principles of management

Study MaterialOn

PGDHHM Correspondence Course

PRINCIPLES OF MANAGEMENT

COMPILED BYProf. A.M. Joshi

B.Sc., CAIIB, DFM, MPM

Symbiosis Centre of Health Care (SCHC)

AUTHOR

Printed and Published on behalf of the Symbiosis Centre of Health Care byDr. Rajiv Yeravdekar, Hon. Director, SCHC.

Printed at Gayatri Graphics, Pune - 411 037.

Prof. A. M. JoshiB.Sc., CAIIB, DFM, MPMVisiting Faculty SIMS

All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other means, without permission in writing from the Symbiosis Centre of Health Care.


CONTENTS

No. Chapter Page No.

1. Principles of Management ....................................................................1

2. Evolution of Management Thought...................................................13

3. Functions of Management Planning .................................................27

4. Functions of Management Organizing .............................................37

5. Functions of Management Directing .................................................51

6. Functions of Management Coltrolling...............................................57

7. Recent Trends in Management ...........................................................65

8. References .............................................................................................78

About the Author :

Prof.A.M. Joshi, B.Sc., CAIIB, DFM, MPM worked with State Bank of India for 30Years in various capacities. Presently engaged in management education on training in mangement institutes, training centres of banks and corporate concerns

UNIT 1


CONTENTS

• Introduction

• Definitions of management

• Management – Art or Science ?

• Management functions / process

• Managerial levels

• Managerial skills

• Managerial roles

• Significance of management

OBJECTIVES

After reading this unit, you should be able

• to know the concept and nature of management.

• to understand managerial levels, skills and roles.

• to describe the process of management.

• to explain the significance of management.

Principles of Management 1

2

Symbiosis Centre of Health Care

INTRODUCTION

Managing is the most important area of human activity. It is seen in every walk of life.

When people attend some function, go to a musical orchestra, get admitted to a hospital

for treatment, they often express their happiness or unhappiness, satisfaction or dis-

satisfaction about it. Shri. R. K. Laxman, has very effectively depicted this in his cartoon

(Refer page 11). It clearly indicates that mere infrastructure, latest technology,

knowledgeable and experienced doctors do not make a good hospital. What is required

is the co-ordination of efforts of people and proper synchronization of all activities. This

co-ordination of individual efforts to achieve the predetermined goals itself is management.

Ever since people realized that certain goals / aims could not be achieved as individuals,

they started forming the groups. This necessitated the co-ordination of individual efforts.

Thus management can be said as organized / coordinated efforts so as to accomplish

the tasks, goals or results.

Management is a critical element in the economic growth of a country. It brings together

four factors of production viz. men, machines, materials and money. Peter Drucker says

that without management, a country’s resources remain as resources only and never

become production. We will now study few definitions of management.

Mary Parker Follett defines management as ‘an art of getting things done through

people.’

Koontz and Weihrich define management as ‘the process of designing and maintaining

an environment in which individuals, working together in groups, efficiently accomplish

selected aims.’

It will be observed, from the above definitions that management means

- achieving predetermined goals

- through and with people

- efficiently and effectively.

Principles of Management

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Otherwise there will be confusion and chaos.

Thus management is essential in all organized efforts irrespective of the nature of activity.

It is a process of transformation, wherein resources / inputs are converted into products

/ services or outputs.

It is equally important in manufacturing industry or service industry. It is a life giving

element in every organization e.g. a government department, a company, etc.

Management is the function of not only the Chairman or CEO but of all the managers,

supervisors and those responsible for getting the work done. People who are responsible

to help others to achieve their goals are managers. Various thinkers / authors have defined

the term managers. However, the version given by Peter Drucker is considered as the

most appropriate. He defines a manager as ‘one who is responsible for the work of

others’. He says ‘the manager directs the work of others. He does his work by getting

other people to do theirs’.

Organization : Two or more people who work together in a structured way to achieve

a specific goal or a set of goals.

inputs / resourcestransformation

outputs / products / services

Goals : The objectives, purpose that an organization strives to achieve. They give a

sense of direction to the organization and its members. Organizations always have more

than one goal.

Organizations

Formal Business, Govt. Agencies,

Hospitals, etc.

Informal Families, Certain

Voluntary Groups etc.


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We can conclude that management is an attempt to create a desirable future, keeping

the past and present in mind. It produces consequences and effects over a period of

time.

MANAGEMENT : SCIENCE OR AN ART ?

People always debate whether management is a science or an art.

Science is organized, systematized and acquired knowledge. It is a systematic way of

doing things. It is why of a phenomenon. On the other hand an art is an application of

knowledge, how of a phenomenon. It is the most creative human activity.

The most productive art is always based on understanding science underlying it. Thus

science and art are not mutually exclusive but they are complementary. Management is

synthesis of both art as well as science. e.g. a surgeon performing an operation. He

may be knowing all the theory but its application is an art. The way he uses his scalpel

will make him a successful surgeon.

Management as a science can be learnt through the study of basic rules and formulas,

but as an art it is acquired through practice, trial and error and years of experience.

While management as a science is concerned with efficient use of resources and

equipments, as an art it deals with people.

Planning

Organizing

Directing

Controlling


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MANAGEMENT FUNCTIONS

We have earlier seen that management is a process of transformation. It consists of

various sub-processes, which also form the functions of the managers. While Stoner

identifies these processes as planning, organizing, leading and controlling, Koontz and

Weihrich have added yet one more function viz staffing. Luther Gullick has coined a

word POSDCORB to describe these functions as Planning, Organizing, Staffing, Directing,

Coordinating, Reporting and Budgeting.

Thus management process can be diagrammatically shown as under :

Though these functions will be dealt with in detail in the following pages, it will be

worthwhile to describe them briefly.

Planning : It is determining in advance, what should be done, looking ahead and

preparing for future. It is deciding the objectives and charting out the methods to achieve

them. It is what, how, when, where and by whom of doing.

Organizing : A process of arranging and allocating work, authority and resources among

the members of organization to achieve the goals.

Staffing : Providing right persons for the right job in right number, at right place and

right time. It involves recruitment, selection and training.

Directing : Moving towards the objectives. Leading, influencing, motivating,

communicating come under this head.

Controlling : This enables compliance and ensures that things are done in conformity

with the adopted plans.

MANAGEMENT / MANAGERIAL LEVELS

In management, there are three broad levels viz. first line / junior management, middle

management and top management.


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First level / Junior management : It is the lowermost level in managerial hierarchy.

These managers direct non-managerial employees. They do not supervise other managers.

In some organizations they are called as supervisors also. They are white-collar

supervisors, one step above the rank and file.

Middle management : This consists of more than one level in an organization. They

direct activities of junior managers and at times those of employees also. Vast and diverse

group of managers of various departments come under this head.

Top management : It consists of a comparatively small group which is responsible for

overall management of the organization. They are referred as Chairman, President, Vice-

president, Chief Executive Officer, Managing Director, Directors, etc. They normally

establish policies, strategies, coordinate activities and guide the people.

MANAGERIAL LEVELS AND SKILLS

In order to effectively discharge their functions, the managers at all levels require certain

skills. A skill can be defined as an ability to translate knowledge into action. It is the

expertness or dexterity, which enables them to handle the situation in a desired manner.

Skills are not necessarily inborn as was believed earlier but they can be learnt and

developed.

Henri Fayol has identified three basic skills necessary for all managers. They are technical

skills, human skills and conceptual skills. They deal with things, people and ideas

respectively. Technical and conceptual skills are required for decision making whereas

human (relations) skills are necessary for a good leader.


Top Management

Middle Management

Junior Management

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Technical skills : It means understanding the nature of the job, process and technique.

They consist of methods and processes, procedures and functional areas, e.g. engineers,

drivers, surgeons, accountants have technical skills. In short it is the job related

knowledge. These skills are necessary for lower level / front line managers, supervisors,

etc. Its relative importance goes on reducing as a manager moves up the hierarchical

ladder.

Human skills : They comprise of the ability to interact effectively with people at all

levels. It is the ability to work with people. These skills enable managers to recognize,

feelings, sentiments, aspirations of others, judge possible reactions of their actions and

motivate people.

Conceptual skills : Ability to take broad & futuristic view, to analyse various forces

and ability to assess environment and deciding about the changes to be implemented. It

is the creative and innovative ability and having a vision. These skills enable them to set

goals for themselves, the organization and the people. This is required more in top

management.

Even though all these skills are necessary for all the managers, their relative importance

depends mainly upon the rank of the manager in the organization.

Technical skill : Importance at lower levels.

Human skill : Though needed at all levels but primarily needed at middle level.


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Conceptual skill : Mainly for top level; importance rises as one goes up the rungs of

hierarchy.

This will indicate as to how people at top can shift from one industry / activity to another

without reduction in their efficiency. e.g. Mr. Ravi Venkateshan who had all along been

with Pune based Cummins India Ltd. (dealing in diesel engines) moved to Indian arm

of Microsoft (dealing in IT sector). The conceptual skill of these people makes up for

their lack of technical skills.

Management and administration : Often these words are used synonymously. Peter

Drucker has given an appropriate differentiation in them as under :

Management - governance of business enterprise

Administration - governance of non-business enterprise (govt. depts. army etc.)

MANAGERIAL ROLES

A manager has to ensure that the goals of the organization are achieved effectively. For

that he has to perform the functions of planning, organizing, directing and controlling.

However, he has to perform many more activities / functions. Henry Mintzberg studied

and observed what five top executives actually did during the course of their work. He

saw that these executives in addition to the above functions were performing some more

activities or roles. He has described them as managerial roles in his book ‘ The nature

of managerial work’. According to him they perform a series of roles which are as under:

1. Interpersonal Roles

a. The figurehead role : The Manager / CEO performs symbolic duties as

the head of the organization. These are ceremonial and social duties like

receiving the visiting dignitaries, inaugurating / launching new products / new

equipments etc.

b. The leader role : He establishes the work atmosphere, motivates and

encourages the employees to achieve the results.


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c. The liaison role : He develops and maintains webs of contacts outside

the organization.

2. Informational Role

a. The monitor role : He collects all types of information relevant and useful

to the organization.

b. The disseminator role : He circulates, transmits the information collected

from outside to the members in the organization.

c. The spokesman role : He transmit information from inside the organization

to the outsiders.

3. Decisional role

a. The entrepreneur role : Innovation, seeking new ideas and initiating

controlled change in the organization to adapt to the changing environment

come under this role.

b. The disturbance handler role : This is like a fire fighter role. A manager

has to seek solutions to the unanticipated and unexpected problems and to

deal with sudden changes.

c. The resource allocator role : In this role, he makes decisions regarding

the use of organizational resources. Division of work, delegation etc. come

under this role.

d. The negotiator role : Here he deals with other organizations, agencies as

well as individuals etc.

The success of a manager will depend upon his ability to discharge these roles effectively.

SIGNIFICANCE / IMPORTANCE OF STUDY OF MANAGEMENT

To reiterate the words of Peter Drucker, ‘management is the dynamic, life giving element


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in every organization’. It is essential in all organized efforts. A business is a system created

to satisfy the needs and desires of the consumers and the society. It has to generate

surplus on a continuous basis. It is a economic pulse of a nation striving to improve the

economy of the nation and the society’s standard of living. Business is a product of

environment comprising of several internal, external forces. Success of a business depends

upon how well these forces are analysed, synthesized and integrated. We can describe

today’s environment in this acronym LPG meaning thereby liberalization, privatization and

globalization. The days of protection, licensing and nationalization are no more. This has

drastically changed the role of management. Stiff and cutthroat competition is observed

in every filed. This has led to the customer and his satisfaction gaining more and more

importance. People are no longer prepared to settle for inferior products and services

when they have access to excellent products and services elsewhere. As such quality,

price, delivery schedule and after sales service have become important. This has

necessitated a drastic shift in the working of the organizations and the style of managing.

As such there is a need for the organizations to be – customer driven, cost effective,

fast and flexible and continuously improving. Otherwise they will not be able to sustain

in this highly competitive global environment. ‘Survival of the fittest’, ‘perform or perish’

have become today’s business Mantras. Hence there is a paramount need to manage

the affairs of an organization in such a way that will ensure its continuous success. This

will be possible through committed and involved employees. Dynamic and progressive

management will be able to address all these challenges. This is more so in hospital

management and health care services. Health is fundamental to quality of life. Hence

health care plays an important part in our lives. The delivery of health services to the

community is highly visible and open to criticism. The human factor is very important in

respect of both the consumers and providers of care. This field also now faces a very

stiff competition. As such efficient and effective management will only ensure that the

organizations providing health care services are able to flourish in this environment.

Organizations in the ‘also ran’ category will not be able to survive. Therefore the study

and application of the principles of management has become essential. One has to

remember that 21st century is going to be the century of customers and hence all the

organizations will have to gear up for meeting this challenge.


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LET US SUM UP

Management is an art of getting things done through others. It is organized efforts so

as to achieve the predetermined goals. It is a continuous process made up of various

functions like planning, organizing, directing and controlling. A manager is one who is

responsible for getting work done through people. In order to discharge his functions

effectively, he should possess technical, human and conceptual skills. The managerial

hierarchy consists of top, middle and junior levels and they have to exhibit certain

managerial roles. Management is needed in every walk of life. It is synthesis of art and

science. Without management there will be chaos. Management occupies a significant

place in the highly competitive global environment in the 21st century.

Questions

1. ‘Management is an art of getting things done through others’ Discuss.

2. Whether management is a science or art?

3. What is meant by management process? Describe the various functions of

management.

4. Explain the managerial levels and the skills necessary at these levels.

5. Describe the managerial roles as suggested by Henry Mintzberg.

6. Explain the significance of management with a special reference to the 21st century.


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He was rushed in only yesterday and now is rushing out? You can’t blame the poorfellow, the conditions here are so bad!


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Evolution of Management Thought

UNIT 2

EVOLUTION OF MANAGEMENT THOUGHT

CONTENTS

• Early approaches

• Scientific theory of Taylor

• Modern operational management of Fayol

• Behavioural and social approach with special reference to Elton Mayo

• Peter Drucker – The Management Guru

• Present scenario

OBJECTIVES

After reading this unit, your should be able

• to know the early approaches of management thought.

• to understand the management theories of Taylor, Fayol and Mayo.

• to know the Management Guru ‘Peter Drucker’ and present scenario.

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EVOLUTION OF MANAGEMENT THOUGHT

Management and organizations are the products of historical and social times and places.

In fact the management thought emerged from the days when people first attempted to

achieve their goals by working together in groups. Management in one form or other

was being practised since ancient times. The Pyramids of Egypt, Angakorvat temples of

South East Asia, Ajanta-Ellora caves would not have been possible without management.

We find some references about management in the writings of few early thinkers. Sun-

Tzu, the famous Chinese Philosopher in his book ‘Art of War’, written about more than

2000 years back, prescribed certain management dictums. On the Indian scene, we have

Arya Chanakya’s ‘Arthashastra’ and other works. We find various references about

governance (which is nothing but management) in the Mahabharat by Vedvyas.

In the mediaeval period Machiavelli, an Italian, in the 16th century in his books ‘The

Prince’ and ‘Discourses’ described various principles, which hold good even today. The

Roman Catholic Church, with formal structure of hierarchy, was practising all these even

before the word management came into use. However modern management theories

emerged in the early 20th century, with the works of Frederic Taylor and Henri Fayol.

We know that Industrial Revolution in the 2nd half of the 18th Century ushered the factory

system. Two major events led to this, first being the invention of printing press by

Guttenberg in 1455. This resulted in the spread of knowledge in European continent.

The second was the invention of steam engine by James Watt in 1769. The power of

steam was used for work in the factories and railways. In fact the railway conquered

the distance in a way. People started moving out, mobility was increased expanding the

horizons of people. The factory system resulted in mass-production and adventurous

entrepreneurs began establishing mills and factories. It was at this stage that some of

them introduced certain management techniques.

James Watt Junior and Mathew Boulton brought in market research, forecasting,

production planning, standardization of products etc. In the personnel area they developed

worker and managerial training, work-study, development programmes, etc.

Robert Owen :th One of the most successful industrialists in the early 19 century, Robert


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Owen is considered as a pioneer of management. During those days, the situation of

workers was very bad and pitiable. Long hours of labour, very very low wages and

that too paid irregularly, lack of safety and hygiene requirements, child and women labour

were rampant everywhere. In short the employers exploited the employees. They were

treated as mere inert instruments of production. On this background Robert Owen

attempted many changes. He improved their working conditions, raised the minimum

working age of children, reduced working hours, provided meals and constructed houses

for them, etc. He was not a philanthropist. He believed that the good personnel

management pays dividends to the employer. As such he is rightly considered as ‘the

father of modern personnel management’. The major thinking in management thought was

propagated by Frederick Taylor and Henri Fayol in the early 20th Century.

FREDERICK TAYLOR AND SCIENTIFIC MANAGEMENT

Even though Industrial Revolution resulted in the tremendous increase in factories and

mills, the then managers were merely keeping a close watch on the workers. No one

thought about ways and means to improve the productivity. If they observed that a

worker was producing less he was severely scolded. But who was to decide whether

the productivity was less or more as there were no parameters or standards. Taylor,

amidst this chaotic situation laid down the foundation of scientific management by his

famous ‘time and motion study’.

Frederick Winslow Taylor (1856-1915) came from a very affluent family. He gave up

college and started working as an apprentice pattern maker and machinist in 1875. In

1878, he joined Midvale Steel Works in Philadelphia as a machinist. Simultaneously he

studied engineering in the evening classes and earned an engineering degree. He went

on rising in the company and rose to the position of Chief Engineer in 1884. He invented

high speed steel cutting tools and patented them. He had about 100 such patents to his

credit. The shape of present lawn tennis racquet is the contribution of Taylor. He also

worked as a Consulting Engineer. His experience as an apprentice, a common worker,

foreman and Chief Engineer gave him the opportunity to know at first hand the problems

faced by the workers and their attitudes. After earning huge money he retired at the


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age of 45 years and spent the rest of his life in honorary consulting and propagating his

ideas of scientific management. He has made great impact on the development of

management thought. Throughout his life his concern was to increase efficiency of

production. He was not merely interested in reducing the costs and increasing the profits

but he desired to pass on the benefits of higher productivity and profits to the workers

through increased pay. He observed that workers used to produce less since they were

afraid that if they produced more, prices would fall, profits would go down and as such

they would lose their jobs. Taylor also observed that both the employers and workers

were not aware of ‘fair day’s work’ and ‘fair day’s pay’. He believed that productivity

was the right answer to higher profits and higher wages. According to him productivity

could be improved by application of scientific method instead of ‘rule of thumb’ practices.

Thus scientific knowledge and methods were to replace the traditional rule of thumb

methods and as such his theory is known as the theory of scientific management.

TAYLOR’S CONTRIBUTIONS

i. Time and motion study : Under this, he measured each motion in respect of

the time, with the help of a stopwatch. Thus he could arrive at a standard measure

for carrying out a given job and the best way to do it.

ii. Differential payment : We have seen earlier that the workers used to produce

much below their capacity and potential. As such he introduced a new method to

establish linkage between production and incentives. Here a worker was paid at

a lower rate for standard production and at a higher rate if he exceeded the

standard. He thought that this ‘differential payment’ would motivate the workers

to produce more.

iii. Drastic reorganization of supervision : Those days the supervisors used to

merely allot the work. The workers used to plan their work, select the tools and

the way / order in which to complete the job. The supervisor used only to tell

‘what to do and not’ ‘how to do’. Taylor suggested that foreman / supervisor

should plan the work and should give instructions to the workers as to how to

do it. He also suggested that for different activities, there should be separate


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supervisors. Thus he introduced the principles of (a) separation of planning and

doing and (b) functional foremanship respectively.

iv. Scientific recruitment and training : Taylor stressed on the need for scientific

selection and development of workers. He felt that management should develop

and train every worker to enable him to bring out his best. This would make the

work more enjoyable and interesting than in the past.

v. Intimate friendly cooperation between management and workers : Taylor

favoured harmonious relations between the management and the workers. He said

that ‘complete mental revolution’ both on the part of the management and workers

was needed. Taylor propagated all these thoughts in his books ‘Shop management’

and ‘The Principles of Scientific management’ published in 1903 and 1911

respectively. He created an awareness that tools and movements involved in a task

could be made more rational and efficient. This approach professionalised

management. The scientific management developed a rational approach to solving

organization problems.

LIMITATIONS AND CRITICISM

This theory was widely appreciated as well as severely criticized. His assumption that

incentives are strong motivators has been proved wrong. Money does not attract a person

beyond a certain limit. Time and motion study was not accepted as entirely scientific.

Two individuals may take different time to perform the same job and do it in different

ways. There cannot be ‘the way’ to do a job. Better tools, equipments and machines,

improved techniques rendered workers as excess. Some of them lost their jobs and

found it difficult to get alternate jobs. They wrongly attributed this loss of jobs to Taylors

theory. As such there was a wide resentment among them. Consequently he was

summoned to appear before a committee of House of Representatives to justify his theory.

His stand was published in ‘Testimony before the special House Committee’ in 1912.

In spite of the criticism, the theory, for the first time tried to rationalize and professionalise

the management by a scientific approach. As such it occupies an important place in the

development of management thought.


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The theory was further refined and developed by his followers, notable being Henry

Gantt, Frank and Lillian Gilberth thought various modifications.

ADMINISTRATIVE / MODERN OPERATIONAL MANAGEMENT

While Taylor is considered as the ‘Father of Scientific Management’, Henri Fayol (1841-

1925) is known as ‘The Father of Administrative / Operational Management’. This theory

lays focus on development of administrative principles applicable to managerial levels.

Henri Fayol was a French mining engineer and while working in a local mining company

rose to the rank of managing director. Later on he became a leading industrialist. He,

for the first time advocated that management can be and should be taught. He presented

his famous functional approach to management in 1908, which contained a systematic

analysis of the process of management. He wrote another book on management in 1916.

However both these works were in French and could be translated and circulated in

English in the 1940s. As such his work was not known to the other thinkers.

He classified the activities of Industrial Undertakings into the following six groups :-

Technical : production, manufacture, adaptation

Commercial : buying, selling, exchange.

Financial : search for and optimum use of capital,

Accounting : stock taking, balance sheets, costs and statistics.

Security : protection of property and persons.

Managerial : planning, organizing, commanding, coordinating and controlling.

Fayol observed that these activities are performed in every kind of business. While the

first five were better known, the sixth viz managerial was little known and he concentrated

on its analysis.


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According to Fayol, a manager, in order to be effective should have the qualities given

below :

Physical : health, vigour.

Mental : ability to understand and learn, judgment, adaptation.

Moral : energy, firmness, initiative, loyalty, dignity, willingness to accept

responsibility.

Educational : general acquaintance.

Technical : pertaining to the function.

Experience : which comes out of work proper.

Fayol, based upon his experience, came out with fourteen principles of management;

These according to him, are flexible and not rigid, which can be applied irrespective of

changing and specific conditions. These principles are as under :

1. Division of labour : In managerial process, various functions like planning,

controlling, organizing, directing etc. cannot be performed efficiently by a single

person or group. As such they should be entrusted to different persons. This

specialisation is necessary for efficiency of labour. This increases skill and produces

better and more work. Fayol applies this principle to all kinds of work, technical

as well as managerial.

2. Authority and responsibility : Since management means getting work done

through people, it implies that manger who has the responsibility to get the work

done, should also have authority to command obedience. He may exercise formal

authority and personal power. The former is derived from the official position,

whereas the latter is the result of knowledge, intelligence, ability to lead, moral

worth, etc. Responsibility is closely linked to authority. It arises when authority is

exercised.


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3. Discipline : Discipline is essential for the smooth running of business. By discipline,

we mean observance of rules and regulations, compliance with systems and

procedures, respect for superiors etc. Good supervision, clear and fair terms of

employment and judicious application of penalties can ensure discipline.

4. Unity of command : This implies that the employees should receive instructions,

directions or orders from one supervisor, manager only. If they receive orders from

more than on supervisor, they may be confused and this may lead to chaos.

5. Unity of direction : Those activities or operations within the organization that

have the same objective should be directed by only one manger using one plan.

e.g. the personnel deptt. in a company should not have two managers each with

a different hiring policy.

6. Subordination of individual interest to general interest : In any organization,

the interests of the organization should get priority over the interests of the individual

member of the organization.

7. Remuneration : Remuneration and methods of payment should be fair and should

afford maximum possible satisfaction to both the employees and the employer.

8. Centralisation : Centralisation means that decision making is concentrated in the

superiors as against decentralization where the sub-ordinates have an increasing

role in decision making. According to Fayol, the responsibility of centralization rests

with the manager and he will determine depending upon the circumstances, the

extent to which the role can be passed on to the sub-ordinates.

9. Scalar Chain : This means that the hierarchy of authority starts from the top level

and extends to the lowest level. The orders should pass through the proper channel

along the scalar chain. However, in case of need, it can be short-circuited.

10. Order : It means that things should be in proper order. This requires special

efforts. The principle of ‘place for everything and everything in place’ should be

practised in every organization.


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11. Equity : It means fair treatment without any kind of discrimination. This comes

from combination of kindness and justice on the part of the managers while dealing

with the sub-ordinates.

12. Stability of tenure : If the workers are assured of job security, they will be

motivated to perform better. In case of insecurity of job, their morale will be low,

which will affect their performance adversely and they will not have attachment

with the organisation.

13. Initiative : Employees should be given freedom to conceive and carryout their

ideas and plans, even if there are mistakes in their work. This will encourage them

to innovate and take decisions.

14. Esprit de corps : Promoting team spirit will give the organization a sense of unity

and unity is strength. Fayol says that even small factors should help to develop

team spirit. He suggested use of verbal communication to develop team spirit.

Thus Fayol for the first time systematized the managerial behaviour. While Taylor was

more concerned about shop floor management, Fayol focused on total organizational

management as this area was hitherto neglected. Prior to Fayol, there was a belief that

managers are born and not made. However, Fayol strongly advocated that management

can be taught and need not be inborn.

Thus like Taylor, Fayol’s theory forms an important milestone in the development of

management thought.

BEHAVIOURAL AND SOCIOLOGICAL APPROACHES

Taylor and Fayol laid the foundation of management thought. Various thinkers

based on the above theories, also started thinking about the management in different ways. It was

thought earlier that the employees are paid for their work and as such they have to

and should discharge their duties willingly and with involvement,. However, it was not

uniformly observed. It was seen that while some workers were sincere and enthusiastic,

others merely worked just to escape being scolded by the supervisors. They did not


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seem to be involved and committed. It appeared, therefore, that money alone was not

enough to inspire the workers to the best of their abilities. So what were these factors?

The study led to the development of industrial psychology. Hugo Munsterberg, was the

pioneer in this field and focused on the application of psychology to industry. His

objectives were to find out :

i. How to find people whose mental qualities are best suited for the work they

perform?

ii. What are the psychological conditions under which greatest and most satisfactory

output can be obtained from every individual?

iii. How a business can influence the workers so as to obtain best possible results?

Munsterberg published his views in his landmark book ‘Psychology and Industrial

Efficiencies’ in 1912. For his work Munsterberg is called as ‘The Father of Industrial

Psychology’.

Some thinkers like Max Weber (German), Vilfredo-Pareto (Italian) and others focused

on observing people as ‘products of group behaviour’. The views of these people had

considerable influence on Elton Mayo, F. J. Roethlisberger and others who carried out

the famous Hawthorne Experiments at the Hawthorne plant of Western Electric Co. in

Cicero, Illinois from 1927 to 1932. This plant employed 29000 workers to manufacture

telephone parts and equipments. The experiments were conducted to determine the

effects of working conditions and other factors on the productivity of the workers. They

were carried out in four parts as under :

i. Illumination experiments

ii. Relay assembly test room

iii. Interviewing programme

iv. Bank wiring test room


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Through these experiments it was observed that changes in working conditions basically

were not affecting productivity significantly. As such they thought that some other factors

were responsible for this. They found that improvement in productivity was due to social

factors like morale, sense of belonging etc. Elton Mayo laid emphasis on understanding

human behaviour, especially group behaviour and using interpersonal skills like motivating,

counselling, leading and communicating. This phenomenon is known as the Hawthorne

effect wherein people basically like to be noticed and recognized. This factor was the

famous human factor.

CONTRIBUTIONS OF HAWTHORNE EXPERIMENTS

• Business is a social system and not merely techno economic system. Therefore

social satisfaction of workers was necessary for effective production.

• There was no significant correlation between improved working conditions and high

production.

• Realisation that group behaviour and group pressure play an important role in

productivity.

• Monetary incentives did not work all the time; non-monetary rewards are also

needed and they are equally important.

• Democratic and participative style of leadership was more suitable than task

oriented leadership.

This behavioural and social approach to management was another important milestone

in the development of management thought.

Peter Drucker : With the business becoming more and more complex, different

management thinkers started studying management from various angles, dimensions and

perspectives. Earlier management was basically confined to manufacturing industries but

over a period of time service sector and later on even non-profit organisaions were

also included in business. New ideas and concepts emerged and various thinkers


24


contributed to the development of management thought. The most important and

prominent position among them is held by Late Peter Drucker who is considered as a

legand, as a Guru, so far as management is concerned. He is the most prolific writer

on almost every aspect of management.

Peter Drucker was born in Vienna (Austria) in 1909 in an affluent family. He graduated

in 1927 and secured a degree of LLD in 1931 from the Frankfurt University. He started

teaching in Law and writing on topics related to Economics. He shifted to UK in 1933

and to USA in 1937 and lived there till his death in 2005. An assignment as a consultant

in General Motors, gave him an opportunity to study the aspects of top management

and this gave birth to his book ‘Concepts of the Corporation’ in 1946. Prior to that he

had written ‘The End of Economic Man’ and ‘The Future of Industrial Man’ in 1939

and 1942 respectively. In 1950 came ‘The Principles of Management’ followed by not

less than 25 books on management. ‘Managing in the New Society’ was published in

2002, at the age of 93.

His Contributions : He, for the first time, gave a most appropriate definition of a

manager as “One who is responsible for the work of others”. He called manager as a

dynamic, life-giving element in every business. According to him, the management has

to perform the following main functions :

i. to build an effective and vibrant team from the people so that they can bring out

their best. The manager has the responsibility to co-ordinate these efforts.

ii. to maintain a balance between the present and the future. The manager has to

mould the organization so as to adapt to the changing time.

Drucker has dealt with the desired skill of the manager as under –

a. Ability to analyse and assess

b. Ability to manage people

c. Ability to communicate effectively


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Peter Drucker pays maximum importance to the integrity of the manger. He gives first

preference to integrity as against intelligence. He prescribes ‘Management by Objectives’

(MBO). The approach was first proposed by him in his ‘The Practice of Management’

in 1954. Since then MBO has been very widely discussed. MBO refers to a formal

set of procedures that starts with setting the goals and thereafter planning for them and

achieving them. He has contributed to all areas of management specially management in

the 21st century, knowledge worker, management of non-profit organizations and so on.

Thus Peter Drucker occupies a unique position in modern management. Tom Peters, as

such has rightly observed that, ‘Our debts to Peter Drucker knows no limits’. The Guru

of modern management was active till his death in November 2005 at the age of 96.

His last book will be published posthumously in 2006.

PRESENT SCENARIO

In the subsequent period, globalisation, which led to stiff competition and created new

challenges in the field of management, gave rise to many more important management

thinkers. Tom Peters, Michael Porter, Jim Collins, Warren Bennis, C.K.Prahlad are a

few notable contributors. Stephan Covey has focused on ‘The Seven Habits of Highly

Effective People’. Jack Welch, the most influential executive of the 20th century, who

actually practised the principles of management in his ‘General Electric Co.’ has also

contributed in form of two books ‘Jack-Straight from the Guts’ and ‘Winning’. The

emphasis on Total Quality Management and other Japanese techniques has changed the

entire thinking of management. The 21st century will see many far-reaching concepts and

changes in the area of management.

LET US SUM UP

Management is very ancient phenomenon. It emerged when people realized that certain

goals could be achieved only when they acted together. However there were few

references in the ancient literature about management. Sun-Tzu, Arya Chanakya, etc were

the early contributors to the management thought. In the mediaeval period, Machiavelli


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propagated certain principles of management. The Church in fact was practising

management in their activities. However, the Industrial Revolution and resultant

establishment of factories, mills, etc led to the development of managerial thought in the

real sense. In the 20th century there was a real boost and many management thinkers

started studying the various aspects of management and significant contributions came

from them. Last decade and half of the 20th century and the present 21st century are

witnessing various revolutionary changes in management and managing in the 21st century

is going to be very very challenging.

Questions

1. Discuss the contributions of Henry Fayol to the management thought.

2. What is Scientific Management ? Explain the contribution and criticism in respect

of Taylor’s theory.

3. Discuss the Hawthorne experiments by Elton Mayo and significance thereof in the

area of management.

4. Explain the contributions of Peter Drucker.

5. Write short notes on –

a. Time and Motion study

b. Qualities desired of manager by Fayol

c. Management by Objectives


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Functions of Management Planning

Unit 3

FUNCTIONS OF MANAGEMENT PLANNING

CONTENTS

• Introduction

• Significance of planning

• Strategic and Tactical planning

• Objectives - characteristics of objectives

• Objectives – requirements and benefits

• Steps in planning

• Limitations of planning

• SWOT analysis

OBJECTIVES

After studying this unit, you should be able

• to understand the nature and importance of planning as a management

function

• to know the objectives of planning, their characteristics and benefits

• to learn the steps and limitations in planning

• to realize the importance of SWOT analysis

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We have earlier seen that, management is a process of transformation. It consists of

various sub-processes, which are also known as the functions of management. Planning,

Organising, Directing and Controlling are the various functions of management. In this

chapter, we will study the function of planning.

PLANNING

Planning is the most basic function of management. In fact it is the beginning of the

process of management. Management is seeking of goals and achieving them. This

requires prior arrangement of charting out the objectives and deciding as to how to

allocate the resources and identifying the people who will perform the jobs. This entire

process is known as planning. As such it is a must before all other managerial functions.

Planning is required everywhere. Without planning there will be chaos, which will result

in failure in a accomplishing the objectives. Thus planning is ‘thinking in advance’. It is

what, when, how and by whom of doing. It is defined as ‘choosing among the

alternatives’.

Planning is a continuous process. According to Koontz, planning and controlling are the

Siamese twins of management. As a navigator constantly checks whether the ship is going

in desired direction, manager should constantly monitor the progress of his plans and

initiate mid-way corrections if any. Thus a plan must be flexible so that changes can be

made depending upon the situations.

IMPORTANCE / SIGNIFICANCE OF PLANNING

i. Planning minimizes risks and uncertainties. Today’s business is complex and subject

to many forces, both external and internal. As such we can not rely solely on the

sixth sense or gut feeling and take any ad-hoc actions. Hence the importance of

planning. It provides a rational, fact based procedure to take decisions.

ii. Leads to success : Human behaviour is goal oriented. Goals give directions to

the efforts. Planning enables to perform better and leads to success. It is a

proactive process.


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iii. Focus on organization goals : It helps the employees and all others to focus

on organizational goals and activities. It enables to apply resources more efficiently.

iv. Facilitates control : Planning enables to achieve the goals set by management.

These goals work as the benchmark for comparison with actual performance. Thus

the activities can be controlled / monitored.

STRATEGIC AND TACTICAL PLANNING :

Strategic planning means deciding the major goals of the organization and policies to

achieve them. Tactical planning on the other hand is deciding about utilizing the available

resources to achieve the strategic goals. e.g. In view of increasing proportions of HIV /

AIDS, the hospital may decide to start a special cell / wing to provide preventive and

curative treatment for this dreaded disease. This will be a strategic decision and once it

is decided, the other detailed planning will amount to tactical planning. It involves deciding

how to deploy the resources of the organization. The points of distinction between them

can be described as under :

Strategic Planning

1. Deciding major goals and policies

as well as strategies to achieve

them

2. Done at top / higher level of

management

3. Long term view

4. Broad perspectives

5. Based on long term forecasts about

technology, environment, more

uncertain

Tactical Planning

1. Deciding detailed use of resources

and finer aspects of action

2. Done at lower level of management

3. Short term view

4. Minute & detailed perspectives

5. Based on past performance and

experience thereof, lesser uncertainty


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However, these differences are not very hard and fast. They are not like watertight

compartments.

OBJECTIVES

Planning starts with deciding objectives to be achieved. They form the foundation or

basis of planning function. Objectives can be defined as the broad ends or goals, which

are to be achieved. They are the end results and act as polestars towards which the

activities of the organization are directed.

Characteristics of Objectives

i. Multiple in number : Every business or activity may have more than one

objective. These may be in different key areas. e.g. A hospital may have one

objective of improving the profitability and also an objective of reducing customer

complaints. It may also ponder over curtailing the staff strength. Peter Drucker

has identified eight key areas in which objectives are set. They are – market

standing, innovation, productivity, physical and financial resources, profitability,

manager performance and development, worker performance and attitude and social

responsibility.

ii. Tangible and intangible objectives : Tangible objectives can be quantitatively

measured whereas intangible objectives are qualitative and can be measured in

quantitative numbers. e.g. productivity, sales, profits etc. are tangible whereas

worker’s morale, integrity are intangible.

iii. Have priority : Certain objectives, depending upon the circumstances may have

priority over other objectives. Say, e.g. addressing customers’ grievances may be

given more importance than launching a new site or service.

iv. Have hierarchy : There are objectives simultaneously at the corporate, divisional,

departmental, sectional, level etc. Naturally they will have more importance in that

order and will be dealt with accordingly.


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v. Objectives at times clash with other : The classification of objectives in the

earlier manner (hierarchy) and objectives of the different departments may at times

clash with other. Suppose finance department’s objective is to cut down costs,

then it may adversely affect the marketing department or R & D Department since

their resources would be curtailed. These are called the ‘Dilemmas of the

Management’.

Requirements of the objectives

The objectives should be - clear and acceptable

- precise

- measurable

- must support each other

- should remain valid always

Benefits of objectives

- basis for planning

- act as motivators for individuals as well as other depts.

- facilitate co-ordination between different departments,

sections

- serve as managerial control;

- facilitate better management.

- reduce misunderstanding and conflicts

STEPS IN PLANNING

We have earlier seen that planning is choosing / deciding among the alternatives. The

process of planning comprises of various steps which are given below :


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i. Setting goals / objectives : This is normally done at the top management level

after taking into consideration all the relevant aspects. Values of the organization

play a vital role in this.

ii. Establishing planning premises : Premises mean certain assumptions about future

which form the basis of planning. These promises are very important because

success of planning depends upon them.

Internal and external premises : The premises which are within the organization

are internal premises e.g. sales forecast, policies of the organization, capital to be

invested in equipments, etc. The premises which are outside the organization are

external premises, e.g. business environment, technological changes, political stability,

factors that influence demand for the products and services, etc.

Tangible and intangible premises : The former can be measured quantitatively

while the latter are being qualitative. Population growth, demand, capital investment

are tangible premises. Attitudes of the employees and customers, political stability,

etc. are intangible premises.

Controllable and non-controllable premises : As above, premises which are

within control of the organization and those beyond such control, are controllable

and non-controllable promises respectively. Resources, policies strategies etc. are

controllable premises and strikes, wars, natural calamities, emergency etc. are non-

controllable premises.

iii. Deciding planning period : Whenever planning is done, it has to be for a certain

period. This planning period depends upon the policies of the organization and

the nature of objectives to be achieved. Short range period may be for about a

year and long range period may extend up to 5-10 years. The factors influencing

the planning period are as under :

a. Lead time in developing and commercial launching of a product : e.g.

a pharmaceutical company develops a drug for some disease. Once

everything is finalized, tests are carried out, suitable permissions are obtained,


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the company may go in for commercial production. This intervening period

is the lead time.

b. Pay back period : Time requirement to recover capital investment in

machinery, equipment, etc. e.g. A machine costing Rs. 10 lacs, generates

cash flow of Rs. 2 lacs per year. Then the length of planning period should

be at least 5 years.

iv. Alternative course of action : Since planning is choosing among the alternatives,

the organization has to search and examine alternative course of action.

e.g. if they have to obtain technical know-how – then they have to examine

whether it can be obtained from certain overseas expert or through training the

concerned staff abroad. Similarly while launching sale of a product, the alternatives

would be to sell directly or through some specialized agencies.

v. Evaluating / selecting a course of action : We will once again reiterate that

planning is choosing among the alternatives. In the previous step we have seen

that alternative courses of action i.e. various choices are before us. We have to

screen, evaluate and select the best course from these alternatives. Thus the best

alternative will be identified.

vi. Developing derivative plans : Once the course of action is finalized, plans are

drawn / formulated to derive it. Now herein lies the main action, operations and

processes. Usually this is done at middle and junior level of management.

vii. Measuring and controlling progress : This is the process of monitoring. Any

mid-way corrections, if necessary, are carried out to ensure the success of planning.

LIMITATIONS OF PLANNING

Planning is a process directed towards achieving the pre-decided goals. Hence it is a

very essential and useful process. However, in planning, there are certain limitations and

we should be aware of them.


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i. Expensive and time consuming process : It involves money, energy or efforts

and it is not free from certain risks / uncertainties. As such smaller organizations

cannot afford to have a formal planning dept to workout planning programmes.

ii. It curbs initiatives on the plea that everything has already been charted out and

therefore it is not possible to deviate from it. At times it places restrictions on

adopting innovative approaches. Organizations, therefore, are constrained to adopt

the proven track only.

iii. It is said that change is a universal phenomenon. However, since last few decades,

the pace of change is very very fast as compared to the earlier period. Therefore

the scope of planning is limited as planning essentially relates to future course of

action. Due to fast pace of obsolescence, planning may have a limited scope.

iv. There are difficulties in correctly and accurately formulating planning premises.

Hence an element of error is possible.

v. Resistance from the implementors : At times the employees who are going to

implement the plans, may not be willing to implement the decided course of action.

They may think that this is being thrusted upon them. Therefore, there may be

poor / cold response or even resistance from them. Normally by adopting

participative decision making, this can be avoided.

In spite of the limitations, planning is necessary in every business activity. It is essential

even in individual life, family affairs and in society also. Unplanned business leads to

chaos, disorder. There is an adage that ‘well begun is half done’. This applies to planning

also. For making planning successful, the following factors are necessary –

- co-ordination

- communication

- commitment

- conducive work climate and

- participation


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SWOT Analysis

SWOT analysis is also considered as another form of planning. These days the business

is subjected to internal and external environment. A business enterprise always carriesout SWOT analysis before launching/ commencing an action. ‘S’ stands for strength,

‘W’ for weaknesses. Both these factors are part of internal environment. ‘O’ stands forOpportunities before the enterprise and threats to it are external factors. Strengths are

to be further improved, weaknesses are to be overcome, opportunities are to be judged

and caught as they are like tide and time who never wait for others.

Threats are to be faced and

‘T’ stands for

conquered. SWOT analysis, therefore, is a very useful tool in the hands of the organizations. It has to be carried out and implemented in

right manner else the entire exercise will mean Simply Waste Of Time.

LET US SUM UP

Management as a process of transformation consists of various functions. Planning isthe most basic and important function among them. Planning means deciding in advance.

It is the what, when, how and by whom of doing; In planning, we have strategic and

tactical planning. The process of planning begins with setting up of objectives followedby other sequential steps. Planning leads to focus on the goals and in turn to success.

However, there are certain limitations in planning and we have to overcome them. SWOT

analysis is another recent development in planning. Without planning, there would be

chaos, confusion and failure to achieve the goals effectively.

Questions

1. Define planning and steps involved in planning.

2. ‘Planning is the most basic function of management’ Elucidate.

3. What are the planning premises?

4. Discuss the characteristics and importance of objectives in planning.

5. Describe the limitations in planning.

6. Write a short note on SWOT analysis.


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37


Functions of Management Organizing

UNIT 4

FUNCTIONS OF MANAGEMENT ORGANIZING

CONTENTS

• Organizing and organization

• Characteristics of organization

• Importance / significance of organization

• Steps in organizing

• Types of organizations

• Departmentation

• Organizational structure

• Authority and responsibility

• Line and staff authority

• Delegation

• Decentalisation

OBJECTIVES

After studying this unit, you should be able

• to understand the concept of organizing.

• to explain the organization, its characteristics and importance.

• to learn the steps in organizing.

• to know organizational structure, line and staff authority.

• to realize the importance of delegation and decentralization.

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ORGANIZING

Organizing is one of the important functions of management. After planning, the activities

are set in motion. This requires arranging and allocating work, authority and resources

to the employees. This process is called as organizing. Thus

- organizing is the process of arranging and allocating work, authority and

resources among the members of an organization so as to achieve the goals.

- it is to design and maintain a system of roles.

- it is an ongoing managerial process.

ORGANIZATION

Organization means two or more people who work together in a structured way to

achieve a specific goal or a set of goals. Amitai Etzioni defines an organization as a

social unit or human grouping deliberately structured for the purpose of attaining specific

goals.

It is a formalized intentional structure of roles and positions, having interwoven

relationships.

Characteristics of an Organization

a. Common or shared objectives e.g. the main objective of hospital will be alleviation

of human suffering health care and This will be common to all employees, from

room boys, ambulance drivers, accounts clerks to surgeons and doctors.

b. Clear concept of major duties and activities involved so that work is carried out

in a systematic manner.

c. An understood area of authority and discretion so that people occupying a post

are aware of their powers as well as responsibilities. This is known as hierarchy

or chain of command.


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d. Proper co-ordination between different activities.

e. Set of rules and regulations, systems and procedures.

f. Channels of communication.

IMPORTANCE / SIGNIFICANCE OF ORGANIZATIONS

An organization is a mechanism through which management directs, co-ordinates and

controls the business. Hence an organization is the foundation of management; it has

the following benefits :

i. It facilitates administration and ensures success.

ii. It gives strength to a group of people.

iii. It improves managerial efficiency.

iv. It accelerates growth and diversification.

v. It encourages proper utilization of human resources, gives rise to workers’

participation and avoids duplication.

vi. It ensures proper co-ordination of work, authority and resources.

vii. It creates a healthy work climate.

viii. It stimulates creativity and initiative through well-defined areas of work.

ix. It provides for optimum use of technological improvements.

x. It provides for supply of systematic information.

STEPS IN ORGANIZING

Like in planning, there are steps in organizing as it is also a process. These steps are

as under :


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a. Set the objectives : Setting goals / objectives is a necessary element in organizing

also. As stated in planning, goals give us a direction in which to proceed.

b. Define (identify) the activities : Organizing is arranging and allocating work,

responsibilities and resources. As such we have to define and determine the

activities to be carried out.

c. Group activities : Here various activities are classified and grouped according

to their nature. e.g. plumbing, electric work / repairs, proper conditioning of lifts

etc. would come under maintenance. Routine check-up, medication, medical check-

ups etc. would be grouped in day care or OPD etc.

d. Assign activities : Once objectives are set, activities have been defined and

grouped, it becomes necessary to assign these activities to specific people. They

will be responsible and accountable for implementing these activities. This is like

establishing structural relationships. This results in systematic working or else there

will be disorder and chaos.

e. Set time frame : It is important since the objectives need to be achieved in a

time bound manner. This will help generating and maintaining a pace of the activities.

f. Follow-up (monitor) : this is to ensure that we have been proceeding in the right

and the desired direction. Diversions, deviations, if nay, can be corrected so as

to ensure compliance with set objectives.

TYPES OF ORGANIZATIONS

Organizations broadly are classified into formal and informal. The formal organizations

are those wherein activities of the persons are consciously coordinated towards a given

objective. e.g. A govt. dept., a hospital, a bank, insurance company, medical college

are formal organizations. This structured way / hierarchy, formalities are not there in

informal organizations. e.g. certain voluntary groups, family etc. are informal organizations.

Some people may voluntarily offer to come, sit and accompany those patients who don’t

have relatives to attend to them.


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DEPARTMENTATION

In order to ensure smooth working of an organization, the work is divided into tasks

that can logically and comfortably be done by the individuals or groups. This grouping

of tasks and employees is called as departmentation. The word department designates

a distinct area, division or branch of an enterprise over which a manger has authority

for the performance of specified activities. This makes possible to expand the organization

to an indefinite degree. Pattern of departmentation may vary from organization to

organization, from situation to situation. Thus separating the organization into various parts/

depts. / sections, depending upon the functions, results into specialization which in turn

improves skill, efficiency, speed of working. It helps in smooth functioning since there is

a role clarity. In hospital set up the various departments are like OPD, surgery, paediatric

ward, pathological laboratory, radiology etc.

ORGANIZATIONAL STRUCTURE - SPAN OF MANAGEMENT

The numbers of sub-ordinates, a manager can efficiently and effectively handle is called

a span of control or span of management control. This leads to emergence of various

levels in an organization. Once work is divided, departments are created, span of control

chosen, managers can decide on the chain of command. This sets a pattern called as

hierarchy. At the top of hierarchy there is a senior ranking manager who is responsible

for overall operations. He is known as President, Chief executive officer, Chairman etc.

Other lower ranking managers are located down at the various levels of the organization.

Span of control : (a) Narrow span, tall hierarchy (b) Wide, flat hierarchy

a. Narrow span, tall hierarchy : In this set up there are many levels between top

and bottom.

b. Wide span – Flat hierarchy : In this set up there are few management levels

between the top and the bottom.


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Merits Demerits

- Close supervision and control - Many levels of management

- Fast communication - High cost of operations

- Slow decision-making

CEO

Narrow span, Tall hierarchy

CEO

Wide span, Flat hierarchy


43


Advantages Disadvantages

- Improved delegation - Superiors are overloaded and overtaxed.

- Effective decision-making - Decision bottlenecks

- Risk of loss of control of the superior

- Will succeed when the managers are capable.

Both these setups have certain advantages and few drawbacks. Basically there is a need

for balancing. These days there is a trend on designing lean or flatter organization.

AUTHORITY AND RESPONSIBILITY

Henri Fayol, the renowned French management expert has said that responsibility and

authority should go hand to hand. Organization authority is the formal right of the superior

to command and make the sub-ordinates to perform a given act. It is a right to give

orders and power to exact obedience. It is essential for managerial functions.

Sources of authority – classical view : Authority originates at the top and flows

downward i.e. managers at each level derive their authority from their superiors and so

on.

Human relations view : Authority of a manager or superior depends upon the

willingness of his sub-ordinates to accept it. If they do not accept his authority, they

may not comply with his orders. A sub-ordinate accepts authority when it is legitimate.

According to Chester Bernard, four conditions are necessary for an order to become

acceptable to a person.

a. he must understand the order (communication)

b. he must believe that it is not inconsistent with the purpose of the organization

c. he must believe that it is not incompatible with his personal interests

d. he must be physically and mentally capable of complying with the order


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AUTHORITY AND POWER

Authority emerges from the position, designation, whereas power is to influence a person

to perform an act. It is a wider concept. A person may have authority on account of

the position he is occupying but may lack in power which is an individual aspect.

Authority Power

- right of superior to command & control - ability to influence to perform

- rests with the chair (position) - rests in an individual

- can be delegated - to be earned

- well defined - not defined

- formal - informal

Advantages of Authority

Herbert Simon gives the benefits of authority as under :

a. It enforces obedience to norms

b. It results in expertise in decision making

c. It permits centralisation of decision making and co-ordination of activities

RESPONSIBILITY

While authority is the right of the superior to give orders, responsibility is the obligation

of the sub-ordinate to comply with the orders. Thus when a superior assigns a job to

a sub-ordinate, it becomes his responsibility to do it.

Authority can be delegated but not responsibility.


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LINE AND STAFF AUTHORITY

In the entire managerial set up, this issue has wide differences of opinions. Basically it

is a matter of relationships between the various departments of an organization. It is

referred to as line and staff function also. Line functions are those that have a direct

impact on the accomplishments of the objectives of the organization. Line staff are directly

responsible to achieve organizational goals. e.g. production, sales and at times finance

are called as line functions. Support functions on the other hand, assist the line authority

to achieve the goals. e.g. purchasing, accounting, personnel, maintenance etc are called

as the staff functions. They supplement line activities. They are complementary functions

and lead to the success of an organization.

DELEGATION

Delegation means entrusting a task to another person, when the activities increase beyond

the capacities of an individual. It is an arrangement between two persons when one,

normally the superior, delegates the task (responsibility) which belongs to him along with

appropriate authority, to the other person. Thus it is a process of transferring certain

authority to immediate capable sub-ordinate with a view to decentralization for smooth

administration.

Principles of Delegation

a. Delegator’s authority only can be delegated. He has to retain the responsibility

and accountability. The delegatee also becomes jointly responsible to a certain

extent. Delegation, therefore, is not abdication.

Responsibility

Responsible for the job Responsible accountable to the superior


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b. Authority can not be forced upon the delegatee.

c. Delegatee should be capable of shouldering the authority of the delegator.

d. The role boundaries should be made known to the delegatee.

e. Delegatee can not delegate down the line.

What to Delegate

i. routine administrative matters

ii. routine correspondence

iii. staff matters where clear guidelines are available

iv. expenses of routine nature

Whom to Delegate

a. capable, willing sub-ordinate

b. should be aware of his duties and responsibilities

c. experience and availability of time should be taken into consideration

d. proper explanation and counseling necessary

Why to Delegate

- for smooth administration

- speedy disposal

- better customer service


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- creating confidence in the subordinate and thus developing him for future

- encouraging him to take decisions

- preparing a line of succession

Barriers to Delegation

Though delegation is considered as a desirable management process, it is rather difficult

to implement in practice on account of various barriers / obstacles. These can be

classified as pertaining to the delegator, delegatee and the situation. These barriers are

give below –

i. Delegator - I like doing it myself

- I can do it better myself

- I don’t want to develop sub-ordinates (insecurity)

- I can’t tolerate mistakes (perfectionism)

- No time to explain, to supervise

- Envy of the ability of sub-ordinate

ii. Delegatee - Lack of experience

- Work overload

- Avoidance of responsibility

iii. Situation - Boss would not tolerate mistakes

- Too critical decisions

- Urgency

- Understaffing

Do’s of Delegation

- provide necessary infrastructure / resources


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- assist the delegatee to enhance his competence

- allow freedom to delegatee to exercise creativity

- take joint responsibility for genuine mistakes and take corrective steps

- respect each other’s role boundaries

- appreciate when needed

Don’ts of Delegation

- do not exercise close supervision

- do not overload delegatee

- do not delegate authority which you yourself don’t have

- do not delegate authority down the line

Thus by delegating, the executive becomes free from the routine matters and can devote

more time and energy on developmental activities and for attending to other important

matters. Delegation is an art and an important function of management.

DECENTRALIZATION

When the decision making authority in an organization is concentrated in few hands at

the top managerial level, the setup is called a Centralised setup. Whereas in a

decentralized setup this authority is dispersed throughout the organization. Organizational

authority is the power conferred on people to use their judgment in decision making.

Every organization decides the extent or degree of centralization and decentralization.

The degree of decentralization, according to Ernest Dale, is greater where -

i. the number of decisions made at the lower level is more.


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ii. the more important decisions are made at the lower level.

iii. the functions or areas affected by the decisions at lower level are more.

iv. less checking is required on a decision.

Fayol says that everything that increases the importance of the role of subordinates is

decentralization and everything that goes on to reduce its is centralization.

These are relative terms. Absolute centralization is not possible in any organization except

in a proprietary concern. Also it is not possible to have absolute decentralization in any

organization.

DIFFERENCE / DISTINCTION BETWEEN DELEGATION AND

DECENTRALIZATION

a. Delegation is a process, whereas decentralization is the end-result of delegation.

b. In delegation the superior continues to be responsible for the work delegated. In

decentralization a sub-ordinate becomes liable for it.

c. Decentralization is optional depending upon the policy of the organization. However

delegation is an important managerial process.

The organizations have to seek a balance between centralization and decentralization in

the best interests of the organization and its members.

LET US SUM UP

In the process of management, the basic function is planning. Thereafter, a manager has

to arrange and allocate work, authority and resources among the members of the

organization. Organizations are the entities, where two or more people come together

who have common and shared objectives. There are formal and informal organizations

followed by a structure. In order to effectively monitor the work of organizing, there


50


are departments, sections etc, where the principle of division of labour is practised.

Organizing gives rise to responsibility and authority. Delegation and Decentralization

facilitate the effective functioning of the organization.

QUESTIONS

1. Explain the term organizing and steps in organizing.

2. What is an organization? Discuss the characteristics of organization and its

significance.

3. Write a note on departmentation.

4. Explain organizational structure. Elucidate wide and narrow span of control with

merits and demerits.

5. What is meant by authority ? Distinguish between authority and power. Explain

the conditions required for acceptable instructions.

6. Write short notes on –

a. Line and Staff authority

b. Principles of delegation

c. Decentralization

d. Barriers to delegation


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Functions of Management Directing

UNIT 5

FUNCTIONS OF MANAGEMENT DIRECTING

CONTENTS

Coordinating - concept, techniques, obstacles and significance

OBJECTIVES

After studying this unit, you should be

• aware of importance and necessity of co-ordination

• to know techniques of co-ordination

• to understand obstacles in co-ordination

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DIRECTING

Management is a process of transformation. Resources, inputs are converted in to outputs,

products and services. We have also seen that achieving predetermined objectives is

essential in management. Planning, organizing are the initial functions in the process of

management. Directing is the next critical and important function of management.

Directing can be defined as moving towards the objectives. This is the stage of real

action and efforts carried out to accomplish the goals. Directing consists of various

activities like leading, influencing, motivating, communicating, etc. All these activities have

been dealt with in other study material, the copies of which are already with you.

Coordinating is yet another function included in directing. We will study coordinating in

this chapter.

Coordinating is an essential element and an ongoing process of management. In fact

management itself is co-ordination of human efforts. As such it is the essence of

managership.

Coordinating can be defined as achieving harmony among individual efforts towards

achievement of group objectives.

All managerial functions contribute to co-ordination. It is management of interdependence

in work situations. e.g. in a hospital, unless there is proper co-ordination between all

the departments, section, etc, the purpose of a hospital will not be achieved. Similarly

a human body is another example of co-ordination. It is like synchronization of all the

players in an orchestra, where the conductor, with a baton in his hands, co-ordinates

all the activities so that a fine melody enthralling the audience emerges. Thus co-ordination

is “common action, movement or condition that seeks to bring persons or things into

proper perspective and relation so that they act together in a smooth and concerned

manner.”

Certain authors consider co-ordination as a part of directing, whereas Henri Fayol feels

that it is a separate managerial function. Co-ordination, at times is confused with co-

operation. Co-operation is working together towards the same goal. In a football match,


53


one player, howsoever skillful, can not carry the ball to the goal post. At the appropriate

time, he has to give it to another player, teammate who is better placed to put the ball

in the net. This will be possible when there is co-operation among them. Co-operation

is the pre-requisite of co-ordination. They are mutually complimentary. Mere co-ordination

will not ensure success unless there is proper co-operation among the members. It

requires congruence of the goals – individual and organizational.

NEED FOR COORDINATION

1. Division of labour : When a job is broken into smaller elements that can be

performed by an individual, it amounts to division of labour. It leads to improving

skills, faster production and increase in profits. Henry Ford, in his assembly plant

of manufacturing cars, successfully utilized this. A car that could be completely

assembled in 12 hours in 1908 could be completed in 1 minute in 1920 and 5

seconds in 1925. One can imagine the tremendous output and the resultant

increase in profits. However this will be possible only when there is proper co-

ordination among all the factors of production.

2. Organizational objectives : The activities in an organization are interdependent.

e.g. A surgery can be performed only when all the concerned departments like

radiology, pathology, maintenance, etc function properly. This will be possible when

there are common and shared objectives.

TECHNIQUES OF CO-ORDINATION

- laying down clear cut objectives / goals

- simplifying the process

- achieving harmony in policies and programmes

- well defined and open system of communication

- proper supervision


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- directing interpersonal relationships

- continuity and consistency

- dynamism

OBSTACLES IN CO-ORDINATION

Even though co-ordination is desired in successfully achieving the objectives of the

organization, it is not that simple. There are certain obstacles, hindering factors. Let us

study them.

a. Uncertain behaviour : Co-ordination is concerned with human efforts. Human

behaviour is uncertain and can not be predicted accurately. There is difference

between a man and a machine. A man has a mind. As such a man has feelings,

emotions, likes and dislikes, prejudices etc. A man may want recognition and

appreciation. This makes human behaviour a highly individualistic subject and has

to be handled properly.

b. Lack of knowledge, skill, experience and above all initiative.

c. Confused and conflicting policies and strategies

d. Resistance to change

Absence of co-ordination

It will lead to - chaos

- confusion

- inefficiency

- expenditure on time, money and energy


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- either goals are not reached or difficulties are encountered in achieving

the goals

LET US SUM UP

Like planning and organizing, directing is an important function of management. Leading,

motivating, communicating and coordinating are included in directing. Coordinating is

achieving synchronization of individual efforts which ultimately results / helps in reaching

the goals. As such it is an essential and ongoing process of management.

QUESTIONS

1. Describe the significance of co-ordination in the process of management with a

special reference to hospital and health care.

2. Write notes on –

- Techniques of co-ordination

- Obstacles in co-ordination

- Difference between co-ordination and co-operation


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Functions of Management Controlling

UNIT 6

FUNCTIONS OF MANAGEMENT CONTROLLING

CONTENTS

• Concepts, definition

• Steps in controlling

• Types of control

• Principles of effective control system

• Techniques of control

• Budgeting

OBJECTIVES

After studying this unit, you should be able –

• to understand the concepts and importance of controlling.

• aware of steps in controlling, types of control.

• to understand principles of effective control system.

• to know budgeting, its process and advantages.

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CONTROLLING

In managing we try to achieve the predetermined goals through planning, organizing and

directing. It is a continuous process, it is like a flow. In any kind of flow, if there are

blockages, it creates problems and as such it becomes necessary to ensure that these

obstacles in flow don’t emerge and if at all they emerge, they have to be corrected.

This equally applies to management. When we are moving, acting in the direction of

achieving the goals, we have to see that we are not deviating from the course of action.

This is achieved through another function of managing i.e. controlling.

Controlling is an important function of management. It is the process of ensuring that

actual activities conform to the planned activities. It is a process of monitoring the

effectiveness of planning, organizing and leading activities. Brech defines controlling as

“checking current performance against predetermined standards contained in the plans

with a view to ensuring adequate progress and satisfactory performance.” Controlling is

a continuous and proactive process.

Objectives of Controlling

To ascertain variations if any, between standards set and actual performance and if

necessary to take corrective / remedial steps to prevent occurrence of such variations

in future. In short controlling means

- to measure progress

- to ascertain deviations, if any and

- to initiate remedial actions

STEPS IN CONTROLLING

a. Establishing standards necessary for measuring the results. Organizations should

develop their own standards and the key areas, e.g. productivity, profitability,

employee performance, customer grievances etc. These standards should preferably

be in quantitative terms, should be precise (not vague or in general terms) i.e. in


59


clear measurable terms, specific time bound limits etc.

e.g. – standard : reduction in costs - No

– but reduction in costs by 10% - Yes

– to improve employee skills – No

– but to improve employee skills in correspondence – Yes

b. Measuring and Comparing actual results against standards (i.e. measuring

performance). This measurement is an ongoing process. The frequency may vary

form activity-to-activity and depending upon the circumstances. e.g. In case of a

cardiac patient, the ECG, while in ICU will be monitored continuously but later

on it’s periodicity will go on increasing suitably. Then this performance will be

compared with the predetermined standards by using various control systems, say

by

- observing actual work

- studying the figures, reports etc

c. Taking corrective action : After comparing the performance and ascertaining the

deviations, the next job is to correct these deviations. Remedial action should be

fast and without wasting time, so that normalcy is restored without delay. This

will ensure smooth accomplishment of organizational goals and also save avoidable

wastage of resources, energy, money and manpower. The causes for deviation will

vary. e.g. inadequate and delayed supply of resources, poor equipment, shortage

of power, lack of employee skill, lack of motivation and communication etc. The

remedial steps will depend upon the nature of causes for deviation.

Establishing standards

and methods for

measurement of

performance

Measure performanceCompare with

standards

If yes, carry onIf no, initiate

remedial steps


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CONTROLLING PROCESS

Types of control : (a) past oriented controls (b) future oriented controls

a. Past oriented controls : In this type of control, the results are measured after

the process, or when the events, happenings are over the results are examined

thereafter.

e.g. - financial statements of an organization (Trading and manufacturing account,

Profit & Loss account and Balance sheet)

e.g. - performance of the schools in the examinations, etc

Thus the discrepancies observed, lessons learnt, shortcomings / lapses noticed etc

can be used for future corrective steps.

These controls are also known as post action controls.

b. Future oriented controls : They are also referred to as steering controls or feed

forward controls. They are designed to measure the results during the process itself,

so as to initiate action before the job / or process is completed. They are mainly

the warning signals to attract the attention and not for evaluating.

e.g. Cash Flow and Fund Flow analysis

Past oriented and future oriented controls are not alternatives to each other. They are

complementary to each other and should be used simultaneously.

PRINCIPLES OF EFFECTIVE CONTROL SYSTEMS

We have seen that controlling is necessary to ensure compliance to planned activities.

Hence the control systems should be so designed to facilitate the main process and not

to hinder it. As such there is a need to have some ground rules / principles while

introducing the control systems, which are given below.

i. They should be appropriate to the nature and needs of the activity.


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ii. Timely and forwards working : shortcomings noticed should be reported in time

and immediately.

e.g. the water level of flooding rivers above the danger mark should be reported

immediately so that evacuation of the people and live stock can be commenced

and possible loss could be averted. It calls for a quick and efficient feed back

system.

iii. Objective and easy to understand - in clear and specific terms.

iv. Flexible so as to adjust / adapt to the change in environment.

v. Economical : The system of control should be such that benefits from the control

will be greater than the cost involved in implementing the control.

vi. Prescriptive and operational : The control system should not only detect

deviations but should also suggest solutions to the problems that cause the

deviations. They must disclose where failures are occurring, what are the causes

and remedies.

vii. Acceptable to all : This will enable to gain wholehearted support and commitment

of all the concerned. This will motivate them and thus in turn ensure success.

METHODS / TECHNIQUES OF CONTROL

Over a period of time, various methods / techniques of controlling have been evolved.

They vary according to the activity.

Old and traditional techniques are as under –

budgeting, cost accounting, breakeven analysis, financial statements, ratio analysis, audits,

reports, etc.

New techniques : PERT (Performance Evaluation and Review Techniques), CPM

(Critical Path Method), TQM (Total Quality Management), ISO certification, human

resource accounting , human resource audit, etc.


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The new techniques are in addition to the old ones. They have not been scrapped and

continue to be used.

BUDGETING

Budgets are the formal quantitative statements of the resources set aside for carrying

out planned activities over a given period of time, usually one year.

Budgets

1. are stated in monetary terms, used as a common denominator for a wide variety

of organizational activities – like purchasing, selling, manufacturing, hiring,

advertising, training, etc.

2. focus on two major factors : capital (key organizational resources) and profit (key

organizational goal)

3. establish unambiguous standards of performance for a set period of time, usually

a year. This period can vary depending upon the activity and circumstances.

Budgeting Process

It begins when the top management sets the strategies and goals of the organization.

Lower lever managers establish / finalize the budgets of their sub-units within the above

guidelines. The draft budget is reviewed by the top / senior management and thereafter

final budget is compiled. The overall budget of the organization comes into force when

it is approved by the board of directors.

Advantages of Budgetary Control

1. Indicates limits for expenditure and the results to be achieved in a given period.

2. Coordination of organizational work becomes possible.


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3. Active participation of all levels of management is ensured. As such it becomes

the product of combined wisdom of all. It leads to motivation, commitment and

involvement of all the concerned.

4. It brings together the activities of various departments which results in greater

cooperation and building of team spirit.

5. Deviations can be ascertained and corrective measures can be initiated in time.

6. It helps people learn from the past.

7. It improves communication.

Limitations

a. As budgetary control is used to evaluate results, inefficient and lethargic employees

do not cooperate wholeheartedly.

b. Budgetary estimates, at times, prove absolutely wrong / inaccurate. Therefore the

system becomes ineffective.

c. The budgets are mostly rigid and inflexible. They do not respond to the changes

in the environment, both internal and external.

d. Are not effective in handling urgent problems, which, at times, require here and

now solutions.

e. They become, sometimes, cumbersome and expensive.

f. They act as discouragement for good and ambitions managers.

g. They are well suited for hiding inefficiency.

h. The control systems are designed to cope up with changes of a certain magnitude.

As such if there are sudden and unexpected changes, which are beyond normal

ways, then the control system fails.

In spite of these limitations, they play an important role in all types of the organizations.


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LET US SUM UP

Controlling is an essential, ongoing management function. It ensures compliance of planned

activities. As Koontz has said it is ideally forward looking and the best kind of managerial

control that checks deviations from the plans before they occur. Controls are of two

types, past action and future action control. The control system to be effective should

contain certain principles. The controlling is an essential element. It has certain limitations,

which can be overcome. Thus control ensures compliance and timely intervention.

QUESTIONS

1. ‘Controlling is an essential managerial function to ensure compliance with planned

activities’ Discuss.

2. Explain the steps in controlling.

3. Describe the types of control and how they are used.

4. What is budgeting? What are the benefits of budgeting?

5. Discuss the principles of effective control system.


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Recent Trends in Management

UNIT 7

RECENT TRENDS IN MANAGEMENT

CONTENTS

• 21st century – its uniqueness and management challenges.

• Japanese management

• Quality circles (QCs)

• Total Quality Management (TQM)

• JIT i.e. Just do it or Kanban

• ISO 9000

OBJECTIVES

After reading this unit, you should be able -

• to know the challenges and special features of the 21st century.

• to understand the Japanese management.

• to learn about Quality Circles, Total Quality Management, Kanban etc.

• to explain ISO 9000 series of certification.

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INTRODUCTION

Management is a dynamic process. It has been changing over a period of time, with

changes in environment and thinking. In the earlier period, the workers were illiterate,

unorganized. Also there was little competition. As such the entrepreneurs, who established

industrial activities, were oblivious of various factors, which are considered important

today. They mostly concentrated on more production and higher profits. As the workers

were ignorant, they directed them and the workers were supposed to merely execute

the orders. Long hours of work (16-17 hrs), meagre wages and those too not paid in

time, child and women labour, lack of safety and hygienic conditions were the order of

the day. In short there was exploitation of working class. They were considered as inert

instruments of production and had to work in inhuman conditions. However, with trade

union movement, awakening of workers, growing competition and enlarged markets

started having its effect. The employers realized that they will have to change their style

of management in order to get satisfactory returns from the workers. Growing

International Trade and entry of domestic and foreign competitors worsened the situation.

It was getting increasingly difficult to stay alive in this mad race. As a result, human

and behavioural approaches to management emerged. The employees were looked as

human beings who had mind. This mind made much difference and the employers

became aware of the distinction between man and machine. Efforts were started to win

over the commitment and involvement of this vital and important resource i.e. human

resource. Various new methods and techniques were experimented to harness this

resource. Growing competition changed the markets from hitherto sellers’ market to

buyers’ market. The customer now had options, choices and as such was not prepared

to settle with inferior goods when quality goods were available elsewhere.

Hence quality, price, delivery schedule, and after sales service became

important. ‘Survival of the fittest’ ‘perform or perish’ became the ‘Mantras’ of modern

management.

Japanese people did lot of work in this direction. Actually Japan at one time, was known

for shoddy and low quality goods. By copying the American products she wanted to

capture the market, the results of which were disastrous. Hence it dawned upon them

that unless and until they really give quality goods at most competitive prices, they will


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not be able to survive. The Second World War had already hit them badly. On this

background they started examining ways and means to improve quality, reduce wastages

and costs. They were aided in these efforts by their own people as well as two Americans

viz. Dr. Edward Deming and J. M. Juran. They also utilised the knowledge and

experience of their employees in this endeavour. Increasing employee participation was

a major change in the style of management. Various techniques like Quality Circle,.

Kanban or just do it, Kaizan, 5 S etc emerged over a period of time. This changed

the Japanese products and services altogether and from shoddy and substandard goods,

Japan = Quality became an equation. We will consider some of these movements in

brief in the following pages.

QUALITY CIRCLES

Quality Circles are the voluntary associations of the employees working in the same work

area or doing the same kind of work. They meet regularly, preferably once a week or

any fixed appointed date, to identify, analyse and solve work related problems. They

suggest improvements to productivity, quality of service etc. This apart from improvement

in sales and profits, results in enriching quality of work life The concept of Quality Circle

was developed by two Americans, viz Dr. Edward Deming and J. M. Juran. They were

not, taken seriously in America and hence shifted to Japan in the early 1960s. Japanese,

however, welcomed this idea and the concept of Quality Circles was introduced in Japan

in 1962. Another Japanese thinker Dr. Ishikawa further refined the concept and made

significant contributions to this. As such he is considered as the Father of Quality Circle

Movement.

The concept started yielding results and therefore there was a phenomenal increase in

the number of Quality Circles in Japan. It was picked in about 40 countries all over

the world. In India it was initiated around 1982 in Bharat Heavy Electrical Ltd. (BHEL).

Initially it was thought that the concept was applicable to manufacturing activities only.

However it was realized that it was equally applicable to service industry like banks,

insurance cos, hotels, hospitals, offices etc. Today worldwide lacs of Quality Circles are

operating in their respective field and making significant contributions.


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Steps in Quality Circle Working

a. Formation : Quality Circle is a purely voluntary, optional formation. Though there

is no ceiling on the number of members, it is desirable to have around 8-10

members. In case the number is either less or more than the desired number it

may not yield the expected results. These members elect a leader to facilitate the

proceedings. Leadership can be rotated so that all get an opportunity to discharge

this role. Usually the departmental lead monitors, encourages, supports and guides

the members.

b. Identification of problem : QC at a time deals with only one problem. In an

organization there may be various problems in the varying degrees of priorities.

All the members discuss freely, express their views and assign priority to the

problems. This is carried out by open, free and frank discussion. No one is

discouraged or laughed at for his view. This technique is known as brainstorming.

It was developed by Alex Osborne in 1938. The members make out a list of

various problems. Thereafter each one assigns rankings to these problems in terms

of their own priorities. Thereafter the problem that receives maximum ranking score

is identified as a problem for solving. This process is called Pareto Analysis, named

after an Italian Economist Vilfredo Pareto. Pareto diagram is also drawn.

Sco

re

Problems

c. Cause-effect analysis : After the problem has been identified, the members start

analyzing the problem and various factors / causes that lead to the problem. There


69


may a few sub causes also. These are classified under the broad headings of Men,

Method, Machines and Materials. Thus the problem is the effect and the factors

causing it are the causes. A diagram called cause-effect diagram or Ishikawa

diagram (named after Dr. Ishikawa) or fish-bone diagram (it resembles a fish-bone)

is drawn to make the situation more clear.

d. Finding out solutions : Once the causes are identified, solutions are suggested

to do away or overcome these causes. These solutions are thoroughly discussed

in terms of practicability, viability, feasibility etc. and finally the solutions are worked

out.

e. Presentation : A presentation of this project is prepared. A suitable write-up

consisting of names of the members, various problems that emerged in the

discussion, identification of the problem, working out solutions etc. is prepared.

Various charts, diagrams (like Pareto diagram, Ishikawa diagram, histogram, pie

diagram etc.) transparencies are prepared for this presentation. It can be done

on PowerPoint also. It is thereafter presented before the management. All the

members of QC are involved in this presentation. Management examines the

solutions suggested and gives its views and go-ahead signal when it agrees to it.


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f. Implementation : The solutions are implemented. Thus one project is completed.

The QC continues its quest by taking up another project in the similar way.

g. Review : The project implementation is reviewed so as to ensure proper

compliance.

Gains / Benefits / Advantages of QC

There are various monetary and non-monetary pay-offs of QC. e.g.

Monetary Non-monetary

- Improvement in quality - Self development

- Waste reduction - Ability to communicate and to listen

- Cost reduction - Mutual development

- Problem solving - Team building

- Increase in sales - Participation

- Improvement in productivity - Involvement

- Increase in profits - Commitment

- Safety, reduction in accidents - Job satisfaction

- Reduced absenteeism - Creativity, innovation

QCs are not panaceas for all problems. They are not the forum for grievances, nor are

a substitute for task force, committees etc. QC is not a management technique to tackle

their problems. It is a philosophy, a way of life, where the tangible and intangible benefits

accrue both to the organization and the members.

Worldwide QCs are doing commendable work. As stated earlier, they can be practised

in any activity, irrespective of its nature. These days they are being used in schools,

colleges, families and communities also. In India Quality Circle Forum of India (QCFI),

an apex body has been doing important work of coordinating, guiding the activities of

QCs allover India.


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JUST IN TIME (JIT) OR KANBAN

While Japan was known, earlier, as a flimsy and poor quality manufacturer, post war

Japan came to be known for quality. Today, Japanese products are considered as a

hallmark of quality. Various revolutionary ideas, concepts were developed in this pursuit

and Just In Time (JIT) or Kanban is one of them. It is a simple and direct communication

at work centre. Originally, it was introduced in Toyota production system, the purpose

being to eliminate wastage and reduce costs.

JIT is aimed at regulating flow process i.e. the right parts needed in assembly reach the

assembly line intime they are needed and in number they are needed. The system aims

at reducing inventory or stock and thus reducing inventory carrying costs. It is also

known as zero-inventory, wherein optimum inventory needed for consumption, only is

maintained. It makes use of a flag or a piece of paper which contains all relevant

information like part number, description, process area used, time of delivery, quantity

available, needed etc. These flags are called as Kanban in Japanese. Hence the name.

The principle is to make just what is needed in time, but not making too much. This

means that a radically new systems will be required so that old way of work can be

given up. Brain storming discussion will be necessary before its introduction so that the

change implementors understand its necessity and importance and will implement it

wholeheartedly. Thus Kanban aims at minimum or zero inventory so as to reduce

wastage chain.

The Japanese thought of and implemented various such techniques in their management.

Kaizan or continuous improvement is one of them.

5 S – consisting of

SEIRI – Organization or reorganization

SEITON – Neatness

SEISO – Cleanliness

SEIKETSU – Standardization


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SHITSUKE – Discipline

is also yet another technique.

TOTAL QUALITY MANAGEMENT (TQM)

We have earlier seen how the shift from sellers’ market to buyers’ market established

the importance and necessity of quality. Customers now had the option and as such

their satisfaction became of paramount importance. Hence everywhere the providers of

products and services realized that quality would alone enable them to survive in this

fiercely competitive global environment. Prior to TQM, the journey towards it had began

in the following stages :

Quality - Inspection

- Control

- Assurance

- Reliability

All these meant controlling, inspecting for quality, amend and resell if necessary so that

they could assure to the customer of quality and reliability. But soon they started realizing

that these were the post production stages i.e. products were inspected and checked

for quality after they were manufactured. In case of defects noticed they were sorted

out and reworked. At times, they were returned by customers and again delivered to

them after removing the defects. All these operations added to the cost and thus reduced

the profit margins, which were getting thinner due to competition. Hence a solution in

the form of maintaining quality throughout the manufacturing process, working every step

in such a way so as to ensure quality, was thought of. This solution is named Total

Quality Management; wherein everyone, at each level, in every operation is focused on

one factor i.e. quality.

Let us now see what is meant by quality. It means different things to different people.

Quality means – value for money.


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- consistent conformance to customer expectations.

- customer satisfaction, the delight of the ultimate judge as to howwell the products and services measure up.

- prevention, constructing solutions to problems before they occur and

designing excellence into a product or service.

Once quality is defined, the next step would be to work for total quality management

i.e. it would not be sufficient by merely knowing what is meant by quality but to strive

for managing in such a way that the concept of quality would guide all the operations

like a polestar. This is total quality management.

Thus TQM is an investment reaping a payoff because in the long run, doing it right for

the first time, is less expensive than correcting it latter. It is everything an organization

does in the eyes of its customers, which will determine whether they buy from them or

from their competitors. It will establish the confidence of the buyers. TQM is an approach

for improving he effectiveness and flexibility of business as a whole. It is essentially a

way of organizing and involving the whole organization, every department, every activity,

every single person at every level.

Components of TQM (i.e. How to achieve total quality management)

• Understanding the business : Its nature, market, competition, functional analysis,

quality costs etc.

• Understanding the customer : What are his needs, requirements and

expectations? Here they distinguish between the external; and internal; customer.

The former being the actual buyer and user of the company’s products or services.

Whereas the latter means the person in the organization itself to whom the product

would go for the next operation. He is an insider, an internal person within the

company. It simply means that any person while doing his job has to think of the

next person so that he can do his part of the job in a proper manner. It is also

denoted by NOAC (Next Operation As Customer).


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• Quality management schemes : A controlled and documented system of

procedures designed to ensure that only conforming products and services are

released to the customers. It is a systematic way of guaranteeing that all activities

within the organization happen the way they have been planned. It is a management

discipline concerned with preventing problems by creating an attitude and controls

that make prevention possible.

QUALITY TOOLS

For achieving TQM, various tools are used like flow diagram, brainstorming, data

collection, Pareto analysis, cause-effect diagrams etc.

All these measures focus on participative management, open and free communication,

mission and vision statement, quality policy, quality plan etc.

Thus TQM is a philosophy of management that strives to make the best use of all

available resources and opportunities by constant improvement. Thus it is an ongoing

process.

ISO 9000

We have seen how the quality of products and services started getting

increasing importance. Quality became the criteria and standard. But the major problem

was as to how to measure this quality? What should be the standards,

the parameters or the benchmarks to judge, ascertain and certify the quality? In India,

e.g. we have ‘ISI certification’ (Indian Standards Organization) for products other than

food and related articles. For the later we have ‘Agmark’ certification. The standards

like these were the local standards used and approved in the respective countries.

But with the growing international trade, a need was felt for some standard that would

be acceptable to all the countries. This over a period of time led to the setting up of

ISO-9000.


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ORIGIN

The 19th and 20th centuries witnessed rapid growth of technology. This made inspection

a costly and ineffective process. As such statistical sampling was introduced which helped

in sorting out products as good or bad. However, it did not contribute for quality

improvement of production process. In 1924, Dr. WA Shewhart devised control charts

for production process control. This was effectively used in Second World War.

Thereafter various standards were introduced and implemented. Seeing this interest

International Organization for Standardization, Geneva, published in 1987, a series of

Quality System Models to enable the world communities to standardize on a common

set of Quality System Requirements, known as ISO-9000 series.

AIM

To establish a customer oriented quality discipline in marketing, designing, engineering,

procurement, production, inspection, testing and related service functions. Quality thus

has become everybody’s job. It will be observed that ISI, Agmark etc. certify the quality

of the products. However ISO-9000 series is wider. It goes deep down in the entire

process and certifies that the process confirms to the standards laid down. It will

automatically ensure quality. Also in today’s growing international trade an overseas buyer

may not know the credentials of the foreign manufacturer and may be hesitating while

buying from him.

However, if the manufacturing company has a ISO certification, he may be rest assured

for the quality of the products. ISO-9000 series are also applicable for service industries.

That is why we see today colleges, management institutes, universities, hotels, hospitals,

banks, etc. going in for ISO-9000 certification.

In ISO, there are various series like ISO 9000-1 to ISO 9000–3, ISO 9001 to ISO

9004 etc. They are adding more and more series to this list. eg. ISO-14000 relates to

environmental management systems.


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QS-9000

A set of quality system requirements set up by 3 big American Automobile Manufacturers

viz. Ford Motors Co., General Motors Corporation and Chrysler Corporation for

adherence to their main suppliers.

Bureau of Indian standards (which certifies ISI, Agmark) is a member of International

Organization for Standardization, Geneva.

Thus ISO-9000 series, establishes a quality conscious process, which is recognized

worldwide. It in a way has helped for growth of international trade.

LET US SUM UP

Management is a dynamic concept and has been changing over a period of time.

However the change has become very fast in the last two decades of 20th century and

present 21st century. Waves of changes are hitting the shores faster. There are no borders

to protect the countries from the overseas competition. Hence quality has become the

hallmark of products and services. With the changing environment, including cultural

changes, management today has become very demanding and challenging. Man in order

to cope up with this situation has introduced and developed various revolutionary

concepts. Gone are the days of controlling and dictating the employees where once the

situation was ‘Do or Die, do not ask why’. It has been replaced by participative style

of management wherein an employee is considered as an important and valuable resource

and all out efforts are done to encourage his participation. His knowledge, skills,

innovation and creativity are being harnessed. His contribution is being valued and

recognized. Various new concepts like quality circles, total quality management, Kanban,

Kaizan, 5S, reengineering, ISO-9000 are being utilized. This has made the role of

managers highly significant. He has to show leadership qualities. Warren Bennis, as such,

has aptly said that 21st century requires the leaders and not the managers. Management,

therefore, in the 21st century, will be highly dynamic, demanding, challenging but at the

same very interesting and rewarding.


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QUESTIONS

1. Explain the uniqueness of Japanese management techniques.

2. Write short notes on -

a. Kanban or JIT

b. Non-monetary payoffs of Quality Circle.

c. Quality tools

d. Participative management and its importance

3. ‘Quality Circle is not a panacea to all problems’ Discuss and explain the steps in

Quality Circle.

4. ‘ISO-9000 is a global certifying system in respect of management process’ Explain.


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REFERENCES

I gratefully acknowledge having used the books mentioned below for reference.

• Management – Harold Koontz, Cyril O’Donnell and Heinz Weihrich

• Principles of Management – P C Tripathi and P V Reddy

• Boardroom (Marathi) – Acchyut Godbole

• Organizational Behaviour - Stephen P Robbins

• Human Resource and Personnel Management – K Aswathappa

• Quality Circles – Concepts and Practices – B R Dey

• Quality Circles in Banks – Dr. P. Amsa

• Quality Circle Forum of India, Secundarabad – Booklets on ISO-9000 and JIT

or Kanban by K Ganapathy, V. Narayana and B Subramanian

principles of management

Documents

process of management

nature of management

management education

predetermined goals

coordination of efforts

organized efforts

set of goals

certain goals