meaning of planning- planning is a pre-decided/pre-
determined course of action to be taken in future.
In planning defined about the goal/objective, how
it would be get in certain time period? Entire
things will be described.
According to koontz and O’Donald- planning is
deciding in advance what to do? How to do it?
When to do it? Who is to do it?
Nature/feature of planning
1- planning is goal oriented.
2- planning is a primary function.
3- planning is a continuous process.
4- planning is a forward looking.
5- Planning is an integrated process.
6- planning is directed towards efficiency.
7- planning involves choice.
8- planning is an intellectual process.
Planning is goal oriented- planning is a pre-decided
course of action to taken in future. Organisation
can achieve the target in very specific time. If
they made/prepared proper planning that how to
do it. That is called planning is goal oriented.
2- planning is primary function- planning is the first
function of any management. Planning is based up
on the management objective. And also other
managerial operations like- organising, staffing,
directing, controlling etc. planning is must in
every activities of management.
3- planning is a continuous process- in an
organisation planning is an on-going and dynamic
exercise. It could not be stopped, they change the
old plan and apply new plan. As a manager
carries out his function, he continuous in plan,
revising his old plan selecting alternative plans.
4- planning is forward looking- planning is always
concerned with looking in to future. It involves
forecasting of future environment in which the
organisation is expected to actions.
5- planning is an integrated process- it is not just
happen, pre-decided work for all level mgt. plans
are inter-related and inter-dependent . Planning is
a time bound concept.
6- planning is directed towards efficiency- planning
is important of an organisation because of work
would be carry with the proper planning.
Organisation achieve goal/objective economically
and efficiently. The efficiency of plan is measured
by how much they contribute to the objectives.
7- planning involves choice- planning is concerned
with selecting the best course of action from
among the alternatives. Decision making is an
integral part of the planning. There is no need to
planning if one way of doing some thing.
“ selecting the best alternatives”
8- planning is an intellectual process- planning is
not a easy task and done by any one. It is not
guess work/wishful thinking. It requires mental
capabilities to do something.
scope/importance of planning-
planning is most important both for an organisation
and an economy. Sound plan make effective work
and help to management. Planning full-fill the
management objective. Planning is useful to an
1- focuses/attention on objectives and results- every
organisation want to achieve certain objective.
Planning force to members of the organisation do
hard work, make proper coordination, in different
department, make single objective and think about
the organisational goals.
2- reduces uncertainty and risk- future is uncertain
planning can not catch it. But proper planning,
organisation can reduces risk and uncertainty. An
organisation can predict future event and make
provision for them. Planning helps to identify
potential threats and opportunities.
3- guides decision making- planning is selecting the
best alternative for an organisation. Planning
guide what will be the best option. Because
planning predicting the future. Planning helps in
taking future oriented decisions.
4- provide sense of direction- planning saves an
organisation from drafting and avoids aimless
activities. planning is blue print, give guide to
the different department what to do? How to
do? Without proper direction no-one can do
any things efficiently/economically.
5- helps in coordination- planning would be
helpful in making coordination between
different levels of management.
Planning integrate all workforce at work place
for common goal/objective. it would be
possible from proper planning and
coordination. It provides unifying framework.
6- Encourages innovation and creativity-
planning is prediction of future. So in an
organisation what would be the possible
changes(technology, Ideas, concept) comes
from planning. Planning requires continuous
monitoring of environment for new Ideas and
objective of planning-
Every organisation have aim/purpose to do
business that is called objective.
1- mission- it represent the overall philosophy of
an organisation. Mission is used generally in
non-business organisation like- college,
religious trust, club, govt. etc.
Exp- elimination of poverty is the mission of the
govt. of India. It indicates the line of business
of an enterprises and its long-term
2- goal- goal is that things which is done by an
organisation. Goal is the role of an organisation in
society and provide a motive for its activities.
Exp- the goal of Suzuki is to provide low cost,
economical and quality automobiles to the public.
Tata Nano- low cost, economical and quality
automobiles to the public.
3- target- it is a specific and quantitative objective.
Exp- the total out-put in one year.
The total sales by a salesman in a day.
4- standards- standard is a norm/criteria against which
performance can be compared and evaluated. Standard
may be two types.
Unit of out- put, unit of
Quality standard etc.
5- quota- quota defined by in their territory. It is the
prescribed guidelines to whole seller/agent. Quota
is fixed for marketing activities like- no. of retail
points, sales figure of each retail points, etc.
6- deadline- time limit of competition of task.
Planning make deadline for every task in an
organisation. So the each department make best
utilisation of time.
Exp- supplying an order by Dec-2-2013 is a
deadline. a deadline show that the time limit for
the completion of a task.
Types of planning
1- Long-range planning- long-range planning is the
process of planning for long-term goals. In long-
range planning time horizon would be 5 years and
more. High uncertainty, organisation linkage with
the external environment. Different implications
comes in long range planning like- changes in the
structure and resources.
2- Medium-term or intermediate planning- such
planning covered time horizon between 2 and 5
years. It would be more suitable than long-range
planning. Such plans are coordinative in nature
and designed to implement in long term plans by
coordinated efforts of different departments.
3- Short-range planning- such types plans for 1
years. In this plans low uncertainty. Forecasting
depend upon the past experience, and linkage
between the different part of the organisation. It is
provides the basis for day to day operations,
program me, schedule etc.
According to the level of formulation, planning may
be classified in to 3 categories-
1- corporate planning
2- divisional or business planning
3- functional or unit planning
1- corporate planning- corporate planning is the
planning of whole enterprises. It is define the
basic goals, strategies, and policies for the
enterprises as whole. (top mgt.)
2- divisional or business planning- such plans
specifies the goals, policies, and program me, of a
particular department in an organisation.
Departmental plans- sales budget is the
departmental plans for the sales department. It is
formulated by middle level mgt. corporate
planning concern with the organisational goal.
Divisional planning relates to the particular
3- functional planning- this is the lowest level of
planning. Exp- advertising plan may be prepared
to achieve the sales targets. Focus on day to day
operations. (operating executives)
According to the focus, the following types of
planning can be identified-
1- strategic planning- strategic planning for whole
planning for an organisation. Direction of
allocation of resources, based on long-term
forecast. Usually done by the top level mgt., it is
the formulation of detailed operational plans.
2- operational planning- operational plans for the
particular department/function areas. Short-range
planning, operational planning for middle/
Planning process/steps in planning
Selection of best
Evaluation of best
1- establishing objective- planning is an intellectual
process. When making planning the question is
arise in mind “what is the objective of the doing
job”? So the first steps the planning determine the
objective. Objective provide direction to various
activities in the enterprise, planning has no utility if
it is not related to objective.
2- collection of information and forecasting-
sufficient information must be collected in order to
make the plans and sub-plans.all the information
makes the critical assessment of the current status
of the organisation. The assessment of the external
environment may consider the strong and -
Weak points of the organisation.collection of
information and making forecast serve as
important basis of planning.
3- development of planning- planning is done for
future which is uncertain. In planning explain
limitation which plans are to be implemented.
Collected data on the current status of the
organisation and to forecast future changes.
4- determine alternative- there are several
alternatives for any plan. They find out the all the
Exp- increase sales of an organisation may launch-
advertising campaign or reducing prices.
Or improve quality of products.
5- evaluate the alternatives- they must evaluated the
alternative with reference to consideration like-
cost, long-range objective, limited resources,
expected payback, risk, etc.different technique are
available to evaluate alternatives. The best
possible alternative may be chosen by the
6- selection of plan- this is the final steps in the
planning process is to select most feasible plan
and develop derivative plans. The hierarchy of
plans must be both integrated and flexible to meet
the changing internal and external environment.
Limitations of planning-
1- lack of accurate information- planning is done for
the future and the quality of planning depend up
on the accuracy of information. No manager can
predict completely and accurately the event of
future. If reliable forecasts and data are not
available, planning can not be realistic.
2- time and cost- planning is a time consuming and
expensive process. collection of data and revision
of plans involve maximum time, effort and
money. Increase the accuracy of planning,
manager may spend excessive time and money in
securing information. planning may delay action.
3- Inflexibility- planning may result rigidity in
managerial work. Manager/top management could
not explain the planning when they are preparing
4- Lack of ability to plans- some manager do not
believe in the worth of planning. Lack of
commitment to planning, lack of clear and
meaningful objectives, lack of top management
support. Lack of positive attitude are common
human weakness that create problems in planning.
5- Environmental constraints- manager can not
control the macro environment. As the condition
change more frequently.
Errors of judgment may increase. Changing
environment, planning may fit for one condition
may not be for next/another condition.
6- False sense of security- planning may create a
false sense of security in the enterprise. A
manager feel that the plans are formulated, action
will automatically be efficient. Once the policies
and the procedures are established, they are
considered sacred. Instead of facilitating action,
these may hinder action unless they are reviewed
and revised periodically.
Meaning of business forecasting- forecasting is the
formal process of predicting future events that
will significantly affect the functioning of
a)Forecasting is concerned with future events.
b)Forecasting is done by analysing the past and
c)Forecasting may be made for long-term or short-
d)The quality of forecasting depend up on the
reliability of information.
Importance of business forecasting
1- key to planning- forecasting is helpful in making
plans. It improve the quality of managerial
planning. With the help of forecasting, mgt. can
anticipate future trends and decide the appropriate
course of action to take the advantages of these
Exp- sales forecasting helps in identifying the future
Good forecasting for good plan.
2- means of coordination- people at different level
participate in the process of forecasting. Regular
interactions between the members of the
organisation make coordination and unity among
Forecasting helps in integrating various
departmental plans in to the corporate plan.
3- basis for control- forecasting provides relevant
information for exercising control. The manager
can know their weaknesses in forecasting process
and take suitable action to over come these.
Forecasting can disclose the areas where control
is lacking. Once such areas are indentified then
steps can be taken to make control effective.
4- executive development- forecasting requires
executives to look ahead. Think through the future
and improve their mental capability. Manager
development the habit of collecting,
analysing, interpreting data, no guess work.
5- facing environmental challenges- forecasting
provides clues about the future happening.
Manager can serve the organisation from the
impact of trade cycle and other threats.
Forecasting is helpful in not only in planning but
in the entire management process.
Limitation of business forecasting
Not absolute truth Time consuming and
1- Based on assumption- all forecast are based on
certain assumption which may not always be true.
The basic assumption behind forecast is that event
would not be change. This assumption may not
hold good in all cases. As a result forecasts may
2- not absolute truth- forecast indicate the trend of
the future events and may not be fully true. The
techniques of forecasting simply project the future
trends and can not guarantee that particular trend
will occur in future. There is always a possibility
3- Time- consuming and expensive- lot of time
and money are involved in the collection,
analysis and interpretation of data for
Elements/process of business forecasting
1- Developing the ground work- first of all the real
problem about which the forecasting is to be done
and the purpose of forecasting should be made
clear. Investigation and analysis of various factors
influencing the organisation is necessary. The past
events should be analysed and compared with the
present events. This will reveal the cause of
various changes in the relevant factors.
2- Estimating future trends- in second stage
estimating future trends, past trends are projected
and the necessary data are analysed this probable
trends are intelligent guesses rather than absolute
guide to be executive action.
3- Comparing actual with estimated results- the
actual results are periodically compared with the
estimates. Such comparisons reveals deviations.
All significant deviations are analysed to
identified their causes and suitable corrective
action is taken.
4- Refining the forecast- forecasting is an ongoing
process. Proficiency (expert) in forecasting can be
achieved slowly through constant improvements
in data and techniques over a period of time.
Techniques of business forecasting
Depend up on statistical data
Depend up on human judgment
1- time series analysis- in time series analysis data is
in various components trends, seasonal variation
climates, weather condition customers, tradition
and habits. Cyclical variation- prosperity,
declining, depression and improvement.
2- extrapolation- it is based on the time series
analysis but it does not isolate the effect of
various types of changes. It is assumed that there
is a constant and stable pattern of movement.
3- regression analysis- it is depend up on two or
more interrelated series. Changes in one variable
also changes in another variables.
4- econometric model- it is more expensive model
small firm can not afford it. It is the mathematical
models in this models interrelationship among
different variables. It takes a set of simultaneous
equiations.these equitation are not easily to
formulate, this models developed by specialized
institute or agencies.
1- panel consensus method- a panel of expert in the
area is prepared and they interact to each others.
Exp- the opinion polls are used to predict the out
come of election.
2- Delphi technique- expert opinion of any topic but
they have no face to face contact. Selecting the
best alternative from different opinions. This
method applies a scientific approach but may not
be give the same answer in all cases.
3- morphological analysis- this method is used
mainly to forecast technological changes.
It is depend up on several factors like-
a)Time period to be covered
b)Cost of the forecast
c)Time available for forecasting
4- business barometers- business barometers are the
index numbers used to predict the direction in
which the economy is moving. The assumption
here that the past pattern tend to repeat themselves
Gross national product, wholesale price index,
consumers price index, index of industrial
production, stock exchange index.
Used in forecasting continuous rise in gross national
Management by objective (MBO)
In 1954 Peter Drucker suggested “ management by
objective and self control” as the basis of
measuring the performance of manager in an
In 1961 Edward Shelh MBO is integrating
individual with the organisation.
In 1965 John Humble a British management
consultant published his book “ MBO” MBO is
known by the different names like “ management
by results” “goal mgt.” “work planning and
review” in recent year MBO has become a
philosophy of managing many enterprises.
Concept of MBO- according to George Odiorne “
MBO is a process where by the superior and the
subordinate managers of an enterprise jointly
identify its common goals.
According to John W. Humble- “ MBO is a
dynamic system which seeks to integrate the
companies need to clarify and achieve its profit
and growth goals with the managers need to
contribute and develop himself. It is a demanding
and rewarding style of managing a business”
Feature of MBO
1- mutual goal setting- mutual setting of objective
between different department (every employee)
use of these objective as standard evaluating the
employees performance. Every manager set target
and done with his superior. There is a active
participation of all level of people.
2- compatibility- it is helpful in setting objective at
all level of organisations. The setting of
organisational objective at the top. It is helpful in
middle and lower level employee, determine their
objective towards organisational objective and
with each other.
3- systematic- it is a formal process that being with
goal setting and continues through performance
review, manager and subordinate act together not
only to set common goals but to review
performance in the light of these goals.
4- continuity- under MBO performance appraisal
with provision for regular periodic reviews. It is a
dynamic a approach that integrate the individual
with the organisation. Try to predict and influence
future rather than on responding and reacting to
past. Focus is generally on change to improve
both individual and organisational effectiveness.
5- key result areas- MBO ensure that due attention
is given to the priority areas which have
significant impact on performance and growth of
the organisation. Goals of all key personnel are
properly explain and they are required to make
maximum contribution to the overall objectives.
Finance (key area)
Cash flow, dividend policy, debt-equity ratio, source
6- measurable objectives- MBO involves the setting
of specific measurable objectives for a future time
period. The idea is to assign each employee a
specific target which is time bound.
Setting measurable objectives may be simple in
sales and production. But in other areas it is
difficult to set objective in specific terms.
Exp- “ design and run ten community service
advertisements” may be an objective in public
Steps in MBO process
Understanding the organisation
Organisational goals and
Unit and individual goals
Review by superior
Sequence of activities
Rules and regulation
Time and resources
Revise goals and
Advantages of MBO
1- improved planning- MBO produces clear and
measurable performance goals. People know what
they have to do? There is effective matching of
goals and resources. MBO forces manager to plan
for result rather than plan for work. Organisation
objective would be for each department
2- team work- MBO results is better
communication/ coordination between different
department and reduces conflict. The whole
management team do for one goal/ objective.
there is a interaction of all level of employees.
MBO clarifies the job assignment and
responsibility of each individual.
3- effective self- control- leadership is free from the
routine task, concentrates its efforts and time.
Identifying problem and plan can be developed to
solve such problems. MBO provide a mechanism
by which manager can ensure that enterprise is
moving in right direction.
4- objective appraisal- the performance of every
individual is evaluated in terms of the mutually
agreed targets. MBO also allows employees to
monitor and control their own performance.
MBO helps to develop manager, who have potential
for growth. Appropriate training programs can be
formulated on the basis of performance reviews.
4- motivation- MBO leads to better interpersonal
relation in at all levels. It provides greater
opportunities to make personal contribution and to
accept more responsibility. Superior manager
assume a supportive role and subordinates are
allowed to exercise self direction and self control.
Different organisation private/public have benefited
a lot through the application of MBO.
Limitation of MBO
1- goal setting problems- it is very difficult to set
measurable goals. Highly expensive short-term
goals may beat the cost of long-term goals. Focus
on only end result and goals once set followed
rigidity to inflexibility in the organisation.
2- time consuming- MBO requires maximum time
in setting of measurable goals. Maximise meeting
in initial stage for confidence in subordinates. The
formal periodic reviews and final report also
consume a lot of time.
3- increased paper work- MBO maximise paper
work like newsletters, instruction book, training
manual, performance report, etc. employees have
to fill and submit detailed reports of their
4- pressure-oriented- under MBO manager are
forced to subordinates, not easy to change acting
style. An MBO program me based on reward,
punishment, psychology may prove self-
defecating in the long run.
5- participation problem- MBO requires mutual
goal- setting by the superior and the subordinates.
But in many cases superior has no time to discuss
with the subordinates. He is not willing to share
power with subordinate. Subordinate may not
willing to set goals for himself because he is in
competent or he fears criticism from the superior.
6- inflexibility- MBO introduce inflexibility in the
organisation. Once the goals are set down, then
the superior may not like to modify it.
Concept of organisation- organisation is also widely
means a group of people, a structure of
relationship and a function of management.
Organisation is used in management in 2 different
ways- 1) as a structure 2) as a process
As a structure- organisation is the network of
relationship among the member of group of a
As a process- identifying and grouping the work to
be performed, defining responsibility and
authority and establishing relationship for the -
Purpose of common objective.
Nature of organising-
1- common purpose- every organisation is goal
oriented/purposeful. Every organisation have
common goals. It is bound by common purpose
and they do for it.
2- division of labour- each and every organisation
have division of lab our according to people
experience and knowledge divide in to functions.
It is necessary to avoid time, energy and
resources. It also provide benefits of
3- authority structure- define authority of every
position. Who is superior or who is subordinates,
superior-subordinates relationship is known as
chain of command.
4- people- an organisation is basically a group of
persons. People constitute the dynamic human
elements of an organisation. They have their own
need, feeling, goals, sentiments and values.
5- communication- every organisation playing vital
role in communication. Proper communication
between different department and mutual
understanding and cooperation among the
member of an organisation.
6- coordination- in an organisation we can find-out
proper coordination between different department.
7- resources- an organisation makes various
resources like- technology, and skills.
8- environment- an organisation function in an
environment comprising- economic, social,
political, and legal factor.
9- rules and regulation- every organisatin has rules
and regulation for regular functioning. There rules
and regulation may be in writing.
Significance of organisation-
1- efficient management
2- coordination and communication
3- growth and diversification
4- optimum use of technological innovation
5- Optimum use of human resources
6- balanced to various activities
1- efficient management- for the successful
management it is most important that all the
management activities should be done like-
planning, staffing, directing, and controlling lack
of these things increase duplicacy in an
organisation. And some important operation may
be left out.
2- coordination and communication- it is clear that
proper coordination between different department
in an organisation. Improve relationship and
mutual communication in different department.
3- growth and diversification- sound organisation
helps in the growth and expansion of the
enterprise by efficient mgt. sound organisation
helps in keeping activities in various areas and
increase the capacity of enterprise.
Exp- Air Tel- telecom
Air Tel- air tel digital
4- optimum use of technological innovation- sound
organisation change technology with the change
of environment for catching the market condition
modifying the authority and responsibility and
relationship of new development.
5- optimum use of human resources- sound
organisation select right person for right job.
Favorable condition, satisfy customers and take
100% effort them. The better use of individuals
working in the enterprise.
6- balanced to various activities- organisation
divides the entire operations of the enterprises in
to different development. Define role of various
department. This will help in giving attention to
various departments according to their
contribution to the goals.
process of organising
1- identification of activities
2- grouping of activities
3- assignment of duties
4- delegation of authority
1- identification of activities- the organisation
structure is developed to achieve objective. The
total work is classified or divide systematically.
Identification/classification of important activities
while identifying/classifying activities and
management must ensure that-
a) All the necessary activities are performed.
b) There is no unnecessary duplication in
c) The different activities performed in a
coordinated manner and identification of each
and every department.
2- grouping of activities- similar activities is group
together from department, division, section.
Grouping is based on the requirement of the
situations. Such grouping of activities is called
3- assignment of duties- every group related
activities is assigned a position. Every position
occupied by an individual. The requirement of the
job and the competence of the individual should
be properly matched. It creates responsibility and
ensure certainty of work performance.
4- delegation of authority- assign duty for right
people. Authority and responsibility are properly
balanced. Delegation of authority creates superior
and subordinates relationship between various
position in the organisation.
Principles of organisation
1- principle of objective
2- principle of division of work
3- principle of unity of command
4-Principle of equality of authority and
5- principle of coordination
6- principle of flexibility
7- principle of efficiency
8- principle of exception
9- principle of continuity
1- principle of objective- in a sound organisation
every part should be directed towards the
accomplishment of basic objective. Every
member of organisation should be familiar with
2- principle of division of work- in sound
organisation the total task should be divided in
individual. The allocation of task should be on the
basis of qualification and aptitude. It should not
make work mechanical and boring.
3- principle of unity of command- every person
should received orders from only one superior and
be accountable to him. This is necessary to avoid
the problems of conflict in instruction, frustration,
uncertainty, and divided loyalty and to ensure the
feeling of personal responsibility for results.
4- principle of equality of authority and
responsibility- authority and responsibility must
exist side by side. Authority and responsibility
should be clearly defined for all positions.
5- principle of coordination- in sound organisation
coordination between department and groups
efforts. It is motivate for common objective.
6- principle of flexibility- organisation structure
should flexible not static changes. Changes in
technology/policy/strategy/etc. according to
7- principle of efficiency- in sound organisation the
whole things going well and organisation achieve
objective at a minimum possible cost. It should
permit optimum use of resources.
8- principle of exception- every manager should
take all decision with in the scope of his authority.
Only exceptional matters whish are beyond the
authority of lower level persons should be
referred to higher levels. Routine matters should
be deal by executive levels.
9- principle of continuity- the organisation should
continuity in business/operation. Proper
arrangement should be made for the training and
development of executive.
Types of an organisation
Line and staff
Committee type of
Project org. Matrix org. Free from org.
1-Line or military type organisation
It is the oldest and simplest form of organisation.
It is also known as a military type organisation.
All responsibility will be centralized by one man
He distribute the responsibility to his subordinate.
Line organisation consist of direct vertical
A superior exercise direct command over his
Line and staff organisation
• Staff who are experts in specific areas assist the
• Experts do not have power to command
• They can only advise
• The line manager can accept the suggestion or
may reject it
Vice president in- charge of marketing
Advertising manager General sales manager Manager of marketing
Director to sales
Director of dealer
District sales manager
Branch sales manager
Functional type organisation
• Only for large scale organisation
• Separate departments to look after different
• Ex: purchase
• Each department has a head and will work under
Director of sales administration
Sales person Sales person Sales person Sales person Sales person
1- taking important policy decision and planning.
2- general manager, general sales manager,
advertising manager, sales research manager,
comes in committee type sales organisation.
3- sales man training committee, customers relation
4- they do the meeting time to time and discuss the
5- Project organisation
When an organisation has to execute large projects
of long duration, it may adopt a project
A project team is created consisting of specialists
from different departments.
The activities of project team are coordinated by the
Once a project is complete the regular project
division undertakes a new project.
1- in project management specialist employees in
2- it provides flexibility in handling specialised
3- it allows maximum use of specialised knowledge
4- it makes for meaningful control.
1- there is a great uncertainty because the project
manager has to deal with specialists from a no. of
2- lack of clear communication.
3- lack of awareness of project problems.
6- Matrix organisation
It is created by merging the two complementary
organisation. (the project & the functional) . It
represent a combination of vertical functional
departmental organisation with project
organisation. Matrix organisation is used in
industries with highly complex products as in
aerospace industry where project team are created
for specific space and system.
Advantages of matrix organisation
1- this leads to better planning and control and helpful
in competition of project in time.
2- it is more flexible than the traditional functional
organisation.it can be more easily adapted to
changes in technology.
3- matrix structure provides motivation to personnel
engaged in a project.
1- the organisational relationship become more
complex and it also create confusion among
7-Free from organisation-
A free from org. Is a rapidly changing, adaptive,
temporary system organised around problems to
be solved by group of diverse professional skills.
Free from organisation is similar to the project &
1- objective- a free from org. is follows long-range
and development oriented goals but roles and
relationship are not well defined.
2- environment- it is highly flexible and dynamics
structure, every org. adopts its own organisation
design to meet fast changing environment.
3- time- there is no time limit. The structure may
last week, a month, or a year depending on
4- communication- there are no fixed channel of
communication. Focus is on team approach.
Communication is in the form of advice and
information rather than orders and instruction.
5- roles- roles would not be fixed. Roles performed
are interchangeable depending on the nature and
complexity of the mission.
6- profit centers- it is the place for all contribution to
an integrated single unit with unified goals. so
that all gain or lose by the result. major function
are treated as profit centers.
Formal organisation informal organisation
1-it refers to the personal relationship
which develop automatically when people
1- it refers to the well defined
authority and responsibility
2- it is related to well defined
2- it is created to satisfy social needs of
3-it is focus the official chain of
command which can not be
3-it does not have a fixed chain of
command .it is based on the sentiments of
4-formal authority attaches to a
4- informal authority attaches to a person
5-formal organisation is created to
meet organisational goals.
5- informal organisation is created for
social satisfaction of members
6- it is permanent and stable 6- it is relatively unstable
Function/advantages of informal group-
1- desire to socialise- being a member of an
informal group allows an individual to satisfy his
social needs. Informal organisation arises from
man’s quest (search) for social relationship. Man
is a social being he wants to belong, to associate
with other rather to work in isolated, loneliness.
2- sense of identification- people want something
more than just to have friendship. Everybody
should sense that he is a part of an organisation.
Worker get more identified in smaller groups.
3- common interest- having common interest helps
in bringing informal relationship among the
individual working in the organisation.
Performing the same type of work, is common
determinant of informal groups.
4- source of information- informal group is a source
of information to its members. Informal
communication is very fast. The group may
develop a special language for speedy
Disadvantages of informal group-
1- negative leadership- in order to increase his
influence, he may work against the policies of
management and manipulate the behavior of his
followers. He can be a source of conflict between
management and workers.
2- role conflict- conflict between his role as a
member of an informal organisation and the
formal organisation, in the informal organisation
may require him to go slow in his work while the
formal organisation may require him to work to
his normal capacity.
3- rum our- an informal org. provide a false
information which is make problem to smooth
functioning of the organisation.
4- conformity- an informal org. forces its members
to conform to its norms or code of behavior even
of it is detrimental to the objective of the formal
5- restriction of out-put- the informal group may set
its out works standard and agree on a level of out-
put. Which does not permit one member to out
Span of control
Meaning of span of control- it is refer to the member
of subordinates that report directly to a single
manager or superior.
Factors determining span of control-
1- nature of work
2- types of technology
3- ability of manager
4- capacity of subordinates
7- time available for supervision
1- nature of work- when the work perform by
worker /subordinates is not complicated. Then no
need to supervision and manager can subordinate
maximum workers. When the work is different
then the need of manager.
2- type of technology- mass production and
assembly line technology can have wider spans
than those employing batch or process production
Mass production &assembly line-
Unit or small batch production-
3- ability of the manager- span control is the depend
up on the ability of the manager.(qualities,
leadership, communication, decision making and
control) can manage more subordinates. The
attitude and personality of a manager also
determine the span.
4- capacity of subordinates- well educated and
trained subordinates may need less supervision
they work without much help from the manager.
5- planning- if policies, and rules are clearly defined
Subordinates can direct their own work on the
basis of these guidelines.
6- staff assistance- use of staff assistance can
reduce the work load of the manager.
7- time available for supervision- at higher levels
top management/ managers have less time for
supervision. They involve in planning and
Impact of span of control on organisation-
If the span of control is too wide then it becomes
difficult to supervise subordinates effectively and
places more stress on the manager. there may be
lack of time to carry out all activities properly.
Planning training, inspection and control may
suffer in particular leading to poor job
performance. a wide span of control may also
result in a slowness to adapt to change or to the
introduce new methods/machine.
If the span of control is too narrow. Narrow span of
control increase administrative cost and can
prevent the best use being made of the limited
resources of managerial talent.
They can lead to additional levels of authority in the
organisation creating an unnecessarily long scalar
1 2 3 4 5
Span of control
Maximum span=5 levels= 2
Wide span of control
Span of control
Narrow span of
It involves the authority by
a manager to his immediate
subordinates in a work
Delegation involves a
limited transfer of
Delegation is adopted by
the manager for getting
done the workers of daily
Decentralisation is not
essential for delegation.
Delegation is essential for
It involves systematic
delegation of authority at
all levels and in all function
of the organisation.
It involves a wide
distribution of authority.
It requires the formulation
of policy at the top levels of
Delegation is essential for
It is not essential for all
Departmentation is used to group various business
function and also personnel who will perform
Departmentation are the various part or divisions of
Concept of departmentation- concept of
departmentation involves grouping all operating
task in to jobs, combining of jobs in to effective
work group and combining all groups in to
divisions often terms as department at.
1- specialisation- when every department looks after
one major function, expertise is developed and
efficiency of operation increase.
Marketing manager look after only marketing
2- expansion – one manager can supervise and
direct only a few subordinates. Grouping of
activities in to departments make it possible for
the enterprise to expand and grow.
3- autonomy- departmentation results division of the
enterprise. In these unit every manager is given
adequate freedom. The feeling of autonomy
provide job satisfaction and motivation.
4- fixation of responsibility- it provide a basis for
building up loyalty and commitment, the
responsibility for result can be define more
precisely and an individual can be accountable for
bases/types of departmentation
1- departmentation by function
2- departmentation by product
3- departmentation by process
4- departmentation by customers
5- departmentation by geographical area
Deparmentation by function
planning manufacturing Quality control
foundry assembly stores
2- departmentation by product
Board of directors
Chemical division Metals
finance production sales personnel
Departmentation by process
General manager textiles
Departmentation by customers-
General manager (automobiles)
Departmentation by geographical-
LIC head office Mumbai
jalandhar Chandigarh Ajmer
Branch unit-1 Branch unit-2
Branch unit-3 Branch unit-4
Authority and responsibility
Concept of authority- according to G.R. Terry
authority denotes certain rights granted to a
position in institution. It includes right to takes
decisions and get them executed from the
Concept of responsibility- responsibility denotes the
duties assigned to a person of his position in the
Source of authority-
1- formal authority theory
2- acceptance authority theory
1- formal authority theory- all authority originates in
the formal structure of an organisation. Shares
holders entrust the mgt. of the company to the
board of directors and delegates to it most of their
authority. every manager or executive possesses
authority because of his organisational position
and this authority is known as formal authority.
2- acceptance authority- according to this theory the
authority is the power which is accepted by the
others. The acceptability of an order will depend
up on relative consequences, both positive and
negative. Subordinate will accept an order.
If( he understand it well)(he is able mentally and -
Physically to comply with it.
3- competence authority- an individual derives
authority because of his personal competence.
(seniority, popularity). A person may get his order or
advice accepted not only because, he is having an
formal authority but also because of his personal
1- right to command
2- arises from position
3-long life continuing
4- flow downward
1- obligation to perform
the assigned duties.
2- arise from superior-
3- short life –over with
performance of the given
4- flow upward
It is not that people can’t see the solution. It is that
they can’t see the problem.
charles f. kettering, writer
Concept of decision making-
“a decision represent is a judgment, a final
resolution of a conflict of needs, and a
commitment to action made in face of uncertainty,
complexity, and even irrationally.”
“Decision making is a process of selection and the
aim is to select the best alternative”
Types of decisions-
1- programmed decisions
2- non-programmed decisions
3- strategic decision
4- tactical decision
1- programmed decisions- programmed decision are
routine and repetitive and are made within the
framework of organisational policies and rules.
These policies and rules are well in advance to
solve recurring problems in the organisation.
Programmed decision are relatively simple-
And have a short-term impact. It happen in lower
levels of management.
Exp- the problem relating to promotion of
employees is solved by promoting those
employees who meet promotion criteria. these
criteria established by promotion policy and
manager have just to decide which employees
meet criteria for promotion and the decision is
2- non-programmed decisions- non-programmed
decisions are relevant for solving unique/unusual
problems in which various alternatives can not be
decided in advance. For such decisions, the
situation is not well structure and the outcomes of
various alternatives can not be arranged in
Exp- if an organisation wants to take actions for
growth, it may have several alternative routes
like- going for a gross route project or taking over
an existing company. The manager have to
evaluate the likely these alternatives. in case of
non-programmed decisions readymade solution -
Are not available. Since these decision are of high
importance because of their long- term
consequences, these are made by manager at
higher levels in the organisation.
3- strategic decision- strategic decision concept is
based on strategy which is a major action plan in
an organisation. It is a major choice of actions
concerning allocation of resources and
contribution to the achievement of organisational
a) The decision is a major one which affects the
whole or major part of the organisation.
b) it contribute the directly to the achievement of
the organisational objectives.
c) The strategic decision is normally a non-
programmed decision which is made under the
condition of partial ignorance. The alternative
involved and the outcomes of these alternatives
cannot be known in advance.
d) It create relationship between the organisation
and its environment.
e) Its comes from top management like- new plant,
launching a new product, taking over running
firm, are exp. Of strategic decision.
4- tactical decision- tactical/operational decision is
derived out of strategic decision. It relates to day
to day working of the organisation and is made in
the context of well-set policies and procedures.
a)It relates to decision about purchase of raw
materials, assigning duties to employees, etc.
b)It short-term nature and affects a narrow part of
the organisations. Exp- purchase of raw material
affect the production dept.
c)It inter-relates to lower levels of managers.
Decisions making process-
Choice of alternativeAction
1- specific objective- first define the objective
because every action of human being is goal
directed. Objective setting is an outcome of earlier
decision, this may not be considered truly as the
first step of decision process but provides
framework for further decisions.
2- problem identification- identification of problem
is the real beginning of decision making process.
it is the gap between present and desired state of
affairs on the subject matter of decision. It is just
like diagnosis of patient by the doctor. A problem
can be identified much clearly, if manager go
through diagnosis and analysis of the problem.
3- search for alternatives- at through diagnosis
defines both a specific problem and the situation
in which the problem exist. With this definition in
mind , a decision maker seeks possible solutions.
A problems can be solved in several ways,
however all the ways can not be equally satisfying
if there is only one way of solving a problem, no
question of decision arises. The decision maker
must try to find out the various alternatives
available in order to get the most satisfactory
result of a decision.
4- evaluation of alternative- after searching the
alternatives it is the next stage to evaluate the
alternatives. It is the process of measuring the
positive and negative consequence of each
alternative. Both qualitative and quantitative
evaluation is needed to ensure that all tangible
and intangible factors are taken in to account.
Mgt. must set some criteria against which the
alternatives can be evaluated-
5- choice of alternative- after evaluation of optimum
alternative is selected. It is the process that
maximise the result under given condition. Choice
of the best alternative is the most critical point in
decision making. The selection of best alternative
depend upon managers past experience,
experimentation, research and analysis.
6- action- once the alternative is selected, it is put in
to action. The actual process of decision making
ends with the choice of alternatives through which
the objectives can be achieved. Decision making
is the ongoing process. It is ensure that the
objective have been achieved by the selected-
It is ensure that the objective have been achieved
by the selected alternative. The effectiveness of
action is important because It is only effective
action through which organisational objective can
be achieved, and right decision help in the
7- results- when decision is put into action, it brings
certain result. this result must correspond with
objective. If the good decision has been made and
implemented properly then the result will be
positive. A successful mgr. is one who keeps a
close look at the objectives and results of the-
Decision and modifies his decision according to the
changes in the circumstances.
Techniques of decision making –
1- marginal cost analysis
2- cost benefits analysis
5- Delphi technique
1- marginal costing- “basic concept of marginal
costing is the amount at any given volume of out-
put by one unit”. It requires complete information
regarding the various components of cost and
clear difference between fixed cost and variable
cost. This would be the point of the maximum
efficiency of the machine. Break-even analysis is
the modification of this technique which tells the
management the point of production where there
is no profit and no loss.
2- cost- benefits analysis- it is the technique of the
selecting alternative to identify a preferred choice
when objective are less specific. Than those
expressed by such clear quantities as sales,-
Costs or profits. Cost models may be developed to
show cost estimates for each alternative and
benefits models show the relationship between
each alternatives and its effectiveness.
3- operation research- operation research has been
defined as the scientific method of analysis of
organisational problems to provide the executive
the needed quantitative information in making
suitable decisions. The object of operation
research is to provide the manager with a
scientific basis for solving organisation problems
involving the interaction components of the
operation research is widely used in modern
business organisation. Exp- inventory models are
used to control the level of inventory.
4- brainstorming- under this technique a small group
of person are stimulated to creative thinking.
Maximum group participation and minimum
criticism are employed. a problem is posed and
ideas are invited. And these ideas are identify and
the best ideas are selected. no evaluation of ideas
during discussion. Such free association and
unrestricted thinking generates some novel ideas
from which unique solution can be found.
5- Delphi technique- in this technique a panel of
experts who are physically separated and
unknown to each others. And suggestion are
provided to panel members for inviting further
suggestion. And finally select the best suggestion.
1- economic man model
2- administrative man model
1- economic man model- Adam smith and other
classical economists suggested that managers are
fully rational and choose the alternative which
provides maximum gain. the classical theory of
economics is based on the goal of profits
maximisation. A rational decision maker has clear
idea of the problem to be solved and he is fully
objective and logical in his approach.
A rational business decision is that which effectively
and efficiently assures the attainment of aims for
which the means are selected. It means that the
decision-maker as an economic being tries to
maximise the advantage by selecting the best or
optimum solution to a problem.
It is based on following assumption-
a)A single and well defined goal is to be achieved.
b)The problem is clear and well defined.
c)All alternative and their consequences are known.
d)There are no constraints of time and cost.
According to Herert simon, it is only describes how
a person should make decision . In real life,
human being can not be fully rational decision
makers in practices.
Perfect rational is only a norm which can rarely be
attained in practices. Several practical problems
come in the way of totally rational decision
Rational is bounded by several limitations. Herbert
proposed the term “bounded rationality” to define
the behavior of decision makers.
2- administrative model- Prof. Herbert define the
principle of bounded rationality to explain the
decision making behavior in real life. This model
is define the fact that due to several constraints
manager are unable to make perfectly rational
decisions, there are several boundaries to
rationality in decision making. the principle of
bounded rationality implications-
a)He makes his choice without first determining all
b)A decision maker does not search for the best
c)An individual does not have enough knowledge -
Of alternative courses of action and their
d) It is realistic while the economic man model is
A decision is called objectively rational if it is really
the correct behavior for maximising given values
in a given situations. it subjectively rational if it
maximise attainment relative to the actual
knowledge of the subject.
A decision is organisationally rational if it is
oriented to the goals of the organisation. It is
personally rational if it is oriented to the