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Introduction to Management

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MANAGEMENT

SCEINCE


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UNIT IINTRODUCTION TO MANAGEMENT

INTRODUCTION

In the present context, managing has become one of the most importantareas of human activity because of increasing role of large and complexorganisations in the society. Because of their increasing role, theorganisations have attracted the attention of both practitioners andacademicians to find out the solutions for business problems.

Concept

Defining the term management precisely is not so simple because the termmanagement is used in a variety of ways. Being a new discipline, it has drawnconcepts and principles from a number of disciplines such as economics,

sociology, psychology, anthropology, statistics and so on.

Each group of contributors has treated management differently. For example,economists have treated management as a factor of production; sociologistshave treated it as a class or group of persons; practitioners have treated it asa process comprising different activities.

DEFINITION

Management is the art of getting things done through and with people informally organized groups--- Koontz

Management is the art of knowing what you want to do and then seeing thatit is done in the best and cheapest way F.W. Taylor

Management is the art of securing maximum results with minimum effort soas to secure maximum prosperity and happiness for both employer andemployee and give the public the best possible service--- John Mee.

Management is the accomplishment of results through the efforts of otherpeople -- Lawrence

Management is simply the process of decision making and control over the

action of human beings for the expressed purpose of attaining pre-determined goals Stanley V.

Management is a process involving planning, organizing, staffing, directingand controlling human efforts to achieve stated objectives in an organization.

From the above definitions, the following features are identified:-

1) Organised Activities: Management is a process of organizedactivities. Without organized activities, two groups of people cannot beinvolved in the performance of activities. Where a group of people areinvolved in working towards a common objective, management comes

into existence.2) Existence of objectives: The existence of objectives is a basic

criterion of e very human organization because all organizations are


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deliberate and purposive creation and, therefore, they should havesome objectives. Without objectives, it becomes difficult to define the

direction where organized group of activities would lead to.3) Relationship among resources: Organised activities meant to

achieve common goals are brought about to establish certain

relationships about the available resources. Resources include money,machine, material, men and methods. All these resources are madeavailable to those who manage the organization. Managers apply

knowledge, experience, principles for getting the desired results. Thus,the essence of management is integration of various organisationalresources.

4) Working with and through people: Management involves workingwith people and getting organisational objectives achieved throughthem. The idea of working through people is interpreted in terms of

assigning and reassigning of activities to subordinates.5) Decision Making: Management process involves decision making at

various levels for getting things done through people. Decision making

basically involves selecting the most appropriate alternative out of theseveral. If there is only one alternative, there is no question of decisionmaking.

Nature of Management: - The study and application of managementtechniques in managing the affairs of the organization have changed itsnature over a period of time. The following points will describe the nature ofmanagement

1) Multidisciplinary: Management has been developed as a separatediscipline, but it draws knowledge and concepts from various

disciplines like psychology, sociology, anthropology, economics,

statistics, operations research etc.,. Management integrates the ideaand concepts taken from these disciplines and presents newer

concepts which can be put into practice for managing the organisations2) Dynamic nature of Principles: Principle is a fundamental truth which

establishes cause and effect relationships of a function. Based on

integration and supported by practical evidences, management hasframed certain principles. However, these principles are flexible innature and change with the changes in the environment in which an

organization exists.3) Relative, Not absolute Principles: Management principles are

relative, not absolute, and they should be applied according to the

need of the organization. Each organization may be different fromothers. The difference may exist because of time, place, socio-culturalfactors, etc.,.

4) Management: Science or Art: There is a controversy whethermanagement is science or art.An art is personal skill of business affairs. Art is characterized bypractical knowledge, personal creativity and skill. The more onepractices an art, the more professional one becomes. Management canbe considered as an art because it satisfies all these criterion of an art.A science is a systematized body of knowledge of facts. It canestablish cause-and-effect relationships among various factors. Itinvolves basic principles, which are capable of universal application.

Management can be considered as science because it satisfies all thesecriterion of a science.


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5) Management as profession: Management has been regarded as aprofession by many while many have suggested that it has

not achieved the status of a profession.Profession refers to a vocation or a branch of advanced learning suchas engineering or medicine.

6)Universality of management: Management is a universalphenomenon. However, management principles are not universallyapplicable but are to be modified according to the needs of the

situation.

Importance of Management

Management has been important to the daily lives of people and to theorganisations. The importance of management may be traces with thefollowing.

1) Effective utilisation of Resources: Management tries to makeeffective utilisation of various resources. The resources are scarce in

nature and to meet the demand of the society, their contributionshould be more for the general interests of the society.Management not only decides in which particular alternative aparticular resource should be used, but also takes actions to utilize it inthat particular alternative in the best way.

2) Development of Resources: Management develops variousresources. This is true with human as well as non-human factors. Mostof the researchers for resource development are carried on in anorganized way and management is involved in these organizedactivities.

3) It ensures continuity in the organization: Continuity is very

important in the organisations. Where there are no proper guidelines

for decision making continuity can not be guaranteed. It is quitenatural that new people join while some others retire or leave the

organization. It is only management that keeps the organizationcontinuing.

4) Integrating various interest groups: In the organized efforts,

there are various interest groups and they put pressure over othergroups for maximum share in the combined output. For example, incase of a business organization, there are various pressure groups

such as shareholders, employees, govt. etc. these interest groups havepressure on an organization. Management has to balance thesepressures from various interest groups.

5) Stability in the society: Management provides stability in the societyby changing and modifying the resources in accordance with thechanging environment of the society. In the modern age, moreemphasis is on new inventions for the betterment of human beings.These inventions make old systems and factors mostly obsolete andinefficient. Management provides integration between traditions andnew inventions, and safeguards society from the unfavorable impact ofthese inventions so that continuity in social process is maintained.

Functions of Management:-

To achieve the organisational objectives managers at all levels of organization

should perform different functions. A function is a group of similar activities.


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The list of management functions varies from author to author with thenumber of functions varying from three to eight.

Writers Management Functions

Henry Fayol

Luther Gullick

R. Davis

E.F.L. Breech

Koontz

Planning, Organizing, Commanding, Coordinating,

ControllingPOSDCORD- Planning, Organising, Staffing,Directing, Coordinating, Reporting, DirectingPlanning , Organising, Controlling

Planning, Organising, Motivating, Coordinating,Controlling

Planning, Organising, Staffing, Leading, Controlling

Different authors presented different variations. By combining some of

functions, these are broadly grouped into Planning, Organising, Staffing,Directing, and Controlling.

1) Planning: Planning is the conscious determination of future course ofaction. This involves why an action, what action, how to take action,and when to take action. Thus, planning includes determination ofspecific objectives, determining projects and programs, setting policiesand strategies, setting rules and procedures and preparing budgets.

2) Organising: Organising is the process of dividing work into convenienttasks or duties, grouping of such duties in the form of positions,grouping of various positions into departments and sections, assigningduties to individual positions, and delegating authority to eachpositions so that the work is carried out as planned. It is viewed as abridge connecting the conceptual idea developed in creating andplanning to the specific means for accomplishment these ideas.

3) Staffing: Staffing involves manning the various positions created bythe organizing process. It includes preparing inventory of personalavailable and identifying the sources of people, selecting people,training and developing them, fixing financial compensation, appraisingthem periodically etc.

4) Directing: when people are available in the organization, they mustknow what they are expected to do in the organization. Superiormanagers fulfill this requirement by communicating to subordinatesabout their expected behavior. Once subordinates are oriented, thesuperiors have continuous responsibility of guiding and leading themfor better work performance and motivating them to work with zealand enthusiasm. Thus, directing includes communicating, motivatingand leading.

5) Controlling: Controlling involves identification of actual results,comparison of actual results with expected results as set by planningprocess, identification of deviations between the two, if any, and taking

of corrective action so that actual results match with expected results.


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TAYLOR & SCIENTIFIC MANAGEMENT

The concept of scientific management was introduced by Frederick WinslowTaylor in USA in the beginning of 20th century.

Scientific management is concerned with knowing exactly what you want todo and then see in that they do it in the best and cheapest way

Since Taylor has put the emphasis on solving managerial problems in ascientific way, often, he is called as father of scientific management and hiscontributions as the principles of scientific management. Taylor carried

experiments about how to increase the efficiency of people. On the basis ofexperiments, he published many papers and books and all his contributionswere compiled in his book scientific management. His contributions are

divided into two parts.

Elements and tools of scientific management

Principles of scientific management

FEATURES / ELEMENTS AND TOOLS OF SCIENTIFIC MANAGEMENT

1) Separation of planning & doing: Taylor emphasized the separationof planning aspect from actual doing of the work. In other wordsplanning should be left to the supervisor and the worker shouldconcentrate only operational work.

2) Functional foremanship: Taylor introduced the concept of functionalforemanship based on specialization of functions. In this system, eightpersons are involved to direct the activities of workers. Out of these

four persons are concerned with planning viz., route clerk, instruction

card clerk, time and cost clerk and disciplinarian. The remaining fourpersons are concerned with doing aspect of the job, viz., speed boss,

inspector, gang boss and maintenance foreman. It is against to theprinciple of unity of command.

3) Job Analysis: It is useful to find out the one best way of doing the

things. The best way of doing a job is one which requires the leastmovements, consequently less time and cost. The best way of doing

the thing can be determined by taking up time motion - fatiguestudies. Time study involves the determination of time a movement

takes to complete.

Work Shop Manager

Plannin In char e Production In char e

RouteBoss

worker

disciplinarian

Instruction

Timeand

RouteClerk

GangBoss inspector Maintenance


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Motion study involves the study of movements in parts whichare involved in doing a job and thereby eliminating the wasteful

movements. Fatigue study shows the amount and frequency of rest required

in completing the work.

Thus, job analysis identifies the fair amount ofa days work requiringcertain movements and rest periods to complete it.

4) Standardization: As far as possible, standardization should be

maintained in respect of instruments and tools, period of work, amountof work, working conditions, cost of production etc.,. These thingsshould be fixed in advance on the basis of job analysis and various

elements of costs that in performing a work.5) Scientific selection and training of workers: Taylor has suggested

that workers should be selected on scientific basis taking into account

their education, work experience, aptitude, physical strength, etc., Aworker should be given work for which he is physically and technicallymost suitable. Apart from selection, proper training should be provided

to workers to make them more effective and efficient.6) Financial Incentives: Financial incentives can motivate workers to

put in their maximum efforts. If provisions exist to earn higher wagesby putting in extra effort, workers will be motivated to earn more.Taylor himself applied the concept of differential piece rate systemwhich was highly motivating. According to this scheme, a worker whocompletes the normal work gets wages at higher rate per piece andone who does not complete gets at lower rate.

7) Economy: while applying scientific management, not only scientificand technical aspects should be considered but adequate considerationshould be given to economy and profit. 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.

1) Replacing rule of thumb with science: According to Taylor,

exactness of various aspects of work like days fair work,standardization in work, differential piece rate for payment, etc.., isthe basic core of scientific management, it is essential that all theseare measured precisely and should not be based on mere estimates.

2) Harmony in group action: Taylor has pointed out that attemptsshould be made to obtain harmony in group action rather than discord.Group harmony suggests that there should be mutual give and takesituation and proper understanding so that group as a wholecontributes to the maximum.

3) Co-operation: Scientific management involves achieving cooperationrather than chaotic individualism. It is based on mutual confidence, co-operation and goodwill. Co-operation between management and

workers can be developed through mutual understanding and a changein thinking.


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4) Maximum output: scientific management involves continuousincrease in production and productivity instead of restricted production

either by management or by worker. Taylor heated inefficiency anddeliberate curtailment of production.In his opinion, there is no worse crime to my mind than that of

deliberately restricting output5) Development of workers: all workers should be developed to the

fullest extent possible for their own and for the companys highest

prosperity. Training should be provided to the workers to keep themfully fit according to the requirement of new methods of working whichmay be different from non-scientific methods.

FAYOLS ADMNISTRATIVE MANAGEMENT

Henry Fayol is a French Industrialist and the father of modern operationalmanagement theory. Fayol recognized the following organizationalactivities.

Organizational Activities: Fayol divided the activities of organizationinto six groups---

Technical (related to production) Commercial ( buying, selling and exchange)

Financial ( search for capital and its optimum use)

Security ( protection of property and person ) Accounting

Managerial ( planning, organizing, commanding, coordinating andcontrolling)

Among the above activities Fayol considered managerial activities are the

most important for the success of business and he concentrated more on

that. His contributions are divided the following categories. Qualities of a manager

General principles of management Elements of management

Managerial Qualities and Training: According to Fayol the following arethe list of qualities required in a manager. Physical ( Health, Vigor and Health )

Mental ( Ability to understand and learn, judgment , mental vigor andcapability)

Moral ( energy, firmness, initiative, loyalty, tact etc.,)

Educational Technical ( peculiar to the function being performed )

Experience

GENERAL PRINCIPLES OF MANAGEMENT:

Fayol has given 14 principles of management. He has made distinctionbetween management principles and management elements. Whilemanagement principles is a fundamental truth and establishes cause effectrelationship, elements of management denotes the function performed by amanager.

While giving the management principles, Fayol has emphasized two things.


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1. The list of management principles is not exhaustive but suggestive andhas discussed only those principles which he followed on most

occasions.2. principles of management are not rigid but flexible

Principles:-

1. Division of work: It is helpful to take the advantage of specialization.

Here, the work is divided among the members of the group based on theemployees skills and talents. It can be applied at all levels of theorganization.

2. Authority and Responsibility: Fayol finds authority as a continuation ofofficial and personal factors. Official authority is derived from themanagers position and personal authority is derived from personal

qualities such as intelligence, experience, moral worth, past services, etc.,Responsibility arises out of assignment of activity. In order to dischargethe responsibility properly, there should be parity between authority and

responsibility.3. Discipline: All the personal serving in an organization should be

disciplined. Discipline is obedience, application, behavior and outwardmark of respect shown by employees.

4. Unity of Command: Unity of command means that a person should getorders from only one superior. Fayol has considered unity of command asan important aspect in managing an organization. He says that should itbe violated, authority is undermined, discipline is in jeopardy, orderdisturbed, and stability threatened.

5. Unity of Direction: According to this principle, each group of activitieswith the same objective must have one head and one plan. It is concerned

with functioning of the organization I respect of grouping of activities or

planning. Unity of direction provides better coordination among variousactivities to be undertaken by an organization.

6. Subordination of individual interest to general interest: Individualinterest must be subordinate to general interest when there is conflictbetween the two. However factors like ambition, laziness, weakness, etc.,

tend to reduce the importance of general interest. Therefore, superiorsshould set an example in fairness and goodness.

7. Remuneration to Personnel: Remuneration to employees should be fair

and provide maximum possible satisfaction to employees and employers.Fayol did not favor profit sharing plan for workers but advocated it formanagers. He was also in favor of non-financial benefits.

8. Centralization: Everything which goes to increase the importance ofsubordinates role is decentralization; every thing which goes to reduce itis centralization. The degree of centralization or decentralization isdetermined by the needs of the company.

9. Scalar Chain: There should be a scalar chain of authority and ofcommunication ranging from the highest to the lowest. It suggests thateach communication going up or coming down must flow through eachposition in the line of authority. It can be short-circuited only in specialcircumstances. For this purpose, Fayol has suggested gang plankScalar chain and gang plank can be presented as follows


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10.Order: This is a principle relating to the arrangement of things andpeople. In material order, there should be a place for every thing andevery thing should be in its place. Similarly, in social order, there shouldbe the right man in the right place.

11.Equity: Equity is the combination of justice and kindness. Equity intreatment and behavior is liked by everyone and it brings loyalty in the

organization. The application of equity requires good sense, experience

and good nature.

12.Stability of tenure: No employee should be removed within short time.There should be reasonable security of jobs. Stability of tenure is essentialto get an employee accustomed to new work and succeeding in doing it

well

13.Initiative: Within the limits of authority and discipline, managers should

encourage their employees for taking initiative. Initiative is concerned withthinking out and execution of a plan. Initiative increases zeal and energyon the part of human beings.

14.Esprit de corps:It is the principle of union is strength and extension ofunity of command for establishing team work. The manager should

encourage esprit de corps among his employees.

Hawthorne experiments and human relations:

The human relations approach was born out of a reaction to classicalapproach. A lot of literature on human relations has been developed. For the

first time, an intensive and systematic analysis of human factor inorganisations was made in the form of Hawthorne experiments.

To investigate the relationship between productivity and physical

working conditions, a team of four members Elton mayo, White head,Roethlisberger and William Dickson was introduced by the company in

Hawthorne plant. They conducted various researches in four phases with eachphase attempting to answer the question raised at the previous phase. Thephases are ---

1. Experiments to determine the effects of changes in illuminations onproductivity. Illumination experiments (1924-27)

2. Experiments to determine the effects of changes in hours and other

working conditions on productivity. (Relay assembly test roomexperiments 1927-28)

3. mass interviewing programme (1928-1930)

4. determination and analysis of social organization at work (Bank wiringobservation room experiments 1931-32)

Conclusions:


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Individual workers must be seen as members of a group

The sense of belongingness and effective management were thetwo secrets unfolded by the Hawthorne experiments.

Informal or personal groups influenced the behaviour of workers

on the job. Need for status and belongingness to a group were viewed as

more important than monetary incentives or good physical

working conditions To seek workers cooperation, the management should be aware

of their social needs and cater to them. Otherwise, there is

every danger that the workers ignore and turn against theinterests of the organisation.

MASLOWS NEED HIERARCHY:

The behaviour of an individual at a particular movement is usually

determined by his strongest need. Psychologists claims that needs have acertain priority, as the more basic needs are satisfied, an individual seeks tosatisfy the higher needs. If his basic needs are not met, efforts to satisfy thehigher needs should be postponed.

A.H.Maslow, a famous social scientist, has given a framework thathelps to explain the strength of certain needs. According to him, there ishierarchy for need, which is presented in the following way.

Self actualization needsEsteem needs|

Social needs|Security needs|

Physiological needs |

Mallows need hierarchy

Physiological needs: The Physiological needs are at the top of hierarchybecause they tend to have the highest strength until they are reasonablysatisfied. Until these needs are satisfied to the degree needed for the efficientoperation of the body, the majority of a persons activities will probably atthis level, and the other level will provide him with little motivation.

A famous saying man can live on bread alone if there is no breadsuggests that man first try to acquire necessities for their survival.

Safety Needs: Once physiological needs are satisfied to a reasonable level,the next level in the hierarchy is safety. Safety means being free of physicaldanger or self-preservation. In the industrial society, employee can bemotivated through either positive action like pension plan, insurance planetc... Or negative actions like laid off or demotions.

Social needs: After the first two needs are satisfied, social needs becomeimportant in the need hierarchy. Since man is a social being, he has a need tobelong and to be accepted by various groups. In the organisation, workersform informal group environment to support unfulfilled social needs such as

affiliation.

Esteem needs: These needs are concerned with self respect, self confidence,a feeling of personal worth, feeling of being unique and recognition.


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Satisfaction of these needs produces feelings of self confidence, prestige,power and control. These needs are satisfied through adaptive behaviour,

matured behaviour or with irresponsible actions.

Self actualization needs: It is the need to maximize ones potential,

whatever it may be. It is related with the development of intrinsic capabilitieswhich lead people to seek situations that can utilize their potential. Thisincludes competence which implies control over environmental factors both

physical and social and achievement.

Conclusion: Maslow suggest that the various levels are interdependent and

overlapping, each higher level need emerging before the lower level need hasbeen completely satisfied. Since one need does not disappear when anotheremerges, all needs tend to be partially satisfied in each area.

HERZBERGS MOTIVATION HYGIENE THEORY:

Frederick Hertzberg conducted a structured interview programme toanalyse the experience and feelings of 200 engineers and accountants in ninedifferent companies in Pittsburg area, U.S.A during the structured interview,they were asked to describe a few previous job experiences in which they feltexceptionally good or exceptionally bad about jobs.

In his analysis, he found that there are some job conditions whichoperate primarily to dissatisfy employees when the conditions are absent,however their presence does not motivate them in a strong way. Another setof job conditions operates primarily to build strong motivation and high jobsatisfaction, but their absence rarely proves strongly dissatisfying.

The first set of job conditions has been referred to as maintenance or

hygiene factors and second set of job conditions as motivational factors.

Hygiene Factors:

According to Hertzberg, there are 10 maintenance factors. These arecompany policy and administration, technical supervision, salary, job security,personal life, status, working conditions, interpersonal relationship with

superiors, interpersonal relationship with peers and interpersonal relationshipwith subordinates.

These maintenance factors are necessary to maintain at a reasonable

level of satisfaction in employees. Any increase beyond this level will notproduce any satisfaction to the employees: however, any cut below this levelwill dissatisfy them.

Motivational Factors:These factors are capable of having a positive effect on job satisfaction

often resulting in an increase in ones total output. Hertzberg includes sixfactors that motivate employees. These are achievement, recognition,advancement; work itself, possibility of growth and responsibility.

Most of the above factors are related with job contents. An increase inthese factors will satisfy the employees: however, any decrease in thesefactors will not affect their level of satisfaction. Since, these increased level ofsatisfaction in the employees, can be used in motivating them for higheroutput.


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LEADERSHIP

CONCEPT: Leadership is the process of influencing the behaviour of other towork willingly an enthusiastically for achieving predetermined goals.

DEFINITION:Leadership is interpersonal influence exercised in a situationand directed through communication process, towards the attainment of aspecified goal or goals. Tennenbaum.

Leadership is the process of influencing and supporting others to workenthusiastically toward achieving objectives. Barnard Key.

LEADERSHIP STYLES:Leadership styles are the patterns of behaviour which a leader adopts

in influencing the behaviour of his subordinates. Based on the degree ofauthority used by the supervisors, there are three leadership styles.

1. Autocratic Leadership: It is also known as authoritarian, directive ormonothetic style. In autocratic leadership style, a manager centralizesdecision-making power in him. He structures the complete situation for hisemployees and they do what they are told. Here the leadership may benegative because followers are uninformed, insecure, and afraid if theleaders authority.

Advantages:-1. It provides strong motivation and reward to a manager exercising thisstyle.2. It permits very quick decisions as most of the decisions are taken by asingle person.3. Strict discipline will be maintained.4. Less competent subordinates also have scope to work in the organisationunder his leadership style.

Disadvantages:-1. Employees lack motivation; Frustration, low morale and conflict develop inthe organisation.2. There is more dependence and less individuality in the Organisation. Assuch future leaders in the organisation do not develop.3. People in the organisation dislike it specially when it is strict and themotivational style is negative.

1. Participative Leadership:-This style is also called democratic, consultative or ideographic. A

participative is defined as mental and emotional involvement of a person in agroup situation which encourages him to contribute to group goals and shareresponsibility in them. A participative manager decentralizes his decision-making process, instead of taking unilateral decisions, he emphasis onconsultation and participation of his subordinates.

2. Free Rein Leadership:-Free Rein or lassie faire technique means giving complete freedom to

subordinates. In this style, manager once determines policies, programmes

and limitations for action and the entire process is left to subordinates. Groupmembers person everything and the manager usually maintains contacts


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with outside persons to bring the information and materials which the groupneeds.

LEADERSHIP STYLES: - Leadership styles refer to a leaders behaviour.Behavioral pattern which the leader reflects in his role as a leader is often

described as the style of leadership. It is the result of the philosophy,personality and experience of the leader. The important leadership styles areas follows:-

1. Autocratic (or) Authoritarian leaders2. Participative (or) Democratic leaders

3. Free rein (or) Laiser faire leaders

Autocratic Leadership Style: - This is also known as authoritarian, directive

style. In this style manager centralizes decision-making power in him. Hestructures the complete work situation for his employees. He does notentertain and suggestions or initiative from subordinates. He gives orders and

assigns tasks without taking subordinates opinion. There are three categoriesof autocratic leaders.

Strict Autocrat: - He follows autocratic styles in a very strict sense. Hismethod of influencing subordinates behaviour is through negative motivationthat is by criticizing subordinates, imposing penalty etc

Benevolent Autocrat: - He also centralizes decision making power in him,but his motivation style is positive. He can be effective in getting efficiency inman situations. Some like to work under strong authority structure and theydrive satisfaction by this leadership.

Incompetent autocrat: - Sometimes, superiors adopt autocratic leadershipstyle just to hide their in competency, because in other styles they may

exposed before their subordinates. However, this cannot be used for a longtime.

Advantages:-1. It provides strong motivation and reward to manager.2. It permits very quick decisions.

3. Less competent subordinates also have scope to work in the organisation.

Disadvantages:-

1. People in the organisation dislike it specially when it is strict and themotivational style is negative.2.Employees lack motivation frustration, low morale and conflict develops in

the organisation.3. There is more dependence and less individuality in the organisation.

A B C

M


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Participative Leadership Style:- It is also called as democratic,consultative or idiographic leadership style. In this style the manager

decentralizes his decision-making process. Instead of taking unilateraldecision he emphasizes consultation and participation of his subordinates. Hecan win the cooperation of his group and can motivate them effectively and

positively.

Advantages:-

1. Employees are highly motivated.2. The productivity of employees is very high.3. Subordinates share the responsibility with the superior and try to

safeguard them also.

Disadvantages:-

1. Complex nature of organisation requires as through understanding of itsProblems which lower-level employees may not be able to do.

2. Some people in the organisation want minimum interaction with their

superior.3. Some leaders may use this style as a way of avoiding responsibility.

Free-rein Leadership:- A free-rein leader does not lead, but leaves thegroup entirely to itself as shown in the following figure.

In this style, manager once determines policy, programmes, andlimitations for action and the entire process is left to subordinates groupmembers perform everything and the manager usually maintains contacts

with outside persons to bring the information and materials which the groupneeds.

A

MD

C

B

A B

D

C

M


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The following figure shows the spectrum of a wide variety of leadershipstyles moving from a very authoritarian style at one end to a very democraticstyle at the other end, as suggested by Tannenbaum and warren H.schmidt.

Autocratic Democratic Free Rein

Social Responsibility:-Fro most of the business organisation, social responsibility is a way of

life. Social responsibility refers to the process which includes several activities

ranging from providing safe products and services to giving a portion of the

companys profits to welfare organisations with a philanthropic perspective.Social responsibility of a business is also viewed as conducting its

operations in a free and fair manner by dischargting its consumer towardsdifferent segments of its operational environment such as creditors, shareholders consumebrs, employees,Government, and other general public

asexplained below

Use of Authority

Area of freedom permitted to subordinates


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UNIT-II

DESIGNING ORGANISATIONAL STRUCTURES=====================================================

INTRODUCTION:

Management is a process involving planning, organizing, directing and

controlling human efforts to state of objectives in an organization.

The second phase of management process is organizing, which basically involvesanalysis of activities to be performed for achieving organizational objectives,

grouping these activities into various division, departments and sections so thatthese can be assigned to various individuals and delegating them appropriateauthority so that they are able to carry on their work effectively.

CONCEPT OF ORGANISATION AND ORGANISING:

In management literature, sometimes the term organisation and organizing are

used inter changeably because the term organisation is used in many ways. But itis not correct organisation is different from organising. Organising is one of thefunctions of management where as organisation refers to the institution where inthe functions of management is performed.Organising is a process of

Determining, grouping and structuring the activities.

Creating rules for effective performance at work. Allocation necessary authority and responsibility. Determining detailed procedures and systems for different problems areas

such as coordination, communication motivation etc.The ultimate result of organising is organisation. In other words, organisingfunction ends with creating a structure of relationships.

FORMAL AND INFORMAL ORGANISATION:Formal organisation refers to the structure of well-defined jobs, each bearing adefinite authority, responsibility and accountability.

CHARACTERISTICS:

1. Organisation structure is designed by the top management to fulfill

certain requirements.

2. Coordination among members and their control are well specifiedthrough process, procedures rules etc.3. Organisation concentrates more on the performance of jobs and not on

the individuals performing the jobs.

Informal organisation refers to the natural grouping of people on the basis ofsome similarity in an organisation.

It refers to people in group associations at work, but these associations are notspecified in the blue print of the formal organisation, the informal organisationmeans natural grouping of people in the work situations.

CHARACTERISTICS:

Informal organisation is a natural out come at the work place. Informal organisation is created on the basis of some similarity

among its members. The basis of similarity may be age, place of

origin, caste, religion, liking/disliking etc.


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Membership is an informal organisation is voluntary. Behavior of members of the informal organisation is coordinated

and controlled by group norms and not by the norms of formalorganisation.

BASIC CONCEPTS RELATED TO ORGANISATION:

AUTHORITY AND RESPONSIBILITY:

Authority may be defined as the power to make decisions which guide the actions

of another. It is a relationship between two individuals, one superior, othersubordinate. The superior frames and transmits decisions with the expectationthat these will be accepted by the subordinate.

Responsibility is defined as that obligation of an individual to carry out assignedactivities to the best of his ability. It is not merely duty that is assigned but anobligation that the duty is performed.

PARITY OF AUTHORITY AND RESPONSIBILITY:Principle of authority and responsibility suggests that authority of a person should

match his responsibility. Otherwise, the performance of the managers goesunchecked where the authority exceeds the responsibility. It may lead to miss-utilization of authority and vice-versa.

DELEGATION OF AUTHORITY:Delegation of authority is one of the important factors in the process oforganising. It is essential to the existence of a formal organisation. Delegationmeans conferring authority from one manager to another in order to accomplish

particular assignments.

CENTRALISATION AND DECENTRALISATION:Another highly important issue in organising is the extent to which authority iscentralized, or decentralized, in a formal organisation structure. In managementcentralization refers to concentration of authority and decentralization refers todispersion of authority.

SPAN OF MANAGEMENT:It refers to the number of subordinates that should be placed under singlesuperior. The number of subordinates who report to superior has two importantimplications.

It determines the complexity of individual manager job. It determines the shape or configuration of the organisation.

The classical writers suggest that between 3 to 8 subordinates as ideal dependingup on the level of management.

V.A.Gracuna a French management consultant has suggested a mathematicalformula to fix the number of subordinates.He classified superior and subordinate relationship into the following:

Direct single relation ship. Direct group relation ship. Cross relation ships.

Direct single relationship:- Direct single relationships arise from the directindividual contacts of the superior with his subordinates.

Ex:- A,B,C are subordinates to XHere three single relation ships.


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Direct group relation ships:-Direct group relationships arise between thesuperior and subordinates in all possible combinations. Thus the superior mayconsult his subordinates with one or more combinations.Ex:-A with B,B with C,A with C, etc..

Cross relationships:- Cross relationships arise because of mutual interaction

of subordinates working under the common superior , such as A and B,B andC,A and C,C and A etc.. The relationship is quite different between A and Bthan B and A from management point of view because the type of interaction willbe different in both cases.

Gracuna has given formula to find various relationships with varying number ofsubordinates.

Number of subordinates = n,

Direct single relationship = n,

Direct group relationship = n(2n-1-1)

Cross relationship = n(n-1),

Total relationship = n(2n/2+n-1)

(or)

= n(2n-1 +n-1).

No. of sub ordinates No. of relationships

1 . 1

2 . 6

3 . 18

4 . 44

5 . 100

6 . 222

8 . 1080

10 . 5210

Gracuna suggest that most ideal span for a manager is 6 subordinates with 222relationships.

Factors effecting span of management:-

1. Capacity of superior2. Capacity of subordinate

3. Nature of work

4. Degree of decentralization

5. Degree of planning

6. Communication technique

7. Use of staff assistance

8. Supervision from others


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CONCEPT OF ORGANISATION STRUCTURE:

Organisation structure is the pattern of relationships among various componentsor parts of the organisation. This prescribes the relationships among variousactivities and positions. Since these positions are held by various persons, thestructure is the relationships among people in the organisation

DEPARTMENTATION:The first task in designing an organisation structure is the identification ofactivities and to group them properly. The process of grouping the activities is

known as Departmentation.

LINE ORGANISATION STRUCTURE

It is also known as scalar, military, or vertical organisation and perhaps is theoldest form. In this form of organisation managers have direct responsibility forthe results; line organisation can be designed in two ways.

1. PURE LINE ORGANISATION:

Under this form, similar activities are performed at a particular level. Each groupof activities is self contained unit and is able to perform the assigned activities

without the assistance of others

Production Manager|

______________________________ |____________________________| | |

Foreman-A Foreman-BForeman-C

| | |Worker WorkerWorker

2. DEPARTMENTAL LINE ORGANISATION:

Under this form, entire activities are divided into different departments on thebasis of similarity of activities. The basic objective of this form is to have uniformcontrol, authority and responsibility.

Production Manager|

______________________________ |____________________________

| | |Foreman-A Foreman-BForeman-C(Body Moulding) (Seating)

(Finishing)| | |

Worker Worker

Worker

Merits Demerits

1) It is simple to understand

2) Easy supervision & control3) Quick decisions4) It sets clearly the direct lines of

1) Lack of specialization

2) Low Morale3) Autocratic approach4) Overburden to manager


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authority and responsibility of aline manager

Suitability:- It is suitable to small scale organizations where the number ofsubordinates is quite small


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LINE AND STAFF ORGANISATION:It refers to a pattern in which staff specialists advise line managers to performtheir duties. When the work of an executive increases its performance requiresthe services of specialists which he himself can not provide because of his limitedcapabilities on these matters. Such advise is provided to line managers by staffpersonal who are generally specialists in their fields. The staff people have the

right to recommend, but have no authority to enforce their preference on otherdepartments.

FEATURES:- This origin structure clearly distinguishes between two aspects of

administration viz., planning and execution. Staff officers provide advice only to the line officers; they do not have any

power of command over them. The staff supplements the line members.

MERITS DEMERITS

1. It enhances the quality ofdecision

2. Greater scope for advancement3. It relieves the line managers.4. Reduction of burden.

1. It may create more friction orConflict between line and staff

2. It is expensive3. It creates confusion

SUITABILITY: - It can be followed in large organizations where specialization ofactivities is required, because it offers ample opportunities for specialization.

FUNCTIONAL ORGANISATION STRUCTURE:-It is the most widely used organization structure in the medium and large scaleorganizations having limited number of products. This structure emerges from the

idea that the organization must perform certain functions in order to carry on itsoperations.Functional structure is created by grouping the activities on the basis of functionsrequired for the achievement of organizational objectives. For this purpose, all

the functions required are classified into basic, secondary and supportingfunctions according to their nature & importance.


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FEATURES:

1) The whole activities of an organisation are divided into various functions2) Each functional area is put under the charge of one executive3) For any decision, one has to consult the functional specialist

MERITS DEMERITS1) Planned specialization2) Facilitates large scale production3) Disciplinary controls are well

defined4) Offers clear career paths

1) calls for more coordination2) no clear line of authority3) slow decision making4) lack of responsibility

COMMITTEE ORGANISATION: -

A committee does not represent a separate type of organization like line andstaff, or functional. It is rather a device which is used as supplementary to or in

addition to any of the above types of organizations.

A committee may be defined as a group of people performing some aspects ofManagerial functions. Thus, a committee is a body of persons appointed orelected for the Consideration of specific matters brought before it.


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MATRIX ORGANISATION

It is also called project organization. It is a combination of all relationships in theorganization, vertical, horizontal and diagonal. It is a mostly used in complexprojects. The main objective of Matrix organisation is to secure a higher degree ofco-ordination than what is possible from the conventional, organizational

structures such as line and staff.

In matrix organization structure, a project manager is appointed to co-ordinatethe activities of the project. Under this system a subordinate will get instructions

from two or more bosses, Viz., administrative head and his project manager.

Merits

1. It offers operational freedom & flexibility2. It focuses on end results.3. It maintenance professional Identity.4. It holds an employee responsible for management of resources.

Demerits:-1. It calls for greater degree of coordination,

2. It violates unity of command.3. Difficult to define authority & responsibility.4. Employee may be de motivated.

Suitability:-It can be applicable where there is a pressure for dual focus, pressure for highin formation processing, and pressure for shred resources.Ex:- Aerospace, chemicals, Banking, Brokerage, Advertising etc..,

General Manager

Production Personnel Finance Marketin

W W

Project B

Manager

WW

W W W

WW

W

W WProject B

Manager

Project C

Manager


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Boundary Less Organization:-

Problems with traditional organizational structures:-1. Lack of flexibility to changing mission needs/rapidly changing

world.1. Slow/poor in responding customer requirement.

2. Failure to get things to done.3. Customer/vendor has a hard time dealing with the organization.

What are the boundaries?

Vertical: Boundaries between layers within an organization. Horizontal: Boundaries which exist b/w organizational

departments.

External: Barriers between the organization and the out sideworld. (Customers, suppliers other govt. committees).

Geographic: Barriers among organization units located in differentcountries.

Problem:-isolation of innovative practices & ideas.

What is boundary less Organisation?It may be defined as an organisation structure that can avoid all the barriers(vertical, horizontal, external, geographic) much more permeable than they arenow;

Boundary less organisation allows free flow of ides/information / resourcesthroughout the organisation and into others.

A boundary less organisation is the opposite of a bureaucracy with numerous

barriers and division. In contrast, the organisation with out boundaries offersinteraction and networking among professionals inside and outside the

organisation. The organisation model is fluid and highly adaptive, much like anopen system in biology.

Jack Welch, former CEO of General Electric, stated his vision for the company asa boundaryless company. By this he meant an open, anti-parochial

environment, friendly toward the seeking and sharing of new ideas, regardless oftheir origin. The purpose of this initiative was to remove barriers between thevarious departments as well as between domestic and international operations.To reward people for adopting the integration model, bonuses were awarded tothose who not only generated new ideas but also shared them with others.


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Unit-3

Plant Layout

Introduction:

Plant layout deals with the arrangement of work areas and equipment. It is related toallocation of adequate spaces at the appropriate places for work equipment, working

men, materials, other supporting activities and also customers. The basic theme

behind the arrangement of work area is to produce the product economically, to

provide the service effectively and to provide a safe and good physical environment

for the users that is, the workers and / or the consumers

Plant Layout:

Plant Layout can be defined as the process of determining a spatial location for a

collection physical production facility suitable to manufacture a product or service. It

is concerned with arranging

The manufacturing and servicing departments in the factory site The machinery within these departments The layout of individual work places

Principles of Plant Layout

1. The total movement of materials should be minimum. For this, one has toconsider the movement distances between different work areas and the number

times such movements occur per unit period of time.

2. The arrangement of the work area should have as much congruence as

possible with the flow of materials within the plant. Here, flow means not anyparticular direction, it means that the different stages through which the

material passes before it becomes a finished product.

3. the layout should ensure adequate safety and healthy working conditions forthe employees

4. The layout should be adaptable or flexible enough so as to allow for probablechanges in the future as all systems should anticipate changes in the future.

5. A good layout should take into consideration all the three dimensions of spaceavailable. In addition to the floor space, the vertical space available should

also be taken into account while designing the work areas.

Basic types of layout

Process layout or layout by function

This is typical of the job-shop type of production where the equipment performing

similar operations is grouped together. For instance, grinding machines could be

grouped together to form a work area, milling machines could be grouped together,

drilling machines could be grouped together, etc. such a layout is particularly useful

where the volume of manufacturing is low and the variety of jobs is great. Here, the

layout should provide tremendous flexibility in the sequence of operations because;

the sequence of operation for one job is different from that of another job. For this

reason, in all job-shop types of production, work areas are grouped together.

Process layout can be preferred when

more varieties of products are manufactured in fewer quantities


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close quality inspection is required

it is difficult to carry out time and motion study

it is necessary to use the same machine for more than one product

Merits:

It is more flexible, since, it allows to change the sequence of operations.

Production can be increased by installing additional equipment.

Better working conditions

More specialization

If a machine fails, it does not effect on other machines.Demerits:

It is very difficult to shift material from one stage to another.

Diseconomy in utilization of floor space. Under this method of layout more manpower is required to check the work of

each and every department.

It increases the material handling cost.

Product layout or line production

The equipment here is laid out accordance to the sequence in which it is used for

making the product. Product layout is usually suitable for assembling operations, for

example in the automobile industry. In product layout the logical sequence in the

production process forms the basis for the arrangement.

Product layout can be applicable where

the machines can be continuously handled for longer periods time and motion study can be conducted the products so manufactured do not require higher degree of inspection

Finished goods

Drill Bore Grind Mill Inspect

Merits:

This layout ensures constant flow of production. Under this method there is direct channel for the flow of material. So that ,

there is economy in material handling.

Inspection is more easy and convenient. Since, all the machines are in asequence.

Economy is manufacturing time

Maximum utilization of available space.

Lesser work-in-progress or semi finished goods

Economy in manufacturing time.

Demerits: If one machine in the line stops on account of breakdown, the remaining

machines cannot operate.


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Certain changes are very costly and impracticable under this method of layout

It is an expensive layout.

Fixed position layout:

In this layout, the material remains in a fixed position, but the machinery, tools,

workmen, etc. are brought to the material.

It is suitable when the equipment and the machinery are small in number and size, and

where the workmen are highly skilled to perform the various small jobs on the

product.

This type of layout is used in case o large projects such as building ships, manufacture

of aircrafts, heavy pressure vessels and automobile industries etc.,

Merits:

It is more flexible layout.

It requires less floor space because machines are moved from one location toanother.

Material handling cost is minimum.Demerits:

This type of layout is not suitable for manufacturing small products in largequantity.

It involves high equipment handling cost.

It requires more capital.

Features of good layout:

1. Maximum Flexibility: A good layout is one which can be modified to meetchanging circumstances. It must be capable of incorporating, without major changes,

new equipment to meet technological requirement.


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PLANT LOCATION

Introduction:

The location where firms set up their operation is simply called as plant

location. All the manufacturing and service organizations carefully plan where they

should locate their plants and service facilities because location will have a serious

affect on the success of an organization. Firms conduct plant location analysis where

they evaluate different locations and finally choose an optimum location to start their

operations.

Importance:

Selection of a plant location is a strategic decision for any organization. Therefore,

it has to be made after considering all the factors which have a bearing on it. Location

decisions are important for several reasons.

1. The location of a plant will fix the production technology and cost structure.

2. The significance of plant location depends on the size and nature of thebusiness.3. The location of the facility affects the companys ability to serve its customers

quickly and conveniently.

Factors affecting plant location:-

1) Closeness to raw material:

Normally the proportion of raw material cost to the cost of production is significant for every

product. If the plant is located close to supply points of the raw material, the cost of procurement can

be minimized, particularly if the raw material is fragile, perishable, bulky or heavy.

Ex:- Rice mills are located near by paddy fields.

2) Nearness to the markets:If the plant is located close to the markets, the cost of transportation can be

minimized. This also helps the producers to have direct knowledge of the

requirements of the customers. The knowledge about the profiles of customer

segments enables the plant to mould its sales strategies accordingly.

3) Transportation facilities:

The five basic modes of physical transportation are air, road, rail, water and

pipeline. Firms consider relative costs, convenience and suitability of each mode and

then select the transportation method.

Ex:- Exporters may choose a location near to a seaport or airport.

4)Availability of labour:

The availability of labour and skills is one of the important factors in production.

Labour may be readily available in some areas than in other areas. Availability of

skilled and unskilled in the required proportion in one area is usually not possible.

Firms that emphasise more on technology require skilled people and so prefer a

location where the skilled people are available and vice versa.

Natural and climatic factors:- :- In some cases, location of industry is simplythe result of industry is simply the result of certain naturalfactors.

Shipbuilding is located in vishakapatnam and Bombay as these are deep

water- harbours, besides having well-developed markets for labour, raw

material and machinery in its neighbourhood.


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Availability of amenities:- :- Locations with good external amenities such ashousing, shops, community services, communication systems etc are moreattractive than those located in the remote areas.

Availability of services:- Electricity, water, gas, drainage, and disposal ofwaste are some of the important services that need to be considered while

selecting a location.

Safety requirements:- some units such as nuclear power stations and otherchemical and explosive factories may present potential threat to the

surrounding neighbourhood . so firms should ensure that such units are located

in remote areas where the damage will be minimum in case of an accident.

Political interference:- This applies more in case of public enterprises, many atime, political considerations over ride the economic rational in assigning an

industry to a particular location.

Site cost:- The management of the firm should ensure that the cost of the siteis reasonable for the benefits that it is going to provide.

PRODUCTIVITY AND PRODUCTION

Productivity is defined as the rate at which the goods and services are produced. Itrefers to the relationship between the inputs and the outputs. It is calculated as a

ratio between the amount produced and the amount of resources used in the

production.

Productivity =output/input

Productivity is different from production. Productivity is the rate of production of

goods and services while production refers to the actual amount of goods and

services produced.

Methods of production:- The methods of production can be of the following

types.

o Job productiono Batch productiono Continuous or mass production

Job production:- The production of small number of a product at a time, which

may

or may not be repeated in future is known as job production or unit production.

The products are manufactured to meet the specific requirements of a

customer.

Generally, a special job order is made and it is connected with some special

machinery, special models and projects. These are produced in very small quantityaccording to the customerrequirements.


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Ex:- Lifting equipments, pressure vessels, processing plants etc

Batch production:- The production of sufficient number of identical items, mostly

repeated with time intervals is known as batch production. It is also known as

quantity

production.There are several standard components which are used in different

machineries . Batch production is mainly concerned with the production of such

items

to meet a specific demand. When a particular batch is manufactured, the plant

should

be available for the production of similar products. This type of production needs

general purpose equipments and is very useful in manufacturing machine tools,

paints, drugs etc

Mass production:- The production of large number of identical items,

continuouslyis known as mass production.

In this case, the production is carried out throughout the day and

plant

facilities are fully engaged. Production goes on the same sequence of process . It

is

associated with large quantity production and with high rate of demand.

The main advantage of this method of production is the lowest unit

cost

of production.

The products such as Tvs, air conditioners, cars, scooters, and othersare manufactured through mass production.

WORK STUDYIntroduction:

Work study is a new name for the techniques usually known as motions and time

study. Work study refers to the method study and work measurement, which are used

to examine human work in all its contexts by systematically into all factors affecting

its efficiency and economy to bring forth the desired improvement.

Nature & ScopeWork study is a generic term for those techniques, particularly method study and

work measurement, which are used in the examination of human work in all its

contexts.

Work study is the study of the work in order to simplify it. In fact, it is an approach in

respect of the use of manpower, material and equipment with a view to eliminating

waste in every form. It is extensively used in agricultural operations, manufacturing,

services, and transport and supply industries.

Method study is the systematic recording and critical examination of existing and

proposed ways of doing work, as means of developing and applying easier and more

effective methods and reducing costs.


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Objectives of method study:

The study is conducted to achieve the following objectives1. to bring improvement of work processes and procedures2. to economize human efforts and to reduce unnecessary fatigue3. to improve the usage of materials, machines and manpower

4. to develop better physical working condition and environment

Procedure for method study:

Method study includes the following steps:

Select choosing the job or procedure to be studiesRecord collect all the relevant facts about the present or proposed

method.

Examine - critically scrutinizing these facts in an orderly sequence

using the techniques best suited to the purpose

Develop develop the best possible methodInstall - practice the developed method

Maintain checking the new standard practice by proper controlprocedures and regular routine checks.

Select:

Only such jobs are to be selected that promise substantial improvement and dividends.

Some of the prospective tasks for the study are those which are holding up certain

other operations bottleneck tasks which involve a long travel of the forms,documents and materials.

After selection of job, it will be a good practice to compile a list of specifications of

the job

Ex: job particulars, who initiated the study, layout etc.


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Record:

The current process of doing job has to be recorded. While doing so, every detail,

however small it may be, has to be identified. Where the process is too long,

involving many stages of production, inspection, the present process of doing the job

is recorded sufficiently, together with all the relevant information, by using the

process chart.

A process chart is a graphic representation of the sequence of events or steps that

occur in the work method or procedure. Classifying them by symbols according to the

nature of the event is as follows

Symbol Meaning

Operation: It involves change in the condition of a product

Transport: Moving something from one location to another

Storage: It occurs when object is kept and protected against

unauthorized removal

DDelay or Temporary storage: A delay occurs to an object when

conditions do not permit the performance of next job

Inspection: Quality and quantity of the product is good or not

Operation cum Inspection: Inspection is taking place during the

production process

Examine:

This is the most important phase of method study. After an activity has been suitably

recorded by means of any method, the recorded events are to be critically examined.

The analysis may be based on primary questions like purpose, place, sequence, person

etc.

At the secondary stage, the questions are meant to seek alternatives so as to be able to

think out a better, and finally the best way of accomplishing the task.

Develop:Based on the recorded data, the alternative methods of doing the same job more

effectively are to be identified and evaluated. From these alternatives, the best one is

selected and developed to suit the requirements.

Install:

The new method so developed is to be installed in a phased manner. As part of

installation, adequate planning of schedules and deployment of resources should be

taken carte of.

Once the method is adopted, the workers have to be retrained, the equipment has to be

provided, and the method has to be tested in order to seek improvement.


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Maintain:

It should be ensured that the method is used in the manner intended. Complaints and

improvements in productivity should be registered. Once the new method starts

yielding the desired result, it is necessary to maintain the new method without any

change for sometime.

Work Measurement:

Work measurement, also called time study, establishes the time taken by a qualified

worker to complete a specified jab at a defined level of performance. These

techniques are used to answer the questions how long? And when? They usuallyfollow the results of method study. They are employed for following purposes.

To develop costing system To determine the production schedules To develop incentive schemes To compare the time taken by alternative methods of a given job To standardize the job in terms of standard time, thus, supplementing the

efforts of method study. To determine the optimum number of men and machines to ensure their

effective utilizations

Effective planning and control of production, distribution, administration and services

can not be achieved unless they are based on the facts. One of the most important

facts is the time required to complete the job, which can be obtained by work

measurement.

Procedure:

1. Break the job into elements which can be identified as distinct parts of anoperation, capable of being observed, measure and analyzed

2. Measure time taken to perform each element using a stopwatch3. Add the time taken to do all elements and arrive at the basic time required to

do the entire job.

Work Sampling:

One of the methods of developing production standards i.e., work sampling differs

from the other methods. It does not require a stop watch and involves observing a

portion or sample of one or more work activities.

Work sampling is one of the very common techniques of work measurement which

has gained widespread use on shop floor and office in nearly all types of

manufacturing and non manufacturing organizations.


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Unit-4

cALUCULATION OF EOQTotal ordering cost = No of order placed per year x ordering cost per order= (A/S) B

Total carrying cost per year = Avg inventory level carrying cost per year

= (S/2) C

Economic order quantity is that of order where ordering cost is equal to carrying cost..(AB)/S = (SC)/2

2AB =s2

C

S2

= 2AB/C

S = (2AB/C)

S = Economic Order Quantity

A = Annual Demand

B = Buying cost (or) Ordering cost

C = Carrying cost

ABC Analysis:-

The inventory of an organization of large no of large items with varying price & usage rate. It

is not possible to pay equal attention on all the items. ABC analysis is a selective approach of

inventory control. It enables the management where to be paid concentration and its efforts.

Usually materials are classified into three categories.

A class items: These items consist of hardly 10% of the total items and account for 70% of

the total value of inventory.

B class items: These items relatively less important. They may constitute 20% of the total

items and the % of the investment in inventory about 20% of the total inventory value.

C class items: These are about 70% in number but it consists of 10% investment in

inventory value. (10% of the total expenditure on inventory)

A class items required rigid and strict control and need to be stocked in smaller quantity. Anattention should be paid in estimating requirements. Purchasing & storing them. A little

attention should be paid on class B items. The control on these items should be intermediate

between A & C, C items being less expensive does not required strict control. These areordered in bulk quantity.

ABC Analysis (Policy Guidelines)

A class items-Tight control on stock

level.

-Low safety stock.

-Regular & continuous

on wastage.

-Procure material through

multiple sources.

B class items- Moderate control.

- Median safety stock

- Quarterly check on

wastage

- Two or more reliable

sources

C class items- Lesser control- Large safety stock- Annual review on

wastage

- Only one or two reliable

sources

Stock Levels:-


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Maximum Stock Level: - It is the level beyond which storage of raw materials are not

allowed .The main purpose of this levels is to avoid blocking up of capital unnecessarily on

material.

Maximum stock level

Reorder level +recorder quantity(minimum usage *minimum reorder period)Minimum stock level: - It is level below which material should not be allowed to fall. This

level indicates the possibilities of stoppage of production unless quick arrangement is made

for further purchase of material.

Minimum stock level=reorder level-(normal usage *normal reorder period)

Re - order level:-this id the level where the company should place an order for fresh

procurement. This level is fixed in between minimum level and maximum level.

Re order level = lead time *average usage

(Or)

Minimum stock level + consumption during lead time

Danger level: - this level is fixed in between minimum level and zero stock level. As and

when material stock level reached to this level the store keeper should make necessary special

arrangements to procure material.

Safety stock: - the safety stock is the additional stock of material to be maintained to be

maintained in order to meet the unanticipated increase in demand.

Safety stock = (maximum lead time-minimum lead time)*consumption rate

Lead time: - it is the time gap between placing of an order and the time of actual receipt of

material

Purchasing Function: - For an organization. Purchasing is a window to the outside world.

The prime function of purchasing is that of being sensitive to the external supply marker

situation and also of feeding back this information to the other functions of the organization.

However, it is usually understand to be to get the right quantity of material of the right quality

at the right time, at the right place, from the right source and at the right cost.

Objectives of Purchasing:

1. To ensure availability of proper quantities of materials for smooth functioning

of the production department.

2. To procure materials at reasonably low costs for the company.

3. To ensure supply of quality materials.

4. To select the proper sources of supply in order to ensure the above.

5. To maintain functional relations with order department and provide up-to-date

information and device about the availability of alternative materials.

6. To train staff make policies and procedures and thus evolve a sound

organization to achieve the objectives.

Centralized vs decentralized buying function:

Whether to centralize of decentralize buying inventory is a question of policy.


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To decentralize the procurement function needlessly is to deny a firm some of its potential

profit. Centralization of inventory procurement is essential for attaining both operating

efficiency and maximum profit.

When the entire responsibility of procurement of inventory lies with one single person, it is

called as centralized buying.

On the other hand the buying function is said to be decentralized when personal from other

functional areas of business say production, Engineering, marketing, finance, personal decide

on sources of supply. Negotiate with vendors directly or perform any of the other major

function of buying inventories.

Process of Purchasing:-

Purchasing procedure includes the following steps.

1. Receiving Purchasing requisitions: - Purchase department collects all requisitions for

purchase of material. The department which requires materials or stores prepares the

purchase requisitions and sent to the purchase department. It does all the purchases belong to

the organization.

2. Selection of possible sources of supply: - It is the function of the purchase departmentto maintain the list of suppliers of every type of material. There could be alternative materials

available as a result of technological development should explore such alternative materials

that involve lower cost and additional benefits.

3. Making request for quotations: - Purchase department invites quotations from the

selected suppliers. In the invitations it can be mentioned the particulars of details to be

submitted. The details of price, quantity to be supplied. The time of delivering,

discount, the terms of payment etc. are furnished in the quotations. The suppliers are

short listed based on their post performance in terms of quality, reliability..Objectives of Purchasing:

1. To ensure availability of proper quantities of materials for smooth functioning

of the production department.

















on sources of supply. Negotiate with vendors directly or perform any of the other majorfunction of buying inventories.



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the organization.

2. Selection of possible sources of supply: - It is the function of the purchase departmentto maintain the list of suppliers of every type of material. There could be alternative materials


that involve lower cost and additional benefits.

3. Making request for quotations: - Purchase department invites quotations from the




short listed based on their post performance in terms of quality, reliability..Objectives of Purchasing:

1. To ensure availability of proper quantities of materials for smooth functioningof the production department.

















on sources of supply. Negotiate with vendors directly or perform any of the other majorfunction of buying inventories.






the organization.

2. Selection of possible sources of supply: - It is the function of the purchase department

to maintain the list of suppliers of every type of material. There could be alternative materials


that involve lower cost and additional benefits.3. Making request for quotations: - Purchase department invites quotations from the



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short listed based on their post performance in terms of quality, reliability..Have to be utilized. If it is both for consumer and industrial markets. More than one

channels to be employed.

Market size:- If the size of the market is small. it will be worthwhile to go fordirect marketing. In case of larger markets. On the other hand we have many

channels.

Size of consumer order: size and average frequencyof consumer orders also

influencethe channel decision. If the volume of sales is large direct selling may be

economically feasible. In the reverse situation i.e., in case of small quantity demand.

Services of a retailers etc. may be availed of.

III consumer Factors:-Marketing essentially constitutes people who have some unsatisfied wants and

necessary financial resources to get their demand satisfied. Hence while determining

the channels of distribution the convenience & inconvenience of the prospective

customers will have to be taken note of. For e.g. Avery large number of people prefers

management sceince

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