1.

UNIT – I
INTRODUCTION TO MANAGEMENT
Introduction: Management and organizational concepts of management and organizationNature and
Importance of Management, Functions of Management, System approach to Management- Taylor’s
Scientific Management Theory, Fayol’s Principles of Management, Leadership Styles, Social
responsibilities of Management. Designing Organizational Structures: Basic concepts related to
Organization - Departmentation and Decentralization, MBO, Processandconcepts.
CONCEPT OF MANAGEMENT
Management is what managers do. It refers to the people at top level in the
organization. It is often viewed as maneuvering, i.e. doing something cleverly to change a
situation and make things happen the way you want them to. It has drawn the concepts and
principles from a number of disciplines such as economics, sociology, psychology,
anthropology, and statistics and so on. There are a variety of views about the term
management. Traditionally, the term "management" refers to the activities (and often the
group of people) involved in the four general functions (planning, organizing, leading,
controlling).
Another common view is that "management" is getting things done through others. To
most employees, the term "management" probably means the group of people (executives and
other managers) who are primarily responsible for making decisions in the organization. In
non-profit organizations, the term management might refer to all or any of the activities of the
board, executive director and/or program directors.

Human Physical
Resources resources
Effective and
Managerial efficient Goals
activities utilization

Financial
Resources Information
resources
In general, management is a set of activities directed at the efficient and effective
utilization of resources in the pursuit of one or more goals. Different scholars from different
disciplines have expressed their views on management. For example, economists have treated
management as a factor of production; sociologists have treated it as a class or group of
persons; practitioners have treated it as a process comprising different activities.

Definition:
1. According to Harold Koontz, “Management is an art of getting things done through
and with the people in formally organized groups. It is an art of creating an
environment in which people can perform and individuals and can co-operate towards
attainment of group goals”.
2. According to F.W. Taylor, “Management is an art of knowing what to do, when to do
and see that it is done in the best and cheapest way”.
3. According to Henry Fayol, “To manage is to forecast and to plan, to organize to
command, to coordinate and to control”.
Therefore, we can say that good management includes both being effective and
efficient. Being efficient means doing the task correctly atleast possible cost with minimum
 1.2

wastage of resources. Management is a process involving planning, organizing, staffing,

directing and controlling human efforts to achieve stated objectives in an organization.
 1.3

IMPORTANCE OF MANAGEMENT
Management has been important to the daily lives of people and to the organizations.
The importance of management may be traced in the following contexts:
1. Achievement of group goals: A human group consists of several persons, each
specializing in doing a part of the total task. Each person may be working efficiently,
but the group as a whole cannot realize it objectives unless there is mutual
cooperation and coordination among them. Management creates team work and
coordination in the group.
2. Optimum utilization of resources: Managers forecast the need for materials,
machinery, money and manpower. They ensure that the organization has adequate
resources and at the same time does not have idle resources.
3. Minimization of Cost: In the modern era of cut-throat competition no business can
succeed until it is able to supply the required goods and services at the lowest possible
cost per unit. Management directs the day-to-day operations in such a way that all
wastages are avoided.
4. Survival and Growth: An enterprise has to adapt itself to the changing demands of
the market and society. It takes steps in advance to meet the challenges of changing
environment. Managers enable the enterprise to minimize the risks and maximize the
benefits of opportunities.
5. Generation of Employment: By setting up and expanding business enterprises,
managers create jobs for the people. Managers also create such an environment that
people working in enterprise can get job satisfaction and happiness.
6. Continuity in the organization: Continuity is very important in the organization. It
is only management that keeps the organization continuing. Where there are no
proper guidelines for decision making continuity cannot be guaranteed.
7. Development of the Nation: Efficient management is equally important at National
level. The development of a country largely depends on the quality of the
management of its resources. By producing wealth, management increases the
national income and living standards of people.

NATURE OF MANAGEMENT
The study and application of management techniques in managing the affairs of the
organization have changed its nature over a period of time. The following points will describe
the nature of management:
1. Management is a Social process: Management is done by people, through people
and for people. Social process refers to a series of activities that are performed in the
society. These activities are carried out by administrators, politicians, economists,
doctors, lawyers, parents, etc.
2. Management is goal oriented: Management involves achieving certain goals; it has
no justification to exist without goals. The basic goal of management is to ensure
efficiency and economy in utilization of human, physical and financial resources.
3. Management is Universal: Management is an essential element of every organized
activity irrespective of the size or type of activity. All types of organizations require
management. Managers at all levels perform the same basic functions.
4. Management is a continuous process: Management is dynamic and an on-going
process. The cycle of management continuous to operate so long as there is organized
action for the achievement of group goals.
 1.4

5. Management is a Group Activity: Management is very much less concerned with

individual‟s efforts. It is more concerned with groups. It involves the use of group
effort to achieve predetermined goal of management of ABC & Co. is good refers to a
group of persons managing the enterprise.
6. Relative, Not Absolute Principles: Management principles are relative, not absolute,
and they should be applied according to the need of the organization. A particular
management principle has different strengths in different conditions. Therefore,
principles should be applied according to the prevailing conditions.
7. Management is Multidisciplinary: Management has been developed as a separate
discipline, but it draws knowledge and concepts from various disciplines like
psychology, sociology, economics, statistics, operations research, etc. Management
integrates the idea and concepts taken from these disciplines and presents newer
concepts which can be put into practice for managing the organizations.
8. Management is Intangible: Management is an unseen or invisible force. It cannot be
seen but its presence can be felt everywhere in the form of results. However, the
managers who perform the function are tangible or visible.
9. Management is a Profession: A Profession refers to a vocation or a branch of
advanced learning such as engineering or medicine. Management helps to carry out
every profession in a scientific manner.
10. Management is an Art as well as Science: An art is characterized by practical
knowledge, personal creativity and skill. A science is a systematized body of
knowledge of facts. It involves basic principles, which are capable of universal
application.

MANAGEMENT AS ART OR SCIENCE

To understand the basic nature of management, it must be analyzed in terms of art
and science, in relation to administration, and as a profession, in terms of managerial skills
and style of managers.

Management as a Science:
Science means a systematic body of knowledge pertaining to a specific field of study.
It contains general principles and facts which explains a phenomenon. These principles and
theories help to explain past events and may be used to predict the outcome of actions.
Scientific methods of observations and experiments are used to develop principles of science.

Thus, the essential features of science are as follows:

1. Systematic body of knowledge: Management has a systematic body of knowledge
consisting of general principles and techniques. These help to explain events and
serve as guidelines for managers in different types of organizations.
2. Universal principles: Management contains sound fundamental principles which can
be universally applied. For instance, the principle of unity of command states that at a
time one employee should be answerable to only one boss.
3. Scientific enquiry and experiments: Management principles are also based on
scientific enquiry and investigation. These have been developed through experiments
and practical experience of a large number of managers.
4. Cause and effect relationship: The principles of management establish cause and
effect relationship between different variables. For instance lack of balance between
authority and responsibility will cause management to become ineffective.
 1.5

5. Tests of validity and predictability: Principles of management can also be tested for
their validity. For example, the principle of unity of command can be tested by
comparing two persons, one having a single boss and other having two bosses. The
performance of the first person will be higher than that of the second.

Management as an Art:
Art implies the application of knowledge and skills to bring about the desired results.
The essential elements of arts are:
1. Practical knowledge: Every art signifies practical knowledge. For example, a person
cannot become a successful manager simply by reading the theory and getting a
degree. He must also learn to apply his knowledge in solving managerial problems in
practical life.
2. Personal skill: Every artist has his own style and approach to his job. Every manager
has his individual approach and style in solving managerial problems. The success of
a manager depends on his personality in addition to his technical knowledge.
3. Result-oriented approach: Arts seeks to achieve concrete results. The process of
management is also directed towards the accomplishment of desirable goals. Every
manager applies certain knowledge and skills to achieve the desired results.
4. Creativity: Art is basically creative and an artist aims at producing something that
had not existed before. A manager effectively combines and coordinates the factors of
production to create goods and services.
5. Improvement through people: Practice makes one perfect. Every artist becomes
more and more efficient through constant practice. A manager gains experience
through regular practice and becomes more effective.

Management is Combination of Art and Science:

Management knowledge exhibits characteristics of both a science as well as an art. It
is a science because it has an organized body of knowledge consisting of certain universal
facts. It is known as an art because it involves creating results through practical application of
knowledge and skills. However, art and science are complementary to each other. Art
without science has no guide and science without art is knowledge wasted. For example, a
successful manager must know the principles of management and also acquire the skill of
applying those principles for solving managerial problems in different situations.

FUNCTIONS OF MANAGEMENT
Management is a process of the quality of both physical as well as human resources to
seek objectives. The elements or activities which are performed in this process are known as
functions of management. Various authors have classified these functions differently:
Writers Management Functions
Henry Fayol Planning, Organizing, Commanding, Coordinating, Controlling

Luther Gullick POSDCORD- Planning, Organising, Staffing, Directing

Coordinating, Reporting, Directing

Koontz Planning, Organising, Staffing, Leading, Controlling

Thus, the functions of management may be classified in to five categories: Planning,
Organizing, Staffing, Directing (leadership, motivation, communication, coordination) and
Controlling.
 1.6

PLANNING
The first function of the manager is planning. It is also the foremost and the essential
function. Planning defines the goals and objectives to be reached in the plan period. It also
consists of policies, procedures, methods, budgets, strategy and programmes that are needed
to achieve the goals set. Decision-making is the most important and integral part of planning.
Planning is the most basic and pervasive process involved in managing. It means
deciding in advance what actions to take and when and how to take them. Planning is needed,
firstly for committing and allocating the organization‟s limited resources towards achieving
its objectives in the best possible manner and, secondly for anticipating the future
opportunities and problems.
Planning is putting down in black and white the actions which a manager intends to
take. Each manager is involved in planning though the scope and character may vary with the
level of the manager. Planning involves determination of objectives; forecasting; formulation
of policies and programmes; and preparation of schedules.

The steps generally involved in planning are as follows:

1. Establishing Verifiable Goals or Set of goals to be achieved
2. Establishing Planning Premises
3. Deciding the planning Period
4. Finding Alternative Course of Action
5. Evaluating and selecting a Course of Action
6. Developing Derivative plans
7. Measuring and Controlling the progress

ORGANIZING
Organizing is to give a proper shape to the structure that should execute the plan
smoothly to achieve its success. It is the function of putting together different parts forming
an enterprise and makes it an organic whole to enable it to carry out defined operations.
Various activities to fulfill the goals have to be grouped and these are to be assigned to
people in-groups or departments. The authority, responsibility, accountability needed at each
level to execute the plan is to be defined and delegated.
Organizing simply can be defined as a process that results in organizational structure
through departmentalization, linking departments together, defining authority and
responsibility and prescribing authority relationship sub activities. The organizing function
deals with all those activities that result in the formal assignment of tasks and authority and a
coordination of effort. The supervisor staffs the work unit, trains employees, secures
resources, and empowers the work group into a productive team.
 1.7

The process of organizing consists of the following steps:

a. Determining and defining the activities required for the achievement of planned goals;
b. Grouping the activities into proper and convenient units;
c. Assigning the duties and activities to specific positions and people
d. Delegating authority to those positions and people;
e. Defining and fixing responsibility for performance; and
f. Establishing horizontal and vertical authority-responsibility relationship throughout
the organization.

STAFFING
It is the function of manning the organization structure and keeping it manned.
Staffing has assumed greater importance in the recent years due to advancement of
technology, increase in size of business, complexity of human behavior etc. The main
purpose of staffing is to put right man on right job i.e. square pegs in square holes and round
pegs in round holes.
The staffing function involves identifying/selecting the right person for executing
each task planned. By carrying the functions of organizing and staffing the "plan" is
transformed from a document level to the operational stage. Having found the right
candidate, it is equally important that you are able to retain him. Among other things,
motivation and leadership provided by the top management of organization also plays an
important role.
The staffing function includes all the jobs connected with:
 Manpower Planning;
 Recruitment; Selection & placement;
 Training & development;
 Remuneration, Performance Appraisal;
 Promotions & Transfer.

DIRECTING
It is that part of managerial function which actuates the organizational methods to
work efficiently for achievement of organizational purposes. It is considered life- spark of the
enterprise which sets it in motion the action of people because planning, organizing and
staffing are the mere preparations for doing the work. Direction is that inert-personnel aspect
of management which deals directly with influencing, guiding, supervising, motivating sub-
ordinate for the achievement of organizational goals.
The function of directing embraces the following activities:
a. Issuing orders and instructions.
b. Supervising (overseeing) people at work.
c. Motivation, i.e. creating the willingness to work for certain objectives.
d. Communication, i.e. establishing understanding with employees regarding plans
and their implementation, and
e. Leadership or influencing the behavior of employees.
Direction has following elements:
1. Supervision: implies overseeing the work of subordinates by their superiors. It is the
act of watching & directing work & workers.
2. Motivation: means inspiring, stimulating or encouraging the sub-ordinates with zeal
to work. Positive, negative, monetary, non-monetary incentives may be used for this
purpose.
 1.8

3. Leadership: may be defined as a process by which manager guides and

influences the work of subordinates in desired direction.
4. Communications: is the process of passing information, experience, opinion etc
from one person to another. It is a bridge of understanding.

CONTROLLING
Control is the tool for course regulation as the organization marches ahead and
correcting it when it diverts off-course. The results of the activity must confirm to the laid
down standards and all variations should be analyzed and root cause identified. Controlling
includes ongoing collection of feedback, and monitoring and adjustment of systems,
processes and structures accordingly. Examples include use of financial controls, policies and
procedures, performance management processes, measures to avoid risks etc.
Planning and controlling go hand in hand. There can be no control without a plan and
plans cannot be successfully implemented in the absence of controls. Controls provide a
means of checking the progress of the plans and correcting any deviations that may occur
along the way. It implies measurement of accomplishment against the standards and
correction of deviation if any to ensure achievement of organizational goals.
The purpose of controlling is to ensure that everything occurs in conformities with the
standards. Controlling is the measurement & correction of performance activities of
subordinates in order to make sure that the enterprise objectives and plans desired to obtain
them as being accomplished.

The process of controlling involves the following steps:

a. establishing standards for measuring work performance;
b. measurement of actual performance and comparing it with the standards;
c. finding variances between the two and see the reasons ; and
d. taking corrective action for rectifying deviations so as to ensure attainment of
objectives

MANAGEMENT LEVELS

Level of Management refers to the categories or layers of managerial positions in an

organization. The level of management determines the amount of authority and status of the
person occupying the position at that level. Managerial Hierarchy consists of:
 1.9

Top-level Management or Senior Management:

These includes board of Directors, CEO‟s they comprise small groups but are
responsible for overall management they formulate plans, decide objectives & communicate
to middle level management.
1. Require an extensive knowledge of management roles and skills.
2. They have to be aware of external factors such as markets and government policies.
3. Their decisions are made using analytic, directive, conceptual and behavioral/
participative processes.
4. They are responsible for strategic decisions.
5. They have to chalk out the plan and see that plan may be effective in the future.

Middle Level of Management:

The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. In small
organization, there is only one layer of middle level of management but in big enterprises,
there may be senior and junior middle level management. Their role can be emphasized as:
1. Executing plans of the organization in accordance with the policies and directives of
the top management.
2. They participate in employment & training of lower level management.
3. They interpret and explain policies of top level management to lower level.
4. They are responsible for coordinating the activities within the division or department.
5. They evaluate the performance of employees and send the reports and other important
data to top level management.

Lower Level of Management:

Lower level is also known as supervisory / operative level of management. It consists
of supervisors, foreman, section officers, superintendent, workers, etc. They are concerned
with direction and controlling function of management. Their activities include:
1. Assigning of jobs and tasks to various workers.
2. They guide and instruct workers for day to day activities.
3. They are responsible for the quality as well as quantity of production.
4. They communicate workers problems, suggestions, and recommendatory appeals,
etc., to the higher level, and higher level goals & objectives to the workers.
5. They arrange necessary materials, machines, tools etc for getting the things done.

EVALUATION OF MANAGEMENT THOUGHT

From the start of the 19th century until the 20th century, managers and scholars have
formed a theoretical framework to explain what they believe to be good practices of
management. Their efforts led to different classes of perspectives on management and each
perspective is based on different assumptions towards the objectives of the organization and
human behavior.
 1.10

The schools of management thoughts are classified as follows:

1. Classical Perspective: This perspective existed in the 19th century and early 20th century.
It focuses on the rational and scientific approaches to the study of management and on
finding ways to mould an organisation to become more efficient. Classical management
theory can be divided into three perspectives distinguished by the issues and problems
that they address.
 Scientific management emerged primarily among American scholars and
managers and focused on issues involved in the management of work and workers.
The theory of scientific management developed by F.W.Taylor and others accepted
the empirical methods for arriving at conclusions.
 Administrative theory (also called Functional approach) evolved from a concern
by both European and American academicians and managers with the nature and
management of the total organization. Issues and problems that they sought to
address focused on the technical efficiency of the organization. Other thinkers like
Henry Fayol following the functional approach emphasized on the importance of
managerial functions and principles for universal application.
 Bureaucracy theory was developed by the German sociologist, Max Weber, which
portrays the structure and design of organization characterized by a hierarchy of
authority, formalized rules and regulations that serve to guide the coordinated
functioning of an organization.

2. Neo-Classical or Human Relations Perspective: The neo-classical writers tried to

remove the deficiencies of the classical school and suggested improvements for good
human relations in the organization. Human relation is frequently used as a general term
to describe the ways in which managers interact with their employees. When „employee
management‟ stimulates more and better work, the organization has effective human
relations, when morale and efficiency deteriorate, its human relations are said to be
ineffective.
The human relations movement/approach arose from early attempts to
systematically discover the social and psychological factors that would create effective
human relations. Their propositions are based on 'human relations studies' and
motivational theories such as Hawthorne Experiments, Maslow‟s need hierarchy theory,
etc.

3. Quantitative Management or Behavioral Sciences Perspective: The behavioral school

emerged partly because the classical approach did not achieve sufficient production,
efficiency and workplace harmony. People did not always follow predicted or expected
patterns of behavior. Thus there was increased interest in helping managers deal more
effectively with the people side of their organizations.
Several theorists tried to strengthen neoclassical management theory with the
insights of sociology and psychology. The behavioral science perspective believes that it
is difficult to understand the sociology of a group separate from the psychology of the
individuals comprising it and the anthropology of the culture within which it exists.

4. Contemporary or Modern Perspective: The modem management thinkers define

organization as a system and also consider the impact of environment on the effectiveness
of the organization. The organization is viewed as adaptive systems which must in order
to survive adjust to environmental changes. As a result, two approaches have gained
prominence after 1960s, which are: Systems approach and Contingency approach.
 1.11

SCIENTIFIC MANAGEMENT
The classical scientific branch arose because of the need to increase productivity and
efficiency. The emphasis was on trying to find the best way to get the most work done by
examining how the work process was actually accomplished and by scrutinizing the skills of
the workforce.
The concept of scientific management was introduced by Frederick Winslow Taylor
in USA in the beginning of 20th century (1856-1915). Since Taylor has put the emphasis on
solving managerial problems in a scientific way, often, he is called as Father of Scientific
Management and his contributions as the principles of scientific management. He also
developed a theory of organizations, which has been largely accepted by subsequent
Management Philosophers.

Definition:
“Scientific management is concerned with knowing exactly what you want to do and
then see in that they do it in the best and cheapest way.”
Taylor was concerned with the problems of increasing labour productivity without
putting under strain or workers. Scientific management implies the application of scientific
methods of study and analysis to the problems of management. On the basis of experiments,
he published many papers and books and all his contributions were compiled in his book
“Scientific Management”.

His contributions are divided into two parts:

 Principles of scientific management.
 Elements and tools of scientific management.

Principles of Scientific Management:

Taylor has given certain basic principles of scientific management.
1) Replacing rule of thumb with science: It requires scientific study and analysis of
each element of a job in order to replace the old rule of thumb approach development
of a science for each element of a man‟s job requires that decisions should be made
on the basis of facts rather than opinions and beliefs.
2) Harmony in group action: Taylor has pointed out that attempts should be made to
obtain harmony in group action rather than discord. 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 cooperation rather than
chaotic individualism. It is based on mutual confidence, co-operation and goodwill.
Co-operation between management and workers can be developed through mutual
understanding and a change in thinking.
4) Maximum output: Scientific management involves continuous increase in
production and productivity instead of restricted production either by management or
by worker. This can be possible when efficiency and output are maximized.
Maximum output and optimum utilization of resources brings profits.
5) Development of workers: All workers should be developed to the fullest extent
possible for their own and for the company‟s highest prosperity. Training should be
provided to the workers to keep them fully fit according to the requirement of new
methods of working which may be different from non-scientific methods.
 1.12

Elements and Tools of Scientific Management:

1. Separation of planning & doing: Taylor emphasized the separation of planning
aspect from actual doing of the work. In other words planning should be left to the
supervisor and the worker should concentrate only on operational work.
2. Functional foremanship: Taylor introduced the concept of functional foremanship
based on specialization of functions. In this system, eight persons are involved to
direct the activities of workers. Out of these four persons are concerned with planning
viz., route clerk, instruction card clerk, time and cost clerk and disciplinarian. The
remaining four persons are concerned with doing aspect of the job, viz., speed boss,
inspector, gang boss and maintenance foreman.
Work Shop Manager

Planning In charge Production In charge

Route Time and Instruction Disciplinar Gang Route Inspecto Maintenance

Clerk cost clerk Card clerk ian Boss Boss r Foreman

Worker

3. Standardization: It is a process of fixing well thought out and tested standards of

norms with a view to minimize efficiency of work. It should be maintained in respect
of instruments and tools, period of work, amount of work, working conditions, cost of
production, etc.
4. Selection and Training: Taylor has suggested that workers should be selected on
scientific basis taking into account their education, work experience, aptitude,
physical strength, etc. A worker should be given work for which he is physically and
technically most suitable. Apart from selection, proper training should be provided to
workers to make them more effective and efficient.
5. Financial Incentives: 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. According to this scheme, a worker who
completes the normal work gets wages at higher rate per piece and one who does not
complete gets at lower rate.
6. Economy: While applying scientific management, not only scientific and technical
aspects should be considered but adequate consideration should be given to economy
and profit. The economy and profit can be achieved by making the resources more
productive as well as by eliminating the wastages.
7. 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.

CRITICISM:
Scientific management ignored human side of organization. Taylor and his disciples
were called "Efficiency Experts" because they concentrated attention on improving
efficiency of workers and machines. Scientific management is therefore restricted in scope as
a theory of Industrial Engineering or Industrial Management, rather than a general theory of
management.
 1.13

Although it is accepted that the scientific management enables the management to put
resources to its best possible use and manner, yet it has not been spared of severe criticism.
Employer’s Viewpoint:
1. More Expensive: Scientific management is a costly system and a huge investment is
required in establishment of planning dept., standardization, work study, training of
workers. It may be beyond reach of small firms.
2. Time Consuming: Scientific management requires mental revision and complete
reorganizing of organization. A lot of time is required for work, study standardization
& specialization.
Workers Viewpoint:
1. Unemployment: Workers feel that management reduces employment opportunities
through replacement of men by machines and by increasing human productivity
fewer workers are needed to do work leading to chucking out from their jobs.
2. Exploitation: Workers feel they are exploited as they are not given due share in
increasing profits which is due to their increased productivity. Wages do not rise in
proportion as rise in production. Wage payment creates uncertainty & insecurity.
3. Monotony: Due to excessive specialization the workers are not able to take initiative
on their own. Their status is reduced to being mere cogs in wheel. Jobs become dull.
Workers lose interest in jobs and derive little pleasure from work.
4. Weakening of Trade Union: Everything is fixed & predetermined by management.
So it leaves no room for trade unions to bargain as everything is standardized,
standard output, standard working conditions, standard time etc.
5. Over speeding: The scientific management lays standard output, time so they have to
rush up and finish the work in time. The workers speed up to that standard output, so
scientific management drives the workers to rush towards output and finish work in
standard time.

ADMINISTRATIVE / MODERN OPERATIONAL MANAGEMENT

Administrative theory focuses on the total organization and attempts to develop
principles that will direct managers to more efficient activities. Administrative theorists
looked at productivity improvements from the "top down", as distinguished from the
Scientific Approach of Taylor, who reorganized from "bottom up". Administrative theorists
developed general guidelines of how to formalize organizational structures and relationships.
Henri Fayol (1841-1925) was a French mining engineer who spent many of his later
years as an executive for a French coal and iron combine. In 1916, as director of the
company, Fayol penned the book General and Industrial Management. In this book, Fayol
classified the study of management into several functional areas which are still commonly
used in executive training and corporate development programs. The functional areas
identified by Fayol are planning, organizing, commanding, coordinating, and controlling. His
contributions are divided in the following categories:
According to Fayol the following are the list of qualities required in a manager:
 Physical – includes Health, Vigor and address.
 Mental – includes ability to understand and learn, judgment, and capability.
 Moral – includes energy, firmness, initiative, loyalty, etc.
 Educational – includes qualifications.
 Technical - peculiar to the function being performed.
 Experience – knowledge in related field.
 1.14

Organizational Activities:
He emphasized the role of administrative management and concluded that all
activities that occur in business organizations could be divided into six main groups.
1. Technical - related to production or manufacturing.
2. Commercial – includes buying, selling and exchange.
3. Financial – includes search for capital and its optimum use.
4. Security – related to protection of property and person.
5. Accounting – includes record keeping, costing and statistics.
6. Managerial – includes planning, organizing, commanding, coordinating and
controlling).
He concluded that the six groups of activities are interdependent and that it is the role
of management to ensure all six activities work smoothly to achieve the goals of an
enterprise.

General 14 Principles of Management:

Henry Fayol has given 14 general principles of management:
1. Division of work: It is helpful to take the advantage of specialization. Here, the work
is divided among the members of the group based on the employee‟s skills and
talents.
2. Authority and Responsibility: Fayol finds authority as a continuation of official and
personal factors. Official authority is derived from the manager‟s position and
personal authority is derived from personal qualities such as intelligence, experience,
moral worth, past services, etc., Responsibility arises out of assignment of activity.
3. Discipline: All the personal serving in an organization should be disciplined.
Discipline is obedience, application, behavior and outward mark of respect shown by
employees.
4. Unity of Command: Unity of command means that a person should get orders from
only one superior. Fayol has considered unity of command as an important aspect in
managing an organization.
5. Unity of Direction: According to this principle, each group of activities with the
same objective must have one head and one plan. Unity of direction provides better
coordination among various activities to be undertaken by an organization.
6. Subordination of individual interest to general interest: Individual interest must be
subordinate to general interest when there is conflict between the two. However
factors like ambition, laziness, weakness, etc., tend to reduce the importance of
general interest. Therefore, superiors should set an example in fairness and goodness.
7. Remuneration to Personnel: Remuneration to employees should be fair and provide
maximum possible satisfaction to employees and employers.
8. Centralization of Authority: Authority is to be centralized when decision making
powers are retained at top level. The degree of centralization or decentralization is
determined by the needs of the company.
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. It can be
short-circuited only in special circumstances. Scalar chain can be presented as
follows:
 1.15

10. Order: This is a principle relating to the arrangement of things and people. In social
order, there should be the right man in the right 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 or transferred within short time.
There should be reasonable security of jobs. Stability of tenure is essential to get an
employee accustomed to new work and succeeding in doing it well.
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. Initiative increases zeal and energy on the part of human beings.
14. Esprit de corps: It is the principle of „union is strength‟ and extension of unity of
command for establishing team work. The manager should encourage esprit de corps
among his employees.
Until today, his principles remain important as they continue to have a significant
impact on current managerial thinking. Fayol's main contribution was the idea that
management was not a talent related to genetic hereditary, but a skill that could be taught. He
created a system of ideas that could be applied to many areas of management and laid down
basic rules for managing large organizations.

DECISION MAKING
Decision-making is an essential aspect of modern management. It is a primary
function of management. Decision-making is the key part of manager's activities. Decisions
are important as they determine both managerial and organizational actions. A decision may
be defined as "a course of action which is consciously chosen from among a set of
alternatives to achieve a desired result." It represents a well-balanced judgment and a
commitment to action.
Decision is a choice from among a set of alternatives. The word 'decision' is derived
from the Latin words de ciso which means 'a cutting away or a cutting off or in a practical
sense' to come to a conclusion. Decision-making is a process by which a decision (course of
action) is taken. Decision-making lies embedded in the process of management.
According to Trewatha & Newport, "Decision-making involves the selection of a
course of action from among two or more possible alternatives in order to arrive at a solution
for a given problem".

Decision Making Process:

Decision-making involves a number of steps which need to be taken in a logical
manner. Decision-making process prescribes some rules and guidelines as to how a decision
should be taken or made. This involves many steps logically arranged. Drucker recommended
the scientific method of decision-making which, according to him, involves the following six
steps as shown below:

1. Identify/Define the Problem: Identification of the real problem before a business

enterprise is the first step in the process of decision-making. It is rightly said that a
problem well-defined is a problem half-solved. Information relevant to the problem
should be gathered so that critical analysis of the problem is possible. In brief, the
manager should search the 'critical factor' at work. It is the point at which the choice
applies.
 1.16

Identify/Define the Problem

Analyzing the Problem

Developing Alternative Solutions

Selecting the Best Solution

Implementation of Decision

Feedback & Follow up Action

2. Analyzing the Problem: After defining the problem, the next step in the decision-
making process is to analyze the problem in depth. This is necessary to classify the
problem in order to know who must take the decision and who must be informed
about the decision taken.
3. Developing Alternative Solutions: After defining the problem and analyzing its
nature, the next step is to obtain the relevant information/ data about it. Using this
data the manager has to determine available alternative courses of action that could be
used to solve the problem at hand. If necessary, group participation techniques may be
used while developing alternative solutions as depending on one solution is
undesirable.
4. Selecting the Best Solution: After preparing alternative solutions, the next step in the
decision-making process is to select an alternative that seems to be most rational for
solving the problem. The alternative thus selected must be communicated to those
who are likely to be affected by it. Acceptance of the decision by group members is
always desirable and useful for its effective implementation

5. Implementation of Decision: After the selection of the best decision, the next step is
to convert the selected decision into an effective action. Without such action, the
decision will remain merely a declaration of good intentions. Here, the manager has to
convert 'his decision into 'their decision' through his leadership.
6. Ensuring Feedback: Feedback is the last step in the decision-making process. Here,
the manager has to make built-in arrangements to ensure feedback for continuously
testing actual developments against the expectations. It is like checking the
effectiveness of follow-up measures.

Factors influencing the managerial decision making process:

There are many reasons due to which the decision taken by the manager may be
ineffective. The various factors influencing the managerial decision making process are:
1. Inadequate information, data and knowledge: For rational decision-making accurate,
reliable and complete information about various aspects of the problem under
investigation is necessary. The possible future trends can be estimated with the help of
such information. However, adequate and reliable information may not be available at
the time of decision-making.
 1.17

2. Uncertain environment: Decisions are taken on the basis of information available

about various environmental variables. However, the variables are many and complex
in nature. They may be related to political, economic, social and other aspects. It is
not possible to study all such variables in depth due to inadequate information/data.
3. Limited capacity of decision-maker: A decision-maker should be expert,
knowledgeable, intelligent and matured. He needs vision and capacity to imagine
possible future situation. In the absence of such qualities, the decision-maker may not
be able to take rational decisions. Similarly, the decision taken may not be rational if
the decision-maker fails to follow all necessary steps required for scientific decision-
making.
4. Personal element in decision-making: Decision-making should be always impartial
and also favorable to the organization. Decision against organization but favorable to
decision maker or other employees will be unfair. Such decision will not be rational.
Similarly, every decision-maker has his own personal background in the form of
personal beliefs, attributes, preferences, likes and dislikes and so on.
5. A decision cannot be fully independent: Managerial decisions are interlinked and
interdependent. A manager has to make adjustments or compromises while making
decisions. For example, for reducing price, some compromise with the quality may be
necessary.

BASIC CONCEPTS OF ORGANISATION

The term 'organization' connotes different meanings to different people. Many writers
have attempted to state the nature, characteristics and principles of organization in their own
may. The word 'organization' is also used widely to connote a group of people and the
structure of relationships. The term „organization‟ is used in many ways. It means different
things different people. Currently the following uses of the term are popular
 A group of people united by a common purpose.
 An entity, an ongoing, business unit engaged in utilizing resources to create a
result.
 A structure of relationships between various positions in an enterprise.
 A process by which employees, facilities and tasks are related, to each other, with a
view to achieve specific goals.

Definition:
According to Koontz and O'Donnel "It is grouping of activities necessary to attain
enterprise objectives and the assignment of each grouping to a manager with authority
necessary to supervise it".

Steps in Organizing:
Organizing involves the following interrelated steps:
1. Determination of Objectives: Organization is always related to certain objectives.
Therefore, it is essential for the management to identify the objectives before starting
any activity. It will help the management in the choice of men and materials with the
help of which it can achieve its objectives.
2. Identification and Grouping of Activities: If the members of the group are to pool
their efforts effectively, there must be proper division of the major activities. Each job
should be properly classified and grouped. This will enable the people to know what
is expected of them as members of the group.
 1.18

3. Assignment of Duties: After classifying and grouping the activities, each individual
should be given a specific job to do according to his ability and made responsible for
that. He should also be given the adequate authority to do the job, assigned to him.
4. Developing Authority, Responsibility and Relationships: Since so many
individuals work in the same organization, it is the responsibility of management to
lay down structure of relationships in the organization. This will help in the smooth
working of the enterprise by facilitating delegation of responsibility and authority.

PRINCIPLES OF ORGANISATION
Effective and efficient working of any organization depends on how the managerial
function of organization is being performed. The function of organization can be carried
effectively with the help of under mentioned principles:
1. Division of work: While structuring organization, division of work, at the very
outset, should be considered as the basis of efficiency. It is an established fact that
group of individuals can secure better results by having division of work. This is also
called the principle of specialization.
2. Attention to objectives: An organization is a mechanism to accomplish certain goals
or objectives. The objectives of an organization play an important role in determining
the type of structure which should be developed.
3. Span of Management: Span of management also refers to span of control signifying
the number of subordinates reporting directly to any executive. It is an established fact
that larger the number of subordinates reporting directly to the executive, the more
difficult it tends to be for him to supervise and coordinate them effectively.
4. Unity of Command: Organization structure should also be designed in such a way
that there exists unity of command in the sense that a single leader is the ultimate
source of authority.
5. Flexibility: While designing the organization it should be kept in mind that
organizational structure should not be regarded as static. Every organization is a
living entity in a living environment which is fast changing.
6. Proper balance: It is important to keep various segment or departments of an
organization in balance. The problem of balance basically arises when an activity or a
department is further divided and subdivided into smaller segments
7. Efficiency: The organization should be able to attain the predetermined objectives at
the minimum cost. From the point of view of an individual, a good organization
should provide the maximum work satisfaction.
8. Decentralization: This principle is of great significance to big organizations.
Decentralization implies selective dispersal of authority to help departments and units
to run effectively and efficiently without frequent interruptions from the top of the
enterprise.
9. Scalar principle: Scalar chain refers to the vertical placement of superiors starting
from the chief executive at the top through the middle level to the supervisory level at
the bottom. Proper scalar chain or line of command is prerequisite for effective
organization.
10. Continuity: The form of organization structure should be such which is able to serve
the enterprise to attain its objectives for a long period of time.
11. Coordination: The principal of coordination underlines that there should be proper
liaison and cooperation between different departments and units of work. Unity of
efforts for the accomplishment of desired objectives is the main aim of organization.
 1.19

12. Authority and Responsibility: Authority should commensurate with responsibility.

While assigning the responsibility, authority should also be assigned. If authority is
not granted, the subordinates cannot discharge their responsibility properly.

TYPES OF ORGANISATION
The organization functional structure is divided into two categories as:
1. Formal organization
2. Informal organization
Formal Organization:
A formal organization is deliberately designed to achieve some particular objectives.
It refers to the structure of well-defined jobs, each bearing a definite measure of authority,
responsibility and accountability. The structure is consciously designed to enable the
organizational members to work together for accomplishing common objectives. It tells him
to do certain things in a specified manner, to obey orders from designated individuals and to
cooperate with others. The formal organization is built around four key pillars; namely,
a. division of labor,
b. scalar and functional processes,
c. structure, and
d. span of control.
The basic characteristics of formal organization are as follows:
1. Organization structure is laid by the top management to achieve organizational goals.
2. Organization structure is based on division of labor and specialization to achieve
efficiency in operations.
3. Organization structure concentrates on the jobs to be performed and not the
individuals who are to perform jobs.
4. The organization does not take into consideration the sentiments of organizational
members.
5. The authority and responsibility relationships created by the organization structure are
to be honored by everyone.

Informal Organization:
Informal organization refers to the relationship between people in the organization
based on personal attitudes, emotions, prejudices, likes, dislikes, etc. These relations are not
developed according to procedures and regulations laid down in the formal organization
structure; generally, large formal groups give rise to small informal or social groups. These
groups may be based on same taste, language, culture or some other factor. These groups are
not preplanned, but they develop automatically within the organization according to its
environment.
The salient features of informal organization are as follows:
1. Informal relations are unplanned. They arise spontaneously.
2. Formation of informal organizations is a natural process.
3. Informal organization reflects human relationships.
4. Informal organizations are based on common taste, problem, language, religion,
culture, etc.
 1.20

Difference between Formal and Informal Organizations:

The difference between formal and informal organizations can be enumerated as:
1. Formation: Formal organization is deliberately created by management. It is the
result of a conscious and deliberate effort involving delegation of authority. On the
other hand, informal organization arises spontaneously and no conscious efforts are
made to create it. It takes place on the basis of relationships, caste, culture,
occupations and on personal interests etc.
2. Basis: A formal organization is based upon rules and procedures, while an informal
organization is based upon attitudes and emotions of the people. It depends on
informal, social contacts between people working and associating with one another.
3. Nature: A formal organization is stable and predictable and it cannot be changed
according to the whims or fancies of people. But an informal organization is neither
stable nor predictable.
4. Set-up: A formal organization is a system of well defined relationships with a definite
authority assigned to every individual. It follows predetermined lines of
communication. On the contrary, an informal organization has no definite form and
there are no definite rules as to who is to report to whom.
5. Emphasis: In a formal organization, the main emphasis is placed on authority and
functions. In an informal organization the stress is on people and their relationships.
6. Authority: Formal authority is attached to a position and it flows from top to bottom.
Informal authority is attached to a person and it flows either downwards or
horizontally.
7. Existence: A formal organizations exists independently of the informal groups that
are formed within it. But an informal organization exists within the framework of a
formal structure.
8. Rationality: A formal organization operates on logic rather than on sentiments or
emotions. All activities follow a predetermined course. As an association between
like-minded people, an informal organization has little rationality behind it. In an
informal organization, activities are influenced by emotions and sentiments of its
members.

DEPARTMENTATION
Departmentation is a means of dividing the large functional organization into smaller,
flexible administrative units. It makes grouping of activities into units and sub-units created
through departmentation which are known as department, division, section, branch etc. The
process of departmentation takes place at all levels in the organisation. At the top level, the
breakup of functions into activities is called “Primary Departmentation”. Grouping activities
into separate units at the middle level is called “Intermediate Departmentation” and at the
lower level it is called “Ultimate Departmentation” or “Secondary Departmentation”. Let us
discuss some definitions of Departments.

Definition:
1. According to Louis Allen, “Departmentation is a means of dividing the large and
monolithic functional organisation into smaller flexible administrative units.”
2. According to Koontz and O‟Donnell, “A department is a distinct area, division or
branch of an enterprise over which a manager has authority for the performance of
specified activities.”
 1.21

In short, we need departmentation in an enterprise to divide the activities along with

authority, responsibility and accountability with sole objective to get the work done smoothly
and in the best possible way.

Importance of Departmentation:
The importance of departmentation is to facilitate successful operation and to create
an environment for effective performance. Grouping of activities and employees into
departments makes it possible to expand an organisation to a large extent. It enables the
organisation to recapture some of the advantages of the small functional organisation while
minimising the disadvantages of that which comes with increasing size, diversity and
dispersion.
The importance of departmentation may be stated in the following way:
1. Specification: Departmentation helps to grow specification in various activities
which leads to improving the efficiency of operation.
2. Feeling of autonomy: Departmentation gives independent charges to managers. The
feeling of independence provides satisfaction and in turn increases their
responsibilities and efficiency.
3. Fixation of responsibility: Through departmentation, responsibilities of the work can
be precisely and accurately fixed. The authority and responsibility of each department
is defined precisely.
4. Budget Preparation: It makes the preparation of budget for departments easier as
well as for the organisation as a whole easier.
5. Development of Management: The managers of each department perform
specialised functions. They take independent decision and develop themselves for
higher positions. Departmentation facilitates the development of managerial personnel
by providing them opportunities for exercising initiatives.
6. Facility in Appraisal: Since the managers perform specified jobs, their performance
appraisals become easier. Departmentation facilitates administrative control as
standards of performance are laid down separately for each department.
7. Proper Supervision: As the authority for making decisions is diffused to the
managers of the departments and works are assigned to each individual department
wise, supervision and control become easier.

Principles of Departmentation:
1. Attainment of organisational objectives: It implies that departments are designed or
created to provide all the facilities to achieve organisational objectives in an effective
and efficient manner.
2. Comprehensive departmentation: It implies that the entire functions of the
enterprise are to be covered while creating the departments.
3. Inter-departmental co-operation: It implies that departments should be designed in
such a way that maximum inter-departmental co-operation is possible.
4. Promotion of specialisation: It should help in enhancing both managerial and
operational specialisation so that organisational efficiency can be achieved.
5. Cost-benefit analysis: It should be designed and developed in a manner to get the
maximum benefit with minimum possible costs.
6. Special attention to key-result areas: Key-result areas are those areas which
determine the long term growth and survival of an organisation. It may include
profitability, market standing, public relation etc. According to this principle while
creating departments the key-result areas should be given special attention.
 1.22

7. Principle of flexibility: It implies that there should be sufficient scope to change the
design or set of departments as per the requirements of changing situation.
8. Human consideration: Human consideration such as needs, values, attitudes,
expectation, feelings etc. must be taken into consideration while creating departments
along with technical or financial considerations.

Methods of Departmentation:
Different methods of creating departments in an organisation are:
1. Departmentation by Function
2. Departmentation by Product
3. Departmentation by Customer
4. Departmentation by Territory
5. Departmentation by Process

Departmentation by Function:
In departmentalization by function the activities of an organisation are divided into
the primary functions to be performed i.e. manufacturing, marketing, research and
development, employee relations, and finance. This arrangement has the advantage of the
specialization and concentration of similar activities within a departmental unit. The major
problem with this form is the coordination of the specialized activities. The following chart
depicts clearly the departmentation on the basis of function:

Advantages:
The main advantages of this basis of departmentations are:
1. Benefits of specialisation.
2. Coordination among departments.
3. Simple organisation structure.

Dis-advantages:
The main disadvantages of this basis of departmentation are:
1. Isolation of the departments.
2. Lack of coordination.
3. Hindered development of individuals.
 1.23

Departmentation by Product:
Large organisations with number of products can follow the departmentations on the
basis of products. All the activities related to each product are grouped separately. That is,
each department becomes autonomous, dealing in a particular product. For example, an
organisation manufacturing a number of products like soaps, tooth paste, cosmetics, blades,
milk powder, etc. groups all the activities from manufacturing to distribution independently
for each product. The following chart that depicts departmentation by product:

Advantages:
The main advantages of Departmention by product are:
1. Profitability of each product can be assessed.
2. Better service to consumers can be provided as the salesmen have thorough
knowledge about the product.
3. It is suitable for undertakings manufacturing varied and complex product
lines.
4. Flexibility in product lines can be attained as the addition or dropping of
product lines is easy.
5. Specilisation is made possible.

Disadvantages:
The main disadvantages of departmentation by product are:
1. Confusion in the customers‟ mind.
2. Duplication and wastages of resources.
3. Increased costs.

Departmentation by Customers or Markets:

An organisation can divide its activities into departments on the basis of different
customer groups served by the organisation, such as industrial users, consumers, wholesalers,
retailers etc. The following chart depicts the customer-wise departmentation. The following
chart that depicts departmentation by customers:
 1.24

Advantages:
The advantages of developmentations by customer are:
1. Specialised service to customers.
2. Supply of goods according to customer‟s requirements.

Disadvantages:
The disadvantages of departmentation by customer are:
1. Difficulty in coordination.
2. High cost.
3. Under utilisation of human resources.

Departmentation by Territory:
Under this system the activities of the organisations are grouped into different
departments on the basis of the geographical area. For example, a company can carry out its
activities by grouping them into regions like eastern region, western region, southern region,
northern region, etc. This type of departmentation is suitable for large organisations which
are geographically spread over to different areas. The following chart depicts the territorial
departmentation:

Advantages:
The advantages of territorial departmentations are:
1. Familiarity with customers in the particular region.
2. Enjoying advantages of local situations.
3. Benefits from geographical market segmentation.
4. Training for development.

Disadvantages:
The disadvantages of territorial departmentations are:
1. Increase in costs.
2. Difficulty in coordination and control.
 1.25

Departmentation by Process:
Departmentation by process implies the grouping of the activities into different
departments on the basis of the processes involved in production. For example, in a textile
unit, departmentation can be done on the basis of process i.e. spinning, weaving, dyeings,
bleaching etc. The following chart shows the departmentation by process:

Advantages:
The advantages of departmentation by process are:
1. High operational efficiency.
2. Benefits of specialisation.
3. Reduction in manufacturing time and unnecessary movements in the process.

Disadvantages:
The disadvantages of departmentations by process are:
1. High Costs.
2. Requiring continuous training.

In actual practice no single method of grouping activities is applied throughout the

organisation structure. In reality, a single organisation may employ one or all of the bases of
departmentalization at the same of various hierarchical levels.

DECENTRALIZATION
An organization is said to be decentralized when managers at middle level and lower
level are given the authority to take decisions on matters relating to their functions. They are
required to take decision keeping in view the overall policies of the company.
According to Allen, "Decentralization refers to the systematic effort to delegate to the
lowest levels all authority except that which can only be exercised at central points." Thus,
decentralization means reservation of some authority (power to plan, organize, direct and
control) at the top level and delegation of authority to make decisions at points as near as
possible to where actions take place.

Advantages of Decentralization:
1. Reduction in the Burden of Chief Executive: Decentralization of authority reduces
the burden of the chief executive, as he delegates a major part of his authority to his
subordinates and this will enable him to devote more time on important functions.
2. Quick Decisions: Decentralization avoids red-tapism in making decisions as it places
responsibility for decision making as near as possible with the place where actions
take place.
3. Diversification of Activities: With the addition of new product lines, an organization
may grow complex and pose a challenge to the top executives. The challenge can be
met effectively by decentralizing the authority under the overall coordinating purview
of the top management.
 1.26

4. Development of Managerial Personnel: When authority is decentralized, the

subordinates get the opportunity of taking initiative to develop their talents and to
enable them to develop qualities for managerial positions. They learn how to decide
and depend on their own judgment and how to manage.
5. Effective Control and Supervision: The greater the degree of decentralization, the
more effective becomes the span of control. It leads to effective supervision as
managers at the lower levels have complete authority to make changes in work
assignment, to change production schedules, to recommend promotions and to take
disciplinary actions.
6. Effective Coordination: Under decentralization, coordinated efforts are required only
at the levels of segments created by decentralization. This makes coordination more
effective
7. Improvement of Motivation and Morale: Decentralization of authority fulfils the
human needs of power, independence and status. It gives the local executives an
opportunity to take initiative and to try new ideas. This improves their motivation and
heightens their morale.
8. Miscellaneous Economies: In addition to the above advantages, decentralization also
achieves several internal and external economies. Internal economies include speedier
communication, better utilization of lower level and middle level executives, greater
incentive to work and greater opportunities for training. These make possible for the
management to reduce the cost of production and meet competition effectively.
Limitations of Decentralization:
1. Decentralization increases the administrative expenses because it requires the
employment of trained personnel to accept authority. The services of such highly paid
personnel may not be fully utilized particularly in small organizations.
2. Decentralization requires the product lines of the concern to be broad enough to allow
creation of autonomous units, which is not possible in small concerns.
3. Decentralization of authority may create problems in bringing coordination among the
various units.
4. Decentralization may not be possible because of external factors. If a company is
subject to uncertainties, it will not be able to meet these under decentralization.
5. Decentralization may bring about inconsistencies in the company.

DELEGATION OF AUTHORITY AND RESPONSIBILITY

Delegation of authority means conferring authority to another to accomplish a
particular assignment while operating with prescribed limits and standards established.
Delegation of authority is the key to organization. An executive confers authority on the
subordinates to accomplish specific tasks which may not be able to do alone. That means a
manager can get things done through others by sharing authority with them.
Principles of Delegation of Authority:
The following principles are guides to successful delegation. Unless carefully
recognized in practice, delegation may be ineffective, organization may fail and the
managerial process may be seriously impeded:
1. Parity between authority and responsibility: There should be complete parity
between authority and responsibility. If authority is more than responsibility, people
will make misuse of their authority and if responsibility is more than authority, the
results can never be achieved.
 1.27

2. Responsibility in terms of results: To be effective, delegation of authority should be

always be in terms of exact results of responsibility. In other words, responsibility
should be specific on a specific person, because everybody‟s responsibility is
nobody‟s responsibility.
3. Principle of Unity of command: To avoid confusion, conflicts and duplication of
work-orders, instructions and guidelines should flow to a subordinate from a single
particular executive only.
4. Delegation of responsibility: Authority can be delegated, but responsibility cannot
be delegated. By delegating authority, an executive does not escape from
responsibility. He is, in addition, responsible for the act of his subordinates also.
5. Overlapping of responsibilities: While delegating authority, it must be ensured that
duties and responsibilities of subordinates do not overlap.
6. Free flow of information: In delegation of authority, there should be free two way
communication (i.e. exchange of ideas, suggestions, instructions, guidelines, etc.,)
between an executive and a subordinate.
7. Delegated authority: Authority delegated to a subordinate should be adequate,
enough and as per the status and position of the subordinate, in order to achieve
optimum results.

TYPES OF MECHANISTIC AND ORGANIC STRUCTURES OF ORGANIZATION

An organization structure shows the authority and responsibility relationships
between the various positions in the organization by showing who reports to whom. It is a set
of planned relationships between groups of related functions and between physical factors
and personnel required for the achievement of organizational goals.
Organization involves establishing an appropriate structure for the goal seeking
activities. The structure of an organization is generally shown on an organization chart or a
job- task pyramid. For instance, if an undertaking is in production line, the, dominant element
in its organization chart, would be manufacturing and assembling. A good organization
structure should not be static but dynamic. It should be subject to change from time to time in
the light of the changes in the business environment. While designing the organization
structure, due attention should be given to the principles of sound organization.

There are two types of structural variables, namely;

a) Basic structure involves such central issues as how the work of the organization will
be divided and assigned among positions, groups, departments, divisions, etc. and
how the coordination necessary to achieve organizational objectives will be brought
about.
b) Operating mechanism includes such factors as information system, control
procedures, rules and regulations, system of reward and punishment, etc.
 1.28

In order to organize the efforts of individuals, any of the following types of

organization structures may be set up:
1. Line organization
2. Line and staff organization
3. Functional organization
4. Matrix organization
5. Committee organization
6. Project organization
7. Inverted Pyramid structure
8. Virtual organization
9. Cellular organization
10. Team structure
11. Boundary less organization
12. Lean and Flat organization

LINE ORGANIZATION
It is also known as scalar or military or vertical organization and perhaps is the oldest
form. In this form of organization managers have direct responsibility for the results; line
organization can be designed in two ways:
a) Pure Line Organization: Under this form, 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.
 1.29

Production Manager

Foreman-A Foreman-B Foreman-C

Worker Worker Worker

b) Departmental Line Organization: Under this form, entire activities are divided into
different departments on the basis of similarity of activities. The basic objective of
this form is to have uniform control, authority and responsibility.

Production Manager

Foreman-A Foreman-B Foreman-C

(Body Moulding) (Seating) (Finishing)

Worker Worker Worker

Suitability:
This type of organisational structure is suitable to small scale organizations where the
number of subordinates is quite small.

Advantages:
1. Simplicity: Line organization is very simple to establish and can be easily understand
by the employees.
2. Discipline: Since each position is subject to control by its immediate superior position,
often the maintenance of discipline is easy unity of command and unity of direction
foster discipline among the people in the organization.
3. Co-ordination: The hierarchy in management helps in achieving effective coordination.
4. Effective communication: There will be a direct link between superior and his
subordinate; both can communicate properly among him or herself.
5. Economical: Line organization is easy to operate and it is less expensive.
6. Unity of command: In this every person is under the command of one boss only.
7. Prompt decision: Only one person is in charge of one division or department. This
enables manager to take quick decisions.
8. Over all development of the managers: The departmental head has to look after all the
activities of his department; therefore, it encourages the development of all round
managers at the higher level of authority.

Disadvantages:
1. Ability of Manager: The success of the enterprise depends upon the caliber and
ability of few departmental heads, loss of one or two capable men may put the
organization in difficulties.
 1.30

2. Personnel limitations: In this type of organization an individual executive is suppose

to discharge different types of duties. He cannot do justice to all different activities
because he cannot be specialized in all the trades.
3. Overload of work: Departmental heads are overloaded with various routine jobs
hence they cannot spare time for managerial functions like planning, budgeting, etc.
4. Dictatorial way: In line organization, too much authorities centre on line executive.
Hence it encourages dictatorial way of working.
5. Duplication of work: Conflicting policies of different departments result in
duplication of work.
6. Unsuitable for large concerns: It is limited to small concerns.
7. Scope of favourism: As the departmental heads has the supreme authority, there is
chance of favourism.

LINE AND STAFF ORGANIZATION

It refers to a pattern in which staff specialists advise line managers to perform their
duties. When the work of an executive increases its performance requires the services of
specialists which he himself cannot provide because of his limited capabilities on these
matters. Such advice is provided to line managers by staffs personal who are generally
specialists in their fields. The staff people have the right to recommend, but have no authority
to enforce their preference on other departments.
Features:
1) This origin structure clearly distinguishes between two aspects of administration viz.,
planning and execution.
2) Staff officers provide advice only to the line officers; they do not have any power of
command over them.
3) The staff supplements the line members.

Suitability:
It can be followed in large organizations where specialization of activities is required,
because it offers ample opportunities for specialization.
 1.31

Advantages:
1. Planned specialization: The line and staff structure is based upon the principle of
specialization. The line managers are responsible for operations contributing directly to
the achievement of organizational objectives where as staff people are there to provide
expert advice on the matters of their concerns.
2. Quality decisions: Decisions come after careful consideration and thought each expert
gives his advice in the area of his specialization which is reflected in the decisions.
3. Prospect for personal growth: Prospect for efficient personal to grow in the
organization not only that, it also offers opportunity for concentrating in a particular
area, thereby increasing personal efficiency
4. Less wastage: There will be less wastage of material.
5. Training ground for personnel: It provides training ground to the personnel in two
ways. First, since everybody is expected to concentrate on one field, one‟s training
needs can easily be identified. Second, the staff with expert knowledge provides
opportunities to line managers for adopting rational multidimensional approach towards
a problem.

Disadvantages:
1. Chances of Mis-interpretation: Although the expert advice is available, yet it reaches
the workers through line supervisors. The line officers may fail to understand the
meaning of advice and there is always a risk of misunderstanding and
misinterpretation.
2. Chances of friction: There are bound to be occasions when the line and staff may
differ in opinion may resent in conflict of interests and prevents harmonious relations
between the two.
3. Ineffective Staff in the absence of authority: The staff has no authority to execute
their own advice. Their advice is not a binding on the line officers. Therefore the
advice given by specialist may be ignored by line heads.
4. Expensive: The overhead cost of the product increases because of high salaried
specialized staff.
5. Loss of initiative by line executives: If they start depending too much on staff may
lose their initiative drive and ingenuity.

FUNCTIONAL ORGANIZATION
It is the most widely used organization structure in the medium and large scale
organizations having limited number of products. This structure emerges from the idea that
the organization must perform certain functions in order to carry on its operations.
Functional structure is created by grouping the activities on the basis of functions
required for the achievement of organizational objectives. For this purpose, all the functions
required are classified into basic, secondary and supporting functions according to their
nature & importance.
Features:
1) The whole activities of an organization are divided into various functions.
2) Each functional area is put under the charge of one executive.
3) For any decision, one has to consult the functional specialist.

Suitability:
Functional organisational structure is suitable for large scale organizations.
 1.32

General Manager

Marketing Finance Personnel Production

Manager Manager Manager Manager

Branch Manager Office Manager Factory Manager

Line of authority
Functional authority

Advantages:
1. Separation of work: In functional organization, work has been separated from routine
work. The specialist has been given the authority and responsibility for supervision
and administration pertaining to their field of specialization unnecessary over loading
of responsibilities is thus avoided.
2. Specialization: Specialization and skilled supervisory attention is given to workers
the result is increase in rate of production and improved quality of work.
3. Ease in selection and training: Functional organization is based upon expert
knowledge. The availability of guidance through experts makes it possible to train the
workers properly in comparatively short span of time.
4. Reduction in prime cost: Since for every operation expert guidance is there, wastage
of material is reduced and thus helps to reduce prime cost.
5. Scope of growth and development of business: This type of organization presents
ample scope for the growth and development of business.

Disadvantages:
1. Indiscipline: Since the workers receive instructions from number of specialist it leads
to confusion to whom they should follow. Therefore, it is difficult to maintain
discipline
2. Shifting of responsibility: It is difficult for the top management to locate
responsibility for the unsatisfactory work everybody tries to shift responsibility on
others for the faults and failure.
3. Kills the initiative of workers: As the specialized guidance is available to the workers
the workers will not be using their talents and skills therefore their initiative cannot be
utilized.
4. Overlapping of authority: The sphere of authority tends to overlap and gives rise to
friction between the persons of equal rank.
5. Lack of co-ordination between functions: except the function in which he is
specialized he is absolutely indifferent to other functions. Therefore, there is a lack of
coordination of function and efforts.
 1.33

MATRIX ORGANISATION
It is also called project organization. It is a combination of all relationships in the
organization, vertical, horizontal and diagonal. It is a mostly used in complex projects. The
main objective of Matrix organization is to secure a higher degree of co-ordination than what
is possible from the conventional, organizational structures such as line and staff.
In matrix organization structure, a project manager is appointed to co-ordinate the
activities of the project. Under this system a subordinate will get instructions from two or
more bosses, Viz., administrative head and his project manager.

General Manager

Production Personnel Finance Marketing

Project A
W W W W
Manager

Project B W
W W W
Manager

Project C W W W W
Manager

Suitability:
It can be applicable where there is a pressure for dual focus, pressure for high
information processing, and pressure for shred resources.
Ex: Aerospace, chemicals, Banking, Brokerage, Advertising etc.

Advantages:
1. It offers operational freedom & flexibility
2. It focuses on end results.
3. It maintenance professional Identity.
4. It holds an employee responsible for management of resources.

Disadvantages:
1. It calls for greater degree of coordination,
2. It violates unity of command.
3. Difficult to define authority & responsibility.
4. Employee may be de motivated.

COMMITTEE ORGANISATION
A committee does not represent a separate type of organization like line and staff, or
functional. It is rather a device which is used as supplementary to or in addition to any of the
above types of organizations. A committee may be defined as a group of people performing
some aspects of Managerial functions. Thus, a committee is a body of persons appointed or
elected for the Consideration of specific matters brought before it.
 1.34

Suitability:
It is suitable for educational organizations and universities.

Merits:
Pooling up of opinions.
It facilitates coordination.
It enhances communication.
It gives better motivation.

Demerits:
It is highly expensive.
It makes compromised decisions.
Lack of secrecy.
Domination by few members.

PROJECT ORGANIZATION
A project organization is a special case where common service like finance, purchase
etc. are organized at the functional level. But project resources are allocated to the project
manager. Since the business responsibility rests with the project manager, necessary authority
is given to him with the requisite resources.
This type of organization structure helps in making decisions for project control in
terms of cost, resource and time.

Merits:
1. This calls for quick divisions.
2. Organizing all functional.
3. Proper coordination of work of different departments.
 1.35

Demerits:
1. It tends to increase the problems of control for top management.
2. It is special case of product organization.
3. The organization may get disintegrated with increasing focus on departments.

VIRTUAL ORGANIZATION
The concept of virtual organisation or corporation along with virtual team and office
has entered management field very recently. The meaning of virtual is having the efficacy
without the material part; unreal but capable of being considered as real for the purpose. It
works in a network of external alliances, using the Internet. This means while the core of the
organization can be small but still the company can operate globally is a market leader in its
niche.
Employees in a virtual organization will become emasculate and ineffective in the
absence of information and knowledge. Therefore, virtual organizations use a seamless web
of electronic communication media. The main components of this web are as follows:
1. Technology: The traditional ways of working has been transformed through new
technology.
2. E-mail integration: The whole organization can take advantage of SMS products
such as „Express Way‟ by integrating SMS into the existing e-mail infrastructure.
3. Office systems integration: SMS technology can greatly enhance the existing or new
office systems. For example, phone messages can be sent via SMS rather than
returning it in a message book.
4. Voice Mail Alert: Addition of SMS technology to the existing voice mail system
builds an effective method of receiving voice mail alerts.
5. Mobile Data: This enables a laptop to retrieve information anywhere through the
mobile phone network. In the past corporate information has been inaccessible from
many places where it is needed. One can keep connected to his/her virtual
organization from anywhere by linking laptop to mobile phone.
 1.36

Advantages:
1. Saves time and travel expenses.
2. Provides excess to outside experts, without down time and travel or logging expenses.
3. Ability to organize in teams even if members are not in reasonable proximity to each
other.
4. Firms can expand their potential labour markets. They can hire and retain the best
people irrespective of their physical locations.
5. Employees can accommodate both personal and professional lives.
6. Employees can be assigned to multiple concurrent teams.
7. Dynamic team membership allows people to move from one project to another.
8. Team communication and work reports are available on-line to facilitate swift
responses to the demands of a global market.

Disadvantages:
1. Lack of physical interactions.
2. Lack of synergies arising from face-to-face interaction.
3. Non-availability of verbal and non-verbal cues such as voice, eye movement, facial
expression and body language which make communication more effective.

BOUNDARY LESS ORGANIZATION

It may be defined as an organisation structure that can avoid all the barriers (vertical,
horizontal, external, geographic) much more permeable than they are now. Boundary less
organisation allows free flow of ides/information / resources throughout the organisation and
into others. The boundaries are:
1. Vertical: Boundaries between layers within an organization.
2. Horizontal: Boundaries which exist b/w organizational departments.
3. External: Barriers between the organization and the outside world. (Customers,
suppliers other govt. committees).
4. Geographic: Barriers among organization units located in different countries.
A boundary less organisation is the opposite of a bureaucracy with numerous barriers
and division. In contrast, the organisation without boundaries offers interaction and
networking among professionals inside and outside the organisation. It is characterized by
teamwork and communication.
The purpose of this initiative was to remove barriers between the various departments
as well as between domestic and international operations. To reward people for adopting the
“integration model”, bonuses were awarded to those who not only generated new ideas but
also shared them with others.

Advantages:
1. It allows free flow of ideas of information or resources throughout the
organisation and others.
2. Boundary less organization is able to achieve greater integration and coordination.
3. They are able to adapt to environmental changes.
4. It is highly flexible and responsive.
5. It reduces ineffectiveness.
6. Creativity, quality, timeliness.
7. Increase in speed and flexibility.
 1.37

Disadvantages:
1. Lack of flexibility to changing mission needs/rapidly changing world.
2. Slow/poor in responding customer requirement.
3. Failure to get things to done.
4. Customer/vendor has a hard time dealing with the organization.

TEAM STRUCTURE
One of the newest organizational structures developed in the 20th century is team. In
small businesses, the team structure can define the entire organization. Teams can be both
horizontal and vertical. While an organization is constituted as a set of people who synergies
individual competencies to achieve newer dimensions, the quality of organizational structure
revolves around the competencies of teams in totality.
For example, every one of the Whole Foods Market stores, the largest natural-foods grocer in
the US developing a focused strategy, is an autonomous profit centre composed of an average
of 10 self-managed teams, while team leaders in each store and each region are also a team.
Larger bureaucratic organizations can benefit from the flexibility of teams as well.

Suitable:
Xerox, Motorola, and DaimlerChrysler are all among the companies that actively use
teams to perform tasks.

Advantages:
1. Team-based organizations filter decision making down to all levels of management.
2. Team-based organizations require that all employees participate in the decision-
making process.
3. Employees feel they are part of the total organization, rather than members of an
individual department.
4. Team-based organizations run more efficiently and effectively, giving them a
competitive edge in today's global market.

Disadvantages:
1. Recognition for individual achievement within a hierarchical organization is a
motivator and a factor in determining compensation.
2. Team-based organizations value team performance over individual performance.
3. Lack of focus on the individual in team-based organizations.
4. Motivating individuals in a team-based organization can be more challenging.
5. Team-based organizations are decentralized rather than hierarchical.
 1.38

INVERTED PYRAMID STRUCTURE

This is an alternative to traditional chain of command. This is a structure which is
narrow at the top and wide at the base. It includes few levels of management i.e. sales people
and sales support staff sit at the top as they are key decision makers for all issues related to
sales and dealings with customers. Since they are in tough with customers, they are given all
the freedom to follow their own judgment at all levels.

Suitable:
This organisation structure is suitable for sales associates, journalism, etc.

Advantages:
1. In this structure the customers are given the first preference.
2. It becomes simple to know their preferences and plan the strategies of the
organisation accordingly.
3. Front line employees are given more responsibility and authority in the organisation
than the top management because they are closest to the customers.
4. Decentralization of authority and responsibility place a very important role in prompt
and timely decisions.
5. The inverted pyramid structure motivates the employees as they are placed in a better
position than the top management.

Disadvantages:
1. This structure may be dangerous because the role of top management is shifted to
supporting one from that of commanding one which ultimately leads to the direction
less- organisation.
2. In this structure there is absence of clear authority and responsibility levels as a result
of which people become confused and business veers out of control.
3. Frontline supervisor cannot make strategies regarding organisations even though they
have proper understanding of the customers because they are not equipped to do so.

CELLULAR ORGANISATION
A form of organization consisting of a collection of self-managing firms or cells held
together by mutual interest. A cellular organization is built on the principles of self-
organization, member ownership, and entrepreneurship. It has been replacing other systems.
In this the workers manufacture total products in teams i.e. cells.
 1.39

Each cell within the organization shares common features and purposes with its sister
cells but is also able to function independently. Every team of workers has the responsibility
to improve or maintain the quality and quantity of its products. The cells comprise self
managed teams. They monitor themselves and correct wherever necessary on their own. The
idea is an extension of the principles of group technology, or cellular manufacturing.

Advantages:
It allows free flow of ideas of information or resources throughout the organisation and
others.
They are able to adapt to environmental changes.

It is highly flexible and responsive.

It reduces ineffectiveness and Increase in speed.

Disadvantages:
Slow response customer requirement.
Failure to get things to done.
Lack of flexibility to changing mission needs changing the world.
Customer has a hard time dealing with the organization.
FLAT AND LEAN ORGANISATION

Flat Organizations are those, which have few or even one level of management. For
example, a service organization with equal partners and 30 employees. Flat organizations are
known by their wider span of management of control. Each manager controls more number
of employees at a given point of time.

Managing Director

Sales Manager Production Manager Personnel Manager Finance Manager

 1.40

Tall/Lean organizations may have many levels of management. It focuses on vertical

communication through the levels of grades. It involves narrow span of management.
Generally the greater the height of organisational chart, the smaller is the span of control,
vice versa.
Managing Director

General Manager

Sales Manager Production Manager Personnel Manager Finance Manager

Advantages:
It is simple to understand.
Easy supervision & control.
Quick decisions are possible.
It sets clearly the direct lines of authority and responsibility of a line manager.

Disadvantages:
Lack of specialization
Low – Morale
Autocratic approach
Overburden to manager

IMPORTANT QUESTIONS
Explain the nature and functions of management?
Explain how scientific management paved way for changes in the traditional mindset.
3. “Management is regarded as an art by some, science by others”. In the light of this
statement, Explain the exact nature of management
4. What is the contribution of Henry Fayol to management thought? Explain 14
principles of management thought.
5. Write short notes on:
a. Maslow theory of Hierarchy of Human Needs
b. Frederick Herzberg two factor theory of motivation.
c. Theory X and Theory Y (Douglas Mc. Gregor)
d. Mayo‟s Hawthorne Experiments
6. Explain the concept of Systems approach to Management with diagram?
7. What are the challenges you have to face as a manger? Discuss.
8. State the history of evolution of management thought with emphasis on modern
management techniques.
9. Is management an art or science? Justify your answer.
10. Define organization and discuss its characteristics.
11. Explain the meaning of organization and state its principles.
12. What do you mean by formal and informal organization? Evaluate its importance.
Unit-5: Project Management 5.41 CSP
13. What do you understand by informal organization? How does it differ from a formal
organization?
14. "Organization is an important tool to achieve organizational objectives", Comment.
15. Write brief notes and merits and demerits of the following.
a. Line & staff organization
b. Line organization
c. Functional organization
16. What do you understand by decentralization? Explain the advantages and
disadvantages of decentralization.
17. Discuss the process of organizing and explain the relationship among organization,
organizing and management.
18. Give brief note on classification of organization based on authority relationship and
evaluate their merits and demerits.
19. What are the different organizational structure designs in modern trends?
20. Define Departmentation. Explain the methods of Departmentation.
21. Briefly explain the merits and demerits of the following:
a. Matrix structure
b. Project organisation
c. Committee organisation
d. Boundary less organisation

Management Science CS PATRO