NITION
"Otass A managers hire class A people. Class B managers
hire Class C peopl e, so they won', be threatened", says a
management expert :
Sl alfing start s with hiring and ends up with firing. Hiring
invol ves deter minIng needs and inviting applicati ons from
prospective candidates. Alt er hi ring selection Is made and
t hen the selected candidate Is placed on the job, But t he
staffing activity will not end here. It will ccnueue throughol.: l
his career in the company in the form o( promotion. tran ster,
restructuring sal ary l evels, develop ment. meeting grievances,
and separato n. Separation means reuremera. lay-oil . dismissal.
or resignation.
STAFFING ACTIVITIES
The details 01 staffing achvities are as follows:
1. Determination of needs
2. Select ion and recruitment
3. Orientation and training
-
4. Performance appraisal
5. Compensation
6. Prcmonon
7. Separation ....
154
1. Determination of Needs
Ettective management urst determines need lor personnel
before It makes decision 10 hire. There is a tendency Ihat
management value some positions more than others. The
management should avoid such a discrimination.
In the following are some approaches to evaluate jobs:
a. The comparison method: It is based on guesswork.
,
In this method comparison is made between what the com a y
is..!ying for a poSt I n and what the
l or the same posillons.
b. The job/actor method: Thi s rnetnod is in itself
objective but subject 10 the SUbjec tive judgement 01 the
evaluator. It del ermines the dilticulty in t he evaluation 01each
job. This method is applied only in non-managerial jobs. and
takes i nto accounl overtime.
money (extra payment for odd
--
c. Time-spen of discretion method: II. according
to Elliott. Jagues, sugges'ts thai the job will be more lrnponant
if it takes longer tor a
-
d. Ranking method: All Jobs are ranked in ascendino.....
,-
order 01 importance of Job. Importance 01 job is based on
J(Oowledg9. skillL, scop e and impact;-re!at"ionshl Ps. and
s!JperviSjOn of others.
6. Inventory chart method: It is a concrete wri tt en
evaluation 01 the promolabilily of the StaiTlOlhe near lulure
.-- --- or at present._
t. Organizational chart method: Jt is the
skeleton l hal determines authority relati onships. levels 01
..,----- - --- -- ,
155
organizalton, of aJ,.1borily. and span of management.
IfSdarkaspect is the resultant inflexibility 01the organiza tion
and t he complex 01 superiority of the upper-le....el staff .
g. Job specfnc8tlon method: It stresses the candidate's
education, ab" and olher .. - u . .
'lualificaHonS..:-dut fes and
-r-"
In determining needs, it is also necessary to tix the number
of managers and the dates when they will be needed. By
reviewi ng the current posi tion of the available manpower with
the organiZational chart, management Is in a position to decide
to reorgani ze or create new posilions.
2. Selection and Recruitment
OnceJheneed has been detennined, starts.B.ecwiljrp_
ref ers 10 iO'{jUng applications from prospective cand idates.
-
Acco rding 10 Fulmer, selection precedes recruitment
because If selection methods are net preset, the recruiting
process will fail .
Once the appl ications have bee n received, they will be
". " " . ' .---
accordi ng to the company's job
and specification. Then lhe candidales will be interviewed,
tested. medicall y checked li p, and fi nally se leC1ed.
3. Orlentallon and Training
Orientatlcn is a period__ Many cmenteeucns
and formal session, Interviews, and sPeeciles.
'Gi oup --oonrerences, leCt 'ures, and movies are ' also used. 10--
' o rie'rii il'tKlil-for'lowing- subjed s are--covered> '". -- . '
'- . ._-- ..._.-- ,
1. histo ry and its major operations.
2. Company poucles. rul es, and regul ations.
156
3. Relations with immediate boss and sUbOfdinal et>.
4. Rules and regulahons about:
"'Wages and method .ot pay.o:.,nt.
b. , ) ".J0rking hours and evertfmc.
c. Safety; health, accidents ,..
d. Holidays, hiiwes:'
if.---Reports about absenteel sffi anci tardiness.
I: '- DIsCipline and . -
g.
' h. Parking1acility.
5. Economic and recreal ional services.
..
a. Insurance .ptans
. Pension pl ans .
. __Garnes and soci al programs
6. Opportunllies:
Promoti on, transfer
..._. . - ' -- --. ,"" -..
Job security.
c. Suggestion syst em
a. -Rights' and powers
Details 01trai ning are given in the loll owing pages in this
chapter .
4. Appraisal of Perf orman
r
9
It ret ers to measuring the performance 01managers. Managerial
apprai sal is required lor the followi ng reasons:
a. To allocate resources.
b. To reward employees.
c. To provide feedback lor emplOyees.
d. To create cooperative atmosphere.
e. To lacili tate communication.
157
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Modern philosophy 01 appraisal has three viewpoints:
1. Performance orientation: To make workers realize their
faults.
v
2. Goal orlerxation: To make workers keep on the way :[,
;:
to oojecnvss.
3. or mutual goal setting: To commit the worker to
the goals and make them feel personally responsible.
Management by objective or MBO
By Mao we grade employees by the objectives they actually
accomplish rather than by seeing whether they are honest,
loyal and true.
MBO is based on the following principles:
1. Managers shouldbe appraised by what they accomplish
rather than how they spend their time.
2. Managers should know what their objectives are.
3. ctnd subordinates should have a say in selling
their own objectives.
5. Compensation
Compensation is the reward for the services one has perlormlt,d.
People should be paid according to their perlormance. Wages
are most important motivating factor. Wage 'incentive is7
way to release the potential ofaworker. Wage alterations
can be used to increase productivity. Compensation includes
wages, salariAs, bonuses, overtime p:lymenls,
incremel'IS-,-8'1f.1 other fringe benefits and liorli:S. Differ It
may be use'! in making cv",pensalion,
straight salary, shift premium, piece-rate payment, time wages,
-,
pay.!!!!illl, commission payment. Wages include all
payments made to workers for the service they render for
others. Wages are the rewardpaid to workers for their productive
work.
158

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Compensation may also use such terminology as 'tlU,
interest, commission, bribery, tuition. ransom, blackmail , tare.
toll , tax, dues, honorarium, rent, kickback, commission. and
discount.
6. Promotion
f}Omol;onis upward Iransl er bringing higher sial us and salary.
It has great int angible impacts which are social, psychological ,
and personal. II Is one of the methods 01 Iill ing an opening--:
l'il such a case it is referred 10 as promolion trom within.
Employees are promoted 10 the htgher vacant position mstead
of hiring Irom outside. But this method prevents a
10 have new technology. methods, andfresh bloOd. 8ul on
theother handJLIalses the morale 01 company employees.
. - .
7. Separ ation
Staffi ng cyc6e COrfllk)les ils revojuno n at separation. Separation
ffiCludes -
and death which are discussed bek>w. Termination involves
penSKm, gratuily aod provident lund. .... . - :
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Japanese managerial system has "fe-k>ng employment
system, Employees reti re on their discretio n rather than at
the will 01 the employer or at the superannuation age. The
l ollowing are the forms of separati on.
Resignation
Employees may leave the company 9n their own disCrel ion,
SUCh a voluntary le,fiingi"Siilerred to as resignation. Employees
may resign tor better future prospects. joIning some omer
company, or dillerence with the management ot the company.
Lay 011
IUs that separation which is the rlWlb 01 economic and
tj,ctQcs . Du..!!!.lO depreSSion or seasonal t1\JctualioRS
are l emporadlyJillilQ.Q, This lay oft may last from someweeks
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10 morans or even years. Lay aU is very common among
seasonal food orocess'nc companies. After slack season Is
over, laid off workers are re-employed.
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Reti rement ':l
It is compul sory separation of the empklyee at his t t i ~ n g . {
certain level 01 age. In Pakistan retirement age l or men is 90' "
aAd-..fef W OI'AYR sa. 11 entails pension, gratuity. and provident .
~ In Japan there Is no compulsory retirement. .-..... _- I
Retrenchment
I,!..ts !Jrlairing 1he number of employees in a company. It is -
the result 01 overempk)ymenl or POOf_bu" ineslLQQodi tiorJs.
I'lea'UCfnQIile excessive number of employees can only be
done under government' s prescribed laws.
Termination
Termination is dismissal, flrl , or di scharge ol tha empoyee
t1: ythe company usuaUy on disciplinary grow !I.1tl5 nvo ary- -
permanent separation from the organization for any reason.
The employee so fired is entitl ed to severance pay.
Death
It ils .mother reason tor separascn. ccmponjes endeavor 10
pm', Je hospi1alizatk1n and medical benents, and maintain
proper workir m{1iUcns 10 ensure the health and protecti on
or lives of it: otoyees.
APPRGACHES TO EVALUATE JOBS
For the evaluation or the nature 01the job following methods
may be used.
1. Job doscript ion/Job analysis
2. Job specification
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3. Inventory chan method
4. Ranking method
5. Job-Iactor method
6. Time-span 01discretion methOd
.r 7_ Organization chart method
.-.j 8 . Comparison method

./ob Descriptl on
It is a written descriplion of the ;abto be done in a 'particular
i post. II involves survey 01 all details of each pcsttfcn i n the
company. It includes the locauo n 01 the [en, ils duties and
responsi bili ti es, t he work environme nt , the salary and
auowances. the promotion pcssibrnues. and the training_
Advantages
The advantages of the job description are as l ollows:
1. The new employee knows exactly who 10 do on the
job.
2. It sets standard 01 performance:
3. It acts as a legal document bOth tor the employer and
the employee l or fut ure reference.
4. II prot ects an employee hom performing unauthorized
or excessive ;ab.
Job Specification
II Is me sumrrary of the Job description. It scecmes the fob
regarding its duties, responsibilities. pay, promoti on. authorit y.
and candidate's qualif ications and qualiti es. Job descriplion
describes Ihe nature ol l he job. while Job specincation specifies
what type of man is needed.
Inventory Chart
II is Ihe chart that shows the foll owing del ails:
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1. The persons promotable immediately.
2. The persons promotable in one year.
3. The persons potential for further promotion.
4. The person with satisfactory performance, but not
promotable.
5. The persons to be terminated.
Inventory charts serve as a ready referencefor the manager
about the employee's future prospects.
Ranking Method
The jobs are placed in ranking order by the management. ,
The ranking method takes into account knowledge, skill, '
cooperation, performance, and other factors. It is concise and ,':
objective method. :1
Job Factor Method !
Although it is objective method in itself but depends upon 'i'
subjective judgment of the evaluator. This method takes into
account difficulties inherent to the job. For this dittlculty extra
pay such as overtime, combat pay, and dirty money (money
for doing odd 'H dirty jobs) is given.
Time Span of Discretion Method
This type of job evaluation method was developed by Elliot
Jagues. He asserts that the time span involved in the evaluation
of the performance determines the importance of the job. If
it takes more time to determine the efficiency, the job will be
more important than the other.
Organization Chart
It exhibits the relationship among the departments and
individuals along the lines of authority. Jt clearly indicates
various management levels and non-management cadre of
employees. Its limitations and dysfunctions include rigidity,
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overlooking inl ormal rel ationships. overccnsciousness about
the position held by the employee, and contusion about authority
relationship.
Comparison Method
The company' s pay structure is compared with that of the
industry to determine the current market-rate for every pcsmc n.
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FAVORITE CHARACTERISTICS
OF THE CANDIDATE
6. Inlegri1y :
Stature, health, grooming, dr ess, neatness
re asoni ng skill, sma rtn ess. keenness,
maturfty.
Poise, se u-conndence , execunve -nke
etteuce. capacity for leadershi p, courtosy,
tact , diplomacy.
Enthusiasm, Initi ative, drive, ambit ion.
Soci ability, adaptability, abil ity 10 get along
wit h others.
Honest y in working hours, using company
resources, avoiding wa stages;
dependabil ity.
7. Experience: Accompli shments , skllts , abil ity to
communicate _
8. Organizat ion ; Ability 10 thi nk logically and get to point
quickly.
Clarity, grammar, syntax. diction.
Accentu ation .
Maturity, adaptabi lity, good judgment , abilily
10 make oectsicn. and resourcefulness.
expression:
10. Mental :
9. Voice and
4. Interest :
5. ., Sensitivity :
3. Manner :
1. Appearance:
2. InlelJigence:
The employer looks for the lollowing characteristics of
_ I he candidate.
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NEGATIVE QUALITIES OF THE CANDIDATE
The foll owing are the qualiti es thai tho employer does ret
wan! in the candidate to be selected.
1. Poor physical appearance
2. Lack 01 interest . enthusiasm, and ambition.
3. Overaggressive and overhearing
4. lack of set objectives lor Iile.
5. Lack of conlldence.
6. Money-conscious.
7. Inability to qet to pomt .
8. Inabilit y 10 contact the eye wi th thai al the intervi ewer ,
9. Weak handshake
10. Inabil ity 10 make decisions
11. Lat e arrival l or the int erview
12. Lack of t act. maturity, adaptabuny, court esy and integrit y.
TRAINING AND DEVELOPMENT
Although training and development are inter changeable terms.
they have diNerent meanings. Both the terms are discussed
below.
Managerial Training
Manageri al trai ning reters to the progr am devi sed by top
management to facilitate learning progress. II includes for mal
schooling or on Ihe job training. It may be gi ven to Indivi dual s
or groups wit hin or outsi de the company.
Management Devel opment
" is tne progress a manager makes in learning how tc manage.
II is 1he resul t of l ime and experience of the manager. A
trained manager may not have experience but a developed
manaaer is t he experienced person. A trained manager has
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been taught but ma y not have learned. A developed manager
is the learned person.
METHODS OR APPROACHES TO
MANAGERIAL TRAINING
Managers may be train ed by the rallowing methods:
1. Planned Pro gr ession
This type 01 traini ng is not only a series of promotion l or a
manager bul also exhibits a furcnenat crqamzaucnat sirucmr e.
Alter having worked on a posiuon, the manager becomes
trained for lhe next higher posi tion. A sales repres entative
may be promoted gradually fa sales supervisor . sales executive,
sales manager , and general manager.
2. Job Rotation
By this method diversified training is given 10 Ihe manag er.
Here a manager is transferred 10 var ious and di versilied
positions. The rctat tcn may be i n superv isory or nonsupe rvisory
positions or in observati on assignments.
3. Creation of Assistant -to' Posi tions
Every managerial positi on may have assistants, deputies, or
vice. Assistant menaaer . deputy manager, and vice president
are the example. Here the superior also acts as a teacher.
4. Psychological Training
Under this method two ,j ;fl erent techniques are used.
(/) Role Playing
Trainee managers are given certai n rctes 10 play to hefp them
understand business problems. The observers and nalners
minutely notice and evaluate the performance and reactions
of the trainees 10 the prob lem.
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(ii) Unstructured Discussion
It is useful in leadership and sensitivity training. Trainees are
invit ed to part ici pate in the open di scussion which is nol with
a particular topic or topics. It facilit ates self-knowledge and
insight into i nterpersonal relationships.
5. Temporary Promotions
Managers are temporarily promoted to a higher pl ace to gain
knowledge and experience 01 the job. It is onl y possibl e when
there is a vacancy or Ihe head 01 the department has gone
on leave. When he returns Ihe subordinate is senl back to his
position. Thi s type 01 .raining tacmtates to rill a vacant job
immedi ately by the per son so trained.
6. Conference Programs
These programs are held lor group Iraining which is economical
and inlormalive. Peopl e exchange ideas. tntc rmatton.
knowl edge. and experience.
7. Committees and Boards
Boards or committees are set up 10 exchange inlormalion
and ideas and 10 consider various protsems facing the company.
Deci sion are made and referred 10 the tncbarqe, who after
evaluation may rej ect. accept. wi thhol d. or send them back 10
t he committ ee tor .reconskferatton. The board or committ ee is
composed of a group 01 experienced and able mlddle-level
managers.
8. University Management Program
In the uni versit y special courses on management are taught .
The university imparts DBA or MBA deQree or may issue
dipl oma or certi ficate In business administrat ion. Courses in
business administrati on have gained word-sloe acceptance.
The purpose of this program is to prepare skilled managers
for industries and businesses.
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'I. Follow-up Training
I he touow-uo (raining is essential to keep the manager abreast
III the changes and recent developments. The foll owing are
nome types of fol low-up training.
(I) Coaching
Coaching is given to a subordinate who is promoted to a
manageri al pcsnton. This type of training is touowed by formal
and informal trailling. 11 is a tece.tc-tace counselling Person..1
qualities of the supe rior and the subordinate playa vnat role
in the succe ss 01coaching progr am which must be designed
acco rding to indi vidual needs, envtrcnment . and type 01 the
lob.
(If) Refresher Courses
The scope of retresbeecourses varies from acvanceo lr aining
10 group problem solving. Advanced training as a form 01
refresher course is tong term, whil e group problem solving
sbc rt-term. These cour ses brush up manager's knowledge ,
and acquai nt him with new changes and developments in the
industry and environment.
(III) The Vertical Slice
It is a group comprising rnanaj ers in the venjcal chai n 01
command (all managerial level s) appointed 10 sol ve the
problems ac versufy attectinq operatlnq etnctencya. autevets
II provides managers at aUlevels to see deEply into the probrem.
Problems undertaken by the vertical slice may include l ack 01
cooperation, poor communication, cetecuve centralization or
decentralization, and many more.
167
' Exami nall on Question
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1. Def ine human resources. brie'.ly sl al!i ng
2. What is separation? What are its vanous for ms? .
3. Explain serection and recruiting 01personnel. ,
4. As manager, how would YOu appraise the performance 01
your subordinates?
5. What is job evaluation? What approaches would you adop
in evaluating jobs? _
6. What are the favorite and negali ve cnaracrenst tcs of
candidate? )
7. Compare traini ng and development. Explai n methods Of}
managerial training. I
8. Discuss the following: -
I) Job description _
Ii) Orientation I'
iii) Appralsal of performance .
iv} Inventory chart
v) Organi zation chart memoo .
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CHAPTER 10
CONTROLLING
DEFINITION
BASIC CONTROL PROCESS
v Establishing standards
!.- Measuring Performance
1../ Correcting Deviations
PHASES or CONTROL
Precontrol Phase
Concurrent Comrnl Phase
Post Control Phase
Cor rection Phase
TYPES OF CO:\'TROL
Production Control
Inventory Control
Quality Control
Financial Control
_MANAGEMENT CONTROL
Definition
Direct Control
Direct Control Through Key-areas
Direct Control Through Management Audit
16 ')
Def inition of Managt'fflt'nf Audit
Nt'eJ
Purpose
Indirect Control
Orgoniuulonal Coni#itlolling
ManogeriQl Molding
CHARACTERISTICS OF GOOD
CONTROL SYSTEM
. nUDGETS
Definition
Types of Budgets
Revenue and Expenditure Budgets
Capira! Budgets
Cash Budgets
Time. Space, Material and Product Budgets
Balance Shed Budgets
Master Budgets
Zero-base Budgeting (ZUB)
Milestone Budgeting
11 NON BUDGETARY CONTROL
DEVICr,s
EXAMINATION QUESTIONS
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DEFINITI ON
Cont rolling is the last function of the manager . first being
'planning. The control measures actual performance against
ana to'iccomr
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plans : Controlling includes establishing standard, measuri ng
and correct ing devlati nns. ". "
II acts as 31 yardsl ick againsl which actual performance b
mea...uted. Through controls weaknesses, deviations are set ri ght .
CONTROLLING PROCESS
,.
r The basis control process has three steps:
1. Estab lishing standards
2. Measuring performance
3. Correcting dev iations )
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I. Est ablishing Sta ndards
Standards are yardst icks against which actual results are measured
aJ 'iirifflciei1.cY'ls 'deh:rmined. Standards are plans which iCil'W
we-should ,. .., . .. . , .. '.. - - .
Stand ards may be physi cal, financial , qualitative, quant itat-
ive, or are usually staled in specific teiiru;,
but they may the degree
goodwill , market image, and public opinion and attitu de. '
2. Measuring Permrmance
established to actual performance. By
measuring actual performance againMstandards we come 10
know where we are as against we were supposed 10 he.
If the standards are objective, measurement is obj ective. If
the standards are subjective, measurement is also subj ective. .!!..
the standards are appropriately dra wn, appraisal is fairly easy.
3. Cor r ect ion of Dev iation
The negative difference between where we should have been and
where we actually are is controlled . D eviation is correc ted.
Controls should faci litate corrective actions.
The manager may be compelled to correct actions by
redrawing his plan. s or by modyfing his goals . If controls' are
forward loo king they may indicat e weak areas in ti me stopping
further damage. '
TIlE PHASES OF COSTROL
( In the followi ng are given the phases of control:
, J. Precontrcl phase
2. Concurrent control phase
3. Post-control phase
4. Cor rect ion of deviation phase1
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I. Precontrol phase
It is a preventive phase. It keeps the problem from hap[tCuilll:
PreCQillroJI.i rif iav.es and It is-far better to take
timi:1y' action befo re the actual
fantarnouli l io prevention is bet ter than the cure ,
2. Concurrent control phase
It is lhe phase when problem has not appeareJ and theactlvlty
is cOntinuing . It is malnteuance phase that is usual and routi ne.
By'maint enanceproblem is prevented.
3. Post-control phase
It is the poores t approach hut most common. [l ere the problem
has occurred. It is costly and wasteful to renovate, repair , or
rebUild. There' ar e situat ions where no lither approach can be
used than posr-comrol approa ch. Accounting and auditing are
post ccntrcl devlces. .
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4. Correction 0/ deviation Phase
Once the problem has appeared and the damage has tak en
place. devi at ion must be corrected to avo id further damage.
Early corrective action will cause less damage and earlier
of goal s. A stitch in ti me saves mine is a
maxim that holds tr ue her e.
. follow ing factors should be considered in any control
Situation.
I. Controls should have a bearing on the situation or Ihe per-
son involved .
2. :"h?uld have logical processes and be objec-
uve.
3. Co ntrol should treat the cause or die problem.
173

4. It should be determined whether the problem lies in th.

-management system or in the unavoidable condi tion; h ___
TYPES OF CONTROL
The following are the types of control.
I. Production Contro l
2. Inventory Co ntrol
3. Qual ity Control
4. Financial Cont rol
S. Management Control
1. Production Cont rol f t ,

For a manufacturing co ncern product ion is memain an.... prime ':;
Iunctton. Much amount of capi tal is invested in it. Then:fuie, it I '
is necessary that excessive Or short production should be avoideJ: 'I'
To achi eve optimum level the following functi ons should \ '
followed in sequence:
(i) Planning
Production planning Involves receiving order from a customer,
br eaking down into its component paris such raw mate rial,
work-in-process, and finished part . Fhen it is decided what part s
to be purchased and what to be fabr icated. .v ...
(ii) Routing ,:;.' /.! 1.(...,,1.//,: i:
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.It deter mines theopcration.(O be performed. II sets sequence
of p roduction. It also determines the flow of materials
through a series of operation. Routing involves the-prep--
aratlon of route sheets, route charts, "ar-d mule fil es to
facilitate s mooth operation in a sequence.
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(iii) Loading . ;
It assigns the work to a machine, J ellartm.ent or
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(iv) Scheduling
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It detennines time-table through. whi ch each operation will take
place. A master _schedule"is"prepared showTng'--the' number of
products to be ready each week 'or month. Schedule for purchases
requisitions are also made.
(v) Estimating .
in advance the eX(l Ccted cost of a job or product.
6i) Dispalc1zing Z -: ,
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)l) SIhe actual ordering of work. to be performed leading to the
f.elease of the work order and to starr productlcn.
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(Vii) Expediting .... p . I i';!. ; ; , ' ! .'
J lt is a follow-up set up. Hensures thai the plans are actually being
executed . Etoborate controls mayalso be set up. Sciuxluloo
performance reports are made by the production control
department.
z. Invent ory Control
Inventor y may be composed of three types of mat erial s:
I. Raw materials
2. Works in progress
3. finished products
The purpose of inventory control is to trim the excessi ve an'"
to make up the shortage of inventory. Good invent ory (.0 01((11is
responsi ble for:
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I. Optimum level of inventory.
" 2. Economics size of each order for material to be purchased.
,3'. A proper record system informing the present level of
inventory.
Inventory expenditure. It requires special
atteiilloO:-scdhat excessive' or short stock of materials and mer-
chandise can be avoided or controlled,
Disadvantages or Hazards of Excessive Inventory
1.. Capital is unnecessarily blocked with no return on it.
2. Company will lose if the prices of the purchased stock fall.
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/3. Should the fashion change, the excessive stock will go out
of date and will have to be sold at slashed price or at a
loss.
4. In the case of new inventions, new substitutes or competl-
1/ tion, the company with the excessive stock wil-l suffer the
most.
",/5. Carrying and malntalnance charges increase the cost of
business. Cost of storing materials include insurance, risk,
rent, hand ing, recording, and interest expenses.
Hazards Invotved in Short Inventory.
/ 1 The demand of custnme-s cannot be fulfilled.
2 If the prices rise the company will lose and will be com-
pelled to repeat purchase at a higher rate.
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Continued shortage compels customers to abandon business
dealings with the firm.
4 Unexpected large orders cannot be mel.
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cou nts and other economies.
Factors of Optimum Inventory
1. The volume of safety stocks to be determined to avoid
shortages lhat interrupt production.
2. Consideration ofeconomy in purchase.
3. Expected price changes in futur e.
.4; The expected volume of production and sale.
j .... -The operating cost of carrying invenlory.
6. The cost and availability of capital .
3. Quality Control
Quality control ensures the uniformity and standard of qua lity.
Specific tests are"m:K1e"IO-d"etermine whether the product is
correct size (variationnot greater/smaJler than 1/1000of an inch),
or is strong, hard , or durable according to requirement. Stat istical
methods theoryare used. Samplesare r;:;quc'niiy
takento determine tilequality.. Substandardproducts are-rejected.
4. Flnancla! Control
Its purpose is to ens ure the safety of capi tal. f inancial controls
include budgets. accou nting statements ,
even analysis and return on investment. Details of these type
control are jl;iven in the buds:et section in this
control is a part of financial management that det er mines sourct'""
and looks to usesof funds .
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Management Control
Like other things are controlled and. managerial
activities such as decisioo"makhlg, p'iii'ns"a"nd imttingthem into
effect. This tYP'l,'lQf control ensures the.quality of In
terms of preparation of efficient and accompllshable plans, their
execution, and maximum output with a minimum input.
. (I) Direct control
(ii) Indirect Control
Direct Control
Direct control implies to develop better managers who will
skillfully apply principles and thus eJiminate undesirahle results
caused by poor management.
It involves the fixation of the responsibility on individual
managers for inefficiency, negative deviations, and poor per-
formance. It ensures whether managers act in accordance with
the preset standards, plans, and principles and head their team
toward the accomplishment of goals. '
Direct Control Principle is Based on Four Assump-
tions:
(I) Qualified and proficient managers do not make many
mistakes. .
v-(2). The performance of managers is measurable.
. (3) Management principles can be applied in measuring the
performance of managers.
/(4) Application of management principles can be analyzed.
Direct Control Through Key-Areas
Ruality of management be determined and evaluatedby..,
,Iookin'g up the key-areas of the company. These are' as follows:
178
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/ I. Market image of the company.
2. Company' s productivity and overatl performance .
3. Fi xed and current assets of the fi rm.

Financi al resources.
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5. :5 . Product innovation and development.
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6. Human resources and organizat ion.
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7. Profit posit ion.
S. The extent to which social j esponsl billt y is met.
Direct Control Through Management Audit
Aud it is de fined as the systemat ic examination and ver ification
'o r necessaryrecords and acti vities, The periodi cal fina ncial audi t
by an impartial , outside auditor has become imperative and
"",glial in limited cootpanics. audh invol ves
evaluation of the non nnancial atr<1irs of, . and the
'systematic examination and ve rification of necessary records and
actlvltles."

In management audit it has to be decided as to what and how
managerial characteristics to measure:'SOme'management experts
suggest 'that management aud it should also take into account,
morale , integrity. creativity, social values, and human empathy
Ofinanagement. ---- , .-- "... - , .... , .
Dru cker, a management sci entist, suggests the following in
management audit:
1. The manager' s performance in using capital.
2. Development and placement of subordinates.
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3. Innovation demonstration .
4. Planning ahility.
Self-Management Audit
In 1930' s. James Mckinsey suggested management self audit and
appraisal system. His aim was to di scover and correct erro rs of
management . Such selt-appralsals have now become recently
quite common. General and specialized journals and magazines
oc casionally issue selentlflcally designed weighted and simple
questionnaires to evaluate self. Self appraisal should include
company - policies. structure. personnel practice,
managerial practice, contro l style, physical assets, and human
rel ation str ategy and philosophy. A self-audit is useful if con-
ducted regul ar ly and without any bias.
Th e Amer ican Management Inst itute has bun co nducti ng
management audit. Its audit covers the follo wing ten areas :
J. Economic Functions .
2. Corpo rate Structure
3. Earning Growth
4. Fairness to Stockholders
5.
Research and Development
6, Compositi on of Board of Di rections
1. Fiscal Poli cies
8. Production Quality
9. c ates
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Executive Evaluation
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Problems in Selr Audit
There ate problems in self-audit:
I. People a. e reluctant to appraise themselves-s-even though
they will benef it in the long run by gaining more excellence.
Due to this reluctanc e there is a need for management audi t
by independent, outside expert .
2. There ls a problem of quantifying talent and eval uating
intangibl es.
Need for Management Audit
During: the past three decades wor ld economy has declined
consklerably. Alongwithother reasons poor, qualitymanagement
can be attr ibuted to this decline. This inefficiency has calletJ fur
effect ive management control whic h thw ugh management ilm.lit
ensures the qoal uyuf managers aed the qualit y II f total mOlnagi ng
system of a fi nn.
Purposes
Management audit is profitably used for the followi ng pur-
poses:
II ensures to ut ilize human, physical , and financial resources
ofthe firm most productively in order to maximumoutput
with a minimum input.
2 Management audit acts as an effe ctive mOl iv,;ttors.1t moli villcs
manage rs 10increase their effi ciency and skill. Managers keep
developing themselves, and abreast of the modern changes in
different environments.
3 Management audit includes verlflcationof managers functions
of planning, organizi ng, Mailing, di rect ing, coordi-
natlng, and controlling.
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INDIRECT MANAGEMENT CONTROL
Like direct control it motivatesthe manager to modlfyhls
action to achieve It Involves tracing the causg_9f
an unsatisfactory result hack to the person responsible for it,
and get him to correct his behavior and improve his J edsio'n
making quality,
Quantitative controls like sales, expenditure, cost can eas-
i1y bedeveloped, applied, and rechecked. But qualitative con-
trois like morale. ambition, producti vity, and loyalty cannofbe
easily developed and used. For this purpose two types of
indirect controls are applied:
,
1. Organizational Condit ioning
It is the process of uniting the whole team that stands for the
accomplishment of crganizatiou's goals and methodology.
2. Managerial Molding
It refers to developing and shaping managers creati ve and initi-
ative skills and qualities. Managerial molding is
socialization of managers.
CHARACTERISTICS OF A GOOD CONTROL SYS-
TEM
The following characteristics arc necessary for an effective
control system:
1. Controls must reflect the nature and needs ofthe activily
All controls should reflect the job. to be done. There will be
different controls for different activities. Cont rols of the sales
department will differ from those of purchase depar tment.
182
2
1
t
2. Controls should report deviations promptly
Late reporting will increase damage and cost. The ideal con-
troIs detect possi ble devi ations In good times. ACC<lunting is at
a Ion that does not furnish early control information.
,
" J. Controls should he f orward looking
r:
Controls should be able to forecast devia tions so that such
devia tions may be sto pped well in time. Some of the electronic
co ntrols are forward looking. In addition , budgets, break even
analyses , special repo rts, and personal observations can be cited
as forward looking controls .
4. Controls should point up exceptions a1 critical points
Controls should not only poi nt up deviat ions but should pinpoint
them where they are important or cr itical. Deviations may be
important or unimpor tant . Important deviations shoul d be dis-
d osed quickly.
. 5. Controls should he objective
Objective controls measure performance correctly and
honestly. They are definite anddeeermtnable. They prov ide an
exact yardst ick aga inst which deviation from standard can eas-
By he detected. Out setting objective controls for managel"i a.l
appra isal and manag ement audit is not that easy job.
6. Coturals should be flesible
Things are always changing; new technology and methods ace
coming up. and so controls should be adopt ed accordi ngly .
Controls must al so remai n workabl e in the changed cir cum-
stances. The dement of tlexihility in control can provided by
hl1ving alternative plans fur different situations and environment" .
183
7. Con/rols should reflect the organization pattern
Organization is in itself a means for maintai ning cootrol . The
manager isthe focal polntofcont rcl . To accomplish thls objecnve
control data must be specifi c about amounts and sources of
diffi cult ies.
8. Controls should be economi cal
Controls must be worth their cost. Asmall companycannot afford
to adopt a control systero of a large company. If tailored to the
jo b and size of the enterprise. control may become econo mical.
Economy is relative, since the benefits vary with the natur e of
the activity. the steeof'the business . and the pre vailingcondalons.
9. Controls should hi! understandable
Some controls are complex and cannot be understood unless
trained in them, Mathematically formulas, 3\X',(lUJl{in :; data, break
even analysis, statistical approach, ratio analysis and ot her
technical and mathematical controls are not unders tandable tu all
managers. They fail to commenlcate the coatrcl information to i
the non-quantltat tve manager who wants to use them.
10. Omlrols sh()u1d ;tulicate correaive acl;oll
Controls should not only detect deviations but also suggest cor-
rect ive measures. A guod cont rol system should disclose where
failures and deviations are occurring, who is responsi ble, and
what to do about them,
11. Controls sboukl seek employee commitment and
cooperaJion
Controls should be estecl tshed " her allowipJ:O employee partici -
pation, and developi ng a support ive employee attitude.
12. Dmtrols should seek: mpidfeedback
Information should be pmvi(lcd in lime to avokl deviation.
184
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Timely feedback will save cost, tabor , and time, and call win
the of management, employees, and .;uswmers.
Des igned information or actions arc usuall y ..... onnlcss.
13. Cont rols should amid obsolescence
Control s should not he ohsctete. They should he chimg
eu
,
improved ax the expediency demands, They will get ohso!ete if
they are not tured to changes, technology, competition. gnv
emment and company plans. new productdevel, aru' otber
marketing comlitions.
BUDGETS
Definit ion
Budgeting is "he formulation of plans for a given in
mancrtcat teems . it acts as (;ontrol device Tqll. Koontz calls
budgeting as profit all!.l the budget *.hc pro
f
:
1
, plan
&tatemenl!,ofer:pected result", in m.llw!.D;'Y or
terms. Budgets act not only as a control dev ice but also 3<; 1\ pial),
They act as standards agaInst which actu;\! perf\!I"l'(l am:e is
measured .
Budget as a plan
r\. budget is a single-use financial plan covering 3. spedl1eJ per iod
of time. It wor ks out how much money will go to labor, raw
materials, assets , and paying {Iff liahilit ies. <1130 deter-
mine the sources form where funds will be- raised to meet v<.\110US
financial expenditu res. A budget is a plan tn U;!H it to-esecs
expected cash in-and outflow, use of labor and ad
sources of funds. It is concerned with future r allgin,g n'um hours
to years.
Budget as a cont rol
A budget is <I. plan which is not only with the future
but .also with the past and therefore it, acts a-so as a corarollh.g
device, Plans after tilt: speci fied t ime is lapsed become cont rols.
Budgets are controls in that they provide an objective yardstick
against which a compa ny's performance can be measured.
Anything that measures {he performance is a control device.
u J g e l ~ measure theperformance in the field of sales. pur chases.
cash Jotlow and outflow, labour and machine hours utilized.
Budgets tell us what was to be done anti what hils actually been
done.
TYPES OF ilUDGlnS
Companies use the following types of budgets.
1. Revenue and Expense n!l dgd
II is the most common type of hudgds expressed in f inancial
terms. i1,f; main component is the sales. Other revenue sources
Include rentals . commissions, Interests. royalties. The other side
(If hl.ldl;-et spells 'lUI' operating expenses , direct material, direct
labor. dmlnisrrarive and oftlce expenses.
2. Capuet Budgets
Capital budgets are prepared showing capital expenditure. They
spell out expeeredor proposed expenditures on plant, machinery,
equipment. These budgets show long-range planning.
3. Cash Budgets
They state expected cash receipts and disbursements. They act as
<HI effective cash control device. They tell the sources and uses
of casb during a given future period of time.
4. Time, Space, Material, and Product Budgets
These are the budgets expressed in physical terms. They express
direct-k-bcr hours, machine hours, amount of materlals, and
number of units of production.
186
:r
;
i
or 5. Balance Sheet Ih ltJgci.:;
Tbey show the fcrun.. -e xpccted p' lsilinn of current and theJ
; a. .... sets, current and long-term Iiahil itics. and capital .. This of
budget proves the accur acy of other budgets.
6. Mast er
Th ey gather IdJrether all (lthcr orepared by various
departments of it company.. 11 1.11..\,:;, :!" C\ -unt expected Income
st atement and bala nce sheet informatlon.
7. Zero-base Budgeting (7.Um
It ls a device for cont rolling discret ionary expenses. TIllS tech-
nique was developed by the Texas Instruments Inc. US. in 1970.
The ZDHcalIs for rejustificaticInofexpenses everytlmeIhe blldget
is formul ated. According to koonrz, "Compaoy programs are
divided into packages comprising goals, activit ies, lind needed
resources, and costs are calculated for each package from the
ground up. "
8. Mil estone Budgeting
'This type of controlling device is USl'!{! to control engineer ing and
development. It Is prepared by breaking a project do wn into
controllabl e pieces &l nll then they are carefully f' IU(1Wed ,
NON BUDGETARY CONTROL DEVI CES/ TYPES
OF NONBUDGETARY CONTItoLS
In addition to bud!;... .... . t. ere are other control devices tHO. which
are as follows:
,

L Stati stical data

2. Analysis of break-even points
3. Special reports and analyses
l e7
4. Int ernal audit
S. Perso nal observation
6. Rate ot Return
I . Statlstlcal Data
I
,
d
"
BE
Statist ical analyses of vari ous business aspects and data are useful
as a control device or as a forecast . Some managers prefer and '. '
readily analyse stat istical oat il in tabular form while other s prefer
data on (harts . Data presented whet her in tabular or chart form
requires imagination ami intelligence.
2. Ana lysls of Break-even Point s
Break-even po int analyses are expressed t'ly means of charts or
algebrai c formu la. Th e chart merely deposits the relationsbip of
sates and expenses in such a way as to show at what vol ume
revenues exactly cover expenses. The chart further explains that
if the revenues arc below costli ne there wilt he a los.". and if the
revenues line is above the cost li ne ther e will he protu .
The brea k-even chart predicts the profit pos ition of a busi ness.
It isordinari Iy used 10determine the prcfl tablfh yof a gi ven course
of action as compared with alternatives.
Break-even analysis i!O especially useful in planning and
control, because it emphasizes the marginal concept. Acco unt ing
ratios such 3..' profit to sales rat io tends eventoovertoo k the impact
of costs, while break-even analysis explains the effects of addi-
tional sales or emits on pro fit. Th e Break-even analysislakes into
acco unt the imflat.:l of costs ilOO the marginally of the d ~ i s i n .
Break-even analysis can be expressed in Ihe full owing two
ways.
188
WI
Aigebric Break-Even AnalysIs
Algebric break-even method is used when a Quickbut accurate
determination of a break-even point is needed. It uses tne
following formula:
liE FC
pVC
Where: BE " The l evel of production at whi ch lhe
company breaks even.
Fe .. Total fixed cosl of production
P .. Selli ng price
VC :: Total vartable cost of produ ction and sale
Revenues
30 0 _ - -
Fixed
U petlSe5
10 15 20 25 30 35
e

"0
20
-o

g
15

10
5
0
251--j- --t- -j-- -t--V'-,b-'+
$all!Svolume in milli ons 01 doll ars
Brea.....- ffi chart
Too brueeeven POlot .... reactec
when revenues equal 6xper1di >
om
(imp,',;, B,.eak-E'l n ..1nalj'si s
(j rOlllhic break-even anaJ"sis is prepared in the for m of a t rapb
pi npointing all cri tical points such ;u vari able cost, fixed COli,
tot al revenue. breaki ng even point, loss area, and pro fit area. 11\.
graph shows that below the break even point there is a loss , and
above is a profit . The gfaph shows thai hy cha:lci11g variable azul l
fixed costs, and lhe selling pr tce the company can incrcaat
profitabil ity. The gr aphic break-even method is useful when it It
necessary to comprehend a more complete and det ailed p { ~ i t i o ~
of the cumul at ive relationships among variable cost, fi xed cost,
and break-even point.
J. Special Reports and Ana l)'sis
Such repo rts and anal yses hell' In particuldf ,)wt"!!em areal ,
Sometimes routine accounting and statistical infor mation do not
furnish necessary and pr actical infor mation, therefore, special
repo rts for that specific problem are prepared. Good ma:"' .Jgemem
requires constant searching out of exception, critical points , aDd
limiting factors.
4. Internal Audit
Internal audi t is an effective and widely used tool of managerial
control . It is regular and independent appraisal of the accounting,
financi al, andother operat ions of business . Internal auditors not
only appraise the account s but also appraise polici es , procedures,
useofauthority, qualityof management, effectivenessof method.
and other phases of operation . They not only determine thl
integr ity of accounts but also that of managers.
5. Personal Observation
Going through statistical data , special reports and analyses,
break-even point analyses, and internal audit repo rts , sitt ing In
air conditioned and sound proof cubicles, managers cannot' ~
successful in achi eving good and effective controls. Personal
supervision, watch observation of the subordinates ' work are
equally important and essential. Managers must visit about the
places where subordinates are worki ng and observe and check
their per formance. Physical presence of the superiors will
enhance the efficiency of the workers . '
190
~
Return on Investment I Ratio Analyses
It is anot her nonbudgetary control device. Return on iOVCslllll;nt is
the ratio of net pr ofi t to investment. The ratio lakes into account ill!
inputs such as time, moncy, end labor costs. Gross or net profit will
00( showa true stale of atteirs unless itis related 10 or compa red wit h
the investment .
If Company A earns a profit of Rs.l0,ooo. and Company 2
Rs.20,OOOin a year, who ts bett erol'! Wecannol decide until we come
10 knowthe amount oflnvesucent byeach. CompanyAwilldefinitely
be in a bett er position if us invest ment is R ~ 5 0 O O O and Company B' s
Rs. 200,OJO, becauscA's reteof returnon investment is20percent and
B's merely 10 percent.
Ratio analysis used In det erml cc the liquidityand pro fitability
ofthe business may be divided into t he following types.
1. Uquldity Ratios: Theycalculat e the abilityof business to fulfil
its obligations when they (all due.
2. Leverage Ratios: They ar e the ratios that measure sou ndness
of and relationship betwee n financing by equity and debts.
3. Activity Ratios: They determine as tcwhetbcr resources of the
firm have bee n properly utilized.
Ratio analyses arc diffr cnt cquat ioea which ar e used 10 deter-
mine the profitability,liquidity,and other aspects.of financial sound-
cess of the businees. Ratio analyses use various items of income
statement and balance sheet.

.
,.
,
!91
EXAMINATION QUESTIONS
Define control. Compare controlling with planning. Also
discuss basic control processes.
2 What are the types of control? What are its phases?
3 What do you understand by management control? Differ-
entiate between direct and indi rect control.
4 Wha t is management aud it? Explain direct control through
key areas.
S What are the characteristics of good contro l system?
6 What is budgd. '1 What are its kinds ? Explain budget as a
pl:lnning and co nrrolltng device .
7 Wba( is inventory control '1 What are the hazanb involved in
excess ive ;\I\(I short inventories ., What are the factors of
optimum inventory?
8 w hat is production management I cont rol '1 What are its
routes 1
9 What are quality and financial controls '1 Also discuss mile-
S N l l ~ and zero base budget ing .
10 Wri te short notes on the following:
(a) zan
(b) Milestone blJJ gct ing
(c) ~ ~ r l udget
Cd) Break-s ven - even analysis
11 Describe non ~ budgetary control devices.
192

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Chapter 11
MOTIVATION
(Human Dimension of Management)
MOTIVE
MOTIVATION
Human characteristics Fatalism .. Rallonallsm ..
Egotism Artrufsm .. HedonIsm UUUtarfanism Different
,
vJews on Motivation Sociological view, Biological
vrew- Psychoanalytical view, Behaviorist view
HUMANISTIC APPROACH
MaslOw's Theory 01Needs [Psychological needs, sal ety
needs, loveand belongingness needs. self esteem needs,
self actualization needs! .. Self Actualizing Persons ..
Maslow's self actualizIng persons .. Roger's self
actuallzlng persons .. Fromm's self actualizing persons
SELF ACCEPTANCE/SELF
IMAGE/SELF CONCEPT
Definition McClelland's view of self concept
HUMAN THEORISTS
Hippocrates. Juno. sbel don
QUESTIONS
193
Motive
Motive relers to action to satisfy a need. Need, want , aim" .
stlrrnrhrs. goal, drive. and desire are alsoused to mean motive, \.
The mainspring of peopl e action is a motive. 11 is a .-
restlessness to get over the pack and satisfy a yen. II explaln'
lhe 'whys' of behavior. Moti ve is an inner state that energizes;"
activates, or moves, and that directs behavior toward the..
accomplishment of goals . It makes us work to satisfy wanl s:-
Needs (depri vations) lead to drives (directions), and drives
lead to goal s (satisfaction) . l
Motives may be (I) prfrn.a.ry, and (2) secondary. Primary
moUves are unlearned and physkl loglcally based. Secondary
motives are closely allied to the learning concept s.
Motivation
Motives explain the 'why' ot behavior. whereas motivation. i-
explains Ihe 'howla' aspect 01 behavior. Motivatkm tswiIJingnessl
to expend energy to achieve a goa' or a reward. It is stimulus.
A stimulus is an action, influence, or agency that produces a
response in a living organizm. It Is anything that rouses to
actlon or increased action.
According to early religious and philosophical findings the
human natur e refl ects the following characteristi cs :
Fatalism
The doctri ne that all events are subject 10 fate, and happen
by unavoidable .oecessfty,
I
1
s
,
,
Rationalism .. .
A system of beliefs regulated by r ~ a S n not authorIty.

194
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I
Egotism
The theory of seu-tn terest as t ne pnncspte 01 momlll y,
selfishness.
Altr uism
The principle and' 01 IIvin9 and acting -jor the i nterest
others. - ,
Hedonism
The doctri ne lhal tha pl easure is. the hi gh,?st ' good. .
Ut ilitlf rl anlsm , ,
The theory that find s the fttness of utility to produce happiness.
Differ ent vi ews on motivation
{Basie Mot ives of Peopl e }
Why people behave the way they do is ofscussed be loy.' lrom
dill erent viewpoints. .
'1. Sociological view
The behavfcr of people is molded by the soci al environment.
Society determlnes the values and norms of the beha vior of
tts pecpte. The soceiy dislikes. 'rejects.icr condemns ' hose
who do not follow these values and norms.
2. BiologIcal view
The behavior ot people depends upon 'their physical and
biolOgical needs. Chemical or balance afleCthuman
behavior . According to thi s vi ew, 'people are what they ea..
3. .Psychoanalytic view . ..
Sigmund Freud suggesled that our moti v,8S determined
bVour subconscious. According to some.other psychologists,
people are what they thi nk. The personal ity bu ild-up Is
dependent upon their level thinking.
195
4. Behaviorist view
This is mode rn view on mot ivati on. Behaviorist s are not
concerned with the 'whys' of the behavior. The empnasts is
on what's happening. J.B. warson . a behavioral scientist.
declares that the human behavior is l he resull of input Ulrough
live senses .
In short , management should understand mot ivation to
decide the action that should be taken. Having the knowl edge
01 the subordinates motivation will tacuuate the manager's
right action.
HUMANISTIC APPROACH
Maslow, a psychologist , has evcfveu a theory of hierarchy of
needs. Hi s aUitude and philosophy about human needs are
quue positi ve. According to him. every human has a natural
drive toward health. pleasure. and achievement. Maslow
discovered five baslc human needs arranged in a natural
order. According to him, once the lower needs are satisfied,
the higher needs are sought for their satisfaction.
Maslow describes the 'ollowing hierarc."ly 01 needs :
1. Physiokl gical needs
2. Safety and security needs
3. Love and beklngingness needs
4. Self esteem needs
5. Selt-actuansaticn needs
1, Physiologi cal needs
Human physiological needs are food. air, shelt er, medicine,
clothing, water. At the stage of basic needs humans ale not
desirous of luxuries, security , or respect. They may do every
thing in the pursuit of food, shelter, and wate r. They can
endanger Iheir lives to gel food .
r
, .
.. ;
,
-os
2. Safety and Security needs
Once the needs for load, wat er, and shelter are satrsued. a
human starts pursuing the satisfaction 01higher level 01needs
which are safety and secur ity needs, It is tragic that in some
societies in the third world people are under continual political,
geographical , or weather hazards. They don', have job and
life security. Job insecurity brings down prOduC1ivil y and morale
01 the employees. Providing soci al security has become the
responsibility of governments.
3. Love and Belongingness
Human nature is lull of love and anectic n. He has love l or
children, brothers, sisters, parents, friends, elders, and youngers.
He also wants to be 'cved. He wants to belong to a group.
The group rna, be lamily, friends, or company. He wants
acceptance and recognition 01 his existence, role, and work.
But the creation of l hese needs are based on the sati sfaction
of the first two needs. A mother may sell her baby 10 purchase
l oad for her survival.
4. Self-esteem needs
This Is harder 10 satisfy. In the present society self -esteem
can be ecccrrousrec by having a bungatow, car, well-furnished
home, status, a position of responsibility in a prestigious
company or possession of riches. A name plate outside his
ollice, a secretary. or a separate cubicle at his ollice will add
to the sen-esteem of a manager.
5. Sell-actualization
There are the persons who have specific goals and aims to
accorrousn in their lives. Such people are at the lop of the
hierarchy of needs, sen-acnrauzaucn takes placewhen people
are willing to fulfil the needs 01 others. Such persons have
e ve for beauty and art. They have aestnenc taste. These are
I ne peopl e whO truly know themselves. They know the
. 1 9 7
weaknesses and strengths of their own. The knowieoge 01
the sell makes a human great These are the pecpie who are
destined to perf orm a teat.
Self-
Actu aliz
atic n Needs
Esteem Needs
Belonqinqness Needs
Safety Needs
- - -- -
Basic Needs
Hierarchy 01 Needs by MASLOW
MASLOW' S SELF-ACTUALISING PERSONS
Maslow investi gated the cnarectensucs 01 seft-actuansec
persons. He studied Einstein, tfncotn, Roosevelt . Beethoven.
and Thoreau. He decl ared sett-actuaused persons ulfmtalJ y
healthy. His i indings are as t ottcws.
1. Self-actualised persons can accopt t he way
things are.
Such people adapt rhemselves to the living environment They
don't bother about 'what should he' and are wi lling to recconlze
and accept 'what is'. They have a great degree 01 adaptability
and therefore are not cynic or hypochondriac. They accept
th eir pitfall s and weaknesses, and are abl e to turn these
weaknesses into strengths. They accept not only tnernselves
but also otnere the WilYthey are. They are not selt -sattsftoc
with 1he status -quo. They are action peopl e and want to
continuously grow.
198
f

2. They are not afraid to get close to otners.

r hey l end 10 come cl oser 10 other s because they are social.
-, ,
, They are net complacent . They don't teet threat s Irom other s.
Because they are bold 10 express thei r inner feel ings and
believe In openness and candor they are nol afraid of the
qualities, abil ities, and genius of others.
3. They are elf/cient JUdges of others and
situations.
According to Maslow, "SeU-actualizing persons have an urarsuat
ability to detect the spurious, the lake, and the dishonest in
personality". They can judge people correctly and wit h precision.
They have the abi lity 10 sowe Ihe problem as the expediency
demands. They can dttferenttat e between a hypocrite and a
true and honest person,
4. They are creati ve and appreciative.
Creative
Selt acl uatising persons are cre ative peopl e who respond to
exIsting situation, while ordinary people react according to
their own desjre. SeU-actualized persons donl l ry 10 be creative
but creativi ly is inherent in I hem.
Appreciative
They appreciate, prai se. and recogn ize t he efforts 01 others.
They appreciate the bas ic goods 01 lif e wi th pleasur e, awe,
wonder , and ecstasy. Daily life and allairs can be thrill ing,
exili ng. and ecstatic for Ihem.
5. They march to a different drummer.
Thev are dill erent from others. They 000" Ioucw others blindly,
Such persons have third car which means the abil it y to read
in between the lines . They have their independent viewpoint
They make their own jUdgement and am independent and
confident in tnoup ht and act. Self-actualized manaqere have
199
ROGERS' SELF-ACTUALl5ED PERSONS
their own standardS and norms of beaavcr and values.
i ndependence 01 environmental sltuatlon rel ers to composurt
and peace in the face 01 hard knocks, blows, deprivat ionl
l
frustrations, and straits. They are able to keep themselv'l
composed in the situations that would drive other peopl e to
'commit suici de. They are sen-contained.
6. They are willing /0 learn from a/hers.
sen-actuausinc persons are aware 01 their streng ths and
weakne sses. They are not afraid 01 revealing of their ignorance, \
They' beueve il is benet to bl under uc than 10learn
nothi ng gracefully. They are ready to learn from Ihei r juniors,
subordi nates, students, or any other persons. They have l he
ccuraqe to cut-oil a lecture and ask me quesncn thai ctnera 11
would be unable to ask.
I
Car1 R. Rogers was a c nnlcet psychologist. He has deterrnlned
lhe characteristics 01a setl-actualising person. In determini ng
these qual ities t madopted non-directive approach in studyi ng
people. According to him, such a person has exceptional
emotional maturity.
Rogers describes the qualllles as under:
1. He Is willing 10 pass th rough a course 01 events l or what
he is. He de velops wi sdom deri ved from the ch anges and
trials of life.
2. He has trust and confidence in his own abil ity and judgment.
3. He relies more on sea than on others or society.
4. He want s a conti nuous growth and development .
FROMM'S SELF-ACTUALISED PERSONS
According to Eric Fromm, seft-actuallsed per sons are like a
200
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/
I,
I
I
I.
n
I,
I

d
g
g
.,
I
t
I
J
seed. A seeo has a tremenooua potential lor orow11l I h nt III
this potential tt terns into a solid and tan tree. A scco 1I 111V1111
odd shape, or too small 10 be seen by nakod CyuD, Vl ' l 11Il.
remarkable potenti al 10 grow provided it has COll t lt U.l VIl
environment . On the other hand, there arc plant s whoso UlOwlh
is stunted . Insect s cal away at them.
So is the case with a human. Some peopl e are abte 10
ut il ize thei r potenti als to a maximum. while others fail.
SELF-CONCEPT AtlD ITS IMPORTANCE
Self concept, sen idt> ntil y, ego, sen-acceptance, and sell -
ccnttoence are synonymous terms . Why a person behaves
the way he ooes depends upon his sett-cc ncept . In other
words. you are what you do.
To understand another person. we must be aware 01how
he lhinks and Ieets about himsell. A sell-i mage may not be
a true and accurate represent ation. but one l ends 10 behave
in accordance with his own sell image. His actions are lunclion
01 how he feel s or views himsel f. A person's knowledge about
himsetf may be QUite inaccurate or vague. Likewise, our opinion
about tho other person may be Quite inacccre'e . To understand
another person we must be lass judgmental and mort)
perceptive.
Childhood at nome is most Of inll uenli al l aclor
of his formation 01 personal concept and personality. Tho
strongesl influence 01 hi s self -concept i s his personal worth
duril ,g Childhood at home by parent s, brothers. si sters, anti
by outsj ders like frie nds. teacher s. and aseoct ates. Illla'
accomplishment s also cetermlne his wort h in hi s eyes.
Self -concept determines what we are, what Wf,; fUIII, Uf
what we I hink. Jobs. tanstles. and I rlenc s also doli llu olm'l!
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sett-ldentlty. Humans depend on others to deter mine their
personality and actions.
In addition to self concept everyone also acquires a personal
view 01 his world. His personal frame of reference is'an amalgam
01 his sett-lrnaqe. his behavior, and his perception of the
world 01himselt . His percepti ons and preconceived thoughts
01his environment hel p det ermine whethe r he will be bold or
t'mld, opnrrssuc or peselrntattc, trustingor suspicious. He always
I behaves in such a way as 10 protect and improve his world
I as be sees. ..
lIIoCLELI.ANO AND SEI.F CONCEPT
Davi d McClelland et at suggests thai the motlvaticnal factors
tnat drive peopl e are as follows.
1. The Need tor Achi evement.
Peopta cetenntne the nature and extent o! success In
accordance wil h tbelr perception and persona! value. Dttterent
individuals evaluat e their success dltterentty. Their desire to
succeed comes from within, and. II cannot be i mposed, upon

trcm outslde.
2. Tho Need for AUHI<t H!on
Humans are social ani mals; tney want to live in groups, as
friends, famil y, company.
3. ThiJ Need for Power
Everyone wants to nave power In order to bring a change
according to his concept, desire. He may want to exerci se it
direcliy or lnolroctly. His desired power may be mental. physical
or financial.
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lIuman Th eori sts
Seve ral theorists and p'ulcsophets have given thei r
classiuceticne 01 humans :
Hi pp ocrates (460-3n B.C.) .
Hippocrates. born i n ancient Greece in, 460 B.C. was the
physici an and tounder of the Hippocratic school 01medictne.
whi ch greatl y bore a great impact on medical science until
the 16th century. His school of medi cine is still practised in
Pakistan in the namo ct 'Ttbb-e-Dnanl" and "tsl arnl Tibb," He
and his lollowers beli eved that health was governed by the
balance 01 four bOdy ll u!ds, or humors: Phlegm. blood. bl ack
bile. and yeucw bil e. He Is also understcod to be tho author
of t i ippocratic Oath. taken by meojcal students and physicians,
binding them to observe medical ethics.
Hippocrates suggests thai peop le are lour types:
1. Sangui ne
Such people are optimistic, cheerful , hopeful, conndent. and
ambit ious.
2. Phlegmatic
They are sluggiSh, dull, and lacking in Int erest. They avoid
responsibilities, and am uni nterested in the attaes. They are
coot-minded, and cannot be inciled 10 anger in a normal course.
3. Melancholic
They are the people who li ve down in the mouth n1ey arc
hypochondri ac, .Jermtah. depressed, nnd dished. UII} y arc
pessimists . Thei r Chemistry is composed of hlack nne.
4. Choleric
They are grouchy, peevish, angry , and bao-t empereo. Their
chemistry makes them emotional.TtHJY nave 'Yellow bile"
characteristic.
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JUNG (1875-1961)
Carl Gustav Jung was the Swiss psychologist 01 the modern
lime. He was lhe student of pioneer psychologist, Sigmund
Freud. He discarded the views on human advanced by his
teacher. He suggested the following types of human behavior,
1. Extrovert:
This type of behavior facilitates thinking, altitude, actions,
and decisions by objective rather than opinion. It is reality
anc' environment oriented.
2. Introvert :
This behavior is inward and thoughtful. It is guided by personal
opinion.
According 10 Jung extrovert and introvert types of people
can be described by four factors which are the inputs that
determine the behavior. These factors are as follows:
1. Thinking ;
It Is based on factual, logical, and rational reasoning.
2. Feeling;
It is based on personal and subjective interpretation of the
situation.
3. Sensalion
II is how a human perceives things, persons, and situations
without making evaluation or analysis.
4. Intuition:
II is based on "sixth" sense which is unconscious inner
perception 01 things.
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SHELDON
WilUam H. Sheldon is the modern l heorlsl 01 physiognomy .
Physiognomy is lhe art 01 judging personality and character
from appearance, especially from the lace, on the ground
,l hal the face is Ihe index 01the mind. He explains the o l ~ i n
lypes of persons:
1. Endomorph
Endomorphic person is 01 rounded build. He is bUlky. sluggish,
scn-tempereo. clam. dependent, sociable, and loves to eat.
2. Mesomorph
Mesomorphic person is silong, heallhy, lough. and athleti c.
He is cheerful . confidenl , dominant. enthusiastic, talkative,
enterprising, and hot-tempered.
3. Ectomorph
EclomorphiC person is thin, slender but share-minded. Hp. is
tense. sell-conscious . meticulous, musing, shy. cool, tactt ut.
and sensitive.
Accord:flg to Sheldon :
(i) An endomorphic person is viscerotonic meaning extrovert,
sociable, and fond of bodi ly comtons.
(Ii) A mesomorphic person is somat otonic meaning alert and
aggressive.
(iii) The ect omorph ic Is cerebrotonjc meani ng introvert .
hypersensitive. and bra iny.
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Exarnination Questions
1. Define moti ve and motl .... ation, Al so discuss human
characteristics.
2. Explain dillerent views on motivation.
3. Expl ain humani st ic approach. What Is Maslow' s theory of i
needs?
4, Who are selt-actuafislnq persons? Support your answer
from the viewpoints of :
Maslow 1\ .
Rogers
Fromm
5. What is self acceptance or self concept? Explain I
McClelland's view of self-concept.
6. Explain various types of humans as suggest ed by
Hippocrates, Jung, and Sheldon .
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Chapter 12
MOTIVATION THEORIES
(THE MYSTIQUE OF MOTIVATION)
Personali ty, Behavior, and Motivation
Components of Personality
Theories of Moti vat ion
The Cont ent Theori es
1. Classi cal Theory (Fr ederick Taylor)
2. Need or Humani sti c Theory (Abraham Maslow)
3. Need Theory (O.T. Hall & K. E. Nougal m)
4. 'two-teeter Theory (Frederick Herzberg)
5. Human Reialions Theory (Rensls L1kem
The Process Theories
1. Cl assi cal Conditioning (lven PavlOv)
2. Operant Condltlonlng (e .F. Skinner )
3. Preterence-Bxpectatlon (Victor Vroom)
4. Expanded Conti ngency Model (Porter and l awler)
or Theory 01 Equit y
Theory X and Theory Y (McGregor)
Theory Z (Dr. Willi am Ouchl)
Theory Z and Moti vati on
Money and Moll vatlon
Morale and Productivity
Examination Questions
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Personality, behavior, and motivation
The word personality has been derived from the Latin words
Per sona meanlnc. 'to sneak through'. The common use of
the word is to emphasize the role or behavior which a person
displays to others. The personality is a very diverse and complex
psychological phenomenon. It embodies external appearance,
behavior, self, traits, and environmental interactions. It is the
composite of a cerscn, behavior, and internal forces. It embodies
physical appearance (height, weight, stature, facial teatures.
color, dress, hair), nenovtcr (curt, friendly, courteous,
discourteous, rude), and self concept. In addition 10 the above
definitions, personality has also been defined as follows:
"The sum total 0' Ihe physical. menial, emcttcnar, social
characteristics of a person".
"It is the integrating process by which all the physiological
and psychological components of the man are combined into
the whole".
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According to KlUCKHOHN and MURRAY, -rosome extent.
a person's personality is like all other peopl e's, like some
other peopl e' s. and l ike no omer people's".
When a human being Is internally consist ent wi thin nlrnsen
he has a well-adjusted personality. When he is externauy
adapted to his environments, he is well adapted. When he is
both adjusted and adapt ed, he has an integrat ed personality,
The sell and personality are one and lhe same.
Components 01 Personality
In the earlie r part 01life personality is dynamk:. II can change.
adapt, and Is influenced by external envlrc nments. Humans
tend to change and adapt their behavior to the need of time
and occasjcn. Aperson behaves dillerentty at home. at parties.
al the olfice and with parents. guests, men. women, ch ildren.
and friends. He also adjusts his behavior to a sad or a happy
occasion.
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The personalit y Is the compositi on of tho following
components :
1. Extornal appearance, behavior, and social stimulus value:
height, weighl , stature, color, hair , Iectal features, address,
dress .
2 Sen-concept which Is a permanent organizing terce.
3. Inner and outer torcee that organi2e a person's trans.
4. Sum total of physical , mental , psychological, emotional
and social ch aracteristics 01 a' person .
. 5. Motivation which is a key 10 one's behavior.
THEORIES OF MOTIVATION
Difl erent psychotoqists and management experts have evolved
several mcnvancn theories. These can be listed in the following
categories :
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I. The centem Theories
1. Classical Theory (FrederiCk Taylor)
2. Need or Humanistic Theory (Abraham Mfts lOw)
3. Need Theory (D.T. Hall & K.E. Nougaim)
4. 'two-teeter Theory (Frederick Herzberg)
5. Human Relation Theory (Rensls likert )
' II. The srccese Theories
1. Classical Conditioning (Ivan Pavlov)
2. Operant Condit ioning (B.F. Skinner)
3. Preference-Expectation (Victor Vroom)
4. Expanded Contingency Model (Porter & Lawler)
III . TMOry X and Theory Y
IV TheOry Z
All the above theori es try to li nd some connection between
the stimulus ana response. Now we discuss above tneortes
In detail .
I. THE CONTENT THEORIES
1. Classical Theory (Frederi ck Taylor)
Frederick Tayl or. an Amerjcan, is popularly known as tamer
01 sclemlnc management He star ted his career as a machine
operator. and graduall y succeeded to the highest position 01
the chi el execut ive oi the same company. During his tenure
of service i n tne company he learned the weaknesses 01
workers and management He observed Ihat the management
and the workers have fumed into rival groups adversely allecli ng
tne productivity. Experienced by such condi tions he developed
the theory 01 scientific management by which he meant mental
revolution on the part of management. and workers. Both the
groups should cease to be rival and should turn Into fr iendly
groups thereby increasing the productivity.
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According to Tayl or money Is the strcnqest mottvatcr .
People tr y 10 get that job which oilers more money (salary
and allowances). But many 01the ps ychol ogists , sociolog ists ,
and managemen t scient ists do not agree with Taylor. TI'1('y
say that money is not every thing While other t heorist s agreei ng
wi th Taylor say l hat every person has its price and vajue.
Although there are peopl e who fi nd themselves above
money power, money is the mai n moti vator for lew income
groups. For high income groups money is less important than
status, self respect, and facilities like car , luxury house,
telephone, private secretary. separate cubicle. and a name
plate outside. their ctnce .
Taylor decided that a clear ctsttncfon should be drawn
between hard workers and d... :: workers. The hard worker
should be paid more than others or he wilt get discou raged
and jose his ettlcl ency. By ti me and motion s1udy he developed
standard time and work . Those who accompli sh ttus standard
work in standard ti me should be paid bonus. Those who fai l
In it, should be paid at a lower rate. For (hiS purpose he
developed "Wage l?ilf erenll al Plan". But the classical theory
tans to specify other motivati ng Iactors .
2. Need or Humanistic Theory (Maslow)
Abraham Maslow became pUbl icly known when his article
lirst published In a monthly magazine Psychology Review In
July 1943. His article was on the theory of human moti vation.
He described fi ve human needs which a human wants sattsued
in order ct i mportance. According to hi m sattst act fcn 01 one
need leads to the sattstactfon at the oth er more sophisticated
need. He describes the hierarchy 01 the needs as follows.
t , Basi c needs
These include food, sheller, wat er, clothing, medicine. ai r,
etc.
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2. Safety needs
Security 01 life. property. and job. l ow income groups busy
themselves in satisfying these f irst two needs thr ough their
lives.
3. SocIal needs
Love, association, belongingness. This need arises subsequent
to the satisfact ion 01 the first two.
4. Self-esteem needs
This is the need lor self-respect. II is accomplished by owning
a car, jewel s. big house, big tiUe of the job. This higher level
of need is harder 10 salisl y, and only a l ew persons are able
10 satisf y t his need.
." Bett-ectuettsetton
II lies at the highest rung of the ladder 01 needs. It is most
dillicull to satisf y. Her e the person i s more conce rned with
the weuare 01others rather than nuneen. He want s 10 perform
some feal.
Detailed explanallon of the above hi erarchy of needs Is
given In humani stic approach In th e previous chapte r 11.
This theory guides managers in deali ng with their subordmates.
3. Need Th eory (D.T. Hall & K.E. Nougaim)
In 1957, D.T. Hall and K. E. Nouqafm started a live year study
01 young managers 0 1 Amer ican Telephone and
and made the lollowing suggestions lor those managers whose
subordi nates are managers :
1. Being in a company all managers' need l or achievement
and est eem increases with the passage of l ime.
2. Eff icient and successful managers will get the reward in
the form of promotion, pay increase. and other benefits
and perks.
3. Efficient managers succeed in gelling increased managerial
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respcnstbulty.. As such in l ive years their achievement
and esteem satisfacti on is greater than mose managers
and compeers who are lett behind.
4. As a result of great satisfaction of achievement and est eem
needs such managers become more Involved in their jobs .
5. Their greater job invci vement brings tnem turther growlh.
promotion. 300 more important responsibi lities in an upward
series.
4. Two-Iactor Theory (F. Herzberg)
Frederick Herzberg was prof essor of psychology at Case
West ern Reserve Uni versity, USA. He conducted a series 01
experiments with two hundred engineers and accountants to
reveal the myst ery 01 motivation. He asked them to descri be
those moments that especiall y were either happy or unhappy
ones. He inferred 1'1.' ,) lollowing important fact ors whi ch he
characterizes as :
1. Mai ntenance Fact or s
2. rAotlvsll onal Factors
Mai ntenance Factors
Herzberq's study di scovered the following mainten ance factors
whi ch are minimum requirement s of a job. Wilhoul the
satistactron 01 I hese Iactors no employee will be will ing to
work.
1, Company manaqement and poli cy.
2. Technical supervision
3. Interperscnat retatons with supervisor
4. Interpersonal retatjons with compeers
5, Interpersonal rel ations wit h subonnnatcs
6. Salary
7. Job security
8, Personal bett erment
9. Working condili ons
10. Status
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Motivational Factors
Herzberg discovered six motivational factors. Incidentally, these
factors match the highest-level need as described by Maslow
1. Achievement
2. Recognition
3. Advancement
4. The" job itself
5. The possibility of promotion
6. Responsibility
Herzberg emphasizes independence and decentralization
of authority to properly and efficiently pertcrrn the job. According
10 him independence and authority to make decisions is a
good motivator.
Herzberg's theory is much like Maslow's in that the former's
maintenance factors lie in the first rungs of the Maslow's
ladder of needs, and the motivational factors fit into the top
level of needs.
On the pattern of Herzberg, M. Scott Myers also conducted
a study and summarized three questions that every manager
should use to motivate his subordinates.
1. What motivates employees 10work effectively? This question
refers to a challenging job which entails a sense of
accomplishment, responsibility, growth, advancement,
enjoyment, and recognition.
2. What dissatisfies workers? Dlssatlsuers may be work, rules
and regulations, working conditions, titles, seniority rights,
wages, fringe benefits.
3. When do the workers become dissatisfied? It is the
occasions when advantageous conditions for growth,
achievement, and recognition no longer prevail.
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5. Human Relali on Theory (Rensls Likert)
Rensis Liken is one 01 tne modern management experts. He
advocates human-cent ered management. He goes that far
that the management shoul d not curtail manpower during
recession no matt er even if it has 10 reduce jnventory and
other production f acilil y.
Rensls Likert discards first two level s of needs of the
need theory namely (i) physiological needs and, (2) Safety
needs. He focuses his attention on t he top three needs. namely.
social needs. ego needs, and sell-f ulfill ment needs. He says
that money and security are not rrcttvatcrs In tnemsejves
rattler they are tools 01the mot iVator. Likert's theory put s its
emphasis on managers rather than employees. Managers
shOuki use such motivators as economic welfare, security
Iactor s. ego motives. and desire to be innovative . creanve.
and desire to use initi ative.
Likert contends that htgh level producti vity Is Ihe result 01
mutual cocperat jcn of every member 01the organization. Good
relations among subordinat es. compeers, and superiors should
be established and nourished. Subordinates should have a
sense of participation, a say In decisi on- making, and should
feel tnemsefves as a part 01 the co mpany.
Human retatson theory i s exacuy opposite of Taylor'S
c1assicat theory. Taylor says thai nothing important. especiall y
work 01 respcnsjbmty ehcu'd be lett . to the workers. On the
other hand, human retatlcn theory suggeSISIhat worker s should
be given proper Importance, they shou ld have work 01
responsibil ity, and as a member 01 the team they shouSd be
participant in the decision makIng. Moreover. Taylor underli nf$
the importance of work, and ignores human psychological
aspects. Bot l iken puts qreater impot1ance on the work er
than the work.
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II. THE PROCESS THEORIES
1110 process theories 01 mot ivati on have been discUSSed by
11 10 foHowi ng theorists. These theories t ry to establish thai
overy response is Ihe outcome or a stimulus.
1. Theory 01 cla ssIcal conditionIng (Pavlov)
13010re we discuss tt us theory, it is necess<:lry that some related
terms are defined first:
Mol/val/on
It is drive and euc rt to satisfy a want OJ {lOa!' It is willingness
to spend energy 10 achieve a OMlor a reward . II exptalns
' how-Io' aspect 01 behavi or.
Motive
It rel ers to desire, drive, aim, need, wish, yen, want. goal,
aspirat ion. It Is an Inner st ate thai cnerques. activates, or
moves. 11 dir ect s or channels behavi or tcwarcs goals. A mot ive
Is a restlessness 10 remedy tno 1<'I(;k, 10 aljevtate 1M yen, a
terce .
Conditioning
II is a way of learning by which a new -esponse to e particular
stimulus i s devel oped.
Satisfaction
Contentment "I wan! is sat tsned.
Stimul us
n is drive, incitement, or need. II is Ro,.lie,", inuuence, or agency
that produces a response ill a l ivln'J r" ganism. ;'l,1l;,1hl ng tnat
rouses 10 action or increased action . Sor, lething thaI
behavior.
Stimuli
Plural Iorm 01 stimulus
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Clsssi cal condi tioning:
It Is Pavlov 's approach which stawrs for en uncoroholl :lhh,
stimulus used betcre natural stil:it..ius. It is marupurauo III
stl mul l!S.
Instrumental conditioning:
Semi-eonj rollable reward or punishment .
Refnfcr cement
Any thing the person Iinds rew<.t rdi' lg ,\nytt ,irtg thai Ilolh
mcreases lilt: strepgl h ')1response and tones to hduco repctstcn
of 1M behavior l hal preceded the retnrorcemcr.t. J strenqtbens
tne response and ncreases tne probability 01 repetition.
Expl anati on 01 the Theory 01 ct assteet
Condit i oni ng
Pavl ov was U p:W';hOlogist of t be ninp. !ci'I,)It\ ce ntuey.. He
conducted many experi ment s to detennlne relationship between
the modified am.i sL.'bslituled sl:rnulllS and resulted response.
He wa nted to ream Whdl w(,ukt haj)jAm to mcuvauon It ' he
is changed or maniputaterl . He conducted experiments
on his dogs and carne 10 know tnat on t;l ':1 slg:-ll of ' oolJ the
dogs woukl salivate. Pavlov staneo ringing C\ bell when the

dogs caugll t sigt.t of toed. He repeal ed this act ion many tunes.
Then he experienced thai the dogs salivated just bf
t he sound of the bell even wlttout t oed. II pro... e::f mat
sti mulus would continue to mcttvate or 10 brrng the san-e
response
These experiments revealed nen' dimensiu.lSat ...
This discovery was named claselcat conditi oning which Is, III
tact. a manipul ati on or playing treks 10 bring the
response. But on the other hand. it has ccen i,'s!<'l.bli;;hl' (1 Ih; lt
want 10 be motivated than rc bo choillOl I.
trickfd. manipulatedly rnoU... ated.
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Managers are now in a better position 10 get to know that
workers' lack 01 interest in the work is not due to their (workers')
sluggishness or shirking. Its reason lies in the weakness 01
motivation.
Instrumenlal CondlUenlng
During the ctaeeicat conditioning research, another new concept
emerged which was known as Instrumental conditioning. The
theory of classical conditioning was dlscaroed on the plea
that it could not justify human motivation. And if it is applied
on human it could not produce better results. Opposite of this
is the theory of Instrumental conomontne which fits much the
human nature. II focuses its attention on a change in mottvaticn
Which is either reward or punishment, and this reward or
punishment is under the control of the subject.
2. Theory o f Operant Conditioning (Skinner)
By this theory Skinner, a Harvard psychologist, discovers a
world of behavior modtners. He explains how you make a
subject (your subordinate) 10 behave or act lhe way you like
in return Ior u certain reward. Skinner is of the opinion that
a human is what his external eovrronment makes him. A person
Is tho renecucn of external teeters. conditions, and environments;
his internal drives, aspiratlons. needs, desires, emotions do
not play any important role in making hla outer personality.
His behavior can be observed, analyzed, and manipulated
taki ng into account his external environment. In plain terms
he 15 conditioned by his external conditions. Skinner seems
to agree to the famous saying that a person is known by the
company he keeps or the society he moves about.
Operant conditioning theory is referred to as theory 01
rein forcement. Refntcrcements play an important role in
cFlanging the behavior of a human. He divides reinforcers
into the following kinds:
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1. Posl1lve reinforcer
II is a reward paid to encourage the repeutson of a desired
action. Food is a positive reinforcer to salisfy hunger.
2. Negel/ve reinforcer
It strenqtnens and increases behavior by the termlnauon or
wil hdrawal of an undesirable acti on. Negative reinforcement
is dillerenl than puniShment in 1Ml the termer increases a
cert ain behavior whereas Ihe laUer decr eases iL Taking aspirin
to kill pain is negative reinforcer .
3. Neutral reinforcer
It neuher encourages nor di scourages a certain behavjc r.
4. Continuous reinfor cer
II is repetition 01 an action when correct response is given.
5. Partial reinforcer
11 happens only occasionally. li s objective Is to keep the positive
reinforcer altho c westrevernecessary to maintainperformance.
6. Ratio or Interval reinforcement
The reward Is gi ven at regular interval, say every 3rd, 7th. or
9th lime the desired action is performed. It is given repeatedl y
to encourage a desired action. II is of two ki nds:
(I) Fixed rallo relntorcement . It is used to speed up
pert ormance as one dozen tooth pastes tree 01 cost at
every one gross 01 tooth pastes ordered will resuh in
increased sale. Another example is the payment of armuat
bonus to employees.
(II) v artabt e rallo rei nforcement : II is used 10 mcnv ate
continuously. Payment of the salary cernes tlll der this
category.
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Stephen Joblonsky and David De Vries have det ermined
the foll owi ng rules for achi eving maximum moti vation through
operant conditioning;
1. Punishment device Is not good for molivating .
2. Encou rage desir ed behavior and tgnore undesir abl e
behavior.
3. Time gap between operant response and reinfor cement
should be minimum.
4. Usc retntorcement frequcnUy when using available ral k>
progr am,
5. Study tne responsive behavi or of the subcrcmate and
then accor dingly mold or shape his benavtor in a desired
manner [e.q. training)
6. Determine envnonmentaricrces lila! are good or adverse
loan individual.
7. Determine the desired behavior In operational ter ms.
3. Preference Expect ation Theory (Vro om)
Victor H. Vroom evolved this theory In 1964 ell.plaining how
two variabl es. preference and expectation. Interact wit h each
otter i n the precess 01motivation. Thi s theory can be explained
in two parts :
Preference
II is a variety 01 possible results for an acti vity or wolk by an
Individual. The result s may be promotion, praise, prize, trophy.
jealousy. Or nothing may result , or even somel hing unexpected
may happen . Each individual has tus own references; not all
wish the same outcome or t ruu. He will preter thai outcome
which overcomes his lacki ng or deprivation.
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"
Expectation
Expectation of the out come will det ermine the qual ity of wor k
by the subordi nate. If he expects lhal his hard wor king will
produce no bett er resun he is unlikely to do hard worki ng.
Expectation t empt s entnustasrn and motivates the worker .
Preference - expect ation retatcnst sp expl ains how to rrctlvate
individual workers according 10 l helr nature and desir es. To
apply this Iheory 10 motivate employees it is necessary to
have a deep underst anding and knowledge 01the preferences
and expectati ons of Individual cases.
4. Theory of Equity or Expanded Contingency
Model by Porter and Lawlar
Lawler and Porter expanded Ihe version of the Vroom' s s- neer
of thought. They assert t hai conti nuity 01 beh avior or
performance depends upon Individual's saustacton. lt the reward
for the per formance of Ihe work equals or exceeds what he
feels he deserves, he will continue -repeating bts pertormance.
But If the rewards are less than what he teets he deserves,
he will get dissal isfied resunino In abandoning his performance.
There are many theorist s who do not agree with Lawl er
and Porter. They l ind no li nk between perfor mance and
saustacucn or morale. Vroom hi mself could determine only
weak relation between them. But Porter and Lawler di scovered
perceived reward as mIssing link between performance and
sanstecti on.
They dlvtde rewards into two categories
(1) Intrinsic rewards: These l n l u ~ satisfying high-Ievel needs
such as recognition, actrteverrent. advancement. growl h,
self respect . having a secretary. etc.
(2) Extrinsic rewards: These are rnatntenance (basic) rewards
as salary, job security, safel y, teed, etc.
~ ~ l
The theory enables the manager 10 understand the workers'
approach toward U18 measurement of reward in relation to
thei r performance. When the theory establishes connecncns
among performance, reward, and saustactlcn. i1 actuall y tocuses
its attention on the extrinsic (rnatntenance or basic) needs of
the worker. Therefor e, by tne knowledge of this theory the
manager can devise an errecuve sal ary structure of the firm
in order to maximize the efforts of the workers.
III . THEORY X AND Y (McGREGOR)
McGregor is one of the modern management scientists. He
developed two contrasting motivation theories which he named
them Theory X and Theory Y. Douglas McGregor's Theory X
is explained below:
Theory X
Amanaqer who is autocratic. cent ral izes power and authority,
and believes in close conl rol and Shotgun management can
be explai ned by t heory X. He has tradit ional authoritarian
style of leadership.
The theory has following assumptions:
1. An average persons dislikes work andwill avoid it whenever
possible.
2. To gel l he work accomplished most people have 10 be
coerced, forced, or threatened by punlshme nt.
3. An average person is basically passive and wants to be
di rect ed and l ed. He does not like to assume any
responsibthty.
Koeping In vlewthis human psychology and social behavior
of most workers, the manager has 10 resort 10 shOtgun
management whiCh is the refl ect ion of theory X.
222
-
Theory Y
Theory Y is Just opposite tc Theory X. Here the manager
adopts humanistic approach toward his subordinates. He does
nol bel ieve in ccercen. autocracy . and centrauzanon 01power
and authority. The theory has the following assumptions.
1, Work is as natural to humans as play or rest and tneretor e.
the worker will not avoK:1 it.
2. Coercion is unnecessary 10 get the work done. When
workers are commi ll ed 10 work they will be sell-motivated
and deri ve saustactlcn from the work.
. 3. Commitment is a crucial tactcr In motivation. and it is a
func1ion 01 reward coming f rom it.
4. An average per son accepts and even seeks responsibility
under proper environment.
5. As against popular belief, most people are creative and
innovative.
6. In modern busines s and organizations human potent ialities
are Iittlo utilized.
Both the theori es repr esent ext reme vlew point s. Bul both
are workabl e in different ti mes and snuations. and Iherel ore,
any of them cann,ot be completely disca rded.
The critics of the theories have the opinion 1hat the solution
01 the problem {human nannej ues somewhere between theory
X and theory Y. To them theory Z ts the moderate one and
It presents optimum solu lion 10 the problem.
IV. THEORY Z
The theory Z, advanced by Japanese - American, Or. Wi lliam
G. Ouchi explains the art 01 Japanese management and shows
how it can be adapted 10 American and ethers companies.
William Ouchi who coined the term "theory Z manaqement"
223
Is a professor In the Graduate School of California at Los
Angeles. He is a regular consultant to as many as 500
companies. He earned his MBA from Stanford University and
Ph. D. in Business Administration from the University of Chicago.
Professor Willia.mOuctu makes a comparison of Japanese
and American management practices in the following.
Japan
Planning
America
1. Focus on long-term Focus on short term
policies. policies.
2. Group decision making. Decision making by
individuals.
3. Planning In the hands of Planing by individuals.
groups.
4 Slow decision making Fast decision making and
and fast lmptementatlon slow Implementattcn.
Organizing
1,. Cclte ctlve responsibilit y.
2. Informal organization
preferred.
3. No fixed working hours.
You can do office work
at home.
Individual responsibility.
Formal and inflexible
organization rigidly followed.
Rigidly followed working
hours. You must be present
in the office during these
hours.
224
Stalli ng
1. Workers are not special- Specialization is emphasized.
lzed in a part icular fi eld.
2. Frequent shifting of Frequent shil ti ng is not
workers and managers possible due to spectauza
l rom one department to uon.
another.
3. Selection of rookies Selection of experi enced
(young fr esh, in- and older candidates.
experi enced graduates).
4. Slow Promotion. Rapid Promotion.
5. Li fetime employment. Employees must retire at 60.
6. High morale and loyalty loyal with t he profession.
01 the employees for
the compa ny.
7. Job turnover is very High job turnover.
small,
Leading
--; .

1. l eader is merely a
group member.
2. Collective responsibility
and lace saving of
individuals.
Leader is the nead ottne
group.
Individual's responsibi lity
and dressing down.
225
3. Decisions flow bottom-up Decisions flow topdown.
Controll ing
..
1. Control by the company
as a :-vho1e. or by the
system.
2. Control over group per-
formance
Control by the boss.
-' , '
Contro l over individual :
pertcr mance.
Theory Z and Motlvallon
Or. Ouch! suggests that the secret of Japanese growth"'and
development is not the technology but it s motivating
management system. are effectively motivated by
participation, group decision making, face savi ng, life-time
employ ment, non-specialization (killi ng mcnotonyj . leaderless
control , and trust - - resulting in hi gh morale. producti vity,
and loyalty. Why Ouchi has named his findings 'Theory Z', he
hlmseJl explains In his book theory Z. "Ifus choice of labEt I is
an intentional relerence to the distinction made earlier between
"Theory X"and "Theory Y" management by Douglas McGregor,
and my argument i s related 10 his. Just as most managers
are not purely described by assumptions X and Y, organizations
are rarely purely 01 the lorm A or
Money and Motivation
, Money is not an end, rather it is a means to an end. Studies
nave shown that money Is not a good motivator except for
some persons who are at the lowest level 01 Maslow' s hierarchy
-- of needs, the phys iological or basic needs. c'lhose who find
themselves running after money are actuall y i n the pursuit of
stat us . achieve ment, or i ndependence. Accordi ng 10
psychologi sts and management experts there are stronger
.not tvatora than money, such as promot ion, CUbicle, name
pl ate at office door, secretary. praise, good rel ations wi lh l he
boss. Such motivators improve morale and productivity. Money
226
I

I
..-. '
has to a greal extent IoSI its position as a moti vating teeter
owing to fring e benefits, status. provtsfcn at job and eocta!
security, tree medi cal, and services.
Moral and Productivity
Napoleon once said. "In war. morale conditi ons make up three
quart ers 01 the game: The relati ve balance of manpower
accounts for the remaining Quart er." The importance of morale
, cannot be overemphasized whet her it Is war or managing the
company. Mor ale has olrect relationship wit h producuvny.
Definitions of More'e
has been delined diHerenlfy and variousl y: '11 is prevailing
mood and spi ril conduci ve to wi lli ng and dependable
pertormance."
"II Is whole-hearted cooperation i n a common ettcrt ."
According to Mooney, "The sum of several psych;c ouannes
that incl ude courage, Iortaude, resolution, and above aU,
confidence.
Beishli ne defines morale as, -cocraqe. confidence, and
enthusiasm in the performance 01duty."
According to Urwick, morale can be judged trom sliml nallon
of sloppiness, the acnrevemeru of maximum performance and
tenacity.
Robert M. Guion deli nes morale as, "tne extent to which
an individual's needs are eatlstted and the exl ent 10 which
l he incUvtdual perceives that sausraction as stemming from
his tote! job snuauon."
Morale is developed and increased by total job satlstacttcn.
according to Robert Guion. He says, ttrat totat job satisfaction
227
includes (1) inherent job satista cllon, (2) satrstacncn with the
company, (3) satisfacti on with the supervisi on, and (4)
satisfaction with rewards and prospects for promotion and
growth.
Morale and productivity have direct relalionship. High morale
results in high productivity and vice versa. Every company
shOuld concentrate on the development 01 high morale of its
employees. Low morale i s lhe result 01 lrustration and
deprivation . ccouoence. zeal , training, participati on, and
reratcnetan wit h the boss, communicalion, leader ship, and
all such other tactors have an important bearing on prcduct lvlty.
228
Examination Questions
(I) Abraham Maslow
(g) Need theory
(h) Dr. Will iam OUChi
(i) Theory Y
,
,
1.
2.
3.
4.
5.
6.
7.
,

.
6.
9.
i
Deline personality, behavior, and motivati on, What are
the components of personalit y?
Name the theories on moti vation. Explain any three 0'
them.
Describe Theories X. Y. and Z.
What Is Process Theory of motivation? Explain In det ail
any two of them.
What is Cont ent Theory? Explain cl assical and human
relations theories.
Define Preference Expectation and Expanded Contingency
theor ies of motivation. Al so explain their weaknesses .
What is t he relation between "money and motivalion", and
"morale and productivity"?
Explain Operant Condi tioning Theory, and 'rwo-tact cr
Theory,
Write notes on t he following
(a) Morale
(b) Morale and producll vity
(e) Money and motivation
(d) Two-teeter theory
(e) Bensls Li kert
229
- Chapter 13
Communication
..'.' '
Process of Communication
Up and Down Communication -
Communication Pitfalls and Barriers
- Modes or Media Of Communication '
Philosophies of Communication
. Development Commul1lcatlon
. COntrolling Coriuriunlcatlon
Relinquishing Communicator
, Withdrawn Communicator
,Ni ne C's of
I
I
'it,
!
,
J
,
1
I
I

"
,. '"
.'.-
Definition _
Communication systems
Wheel Network
Chain Network
AlI.Channel Network
Circle network
\:
Transactional Analysis (TA)
The Child
The Parent
The Adult
Motivating with TA
life Positions
I am not O.K. you are O.K.
I am O.K., you are not O.K.
t am not O.K., you are not O.K.
I am O.K., you are O.K.
Ten Commandments lor Good listening
Examination Questions
" ". -
.' , "
,
' -, '
.'.' .
23 1
Definition 01 Communicallon
According to Fred Lut nans Communication is, "The flow at
malarial, inloimalion. perception, and understanding between
various part s and members of an orqanizatlcn." According 10
him communicati on includes
(1) "all the methods, modes, and media 01commc nicaton",
(2) "all the channels, networks. and systems of commmcator r;
(3)_"all the persons to persons interchange (imerperscnar
communications",
(4) "all aspects 01 communication up, down, lateral, speaking,
writing listening, reading, verbal , nonverbal . mettccs, media,
modes. channe ls, networks, fl ow, imerpersonat, inter-
organizational, and body language:
Dr. Johnson says tnat language is the dress of thought.
It wi ll be noted with interest thai successive transmission s
01 the same message are decreasi ngl y accurate:
( 1) In oral communication around 30 percent ct tne information
is lost in each transmission.
(2) Even written communication Is subject to some loss 01
meaning i n tr ansmi sslon.
(3) Equally serious is poor ret entlon of information. St udies
show t hat empJoY1. 6S retain only 50 per cent of
co mmun icat ed i nfor mat ion. and supervisors only sixt )'
percent.
23 2
Anothe r study shows that there is tremendous loss 01
inlormation - 37 percent between the board of directors and
.: ; the vi ce president level. General supervisors got 56 percent
01 the information, plant managers 40 percent . and general
foremanreceIved only 30 percent 01 what had been transmitted
downward to them.
An average 01 only 20 percent 01 the communication sent
downward thr ough the fi ve level s 01management fi nall y gets
10 the worker level.
Communication is a key to management euecnveness.
Oral and written communications, tormal and lntormat, go
through many cha nnels and in various directions.
f.!<inagernent needs 10 communicate poli cies. instructions,
and goal s so thai all ernptoyees wiU under.siand
and accept
The final test of all communiCation Is whether it produc es
desi red results quickly and correctly . Communi cation is an
Idea transplant.
Communicat ion activiti es till the business day . An analys is
01 apProximately 10 percent
in wrili ng, 15 percent reading, 25 percent speaki ng, and 40
perce nt liste ning.
Ther e i s people-to-people communication. also, we
are continua lly send ing and receivi ng within ourselves. An
artist communicates with himself (and with others) as ho pours
his inner lee lings into some tangibl e form.
The purpose 01communicalion is to bring about J change .
It is said tnat no person can effectively communicato lor another
person.
233
The Process of Communication, the Elements
of Communication, or the Factors 01'
Communication 'f
The factors of commurtlcatlon have tne.rcnowmc elements.
-"., 1. Sender
"""
2. Message
3. Medium
/
4. Receiver
Before we explain the above tacrors it will be better to
explain the communication process in the following diagram:
Idea originated Encoding Transmiller - Noise and
barriers --. Receiver Decoding -vtdea received.
1. Sender
theperson who communtcates the idea, information,
material, etc. He acts in the capacity of speaker, writer, or
piiiai'ls are inherent with the sender:
(a) The message he intends to send.
(b) The message he actually sends.
(c) The message the other person' receives or Understands.
(d) The other person's interpretation of the message.
(e) The other person's response.
(f) The difference between the message sent and received;
arid between the response expected and response received.
2. Message
The message may be in the form 01 order, opinion, advice,
sLi,ggestion, Instruction, or material ..JLis
and important'that.'idea '1)( messaqe received be
iaentldil--to'-the idea or "message sent." a "is only
234
wI
;n
P!
8
,

when bot h communicators (sender and receiver) are skifttul

in commun;calion and lis - ,"" , " .
In the' case 01 wrnten thereshould be
prQPer grammar.and paragraphing.
But remember '.
,." -., ,,
3. Medium
Medium l etters, reports.
fax': mriilOrams."cab:es. tetex:' p-ostais: , ch'arts,
jmi'olher' mecnarllCaTdevlce:
as apostman. II may be a device, as a It
may also be an organization. as a post office or news agency .
Medium is the way through which communication flows
Irom to the receiiter:--'-" ' .- , "' " ..'
4. Receiver
.. when receives, decodes or
i!1terprelS th,fl message. Slncc perfect commumcancn Is not
possi ble. there is deviation be-tween the Idea sent and the
idea received or interpreted. II the receiver is skill ful i n
communicati on then the deviatio n will be small.
Communicallon Pitfall s and Barr iers
Communication tsnever perfect. since every person has different
perception 01a thing or a sltuatton. Some pitfalls are nalural
ane'- others are 'due to lack 01 knowledge of cornmunicallon
principtes."Bias of the sender or receive r is another reason
for the noise. The communication distort ion may result Irom
the fOllowing.
1. , The message you think 10 send.
2. The message you actually send.
; ,3. The message Ihe ctner person actually receives.
2 35
-- -------
' I
4.
/ 5.
6.
7.
6.
9.
10.
,
.' :. ;
The receiver 's decodin g and Interpret atton of the
messago received.
The other person's reply or reaction.
The response the other person intends 10 send.
The response the other person actually sends.
I be response you actually receive.
v cvr tnterpretatlon 01 the message,
Thu r tevl anon and gap between the response expect ed
and the response actually received and i nt erpreted.
The resultant g3p causes ccnnicts. disputes, batues. wars,
divorces, development 01 different schools of thoughlS
Some Specific Bs.rriers
1. Wrong assumption
Alief om: has sent tne rnessaqe he assumes that it would
reach the destiny. He may be wrong,
2. Lack of planning
Hapnazard will bri t1g no better resu lts. You
must plan berore you .ccmmunlcate.
3. Poor planni ng of communication
Poor ptannmq and design of communicati on qi Sjort s the
message. Cliches. jargon, trite ami poorly chosen words,
improper punctuation. poorly organiZed qrammar.
and fncc rrect sent ence ;1'ru6tU<r; c' rnake the message vague
and incoillprehensible. Unplanned message may miss some
t:1essages' should be well-planned and
organized. - - -
4. Loss in each successtve transmission
Accuracy and retent ion decreases at every successiv e
transrnisao n. Findings show that employee retai n o<lly . 50
percent and supervisors 60 percent ct tne i nformation received.
2 36
Another study shows Ihat only 20 percent ot the orallnformutton
reaches thEf -1illh' successive lever.' ," '., ,<,'.""
5. Poor listening
Talkers are more than nst cners. People like to talk than
Ilsten:') ;;ey'-lfnd i! dilficull to,ccreentrate. ' When' the'y listen
they tend to judge, approve, er di sapprove. what the .other
!.alher than trying, to
of the sPtiaker. The principles of good listen ing have" been
, , ' , ". ,.
given at t he end of this chapter.
6. Distrust and fear
Anolher lmw rtant area 01mettectlve communi cation is distrust,
lear, and of ccnndence. ...' .
MEDIA OR MODES OF COMMUNICATION
The mecc m is a message in il sell . n auecte the quality and
toice of tne Eachmedlumor mode of cc mmuntcatlon
entails some quali ty or quant ity deviation. II has been observed
I hat we usten only 10 every filth word we near .
According fa Robert M. Fulmer the following are I ne media
l hrough which communication travels.
1. Thinking
Communication starts wil:h l he idea originated. Thinking creates
the .message we to ,co!:"vey. Organized thinking and
medil ati on make a person un iqu e. different. and even
charismatic. Thinking is the foundation of every comrTlmlcal lon.
The main between asane and insari'e person is
that the former enjo)'s l he power 01 lhi nking while the tatter
oces not.
237

2. Action _ . r
An action is in itseK 'a language. 'Action speaks louder l han ::.
. .-.....
the words. Someti mes body language and facial express ions
are stronger than the spoken or writt en words . Actions a're---
the expressions of feelings. The rnessaqe and feeling trav;l
through bOdy actions. Act ing in the stage drama or film is an
example.
3. Observation
Carefullyand thoughlful1y seeing is observtnq. It is systematic ,
watchi ng. It Is directing watchtul and crlucat at tenttcn wi th a
view 10 ascertai n a tact . Observation forms percepti on.
........ .-. . " ,
Wrong observation is possible. Things may happen so
quickty or conl usingly IMl what one sees may not be tact .
The communicator should not allow possi ble di stort ion in his
message caused by his bi as arid impression.
4. Speaking
Some people are loquacious ano some are reli cent. You ain't
learning' nothin' when you're bUSinessme';"deveIOp
a talent for keeping other persons talking to elic.it maximum
infor mation or secr et from them. Speakers gai n less Ulan
listeners. However, t here are many professions
more soeakfoc . such as tE-aChi ng. selling, and commentary. "
The doctors, 0 I t he other hand, should spend a great deal 01
time in ltstenin J to the pati ent s. Tal kative persons l eOd 10 lei
on secrets unconsciousl y.
5. Listening
When you are listening you are learni ng, 'r ncse peop te are
wise who have developed, t he habit 01 IiSl ening th at tmprcves
concentralion. lisl enlng is also used as a medica l therapy,
This type ottherapy is known as 'um-hmm psychology" because.'
the counselor occasionally repeals only um-hmm throughout
2 38
T1

...

Ihe enure therapy intervi ew. We should also leam to 1161011

wilh the third year which means to hear the message tnatues
in between the l ines. ' -.
6. Wr iting
According loa study, during business hours a manager spends
'lime' is'-i;ne'01 the most
irripo'rtahfiTrO'd'es'of'communicaiion' 'Ii a.
perman:enfreCOrd.-Writing 'calis"for correct syntax,-
dicti on proper puncfuatlon, simple words and sentences. and
proper organIzati on 01 the idea. '.' .
7. Reading
Reading' is leaming, "AccOfding to a research a manager spends
abOui<' tout and a hall hours reading report , memorandums,
and "other materials per day. Students are_ to develop
reading skills. A person with a habit has always great er
...... ... . " ' ......... _ , _ ._..-_ . ... .... ' . _ . ... ,
knowledge tha n the person without . .' , --'
Dev ices which f aci litat e topdown and
bottom-up communication between a super and
a subordinate.
The lollowing up and down communication devices i mprove
working of the organ;zali on.
1. Chain of command
Chai n 01command provides a clear channel for the eff ective
and effi cient 1I0w ot information up the organization ladder .
Chain of command is the establi shment of super-subordinate
relationships 'In a verucat order.
2. Grievance procedure
procedure employees heard and thelr problems
are solved. Employed should be all owed to submit crrevences
withOut any fear. . ..
239
= E
3. Complaint system
Question or suggeslion boxes are provided. Ideas. opi nions,
and complaints so received are acted upon. This system should
be used in its true spirit.
4. Counseling service
To help them overcome their personal and otnce probl ems
counseling service has prov ed very useful for empl oyee s. It
Increas es thei r mor ale.
5. Open-door poli cy
II it i s trul y tonowed. the supervisor wins the confidence of
his subordinates. This is an effective device 01communication.
This policy allows employees 10 present their problems heely
and without any fear of thei r superiors.
6. Questionnai re
A questionnaire is a formalized schedule l or collecting data
from respondents. The l unclion 01 the questionnaire is 10
measure past behavi or, altitudes, and the cnaract ertsttcs of
respondents.
7. Exit Intervi ew
Employees leavi ng the company ar e under no pressure. and
theref ore. Ihei r unbiased and fearless views and valuable
opi nions should be recorded.
8. Grapevine
It is i nformal communication medium which i s quiCk. efficient.
and slrong provided it is separated Irom rumors and gossips.
Grapevi ne is an Informal communication avoiding formal
channels, and moving through opinions, doubts, and rumors.
Information relatin g to the organizati on may be as accurate
as 75 per cent by grapevine communication mode.
240
, J
I
9. labor representation
Although labor unions are biased. their suggestions, crutcf sm
and ideas may be valuable and should be laken into account .
10. Inlormer
Informers are looked down upon. But they can be used to
collect important inlormation l or management . But thi s system
should not create unrest amongst subordinates.
11. Speci al Meetings
Special meetings with the persons are helpful and constructive
and may bring the problem 10 me surface.
12. Ombudsman
He is a grievance man. He is an ofliclal who is appoint ed 10
investigat e complaints against the administration. Sweden
pioneered Ihe conc ept 01ombudsman in 1809.
Philosophies of Communication
There are four types of communication philosophies that
determine Ihe cnaractensucs at communicators. A communicator
does not appl y only one philosophy. He uses dinerent
philosophies on ottterent occasions.
1. The cevejopmentet comrnunlca tcr
2. The conl rolJing communicator
3. The relinquishing ccnenunicetcr
4. The wit hdrawn comrrcmcatc r
1. The Development Communicator
Such a communicator bel ieves in the eloboration 01 a meme
in collaboration with his compeers and subordinales. He Ides
10 bring out what is latent or potential. He believes to two-
way communication and participation . He e'Tlphasizes on joint
understandi ng 01probl ems. According to him, Iwo heads are
"' 1
\
better than one. Such communicalor enjoys expenmentatton
and explorat ion to ' discover new methods and approaches,
He is employee-centered.
2. The Controlling Communica tor
His approach is dic1atorial. He beli eves that there is no other
solulion except one given by him. He does not listen to others.
His approach Is management-centered. These autncnt arious
do not beli eve In two-way communication. To them one-way
communication is safe to accompfis f their goals.
However, controlli ng approach is suitable in tne l ollowing
situations:
1. When the manager has complete knowledge and
experience in tne l iald.
2. When speedy and ellici ent actions are needed.
3. In crises and emergencies . like a l ire, acci dent.
4. When joint commitment, motlvali on, or part icipat ion is
not appropriate.
3. The RelinqUishing Communicator
Relinquishing communicators are reluctant to assume any
responsibility. They try to shiflthe burden to other. They are
willing 10 ponder over alternative courses of acuons bul only
cursoril y. They think that the 1hings will make their own way.
They do not take lnitlative. They are not sett-statt ers or high-
achievers. RelinquiShing approach is desi rable i n the 'ollowing
situations.
(i) When subordinates have command over a sftuation and
have necessary information , expe rtise , tacts. and
experience,
(ii) When the other person is specialized in hi s fi eld and his
skill has proved its worth.
242
I
,
I
4. The Withdrawn Communicator
Such communi cators are uncommunicative and tntrovernut .
They belie.... e in status quo. He i s a man wno feels bad wlwlI
he feels good tor fear he'll teet worse when he teets bettor .
He lakes everybody as nasty as himself and hal es them lor
it. He is cynic in thai he is disincl ined to recognize or beli eve
In goodness. Competent manage rs do not wilhdraw l rom
challenging or ditllcull sit uations.
The withdrawn approach is acceptabl e or desirable when
there is legal . moral , or ertucar problem. Gelling involved in
such a snuatlc n may brtng nothing but problems. Moreover ,
he has no competent authority to deal with il .
BUSINESS WRITING PRINCIPLES
(9 CS OF COMMUNICATION)
All er planni ng steps in commvn'cannq the message have been
complet e we have 10 consider speciuc writing pri nciples to
~ p us choose right words and syntax and sentences lor our
leite rs, reports, memorandums, ere.
These p-lnclples are as follows :
1. Correctness 2.
3. Clarity 4.
S. Concreteness 6
7. Courtesy 6.
9 _ Conversat ional l one
Conciseness
cerroreteness
ConslderaUon
Conlidence
1. Correct ness
To be correct /" communication the following principlos should
be borne In mind.
1. Use the correct level of language.
243
2. Include only accurate facts, words, and l igur es.
3. Maint ain acceptabl e wri ting mechani cs.
4. Apply the following quali ties.
a. Avoid switching f rom third person 10 2nd or t st person.
II you are writi ng in tne third person don 't use I. me. we, us,
you.
b) Vary your sent ence structure.
C) There should be proper grammar, ponctcaton. spelling.
and paragraphi ng.
2. Conci seness
Business executives are dea d-busy, They don't have l ime to
go t hrough unnecessarily lengthy messages The wnter is
also a loser if he writes wordy messages, because II invol ves
more,,,tlme and money to type and read. Conciseness makes
ttie.mess ace more uoderstandabte and comprehensible, To
achi eve conciseness the lollowing should be observed.
1. Omit tnt e and unnecessary expressio ns.
2. Avoi d unnecessary repetltton and wordy expressions,
3. Include only relevant fact s wi th courtesy,
The message snoukt be laconic but conci seness should
not be accompli shed artne cost 01 compl eteness or courtesy.
In business writing l ess is more, spare is' l air, lean is keen ,
3. Cla rity
Clarity demands that the business message should be correct.
concise, complet e, concrete and with consideration.
The foll owing ways lead to cl arity
1. Choose words that are short, familiar. conversational.
244
'_ .
2, Constr uct ett ectiva sentences and paragraphs.
3. Proper punctualions make the wr iting clear .
4. Achi eve appropriat e readability (easy words and sholl
sentences) .
5. Incl ude examples, illustrations, and other vi sual aids if
des irable .
4. Completeness
TM message should be compl ete to bring desirable results .
11 sncut c include everything the reader needs l or the reaction
you desire, You must know what mtcrmancn our reader wants
or needs . You should be able 10 know the reader 's background,
vi ewpoints, needs, auncce s. and emotions 10 det ermine the
extent of mtcrmanon 10 be incl uded in the messaqe.
Foll owing are the guidelines for compteteness.
1. Answer all questions asked.
2. Give some exi ra or addilKmal information, when desirable.
3. Check lor the 5 Ws and any other essenti als. Five Ws
are as foll ows : (Five questions)
Who
What
Where
When
Why
5. Concreteness
The business wr iting should be specific, definite, unamblcuoun.
and vivid rather than vague and gener al. The l ol1owfnn
gUideli nes lead 10 conc reteness.
1. Use specmc facts and li gures.
2. Put action in your verbs. (You should prel er ncuvo votcc
and use verbs rather than nouns) .
245
3. Choose vi vid, i mage bui lding words.
6. Considerat ion
Consideration retors 10 you attitude. sympathy, Ihe human
lauch and underSlan<l,i ng 01human naiure. Conaderaton means
the message wl tn the receiver in mind. You shoukt try 10
vi sualize your readers, theil desi res, probl ems, emotions,
circumstances, and possible react ion to your request .
Considerat ion can be achieved thr ough the l ollowing
1. focus on you instead 01 - I- & W e ~ Don't be eccust .
2. Show reader benem or Interest i n reader.
3. Apply integrity i n the message .
4. Emphasize the posrtfve. pteasnnt tacrs.
7. Courtesy
"Everyone gai ns where courtesy reign!>- is a good slog an l or
writt en and or al cc mrncrucauon.
Courtesy is more important and advanl ageous in business
wri li ng tnan it is in tace-to-tace communication or conversation.
Courteous messages strengt hen present rel ations and make
new trtends. It is a goodwill builder.
Courtesy may be achieved by the l otlowing
1. Be sincerely tacttut. thoughllul, and appreciative .
2. Omlt expression that i rritate , hurt , or belittl e.
3. Answer your mai l promptl y.
4. Grant and apcloqize good- naturedly.
Any refusal should be tactful rather than blunt. GrUdging
should be avcioec .
"No news is coco news" Is a myth. Bad news, however,
246
oce st turn up. Never sugar coat it. Never suppress it, A good
rule is: -Myou musl present bad news, do so, But do it honesl ly,
and reansncany". Someti mes we can use negat ive 10 denat e
swollen ego or to reduce unr ealistic expectatons about pay,
perf ormance , or promoti on, as suggested by Charles v ervalm.
8. Confidence
Your lett er will be more successful when you show confid ence
in ycurseu . conf idence in your reader, and confidence in your
message. Letters with ccurrusuc tone fake into account neglect
and negati ve issues. Confidence in communication creat es
pos luv e tone. Conlidence in yourse lf is produced when you
believe in the fairness of your decisions and actio ns. You
need nol be def ensive or apologetic . Show your reader that
you are decisive, positive, confident. and straightforward rather
than diffident , dubious, indecisive, and neqattve.
To have confidence i n your reader means lhat you are
sure the reader will do what is right until otherwise it is proved.
You should give your reader the be nefit of doubt .
You lose confidence in your message when you writ e -I
hope, I trust , if and why not", Such phrases should be avoided .
Spend the time necessary in designing a tetter so that the
message accomplishes t he busi ness obj ectives.
9. Conversational Tone
Your letter should read the same way as you would talk to
the reader , The l one shoul d be comtc rtabt e, natural,
ccn versatcnat. uepret ennous and Inconspicuous. Bustness
teuers are not scholarly di ssertations. Conversational roue
makes the writ er emphatic. You should avoid teqatese and
business jargon such as beg 10 advise, please find enclo!'od
herewi th, or I hanki ng you in anti cipation. To n" f:ornpli!:h
ccnveraatfonat tone. vary your wor ds, use proper Ill l
st raighHorward, keep the paragraph small, and
writing.
247
Communication Systems
Communication is a function of leadership. Leaders must have skill
in motivating, counselling, leading and coramunicaung, The success
of business depends upon effective communication networks.
A network is a structure situation in which people transmit
information in a specific pattern. Networks may be of the following
types.
1. Wheel network
Each of the four persons communicates with the person at the
nucleus. All the persons are subordinates to the person in the
e-ntre.
2. Chain network
Here are twosets of persons, eachcomprisingtwo persons. The tW{J
members of eachset communicatewitheachotherand withthe perso/l
between them in the centre. It reflects the chain of command prin-
ciple.
3. Circle network
Each person can only communicate with two other above and below
him. It reflects highlydecentralizedp..stern. it encourages grapevine.
4. AII-channel network
People are able to communicate freely with OIW another. Free flow
of communication coutnbmes rc Jp' solution of problems. It abo
encourages creativity and innovationto solutions. it is decentralized.
248
Whet-l ur .ti'l n ~ l w k
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249
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TRANSACTIONAL ANALYSIS (TAl
The success of cc mnwrucatlon depends also upon the fact
tbat how the communi cators value and think about tnemsefves
and wnat is their seu-imaco or sen-concept. And how t hey
value and think 01 others. To unde rstand the self concept and
sell perception 01 the human an anaiyticat theory has been
developed whiCh is known as Transact ional Analysis ITA).
This tnecry has bee n advanced by Eric Bern and rel ined by
Tom Harrts. II explains -vhat hdppens when two persons transact
or lnterect. The TA theory is the human behavior analysis.
The theory scccesrs Ihal the loundation 01human behavior
is laid in rus childhcod . Ever)' petscn'r behavior can be divined
tmo nvee kinds :
1. The Child
2. The Pa rent
3. The Adult
1. Th e Child
The Child l ype 01 behavior is lhe result 01 experiences ,
irustraucns. helplcr.sness, weakness. tov, curiosil y, imagination,
and success or failure in the period 01 chi ldhood. The Child
behavi or is tne 't en concept 01 lif e'.
The Child 01 a person can be di vided int o two kinds
(I) Free Child: He is independent, sell-origi nated . impulsive,
and free from anxiety . His behavior is mature .
(II) Hurt Chil d: He Is melanchol ic, depressed, and frustrated.
Hi s behavi or is Immature with a sense of tnsecunt y.
2. The Patent
"the Parent type 01 behavior is the reflection 01 that of a
per son' s father, mother , orders. and elders toward himself in
250
his childhood. In his earl y part or ltte. the child learns mat the
elders and big peopl e are always right because they are
powerful . The parent aspect ot behavior is known as , aughl
con cept of lif e."
The parent type people may be of two kinds:
,I). Critical parent : The manager 01 this nature is dictating.
rigid, and management or iented.
(1I).Nurturlng parent: This type of manager is cooperative,
considerate, encouraging, flexible, and inviting participation.
3. The Adult
Thi s behavior is reflect ed by one's confidence and mature
outlook. It is me "thoughl concept of Iile". Such peopl e deteu d
l hei r acuons by reasons rather Ihan emot i ons.
TA also suggests some other ch ar ecter tsu cs of the human
in addition to the above three:
1. Stroke:
These are lhe rewards everybody is running aller, as praise,
compl iment s, or smiles which are positive strokes. Negative
strokes include evasion. cr iticism, taunt, or reprimand.
2. Games :
These are littl e tricks mat are used to gel strokes. We mold
our behavior and act in such ways as to get certain strokes.
Games reinforce the psychological pcsitlons, a .J hel p avoid
or maintain friendship Or relation. Peopl e pl ay g ~ s when
they feel bored and want to tttt up li me.
3. Scripts :
These are Ihe rol es we adopt . They encourage games we
want to play. During the childhood childr en pl ay the roles of
251
t he persons that they want to be in the future. Some play the
king, tho brave, or me good, whi le others play I he vnnan. or
the bad.
Motivating with TA
TA can be used to motivate others in tne followi ng ways:
1. Select , teach. and use a monv atmq term when speaking
to your subordinates. You can use me term TA.
2. Adopt a particu lar leadership style and practi se it when
dealing with your subcrdtnetes The aouu type 01behavior
will bring bett er result s.
3. r.ct as a teacner-menaqer i.e., a supporti ve parent
4. Show a growth and change alt itude to your stall .
5. Adopt Parent , Adul t, or Child behavior accor di ng 10 the
need of l ime.
6. Don't gel rash, remer enjoy the child behavior 01cu e-s.
7, Use positive and avoid neqeuve strokes whenever possibte.
6. o ~ Adult behavior in most business eltuattons.
9. Do not overa ct as Adult in dealing with management
problems.
Lile posi tions
Our behavior with others depends upon our assumpt ions that
we make for ourselves and others. These assumptions are
known as Iile positions. They can be classified into tne fOllOWing
tour categories:
1. I am nol O.K., you are O.K.
This type 01person teets himsell untit, incapable. ene weak
and regards others as l it. capable. and sl rong enough 10
meet the situat ion. His feel ing about himsell is establi shed in
his childhood. He is rel inqui shing rather than contributing to
the probtem-sctvlnq sit uation.
252
2. I am O.K. you are not O.K.
HE! Is a dist rusttut per son. He thinks he is always rl gM. wntte
others wr ong. He wants to hold and exerctse authority and
control over ot hers, He does not allow participat ion in dects'on-
making process.
3. I am not O.K., you are not O.K.
Il ls a Irusl rat ing and cessunreuc concept 01 HI e, He holds the
belief of cynici sm. He is kind 01 withdrawn commu nicator.
4. I am O.K., you are O.K.
This is ratic nat view ot rite posltion . He has Adult behavior.
He is a devel opmental communicator and may be regarded
as sell -actual ized person,
LI STENING
Ten commandment s for good liste ni ng
Li stening is an art . People lend 10 speak more than li sten
Li stening can be improved by observing I he 10010wing 10
princi ples:
1. Stop talking
You ain' t learnin' nothtn' when you'r taud n'.
2. Put the t alker at eas e :
Make him al home so that he is free to talk.
3. Show him that you want to IIslen
Look and act tr eerestec. 00 not read newspaper or mail while
he talks.
253
4. Rgroove distractions :
Oon'l sera..... l , tap, OJ shuffle papers, It would be better it you
shul the door.
5. Empathize wi th the telker
Try to put yourse lf in his place so thai you can see his poi nt
of view,
6. Be patient
Do not lnt enupt him. Allow pl enty 0' time . Don', start for the
door or walk away. Don't cut in.
7. Hol d your temper :
II you lose your temper, you may gel wrong meaning frolil
the words.
8. Take It easy on ar gument and cri ticism :
He may calm up or get angry. In bOth cases he will iose.
Don't argue or you ..... iII lose.
9. Ask questions :
It encourages t he talXf;l r and srcwe you are l aki ng inter est.
10. Stop talking:
.t st and last principl e for good lisl eni ng. You learn o nly when
you are not talking.
( Robert M. Fulmer)
254
Examination Questions
t . Define communication. What are the commandments 01
good li stening?
2. Ellcidal e Transactional Analysis.
3. What do you mean by Child, Parent . and Adult aspects 01
a person ? Is it possible to motivate with TA ?
4.. What are the philosophies 01 communication ?
5. Explai n in detai l 9 Cs 01 commu nicat ion. Also discuss
modes 01 communication.
6. What is up and down communicalion ? Also explai n teeters
or procedures to make up and down communicati on
successful.
7. What are the devices to facilitate ettkient communication
beth up and down the organization hierarchy.
8. Explain barri ers thai come In Ihe way 01 commemcannq
your message to your subordinate.
9. Deline communication process.
10. Expl ai n lif e posit ions 01 a person. Al so discuss
communicat ion systems.
11. Write short notes
a. The Child
b. I am O.K. , You are nol O.K.
c. Rules for good listening.
d. Media 01 communicali on.
e. Ocrtmuntcatlon.
I. TA
255
Chapter 14
BUSINESS ETHICS
DEFINITION 257
SOCIAL RESPONSIBILITY OF BUSINESS 258
FACTORS OF SOCIAL RESPONSIBILITY 258
1. Models of Social Responsibility
Tradltfonal Corporation Theory
Metro Corporatron Theory
2. Evolution of Emphasi s
3. The levels of Social ResponslblJit y
4. Social Audit
ETHICAL PROBLEMS BY SHAPIRO 263
BENEFITS OF ETHICAL CODE 264
Internal Benefits, Employee Benefits, Customer
Benefits, Industry Benefits
GUIDELI NES IN DEVELOPI NG CODE OF
ETHICS 265
MUSLIM ETHICS . NON-MUSLIM ETHICS
UNSEt IEII ERS' ETHICS. QUESTIONS
2 f... 7 ...:... 271
2 56
BUSINESS ETHICS
Definition
The word ettncs bas derived frcmtne Greek_.'cOrd"elhos
meaning charact er. custom. Chambers DiCtionarydeunes emcs
as "the of morals . thai branch 6f philosophy which
__ human character and condUct":
webster Dictionary delines ethics as ' 00 discipline dealing
with lhal which is good and bad and with moral duty and
obl lgaUon."
Ethics may be termed as moral phil osophy. It delines
of varleus paris society...'!, a sySlem
01 morals. rules of behavtor. II is a treatise on morals.
257
Soci al Respo nsibil ity of BusIness
George Bernard once declared that every profession is a
conspi racy agai nst the publi c.
Napol eon remarked thai the Engli sh are a nati on 01
sncpkeepers.
In 1776, Adam Smith, a great economist, wrote i n his
book that "busi nessman of identlcat ttelds seldom meet, but
whenever they meet they l inlsh up with the conspiracy against
public .
Aristotle sugg ested that -buyIng and' selli ng are unnatural
money making acnvmes."
Ij)C
/)
Tl
Plato also hat ed me concept ct business
on educati on and philosophy.
and retner
.-
AlI lhese uve persons have an important ptace in history.
They have the same tone 01 voice againsl The
reason l or their prea was that a business lnstuutlon tri es to
extract every thing trom the people and society bul does not
give anything i n return. . rnenauement tails to se!'Ye .
society. To the busjness. proftt making is a primary goal ,
and service 10 the soctety is secondary in nature.
TO accompli sh social responsibnily the foll owing factors
should be considered.
. 1. Models at social responsloulty.
2. Evolut ion of emphasi s.
3. The l evels 01 soci al responsibil ity.
-4 . Social audi t.
Models 01 soclelal or soci al responsi bil ity
Two theories of sccl etat responsibility have been developed
25 8
10
e,
. 0<
/I
M
"
01

fixi ng the responsibil ity of corporations.

~ i l Traditional corpo ration theory
",Hi) Mel ro-corpo rati on theory
i) Traditional corporation Iheory
This theory has followi ng assumptions ;
I.
d.
/

-:
Shareholders are the kings.
The objecti ves of corporati ons are maximi zation 01
profits.
c. The only responsibility and dUly 01 a manager is 10
lead (he company toward maxlnwm prouts
The corpcrancns have no social responsibi lity. Their
onty responsibilit y is 10 discharge legal dutie s.
Unions rather than management will be responsibl e
for the wella re of taborers.
Corporalions have nothing 10 gi V6 away. They have
10 gain only.
In short, the theory suggests that corporations have nothing
to do except to maximize profits. Ther e are many management
experts who cont end that the theory still holds good. In our
. country this theory is i n common practice. "
'-- ' .
ii) Metro-corporation theory
M ~ r o is a Greek word referring to mother. Metro-corpcrauon
refers to a corporation acting as a mother. This theory is just
opposite to the Itrst one. It has following assumpt ions :
/ 3.
A corporal ion is a social Institution and hence is
responsible to serve l he society.
Acorporation should not be absorbed in and confi ned
to only money making.
c. It has cultural, welfare, social , and benevol ent
responsibilities.
d. II has the same ri ghts and dulles as a citizen .
b.
/
2 59
But the two extrente tneones are nol acceptable. The
solution lies somewhere in between the two extremes.
2. The Levels of Social Responsibility
Society has tixec some minimum responsibilities on corpcratons
a. Employees must be paid a minimum wage.
b. Pollution should be coni roll ed.
c. Dtscnmmeuon should be abaurJoned.
American Chamber 01 Commerce has developed a mode t
of hierarchy 01 soci al responsibility for corporations :
4
3
2
1
Hierarchy 01 scctat responsibility
1. Obey the law
2. Meeting Public Expectations
3. Antici pating new demands
4 . Leading
The model suggests that prOfit oriented companies stick
10 lhe 1sl level. They try tc maximize profit wi l hin the leg al
boundaries. They just discharge their legal obligations and
go on making prouts. ' ..
A manager who Is more spirlled alms at greater tarqets
than Just fulfilling legal responsibllity. He goes to the second
stago and struggles to meet public expectations by giving
261>
II
o
a
d
s
t
I
,
,
1
t
I
them better goods and services.
Higher spi rited managers try to accomplish higher
objective. They wanl to..reach a stage where they want 10
ant icipate new demands. They public
demands and so serve better than "others.
The models suggests the 01 soci al responsibility
is. The managers who take the company to tnat highest
standard 01 social responsibil ity will ingly set in standards 01
business performance. shape the pUblic opi nion and
teste,

3. Evol uti on 01 Emphasis
The emphasis on social responsibili t y slowly accelerated with
the gradual development 01 i ndustri es and business. Robert
Hay and Ed Gray have di vided evolution at emphas}s and
necessity 01 social responamtttty in staqes
I) -:'Maxlmum pr ofit Siage )
Adam Smith was at the opi nion mat existence 01fr ee economic
system and controlled compet ition are necessary to maxmuze
prof it leading to inc rease the nattonet revenue. Increased
naucnal revenue will in turn improve the welfare ott ne soci et y.
This theory was adoptoo by Americans in the early 20lh cenl ury.
iI) 'TrusteoslJlp stage)
In l hi!: stage tim nature and degree of socia l fesponsibili ly
changed. Between 1920 and 1930 t he concept 01 corporation
system came Into being. The concept 01collecti ve ownership
emerged Sole propri etorships and partnerstups wer e convened
inl o corporations. The top manaoement level compri sing boar d
(If director s acted as me trustees of stockhol ders. Here the
board was responsible and nccountable of its social obligations
to ttie stocahclders. I n stage the concept of rflet:li nrj PU1)!iC
261
expectations emerged.
/II) QU8111y of life st age i
This is modern concept. M,magers reali zed responsibili l y to
improve the quality ol lil e 01their workers, They acc epted the
higher level of social responsibility. They recognized e otatent
strengths and benefits in fulfilling social obiioalions. In devctcped
countri es. the ccrporauons are now lighting against pcuuuon.
They are st ruggling lor bette r products, uanspcrtauon system,
and service rather l han creatin9 snc neae ct goods.
4. Social Audit
concept. may be denoeo as the systemauc
examlnatton 01accounts by an auuonzec l'!nd Q'lali fir d person
or persons. aUd:t _is. to and deliumil1lJ 10
degree a manager pertorms his social cbliqation. It measures
the gap of ";;' hat WAS his social reSPQniibilily 3r\d whal ne
actually accomplished.
There are three aporoacn es IQ conduct a socta t audit
(I) A corporat ion evaiuares and reviews the eovtronment in
ordei: tci set its ob'ecuves accordingly _ rne comcrauoo
commands its acuoos adapted to envi ronment.
(;I) A detailed lisl of scctat re, ponsibi" l y is prepared, 't he
company compares tts performance willl H'lls cnecknst.
(iii) Annual company report s. are anat yzeu 10 measure Iht'
allainmelll of sccf.., 9031;;0 : Afl f:Usl audit reccrt IS a sort of
social audit repcn.
To conduct thi s li n0. ncial wx i i! dllf (,f cn\ spectaltaed courses
have been developed. One Hie co. epl enon 01 tnese courses
tne candidates are with negree of r. PA or CA
.
.. ::
-.,-
, ...
262
Jim Higgins assert s that tne soctat auce has been quantified
into linancial audit.
Et hical Problems
Shapi ro 01 DuPont Company has suggested the following etr scat
probl ems :
1, Whal is the limit 01 nur job responsibtutv ?
2. Do we mak e the decisions. or mUS1we i nvolve our cnems
or customers in the decisions ?
3 Shall we mamput ate the people to! thei r own goOd ?
.. Which is more lrrport ant -- the system or indivIdual '}
1) What is the l imi t of our job responsibility?
Ti l e manag er faces the problem 01' what degree of quality
should be achievecr. Peopl e are unaware of what i f; good
qualit y. They don 't know the extent 01 perfection. So wlil it be
unethi cal to produce less than pen cct qooos?
2) Shall we manipulate the people lor their own
good
Are the managers allowed 10 manipulat e me thinking of people?
Benevolent autocracy ref ers 10 usten to every one but make
your own deci sions Should a ma nag er be a benevolent
autocr at?
3) Do we make deci sions, or must we i nvolve
our clients '}
Managers have bet ter understanding and knowledge of the
situati on. Tnereto re. they make decisions wuhout the
participat ion of cust omer s and ctterus. It is sure that au the
customers with di versif i ed int erest can not be all owed to
parti cipate in a company's deci sion
26 3
4) Which Is more Important - the system or
the Individual ?
Should the busi ness provide lib6rali ng oppor1unil y l or workers?
Wi ll it be usel ess for the individual 10 struggle and agitate
against all power ful organizati on? Is indi vidual resist ance
essential for organi zation's progress?
BENEFITS OF CREATI NG ON ETHICAL CODE
Corporations adopt a code of ethics to improve business euacs.
Codes 01 ethi c act as standards against whi ch responsibility
is measured. Codes act in the form of arbitrary rules, regulations.
They may be clear-cut or vague . Observance of codes reduces
contltct s. grievances, and di ffi dence or douut c. Codes cr eate
harmony between parties of extreme points like employer and
employee. Some 01 the advantages are described below.
1. Internal Be nefits
American Management Associ ation opi nes. "the process cf
formul ating the cr sed is often more valuable tnan the fi nished
product. " Cymes who have test l heir benet in human goodness
now should chanqe the'r altitude because peopl e are inclined
to live and to let live. Codes once formul ated should not be
shelved. They should be observed by the parties invol ved.
Effective sell regulation calls for no external control s. Those
who enjoy freedom within tne limit s set by law are law- alliding
citi zens. Firms, companies, and tnstmrttons working within
codes 01 etrucs have good puouc image and support . and are
tree trom anention of law-enforcing agencies and l egi sfalors.
2. Employees Benet/Is
The company for mulating and truly observing codes is able
to att ract right man lor I he right job. Morale 01 employees is
rai sed. Their product ivit y increases.
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Ethical company can have ethtcat empic ycvu. MlIlu,,1
ccop eratton and confi dence are enhanced. w nnen t l l h l l ~ a' "
especially uset ur for new employees . They dispel conruoou
01 the l ob and tacnltate training On the strength of cocas. an
ernpcyee can reter on unel hical and illegitimate requests. (II
orders. Employees are more devoted to the Job. bos ses,
sunoromates. and toe company.
3. Customers Benefits
Codes and their observance create a sense of conndence in
the customers. Wi nning t he confidence 01customers and gor,mal
publi c cannel be overemphasized. Customers snow mat I hey
can depend on price, qU<i lity, and terms 01sales 01 the company.
lheir ccnttd ence about unil Oflllit)' 01 policy and eouatt reatmeru
of customers bring more busi ness 10 the company.
4. Advan tages for the i ndustr y
Almos t all the major industri es have lh eir codes. Machiavelli
once said that the good or ethical man was etten an easy
prey lor the uoscropuious. Therefore. the weak or ethical
persons 01 an indusl r, may urute themsel ves 10 behave in a
required euucat fashion. Thus unethical precnces may be
overcome.
Nol only industries but professi ons also neve codes 01
ethics. Doctors, engi neer, accountants. and advocates have
10 work wit hin the codes. Codes have raised rt.e imnge of
their prct esslons .
Codes tend to make it muc h easier to identi fy vjotanon
and punish tnose who behave in an undesirable tastuon. Even
if codes ale n01 strictly totlowec. their mere cronnon <lml
existence at least r etard the degree 01 unet hical action.
Gui delines' in Devel oping Code of Et hi cs
Each code should be adapted and trimmed 10 me rl :'1t1lf ()fl\ cnls
265
of individual group. The lallowing principles shoul d or may be
observed in ' ormulati ng codes:
1. Study what others neve done
Omers' experience may be useful. Ideas may be borrowed
I rom ethers in the identical fields.
2. Don't do it yourself
A manager usuall y has limi ted knowledge and experience in
tbu usual fermat and contents 01 codes. Specialized outside
expert advice should be utili zed in tneu tormuranon.
3. Par tici pation brings support
Those i nvolved in the preparation 01 code s are like ly to be
comrruued 10 their observance. In the torrnutencn 01 various
pol icies respecti ve represeruauvee should be all owed to
panlcipate to ensu re higher ccmmnment
4. Provide tor enforcement
Codes once tormclareo must be entcrcco . Like rules. codes
must bo tcuoweo by every member at an organization no
matter howhigh position he hOlds. There should be no dev iation
and violati on by anyone. Codes should be applied equally to
everyone. Compensation. promotion, transfer. tob maintenance.
and separation should be jus1 and accordi ng to poli cy.
Unwarranted pr ivileges, benef its, and prestige damage the
true spirit of codes.
5, Keep rhe code up to date
Codes should oe trimmed to t ho need of time. Periodic revision
is necessary in view 01 eve r changing envi ronment. nal ional
and intemat o na! cu atre, economy. and technology. Empirical
. we aknesses in tt te code have damaged the reputation of these
instruments to a great degree. So they should be updated as
the expediency demands.
26 6
MUSLIM ETHI CS
Above 1400 years ago Islam gave the ethics It) Ih..': IIl IIll: \II.',
These ethics arestillpracticableanti invogue. '111.' SUIl l l1j;t/ V
soc ial and business c{hi;;s flxed )q h hlm ar e ;1.',
I , Defect (If goods should be disclose! betore the)' are
sold ,
2. Laborer should be paid right in ti me (before his :<: Wl' ,;J!
dries).
3, Labor charges shouht be determiocd Iv;fore yUl.l hire
the laborer.
4. Interest on .:apit..al is unf air mul T:.: r,l" L
5. The- business in any form <i nd f" i: il' (. ; 1)1' pork are
:..alfajrful and haram.
6. All business deal ing.s should be based on truth .
7. Extravagance is prohibited.
s. Concentration of wealth is discouraged.
9. Farce and empty shows are discouraged.
10 Specul ation, sana, addicuce. 11031'(1111::: "f " III
banned.
11 Nudity and sensualism are not allowed.
12 Economic equity hasbeen emphasized.
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i3 The righls . duties, and ebhgat ions of parents and off-
spr ings, teachers and students, hu...bands and wives, and
state and people have been elaborately defined .
14 The lights and duties of e.Ylploy.:rs, buyers,
and seller have also heea div1WJ.
15 Halal income ;l ,I' J food have been made compulsory.
16 Lie. hypocrisy, and dishonesty are
completely banned
NON ...lISl. IM e'r HICS
;; Hmanil anani5m tne basts Md l: hicl clement of all rel igions.
"T hey ent'qhten uno preacn the mankind not 10 exploit one
ancmer.
ttm duterence between isl am and other retlotcns lies
In the f"IC-1 lhat the termer covers atl spirituJI and secular
Wi W. ' C1S 01tne human hi e but the tauer are limited 10 only a
I ewer d:!'!"""';fl sion s
western ue....eicped neto ns tnat are rominaled by Chrislia ns
and Far B.. have H.-giSI(!wd It1' lollowing pracucat
etbtcal actrte.... ement s.
t . They have successtunv uproot ed acuneraucn 01 ev&ry
kind. They cat pur e food. drink uncontaminat ed wat er. and
fake genuine meojctnes.
2, Business is om onthe princi ples of truth and tonesty.
TheIl supply coocs in accordance with samples.
3. Anti-corruption and all other laws are truly observed. AllY
person violati ng them is puni shed accordingly erespecuvc 01
his status in the SOCiety. There are exarroles when presldcnt s.
ministers, and other VIPs in me US, UK, Japan. and 011'101
countr ies had to rosign on various charges of corrupti on and
adultery. In ol her words. lhere is a rule at tawin these oountrios,
and all are equall y treated before law. But in the Thi rd World
countries the upper class including bur eaucrats, rulers. milil ary
and police ofllcers, andother powerful persons are insuperabl e
to the law. .
4. Devek>ped Non-Muslim nations have est ablished public
welfare institutions and organizations Irom which persons
belongi ng 10 any religion can benefit. These institutions and
organizations ate operated Iro m li beral contributi ons 01
industrialists and other rich corporauons. Exampl es are Red
Cross , schools. colleges, untversttles, general hospitals, deal
and dumb. leprosy. and othe r apeciauzed hospi tals, AIDS
and cancer research lnsthutea. Amnesty International, etc.
5. They have det ermin ed the rights and duties of employers
and empl oyees, buyers and sell ers. publi sher s and authors.
etc. These righl s and duties have been so devised l hal no
pany can be aggrieved.
6. Existing phenomenon of the employ ee's fringe benetns.
perks, all owances, holidays, olf days. ovemrne. bonus, leaves.
gratuity, providenl l und, nseo WOrking hours all hav e been
tntrococed by the western world.
7. Credit goes to Ihem l or cO11llelely abol ishing s;lavery from
the world.
B. Hoarding and dearness have been completely chocked .
On their Iestlvals supply is rather increased and pr ices are
lowered.
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9, Businessmen and traders take every care and are fair in
weighino and measurlnq.
10, Their' business world has a proven record of honoring
their promises and commitments. Examples can be cited from
010 western sty led stock, cotton, and other exchanges where
billions 01 dollars transactions are made just orally, and are
honestly honored,
11. Their governments are true and sincere to their people.
They believe in 'for the people', 'of the people', and ' by the
people' .
From Islamic vtewpolntthe following are t he dark aspects
ot the Western society. However, they view them necessary
lor Individual freedom.
1. Their economy is Interest-based.
2. Extravagance, worldly vanity, and pomp are common.
3. Satta, lottery, gambling are all allowed.
4, Nudlty, sensuality, and lasciviousness are free and
unchecked,
5. Eating pork k ~ f . h of pig) is quite common. (Like Muslims.
Jews too d,n'l eat pork). They are addicted to alcoholic
drinks.
UNBELIEVERS' ETHICS
Unbel ievers are mostly inhabitant in the Oomrnunlst countries
like China. North Korea, Vietnam, and East European countries
(the last group has now abandoned communism an? godless
belief).
The unbelievers who are popularly known as atheist have a
good record of following worldly ethics as do the Western
countries. Their additional achievements are as follows:
270
1. Thei r economy Is tnterest-rree.
2. They don't live a ue of pomp, vanny. sensuanry. anti
extravagance.
3. General price l evel is within the reach 01 every citizen.
4. There are no nighl clubs, casinos, and brothels. Nudity is
well -checked.
5. Salt a, tOll ery, gambling in any lorm are nol allowed.
271
Chapter 15
THE CHANGING ENVIRONMENTS OF
MANAGEMENT
I
TWENTIETH CENTURY - PAST AND
FUTURE 213
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CHANGING ENVIRONMENTS
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Demographic or population Trends, Education, City
Problems, Changing Labor Force, Changing Attitude
Toward Business
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CHALLENGES OF THE NEXT DECADE
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High Political Turbulence and Uncertainty
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Slow Economic Growth
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Expensive ca pital and Credit
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Weakening Industrial Discipline
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Public Demand and Government Regulations
A ChaUenge to Prt vate Enterprise System
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QUESTIONS
272
TWENTIETH CENTURY - PAST AND FUtURI!
Herman Kahn, one 01leading IUlutl stl(JD, till" dlllldncllwCll llt_lh
century In four par te:
1. La PremIer Epoque 1006 - 1813 (. Flr.'.r.)
This is the era marked with a groDt ou" betwuen Illn 11ll vtUw:ud
capitalist ccunrnee and the rest 01 the world. In this period
the average economic growth rat e 01advanced capitalist nal ion
was 3.3 %.
2. La Mauvalso Epoquo 1913 - 1947
(= Bad ora)
This era saw two world wars. II also experienced great
depression. lI aly had the rise and l aU of tasolsm. Two great
cc mmunlst rcvonruons. Russian aod Chinese, emerged. Thl s
273
era created two world power s, USA and USSR. Here the
growth rate was law at 1.6 %.
3, La Deuxieme Bella Epoque 1947 - 1973
(=Tha era 01 second prosperity)
The era is marked with cold war, decoJonizallon, emergence
01 middle income nations, emergence 01 Japan as one of the
great est economic powers. and emergence 01 oil producing
rich natons. This era erso experi enced excessive military ru'es
in developing nations.. The growth rate was highest 4.9 %.
4. L'Epoque de Malaise 1973 - 2000
(Unrest era)
Unrest, violence, massacres. calamities. and disorder in third
wor1d countries have till ed lhi s age. Growth rate Is 3.5 percent.
Struggle against imperialism intensified. (U.S.S.R. and European
Communism also dissol ved in this era)
CHANGING ENVIRONMENTS
En\li r(mmenl --refer s ~ ext ernat conditions inlluenclng
development or growth 01 people, animals, or plants. II is
li\l.ing or working conditions. Environments are incessanlly.
changing. A bus iness has to wor k under such dynamic
conditions. Ever Changing environmenls are a challenge to
busi ness, A successl ul manager keeps a constant watch on
environmental.changes and p_/ans accordingly. These changes
are uncontrollable. The lollowing changes should be taken
lnto account:
1. Demographic trends
2. Education and Individual .
3. City problems .
4. Changing nature 01the work force
5. Changing atutuoes toward business
274
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1. Demographic or Population Trends
The world popu lation is fast growing. II has exceeded six
bill ions. Incr ease In populalion has not only caused soci al
cmd economic problems but it also has expanded markets.
'. Pakistan is .atsc facing acut e problem, due 10. whic h
developmental programs have been acversely .atrected. Our
populalion has much greal er number 01 children and youths
lhan the !'liddle-aged anc tne .old. The death rate 01 men is
greate r than women In Pakist an.
2. Education
Education has brought a menial revolution. II has created
self conce pt and sell respect . Pecpte as consumer, customer,
emoovee. or studenl are now well aware of tbeu rights. ounes,
and obncauo ns. Education has created bette r economic
opportunities. By acquiri ng managerial, professional. or tecbrscat
abilities, a young man has laced hi m in a t etter status In
societ y. II is' the era of professional management system as
compare 10 pr evious family management system,
Business and r-ct eestcnat educat fcn has far exceeded
the traditional education 01 art s or humanities. The ,utilil y of
it is now being questioned. On the other hand, educall on i n
busi ness administ ration, engineering is
bring ;, bout a matertat and substantial change In the society
by l m.... )vi ng methods. systems. and l echnology.
3. City Problems
Not only Paki stan but the rest of the worl d Including western
developed nations are lacing the elly problems. Tremendous
shift from villages to the cit ies has created transport , housing,
water, and slum problems. Pollution and energy crisis have
augmented the difHcult ies ot the cit ies . These Pfoblems have
caused mental . psychological. and etnruc complicaUons.
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4. Changing labor lorce and unamployment
labor torce compri ses Skilled. semi skilled. and unskHled
persons . As a result of unchecked increase in population the
atreet or unemploymenl has trembled the third would.
Unemployment has created poverty. unrest , and subversion,
Pakistan's labor terce comprises the persons mostly aging
between 16 and 44 . EmpJoyers preler 10 hire young labor
lorce because 01 jts high productivity.
5. Changing altitude toward business and frtnge
banellls
Now the manager cannot perform his duties silting close in a
cubicle. He has to keep a conslant watch on the prevailing
and changing conditions. For a businessmen technological,
eccoome. legal, ccmpetnjve. and pcnucat envlrcnmer us are
vital aUeeting t rls decisIons. A manager Is expected not only
10 solve business problems but also cullural and community
issues. A corporauon is expected to Improve lhe standard 01
living of masses. It is understood to be responsible for the
wetlare 01 Its employees , and to Improve the standard of
products. Minimum level of wages are expected from It.
Increasing education. automaUon. and desU'e 10f better future
have tcrced the businessmen nol to expk>it their employees.
AIongwlth their salaries and wages laborers demand bonus,
anowances, pensjcn, Increment. job security , housinQ and
'ranspon facilities. and other frlngebenefils.
THE CHALLENGES OF THE NEXT DECADE
The coming decade is expected to be registered with dlUculUes,
problems. aOO challenges. It ls Ukel)10have unrest , disturbanCe,
violence, low groW1h rata. and Increase In cost.
1. High Political Turbulence and Uncertainty
The coming decade, Ihe last one 01 the twentieth century, is
276
likely 10 bring wit h it more uncertai nty and political unrest.
Such ominous and Inauspicious changes have dreaded me
capitali sts and businessmen. Mobilizati on 01capital has sjcwed
down. Now the survival 01 business and capital has become
the only objective of the busi nessmen.
Infl ation, unemployme nt, energy cr isis. pollution. and
environmenl:s, will be the vil al and main problems 01 the coming
decade. To meet t his challenge minority and human rights
will have to be released. A harmony will have to be brought
about between employee and employer, buyer and sell er,
management and shareholder, government and people. and
manufacturer and shop-keeper.
2. Slow Economics Growth
The decade is likel y to contrcnt slow economi cs growth,
therefore, the managers will be compelled to keep their desire
l or growth at a lower level. Increase in popula tion and low
produclivity will keep the economic growth at a low level.
Production wi. come down. New l echnology anti establi shmenl
of new Industries will be timil ed.
3. Expensive Capital and Credit
Starting and establi shing a new busi ness will be costly in the
decade to come . Not only the price of product will rise but the
cost of land. machinery, ccn strucucn. and interest rate will
be htgh. Now a medium-sized business can be establi shed if
millions 01 rupees are avai lable.
4. Weaken ing Industrial Discipli ne
In the thl,d world countries the poor are becoming poorer and
the rich richer. This alonqwit h other teeters will weaken industrial
disc ipline. The pressure of wor ker s will incr ease on
management. Managers will have less amount of authority.
The employees will have to be convinced that their cooperation
with the management will be In their own interest.
277
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5. Public Demands and Government Regulation
. Acc elerat ing publi c pressure will bring more government
regulations In favor 01 work ers. Thus govemment preS$UTO.
emphasi s on human righl S. and increasing critici sm 01experts
of envir, oments wilt complicate the work 01 management.
Unorganind groups and silenl majority will be well -organized
and have a voice in the probl ems. Governmem intrusion in
t he business will grow restricting the freedom 01managers.
6. A Challenge to the Private Enterprise System
Private enlerprlse system has already weakened in the third
world countries. Now this hazard has extended to tne rich
capitalist countries. The youths and
278
1"1

In accordacnce with the new syUabus o(
the UnIversity o( KarachI
BUSINESS COMMUNICATION
For B. Com ((
written by
Mohammed Amin Khalid
B. Com, MBA
An UnexceUed and Unmatched Text Book
. Some Special Features:
More than 36 Business Jetters In complete
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Fourteen Important business reports
providing business, marketing, and
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Theory easily comprehensible and made
easy
Must for
Passing your exams in good grades
Developing your written and verbal
communication skills
Getting a better job after graduation
No Notes or Private Tuition Required
27S

In accordance with the new ayllabua of
The University of Karachi
Introduction to Business
for B.Com.1
by
Mohammed Amln Khalld
B.Com., MBA
!
,.
I
\
..
..
The only and first ever book on
the business Introduction end principle, 'I
that makes the concept quite clear
. ,
Easily understandable
Self taught
Sure success In the exarns
Intensive, complete and exhaustive
Equally good for commerce students of all years
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No Notes or Private Tuition Required
280
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