SATHYABAMA UNIVERSITY

FACULTY OF BUSINESS ADMINISTRATION

Subject Title: PRINCIPLES OF MANAGEMENT AND PROFESSIONAL ETHICS

Subject Code: SBAX1001
Course: B.E. / B.Tech

UNIT – 1
MANAGEMENT FUNCTIONS AND STRUCTURE
Management – Definition – Basic Functions – Contributions of Taylor and Fayol. Types of
structure – Line, Staff, Line and Staff, Functional, Committee, Project and Matrix Structures.
Departmentalization – Centralisation – Decentralization – Span of Control – Management by
Objectives – Management by Exception.

INTRODUCTION TO MANAGEMENT

Groups of people working in an organization to develop or appraise or attain the common goal of
the organization by utilizing the available resources are called Management. In simple terms it
means managing the work done by the people. Just as the mind coordinates and regulates the
various activities of the person, the management coordinates and regulates the activities of
various members of an organization.
Management is the process of Planning, Organizing, Staffing, Directing, Coordinating and
Controlling the human, physical, financial, and information resources of the organisation in an
effective and efficient manner in order to maintain the common objectives.
DEFINITION:
 F.W. Taylor -“Art of knowing exactly what you want your men to do and then seeing
that it is done the best and cheapest way”.
 Henry Fayol –“To Manage is to forecast, to plan, to organize, to command, to co-ordinate
and to control”.
 Peter F.Drucker –”Management is work and as such it has its own skills, its own tools
and its own techniques”.
 Mary Parker - “Management is the art of getting things done through and with people”.
 Theo Haiman and William G Scott - Management is a social and technical process which
utilized resources influences human action and facilitates changes in order to accomplish
organizational goals.
 Koontz and O Donnel - Management is the creation and maintenance of an internal
environment in an enterprise where individuals working in groups goals, efficiently and
effectively towards the attainment of group goals. It is the art of getting the work done through
and with people in formally organized groups.
RESOURCES – 5 M’S
1) Men
2) Machine
3) Material
4) Money
5) Methods
FUNCTIONS OF MANAGEMENT
Planning
•Look ahead and chart out future course of operation
•Formulation of Objectives, Policies, Procedure, Rules, Programmes and Budgets
Organizing
•Bringing people together and tying them together in the pursuit of common objectives.
•Enumeration of activities, classification of activities, fittingindividuals into functions,
assignment of authority for action.
Directing
•Act of guiding, overseeing and leading people.
•Motivation, leadership, decision making.
Controlling
•Laying standards, comparing actuals and correcting deviation-achieve objectives according to
plans.
Co-ordination
•Synchronizing and unifying the actions of a group of people.
‘POSDCORB’ FUNCTIONS OF MANAGEMENT:
1) Planning: Planning means forecasting or predicting the future activity in a specific
manner or structure. It is the basic function and essential for all the organization.
2) Organizing: It is collection or joining of all the resources available within the
organizational and outside, in order to achieve the organizational goal with efficiency.
3) Staffing: It involves appointing the right man for the right job at the right time. The
management is to analyze the human resource, see if he is suitable for the job and accordingly
allocate the work in the organization.
4) Directing: It is showing the correct path or correct way to achieve the organizational goal
within the stipulated time.
5) Controlling: Controlling as a function involves regulating the person or examining the
person whether he is working in the right way or not. In order to achieve the common goal as
efficient as possible.
6) Coordinating: It is a type of support function. It involves accumulating the work to
achieve the task.
7) Budgeting: It means allocation of the resources. It involves financial planning for the
future activities.
8) Reporting: It is a statement showing the various activities to the top management. It
shows the status of the work done.
NATURE/CHARACTERISTICS OF MANAGEMENT
1. It is an Universal Activity: Management is relevant in every sphere of activity. It is
relevant in army, government, private household work etc. the work can be done in a more
systematic manner with the application of the techniques of management. The material and
human resources can be effectively handled and the foal can be attained with maximum
efficiently. Ex. a student study at random and systematic manner. Later is best one.
2. It is goal oriented: Management focuses attention on the attainment of specific
objectives. For Ex a business may aim for a particular level of sales. This can be achieved by
proper forecast of sales by planning production by fixing the targets.
3. It is an Intellectual activity: The practice of management requires application of mind
and intelligence. Every work needs to be properly planned and execute work has to be assigned
to different Individuals and responsible have to be fixed on them. Ex in a manufacturing unit
production finance and marketing are the important activities performed. It has to work in proper
co-ordination with the other departments. Then only objectives of the firm can be achieved.
4. It is a process: It is process consisting of various stages/ functions such as Planning,
Organising, Directing, Controlling and Co-ordination. Planning is the starting point of
management and control is its last stage.
5. Management is both Art and Science: The practice of science needs knowledge of
theory and formulae. But the practice of art requires skill management is social science. It
focuses attention on the behavior of individuals and groups. The theoretical knowledge may not
help always that time they require skill ex if the workers in a factory demand more pay and
threaten to go on strike if their demand is not considered. Here the skill of the manager will help
to avert the strike then its theoretical.
6. It is a Social Process: Management deals with the behavior of individuals and group. In
a work place individuals work as a team. The behavior of an individual is bound to be different
while he is part of a group ex: an individual worker may be forced to join a strike program
because of the union.
7. It is an on-going Activity: It is a continuous process planning, organizing etc have
unlimited use. Management will exist as long as there are human activities.
8. It is Intangible: It is invisible cannot be seen, but it can be felt.
9. Management is a Profession: Like medical, law and engineering, management has also
come to be recognized as a profession
MANGEMENT IS AN ART AND SCIENCE
Art:
 Practical know how
 Technical skills
 Concrete results
 Creativity
 Personalised nature
Science:
 Empirically Derived
 Critically tested
 General principles
 Cause and effect relationship
 Universal applicability
‘Management as a science provides principles and as an art helps in tackling situations’.
ROLE AND IMPORTANCE OF MANAGEMENT
 Achievement of group goals
 Optimum utilization of resources
 Minimum Cost
 Survival and growth
 Generation of employment
 Development of nation
MANAGEMENT VS ADMINISTRATION
Meaning
Administration as a function is concerned with determination of corporate policies, coordination
of the various departments (production, finance, distribution etc.) of the organization under the
control of the executives.
Management is concerned with execution of the policy within the limits setup by administration and
employment of the organization for the particular objective before it. In other words Management is the
doing process and administration is the thinking process.

POINTS ADMINISTRATION MANAGEMENT

1. Nature of work It is concerned about the It puts into action the policies
determination of objectives and plans laid down by the
and major policies of an administration.
organization.
2. Type of function Determinative Executive
3. Scope Takes major decisions of an Takes decisions within the
enterprise as a whole framework set by the
administration.
4. Level of authority Top-level activity. A middle level activity.
5. Nature of status Consists of owners who invest It is a group of managerial
capital in and receive profits personnel who use their
from an enterprise. specialized knowledge to
fulfill the objectives of an
enterprise.
6. Nature of usage It is popular with government, It is used in business
military, educational, and enterprises.
religious organizations.
7. Decision making Its decisions are influenced by Its decisions are influenced by
public opinion, government the values, opinions, and
policies, social, and religious beliefs of the managers.
factors
8. Main functions Planning and organizing Motivating and controlling
 functions are involved in it functions are involved in it
9. Abilities It needs administrative rather It needs administrative rather
than technical abilities than technical abilities.
10. Focus Handles the business aspects Handles the employers.
such as finance

LEVELS OF MANAGEMENT
FUNCTIONS OF TOP LEVEL MANAGEMENT
• To provide a basic sense of direction to the activities of the company by setting its long
range mission and translating into clear set of objectives
• To design the organization structure of the company in terms of differentiated and
integrated activities, role of various positions, authority & responsibility between them.
• Top management must ensure the quality of personnel in terms of their skills, orientations
and commitment
• To ensure that the resource conversion and exchange systems are designed and operated
efficiently.
• Periodic review of objectives for necessary modifications is a part of this function
FUNCTIONS OF MIDDLE LEVEL MANAGEMENT
• To interpret and explain the plans and policies formulated by top management
• To monitor & control the operating performance
• To cooperate among themselves so as to integrate the various activities of a department
• To train, motivate and develop supervisory personnel; and
• To lay down rules & regulations to be followed by supervisory personnel.
FUNCTIONS OF LOWER LEVEL MANAGEMENT
• To plan day to day production within the goal laid down by higher authorities
• To assign jobs to workers and to make arrangements for their training and development
• To issue orders & instructions
• To supervise & control workers‟ operations and to maintain personal contact with them
• To arrange materials and tools and to maintain machinery
• To advise & assist workers by explaining work procedures, solving their problems etc.
• To maintain discipline and good human relations among workers
• To report feedback information and workers‟ problems to the higher authorities.
THREE LEVELS OF MANAGEMENT
Board of Directors

TOP
Managing Director
MANAGEMENT

Executive Directors

Marketing Manager Finance Manager Personnel Manager MIDDLE MGT

Branch Manager Chief Accountant

Labor Officers

Finance Officers LOWER

Sale Officers
MGT

CONTRIBUTIONS OF TAYLOR AND FAYOL

F.W.Taylor's Scientific Management (USA 1856-1915)
He started as an apprentice machinist in Philadelphia, USA. He rose to be the chief engineer at
the Midvale Engineering Works and later on served with the Bethlehem Works where he
experimented with his ideas and made the contribution to the management theory for which he is
so well known. Frederick Winslow Taylor well-known as the founder of scientific management
was the first to recognize and emphasis the need for adopting a scientific approach to the task of
managing an enterprise. He tried to diagnose the causes of low efficiency in industry and came to
the conclusion that much of waste and inefficiency is due to the lack of order and system in the
methods of management. He found that the management was usually ignorant of the amount of
work that could be done by a worker in a day as also the best method of doing the job. As a
result, it remained largely at the mercy of the workers who deliberately shirked work. He
therefore, suggested that those responsible for management should adopt a scientific approach in
their work, and make use of "scientific method" for achieving higher efficiency. The scientific
method consists essentially of
(a) Observation
(b) Measurement
 (c) Experimentation and
(d) Inference.
He advocated a thorough planning of the job by the management and emphasized the necessity
of perfect understanding and co-operation between the management and the workers both for the
enlargement of profits and the use of scientific investigation and knowledge in industrial work.
He conducted the experiments at his work places to find out how human beings could be made efficient
by standardizing the work and better method of doing the work. These experiments have provided the
following features of scientific management:
ELEMENTS AND TOOLS OF SCIENTIFIC MANAGEMENT
Taylor conducted various experiments at his work places to find out how human beings could be made
efficient by standardizing the work and better method of doing the work. These experiments have
provided the following features of scientific management.
1. SEPERATION OF PLANNING AND DOING: Worker was put under the supervision of a supervisor
commonly known as gang boss. Thus, supervisor’s job was merely to see how the workers were
performing. This was creating a lot of problems, and Taylor emphasized that planning should be left to
the supervisor and the worker should emphasize only operational work.
2. FUNCTIONAL FOREMANSHIP: Separation of planning from doing resulted into development of
supervision system which could take planning work adequately besides keeping supervision on workers.
For this purpose, Taylor evolved the concept of functional foremanship based on specialization of
functions.

Workshop manager

Planning in charge Production incharge

Route Instructi Time discipli Speed inspect Mainten Gang

clerk on card and cost narian boss or ance boss
clerk clerk foreman

worker

3. JOB ANALYSIS: Job analysis is undertaken to find out the one best way of doing the thing. The best
way of doing a job is one which enquires the least movements, consequently less time and cost.
(i) Time study involves the determination of time a movement takes to complete. The movement which
takes the minimum time is the best one. This helps in fixing the fair work for a period.
(ii) Motion study involves the study of movements in parts which are involved in doing a job and
thereby eliminating the wasteful movements and performing only necessary movements. This reduces
the time taken in performing a work and also the fatigue of workers.
(iii) Fatigue study shows the amount and frequency of rest required in completing the work. After a
certain period of time, workers feel fatigue and cannot work with full capacity. Therefore, they require
rest in between.
4. STANDARDISATION: As far as possible, standardization should be maintained in respect of
instruments and tools, period of work, amount of work, working conditions, cost of production, etc.
These things should be fixed in advance on the basis of job analysis and various elements of costs that
go in performing a work.
5. SCIENTIFIC SELECTION AND TRAINING OF WORKERS: A worker should be given work for which he is
physically and technically most suitable like, education, work experience, aptitude, physical strength,
etc.
6. FINANCIAL IINCENTIVES: Financial incentives can motivate workers to put in their maximum efforts. If
provisions exist to earn higher wages by putting in extra effort, workers will be motivated to earn more.
7. ECONOMY: The economy and profit can be achieved by making the resources more productive as
well as by eliminating the wastages.
8. MENTAL REVOLUTION: Scientific management depends on the mutual co-operation between
management and workers. For this co-operation, there should be mental change in both parties from
conflict to co-operation
PRINCIPLES OF SCIENTIFIC MANAGEMENT
Taylor has given certain basic principles of scientific management. The fundamental principles are:
1. REPLACING RULE OF THUMB WITH SCIENCE: Taylor has emphasized that in scientific management,
organized knowledge should be applied which will replace rule of thumb. While the use of scientific
method denotes precision in determining any aspect of work, rule of thumb emphasizes estimation.
2. HARMONY IN GROUP ACTION: Group harmony suggests that there should be mutual give and take
situation and proper understanding so that group as a whole contributes to the maximum.
3. CO-OPERATION: Scientific management involves achieving co-operation rather than chaotic
individualism.
4. MAXIMUM OUTPUT: Scientific management involves continuous increase in production and
productivity instead of restricted production either by management or by worker.
5. DEVELOPMENT OF WORKERS: In scientific management, all workers should be developed to the
fullest extent possible for their own and for the company’s highest prosperity.

Benefits of Scientific Management:

Taylor's ideas, research and recommendations brought into focus technological, human and
organizational issues in industrial management.
Benefits of Taylor's scientific management included wider scope for specialization, accurate
planning, timely delivery, standardized methods, better quality, lesser costs, minimum wastage
of materials, time and energy and cordial relations between management and workers. According
to Gilbreths, the main benefits of scientific management are "conservation and savings, making
an adequate use of every one's energy of any type that is expended". The benefits of scientific
management are:-
1. Replacement of traditional rule of thumb method by scientific techniques.
2. Proper selection and training of workers.
3. Incentive wages to the workers for higher production.
4. Elimination of wastes and rationalization of system of control.
5. Standardization of tools, equipment, materials and work methods.
6. Detailed instructions and constant guidance of the workers.
7. Establishment of harmonious relationship between the workers.
8. Better utilization of various resources.
9. Satisfaction of the needs of the customers by providing higher quality products at lower prices.
Criticism:
1. Worker's Criticism:
(a) Speeding up of workers: Scientific Management is only a device to speed up the workers
without much regard for their health and well-being.
(b) Loss of individual worker's initiative: Scientific Management reduces workers to automatic
machine by taking away from them the function of thinking.
(c) Problem of monotony: By separating the function of planning and thinking from that of
doing, Scientific Management reduces work to mere routine.
(d) Reduction of Employment: Scientific Management creates unemployment and hits the
workers hard.
(e) Weakening of Trade Unions: Under Scientific Management, the important issues of wages
and working conditions are decided by the management through scientific investigation and the
trade unions may have little say in the matter.
(f) Exploitation of workers: Scientific Management improves productivity through the agency of
workers and yet they are given a very small share of the benefit of such improvement.
2. Employer's Criticism:
(a) Heavy Investment: It requires too heavy an investment. The employer has to meet the extra
cost of the planning department though the foreman in this department do not work in the
workshop and directly contribute towards higher production.
(b) Loss due to re-organization: The introduction of Scientific Management requires a virtual
reorganization of the whole set-up of the industrial unit. Work may have to be suspended to
complete such re-organization.
(c) Unsuitable for small scale firms: various measures like the establishment of a separate
personnel department and the conducting of time and motion studies are too expensive for a
small or modest size industrial unit.
FAYOL
Henry fayol (1841-1925) is generally hailed as the founder of the classical management school –
not because he was the first to investigate managerial behavior but because he was the first to
systematize it.
Perhaps the real father of modern operational management theory is the French industrialist Henry
Fayol. His contributions are generally termed as operational management or administrative
management.
“To manage is to forecast and to plan, to organize, to coordinate and to control.”
He found that activities of an industrial organization could be divided into six groups:
1. Technical (relating to production);
2. Commercial (buying, selling and exchange);
3. Financial (search for capital and its optimum use);
4. Security (protection of property and person);
5. Accounting (including statistics) and
6. Managerial (planning, organization, command, coordination, and control).
He has divided his approach of studying management into three parts: (i) managerial qualities and
training, (ii) general principles of management, and (iii) elements of management.
MANAGERIAL QUALITIES AND TRAINING
Fayol was the first person to identify the qualities required in a manager. According to him, there are six
types of qualities that a manager requires. These are as follows:
1. Physical (health, vigour, and address);
2. Mental (ability to understand and learn, judgement, mental vigour, and capability);
3. Moral (energy, firmness, initiative, loyality, tact, and dignity);
4. Educational (general acquaintance with matters not belonging exclusively to the function performed);
5. Technical (peculiar to the function being performed); and
6. Experience (arising from the work).
GENERAL PRINCIPLES OF MANAGEMENT (14 principles of Management)
1. DIVISION OF WORK: According to him,” specialization belongs to natural order. The workers always
work on the same part, the managers concerned always with the same zmatters; acquire an ability,
sureness, and accuracy which increase their output.
2. AUTHORITY AND RESPONSIBILITY: The authority and responsibility are related, with the latter the
corollary of the former and arising from it. Fayol finds authority as a continuation of official and personal
factors.
3. DISCIPLINE: Discipline is obedience, application, energy, behavior, and outward mark of respect
shown by employees.
4. UNITY OF COMMAND: Unity of command means that a person should get orders and instructions
from only one superior..
5. UNITY OF DIRECTION: Unity of direction is different from unity of command in the sense that the
former is concerned with functioning of the organization in respect of its grouping of activities or
planning Unity of direction provides better coordination among various activities to be undertaken by an
organization.
6. SUBORDINATION OF INDIVIDUAL TO GENERAL INTEREST: Common interest is above the individual
interest. Individual interest must be subordinate to general interest when there is conflict between the
two.
7. REMUNERATION OF PERSONNEL: Remuneration of employees should be fair and provide maximum
possible satisfaction to employees and employers.
8. CENTRALISATION: In small firms, centralization is the natural order, but in large firms, a series of
intermediaries is required. Since both absolute and relative values of the managers and employees are
constantly changing, it is desirable that the degree of centralization or decentralization may itself vary
constantly.
9. SCALAR CHAIN: There should be a scalar chain of authority and of communication ranging from the
highest to the lowest. It suggests that each communication going up or coming down must flow through
each position in the line of authority. Fayol has suggested ‘gang plank’ which is used to prevent the
scalar chain from bogging down action.
10. ORDER: This is a principle relating to the arrangement of things and people. In material order, there
should be a place for everything and everything should be in its place.
11. EQUITY: Equity is the combination of justice and kindness. Equity in treatment and behavior is liked
by everyone and it brings loyalty in the organization
12. STABILITY OF TENURE: No employee should be removed within short time. There should be
reasonable security of jobs.
13. INITIATIVE: Within the limits of authority and discipline, managers should encourage their
employees for taking initiative. Initiative is concerned with thinking out and execution of a plan.
14. ESPIRIT DE CORPS: This is the principle of ‘union is strength’ and extension of unity of command for
establishing team work.
ORGANISATION STRUCTURE
Types of structure
 The organisation structure, being abstract, is not visible in the same way as a biological
or mechanical structure, though it can be inferred from the actual operations and behavior of the
organisation.
 To put it in simple words Organizational structure refers to the levels of management and
division of responsibilities within an organisation.
 In an organization of any size or complexity, employees' responsibilities typically are
defined by what they do, who they report to, and for managers, who reports to them. Over time
these definitions are assigned to positions in the organization rather than to specific individuals.
The relationships among these positions are illustrated graphically in an organizational chart.
Factors in Designing Organisation Structure

A sound organisation requires sound organisation structure. This requires the identification and
analysis of activities While designing a structure, the following points should be given adequate
consideration.
1. Departmentation. Departmentation is the process of arranging work to form positions
functions, and other organisational elements. There are several ways of departmentation.
However, any base should provide (i) facility in co-ordination (ii) advantages of specialisation,
(iii) minimum cost, (iv) emphasise on important activities, (v) consideration of internal and
external factors, and external factors, and (vi) development of individuals. Departmentation is
not a fixed pattern, it should be checked and analysed from time to time to make necessary
adjustment according to changes in internal an external variables.
2. Balancing. Each function should be given its proper emphasis with respect to its basic
purpose in the organisation. Each element of the organisation should be seen in the context of
total structure because no decision can be taken on a particular element in isolation. Compromise
in various elements gives a balanced and workable organisation structure.
3. Focusing of Operating Responsibility. The work assignment creates responsibility.
Organisation structure should clearly define the responsibility of all the individuals so that they
exactly know what is expected of them. Clearly defined responsibility helps in delegating
appropriate authority to various level. Moreover, when responsibility is clearly defined, the
persons can be trained accordingly to occupy the positions.
4. Establishing Span. Span of management, supervision, or control refers to the number of
people one manager can supervise. There is a limit on this number; however, arbitrary
designation of limits on number is misleading. In practice, the span may vary widely because a
number of factors determine this. The span should be decided on the basis of its needs at various
levels of organisation
5. Facilitating Units. Departmentation and responsibility centres provide as to who will
perform the work. The persons heading the responsibility centres need the help of facilitating
units which are created in the organisation. These units may be organised in the form of
departments, sectors, or committees. In organising these units, factors like co-ordination of
operating units, consistent action throughout the organisation, provision for adequate importance
and control, and common use of specialised facilities should be considered.
6. Continuity. The structure is determined for future period also. As such, it should be
designed in such a way that it helps in achieving the objectives of near future also. Forthis
purpose, the structure should be kept flexible enough so that it can be adjusted to changing
conditions.

Three-fold of organisation structure

The basic purpose of designing organisation structure is three-fold
1. All the necessary activities are performed and no unnecessary activity is performed.
2. There is no unnecessary duplication in performing necessary activities.
3. The various activities are performed in a synchronized or co-ordinated way.
Forms of Organisation Structure
Designing of the organisation structure is ordinarily considered to be a matter of choice among a
large number of alternatives. There are three traditional forms: line, line and staff, and functional
organisation, and two newer forms-committee and matrix organisations. In fact, no particular
form is the best and, in practice, an admixture of all these or of some is found.
1) Line Organisation
This is also known as scalar, military, departmental, or vertical organisation an perhaps is the
oldest form. This concept holds that in any organisation or hierarchy derived from a scalar
process, there must be a single head who commands it.
It is perhaps the oldest and the simples organisational structure. In this kind of structure every
manager exercise a direct authority over his subordinate who in turn directly reports to their
superiors.
 There is a hierarchical arrangement of authority.
 Each department is self-contained and works independently of other departments.
 Lines of authority are vertical i.e. from top to bottom.
 There are no staff specialists.

Advantages
 Simple to establish and operate
 Promotes prompt decision making.
 Easy to control as the managers have direct control over their subordinates.
 Communication is fast and easy as there is only vertical flow of communication.
Disadvantages
 Lack of specialisation
 Managers might get overloaded with too many things to do.
 Failure of one manager to take proper decisions might affect the whole organisation.
However, line structures are suitable for small businesses where there are few subordinates
organisations where there is largely of routine nature and methods of operations are simple.
Two ways of designing Line Organisation
Line organisation can be designed in two ways:
 Pure Line Organisation
 Departmental Line Organisation
1. Pure Line Organisation
Under this from, similar activities are performed at a particular level. Each group of activities is
self-contained unit and is able to perform the assigned activities without the assistance of others.
Pure line organisation may be depicted as follows:
Though, this is simple in organizing but it almost non-existent in the modern world.
2. Departmental Line Organisation
Under this form, entire activities are divided into different departments on the basis of similarity
of activities.

Each department is placed under one departmental superintendent. All persons in the department
are subject to control by the departmental head. The basic objective of this form is to have
uniform control, authority, and responsibility.

2) Line and Staff Organisation

It is a combination of line and functional structures. In this organisation a structure, the authority
flows in a vertical line and get the help of staff specialist who are in advisory. When the line
executives need advice, information about any specific area, these staff specialists are consulted.
For example Chief accountant has command authority over accountants and clerks in the
accounts departments but he has only advisory relationship with other departments like
production or sales.

Fig.: Line and Staff Organisation

Advantages
Line managers are provided by expert advice by these specialists.
Staff managers provide specialist advice which can improve quality of decisions in various
departments.
Disadvantages
Line managers and staff managers might have conflicts on particular issues.
Line and staff managers might not be clear as to what the actual area of operations is and what is
expected of them. Co-ordination may be a problem.
Staff personnel are not accountable for the results and thus may not take tasks seriously.
However, Line and staff organisation is very suitable for large organisation.
3) Functional Organisation Structure
Functional organisation structure is were “authority rests with the functional heads; the structure
is sectioned by departmental groups.”The organisation is divided into a number of functional
areas. This organisation has grouping of activities in accordance with the functions of an
organisation such as production, marketing, finance, human resource and so on.
The specialist in charge of a functional department has the authority over all other employees for
his function.
It is a kind of Formal Organisation whose structure is based on organising resources to perform
specialized tasks or activities in order to attain the goals of organisation.
This structure emerges from the idea that the organisation must perform certain functions in
order to carry on it‟s operations.
Functional structure is created by grouping the activities on the basis of functions required for
the achievement of organisational objectives. For this purpose all the functions required are
classified as shown below:-

Nature & Performance

Basic Secondary Supporting

Characteristics of Functional Organisation

1. Functional authority relationship
2. Limited span of management
3. Line and staff division
4. Organisation growth through emphasis on sub goals
5. Specialisation on functional areas
Fig.: Functional Organisation Structure
Advantages
 Is logical and reflection of functions
 Follows principle of occupation specialisation
 Simplifies training
 Better control as the manger in charge of each functional department is usually an
specialist.
Disadvantages
 Overspecialization and narrow viewpoints of key personnel can limit the organisation
growth.
 Reduced coordination between functions.
 Conflicts between different functions could be detrimental for the organisation as a
whole.
 Difficult for general managers to coordinate different departments.
However, it is much suitable for large organisations where there is ample scope for
specialization. Once harmony and proper coordination among different functions is achieved, it
could lead to sure success for an organisation.
4) Committee Organisation Structure
Organisation committees are quite popular at different levels for various functions. The board of
directors is a committee.
Similarly, there may be executive committee, finance committee, audit committee, bonus
committee, planning committee, grievance committee, etc. Exact definition of a committee is
difficult because there are many different kinds of committees and the concept of a committee
may be defined as a group of persons in an organization to another. However, a committee may
be defined as a group of persons in an organization for taking or recommending certain
decisions.

Characteristics of committee organisation

On the basic of the definition, following broad characteristics of a committee any be spelled out.
1) A committee is a group of persons there should be at least two persons. There is no
limitation on the maximum number of persons. However, if number of persons rises above
seven, communication tends to become centralized because committee members do not have
adequate opportunity to communicate directly with one another.
2) A committee is charged with dealing with specific problems and it cannot go in for
actions in all spheres of activities. There are strictly defined jurisdictions within which a
committee is expected to justify its existence. Beyond these limited spheres a committee is
doomed to fail as an organ of action.
3) Members of the committee have authority to go into details of the problems. This
authority usually is expressed in terms of one vote for each member.
4) A committee have the authority either to take a final decision or it may merely decision
or it may merely deliberate on problems without authority to decide.
5) A committee may be constituted at any level of organisation. Moreover, the members of a
committee may be drawn from various levels. Usually in such a case, all the members of the
committee enjoy equal authority.

5) Matrix Organisation Structure

 Matrix organisation combines two structures – functional departmentation and project
structure.
 Functional department is a permanent feature of the matrix structure and retains
authority for overall operation of the functional units.
 Project teams are created whenever specific projects require a high degree of technical
skill and other resources for a temporary period.
 Project team form the horizontal chain and functional departments create a vertical
chain of command.
 Members of a particular team are drawn from the functional departments and are placed
under the direction of a project manager who has the overall responsibility of a particular
project.
Advantage
 Is oriented towards end results.
 Professional identification is maintained
 Pinpoints product-profit responsibility
Disadvantages
 Conflict in organisation authority exists.
 Possibility of disunity of command exists
 Requires manager effective in human relations
Matrix organizations are used in industries with highly complex product systems for example,
aerospace industry where project teams are created for specific space or weapon systems.
6) Project Organisation Structure
The project structure consists of a number of horizontal organisational units to complete projects
of a long duration. A team of specialists from different areas is created for each project. Usually
this team is managed by the project manager. The project staff is separate from and independent
of the functional departments.
Advantages
 Special attention can be provided to meet the complex demand of the project.
 It allows maximum use of specialist knowledge thus chances of failure are very less.
 Project staff works as a team towards common goal which results in high motivation
level for its members.
Disadvantages
As the project staff consists of personnel from diverse fields, it might be quite challenging for the
project manager to coordinate among them.
Departmentation
Departmentation is process of grouping activities and people onto department make it possible to
expend organization. After reviewing the plan, usually the first step in the organization process is
departmentalization. Once job have been classified through work specialization, they are
grouped so those common tasks can be coordinated. Departmentation is the biases on which
work or individuals are grouped into manageable units. There are five traditional methods for
grouping work activities.
Thus workflow analysis can be used tighten the connection between employees‟ work and
customers‟ needs. Also it can help to make major performance breakthroughs throughout
business process reengineering (BPR).A functional rethinking and radical redesign of business
process to achieve dramatic improvements in costs, quality, service, and speed.BPR use
workflow analysis to identify jobs that can be eliminated or recombined to improve company.
TYPE OF DEPARTMENTATION:
1. DEPARTMENTATION BY NUMBERS:
Departmentation by number is telling off persons who are to perform the same duties and putting
them under the superior of a manager the essential fact is not what these people do, where they
work? Or what they work with, it is that the success of the understanding depends only on the
number of persons include in it. This method is rapidly applying in army.
DISADVANTAGES OR DECLINES REASONS
There are many reason of decline of departmentation by numbers.
 It has declined due to advance technology and demand of specialized and different skills.
 A second reason is groups composed of specialized personnel are more efficient than
those based on number.
 Departmentation by number is useful only at the lowest level of the organization.
 Departmentation by number fails to produce good results
2. DEPARTMENTATION BY TIME
It is grouping activities on the basis of time. It is oldest form of departmentation and it is
generally used in low level of departmentation. It is particularly applied in hospitals and steel
manufacturing enterprise where continue process of service and manufacturing is used
ADVANTAGES
 It is process of working and services throughout 24 hours.
 It is continuing service process.
 Expensive machinery is used in shifts.
 Students can work evening or at night.
DISADVANTAGES
 There is lacking supervision at night.
 Exhaustion factor.
3. DEPARTMENTATION BY FUNCTION
It is grouping activities on the basis on function of an enterprise. The basic enterprise functions
are production, selling, and financing functional departmentation is bases for organizing
activities and in organizational structure. It organizes by function to be performed. The function
reflects the nature of the business. The advantage of this type of grouping is obtaining
efficiencies from consolidating similar specialties and people with common skills, knowledge
and orientations together in common units
ADVANTAGES
 It is logical reflection of function.
 Maintains power of major functions.
 Simplifies training.
DISADVANTAGES
 De-emphasis of overall company objectives.
 Reduces coordination between function.
 Slow adoption to change in environment.
4. DEPARTMENTATION BY GEOGRAPHY
Departmentation by geography is followed where geographic marked appear to offer advantages.
Geographic department most often use in sales and production, it is not use in finance.
Departmentalization by geographical regions groups jobs on the basis of territory or geography.
For example Merek, a major pharmaceutical company, have its domestic sales departmentalized
by regions such as Northeast, Southeast, & Northwest
ADVANTAGES
 It emphasis on local markets and problems.
 Improves coordination in a region.
 Better face to face communication.
DISADVANTAGES
 Increases problem of top management control.
 Requires more persons with general manager abilities.
5. DEPARTMENTATION BY CUSTOMER
Departmentalization by customer groups jobs on the basis of a common set of needs or problems
of specific customers. For instance, a plumbing firm may group its work according to whether it
is serving private sector, public sector, government, or not- for-profit organizations. A current
departmentalization trend is to structure work according to customer, using cross-functional
teams. This group is chosen from different functions to work together across various departments
to interdependently create new products or services. For example, a cross-functional team
consisting of managers from accounting, finance and marketing is created to prepare a
technology plan.
There is different difficult decision to be made in separating some type of customer departments
from product departments. Business owners and managers arrange activities on the basis of
customer requirements. Departmentation by customer can be defined by figure
ADVANTAGES
 Departmentation by customer emphasis on customer needs.
 It develops experience in customer area.
DISADVANTAGES
 It may be difficult to analysis customer demands.
 It requires managers and staff expert in customer problems.
 Customer groups may not always be clearly defined.
6. DEPARTMENTATION BY PROCESS
This type of departmentation is found in production and operative levels. Such type of
departmentation can be found in paint or electroplating process. Departmentalization by process
groups jobs on the basis of product or customer flow. Each process requires particular skills and
offers a basis for homogeneous categorizing of work activities. A patient preparing for an
operation would first engage in preliminary diagnostic tests, and then go through the admitting
process, undergo a procedure in surgery, receiver post operative care, be discharged and perhaps
receive out-patient attention. These services are each administered by different departments.
ADVANTAGES
 It simplifies training.
 Achieve economic advantage.
 Uses specialized technology.
DISADVANTAGES
 Coordination of departments is difficult.
 Responsibility for profit is at the top.
7. DEPARTMENTATION BY PRODUCT
This type of departmentation used in organization where more than one product is producing. In
this department all the sources and authority are placed under the control of one manager.
Departmentation by product assembles all functions needed to make and market a particular
product are placed under one executive. For instance, major department stores are structured
around product groups such as home accessories, appliances woman‟s clothing, men‟s clothing
and children clothing.
ADVANDTAGES
 Places attention on production.
 Increase growth of product.
 Places responsibility for profit at division level.
DISADVANTAGES
 Requires more persons with general manager abilities.
 Presents problems of top management control
 REWARD POWER: Power arises from ability of some people to grant reward reward is
known as reward power. University Professors have considerable reward. power they made high
grade.
 EXPERT POWER: Power may also come from the expertness of a person or a group.
This power of knowledge. Physician lowers, &university professors may have considerable
influence for their special knowledge.
 REFERENT POWER: This is the power of admiring high esteemed leader by
individuals.
 DECESION MAKING POWER: This power arises from the power of positions. When
people speak authority in managerial setting, they are usually referring to the decision making
power.

CENTRALISATION
Centralisation is the systematic and consistent reservation of authority at central point within the
organisation
Benefits of Centralisation
This system results in certain advantages to the organisation
1- Facilitating Personal Leadership. Personal leadership can be a potent influence in the
success of a small organisation and during its early growth stages. The success and survival of
the small, young enterprise in the competitive market depends upon aggressiveness, singleness of
purpose, and flexibility. Under a talented and dynamic leader, centralisation in small
organisation may result in quick decisions, enterprising and imaginative action, and high
mobility
2- Providing Integration. Certain amount of centralisation is necessary to unify and
integrate the total operation of the enterprise. Some sort of central direction is required to keep
all parts of the organisation moving harmoniously together towards a common objective. Thus, it
acts as a binding force on the various parts of the organisation.
3- Uniformity of Action Centralisation brings uniformity in all actions in the organisation.
Thus, to the extent that the organisation wishes all its units to do the same thing in the same way
or the same time, there must be centralisation of appropriate decisions.
4- Handling Emergencies. When emergency decisions affecting all the units of the
organisation are to be taken, centralisation is necessary. The more acute emergency or the more
acute competition requires greater centralized decision-making.
5- Other Benefits. Besides, centralisation minimizes duplication of work and wastages
require easier control, and makes communication easier.
However, these advantages of centralisation are limited in certain circumstances and particularly
in smaller organisations. A stage comes when decentralisation becomes desirable to achieve its
advantages and where the limitations of centralisation come in the way of successful
organisational functioning.
DECENTRALISATION
Decentralisation has become the prevailing philosophy for organising activities on the part of
large organisations.
Benefits of Decentralisation
Many organisations, which were centralized at earlier stages, have been forced to go for
decentralisation simply because they could not cope up with the situation under centralized
authority. This show the benefits of decentralisation which are as follows:
1. Reducing Burden to Top Executives. Decentralisation is necessary for solving the
problems of expanding organisations. It is the means by which the chief executive can extend his
leadership over a giant organisation, when the chief executive makes operating decisions and
with problems of immediate urgency, he finds it almost impossible to adopt the relaxed and
contemplative point of view necessary for planning and thinking ahead. Decentralisation relieves
this pressure on the chief executive an provides him time to think for the future and to make
plans accordingly.
2. Facilitating Diversification. Decentralisation can facilitate the growth and
diversification of product lines. Divisionalization facilitates diversification an former is
successful under decentralisation. For under decentralisation, each product line is treated as
separate unit and proper emphasis on all important matters such as present position, future
prospects, an comparative efficiency, can be given.
3. Ensuring Marketing Innovations. Customers require satisfaction in respect of supply of
qualitative products, regularity of supply, and at cheaper rates. Marketing innovations ensure
better customer satisfaction. Each organisation has to carry on these marketing innovations for its
existence and growth. In decentralized organisation structure, higher level people get much time
for the creativity and innovations. The impact of decentralisation on both product and market has
proved by the various organisations.
4. Motivating Mangers. Various research studies have shown that we organisation
structure itself can influence the people within the organisation. The extent to which the
organisation facilities participation, communication, delegation, mutual interaction, and
interdependence, motivates people for higher productivity. Decentralization tends to emphasise
those desirable characteristics in whatever type of structure it is found.
5. Encouraging Development of Managers. Managers are made, not born and
decentralisation is one of the best methods of developing managers in the organisations. Other
methods of management development have their own contributions in this field. However, giving
manager‟s management jobs to do and to delegate authority for decision-making make them
more mature and competent and broad-based. The problem of succession is overcome this way
and the future growth and success of the organisation are ensured as most organisations find lack
of managerial talent a limiting factor in growth. Perhaps, the necessity of management
development is one of the compelling reasons for decentralisation.
SPAN OF CONTROL
In a business of more than one person, unless the business has equal partners, then there are
managers and subordinates. Subordinates are workers controlled by the manager.
A hierarchy describes the structure of the management of the business, from the top of the
company – the managing director, through to the shop floor worker, who reports to their
foreman, in a manufacturing business.
The hierarchy of a business is usually best understood by drawing an organisation chart
showing which levels of management and employees report to whom.
An example of a hierarchy is shown in the diagram below

A span of control is the number of people who report to one manager in a hierarchy. The more
people under the control of one manager - the wider the span of control. Less means a narrower
span of control.
An example of a narrow span of control is shown in the diagram below:

The advantages of a narrow span of control are:

 A narrow span of control allows a manager to communicate quickly with the employees
under them and control them more easily
 Feedback of ideas from the workers will be more effective
 It requires a higher level of management skill to control a greater number of employees,
so there is less management skill required
An example of a wide span of control is shown in the diagram below:

The advantages of wide span of control are:

 There are less layers of management to pass a message through, so the message reaches
more employees faster
 It costs less money to run a wider span of control because a business does not need to
employ as many managers
The width of the span of control depends on:
The type of product being made – products which are easy to make or deliver will need less
supervision and so can have a wider span of control
Skills of managers and workers – a more skilful workforce can operate with a wider span of
control because they will need less supervision. A more skilful manager can control a greater
number of staff
A tall organisation has a larger number of managers with a narrow span of control whilst a flat
organisation has few managers with a wide span of control.
A tall organisation can suffer from having too many managers (a huge expense) and decisions
can take a long time to reach the bottom of the hierarchy
BUT, a tall organisation can provide good opportunities for promotion and the manager does not
have to spend so much time managing the staff
Chain of command is the line on which orders and decisions are passed down from top to
bottom of the hierarchy. In a hierarchy the chain of command means that a production manager
may be higher up the hierarchy, but will not be able to tell a marketing person what to do.
The advantages of hierarchies are:
 Helps create a clear communication line between the top and bottom of the business –
this improves co-ordination and motivation since employees know what is expected of them and
when.
 Hierarchies create departments and departments form teams. There are motivational
advantages of working in teams.
The disadvantages of hierarchies are:
 The formation of departments can mean that:
 - Departments work for themselves and not the greater good of the business.
 - Departments do not see the whole picture in making decisions.
 Hierarchies can be inflexible and difficult to adjust, especially when businesses need to
adapt to changing markets – remember employees do not tend to react well to change.
1) Span of control refers to the number of immediate subordinate who report a manager.
(2) Different level of organization level is also called span of control.
FACTORS DETERMINING AN EFFECTIVE SPAN
There are several factors which influence the span of management.
1- TRAINING OF SUBORDINATES
The better training of subordinates increases the necessary superior subordinate‟s relationship.
Well trained subordinates require less time of their managers also they have less contact with
their managers. Training programs increase in new and more complex industries.
2-CLARITY OF DELEGATION OF AUTHORITY
Although training enables managers to reduce the frequency of time consuming contact but
delegation of authority should be clear. If a manager clearly delegates authority to task with a
minimum of the managers time and attention. But if a manager delegate‟s authority unclearly
than subordinate give his maximum.
3-CLARITY OF PLANS
If plans are well defined if they are workable, if the delegation of authority toward plan is clear,
if the subordinate understands what expected than little of a supervisor time will be required on
the other hand if plan cannot be drawn accurately and subordinates do much of their own
planning, they may require considerable guidance.
4- USE OF OBJECTIVE STANDARD
A manager must find out, either by personal observation or through the use of objective
standards, whether subordinates are following plans. Obviously, good objective standards enable
managers to avoid many time consuming contact.
5- RATE OF CHANGE
Certain enter rises change much more rapidly than others. The rate of change is very important in
formulating and maintaining policies. It may explain the organization structure of company‟s
railroad, banking and public utility companies.
6- COMMUNICATION TECNIQUES
Communication techniques also influence the span of management. If every plan, instruction,
order or direction has to be communicated by personal contact than managers time will be
heavily burdened. An ability to communicate plans and instructions clearly and concisely also
tends to increase a managers span.
7- AMOUNT OF PERSONAL CONTACT NEEDED
Many instances, face to face meetings are necessary. Many situations cannot be completely
policy statements planning documents or other communications that do not involves personal
contact. An executive may and valuable information‟s by meeting to subordinates and by discuss
problems with them. Some problems can be handled only in face to face meeting so the best way
of communicating problems, instructor, and subordinates is to spend time in personal contact.
8- VARIATION BY ORGANIZATION LEVEL
Several research projects have found that the size of the most effective span differs by
organizational level. For example, it was studied that when a greater number of specialties were
supervised, effective spans were narrower at lower and middle levels of organization but were
increased at upper levels.
9- COMPETENCY OF MANAGERS
A manager who is competent and well trained can effectively supervise more people than who is
not.
10- MATURITY AND MOTIVATION OF SUBORDINATES
The more mature subordinates may delegate more authority, thus widening the span.

MANAGEMENT BY OBJECTIVE (MBO)

Management by objectives (MBO) is now practiced all over the world. Yet, despite its wide
applications, it is not always clear what is meant by MBO. Some says that it is an appraisal tool;
other sees it is a motivational technique; still others consider MBO a planning and control
device. In other words, definitions and applications of MBO differ widely. MBO process consists
of setting goals at the highest level of the organization, clarifying the rules of responsible persons
for achieving the goals. Some still define MBO in a very narrow, limited way.
 MANAGEMENT BY OBJECTIVES (MBO):-
A technique used for improving the performance of management. It shapes a clearly structured,
generally applicable implementation methodology out of the various concepts and theories of
management. It is also called “result management” or “management by results”.
STEPS IN MBO OR PROCESS OF MBO:-
 Setting objectives.
 Developing action plan.
 Appraising annual performance.
PRECAUTIONS FOR MBO PROCESS:-
 Setting clear and well defined objectives.
 Communicating the objectives to achieve results.
 Integration of department objectives with overall organizational objectives.
 Set reasonably attainable objectives.
 Consideration for uncontrollable, factors while fixing the individual factors i.e,
objectives.
 Review of objectives periodically and change if necessary.
 Complete participation by all personnel.
FLOW CHART FOR MBO
Objective achievement

Yes No
Do we revise goal what is the reason
standards or target

YES NO Need for skill Other reasons

Improve Improve
By how much Results are
Satisfactory How How
How How
MBO HAS THREE ELEMENTS
1. Managers (Subordinate manger) should be measured what they accomplish rather than
how they spend their time.
2. Manager must be well informed of their objectives. Manager objectives are their duties
that they must perform.
3. Manager and their subordinates should jointly set performance objectives.
ADVANTAGES OF MBO:-
 Provides a basis for planning.
 It provides meaning and direction to people.
 Better coordination is possible.
 It constitutes standards and so it is a controlling measure.
 It is a motivating device.
 It shows the path to the management to think ahead.
 It makes individuals more aware of the organizational goals.
 It makes evaluation process more equitable by focusing on specific accomplishment. It
also lets subordinates know their objectives will.
LIMITATIONS:-
 Not all objectives can be quantified.
 This may cause tension and resentment.
 It is difficult for the superiors to help instead of judging the subordinates.
 Not all people are capable of participating.
MANAGEMENT BY EXCEPTION (MBE):-
It is a system of identification and communication that signals to the manager when his attention
is needed. MBE is a controlling technique.
 PROCESS OF MBE
 MEASUREMENT.
 PROJECTION.
 SELECTION.
 OBSERVATION.
 COMPARISION.
 DECISION-MAKING
 MEASUREMENT:-
By assigning values to past and present performances, exceptional areas can be identified.
 PROJECTION:-
All the values that are meaningful to the organizational objectives are to be extended (projected)
to see further or future requirements (whether they can be achieved or not).
 SELECTION:-
This involves the criteria and method which the management will use to follow the progress path
towards organizational objectives.
 OBSERVATION:-
Current performance are observed and measured so that managers are aware of the current state
of affairs in the organization.
 COMPARISION:-
Involves the evaluation of the actual performance against planned performance,
identifying the exceptions that require attention and reporting the variations to the management.
 DECISION MAKING:-
Involves prescribing the action that must be taken in order to bring performance back into
control or to adjust expectations to reflect changing conditions within and outside the
organization or to exploit the opportunity.
 DIFFERENCE BETWEEN MBE AND OTHER PRACTICES:-
 Superiors attention is drawn only in the case of exceptional differences between planned
performance and actual performance.
 When there is no such large or exception difference, the decisions are taken by
subordinate manager.
 All exceptional work should go through the entire process till normally is established.
 ADVANTAGES:-
 Executives are left with more time to tackle bigger and tougher issues as the details of
small problems are left to the subordinates.
 There is better utilization of managerial talent across the organization as even the
subordinates get to implement their own decisions and solve problems in their way, however
small they may be.
 It increases the span of management and delegation of authority is improved.
 It provides great opportunity and thus to increase confidence and motivation.
 It uses the latest knowledge on trends, history and business data.
 It forces every manager to be through and precise and also up-to-date with all relevant
information.
 It helps to identify problems before they became big.
 It also prevents last minute rush and panic.
 Increased chances of better performance an hence improves motivation.
 Communication is improved between different segment of an organization.
 Better organizations cohesiveness for the achievement of objectives.
 LIMITATIONS/DISADVANTAGES:-
 Training subordinates to be almost at the level of superiors, but still retaining them at the
lower level, often leads to demotivation and stress among individuals.
 Too much of focus on results leads to lack of quality in the process.
 Too much Newly established organizations and organizations with a dynamic
environment cannot adapt this technique.
 Establishing standards i.e, both qualitative and quantitative takes a dot of time and
involves a lot of effort and precision (accuracy).
 Proper (suitable) and knowledgeable subordinates need to be found, which is a difficult
process.
 Subordinates act out of over confidence and think they can handle better/bigger
problems.
 Keeping lack of all the latest trends is often tedious.
 of accuracy leads to magnifying even the slightest change in trend and creating problems
for the organization and the executive.

Questions
Part A
1. Define management
2. What is „PODSCORB‟?
3. Who is the father of scientific management?
4. Define planning.
5. What is meant by committee form of management?
6. Define decentralization.
7. Define centralization.
8. What is span of control?
9. Define MBO
10. What do you mean by MBE?
Part B
1. Define management. Explain the various functions of management.
2. What is meant by organization structure? Explain its types.
3. Explain Fayol‟s 14 principles of management.
4. What is Departmentation? Explain the different methods of Departmentation.
5. Discuss MBO in detail and state its merits and demerits.
6. Explain the steps involved in MBE. What are its disadvantages?
7. Differentiate between the centralization and decentralization
8. Write the merits and demerits of centralization
9. Write the advantage and limitation of decentralization
10. What are the steps involved in scientific management by F.W.Taylor