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  2. 2. BASIC CONCEPTS OF MANAGEMENT <ul><li>INTRODUCTION </li></ul><ul><li>What is the need to have Management in organisations ? </li></ul><ul><ul><li>Members of one organisation or another </li></ul></ul><ul><ul><ul><ul><li>A college </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A Sports team </li></ul></ul></ul></ul><ul><ul><ul><ul><li>a business, etc. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Basic element of any organisation- GOAL OR PURPOSE. </li></ul></ul></ul></ul><ul><ul><li>Some programs or methods for achieving goals - a PLAN. </li></ul></ul><ul><ul><li>Allocate and acquire the resources necessary to achieve goals. </li></ul></ul><ul><ul><li>Need people responsible for helping in achieving the goals- </li></ul></ul><ul><ul><li>‘ MANAGERS ’ </li></ul></ul>
  3. 3. WHAT IS MANAGEMENT? <ul><li>DEFINITION I </li></ul><ul><li>For the purpose of study- </li></ul><ul><li>“ Management is the process of planning, organizing, leading, and controlling the resources of an organisation in the efficient and effective pursuit of specified organisational goals.” </li></ul><ul><li>- Burton & Thakur </li></ul>
  4. 4. EFFICIENCY AND EFFECTIVENESS <ul><li>EFFICIENCY - Ability to maximize the use of resources in achieving organisational objectives- “doing things right” </li></ul><ul><li>Input- output concept. </li></ul><ul><li>EFFECTIVENESS - Ability to determine appropriate objectives: “doing the right things” </li></ul><ul><li>Involves choosing right goals. </li></ul>
  5. 5. PRODUCTIVITY <ul><li>Surplus is created through productive operations. </li></ul><ul><li>Definition: </li></ul><ul><li>“ Productivity is the output-input ratio within a time period with due consideration for quality.” </li></ul><ul><li>Productivity = output </li></ul><ul><li> inputs </li></ul><ul><li>(within a time period and quality considered) </li></ul>
  6. 6. DEFINITION II <ul><li>“ Management is the process of designing and maintaining an environment in which individuals , working together in groups, efficiently accomplish selected aims.” </li></ul><ul><li>- Harold Koontz & Heinz Weihrich </li></ul>
  7. 7. Management As A Science <ul><li>Systematized body of knowledge covering general truths or the operation of general laws. </li></ul><ul><li>Better work by using the organized knowledge about management. </li></ul><ul><li>Organized knowledge underlying the practice. </li></ul>
  8. 8. MANAGEMENT AS AN ART <ul><li>Managing as practice. </li></ul><ul><li>Learning from mistakes and polishing managing art. </li></ul><ul><li>“ Science and art are not mutually exclusive; they are complementary.” </li></ul>
  9. 9. MANAGEMENT AS A PROFESSION <ul><li>Occupation for which specialized knowledge, skills, and training are required. </li></ul><ul><li>Use of these skills for larger interests of the society not for self- satisfaction. </li></ul><ul><li>Success is measured not in terms of money alone. </li></ul>
  10. 10. Certain Characteristics of Profession Missing in Management <ul><li>No formal education requirements for entry into management. </li></ul><ul><li>No system of accreditation or licensing for managers. </li></ul><ul><li>Managers do not have specific clients. </li></ul><ul><li>No clear code of managerial ethics. </li></ul><ul><li>No common body of knowledge required for understanding someone to be a manager. </li></ul><ul><li>Thus, Management is moving closer to the state of professionalism. </li></ul>
  11. 11. Canakya Sutras
  12. 12. Rajyatantram (Management) <ul><li>a-labdha-labhah na alasasya </li></ul><ul><li>“ Gaining that which not in possession is not for the lazy” </li></ul>
  13. 13. Continued… <ul><li>alasasya labdham api raksitum na sakyate </li></ul><ul><li>“ The lazy cannot even protect that which is gained.” </li></ul>
  14. 14. Continued… <ul><li>na ca alasasya raksitam vivaradhate </li></ul><ul><li>“ Neither does the lazy person’s protected (gains) grow.” </li></ul>
  15. 15. Continued… <ul><li>na bhrtyan presayati </li></ul><ul><li>“ (The lazy) does not deploy employees (servants).” </li></ul>
  16. 16. Continued… <ul><li>a-labdha-labhadi catustayam rajya-trantram </li></ul><ul><li>“ These four, starting from gaining the non-possessed, together constitute the technology of enterprise (management).” </li></ul>
  17. 17. Management Functions at Different Organisational Levels <ul><li>Management Levels </li></ul><ul><li>First- Line Managers: </li></ul><ul><ul><li>Responsible for the work of operating employees only and do not supervise other managers. </li></ul></ul><ul><ul><li>‘ First’ or lowest level managers in the organisational hierarchy. </li></ul></ul>
  18. 18. <ul><li>Middle Managers: </li></ul><ul><ul><ul><li>Managers in the midrange of the organisational levels. </li></ul></ul></ul><ul><ul><ul><li>Responsible for other managers and sometimes for some operating employees. </li></ul></ul></ul><ul><ul><ul><li>Report to more senior managers. </li></ul></ul></ul>
  19. 19. <ul><li>Top Managers: </li></ul><ul><ul><ul><li>Responsible for the overall management of the organisation. </li></ul></ul></ul><ul><ul><ul><li>Establish operating policies. </li></ul></ul></ul><ul><ul><ul><li>Guide the organization's interaction with its environment. </li></ul></ul></ul>
  20. 20. Management Functions <ul><li>PLANNING </li></ul><ul><li>“ Process of establishing goals and a suitable course of action for achieving those goals.” </li></ul><ul><ul><ul><li>Actions are based on some method, plan or logic. </li></ul></ul></ul><ul><ul><ul><li>Plans are the guides by which – </li></ul></ul></ul><ul><ul><ul><ul><li>The organisation obtains and commits the resources. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Members of the organisation carry on activities consistent with the chosen objectives and procedures. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Progress toward the objectives is monitored and measured to take corrective actions . </li></ul></ul></ul></ul>
  21. 21. 2. ORGANIZING <ul><li>“ Process of engaging two or more people in working together in a structured way to achieve a specific goal or set of goals.” </li></ul><ul><ul><ul><li>Different goals require different structures. </li></ul></ul></ul><ul><ul><ul><li>Bridge connecting the conceptual idea in creating and planning to the specific means for accomplishing ideas. </li></ul></ul></ul>
  22. 22. 3. LEADING <ul><li>“ Process of directing and influencing the task-related activities of group members or an entire organisation.” </li></ul><ul><ul><ul><li>Management of human resources. </li></ul></ul></ul><ul><ul><ul><li>Interpersonal task of motivating the individual employee. </li></ul></ul></ul><ul><ul><ul><li>Motivate the work unit, work group or department as a complexity of individuals. </li></ul></ul></ul><ul><ul><ul><li>Management of organizational power, political forces and organizational culture. </li></ul></ul></ul><ul><ul><ul><li>Management of organizational communication processes. </li></ul></ul></ul>
  23. 23. 4. CONTROLLING <ul><li>“ Process of ensuring that actual activities conform to planned activities.” </li></ul><ul><li>Main Elements: </li></ul><ul><ul><ul><li>Establishing standards of performance. </li></ul></ul></ul><ul><ul><ul><li>Measuring current performance. </li></ul></ul></ul><ul><ul><ul><li>Comparing this performance to the established standards. </li></ul></ul></ul><ul><ul><ul><li>Taking corrective actions if deviations are detected. </li></ul></ul></ul>
  24. 24. PLANNING Managers use logic & methods to think through goals and actions. ORGANIZNG Managers arrange & allocate work, authority, and resources to achieve organizational goals. LEADING Managers direct, influence and motivate employees to perform essential tasks. CONTROLLING Managers make sure an organisation is moving towards organizational objectives. THE INTERACTIVE NATURE OF THE MANAGEMENT FUNCTIONS
  26. 26. Management Levels and Skills <ul><li>Henry Fayol Identified three basic skills:- </li></ul><ul><li>TECHNICAL SKILL </li></ul><ul><ul><ul><li>Ability to use procedures, techniques and knowledge of a specialized field. </li></ul></ul></ul><ul><ul><ul><li>E.g. Surgeons, engineers, musicians,etc. </li></ul></ul></ul><ul><ul><ul><li>Pertain to knowledge and proficiency in processes, procedures, methods and techniques which are used in doing a work. </li></ul></ul></ul><ul><ul><ul><li>Also called as ‘hard skills’. </li></ul></ul></ul>
  27. 27. <ul><li>HUMAN SKILL </li></ul><ul><ul><li>Ability to work with, understand, and motivate other people as individuals or in groups. </li></ul></ul><ul><ul><li>Management is a process of getting things done with and through people. </li></ul></ul><ul><ul><li>No manager can be effective without suitable human skills irrespective of being technically and conceptually competent. </li></ul></ul>
  28. 28. <ul><li>3 . CONCEPTUAL SKILL </li></ul><ul><ul><li>Ability to co-ordinate and integrate all of an organization's interests and activities. </li></ul></ul><ul><ul><li>Involves seeing the organization as a whole. </li></ul></ul><ul><ul><li>Anticipating how a change in any of its parts will affect the whole. </li></ul></ul>
  29. 29. MANAGERIAL ROLES <ul><li>Henry Mintzberg discussed ten activities of managers in his book “The Nature of Managerial Work”. </li></ul><ul><li>Role is defined as the pattern of behaviour which is defined for different positions. </li></ul><ul><li>Mintzberg identified three major categories of roles of a manager each of which has different defined roles. </li></ul>
  30. 30. <ul><li>INTERPERSONAL ROLES </li></ul><ul><li>Concerned with interaction with other persons, both the organizational members and outsiders. </li></ul><ul><li>Three types of interpersonal roles:- </li></ul><ul><ul><li>Figurehead :- </li></ul></ul><ul><ul><ul><li>Perform activities which are of ceremonial and symbolic nature. </li></ul></ul></ul><ul><ul><ul><li>These include greeting the visitors, attending social functions involving employees, handing out merit certificates and other awards to outstanding employees. </li></ul></ul></ul>
  31. 31. <ul><li>Leader Role </li></ul><ul><ul><ul><li>Involves leading the subordinates and motivating them for willing contributions. </li></ul></ul></ul><ul><ul><ul><li>Requires those leadership and motivational activities that are essential for the management of people. </li></ul></ul></ul><ul><ul><ul><li>These include- </li></ul></ul></ul><ul><ul><ul><ul><ul><li>staffing </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>maintaining a productive work force,etc. </li></ul></ul></ul></ul></ul>
  32. 32. <ul><li>Liaison Role </li></ul><ul><ul><ul><li>Includes activities by which the executive develops and maintains a network of contacts outside the organization. </li></ul></ul></ul><ul><ul><ul><li>Manager serves as a connecting link between his organisation and outsiders or between his unit and other organisational units. </li></ul></ul></ul><ul><ul><ul><li>Major objective- to maintain a link between the organisation and its external environment. </li></ul></ul></ul>
  33. 33. <ul><li>INFORMATIONAL ROLES </li></ul><ul><li>Mainly involve management of information. </li></ul><ul><li>Include communication- giving and receiving information- both within and outside the organisation. </li></ul><ul><li>Three types of informational roles: </li></ul><ul><ul><li>Monitor Role (or Recipient Role):- </li></ul></ul><ul><ul><ul><li>Involves constantly collecting information about those factors which affect a manager’s activities. </li></ul></ul></ul><ul><ul><ul><li>Factors may be within the organisation or outside it. </li></ul></ul></ul><ul><ul><ul><li>Manager uses interpersonal roles to seek information from many sources, both inside and outside the organisation. </li></ul></ul></ul>
  34. 34. <ul><li>Disseminator Role </li></ul><ul><li>Distributes the information to his subordinates who may otherwise not be in a position to collect it. </li></ul><ul><li>Dissemination may be written or oral, formal or informal. </li></ul>
  35. 35. <ul><li>Spokesperson Role </li></ul><ul><li>As a spokesperson, the manager represents his organization or unit while interacting with outsiders. </li></ul><ul><li>Transmitting information to those outside the organisation. </li></ul><ul><li>Information is related to corporate plans, strategies, policies, actions, performances, etc. </li></ul>
  36. 36. <ul><li>DECISIONAL ROLES </li></ul><ul><li>Involves choosing the most appropriate alternative out of the available ones. </li></ul><ul><li>A manager performs four roles: </li></ul><ul><ul><li>Entrepreneur Role:- </li></ul></ul><ul><ul><ul><ul><li>Process by which manager seeks and identifies opportunities to promote improvement and needed change. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Manager assumes certain risk which is involved in terms of the outcomes of an action. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Since these actions can be affected by dynamic and constantly changing factors, manager is required to bring suitable changes. </li></ul></ul></ul></ul>
  37. 37. <ul><li>Disturbance-Handler Role </li></ul><ul><li>Equips the manager to take corrective actions needed to resolve important, unexpected disturbances. </li></ul><ul><li>Disturbances can be in the form of strike by employees, shortage of raw materials, employee complaints and grievances, natural disasters, etc. </li></ul>
  38. 38. <ul><li>Resource Allocator Role </li></ul><ul><li>Manager allocates resources – human, physical and financial- to various organisational units according to their needs. </li></ul><ul><li>Specific activities might include developing and monitoring budgets, predicting future resource needs, forecasting future resource problems, etc. </li></ul>
  39. 39. <ul><li>Negotiator Role </li></ul><ul><li>Manager negotiates with various interest groups in the organisation. </li></ul><ul><li>Such interest groups are – shareholders, employees and outside agencies. </li></ul><ul><li>For example- a manager might represent the corporation to negotiate a trade union contract, a joint venture, or a trade agreement. </li></ul>
  40. 40. Limitations of Mintzberg Approach <ul><li>Sample of five executives used in his research is far too small. </li></ul><ul><li>Type of roles identified by Mintzberg are not applicable to all types of managers. </li></ul><ul><li>Managers have to do some work that is not purely managerial. </li></ul><ul><li>Many of the activities Mintzberg found are evidences of planning, organizing, leading and controlling. </li></ul>
  42. 42. EVOLUTION OF MANAGEMENT THOUGHT <ul><ul><li>Study of how managers achieve results is predominantly a 20 th century phenomenon. </li></ul></ul><ul><ul><li>World War I compelled people to think of solution to the problem of how limited resources could be applied in better way. </li></ul></ul><ul><ul><li>World War II added further problem. </li></ul></ul><ul><ul><li>Growing competition and complexity of managing large business organisation forced to develop systematic management concepts and principles. </li></ul></ul>
  43. 43. Increase in competition has come from factors as:- <ul><li>Technological innovations and their dissemination in business. </li></ul><ul><li>Growing technological obsolescence. </li></ul><ul><li>Increase in capital investment. </li></ul><ul><li>Freedom at national and international markets. </li></ul><ul><li>Increasing buyers’ sovereignty in the markets. </li></ul>
  44. 44. Complexity of managing business has increased because :- <ul><li>Increasing size of business organisations. </li></ul><ul><li>High degree of division of labour and specialisation. </li></ul><ul><li>Increased government regulations and controls to make business more socially-oriented. </li></ul><ul><li>Organized union activities to put pressures on management. </li></ul><ul><li>Pressure of various conflicting interest groups to meet their demands from the organizations. </li></ul>
  45. 45. Management Contributions by Earlier Civilisations Centralisation of command and decentralisation of military operations. Military organisational structures Simple hierarchy of authority with a ranking order of pope, cardinal and local priest. Roman Catholic Church (AD 200) Creation of chain of command by delegating authority to 100 provinces. Romans (AD 284) Application of the span of management and creation of line organisation structure by Moses. Hebrews Code of Hammurabi stipulating guidelines and procedures in respect of trade, property, families and labour. Babylonians (2000 BC) Written records in respect of control of herds, income, taxes and property. Sumerians (3000) BC Planning, mobilisation, organizing and coordination of natural and especially human resources in the building of the pyramids. Egyptians (4500 BC) CONTRIBUTION CIVILIZATION
  46. 46. THE SCIENTIFIC MANAGEMENT SCHOOL <ul><li>Formulated by Frederick W. Taylor & others between 1890 & 1930,that sought to determine scientifically the best methods for performing any task, and for selecting, training and motivating workers. </li></ul><ul><li>Generally acknowledged as “the Father of Scientific Management”. </li></ul><ul><li>Concerned essentially with improving the operational efficiency at the shop-floor level. </li></ul><ul><li>Published many papers and books and compiled all his contributions in his book “Scientific Management”. </li></ul>
  47. 47. PRINCIPLES OF SCIENTIFIC MANAGEMENT <ul><li>Replacing rule of thumb with science </li></ul><ul><ul><ul><li>Application of organized knowledge. </li></ul></ul></ul><ul><ul><ul><li>Emphasis on scientific method which denotes precision in determining any aspect of work. </li></ul></ul></ul><ul><ul><ul><li>Should not be based on mere estimates (rule of thumb). </li></ul></ul></ul>
  48. 48. <ul><li>Harmony in Group Action </li></ul><ul><ul><ul><li>Attempts should be made to obtain harmony in group action rather than discord. </li></ul></ul></ul><ul><ul><ul><li>Mutual give and take situation and proper understanding should exist so that group as a whole contributes to the maximum. </li></ul></ul></ul><ul><li>Maximum Output </li></ul><ul><li>Involves continuous increase in production and productivity instead of restricted production either by management or by workers. </li></ul>
  49. 49. <ul><li>Cooperation </li></ul><ul><ul><ul><li>Involves achieving cooperation rather than chaotic individualism. </li></ul></ul></ul><ul><ul><ul><li>Cooperation between management and workers can be developed through mutual understanding and a change in thinking. </li></ul></ul></ul><ul><ul><ul><li>Based on mutual confidence, cooperation and goodwill. </li></ul></ul></ul>
  50. 50. <ul><li>Development of Workers </li></ul><ul><ul><ul><li>All workers should be developed to the fullest extent possible for their own and for the company’s highest prosperity. </li></ul></ul></ul><ul><ul><ul><li>Training should be provided to workers to keep them fully fit according to the new methods of working. </li></ul></ul></ul>
  51. 51. OPPOSITION OF SCIENTIFIC MANAGEMENT <ul><ul><li>Many followers took aggressive mechanical view of production and sidelined human aspect at the workplace. </li></ul></ul><ul><ul><li>Work used to be performed under close and strict supervision based on authoritarian approach. </li></ul></ul><ul><ul><li>Lack of scientific standardization of work and whatever standards used to be set by the management, workers had to follow strictly. </li></ul></ul><ul><ul><li>Most crucial element under contention was Differential rate system- Taylor’s compensation system involving the payment of higher wages to more efficient workers which was interpreted by trade unions as a new method of exploiting workers by the industrialists. </li></ul></ul>
  52. 52. THE GILBRETHS <ul><li>A construction contractor by trade, Frank Gilbreth gave up his contracting career in1912 to study scientific management after hearing Taylor speak at a professional meeting. </li></ul><ul><li>Frank and his wife Lillian, a psychologist, studied work to eliminate wasteful hand-and-body motions. </li></ul><ul><li>Focused on ways of promoting the individual worker’s welfare. </li></ul><ul><li>Ultimate aim of scientific management was to help workers reach their full potential as human beings. </li></ul>
  53. 53. <ul><li>First researchers to use motion pictures to study hand-and-body motions. </li></ul><ul><li>Invented a device called microchronometer that recorded a worker’s motions and amount of time spent doing each motion. </li></ul><ul><li>Wasted motions missed by the naked eye could be identified and eliminated. </li></ul><ul><li>Devised a classification scheme to label 17 basic hand motions (search,grasp,hold,etc.) which they called therbligs . </li></ul>
  54. 54. HENRY L. GANTT <ul><li>Worked with Taylor on several projects and began to reconsider Taylor’s incentive system when he went out on his own as a consulting industrial engineer. </li></ul><ul><li>Abandon the differential rate system. </li></ul><ul><li>Came up with new idea- </li></ul><ul><ul><li>Every worker who finished a day’s assigned work load would win a 50-cent bonus. </li></ul></ul><ul><ul><li>Second motivation- the supervisor would earn a bonus for each worker who reached the daily standard, plus an extra bonus if all the workers reached it. </li></ul></ul><ul><ul><li>This would spur supervisors to train their workers to do a better job. </li></ul></ul>
  55. 55. <ul><li>Every worker’s progress was rated publicly and recorded on individual bar charts- </li></ul><ul><li>Black – Days the worker made the standard. </li></ul><ul><li>Red - When he or she fell below it. </li></ul><ul><li>Beyond this, he originated a charting system production scheduling – “the Gantt Chart” which is still in use today. </li></ul><ul><li>Formed the basis for two charting devices which were developed to assist in planning, managing and controlling complex organisations – </li></ul><ul><ul><ul><li>CPM ( Critical Path Method- originated by Du Pont). </li></ul></ul></ul><ul><ul><ul><li>PERT (Program Evaluation & Review Technique developed by Navy). </li></ul></ul></ul>
  56. 56. How Do Today’s Managers Use Scientific Management? <ul><li>Principles of Scientific management which are used today :- </li></ul><ul><ul><li>Analysing the basic work tasks that must be performed. </li></ul></ul><ul><ul><li>Use time and motion study to eliminate wasted motions. </li></ul></ul><ul><ul><li>Hire the best qualified workers for a job. </li></ul></ul><ul><ul><li>Design incentive systems based on output. </li></ul></ul>
  57. 57. MODERN OPERATIONAL MANAGEMENT THEORY/ CLASSICAL ORGANISATION THEORY SCHOOL <ul><li>Attempt pioneered by Henri Fayol, to identify the principles and skills that underlie effective management. </li></ul><ul><li>HENRI FAYOL </li></ul><ul><li>Real father of modern operational management theory – French industrialist Henri Fayol. </li></ul><ul><li>Contributions are termed as operational management or administrative management. </li></ul><ul><li>Contributions were first published in book form titled ‘Administration Industrielle at Generale’ in French language in 1916. </li></ul><ul><li>Its English version was published in 1949 in the United States of America. </li></ul>
  58. 58. FAYOL’S GENERAL PRINCIPLES OF MANAGEMENT <ul><li>Gave fourteen principles of management. </li></ul><ul><li>Gave emphasis on two things:- </li></ul><ul><ul><li>The list of management principles is not exhaustive but suggestive and has discussed only those principles which he followed on most occasions. </li></ul></ul><ul><ul><li>Principles of management are not rigid but flexible. </li></ul></ul>
  59. 59. Fayol’s Fourteen Principles of Management <ul><li>Division of Work: Specialisation allows the individual to build up experience, and to continuously improve his skills . Thereby he can be more productive. </li></ul><ul><li>Authority and Responsibility: The right to issue commands, along with which must go the balanced responsibility for its function. </li></ul><ul><li>Discipline: Employee must obey, but this is two-sided: employees will only obey orders if management play their part by providing good leadership. </li></ul>
  60. 60. <ul><li>Unity of Command: Each worker should have only one boss with no other conflicting lines of command. </li></ul><ul><li>Unity of Direction: People engaged in the same kind of activities must have the same objectives in a single plan. This is essential to ensure unity and coordination in the enterprise. </li></ul><ul><li>Subordination of Individual Interest to General Interest: Common interest is above the individual interest. Individual interest must be subordinate to general interest when there is a conflict between the two. </li></ul>
  61. 61. <ul><li>Remuneration of Personnel: Payment is an important motivator although by analyzing a number of possibilities. </li></ul><ul><li>Centralisation: He refers the extent to which authority is centralised or decentralised. </li></ul><ul><li>Scalar Chain: A hierarchy is necessary for unity of direction. It refers to the number of levels in the hierarchy from the ultimate authority to the lowest level in the organisation. </li></ul>
  62. 62. <ul><li>Order: Principle relating to the arrangement of people and things. </li></ul><ul><li>Material Order- Place for everything and everything should be in its place. </li></ul><ul><li>Social order- There should be the right man in the right place. </li></ul><ul><li>Equity: It is the combination of justice and kindness. Equity in treatment and behavior is liked by everyone and it brings loyalty in the organisation. </li></ul>
  63. 63. <ul><li>Stability of Tenure: No employee should be removed within short time. There should be reasonable security of jobs. </li></ul><ul><li>Initiative: Within the limits of authority and discipline, managers should encourage their employees for taking initiative. It increases zeal and energy on the part of human beings. </li></ul><ul><li>Esprit de Corps: This is the principle of ‘union is strength’ and extension of unity of command for establishing team work. The manager should encourage esprit de corps among his employees. </li></ul>
  64. 64. Dissimilarity between contributions of Taylor and Fayol Systematic theory of management Basis for accomplishment on production line. Overall Contribution Personal experiences translated into universal truths. Scientific observation & measurement Results Managerial functions. Production and engineering Orientation Overall efficiency by observing certain principles. Efficiency through work simplification and standardisation Focus Higher management level Shop-floor level Perspective Fayol Taylor Basis of Difference
  65. 65. Administrative Theory <ul><li>MAX WEBER (1864-1920) </li></ul><ul><li>A German sociologist who studied organizational activity. </li></ul><ul><li>Developed a theory of authority structures and relations in the early 1900s. </li></ul><ul><li>Any goal oriented organisation consisting of thousands of individuals would require carefully controlled regulation of its activities. </li></ul>
  66. 66. <ul><li>Developed a theory of bureaucratic management that stressed the need for a strictly defined hierarchy governed by clearly defined regulations and lines of authority. </li></ul><ul><li>Bureaucracy- A form of organisation characterized by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships. </li></ul><ul><li>Believed that technical competence should be emphasized and that performance evaluations should be made entirely on the basis of merit. </li></ul>
  67. 67. Features of Weber’s Ideal Bureaucratic Structure <ul><li>Recognized that this “ideal bureaucracy” did not exist in reality. </li></ul><ul><li>A basis for theorizing about work and how work could be done in large groups. </li></ul><ul><li>Administrative Class: </li></ul><ul><ul><ul><li>Responsible for maintaining co-ordinative activities of the members. </li></ul></ul></ul><ul><ul><ul><li>People are paid and are whole time employees. </li></ul></ul></ul><ul><ul><ul><li>Receive salary and other perquisites normally based on their positions. </li></ul></ul></ul><ul><ul><ul><li>Their tenure in the organisation is determined by the rules and regulations of the organisation. </li></ul></ul></ul><ul><ul><ul><li>Selected for the purpose of employment based on their competence. </li></ul></ul></ul>
  68. 68. <ul><li>Authority Hierarchy: </li></ul><ul><ul><ul><li>There is a hierarchy of positions in the organization. </li></ul></ul></ul><ul><ul><ul><li>Hierarchy is a system of ranking various positions in descending scale from top to bottom of the organization. </li></ul></ul></ul><ul><ul><ul><li>Each lower office is subject to control and supervision by a higher office. </li></ul></ul></ul><ul><li>Division of Labor: </li></ul><ul><ul><ul><li>Work is divided on the basis of specialization to take the advantages of division of labor. </li></ul></ul></ul><ul><ul><ul><li>Tries to ensure that each office has a clearly defined area of competence within the organization. </li></ul></ul></ul><ul><ul><ul><li>No work should be left uncovered. </li></ul></ul></ul>
  69. 69. <ul><li>Official Rules: </li></ul><ul><ul><ul><li>Administrative process is continuous and governed by official rules. </li></ul></ul></ul><ul><ul><ul><li>Rules provide the benefits of stability, continuity, and predictability. </li></ul></ul></ul><ul><ul><ul><li>Each official knows precisely the outcome of his behavior in a particular manner. </li></ul></ul></ul><ul><li>Impersonal Relationships: </li></ul><ul><ul><ul><li>Relationships among individuals are governed through the system of official authority and rules. </li></ul></ul></ul><ul><ul><ul><li>Official positions are free from personal involvement, emotions and sentiments. </li></ul></ul></ul><ul><ul><ul><li>Concept used in dealing with organizational relations as well as relations between the organisation and outsiders. </li></ul></ul></ul>
  70. 70. <ul><li>Official Records: </li></ul><ul><ul><ul><li>Maintenance of proper official records. </li></ul></ul></ul><ul><ul><ul><li>Decisions and activities of the organization are formally recorded and preserved for future reference. </li></ul></ul></ul><ul><ul><ul><li>An official record is almost regarded as encyclopedia of various activities performed by the people in the organization. </li></ul></ul></ul>
  71. 71. Demerits of Weber’s Bureaucratic Model <ul><li>Invalidity of Bureaucratic Assumptions: </li></ul><ul><ul><ul><li>Rules often become source of inefficiency. </li></ul></ul></ul><ul><ul><ul><li>Rigid organisational hierarchy works against hierarchy. </li></ul></ul></ul><ul><ul><ul><li>Total impersonal approach cannot be adopted while dealing with people. </li></ul></ul></ul><ul><li>Goal Displacement: </li></ul><ul><ul><ul><li>Resources are used for a purpose other than for the organisational goals. </li></ul></ul></ul><ul><ul><ul><li>Following of rules may become the objective of the organisation and organisational objectives may become secondary. </li></ul></ul></ul><ul><ul><ul><li>People may be judged on the basis of observance of rules not results. </li></ul></ul></ul>
  72. 72. <ul><li>Unintended Consequences: </li></ul><ul><ul><ul><li>Excessive specialisation may lead to trained incapacity in the organisation which refers to a phenomenon where a person does not see beyond his training and tries to correlate the matter with total situation on the basis of his training. </li></ul></ul></ul><ul><ul><ul><li>Conflicts between professionals and bureaucrats. </li></ul></ul></ul><ul><ul><ul><li>Professionals try to work according to their discipline for efficiency. </li></ul></ul></ul><ul><ul><ul><li>Bureaucrats try to emphasize rules and regulations. </li></ul></ul></ul><ul><ul><ul><li>Conflict between organisation and individuals. </li></ul></ul></ul>
  73. 73. <ul><li>Inhuman Organisation: </li></ul><ul><ul><ul><li>Behavioural scientists criticized the most, emphasizing on human behaviour in the organisation. </li></ul></ul></ul><ul><ul><ul><li>It is incompatible with the development of a mature personality. </li></ul></ul></ul><ul><ul><ul><li>It promotes conformity. </li></ul></ul></ul><ul><ul><ul><li>It does not consider the informal organisation and interpersonal difficulties. </li></ul></ul></ul><ul><ul><ul><li>The hierarchy interferes with communication. </li></ul></ul></ul><ul><ul><ul><li>Innovation and new knowledge are stifled. </li></ul></ul></ul>
  74. 74. <ul><li>Closed-System Perspective: </li></ul><ul><ul><ul><li>Closed System is :- </li></ul></ul></ul><ul><ul><ul><ul><li>Self contained. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Self maintaining. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Rigid. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Static. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Ignores external conditions. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Does not allow for adapting to changes in the environment. </li></ul></ul></ul></ul><ul><ul><ul><li>Bureaucratic organisation can work well when environment is highly static and predictable. </li></ul></ul></ul><ul><ul><ul><li>An open-system perspective is more suitable for the management of modern day organisations where more interaction between organisation and environment is required. </li></ul></ul></ul>
  75. 75. BEHAVIORAL APPROACH <ul><li>HAWTHORNE STUDIES </li></ul><ul><li>Hawthorne plant of Western Electric Company, Chicago, was manufacturing telephone system bell. </li></ul><ul><li>Employed about 30,000 employees at the time of experiments. </li></ul><ul><li>Most progressive company with pension and sickness benefits and other recreational facilities. </li></ul><ul><li>Great deal of dissatisfaction among the workers and productivity was not up to the mark. </li></ul><ul><li>A team was constituted to investigate the real causes behind this phenomenon. </li></ul>
  76. 76. <ul><li>First set of experiment was to investigate the relationship between the level of lighting in the workplace and worker productivity. </li></ul><ul><li>Control and experimental groups were set up. </li></ul><ul><li>Experimental group being exposed to various lighting intensities. </li></ul><ul><li>Control group working under a constant intensity. </li></ul><ul><li>Findings: </li></ul><ul><li>As the level of light was increased in the experimental group, output for both groups increased. </li></ul><ul><li>As the light level was decreased in the experimental group, productivity continued to increase in both groups. </li></ul><ul><li>A productivity decrease was observed in the experimental group only when the level of light was reduced to that of a moonlight. </li></ul>
  77. 77. <ul><li>The engineers couldn’t explain what they had witnessed but concluded that illumination intensity was not directly related to group productivity and something else must’ve contributed to the results. </li></ul><ul><li>In 1927, the Western Electric engineers asked Harvard professor Elton Mayo and some associates to join the study as consultants. </li></ul><ul><li>New Set of Experiment : </li></ul><ul><li>A small group of workers was placed in a separate room and a number of variables were altered:- </li></ul><ul><ul><li>Wages were increased. </li></ul></ul><ul><ul><li>Rest periods of varying length were introduced. </li></ul></ul><ul><ul><li>The work day and work week were shortened. </li></ul></ul><ul><ul><li>Researchers also allowed the groups to choose their own rest periods and to have a say in other suggested changes. </li></ul></ul>
  78. 78. <ul><li>Findings: </li></ul><ul><li>Because of special attention, both the groups have developed a group pride that motivated them to improve their work performance. </li></ul><ul><li>Sympathetic supervision had further reinforced their motivation. </li></ul><ul><li>Employees would work harder if they believed management was concerned about their welfare and supervisors paid special attention to them. This phenomenon was labeled as the Hawthorne Effect. </li></ul><ul><li>Informal work groups- the social environment of employees- have a positive influence on productivity. </li></ul>
  79. 79. Criticisms of Hawthorne Experiments <ul><li>The Hawthorne plant was not a typical plant because it was a thoroughly unpleasant place to work. Therefore, the results could not be valid for others. </li></ul><ul><li>It assumed acceptance of management’s goals and look on the worker as someone to be manipulated by management. </li></ul><ul><li>Insufficient attention was given to the attitudes that people bring with them to the workplace. </li></ul><ul><li>There was bias and preconception on the part of the Harvard researchers. </li></ul>
  80. 80. CHESTER IRVING BARNARD <ul><li>Chester Barnard (1886-1961) was an American Executive and an early organisational theorists. </li></ul><ul><li>He was author of Functions of the Executive , an influential 20 th century management book, which presents a theory of organisation and the functions of executives in the organisation. </li></ul><ul><li>His analysis of management is truly a social systems approach,i.e., an organisation is essentially a cultural system composed of people who work in cooperation. </li></ul>
  81. 81. Contributions of Barnard <ul><li>Concept of Organisation: </li></ul><ul><ul><ul><li>Defined formal organisation as a system of consciously coordinated activities of two or more persons. </li></ul></ul></ul><ul><ul><ul><li>An organisation exists when the following three conditions are fulfilled:- </li></ul></ul></ul><ul><ul><ul><ul><li>There are persons able to communicate with each other. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>They are willing to contribute to the action. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>They attempt to complete the common purpose. </li></ul></ul></ul></ul>
  82. 82. <ul><li>Formal and Informal Organisations: </li></ul><ul><ul><ul><li>An organisation can be divided into two parts:- </li></ul></ul></ul><ul><ul><ul><li>Formal: Consciously coordinated interactions which have a deliberate and common purpose. </li></ul></ul></ul><ul><ul><ul><li>Informal: Refers to those social interactions which do not have consciously coordinated joint purpose. </li></ul></ul></ul><ul><ul><ul><li>A manager should take into account both types of organisations. </li></ul></ul></ul><ul><ul><ul><li>Executives should encourage the development of Informal organisation. </li></ul></ul></ul>
  83. 83. <ul><li>Elements of Organisation: </li></ul><ul><ul><ul><li>There are four elements of a formal organisation:- </li></ul></ul></ul><ul><ul><ul><ul><li>A system of fictionalization so that people can specialise,that is, departmentation. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A system of effective and efficient incentives so as to induce people to contribute to group action. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A system of power which will lead group members to accept the decisions of the executives </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A system of logical decision making. </li></ul></ul></ul></ul>
  84. 84. <ul><li>Authority: </li></ul><ul><ul><ul><li>Gave a new concept of authority which is termed as ‘acceptance theory of authority’ or ‘bottom-up authority’. </li></ul></ul></ul><ul><ul><ul><li>A person will accept a communication as being authoritative only when four conditions are met simultaneously:- </li></ul></ul></ul><ul><ul><ul><ul><li>He can understand the communication. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>He believes that it is not inconsistent with the organisational purpose. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>He believes it to be compatible with his personal interest as a whole. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>He is mentally and physically able to comply with it. </li></ul></ul></ul></ul>
  85. 85. <ul><li>Functions of the Executive: </li></ul><ul><ul><ul><li>Maintenance of organisational communication through a system of organisation, that is, through formal interactions. </li></ul></ul></ul><ul><ul><ul><li>Securing of essential services from individuals so as to achieve organisational purpose. </li></ul></ul></ul><ul><ul><ul><li>Formulation and definition of organisational purpose. </li></ul></ul></ul><ul><li>Motivation: </li></ul><ul><ul><ul><li>Apart from financial incentives, he suggested a number of non-financial techniques for motivating people. </li></ul></ul></ul><ul><ul><ul><li>Some of them are: opportunity of power and distinction, pride of workmanship, pleasant organisation, participation and feeling of belonging-ness. </li></ul></ul></ul>
  86. 86. <ul><li>Executive Effectiveness: </li></ul><ul><ul><ul><li>It requires a high level of responsible leadership. </li></ul></ul></ul><ul><ul><ul><li>Leadership is the most strategic factor in securing cooperation from the people. </li></ul></ul></ul><ul><ul><ul><li>It requires high calibre, technological competence, and technical and social skills. </li></ul></ul></ul><ul><li>Organisational Equilibrium: </li></ul><ul><ul><ul><li>Matching of individual efforts and organisational efforts to satisfy individuals. </li></ul></ul></ul><ul><ul><ul><li>Demands and aspirations of individuals change and the organisation has to cope with the dynamic situation. </li></ul></ul></ul><ul><ul><ul><li>Equilibrium of the organisation depends on the individuals working in it, other organisations, and the society as a whole. </li></ul></ul></ul>
  87. 87. Douglas McGregor <ul><li>Distinguished two alternative basic assumptions about people and their approach to work. </li></ul><ul><li>THEORY X: </li></ul><ul><li>Presents an essentially negative view of people. </li></ul><ul><li>Assumes that workers have little ambition, dislike work, want to avoid responsibility, and need to be closely controlled to work effectively. </li></ul><ul><li>Presented a traditional view of motivation that holds that work is distasteful to employees, who must be motivated by force, money or praise. </li></ul>
  88. 88. <ul><li>THEORY Y: </li></ul><ul><li>Offers a positive view of people. </li></ul><ul><li>Assumes that workers can exercise self-direction, accept and actually seek out responsibility, and consider work to be a natural activity. </li></ul><ul><li>People are inherently motivated to work and do a good job. </li></ul>
  89. 89. SYSTEMS APPROACH <ul><li>Rather than dealing separately with the various segments of an organisation, the systems approach to management views the organisation as a unified, purposeful system composed of interrelated parts. </li></ul><ul><li>Approach give managers a way of looking at the organisation as a whole and as a part of the larger, external environment. </li></ul><ul><li>Activity of any segment of an organisation affects, in varying degrees, the activity of every other segment. </li></ul><ul><li>Mangers cannot function wholly within the confines of the traditional organisation chart. </li></ul>
  90. 90. Features of a System <ul><li>A system is basically a combination of parts- subsystems. </li></ul><ul><li>Parts and sub-parts of a system are mutually related to each other. </li></ul><ul><li>A system is not merely the totality of parts and subparts but their arrangement is more important. </li></ul><ul><li>Synergy:- The situation in which the whole is greater than its parts. In organisational terms, synergy means that departments that interact co-operatively are more productive than they would be if they operated in isolation. </li></ul><ul><li>2 + 2 = 5 </li></ul>
  91. 91. <ul><li>A system can be identified because it has a boundary that separates it from its environment. </li></ul><ul><li>Boundary classifies it into two parts:- </li></ul><ul><li>Closed System: A system that does not interact with its environment. </li></ul><ul><li>Open System: A system that interacts with its environment. </li></ul><ul><li>System transforms inputs into outputs. </li></ul><ul><li>Three aspects are involved in this transformation process:- inputs, mediator, outputs. </li></ul><ul><li>System works as a mediator. </li></ul>
  92. 92. <ul><li>Feedback is the key to system controls. </li></ul><ul><li>It is the part of system control in which the results of actions are returned to the individual, allowing work procedures to be analyzed and corrected. </li></ul>
  93. 93. Limitations of Systems Approach <ul><li>Abstract Approach:- </li></ul><ul><ul><ul><li>It is not of much use of a practicing manager. </li></ul></ul></ul><ul><ul><ul><li>Its contribution to managing is limited. </li></ul></ul></ul><ul><ul><ul><li>E.g., An organisation is a social system and therefore, is related with other organisation in the society. This approach fails to spell out the relationship among these. </li></ul></ul></ul><ul><li>Lack of Universality:- </li></ul><ul><ul><ul><li>It cannot be applied to all organisation as it is suitable for large and complex organisation, but not suitable for small organisation. </li></ul></ul></ul><ul><li>This approach does not offer anything new. </li></ul><ul><li>Managers have been doing their jobs seeing the problems as a network of interrelated element with interaction between environment inside and outside of their organisation. </li></ul>
  94. 94. CONTINGENCY APPROACH <ul><li>Extension of systems approach. </li></ul><ul><li>A manager’s task is to identify which technique will, in a particular situation , under particular circumstances , and at a particular time , best contribute to the attainment of management goals. </li></ul><ul><li>It represents an important turn in modern management theory , because it portrays each set of organizational relationships in its unique circumstances. </li></ul><ul><li>Also known as situational approach. </li></ul>
  95. 95. Features of Contingency Approach <ul><li>Management action is contingent on certain action outside the system or subsystem as the case may be. </li></ul><ul><li>Organisational action should be based on the behavior of action outside the system so that organisation should be integrated with the environment. </li></ul><ul><li>Because of the specific organisation-environment relationship, no action can be universal. It varies from situation to situation. </li></ul>
  96. 96. <ul><li>Management is entirely situational and there is nothing like universal principles of management, or one best way of doing a particular thing. </li></ul><ul><li>The approach suggests suitable alternatives for those managerial actions which are generally contingent upon external and internal environment. </li></ul><ul><li>It suggests that since organisation interacts with it environment, neither the organisation nor any of its subsystems are free to take absolute action. </li></ul>
  97. 97. Limitations of Contingency Approach <ul><li>Inadequate Literature:- </li></ul><ul><ul><ul><li>It has not adequately spelled out various types of actions which can be taken under different situations. </li></ul></ul></ul><ul><ul><ul><li>It is not sufficient to say that ‘managerial action depends on the situation. </li></ul></ul></ul><ul><li>Complex:- </li></ul><ul><ul><ul><li>When put into practice, this approach becomes very complex. </li></ul></ul></ul><ul><ul><ul><li>Determination of situation in which managerial action is to be taken involves analysis of a large number of variables with multi-dimensions. </li></ul></ul></ul>
  98. 98. <ul><li>Difficult Empirical Testing:- </li></ul><ul><ul><ul><li>Methodology available for testing consists of too many factors which makes testing difficult. </li></ul></ul></ul><ul><ul><ul><li>It cannot be adopted to managerial actions. </li></ul></ul></ul><ul><li>Reactive not Proactive:- </li></ul><ul><ul><ul><li>It does not suggest what managers can do in a given situation. </li></ul></ul></ul><ul><ul><ul><li>Managers are supposed to take actions based on the situation. </li></ul></ul></ul>
  99. 99. Mckinsey 7-S Framework <ul><li>Developed in the early 1980s by Tom Peters and Robert Waterman, two consultants working at the McKinsey & Company consulting firm, the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful. Following are the uses:- </li></ul><ul><li>Improve the performance of a company; </li></ul><ul><li>Examine the likely effects of future changes within a company; </li></ul><ul><li>Align departments and processes during a merger or acquisition; or </li></ul><ul><li>Determine how best to implement a proposed strategy. </li></ul>
  100. 100. Seven Elements <ul><li>Strategy: the plan devised to maintain and build competitive advantage over the competition. </li></ul><ul><li>Structure: the way the organization is structured and who reports to whom. </li></ul><ul><li>Systems: the daily activities and procedures that staff members engage in to get the job done. </li></ul>
  101. 101. Continued… <ul><li>Shared Values: called &quot;superordinate goals&quot; when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic. </li></ul><ul><li>Style: the style of leadership adopted. </li></ul><ul><li>Staff: the employees and their general capabilities. </li></ul><ul><li>Skills: the actual skills and competencies of the employees working for the company </li></ul>
  102. 103. Japanese Management System <ul><li>Also known as Theory Z, describes the major postulates of Japanese management practices and how these practices can be adopted to the environment of United States and other countries. </li></ul><ul><li>William G. Ouchi is among those who have studied Japanese business in the hope that it might provide solutions to some American problems. </li></ul>
  103. 104. Features of Theory Z <ul><li>Based on the Japanese management practices and motivational pattern, Ouchi has suggested five broad features:- </li></ul><ul><li>Trust:- </li></ul><ul><ul><ul><li>Trust between employees, supervisors, work groups, unions, management, and government. </li></ul></ul></ul><ul><ul><ul><li>When trust and openness exist, the chances of conflict are automatically reduced to the minimum. </li></ul></ul></ul><ul><li>Strong Bond between Organisation and Employees:- </li></ul><ul><ul><ul><li>Encouraging life-time employment. </li></ul></ul></ul><ul><ul><ul><li>Slowing down of evaluation and promotion, and giving more emphasis to horizontal movement which reduces stagnation. </li></ul></ul></ul>
  104. 105. <ul><li>Employee Involvement:- </li></ul><ul><ul><ul><li>Involvement comes through meaningful participation. </li></ul></ul></ul><ul><ul><ul><li>There can be some decisions which are taken without consulting employees but they are informed later. </li></ul></ul></ul><ul><ul><ul><li>Idea is not to slow down decision-making process but to involve employees for their commitment and giving due recognition to them. </li></ul></ul></ul><ul><li>No formal Structure:- </li></ul><ul><ul><ul><li>There should be a perfect team-work with co-operation along with sharing of information, resources and plans. </li></ul></ul></ul><ul><ul><ul><li>It places emphasis on rotational aspect of employee placement which provides opportunities to him to understand how his work affects others or is affected by others. </li></ul></ul></ul>
  105. 106. <ul><li>Coordination of Human Beings:- </li></ul><ul><ul><ul><li>Leader’s role is to coordinate people and not technology to achieve productivity. </li></ul></ul></ul><ul><ul><ul><li>Purpose is to achieve commitment of employees to the development of a less-selfish-more-cooperative approach to work. </li></ul></ul></ul><ul><ul><ul><li>Leader must develop trust which requires a complete openness in the relationship. </li></ul></ul></ul><ul><ul><ul><li>This develops a common culture and no class feeling in the organisation. </li></ul></ul></ul>
  106. 107. Limitations of Theory Z <ul><li>Provision of life-time employment to develop strong bond between the organisation and the employees seems to be difficult because of two reasons:- </li></ul><ul><ul><ul><li>Employer cannot retain an employee who is unproductive because of easy availability of substitutes. </li></ul></ul></ul><ul><ul><ul><li>An employee will not hesitate to switch over, if there is a relative rise in the income or other non-monetary benefits. </li></ul></ul></ul><ul><li>Common culture and no class feeling within an organisation is very difficult as people come from a wide variety of environments. </li></ul>
  107. 108. <ul><li>Proposition that shareholders will accept less profit or accept losses to avoid lay-off, does not seem feasible where most of the organisations believe in low level of social responsibility. </li></ul><ul><li>Following operational problems may come while implementing Theory Z:- </li></ul><ul><ul><ul><li>Organisation without structure has been emphasised but how actually it works is yet unanswered. </li></ul></ul></ul><ul><ul><ul><li>Degree of horizontal movement is limited to the extent to which skills needed for one job can be transferred to other jobs. </li></ul></ul></ul>
  108. 109. Pertinent Features of Japanese Management System <ul><li>Company wide union or House union. </li></ul><ul><li>General preference to inexperienced fresh graduates from schools and colleges. </li></ul><ul><ul><li>Temporary Staffing </li></ul></ul><ul><ul><li>University Recruiting </li></ul></ul><ul><ul><li>Mid-Career Hiring </li></ul></ul><ul><li>Preference for promotions from within. </li></ul><ul><li>Life-time employment. </li></ul>
  109. 110. Continued… <ul><li>Quality Control Circles (QCCs). </li></ul><ul><li>Training Practices. </li></ul><ul><li>Decision making and consultation practices. </li></ul><ul><li>Settlement of conflict through negotiations. </li></ul><ul><li>Compensation. </li></ul>
  111. 112. DEFINITION <ul><li>“ Social responsibilities refer to the businessman’s decisions and actions taken to reasons at least partially beyond the firm’s direct economic or technical interest.” </li></ul>
  112. 113. Social Responsibility of Managers <ul><li>Responsibility towards shareholders. </li></ul><ul><li>Responsibility towards consumers. </li></ul><ul><li>Responsibility towards employees. </li></ul><ul><li>Responsibility towards creditors. </li></ul><ul><li>Responsibility towards the government. </li></ul><ul><li>Responsibility towards suppliers. </li></ul><ul><li>Responsibility towards competitors. </li></ul><ul><li>Responsibility towards general public. </li></ul>
  113. 114. Arguments For Social Involvement of Business <ul><li>Business: A part of the society. </li></ul><ul><li>Avoidance of Government regulations. </li></ul><ul><li>Internal activities impact on the external environment. </li></ul><ul><li>Social involvement may be in the interest of stakeholders. </li></ul><ul><li>Long-run self-interest of business. </li></ul><ul><li>Profitably re-utilisation of wasteful items. </li></ul>
  114. 115. Arguments Against Social Involvement of Business <ul><li>Contrary to basic function of Business. </li></ul><ul><li>Incomplete support for involvement in social actions. </li></ul><ul><li>It would create excessive cost for business. </li></ul><ul><li>Lack of social skills needed to deal with the problems of society. </li></ul><ul><li>Lack of accountability of business to society. </li></ul>
  115. 116. PLANNING
  116. 117. WHAT IS PLANNING? <ul><li>A process that involves defining the organisation’s goals, establishing an overall strategy for achieving those goals, and developing a comprehensive set of plans to integrate and co-ordinate organizational work. </li></ul><ul><li>Ongoing process that reflects and adapts to changes in the environment surrounding each organization. </li></ul><ul><li>Planning is an activity consisting of a process, hence various sub-activities. </li></ul><ul><li>Plans are the documents that outline how goals are going to be met including resource allocations, schedules, and other necessary actions to accomplish the goals. </li></ul><ul><li>Goals are desired outcomes for individuals, groups or entire organizations. </li></ul>
  117. 118. WHY DO MANAGERS PLAN? <ul><li>Planning gives direction to managers by establishing coordinated effort. </li></ul><ul><li>Planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses. </li></ul><ul><li>Planning reduces overlapping and wasteful activities by coordinating activities around established plans. </li></ul><ul><li>Planning establishes goals or standards that are used in controlling. </li></ul>
  118. 119. TYPES OF PLANS <ul><li>A plan is a commitment of resources to a particular course of action believed necessary to achieve specific purpose. </li></ul><ul><li>A plan can be effective only if properly understood which managers, generally, fail to do. </li></ul><ul><li>Plans can be classified as:- </li></ul><ul><ul><ul><li>Purpose or Mission: </li></ul></ul></ul><ul><ul><ul><li>Basic function or task of an organisation. </li></ul></ul></ul><ul><ul><ul><li>Basic objective of an organisation is accomplished by undertaking activities, going in clearly defined directions, achieving goals and accomplishing a mission. </li></ul></ul></ul>
  119. 120. <ul><li>Objectives: </li></ul><ul><li>Objectives or goals are the ends toward which activity is aimed. </li></ul><ul><li>Represents not only the end point of planning but the end toward which other functions of management are aimed. </li></ul><ul><li>A department may also have its own objective. </li></ul><ul><li>Strategies: </li></ul><ul><li>General programs of action and deployment of resources to attain comprehensive objective. </li></ul><ul><li>They furnish a framework of guiding, thinking and action. </li></ul><ul><li>They do not attempt to outline exactly how the enterprise is to accomplish its objectives. </li></ul>
  120. 121. <ul><li>Policies: </li></ul><ul><li>General statements or understandings that guide thinking in decision making. </li></ul><ul><li>Not all policies are “statements”; they are often merely implied from the actions of the managers. </li></ul><ul><li>It defines an area within which a decision is to be made and ensure that the decision will be consistent with, and contribute to, an objective. </li></ul><ul><li>They are the means of encouraging discretion and initiative, but within the limits. </li></ul><ul><li>E.g. Hiring only university affiliated management graduates. </li></ul>
  121. 122. <ul><li>Procedures: </li></ul><ul><li>Plans that establish a required method of handling future activities. </li></ul><ul><li>Guides to action. </li></ul><ul><li>Chronological sequences of required actions. </li></ul><ul><li>Often cut across department lines. </li></ul><ul><li>Rules: </li></ul><ul><li>Specific required actions or non-actions, allowing no discretions. </li></ul><ul><li>Essence of a rule is that it reflects a managerial decision that a certain action must-or must not be taken. </li></ul>
  122. 123. <ul><li>Programs: </li></ul><ul><li>Set of clear instructions in a clear and logical sequence to perform a particular task. </li></ul><ul><li>Explain how to carry out a given course of action. </li></ul><ul><li>Supported by budgets. </li></ul><ul><li>Budgets: </li></ul><ul><li>Statement of expected results expressed in numbers. </li></ul><ul><li>It may be- </li></ul><ul><ul><ul><ul><li>Expense Budget that deals with operations. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Capital Expenditure budget that reflect capital outlays. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cash Budget that shows cash inflows and outflows. </li></ul></ul></ul></ul>
  123. 124. STEPS IN PLANNING <ul><li>The sequences of various steps in planning are in such a way that they lead to the translation of an idea into action by reaching to the state of establishing of sequences of activities. </li></ul><ul><li>Each stage contributes to plan formulation in following ways: </li></ul><ul><li>Perception of Opportunities: </li></ul><ul><ul><ul><li>Not strictly a planning process. </li></ul></ul></ul><ul><ul><ul><li>It leads to formulation of plans by providing clue whether opportunities exist for taking up particular plans. </li></ul></ul></ul><ul><ul><ul><li>A preliminary look at possible opportunities. </li></ul></ul></ul><ul><ul><ul><li>It takes the advantages of opportunities and avoids threats. </li></ul></ul></ul>
  124. 125. <ul><li>Establishing Objectives: </li></ul><ul><ul><ul><li>Major organisational and unit objectives are set. </li></ul></ul></ul><ul><ul><ul><li>Objectives specify the results expected and indicate the end points. </li></ul></ul></ul><ul><ul><ul><li>Establishing objectives for the entire enterprise and then for each subordinate work unit. </li></ul></ul></ul><ul><li>Developing Premises: </li></ul><ul><ul><ul><li>Conditions under which planning activities will be undertaken. </li></ul></ul></ul><ul><ul><ul><li>Planning premises are planning assumptions- the expected environmental and internal conditions. </li></ul></ul></ul><ul><ul><ul><li>Forecasting plays a major role in planning premises. </li></ul></ul></ul><ul><ul><ul><li>The nature of planning premises differs at different levels of planning. </li></ul></ul></ul>
  125. 126. <ul><li>Determining Alternative Courses: </li></ul><ul><ul><ul><li>This concept suggests that a particular objective can be achieved through various actions. </li></ul></ul></ul><ul><ul><ul><li>The most common problem is to reduce the number of alternatives so that most promising ones may be taken for detailed analysis. </li></ul></ul></ul><ul><li>Evaluation of Alternatives: </li></ul><ul><ul><ul><li>An attempt is made to evaluate how each alternative contributes to the organisational objectives in the light of its resources and constraints. </li></ul></ul></ul><ul><ul><ul><li>There is no certainty about the outcome of any alternative. </li></ul></ul></ul><ul><ul><ul><li>It is affected by a large number of factors making the evaluation work quite complex. </li></ul></ul></ul>
  126. 127. <ul><li>Choice of Alternative: </li></ul><ul><ul><ul><li>This is the point at which the plan is adopted. </li></ul></ul></ul><ul><ul><ul><li>It is the real point of decision-making. </li></ul></ul></ul><ul><ul><ul><li>Evaluation may show more than one alternative good. </li></ul></ul></ul><ul><ul><ul><li>Alternative course of action is to be undertaken in future which is not constant. </li></ul></ul></ul><ul><li>Formulation of Supporting Plan: </li></ul><ul><ul><ul><li>After formulating the basic plan, various plans are derived so as to support the main plan. </li></ul></ul></ul><ul><ul><ul><li>Derivative plans in no way reflect the main focus of the business, but they are formulated out of the main plan. </li></ul></ul></ul>
  127. 128. <ul><li>Establishing Sequence of Activities: </li></ul><ul><ul><ul><li>Sequence of activities are determined so that plans are put into action. </li></ul></ul></ul><ul><ul><ul><li>Budgets for various periods can be prepared to give plans more concrete meaning of implementation. </li></ul></ul></ul><ul><ul><ul><li>The overall budgets of an enterprise represent the sum total of income and expenses, with resultant profit or surplus. </li></ul></ul></ul><ul><ul><ul><li>Each department of a business can have its own budgets, usually of expenses and capital expenditures, which tie into the overall budget. </li></ul></ul></ul>
  128. 129. OBJECTIVES
  129. 130. OBJECTIVES <ul><li>Definition: </li></ul><ul><li>“ Intended end result that an organisation desires to achieve over varying periods of time.” </li></ul><ul><li>FEATURES: </li></ul><ul><li>Organisations or groups are created for certain objectives. </li></ul><ul><li>Objectives may be broad or specific, short-term or long-term. </li></ul><ul><li>Objectives are clearly defined and provide clear direction for managerial action. </li></ul><ul><li>Objectives have hierarchy. </li></ul><ul><li>An organisation may have multiple objectives. </li></ul>
  130. 131. HIERARCHY OF OBJECTIVES <ul><li>Organisational objectives form a hierarchy ranging from the broad aim to specific individual objectives. </li></ul><ul><li>Process of assigning a part of a mission to a particular department and then further sub dividing the assignment among sections and individuals creates a hierarchy of objectives. </li></ul><ul><li>Objective of each subunit contribute to the objectives of the larger unit of which it is a part. </li></ul>
  131. 132. Hierarchy of Organizational Objectives 7. Individual objectives 6. Department and unit objectives 5. Division Objectives 4. More specific overall objectives 3. Overall objectives of the organization 2. Mission 1. Socio- economic purpose
  132. 133. GUIDELINES FOR OBJECTIVE SETTING <ul><li>Objectives must be clearly specified. </li></ul><ul><li>Objectives must be set taking into account the various factors affecting their achievements. </li></ul><ul><li>Objectives should be consistent with organisational mission. </li></ul><ul><li>Objectives should be rational and realistic rather than idealistic. </li></ul><ul><li>Objectives should be achievable but must provide challenge to those responsible for achievement. </li></ul>
  133. 134. <ul><li>Objectives should yield specific results when achieved. </li></ul><ul><li>Objectives should be desirable for those who are responsible for the achievement. </li></ul><ul><li>Objective should start with the word ‘to’ and be followed by an action verb. </li></ul><ul><li>Objectives should be consistent over the period of time. </li></ul><ul><li>Objectives should be periodically reviewed. </li></ul>
  134. 135. <ul><li>EXAMPLE OF GOOD OBJECTIVE SETTING </li></ul><ul><li>“ We want to make our product number selling brand in its field in terms of units sold.” </li></ul><ul><li>“ We strive to become leader in product innovation in our field by investing five per cent of our sales revenue on research and development.” </li></ul><ul><li>EXAMPLE OF POOR OBJECTIVE SETTING </li></ul><ul><li>“ Our objective is to maximize our profit.” </li></ul><ul><li>“ Our objective is to offer best and cheapest product.” </li></ul>
  135. 136. MANAGEMENT BY OBJECTIVES <ul><li>Approach was first proposed by Peter Drucker in his 1954 book ‘The Practice of Management’. </li></ul><ul><li>Definition: </li></ul><ul><li>“ A comprehensive managerial system that integrates many key managerial activities in a systematic manner, consciously directed towards the effective and efficient achievement of organisational objectives.” </li></ul>
  136. 137. FEATURES OF MBO <ul><li>It is an approach and philosophy to management and not merely a technique. </li></ul><ul><li>Refers to a formal set of procedures that begins with goal setting and continues through performance review. </li></ul><ul><li>Heart of MBO is the objectives, which spell out the individual actions needed to fulfill the unit’s functional strategy and annual objectives. </li></ul><ul><li>It is characterized by the participation of concerned in objective setting and performance reviews. </li></ul>
  137. 138. <ul><li>Periodic review of performance is an important feature as it emphasises initiative and active role by the manager who is responsible for achieving objectives. </li></ul><ul><li>Once the objectives have been agreed upon, the individual enjoys wide discretion in choosing the means for achieving them. </li></ul><ul><li>Effective MBO programs usually start with the top managers, who determines the organization's strategy and set preliminary goals. </li></ul>
  138. 139. PROCESS OF MBO <ul><li>Setting of Organisational Purpose and Objectives: </li></ul><ul><ul><ul><li>Questions which provide guidelines for the statement of purpose are:- </li></ul></ul></ul><ul><ul><ul><li>Why does the organisation exist? </li></ul></ul></ul><ul><ul><ul><li>What business are we in? </li></ul></ul></ul><ul><ul><ul><li>What should be our business? </li></ul></ul></ul><ul><ul><ul><li>Top managers has to determine what he or she perceives to be the purpose or mission and the more important goals of the enterprise for a given period ahead. </li></ul></ul></ul><ul><ul><ul><li>Companies strengths and weaknesses should be taken into account in the light of available opportunities and threats while setting the goals. </li></ul></ul></ul><ul><ul><ul><li>Goals are tentative and entire chain of verifiable objectives is worked out by the subordinates. </li></ul></ul></ul>
  139. 140. <ul><li>Identification of Key Result Areas (KRAs): </li></ul><ul><ul><ul><li>These are those aspects of a unit or organisation that must function effectively if the entire unit or organisation is to succeed. </li></ul></ul></ul><ul><ul><ul><li>KRAs indicate the present state of an organisation’s health and the top management perspective for the future. </li></ul></ul></ul><ul><ul><ul><li>Organisation’s objectives and planning premises together provide the basis for identification of KRAs. </li></ul></ul></ul><ul><ul><ul><li>E.g., KRAs of marketing can be sales volume, sales expense, advertising expenditure, individual sales-person’s performance. </li></ul></ul></ul>
  140. 141. <ul><li>Setting Subordinates’ Objectives: </li></ul><ul><ul><ul><li>Organisational objectives are achieved through individuals. </li></ul></ul></ul><ul><ul><ul><li>Each individual manager must know in advance what he is expected to achieve. </li></ul></ul></ul><ul><ul><ul><li>Process begins with superior’s proposed recommendations for his subordinate’s objectives. </li></ul></ul></ul><ul><ul><ul><li>Subordinate states his own objectives as perceived by him. </li></ul></ul></ul><ul><ul><ul><li>Final objectives are set by the mutual negotiation between superior and subordinate. </li></ul></ul></ul>
  141. 142. <ul><li>Matching Resources with Objectives: </li></ul><ul><ul><ul><li>Objectives should indicate the resource requirement. </li></ul></ul></ul><ul><ul><ul><li>Proper application of resources ensures objective achievement. </li></ul></ul></ul><ul><ul><ul><li>There should be matching between objectives and resources. </li></ul></ul></ul><ul><ul><ul><li>Allocation and movement of resources should be done in consultation with the subordinate manager. </li></ul></ul></ul><ul><li>Appraisal: </li></ul><ul><ul><ul><li>Tries to measure whether the subordinate is achieving his objective or not. </li></ul></ul></ul><ul><ul><ul><li>Helps in identifying the problems and the ways to overcome them. </li></ul></ul></ul><ul><ul><ul><li>On-going process so as to find out deficiency in the working and also to remove it promptly. </li></ul></ul></ul><ul><ul><ul><li>It is taken to ensure that everything is going as planned and the organization is able to achieve its objectives. </li></ul></ul></ul>
  142. 143. <ul><li>Recycling: </li></ul><ul><ul><ul><li>Appraisal, being the last aspect of MBO, is used as an input for recycling objectives and other actions. </li></ul></ul></ul><ul><ul><ul><li>What happens at each level may affect other levels also. </li></ul></ul></ul><ul><ul><ul><li>Outcome of appraisal at one level is recycled to see if the objectives have been set properly at the level concerned and also at the next higher level. </li></ul></ul></ul>
  143. 144. Benefits of MBO <ul><li>Better Managing: </li></ul><ul><ul><ul><li>Resources and activities are put in such a way that they result in better performance. </li></ul></ul></ul><ul><ul><ul><li>MBO forces managers to think about planning for results, rather than merely planning activities or work. </li></ul></ul></ul><ul><ul><ul><li>Clarity of objectives. </li></ul></ul></ul><ul><ul><ul><li>Clarity of roles. </li></ul></ul></ul><ul><ul><ul><li>Periodic feedback of performance. </li></ul></ul></ul><ul><ul><ul><li>Participation by managers in the management process. </li></ul></ul></ul><ul><ul><ul><li>Realization that there is always scope for improvement. </li></ul></ul></ul>
  144. 145. <ul><li>Clarity in Organisational Action: </li></ul><ul><ul><ul><li>Tends to provide the key result areas (KRAs) where organizational efforts are needed. </li></ul></ul></ul><ul><ul><ul><li>While implementing MBO, the deficiencies in the organization get discovered and appropriate remedial measures can be initiated. </li></ul></ul></ul><ul><ul><ul><li>Helps in defining the organisation properly in the environmental context as well as in the context of its various competitors. </li></ul></ul></ul><ul><li>Personal Satisfaction: </li></ul><ul><ul><ul><li>Encourages people to commit themselves to their goals. </li></ul></ul></ul><ul><ul><ul><li>This is possible because of two closely related phenomena: participation in objective setting and rational performance appraisal. </li></ul></ul></ul><ul><ul><ul><li>People become enthusiastic when they work for the objectives set by themselves. </li></ul></ul></ul>
  145. 146. <ul><li>Basis for Oraganisational Change: </li></ul><ul><ul><ul><li>It provides a framework and guidelines or planned change, enabling the top management to initiate, plan, direct and control the change. </li></ul></ul></ul><ul><ul><ul><li>It aids in developing effective controls. </li></ul></ul></ul><ul><ul><ul><li>Change process becomes easier because of application of MBO. </li></ul></ul></ul>
  146. 147. Limitations of MBO <ul><li>Time and Cost: </li></ul><ul><ul><ul><li>Requires large amount of time of the senior managers. </li></ul></ul></ul><ul><ul><ul><li>It generates paper work because large number of forms are to be designed and put into practice. </li></ul></ul></ul><ul><li>Failure to Teach Philosophy of MBO: </li></ul><ul><ul><ul><li>Philosophy is built on concepts of self-control and self-direction, which are aimed at making managers professionals. </li></ul></ul></ul><ul><ul><ul><li>Managers have doubt MBO like what purpose it serves, how the performance is to be appraised and how organisation will benefit. </li></ul></ul></ul>
  147. 148. <ul><li>Problems in Objective Setting: </li></ul><ul><ul><ul><li>MBO requires verifiable objectives against which performance can be measured. </li></ul></ul></ul><ul><ul><ul><li>It is difficult, sometimes, to quantify the objectives because of dynamic environment. </li></ul></ul></ul><ul><li>Failure to Give Guidelines to Goal Setters: </li></ul><ul><ul><ul><li>Managers must know about their corporate goals and how their own activity fits in with these goals. </li></ul></ul></ul><ul><ul><ul><li>No guidelines are being given for managers regarding future assessment, understanding of the policies affecting their areas of operations, etc. </li></ul></ul></ul>
  148. 149. <ul><li>Emphasis on Short-run Goals: </li></ul><ul><ul><ul><li>In order to be precise, there is a tendency to emphasize short term goals usually for a year or even less as it helps in performance appraisal. </li></ul></ul></ul><ul><li>Danger of Inflexibility: </li></ul><ul><ul><ul><li>It is useless to follow old objectives in the context of revised corporate objectives, changed premises or modified policies. </li></ul></ul></ul><ul><ul><ul><li>Managers hesitate to change objectives during a period of time. </li></ul></ul></ul><ul><li>Managers may downgrade the important goals that are difficult to state in terms of end results. </li></ul>
  150. 151. STRATEGY <ul><li>Strategy is the broad program for defining and achieving an organisation’s objectives; the organisation’s response to its environment over time. </li></ul><ul><li>Term ‘strategy’ has been derived from Greek word ‘strategos’ which means general. </li></ul><ul><li>It may be defined as a comprehensive plan guiding resource allocation to achieve long-term organisation goals. </li></ul><ul><li>Strategic Intent is focusing and applying organisational energies on a unifying and compelling goal. </li></ul><ul><li>Coca- Cola: To put a Coke within ‘arm’s reach’ of every consumer in the world. </li></ul>
  151. 152. STRATEGY AND POLICY <ul><li>Policies are general statements or understandings that guide managers’ thinking. </li></ul><ul><li>Essence of policy is discretion. </li></ul><ul><li>Strategy concerns the direction in which human and material resources will be applied in order to increase the chance of achieving selected objectives. </li></ul>
  152. 153. SRATEGY AND TACTICS <ul><li>Strategy determines what major plans are to be undertaken and allocates resources to them. </li></ul><ul><li>Tactics is means by which previously determined plans are executed. </li></ul>
  153. 154. Corporate –Level Strategy Business-Level Strategy Business- Level Strategy Marketing Strategy Production Strategy R & D Strategy Finance Strategy Advertising Strategy LEVELS OF STRATEGY
  154. 155. CORPORATE-LEVEL STRATEGY <ul><li>Strategy formulated by top management to oversee the interests and operations of multiline corporations. </li></ul><ul><li>Major questions at this level are- </li></ul><ul><ul><li>What kinds of businesses should the company be engaged in? </li></ul></ul><ul><ul><li>What are the goals and expectations for each business? </li></ul></ul><ul><ul><li>How should resources be allocated to reach these goals? </li></ul></ul><ul><li>It sets long term direction for the total enterprise. </li></ul><ul><li>Typical strategic decisions at corporate level relate t the allocation of resources for acquisitions, new business development, divestitures, etc. </li></ul>
  155. 157. BCG MATRIX(BOSTON CONSULTING GROUP) <ul><li>QUESTION MARK </li></ul><ul><ul><ul><li>They are low-market-share businesses in high growth markets. </li></ul></ul></ul><ul><ul><ul><li>They do not produce much profits but compete in rapidly growing markets. </li></ul></ul></ul><ul><ul><ul><li>They are the source of difficult strategic decisions. </li></ul></ul></ul><ul><ul><ul><li>Usually require cash investment so that they can become “stars”. </li></ul></ul></ul>
  156. 158. <ul><li>STARS </li></ul><ul><ul><ul><li>They are the high-market-share businesses in high growth markets. </li></ul></ul></ul><ul><ul><ul><li>They produce large profits through substantial penetration of expanding markets. </li></ul></ul></ul><ul><ul><ul><li>If properly handled, they can turn out to be the firm’s “cash cows” of the future. </li></ul></ul></ul><ul><ul><ul><li>Preferred strategy for stars is growth, and further resource investments in them are recommended. </li></ul></ul></ul>
  157. 159. <ul><li>CASH COWS </li></ul><ul><ul><ul><li>They are high-market-share businesses in low-growth markets. </li></ul></ul></ul><ul><ul><ul><li>They produce large profits and a strong cash flow. </li></ul></ul></ul><ul><ul><ul><li>Such businesses are in a position of making the products at low cost. </li></ul></ul></ul><ul><ul><ul><li>Preferred strategy is stability or modest growth, and harvest. </li></ul></ul></ul><ul><ul><ul><li>“ Cows” should be “milked” to generate cash that can be used to support investments in stars and question marks. </li></ul></ul></ul>
  158. 160. <ul><li>DOGS </li></ul><ul><ul><ul><li>They are the low-market-share businesses in low growth markets. </li></ul></ul></ul><ul><ul><ul><li>They do not produce much profits; and they show little potential for future improvement. </li></ul></ul></ul><ul><ul><ul><li>These businesses are usually not profitable and generally should be disposed off. </li></ul></ul></ul><ul><ul><ul><li>Preferred strategy is divest (retrenchment by divestiture). </li></ul></ul></ul>
  159. 161. BUSINESS-LEVEL STRATEGY <ul><li>It is the strategy for single business unit or product line. </li></ul><ul><li>Applicable in those organizations which have different businesses and each business is treated as Strategic Business Unit (SBU). </li></ul><ul><li>SBU describes a single business firm or a component that operates with a major business line within a larger enterprise. </li></ul>
  160. 162. <ul><li>It could be termed as a sub strategy of corporate where for each line of business, a separate strategy is formulated. </li></ul><ul><li>Selection of strategy at the business level involves answering the strategic question:- </li></ul><ul><li>“ How are we going to compete for customers in this industry and market?” </li></ul><ul><li>Typical business strategy decisions include choices about product/service mix, facilities location, new technologies, etc. </li></ul>
  161. 163. PORTER’S GENERIC STRATEGIES <ul><li>According to Porter, business-level strategic decisions are driven by two basic factors:- </li></ul><ul><ul><li>Market Scope – ask: “ How broad or narrow is your market or target market? </li></ul></ul><ul><ul><li>Source of Competitive Advantage – ask: “ Will you compete for competitive advantage by lower price or product uniqueness?” </li></ul></ul><ul><li>These factors combine to create the following three generic strategies that organisations can pursue. </li></ul>
  162. 165. <ul><li>DIFFERENTIATION </li></ul><ul><li>Organisation’s resources and attention are directed toward making its products appear different from those of the competition. </li></ul><ul><li>It aims at increasing the firm’s share of the market by bringing about some changes in the basic features of its products like the colour, shape, design or size of the product. </li></ul><ul><li>This offers a customer appeal to the buyers and also a competitive advantage to the firm over its competitors. </li></ul>
  163. 166. <ul><li>OVERALL COST- LEADERSHIP </li></ul><ul><li>Organisation’s resources and attention are directed toward minimizing costs to operate more efficiently than the competition. </li></ul><ul><li>It aims at increasing the firm’s share of the market by minimizing the per unit cost of its products and reducing the selling price, thereby increasing its sales volume. </li></ul><ul><li>Sales volume is increased in the present market by cutting down the company’s overall costs (production, R&D, advertising,etc.) below the costs of the competing firms. </li></ul>
  164. 167. <ul><li>FOCUSED STRATEGY </li></ul><ul><li>Organisations concentrate on a special market segment with the objective of serving its needs better than anyone else. </li></ul><ul><li>Its focus may be on a specified group of customers, or a specified product, or a specified area. </li></ul><ul><li>They seek competitive advantage in that market segment through product differentiation. </li></ul>
  165. 168. FUNCTIONAL-LEVEL STRATEGY <ul><li>It guides activities within one specific area of operations. </li></ul><ul><li>It guides the organisational resources to implement business strategy. </li></ul><ul><li>The strategic question to be answered in selecting functional strategies is: </li></ul><ul><li>“ How can we best utilize resources to implement our business strategy?” </li></ul><ul><li>Typical strategic decisions include the choice of management practices within each function that improves operating efficiency, product or service quality, customer service or innovativeness. </li></ul>
  166. 169. Environmental Analysis by TOWS Matrix <ul><li>It aims at matching the organization's internal strengths and weaknesses (company profile) with its external threats and opportunities (environmental analysis). </li></ul><ul><li>Combination of these factors require distinct strategic choices, and thus give rise to four alternative strategies:- </li></ul><ul><li>WT Strategy: </li></ul><ul><ul><ul><li>Company aims at minimising its internal weaknesses and the environmental threats. </li></ul></ul></ul><ul><ul><ul><li>It may require a complete restructuring of the firm,e.g., form a joint venture, retrench or even liquidate. </li></ul></ul></ul>
  167. 170. <ul><li>WO Strategy: </li></ul><ul><ul><ul><li>Company minimises its weaknesses by developing its internal strengths and maximises the environmental opportunities. </li></ul></ul></ul><ul><ul><ul><li>T take advantage of opportunities, a firm with certain weaknesses in some areas may either develop those areas within the enterprise or acquire needed competencies, e.g., technology, persons with needed skills,etc. </li></ul></ul></ul><ul><li>ST Strategy: </li></ul><ul><ul><ul><li>Company maximises its strengths (technological, functional, managerial,etc.) to be able to minimise the environmental threats. </li></ul></ul></ul><ul><ul><ul><li>Company can make use of its technological developments to face the threat of stiff competition with its competitor. </li></ul></ul></ul>
  168. 171. <ul><li>SO Strategy: </li></ul><ul><ul><ul><li>Company uses its strengths to take advantage of environmental opportunities. </li></ul></ul></ul><ul><ul><ul><li>Weaknesses, if any, are overcome and converted into strengths. </li></ul></ul></ul><ul><ul><ul><li>Environmental threats are overpowered by opportunities. </li></ul></ul></ul><ul><ul><ul><li>Most desirable strategy where the organisations use their strengths to exploit the opportunities offered by the environment and are also able to face the threats and convert them into opportunities. </li></ul></ul></ul>
  169. 172. Effective Implementation of Strategies <ul><li>Communication of strategies. </li></ul><ul><li>Communication of planning premises. </li></ul><ul><li>Reflection of overall objectives. </li></ul><ul><li>Review. </li></ul><ul><li>Develop contingency strategies. </li></ul><ul><li>Development of an organisation structure. </li></ul><ul><li>Need to spread the importance of strategies. </li></ul><ul><li>Climate. </li></ul>
  170. 173. PLANNING PREMISES <ul><li>“ Planning premises are the anticipated environment in which plans are expected to operate. They include assumptions or forecasts of the future and known conditions that will affect the operation of plans.” </li></ul>
  171. 174. Making Premising Effective <ul><li>SELECTION OF PREMISES </li></ul><ul><ul><ul><li>Managers have to identify the most critical and high priority factors which should be later analysed intensively. </li></ul></ul></ul><ul><li>PREMISES FOR CONTINGENCY PLANNING </li></ul><ul><ul><ul><li>Planning premises are not constant but dynamic. </li></ul></ul></ul><ul><ul><ul><li>Managers should be ready with alternative premises and align their plans accordingly. </li></ul></ul></ul>
  172. 175. <ul><li>VERIFICATION OF THE CONSISTENCY OF PREMISES </li></ul><ul><ul><ul><li>Managers should ensure that premises are consistent with the objective of the organisation. </li></ul></ul></ul><ul><li>COMMUNICATION OF THE PREMISES </li></ul><ul><ul><ul><li>It should be communicated to those who are involved in planning process at different levels of the organisation. </li></ul></ul></ul>
  173. 176. DECISION - MAKING
  174. 177. DECISION - MAKING <ul><li>The word ‘ decision ’ has been derived from the Latin word ‘ decidere ’ which means a cutting away or a cutting off, or in a practical sense. </li></ul><ul><li>A decision represents a judgment. </li></ul><ul><li>Decision-making is defined as selection of a course of action from among alternatives. </li></ul><ul><li>Plans get translated into action only when a decision has been made. </li></ul>
  175. 178. DECISION MAKING PROCESS <ul><li>Identification of the Problem: </li></ul><ul><ul><ul><li>Problem may be defined as any deviation from a set of expectations. </li></ul></ul></ul><ul><ul><ul><li>This is done in three stages:- </li></ul></ul></ul><ul><ul><ul><li>Scanning:- Scanning of the current set up of an organisation to ascertain as to whether or not it is in accordance with the requirements of the internal and external environment. </li></ul></ul></ul><ul><ul><ul><li>Categorisation:- Areas of operation which can be responsible for the deviation are categorised. </li></ul></ul></ul><ul><ul><ul><li>Diagnosis:- Managers collect facts and information which have led to the occurrence of the problem. </li></ul></ul></ul>
  176. 179. <ul><li>Establishment of Objectives: </li></ul><ul><ul><ul><li>Aim is to solve the problems identified. </li></ul></ul></ul><ul><ul><ul><li>This resolution of managers forms the objective of decision-making. </li></ul></ul></ul><ul><li>Generating Alternatives: </li></ul><ul><ul><ul><li>Alternative solutions refer to two or more ways of dealing with a particular problem. </li></ul></ul></ul><ul><li>Evaluation of Alternatives: </li></ul><ul><ul><ul><li>Three ways of evaluating alternatives:- </li></ul></ul></ul><ul><ul><ul><li>Quantitative and Qualitative Factors: </li></ul></ul></ul><ul><ul><ul><ul><li>Fixed and operating costs. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Quality of labor relations, the risk of technological changes and the domestic or international political climate. </li></ul></ul></ul></ul>
  177. 180. <ul><ul><li>Marginal Analysis: </li></ul></ul><ul><ul><li>Refers to comparing additional revenues associated with the acceptance of an alternative with its additional costs. </li></ul></ul><ul><ul><li>If the additional benefits are more than the additional costs associated with an alternative, the proposed alternative should be accepted. </li></ul></ul><ul><ul><li>Cost-Effectiveness Analysis: </li></ul></ul><ul><ul><li>Also known as Cost Benefit Analysis. </li></ul></ul><ul><ul><li>Refers to comparing the future expected benefits with the potential costs of alternative solutions and selecting the one which gives the maximum benefit generated in terms of difference between the potential revenues and costs. </li></ul></ul>
  178. 181. <ul><li>Selection of an Alternative: </li></ul><ul><ul><ul><li>Most suitable alternative is selected by adopting any of the following three approaches:- </li></ul></ul></ul><ul><ul><ul><li>Experience:- Post experience serves as a guide for future. </li></ul></ul></ul><ul><ul><ul><li>Experimentation:- Each available alternative is put to practice and the one which is most suitable is selected. </li></ul></ul></ul><ul><ul><ul><li>Research and Analysis:- Most effective technique when major decisions are involved. </li></ul></ul></ul><ul><ul><ul><ul><li>Solving a problem by first comprehending it. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Problem is broken into its component parts and various quantitative and qualitative factors are studied. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A model simulating the problem is developed. </li></ul></ul></ul></ul>
  179. 182. <ul><li>Implementation of the Alternative: </li></ul><ul><ul><ul><li>Planning for the application of the selected alternative is required. </li></ul></ul></ul><ul><ul><ul><li>Other major area of concern is the acceptance of the alternative by those who are actually affected by it. </li></ul></ul></ul><ul><li>Monitoring the Implementation: </li></ul><ul><ul><ul><li>Implementation process, once initiated, should be regularly monitored to know the degree of acceptance by the organisational members. </li></ul></ul></ul>
  180. 183. TYPES OF DECISIONS <ul><li>PROGRAMMED DECISIONS </li></ul><ul><li>Decisions related to structured situations, where the problem is more or less of routine and repetitive in nature. </li></ul><ul><li>Managers take recourse to the pre-established criteria for taking decisions. </li></ul><ul><li>Various policies, schedules and procedures laid down by the management provide a guideline for taking these decisions. </li></ul><ul><li>E.g., Ordering of fresh inventory when the existing level of inventory reaches the re-order point. </li></ul>
  181. 184. <ul><li>NON-PROGRAMMED DECISIONS </li></ul><ul><li>Decisions are taken in unstructured situations which are reflective of novel, ill-defined and complex problems. </li></ul><ul><li>They are non-recurring or exceptional in nature and require brainstorming by managers. </li></ul><ul><li>E.g., Increase in advertising expenditure. </li></ul>
  182. 185. SITUATIONS OF DECISION MAKING <ul><li>While making decisions, the managers face three types of situations or conditions:- </li></ul><ul><li>CERTAINTY </li></ul><ul><ul><ul><li>It exists when managers can obtain complete and reliable information about future. </li></ul></ul></ul><ul><ul><ul><li>Future is predictable. </li></ul></ul></ul><ul><ul><ul><li>Such decisions normally relate to very near future and are taken by lower-level or middle level managers. </li></ul></ul></ul>
  183. 186. <ul><li>UNCERTAINTY </li></ul><ul><ul><ul><li>It exists where almost no information is available about future . </li></ul></ul></ul><ul><ul><ul><li>Normally such situations do not occur and very few decisions are made under such conditions. </li></ul></ul></ul><ul><ul><ul><li>E.g., Change in the economic, legal or political scenario in future. </li></ul></ul></ul><ul><li>RISK </li></ul><ul><ul><ul><li>It occurs when information is available about future but it may be incomplete. </li></ul></ul></ul><ul><ul><ul><li>Impact of present decisions on future outcomes can be predicted with a fair degree of certainty, the exact degree not always known. </li></ul></ul></ul><ul><ul><ul><li>Past experience and current economic scenario help in predicting the future. </li></ul></ul></ul><ul><ul><ul><li>E.g., Potential of new entrants in the market. </li></ul></ul></ul>
  184. 187. Modern Approaches to Decision-Making Under Certainty <ul><li>RISK ANALYSIS </li></ul><ul><ul><ul><li>It is important to know the size and nature of the risk involved in choosing a course of action. </li></ul></ul></ul><ul><ul><ul><li>New techniques have been developed to give a more precise view of risk. </li></ul></ul></ul><ul><ul><ul><li>It is important to analyse the interaction of important variables, many of which have an element of uncertainty. </li></ul></ul></ul>
  185. 188. <ul><li>DECISION TREES </li></ul><ul><ul><ul><li>Some decisions involve a series of steps, the second step depending on the outcome of the first, and so on. </li></ul></ul></ul><ul><ul><ul><li>It is a graphical method for identifying alternative actions, estimating probabilities, and indicating the resulted expected payoff. </li></ul></ul></ul><ul><ul><ul><li>Decision trees depict the decision points, chance events and probabilities involved in various courses that might be undertaken. </li></ul></ul></ul><ul><ul><ul><li>Graphical form visually helps the decision makers view his alternatives and outcomes. </li></ul></ul></ul>
  186. 189. <ul><li>PREFERENCE THEORY </li></ul><ul><ul><ul><li>Also known as Utility Theory, explains the individual attitude toward risk, i.e., risk averters and gamblers. </li></ul></ul></ul><ul><ul><ul><li>Assumed that the decision makers follow the statistical probabilities, as applied to decision making. </li></ul></ul></ul><ul><ul><ul><li>Attitudes toward risk vary not only with the individual, but also with the level of the manager in an organisation and the source of the funds involved. </li></ul></ul></ul>
  187. 190. <ul><li>DECISION SUPPORT SYSTEM </li></ul><ul><li>They use computers to facilitate the decision-making process of semi-structured tasks. </li></ul><ul><li>Designed not to replace managerial judgement but to support it to make the decision process more effective. </li></ul><ul><li>LIMITING FACTOR </li></ul><ul><li>Factors that stand in the way of accomplishing a desired objective. </li></ul><ul><li>Help in choosing the best alternative. </li></ul><ul><li>It is possible to narrow the search for alternative that are required in overcoming the limiting factors. </li></ul><ul><li>By recognizing and overcoming those factors that stand critically in the way of a goal, the best alternative course of action can be selected. </li></ul>
  188. 191. ORGANISING
  189. 192. ORGANISING <ul><li>Organising is the process of arranging people and other resources to work together to accomplish a goal. </li></ul><ul><li>Once plans are created, the manager’s task is to see to it that they are carried out. </li></ul><ul><li>Organising begins the process of implementation by clarifying jobs and working relationships. </li></ul>
  190. 193. ORGANISATION STRUCTURE <ul><li>Organisation structure is the system of tasks, workflows, reporting relationships and communication channels that link together the work of diverse individuals and groups. </li></ul>
  191. 194. FORMAL ORGANISATION <ul><li>A formal organisation is a well-defined structure of authority and responsibility that defines delegation of authority and inter-relationships amongst various organisational members. </li></ul><ul><li>It works on the basis of pre-defined set of policies, plans, procedures, schedules and programs. </li></ul><ul><li>Some degree of formalisation is a must for any organisation to function effectively. </li></ul><ul><li>Excessive reliance can lead to loss of initiative and innovative capacities of employees. </li></ul>
  192. 195. Features of Formal Organisation <ul><li>It is a job-oriented concept which allocates jobs amongst people for the attainment of a common objective. </li></ul><ul><li>It is based on the principles of division of labor and efficiency in operations. </li></ul><ul><li>The structure of relationships is depicted through lines and boxes on the organisation chart. </li></ul><ul><li>People enjoy the authority and power by virtue of their position in the organisational hierarchy. </li></ul><ul><li>Coordination among members and their control are well specified through processes, procedures, rules, etc. </li></ul>
  193. 196. INFORMAL ORGANISATION <ul><li>It refers to the natural grouping of people on the basis of some similarity in an organisation. </li></ul><ul><li>Chester Barnard, author of “The Functions of the Executive” described informal organisation as any joint personal activity without conscious joint purpose, even though contributing to joint results. </li></ul><ul><li>Such relationships may be more complex the the officially prescribed ones. </li></ul>
  194. 197. Features of Informal Organisation <ul><li>It is a natural outcome at the work place. </li></ul><ul><li>They are created on the basis of some similarity among its members. </li></ul><ul><li>A person may become member of several informal organisations at the same time. </li></ul><ul><li>They can be very helpful in getting work accomplished. </li></ul><ul><li>It enables informal learning that takes place while working and interacting together throughout the work day. </li></ul>
  195. 198. Social interaction. Well – set goals. Purpose 4. It is attached to a person and given by group. It is attached to position and is institutional in nature. Power 3. People and their relationships. Positions Emphasis 2. Spontaneous reaction to formally structured organisations Formally structured. Structure 1. Informal Organisation Formal Organisation Nature S.No.
  196. 199. Group norms. Rules & procedures. Guidelines for behavior 7. Highly flexible. Not flexible. Flexibility 8. Change in members can lead to instability. Stable;not affected by incomings and outgoings of organisational members. Stability 6. Authority comes from personal knowledge & skill and given by group. Chain is respected and the authority is delegated by the top management. Chain of Command 5. Informal Organisation Formal Organisation Nature S.No.
  197. 200. SPAN OF MANAGEMENT <ul><li>Also known as Span of Control. </li></ul><ul><li>It is the number of subordinates directly reporting to the manager. </li></ul><ul><li>Magic number for an effective span was never found but this span of control principle evolved: </li></ul><ul><li>“ There is a limit to the number of people one manager can effectively supervise; care should be exercised to keep the span of control within manageable limits.” </li></ul>
  198. 201. NARROW SPAN <ul><li>When only few people are under a manager’s immediate supervision, then the span of control is said to be narrow. </li></ul><ul><li>It gives rise to a Tall Structure. </li></ul><ul><li>Manager is in a position to exercise tight control over their activities. </li></ul><ul><li>It results in creation of a large number of levels in an organisation. </li></ul>
  199. 202. Narrow Span / Tall Structure
  200. 203. Advantages of Narrow Span <ul><li>Managers can maintain a close supervision on their employees. </li></ul><ul><li>There can be better communication between superiors and subordinates. </li></ul><ul><li>It results into personalised relationship between managers and subordinates. </li></ul><ul><li>Control can also be tightened. </li></ul>
  201. 204. Disadvantages of Narrow Span <ul><li>Too many hierarchial levels are created which makes coordination complicated. </li></ul><ul><li>There is need for more number of managers to supervise the given number of workers resulting in an increase in the overhead expenditure. </li></ul><ul><li>Increasing gap between the top-level managers and workers can result in slow communication process. </li></ul><ul><li>Decision making becomes difficult. </li></ul><ul><li>Supervisors are engaged in the routine jobs of supervising their subordinates and have less time to look after other important matters. </li></ul>
  202. 205. WIDE SPAN <ul><li>When many people are under a manager’s immediate supervision, then the span of control is said to be wide. </li></ul><ul><li>It gives rise to a Flat Structure. </li></ul><ul><li>It is created with lesser number of hierarchial levels. </li></ul>
  203. 206. Wide Span / Flat Structure
  204. 207. Advantages of Wide Span <ul><li>There is reduction in cost. </li></ul><ul><li>Decision-making process is made more effective as superiors delegate the authority to their subordinates and are relieved of dealing with the routine matters. </li></ul><ul><li>It results in a better system of communication as the number of levels is less. </li></ul><ul><li>Clear policies can be made. </li></ul>
  205. 208. Disadvantages of Wide Span <ul><li>There is the risk of superiors losing track of the activities being actually performed by the employees. </li></ul><ul><li>It can give rise to a situation of decisive bottlenecks because of overloaded superiors. </li></ul><ul><li>It requires exceptional qu