Introduction to management

PRINCIPLES OF MANAGEMENT
UNIT 1
INTRODUCTION TO MANAGEMENT
AND ORGANIZATIONS
Compiled by
Dr.M.Balasubramanian

Definition:
An organization is a systematic arrangement
of people brought together to accomplish
some specific purpose.
Compiled by Dr.M.Balasubramanian
What’s the organization?

Three common characteristics of the organization
Organization
purpose
Every organization has its
distinct purpose, which is
typically expressed in terms
of a goal or set of goals.
People
Organizations are
made up of people.
Making a goal into
reality entirely
depends on people’s
decisions and
activities in the
organization.
Structure
All organizations develop a systematic
structure that defines and limits the
behavior of its members.

Organizational Level
Top
managers
Middle-line
managers
First-line managers
Operatives
Responsibility Title
Directing the day-to-day
activities of operatives
supervisors
Translating the goals set by top
management into specific details
that lower-level managers can
perform
department or agency head/
project leader/ unit chief/
district manager/dean/
bishop/division manager
Making decisions about the direction
of the organization and establishing
policies that affect all organizational
members.
vice president/president/chancellor/
chief operating officer/
chief executive officer/
chairperson of the board

Administration vs Management
S.No Administration Management
1 Legislative &
determination function
Executive Function
2 Determination of
objectives & policies
Implementation of Policies
3 Provides a sketch of the
enterprise
Provides the entire body
4 Influenced mainly by
public opinion & other
outside force
Influenced mainly by
administrative function
5 Mainly top level function
involves thinking &
planning
Mainly middle level
function involves doing and
actingCompiled by Dr.M.Balasubramanian

What is management?
• Definition 1
The term management refers to the process of getting
things done, effectively and efficiently, through and with
other people. Several components in this definition need
discussion. These are terms process, effectively, and efficiently.
Definition 2
Management is the attainment of pre-established goals by
the direction of human performance along pre-established
lines
Definition 3
Management is the force that integrates men and physical
plant in to an effective operating unit.

Efficiency & Effectiveness
• Efficiency means doing the task correctly and
refers to the relationship between inputs and
outputs. Management is concerned with
minimizing resource costs.
Effectiveness means doing the right things. In an
organization, that translates into goal attainment.

Low effectiveness and low efficiency. For example, this is the case when you
choose wrong products that you don’t know
how to sell them to the customers
High effectiveness and low efficiency. For example, this is the case when you
choose the right products that you want to
sell, but you don’t know how to sell them,
or you sell them on a wrong way.
Low effectiveness and high efficiency For example, this is the case when you
choose wrong products that you are selling
to them in a right way. The customers will
probably buy for the first time, but it is sure
that they will not come for more
High effectiveness and high efficiency For example, this is the case when you
choose the right products that you sell on
right way. In such a way, you will assure a
long-term success of you as an entrepreneur
and your business.
EXAMPLE

MANAGEMENT VS ENTEPRENUER

Is Management Art or Science
• Art is a way of presenting or doing things
Manager like an artist requires creativity and
skill. Art of getting things done through others
Art is a practice based and perfection in it
requires continuous practice over a long
period of time.
• Science enables a person to know
A manager should know what he should do
and how to do it effectively and efficiently

Management as an Art
The main elements of an art are
• Personal Skills
• Practical know-how
• Result orientation
• Creativity
• Constant practice aimed at perfection

Management as Science
The essential elements of Science
It is a systematized body of Knowledge
• contains underlying principles and theories developed
through continuous observation, experimentation and
research.
• Universal applicability
• Organised body of knowledge can be taught and learnt
in class room and outside.
Mgt is a science becoz it contains all the essential of
science
• Thus, the theory (Science) and practice (art) of Mgt go
side by side for the efficient functioning of an
organisation. Compiled by Dr.M.Balasubramanian

SCHOOL OF MANAGEMENT THOUGHTS
(OR)
MANAGEMENT APPROACHES
CLASSICAL
APPROACH /
THEORY
SCIENTIFIC
MANAGEMENT
BUREAUCRATIC
MANAGEMENT
(Max Weber)
ADMINISTRATIVE
MANAGEMENT
NEO
CLASSICAL
MGMT. (OR)
BEHAVIORAL
APPROACH
HAWTHORNE
STUDIES
MASLOW’S NEED
HIERARCHY
THEORY X AND
THEORY Y
QUANTITATIVE
APPROACH
MANAGEMENT
SCIENCE
OPERATIONS
MANAGEMENT
MANAGEMENT
INFORMATION
SYSTEM
MODERN
APPROACH
THE SYSTEMS
THEORY
CONTINGENCY
THEORY
EMERGING
APPROACHES

One of the first schools of management thought
developed is the classical management theory
Developed during the Industrial Revolution when new
problems related to the factory system began to appear.
Managers were unsure of how to train employees or
deal with increased labor dissatisfaction, so they began
to test solutions.
As a result, the classical management theory developed
from efforts to find the “one best way” to perform and
manage tasks.
Classical Management Theory

Classical Management Theory
The classical approach, however, suffers from
several limitations.
• First, it is a mechanical approach, which
undermines the role of human factor in
management. The focus is on technical and
economic aspects, at the cost of socio-
psychological issues in management.
• Secondly, the validity and universality of
management principles is doubtful due to
environmental changed
• Thirdly, there is a danger in relying too much on
past experience, as two managerial situations are
never identical.

• Scientific Management
Frederick Taylor, known as the father of Scientific Management,
Published Principles of Scientific Management , in which he proposed
work methods designed to increase worker productivity.
Organizational productivity can be increased by creating job that
economizes on time, human energy, and other productive resources.
Techniques of Scientific Management
Time Study, Motion Study, Scientific task Planning, standardization
and simplification and Differential piece rate system
• Administrative Management
Scientific management tried to determine the best way to perform a
job, but administrative management explored the possibilities of an
ideal way to put all jobs together and operate an organization.
Administrative Management emphasizes the manager and the
functions of management.
• POSDCORB is the steps in administrative process. ‘P’ stands for Planning, ‘O’ stands
for Organizing, ‘S’ stands for Staffing, ‘D’ stands for Directing, ‘CO’ stands for
Coordinating, ‘R’ stands for Reporting and ‘B’ stands for Budgeting

Taylor’s Principles of Management
• Develop a scientific way for each element of an individual’s work, which
replaces the old rule-of-thumb method.
a)Standardization of working condition – lighting, temp, provision for
seating, cleanliness, ventilation and noise control
b)Standardization of working methods – Motion study techniques to
determine the time to do a job
c)Standard of performance – estimating the std. time and accordingly plan
the daily work
• Scientifically select and then train, teach, and develop the worker. Right person
should be selected for the right job
• Heartily cooperate with the workers so as to ensure that all work is done in
accordance with the scientific way that has been developed.
• Divide work and responsibility almost equally between managers and workers.
Managers take over all work for which it is better fitted than the workers.
• Maximum output not restricted output - Workers must be encouraged for
higher production by giving incentive or higher wages. He introduced
differential piece rate system. Workers who produced above the standard level
were paid high piece rate, while others were paid at low piece rate.

Time Study
• Time study is a technique to estimate the time to be
allowed to a qualified and well-trained worker
working at a normal pace to complete a specified task
by using specified method.
• Divide work in to smaller elements
• Measuring the smaller elements
• Adding the allowances to the sum of all elements to
estimate the std. time
• For example, the time to pick screw driver from its
place and the time to tighten or loosen the screw is a
variable, depending upon the length and size of the
screw.

Limitations of Scientific Management
No man is entirely an ‘economic man’ and man’s behaviour is
dictated not only by financial needs, but by other needs like
social needs, security needs and esteem needs. Hence, it may
not always be true that economic incentives are strong
enough to motivate workers.
Secondly, there is no such thing as ‘one best way’ of doing a
job so far as the component motions are concerned and hence
time and motion study may not be entirely scientific. Two
studies done by two different persons may time the same job
entirely differently.
Thirdly, separation of planning and doing a job and the greater
specialization inherent in the system tend to reduce the need
for skill and produce greater monotony of work.
Lastly, advances in methods and better tools amid machines
eliminated some workers, causing fear among workers.

Bureaucracy Management
Weber’s Ideal Bureaucracy
Max Weber known as father of modern Sociology analyzed bureaucracy as the most logical
& structure for large organization.
• Division of labor & Work Specialisation
• Authority hierarchy (supervisor has control)
• Formal selection (competency basis not personality)
• Formal rules and regulations (document all actions &
decisions) – Rule Book
• Impersonality (promote fair and equal treatment)
• Career orientation

Contributions of Behavioral Thinkers to
Management Thought
Name Period Contribution
Mary Parker
Follet
1868-
1933
Advocated the concept of ‘power
sharing’ and integration
Elton Mayo 1868-
1933
foundation for the Human Relations
Movement;
Abraham
Maslow
1908 –
1970
motivated by a hierarchy of needs
Douglas
McGregor
1906-
1964
Theory X and Theory Y personalities

Neo Classical Mgmt.
(Hawthorne studies )
(Elton Mayo and Fritz Roethlisberger in the 1920’s )
Classical theory over-emphasized the mechanical and
physiological characters of management and neoclassical
theory with a more human-oriented approach and
emphasis on time needs, drives, behaviours and attitudes
of individuals
There are three major phases to the Hawthorne studies:
1. The illumination experiment :
Tried to determine whether better lighting would lead to
increased productivity. This experiment showed no
connection between the amount of production and
illumination, however, it became the conduit for future
studies on what could influence worker output
2. The relay assembly group experiments
3. The bank wiring group studies.

• Mayo took six women from the assembly line (known as Relay
assembly) and separated them from the rest of the factory.
Mayo (harvard business school professor in 1927)controlled their
work conditions by, but not limited to, changing their hours, rest
breaks, temperature and humidity.
This was done with advance notice and a supervisor who was
present as an observer, not a disciplinarian.
These six workers became a team that worked well together as
they felt no coercion from above and no limitations beneath them.
The result was that they produced 3000 relays a week versus the
2,400 they normally produced under routine working conditions.
• Bank Wiring Room Expt. The social structure of employees was
investigated along with payment incentives.
The question was whether the informal social structure was based
on occupations.
This experiment included 9 wiremen, 3 soldermen, 2 inspectors
and an observer. It was found that special attention did not affect
their productivity or behavior.
Productivity did not go up, as the workers were afraid that the
company would lower the base pay

Behavioral Management
• Focuses on the way a manager should personally
manage to motivate employees.
• Mary Parker Follett: an influential leader in early
managerial theory suggested that.
– Workers help in analyzing their jobs for improvements.
– Worker knows the best way to improve the job.
– If workers have the knowledge of the task, then they
should control the task.

Systems Theory
Resources
 Labor
 Materials
 Capital
 Machinery
 Information
Managerial and
Technological
Abilities
 Planning
 Organizing
 Staffing
 Leading
 Controlling
 Technology
 Goods
 Services
 Profits and
losses
 Employee
 satisfaction
Inputs
Transformation process Outputs
Feedback

Contingency Theory
Systems Viewpoint
How the parts fits
together
•Individual
•Group
•Organization
•environment
Behavioral Viewpoint
How managers influence
others
•Interpersonal Roles
•Informational Roles
•Decisional Roles
Traditional
viewpoint
What managers
do
•Plan
•Organize
•Lead
• Control
Contingency
Viewpoint
Managers’ use
of other view
points to solve
problems
•External
environment
•Technology
•Individuals

Emerging Approaches In Management Thought
 William Ouchi, outlined new theory called Theory Z.
 It is the blend of positive aspects of both American
and Japanese management styles.
 Quality Management is a management approach
that directs the efforts of management towards
bringing about continuous improvement in product
and service quality to achieve higher levels of
customer satisfaction and build customer loyalty.

Fayol’s 14 Principles of Modern
Management (Administrative Theory)
1. Division of Work
2. Authority
3. Discipline
4. Unity of Command
5. Unity of Direction
6. Subordination of
Individual Interests to the
General Interest
7. Remuneration
8. Centralization
9. Scalar Chain
10. Order
11. Equity
12. Stability of Tenure of
Personnel
13. Initiative
14. Esprit de corps

 Division of work – Specialization in any field, worker concentrates on a particular field. This
increases productivity, quantity and quality. Workers feel bored, because of doing repeatedly
same work. Difficult to reschedule when the worker is absent.
 Authority & Responsibility – Power given to a person to extract work from subordinates,
Responsibility is the obligation of a person to perform his duty towards a job
Authority may be delegated but responsibility cannot be delegated.
Authority without responsibility and Responsibility without authority are the major defects in
any organization
 Discipline – This is respect for agreements. Sincere effort for completing a given task.
Maintenance of discipline requires good supervisors, clear and fair agreements, judicial
application of penalty and effective communication
 Unity of Command – An employee should receive order only from supervisor or their
immediate higher authority. Multiple commands will cause confusions.
 Unity of Direction – There should be one head and one plan to reach an objective. Unity of
command cannot function without unity of direction.
 Subordination of individual interest to general interest – For any employee, his personal
interest is important, but for the management, management interest is important in
maximizing the profit and developing the organization. It is necessary to maintain unity among
employees and avoid friction.
 Remuneration of Personnel – Money paid for mental and physical effort. It should be fair and
satisfy both employer and employee.

• Centralization – If all the powers are retained at top level management, organization
is centralized. If the power is delegated to subordinates, the organization is
decentralized. Delegation of authority to subordinates helps to take quick decision to
all problems and it will have shorter span of control
• Scalar Chain –means Line of authority. Any instructions or orders should be sent from
top to bottom. Level only through the line of authority.
• Order – Material order and Social order
Material order – A place for everything and everything in its place.
Social order – A place for everyone and everyone in their place.
Scientific selection, training and placement
• Equity – All the employees should be treated equally. This will improve the morale,
sincerity and loyalty of the employee
• Stability of tenure of personnel – stable and secure work force is an asset to any
organization. Management should create favorable condition by providing good
salary, promotion and welfare facilities.
• Initiative – Executing any work with enthusiasm voluntarily. When employees come
with new ideas, new methods, they must be encouraged.
• Espirit de corps – This is a French word which means feeling of harmony and union
among personnel of an organization. Management should treat the employees kindly
and equally to develop co-operation among them.

Six Core Managerial Competencies:
What It Takes to Be a Great Manager
 Communication Competency
 Planning and Administration Competency
 Teamwork Competency
 Strategic Action Competency
 Multicultural Competency
 Self-Management Competency

Communication Competency
 Ability to effectively transfer and exchange information
that leads to understanding between yourself and others
 Informal Communication
 Used to build social networks and good
interpersonal relations
 Formal Communication
 Used to announce major events/decisions/
activities and keep individuals up to date
 Negotiation
 Used to settle disputes, obtain resources,
and exercise influence

 Deciding what tasks need to be done, determining how
they can be done, allocating resources to enable them
to be done, and then monitoring progress to ensure
that they are done
 Information gathering, analysis, and problem solving
from employees and customers
 Planning and organizing projects with agreed
upon completion dates
 Time management
 Budgeting and financial management

 Accomplishing tasks through small groups of
people who are collectively responsible and
whose job requires coordination
 Designing teams properly involves having
people participate in setting goals
 Creating a supportive team environment gets
people committed to the team’s goals
 Managing team dynamics involves settling
conflicts, sharing team success, and assign tasks
that use team members’ strengths

Strategic Action Competency
 Understanding the overall mission and values of
the organization and ensuring that employees’
actions match with them
 Understanding how departments or divisions of
the organization are interrelated
 Taking key strategic actions to position the firm
for success, especially in relation to concern of
stakeholders
 Leapfrogging competitors (to move forward)

 Understanding, appreciating and responding to
diverse political, cultural, and economic issues
across and within nations
 Cultural knowledge and understanding of the
events in at least a few other cultures
 Cultural openness and sensitivity to how others
think, act, and feel
 Respectful of social etiquette variations
 Accepting of language differences
Multicultural Competency

Self-Management Competency
 Developing yourself and taking responsibility
 Integrity and ethical conduct
 Personal drive and resilience
 Balancing work and life issues
 Self-awareness and personal development activities

INTERNAL ENVIRONMENTAL FACTORS
• The internal environment is the environment that has a direct impact on the business. The
internal factors are generally controllable because the company has control over these
factors. It can alter or modify these factors.
• i) Resources:
To identify company resources is to look at tangible, intangible and human resources.
Tangible resources are the easiest to identify and evaluate: financial resources and
physical assets are identifies and valued in the firm’s financial statements. Intangible
resources are largely invisible. It includes reputational assets (brands, image, etc.) and
technological assets (proprietary technology and know-how).
• Human resources are the productive services human beings offer the firm in terms of
their skills, knowledge, reasoning, and decision-making abilities.
• ii) Capabilities:
The term organizational capabilities are used to refer to a firm’s capacity for undertaking a
particular productive activity. Our interest is in capabilities relative to other firms. To
identify the firm’s capabilities we will use the functional classification approach. A
functional classification identifies organizational capabilities in relation to each of the
principal functional areas.
• iii) Culture:
It is the specific collection of values and norms that are shared by people and groups in an
organization and that helps in achieving the organizational goals.

EXTERNAL ENVIRONMENT FACTORS
• It refers to the environment that has an indirect influence on the
business. The factors are uncontrollable by the business.
• MICRO ENVIRONMENTAL FACTORS
Share Holders : Any person or company that owns at least one share
in a company is known as shareholder
Suppliers : Increase in raw material prices will have a knock on affect
on the marketing mix strategy of an organization
Distributors : Entity that buys non-competing products or product-
lines, warehouses them, and resells them to retailers or direct to
the customers is known as distributor.
Competitors : A company in the same industry which offers a
similar product or service is known as competitor
Customers : A person, company which buys goods and services
produced by another person, company, or other entity is known
as customer
Media : Positive or adverse media attention on an organisations
product or service can in some cases make or break an
organisation..

MACRO ENVIRONMENTAL FACTORS
i) Political Factors
Political factors include government regulations and legal issues examples include:
•tax policy, •employment laws, •environmental regulations, •trade restrictions and tariffs,
•political stability
ii) Economic Factors
Economic factors affect the purchasing power of potential customers and the firm's cost
of capital. The following are examples of factors in the macro economy:
•interest rates, •exchange rates, •inflation rate
iii) Social Factors
Includes the demographic and cultural aspects of the external macro environment.
These factors affect customer needs and the size of potential markets. Some social
factors include:
•health consciousness, •population growth rate, •age distribution, •career attitudes,
•emphasis on safety
iv) Technological Factors
Technological factors can lower barriers to entry, reduce minimum efficient production
levels and influence outsourcing decisions. Some technological factors include:
•R&D activity, •automation, •technology incentives, •rate of technological change

Major tendencies favouring the development of
a unified global theory of management.
 Historical Tendencies
– Situational and contingency approaches:
Situational or contingency management are the away of distinguishing between science and
art, knowledge and practice. Different situation arises in the organization. Efficient and
intelligent manager actually depends on the situation whether it is in the home country or
host country.
 Conceptual Tendencies
– Use of Principles of Management
– Motivation and leadership theory:
Motivation is a process which creates in employees activate, energies and direct their
behaviour towards the common goal. Leadership have related to motivation. The functions of
a leader includes a part from ordering “teaching, inspiring, guiding, initiating and solving
problems”.
- Organization behaviour:
Organizational behaviour is a study of the behaviour of people at work which may be reflected
through their attitudes and approaches. Organization behaviour seeks to help people and
relates each other more effective.
 Modern Tendencies
– MNC Modern Practices
Behavioural approach to management
– Technology:
The technology factor in very important for successful company. Every organization should
adopt new technology. It is an important component of efficient and effective performance.

The Strategy of International Business
• Strategy – is the actions managers take to attain the
goals of the business (usually to maximize value for
the shareholders/stakeholders).
• Value Chain – The operations of the firm compose the
value chain which are the series of value creating
activities that occur to create value. These actions
include sales, production, IT, accounting etc. These
activities are divided into support and primary
activities.
• Global Expansion Strategy
• Localization Strategy
• Transnational Strategy
• International Strategy

Difference between a global, transnational,
international and multinational company
• International companies are importers and exporters, they have
no investment outside of their home country. Example : Intel, IBM
• Multinational companies have investment in other countries, but
do not have coordinated product offerings in each country. More
focused on adapting their products and service to each individual
local market. Examples : BMW, Epson, HP, HSBC, Coca Cola
• Global companies have invested and are present in many
countries. They market their products through the use of the
same coordinated image/brand in all markets. Generally one
corporate office that is responsible for global strategy.
Example : McDonald, Ranbaxy took over RPG Aventis (french),
TATA took over Tetley Tea (England)
• Transnational companies are much more complex organizations.
They have invested in foreign operations, have a central corporate
facility but give decision-making, R&D and marketing powers to
each individual foreign market.
Example : Nokia

Global Expansion Strategy
• Focus
Reaping cost reduction benefits through:
Economies of Scale (Cost advantages that enterprises obtain due to size, with
cost per unit of output generally decreasing with increasing scale as fixed costs
are spread out over more units of output)
Learning effects ( education increases product and in results in higher wages)
Locations economies (region or metropolitan area, or on a narrow one such
as a zone, neighbourhood, city block, or an individual site)
Low Cost on a Global Scale ( ex: walmart)
• Method
R&D, Production and Marketing activities are concentrated in a few
favorable locations
Try not to customize their products/marketing strategy
Use aggressive pricing
• When to use it
Strong pressures for cost reductions
Minimal demand for localization

Localization Strategy
• Focus
Increase profitability by customizing goods to match
tastes and preferences in international markets
• Method
Increase the value of the product in the local market
Duplication of functions
Smaller production runs, Still need to be as efficient as
possible
• When to use it
When cost pressures are not high
When local tastes differ dramatically
When you have fewer competitors

Transnational Strategy
• Focus
Multidirectional transfer of core competencies and skills
Leveraging subsidy skills
Try to achieve low costs through location economies,
economies of scale and learning effects while differentiating
their products for the local market.
Very difficult to accomplish
• Method
Redesign products to use the same components and produce
them in one location
Use assembly plants in key markets to assemble the more
market specific final product
• When to use it
When customization and cost reduction pressures are high
When managers have to balance the divergent pressures

International / Multi National Strategy
• Focus
Taking products from your local country and without much
customization, selling them in other markets.
• Method
Centralize product development functions
Tend to establish manufacturing and marketing functions in each
major country or geographic region in which they do business.
Increases costs but there are no cost pressures so that isn’t an
issue
May decide to do some minor customization of the marketing
strategy
• When to use it
Low cost pressures
Low need for local responsiveness
Selling products that serve universal needs
Do not have many competitors

Other Forms of Globalization
• Strategic Alliances
– Partnerships between and organization and a foreign
company in which both share resources and knowledge in
developing new products or building new production
facilities.( TCS alliance with google enterprise for selling)
• Joint Venture
– A specific type of strategic alliance in which the partners
agree to form a separate, independent organization for
some business purpose.
(TESCO with TATA in retail business)
• Foreign Subsidiary
– Directly investing in a foreign country by setting up a
separate and independent production facility or office.

BUSINESS ORGANIZATION
If you observe these business activities carefully, you will realise
that whatever business activity one may take up, he has to
bring together various resources like men, money, materials,
machines, technology, etc. to carryout that activity
successfully. Not only that these resources are to be put into
action in a systematic manner to achieve the objectives of
business. Thus, to carry out any business and achieve its
objective of earning profit it is required to bring together all
the resources and put them into action in a systematic way,
and coordinate and control these activities properly. This
arrangement is known as business organisation.

FORMS OF BUSINESS ORGANIZATION
(1) Sole proprietorship
(2) Partnership
(3) Joint Hindu Family
(4) Cooperative Society
(5) Joint Stock Company

SOLE PROPRIETORSHIP
• ‘Sole Proprietorship’ from of business organisation
refers to a business enterprise exclusively owned,
managed and controlled by a single person with all
authority, responsibility and risk

CHARACTERISTICS OF SOLE PROPRIETORSHIP FORM
OF BUSINESS ORGANISATION
(a) Single Ownership: The sole proprietorship form of business organisation has a
single owner who himself/herself starts the business by bringing together all the
resources.
(b) No Separation of Ownership and Management: The owner himself/herself
manages the business as per his/her own skill and intelligence. There is no
separation of ownership and management as is the case with company form of
business organisation.
(c)Less Legal Formalities: The formation and operation of a sole proprietorship form of
business organisation does not involve any legal formalities. Thus, its formation is
quite easy and simple.
(d) No Separate Entity: The business unit does not have an entity separate from the
owner. The businessman and the business enterprise are one and the same, and
the businessman is responsible for everything that happens in his business unit. (
(e) No Sharing of Profit and Loss: The sole proprietor enjoys the profits alone. At the
same time, the entire loss is also borne by him. No other person is there to share
the profits and losses of the business. He alone bears the risks and reaps the
profits.
(f) Unlimited Liability: The liability of the sole proprietor is unlimited. In case of loss, if
his business assets are not enough to pay the business liabilities, his personal
property can also be utilised to pay off the liabilities of the business.
(g) One-man Control: The controlling power of the sole proprietorship business always
remains with the owner. He/she runs the business as per his/her own will.

MERITS OF SOLE PROPRIETORSHIP
(a) Easy to Form and Wind Up: It is very easy and simple to form this type of
business organisation. No legal formalities are required to be observed.
Similarly, the business can be wind up any time if the proprietor so decides.
(b) Quick Decision and Prompt Action: Nobody interferes in the affairs of the sole
proprietary organisation. So, he/she can take quick decisions on the various
issues relating to business and accordingly prompt action can be taken.
(c) Direct Motivation: The entire profit of the business goes to the owner. This
motivates the proprietor to work hard and run the business efficiently.
(d) Flexibility in Operation: It is very easy to effect changes as per the requirements
of the business. The expansion or curtailment of business activities does not
require many formalities as in the case of other forms of business organisation.
(e) Maintenance of Business Secrets: The business secrets are known only to the
proprietor. He need not disclose any information to others unless and until he
himself so decides. He is also not bound to publish his business accounts.
(f) Personal Touch: Since the proprietor himself handles everything relating to
business, it is easy to maintain a good personal contact with the customers and
employees. By knowing the likes, dislikes and tastes of the customers, the
proprietor can adjust his Compiled by Dr.M.Balasubramanian

LIMITATIONS OF SOLE PROPRIETORSHIP
a) Limited Resources: The resources of a sole proprietor are always limited. Being
the single owner it is not always possible to arrange sufficient funds from his
own sources. So, the proprietor has a limited capacity to raise funds for his
business.
(b) Lack of Continuity: The continuity of the business is linked with the life of the
proprietor. Illness, death or insolvency of the proprietor can lead to closure of
the business. Thus, the continuity of business is uncertain.
(c) Unlimited Liability: You have already learnt that there is no separate entity of the
business from its owner. In the eyes of law the proprietor and the business are
one and the same. So personal properties of the owner can also be used to
meet the business obligations and debts.
(d) Not Suitable for Large Scale Operations : Since the resources and the managerial
ability is limited, sole proprietorship form of business organisation is not suitable
for large-scale business.
(e) Limited Managerial Expertise: This always suffers from lack of managerial
expertise. A single person may not be an expert in all fields like, purchasing,
selling, financing etc. Again, because of limited financial resources, and the size
of the business it is also not possible to engage the professional managers.

PARTNERSHIP
‘Partnership’ is an association of two or more
persons who pool their financial and
managerial resources and agree to carry on a
business, and share its profit. The persons
who form a partnership are individually
known as partners and collectively a firm or
partnership firm.

CHARACTERISTICS OF PARTNERSHIP FORM OF
BUSINESS ORGANISATION
(a) Two or More Persons: To form a partnership firm atleast two persons are required. The maximum limit on the
number of persons is ten for banking business and 20 for other businesses. If the number exceeds the above limit,
the partnership becomes illegal and the relationship among them cannot be called partnership.
(b) Contractual Relationship: Partnership is created by an agreement among the persons who have agreed to join hands.
Such persons must be competent to contract. Thus, minors, lunatics and insolvent persons are not eligible to
become the partners. However, a minor can be admitted to the benefits of partnership firm i.e., he can have share
in the profits without any obligation for losses.
(c) Sharing Profits and Business: There must be an agreement among the partners to share the profits and losses of the
business of the partnership firm. If two or more persons share the income of jointly owned property, it is not
regarded as partnership.
d) Existence of Lawful Business: The business of which the persons have agreed to share the profit must be lawful. Any
agreement to indulge in smuggling, black marketing etc. cannot be called partnership business in the eyes of law.
(e) Principal Agent Relationship: There must be an agency relationship between the partners. Every partner is the
principal as well as the agent of the firm. When a partner deals with other parties he/she acts as an agent of other
partners, and at the same time the other partners become the principal.
(f) Unlimited Liability: The partners of the firm have unlimited liability. They are jointly as well as individually liable for
the debts and obligations of the firms. If the assets of the firm are insufficient to meet the firm’s liabilities, the
personal properties of the partners can also be utilised for this purpose. However, the liability of a minor partner is
limited to the extent of his share in the profits.
(g) Voluntary Registration: The registration of partnership firm is not compulsory. But an unregistered firm suffers from
some limitations which makes it virtually compulsory to be registered.
Following are the limitations of an unregistered firm.
(i) The firm cannot sue outsiders, although the outsiders can sue it. (ii) In case of any dispute among the partners, it is
not possible to settle the dispute through court of law. (iii) The firm cannot claim adjustments for amount payable
to, or receivable from, any other parties. Compiled by Dr.M.Balasubramanian

MERITS OF PARTNERSHIP FORM OF BUSINESS
ORGANISATION
(a) Easy to Form: A partnership can be formed easily without many legal formalities. Since it is not
compulsory to get the firm registered, a simple agreement, either in oral, writing or implied is
sufficient to create a partnership firm.
(b) Availability of Larger Resources: Since two or more partners join hands to start partnership firm it may
be possible to pool more resources as compared to sole proprietorship form of business organisation.
(c) Better Decisions: In partnership firm each partner has a right to take part in the management of the
business. All major decisions are taken in consultation with and with the consent of all partners.
(d) Flexibility: The partnership firm is a flexible organisation. At any time the partners can decide to
change the size or nature of business or area of its operation after taking the necessary consent of all
the partners.
(e) Sharing of Risks: The losses of the firm are shared by all the partners equally or as per the agreed
ratio.
(f) Keen Interest: Since partners share the profit and bear the losses, they take keen interest in the affairs
of the business.
(g) Benefits of Specialisation: All partners actively participate in the business as per their specialisation
and knowledge. In a partnership firm providing legal consultancy to people, one partner may deal with
civil cases, one in criminal cases, another in labour cases and so on as per their area of specialisation.
(h) Protection of Interest: The rights of each partner and his/her interests are fully protected. If a partner
is dissatisfied with any decision, he can ask for dissolution of the firm or can withdraw from the
partnership.
(i) Secrecy: Business secrets of the firm are only known to the partners. It is not required to disclose any
information to the outsiders Compiled by Dr.M.Balasubramanian

LIMITATIONS OF PARTNERSHIP FORM OF
(a) Unlimited Liability: The most important drawback of partnership firm is that the
liability of the partners is unlimited i.e., the partners are personally liable for the debt
and obligations of the firm. In other words, their personal property can also be
utilised for payment of firm’s liabilities.
(b) Instability: Every partnership firm has uncertain life. The death, insolvency, incapacity
or the retirement of any partner brings the firm to an end. Not only that any
dissenting partner can give notice at any time for dissolution of partnership.
(c) Limited Capital: Since the total number of partners cannot exceed 20, the capacity to
raise funds remains limited as compared to a joint stock company where there is no
limit on the number of share holders.
(d) Non-transferability of share: The share of interest of any partner cannot be transferred
to other partners or to the outsiders. So it creates inconvenience for the partner who
wants to transfer his share to others fully and partly. The only alternative is dissolution
of the firm.
(e) Possibility of Conflicts: You know that in partnership firm every partner has an equal
right to participate in the management. Also every partner can place his or her
opinion or viewpoint before the management regarding any matter at any time.
Because of this, sometimes there is friction and quarrel among the partners.
Difference of opinion may give rise to quarrels and lead to dissolution of the firm.

TYPES OF PARTNERS• (A) Based on the extent of participation in the day-to-day
management of the firm partners can be classified as ‘Active Partners’
and ‘Sleeping Partners’.
• (B) Based on sharing of profits, the partners may be classified as
‘Nominal Partners’ and ‘Partners in Profits’. Nominal partners allow
the firm to use their name as partner
• (C) Based on Liability, the partners can be classified as ‘Limited
Partners’ and ‘General Partners’. The liability of limited partners is
limited to the extent of their capital contribution. The partners having
unlimited liability are called as general partners
• (D) Based on the behaviour and conduct exhibited, there are two
more types of partners besides the ones discussed above. These are
(a) Partner by Estoppel; and (b) Partner by Holding out. A person who
behaves in the public in such a way as to give an impression that
he/she is a partner of the firm, is called ‘partner by estoppel’.
Similarly, if a partner or partnership firm declares that a particular
person is a partner of their firm, and such a person does not disclaim
it, then he/she is known as ‘Partner by Holding out’. Such partners are
not entitled to profits but are fully liable as regards the firm’s debts.

JOINT HINDU FAMILY FORM OF BUSINESS
ORGANIZATION
• The Joint Hindu Family (JHF) business is a form of
business organisation run by Hindu Undivided Family
(HUF), where the family members of three successive
generations own the business jointly. The head of the
family known as Karta manages the business. The
other members are called co-parceners and all of
them have equal ownership right over the properties
of the business.

CHARACTERISTICS OF JHF FORM OF
(a) Formation: In JHF business there must be at least two members in the family, and family
should have some ancestral property. It is not created by an agreement but by operation of
law.
(b) Legal Status: The JHF business is a jointly owned business. It is governed by the Hindu
Succession Act 1956.
(c) Membership: In JHF business outsiders are not allowed to become the coparcener. Only the
members of undivided family acquire co-parcenership rights by birth..
(d) Profit Sharing: All coparceners have equal share in the profits of the business.
(e) Management: The business is managed by the senior most member of the family known as
Karta. Other members do not have the right to participate in the management. The Karta
has the authority to manage the business as per his own will and his ways of managing
cannot be questioned. If the coparceners are not satisfied, the only remedy is to get the HUF
status of the family dissolved by mutual agreement.
(f) Liability: The liability of coparceners is limited to the extent of their share in the business. But
the Karta has an unlimited liability. His personal property can also be utilised to meet the
business liability.
(g) Continuity: Death of any coparceners does not affect the continuity of business. Even on the
death of the Karta, it continues to exist as the eldest of the coparceners takes position of
Karta. However, JHF business can be dissolved either through mutual agreement or by
partition suit in the court.

MERITS OF JHF FORM OF BUSINESS
ORGANISATION(a) Assured Shares in Profits: Every coparcener is assured of an equal share in the profits
irrespective of his participation in the running of the business. This safeguards the
interest of minor, sick, physically and mentally challenged coparceners.
(b) Quick Decision: The Karta enjoys full freedom in managing the business. It enables him
to take quick decisions without any interference.
(c) Sharing of Knowledge and Experience: A JHF business provides opportunity for the
young members of the family to get the benefits of knowledge and experience of the
elder members. It also helps in inculcating virtues like discipline, self-sacrifice, tolerance
etc.
(d) Limited Liability of Members: The liability of the coparceners except the Karta is limited
to the extent of his share in the business. This enables the members to run the business
freely just by following the instructions or direction of the Karta.
(e) Unlimited Liability of the Karta: Because of the unlimited liability of the Karta, his
personal properties are at stake in case the business fails to pay the creditors. This
clause of JHF business makes the Karta to manage business most carefully and
efficiently.
(f) Continued Existence: The death or insolvency of any member does not affect the
continuity of the business. So it can continue for a long period of time.
(g) Tax Benefits: HUF is regarded as an independent assessee for tax purposes. The share
of coparceners is not to be included in their individual income for tax purposes

LIMITATION OF JHFFORM OF BUSINESS
ORGANISATION
• (a) Limited Resources: JHF business has generally limited
financial and managerial resource. Therefore, it is not
considered suitable for large business.
• (b) Lack of Motivation: The coparceners get equal share in
the profits of the business irrespective of their participation.
So generally they are not motivated to put in their best.
• (c) Scope for Misuse of Power: Since the Karta has absolute
freedom to manage the business, there is scope for him to
misuse it for his personal gains. Moreover, he may have his
own limitations.
• (d) Instability: The continuity of JHF business is always under
threat. A small rift within the family may lead to seeking
partition

COOPERATIVE SOCIETY
The term cooperation is derived from the Latin
word ‘co-operari’, where the word ‘Co’ means
‘with’ and ‘operari’ mean ‘to work’. Thus, the
term cooperation means working together. So
those who want to work together with some
common economic objectives can form a
society, which is termed as cooperative society.

CHARACTERISTICS OF COOPERATIVE SOCIETY
(a) Voluntary Association: Members join the cooperative society voluntarily i.e., by their own choice. Persons
having common economic objective can join the society, continue as long as they like and leave the
society when they want.
(b) Open Membership: The membership is open to all those having a common economic interest. Any person
can become a member irrespective of his/her caste, creed, religion, colour, sex etc.
(c) Number of Members: A minimum of 10 members are required to form a cooperative society. In case of
multi-state cooperative societies the minimum number of members should be 50 from each state in
case the members are individuals. The Cooperative Society Act does not specify the maximum number
of members for any cooperative society.
(d) Registration of the Society: In India, cooperative societies are registered under the Cooperative Societies
Act 1912. The Multi-state Cooperative Societies are registered under the Multi-state Cooperative
Societies Act 2002.
(e) State Control: Since registration of cooperative societies is compulsory, every cooperative society comes
under the control and supervision of the government
(f) Capital: The capital of the cooperative society is contributed by its members. Since, the members
contribution is very limited, it often depends on the loan from government. and apex cooperative
institutions or by way of grants and assistance from state and Central Government.
(g) Democratic Set Up: The cooperative societies are managed in a democratic manner. Every member has a
right to take part in the management of the society. However, the society elects a managing committee
for its effective management.
(h) Service Motive: The primary objective of all cooperative societies is to provide services to its members.
(i) Return on Capital Investment: The members get return on their capital investment in the form of
dividend.
(j) Distribution of Surplus: After giving a limited dividend to the members of the society, the surplus profit is
distributed in the form of bonus, keeping aside a certain percentage as reserve and for general welfare
of the society

TYPES OF COOPERATIVE SOCIETIES
(a) Consumers’ Cooperative Societies: These societies are formed to
protect the interest of consumers by making available consumer
goods of high quality at reasonable price.
(b) Producer’s Cooperative Societies: These societies are formed to
protect the interest of small producers and artisans by making
available items of their need for production, like raw materials, tools
and equipments etc.
(c) Marketing Cooperative Societies: To solve the problem of marketing
the products, small producers join hand to form marketing
cooperative societies.
(d) Housing Cooperative Societies: To provide residential houses to the
members, housing cooperative societies are formed generally in
urban areas.
(e) Farming Cooperative Societies: These societies are formed by the
small farmers to get the benefit of large-scale farming.
(f) Credit Cooperative Societies: These societies are started by persons
who are in need of credit. They accept deposits from the members
and grant them loans at reasonable rate of interest.

MERITS OF COOPERATIVE SOCIETY
(a) Easy to Form: Any ten adult members can voluntarily form an association get it
registered with the Registrar of Cooperative Societies. The registration is very
simple and it does not require much legal formalities.
(b) Limited Liability: The liability of the members of the cooperative societies is
limited upto their capital contribution. They are not personally liable for the debt
of the society.
(c) Open Membership: Any competent like-minded person can join the cooperative
society any time he likes. There is no restriction on the grounds of caste, creed,
gender, colour etc. The time of entry and exit is also generally kept open.
(d) State Assistance: The need for country’s growth has necessitated the growth of
the economic status of the weaker sections. Therefore, cooperative societies
always get assistance in the forms of loans, grants, subsidies etc. from the state
as well as Central Government.
(e) Stable Life: The cooperative society enjoys the benefit of perpetual succession.
The death, resignation, insolvency of any member does not affect the existence
of the society because of its separate legal entity.
(f) Tax Concession: To encourage people to form co-operative societies the
government generally provides tax concessions and exemptions, which keep on
changing from time to time.
(g) Democratic Management: The cooperative societies are managed by the
Managing Committee, which is elected by the members. The members decide
their own rules and regulations within the limits set by the law

LIMITATIONS OF COOPERATIVE SOCIETY
• (a) Limited Capital: Most of the cooperative societies suffer from
lack of capital. Since the members of the society come from a
limited area or class and usually have limited means, it is not
possible to collect huge capital from them. Again, government’s
assistance is often inadequate for them.
• (b) Lack of Managerial Expertise: The Managing Committee of a
cooperative society is not always able to manage the society in an
effective and efficient way due to lack of managerial expertise.
Again due to lack of funds they are also not able to derive the
benefits of professional management.
• (c) Less Motivation: Since the rate of return on capital investment
is less, the members do not always feel involved in the affairs of
the society.
• (d) Lack of Interest: Once the first wave of enthusiasm to start and
run the business is exhausted, intrigue and factionalism arise
among members. This makes the cooperative lifeless and inactive.
(e) Corruption: Inspite of government’s regulation and periodical
audit of the accounts of the cooperative society, the corrupt
practices in the management cannot be completely ignored.

JOINT STOCK COMPANY
If you want to set up a cement plant that requires a massive
investment of crores of rupees, then what will you do?
Partnership may not be the suitable option for the business
where huge capital investment is required. There is a restriction
on the membership of partnership, so it may not be possible to
arrange the required amount of capital to set up a cement plant
A Joint Stock Company or simply a company is a voluntary
association of persons generally formed for undertaking some
big business activity. It is established by law and can be
dissolved by law. The company has a separate legal existence so
that even if its members die, the company remains in existence.
The capital of the company is divided into small units called
shares. Since members invest their money by purchasing the
shares of the company, they are known as shareholders and the
capital of the company is known as share capital.

CHARACTERISTICS OF JOINT STOCK COMPANY
(a) Artificial Person: A joint stock company is an artificial person in the sense that it is created by law and
does not possess physical attributes of a natural person. However, it has a legal status like a natural
person.
(b) Formation: The formation of a joint stock company is time consuming and it involves preparation of
several documents and compliance of several legal requirements before it starts its operation.
(c) Separate Legal Entity: A company exists independent of its members. It can make contracts, purchase
and sell things, employ people and conduct any lawful business. It can sue and can be sued in the
court of law. A shareholder cannot be held responsible for the acts of the company.
(d) Common Seal: Since a company has no physical existence, it must act through its Board of Directors.
But all contracts entered by them shall have to be under the common seal of the company.
(e) Perpetual Existence: The company enjoys continuous existence. Death, lunacy, insolvency or
retirement of the members does not affect the life of the company. It goes on forever.
(f) Limited Liability of Members: The company form of business is able to attract large number of people
to invest their money in shares because it offers them the facility of limited risk and liability.
(g) Transferability of Shares: The members of the company (Public company) are free to transfer the
shares held by them to others as and when they like.
(h) Membership: To form a joint stock company, a minimum of two members are required incase it is
private limited company and seven members incase of public limited company. The maximum limit is
fifty incase of private ltd company. No maximum limit of membership for a public limited company.
(i) Democratic Management: You know that people of different categories and areas contribute towards
the capital of a company. So, it is not possible for them to look after the day-to-day management of
the company. They may take part in deciding the general policies of the company but the day-to-day
affairs of the company are managed by their elected representatives, called Directors

MERITS OF JOINT STOCK COMPANY
(a) Large Resources: A joint stock company can raise large financial resources
because of its large number of members
(b) Limited Liability: In a joint stock company the liability of its members is limited
to the extent of shares held by them.
(c) Continuity of Existence: A company is an artificial person created by law and
possesses independent legal status. It is not affected by the death, insolvency
etc. of its members. Thus, it has a perpetual existence.
(d) Benefits of Large-scale Operation: The joint stock company is the only form of
business organisation which can provide capital for large-scale operations.
(e) Liquidity: The transferability of shares acts as an added incentive to investors
as the shares of a public company can be traded easily in the stock exchange.
The public can buy shares when they have money to invest and convert shares
into cash when they need money.
(f) Professional Management: Companies, because of the complex nature of their
activities and large volume of business, require professional managers at every
level of organisation resulting in improved processes of production, innovating
new products, improving quality of product, new ways of training its staff, etc.
(h) Tax Benefits: Although the companies are required to pay tax at a high rate, in
effect their tax burden is low as they enjoy many tax exemptions under Income
Tax Act.

LIMITATIONS OF JOINT STOCK COMPANY
(a) Difficult to Form: Involves compliance with a number of legal formalities under
the companies Act and compliance with several other rules and regulations of
Govt.
(b) Control by a Group: Theoretically a company is supposed to be managed by
experienced Directors. But most of the companies are managed by the
Directors belonging to the same family. The shareholders holding majority of
the shares take all decisions on behalf of the company.
(c) Excessive Government Control: A company is expected to comply with the
provisions of several Acts. Non-compliance with these, invites heavy penalty.
(d) Delay in Decision Making: A company has to fulfill certain procedural
formalities before making certain decisions, as they require the approval of the
Board of Directors and /or the General Body of shareholders. Such formalities
are time consuming and therefore, some important decisions may be delayed.
(e) Lack of Secrecy: It is difficult to maintain secrecy in many matters as they may
require approval of board of directors and/or general body whose proceedings
are usually open to public.
(f) Social abuses: A joint stock company is a large-scale business organisation
having huge resources. This provides a lot of power to them. Any misuse of
such power creates unhealthy conditions in the society

Difference Between Public Sector and
Private Sector
BASIS FOR
COMPARISON
PUBLIC SECTOR PRIVATE SECTOR
Meaning The section of a nation's
economy, which is under the
control of government, whether
it is central, state or local, is
known as the Public Sector.
The section of a nation's economy,
which owned and controlled by
private individuals or companies is
known as Private Sector.
Basic objective To serve the citizens of the
country.
Earning Profit
Raises money from Public Revenue like tax, duty,
penalty etc.
Issuing shares and debentures or by
taking loan
Areas Police, Army, Mining, Health,
Manufacturing, Electricity,
Education, Transport,
Telecommunication, Agriculture,
Banking, Insurance, etc.
Finance, Information Technology,
Mining, Transport, Education,
Telecommunication, Manufacturing,
Banking, Construction,
Pharmaceuticals etc.
Benefits of working Job security, Retirement
benefits, Allowances, Perquisites
etc.
Good salary package, Competitive
environment, Incentives etc.
Basis of Promotion Seniority Merit
Job Stability Yes No

Current Trends and Issues
• Globalization
• Ethics
• Workforce Diversity
• Entrepreneurship
• E-business
• Knowledge Management
• Learning Organizations
• Quality Management

Current Trends and Issues (cont’d)
• Globalization
- Management in international organizations
- Political and cultural challenges of operating in a global market
o Working with people from different cultures
o Coping with anticapitalist backlash
“soak the rich” means fine should be charged with respect of income you
earn.
Managers at global companies have come to realize economic
values are not universally transferable, need to modify by managers to
reflect economic values in those countries they’re working
- Movement of jobs to countries with low-cost labor
• Ethics
– Increased emphasis on ethics education in college curriculums
– Increased creation and use of codes of ethics by businesses

• Workforce Diversity
– Increasing heterogeneity in the workforce
• More gender, minority, ethnic, and other forms of
diversity in employees
– Aging workforce
• Older employees who work longer and do not retire
• The increased costs of public and private benefits for
older workers
• An increasing demand for products and services related
to aging.

• Entrepreneurship process
– The process of starting new businesses, generally
in response to opportunities
– Innovation in products, services, or business
methods
– Desire for continual growth of the organization

• E-Business (Electronic Business)
– The work preformed by an organization using electronic linkages
to its key constituencies
– E-commerce: the sales and marketing aspect of an e-business
• Categories of E-Businesses
– E-business enhanced organization
– E-business enabled organization
– Total e-business organization

• Learning Organization
– An organization that has developed the capacity to
continuously learn, adapt, and change.
• Knowledge Management
– The cultivation of a learning culture where organizational
members systematically gather and share knowledge with
others in order to achieve better performance.

• Quality Management
– A philosophy of management driven by continual
improvement in the quality of work processes and
responding to customer needs and expectations
– Inspired by the total quality management (TQM)
ideas of Deming and Juran
– Quality is not directly related to cost
– Poor quality results in lower productivity

Organization Culture
Definition:
According to Ralph Linton:
–The knowledge, attitudes, & behavior patterns
shared and transmitted by the members of a
society
Ten Characteristics of Organization Culture
• Member identity
• Group emphasis
• People focus
• Unit integration
• Control
• Risk tolerance
• Reward criteria
• Conflict tolerance
• Means-end orientation
• Open-systems focus

Organizational Culture Characteristics
Org Culture
Dimensions Dimension Characteristics
Innovation
Experimenting, opportunity seeking, risk taking, few
rules, low cautiousness
Stability Predictability, security, rule-oriented
Respect for
people
Fairness, tolerance
Outcome
orientation
Action oriented, high expectations, results oriented
Attention to
detail
Precise, analytic
Team
orientation
Collaboration, people-oriented
Aggressiveness Competitive, low emphasis on social responsibility

Types of Cultures
• The Clan Culture
– A very friendly place to
work where people
share a lot of
themselves. It is like an
extended family.
• The Hierarchy Culture
A very formalized structured
place to work. Procedures
govern what people do.
• The Adhocracy Culture
A dynamic
entrepreneurial, and
creative place to work.
People stick their necks
out and take risks.
• The Market Culture
A results oriented
organization whose major
concern is with getting the
job done. People are
competitive and goal-
oriented.

Organizational Cultures in MNCs
• Family culture
– Strong emphasis on hierarchy and person orientation
• Power-oriented with paternalistic leader
• Leader looked to for guidance
• Can catalyze and multiply employees’ energy
• Reliance on intuition rather than rational knowledge
• Eiffel tower culture
– Strong emphasis on hierarchy and task orientation
• Employees know what to do
• Coordination from the top
• Methodic approach to motivating and rewarding
people and resolving conflict 90

Organizational Cultures in MNCs (cont.)
• Guided missile culture
– Strong emphasis on equality in the workplace and
orientation to the task
• Work typically undertaken by teams or project groups
• Low priority attached to hierarchical concerns
• Employs a “cybernetic” structure
• Culture may change quickly
• Incubator culture
– Strong emphasis on equality & personal orientation
• Organizations are secondary to the fulfillment of
individuals
• Organization is an incubator for self-expression and self-
fulfillment
• Participants have intense emotional commitment to
their work
91

92
PressuresforDiversity
LowHigh
Strategic Responses for Managing
Diversity and their Implementation
Episodic Freestanding Systemic
1
Deny an assignment to an employee
because a client might object to the
employee’s nationality, race, gender,
age, etc.
2
Choose to risk fines or other costs,
rather than engage in equal
employment opportunity practices
3
Choose geographic locations for the
business which avoid diversity / where
the local workforce does not contain
protected classes
4
In response to a governmental
employment audit, provide a
workshop for protected groups on
“how to succeed by adapting to fit
into the organization”
5
Regular sexual harassment training
which focuses on how to avoid legal
liability
6
Performance appraisal standards for
managers include specific targets /
quotas for hiring of protected groups
7
To increase diversity awareness for
managers, bring in a speaker to tell
them how to value the diversity of
their employees
8
Sponsor an annual event that
celebrates a protected group, e.g.,
Special Olympics
9
To ensure equal pay, program the HR
computerized management system to
annually review and adjust pay
differentials between non-protected and
protected groups
10
Pilot an employee network
conference that engages employees
and their managers in reciprocal
learning activities
11
Regularly include vendors, suppliers,
and customers in the organization’s
diversity training offerings to increase
their involvement in and contribution to
diversity efforts
12
Different business units continually
share information about their diversity
successes and failures, then adapt and
integrate them into their businesses
Marginal Strategic
Executive priorities for managing diversity
Strategicresponsesformanagingdiversity
ProactiveAccommodativeDefensiveReactive

Guidelines for Effectively Managing
Culturally Diverse Groups
1. Select team members for their task-related abilities
2. Team members must recognize and be prepared to
deal with their differences
3. Team leader must help the group to identify and
define its overall goal
4. Members must have equal power so that everyone
can participate in the process
5. All members must have mutual respect for each
other.
6. Managers must give teams positive feedback on their
process and output

ETHNO CENTRIC ORGANIZATION
• Ethnocentrism is the tendency to look at the world primarily from the
perspective of one's own ethnic culture. The concept of
ethnocentrism has proven significant in the social sciences, both with
respect to the issue of whether the ethnocentric bias of researchers
colors the data they obtain, and the findings from research.
• Such research has revealed ethnocentrism in every culture around
the world, based on a number reasons, including religion, language,
customs, culture, and shared history. It seems natural that people feel
pride in the culture in which they have grown up and from which they
have adopted their values and standards of behavior.
• However, the problem is that one may view other cultures not only as
different, but also as inferior, with a great danger of behaving in ways
that are damaging to those from other cultures.
• However, as increasing globalization brings different cultures
together, people are learning to overcome their self-centered thinking
and see human society from a broader, more inclusive perspective.

END….

Introduction to management

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Introduction to management