PRINCIPLES AND PRACTICES OF MANAGEMENT

UNIT - 2

Functions of Management

1. Planning

2. Organizing

3. Staffing

4. Directing

5. controlling

# Planning :

Process of deciding in advance what is to be done, when and where it is to be done, how it is to be done and by whom.

# Organizing :

Concerned with arrangement of resources – people, materials, technology and finance in order to achieve enterprise objectives. Involves division of work, allocation of authority & responsibility and coordination of tasks. As the firm grows the importance of this function increases.

# Staffing :

Process by which organizations meet their human resource needs including future requirements.

Man power planning, hiring, placing, training & development, motivating & empowering, Compensating.

# Directing :

Function of guiding and supervising. • Leadership - Process of influencing actions of a person or a

group to attain desired actions. • Motivation - To inspire and encourage people to take

desired action.• Communication – Transfer of information and knowledge

from one person to another.

# Controlling :

Monitoring employee activities and tracking the performance and initiating corrective measures to facilitate achieving organization’s goals.

Setting standards of performance,

Measuring actual performance,

Comparing with the plans

To take corrective actions.

Planning

Controlling Organizing

Directing Staffing

Managerial functions: Interrelationship

Planning

Everything around us is changing ! ! !

The only constant is change.

Even the rate of change is changing . . . . .

Terry said “ successful managers deal with foreseen problems, unsuccessful managers struggle with unforeseen problems; difference lies in planning”

Managers do not wait for future. They make the future.

They introduce original action by

removing present difficulties,

anticipating future problems,

changing the goals to suit internal & external changes,

Experiment with creative ideas,

and take initiative attempting to shape the future

and creating a more desirable environment.

Meaning –

A plan is forecast for accomplishment.

It is predetermined course of action.

It is today’s projection for tomorrow’s activity.

Based on futurity :• Planning is a trap laid down to capture the future – Allen• Deciding in advance what is to be done in future – Koontz• Planning is informed anticipation of future - Haimann• Planning is anticipatory decision making – Akhoff

As a thinking function :• Planning is a thinking process, an organized foresight, a

vision based on facts and experience that is required for intelligent action – Alford and Beatty

• Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. – Koontz & O’Donnel

Features of Planning:

Planning has a number of characteristics –

1. Planning is goal oriented

2. Planning is a primary function

3. Planning is all pervasive

4. Planning is a mental exercise

5. Planning is a continuous process

6. Planning involves choice

7. Planning is forward looking

8. Planning is flexible

9. Planning is an integrated process

10. Planning includes efficiency and effectiveness dimension.

Planning questions :

1. Where are we now ?

2. Where do we want to be ?

3. What is the gap?

4. How can we get there from here?

3. Gap ?

4. How to bridge the gap ? ( Current Status ) ( Future Image ) 1. Where are we now ? 2. Where we want to be ?

Steps in planning process:

# Planning is vital and intellectually demanding. Requires lot of time and efforts .

Must adopt systematic approach to avoid pitfalls, error and costly mistakes which may upset the whole business later on.

# Systematic approach has following steps:

1. Establishing the objectives

2. Developing premises – important assumptions.

3. Evaluating alternatives and selection

4. Formulating derivative plans – plans derived for departments, units etc

5. Securing cooperation and participation

6. Providing for follow up

- Review and course correction

- Helps develop sound plans in future

Approaches to planning :1. Top - down approach

2. Bottom – up approach

3. Composite approach

4. Team approach – Team of experts

Importance of planning:1. Planning provides direction

2. Planning provides a unifying framework

3. Planning is economical

4. Reduces risk of uncertainty

5. Planning facilitates decision making

6. Planning encourages innovation and creativity

7. Planning improves morale

8. Planning facilitates controls.

Limitations of planning:

# Planning is not panacea for all organizational ills

# Does not guarantee success because it cannot substitute for human action and judgment.

Limitations are many –

a) Rigidity

b) Costly and time consuming

c) Employee resistance

d) False sense of security

e) Managerial deficiencies

f) Planning prevents innovation

g) External Limitations –• Difficult to predict• Projected too far into the future• Environmental turbulence• Emergency situations

Effective Planning:

Koontz and O’Donnel suggest the following steps

1. Climate

2. Top management support

3. Participation

4. Communication

5. Integration

6. Monitoring

Six rules of planning in learning organizations:

Learning organization is one – everybody is engaged in identifying problems and solving problems enabling organization to continuously experiment, change and improve.

• Strong Mission• Stretch Goals• Learning Environment• Vital Information• Improvement; a way of life• Planning starts and stops at the top

Forms of planning:• Long – range planning • Short - range planning or Operational planning• Strategic planning• Tactical planning• Formal and informal planning• Functional and corporate planning• Proactive and reactive planning

Types of planning: Basically two types of planning –

1. Standing Plans

2. Single use plans

PLANS

STANDING PLANS

•Objectives•Policies and strategies•Procedures•Methods•Rules

SINGLE-USE PLANS

•Programs•Schedules•Projects•Budget

Forecasting

A systematic way to probe the future to recognize problems and opportunities and turn them into action plans.

Business forecasting helps in analyzing the economic,

political and market information to reduce the risks in making business decisions.

Attempt is made to look into all the influential factors

( past and present ) effecting the organization. Based

on the analysis of these factors through statistical and

econometric techniques a reliable calculation of

probabilities about the future is made.

Essential Elements of Business forecasting:Redfield – identified four essential elements –

1. Developing the ground work – Known and available information regarding the growth of the company , industry, product lines etc are put to investigation in the first stage. This prepares the ground work on which future projections can be based.

2. Estimating future business –Trends are, then, projected after careful scrutiny and analysis. Probable trends should not be taken as absolute guides. At this stage they are only intelligent guess.

3. Comparing with actual with estimated results - To ward off dangers, a periodic comparison of actuals with estimated numbers is made. Track down the reasons for major differences unanticipated gains or losses.

4. Refining the forecast process – Above three step process helps managers in gaining proficiency in constructing dependable forecasting. Over a period of time they will be able to refine, sharpen and adjust the forecasting technique to meet the changing needs of business.

Advantages of forecasting :1. Forecasting is essence of planning. Forecasts are premises

or basic assumptions on which decision making and planning are based. They supply vital facts and pertinent information for successful planning.

2. Forecasting forces executives to look ahead, think through the future and improve their mental faculties.

3. Helps in achieving better coordination by focusing attention on the future. Ensures singleness of purpose to planning and objectives

4. Reveals the weak spots of the organization and helps in controlling where ever it lacks and improves

5. Helps identifying the environmental forces and helps in providing for those. With out business forecasting , you will be under mercy of future events.

Limitations :

# Forecasts are only estimates of future conditions and not indicators of actual position.

# Future is shrouded by shadow of uncertainty.

# Because of uncertainties, a bad plan can lead to good results

and good may lead to bad results.

# It is extremely difficult to map out all future possibilities

1. Rule of thumb forecasts only : A successful forecast is something of a miracle and often occurs for wrong reasons.

2. Unreliable : In spite of perfection, cannot eliminate the margin of error. That is why it often remarked -

“ The only certain thing about forecast is that it will be

wrong”

Techniques of Forecasting:

According to L.S.Silk three techniques are in use –

1. Deterministic technique – Assumes there is a close causal connection between present and future. Used to forecast elements like Capital spending, Consumer expenditure, general business conditions etc. Following techniques are used –

# Latest information.

# Knowledge of programs or limits.

# Spotting the beginning of a lengthy process.

# Diagnosing people’s expectations.

2. Symptomatic technique - based on assumption that turning point in economic activity are spotted out from the information collected on national and industry indices. Based on these significant changes in business activity over a period of time and based on the information collected, future trends are predicted.

3. Systematic technique – Based on classical theory,

the cause and effect relations among different economic factors, which hold relevance for past, present and fututre are ascertained and forecasts then are constructed.

This method calls for training, knowledge, statistical facts, technical skills and social and political insight. Here two approaches are employed.

i) Intuitive Approach – Various economic factors are collected and analyzed. The analyst, using judgment and experience, summarizes the main factors draws inferences and then constructs various forecasts.

ii) The econometric approach – Economic models are more rigorous and scientific. Wisdom in economics, mathematics, statistics and accounting is required. These models express relationship among number of variables.

Exa. – Demand for new cars in coming year might be a function of current year income levels, development of new cars in the previous years, cost of existing models during last two or three years, duty structures etc. Such relations can be stated in mathematical terms demand and sales forecast for new cars can be made.

Economic Forecasting Methods:

Economic forecasting is common type of external forecasting. The basic aim is to predict business fluctuations i.e. fluctuations in general economic activity. Depending on the nature of business these fluctuations affect the business.

How to do economic forecast ? Indicators such as interest rates, stock prices, level of employment etc. are used for forecasting economic activity of the nation.

Single most important indicator is GNP, which is value of goods, services produced in the country in a year.

Following methods are used –

1. Extrapolation – Extending the past trends into future. These forecasts ignore factors like fluctuations and abrupt changes.

2. Lead and lag method – Historic behavior of various indicators are studied. Purpose is to find out whether the indicator regularly moved in advance (lead group), has moved simultaneously ( Coincident group), or has lagged behind ( lag group).On this basis forecasts are made

3. Econometrics – Variable are joined in a series of mathematical equations. Then forecasts are made on the basis of assumptions developed from these equations.

Decision Making# Decision Making is an important part of management

process.

# All managers take decisions and therefore covers every part of the organization.

# Managers look for problems and make decisions for solving them. Good decision making is vital for good management because performance of the organization depends on the quality of decision making.

# Decision making is not easy due to ever changing factors, unclear & incomplete information and conflicting point of views.

A decision is a choice made from available alternatives.

Characteristics of decision making

# Goal oriented

# Alternatives – Search and Choice

# Analytical & intellectual - It is both intuitive and deductive logic. Contains conscious and unconscious aspects. Part of it can be learned, but part of it depends upon personal characteristics of decision maker.

# Dynamic process – Characterized as process, rather than as an event. – exa: Hiring people.

# Pervasive function – Covers every part of an enterprise.

# Continuous activity – not a one time deal. Manager decides things on a continual and regular basis

# Commitment of time, effort and money

# Human and social process – Involves intellectual abilities, intuition and judgment. Exa: during hard times firing employees.

# Integral part of planning – Koontz says “ decision making is the core of planning”

Types of decisions• Basic and routine decisions - Basic decisions are

concerned with unique problems or situations. Such as launching new product/ technology, large investments are non routine nature. Requires creativeness, intuition and good judgment. They are strategic decisions affect future of the organization.

Routine decisions repetitive in nature. Generally concerned with short time commitments.

• Personal vs Organizational decisions - Personal decisions are to watch TV, to study or retire early etc. They effect the organization in an indirect way. Sudden decision of a popular singer may effect film industry.

Organizational decisions are made by managers in their official capacity. Unlike personal decisions, organizational decisions can be delegated. These decisions are aimed at furthering the interests of the organizations. Managers operate in open environment and so the results are open to public view.

• Programmed and unprogrammed decisions- Programmed is the one that is routine and repetitive. Rules and policies are established to solve recurring problems. As per pre-established set of alternatives, programmed decisions can be made. Routine procedures leave little room for choice. Judgment cannot be used and freedom is affected.

Non programmed decisions deal with unique/ unusual problems. Decisions are taken in a poorly structured situation, where no pre existing ready solutions.

Decisions such as Acquiring sick units, locating new companies etc.

They are novel and non-recurring

They are made by higher level managers only.

They need be creative when solving infrequent problems.

Decision making process

Basic steps of Decision Making

Awareness of Problem

Diagnose & state the problem

Develop the alternatives

Evaluate the Alternatives

Select the best

alternative

Implement and verify

the decisionFeedback

Internal Environment

External Environment

Organizing “Organization” the term used in many ways.

• A group of people united by a common purpose• An Entity, on going business unit engaged in utilizing

resources to create a result• A structure of relationships between various positions in an

enterprise• A process by which employees, facilities, tasks are related to

each other, with a view to achieve a specific goal.

Organization as structure :

# Structure is essential for achieving goals.

#The manager determines the work activities, writes job descriptions, puts people into groups and assigns them to superiors. Then goals are fixed, time lines are decided and establishes performance standards. Controlled through a reporting system. The structure takes the shape of pyramid.

# It reveals the pattern of relationships among the parts of the organization.

Organization has following features:

• Two or more persons• Common goals• Cooperative efforts• Division of work• Communication• Rules and regulations• Pyramidal shape

Organization as a process:

# Organizing is a process by which employees, facilities and tasks are related to each other.

# According to Allen Organizing is the process of identifying and grouping the work, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work effectively to accomplish objectives.

The process of organizing involves following steps –

• Identify the work.• Grouping the work• Establishing relationships• Delegating authority• Providing for coordination and control

There are many types of organizations -

Economic, Political, business, Service, Government, Religious, social organizations.

Organization structures:

# Graphic representation of a firm’s structure. A plan of working relationship.

# It shows who to do work, who is to supervise and direct.

# Also shows division of work. Flow of work and responsibility for its achievement.

The Charts :

# Depict organization’s formal structure & relationship.

# Do not insure good organization or good management.

# Essentially illustrates who reports to whom

# Shows designation of individuals and no names appear.

# Do not show human relationships. Like a snapshot and a static model of dynamic and living process.

Types of organization charts:

Basically three types of charts exist –

1. Vertical charts –

CEO

2. Horizontal Charts.

CEO

3. Circular Charts

CEO

Organization Design and Classical theory

# Organization design refers to managerial decisions that determine the structure and processes. Those in turn coordinate and control the jobs in an organization.

# Design is system of jobs and work groups including the processes linking them. These processes include authority relationships and communication networks.

# In effect, organization design implies the creation of super structure within which the work of the organization takes place.

Classical Theory ( Taylor, Fayol, Weber ) :• Organization to be build around the work to be

done.• The work must be logically divided into simple,

routine and repetitive tasks – division of labor.• These tasks must be grouped according to similar

work characteristics – departmentation• Departments arranged in an organization

structure in which executive has subordinates reporting directly to him- span of control

• Command should flow top to bottom in a chain – Scalar chain

• Every one should have only one boss – unity of command

• Work must be assigned to individuals based on job demand and the individuals ability – delegation and decentralization

Organizations must rely on these universal design principles while structuring activities.

Challenges to Classical approach# Classical approach for organizing and managing may not

work in all situations.• Fayol’s principles do not guarantee success.• Organizing more than just following rules that Taylor has

stressed.• Weber’s bureaucracy source of inefficiency.

Other challenges are • Bottom – up authority : Further studies have opened up

new ideas – upward communication informal relations based on friendship.

• Closed system - lead to open organizations.

CLASSICAL ORGANIZATIONS MODERN ORGANIZATIONS

•Closed system•Stable environment•Division of labor and specialization•Centralization•Use of authority to get results•Rigid rules and precise role requirement•Command to extract obedience•Communication: one way street•Maintenance needs•Tight control – to achieve goals•Autocratic approach•Negative environment: robs employee of freedom and motivation to work

•Open system•Dynamic environment•Job enlargement and job enrichment•Decentralization•Free form of org. structure•Consensus•Flexibility and adaptability•Participation to achieve ends•Communication: open and multidirectional•Motivational needs•Emphasis on goals: MBO•Democratic approach•Positive work environment : supportive of the feelings, beliefs and values of people.

Contingency theory and org. Structure

# Puts emphasis on organizing on a number of variables.

# This theory says there is no best way to organize. And there is no one pattern of organization style that universally appropriate.

# The design is conditional.

Therefore the organization may be contingent (Something uncertain, may happen)upon many factors – product of many forces internal and external

Contingency Theory - Factors

Forces in the manager (strategy)

Forces in the subordinates

Forces in the task

Forces in the environment

# Strategy and structure

# Size and structure

# Technology and structure

# Environment and structure

# People and structure

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