Principles-of-Management-Professional-Ethics

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Principles of Management & Professional Ethics
Unit 1
Introduction to Management
Groups of people working in an organization to develop or appraise or attain the common
goal of the organization by utilizing the available resources are called Management. In simple
terms it means managing the work done by the people. Just as the mind coordinates and regulates
the various activities of the person, the management coordinates and regulates the activities of
various members of an organization.
Definition of Management
The definitions by some of leading management thinkers and practitioners are as follows:
(i) “Management is the art of getting things done through the people.” - Mary Park
Flott
(ii) “To manage is to forecast and to plan, to organize to command to coordinate and to
control.” - Henry Fayol
(iii) “Management is the art of knowing what you want to do and then seeing that it is
done in the best and the cheapest way.” – F.W.Taylor.
(iv) Management is the creation and maintenance of an internal environment in an
enterprise where individuals working in groups goals, efficiently and effectively
towards the attainment of group goals . It is a art of getting the work done through
and with people in formally organized groups – Koontz and O Donnel
(v) Management is a social and technical process which utilized resources influences
human action and facilitates changes in order to accomplish organizational goals --
Theo Haiman and William G Scott.
Nature of Management :
1. It is an Universal Activity: Management is relevant in every sphere of activity. it is
relevant in army , government , private household work etc. the work can be done in a
more systematic manner with the application of the techniques of management . the
material and human resources can be effectively handled and the foal can be attained with
maximum efficiently. Ex a student study at random ands systematic manner. Later is best
one.
2. It is goal oriented : Management focuses attention on the attainment of specific
objectives. For Ex a business may aim for a particular level of sales. This can be achieved
by proper forecast of sales by planning production by fixing the targets.
3. It is an Intellectual activity: The practice of management requires application of mind
and intelligence . every work needs to be properly planned and execute work has to be
assigned to different Individuals and responsible have to be fixed on them. Ex in an
manufacturing unit production finance and marketing are the important activities

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performed . it has to work in proper co-ordination with the other departments. Then only
objectives of the firm can be achieved.
4. It is a process: It is process consisting of various stages/ functions . Planning is the
starting point of management and control is its last stage.
5. Management is both Art and Science: The practice of science needs knowledge of
theory and formulae. But the practice of art requires skill management is social science.
It focuses attention on the behavior of individuals and groups . the theoretical knowledge
may not help always that time they require skill ex if the workers in a factory demand
more pay and threaten to go on strike if their demand is not considered . here the skill of
the manager will help to avert the strike then its theoretical.
6. It is a Social Process: Management deals with the behavior of individuals and groups . In
a work place individuals work as a team. The behavior of an individual is bound to be
different while he is part of a group ex: an individual worker may be forced to join a
strike program because of the union.
7. It is an on going Activity : It is a continuous process planning , organizing etc have
unlimited use. Management will exist as long as there are human activities.
8. It is Intangible : It is invisible cannot be seen , but it can be felt.
Management is a Profession: Like medical, law and engineering, management has also
come to be recognized as a profession
Need for Management
As the organization grows it faces a lot of problems like shortage of raw material, labour
problem, and misunderstanding among various groups etc. So there is a need to have a central
body or point to a) coordinate the work and b) remove such hurdles both internally and
externally. This center point is called Management.
Usage of Management
Management is very vital
1) To achieve the common goal.
2) To develop overall activity.
3) To motivate the people.
4) To work efficiency.
5) To control the overall operation.
6) To take up overall planning.
7) To maintain mutual relationship among various levels of management.
8) To increase the profit or gain.
9) To reduce the complexity, difficulties and obstacles.

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Functions of Management (“POSD CORB”)
1) Planning: Planning means forecasting or predicting the future activity in a specific
manner or structure. It is the basic function and essential for all the organization.
2) Organizing: It is collection or joining of all the resources available within the
organizational and outside, in order to achieve the organizational goal with efficiency.
3) Staffing: It involves appointing the right man for the right job at the right time. The
management is to analyze the human resource, see if he is suitable for the job and
accordingly allocate the work in the organization.
4) Directing: It is showing the correct path or correct way to achieve the organizational goal
within the stipulated time.
5) Controlling: Controlling as a function involves regulating the person or examining the
person whether he is working in the right way or not. In order to achieve the common
goal as efficient as possible.
6) Coordinating: It is a type of support function. It involves accumulating the work to
achieve the task.
7) Budgeting: It means allocation of the resources. It involves financial planning for the
future activities.
8) Reporting: It is a statement showing the various activities to the top management. It
shows the status of the work done.
Levels of Management
The various levels of management are,
Levels of Management
As authority goes up the level of management, responsibility comes down. It means that
the higher officials are more authority, while major responsibility are given to middle and lower
level.

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A) Top Level Management: The top level management derives its powers and authority
directly from the owners of the enterprise. They are Board of Directors, Chairman,
Managing Directors, COO, CEO etc.
The functions:
1. They are setting out the fundamental objectives of the enterprises.
2. They frame major policies for the business.
3. They design the strategies for the attainment of organizational objectives.
4. They appoint key managerial personnel for the middle management.
5. Development master plans in areas of finance, human resource, technology,
marketing and other functions of organizational.
6. To represent the business outside, particularly in discussing business problems
with the Government trade association and so on.
B) Middle Level Management: They are departmental managers (Head of Department) like
Production managers, Marketing managers, Personnel managers, Finance manager,
Regional manager and other managers.
The functions:
1. They plan the role of a linking in between top level management and the lower
level management.
2. It explains the objectives, strategies, policies laid down by the top level
management to the low level management.
3. Communicates the problems, suggestions and view points of the lower
management to the top management.
4. It prepares the departmental plans.
5. It submits reports on the performance at various departments to the top
management.
6. It offers suggestions and recommendations to the top management for the
betterment of overall management of the enterprise.
C) Lower Level of Management: It is called as operating level management or supervisory
level. This is the level where actual operational work for the enterprise in the areas of
production, finance, marketing, personnel, etc is performed by workers. This level of
management consists of manager like supervisors, the foreman, the sales officers the
accountants the sectional officers etc.
The Functions:
1. It does day to day operational planning in view of the instructions given by the
middle level management.

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2. It provides necessary instructions to operators for the best performance of their
assigned jobs.
3. It supervisors the work of operators to ensure that their performance is in
accordance with the standards laid down in plans.
4. It submits reports on the performance of operating staffs to the middle
management.
5. It operates as a channel of communication between the middle management and
the operators.
6. The problems, suggestions and recommendations of operators are performed by it
to the middle management.
Administration vs Management
Meaning
Administration as a function is concerned with determination of corporate policies,
coordination of the various departments (production, finance, distribution etc.) of the
organization under the control of the executives.
Management is concerned with execution of the policy within the limits setup by
administration and employment of the organization for the particular objective before it. In other
words Management is the doing process and administration is the thinking process.
Administration Management
1) All the policies are made by the
Administration.
1) Management has a main function of
implementing the decisions made by the
Administration.
2) They are the owners / proprietors of the
company.
2) They are the managers of the company.
3) Conceptual, human skills are necessary. 3) Technical and human skills are more
important here.
4) The main functions are planning and
controlling.
4) The main functions are directing and
organizing.
5) Level of authority:
Administration mainly comprise of Top
level management.
Management mainly carried on by Middle
and lower level management.
6) Administration is thus more permanent
in nature.
6) While management may change during
the course of running the organization.
7) Objective:
They are mainly interested in
 Profitability
 Sales volume
They actually work for remuneration, thus
they direct their efforts towards the
attainment of goal.
8) They don’t take part in the day to day 8) Managers take part in the day to day

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activity of the organization. activity.
9) Administration is the thinking process. 9) While the management are the doing
process.
Who is a Good Managers?
Introduction
Managers is a person who has the ability or strength to coordinate, motivate and guide all
the personnel working under him so as to make sure they attain the organizational goal in the
most efficient manner possible.
Qualities of a Good manager
1) Good Education
2) Technical Knowledge
3) Personality
4) Communication skills
5) Honesty
6) Positive thinking
7) Control Management
8) Motivation
9) Guide
10) Leadership qualities
11) Coordinate
12) Decision making (planning, forecasting)
13) Innovative
14) Good analysis
15) Risk taking
Roles of a Manager:
Mintzberg has identified ten roles of a manager which are grouped into three categories.
1. Interpersonal Roles:
a) Figure head – Manager performs symbolic duties required by the status of his
office making speeches, bestowing honors, welcoming official visitors, distributing gifts to
retiring employees are examples of such ceremonial and social duties
b) Leader – The manager relationship with his own subordinates . the manager sets an
example legitimizes the power of subordinates and brings their needs in accord with those of
his organization.
c) Liaison : It describes a manager’s relationship with the outsiders ex. Govt, industry
groups.
2. Information Roles:
a) Monitor role :Seeks and collects information to obtain thorough understanding
of organization and environment E.g. Reading periodicals.

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b) Disseminator role: Transmits information received from outsiders or insiders to other
organization members Eg. forwarding mail.
c) Spokes person role :Transmits information to outsiders on organization plans,
Policies, actions Eg. board meetings , handling mail.
3. Decisional roles:
a) Entrepreneurial role : An initiate change adapting to the environment and
supervises Design of organization. Improvement projects as opportunities arise. Prepare
strategies
b) Disturbance handler role: Responsible for corrective action when organization
faces unexpected crisis.
c) Resources allocate role :Responsible for allocation of human monetary and materials
resources .Eg. scheduling , requests
d) Negioation
EVOLUTION OF MANAGEMENT THOUGHT
Management practice is as old as human civilization when people started living together in
groups. For, every human group requires management and the history of human beings is full of
organisational activities.
TAYLOR AND SCIENTIFIC MANAGEMENT
Taylor has defined scientific management as follows:
“Scientific management is concerned with knowing exactly what you want your men to do and
then see in that they do it in the best and cheapest way.”
On the basis of his experiments, he published many papers and books and all his contributions
were compiled in his book ‘Scientific Management’. Taylor’s contributions can be described in
two parts: Elements and tools of scientific management and principles of scientific management.
ELEMENTS AND TOOLS OF SCIENTIFIC MANAGEMENT
Taylor conducted various experiments at his work places to find out how human beings
could be made efficient by standardizing the work and better method of doing the work. These
experiments have provided the following features of scientific management.
1. SEPERATION OF PLANNING AND DOING: Worker was put under the supervision of a
supervisor commonly known as gang boss. Thus, supervisor’s job was merely to see how the
workers were performing. This was creating a lot of problems, and Taylor emphasized that
planning should be left to the supervisor and the worker should emphasize only operational
work.

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2. FUNCTIONAL FOREMANSHIP: Separation of planning from doing resulted into
development of supervision system which could take planning work adequately besides keeping
supervision on workers.
For this purpose, Taylor evolved the concept of functional foremanship based on specialization
of functions.
3. JOB ANALYSIS: Job analysis is undertaken to find out the one best way of doing the thing.
The best way of doing a job is one which enquires the least movements, consequently less time
and cost.
(i) Time study involves the determination of time a movement takes to complete. The movement
which takes the minimum time is the best one. This helps in fixing the fair work for a period.
(ii) Motion study involves the study of movements in parts which are involved in doing a job
and thereby eliminating the wasteful movements and performing only necessary movements.
This reduces the time taken in performing a work and also the fatigue of workers.
(iii) Fatigue study shows the amount and frequency of rest required in completing the work.
After a certain period of time, workers feel fatigue and cannot work with full capacity.
Therefore, they require rest in between.
4. STANDARDISATION: As far as possible, standardization should be maintained in respect
of instruments and tools, period of work, amount of work, working conditions, cost of
production, etc. These things should be fixed in advance on the basis of job analysis and various
elements of costs that go in performing a work.
5. SCIENTIFIC SELECTION AND TRAINING OF WORKERS: A worker should be given
work for which he is physically and technically most suitable LIKE : education, work
experience, aptitude, physical strength, etc
Workshop manager
Planning in charge Production incharge
Route
clerk
Instructi
on card
clerk
Time
and cost
clerk
discipli
narian
Speed
boss
inspect
or
Mainten
ance
foreman
Gang
boss
worker

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6. FINANCIAL IINCENTIVES: Financial incentives can motivate workers to put in their
maximum efforts. If provisions exist to earn higher wages by putting in extra effort, workers will
be motivated to earn more.
7. ECONOMY:. The economy and profit can be achieved by making the resources more
productive as well as by eliminating the wastages.
8. MENTAL REVOLUTION: Scientific management depends on the mutual co-operation
between management and workers. For this co-operation, there should be mental change in both
parties from conflict to co-operation
PRINCIPLES OF SCIENTIFIC MANAGEMENT
Taylor has given certain basic principles of scientific management. The fundamental
principles are :
1. REPLACING RULE OF THUMB WITH SCIENCE: Taylor has emphasized that in
scientific management, organized knowledge should be applied which will replace rule of thumb.
While the use of scientific method denotes precision in determining any aspect of work, rule of
thumb emphasizes estimation.
2. HARMONY IN GROUP ACTION: . Group harmony suggests that there should be mutual
give and take situation and proper understanding so that group as a whole contributes to the
maximum.
3. CO-OPERATION: Scientific management involves achieving co-operation rather than
chaotic individualism.
4. MAXIMUM OUTPUT: Scientific management involves continuous increase in production
and productivity instead of restricted production either by management or by worker.
5. DEVELOPMENT OF WORKERS: In scientific management, all workers should be
developed to the fullest extent possible for their own and for the company’s highest prosperity.
FAYOL’S ADMINISTRATIVE MANAGEMENT
Perhaps the real father of modern operational management theory is the French industrialist
Henry Fayol. His contributions are generally termed as operational management or
administrative management.
“To manage is to forecast and to plan, to organize, to coordinate and to control.”
He found that activities of an industrial organization could be divided into six groups:
1. Technical (relating to production);

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2. Commercial (buying, selling and exchange);
3. Financial (search for capital and its optimum use);
4. Security (protection of property and person);
5. Accounting (including statistics) and
6. Managerial (planning, organization, command, coordination, and control).
He has divided his approach of studying management into three parts: (i) managerial qualities
and training, (ii) general principles of management, and (iii) elements of management.
MANAGERIAL QUALITIES AND TRAINING
Fayol was the first person to identify the qualities required in a manager. According to him, there
are six types of qualities that a manager requires. These are as follows:
1. Physical (health, vigour, and address);
2. Mental (ability to understand and learn, judgement, mental vigour, and capability);
3. Moral (energy, firmness, initiative, loyality, tact, and dignity);
4. Educational (general acquaintance with matters not belonging exclusively to the function
performed);
5. Technical (peculiar to the function being performed); and
6. Experience (arising from the work).
GENERAL PRINCIPLES OF MANAGEMENT
Fayol has given fourteen principles of management. He has made distinction between
management principles and management elements.
1. DIVISION OF WORK : According to him,” specialization belongs to natural order. The
workers always work on the same part, the managers concerned always with the same matters,
acquire an ability, sureness, and accuracy which increase their output.
2. AUTHORITY AND RESPONSIBILITY: The authority and responsibility are related, with
the latter the corollary of the former and arising from it. Fayol finds authority as a continuation
of official and personal factors.
3. DISCIPLINE: Discipline is obedience, application, energy, behavior, and outward mark of
respect shown by employees.
4. UNITY OF COMMAND: Unity of command means that a person should get orders and
instructions from only one superior..
5. UNITY OF DIRECTION: Unity of direction is different from unity of command in the sense
that the former is concerned with functioning of the organization in respect of its grouping of

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activities or planning Unity of direction provides better coordination among various activities to
be undertaken by an organization.
6. SUBORDINATION OF INDIVIDUAL TO GENERAL INTEREST: Common interest is
above the individual interest. Individual interest must be subordinate to general interest when
there is conflict between the two.
7. REMUNERATION OF PERSONNEL: Remuneration of employees should be fair and
provide maximum possible satisfaction to employees and employers.
8. CENTRALISATION: In small firms, centralization is the natural order, but in large firms, a
series of intermediaries is required. Since both absolute and relative values of the managers and
employees are constantly changing, it is desirable that the degree of centralization or
decentralization may itself vary constantly.
9. SCALAR CHAIN: There should be a scalar chain of authority and of communication ranging
from the highest to the lowest. It suggests that each communication going up or coming down
must flow through each position in the line of authority . Fayol has suggested ‘gang plank’ which
is used to prevent the scalar chain from bogging down action.
10. ORDER: This is a principle relating to the arrangement of things and people. In material
order, there should be a place for everything and every thing should be in its place.
11. EQUITY: Equity is the combination of justice and kindness. Equity in treatment and
behavior is liked by everyone and it brings loyalty in the organization
12. STABILITY OF TENURE: No employee should be removed within short time. There
should be reasonable security of jobs.
13. INITIATIVE: Within the limits of authority and discipline, managers should encourage
their employees for taking initiative. Initiative is concerned with thinking out and execution of a
plan.
14. ESPIRIT DE CORPS: This is the principle of ‘union is strength’ and extension of unity of
command for establishing team work..
CONTRIBUTIONS OF TAYLOR AND FAYOL : A COMPARISON
Similarity:
1. Both have attempted to overcome managerial problems in systematic way.

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2. Both have developed some principles which can be applied in solving managerial
problems.
3. Both have emphasized that management actions can be effective if these are based on
sound principles.
4. Both of them have emphasized that managerial qualities are acquirable and can be
acquired through training. Therefore, organizations should make attempts to develop
these.
5. Both have emphasized harmonious relationships between management and workers for te
achievement of organizational objectives.
Dissimilarity:
There is more dissimilarity between the approaches of Taylor and Fayol as compared to
similarity. This is because of the fact that Taylor has concentrated on the shop floor efficiency
while Fayol has concentrated on higher managerial levels.
Basis of difference Taylor Fayol
1.Perspective
2.Focus
3.Orientation
4.Results
5.Overall contributions
Shop floor level
Efficiency through work
simplification and
standarisation.
Production and engineering
Scientific observation and
measurement
Basis for accomplishment on
the production line
Higher management level
Overall efficiency by
observing certain principles.
Managerial functions
Personal experiences
translated into universal truths.
Systematic theory of
management.
DEPARTMENTATION:

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Departmentation is the process of dividing and grouping the activites and employees f an
enterprise into the departments. The total work of an enterprise is divided into functions and sub-
functions. Later, these are grouped together to form different departments.
In manufacture concern, the total work may be divided into the following functions:
i. Purchase
ii. Production
iii. Marketing
iv. Personnel and
v. Finance
Each of these functions will be entrusted to different departments. For example, the
production department will look after production and related maters; the marketing department
will look after marketing and other related matters and soon.
The activities normally performed by the different departments in a businedd enterprise may
be stated as follows:
1. Purchase Department–
i. Purchase of raw materials.
ii. Maintenance of necessary records pertaining to materials.
iii. Stores control, etc.
2. Production Department –
i. Manufacture.
ii. Quality control.
iii. Plant maintenance, etc.
3. Marketing Department –
i. Departmention of sales targets.
ii. Appointment of dealers and distributors.
iii. Advertisement and sales promotion.
iv. Monitoring the performance of salesman, etc.
4. Personnel Department–

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i. Recruitment and selection of employees.
ii. Training
iii. Wage administration, etc.
5. Finance Department–
i. Provision of working capital and also
ii. Fixed capital for all other departments.
The concept of departmentation may be explained by means of a chart:
Concept of departmentation
BASIS OF DEPARTMENTATION

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Dividing and grouping of activities and employees may be done by following any of the patterns
given below:
1. Departmentation by functions
2. Departmentation by products
3. Departmentation by Territory
4. Departmentation by Customers
5. Departmentation by Numbers and Time
Departmentation by function:
The most popular basis of departmentation is the one, done according to the major
functions of an enterprise. As mentioned earlier, in a manufacturing concern, production,
marketing, finance and personnel are the major functions. In a trading concern, buying,
assembling and selling are the important functions. Separate departments will be established to
perform these functions. Each major function may be divided into sub-functions. Marketing, for
example, may be further divided into advertising, sales promotion, packing, market research,
monitoring sales personnel and so on.
Functional departmentation by a concern selling cars may be shown by means of a chart:

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Advantages of departmentations by functions:
The following are some of the merits of functional departmentation:
1. It is the most natural approach to divide the activities and employees of an enterprise.
2. It recognizes the importance of the basic activities of a concern.
3. It provides sample scope for specialization.
4. As there are separate departments to look after all key activities of an enterprise,
duplication of work is avoided.
5. It makes assessment of the performance of subordinate easier.
Drawbacks
The following are some of the limitation of functional departmentation:

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1. It increases the responsibilities of the departmentation heads.
2. It gives too much importance to specialization. Even within a department, each employee
may specialize only in a particular job.
3. Functional departmentation increases the need for inner-dependence among different
departments. This may, sometimes, result in conflicts between departments.
4. The autonomy enjoyed by each department may give the departmental head undue
authority. This may be used against the interests of the subordinates.
5. It may also be difficult to secure proper co-ordination between the different departments..
Departmentation by products
This approach is suitable for those concerns that market different lines of products. There
may be separate divisions to look after the production, finance, personnel and marketing needs of
each product line of the enterprise. For example, Godrej Ltd., is manufacturing different lines of
products-soaps, locks, refrigerators, furniture, etc. There separate divisions to look after each
product line of the company.
The idea of product departmentation by Godrej Ltd., may be presented by means of a
simple chart:

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Advantages of product departmentations:
The following are the merits of product departmentation:
1. Each division focuses attention on the production and marketing of a specific product
line.
2. It fixes responsibility on individual departments or divisions for the promotion of specific
product lines.
3. It helps to reduce the problem of co-ordination as each division looks after all activities
concerning a product.
4. It is also possible to evaluate the performance of each division am dthe contribution it
makes to the growth of the entire business enterprise.
5. Departmentation by product is the most suitable approach in the cash of an enterprise
undertaking diversification of activities.

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Drawbacks
The following are the disadvantages of product departmentation:
1. Each division must have all the necessary facilities in order to be self-sufficient. This
increases the cost of operations.
2. The top management may find it difficult to exercise control over the various divisions
and their activities.
3. There may also be duplication of certain activities.
Departmentation by Territory
This approach is suitable for such organization as bank, insurance companies, transport
companies etc., whose activities are spread over the different parts of the state or country. Under
territorial departmentation, division of activities is done region-wise or branch-wise.The idea of
territorial departmentation may be explained by means of chart:
Merits of territorial departmentation:
The merits of territorial departmentation may be stated as follows:
1. It enables the organization to cater to the needs of the customers in different places.
2. Obviously, this approach provides scope for geographical expansion of business.
3. It is possible for the business to gain intimate knowledge of the customers in each place.
Limitations

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Territorial departmentation, however, suffers from the following limitations:
1. It makes it difficult for the head office to exercise effective control over the zonal or
branch offices.
2. It becomes necessary to employ more managerial and subordinate staff to manage the
regional offices.
3. It is also important that the staff who are posted to the various regional offices are
familiar with the regional language, customs and habits of the people living there.
Departmentation by Customers
In the case of departmentation by customers, the division of activities is done based on
the needs of the customers. The depositors of a commercial bank are segregated on the basis of
the nature of their deposit account, i.e., fixed deposit account, recurring deposit account, savings
bank deposit account etc. this has been explained by means of a chart below:
Merits
The advantages of departmentation by customers are given below:
1. The business is able to fulfill the specific needs of the customers.
2. It offers scope for specialization as well.

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3. It also makes it possible for the business to maintain good rapport with different classes
of customers.
Disadvantages
Some of the drawbacks of departmentation by customer are as follows:
1. Certain departments may not be active at all due to lack of clients.
2. There is also a possibility of under-utilisation of men, machines and other resources in
certain departments due to a fall in demand.
3. There is also scope for duplication of activities.
Departmentation by number and time
In the case of departmentation by numbers, grouping of activities is done based on the
number of persons engaged for the purpose. In the army, for example, the fighting troops are
classified into battalions, brigades, etc., based on the number of person prescribed for each unit.
Departmentation by time is relevant in the case of those concern that work 24 hours a day
and as a result may require additional sifts to cope with the volume of work. There may be
separate departmentation to look after each shift.
CENTRALISATION:
MEANING:
Centralization refers to systematic and consistent retention or concentration of
authority for decision making at higher levels of management.
CONCEPT:
Centralization of authority is that philosophy of top management of an enterprise;
under which maximum authority for management of the enterprise is kept by top management
with itself; and minimum authority for management is pushed down the management hierarchy
i.e. is managers at middle and lower levels.
MERITS OF CENTRALISATION:

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1. CONSISTENCY IN DECISION MAKING:
Centralization leads to consistency in decision-making; because decisions
are taken by a small group of managers at upper levels of management. Accordingly, there are
lesser problems of co-ordination.
2. STRONG TOP MANGEMENT:
Centralization of authority strengthens top management; and it is a position
to provide out-standing leadership to the whole enterprise by virtue of its vast authority.
3. LOWER COST OF ADMINISTRATION:
In a centralized set up of the organisation, cost of administration is lesser;
because the enterprises can operate with a limited number of managers. This is a good advantage
pf centralization, in the present-day-times characterized by highly inflationary conditions.
4. BROAD APPROACH TO MANAGING:
In centralization, the top management has a broad outlook to managing; as it
takes decisions from the system’s perspective – viewing the functioning of the organization as a
whole.
5. DISCOURAGING INTER-DEPARTMENTAL CONFLICTS:
Centralization discourages inter-departmental conflicts; because major
decisions of departments are taken at upper levels of management with an orientation towards
departmental co-operation.
6. NATURE DECISION-MAKING:
In centralization, upper management, because of its experience, wisdom and
broad outlook, is more mature in decision-making. Such decisions carry the chance of being
least risky.
7. RETENTION BY TOP MANAGEMENT.
In centralization, top management retains tight control over the whole
organization, because of its vast powers.
8. OPTIMUN UTILISATION OF RESOURCES:
Under centralization, there is an optimum utilization of organisational
resources, because of rational allocation of scarce resources among different uses.
9. EFFICIENT HANDLING OF EMERGENCIES:
In centralization, there is an efficient handling of emergency by top
management; and it can overcome organisational crises in an intelligent and planned manner.
10. SUITABLE IN THE PRESENT-DAY ENVIRONMENTAL SCENARIO:
Centralization is highly suitable for tackling present-day environmental
scenario; which is highly volatile and turbulent. Under these circumstances, top management can
take sound decisions in consultation with specialists, from various fields.
DEMERITS:

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1. HEAVY BURDEN ON TOP MANAGEMENT:
There is heavy burden of management work on top management; as it has to do
strategic planning, policy formulation and controlling over the whole organization.
2. ORGANISATIONAL GROWTH RETARDED:
Centralization retards the growth of organization. Strategies of diversification,
expansion programmes cannot be practical for organization; as top management, already over-
burdened with normal management work, can hardly find time to think in these directions.
3. LOWER STATUS OF LOWER LEVEL MANAGERS:
Centralization decreases the status of over level managers. As such, they have
less motivation to work, because of the non-fulfillment of their ego needs.
4. AUTOCRATIC MANAGEMENT:
Centralization may lead to autocratic management, in the organization. Top
management with unrestricted powers may not hesitate to impose its autocratic policies and
leadership styles on the whole organization i.e. it may misuse its powers.
5. INITIATIVE DISCOURAGED:
Centralization discourages the exercise of initiative on the part of lower level
managers. Their creativity and innovative skills have no scope, in the organization.
6. DELAYED DECISION MAKING:
In centralization, there is delayed decision making; because of top management is
burdened with many organisational issues and cannot pay timely attention to decision-making.
7. INFERIOR DECION MAKING:
There is inferior decision making by top management. This may seem
paradoxical; but it is true in the sense that top rank managers are much remote to the situational
factors, in the context of which decisions have to be made.
8. MANAGERIAL DEVELOPMENT RETARDED:
Centralization retards managerial training and developmental process. Under this
philosophy, lower rank managers have little chance of development; because their roles in
organizational life are routinised and they have nor or little freedom to exercise initiative and
take bold decisions, in an unrestricted manner.
9. MANAGEMENT BY EXCEPTION RETARDED:
Centralization retards the policy of management by exception; under which top
management must concentrate its attention only on strategic issues. However, under
centralization, this policy is not possible; as top management has to attend to all aspects of
managing, because of reservation of substantial decision making with itself.
10. EGOISTIC PLANNING:
As a matter of great men psychology, top management, sometimes, may indulge in
egoistic planning for ambitious purposes: without caring for the attainment of enterprise
objectives.

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DECENTRALISATION
MEANING:
Decentralization means systematic dispersal of authority in all departments and at all
levels of management.
CONCEPT OF DECENTRALIZATION:
Decentralization of authority is that philosophy of management of an enterprise; under
which maximum authority of the management of the enterprise is dispersed (or distributed)
among managers of middle and specially, lower levels, and minimum authority is kept by the top
management, in reserve, to be exercised by it itself.
DEMERITS:
1. LACK OF CONSISTENCY IN DECISION MAKING:
There is a lack of consistency in decision-making; because a large number of
managers at lower levels may decide the same issue in diverse manners – despite operating
within the organizational policy framework. Accordingly, problems of co-ordination are
accentuated.
2. WEAK TOP MANAGEMENT:
Top management is rather weak; as most of its powers to given away among lower
levels of management. It is not in a position to provide outstanding leadership to the
organization; because of its reduced.
3. HIGHER COST OF ADMINISTRATION:
The cost of administration is higher; because to operate the decentralized units, a
large number of managers are necessitated.
4. NARROW APPROACH TO MANAGING:
The managers of decentralized units have, usually, a narrow outlook to managing.
For them, their own departmental interests are supreme-as against the overall interests of the
whole organization.
5. ENCOURAGING INTER-DEPARTMENTAL CONFLICTS:
Decentralization encourages inter departmental conflicts; because different
departmental managers take decisions in their own unique manners and style, by virtue of, their
vast powers and hell care for departmental co-ordination and co-operation.
6. RISKY DECISION-MAKING:
Lower level managers, because of its experience, wisdom and narrow are less mature
in decision making. Sometimes, under decentralization such risky decisions might be taken as
might endanger the very survival of the business enterprise.
7. LOSS OF CONTROL BY TOP MANAGEMENT:

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Top management’s control over the organization is loosened; as its substantial powers
are passed on to the lower levels of management.
8. OPTIMUM UTILISATION OF RESOURCES:
There may be, at times, less than optimum utilization of resources; because the same
set of activities may be duplicated in various decentralized units-leading to wastage of precious
organizational resources.
9. INEFFICIENT HANDLING OF EMERGENCIES:
Lower level management may be frightened by emergencies and run the seek the
shelter and guidance of top management for handling emergency situations. Failure to
effectively deal with emergencies by lower level management, may tell upon the survival and
prosperity of the whole enterprise.
10. UNSUITABLE IN THE PRESENT-DAY ENVIRONMENT SCENARIO:
Present-day environment scenario makes decentralization impractical. For taking sound
decisions under these circumstances, top management cannot provide specialists to every Tom,
Dick and Harry managers at lower levels in the organizations; because of financial implications.
MERITS:
1. LIGHT BURDEN ON TOP MANAGEMET:
There is light burden on top management; as much of the management work is passed
on to lower levels of management.
2. ORGANISATIONAL GROWTH FACILITATED:
Decentralization facilitates organizational growth. Dynamic and talented managers at
lower levels coupled with power, can easily conceive of and implement growth strategies, of
course, in consultation with top management..
3. HIGHER STATUS OF LOWER LEVEL MANAGERS:
Decentralization adds to the status of lower level managers
4. DEMOCRATIC MANAGEMENT:
Decentralization leads to democratic features in organizational functioning. In fact,
under decentralization, management decision making power gets divided among a large number
of lower rank managers. This phenomenon puts restraints over the dictatorial use of powers by
the top management.

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5. INITIATIVE ENCOURAGED:
Decentralization encourages the exercise of initiative on the part of lower level
managers. They can think out and execute their innovative plans, for the overall betterment of
organizational life. Their creativity and innovative skills have full scope in the organization.
That is why, many decentralized enterprises have progressed a lot, in some cases.
6. QUICK DECISION MAKING:
There is quick decision making. For one thing, lower level managers have comparatively
limited managerial work, as they have to attend to only their own departmental problems. And
for another, they need not seek approval of upper management for decision making on issues, for
which authority has been decentralized to them.
7. SUPERIOR DECISION MAKING:
Decision making is superior, in the sense that lower level managers are close to other
situational factors, in the context of which decisions have to be made. In fact, they practically
deal with situational factors and develop a better sense of their appreciation and tackling.
8. MANAGERIAL DEVELOPMENT FACILITATED:
Decentralization is a systematic way of training and developing managers for higher
management positions. This philosophy more or less does away with the problem of managerial
succession.
9. MANAGEMENT BY EXCEPTION FACILITATED:
Decentralization facilitates the policy of management by exception. By retaining authority
for strategic decision making with itself, top management can decentralize substantial authority
for operational management purposes to lower levels managers.
10. RATIONAL PLANNING:
Rational planning is done by lower level managers. They have comparatively little
ambition and ego and care more for attainment of their departmental objectives through
designing and implementing rational plants.
Span of Management :
It refers to the number of subordinates a manager can effectively manage. It is also known as
span of control
What if too many subordinates are placed under a manager?
Loss of control
Communication can be affected

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Frustration can take place
Conflicts may arise very often between managers and subordinates.
What if the number of subordinates is too low?
The mangers potential cannot be fully utilized
The goal of the organization cannot be effectively accomplished
Factors influencing Span of Supervision
Ability of the manager
Capabilities of the subordinates
Nature of work
Facilities available
Extend of Delegation
Quality of plans
MBO (MANAGEMENT BY OBJECTIVE)
MEANING:
MBO is a management system in which each member of organization effectively
participates and involves himself. This system gives full scope and to the individual strength and
responsibility.
DEFINITION:
George S. Ordiorne
“The system of management by objectives can be described as a process whereby the
superior and subordinate managers of an organization jointly identify its common goals, define
each individual’s major areas of responsibility in terms of results expected of him, and use these
measures as guides for operating the unit and assessing the contribution of each of its members”.
Koontz and weihrich
“MBO is a comprehensive managerial system that integrates many key managerial
activities in a systematic manner and that is consciously directed toward the effective and
efficient achievement of organizational and individual objectives”.
FEATURES OF MBO:
1. IT IS NOT ONLY A TECHNIQUE BUT ALSO A PHILOSOPHY:

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The philosophy of MBO and its concepts guides and influences every aspect of
management. MBO is an approach which includes of management.
2. SETTING OBJECTIVES:
The assumption of MBO is that employee participation and involvement in goal
setting which leads too better commitment and motivation towards the achievement of
organizational objectives. It lay emphasis on participate decision making.
3. PROVIDES EVALUATION AND MECHANISM:
MBO is a systematic approach to managing an organization where in all key
personnel are expected to contribute to achieve the overall goals. It attempts to blend and
balance the goals of all key personnel. It provides evaluation mechanism through which the
contribution of each individual is measured.
4. CREATES LINKAGE BETWEEN ORGANIZATIONAL GOALS AND INDIVIDUALS
GOALS:
MBO creates linkage between organizational goals and individuals goals. The
performance targets are derived from the overall objectives of the organization.
5. REWARDS ARE GOVERNED BY THE RESULTS ACHIEVED:
The performances of employees are periodically evaluated in the light of
predetermined targets. MBO emphasis on improving future performance. Rewards are governed
by the results achieved.
6. CONTINUOUS PROCESS:
MBO is a continuous process or a never ending process. The continuous nature of
MBO process not only ensures sustained concentration of efforts towards organizational goals, it
also helps in modifying the goals to suit the changing conditions.
SIGNIFICANCE AND ADVANTAGES OF MBO:
1. TARGETED PLANNING:
MBO results in verifiable goals which can easily be translated into action plans. The
objective setting process of MBO leads to an integrated hierarchy of objectives throughout the
organization.

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2. PARTICIPATION AND COLLABORATION:
Under MBO objectives of each department are consistent with the overall objectives
of the organization. Managers at all levels understand fully their role in total organization. There
is active participation and collaboration among the various levels of the organization.
3. MOTIVATION:
Managers at all levels are involved in goal setting. As a result they are more
committed to the goals of the organization. Rewards are linked with performance. Employees
are allowed considerable discretion in setting individual targets which provides them
psychological satisfaction.
4. EFFICIENT COMMUNICATION:
There is frequent interaction between superiors and subordinate which leads to mutual
faith and understanding among them. It improves the work climate in the organization and leads
to better communication.
5. TRAINING AND DEVELOPMENT:
MBO provides opportunity to subordinate executives to participate in decision making
process. This helps in developing their conceptual and human skills. MBO enables an
organization to fully utilize the ability of its members. MBO helps in identifying the areas in
which employees need further training.
6. PERFORMANCE APPRAISAL:
MBO provides objective yardsticks for systematic evaluation of performance. The
performance of subordinates in monitored more effectively due to periodic review of progress.
The greatest advantage of MBO is perhaps that it makes it possible for a manager to control his
own performance.
LIMITATIONS OF MBO
1. DIFFICULTY IN TEACHING MBO PHILOSOPHY:
When managers are clear about this concept only then they can explain to subordinates how it
works, why it is being done, what will be the expected results, how it will benefit participants,
etc. this philosophy is based on self direction and self control and aims to make managers
professionals.
2. FAILURE TO PROVIDE GUIDELINES TO GOAL SETTERS:
The managers who will guide in goal setting should themselves understand the major policies of
the company and the role to be played by their activity. Failure to understand these vital aspects
will prove fatal for this system.
3. DIFFCULTY IN SETTING GOALS:
The main emphasis in MBO technique is on setting objectives. The setting of
objectives is not a simple thing. It requires lot of information for arriving at the conclusions.
4. EMPHASIS ON SHORT TERM OBJECTIVES:

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. There may be possibility that short term and long term objectives may be
incompatible because of specific problems. So proper emphasis should be given to both short
term and long term objectives.
5. DANGER OF INFLEXIBILTY:
It will also be foolish to strive for goals which have become due to revised corporate objectives.
MBE (MANAGEMENT BY EXCEPTION)
MEANING:
Management by exception is a system of identification and communication that signals to the manager when
his attention is needed and implies the use of management by exception particularly in controlling aspect. Thus it can
be stated that MBE is a controlling technique.
ADVANTAGES:
 Executives are left with more time to tackle bigger and tougher issues, as the details of small
problems are left to the subordinates.
 There is better utilization of management talent across the organization as even the subordinates
get to implement their own decisions and solve problems in their own way, however small they
may be.
 It increases the span of management and delegation of authority is improved.
 It provides greater opportunities and thus increases confidence and motivation.
 It uses the latest knowledge on trends, history and business data.
 It forces every manager to be thorough and precise and also up-to-date with all relevant
information.
 It helps to identify problems before they become big.
 It also prevents last minute run and panic.
 Qualitative and quantitative yardsticks can be established judging the situation and people.
 It increases chances of better performance appraisal and hence improves motivation.
 Communication is improved between different segments of an organization.
 This focus on results causes it identify any problem in any part of the organization.
 Better organizational cohesiveness and achievement of objectives.
LIMITATIONS:
 Newly established organizations and organizational with a dynamic environment cannot
adopt the techniques easily.
 Establishing standards i.e., both qualitative and quantitative takes a lot of time and involves
lot of effort and precision (accuracy).
 Proper and knowledgeable subordinates need to be found, which is a difficult process.

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 Subordinates act out of over-confidence and think they can handle bigger problems too. Thus
often tougher problems go unreported and by the time it comes to the superior. It is too late
and hence very difficult to set things.
PROCESS OF MBE
• Measurement
• Projection
• Selection
• Observation
• Comparison
• Decision making
Measurement:
By assigning values to past and present performances, exceptional areas can be identified.
Projection:
All the values that are meaningful too the organizational objectives are to be extended to see future
requirements.
Selection:
This involves the criteria and method which management will use to follow the progress path towards
organizational objectives.
Observation:
Current performances are observed and measured so that managers are aware of the current state of
affairs in the organization.
Comparison:
It involves the evaluation of the actual performance against planned performance, identifying the
exceptions that require attention and reporting the variations to the management.
Decision making:
This involves prescribing the action that must be taken in order to bring performance back into control or
to adjust expectations to reflect changing conditions within and outside the organization or to exploit
opportunity.

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ORGANISATION
MEANING
The word organization has come from the word organism which means a structure of
interrelated and interdependent parts.
The part or components of organization consist of men, machines, materials, methods,
money, functions, authority and responsibility.
The task of organization is to unite or integrate these components effectivelt for the
purpose of attaining the common goal.
DEFINITIONS
According to Allen, “Organization is the process of identifying and grouping the work to
be performed, defining and delegating responsibility and authority, and establishing relationships
for the purpose of enabling people to work most effectively together in accomplishing
objectives.”
According to Wheeler, “Organization is the structural framework of duties and
responsibilities required of personnel in performing various futions within the company”.
According to Haney, “Organization is a harmonious adjustment of specialized parts for
the accomplishment of some common purpose or purposes”.
PRINCIPLES OF ORGANISATION:
A sound organization structure should adhere to the following principles:

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Objective- The various activities performed in an organization should help to attain the goal of
the enterprise. The goal of each individual and department must synchronise with that of the
concern.
Division of work-The total work of the enterprise should be divided into identifiable functions
like productions, purchases, marketing, finance, etc., for better performance and control. This
leads to specialization.
Authority and responsibility:-authority is the official right of a manager. Responsibility is the
duty of a subordinate, to whom some work has been assigned, to report to the superior on the
work done.
Delegation-It means transfer of authority by a superior to his subordinate. A subordinate to
whom some work has been given must also be given the necessary authority to carry out the task.
Delegation results in a vertical flow of authority from the top level to the organization structure.
Balance- Authority and responsibility must always be equal. If responsibility exceeds authority,
the subordinate will not be able to perform the task. On the other hand, if authority exceeds
responsibility, there will be misuse of authority.
Responsibility is absolute- responsibility is never delegated. For the performance of his
subordinates, a superior is accountable to his own superior.
Unity of command-It means that subordinate should get orders from one superior only and is
accountable o him alone. Dual subordination results in confusion and leads to indiscipline.
Distinction between line and staff functions-Line functions are concerned with the
performance of the basic activities of the business. Production and sales are the line functions of
a manufacturer. Staff functions are of a supportive nature. Purchases, Personnel, etc., are staff
functions. The staff managers can only advise on certain matters. They cannot take the final
decision.

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Simplicity-The organization structure must not be a complicated one. It should have only few
levels of authority so that there is free flow of communication between persons.
Flexibility-The organization structure should not be rigid. It should be capable of being adjusted
according to the required change in future.
ORGANISATION STRUCTURE:
An organization structure explains the position and official relationships between the
various individuals working in an organization. It helps to understand an organization better. It
provides answer to the following questions:
• Who is the top-most official in an organization?
• Who are the department heads? What are their functions?
• Who are the subordinate staff in each department? Etc.
ORGANIZATION CHART:
Diagrammatic presentation of the organization structure is what is known as an
'organization chart'. It may show the names, designations and functions of the personnel in an
organization. A specimen of an organization chart is given below:

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Merits of an organization chart:
The merits of an organization chart may be stated as follows:
General Manager
Production manager Marketing manager
Foreman 1 Foreman 2 Asst.marketin
g manager1
Asst.marketing
manager2
Worker1 Worker2 Worker1 Worker2
Salesman1 Salesman2 Salesman2
Salesman1

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1. It shows the official positions of each individual in an organization.
2. From the organization chart, it is possible to make out who the superiors and subordinates
are.
3. It gives identity to the personnel in an establishment.
4. It helps an outsider to understand the different designations in an organization.
Drawbacks of an organization chart:
The limitations or drawbacks of an organization chart are given below:
1. An organization chart can only show the formal or official relationships in an
organization. It cannot depict the informal or personal relationships between the
individuals.
2. It may, sometimes, promote ill-feelings among the personnel in an organization. An
individual, who has been indicated in the chart as a subordinate, may not be able to take it
in the true spirit.
3. Often, the organization chart is not updated in accordance with the changes in position
taking place in the organization from time to time.
UNIT – 2

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Business: Business means the state of being busy, in other words those activities which involve
production of wealth.
A business is an enterprise which means distributes or provides an article or services which other
members of the community need and are able and willing to pay for it.
Types of Business Organization
1. Sole Proprietorship
2. Partnership
3. Company
4. Co-operatives
5. Multinational Companies
1. Sole Proprietorship: Business wholly owned by a single individual is known as sole
trading. The profit and loss is made is fully responsible by that person.
Characteristics: One man ownership and control ,Enjoyment of entire profit, simplicity,
self employment .
2. Partnership: A partnership is an association of two or more persons working with a
common goal and zeal and agreed to share the profits and losses mutually.
Characteristics: mutual agreement, sharing of profits, unlimited liability, utmost good
faith.
Kinds of partners
(i) Active Partner : a partner who takes full interest in business
(ii) Sleeping Partner: a partner who does not take interest in business but
contributes in capital.
(iii) Partner in Profits only: partners interested in profits only.
(iv) Sub Partner : he is stranger to contract as he is not a part to the partnership, he
is not related to business.
(v) Partner by Estoppels : a person may not be really a partner in business but by
his behavior he makes outsider believe that he is a partner.
(vi) Minor Partner: a person who has not completed the age of 18 but due to
compulsion from the court he may be appointed as a partner.
3. Company: company is an association of persons who contribute money or money’s worth
to a common stock and employ it in some trade or business and also share the profit and
loss as the case may be arising there from.
(i) Private Limited Company : it is a company which has a minimum paid up
capital as may be prescribed.
(ii) Public Limited Company : minimum number of persons should be seven and
maximum unlimited.
(iii) Government Company : fully taken over or run by the Government (State or
Central )
4. Co-Operatives: it is voluntary association of persons for mutual benefit and its aims are
accomplished through self help and collective effort.
5. MNCs : Multi National Companies are companies that manufacture and market products
or services in several countries.

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Recruitment :
It is a process of finding suitable candidates for the various posts in an organization.
Stages involved in selection of candidates:
1. Receiving Application forms
2. Scrutiny
3. Preliminary Interview
4. Tests
5. Final Interview
6. Checking References
7. Medical Examination
8. Appointment
9. Probation
10. Confirmation of Service
Training : training is the process of imparting skill or job knowledge to a person . It takes an
individual from where he is to where he should be
Importance of Training:
1. Improvement in skill and knowledge
2. Higher production and productivity
3. Job satisfaction
4. Better use of resources
5. Reduction of accidents
6. Reduction in complaints
Performance Appraisal :
It means evaluation of performance of an individual, it is a continuous process, done periodically
to find the employee’s strength and weakness.
Objectives:
1. To improve management development
2. To improve employees performance
3. Work force planning
4. To improve effective communication
Methods of Performance Appraisal :
(i) Trait Based techniques: it means performance evaluated by qualities it can be as such
as
Job knowledge – having sufficient knowledge in job
Leadership – having or acquired leadership qualities
Loyalty

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(ii) Graphical scale method : under this method traits are broadly classified and put in a
graphical form
(iii) Ranking method: this method is very easy here rank is provided on the basis of
certain traits , ranking can be outstanding, good and below average.
(iv) Grading : here categories such as good, very good and excellent are used.
(v) Group appraisal : here a small number of persons are taken and appraisal is done.
(vi) MBO (Management By Objectives) under this method the superiors and subordinate
managers of an organization come and discuss upon the employee whether to
promote or not etc.
Problems in Performance Appraisal :
1. There is no standard yardstick to measure the performance
2. Some superiors may be strict in evaluating the other may be not.
3. personal disliking may also affect the appraisal
4. Discrimination may take place based on religion, caste, sex and mother tongue.
5. Many methods may bring in problem.
Steps to make Performance Appraisal effective
1. Continious follow up
2. Standard measure to be followed
3. Manager capacity to be taken care off.
4. No discrimination should be done
5. There should be trust and confidence in the Performance Appraisal
6. Double appraisal should be done to prevent any mistakes
7. Better communication should be there
Accidents
Accidents and Safety (as per Factories act)
As per the Industrial Dispute act “Any occurrence which causes bodily injury to a person making
him unfits to resume duty within 48 hours”. Any untoward incident which causes impairment
(reduction of capacity) to the person, materials , the machinery or to the process.
Causes of Accidents:
1. Monotony and repetitive
2. Work Fatigue and physical exhaustion
3. Faulty layout
4. Faulty design of machines
5. Defective systems and process
6. Lack of training

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7. Lack of precautions in handling dangerous substances
8. Accidents prone situations (high tension wire)
9. Accident prone workmen
10. Absence of safety systems
11. Failure of safety systems
Cost of Accidents
1. Loss of man days, machines and materials.
2. Injury to employee and compensation for the same.
3. Financial losses like repairing the machine – compensation under the act etc.
4. Continuing to keep the workmen who have become less capable due to accidents.
5. Breakdown in mutual trust between employer and employee.
6. Bad publicity and image loss.
7. Unwillingness to take up risky jobs in future.
8. Disturbance in production sequence.
9. Cost of production lost on that date.
10. Consequential losses like market loss and loss of face with competitors.
How to reduce accidents:
1. Investigate each accident and find out the cause.
2. Fix responsibility and prevent repetition.
3. After each accident, explore the systems and correct them.
4. Promote safety awareness, safety consciousness and safe habits.
5. Build up a safety department.
6. Constant training.
7. Preventive maintenance – particularly on holidays. Observe safety day or week (3rd
Nov - Bhopal Gas Tragedy)
8. Identify hazardous materials and pay special attention
9. Reduce monotony of work
10.Display do’s and don’ts near all the machines
Plant Layout
It means planning for location of all machines , equipments , utilities , work stations material
storages areas, service areas , rest rooms , lunch rooms , coffee/tea rooms , rest areas, movement
of materials , people around into and within the buildings.
Objectives of Layout:-
1. facilitates manufacturing process,
2. Proper and efficient utilization of available of floor space.
3. To ensure that work proceeds from one point to another point,
4. provision of control of operations,
5. provide adequate safety to the workers,

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6. provision of medical facilities and cafeteria,
7. Careful planning to avoid frequent changes in layout.
Advantages of Good Layout:-
1. To the worker - better safety and security to the worker, less number of operations, time gap
between two motions is reduced considerably, more output productivity.
2. Manufacturing Costs – wastage is reduced, quality product is achieved, more production in
quantity.
3. Management – maximum usage of floor space, effective supervision, more storage facilities,
production increased, negligible accidents, there by plant shut down comes to nil.
Types of Layout : - Classified under
1. Process Layout; - or functional layout – here more emphasis is given to specialization.
Advantages - similar products with small difference, characteristics is produced in great
quantity. Wide flexibility, easy to adjust any modification can be done. Effective
supervision. More control on machines. Lower capital investment.
Disadvantages: more materials needed, more floor space needed, buffer stock needed.
2. Product Layout: - or Line product – The machine or equipment is determined at some
definite place where machine is required to perform some operation from a sequence of
operations designed to manufacture the product.
Advantages – widely used, provides smooth and regular flow of materials to finished
goods, lesser inspection, reduces material handling.
Disadvantages: A break/ halt at one point can affect the other process too. Heavy capital
investment, vulnerability to production line shut down.
3. Stationary Layout: This type of layout is used in those situations where heavy goods or
of huge size and weight that their movement from one place to another is not possible.
Here men, materials and raw materials are moved to a place where activities are carried
out.
4. Cellular Type Layout: Here machines are grouped into cells;
each cell is formed to produce a single part family.
5. Hybrid Type: - In this type of layout two layouts are taken together and products are
made out.
6. Service Type Layout: - Here this type of layout is used in hospitals, hotels , business
enterprises shopping malls etc.
Steps in planning the layout for new enterprises.
1. Planning of objectives ,nature of machines, equipments and operation involved in the
manufacture
2. Decide on the machines and involved in the manufacture

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3. Develop process charts.
4. Decide on the best process layout needed to manufacture
5. Space layout should be drawn
6. Decide on the number of labors, line man inspectors and supervisors for effective control.
7. Location of toilets, windows break rooms to be decided.
8. Drainage wastages electric fittings tube lights ventilation facilities to be provided.
9. Pathway to be constructed
10. All provision should be drawn accordingly to the GoI Factory Act.
Techniques of Plant Layout:-
1. Type and quality of labor required,
2. Volume of work to be done fro present space to future,
3. Description of operations their sequence ,
4. Nature of machines and operations,
5. Amount of material buffer stock,
6. Size of finished and semi finished goods.
Plant Layout tools and techniques: -
1. Process charts –
2. Process flow diagrams –
3. Machine data cards.
UNIT – 3

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The word “Organization ” originates from the word organism which means a
structure with its parts so integrated that their relation to each other is governed by
their relation to be whole. It also means work together.
Koontz and O Donnell – Organizing involves the establishment of an intentional
structure of roles through determination and enumeration of the activities required
to achieve the goals of an enterprise and each part of it, it involves assigning the
activities , delegation of work, coordination etc.
Characteristics of an Organization :
1. Division of Labor – Work should be allotted on the basis of specialization,
efficiency and the capacity.
2. Co-ordination : Every organization should adopt their own suitable
methods to ensure proper co-ordination of the different activities performed
at various work points
3. Objectives: Any organization should be bound by a set of objectives which
should be common and known to everybody.
4. Social system : Its activities are governed by social and psychological laws.
There are two aspects - the formal and the informal one.
5. Authority and Responsibility : An organization itself means an
arrangement of position into a graded series, the position are arranged in
such a order that subordinates is under a superior. It shows the hierarchy of
the subordinates and superiors
6. Communication: It also shows the ways of communication, the path of
communication.
Organization Charts : For better and effectiveness of the organizing function, a
manager can make use of several aids or organization design. The chart shows the
functions or positions of the organization and their relationships.
Theories in Organization
1. Classical Theory
2. Neo Classical Theory
3. Modern Theory
1. Classical Theory: This theory is derived from F.W.Taylor , it gives the
organization structure . Universal principles, the rules. Job description and

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training. It has four principles Division of Labor, Scalar Chain and
functional process, Structure, Span of Control
2. Neo Classical Theory: This theory is developed by Elton Mayo he took the
principles from classical theory and added some more principles such as
span of control, communication gaps, decision makers.
3. Modern Theory : This theory is based on the above two theories and also
includes, Strategic Parts , the nature of their mutual dependency, the
processes in the system which link the parts together , the goals sought to be
accomplished by the system.
Importance of OB to managers:
1. Ensures cohesiveness and order in the organization.
2. Facilities the effective communication.
3. Foster co – ordination.
4. Improves efficiency and quality of work.
5. Adapts to new technology.
Motivation
Motivation means a process of stimulating people to action to accomplish desired
goals – W.G.Scott.
Something that moves the person to action and continues him in the course of
action already initiated
Characteristics of Motivation
1. It is a Psychological concept – appreciation from the manager
2. Motivation is always total and not piece meal – it means that a person cannot
be motivated in installments.
3. Motivation may be financial or non financial
4. Motivation is a continuous process
Importance :
1. Inducement of employee
2. higher efficiency
3. Optimum use of resources
4. better human relations
5. reduction in labor turnover
6. avoidance of strikes and lockouts

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Theories in Motivation
1. Maslow Need Hierarchy theory
2. McGregor’s X and Y Theories
1.Maslow Theories on Motivation
He classified human needs into five categories and arranged the same in a
particular order
1. Physiological Needs – these are primary needs or basic needs such as
food, clothing. Shelter
2. Safety needs – the safety or security needs emerge once the basic or
physiological needs of a person are fulfilled.
3. Social needs – friendship , companionship, association and love affection
comes under this
4. Esteem needs – the needs arise in view of a persons desire to have has
ego satisfied, ego social status and reputation
5. Self Actualization needs – after reaching all the above needs the person
goes for more of capability.
McGregor’s X and Y Theories
‘X’ Theory – This theory is negative or pessimistic in approach. The following
assumptions are
People generally do not like to work
People are un ambitious, lazy
People lack creativity
Employees need to constantly watched or supervised
‘Y’ Theory – This theory is Positive in approach. The following assumptions are
This theory is positive in approach
People love their work
People are responsible and positive outlook
Self directive

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MORALE
A Morale is nothing but the attitude of employees of an organization towards their
job, the management, the fellow employees, the superiors and the subordinates.
Characteristics of Morale:
3. It denotes group attitudes,
4. it is a psychological concept,
5. it may be high or low,
6. it is tangible
Job Satisfaction :
It is a pleasurable or positive emotion state resulting from the appraisal of one’s
job or job experiences.
Factors affecting job satisfaction :
Personal Factors Organizational Factors
Age nature of work
Sex pay and other benefits
UNIT 4
Leadership

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The word leadership refers to the process of leadiong , those entities that perform one or more
acts of leading , the ability to affect human bahavoiur so as to accionmlish a mission a mission
designated byu the leader.
Good leaders are made not born : one who has the desiere and will power to lead can become an
effective leader. Good leaders develop through a continiours process of self study , education ,
training , experience and reflection.
Difference between Manager and Leader
Sr No Manager Leader
1. Administrator Innovate
2. Has Subordinates Has Followers
3. Focus on systems Focus on people
4. Rely on control Inspire trust
5. Accept the status quo Challenge the status quo
6. Managers imitate Leaders originate
7. Managers copy Leaders show originality
The process of Great Leadership
1. Challenge the process
2. Inspire a shared vision
3. Enable others to act
4. Model the way
5. Encourage the hearts
Characteristics of Leadership:
It is a quality within inner self
It is a process of influencing others
It requires motivation
It is a continuous process
It requires confidence of followers
Qualities of a Leader:
Ability to analyze
Emotional stability
Self confidence
Foresight
Better Understanding
Mental courage
Communication skills
Ability to guide
Positive thinking
Functions of Leader
1. Planning

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2. Policy making
3. Execution of plans and policies
4. Controlling
5. Providing reward and punishment
6. Settlement of disputes
7. Role model
Different Kinds of Leadership styles
1. Autocratic Leader – here the leader wants his subordinates to work in the manner he
wants. The autocratic leader thinks that his followers are incapable of making decisions.
2. Democratic leader – a democratic leader does not make unilateral or one sided decisions.
He allows his subordinates to discuss the problem and put forth their views clearly. He
thinks all the employees are capable.
3. Laissez Faire Leader - He does not lay down guidelines within which his followers have
to work he does not interfere with anybody
4. Functional Leader – This type of leader is one who has specialization in particular field
of activity. He always thinks and spends most of the time on the task given to him.
5. Institutional Leader - An institutional leader is one who has become a leader by virtue
of his official position in the organizational hierarchy
Theory on Leadership
The Traits Theory – this theory is based on the assumptions that a leader is a person who
possesses certain exceptional traits or qualities. Qualities such as Intelligence, communication
skills, judgment, courage, knowledge, sincerity, determination and physical appearance.
The Behavioral Theory : here leaders are made not born. The behavior of a person attracts many
followers towards him. These followers are ready to accept him as their leader as they are
influenced and impressed by his behavior.
The Situational Theory: According to this theory leadership is situation based. According to the
situation leader does his duties.
Communication
Communication: Communication means common derived from the Latin word Communize. It
is a process of sharing facts, ideas and opinions in common.
The information sent is called message, the person who sends the information is called sender or
communicator, the person who receives the information is called receiver or communicatee . The
act of conveying message is called transmission.
Objectives of Communication
- To give and receive information
- To provide advices and opinions
- To provide counseling

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- To issue orders and instructions
- To impart education and training
- To receive suggestions
- To persuade people
- To improve morale
- To motivate people
The Communication Process
Communication is the process of passing information from one person to another.
Nature of Communication:
1. Two way process
2. knowledge of language
3. the message should have substance
4. Communication may be made in gestures too
5. communication is a continuous process
6. communication may be formal or informal
Types of Communication :
1. Formal Communication : This type of communication follows the hierarchy ,(Scalar chain). It
is always authentic and in a written form such as policy manuals, orders, circulars and notices.
Any information that officially reaches an employee is called formal communication.
2. Informal Communication : This type of communication is the result of casual talk or personal
contact between two or more persons. Informal communication is also called as “Grapevine”.
Types of Grape Vine:
Send
er
Encoding Channel Decoding Receive
r
Feedback
A

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Single Stand Gossip Probability
Cluster type
3. Oral Communication : Verbal transmission of information is called oral communication.
4. Written Communication : this type of communication is in a written form.
5. Gesture Communication : gestures are actions , such as nodding head, shaking hands, rolling
of eyes etc
6. Downward Communication : from the top authority to the lower level such as orders,
messages, circulars etc
7. Up Ward Communication : From the lower level management to the top level management
such as feedback and reports .
8. Sideward communication : persons with same designation .
Barriers to Communication:
B
C
D
E
F
G

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1. Personal Barriers :- Lack of command over language, lack of self confidence, lack of
fluency, faulty pronunciation , lack of confidence
2. Mechanical Barriers :- Distortion such as cross talk, bad signal and electrical disturbance.
Overloading of machines, faulty equipments
3. Organizational Barriers:- Inadequate facilities, too much rely on formal organization.
Measures to overcome communication Barriers:
1. Improving vocabulary power and fluency,
2. Gaining self confidence
3. Shorter communication channels,
4. Establish direct contact wherever possible,
5. Repair of faulty devices,
6. Use of grapevine,
7. To make use of more electronic communication devices,
8. Feedback etc
Motivation
Motivation means a process of stimulating people to action to accomplish desired goals –
W.G.Scott.
Something that moves the person to action and continues him in the course of action already
initiated
Motivation as the process of attemting to inflenc to do your will thoruth thye possiblity of
reward”.
According to websters definition, “ Motivation is an impulsive, emotion desire, or psychological
need acting as incitement to action”.
Characteristics of Motivation
5. It is a Psychological concept – appreciation from the manager
6. Motivation is always total and not piece meal – it means that a person cannot be
motivated in installments.
7. Motivation may be financial or non financial
8. Motivation is a continuous process
Importance :
7. Inducement of employee
8. higher efficiency
9. Optimum use of resources
10. better human relations

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11. reduction in labor turnover
12. avoidance of strikes and lockouts
Motivation Process :
Motivation is treated as a need satisfying behaviour.
Theories in Motivation
3. Maslow Need Hierarchy theory
4. McGregor’s X and Y Theories
1.Maslow Theories on Motivation
He classified human needs into five categories and arranged the same in a particular order
6. Physiological Needs – these are primary needs or basic needs such as food, clothing.
Shelter
Unfulfilled
Wants, desires Tension Drive
Learning
Behaviour Goal
Tension Reduction
Cognitive Process
Basic Needs
Social Needs
Safety Needs
Self Actualisation
Needs
Esteem
Needs

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7. Safety needs – the safety or security needs emerge once the basic or physiological
needs of a person are fulfilled.
8. Social needs – friendship , companionship, association and love affection comes
under this
9. Esteem needs – the needs arise in view of a persons desire to have has ego satisfied,
ego social status and reputation
10. Self Actualization needs – after reaching all the above needs the person goes for
more of capability.
McGregor’s X and Y Theories
‘X’ Theory – This theory is negative or pessimistic in approach. The following assumptions are
People generally do not like to work
People are un ambitious, lazy
People lack creativity
Employees need to constantly watched or supervised
‘Y’ Theory – This theory is Positive in approach. The following assumptions are
This theory is positive in approach
People love their work
People are responsible and positive outlook
Self directive
Types of Motivation :
1. Positive Motivation Negative Motivation
- Praise - Demotions
- Participation in decision making - Dismissals
- Pride - Lay offs
- Delegatio of Authority and resp - Pay cuts
2. Extrinsic Motivation Intrinsic Motivation
- Increase in wages - Praise
- Retirement benefits - Recognition
- Rest Periods - Competition
- Holidays and Health Insurances - Participation in
decision making
3. Financial Motivation Non Financial Motivation
- Wages and Salaries - Praise
- Bonus , insurances - Job rotation
- Profit sharing, vacation pay - Recognition and power
- Co – Partnership - job security, team spirit
- Stock options - promotion

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UNIT – V
PROFESSIONAL ETHICS
INTRODUCTION:
BUSINESS ETHICS:
DEFINITION:
The study and examination of moral and social responsibility in relation to
business practice and decision making in business is known as “Business Ethics”.
The term “business” is commonly referred to the commercial activities achieved
at making profit. But gradually there is a substantial change in the way in which people viewed
the business. In the past primary objective of a business was profit maximization but the present
perspectives on business objectives is not maximization.It is profit maximization in long run
besides fulfilling the ethics in the business. A business is regarded as social institution forming
integral part of social systems .The business is viewed as subsystem to the social system. This is
because any type of social system is influenced by :
1. The way the business functions
2. The organization of the business
3. Innovations
4. Transmission and diffusion of information.
5. New ideas etc.
They have either direct or indirect effect on the society.
Business Ethics is the behavior that a business adheres to in its daily dealings with the
world. The ethics of a particular business can be diverse. They apply not only to how the
business interacts with the world at large, but also to their one-on-one dealings with a single
customer.

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When business people speak about “business ethics” they usually mean one of three things: (1)
avoid breaking the criminal law in one’s work-related activity; (2) avoid action that may result in
civil law suits against the company; and (3) avoid actions that are bad for the company image.
Businesses are especially concerned with these three things since they involve loss of money and
company reputation.
ETHICS IN WORK PLACE:
Workplace ethics are codes of conduct that influence the development of an ethical
culture within the workplace. Going beyond what is considered legal in the area where the
business operates, workplace ethics inspire communication between employees, allow for respect
to be extended to each person within the organization, and promote customer relationships that
are based on honesty and integrity. While there are core elements that tend to define a work-
based code of ethics, the specific expressions of these central values vary from one corporate
setting to the next.
It is important to remember that workplace ethics are shaped by two important factors. First,
workplace policy must be in harmony with all laws and regulations that are currently in force in
the jurisdiction where the business operates. This helps to ensure that basic workplace ethics
preclude any pressure or coercion to engage in actions that are considered to be illegal, promote
discrimination in the workplace, support unfair hiring and firing practices, or allow wages to be
set that are below the minimum legal standards for the area.
Along with being shaped by laws and regulations, workplace ethics are also influenced
by business ethics For example, ethical business practices would include actions such as not
using marketing materials or campaigns that mislead consumers. Workplace ethics would also
involve establishing and operating support networks such as wellness programs that help
employees be healthy and happy. Ethics of this type would also involve the conscious effort to
cultivate a working environment where people want to come to work and be productive because
of pride in what they do for a living.
While businesses tend to comply with laws and regulations set by local jurisdictions, not
every company sees the need to develop workplace ethics that affirm the worth of employees and

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motivate them to be productive on the job. When a company chooses to do no more than what is
required by local law, the chances of heavy employee turnover are much higher. In addition, it is
easier for cliques to develop among certain groups of employees, a state that can often
undermine productivity and cost the company a great deal in terms of time and revenue
generation.
FORMULATION OF ETHICS:
Family Ethics are formulated through the operation of five forces in the individual’s
environment:
1. Influences: the formulation of ethics begins when the individual is a small child parents
demonstrate high ethical standards.
2. Peer Influence: As the child develops contacts outside the home through school, play and
work, peer exert considerable influence on the individuals ethical beliefs
3. Experience: As a person matures and develops as a human being, he or she will be exposed to
many critical experiences that will affect his or her ethical standards.
4. Values and Morals: People who have high value on money and material possessions may have
strong ethical standards. People who value the quality of life enjoyed by all living creatures will
have strong ethics.
5. Situational Fact us: People often change their ethics in response to unforeseen situational fact
us.
MANAGERIAL ETHICS:
Managerial ethics illustrate a rather sensitive issue. The recent business history has
proven ethics as a rather challenging objective of larger organizations. The following topics /
views may illustrate fundamental issues in the current debate. The current competing views
include "Maximize Profit" and "society's welfare" .
Maximizing profits illustrate the greatest commitment to shareholder and
stakeholders. In this particular theory, the managerial staff is only committed to maximize the
bottom-line in terms of profit: a mean to an end in order to achieve the highest possible profits.
Society's welfare illustrates a common goods approach.

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In this particular approach managerial staff attempts to achieve a balance between
the bottom-line and social welfare of the society and employees. It is of great interest to explore
the theoretical aspects of managerial issues and compare them to real practices.
The two above name theories assume that managerial issues are constrained and
objective; stakeholders vs. society. On the other hand, the reality proves a rather multi
dimensional reality; stakeholders vs. society vs. culture vs. religion vs. politics vs. diversity vs.
personality vs. globalization vs. many other unpredictable factors. Further, both of theories
appear to be better suited for larger organizations: small businesses encounter more immediate
issues such as revenue and cash flow rather than managerial ethics.
Most small businesses ran by savvy business people are less concerned about
ethics. Out of extensive experience in consulting small businesses, I can confidentially stat that I
have never met a small business owner that was not willing to take unethical actions in order to
maximize profits. Given the fact that this is not a scientific statement, it is important to view this
statement in terms of personal experiences, which conflicts with the academic management
practices.
Moreover, there is more to the issue of ethics. Given the fact that both competing
theories consider some sort of managerial responsibility to some one or some group, illustrates a
major weakness of both theories. Both theories fail to point to the necessity of "perception". It is
hypocritical to expect only one segment of a society i.e. businesses to create value or consider
societal consequences.
Thus, most business simply attempt to create a perception of societal
responsibilities rather than genuine concerns In terms of creating profits, it is important to
understand that in practical terms, it is difficult to create social awareness or consider social
issues without being able to prove their value to the business shareholder or stakeholder. Thus,
any managers' first priority should be profits, Once the objective of achieving the highest
possible profits have been achieved, an organization can effort to pursue alternate goals of
societal concerns and improvement.Some people may argue that societal benefits / concerns may
have a direct influence on the bottom line of any given business.
However, it is important to point to the fact that it is extremely difficult to quantify
the direct impact of societal charity work on corporate profits. It is merely possible to use
anecdotal and qualitative data in order to assign arbitrary real value to such social actions.

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Ultimately, it is important to consider the main goal of any given company i.e. profits.
It is further important to allow for businesses to pursue and achieve their goals before they can
be expected to become beneficial corporate citizens.
MANAGINIG ETHICAL BEHAVIOUR:
Managing ethical behavior is a one of the most pervasive and complex problems
facing business organizations today. Employees' decisions to behave ethically or unethically are
influenced by a myriad of individual and situational factors. Background, personality, decision
history, managerial philosophy, and reinforcement are but a few of the factors which have been
identified by researchers as determinants of employees' behavior when faced with ethical
dilemmas. The literature related to ethical behavior is reviewed in this article, and a model for
understanding ethical behavior in business organizations is proposed. It is concluded that
managing ethics in business organizations requires that managers engage in a concentrated effort
which involves espousing ethics, behaving ethically, developing screening mechanisms,
providing ethical training, creating ethics units and reinforcing ethical behavior.
CODES OF ETHICS:
Definition: Written guidelines issued by an organization to its workers and management, to help
them conduct their actions in accordance with its primary values and ethical standards.
A code of ethics is a set of guidelines which are designed to set out acceptable
behaviors for members of a particular group, association, or profession. Many organizations
govern themselves with a code of ethics, especially when they handle sensitive issues like
investments, health care, or interactions with other cultures. In addition to setting a professional
standard, a code of ethics can also increase confidence in an organization by showing outsiders
that members of the organization are committed to following basic ethical guidelines in the
course of doing their work.
The format of a code of ethics can vary widely. Unlike more straightforward
employee guidelines and codes, a code of ethics usually starts with a section that sets out the
purpose, aspirations, and goals of the parent organization. For example, the 2002 code of ethics

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for the American Psychological Association (APA) begins: “Psychologists are committed to
increasing scientific and professional knowledge of behavior and people's understanding of
themselves and others and to the use of such knowledge to improve the condition of individuals,
organizations, and society.”
Following a general introduction to the function and goals of an organization is a section
dedicated to setting out specific behavior standards for members. This section usually covers
potential ethical issues such as confidentiality, partisanship, or misuse of information. In addition
to addressing theoretical ethical minefields, a code of ethics often contains a section which
outlines the procedures for handling grievances, both outside and inside the organization.
A well written code of ethics will be easy to follow and very clear, with sections that
people can point to in order to illustrate specific issues. In the sense of organizations like the
APA, members agree to support the code of ethics both because it is good practice and because it
promotes their organization. A code of ethics also stands behind most scientific experimentation,
ensuring that the results are valid and that the testing was carried out in an ethical way.
A code of ethics: A code of ethics often focuses on social issues. It may set out general
principles about an organization's beliefs on matters such as mission, quality, privacy or the
environment. It may delineate proper procedures to determine whether a violation of the code of
ethics has occurred and, if so, what remedies should be imposed. The effectiveness of such codes
of ethics depends on the extent to which management supports them with sanctions and rewards.
Violations of a private organization's code of ethics usually can subject the violator to the
organization's remedies (such as restraint of trade based on moral principles). The code of ethics
links to and gives rise to a code of conduct for employees.
ENCOURAGING ETHICAL BEHAVIOUR:
Most authorities agree that there is room for improvement in business ethics. One of
the most problematic questions raised in relation to business ethics is whether or not businesses
can become more ethical in the real world. The majority opinion on this issue suggests that
government, trade associations, and individual firms can indeed establish acceptable levels of
ethical behavior.

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The government can do so by legislating more stringent regulations. But, rules require
enforcement and when in many cases there is evidence of lack of enforcement even the ethical
businessperson will tend to "slip something by" without getting caught. Increased regulation may
help, but it surely cannot solve the entire business ethics problems.
Trade associations can and often do provide ethical guidelines for their
members. These organizations within particular industries are in an excellent position to exert
pressures on members that stoop to questionable business practices. However, enforcement and
authority vary from association to association. Moreover, exactly because trade associations exist
for the benefit of their members, harsh measures may be self-defeating.
Employees can more easily determine and adopt acceptable behavior when
companies provide them with a "code of ethics." Such codes are perhaps the most effective way
to encourage ethical behavior. A code of ethics is a written guide to acceptable and ethical
behavior that outlines uniform policies, standards and punishments for violations. Because
employees know what is expected of them and what will happen if they violate the rules, a code
of ethics goes a long way towards encouraging ethical behavior. However, codes cannot possibly
cover every situation. Companies must also create an environment in which employees recognize
the importance of complying with the written code. Managers must provide direction by
fostering communication, actively modeling and encouraging ethical decision making, apart
from investing in training employees to make ethical decisions.
Sometimes, even employees who want to act ethically may find it difficult to do so.
Unethical practices can become ingrained in an organization. Employees with high personal
ethics may then take a controversial step called "whistle blowing." Whistle blowing is informing
the press or government officials about unethical practices in an organization. Whistle blowing
could have averted disaster and prevented needless deaths in the Challenger space shuttle
disaster, for example. How could employees have known about life-threatening problems and let
them pass? Whistle blowing on the other hand, can have serious repercussions for employees;
those who make waves sometimes lose their jobs.

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Recent literature has suggested several strategies for promoting ethical behavior in
organizations (Adler and Bird, 1988; Burns, 1987; Harrington, 1991; Raelin, 1987; Stead etal.,
1990). First, chief executives should encourage ethical consciousness in their organizations from
the top down showing the support and care about ethical practices. Second, formal processes
should be used to support and reinforce ethical behavior. For example, internal regulation may
involve the use of codes of corporate ethics, and the availability of appeals processes. Finally, it
is recommended that the philosophies of top managers as well as immediate supervisors focus on
the institutionalization of ethical norms and practices that are incorporated into all organizational
levels.
Organizations and their managers must understand that the above recommendations
are key components in the development and maintenance of an ethically-oriented organizational
culture. Organizations can also enhance an ethically-oriented culture by paying particular
attention to principled organizational dissent. Principled organizational dissent is an important
concept linking organizational culture to ethical behavior. Principled organizational dissent is the
effort by individuals in the organization to protest the status quo because of their objection on
ethical grounds, to some practice or policy (Graham, 1986). Organizations committed to
promoting an ethical climate should encourage principled organizational dissent instead of
punishing such behavior.
Organizations should also provide more ethics training to strengthen their employees' personal
ethical framework. That is, organizations must devote more resources to ethics training programs
to help its members clarify their ethical frameworks and practice self-discipline when making
ethical decisions in difficult circumstances.
An effective organizational culture should encourage ethical behavior and discourage unethical
behavior. Although much remains to be learned about why ethical behavior occurs in
organizations and creating and maintaining organizational cultures that encourage ethical
behavior, organizations can benefit from the following suggestions:
** Be realistic in setting values and goals regarding employment relationships. Do not promise
what the organization cannot deliver.