Principles and Practices of Management unit-ii.pptx

MHRM
COURSE 101 : principles and practices of management
Unit-II
 Planning concept and meaning
 Definitions
 Objectives
 Types of Planning
 Planning Premises
 Strategic Planning
 Vision and Mission
 MBOs
 Decision Making
 Forecasting
 Organisational Structures
 Span of Management
 Departmentation
 Divisionalisation
 Centralisation
 Decentralisation
 Delegation of authority
 Line and Staff functions

Concept and Meaning of
planning
 Planning is the most fundamental function of
management. It is basic to all other
management functions. It provides the
foundation upon which organising, staffing,
directing and controlling functions can be
carried out. Planning is a process of
determining objectives, discovering alternative
course of action ad choosing suitable ones for
achieving objectives. It is looking ahead and
preparing for the future.

 In simple words, planning is deciding in
advance what to do, how to do it, when to
do it and who is to do it. Planning bridges
the gap between where we are, to where we
want to go. It is a pre-determined course of
action. It is a blueprint for the courses of
action. Planning is a rational activity based on
foresight and knowledge. It reflects vision,
foresight and wisdom.

Definitions
 Different eminent authors on management have
defined the term "planning" in different ways. Some of
the oft- quoted definitions are given below:
 Koontz and O'Donnell: "Planning is an intellectual
process, the conscious determination of course of
action, the basing of decisions on purpose, facts and
considered estimates".
 Joseph Marrie: "Planning is a process by which a
manager looks to the future and discovers alternative
courses of action open to him".
 Alford and Beatty : "Planning is the thinking process,
the organised foresight, the vision based on fact and
experience that is required for intelligent action".

Objectives of Planning
 The primary objectives of planning in
management are to establish goals, define
strategies, allocate resources, minimize
risks, guide decision-making, and ensure
coordinated efforts towards achieving
organizational objectives.

Types of Planning
On the basis of Nature

Strategic Plan
 A strategic plan is a plan which is formulated
by top-level management for a long period of
time of five years or more. They decide the
major goals and policies to achieve their
goals.
 It takes in a note of all the external factors
and risks involved and makes a long-term
policy of the organization. It involves the
determination of strengths and weaknesses,
external risks, missions, and control systems
to implement plans.

Operational Plan
 Operational plans are the plans which are
formulated by the lower level
management for a short term period of up
to one year. It is concerned with the day to
day operations of the organization. It is
detailed and specific. It is usually based on
past experiences. It usually covers
functional aspects such as production,
finance, human resources, etc.

Tactical Plan
The tactical plan is the plan which is
concerned with the integration of various
organizational units and ensures
implementation of strategic plans on day to
day basis. It involves how the resources of
an organization should be used in order to
achieve strategic goals. The tactical plan is
also known as a coordinative or functional
plan.

On the basis of the Managerial Level
 Top-level Plans: Plans which are formulated by General
managers and directors are called top-level plans. Under these
plans, the objectives, budget, policies, etc. for the whole
organization are laid down. These plans are mostly long term plans.
 Middle-level Plans: The managerial hierarchy at the middle level
includes the departmental managers. A corporation has many
departments like the purchasing department, sales department,
finance department, personnel department, etc. The plans
formulated by the departmental managers are called
middle-level plans.
 Lower level Plans: These plans are prepared by the foreman or
the supervisors. They take the existence of the actual work
and the problems connected with it. They are formulated for a
short period of time and called short term plans.

On the basis of Time
 Long Term Plan: The long-term plan is the long-term process
that business owners use to reach their business mission and
vision. It determines the path for business owners to reach their
goals. It also reinforces and makes corrections to the goals as the
plan progresses.
 Intermediate Plan: Intermediate planning covers 6 months to
2 years. It outlines how the strategic plan will be pursued. In
business, intermediate plans are most often used for campaigns.
 Short-term Plan: The short-term plan involves pans for a few
weeks or at most a year. It allocates resources for day-to-day
business development and management within the strategic plan.
Short-term plans outline objectives necessary to meet intermediate
plans and the strategic planning process.

On the basis of Use
 Single Plan: These plans are connected with some
special problems. These plans end the moment of the
problems to be solved. They are not used, once after
their use. They are further re-created whenever
required.
 Standing Plan: These plans are formulated once and
they are repeatedly used. These plans continuously
guide managers. That is why it is said that a standing
plan is a standing guide to solving the problems. These
plans include mission, policies, objectives, rules,
and strategy.

Planning Premises
 Planning is concerned with the future, which is
uncertain, and every planner uses conjecture
about what might happen in the future. Therefore,
the manager is required to make certain
assumptions about the future.
 Every plan is based on assumptions known as
premises, which relate to anticipating the future
environment. Premises are the basis upon which
plans are drawn.
 Example: Forecasts can be made for demand for
a particular product, changes in the tax rate, etc.

Types
Types of Planning Premises
1.Internal and External
Premises
2.Controllable, Semi-Controllable
and Uncontrollable Premises
3.Tangible and Intangible
Premises
4.Constant and Variable
Premises

Internal and External
 Internal Premises come from the business
itself. It includes skills of the workers, capital
investment policies, philosophy of
management, sales forecasts, etc.
 External Premises come from the external
environment. That is, economic, social,
political, cultural and technological
environment. External premises cannot be
controlled by the business.

Controllable, Semi- controllable,
Uncontrollable
 Controllable Premises are those which are
fully controlled by the management. They
include factors like materials, machines and
money.
 Semi-controllable Premises are partly
controllable. They include marketing strategy.
 Uncontrollable Premises are those over which
the management has absolutely no control.
They include weather conditions, consumers‘
behaviour, government policy, natural
calamities, wars, etc.

Tangible and Intangible
 Tangible Premises can be measured in
quantitative terms. They include units of
production and sale, money, time, hours of
work, etc.
 Intangible Premises cannot be measured in
quantitative terms. They include goodwill of the
business, employee's morale, employee's
attitude and public relations.

Constant and Variable
 Constant Premises do not change. They
remain the same, even if there is a change in
the course of action. They include men, money
and machines.
 Variable Premises are subject to change. They
change according to the course of action. They
include union-management relations.

Strategic Planning
 A strategic plan is a comprehensive
document that outlines an organization's long-
term goals and the strategies required to
achieve those goals. It serves as a roadmap
that guides the organization's actions,
decisions, and resource allocation over a
specified period, typically spanning three to
five years or even longer, depending on the
organization's vision and industry dynamics.

 Key Elements of Strategic Planning:
1. Vision: The vision describes what the
organization hopes to achieve in the future. It
serves as the ultimate goal for the organization.
2. Mission: The mission explains the organization's
purpose and why it exists. It usually describes
what the organization does, whom it serves, and
how it differs from similar organizations.
3. Core Values: These are the fundamental beliefs
of the organization. These guiding principles
dictate behavior and can help people understand
the difference between right and wrong.

4. SWOT Analysis: This refers to evaluating an
organization's strengths, weaknesses,
opportunities, and threats. This analysis is crucial
in developing a strategy that leverages strengths,
neutralizes threats, and exploits opportunities.
5. Goals: These are general statements about what
needs to be accomplished to implement a
strategy. They provide the framework for the
development of strategy.
6. Objectives: These are specific, measurable steps
an organization will take to achieve its goals.

7. Strategy: This refers to the approaches that will
be used to achieve the organization's goals and
fulfill its mission. Strategies usually highlight the
competitive advantage, and the capabilities and
resources of the organization.
8. Implementation Plan: This outlines the activities,
resources, timelines, and budget necessary to
implement the strategy.
9. Monitoring and Evaluation: The process of
regularly assessing progress toward achieving
strategic goals and objectives and making
adjustments as necessary. This involves using
performance metrics to assess progress.

Strategic planning involves input from various
stakeholders within the organization, including top
management, department heads, employees, and
sometimes external consultants. It provides a
structured approach for aligning the organization's
activities with its long-term vision, ensuring that
day-to-day decisions and actions contribute to the
extensive strategic objectives.
A well-designed strategic plan acts as a guide
for the organization, enabling it to adapt to
changing environments, seize opportunities, and
navigate challenges in pursuit of its defined goals
and vision.

Vision and Mission
 Vision
Vision is an aspirational statement describing
an organization's desired future state or long-
term goal.
 Mission
Mission defines the fundamental purpose,
activities, and objectives of an organization in
the present.

Differences
 Vision is future-
oriented.
 Vision is broad and
inspirational.
 Vision describes the
ideal future state.
 Mission is present-
focused.
 Mission is specific
and operational.
 Mission outlines the
organization's
current purpose and
activities.
Vision Mission

Example:
Amazon
 Mission statement: We strive to offer our customers the
lowest possible prices, the best available selection, and the
utmost convenience.
 Vision statement: To be Earth’s most customer-centric
company, where customers can find and discover anything
they might want to buy online.
Amazon’s mission statement sums up the three things that
have made them loved by millions: low prices, a huge
selection, and incredible convenience.
Amazon’s vision statement brings these elements together into
one unified goal: “To be Earth’s most customer-
centric company.”

Management by
Objectives
 Management by objectives (MBO), also known as management by
results (MBR), is a process of defining objectives within an
organization so that management and employees agree to the
objectives and understand what they need to do in the organization
in order to achieve them. The concept of MBO was first introduced
by Peter Drucker in the 1950s to encourage organizations to focus
their energy, resources, and time on things.
 The essence of MBO is participative goal setting, choosing course
of actions and decision making. An important part of the MBO is the
measurement and the comparison of the employee’s actual
performance with the standards set. Ideally, when employees
themselves have been involved with the goal setting and choosing
the course of action to be followed by them, they are more likely to
fulfill their responsibilities.

 George Stanley Odiorne (November4,1920-
January 19,1992) was an American
academic and management theorist
according to him ‘Management by objectives
can be described as a process whereby the
superior and subordinate jointly identify its
common goals, define each individual's
major areas of responsibility in terms of the
results expected of him, and use these
measures as guides for operating the unit
and assessing the contribution of each of its
members’.

Process of MBOs
1. Setting Objectives: Managers, in consultation
with employees, establish clear, realistic, and
attainable objectives for all levels within the
organization.
2. Developing Action Plans: Each employee,
along with their manager, creates an action
plan outlining how they will achieve the set
objectives.
3. Review Progress: At predetermined times,
managers and employees review the progress
made toward meeting the objectives.

 4. Providing Feedback: Constructive feedback
is provided to help employees make any
necessary adjustments to stay on track.
5. Performance Evaluation: The final step
involves assessing each employee’s
performance based on the objectives set at the
beginning of the MBO process.

Benefits
1.Clarity of Goals: MBO ensures all employees are
aware of what is expected of them.
2.Promotes Participation: Since the goals are set
collaboratively, it encourages greater participation
and commitment.
3.Facilitates Performance Evaluation: As MBO sets
measurable goals, it provides a clear metric for
evaluating employee performance.
4.Encourages Communication: It requires regular
communication and feedback between managers
and employees.

Limitations
1. Overemphasis on Short-term Goals: MBO
tends to prioritize short-term over long-term
goals as they are easier to measure.
2. Inflexibility: It doesn’t respond well to sudden
changes in the business environment since
the goals are set in advance.
3. Neglects the Process: The MBO system
places greater emphasis on the result than the
process.

DECISION MAKING
INTRODUCTION
Every action of a manager is generally an outcome of a
decision.
 Owing to this fact, Peter F. Drucker in his book “Practice of
Management,” observes “Whatever a manager does, he does
through making decision.” True, the job of management
involves the making of innumerable decisions. That is why
many persons think that management is decision-making.
 The word ‘decides’ means to come to a conclusion or
resolution as to what one is expected to do at some later
time. According to Manely H. Jones, “It is a solution selected
after examining several alternatives chosen because the
decider foresees that the course of action he selects will do
more than the others to further his goals and will be
accompanied by the fewest possible objectionable
consequences”‘.

 Decision is a choice whereby a person comes to a
conclusion about given circumstances/ situation. It represents
a course of behaviour or action about what one is expected to
do or not to do. Decision- making may, therefore, be defined
as a selection of one course of action from two or more
alternative courses of action. Thus, it involves a choice-
making activity and the choice determines our action or
inaction.
 Decision-making is an indispensable part of life.
Innumerable decisions are taken by human beings in day-to-
day life. In business undertakings, decisions are taken at
every step. All managerial functions viz., planning, organizing,
staffing, directing, coordinating and controlling are carried
through decisions. Decision-making is thus the core of
managerial activities in an organisation.

MEANING AND DEFINITION
 Meaning
A decision is a choice between two or more alternatives. Decision-
making is a managerial process involving selection of a particular
course of action out of many alternatives for achieving given
objectives or solving a problem. It takes place only when more than
one option. The decision is a kind of choice of a desirable
alternative.
Definition
 Decision-making is the selection based on some criteria from two or
more possible alternatives. “-—George R.Terry
 A decision can be defined as a course of action consciously chosen
from available alternatives for the purpose of desired result —J.L.
Massie
 “Decision is the selection from among alternatives of a course of
actions.”-- Koontz & O‘ Donnel

Following elements can be derived from
the above mentioned definitions:
1. Decision–making is a selection process and is
concerned with selecting the best type of
alternative.
2. The decision taken is aimed at achieving the
organizational goals.
3. It is concerned with the detailed study of the
available alternatives for finding the best
possible alternative.
4. Decision making is a mental process. It is the
outline of constant thoughtful consideration.
5. It leads to commitment. The commitment
depends upon the nature of the decision
whether short term or long term.

Characteristics of Decision-
Making
1.Goal-oriented: Decision-making is a goal-oriented
process. Decisions are usually made to achieve
some purpose or goal. The intention is to move
towards some desired state of affairs'.
2.Alternatives: A decision should be viewed as 'a
point reached in a stream of action'. It is
characterised by two activities - search and choice.
The manager searches for opportunities, to arrive at
decisions and for alternative solutions, so that action
may take place. Choice leads to decision, it is the
selection of a course of action needed to solve a
problem. When there is no choice of action, no
decision is required. The need for decision making
arises only when some uncertainty, as to outcome
exists.

 3. Analytical-intellectual: Decision-making is not a purely
intellectual process. It has both the intuitive and deductive
logic; it contains conscious and unconscious aspects. Part of
it can be learned, but part of it depends upon the personal
characteristics of the decision maker. Decision-making cannot
be completely quantified; nor is it based mainly on reason or
intuition. Many decisions are based on emotions or instincts.
"A decision represents a judgement; a final resolution of a
conflict of needs, means or goals; and a commitment to
action made in the face of uncertainty, complexity, and even
irrationality." Decision implies freedom to the decision maker
regarding the final choice; it is uniquely human and is the
product of deliberation, evaluation and thought.

PROCESS OF DECISION MAKING
 Decision making is not an easy job. It requires a lot of
skill. Make good decisions, the manager should
follow a sequental set of steps, rather than a series of
steps. It is based on situation, nature of problem,
environment, time and cost. Rational decision-making
involves the following steps, known as the elements of
decision-making.
1. Define the Problem
2. Analyze the problem
3. Develop Alternatives
4. Evaluate Alternatives
5. Select and Implement the Decision
6. Follow-up and Feed back

1. Define the Problem
Problem definition is the most crucial step in the
entire decision making process. As the saying
goes, “a problem well defined is a problem half-
solved,” utmost care has to be exercised in this
stage for wrong definition of the problem leads to
wrong solutions. This is also called diagnostic
stage. Jumping to conclusions on the basis of
certain symptoms has to be avoided. The problem
has to be examined from different angles so as to
identify the exact causes. Unless exact causes
are identified, right decisions cannot be taken.

2. Analyze the problem
 The problem has to be thoroughly analysed. The past events that
contributed to the problem, the present situation and the impact of
the problem on the future have to be examined. Problems do no
crop up overnight. The genesis of the problem and the various
contributing factors need to be analysed. In analysing the problem,
personal prejudices have to be avoided. As far as possible, an
objective assessment of the situation is useful to arrive at right
decisions.
 Proper analysis of the problem helps the manager to assess the
scope and importance of the problem. If the problem is of minor
nature, he can authorize his subordinates to solve it. If it is a major
problem requiring the involvement of many people, he can initiate
the necessary steps. Interestingly, at times some of the problems
may not warrant any decision. Leaving the problem as it is could be
the better option.

3. Develop Alternatives
There are hardly few problems for which there are
not many alternatives. Effective decision-making
depends on the development of as many
alternative solutions as possible. The underlying
assumption is that a decision selected from
among many alternatives tends to be a better one.
The ability to identify and develop alternative
courses of action depends on the manager’s
creativity and imagination. As the thinking of two
people may not be similar, the skills and abilities
in developing alternatives significantly vary from
one manager to the other.

4. Evaluate Alternatives
The next step in the decision-making process
involves evaluation of the alternative courses
or solutions identified to solve the problem.
Alternatives have to be evaluated in the light of
the objectives to be achieved and the
resources required. Evaluation involves a
through scrutiny of the relative merits and
demerits of each of the alternatives in relation
to the objectives sought to be achieved by
solving the problem.

5. Select and Implement the Decision
Scientific evaluation of the alternatives reveals the
acceptability of various alternatives. After weighing the pros
and cons in detail, the best alternative has to be selected and
implemented. It may not always be possible to select the best
alternative for a given problem for want of complete
information, time and resources. In such a case, the manager
has to satisfy with limited information and optimize the yields
under a given set of circumstances.
Once an alternative is selected that becomes the decision
and it has to be implemented in a systematic way. The
required resources for the implementation and the necessary
cooperation from the people concerned with or affected by
the decision have to be ensured. Otherwise, however good
the decision may be, it may encounter stiff resistance in the
implementation stage.

6. Follow-up and Feed back
Once the decision is implemented, it has to be
closely monitored. Adequate follow-up measures
have to be taken. In the course of implementation,
so many unexpected events may render the
decision ineffective. The decision may not yield
the desired results. Constant followup helps to
take corrective measures as and when necessary.
Further, such a follow-up enables to identify the
shortcomings or negative consequences of the
decision. It provides valuable feed-back on which
the decision may be reviewed or reconsidered.

TYPES OF DECISIONS
Decisions are broadly classified into six types.
1. Programmed decisions
Programmed decisions are routine and repetitive in
nature. It requires pre-determined set of procedures,
techniques and rules to solving those problems.
2. Non-programmed decisions
Non-programmed decisions are made with respect to
problems which are unique, non-repetitive and about
which required knowledge and information are not
available. Such decisions manager have to restructure
and reformulate the problem by applying his managerial
skill, judgement and creativity.

3. Strategic decisions:
Strategic decisions are made by the top level
management on problem and matters which are very
important and critical for the survival , success and
profitability of the organization. These decisions are
tangible for a longer period of time.
4. Tactical decisions
These decisions are concerned with routine and
repetitive matters arising out of the functioning of an
organization. They do not require managerial
judgement and skill because they are related to
implementation of strategic decision. Tactical decisions
are more specific, functional and have short-time

5. Individual decisions
Individual decisions are made by all managers from top
executives to first line supervisors. Ever manager faces
the challenge of making decisions. Decisions made by
individual managers by using skill and judgement, pre-
determind techniques and rules are known as individual
decisions.
6.Group decisions:
Group decisions are made by two or more managers, in
order to make group decisions, managers working at the
same or different levels come together, make
deliberations on the problem, express their views points
on several aspects of the problem and discover a

FORECASTING
INTRODUCTION
In simple terms forecasting means,
"estimation or prediction of future". The
prediction of outcomes, trends, or expected
future behavior of a business, industry sector,
or the economy through the use of statistics.
Forecasting is an operational research
technique used as a basis for management
planning and decision making.

Meaning
 Forecasting is a systematic guessing of the
future course of events.
 Forecasting provides a basis for a planning.
 According to fayol, forecasting includes both
assessing the future and making provision for
it.

Definition
 Webster's new collegiate dictionary defines
that, "A forecast is a prediction and its
purpose is to calculate and predict some
future events or condition.
 "Allen L.A., "forecasting is a systemic attempt
to probe the future by inference from known
facts.
 "Neter & Wasserman, "business forecasting
is refers to a statistical analysis of the past
and current movements in the given time
series so as to obtain clues about the future
pattern of these movement."

Features of forecasting
 It is concerned with future events.
 It is necessary for planning process.
 The impact of future events has to be
considered in the planning process.
 It is a guessing of future events.
 It considers all the factors which affect
organizational functions.
 Personal observation also helps forecasting.

METHODS OF FORECASTING
1. Time Series Analysis: This is a popular technique
used to predict future patterns based on
previously observed data points. The technique
assumes that the future is a reflection of the past.
For instance, a retail store can predict its future
sales based on its past years’ sales.
2. Qualitative Forecasting: This method relies on
expert opinions to predict future outcomes. The
method is often used when there’s lack of
historical data or during unprecedented changes.
For example, a business might use experts’
opinion to forecast demand for a new product
launch.

3.Quantitative Forecasting: This technique uses
mathematical and statistical modeling to predict
future outcomes. It is often used for medium to
long-term forecasting. For instance, airlines may
use it to predict future passenger demand.
4. Econometric Modeling: It's based on the
assumption that future patterns can be forecasted
using suitable economic factors or policy changes.
For example, real estate developers might use
interest rates, population growth, etc. to predict
the demand for properties.

5. Delphi Method: Rand corporation has developed the
Delphi method initially in 1969 to forecast the military
events. Then, it has been applied in other areas also.
A panel of experts is prepared. These experts are
requested to give their opinions in writing for a
prescribed questionnaire. Their opinions are analysed,
summarized and submitted once again to the same
experts for future considerations and evaluations.
Delphi method is useful when past data are not
available and where the past data do not give an
indication for the future events. Delphi method is
highly useful in problems like future petroleum and
diesel needs, likely or probable after effects of a price
expected social changes and the like.

6. Regression Analysis: This statistical technique
can identify the relationship between two or
more variables. It's commonly used for sales
forecasting, risk assessment, or pricing
models. For instance, an insurance company
might use regression analysis to predict claim
amounts based on age, gender, and health
factors.

Organisational Structures
What is an organization?
Organization is a social unit or human
grouping, deliberately structured for the
purpose of attaining specific goals. Thus,
corporations, armies, schools, hospitals,
churches, prisons etc., all are organizations.
But tribes, ethnic and friendship groups and
families are not organizations Because they
do not involve any significant amount of
conscious planning or deliberate structuring.

 The term “organization” is used by different authors in
different sense. Broadly there are 3
1. As a structure
organization structure refers to the net work of
relationships among individuals and positions in an
organization. It is the skeleton framework of an
enterprise, just like the architectural plan of a
building, to achieve its common goal.
2. As a process
organization process refers to one of the important
function of management. Organization is the process
of determining, arranging and assigning the activities
to be performed for the attainment of objectives.
Organization process involves differentiation and
integration of activities.

3. As a system
organization may also be considered as a
system in which individuals play specific
roles assigned to them with the several
roles being coordinated to form an
integrated pattern.
The activities of an organization are goal
oriented and they are coordinated
rationally by assignment of duties and
responsibilities.

Organization structure design
1. Objectives and Goals
Organization is a purposeful system. It is formed
and operates for achieving certain objectives.
2. Size
size of the organization is another factor affecting
organizational design. As an organization grows in
size, there is a tendency to greater specialization.
The number of sub-units increases and more
levels are created in the hierarchy. Larger
organizations tend to be more specialized, more
formalized, more decentralized and more
documented.

3. Technology
Here technology refers to the manner or way in which various
activities will be performed. An organization is a socio-
technical system. It requires certain techniques and methods
for performing various activities. For example:- chain of
command, span of management and ratio of managers to
non-managers are correlated with the type of technology.
4. Environment
Environment comprising economic, social, political and legal
factors. These factors are ever changing . Factors in the
external environment must be carefully analysed while
designing organization structure. Firms operating in simple
and stable environment tend to have simple and organic
structures, wherein jobs, roles and relationships are not
rigidly defined.

5. People
An organization is formed by the people and
operates through them. A large no. of people
are hired for managerial and non-managerial
positions. They carry beliefs, values, needs,
wants and attitudes which a great influence on
the structure. The structure has a reciprocal
relationship with the people working therein.

Organisation structure
is defined as "The logical arrangement of
task and the network of relationships and
roles among the various positions
established to carry out the activities.

Six main types of organization structures
are given below :
1. Line organization
2. Functional organization
3. Line and staff organization
4. Matrix organization
5. Committee organization
6. Project organization

1. LINE ORGANISATION STRUCTURE

Characteristics:
 Line authority and instructions are vertical, that is, they flow
from the top to the bottom.
 The unity of command is maintained in a straight line.
 All persons at the same level of organisation are independent
of each other.
 This structure specifies responsibility and authority for all
the positions limiting the area of action.
Suitability:-
It is suitable to small – scale organizations where the number
of subordinates is quite small.

 Functional structure is created by grouping the activities
on the basis of functional required for the achievement of
organisational objectives For this purpose all the functions
required are classified into basic, secondary and
supporting functions .
Features: The whole activities of an organisation are
divided into various functions.
Each functional area is put under the charge of one executive.
For any decision, one has to consult the functional specialist.

3. Line and staff organization

Characteristics:
 It refers to a pattern in which staff specialists advise line
managers to perform their duties.
 The staff people have the right to recommend, but have no
authority to enforce their preference on other departments
FEATURES:- This origin structure clearly distinguishes
between two aspects of administration viz., planning and
execution.
 Staff officers provide advice only to the line officers; they do
not have any power of command over them. The staff
supplements the line members.

 Matrix organisation structure is essentially a
violation of unity of command. Matrix structure
is the realisation of two-dimensional structure which
emanates directly from two dimensions of authority.
 In matrix organization structure, a project manager is
appointed to co-ordinate the activities of the project.
 Personnel are drawn from their respective functional
departments. Each functional staff has two bosses
his administrative head and his project
manager

 A committee does not represent a separate type of
organization like line and staff, or functional.
 A committee may be defined as a group of people
performing some aspects of Managerial functions.
 “A committee consists of a group of people
specifically designated to perform some
administrative work” W.H. Newman
 “ A committee is a body of persons appointed or
elected to meet on an organised basis for the
consideration of matters brought before it”. Allen

 A project-based organization structure typically consists of
cross-functional teams led by a project manager who reports
directly to the CEO or another senior leader. Each project
team would consist of individuals from various departments
and disciplines, such as marketing, engineering, finance, etc.,
all working together to complete a specific project.
 In this structure, employees may report to both a functional
manager and a project manager. This type of structure fosters
flexibility, strong teamwork, and effective communication, as it
requires individuals from different areas of the business to
work together towards a common goal. It is particularly
beneficial in industries such as construction, research, or
consultancy, where work is often project-based.

Formal Organization
 In every organisation, employees are guided by rules,
policies, and procedures, and the structure of jobs and
positions of employees are clearly defined for achieving
smooth functioning of the organisation. Such a structure
is known as Formal Organisation.
 In a formal organisation, the position, responsibility,
authority and accountability of each and every employee
is defined for achieving organisational goals. It is stable,
rigid and coordinates the effort of every department.

Informal Organization
 Interaction amongst employees at the workplace gives
rise to networks of informal communication and
employees cut the official channels and form their
own social groups, which are known as Informal
Organisations.
 Such informal organisations emerge from within the
formal organisation. It arises out of frequent contact
of people with each other based on common interests.
 It has no definite structure as it comprises a network
of social relationships. It has no specific direction for
the flow of information and is flexible. It is helpful in
faster communication and fulfils the social needs of
employees at the workplace.

SPAN OF MANAGEMENT
 The term Span literally means the space
between two supports of a structure.
 Span of management, also known as span of
control, refers to the number of subordinates
that a manager or supervisor can effectively
manage. This concept helps to determine the
complexity and structure of an organization.

 If the number of subordinates placed under one
manager is too large, it will become difficult to
effectively control them and the desired results
cannot be achieved. Supervision and control
become loose.
 On the other hand, if the number of subordinates
is too small, the time, energy and abilities of the
manager are not utilized fully and the task may
not be accomplished. Control may become too
tight.
 Therefore, span of management refers to the
optimum number of subordinates that a manager
can manage/control effectively at a time.

 There are two primary types of spans of management:
1.Wider span of management
This refers to a larger number of subordinates reporting to a single
manager. It often results in a flat organizational structure with fewer
management layers. A wide span of management can promote
quicker decision-making, streamlined communication, and
increased autonomy for employees. However, there might be
challenges in providing individual attention or close supervision to
each subordinate.
2.Narrow span of management This involves a smaller number of
subordinates reporting to a single manager. It allows for closer
supervision, more direct communication, and potentially greater
control over the work being performed. However, it may lead to a
tall organizational structure with many levels of management, which
can slow decision-making and communication.

Factors determining an effective span of
management
1.Managerial Skills: The span of management heavily
relies on the managerial skills of the person. A highly
skilled and experienced manager can handle more
subordinates compared to an inexperienced one.
2.Nature of Work: The complexity and nature of work
also influence the span of management. If the job is
complex and requires intensive supervision, the
manager may not be able to handle a large number of
subordinates.
3.Competence of Subordinates: If the employees are
competent, trained and experienced, then the
manager can supervise a larger group. However, if the
subordinates need guidance and support, the
manager may need to limit the number of people they
supervise.

4.Time Availability: The amount of time a
manager has available will directly influence
the span of management. If a manager has
other major responsibilities, they may only be
able to effectively manage a smaller team.
5.Degree of Decentralization: If decision-
making authority is distributed across various
levels, then the span of management is wider.
Conversely, in highly centralized organizations,
the span of management tends to be narrower.

6.Geographical Dispersion: If employees are
spread out over different locations, a narrower
span of management is typically necessary
because supervision, coordination, and
communication become more challenging.
7.Organization Structure: A flat organization
structure typically has a wider span of control
compared to a tall hierarchical structure.

Departmentation
 Departmentation is a part of the organisation process. It
involves the grouping of common activities under a
single person's control. The activities are grouped on the
basis of a functions of the organization. This work is
done by a chief executive of the concerned organization.
 Departmentation refers to the process of dividing an
organization into different departments based on various
criteria. This division helps in effectively managing tasks,
roles, and responsibilities within the organization.

Types of Departmentation
1.Functional Departmentation
This involves grouping jobs according to function.
Examples of functional departmentation include
Human Resources, Marketing, Accounting,
Customer Service, etc. For instance, the accounting
department is responsible for handling all the
financial transactions of the company.
2.Geographic Departmentation
In this type, the organization is divided into different
geographical regions, each of which is a separate,
semi-autonomous division with its own set of
responsibilities. For instance, a multinational
corporation may have separate departments for
North America, Asia-Pacific, Europe, and so on.

3.Product Departmentation
The organization is divided into departments
based on the product or service provided. For
instance, a company like Apple Inc. may have
separate departments for iPhones, iPads,
MacBooks, and other products.
4.Customer Departmentation
This is where the company is divided into
departments based on the types of customers it
serves. For instance, a bank may have separate
departments for personal banking, business
banking, and wealth management.

5.Process Departmentation
The organization is divided into departments
based on the production process. For example, a
manufacturing firm may have separate
departments for assembly, quality control, and
packaging.
6.Matrix Departmentation
This involves a combination of functional and
project departmentation where employees have
multiple reporting lines – i.e., to a functional
manager and a project manager. This can be
seen in consultancy firms, where teams are often
assembled for a specific project while also
reporting to their functional area.

Divisionalization
 Divisionalization is a broader concept that
involves organizing an organization into semi-
autonomous units or divisions. Each division
operates as a separate entity within the larger
organization and is responsible for its own
functions such as production, marketing,
finance, and human resources.

a.Product Divisionalization: Divisions are
structured around different product lines or
services offered by the company. Each division
operates independently and focuses on its
specific product line.
b.Geographical Divisionalization: Divisions are
organized based on different geographic locations
or territories where the company operates. Each
division manages its operations within its
designated region.
c.Customer Divisionalization: Divisions are
created to cater to specific customer groups or
market segments. Each division focuses on
serving the needs of its particular customer base.

 Divisionalization allows for more autonomy and
specialization within each division, fostering innovation
and quick decision-making suited to the specific needs
of the market or product line. It can sometimes lead to
duplication of efforts and resources across divisions.
 In contrast, departmentation focuses more on grouping
similar functions or activities together within the
organization. Both departmentation and divisionalization
are strategies used to enhance organizational
effectiveness and performance based on the company's
structure, objectives, and the nature of its operations.
s

Centralization and Decentralization
of authority
 Centralization and decentralization represent
two contrasting approaches to organizing
decision-making authority within an
organization.
 Centralization
Centralization involves concentrating decision-
making authority and control at the top of the
organizational hierarchy.
According to Allen, “Centralization” is the
systematic and consistent reservation of
authority at central points in the organization.

The implication of centralization can be :-
 Reservation of decision making power at top level.
 Reservation of operating authority with the middle level
managers.
 Reservation of operation at lower level at the directions of the
top level.
Under centralization, the important and key decisions
are taken by the top management and the other levels are
into implementations as per the directions of top level.
 For example, in a business concern, the father & son being
the owners decide about the important matters and all the
rest of functions like product, finance, marketing, personnel,
are carried out by the department heads and they have to act
as per instruction and orders of the two people. Therefore in
this case, decision making power remain in the hands of
father & son.

Decentralization
 Decentralization involves dispersing decision-
making authority across various levels of an
organization.

 In a decentralization concern, authority in retained by
the top management for taking major decisions and
framing policies concerning the whole concern. Rest of
the authority may be delegated to the middle level and
lower level of management.
 According to Allen, “Decentralization refers to the
systematic effort to delegate to the lowest level of
authority except that which can be controlled and
exercised at central points.
 Decentralization is not the same as delegation. In fact,
decentralization is all extension of delegation.
Decentralization pattern is wider is scope and the
authorities are diffused to the lowest most level of

 Delegation of authority is a complete process and takes
place from one person to another. While decentralization is
complete only when fullest possible delegation has taken
place.
 For example, the general manager of a company is
responsible for receiving the leave application for the whole
of the concern.
 The general manager delegates this work to the personnel
manager who is now responsible for receiving the leave
applicants. In this situation delegation of authority has
taken place.

 On the other hand, on the request of the personnel
manager, if the general manager delegates this
power to all the departmental heads at all level, in
this situation decentralization has taken place.
 There is a saying that “Everything that increasing
the role of subordinates is decentralization and
that decreases the role is centralization”.
 Decentralization is wider in scope and the
subordinate’s responsibility increase in this case.
On the other hand, in delegation the managers
remain answerable even for the acts of
subordinates to their superiors.

Difference Between Centralization and
Decentralization
Aspect Decentralization Centralization
Definition Power of decision-making is
distributed across multiple levels
Power of decision-making is held by
the top management
Flow of Information Transparent and unrestricted One-way (top to bottom)
Ideal for Best suited for large-scale
organizations
Best suited for small-scale
organizations
Decision-
making speed
Rapid and efficient Tends to be slower
People Involved Involves a larger number of people
from all levels in the decision-making
process
Only a select few from top
management are involved in the
decision-making process
Employee Motivatio
n
Employees tend to be highly
motivated
May lead to demotivation among
employees
Conflict in Decision More likely to occur due to diverse
opinions
Less likely to occur due to unified
decision-making
Burden Shared responsibility across various
levels
Burden falls predominantly on one
group
Stability Can lead to instability due to potential
conflicting decisions
Generally stable as decisions are
made by a central authority with a
common ideology

Delegation of Authority
 A manager alone cannot perform all the tasks assigned to him. In
order to meet the targets, the manager should delegate authority.
 Delegation of Authority means division of authority and powers
downwards to the subordinate.
 Delegation is about entrusting someone else to do parts of your job.
Delegation of authority can be defined as subdivision and sub-
allocation of powers to the subordinates in order to achieve effective
results.

Elements of Delegation
1. Authority - in context of a business organization, authority
can be defined as the power and right of a person to use and
allocate the resources efficiently, to take decisions and to give
orders so as to achieve the organizational objectives.
 Authority must be well-defined. All people who have the
authority should know what is the scope of their authority is
and they shouldn’t misutilize it. Authority is the right to give
commands, orders and get the things done. The top level
management has greatest authority.
 Authority always flows from top to bottom. It explains how
a superior gets work done from his subordinate by clearly
explaining what is expected of him and how he should go
about it.
 Authority should be accompanied with an equal amount of
responsibility. Delegating the authority to someone else
doesn’t imply escaping from accountability. Accountability still
rest with the person having the utmost authority.

2. Responsibility - is the duty of the person to complete the
task assigned to him.
 A person who is given the responsibility should ensure that he
accomplishes the tasks assigned to him. If the tasks for which
he was held responsible are not completed, then he should
not give explanations or excuses. Responsibility without
adequate authority leads to discontent and dissatisfaction
among the person.
 Responsibility flows from bottom to top. The middle level
and lower level management holds more responsibility. The
person held responsible for a job is answerable for it. If he
performs the tasks assigned as expected, he is bound for
praises. While if he doesn’t accomplish tasks assigned as
expected, then also he is answerable for that.

3. Accountability - means giving explanations for any variance in the actual
performance from the expectations set.
 Accountability can not be delegated. For example, if ’A’ is given a task
with sufficient authority, and ’A’ delegates this task to B and asks him to
ensure that task is done well, responsibility rest with ’B’, but accountability
still rest with ’A’.
 The top level management is most accountable. Being accountable means
being innovative as the person will think beyond his scope of job.
Accountability, in short, means being answerable for the end result.
Accountability can’t be escaped. It arises from responsibility.
For achieving delegation, a manager has to work in a system and has to
perform following steps : -
 Assignment of tasks and duties
 Granting of authority
 Creating responsibility and accountability

Line and Staff functions
Line Functions
Line functions refer to the roles directly
involved in achieving an organization's primary
objectives and carrying out its core activities.
These positions are responsible for the
primary activities related to production, sales,
and generating revenue.

Key characteristics of line functions
include:
 Direct involvement in the production or
delivery of goods and services.
 Clear authority and responsibility for decision-
making in their respective areas.
 These functions contribute directly to the
organization's bottom line and are accountable
for operational outcomes.
 Examples of line functions include production
workers, sales representatives, and operations
managers.

Staff Functions
Staff functions support the line functions and
the overall organization by providing
specialized expertise, advice, and assistance.
These roles do not have direct involvement in
core production or revenue generation but
instead offer support and guidance to help the
organization function effectively.

Key characteristics of staff functions
include:
 Providing specialized knowledge, advice, and
assistance to the line functions and
management.
 Supporting roles in areas such as human
resources, finance, legal, marketing, and IT.
 Advisory in nature, staff functions typically do
not have direct decision-making authority but
offer recommendations and guidance.
 Examples of staff functions include HR
specialists, financial analysts, legal advisors,
and marketing consultants.

 In summary, line functions are directly involved
in the core activities and execution of an
organization's primary objectives, while staff
functions provide support, expertise, and
advice to help the organization function
efficiently and effectively. Both line and staff
functions are crucial for the overall success
and functioning of an organization, working in
tandem(together) to achieve common goals.

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