1. 1. INDUSTRIOLOGY:
'The purpose of industryisobvious. Itisto supplymanwiththingswhichare necessary,useful or
beautiful,andthustobringlife tobodyor spirit.'-By R.H.Tawney,The Acquisitive Society.1920.
'Anybody whowishes tostayalive mustbestirhimself,butthe nature anddegree of bestirringmay
range fromthe merely swallowingof foodanddrink tothe enterprise thatcreatesanempire.'
'Entrepreneurship isinnate characterof man.And thischaracter ishighin man and man alone claims
to have this behavioramongotherknowncreatures"
From these quotationswe candefine organizationintermsof the means of combinationof resources
and techniquesinordertoproduce certaincommodityinordertosatisfycertainneed sayhungeror
thirstor beautiful
But economisttalkof organizingresources inordertoproduce somethingi.e. the combinationof labor,
soil,seed, fertilizertoproduce saymaize intermsof costs.Thus the questions how muchresourcesto
produce certainquantityof maize? Sociologistwill talkof workbymore than one personorganization,
thusSociologistwilldefine an organization asconsistingmore thanone person andconsider that
organizationinthe societyasa social unitor economicinstitutionwithbehaviorcharacterizedbythe
personwhocompose it. Social psychologist inthe otherhandwill tell usthat,where there are more
than one personthere are certainkindof relationship whichdistinguishthesepersonswithother
personsinotherrelations.
That, thisrelationshipmayarise fromintereststhat,there are some thingsinwhichtheyshare in
common. So there mustbe some interaction.Thus social psychologiststudythese interaction in order
to understandthe behaviorof the organization. Interactioncalls foradjustmentof the individuals
comprisingthe organization tocertainprincipals governingthe organizationandthisconformityisthe
essence of all organization rangingfromsmall tolarge organizations.
Apart fromthe organizationtheorieswe have considered,thereare political reasons why individuals
make organizations.Organizationtherefore are the waysinwhichindividualsmeet their needsby
interactingwith othersinordertosatisfyingtheir primaryandsecondaryneeds.
2. NEEDS SATISFICATION:
Douglas McGregor distinguished twotypesof man'sneeds,thatof physical andemotional andthatof
intellectual needs.Physical andemotional needsare primaryneedsandintellectualneedsare
secondaryneeds. Physical andemotional needsare physiological needsi.e.needsof hungerandthirst
and emotional suchassafetyneeds.,i.e.security,order. Intellectual needsare Belongingnessand
love needs,i.e.social orgroupneeds,affection,identification. Esteem needs,ego,i.e.successandself-
respect, self-esteem,status,promotion,responsibility. Self actualization,desire toexpressones
capabilities,i.e.achievement,the desire forself-fulfillment.
2. If we thinkthese intermsof industrial man,we findthatindustryhastendedtoconcentrate on1 and 2.
That is industrieshave tendedtoassume thattheywill have acontendedworkforce if the money,
orderand securityneedsare satisfied. Buttheyhave overlookedthe factthat man's goodenvironment
workingcondition needsto be considered too.
3. HUMAN MOTIVATION:
While McGregor was workingon humanneeds, Abraham Maslow was working on human
motivation and proposed whathe calls 'The Hierarchyof Needs. Maslow pointsoutthatthe physical
and emotional needsforma hierarchy,withthe mostpressingorurgentonesonat the base,
demandingsatisfactionfirst,before the needshigherinthe scale canemerge. In this hierarchy,the
physical needs(forfood, drink,rest,andotherphysical necessities) come first;nextinthe scale are the
needsfor safetyandordered existence. Abovethese ,the social needsof love anda sense of
belonging; andabove these the personal needsfor self-confidence andself -respect.Finally,atthe
top of the hierarchy isthe needforself-fulfillment, forbecomingall we are capable of becoming.
Runningparallel to,andtoa large extentserving these needsare ourcognitive needs- rangingfromthe
desire tomake sense of what goeson, to the wishtopursue knowledge forits own sake. These
physical and emotional needs donotmeanthat we are mechanisticstructuresdriventhisway and
that wayby a hierarchyof internal drives. Noone hasever seena predisposition-we infertheir
existence from observinghowpeople behave;mostpeople thinknot intermsof their needssomuch
as their interpretationsof howthey feel for we are,after all,thinkinganimals.Our intellectual or
cognitive needs canbe thoughtof as the desire tomake sense of ourenvironmentandourexperience
inorder to anticipate the future. Ashasbeensaid'' our minds protest against chaos. From childhood,
we are askingwhy.''
It isin thiswaythat man has set finding out why,whichhave made him capable of discoverysothatto
anticipate the future and thisbuildsuphis belief, belief may be definedas how certain groupof
people understandsthe environments around them thatis comprehendingtheirreality, theirbeing
as there are whichmanifestindifferent symbolsormodelscalled expressions.These expression take
they being externally and are knownas culture. Culture of Temples,Synagogues,Mosque and
Churches.The existenceof these architecture is due because there isthe belief incertainsuper-
persons,whomrequire to be obeyed andabove all to be worshiped. These different arts of
worshippingfrom primitivetomodernworshippingisthe impression of the beingof super-beingcalled
God thusthe essence of Biblical and Koran literaturesand traditional mythologies. Asin religion
there isalsowide literaturesin industry,recentlythe name Industrial sociology or psychology are
widely used. Industryas a meanof producingcertain commoditytosatisfycertainhuman needs calls
for various disciplines called management that require the collective name which I have termed
INDUSTRIOLGY-thatisthe studyof man at workwhere he usestechnologies,techniques tomeet his
ends one of these techniquesismanagement skills.
3. 4. MANAGEMENT
Managementis an art whichcallsfor several discipline whichisframed throughplanningandcontrol..
The qualityof goodmanagementcanbe measured by the methodsusedinplanningandcontrolling
towardsimaginedgoals.Imaginationcallsforwillpowersince manunlike God haswill powerwhichis
limited sohe needspractice towardswhichhe willsfor.Godwithsuperpowerscreatedall whatare
throughthe WORD. Thus man inorderto meetsome goalshasto arrange hisworkin shortand long
periods andthismustbe insequences,thisactof arrangingrequire fromhimcertaincharacteristicsuch
as courage,endurance,will powerwhichare necessarytoattainhisgoals.These attitudescombined
togetherare whatwe call entrepreneurship.Entrepreneurshipisinnatecharacterof man andman alone
claimsthischaractersamong otherknowncreatures. The developmentof technologyisdevelopment
of enterprising nature of man from very simple toolssome 10,000 years ago to complex toolstoday.
5. TECHNOLOGICAL DEVELOPMENT AND SOCIAL CHANGE.:
As entrepreneur we mustunderstandthe contemporarysocietyinwhich we live inordertoact
accordingly.Inone sense,the historyof manisa historyof histechnology.Thisis due to several things.
First,there isthe fact that technology isthe central componentof all cultural patterns. Second,
everythingthatis involvedinaculture as technology ---------the tools,the techniquesandthe usage to
whichresourcesare put--all of these are more readilydescribedandanalyzedthan are otheraspectsof
man's socio-cultural life.Thisisespeciallytrue if we thinkof technologyas beingprimarilyrelatedto
the productionof whatman requiresorthink he requirestolive. Notonly are the other aspectsof
culture more difficulttodescribeandanalyze,but itisonly recentlythat seriousattentionhasbeen
turnedto this task.And finally,itisthe material thingsof life ----the tools---thatare most oftenleft
behind,sometimesas the sole remnantsof a previouslyexisting way of life.. Attitudes,orientations,
conceptions,etc.,oftenleave barelydiscernible traces,orno traces at all. It isno wonder, then,that
much of what we knowof the present,andall of what we know aboutthe distantpast,somehowor
otherrelatestotechnology.
While the firstpresentsone picture, theyshouldnotleadtothe conclusionthataone--wayrelationship
existsbetweenthe productive technologyandthe restof the cultural pattern. It istrue that technology
hold a central positioninanyculture andthat man has alwaysbeenconcernedaboutexertinggreater
degreesof control over hisphysical environment,butthisveryinterest incontrol,hischoice of
techniquestobe used,hisattitudestowardhistools andtechniques he usestowhichvariousof his
resourcesare put,the emphasisonchange orconservatism--all of theseare essentially non-
technological andreflectotheraspectsof cultural patterninvolved. Andthese aspectsproduce their
ownparticulareffectsonthe technologyitself.
Thus the firstpointto keep inmind,regardlessof the analytical approachtaken,isthatthere existsa
fundamental andessential interrelationshipbetweenthe technologyandthe rest of the socio-cultural
system. Thismeansthat these twogeneral aspectsof apeople'swayof life affect,andare affectedby
each other.
4. If there is one generalizationthat the sociologistholds withadegree of confidence,itisthat
technological change produce changesinthe restof the social system, eitherimmediately,orultimately.
In the last 300 yearsin Europe and NorthAmericathe technological changeswhich have been
occurring have usuallybeen categorized asthe ''Industrial Revolution''.Thisperiodhasbeen
characterized by the situationof mechanical and relatedformsof power forhumanand animal
power,andhas been accompaniedbythe widespread application of machineryandmachine
techniques. There hasbeenconsiderable documentationof the nature of thisformof technological
development,aswell asitsvariousconsequencesfor westernsocietyingeneral.
In spite of variationsingeographical conditionsand in cultural settings, the processof substituting
mechanical power for man-power--theprocessof Industrialization-seemstohave common
consequencesof anysocial system. Grantingthat there will be some unique featurestothe
consequencesof technological developmentof an industrial sortinanygivenareas,there will also be
certain common thingswhichwill inevitablyoccuras a resultof the process. Thus, from observations
of the processof industrializationinone area,conclusionscanbe drawn, predictions made,andsome
degree of control establishedforthe consequencesof the processinotherareas. Thisisparticularly
true if we can examine different cultural systematdifferentstagesof technological development.
Andto the extentthatthere are commonfeatures inthe differentsituations,predictions about
consequenceswill have anincreasedaccuracy.
6. CHANGING TRENDS IN INDUSTRIALRELATIONS:
Anotherareaworthconsideringisthatof Labor and managementandthe publicin industrial relations.
Industrial Relationsare concernedwith the institutionsof jobregulation,i.e.the systemof rules
governingthe employmentrelationshipsboththe relationshipsbetweenthe firmandthe employees
and amongthose employeesthemselves.
Traditionally the employer believedthat he wasentitledtoexerciseabsolute prerogativesoverhis
laborforcesbecause he ownedthe meansof production. Inreturnfor the opportunitytoearn a living
he expectedcomplete and unquestioningobedience. Thisattitude easedsomewhatasthe owner/
employercome tobe replacedbythe salariedmanager. Butthe inheritedtraditionlingeredon the
work force which wasseenas a team,unifiedbya common purpose. Managementclungtothe belief
that employeesshouldrecognize managementright tomanage,andthat inreturnfor a generous
paternalism,theyshould give loyalserviceand co-operation.
Today managementphilosophyisinatransitional stage. Its view of industrial organizationis moving
away from the'' we are all one big happyfamily''concept,towardsanacceptance of the behavioral
scientist'snotionthatanindustrial organizationisthe plural society,aminiature democratic state
composedof sectional interests,conflictis inherent in the industrial situation.There are the
shareholders,the customersandthe employees. Amongthe employees there isconflictbetween
those whosees theiremploymentintermsof acareer,the professional manager,and those whosee
it in termsof a job- the manual workers. There are also conflictinginterestsbetween skilled and
unskilled,white collarandblue,union andnon-unionmembers,etc. Managementhastostop
5. regardingall conflictasharmful to industrial peace andstable productionandlearn toacceptthe fact
that conflictis endemicto industrial organizationandthat the jobof managementistocontrol and
balance the interestsof these groupsandbringthemsome kindof dynamicequilibrium.
7. INDUSTRIAL DEMOCRACY:
Recentlypassed legislationthat a part of the profitsretainedinthe businessshouldbe capitalizedas
workers'shares,which wouldgraduallybuildupan employee share-holdingwithvotingrightsinthe
company. Thislegislationhasbeen stronglyinfluencedbyaFrenchmannamed --Bloch Laine who
wrote a book in 1963 called Pour Une Reforme de L'Entreprise. Thus managementthataccepts
the realityof work-groupinterestswhich conflictsquite legitimatelywithitsown,and which seeks
honestlyand patientlytoanalysis the causes and constraints thatshape group structure,policies,
and practices,hasa much betterchance of introducing change andmodifyinggroup behaviorinways
which minimize disruptions.
8. THE SOCIAL ANATOMY OF A COMPANY:
"All social life must take place withinsome framework of organization,otherwise manmustrevertto
the lawof the jungle".
Companies organizations varyintheirstructure accordingtothe purpose forwhichtheyare setup. In
general,however,theywill fallintosome kindof hierarchical organization,inwhichone manwill be
foundingeneral charge,eitherof the company as whole orof one of itssub-units. This general
manager,managingdirectororwhatever histitle may be,will be responsible forthe overall direction
of the businesseitheraccordingtoa policylaiddownby a board of directorsor accordingto hisown
ideas,if he happensalsotobe the ownerof the business.
Beneaththis chief executivethe company will probably splitintoanumberof vertical divisionseach
concerned withone of principal aspectof its functioning.Once again an individual will be ingeneral
charge; the salesmanager,forexample,whoisresponsibleforkeepingintouchwithmarketsand
ensuringthatthe productsare sold profitably;the productionmanager,whosejobi tomake them;or
the developmentmanager,whose jobistothinkaheadand
managerwill have hisimmediate subordinates,eachconcernedperhapswithadepartmentwithin the
considered newproductsandnewmethodsand processes.
Withineachof these divisionsthe same picture willbe repeated. The divisiondepartmentmanagers or
with one fairlyseparate aspectof itsworkon the productionside of the firm, forexample,the
productionmanagerwill be ingeneral charge,while hisimmediate subordinates willbe say,six
departmentmanagers. Each of these will have anumber of foreman underhiscontrol,while each of
whichwill have a numberof charge-handsunderhimwhere underthe charge-hands willbe found
the actual production workers.
6. By thismeansitis possible toknowwhoisresponsible forwhat, andwhoma personisresponsibleto.
It provides also a meansof control and co-ordination. Butwe must alwaysrememberthatitis the
productionoperativeswhoactuallydothe work,controllingthe machinesusingthe tools,andmaking
or transportingthe finished products. Inthe lastresortthe managementandsupervisorstall only exist
to facilitate andco-ordinate the effortsof the productionworkers.
It isessential that, thisformal organizationof managementshouldbe coherentandcomplete,forif this
isnot so there will be the dangerthat one individual orgroupmay receive orders frommore than one
person. There is alsothe dangerthat individualsmaybe left out and may have an under fined
powers over others.
9. COMMUNICATION FROM THE TOP DOWNWARDS:
It isthrough this hierarchyof managementthatthe communicationspass onwhichthe workingof a
companydepends.Instructionsmustpassdownwardsfromthose whoare responsible forthe direction
of managementof the business . Theirtaskisto understandthe possibilitiesof the productionand
marketingsituationandtake whateverstepsmaybe necessarytosafeguardanddevelopthe company
inthe immediate future. Butnomatterhow practicable andsensible,theywill remainadeadletter
until theyare put into effectatthe actual workingpoint. Highermanagement,however,cannotfollow
each instructiondown the line indetailandsupervise itscarryingouto the factoryfloor;thisisthe task
of other people inthe hierarchy. Andunlessthe otherpeople comprehendandpassonthese
instructionsaccuratelyandeffectivelythey mayarrive atthe workingpointina seriouslydistortedand
impracticable form.
There are manyopportunitiesformisunderstandinganddistortionbetweenthe general manager and
the production floor,forevery individual through whom the instructionmustpasscan eitheromit
some essential elementorgive itan unfavorable turnortwist. But itis of little use trying toshort-circuit
the normal chainof command because eachsectionandlevel musttranslate instructions into terms
whichtake account of theirownduties,andresponsibilitiesandwhich canbe understoodbythose
below. Seniormanagement,exceptonrare occasionswhich are carefullypreparedbeforehand,
cannot communicate directwithproduction workersinthe normal workingof a company's business.
If it has occasion to doso frequently thisisprobablyasymptom that the normal channelsof
communicationhave been allowed todeteriorate tosuchextent thattheyhave become slow and
unreliable. The remedyisnottoholdmore mass meetingsbuttoimprove the chainof commandfrom
the top downwards. Whateverstartsfrom seniormanagementasapracticable andobviously
necessarydevelopmentshouldreacheverylevelaffectedbyitina formequally practicable,necessary,
and appropriate toit.
10. INCENTIVES:
As we are still consideringthe humanresourcesinindustrialcontest letusturnon the conceptof
incentives andhowitworks to motivatesthe processingproduction.The word''incentives'' iswidely
used nowadays and,whenconsideringatwork,itgenerallymeanssomethingwhichmakesthemwork
harder.There isdangerof confusionbecause incentivescanbe thoughtof inthree different waysand
7. the same word isfrequentlytakento meananyone of themat differenttimes. The three usesbetween
whichwe mustdistinguishare:
a. Somethingexternal tothe individualwhich
he will strive toobtain forexample ''Money''isan incentive.
b. Some manipulation of the work-situation which willencouragesthe individual towork harder,e.g.
a ''bonus incentives'system.
c. Something withinthe individualwhichencourageshim todosomething
When we considerthe motivation of workersin industry,we must thinkof the meansof satisfying
their base urges whichthe conditioninwhich theylive make available tothem. Standingaside from
our dailylivesforamoment,letuslook at the communityinwhichwe live asthoughwe were
strangersfrom outside,andcompare itwith othersindifferent partsof the worldand at different
times. Howwouldwe sumup? As pastoral, where peoplefeed and clothe themselvesby tending
flocksandherds? As agricultural,where theytill the soil ? Oras a communityinwhichpeople hunt
and fish?
All these elementsare perhapspresent,buttheyare hardlythe main theme.. Ours is a communityin
whichmost wantsare satisfiedbythe thingsbroughtinshops,these thingshavingbeen manufactured
or processedbythe workof othersfrommaterialsgrownorextractedeitherhere or a board. The
ordinarypersonhasnot to struggle withnature tofeedorcloth himself,forall he mayneed isread
waitingforhimand he may buyit withmoney whichis equallyexchangeableforshoes or sugar, or
tea. Moreover if he doesnotwant to buyanything today,hismoneywill just asgoodto tomorrow
shouldhe want anythingthen.
In industrial communitysuchasours, therefore,money isthe universallyuseful commodity.
Everythingcanbe valuedbymeans of it,and its possession enablesustosatisfy an y reasonable
want. The individual,in the vastmajorityof cases,triestosupply himself with money,and the means
of doingsois tofind an opportunityof takingpart in processof manufacturing, transporting, and
distributing goods, fora weeklyormonthlypayment.
If people worktoearnmoneyinthe firstplace,thendoesit follow that theywill workhardertoearn
more money? Thisisone of those questionswhichare somisleadinglysimplyinappearance thatit
seemsasthoughonlya born fool could give anyotheranswerthan ''YES'' to them. The trouble isthat
while itisbroadlytrue that people will workhardertoearnmore money,itis not true all the time and
ineverycase. There are exceptionstothe workingof thisrule andwe mustunderstandthem if we are
to understandincentives. For thismoment,howeverletusputthese exceptionstoone side and
considerhow the money incentive works.
8. Havingjoined up witha bodyof people whoare making,transporting or distribution some thing
useful,the individual undertakestoworkin return for wage or salary. There are variouskindsof work
he may undertake ,however,some of whichare verydifficultand require monthsoryearsof training.
Inevitablyakind of''supplyanddemand'' situationwill be set up,andas onlya limitednumberof
people will be able toundertake the more difficultjobstheywill come tocommandmore money.
In thiswaya scale of paymentwill develop. The verydifficultjobswhichonly afew people can do
successfullywillbe paidthe highestwages,while the simplestjobswhich anyone candowill be paid
lowest. The individual,seeingthat one wayto earnmore moneyistoundertake more difficultor
responsible work,will wishtogetone of these betterjobsbecause of the remunerationitoffers There
will always,therefore,be competitionfor betterpaidwork,eventhoughitdemandsmore fromthe
individualwho undertakesit, and consequentlythere will be a fairly universal desire forpromotion
to a betterjob.
On one particularjob,thisuniversal desireformoneyhasmade itpossible tolinkupmore effortwith
greater remuneration. Supposeaworkeris takenon to peel potatoes,ata wage,say,of TZS 35,,000 a
week. Solongas hiswage is forthcominghe can dawdle overthe joband inventexcuse for not having
peeledmore thana stone or so ina day. The responsibilityfor ensuringthathe getson withthe job
and turnsout a reasonable numberrestsinthissituation withthe supervisor,asindeedit usuallydoes
when people are ona time rate.
But as any economistknows,this''infinitelyelasticdemand''isquite arare occurrence,and itis rather
more usual for a slackeningoff processtotake place a er a certainpoint. In cause of water,for
example,amandyingof thirstmightbe willingto give all whathe possessedforadrink. Once histhirst
was slakedhe wouldbe lesswillingtopaya highprice,while we,towhomwaterisavailable outof the
tap, wouldnotbe preparedtopay any price at all.
The positionwithmoneyisrathersimilar. A manwho has nomoneyand who seesno prospectof
gettingany will seize anychance of workwhich offershimawage andhe will workveryhard to
holdon to thatjob. But the man who already hasa jobinwhichhe feelsto some extentsecure will
not necessarilyput forththe same degree of effort to earnmore. There is a pointat which the
incentive valueof money dropsoff and in some causesthispoint maybe reachedassoon as the
individual'smostpressingneedsare met. It isonly by studyingthe individual'onthe lineslaiddownin
The Complete Personalitythatwe canget some ideaof where thispointwill be reached.
Returningfora momenttoconsiderthe culture-patterninwhichwe live,thereare a numberof things
whichaffectthe individual's reactiontoamoneyincentive, quite apartfromthisinevitabledroppingoff
aftera certainpoint.atthe bottom endof the scale oursocial securityservicespreventanyone from
fillingbelow acertainminimum,sothatpeople are protectedfromthe desperate needtotake anykind
of workinorder to escape starvation.` Higherupthe scale taxationbeginstomake itself feltsothat
when an individualbeginstoearnmore than,say, TZS 35,,000 a week,the ministerof laborwill take
quite a amountfrom him.
9. We have come to the point,therefore,where we understandthatin an industrial communitythe
normal wayof satisfyingourwantsisby buying things withmoney, and that the primaryincentive to
workis to earn enoughmoneytolive on. Solongas the individual'sbasicwantsare unsatisfied the
primaryincentive towork ismoneyand he will workhardertoearn more money. Aftera certain
point, however,the money incentive will become lesseffective.Thispointwillvarywithdifferent
people indifferentjobs,butassoonas an individual says''Whatisthe goodof bashing awayat the job
justfor an extra shillingsaweek?''or''Why shouldIundertake all thisextraworryand responsibilityfor
anotherhundredayear?'' it has beenreached.
How thencan we sumup the subject of incentives? Notina few simple words nor by a sweeping
generalization,forpeople are movedtoseekvery manysatisfactionsintheirwork, because their
material needspressheavilyupon them, orbecause theyare insensitive tothe otherkindsof
satisfactionwhich work can offer.Atthe end we should findthose devotedsoulswhosesenseof
vocationmakesthem so consciousof their dutyto others that theylive inpovertywhile workingto
relieve sicknessanddistress. Inthe middle we shall findthose who,whileworkingprimarilytoearna
living,respondalsotothe incentive of pleasantsurroundingsandmeaningful,responsiblework.
How far doesthishelpthose whohave tothinkaboutthe incentivesinone particularwork-situation?
Not very much,perhaps,because itdoesnomore thanexpose analreadycomplicatedpicture and
providesnosimple answertothe problemof ''increasingincentives''. It does, however,suggest thatto
improve the incentivevalue of ajobwe mustconsidera numberof factors,no one of whichwill be
effectivewithall the peopleall the times,butsome of whichwillbe effective withsomepeople partof
the time and some with othersat differenttimes. The kindsof thingsthatcan be done are these:
(a) to ensure thatthose working inthe job earnan adequate living-adequate in relation towhatthey
couldgain in similartypesof work,andin relation totheirlevelsof material expectation (instandards
of living);
(b) to ensure that the individual is remuneratedforextraeffort ona scale whichmakeshimconsiderit
worthhiswhile to work as hard and as accuratelyas he can withoutundue fatigue andstrain;
(c) to ensure that the individualfindssatisfactioninthe actual work he is doingand inthe immediate
physical surroundingsinwhichhe works;
(d) to ensure thatthe relationshipsinthe immediate workinggroupare so agreeable thatthe individual
will consideritworthworkingsome efforttoremainwiththatgroup;
(e) to ensure thatthe individualfindsthatthe prestige of the jobissuchthat he will make some effort
to keepit;
(f) to ensure thatthe individual findsenoughmeaningand purpose inhisworkto make some effortto
live upto its social obligations.
A great part of the foregoing revertstothe questionof fittingthe individual intothe rightjob. Italso
meansthat the individualmustfindsome kind of incentivetomeethisattention.
10. 11. PRIMARY GROUP IN AN INDUSTRIAL COMPANY
Every organization,nomatterhow large , must come downinthe last resortto primaryworking
groups. The very large companytendstobe thoughtof as employing thousandsof peopleall herded
togetherina large anonymousmass. But whenwe goto visit one of the company'splants and lookat
the work actuallyinprogresswe shall find half adozen menworkingonone processhere, a dozen
overthere tendingalarge machine,eightornine somewhere else engaged ona commontask. Most
industrial workfalls naturallyintosmall groups, andevenonthose processeswhere ahundred
people seemtobe workinginone large unstructured group we shall findoncloser inspectionthat
there isusually some form of subdivision,either asetteror mechanic,a relief handoran inspector
who looks after everydozenorso workers..
These small face-to-facegroupinwhich the patternof relationshipsissosignificantare worth a great
deal of study. But quite frequently theyare notprovidedforinthe official organizationof theirfirm. It
isnot unusual forthe laststepinthe managementandsupervisoryhierarchytobe a foremanwhois
leftinnominal charge of fiftyorsixtyoperatives,withnosubordinatecharge-handstotake charge of
the primarygroups. Thisisan impossiblesituation,forobviouslyno patternof face-toface relationship
can form betweenfiftypeople andthere canbe no one central pointat which anyone isoffereda
significantleadershipsrole.
Nowthat we have consideredwhatgoesonamong people ingroupsandseenhow a groupdependsfor
itsexistence onapatternof relationshipsbetweenitsmembers,itwill be apparentthatthe smaller
groupswhere face-to-facerelationshipscanbe maintained are more likelytobe significantthanthe
largergroupswhere the relationshipmaybe more distant. Itseemstobe generallyacceptedthatthe
size of group inwhichthese face-to-face relationshipcanexistisseldommore than abouta dozenor
so,and commonsense tellsusthat in a group of thisnumberindividualscanworkinintimate face-to-
face contact witheach otherand getto know eachother prettywell inthe process. What goes on
withinthese primarygroups,therefore,isimportantfrommanypointsof view.
In the firstplace,these groupsare social cellsof the organization,thatistosay theyare the smallest
units inwhichpeople canwork together. If the relationship withinthe primaryworkinggroupsare of
goodqualityandthe patterninto which theyfall issuitable forthe functionof the group,then the team-
spiritinthe companyas a whole will be agoodone, But if the relationshipswithinasignificant
proportionof the cellsare poor thenthe team-spiritof the whole will be defective.
11. In the secondplace these groupsformthe immediate socialenvironmentof workforthe individuals,
comprisingthe people withwhomhe isincontact forseveral hoursat a time everyday. Now ourstates
of minddependtoaconsiderable extentonthe circumstancesinwhich we findourselves andthese
circumstance inwhichwe findleastsignificant. If we have workthroughout the day among people we
dislike------with whom ourrelationshipare of poorquality------we shall getlittle pleasureoutof the
hours we spend and lookonit as irritatingandtedious. The individual'sstate of mind,therefore ,will
be seriouslyaffected bythe relationshipwithinthe primarygroup..
Thirdly,workingmethodsdependstoagreat extentonthe administrationwithinthe primarygroup.
Thisis a small- scale matterconcernedwiththe minorarrangementof material ,the allocationof task,
and the day-to- dayorganization of work,butit isneverthelessimportantindeterminingthe efficiency
of the companyas whole.Itis no use having methods workedout to fractions of a secondif everytime
a batch is finishedthe operatorhasto waithalf an hour before he isgiven anothertask. Suchdetails
do notdependon the planningdepartment. Theymustbe settledwithinthe primaryworkinggroup.
12 . THE UNOFFICIAL PRIMARY GROUP:
As the workproceedsminordifficultieswillinevitablyarise,andanimpression maygetaround that the
supervisor(official) isnotdoing as such as he mightto deal withthese andtofacilitate the group's
task.An opportunityisthenprovidedforsomeone tosay'' of course,noone cares what happenstous.
We sweatour gustout to getproductionthrough inspite of difficultiesandsolongas the output
keepsupwe can ruinour healthforall anyone else notices. Theyaren'tbloomingwell interested in us
as humanbeings,'' Everyone feelslike thatattimesandthere isboundto be some agreementfromthe
others, The patternof relationshipswill adjustitself forthe momenttocentre onthe personwhohas
thusexpressedthe commonattitude of the group.
Nowit isnot impossible thatthe individual whocomes thusintothe centre of the pattern,however
momentarily,mayhave anopportunitytoexpressanofficial protestorinsome way tocontribute to
easingthe strainon the group or facilitationitswork.If thishappenshe will tendtoconfirmhisposition
of leadership inprotectingthe groupfromexploitationoringivingexpressiontoitsdissatisfaction. The
pattern of relationshipswhich centre momentarilyaroundhimwillbecome more definiteand
permanentandsome expectationswill developthathe will continuetorepresentthe group'spointof
viewtothe official hierarchy of management. Thisprocesshasonly to continue fora few weeksfor
thisindividualtobecome acceptedinaleadershiprole amongthatprimary group,andforanother
appointment, unofficial andcarryingno responsibility,butquite real andeffective,tobe made within
the company.
Primarygroups of thisnature,whichform under unofficial leaders,tend inevitablytobe to some
extent inoppositiontothe formal organizationof the company. Their purpose isusually self-
protective, their relationshipin adefensive purpose, andtheir attitudestowardsthe companyandits
purposesrathersuspiciousandpossiblyhostile. The difficultlyis,however,thatbeing primarygroups,
the relationshipwithinthemhave aface-to-face qualitywhichismore significantinthe livesof the
members than the rather unreal official relationshipsexpectedbythe unworkableformal organization.
12. Moreover,suchgroupshave come intobeingtofill akindof social vacuumwhere aprimarygroup wasa
necessarybuthad notbeenprovidedfor.
It is not our purpose toconsiderintentionallysubversive activityinindustry,thoughacertain amount
isusuallycarriedonfor one motive oranother. One cannot fail tobe a struck,however,bythe
opportunitieswhichare providedgratuitouslyforsubversiveelementswhenthe formal organizationof
a companyfailsto take account of the necessityforrecognizingthe primarygroupswhichmust
inevitablyformatwork.
13. LEADERSHIP:
If,as we have seen,anindustrial companyfallsintoaseriesof interlockinggroups,thenan
understandingof itas a social unitdependstoagreat extentonunderstandingwhatisgoingonwithin
itscomponentgroups, We must,therefore,lookrathermore closely atthese groupsand try to find
out whatholdsthemtogetherandwhyone may be a happierandmore effective workingunit than
another. Thiswill bringusto the questionof leadership,forinthe longrunleadershipisamatterof
influencingone ormore groupsof people.
Firstletus considerwhat holdsa group of people together,whatmakesdifference betweentwenty
strangers whohappento findthemselvesinthe same place atthe same time,andsame people which
knowseachotherand are capable,of workingeffectivelytogether. Clearly,inthe secondcase there is
some kindof a bondbetweenthe individualswhichis lacking inthe first,butitis ratherdifficultto
describe exactlywhatthisbondconsistof. Itiseasyenough,however,to kwonwhetherit existsor
not. Thingof two people alone inarailwaycompartment,each isolatedfromthe otherandimmersed
inhis ownconcerns,eachreadinghisnewspaperwithnoconversationtakingplace betweenthem. In
such situationwe have two animate bodiesandnothingmore;there isnobondbetweenthem..
Let usimagine,however,thataconservationbeginsbetweenthe two,perhapsoveranexchange of the
newspaperormagazines. Atonce the situation haschanged,forbeside the twoindividualsinthe
compartmenta newelementhashappenedwhichwillstrengthen anddevelopasthe conservation
proceeds. This will be abond or relationship- call it whatyouwill- betweenthe two,andas the two
continue totalkit will become more real andsignificantasattitude towardsthe otherpersongrowsup,
as expectations are formedof whathe will sayanddo,and as we gaina strongerimpressionof himasa
person. It isthisnewelement,thisbondorrelationship,which holdspeopletogetherandmakesthe
difference between acrowd of strangersand a formedgroup.
Nowthere are many thingstonote about the relationshipsbetweenpeople,the firstof which isthe
questionof theirquality. In some cases thiswill be pleasantandagreeable,aswhenourtwostrangers
inthe railwayscompartmentbegintheirconservationwithamicable exchangeof newspapers,passon
to a discussionof the weatherandthe view,and thenproceedtoa friendlycriticism of the organization
and personnel of the railway company . Each will tendtothinkof the otheras quite a pleasantsortof
a chap, seeinghimintermsof thisgood qualityrelationshipwhichhasgrownupbetweenthem. But if
by chance,the two strangershadbegun theirconversationwithanacrimoniousargumentabout
whetherthe otherwindows shouldbe openorshut,inthe course of whichone had toldthe other that
13. he didn'tpropose to catch hisdeathof coldsittingina draught because anuncivilized fresh-air-fiend
had got intoa train in which one had a rightto expectthat decentpeople would be travelling,then
the relationshipbetweenthemwould be neitherpleasantnorreassuring. Andaftersuchan exchange
each wouldtendtothinkof the otheras an ill-conditioned fellow,seeinghimonce more intermsof the
poor qualityrelationshipbetween them.Inthisway the qualityof the relationshipwillaffectthe
attitude of the twopeople toeachother.
Certainrelationshipsalsowill contain withinthemexpectationthatone personwill behave inacertain
waytowards the other. Thismay be illustrated whenwe enteranexpensive restauranttoordera
meal. Inthese circumstanceswe expectthe waiterwillbe considerate andhelpful,possiblyevenalittle
deferential, ashe takesourorderand bringsinour meal. It wouldcome asa distinctshockif greetedus
withthe word'' Wotcher cock! Come infor yerbit o' dinneragaineh?'' andwe wouldconsiderhim
insolentandfamiliarforthusfailingtoact upto our expectations. Many relationshipstoagreat extent
dependonthe assumptionthatone personwill givethe directionsand the otherwill carrythemout. In
some casesit may be quite explicitandformalizedwhile inothersitmayneverbe put intowordsor
formallyrecognized.
These relationshipsbetweenpeople,therefore,whichholdgroupstogetherandonwhich organized
social depends,canbe extremelyintricate and subtle . Theyare very difficulttodescribe and analysis
because theyvaryinqualityandbecause theydependon a varietyof expressedortacit assumptions
aboutthe otherperson'sbehaviororreactions. Theyare not, however,difficulttorecognize,asanyone
can prove to himself whenhe compareshisfeelingswhenhe passesastrangerinthe streetwiththose
whenhe seesa friendor acquaintance.
14. TASK NEEDS:
The leader'smaincontributiontoachievingthe requiredresultsliesin:
Beingquite clear whatthe task is
Understandinghowitfitsintothe overall shortandlongtermobjectivesof the organization
Planninghowyou will accomplishit
Definingandprovidingthe resources you need,includingthe time andthe authorityrequired
Doingall in yourpowerto ensure thatthe organizational structure allowsthe taskto be done
effectively
Controllingprogress towardsthe goal
Evaluatingresults and comparingthemwiththe goalsandthe plans.
15. CHECK LIST FOR ACHIEVING THE TASK
Am I clear about myown responsibilitiesand myown authority
14. Am I clearabout the objective of my groupnow and forthe nextfew years(years), have I agreed
themwithmyboss?
Have workedouta programme forreachingthe objectives
Can the jobsbe restructured to getbetter results?
Are the physical workingconditions( e.g. layout,equipment,lighting) rightforthe job?
Does everyone knowexactlywhathis jobis ? Has eachmemberof the group clearlydefinedtargets
and performance standardsagreed betweenhimandme? Have I the same,agreed withmyboss ?
Doeseveryone know to whom he is accountable ?
Has anyone too many people accountable tohimforhimto manage effectively? ( e.g. more than 8-
24 accordingto the complexityof the jobs). If so,can thisresponsibilitybe sharedwithanother?
Is the line of authority clear?
Are there any gapsin the abilitiesof the group(includingmine)necessarytocomplete the tasks? If so,
am I taking steps to fill thembytraining; by additional staff orthe use of specialists?
Am I aware just howI and mygroup are spendingourtime? Is it the bestway? Are our priorities
right?
On those occasions when I am directly involvedwiththe 'technical'work,do I make arrangement
so that the needsorthe group and itsmembersare not ignoredoroverlooked?
Do I receive regularrecordswhichenable me tocheckprogressand to whatarrangementsdoI make
for continuityof leadershipinmy absence ?
Do I periodically take stock? Have I achieved the task set 12 monthsago?If not,whynot?
Do my ownworkand behaviorstandardssetthe bestpossible example tothe group .
16. INDIVIDUAL NEED:
If the needs of the individual are tobe satisfiedatworkhe:
mustfeel a sense of personal achievementinthe jobhe isdoing,thathe is makinga worthwhile
contributiontothe objectivesof the groupor section;
mustfeel thatthe job itself ischallenging,isdemandingthe bestof him, isgivinghimthe responsibility
to match hiscapability;
must receive adequaterecognitionforhisachievements;
musthave control over those aspectsof hisjobwhichhave beendelegatedtohim;
15. mustfeel thathe as an individual,isdeveloping,thathe isadvancinginexperience andability.
17. CHECK LIST FOR MEETING INDIVIDUAL'S NEEDS
For each member of the group:
Have I agreedwitheachof my subordinateshismainresponsibilities(expressedadsaresults) and
standardsof performance bywhichwe canboth recognize success?
Has he a continuinglistof agreedshorttermtargetsforthe improvementof hisperformance,eachwith
agreedmaturitydate?
Have I made the adequate provisionforthe trainingand( where necessary) retrainingof eachperson?
In the eventof success,do I acknowledge itandbuildonit?In the case of failure, doI criticize
constructivelyandgive guidanceonimprovingfutureperformance?
Doeshe have the resources necessary toachieve the agreedperformance standards( including
sufficientauthority)?
Doesthe individual seesome pattern of careerdevelopment? ( unless,perhaps,he isabouttoretire,in
whichcase doeshe needhelpinmeetingthe problemsof retirement)?
Can I remove some controls,thoughstill retainingmyaccountabilitye.g.canIcut downthe amountof
checking I do,holdinghimresponsiblemore andmore forthe qualityandaccuracy of hiswork?
Can I increase the individual's accountabilityforhisownwork?e.g.couldhe notwrite the paperon his
own workfor the technical journal? Doesshe signherown letters?
Can I give additional authority?e.g.Couldshe arrange the agenda and speakersforthe nextsales
conference?Couldall queriesonthisspecial subjectbe made initiallytohiminsteadof me?
Is the overall performance of eachindividual regular( e.g.annually) reviewedwithhim?
Am I sure that, for each individual,work,capacityand pay are inbalance?
If afteropportunitiesfortraininganddevelopmenthe isstill notmeetingthe requirementof the jobdo
I try and finda positionforhim more clearly matchinghiscapacity -or see thatsomeone else does?
Do I knowenoughabouteachmemberof the groupto enable me to have an accurate picture of his
needs,aptitudesandattitudeswithinthe workingsituation? Do I reallyknow how he feelsabout
things?
Do I give sufficienttimeandpersonal attentiontomattersof directconcernto the individual suchas
superannuation, andredundancyarrangements,and,where relevant,socialandrecreation
opportunities?
16. 18. GROUP NEEDS:
The keyfunctionsof the leadertomeetinggroupsneedsare:
To setand maintaingroupobjectivesandgroupstandards.
T o involve the groupasa whole inthe achievementof objectives.
To maintainthe unityof the groupand to see thatdissidentactivityismaintained.
19. CHECK LIST FOR MEETING GROUPS NEEDS:
Do I set groupobjectiveswiththe membersandmake sure that everyone understands them?
Is the group clearas to the workingstandardsexpectedfromthem, e.g.istimekeeping,quality of
work,housekeeping,safety, Am I fairand impartial inenforcingthem? Is the group aware of the
consequencesof infringement ( penalties).
Is the size of the workings correct andare the right people workingtogether? Is there a needfor
subgroup to be constituted?
Do I lookthe opportunitiesforbuildingteamworkintojobs?
Do I take actionon matterslikelytodisruptthe group,e.g.unjustifieddifferentialinpay,uneven work
-loads,discrepanciesinthe distributionof overtime?
Is there a formal and fairgrievance procedure to understoodbyall?
Do I deal with grievances and complaints promptly?
Do I welcome andencourage newideasandsuggestionsfromthe group?
Do I provide regular opportunitiesforgenuine consultationof the groupbefore takingdecisions
affectingtheme.g.decisionsrelatingtoworkplansandoutput, workmethodsandstandards, work
measurement, overtime working?
Do I regularlybrief the group(e.g.monthly) on the organizations, current plans and future
developments?
Am I prepared 'to go into bat' for the group when this is required?
20. LEADERSHIP ABILITIES:
We have seenthat, leadershipariseswhen group needscannotbe metthroughthe formal
organization, Whenthis condition exists,informal line of interaction are createdwhichare geared
17. towardsthe attainmentneedsthatare not necessarilycompatible withthe attainmentof the enterprise
objectives. Therefore the authorityof the leaderisgivenbythe groupandis notdependentupon his
positioninthe organization, Whenthisarise the form of two parallel line appear, the formal and the
informal . At thissituation leadershipabilitiesare requiredtokeepthingsgoing. Itis universally
agreedthat effective leadershipisessential forperpetuationof anenterprise . The life of anenterprise
or civilizationdependsupon acontinuous supplyof personcapable of controllingand resolvethe
inevitable conflictsituationthatmayarise. Thus the elementof goodleadershipis tosee that
conflictsinthe organizationisto be resolved. Leadershipissomethingthatcan be learnedbutthe
problemsishow to teach it. Leadership skillscannoteasily noreffectively be tough in the
stereotype,formalleaning situation, buton a learningclimate thatis chargedwithrealismisneeded.
The properutilizationandapplicationof socio-dramatechniquesmayprovide thismuchneeded
realism andsome traits of leadership,e.g. honest,truthfulness,open-mindedness,courage and
perseverance. Andapart from these we have consideredis the type of the leader. There are four
typesof leadership:
Exploitiveauthority.
Benevolentauthority.
Consultative and,
Participative. And dependsmostlyonthe individualspersonality.
21. MANAGER, LEADER AND ENTREPRENEUR.
What thenisthe differentbetweenthe manager,leaderand entrepreneur. The manager functionisin
the formal positionhe holdsfromsome highersource. The authorityof the leaderisgiventohimby
the group and isnot dependentuponhisposition The entrepreneuris the initiator,the innovator,and
risktaker.. The manager however,maywell have all these characteristicsexceptthathe may not risk
hispersonal fortune tothe extent thatthe entrepreneurdoes. Managercan be a risktaker,in an
affirmative sense, withthe corporation'sfortune forhe riskshispositionandreputation. Withthe
growthof the corporationa large part of the entrepreneur'srole hasbeentransmittedtothe
professionalmanagerwho mustbe able to maximize profitsthroughthe effectivecoordinationof
humanefforts.
Managing an enterprisehave broughtthe followingdisciplineswhichare:Industrial Psychology,
Industrial Sociology andHumane relation. Basicallyeachof these discipline isconcernedwithhuman
problemsandconflictsthat are an integral part of a dynamicIndustrial Society. These subjects are
vitallyinterestedindeveloping and meetinggroundwhere optimumneedsatisfactionmay be attained
by the employer,employeeandthe consumer Industrial Psychologyhope tobringaboutthismeeting
groundby systemic collection of the data pertainingtothe individual inthe workenvironment.
Industrial Sociology,onthe otherhand,uses the group as itsfocal point.. Humanrelationusesboth
the group and the individual asstrategicelementininterpretingandanalyzing social phenomenain
businessandindustrial.
18. 22. MANAGEMENT:
The toolswhichmanager usestomeetenterprisesgoals ismanagement. Letusnow turn toconsider
this subjectcalled ''MANAGEMENT''. There are fourtypesof management:
1. Managementisthe processbywhichindividualsandgroupeffortiscoordinatedtowardsgroupgoals.
2. Managementisthe creationof an environmentwhichwillfacilitate accomplishmentof anenterprise
objectives.
3. Managementisfunctionof distinct processconsistingof planning,organization,actuating.and
controlling,performedtodetermineand accomplish the objective..
4. Managementaimstoreach predeterminedobjectivesbyathought-out,organized,andsystematic
approach.
At the otherhand management isthe applicationof interdisciplinarysystemssciencethatstudies
problemanalysis,decisionmaking,andsolutionimplementation withinanorganization. letus call
Let us call these fourtypesof managementasfourdefinitionof management.
First definition concernswith management functions. These functionsare:
1. Planning.
2. Organizing.
3. Actuating.
4. Controlling. And sub-functions whichare:
a. Staffing.
b. Coordinating.
c. Directing.
d. Reviewing.
Functional managementis continuous practical process in these four elementsof management
whichcomprise decisionmakingalongthese areasof :
Planning:whichisthe selectingof factsandthe makingand usingof assumptionsregardingthe future in
visualization: formulationof proposedactivitiesbelievednecessarytoachieve desiredresults.
19. Organizing: the meansbywhich management coordinatesmaterial andhumanresourcesthroughthe
designof formal organization. Inthe formal organization,authorityisdelegatedfrom the topdown
and responsibility flowsfrom the bottomup.
Actuating: the processof staffinganddirecting personnel towardthe mostefficientaccomplishmentof
statedgoalsand objectives Actuatingthusinvolvesstaffing,directing,andcommunicationtothose who
carry out the plansof the firmwithinthe organizationalframework.
Controlling.:There are three stopsof control,these are: establishmentof standards,informationand
measurementof standardsand actionto correct deviationsfrom standards.
23. PRODUCTION:
Afterconsidering humanresourcesinindustrialorganization letusturnto anotherfactor,thisis
material resourcesthatis production of goods to satisfy humanneeds.
Economicsisthe scientificdiscipline whichconcernitself with''MAN'SWELL-BEING'' encompassesthe
social relationshipsorsocial organizationinvolvedinallocating 'SCARCE''resourcesamong alternative
humanwantsand in usingthose resourcestowardsthe endof '' SATISFYING''wantsas fullyaspossible.
Wants have twocharacteristic---------------theyare varied,andinthe aggregate overtime they are
''INSATIABLE'' insatiability doesnotnecessarily implythatan individual'sdesire forparticular
commoditiesisunlimited,butthatit iswithrespecttocommoditiesinthe aggregate thatwantsare
unlimited.
Thus wantsarise forwhat humanorganismmusthave inorder to continue functioninge.g.the desire
for food,shelterandclothing. Wants alsoarise from culture withinwhichwe live,foreverysociety
dictatescertainrequisitesforthe goodlife. Therefore the satisfactionof biological,cultural andsocial
needsrequiresawidervarietyof goods. Over-timethe same individual wantstosatisfyall thisdiffer,all
of us,each have differenttastesof food,clothing andcertainsocial tastestoodifferwidely.. Thus
differentmodelsof dress,age,climate,social,educationandhostof otherfactors give rise to variety of
goodsdesiredbythe societyingeneral.
The level of wantssatisfactionwhichaneconomycanachieve islimitedpartlybythe quantitiesand
qualitiesof itsknownresources. Resourcescanbe classifiedconvenientlyinto two categories:1. labor
or humanresourcesand2. capital or non humanresourcese.g.land,buildings,machinery,available
mineral resources,rawmaterial,semi-fishedmaterial,businessinventoriesandanyothernonhuman
tangible itemsusedinproductionprocess.
Resourceshave three characteristics1,mostresourcesare limitedinquantity,2,theyare verstile,3.they
can be combinedinvaryingproportionstoproduce a givencommodity. Mostresourcesare scarce in
the sense thattheyare limitedinquantityrelative todesiresforthe productwhich theycanproduce
These are calledeconomicresources The scarcityof economicresourceshere bringsproblems,thuswe
20. mustpick andchoose of whichwants to be satisfiedandin whatdegree. Thushere we foundthat our
problemmainlyisof combinationof resourcesinordertoproduce a givencommodity,here we require
techniques.
Techniquesof production,togetherwithquantitiesandqualities of resourcesinexistence,limitthe level
of wantssatisfactionaneconomycanachieve.Thusyoucan see that,the simultaneouschoiceof goods
to be produced,quantitiestobe producedandtechniquestobe usedfall withinthe scope of economics.
Therefore economistusuallyassume thatforthe productionof anycommodityagivenrange of
technique isavailable andthatforany quantityproducedof commoditythe leastcosttechniqueshould
be usedand it isin thissense thateconomistcall ''economicefficiency''anditisthisthat entrepreneur
needsmostwhenconsidersabout production.
24. COST OF PRODUCTION:
Cost of productionare destination betweenfixedand variablescosts. Fixedcostsare those which,in
giventime perioddonotalterwiththe amountproduced. While variablecostsdo. Underthe fixedrent
system,forinstance,the renta tenantfarmerpaysdoesnotvary withthe acreage of hiscrops in a
giventime ayear,but hiswage bill atharvesttime,histractor fuel,andhisexpenditure onseedand
fertilizersdosovary. These costsalsoare calledinescapable orescapable---thatiswithinone year,the
tenantcannot avoidpayinghisagreedrentbuthe could,by reducinghiscropsproduction tozero,to
take the extreme case,avoidincurringexpenditure onwages,onfuel,seedandfertilizer. Andthis
alwaysoccurs inthe short run periods.
The large the periodunderconsideration,the greaterthe numberof costswhichwill become variable.
In verylongperiod,indeed, all costsare variable since theseisassumedtobe time forthe firmownerto
erecte.g.more building,rentmore land,orgive itup. The destinationbetweenfixed andvariable
costs,on the otherhand, andbetweenthe longandshortperiodon the other,determine eachother.''
That is all costsa variable inthe longperiodandthat,the longperiodisthat inwhichthere are no fixed
costs.
25 FINANCE:
In orderto produce one must have finance tofinance the productioncosts. Finance maybe definedas
the provisionof moneyatthe time itis wanted. Every personresponsible forfinance whethercompany
or any otherisconfrontedwiththe prospect, duringthe comingdays,months, ora year,of the inflows
of receiptsonthe otherhandon the outflowsof paymentsinthe other; and it is hisor herresponsible
to try to make sure that the inflowsandoutflowsare arrangedthatmoneyisalwaysavailable tomake
necessarypaymentsas the arise. Where both receiptsandpayments take place evenlyand
continuously, little difficultislikelytooccur. But where-eitherthe receipts,orpayments,orbothoccur
discontinuously,and especiallyif theyoccurinrelativelylarge amountsatrelativelylongintervals,much
care and forethoughthave tobe takentoensure that at any givenmomentthere ismoneyavailable to
make the necessarypayments
21. For receiptsof the wagesor salaries, solongastheyare inregularemployment,incomesare usually
distributedfairlyevenlyovertime,andfinancial problemsusually arise mainlywhentheyhave tomake
occasional paymentswhich are large relativelytothe income forthe currentweekormonth. Such
large irregularitiesinpaymentsare due onlyoccasionallytofluctuationinthe rate of actual
consumption. Theyare usuallydue tothe fact thatsome things,eventhoughcontinuouslyconsumed,
are broughtincomparativelylarge units, this maybe eitherbecause,while itispossible tobuythingsin
small units,itischeaperor more convenienttobuytheminlarge ones,asit ischeaper or more
convenienttobuycoal by the tonthan by hundredweight;orbecause some things,like houses,or
motorcars or furniture, canbe broughtonlyinunitseach of whichisrelativelylarge. Wheneverany
exceptionalpurchase ismade whichcostsmore thana fraction of that periodincome forthe period's
income,total expenditure forthe periodwill be in exes of income forthe period,andsome
arrangementwill have tobe made tofinance the exes. The length of wantwhichneedstobe financed
dependsontwofactors1 . the periodof productionof the article beingmade and2,. the periodof its
consumption whichwill dependon nondurable anddurable:
1. Non durable e.g.food,drink etc.
2. Durable e.g. clothes,motorcars,households,equipmentsetc.
26 THE RISKS OF FINANCE:
There are fourtypesof risks:
1. physical risks,
2. economicrisks,
3.technical risks,
4. political risks.
1. Physical risksare risksthatsome accidentmy destroyorspoil some physical goodscreatedthe work
financed.
2. Economicrisksare the risksthat remaineventhoughthe physical objectcreatedsufferno
unexpecteddamage andthoughitisfoundpossible toconstructthese physical objectswithresources
assume to be available.Theyare of two kinds:a.the risk of an indequate insupplyof resourcesneeded
to make the product planned,sothatitcost more to make thanhad beenexpectedorevencannotbe
made at all.b. The riskof a fall inthe demandforthe product once it has beenmade.
3 Technical risksare those that arise fromthe fact that the producer'sskillsorwhatof subordinates
may notbe equal tothe boldnessof hisplanandtherefore that,withthe knownmeansathisdisposal,
he may fail to make thingsintended,orthat,if he succeedinmakingit,he may consume inits
constructionmore resourcesthanhe had allowedforinmakinghisplans.
4. Political risksare risksof lossesasthe resultof unforeseeninterventionbythe Government.
22. 27 FINANCIAL ACCOUNTING PRINCIPLES:
a. all sums of moneyreceivedandexpendedbythe companyandthe mattersin respectof whichthe
receiptandexpenditure tookplace.
b. all salesand purchasesof goodsby the company.
c. the assetsand liabilities.
d. the principal of double entry---debitandcredits.
e. capital andrevenue;capital representinvestment.revenue connotesgainorlossontrading.
f. capital expenditure the costof acquiringforthe purpose of earningincome.
g. revenue expenditure consistsof itemsof costincurredinthe maintaining capacityand as oeration
outgoingrequiredforcarryingonthe business.
h. depreciation;wearing------becomingoutof use..
i . the trial balance account isclassifiedascapital or assetsliabilityaccountsandas revenue accounts
or receivable/payableaccounts. Inorderto prove the arithmetical accuracyof the balance disclosedby
variousaccounts of a business,atrial balance isusuallypreparedbysimplylistingthe balance disclosed
on eachaccount accordingto whetherthe accountrelatestocapital or revenue andwhetherthe
balance isdebitor credit. With thisarrangementof accounts ina trial balance,itwill be observedthat
the NET balance of all the capital account isequal andopposite tothe netbalance of all the revenue
accounts.
j. Balance sheetisa statementof the fundsavailableas theiruse.The balance sheetwhichisreallya
statementof the financial positiondisplaysthe balance shownbythe capital accountstogetherwith
amountheldinreserve andthe balance of profitandlossaccount. Balance sheetcomprise the
followingaccounts:
a. currentassets,
b. lesscurrentliabilities,
c. netcurrent assets,
d. fixedassets,
e. lessprior charges,
23. f. nettangible assets.
CURRENT ASSETSare cash inhand,cash at bank,currentdebtors,billsreceivable,inventories,short
terminvestments.
CURRENT LIABILITIES:are trade creditorsandaccrued expenses,fluctuatingbankoverdrafts,shortterm
loans,currenttaxation,dividendsproposed,unclaimeddividends.
FIXED ASSETSare assetswhich are heldpermanentlyforthe purpose of earningrevenue,forexample,
building,plant,machineryandinvestment.
28. INTERNAL SOURCES OFFINANCE:
Profitsmade on turnover.
Overdraft.
Merchandise supplies.
Profitmade duringthe tradingperiodcan be divided insome of itsprofitso thatto meetsome of the
needslike the needforexpandingorcompanydevelopmentcosts,thisiscalledretainof the profit.
Overdraftisthe service of the bankto itsclientwhichpermitsthemtodraw overtheir balance of their
accounts. Merchandise supplyispurchase oncreditontheiraccountsonce theyhave obtained
referencesregardingthe clientfinancialstandingsandcharacter and turnoveristhe total value of sales
at a sellingprice overthe periodsayone year.
29. FORECASTING:
The objective of forecastingistominimize uncertaintyandtoidentifyandevaluate risks.Forecasting
helpsdecisiontakerstoadaptthe bestsolution.Facedwithdoubtsaboutthe future andanumberof
unknownfactorsthe decision takerrequiresasmuchinformationaboutthe future asispossible.
Because of the varyingdegreesof certaintyhe will alsoneedtoknow how muchrisksattachesto
alternative decision. Thusthe role of forecastinginthe enterprise istodirectattentiontowards
alternative course of actionandto bringoutthe degree of certainoruncertaintyattachedtovarious
alternatives,
The forecastingfunctionfallsintotwomainparts. The plannerisrequiredtomapoutthe course of the
businessoveranumberof years. These maybe 1. Objective targetlevel of earning pershare ,a target
returnon capital or target salesfigure.2.Forecastingtomeetthese requiremententailsacareful study
of the previoustrendsandanalysisof the marketinwhichthe businessislikelytooperate. Certain
assumptionswillbe requiredaboutthe societyatlarge,suchas changingtastesand the fashions,
change in the level of purchasingpowerandchange inpopulationstructure. Changesin working
practiceswill need analysis and allowance made forchangingtechnology.
24. Forecastingforthe businessisimpossible unlessthe businesshasestablishedaclearsystemof recording
informationaboutitsownhistoryandexperience. The forecaster must have full accessof sales
records,organizedproduct by product,andin time intervalswhichfacilitate comparisonwiththe
external industrial andnational yardsticks. Thiskindof backgroundinformationisessentialif an
analysisistobe made relatingthe experience of the businesstooutside world. The cyclical experience
of businesscanonlybe linkedtosome external indicatorprovidedfull informationisavailable andfor
frequent time periods.
KEY RELATIONSHIPS:
The forecasterwill be concernedtocalculate andestablishsomekinf of relationshipbetweenthe
businessandoutside worldandtofindaleadingindicator. Formanyfirmsbusiness profitare leading
indicatorforfuture demand.Thereforethere are three typesof forecastaforecastermusttake in
consideration:
a. forecastsincash value,
b. price forecastsand,
c. financial forecasts.
30. NATIONAL ECONOMY AND THE ENTERPRISE
At the firstsightmostbusinessesare unable to see anyclear--cutrelationshipbetweentheirown
activitiesandthe economyatlarge. The enterprise,therefore mustattemptatidentifyingthe factorsat
workin the worldat large whichinduce Governmenttomake changesineconomy policy.
31. THE DEVELOPMENT OF THE ENTERPRISE
RESTRICTION OR LIMITATION.
The forma of actionwhicha n enterprise may take toachieve itsgoalsare calledinstruments. An
instrumentcanbe regardedas the resultsof a seriesof decisionatvariouslevels,fromdecisionon
general developmentpolicythroughdecisiononthe line of businesstochoice of specifictechnique of
productionororganization . Evert enterprise strive toachievesome goal thatisto introduce energy
intothe system. Enterprise have boundaryconditions;theseare conditionswhichmustbe satisfiedin
the course of the enterprise'soperations. A boundary conditionissaidtobe inactive whenitismore
than satisfied---whenthe enterprise isoperatingwell withinthatparticularboundary. If the condition
isjust satisfied,the conditionorthere isa dangerthat it will notbe satisfied,the conditionbecomes
active thenthe enterprise isclose tooron the boundaryand itsbehaviorwill be affectedbysuch
condition. Boundaryconditionare dividedintothree classes:
1. self imposed,
25. 2. pastimposed and,
3. external imposed.
1.Self imposedconditions.are conditionsimposedbythe enterpriseuponitself,oftenbymore orless
deliberatedecision.
2. Past imposedconditionsare:the pastdevelopmentof an establishedenterprise imposing various
restriction onitsactions.
3. External conditionsare those conditionsimposedonthe enterprise fromoutside whichthe enterprise
mustaccept. Example, taxationonprofit.Taxationonprofitisthe partof the environmentwithinwhich
the enterprise operates; itappearsasone set amongthe many external conditionswhichtheyface. A
tax charge will affectonlyfew conditionsinparticular those whichrelatetothe supplyof finance. If tax
ratesfall,more finance isavailable toenterprisefromgivenprofit.
CLASSIFICATION OFAN ENTERPRISEBY ACTIVE CONDITIONS:
There are six classesof conditionswhichmay be active andset limitstothe enterprise'sgrowthor
enterprise's rate of development. These are:finance,market,factors,lackof ambition,lackof
incentivesandmaximumrate. Letustake a lookinshort eachof them;
1. FINANCEmayset a limit, especially byrestricting the rate of investmentinfixedassets.
2. MARKET: The conditionsof the marketfor an enterpriseproductsmyimpose not onlyanupperlimit
but also,incertaincircumstance a lowerlimittothe rate of expansionof salesand therefore of
development;thatistheymay demandsome minimumrate of expansion.
3. FACTORS:Factorscoversthe supplyconditionof all factorsnotincludedelsewhere-of all specific
kindsof labor,materials,equipment,buildings,ideasandexperience. The limittothe rate of
developmentof anenterprise maybe setbythe rate at whichit can increase the amountsemployedof
any of these factors
Classes4 and 5-lackof ambitionandincentivesare conditionswhichqualifyorentirelyreplace the
normal goalsof maximumof increase of the abilitytoearnprofit.
6. MAXIMUM is the resultsof class4 and5. Ambitionandincentive fordevelopment.
As Mackintosha Britishwrite observedinhiswork-- The developmentof afirm--''The greatascentis
certaininsize and scope towers overanypreviousenterprise.The greatascentmeans economic
developmentwhere bymillions of humanbeingstrive fornational entity,tolive tothe chronicle of
recordedevents The greatascentisnot merelya struggle againstpoverty,itisthe economic
developmentandwhichinthe longrun primarily,aprocessthroughwhichthe social,political,and
economicinstitutionsof the future,are beingshapedforthe greatmajorityof mankind''.
26. 32. THE FIRST CENTURY CORPORATION:
Since we have consideredgeneral overview of the taskof the industrial in modernproductionandthe
role of the entrepreneur,letusturntorecentlytrend of the twentyfirstcenturycorporation ''It is
reallyafact that Globalizationbythe use of informationtechnology systems-------ITS have made the
worldto be like the village where individualshave face toface interactionwhichhave resultedon
individualsatdistance tocommunicate asinthe village. Thishave broughtadvantage toall activitiesin
the society,say,political,economic,social andtechnologyitself. Atdistance individualscome into
partnershipand do businesstotheiradvantages. Itis notnecessarytobe multi-nationals inorderto
trade overthe world. Indeed thisprocesshave reduced the costsof running these corporationsatthe
advantage of mankind for, insteadof all the wealthof the worldtobe in the hands of the few people
the recent model of business have taken-overtothe advantagesof the majorityof mankind''.
33. . THE BUSINESSMODEL CANVANS:
Let usnow lookat the operationof dayto day businessatthe modern enterprise called ''BUSINESS
MODEL CANVANS'' The operationof dayto day businessinanenterprisecanbe arrangedintotine
9.canvans;
KEY ACTIVITIES an entrepreneurbusinessisfirsttolookforkeyactivitiesof hisbusinessandaskfor
himself thesequestions;
-- what are keyactivitiesdoourvalue propositionrequire?
--whatisour distributionchannels?
-- what is our customers relationship ?
-- what are ourrevenue streams?
CATEGORIES:
-- our methodof production.
--ourmethodof problemssolving..
our platform/network.
KEY RESOURCES:
-- what keyresourcesdo our value propositionrequire?
-- what are ourdistributionchannels?
--- whatare our customersrelationship?
----whatisourrevenue streams?
27. TYPES OF RESOURCES:
--physical,intellectual ( brands,patents,copyrights,data.
--humanand,financial.
VALUE PROPOSITION.
--- whatvalue proposition dowe delivertoourcustomers?
-- whichone of our customersproblemsare we helpingtosolve?
---- what bundlesof productandservicesourwe offeringtoeachcustomersegment?
---- what customerneedsare we satisfying?
CHARECTERRISTICS:
-newness,
-performance,
customerization,
gettingthe jobdone,
design,
brand/status,
price,
cost reduction,,
riskreduction,
accessibility,
convenience./usability.
CUSTOMER SEGMENTS:
--forwhomare we creatingvalue?
-massmarket?
niche markets?
segments?
28. diversified?
multi-sidedplatform.
CUSTOMERS RELATIOSHIP:
whattype of relationshipdoeseachof ourcustomersegmentexpectsustoestablish andmaintainwith
them?
whichone have we established?
howare theyintegratedwiththe restof ourbusinessmodel?
howcostlyare they?
CHANNELS:
through which channelsdoourcustomersegmentswanttobe reached?
how are we reachingthemnow?
howare our channelsintegrated?
which one worksbest?
whichone are mostcost efficient?
howare we integratingthemwithcustomerroutines?
howdo we riserawarenessaboutourcompany'sproducts/ services?
how dowe helpcustomerevaluate ourorganizationsvalue proposition?
howdo we allowcustomerspurchase specificproductsandservices?
howdo we deliveryvaluepropositiontocustomers?
howdo we provide postpurchase customersupport?
EXAMPLES;
inpersonal assistance,
dedicatedpersonal assistance,
self services,
automatedservices,
29. communities,co-creation.
COST STRUCTURE:
What are the mostimportantcostsinherentinpourbusinessmodel?
whichkeyactivitiesare mostexpensive?
isyour businessmore;
1.costs driven?
2.value driven?
3. fixedcosts?
4.variable costs?
5. economicsof scales?
6. economicsof scope? .
REVENUE STREAMS:
For whatvalue are our customers reallywillingtopay?
For whatdo theycurrentlypay?
How are theycurrentlypaying?
How wouldtheyprefertopay?
How muchdoes each revenue streamcontributetooverall revenue?
TYPES OF REVENUE:
Assetssales.
Subscription fee.
Lending,renting,leasing.
Licensing.
Brokering fee.
FIXED PRICING:
List price.
