Units 1 to 4

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MS Units 1 to 4 (2010-11) II semester

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MANAGEMENT SCIENCE1

UNIT I : INTRODUCTION TO MANAGEMENT: Concepts of Management and Organization Nature andImportance of Management, Functions of Management, Taylors Scientific Management Theory, Fayols Principlesof Management, Maslows Theory of Human Needs, Douglas McGregors Theory X and Theory Y, HerzbergsTwo-Factor Theory of Motivation, Systems Approach to Management, Leadership Styles, Social Responsibilities of

Management.

CONCEPT OF MANAGEMENT

Definitions:

(1) To manage is to forecast and plan, organize, to command, to coordinate and control. (Henri Fayol)

(2) Management is concerned with the systematic organization of economic resources and its task is to make

these resources productive. (Peter Drucker)

(3) Management is a social process. The process consists of planning, control, coordination, and motivation.

(E.F.L. Brech)

(4) Management is the effective utilization of human and material resources to achieve the enterprise

objectives. (W.F.Glueck)

(5) Management is an operational process that can be dissected into five essential management functions.

They are planning; organizing; staffing; directing and leading; and controlling. (Koontz and ODonnel)

(6) Management is the process of designing and maintaining an environment in which individuals, working

together in groups, accomplish selected aims effectively. (Koontz and Weihrich)

The above definitions cover four important aspects of management.

(1) Management is a social process of all functions planning, organizing, commanding, coordinating and

controlling.

(2) Its ultimate purpose is to achieve organizational goals.

(3) These goals are achieved using limited resources efficiently and effectively.

(4) These goals are achieved by working with and through people.

Nature and Features of Management

(a) Management is a social process: Management is a process of certain managerial functions in every

organization. It is a social process in particular because managers, at all levels, work with and through

people.

(b) Management also denotes a body of people involved in decision making: When an organization is

well run, it is said that the management of that organization takes personal interest in that organization.

Here, management denotes a group of people involved in decision-making.

(c)

Management is omnipresent and universal: Successful organizations show that management principlesapply to every kind of organization and also to every level in it.

(d) Management is complex: Management functions are complex. They call for a fairly professional approach

to manage a given situation or organization.

(e) Management is situational in nature: The same style of management cannot work for the same situation

every time. The change in the situation may call for a change in the style of functioning of the manager.

1Prepared by T.S.Nageswara Rao, Professor, Department of Management Studies, DVR & HS MIC College of

Technology, Kanchikacherla-521180 as a teaching material only. Adapted from various sources.

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Similarly, at different points of time also, the style of functioning may have to be different for the same

organization.

(f) Management is an art and also a science :

An art is a personal skill. Art is characterized by practical knowledge, personal creativity and skill.

The more one practices an art, the more professional one becomes. Management can be considered

as an art because it satisfies all these criteria of art. Management skills are highly individual

oriented and can be sharpened with more training and practice. There is a lot of scope to apply

creativity in the context of managing the affairs of a business organization. Hence, management

is an art.

A science is a systematized body of knowledge of facts. It can establish cause-and-effect

relationships among various factors. It involves basic principles, which are capable of universal

application. It also helps to predict the future events. Management satisfies all these criteria to be

considered as a science. It is a systematized body of knowledge; its principles are universally

acceptable. It stands for logical reasoning, scientific testing and inquiry. It also establishes cause-

and effect relationships between the given factors. Hence, management is a science.

(g) Management is an inexact science: Management principles, unlike those in physics or mathematics, are

not exact. Hence, they cannot be generalized precisely.

(h) Management is a profession: A profession refers to a vocation or a branch of advanced learning such asengineering or medicine. The managers are professional in their approach and are governed by a code of

ethics.

(i) Management is inter-disciplinary in nature: The subject of management draws from other disciplines.

The techniques of management are built around the techniques drawn from these subjects. The manager

uses extensively :

the theories of consumption and production fromEconomics;

linear programming, PERT and CPM from Operations Research;

probability theories, correlation and regression techniques from Statistics;

theories of group behavior from Sociology;

theories of individual behavior from Psychology; and

the tools of decision-making such as matrices, and calculus from Mathematics.

(j) Managers use four types of resources: Manpower, money, materials and machines (the four Ms) are the

four types of resources that the managers use.

Importance of Management

(a) Management facilitates the achievement of goals through limited resources: The resources an

organization possesses are limited and hence they have to be effectively allocated and utilized in an

optimum manner. This is possible only through management.

(b) Management ensures smooth sailing in case of difficulties: Management guides an organization,

especially when it is in trouble. In case of a crisis, it is the management which ensures a smooth sailing by

anticipating problems and by making necessary changes in the organization to achieve the targeted results.

(c) Management ensures continuity in the organization: Continuity is very important in organizations.Management provide for continuity in organizations by ensuring that proper guidelines, systems and

procedures are in place.

(d) Management ensures economy and efficiency: The managers plan, coordinate, and monitor the progress

of work and suggest whether the work is satisfactorily done or not. In case of shortfall, it is the managers

who help the employees to perform better. Thus, organizational costs can be minimized through sound

management practices.

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(e) Management focuses on group efforts: If each individual is allowed to plan and organize his work

independent of what others are doing, there would be nothing but chaos. Therefore, management is needed

to guide and direct group efforts.

(f) Management is the key to the economic growth: The economic development of a country largely

depends on the quality of management of its resources. By producing wealth, managers facilitate the

increase in national income, and thus, the standard of living of the people.

CONCEPT OF ADMINISTRATION

There are three schools of thought to explain what administration means in relation to management:

(1) The school of thought pioneered by Oliver Sheldon, Florence and Tead etc., says that administration and

management are two different functions. According to this view,

Administration is concerned with (a) formulation of corporate policy; (b) the coordination of other

functional areas such as finance, production etc, (c) placing the organization under the ultimate

control of the Chief Executive.

Management is concerned with (a) the execution of a policy, within the limits set up by the

administration; (b) creating an organization to achieve the given objectives.

Administration is viewed here as a broader function and management as a subset of administration.

(2) The school of thought propagated by Brech, says that management is broader and includes administration.

According to this view,

Management constitutes the entire executive control.

Administration is that part of management which deals with (a) the formulation of policies and

procedures; (b) carrying out these procedures and (c) measurement of performance as against

these plans.

Management is viewed here as a broader function and administration as a subset of management.

(3) The school of thought led by Fayol explains that the terms management and administration are both one

and the same and are therefore interchangeable.

It is common to find that the term administration is used to refer to higher executive functions in Government

circles, while the term management is used for the similar functions in the business world.

CONCEPT OF ORGANIZATION

An organization refers to a social group designed to achieve certain goals.

Definitions:

(1) Organizations are intricate human strategies designed to achieve certain objectives. (Argyris)(2) Organization is the framework of management process . (Brech)

(3) Organizations are systems of behavior created for better results. So an organization form must be a joint

function of human characteristics and the nature of the task environment. (Simon)

(4) Organizations are systems of interdependent human beings. (Pugh)

(5) Organizations facilitate cohesive performance directed towards achievement of goals. Organizations are

known for their complexity. (Stewart)

The above definitions reveal that:

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An organization is a social group designed to achieve certain goals.

People form the back bone of the organization. Human needs must be considered first before the

organizational issues such as structure, authority levels etc.

.An organization is run through a defined structure, supported by organization charts and organization

manuals.

Organizations have to consider a wide variety of both internal and external factors to strike a balanced

strategy to achieve their goals. The internal factors include formal and informal organizations, span of

control, degree of centralization/decentralization etc. The external factors include customers, competitors,

government, creditors, impact of technology etc.

Significance of Organization

(a) It facilitates administration: When organization structures are created, organizational procedures are

developed, lines of communication are established, and therefore, the task of administration is made easier.

In other words, the top management decisions can be put into practice with ease.

(b) It facilitates growth and diversification: The organizations can grow and diversify only when their

internal organizations are strong and result-oriented.

(c) It ensures effective utilization of manpower: The organization structure forms the basis to identify,

recruit and effectively utilize manpower at different levels in the organization.

(d) It stimulates creativity: Progressive organizations grant full freedom to the staff members to be more

creative and enterprising. Organizations emerge stronger when their employees are highly productive,

independent and empowered.

(e) It ensures optimum utilization of resources: Organizations are well thought out outfits which deploy

resources strategically to achieve the given goals in an optimum manner.

FUNCTIONS OF MANAGEMENT

Different view points

(1) Planning, organizing, staffing and directing are functions of management. (Koontz)

(2) Planning, organizing, staffing, directing, coordinating, reporting and budgeting (POSDCORB) are the

functions of management. (Gullick)

(3) Planning, organizing, commanding, coordinating, and controlling (Fayol)

(4) Motivation, leadership and communication. (Mayo, McGregor and Barnard)

(5) Planning, organizing, staffing, directing, coordinating, reporting, budgeting, innovation and

representation (Classical thinkers)

The functions of management may be classified as:

(a) Planning,(b) Organizing,(c) Staffing,

(d) Directing, and(e) Controlling.

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Planning

Planning is concerned with the determination of the objectives to be achieved and the course of action to be

followed to achieve them. It is the process of deciding in advance what is to be done, when and where it is to be

done, how it is to be done and by whom. Thus planning involves decision-making. Planning helps in achieving theobjectives efficiently and effectively. Planning involves selecting of objectives and strategies, Policies and

programmes and procedures for achieving them.

For any business activity, planning is a prerequisite for doing anything and also to ensure the proper utilization of

the resources of the business concern to achieve the desired goals.

Plans can be classified into standing plans and single-use plans. Standing plans include Objectives, Policies,

Procedures, methods and rules and single-use plans include Budgets, Programmes, Strategies and Projects.

From the analysis:-

- Planning is concerned with future and its essence is looking ahead;

- It involves thinking and analysis of information;- It involves predetermined course of action;- It is concerned with the establishment of objectives to be attained in the future;- It is fundamentally a problem of choosing after a careful study of alternative courses;- It involves decision-making;- Its objectives is to achieve better results;- It is a continuous and integrated process;

Importance and Benefits of the planning:-

1. Planning offsets future uncertainty and change: A business concern has to work in an environment

which is uncertain and ever-changing. Planning helps the manager in carving out the future course of actionand this brings a higher degree of certainty and order into the organization than would be present without

planning.

2. It tackles increasing complexity in modern business: To run a modern business undertaking, there is a

need for a large number of people with different specialization and complex machines. This makes it

necessary for the management to depend on planning to get a clear idea of what is to be done, when it is to

be done, where it is to be done and how it is to be done.

3. It helps in coordination: Planning, through its defined objectives, well-publicised policies, programmes

and procedures helps the management in the co-ordination process.

4. It helps in exercising effective control: Planning involves the determination in advance of the work to be

done, the person responsible to do it, the time to be taken to do that work and the performance with the

planned one. In the case of deviations, steps may be taken to find out the reasons for such deviations. Thus

planning helps in exercising effective control.

5. It helps in proper utilization of the companys resources: As planning involves deciding in advance of

what is to be done, when, when and by whom is to be done, etc., there is a possibility for the proper

utilization of companys resources and for the achievement of companys objectives at the cheapest and the

best manner.

6. It facilitates unity of action: Under planning, policies, procedures and programmes are predetermined and

every decision and action should be within the framework of predetermined policies and procedures and

programmes. This facilitates unity of action and also avoids confusion or misunderstanding at any level.

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7. It helps in avoiding business failures: As planning involves the selection of best objectives, unity of

action, co-ordination of activities, economy in operation and offsetting of future uncertainty and change,

there is a great possibility of avoiding business failures.

Organizing

Organizing is concerned with the arrangement of an organisations resources- People, Materials, Technology andfinance in order to achieve enterprise objectives. It involves decisions about the division of work, allocation of

authority and responsibility and the coordination of tasks. The function increases in importance as a firm grows. A

structure is created to cope with problems created by growth. Through this formal structure, the various work

activities are defined, classified, arranged and coordinated. Thus organizing refers to certain dynamic ascepts:

- What tasks are to be done?- Who is to do them?- How the tasks are to be grouped?- Who is to report to whom?- Where the decisions have to be made?

Importance of Organizing

1. Aid to management: Organisation aids management in accomplishing enterprise objectives. It helps

management in performing other management functions such as planning, direction, delegation, control,

etc. it increases managements efficiency and promptness, avoids delay and duplication of work and

motivates the employees to perform their job efficiently. It lays solid ground work for focusing the

attention and action of management on the accomplishment of the objectives of an enterprise.

2. Facilitates growth of enterprise: An organization is concerned with activities such as recruitment of

staff, delegation of authority, assignment of responsibility, co-ordination and control of activities at

different work centres etc. with these activities, the organization provides a framework within which the

company grows. Thus, organization facilitates growth of enterprise.

3. Ensures Optimum use ofHuman resources: Organisation affects human resources in a number of ways

such as recruitment, training, placement of workers, bringing harmony in their efforts, improving the

communication network and motivating them to improve their efficiency. All these ensure an optimum use

of human resources of enterprise.

4. Stimulates creativity: Sound organization stimulates creative thinking and initiative on the part of

employees. Delegation of authority provides sufficient freedom to supervisors and this encourages

initiative, creative thinking, resourcefulness, independent thinking, spirit of innovation and enterprise

among them.

5. Adoption of New Technology: A sound organization structure facilitates the optimum use of technological

improvements such as automatic techniques of Production, Control devices, Computer system, etc.

6. Encourages Human use ofHuman resources: A sound organization provides for job rotation and job

enlargement and makes jobs meaningful and interesting. It also provides for efficient methods in selection,

training and promotion of employees. Further it encourages people to work in a team and as human beingsand not as machines. Thus, it facilitates human use of human beings.

7. Facilitates stability of Enterprises: A sound organization has flexibility to adjust to the changes in the

conditions, promotes effective leadership, promotes employee morale, provides for delegation of authority

and develops co-ordination, co-operation and communication. All these factors assure stability to the

enterprise.

8. Executive Development: A sound organization by providing for training of staff at different levels and by

proper delegation and decentralization, helps development of managers.

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Staffing

Staffing is the function of employing suitable persons for the enterprise. It may be defined as an activity where

people are recruited, selected, trained, developed, motivated and compensated for manning various positions. It

includes not only the movement of individuals into an organization, but also their movement through (promotion,

job rotation, transfer) and out (termination, retirement) of the organization. Staffing involves selection of right man

for the right job. The various sub- functions of staffing are:

1. Manpower Planning: It has two aspects, short-term and long-term. While short-term manpower planning is

concerned with matching organizational jobs and individuals, long-term manpower planning is concerned

with the estimation of work force in future.

2. Development: This is concerned with the development of employees through training and development

programmes. This also involves appraisal of performance of employees.

3. Determination of employment standards: This involves job specification and job description so as to enable

the management select and train the employees scientifically.

4. Determining the sources: This is concerned with determining the sources of personnel.

5. Selection and placement: This is involves selection of workers and their placement.

6. Training: This is concerned with providing training to the different types of personnel.

7. Other functions: Other sub- functions of staffing include co-ordination, promotion and transfers,

maintaining of records relating to employees, employees rating, motivating employees, etc.

Directing

Directing means telling people what to do and seeing that they do it as per the plan. It includes assignment of jobs,

issuing of instructions and orders supervising the subordinates and rectifying the errors in time.

Directing consists of process and techniques utilized in issuing instructions and making certain that operations are

carried on as originally planned.

The directing has the following components:

(a) Issuing of instructions and orders to the subordinates for getting the work done;

(b) Guiding subordinates in the proper methods of work.

(c) Supervising subordinates to ensure that their performance conforms to the plans and contributes effectively

to the attainment of enterprise objectives.

Directing involves:

i. Leadership: Leadership is the process of influencing the actions of a person or a group to attain desired

objectives. A manager has to get the work done with and through people. The success of an organization

depends upon the quality of leadership shown by its managers.

ii. Motivation: Motivation is the work a manager performs to inspire encourages and impels people to take

required action. It is the process of stimulating people to take desired courses of action. In order to motivateemployees, manager must provide a congenial working atmosphere coupled with attractive incentives.

iii. Communication. Communication is the transfer of information and understanding from one person to

another. It is a way of reaching others with ideas, facts and thoughts. Significantly, communication always

involves two people; a sender and a receiver. Effective communication is important in organization because

managers can accomplish very little without it.

iv. Supervision: In getting the work done it is not enough for managers to tell the subordinates what they are

required to do. They have also to watch and control the activities of the subordinates. Supervision is seeing

that subordinates do their work and do it as directed. It involves overseeing employees at work.

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Controlling

Control is the process to find out whether actions are being taken as planned and taking corrective actions to make

them conform to plans and then to take necessary

steps to prevent the occurrence of variations in future.

Controlling is determining what is being accomplished, that is, evaluating the performance and, if necessary,

applying corrective measures so that the performance takes place according to plans.

The important features of controlling are:

(a) It is an important managerial function.

(b) It is concerned with setting standards.

(c) It involves the measurement of actual performance.

(d) It brings to light the variations, if any, from the standards set.

(e) Its object in checking the variations is to rectify them and prevent their recurrence.

(f) It is a continuous process.

(g)

It operates on everything, i.e. things, people and actions.

Scope or areas of control:

(a) Control over Policies of an enterprise.

(b) Control over Organization.

(c) Control over personnel employed in a concern.

(d) Control over wages and salaries paid to the employees.

(e) Control over costs of material, labour, overheads etc.

(f) Control over capital expenditure.

(g) Control over Production.

(h) Overall control.

TAYLORS SCIENTIFIC MANAGEMENT THEORY

Frederick Winslow Taylor (1856-1915) who is the father of scientific management worked as a chief engineer in the

Midvale steel works where he joined as a worker. Afterwards, he worked in the Bethlehem steel works and after

retirement from this concern, he worked as a consultant.

Taylor the founder of the scientific management movement states that the object of management should be to secure

the maximum prosperity for each employer, coupled with the maximum prosperity of each employee.

Taylors scientific management, in its essence, consists of a certain philosophy which results in the combination of

four great principles of management, viz.,

the development of true science,

the scientific selection of workers,

their scientific selection and development and intimate,

Friendly co-operation between the management and their workmen.

When management of a business unit is based on the systematic study and analysis of various aspects of work

involved, with a view to finding out the best way of doing things, we call it scientific management of business.

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Broadly speaking scientific management is the art of knowing exactly what is to be done and the best way of doing

it.

Taylor observed that inefficiency prevails n the organization because of three causes, viz.,

(a) Workers feel that any increase in output would lead to unemployment.

(b) Defective systems of management and because of these, each worker restricts his output in order tosafeguard his interests and

(c) Inefficient rule of thumb efforts and wasting methods of work.

The elements of scientific management are:

1) Determination of the task

2) Planning of Industrial operations

3) Proper selection and training of workers

4) Improvement in methods of work

5) Modification of Organization

6) Mental revolution.

Study the work scientifically

Scientific Select workers and train them

Management Match jobs and workers properly

Distribute gains between employees

And employers

Determination of tasks or work-load to each employee is on the basis of method study, routing, motion study, time

study, fatigue study and differential piece-wage system.

After setting the task to the workers the next step is to plan production which requires the planning of industrial

operations. This involves four considerations, viz.,

a) What work shall be done?

b) How the work shall be done?

c) Where the work shall be done?

d) When the work shall be done?.

Proper selection and training of workers and also their correct placement have to be done by the management; there

is need for improvement in the methods of work. This involves the standardization of tools and equipment, speed,condition of work and materials.

Taylor also suggested modification of organization. This involves introduction of Functional foremen ship,

According to this, two functions of planning and doing are divided. He has also suggested eight functional foremen,

viz.,

a) Route clerk; (b) Instruction card clerk; (c) Time and cost clerk; (d) Gang Boss; (e) Speed boss; (f) Repair

boss; (g) Inspector and (i) Shop disciplinarian

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For the success of scientific management, there should be a thorough change in the mental outlook of both the

employees and the employer and their hostility and suspicion give place to mutual co-operation and goodwill.

HENRI FAYOLS PRINCIPLES OF MANAGEMENT

Henri Fayol, the Father of Management Science, has evolved fourteen principles of management which may be

briefly stated as:

1. Division of Work: This is the principle of specialization which applies to all kinds of work. The more

people specialize, the more efficiently they can perform their work. Specialization increases output by

making employees more efficient.

2. Authority and Responsibility: Authority is the right to give orders and the power to obtain obedience. A

manager might use both his official authority and personal authority while getting things done. Official

authority is derived from the managers position and personalauthority is derived from personal qualities

such as intelligence, experience, past services, etc. responsibility arises out of assignment of an activity. An

individual, to whom authority is given to exercise power, must also be prepared to bear responsibility to

perform the work in a satisfactory manner.

3. Discipline: Employees must obey and respect the rules that govern the enterprise. Good discipline is the

result of effective leadership, a clear understanding between management and workers regarding the

organisations rules and the judicious use of penalties for violation of the rules.

4. Unity of command: An employee should receive commands from only one superior. Dual command, as

advocated by Taylor in his principle of functional foremanship where a worker receives orders from a

number of functional specialists, undermines authority and puts discipline in jeopardy. Fayol believed that

when an employee reported to more than one superior, conflict in instructions and confusion of authority

would result.

5. Unity of direction: This principle calls for one manager one plan for all operations having the same

objective. For example, the personnel department in a bank should not have two directions, each with a

different requirement policy. The unity of direction principle, when applied properly, ensures unity of

action and facilities coordination.

6. Sub-ordination of individual interest to general interests: In a business concern, the interest of oneemployee or group of employees should not prevail over the common interest or should not block the

fulfillment of general goals of the business concern. If there is disagreement among the two superiors on

any matter, the management should reconcile the differences so as to conduct the overall operations of the

enterprise smoothly.

7. Remuneration: The remuneration that is paid to the personnel of the firm should be fair and as far as

possible, afford satisfaction both to the personnel and the firm. Employees who are paid decent wages or

salary will have a high morale and their efficiency will be high. Further, contented staff is an asset to the

firm and also there will be good relationship between the management and the employees. The rate of

remuneration paid should be based on general business conditions, cost of living, and productivity of the

concerned employees and the capacity of the firm to pay.

8. Centralisation: If subordinates are given more role and importance in the management and organization of

the firm, it is decentralization whereas if they are given less role and importance, it is centralization.

Management has to decide the degree of centralization and decentralization of decisive authority on the

basis of the nature of circumstances, size of undertaking, the type of activities and the nature of

organizational structure. The objective should be the optimum utilization of all faculties of the personnel.

9. Scalar chain: The graded chain of authority from top to bottom through which all communications flow is

termed as scalar chain. However, if following the chain creates communication delays, cross-

communication can

be permitted, if agreed to by all parties and superiors are kept informed.

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10. Order: Management should obtain orderliness in work through suitable organization of men and materials.

The principle of right place for everything and for every man should be observed by the management. To

observe this principle, there is need for scientific selection of competent personnel, correct assignment of

duties to the personnel and good organization.

11. Equity: Managers should be fair in dealing with employees. Equity is the combination of justice and

kindness. The application of equity requires good sense, experience, and good nature for soliciting loyalty

and devotion from subordinates.

12. Stability of tenure of personnel: Stability of tenure is essential because time is required for an employee

to get used to new work and succeed in doing it well. Management must, therefore, implement practices

which encourage long-term commitment of employees. Instability of tenure can significantly affect the

fortunes of a company.

13. Initiative: Employees must be encouraged to think through to implement a plan of action, even though

some mistakes may result. The opportunity to perform independently is an essential component of

employee growth and development.

14. Esprit de Corps: Since Union is strength, the management should create team spirit among the

employees. Only when all the personnel pull together as a team, there is scope for realizing the objectives

of the concern. Harmony and unity of the staff of a concern is a great source of strength to the undertaking.

The management should not follow the policy ofdivide and rule and it should strive to maintain unityamong the staff. If there are any differences or misunderstandings or symptoms of distrust, the management

should take timely steps to eliminate them.

Maslows Theory ofHierarchy of needs

According to Maslow, human needs form a hierarchy, starting at the bottom with the physiological needs and

ascending to the highest need of self-actualization as shown. He says when one set of needs are satisfied they no

longer work as motivators as a man seeks to satisfy the next higher level needs.

The Need Hierarchy

i. Physiological Needs: These are the basic necessities of human life- food, water, warmth, shelter and sexual

satisfaction. Maslow says that until these needs are satisfied to the required level the man does not aim for

the satisfaction of the next higher level needs. As far as work organization is concerned these needs include

basic needs like pay, allowance, incentives and benefits.

ii. Security/Safety needs: These refer to the need to be free of physical danger or the feeling of loss of food,

job or shelter. When the physiological needs are satisfied man starts thinking of the way by which he can

continue to satisfy these physiological needs. Security needs spring up the moment the makes an effort in

the direction of providing himself the source of continuity of physiological needs. This is exactly the reason

why attitude toward security is an important consideration in choosing the job. These needs as far as work

organization is concerned include: Conformity, Security plans, Membership in unions, Severance pay etc.

iii. Social Needs: (Affiliation or Acceptance needs) When the physiological and security needs are satisfied

these social needs begin occupying the mind of a man. This is exactly why he looks for the association ofother human beings and strives hard to be accepted by its group. Social needs at work place include:

Human relations, formal and informal work groups.

iv. Esteem Needs: These needs are power, prestige, status and self-confidence. Every man has a feeling of

importance and he wants others to regard him highly. These needs make people aim high and make them

achieve something great. These needs for employees include status symbols, awards, promotions, titles etc.

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v. Self-Actualisation Needs: This is the highest need in the hierarchy. This refers to the desire to become

what one is capable of becoming. Man tries to maximize his potential and accomplish something, when this

need is activated in him.

Need

For self-

Actualisation

Esteem Needs

Affiliation or Acceptance

Needs

Security or Safety Needs

Physiological Needs

Hawthorne Experiments

Elton Mayo, who is considered to be the founder of human relations movement and his associates, conducted the

Hawthorne studies in the Hawthorne plant of western electric company, USA, between 1927 and 1932. They stated

that the employees morale has great influence on productivity and the manager should treat them as social beingsinstead of economic being or simply as cogs in a machine. For solving any management problem, the manager

should understand group attitudes and psychology as employees are members of a group.

The purpose of the experiment was to determine the effects of different levels of illumination on workers

productivity. The intensity of light under which one group was systematically varied (test group) while the light was

held constant (control group) for the second group. The productivity of the test group increased each time the

intensity of the light increased. However, productivity also increased in the control group which received no added

light. The researchers felt that something besides lighting was influencing the workers participation.

Maximum potential

power

Pay, Allowance,

Incentives, Benefits

Power, Prestige,

Status, Self-Confidence

Human relations,

Formal and Informal

work groups

Conformity, Security

plans, Membership in

unions, Severance pay

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Facts discovered by Hawthorne experiments:

y Social system defines individual roles and establishes norms. These roles and norms of the social system

differ from those of the formal organization.

y Workers follow the social norms rather than achieving the goals.

y Non economic rewards and social sanctions, in addition to economic rewards play a vital role in guiding

the human behavior at work.

y Perception of the workers of the situations rather than of the management matters much.

y Workers fear retaliation for violating the group norms and therefore, they are motivated by group norms

much rather than economic incentives.

y Individual workers attitudes and performance are shaped and determined by the groups. Workers mostly

react as members of groups but not as individuals. Workers prefer to change their behavior based on the

changes in group behavior.

y Informal leader sets and enforces group norms. Official leader proves himself ineffective unless he

confirms to the group norms.

y Workers have need for communication, participation and involvement in decision- making and democratic

leadership. Lower level workers are informed of the decisions and the process which affect them.

y High level job satisfaction leads to high level organization effectiveness.y Managers should have social skills in addition to technical skills and

y Motivating the workers is possible by fulfilling not only lower level needs but also by higher level needs.

Douglas McGregors Motivation Theory X and Theory Y

Douglas McGregor, an American social psychologist, proposed famous X-Y theory in 1960, Douglas McGregor

made his mark on the history of organizational management when he proposed the two theories of motivation by

which managers view employee motivation. He referred to these nearly opposite theories as Theory X and Theory

Y. Both of these theories assume that management's role is to organize resources, including people, to best benefitthe organization.

Motivation Theory X

A Theory X manager makes the following general assumptions:

y Work is inherently distasteful to most people, who will attempt to avoid work whenever possible.

y Most people are not ambitious, have little desire for responsibility, and prefer to be directed.

y Most people have little capacity for creativity in solving organizational problems.

y Motivation occurs only at the physiological and security levels of Maslow's Hierarchy of Needs

y

Most people are self-centered. As a result, they must be closely controlled and often coerced to achieveorganizational objectives

y Most people resist change.

y Most people are gullible and not particularly intelligent.

Essentially, Theory X assumes that the primary source of most employee motivation is money, with security as a

strong second.

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The Problem with Theory X

Drawing on Maslow's Needs Hierarchy, McGregor argues that a need, once satisfied, no longer motivates. Under

Motivation Theory X, the firm relies on money and benefits to satisfy employees' lower needs, and once those needs

are satisfied the source of motivation is lost. Theory X management styles, in fact, hinder the satisfaction of higher-

level needs. Consequently, the only way that employees can attempt to satisfy their higher level needs in their work

is by seeking more compensation, so it is quite predictable that they will focus on monetary rewards. While money

may not be the most effective way to self-fulfillment, in a Theory X environment it may be the only way. Under

Theory X, people use work to satisfy their lower needs, and seek to satisfy their higher needs in their leisure time.

Unfortunately, employees can be most productive when their work goals and higher level needs are in alignment.

McGregor makes the point that a command and control environment is not effective because it relies on lower needs

as levers of motivation, but in modern society those needs already are satisfied and thus no longer motivate. In this

situation, one would expect employees to dislike their work, avoid responsibility, have no interest in organizational

goals, resist change, etc., thus creating a self-fulfilling prophecy. From this reasoning, McGregor proposed an

alternative: Theory Y.

Motivational Theory Y

The higher-level needs of esteem and self-actualization are continuing needs in that they are never completely

satisfied. As such, it is these higher-level needs through which employees can best be motivated.

In strong contrast to Theory X, a Theory Y manager makes the following general assumptions:

y Work can be as natural as play if the conditions are favorable.

y People will be self-directed and creative to meet their work and organizational objectives if they are

committed to them.

y People will be committed to their quality and productivity objectives if rewards are in place that addresses

higher needs such as self-fulfillment.y The capacity for creativity spreads throughout organizations.

y Most people can handle responsibility because creativity and ingenuity are common in the population.

y Under these conditions, people will seek responsibility.

Under these assumptions, there is an opportunity to align personal goals with organizational goals by using the

employee's own need for fulfillment as the motivator. McGregor stressed that Theory Y management does not imply

a soft approach. McGregor recognized that some people may not have reached the level of maturity assumed by

Theory Y and therefore May need tighter controls that can be relaxed as the employee develops.

Applying Theory Y Management - Business Implications

If Theory Y holds true, an organization can use these principles of scientific management to improve employee

motivation:

y Decentralization and Delegation - If firms decentralize control and reduce the number of levels of

management; managers will have more subordinates and consequently will be forced to delegate some

responsibility and decision making to them.

y Job Enlargement - Broadening the scope of an employee's job adds variety and opportunities to satisfy ego

needs.

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y Participative Management - Consulting employees in the decision making process taps their creative

capacity and provides them with some control over their work environment.

y Performance Appraisals - Having the employee set objectives and participate in the process of evaluating

how well they were met.

If properly implemented, such an environment would result in a high level of motivation as employees work to

satisfy their higher level personal needs through their jobs.

Herzbergs Two-factor Theory of Motivation

Maslows theory has been modified by Herzberg and he is called it two-factor theory of motivation. According to

him the first groups of needs are such things as company policy and administration, supervision, working conditions,

Interpersonal relations, salary, status, job security and personal life. Herzberg called these factors as Dissatisfiers

and not motivators. By this he means that their presence or existence does not motivate in the sense of yielding

satisfaction, but their absence would result in dissatisfaction. These are also referred to as hygiene factors.

In the second group are the satisfiers, in the sense that they are motivators, which are related to job content. He

included the factors of achievement, recognition, challenging work, advancement and growth in the job. He says thattheir presence will yield feelings of satisfaction or no satisfaction, but not dissatisfaction.

Maintenance Factors or Dissatisfiers or Hygiene

factors

Motivational factors or satisfiers

Job contextExtrinsic factorsCompany policy and Administration

Quality of supervisionRelations with supervisorsPeer RelationsRelations with subordinatesPayJob securityWork conditionsStatus

Job contentIntrinsic factorsAchievement

RecognitionAdvancementWork itselfPossibility of growthResponsibility

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Systems Approach to Management

Systems Approach tries to solve problems by diagnosing them within a framework of inputs, transformation

processes, outputs and feedback.

It attempts to view the organization as a single unified, purposeful entity, composed of interrelated parts. Rather than

dealing separately with the various parts of an organization, the systems theory gives managers a way of looking at

an organization as a whole and as a part of the larger, external environment. The job of manager is to ensure that all

parts of the organization are coordinated internally so that the goals can be achieved.

Systems Terminology

System: A set of inter-related parts (sub-systems). Each part may have various sub-parts. These parts are mutuallyrelated to each other. Usually a change in one part would lead to a change in other parts.

Sub-system: The parts that make up the whole of a system are called sub-systems. And each system may, in turn, bea sub-system of a still larger whole. Thus, a department may be a sub-system of a plant, which may be a sub-systemof a company, which may be a sub-system of an industry, etc. there are five sub-systems within an organization:

(1) Goal sub-system (individual and group goals)(2) Technical sub-system (tools, equipment, employee skills, knowledge)(3) Structural sub-system (authority layers and relationships)(4) Managerial sub-system (managers who plan, lead and control)(5) Psychosocial sub-system (psychological and social factors influencing people at work).

Synergy: Synergy means that the whole is greater than the sum of its parts. When the parts of an organization areproperly interrelated (such as an assembly line), the output is much greater than it would otherwise be. Synergyrepresents one of the basic challenges of management, getting all of the elements of an organization functioningtogether so that output is optimal.

Open and Closed systems: A system is considered an open system if it interacts with its environment; it isconsidered a closed system if it does not. An organization that is not adaptive and responsive to its environmentwould not survive or grow in any extended period of time. It has to be responsive to demands placed on it by both itsinternal and external environments.

System boundary: Each system has a boundary that separates it from its environment. In a closed system, thesystem boundary is rigid; in an open system, the boundary is more flexible. The system boundaries of manycompanies have become more flexible in recent times. For example, oil companies wishing to engage in offshoredrilling have increasingly had to consider public relation to the potential environmental harm.

Flow: An open system receives inputs form its environment which are transformed into outputs in interaction withenvironmental variables. For a business firm inputs would be material, labour and capital. The transformation

process would turn these inputs into finished products and services. The systems success depends on successfulinteractions with its environment; these might include suppliers, unions, financial institutions, government agenciesand customers. The sale of output generates revenue, which can be used to pay wages and taxes, buy inputs, repayloans, and generate profits for shareholders.

Feedback: Feedback is central to system controls. As operations of the system proceed, information is fed back to

the appropriate people or perhaps to a computer so that the work can be assessed, and if needed, corrected. Feedbackprovides warning signals regarding impending dangers. For example, customer complaints may demand attention to

product improvement, customer service etc.

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Levels of Management

All managers positions involve performance of management functions (Planning, Organizing, Directing, Staffing,

and Controlling). But there are differences among managerial jobs. The differences arise because of the existence of

various levels of management. The levels of management are usually identified in three levels

a) Top level managementb) Middle level management

c) Lower level management

a) Top level management

Determines objectives and policies.

Designs the basic operating and financial structure of an organization.

Provides guidance and direction

Lays down standards of performance.

Maintains good public relations.

Top Level Management

Middle level Management

Lower level Management

b) Middle level management

Interprets and explains the policies framed by the top.

Issues detailed instructions.

Participates in operating decisions.

Trains other managers.

c) Lower level management

Plans day-to-day operations. Assigns jobs to workers Provides supervision and control over work. Arranges material tools and equipment. Maintains discipline.

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Leadership Styles

The behavioural pattern which a leader adopts to direct the behavior of members in an enterprise for achieving the

organization goals is known as the style of leadership.

Different leadership styles may be adopted by the leaders at different times and in different circumstances. Among

the different leadership styles, the three important leadership styles are:

(1) Autocratic or Authoritarian leader

(2) Participative or Democratic leader

(3) Laissez faire or free-rein style

(1) Autocratic or Authoritarian leader: The autocratic leader is one who centralizes decision-making power in

himself and gives orders to his employees and also insists that they should be obeyed. He decides policies for

the group without consulting the group and also asks the group to take steps as per policies determined by

him. He does not delegate authority and runs the whole show by himself. He does not inform the employees

the purpose of the plans. He expects his employees to obey him blindly and without asking the questions and

has no regard for them and does not like to seek their suggestions or advice. Such leadership is negative

because the followers are uninformed, insecure and afraid of leaders authority.

Autocratic leadership can be of two types.

a) Strict autocrat: A strict autocrat is one who relies on negative influences and gives orders which must

be obeyed by the subordinates without questions being asked. His method of influencing subordinate

behavior is through negative motivation, that is, by imposing penalty, criticizing subordinates, etc.

b) Benevolent autocrat: A benevolent autocrat is one who uses a positive motivation style. He disperses

rewards to his group. This type is effective in getting higher productivity and in developing good

human relationships.

Advantages of Autocratic

(a) Some employees get satisfaction by working under centralized authority situation and strict discipline.

(b) As the decisions are taken by a single person, it permits quick decision.

Disadvantages of Autocratic

(a) Because of the strictness and negative motivational style the employees dislike it;

(b) Lack of motivation, low morale, frustration and insecurity affect the organizational efficiency;

(c) There is no scope for individuality and initiative;

(d) Future leaders in the organization do not develop.

(2) Participative or Democratic leader: A democratic leader is one who takes decisions in consultation with his

subordinates. He emphasizes consultation with and participation of his subordinates and encourages initiativefrom them. He also seeks their advice and opinions on matters which affect them and their jobs.

He does not take a unilateral decision and decentralizes his decision-making process and also authority.

Participative leaders have a high concern for people and work.

Advantages of Democratic

(a) It increases the acceptance of managements ideas and reduces resistance to

change.

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(b) As the ideas and suggestions of employees are considered for decision-making they are highly motivated

and their morale also is high.

(c) The decisions are implemented whole-heartedly and the employees productivity is increased.

(d) It reduces the number of grievances of employees

(e) It seeks to evolve a self-regulation and self-discipline mechanism.

(f) As the subordinates are involved in the decision-making process, there is a possibility for making better

decision.

(g) Good relationship between the leader and the followers can take place.

As the advantages are more than the disadvantages, most employees prefer this style of leadership.

(3) Laissez faire or free-rein style: Under this style of leadership, the leader entrusts the decision-making

authority to his subordinates. He does not direct and hardly makes any contribution to overall effort. He

avoids using power and leaves it to his subordinates to establish the goals and work out the plan to attain the

goals. While the group members provide their own motivation, the manager usually contacts the outside

sources and brings information and material which the members of the group require to perform their job.

This style of leadership can be adopted only if the subordinates have a sincere desire to discharge their

responsibilities, and are highly competent and duty conscious and motivated to do the job even without any directionby the manager. Such instances, of course, either do not exist or are found to be rare.

Social Responsibilities of Management

The social responsibility of business refers to such decisions and activities of a business firm which provide for the

welfare of the society as a whole along with the earning of profit for the firm. The business firm functions and acts

in such a way that it will accomplish social gains (social output) along with the traditional economic gains

(economic output) in which the business firm is interested.

Social responsibility refers to The businessmans decisions and actions taken for reasons at least partially beyond

the firms direct economic or technical interest.

The social responsibilities are obligations to pursue those policies, to make those decisions or to follow those lines

of action which are desirable in terms of the objectives and values of our society.

The nature of social obligations to be discharged by the businessmen to the various sections of the society.

Responsibility to owners:

Utilising funds in best possible manner.

Ensure a fair rate of return regularly.

Fair and honest reporting of business operations from time to time.

Responsibility to Employees:

Recognise the social needs of workers and provide adequate participation to employees in matters affecting

their life.

Fair and reasonable rates of pay

Creating a healthy work climate, improving working and living conditions and making the work place safe

and pleasant.

Improving the quality of working life of employees.

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Responsibility to Creditors and Suppliers:

Provide accurate information regarding the financial health of the organization.

Ensure a reasonable price for the articles supplied, and make prompt repayments (involving interest on

borrowings); there should be fairness in transactions.

Promote a healthy atmosphere where creditors, suppliers and other interest groups are treated as partners in

a cooperative Endeavour.

Responsibility to Government:

Follow fair trade policies and practices.

Pay taxes to the government honestly

Obey the laws

Discourage unhealthy practices like bribing the government officials to curry favours, obtain licences in

order to kill the competition, etc.

Responsibility to Customers:

Providing goods of superior quality at reasonable prices.

Avoiding deceitful, false and highly exaggerated advertisements and high pressure publicity gimmicks

aimed at wooing the customers away from competitors.

Management should not indulge in anti-social activities like black marketing, hoarding, etc.

Responsibility to Society:

Elimination of poverty and provision of quality health care.

Preservation of the environment by reducing the level of pollution

Providing equal employment and educational opportunities to all, regardless of race, colour, cred or sex.

Providing sufficient number of jobs and career opportunities and facilities to all members of society.

Improving the physical environment and developing human resources fully.

Responsibility to Community:

Develop constructive relationship with members of the community.

Participate in community activities and promote community welfare. Renovating neighbourhoods

surrounding the companys headquarters, building public parks with playground equipment, and granting

employees paid leave of absence to work in social programmes.

Offer good housing and efficient transportation to own employees and to poorer sections of the community.

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UNIT II: DESIGNING ORGANIZATIONAL STRUCTURES: Basic Concepts related to Organization Departmentation and Decentralization, Types of mechanistic and organic structures of organization (Lineorganization, Committee organization, Matrix organization, Virtual organization, Cellular organization, Teamstructure, Boundary less organization, Inverted pyramid structure, Lean and Flat organization structure) and theirmerits, demerits and suitability.

Organizing and Organization

Organizing is a process of (a) determining, grouping and structuring the activities; (b) creating roles for

effective performance at work; (c) allocating necessary authority and responsibility for results; and (d)

determining detailed procedures and systems for different problem areas such as coordination,

communication, decision-making, motivation, conflict resolution etc. The ultimate result of organizing

is an organization.

If the entire organization is viewed as a system, its sub-systems are the departments of production,

marketing, finance etc.

Organizations may be formal, informal or both.

A formal organization is a structure of relationships which enables persons in official capacity

(a) are able to communicate with one another; (b) are willing to act in an atmosphere of

cooperation; and (c) share a common explicit performance.

An informal organization is a network of relationships, which develop because of common

interests existing among the members but not because of any official proclamation. The likes

and dislikes of the members, not the rules and regulations, bind the informal organization.

Informal organizations do not appear on the organization charts. However, the informalorganizations ensure the success of the formal organization. It is so because the rules and

regulations of the organization do not yield results. The degree of participation and

involvement of people in the organization yield results. Informal organizations such as week-

end meets, cultural meets, sports meets etc., develop bonds which in turn, strengthen the

degree of participation and involvement of people in the organizations.

BASIC CONCEPTS RELATED TO ORGANIZATION

Organizational hierarchy

Organizational hierarchy refers to the layers of management from top management down to

managers/supervisors of the lowest rank. In a small organization, there are very few layers of hierarchy. In sole trader type of organizations, the

owner makes and implements the decisions. In large organizations, there are many levels of hierarchy. Employees have varying degrees of authority in

such hierarchies. The top management, consisting of the Board of Directors and the Chief Executive, isconcerned with formulation of strategic long-term plans and policy decisions. It is their responsibility toensure that the subordinates implement these plans and decisions.

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Orders pass through a clear chain of command running from the top level to the lowest level, in theorganization. The data such as sales, revenues, output, staff turnover etc. are forwarded to the topmanagement through periodical reports to enable them to take decisions.

Authority and Responsibility

Authority is the power to give commands and to use discretion vested in that particular position/job. If

a person is removed from the job or if he leaves the job, he loses the authority.

Responsibility is the obligation to accomplish the goals related to the position and the organization.Authority can be transferred to lower levels but not responsibility.

Managers, at no matter what level of the organization, typically have the same basic responsibilitieswhen it comes to managing the work force: Directing employees toward objectives, oversee the workeffort of employees, deal with immediate problems, and report on the progress of work to theirsuperiors. Managers' primary responsibilities are to examine tasks, problems, or opportunities inrelationship to the company's short-and long-range goals. They must be quick to identify areas of

potential problems, continually search for solutions, and be alert to new opportunities and ways to takeadvantage of the best ones.

Authority and responsibility should always be commensurate and coexistent with each other. Whereauthority exceeds responsibility, it may lead to misutilisation of authority. Where responsibility exeedsauthority, it leads to frustration as he is not given the authority to get the tasks completed.

Delegation of Authority

In order for managers to achieve goals in an efficient manner, part of their work may be assignedto others. When work is delegated, tasks and authority are transferred from one position to anotherwithin an organization.

In order to effectively delegate work, some guidelines should be followed:(a) Determine what each worker can most effectively accomplish;(b) decide whether the worker should just identify a problem or also propose a solution;(c) consider whether the person can handle the challenge of the task;(d) be clear in the objectives of the task;(e) encourage questions; explain why the task is important;(f) determine if the person has the appropriate resourcestime, budget, data, or

equipmentto get the job done on a deadline;(g) create progress reviews as part of the project planning; and be prepared to live withless than perfect results.

Some employees resist delegation for a variety of reasons. Initiative and responsibility involve risk thatthey try to avoid. People tend to play it safe if risk results in criticism. Those who feel they alreadyhave more work than they can also avoid new assignments. Some people doubt their own abilities andlack the self-confidence to tackle new assignments.

Delegation is an excellent professional development tool so long as it expands a worker's expertise andgrowth. Delegation can also compensate for a manager's weakness. A successful team is developed by

building on the strengths of its members. People develop most when stimulated to broaden themselveswhen challenged. More authority can

add challenge; too much challenge, however, can frustrate people and cause them to avoid newresponsibilities. Delegation should involve acceptable challengeenough to motivate but not so muchas to frustrate.

Centralisation/Decentralisation

Centralisation is the process by which the activities of an organisation, particularly those regardingplanning and decision-making, become concentrated within a particular location and/or group.

In political science, this refers to the concentration of a government's power - both geographically andpolitically, into a centralised government. In neuroscience, centralization refers to the evolutionary trend ofthe nervous system to be partitioned into a central nervous system and peripheral nervous system.

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In Management Studies, centralisation and decentralisation refer to where decisions are taken in the chainof command. An organization is said to be centralized when the authority to take decisions is held by thecorporate office. If the authority to take decisions is delegated to regional offices, then the organization issaid to be decentralized.

Factors determining degree of decentralization

(1) Attitude of Top Management: If the top management wants all the decision-making authority to beconfined to itself and to a few key executives, it may prefer centralization. On the other hand, if the topmanagement wants to have only overall control over the organization and prefers decision-makingauthority to be dispersed at different levels of the organization, it may prefer the idea ofdecentralization.

(2) Size of the Enterprise/Scale of Operations: If the size of the concern or the scale of its operations issmall, centralization can prove to be effective. On the other hand, if there are a number of operations to

be performed through many departments or divisions, decentralization can be ideal.(3) Nature of Functions: In a manufacturing concern, production and marketing are the basic functions.

Such basic functions may be decentralized for better results. Functions such as personnel and finance,meant to facilitate the performance of the basic functions, may be centralized to derive greaterefficiency.

(4) Extent of Diversification: If the business enterprise is producing and marketing different types ofproducts, decentralization will be more beneficial.

(5) Availability of capable managers: The decision on decentralization is very much influenced by theavailability of efficient managers. In fact, decentralization will be successful only if the topmanagement is able to find capable managers to effectively manage the different departments ordivisions of the enterprise.

(6) Significance of the decision: If the decision to be taken is very significant and costly, the decisionmay be taken at top management level. If the decisions to be taken are insignificant, then the decision-making may be decentralized.

(7) Sophistication of control techniques: If the control techniques (such as statistical devices, accountingcontrols, usage of computers) are sophisticated, the organization could be directed towardsdecentralization.

(8) Changes in the internal and external environment: If the changes in the organizations environmentare very fast, the top management cannot continue to take decisions both at the macro level and at themicro level. The only alternative is to encourage the managers at lower to use their discretion and takecalculated risks.

(9) Influence of external factors: If the external factors such as government control over matters relatingto price, working conditions and taxes etc. have a lot of influence on the business undertaken, thedecision-making cannot be left to the managers at the department level. The top management wouldcontinue to take decisions.

Span of Control

Span of control or span of management is a dimension of organizational design measured by the number ofsubordinates that report directly to a given manager. This concept affects organization design in a variety ofways, including speed of communication flow, employee motivation, reporting relationships, and

administrative overhead. Span of management has been part of the historical discussion regarding the mostappropriate design and structure of organizations.

A small, or narrow, span of control results in each manager supervising a small number of employees,while a wide span of management occurs when more subordinates report directly to a given manager.

A small span of management would make it necessary to have more managers and more layers ofmanagement to oversee the same number of operative employees than would be necessary for anorganization using a wider span of management.

The narrower span of management would result in more layers of management and slower communicationsbetween lower level employees and top level managers of the firm. Recent moves to downsize

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organizations and to eliminate unnecessary positions has resulted in many organizations moving to widerspans of management and the elimination of layers of middle-level managers.

An argument for a narrow span of control was presented by V.A. Gaicunas, who developed a formulashowing that an arithmetic increase in the number of a manager's subordinates resulted in a geometricincrease in the number of subordinate relationships that a manager had to manage. According to Gaicunas,managers must manage not only one-to-one direct reporting relationships, but also relationships withvarious groups of subordinates and the relationships that exist between and among individual subordinates.The formula is shown below:

Number of all kinds of relationships (N) = n (2n-1+ n-1)

where N is the total number of interactions and n is the number of subordinates.Therefore, if a manager has two subordinates, there are 6 potential relationships to manage. However, if themanager's subordinates are increased to three, then the number of relationships is increased to 18. As the number ofrelationships increased, Gaicunas argued, the sheer number of interactions would exceed the abilities of themanager.

Researchers generally argue that a small span of management and a "tall" organization structure will bemore expensive to operate because of the large number of managers and it may have communication

problems resulting from the multiple levels of management. Such organizations are often seen as wellsuited for a stable, certain type of environment. A "flat" organization design resulting from a wider span ofmanagement would require managers to assume more administrative duties since those activities would beshared by fewer employees. It will also result in more employees reporting to each manager, increasing themanagers' supervisory responsibilities. However, some research also suggests the wider span ofmanagement may cause employees to feel greater ownership of their work and increase their motivation,morale, and productivity. This type of organization design is often seen as effective in more uncertainenvironments.

FACTORS THAT AFFECT SPAN OF CONTROL

While early discussions of span of control often centered on pinpointing the optimal number of subordinates, anumber of factors may influence the span of control most appropriate for a given management position. Assumingthat all other aspects of a manager's job are the same, these factors would likely alter the span of management asfollows:

1. Job complexity. Subordinate jobs that are complex, ambiguous, dynamic or otherwise complicated willlikely require more management involvement and a narrower span of management.

2. Similarity of subordinate jobs. The more similar and routine the tasks that subordinates are performing,the easier it is for a manager to supervise employees and the wider the span of management that will likely

be effective.3. Physical proximity of subordinates. The more geographically dispersed a group of subordinates the more

difficult it is for a manager to be in regular contact with them and the fewer employees a manager couldreasonably oversee, resulting in a narrower span of management.

4. Abilities of employees. Managers who supervise employees that lack ability, motivation, or confidencewill have to spend more time with each employee. The result will be that the manager cannot supervise asmany employees and would be most effective with a narrower span of management.

5. Abilities of the manager. Some managers are better organized, better at explaining things to subordinates,and more efficient in performing their jobs. Such managers can function effectively with a wider span ofmanagement than a less skilled manager.

6. Technology. Cell phones, email, and other forms of technology that facilitate communication and theexchange of information make it possible for managers to increase their spans of management overmanagers who do not have access to or who are unable to use the technology.

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The trend in recent years has been to move toward wider spans of control to reduce costs, speed decision making,increase flexibility and empower employees. However, to avoid potential problems of wide spans of control,organizations are having to invest in training managers and employees and in technology enabling the sharing ofinformation and enhancing communication between and among managers and employees.

Tall Organisation

In its simplest form a tall organisation has many levels of management and supervision. There is a long chain ofcommand running from the top of the organisation eg Chief Executive down to the bottom of the organisation egshop floor worker. The diagram below neatly captures the concept of a tall structure.

However, tall structures rarely exceed 8 levels of management. This is firstly because the number of layers (i.e.management levels) decreases the span of control. Secondly the disadvantages of the tall structure begin to outweighthe advantages of a tall structure.

Advantages of tall Organisations Disadvantages of tall Organisationsy There is a narrow span of control ie each

manager has a small number of employeesunder their control. This means thatemployees can be closely supervised.

y The freedom and responsibility of employees(subordinates) is restricted.

y There is a clear management structure. y Decision making could be slowed down asapproval may be needed by each of the layersof authority.

y The function of each layer will be clear anddistinct. There will be clear lines ofresponsibility and control.

y Communication has to take place throughmany layers of management.

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Flat Organisation

In contrast to a tall organisation, a flat organisation will have relatively few layers or just one layer of management.This means that the Chain of Command from top to bottom is short and the span of control is wide. Due to thesmall number of management layers, flat organisations are often small organisations.

Advantages of flat Organisations Disadvantages of flat Organisations

y More/Greater communication betweenmanagement and workers.

y Workers may have more than onemanager/boss.

y Better team spirit. y May limit/hinder the growth of theorganisation.

y Less bureaucracy and easier decision making. y Structure limited to small organisations suchas partnerships, co-operatives and some

private limited companies.

y Fewer levels of management which includesbenefits such as lower costs as managers aregenerally paid more than worker.

y Function of each department/person could beblurred and merge into the job roles of others.

TYPES OF STRUCTURES OF ORGANIZATION

One of the most challenging tasks of a business may be organizing the people who perform its work. A businessmay begin with one person doing all the necessary tasks. As the business becomes successful and grows, however,there is generally more work, and more people are needed to perform various tasks. Through this division of work,individuals can become specialists at a specific job. Because there are several peopleoften in different locations

working toward a common objective, "there must be a plan showing how the work will be organized. The plan forthe systematic arrangement of work is the organization structure.

(1) LINE ORGANIZATION

It is the oldest and simplest method of administrative organization.

According to this type of organization, the authority flows from top to bottom in a concern.

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The line of command is carried out from top to bottom. This is the reason for calling this organization asscalar organization which means scalar chain of command is a part and parcel of this type of administrativeorganization.

In this type of organization, the line of command flows on an even basis without any gaps in

communication and co- ordination taking place.

Features of Line Organization

1. It is the simplest form of organization.2. Line of authority flows from top to bottom.3. Specialized and supportive services do not take place in these organization.4. Unified control by the line officers can be maintained since they can independently take decisions in their

areas and spheres.5. This kind of organization always helps in bringing efficiency in communication and bringing stability to a

concern.

Merits of Line Organization

1. Simplest- It is the simplest and oldest method of administration.2. Unity of Command- In these organizations, superior-subordinate relationship is maintained and scalar

chain of command flows from top to bottom.3. Better discipline- The control is unified and concentrates on one person and therefore, he can

independently make decisions of his own. Unified control ensures better discipline.4. Fixed responsibility- In this type of organization, every line executive has got fixed authority, power and

fixed responsibility attached to every authority.5. Flexibility- There is a co-ordination between the top most authority and bottom line authority. Since the

authority relationships are clear, line officials are independent and can flexibly take the decision. Thisflexibility gives satisfaction of line executives.

6. Prompt decision- Due to the factors of fixed responsibility and unity of command, the officials can takeprompt decision.

Demerits of Line Organization

1. Over reliance- The line executives decisions are implemented to the bottom. This results in over-relyingon the line officials.

2. Lack of specialization- A line organization flows in a scalar chain from top to bottom and there is noscope for specialized functions. For example, expert advices whatever decisions are taken by line managersare implemented in the same way.

3. Inadequate communication- The policies and strategies which are framed by the top authority are carriedout in the same way. This leaves no scope for communication from the other end. The complaints andsuggestions of lower authority are not communicated back to the top authority. So there is one waycommunication.

4. Lack of Co-ordination- Whatever decisions are taken by the line officials, in certain situations wrongdecisions, are carried down and implemented in the same way. Therefore, the degree of effective co-

ordination is less.5. Authority leadership- The line officials have tendency to misuse their authority positions. This leads to

autocratic leadership and monopoly in the concern.

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(2) LINE AND STAFF ORGANIZATION

Line and staff organization is a modification of line organization and it is more complex than lineorganization.

According to this administrative organization, specialized and supportive activities are attached to the lineof command by appointing staff supervisors and staff specialists who are attached to the line authority.

The power of command always remains with the line executives and staff supervisors guide, advice andcounsel the line executives. Personal Secretary to the Managing Director is a staff official.

MANAGING DIRECTOR

Production Manager Marketing Manager Finance Manager

Plant Supervisor Market Supervisor Chief Assistant

Foreman Salesman Accountant

Features of Line and Staff Organization

1. There are two types of staff :a. Staff Assistants- P.A. to Managing Director, Secretary to Marketing Manager.

b. Staff Supervisor- Operation Control Manager, Quality Controller, PRO2. Line and Staff Organization is a compromise of line organization. It is more complex than line concern.

3. Division of work and specialization takes place in line and staff organization.4. The whole organization is divided into different functional areas to which staff specialists are attached.5. Efficiency can be achieved through the features of specialization.6. There are two lines of authority which flow at one time in a concern :

a. Line Authorityb. Staff Authority

7. Power of command remains with the line executive and staff serves only as counselors.

Merits of Line and Staff Organization

1. Relief to line of executives- In a line and staff organization, the advice and counseling which is provided tothe line executives divides the work between the two.The line executive can concentrate on the execution

of plans and they get relieved of dividing their attention to many areas.2. Expert advice- The line and staff organization facilitates expert advice to the line executive at the time ofneed. The planning and investigation which is related to different matters can be done by the staff specialistand line officers can concentrate on execution of plans.

3. Benefit of Specialization- Line and staff through division of whole concern into two types of authoritydivides the enterprise into parts and functional areas. This way every officer or official can concentrate inits own area.

4. Better co-ordination- Line and staff organization through specialization is able to provide better decisionmaking and concentration remains in few hands. This feature helps in bringing co- ordination in work asevery official is concentrating in their own area.

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5. Benefits of Research and Development- Through the advice of specialized staff, the line executives, theline executives get time to execute plans by taking productive decisions which are helpful for a concern.This gives a wide scope to the line executive to bring innovations and go for research work in those areas.This is possible due to the presence of staff specialists.

6. Training- Due to the presence of staff specialists and their expert advice serves as ground for training toline officials. Line executives can give due concentration to their decision making. This in itself is atraining ground for them.

7. Balanced decisions- The factor of specialization which is achieved by line staff helps in bringing co-ordination. This relationship automatically ends up the line official to take better and balanced decision.

8. Unity of action- Unity of action is a result of unified control. Control and its effectivity take place whenco- ordination is present in the concern. In the line and staff authority all the officials have gotindependence to make decisions. This serves as effective control in the whole enterprise.

Demerits of Line and Staff Organization

1. Lack of understanding- In a line and staff organization, there are two authority flowing at one time. Thisresults in the confusion between the two. As a result, the workers are not able to understand as to who istheir commanding authority. Hence the problem of un

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