B.com Part 2 Management Notes!

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Chapter 4 - Administrative Theory of Management/Principles of Management

* Administrative theory of Management

* Principles of Management

* Nature of Management Principles

* Characteristics of Management Principles

Q.1. Describe in brief the administrative theory of Management?
Briefly explain the Fayol's general principles of Management.
To arrange is to forecast and plan, to organize, to command, to coordinate and to control, Discuss
Discuss the contribution of Fayol to the science of Management.

Henri Fayol - Father of Mangement

Fayol was a French mining engineer in his early thirties, but after that he switched over to general management ans was Managing Director from 1888 to 1918. He wrote his book General and Industrial Management in 1916 in French, which was translated in English in 1949, only when American Management writers came to know about his ideas.
Fayol is known as the father of management or the founder of the classical management. Not because he was first to investigate managerial behaviour, but because he was the first to systematize it. He was contemporary to Taylor. Taylor was basically concerned with organizational fucntions, whereas Fayol was interested in the total organization. It may be noted that Taylor is known as the father of scientific management, i.e. supervisory or lower management, while Fayol is recognized as the father of management, i.e. the higher management or the general management.

Division of Business Activities

According to Fayol, business activities in any organization consist of six interdependent operations as follows:
1. Technical - activities concerning production.
2. Commercial - activities concerning buying, selling and exchange.
3. Financial - activities concerning optimum use of capital.
4. Security - activities concerning protection of property.
5. Accounting - activities concerning final accounts, costs and statistics. And
6. Managerial - activities concerning planning, organizing, commanding, coordinating and controlling.
According to him, the first five activities were well known and as such to devoted his attention to the description and explanation of the managerial activities. Also he analyzed the nature of such activities and skill requirements, which were so far given little scattered attention by thinkers.
Universality of Management: (Elements of Management)

Fayol considered the process of management to be of universal application and distinguished between five elements of the process. He regarded these elements of management as the function of management, which were being performed by all managers universally and at all the levels of organization. He divided management functions into five parts as follows:

  • Forecasting and planning
  • Organizing
  • Command
  • Coordination
  • Control
Thus, according to Fayol, management means to forecast and plan, to organize, to command, to co-ordinate and to control. The management was defined as the process of performing these functions. It may be noted that the present pattern of management functions follows broadly the lines set by Fayol.
Fayol emphasized that management involved the application of certain skills, which could be acquired by persons on the basis of systematic instructions and training. Once acquired the skills could be applied to all kinds of institutions including church, schools, political as well as industrial organization.

Q.2. Describe the basic principles of management?
Principles of Management

Fayol made a distinction between "elements of management" and "general principles of management". Besides a systematic analysis of the management process and management functions, Fayol formulated a set of fourteen principles as guidelines for implementing the process of management.
These principles may be listed as follows:

1. Division of Work
In any organized situation, work should be divided into compact jobs to be assigned to individuals. This applies to managerial work and non-managerial work. Division of labour facilities specialization and improves efficiency, if it is done within reasonable limits.

2. Authorities and Responsibility
The authority is the official right to a manager to manage people and things. Authority of a manager goes hand in hand with the responsibility for effective results. In other words, there should be parity or balance between authority and responsibiliy vested in a managerial position.

3. Discipline
Discipline is defined as observance of diligence and respect for seniors and rules and regulations. Managers as leaders of their work groups should enforce discipline throughout the organization. Fayol declares that discipline requires good superiors at all levels. He emphasized the need of discipline among the personnel for the smooth running of organization. He advocated penalties to prevent in violation.

4. Unity of Command
It means that a subordinate in an organization should be under direct supervision of a single from whom he should get instructions and to whom be should be accountable. In other words, every employee should have only one boss. If a subordinate has more than one boss, to that case conflict and condition in authority and instructions of general bosses would result.

5. Unity of Direction
Fayol advocates one head, one plan for a group of activities having same objective. In other words, a set of activities having the same objective should be under the direction of a single manager. Similarly, there should be one plan of action for such a set of activities because the objective is the same. This principle promotes smooth coordination of activities, efforts and resources.

6. Subordination of Individual Interest to Group Interest
The collective good and common interest of the organization should prevail over the narrow, sectional and self-interest of its members of an organization for the welfare of both the organization and the members.

7. Remuneration of Personnel
Remuneration as well the methods of payment in an organization should be fair so as to afford maximum satisfaction both to the organization and its employees.

8. Centralization
According to Fayol, every thing which reduces the importance of subordinates role is centralization and that which increases it, is decentralization. In his opinion, the question of centralization and optimum degree in particular case. There should be a proper combination and decentralization in an organization based on a consideration of several internal and external factors.

9. Scalar Chain
Fayol defines the scalar chain as the chain of superiors ranging from the ultimate authority (i.e. top authority) to the lowest ranks. It is also known as hierarchy of management. Every communication should follow the prescribed route, i.e. the proper channel. Authority relationships are said to be scalar when subordinates report to their immediate superiors and when their superiors, in turn, directly report as subordinates, to their superiors.
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10. Order
Order relates to both persons and things. It means a systematic arrangement of materials and systematic placement of people in the organization. In material order, everything should be in its proper place and there should be a place for everthing. For social order there should be a place assigned to each employee, and each employee should be in the place assigned. The right man in the right place is the ideal here.

11. Equity
Equity means combination of fairness, kindliness and justice. Equity motivates the workers to perform their duties. Besides, it promotes a friendly atmosphere between superiors and subordinates.

12. Stability of Tenure of Personnel
Management should strive to minimize employee turnover (i.e. changes in staff). In other words efforts should be made to achieve relative stability and continuity of tenure of the personnel. This could be achieved by attractive remuneration and honourable treatment of personnel. Stability and continuity of personnel promote teamwork, loyalty and economy.

13. Initiative
It refers to the freedom to propose a plan and execute it. Management should encourage subordinates to take desirable initiative in thinking out plans and executing them. Entending opportunities and freedom to contribute their best could do this.

14. Esprit de corps
Esprit de corps means the spirit of loyalty and devotion, which unites the members of a group or society. It is a sense of respect and belongingness to one's organisation. This principle stresses the need for team spirit, cordial relations, and co-operations among the personnel.
It is to be noted that Fayol made is clear that he had no intention to close the list of principles or make them inflexible.



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Critical Evaluation

Fayol's administrative or process or functional theory of management may be evaluated as follows:

(A) Contribution of Fayol's Work
Fayol's major contribution was to identify management as a separate set of skill or functions performed by managers in the organizations. The skills and abilities required for effective management were stated to be dependent on the manager's positions at different levels of organization. Fayol pointed out that administrative or managerial skills were more essential for higher-level manager, whereas technical skills and abilities were required more of the lower levels.

Fayol was the first thinker who emphasized, for the first time the necessity of formal education and training in management. He was the person who provided a set of means (i.e. planning, organizing, commanding, coordinating and controlling) for understanding the management process. He also provided principles for implementing this process.
He provided conceptual framework for analyzing the management process and emphasized that management was a separate, distinct activity.
Management as a body of knowledge gained immediately from Fayol's analysis of management skills of universal relevance and the analysis of the principles of general management.

(B) Limitations or Weaknesses
Fayol's administrative theory of management is criticized on the following grounds.

1. It is too formal as Fayol divides "business activities" into six categories, and their management into five functions and the implementation of these functions with the help of fourteen principles.
2. Some critics call this theory as inconsistent, vague and inadequate.
3. It does not pay adequate attention to workers. It has pro-management bias.
4. Jernert Simon calls Fayol's principles as proverbs, comparable to folklore and folk wisdom.


Inspite of several criticisms of Fayol's work, his theory of managerial functions still exerts considerable influence on the practice of management as well as the teaching of this subject world over.
It may be also noted that when combined together the scientific management approach and the functional approach are called classical school or classical theory of management or classical approach to management.


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Q.3. What are Management Principles? Explain the nature of Management Principles.
Why Management Principles are needed? What are their limitations?

Meaning of Management Principles

Management principles may be defined as fundamental truths of general validity. They are helpful in predicting and understanding the results of managerial actions. The principles have been derived from the experience of managers in different fields of activity. Primarily members of the classical management school have developed them.
Management principles are intended to improve the practice of management by providing guidelines for managerial actions in the management process. They become the basis of scientific process of management.

Flexibility of Management Principles (Nature)

As indicated above, management principles are not rigid, absolute truths like rules and laws. In fact, they are flexible guides to managerial actions. Hence, while applying these principles, due attention must be given to varied and changing, circumstances because human beings who are subject of such principles are different and changeable and moreover other concerned factors are also not stable. At times it has been found in practice that the same principles is seldom applied twice in exactly the same way.
Like other social sciences, management science is also not very exact and rigid. Certain kind of flexibility is always necessary to accommodate new thinking, new demands and newly emerging circumstance. Hence the management principles are flexible and can should be adopted to meet the speciality of every situation. However as a precaution management principles should be guarded against unnecessary frequent modifications and alterations based on pure whims and frezies of individual user so that they are not distorted unwarrantedly.
In sum, it may be said that the nature of the principles of management suggests that they should be applied with fair judgement and interpretation of the available facts in a given situation.


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Q.4. Describe the characteristics of management principles also explain it needs & importance?
Characteristics of Management Principles

The characteristics of management principles may be examined as follows:
1. Management principles are derived from analysis of management functions and processes.
2. There are two types of principles:
Descriptive which attempt to explain and predict the behaviour of organizational members and managerial decisions and their relationships.
Normative which attempts to prescribe and evaluate the bahaviour of organizational members including the managers. They prescribed what ought to be, what is good, right and desireable.
3. The principles known today have their origin in the works of classical writers and thinkers like Taylor, Fayol and Mooney and Reiley.
4. They are universal in the sense that they are valid for most organizational under most circumstances.
5. They are flexible in nature and change with the changes in the environment in which an organization exists. It is to be noted that nothing is permanent is the landslide of management, because of the complex and unpredictable nature of human behaviour.

Need and Importance of Management Principles

Proper use of management principles will probably improve organizational performance. According to George R. Terry, Principles of management are to a manager as a table of strengths of materials is to a civil engineer. The value of the principles lies in the foundation they provide for efficient conduct of management practice. By means of principles, a manager can avoid fundamental mistakes in his job and foretell the results of his actions with confidence.
Principles help in several ways - increasing the managerial efficiency, increasing the productivity of workers, enhancing managerial knowledge and thinking, improving research in management, serving as aid to training enhancing social welfare by helping in improving the quality of life of people and community resources to best advantage of organizational members, etc.
The main purpose of management principles is to make available useful elements of a systematic theory of management, so as to improve the management practice. They provide a means of organizing knowledge and experience in management.
The above discussion clearly brings out that it is due to all the above facts that management principles have become a permanent need in today's management world.

Various Management Principles

A number of management thinkers have formulated various management principles. Taylor and Fayol has enunciated the most important principles.


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Chapter number 5:

hapter 5 - Human Relational Approach & Behavioural Approach

* Human relations approach to Management

* Behavioural approach to Management

* Human relations & Behavioural approaches

* Management science approache to Management

Q.1. What is human relations approach to Management? Critically evaluate its contribution to Management theory.
Discuss the impact of Hawthorne Experiments on Management thought.
Human Relations Approach Historical Perspective

Scientific management remained concerned tithe the efficiency and productivity of workmen at the shop floor. Fayol's functional approach to management aimed as improving the managerial activities and performance at top level in the organization. Between 1925, opinion of many experts was directed towards the human element or aspect of the organization. They drew their attention from "work" emphasis to "worker" emphasis. It was clearly felt that earlier approaches to management were incomplete and insufficient in that there was little recognition of the importance of workers as human beings, their attitudes, feelings, needs and requirements. In fact, the technical approach to work methods in scientific management did not produce durable and desirable results in all cases. Individual and group relationships in the work place often prevented maximum benefits to be derived from planning and standardization of work or monetary rewards offered for efficiency. Elton Mayo is the founder of this theory.

Hawthorne Experiments

The human relations approach to management developed as a result of a series of experiences (in all four) conducted by Elton Mayo and his associates F.J. Reothlisherger and W.J. Dickson at the Hawthrone plant of the Western Electric Company at Chicago in United States. The Hawthrone studies were aimed at finding out what factors really influenced the productivity and work performance of workers. These experiments were made with respect to - different levels of illumination in the work place changing in working conditions like hours of work, lunches, test periods and how group norms affect group effort and output.

Human Relations Concepts: Findings of Hawthorne Studies

The main findings of Hawthrone studies were as follows:
1. Physical environment at work place (i.e., working conditions) do not have any material effect on the efficiency of work.
2. Social or human relationship influenced productivity more directly than changes in working conditions.
3. Favourable attitudes of workers and work-teams towards their work were more important factors determining efficiency.
4. Fulfillment of workers social and psychological needs have a beneficial effect on the morale and efficiency of workers.
5. Employee groups formed on the basis of social interactions and common interest exercised a strong influence on workers, performance. In other words, informal organization controlled the norms established by the groups in respect of each member's output.
6. Workers cannot be motivated solely by economic reward. More important motivators are job security, recognition by superiors and freedom to take initiative and to express their individual opinions as matters of their own concern.


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Q.2. Write a comprehensive note on Behavioural approach to management.
Explain the significance of the Behavioural approach in management. What are its main features? Discuss.
Behavioural Or Social Science Approach

Historical Perspective
The Behavioral or social science approach developed as a corollary to the human relations approach.
Social scientists and organization theorists are of the opinion that best results can be obtained by building theories of management and organization based on findings of the Behavioural sciences, such as psychology, sociology, psychiatry, economics, cultural anthropology and philosophy.
Behavioural approach reflects the findings of intensive carried out by Behavioural scientists like Chester I Bernard, Douglas McGregor, Chris Argyris, A.H. Maslow, Herzberg, Rensis Likert etc. many of the conclusions of the Hawthorne studies have been reaffirmed by subsequent research studies. Moreover, certain ideas have been refined, extended and these behaviour scientists have highlighted other important ideas. These scientists have tried to eliminate the exaggeration of the importance of informal relations. The focal point of management action is the behaviour of human being in the organization - management as a technical process only, was given up.
Behavioural scientists conduct research to answer the question. "Why a person or a group of persons behaves or acts in a particular manner? They try in answer in any problems faced by the managers by explaining the behaviour of the people".

Elements Or Concepts or Features Of Behavioural Approach

The Behavioural approach concerns itself with the social and psychological aspects of human behaviour in organization. The behaviour of members of an organization clearly affects both its structure and its functioning as well as the principles on which it can be managed. Behavioural researches have provided sufficient evidence that human element is the key factor in the success are failure of an organization. In several experiments, it has been observed that people prefer to be consulted rather than receive order or information. Less reliance on the use of authority is preferred.
Some of the more important elements or concepts of Behavioural approach may be outlined as follows:
1. Individual Behaviour
Individual behaviour is closely linked with the behaviour of the group to which he belongs. The group dictates changes in his behaviour. Individuals observe those work standards which are prescribed by the group.

2. Informal Leadership
Informal leadership, rather than formal authority of managers is more important for setting and enforcing group standards of performance. A a leader, a manager may be more effective and acceptable to subordinates, if he adopts the democratic style of leadership.

3. Participation
If the subordinates are encouraged and allowed to participate in establishing goals, there will be positive effect on their attitude towards work. If employees are involved in planning, designing the jobs and decision-making, there will be least resistance to changes effected in technology and work methods.

4. Motivation by Self-Control and Self-Development
Behavioural scientists maintain that by nature most people enjoy work and are motivated by self-control and self-development. Managers should try to identity and provide necessary conditions conducive to the proper and sufficient use of human potential. The managers attitude towards human behaviour should positive. They should know that average man is not lazy by nature. But he is ambition. Every man likes to work and prefers to assume responsibilities. MacGregor maintains that employees favour self-direction and self-control. Behaviouralists believe that in place of the concept of social man the concept of self-actualizing man would be more appropriate to explain human motivations.
Chester I Bernard pointed out that material reward is of crucial signification only upto a definite point. The incentives of status, power, good physical conditions opportunities of participation and good social (i.e., cultural interrelationships) are very important.

5. Informal Organization
Behaviouralists particularly Bernard, consider informer organization as an essential part of the formal organization. Informer organization must always be taken into account while determining managerial behaviour.

6. General Supervision Not Close One
As regards supervision of subordinates, Behaviouralists particularly Likert, are not in favour of close supervision. They advocate general supervision, which tends to be associated with high productivity.

Basic Assumptions (Are Propositions) Of Behavioural Scientists

The Behavioural science approach is based on certain assumptions about man and organization, which my be looked upon as their prepositions (statements of opinion or judgement) also. Those may be outlined as follows

1. Organization is socio-technical system involving people and technology as their primary components.
2. The behaviour of the members of an organization clearly affect both its structure and its functioning, as well as the principles on which it can be managed.
3. Individual's behaviour is closely linked with a greatly influenced by the behaviour of the group to which he belongs.
4. A wide range of factors influences work and interpersonal behaviour of people in the organization.
5. Congruence (agreement) between organizational goals and individual goals organizations members would be established.
6. Several individual differences in perceptions, aspirations, needs, feelings, abilities and values of people excite in the organization, such difference along with their changing nature over periods of time have to be recognized.
7. Informal leadership rather than the formal authority of supervisors is more important for increase in employee performance.
8. Democratic leadership style and participative managerial style encourage positive attitude of employee towards work and faster's high moral and initiative among them.
9. By nature most people enjoy work and are motivated by self-direction, self-control and self-development.
10. Conflict in organization may to some extent to inevitable and at times even desirable for development, innovation and creativity in certain cases. Conflicts and cooperation coexist in organizations. Conflicts are not to be suppressed, but are to be resolved and that too not always. Coordinated in vital for achievement of organizational goals.
The above preposition are important elements of Behavioural science thinking. Thus the Behavioural approach represents a significant advance over the human relations approach.
The major areas of research and analysis by the Behavioural scientists are interaction between organizational structure, work performance and employees behaviour, consequences of traditional, coercive controls on humans, influence of technological advances and changes on group behaviour, human needs and aspirations, theories of motivation and leadership, developmental aspects of human resources, organizational behaviour aspects, group dynamics, patterns of communication and their importance in the organization, managerial styles and their impact on employee behaviour, organizational climate, culture and politics, organizational development, change and conflict, organizational rules and status, and so on.


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Q.3. Distinguish between Human Relations and Behavioural approaches?
Distinction Between Human Relations and Behavioural Approaches

As indicated earlier, Behavioural science approach is an improvement over the human relations thinking. This may be explained in the following ways.

1. Areas of Study
The human relations movement kept it limited to the study of psychological needs of people, supervision styles, working conditions, interpersonal relations, communication etc. On the other hand Behavioural scientists have gone very far and wide in the study of organizational and managerial aspects covering the areas as mentioned in the previous paragraph.

2. Human Nature Assumptions
Human relation theorists have made some general, unverifiable assumption about human nature holding "social man" view. In contrast, Behavioural scientists have understood the factual nature of individuals and of their behaviour-holding "self-actualizing man" model.

3. Human Needs
Human relations thinkers presume that people have only social needs, whereas the Behavioural scientists regard individuals as different from one another and dynamic with respect to their needs and attitudes and emphasize both social and psychological needs.

4. Organization Nature
Human relations approach believes organizations to be purely social systems, while Behavioural science approach views organizations as socio-technical systems which are required to accomplish a set of individual, social and corporate (economic) goals.

5. Employee Satisfaction
Human relations theorists advocate that employees satisfaction is achieve through economic and other incentives and then it automatically leads to higher employee productivity. On the other hand, Behavioural scientists assert that employee satisfaction is a matter of a set of factors including fulfillment of social and self-actualization needs and high morale is also necessary for achieving higher employee productivity, which is a composite thing made by different factors including participative management.

6. Conflict Treatment
Human relation thinkers proposed that conflict, competition and disagreement is to be avoided or should always be resolved, whereas Behavioural scientists concede that conflict is not always bad, it may be constructive too, it is inevitable and may not always be resolved.

7. Manager's Role
Under human relations model, manager's traditional role of controller is modified to include responsibility for maintenance of the human system. On the other hand, under the behavioural science model, the manager's basic role is rather dramatically redefined and he is no longer viewed as a controller but rather as a developer and facilitator of the performance of the socio-technical system to which he is assigned.

8. Nature of Approaches
Human relations approach is criticized for being unscientific (i.e. vague and simplistic and for patting forth broad conclusions having personal bias. On the other hand, behavioural scientists have made their propositions based on extensive researches and its sub discipline organizational behaviour also has a strong research orientation.


The contribution of behavioural science to management thought and practice consists primarily of creating new insights rather than new techniques. It has developed a useful way of thinking about the role of a manager, the nature of organizations and the behaviour of individuals with organziations.



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Q.4. What is management science approach to management? Critically examine it.


Define management science approach and explain the characteristics of the situation in which management science applications are usually made.

Management Science Or Operations Research Or Approach

Quantitative Approach

A quantitative approach to management thought is known as management science or operations approach.

"C.West Churchman. Russell Adoff and E.Leonard Arnoff" define the management science or operations research OR approach as an application of the scientific method to problems arising in the operation of a system and a solving of these problems by the solving of mathematical equations representing the system. (Introduction to Operations Research. New York Willey. 1957).

The management science approach suggests that managers can best improve their organisation by using the scientific method and mathematical techniques to solve operational problems.

The Beginning of the Management Science Approach

During the World War II, in Great Britain and in America, some mathematicians, physicists and other scientists were called to help solve complex, operational problems that existing in the military. They were able to achieve significant technological and tactical breakthroughs. The scientists were organized into teams that eventually became known as operations research or groups. When the war was over the applicability of or to problems industry gradually became apparent, particularly in the wake of new industrial technologies being put into use or specialists were called to help managers come up with answers to the new problems. With the invention of electronic computer system or procedures were formalized into what is now called "management science school" or "quantitative school".

The early or groups typically included physicists and other "hard" scientists, who used the problem solving method known as scientific method which involves.

(i) Observing the problem system.

(ii) Constructing a model, i.e. a generalized framework from which consequences of changing the system can be predicted.

(iii) Deducting (inferring) from the model how the system will behave it changes were made in existing conditions.

(iv) Testing the model by performing an experiment on the actual system to see whether the effects of changes predicted using the model, actually occur when the changes are made.

The Operations Research groups were very successful in using the scientific method to solve their operational problems.

Now, the management science approach is being used in many companies in India and other countries and applied to many diverse management problems, such as production scheduling, plant location product packaging etc.

Characteristics of Management Science Applications

Four primary characteristics are usually present in situations in which management science techniques are applied. These are as follows:

1. Large Number of Variables

The management problems studied is so complicated that managers need help in analyzing a large number of variables.

2. Use of Mathematical Model

The use of mathematical models the investigate the decision situation in typical in management science applications. Models are constructed to represent reality and then used to determine how the real world situation might be improved.

3. Use of a Computer

A management science application makes use of computers. There are two factors that make computers extremely valuable to the management science analyst.

Today, managers are using such management science tools as inventory control methods, network models and probability models as aid in decision making process. Since management science thought is still evolving, more and more sophisticated analytical techniques can be expected.

Critical Evaluation of Management Science Approach

Management science team presents management with an objective basis for making a decision. Management science techniques increase the effectiveness of the managers decision making. They are best suited analyzing quantifiable factors, such as expenses, sales and units of production. They are used in such activities as capital budgeting management, cash flow management, production scheduling, development of product strategies, planning for human resource development programmes, maintenance of optional inventory levels and aircraft scheduling.

However, is special widespread use for many problems, management science of today has not developed to a point where it can effectively deal with an important aspect of the organization, that is the human side of an enterprise. But no doubt that it has marvelously contributed to the solving of planning and control problems and to the progress in the areas of organizing, staffing and the leading the organisation. Anyhow some managers complain about the complicated nature of the concepts, language and techniques of management science, which are not readily understandable and not easily implemental. Some other managers indicate about the drawback of management science in that if fails to address to the psychological and Behavioural components of workplace activities because the managers are not sufficiently involved with management scientists at the initial level of developing decision making techniques and as a result the later implementation of these techniques remain often unsuccessful. There exits a lack of awareness among the management scientist regarding the problems and constraints actually faced by the managers in orgnanization, particularly because of their remoteness from the


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Chpater 6:

Chapter 6 - Growth & Development of Management Thought

* Evolution of Management

Q.1. Briefly describe the evolution of management thought from early days to moder times.


Examine the evolution of management thought from the early pioneers to modern thinkers.


Describe briefly various schools or management thought prevalent from time to time.

Growth and Development of Management Thought

The management thought has grown and developed gradually in the following stages:

1. Early Era

The is known as pre-scientific management era. During this era the management finally came into being as a separate field of study and research.

2. Scientific Management Era

During this era some principles of scientific management were developed. This era saw great advances in management practice by application of empirical studies to determine faster and better methods of production.

3. Processes or Functional or Administrative Era

During this era, a clear distinction was made between technical activities and managerial activities. Planning, organizing, command, coordination and control were recognized as managerial activities. The organisation was recognized as a rational-legal structure.

4. Human Relations Era

During this era, special emphasis was laid on "worker" aspect of the organisation. It was pleaded that workers should be cared as human assets of the enterprise.

5. Behavioural Or Social Sciences Era

During this era, the individual, the work groups and the participative management aspects were emphasized.

6. Management Science Or Quantitative Era

This era saw the scholars to lay emphasis on rational decision-making and use of mathematical techniques for managing the organisations.

7. Modern Era

During this era, emphasis is being laid on treating the organisation as a system composed of interrelated and interdependent parts, working in its specific environment. Moreover, it has been experienced and advocated that there is no one best way of dealing with a situation. The manager has to find a best way in each specific situation depending on the different circumstances of the individual case.


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Chapter 7 - Functional Areas Or Scope of Management

* Production Management

* Nature & Importance of Production Management

* Advantages of Production Planning & Control

* Basic Functions of Marketing

* Stages or Steps in Marketing Research Process

Q.1. Define Production Management. Explain production planning and control. Discuss briefly the various techniques of production control.


What is Production Management? Discuss the functions of production, planning and control.


Define Production, Planning and Control. What are its main steps or elements? Discuss in brief.


What are Production, Planning and Control? What are its objects and advantages? Outline the requirement of effective production control system.

Definition of Production Management

In modern competitive world, if an enterprise and master its production and marketing, it will be able to acquire and maintain a considerable market share.

Production may be define as the conversation of the raw material into finished goods are services through transforming process for purposes of supplying them into the market. Thus, it is process of creation of goods and services. The terms "production and manufacturing" are generally used as synonyms. Production activities are vital for the survival, growth and development of every enterprise.

Production to be successful has to be managed. Hence production management assumed great importance in every organisation.

Some important definition of production management may be given as follows:

Elwood Buffa

Production management deals with decision-making related to production process so that the resulting goods and services are produced according to the specifications in the amounts and by the schedule demanded and at minimum cost.


Production management is the process of planning and regulating the operations of that part of enterprise which is responsible for actual transformation of materials into finished products.

Major Activities of Production Management

Production management deals with manpower and physical resources and facilities for transforming inputs into outputs. Production Management involves three major activities or fucntions:

1. Planning of Production Inputs

It includes determining of necessary inputs including raw materials, labour, electrical power, machines and equipments, facilities etc., required for production work.

2. Installation of the Necessary Inputs

It includes taking decisions with regard to designing of the plant, choice of the best machines and arrangement of other necessary facilities so that the production work can be started.

3. Co-Ordination and Control of the Production Process

An effective production system involves co-ordination among the various activities and affairs within the production department itself and also integration of its activities and decisions with other departments of the enterprise, such as finance, marketing, purchases, personnel, according and research and development. It also includes determining the necessary sequence of operations, preparing work schedules and assigning work to specific employees, so as to ensure smooth production operations. Control includes ensuring that the actual production performance meets the predetermined production plans and goals and also providing for proper feedback for taking corrective action.


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Q.2. Describe the nature & importance of production management?
Nature and Importance of Production Management

Production management has become an important now a day that it is treated to be a separate, independent functional area of management.

Production management has assumed its importance because of the following reason:

1. It is the foundation for earning profits - by producing goods or services and selling them into the market.

2. It ensures that produced goods or services are of desired quality, in required quantity and according to time-schedules.

3. It facilitates optimum inventory level.

4. It ensures proper co-ordination and necessary control, which are required for adequate, time and cost-conscious production.

5. It ensures coping with the changes in demands in the market and maintains stability in the production department.

Production Planning and Control

Production Planning, Planning is deciding in advance what to do, how to do it, when to do it, who is to do it. Then, production planning involves decision making in various production aspects, such as designing of production plans, programmes and goals, selection of production process, plant layout, provision of physical facilities (like material, tools, machines, equipments etc.) and preparation of time-schedules.

"Lawrence Bethel Observes" Production planning takes a given product or line of products and organizes in advance the manpower materials, machines and money required for a predetermined output in a given period of time. It starts with a product concept capable of being manufactured, a general idea of the process by which it can be made and a sales forecast for the descernible future.

Production Control

Control means ensuring that actual performance meets the predetermined standards. Then, "production control" refers to a set of steps for verifying whether production operations occur in conformity with the production plan adopted. It guides and directs the flow of production so that the goods of desired quality are manufactured at the right time and it maximum possible economic manner. It may be noted that "production control" is frequently used synonymously with "production planning and control" with planning being implied.

Spriegel and Lansburgh define production control as

the process of planning production in advance of operations, establishing the exact route of each individual item, part or assembly, setting, starting and finishing dates for each important item, assembly, and the finished products and releasing the necessary orders as well as initiating the required follow-up to effective the smooth functioning of the enterprise.

James Lundy says

Basically, the production control function involves the co-ordination and integration of the factors of production for optimum efficiency. The principal objective of production control is to facilitate the task of manufacturing and see that everything is being done strictly in accordance with the plan. It co-ordinates and integrates the factors of production for optimism and directs and checks the course and progress of work.


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Q.3. Describe the advantages of production planning & control?
Advantages of Production Planning and Control

Production planning and control yields the following main advantages,

1. Avoidance of Rush Orders

Production is well planned and its time aspects are well controlled. Therefore, production control reduces the number of risk-orders and overtime work on plant.

2. Avoidance of Bottlenecks

The incomplete work does not get accumulated because production control maintains an even flow of work.

3. Cost Reduction

Production control programmes minimizes the idleness of men and machines, keeps in process inventories at a satisfactory level, leads to a better control of raw materials inventory, reduces costs of storage and materials handling, helps in maintaining quality and containing rejection and thus reduces unit cost of production.

4. Effective Utilization of Resources

It reduces the loss of time by the workers waiting for materials and makes most effective use of equipments.

5. Co-Ordination

It serves to co-ordinate the activities of plant and results in a concerted effort by workmen.

6. Benefits to Workers

Adequate wages, stable employment, job Security, improved working conditions, increased personal satisfaction, high morale.

7. Efficient Service to Customers

It ensures better service to the customers by enabling production to be conducted in accordance with the time schedules and therefore deliveries are made on promised dates.

Q.4. What are the Basic functions of Marketing?
Basic Functions of Marketing

The marketing process performs certain activities as the goods or services move from producer to consumer. Every firm does not perform all these activities or jobs. However, any company that wants to operate its marketing system successfully must carry them out. The following marketing tasks have been recognized for a long time.

1. Selling

It is core of marketing. It is concerned with the persuasion of prospective buyers to actually complete the purchase of an article. Setting pays an important part in realizing the ultimate aim of earning profit. Selling is enhanced by means of personal selling, advertising, publicity and sales promotion.

2. Buying

It involves what to buy, what quality, how much, from whom, when and at, what price. People in business buy to increase sales or to decrease costs. Purchasing agents are much influenced by quality, service and price. The products that the retailers buy for resale are determined by the need and preferences of their customers.

3. Transportation

Transport is the physical means whereby goods are moved from the places where they are produced to those they are needed for consumption. Transportation is essential from the procurement of raw materials to the delivery of finished products to the customers places. Marketing relies mainly on railroads, tracks, waterways, pipelines and air transport. The type of transportation is chosen on several consideration such as suitability, speed and cost.

4. Storage

It involves the holding of goods in proper condition from the time they are produced until they are needed by consumers (in case of finished products) or by the production department (in case of raw materials and stores). Storing protects the goods from deterioration and helps in carrying over surplus for feature consumption or use in production. Goods may be stored in various warehouses situated at different places. Storing assumes greater importance when production is seasonal or consumption may be seasonal. Retail firms are called "stores".

5. Standardization and Grading

The other activities that facilitate marketing are standardization and grading. Standardization means establishment of certain standards or specifications for products based on intrinsic physical qualities of any commodity. This may involved quantity (weight or size) or it may involve quality (colour, shape, appearance, material, taste, sweetness etc). Government may also set some standards e.g., in case of agricultural products. A standard conveys a uniformity of the products.

"Grading means classification of standardized products into certain well-defined classes or groups." It involves the division of products into clauses made up of unit processing similar characteristics of size and quality. Grading is very important for "raw material" (such as fruits and cerials), mining products" (such as coal, iron-ore and mangenese) and "forest products" (such as timber). Branded consumer products may bear grade levels, - A B C.

6. Financing

It involves the use of capital to meet financial requirements of the agencies dealing with various activities of marketing. The services of providing the credit and money needed to meet the cost of getting merchandise into the hands of the final user is commonly referred to as finance, function in marketing. In marketing, finances are needed for working capital and fixed capital, which may be secured from three sources - onward capital, bank loans and advances, and trade credit (provided by the manufactures to wholesaler and by the wholesaler to the retailers).

7. Risk Taking

Risk means lose due to some unforeseen circumstances in future. Risk-bearing in marketing refers to the financial risk inherent in the ownership of goods held for an anticipated demand, including the possible losses due to a fall in price and the losses from spoilage, depreciation, obsolescence, fire and floods or any other loss that may occur with the passage of time. From production of goods to its selling stage, many risks are involved due to changes in marker conditions, natural causes and human factors. Changes in fashions or interventions also cause risks. Legislative measures of the government may also cause risks.

8. Market Information

The only sound foundation, on which marketing decisions may be based, is correct and timely market information. Right facts and information reduce the aforesaid risks and thereby result in cost reduction. Business firms collect, analyze and interpret facts and information from internal sources, such as records, sales people and findings of the market research department. They also seek facts and information from external sources, such as business publications, government reports and commercial research firms. Retailers need to know about sources of supply and also about customers buying motives and buying habits. Manufacturers need to know about retailers and about advertising media. Firms in both these groups need information about competitors activities and about their markets. Even ultimate consumers need market information about availability of products, their quality standards, their prices, and also about the after-sale service facility Common sources for consumers are sales people, media advertisements, colleagues etc.

It may be noted that in addition to the mentioned jobs, the marketing manager is also involved in product planning, pricing of products, selection of distribution channels, framing of marketing objectives, environmental scanning, target market selection, market programming and developing marketing strategy.


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Q.4. Describe the various stages or steps in marketing research process.
Stages or Steps in Marketing Research Process

Marketing research exercise may take many forms but systematic enquiry is a feature common to all such forms. Being a systematic process. Though it is not necessary that all research processes would invariably follow a given sequence, yet marketing research aften follows a generalized pattern, which can be broken down and studied as sequential stages stages. The various stages or steps in the marketing research process may be discussed as follows:

1. Identification and Defining of the Problem

The market research process begins with the identification of a problem faced by the company. The clear cut statement of problem may not be possible at the very outset of research process because often only the symptoms of the problems are apparent at that stage. Then, after some explanatory research, clear definition of the problem is of crucial importance in marketing research because such research is a costly process involving time, energy and money. Clear definition of the problem helps the researcher in all subsequent research efforts including setting of proper research objectives, the determination of the techniques to be used and the extent of information to be collected. It may be noted that the methods of explanatory research popularly in use are : survey of secondary data, experience survey or pilot studies i.e. studies of a small initial sample. All this is also known as preliminary investigation.

2. Statement of Research Objectives

After identifying and defining the problem with or without explanatory research, the researcher must make a formal statement of researcher objectives. Such objectives may be stated in qualitative or quantitative terms and expressed as research questions, statement or hypothesis. For example, the research objective. "To find out the extent to which sales promotion schemes affected the sales volume" is a research objective expressed as a statement. On the other hand, a hypothesis is a statement that can be refuted or supported by empirical findings. The same research objective could be stated, "To test the proposition that sales are positively affected by the sales promotion schemes undertaken this winter." Example of another hypothesis may be. "The new packaging pattern has resulted in increase in sales and profit." Once the objective or the hypothesis are developed, the researcher is ready to choose the research design.

3. Planning the Research Design or Designing the Research Study

After defining the research problem and deciding the objectives, the research design must be developed. A research design is a master plan specifying the procedure for collecting and analyzing the needed information. It represents a framework for the research plan of action. The objectives of the study are included in the research design to ensure that data collected are relevant to the objectives. At this stage, the researcher should also determine the type of sources of information needed, the data collection method (e.g. survey or interview), the sampling methodology and the timing and possible costs of research.

4. Planning the Sample

Sampling involves procedures that use a small number of items or parts of the population (total items) to take conclusion regarding the population. Important questions in this regard are; who is to be sampled as a rightly representative lot? Which is the target - population? What should be the sample size - how large or how small? How to select the various units to make up the sample?

5. Data Collection

The collection of data relates to the gathering of facts to be used in solving the problem. Hence, methods of marketing research are essentially methods of data collection. Data can be secondary, i.e. collected from concerned reports, magazines and other periodicals, especially written articles, government publications, company publications, books etc. Data can be primary i.e. collected from the original base through empirical research by means of various tools. There can be broadly two types of sources - (i) Internal sources - existing within the firm itself, such as accounting data, salesmen's reports etc. (ii) External sources - outside the firm.

6. Data Processing and Analysis

Once data have been collected these have to be converted into a format that will suggest answer to the initially identified and defined problem. Data processing begins with the editing of data and its coding. Editing involves inspecting the data collection - forms for omission, legibility and consistency in classification. Before tabulation, responses need to be classified into meaningful categories. The rules for categorizing, recording and transferring the data to "date storage media" are called codes. This coding process facilities the manual or computer tabulation. If computer analysis is being used the data can be key-product and verified.

7. Formulating Conclusions, Preparing and Processing the Report

The final stage in the marketing research process is that of interpreting the information and drawing conclusion for use in managerial decision. The research report should clearly and effectively communicate the research findings and need not include complicated statement about the technical aspect of the study and research methods. Often the management is not interested in details of research design and statistical analysis but instead in the concrete findings of the research. If need to the researcher may bring out his appropriate recommendation or suggestions in the matter. Researchers must make the presentation technically accurate, understandable and useful.


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Chapter 8:

Chapter 8 - Management By Objectives

* Management by Objectives

* Benefits of Management by Objectives

* Limitation of Management by Objectives

* Steps for improving the prospects of Management by Objectives

Q.1. What do you mean by Management by Objectives? Explain the goal-setting process through Management by Objectives?


Discuss the strengths and weakness of Management by Objectives. What are the minimum requirements of a Management by Objectives programme?


Define Management by Objectives. Explain the Management by Objectives Cycle.

Meaning and Definition of Management by Objectives (MBO)

Management by Objectives (MBO) has become a widely used slogan. It is a basic mentality that a high-performance manager brings to the job of managing. Peter Drucker coined the term "Management by Objectives" in 1954. He profounded Management by Objectives concept and emphasized it and than it developed as a management philosophy. Some authors has used the term "management by results" interchangeable with Management by Objectives.

Management by Objectives is an overall philosophy of management that concentrates on goals and end results. Management by Objectives is based on the presumption that people perform better when they know what is expected of them and can relate their personal goals to organisation goals. It also assumes that people are interested in the goal setting process and in evaluating their performances against the target.

Some important definitions of Management by Objectives may be given as follows:

George S. Odiorne

The system of management by objectives can be described as a process whereby the superior and subordinate managers of an organisation jointly identify its common goals, define each individual's major ares of responsibility in terms of the results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members.

Peter Drucker

He says that management by objectives and self-control is a philosophy of management, resting on a concept of human action, human behaviour and human motivation. Management by objectives applies to every manager at any level and to all business enterprises whether large or small. He says the Management by Objectives "ensures performance by converting objective needs into personal goals"

Heinz Weihrich and Harold Koontz

"Management by objectives is a comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed toward the effective and efficient achievement of organizational and individual objectives."

Essential Characteristics of Features of Management by Objectives

A careful study of the above definitions bring out the following features of Management by Objectives:

1. Management by Objectives is a philosophy or a system and not merely a technique.

2. It emphasizes participative goal setting.

3.It clearly defines each individual's responsibilities in terms of results.

4. It focuses attention on what must be accomplished (goals), rather than on how it is to be accomplished (methods).

5. It converts objectives needs into personal goals at every level in the organisation.

6. It establishes standards or yardsticks (goals) as operating guides and also as basis of performance evaluation.

7. It is a system intentionally directed toward effective and efficient attainment of organizational and personal goals.

Management by Objectives Process

There are four important and essential steps or elements in the Management by Objectives process as follows:

1. Setting Objectives

Goal setting or objective-setting is a multistage process. It starts with the examining of the current state of affairs, level of efficiency, threats and opportunities. Then the key result areas are identified, such as product markets, improved services, lowered costs, work simplification, employee motivation, profitability, innovation and social responsibility. The performance of these areas is critical for organisation in the sense that failure in these areas my result in failure of the organisation and this is why they are known as "key" results areas. Peter Drucker says, "Objectives are important in every area where performance and results directly affect the survival and prosperity of business."

Therefore interacting or joint goal setting takes place. Subordinates are actively involved in formulating goals at every level is the organisation. Such goals are finished with reference to the overall objectives of the organisation. Care is to taken establish goals that are measurable and contribute to the accomplishment of corporate objectives. Proper attention is given to "time" element also. Such goals may be long-range, medium-range or short-range. Further, resources availability also becomes an important consideration in goal setting. There is always need to decided priorities among the different objectives keeping in view the environment which business operates as well s possible future changes in it.
2. Developing Action Plans

Set objectives must be translated into action plans. It requires assignment of specific responsibilities to different departments, divisions and individuals. It also requires allocation of necessary resources needed to perform the assigned responsibilities. Time dimensions are also to be decided in order that targets are reached without any unwarranted delays.

3. Periodic Review Or Monitoring the Progress

After setting objectives and developing action plans, it is necessary to establish a proper monitoring system with a view to regularly keeping the activities and efforts on a prescribed path leading to the ultimate objectives. The progress is monitored without day-to-day interference in subordinates functioning. At agreed intervals, results are measured in terms of quantity, quality, time and cost against the set objectives. It is ensured that the deviations found, if any are thoroughly discussed and immediate corrective actions are taken to set them right on the course. Such a regular monitoring and periodic review not only provide feedback, which is essential for completion of work in time, but also motivates the managers accountable for performance. Periodic review and monitoring are done at departmental levels generally.

4. Performance Appraisal

This is the last phase of Management by Objectives programme that evaluates performance annually. The annual review or appraisal is comprehensive and is done at the organizational level. The actual annual results are evaluated against the set objectives. Such assessment is also used for determining targets for next year for modification in standards (goals) if needed and for taking corrective actions in order to avoid deviations from predetermined objectives.

Management by Objectives Cycle and Recycling Objectives

When all the four steps or phases in the Management by Objectives as mentioned above are completed then one Management by Objectives cycle is said to be over. The last phase or the fourth step in the Management by Objectives cycle is used as an input for recycling objectives and other actions. Objectives are changed or modified in the light of the environmental changes and the experiences gained over the year. Then, revised action plans are developed as per needs, periodic review is done. And performance is gain evaluated. Thus goes on the recycling.


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Q.2. Describe the benefits of Management by Objectives
Benefits of Management by Objectives

1. Balanced Stress on Objectives

Management by Objectives forces managers to set objectives with balanced stress on key result areas. Thus, crisis conditions are avoided to take place in the organisation.

2. Better Managing

Management by Objectives forces managers to think about planning for results, rather than merely planning activities or work. Managers are required to ensure that the targets are realistic and needed resources are made available to subordinates to achieve the targets. Clearly set objectives for the subordinates serve as evaluation standards as well as motivators for them. Thus, Management by Objectives results in improvement in managing.

3. Better Organizing

The positions in the enterprise can be built around the key result areas. Managers are required clarifying organizational roles and structures. Hence better organizing.

4. Greater Employee Involvement and Commitment

If Management by Objectives programme is installed in an organization, people are not just doing work, following instructions and waiting for guidance and decisions from "above" and the superiors do not dictate things. They are now individuals with clearly defined goals, which have been formalized through their own participation in the process. Moreover, they fully well understand the areas of their discretion - their authority. They are also confident of getting needed help from their superiors. There is clarity of roles. These elements together make for a feeling of greater personal commitment on the part of the subordinates. They become more enthusiastic in attaining the targets. There is high motivation; there is high morale too.

5. Orderly Growth of Organization

Management by Objectives provides for the maintenance and orderly growth organization by means of predetermined set of objectives for everyone involved. It is also provides in measurement of what is actually achieved. The progress and even the tenure of all responsible managers are dependent upon their producing the results. Management by Objectives emphasizes the ability, skill and achievement of managers rather than their personality. Thus, the orderly growth and development of the organisation is ensured.

6. Development of Effective Controls

Management by Objectives not only sharpens the planning, but also develops effective controls. It specifically provides for periodic reviews and annual performance appraisals serving as the needed feedback for further streamlining the objectives or targets. It makes possible for a manager to control his own performance, high degree of self-control resulting in stronger motivation. Control from "above" is substituted by control from "self" Management by Objectives facilitates coordinated effort and teamwork.

7. Generating of an Ideal Atmosphere

Douglas McGregor says. "The motivation, the potential for development, the capacity for assuming responsibility, the readiness to direct behaviour toward organisation goals are all present in people. Management does not put them there. The essential task of management is to arrange organizational conditions and methods of operations so that people can achieve their own goals best by directing their own efforts towards organizational objectives." This is an ideal atmosphere suitable for better industrial relations and ensured success of the enterprise.

8. Objective Appraisal

Management by Objectives provides a scientific basis for evaluating a subordinate's performance, because goals (standards) are jointly set by the superior and the subordinates


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Q.3. Describe the limiatation of Management by Objectives.
Limitations of Management by Objectives

In spite of its many advantages, the Management by Objectives has some weaknesses as follows:

1. Unfavourable Attitude of Managers

Some managers have an attitude that the regular attention required of them by Management by Objectives system, draws heavily on their busy time-schedule and is not consistent with their roles. They feel that it is not so effective a way as some other approaches. Some managers view their roles as principally involving policy-making, budget formulation etc.

2. Excessive Paper Work

Management by Objectives programme involves a huge amount of newsletters, instruction booklets, training manuals, questionnaires, performance date, review and appraisal reports to be prepared by the superiors and subordinates. Thus, Management by Objectives is said to have created one more "paper mill" in the organisation added to the already existing large amount of paper work.

3. Problems about Goal Setting

Management by Objectives requires issuance of proper, exhaustive guidelines to goal-setters. However, managers responsible for practicing Management by Objectives do not themselves understand and appreciate a good deal about it, expecially about the concept of self-control and self-direction which is basic to Management by Objectives. Similarly, there are several other difficulties in goal setting:

* Positive and active participation from subordinates is not easily forthcoming.

* Truly verifiable goals are not easy to formalize.

* Empahasis is put on short-range goals, where as long-range goals are avoided, though long-range goals are vital for growth and development of the organisation.

* Goals remain inflexible and rigid. For example, changes desirable in annual budgets are not easily accepted in the middle of the year.

* Over-use of quantitative goals jeopardizes the qualitative aspect which may even more important the quantification is some case.

* Goals tend to take precedence or priority over the people who uses them. Any action is acceptable if it serves in the attainment of goals, without caring of its impact on people. Thus, all these difficulties come in the way of making management by objectives operational in an organisation. Further, managing involves more than goal setting.

4. Time-Consuming Nature of Management by Objectives

Management by Objectives system is time-consuming especially in the early phases of its introduction when employees are unfamiliar with its process. Since managers also have to learn the necessary skills it is commonly estimated that it takes 2 years to take an management by objectives programme working smoothly. A few management by objectives programme working smoothly. A few management by objectives programmes have failed because managers could not spare adequate time needed for its various phases.

5. Difficulties in Making Organizational Changes

Management by Objectives system requires to be integrated with other systems in the organisation, such as budgeting, forecasting, communication, control etc. Sometimes current practices may have to be changed. Thus, greater decentralization may become a necessity. Moreover, some systems may required to be changed, for example, control system, data processing system etc. Managers feel such changes as time-consuming, distributing there "status quo" (or as it is) facilities and difficult in different other ways.

6. Failure to Teach Management by Objectives Philosophy

Management by Objectives as a concept is simple but it is deceptively so. It is much easier to explain this principle than to introduce it to an organsation, especially in a very dynamic and changing environment. Moreover, management by objectives is still building toward achieving a fully institutionalized system of management to be used by the entire key manager. Sometimes managers fail to use objectives as a constructive force, even with the full participation and assistance of their superiors. In order to understand the philosophy of management by objectives, managers have to make themselves professionals.



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Q.4. Describe the steps for improving the prospects or effectiveness of Management by Objectives.
Steps for Improving the Prospects Or Effectiveness of Management by Objectives Application

1. Top Management Support and Commitment

Management by Objectives should be used by a strong power and authority structure, i.e. by the top management, so that "planning for work" may be rightly shifted to "planning for goals or results". David Hampton says, "If you want to make Management by Objectives work, you must integrate it into the real systems of work and influence." Management by Objectives must be considered a way of managing and not to an addition to the managerial job. Harold Koontz points out. "An effective programme of managing by objectives must be woven into an entire pattern and style of managing. It cannot work as a separate technique standing alone." In this whole content, top management support and commitment to management by objectives programme is essential and vital.

2. Other Important Steps

* Managers should be given adequate training in management by objectives philosophy and procedures before installing the system. For this purpose, adequate time and resources are required and therefore be arranged.

* Necessary mechanism for making management by objectives programme a success should devised and for this purpose the administrators of management by objectives programme must be endowed with sufficient authority to punish and reward at their own levels.

* Feedback should be made effective the more specific timely the feedback the more positive the effect.

* Employee Participation should be made real and committed by properly motivating them.

* Management by Objectives must be carried all the way down to the first line or supervisory level.

* It should be seen that conflicting objectives are not set at any level and important non-quantifiable objectives are not brushed aside.

* During the course of implementation of management by objectives the required redistribution of powers and status should be seriously considered so as to avoid all kinds of unnecessary infighting and negative conflicts.

Most of the limitations or weaknesses of management by objectives are not of formidable (uncontrollable) nature. Some minor adjustments in attitudes, initiative and determination on the part of the managers may overcome all the difficulties and pitfalls, which come in the way of management by objectives programme. It appears from the widespread discussions and adoption of management of objectives concept in private and public enterprises that it has come to stay in the field of management.


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Chapter 9:

Chapter 9 - Decision Making

* Decision Making

* Different Theories of Decision Making

* Policy

* Characteristics of Policy

* Classification of Policies

* Process of policy formulation

Q.1. "Decision making is the primary test of management." Discuss this statement and explain the process of decision-making.


Whatever a manager does, he does through decision making. Critically examine this statement.


What is the significance of decision making? What procedure should be followed in arriving at a correct decision?


Decision making is the vehicle for carrying managerial workload and discharging the managerial responsibilities. Evaluate the statement and examine the significance of rational decision making in management.


Decision making is at the care of planning. Discuss this statement and spell out the nature of decision-making.


Decision making is at the care of planning. Discuss this statement and spell out the nature of decision-making.


What is decision making? What are the important factors that influence decision making?

Meaning and Definition of Decision Making

Decision making may be reviewed as the process of selecting a course of action from among several alternatives in order to accomplish a desired result. The purpose of decision making is to direct human behaviour and commitment towards a future goal. If there are no alternatives, if no choice is to be made, if there is no other way-out, then there would be not need for decision making. It involves committing the organisation and its resources to a particular choice of course of action thought to be sufficient and capable of achieving some predetermined objective.

Managers at all level in the organisation make decision and solve problems. In fact, decision-making is the process of reducing the gap between the existing situation and the desired situation through solving problems and making use of opportunities. A decision is a course of action consciously selected from available alternatives, with a view to achieving a desired goal. It is an outcome of the judgement and represents a choice and commitment to the same. It is a final resolution of a conflict of needs, means or goals made are the face of uncertainty, complexity and multiplicity. A decision is conclusion reached after consideration it occurs when one option is selected to the exclusion of others - it is rendering of judgement.

Different management scholars have defined Decision making as follows:

George Terry

Decision making is the selection based on some criteria from two or more alternatives.

Heinz Weihrick and Harold Koontz

Decision making is defined as the selection of a course of action among alternatives, it is the care of planning.

Louis Allen

Decision making is the work a manager performs to arrive at conclusion and judgement.

Nature Or Characteristics of Decision Making

Decision making is globally thought to be selection from alternatives. It is deeply related with all the traditional functions of a manager, such as planning, organizing, staffing, directing and controlling. When he performs these functions, he makes decisions. However, the traditional management threorists did not pay much attention to decision making. Infact, the meaningful analysis of decision making process was initiated by Chester Bernard (1938) who commented, The process of decision are largely techniques for narrowing choice.

The nature of decision-making may be clearly understood by its following characteristics features:

1. Decision making is an intellectual process, which involves imagination, reasoning, evaluation and judgement.

2. It is a selection process in which best or most suitable course of action is finalized from among several available alternatives. Such selected alternative provides utmost help in the achievement of organizational goals. The problems for which there is only one selection are most decision problems.

3. Decision making is a goal oriented process. Decisions are made to attain certain goals. A decision is rated good to be extent it helps in the accomplishment of objectives.

4. It is a focal point at which plans, policies, objectives, procedures, etc., are translated into concrete actions.

5. Decision making is a continuous process persuading all organizational activity, at all levels and in the whole universe. It is a systematic process and an interactive activity.

6. Decision making involves commitment of resources, direction or reputation of the enterprise.

7. Decision making is always related to place, situation and time. It may be decision not act in the given circumstances.

8. After decision making it is necessary and significant to communicate its results (decisions) for their successful execution.

9. The effectiveness of decision-making process is enhanced by participation.


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Elements of Decision Making

There are following elements in decision making.

* The decision maker.

* The decision problem or goal.

* Attitudes, values and personal goals of the decision maker.

* Assumption with regard to future events and things.

* The environment in which decision is to be made.

* Available known alternatives and their estimated or imagined outcomes.

* Analytical results in the whole perspective.

* The constraints.

* The act of selection or choice.

* Timing of decision.

* Proper communication of decision for its effective execution.

Q.2. Discuss in brief different theories of Decision-Making.


What are the principles of Decision-Making? How and why the employee participation in Decision-Making process should be introduced?


Make out a case for employees participation in Decision-Making

Theories of Decision Making

The most common bases upon which decisions are made are, fact experience, intuition and authority. The decision itself is concerned with the achievement of an objective. Bridging the gap between the basis for the decision and the decision itself is the theory (or technique) used to arrive at the decision. Theories of decision making stem from the manner in which decisions are made.

Ernest Dale has suggested a comprehensive list of theories of decision making as follows

1. Traditional Economic Theory

2. Psychological Theory

3. Mathematical Theory.

1. Traditional Economic Theory Or Marginal Theory

The simplest theory of business decision making is that the decision makers try to maximize profits and that key consider all courses of action open to them in attempting to do. This is the theory held by traditional economists. Although it may be partially true that the decision makers generally have the effect of profits on mind, they may not always attempt to maximize profits. Marginal theory is based on the law of diminishing return. According to this law, with the additional units of inputs (labour and capital), the marginal contribution of each unit is at a decreasing rate. There comes a stage when the marginal return is zero. This is marginal point. A number of decisions in the area of production, sales, marketing, advertising, recruitment, etc are taken by the management on the basis of marginal theory.

2. Psychological Theory

This theory is designed to identify what actually goes on in the decision maker's mind when he makes a decision. Several factors leave an impact on the mind of the decision maker, such as nature, size and purpose of the organisation, manager's aspiration, attitude, habits, personally temperament, political learning's, social and organizational status, technological skill, domestic life, education, experience, level of satisfaction and so on Psychology of a manager has an important bearing on the quality of decisions he makes. As decision making is an intellectual process, these psychological factors cannot be avoided altogether.

One of the best-known psychological theories is Herbert Simon's theory, which explain that the decision maker attempts to satisfies rather maximize. In other words, a manager finds an answer that is good enough. What consequences the manager considers good enough, will depend on what has been achieved in the past.

3. Mathematical Decision Theory

It is not designed to show how decisions are actually made. Rather, it is designed to help the decision maker who is interested in maximizing profits in a given situation, to lay out the alternatives in such a way that he sees the risks and the consequences more clearly. With the development of operations research and computers for handling complex mathematical models, this approach is commonly used by large organizations where decision making problem is very complex. The linear programming, venture analysis, game theory, queuing theory, probability theory, etc are some of the examples of widely used Operations Research technique. Although these techniques provide a good deal of analysis, yet the rational and psychological aspects of decision making cannot be ignored totally. The attitude, intelligence and wisdom of the decision maker shall always have an important impact on the quality of decisions made by him



*In search of Oyster Pearls*
Dec 31, 2009
A n3st!
Q.3. Policies are guide-posts for managerial action. Discuss this statement and give at least two examples of policies in any area of business management.


What is Policy? What characteristics do policies have? Also discusses various classifications of an industrial policy.


What is Policy and What are the essentials of a sound policy?

Meaning and Definition of Policy

A policy is a general statement that guides thinking, action and decision making of managers for the successful achievement or organizational objectives Policies define the limits within which decisions are to be made. This ensures consistent and unified performance and exercise of discretion by managers.

The top managers generally frame the policies. However, a manager at any other level may low down policies within the limits of his authority and also within boundaries set by policies of his seniors.

A policy is not static and may be modified or reviewed in the light of changes in the environment. A policy may be verbal, written or implied.

A well defined policy help the manager to delegate authority without undue fear, because the policy lays down the limits for decisions by the subordinates. Moreover, policies operationalise objectives, speed up decision making, ensure coordination, help in training and orienting employees and ensure proper administrative control.

Different scholars have defined the term policy as follows:

Heinz Weihrich and Harold Kountz

Policies are plans in that they are general statement or understanding that guide or channel thinking in decision making. Not all policies are statements they are often merely implied from the actions of managers.

F.T. Hanker

A policy is a statement, verbal, written or implied of those principles and rules but are set by managerial leadership as guidelines and constraints for the organisation's thought and action.

E.F.I Brech

Policy is a patter of direction for the guidance of those who carry responsibility for the management of the activities of the enterprise.

Dalton McFarland

Policies are planned expressions of the company's official attitudes towards the range of behaviour within which it will permit or desire its employees to act.

George Terry

Policy is a verbal, written or implied overall guide setting up boundaries that supply the general limits and direction in which managerial action will take place.