Unit: I

What is Management?
Resources by their nature are generally scarce, thus there is a compelling need of ensuring
caution in the utilization of resources. The organization resources consist of five M’s —
Man, Material, Money, Machine and Methods. Organizational leaders or top management
i.e. the Managers are involved in the effective and efficient utilization of these scarce
resources.

So, in simpler terms, the act/process of efficient and effective coordination of the activities
of the organization’s employees and optimum utilization of scarce resources with a view to
achieving a wide range of goals is called management.

The term management is being loosely understood by a wide variety of people even those
in business. Peter Drucker explains, “Even the people in business often do not know what
management does and what it is supposed to be doing, how it acts and why, whether it
does a good job or not”. He went on to attest that we will only understand management by
analyzing the functions of management.

According to Peter Drucker, "Management is a multi-purpose organ that manages business

and manages managers and manages workers and work." In simple words, "Management
is the art of getting things done through people."

Management is an individual or a group of individuals that accept responsibilities to run an

organization. They plan, organize, direct and control all the essential activities of the
organization. Management does not do the work themselves. They motivate others to do
the work and co-ordinate (i.e. bring together) all the work for achieving the objectives of
▪ The nature, main characteristics or features of management:
▪ Continuous and never-ending process.
▪ Getting things done through people.
▪ Result oriented.
▪ Multidisciplinary in nature.
▪ A group and not an individual activity.
▪ Follows established principles or rules.
▪ Aided but not replaced by computers.
▪ Situational in nature.
▪ Need not be an owner.
▪ Both an art and science.
▪ Management is all-pervasive.
▪ Management is intangible.
▪ Uses a professional approach in work.
▪ Dynamic in nature.
1. Continuous and never-ending process

Management is a Process. It includes four main functions, viz., Planning, Organizing,

Directing and Controlling. The manager has to Plan and Organize all the activities. He
had to give proper Directions to his subordinates. He also has to Control all the activities.
The manager has to perform these functions continuously. Therefore, management is a
continuous and never ending process.

2. Getting things done through people

The managers do not do the work themselves. They get the work done through the
workers. The workers should not be treated like slaves. They should not be tricked,
threatened or forced to do the work. A favorable work environment should be created and
maintained.

3. Result oriented

Management is result oriented because it gives a lot of importance to "Results". Examples

of Results like, increase in market share increase in profits, etc. Management always
wants to get the best results at all times.
4. Multidisciplinary in nature

Management has to get the work done through people. It has to

manage people. This is a very difficult job because different
people have different emotions, feelings, aspirations, etc.
Similarly, the same person may have different emotions at
different times. So, management is a very complex job.
Therefore, management uses knowledge from many different
subjects such as Economics, Information Technology,
Psychology, Sociology, etc. Therefore, it is multidisciplinary in
nature.

5. A group and not an individual activity

Management is not an individual activity. It is a group activity. It

uses group (employees) efforts to achieve group (owners)
objectives. It tries to satisfy the needs and wants of a group
(consumers). Nowadays, importance is given to the team (group)
and not to individuals.
6. Follows established principles or rules

Management follows established principles, such as division of work, discipline,

unity of command, etc. These principles help to prevent and solve the problems in
the organization.

7. Aided but not replaced by computers

Now-a-days, all managers use computers. Computers help the managers to take
accurate decisions. However, computers can only help management. Computers
cannot replace management. This is because management takes the final
responsibility. Thus Management is aided (helped) but not replaced by computers.

8. Situational in nature

Management makes plans, policies and decisions according to the situation. It

changes its style according to the situation. It uses different plans, policies,
decisions and styles for different situations. The manager first studies the full
present situation. Then he draws conclusions about the situation. Then he makes
plans, decisions, etc., which are best for the present situation. This is called
Situational Management.
9. Need not be an ownership

In small organizations, management and ownership are one and the same. However, in
large organizations, management is separate from ownership. The managers are highly
qualified professionals who are hired from outside. The owners are the shareholders of
the company.

10. Both an art and science

Management is result-oriented. Therefore, it is an Art. Management conducts continuous

research. Thus, it is also a Science.

11. Management is all pervasive

Management is necessary for running a business. It is also essential for educational,

charitable and religious institutions. Management is a must for all activities, and therefore,
it is all pervasive.

12. Management is intangible

Management is intangible, i.e. it cannot be seen and touched, but it can be felt and
realized by its results. The success or failure of management can be judged only by its
results. If there is good discipline, good productivity, good profits, etc., then the
management is successful and vice-versa.
Management Process Activities

The management process involves four activities:

1. Planning

2. Organizing

3. Staffing/Leading

4. Controlling
Role of Manager

Interpersonal: Coordinate and interact with employees and provide direction

to the organization.
Figurehead
Leader
Liaison
Informational
Monitor
Disseminator
Spokesperson
Decisional
Entrepreneur
Disturbance hander
Resource allocator
Negotiator
Management Principle:
AUTHORITY AND RESPONSIBILITY

Authority

Authority is the right or power assigned to an executive or a manager in order to achieve certain
organizational objectives. Authority is the power to give orders and get it obeyed or in other
words it is the power to take decisions.

A manager will not be able to function efficiently without proper authority. Authority is the
genesis of organizational framework. It is an essential accompaniment of the job of
management. Without authority, a manager ceases to be a manager, because he cannot get his
policies carried out through others. Authority is one of the founding stones of formal and
informal organizations. An Organization cannot survive without authority. It indicates the right
and power of making decisions, giving orders and instructions to subordinates
Definitions of Authority

According to Henri Fayol, "Authority is the right to give orders and the power to exact
obedience." According to Mooney and Reily, "Authority is the principle at the root of
Organization and so important that it is impossible to conceive of an Organization at all unless
some person or persons are in a position to require action of others."

Authority is the kind of right and power through which it guides and directs the actions of others
so that the organizational goals can be achieved. It is also related with decision making. It is
vested in particular position, not to the person because authority is given by an institution and
therefore it is legal.
Responsibility

Responsibility means state of being answerable for any obligation, trust, debt or something or in
other words it means obligation to complete a job assigned on time and in best way.
Responsibility indicates the duty assigned to a position. The person holding the position has to
perform the duty assigned. It is his responsibility. The term responsibility is often referred to as
an obligation to perform a particular task assigned to a subordinate. In an organization,
responsibility is the duty as per the guidelines issued.

According to Davis, "Responsibility is an obligation of individual to perform assigned duties to

the best of his ability under the direction of his executive leader." In the words of Theo Haimann,
"Responsibility is the obligation of a subordinate to perform the duty as required by his
superior".

Characteristics of Responsibility

• The essence of responsibility is the obligation of a subordinate to perform the duty assigned.
• It always originates from the superior-subordinate relationship.
• Normally, responsibility moves upwards, whereas authority flows downwards.
• Responsibility is in the form of a continuing obligation.
• Responsibility cannot be delegated.
• The person accepting responsibility is accountable for the performance of assigned duties.
• It is hard to conceive responsibility without authority.
Authentic body of an organization is top level management, top level management direct
the subordinates. Departmental managers and other personnel take the direction from top
level management to perform the task. Authority is necessary to perform the work .only
authority is not provided to the people but obligation is also provided. So the obligation to
perform the duties and task is known as responsibility.

Authority and responsibility are closely related and this principle states that these two
must go hand in hand. It means that proper authority should be delegated to meet the
responsibilities.

A match should be there between these two because of two main reasons:--

Firstly, if a person is given some responsibility without sufficient authority he can’t perform
better, and also could not accomplish the desired goal.

Secondly, if there is excess authority being delegated to an individual without matching

responsibility then the delegated authority will be misused in one way or the other.

This is an important and useful principle of management because if adequate authority is

not delegated to the employees they cannot discharge their duties with efficiency and this
in turn will hamper the achievement of the organizational goal. Sometimes the relation
between management and employees is also badly effected by non-delegation of proper
authority.
Positive impacts of this principle:

No misuse of authority.
Helps to complete job effectively and efficiently.
Individuals can be held accountable.
Systematized and effective achievement of organizational objectives.

Consequences of violation of this principle:

Misuse of authority.
Responsibility can’t be discharged effectively.
No one can be held accountable.
Conflicts between management and employees
Accountability

Every employee/manager is accountable for the job assigned to him. He is

supposed to complete the job as per the expectations and inform his
superior accordingly. Accountability is the liability created for the use of
authority. It is the answerability for performance of the assigned duties.

Definition of Accountability

According, to McFarland, "accountability is the obligation of an individual to

report formally to his superior about the work he has done to discharge the
responsibility."

Subordinates receive the authority from top level of the organization and they
also receive the command and direction to perform the work. In other words,
they are authorized and responsible for a specific function. Sometimes the
task may not be performed effectively the subordinates may not be
performed effectively. The subordinates must report to boss about the
assigned task. S/he must answer his/her performance which is known as
accountability.
Authority, Responsibility and Accountability

When authority is delegated to a subordinate, the person is

accountable to the superior for performance in relation to
assigned duties. If the subordinate does a poor job, the superior
cannot evade the responsibility by stating that poor performance
is the fault of the subordinate. A superior is normally responsible
for all actions of groups under his supervision even if there are
several layers down in the hierarchy. Simply stated,
accountability means that the subordinate should explain the
factors responsible for non-performance or lack of performance.

Authority, Responsibility and Accountability are inter-related.

They need proper consideration while introducing delegation of
authority within an Organization. In the process of delegation, the
superior transfers his duties/responsibilities to his subordinate
and also give necessary authority for performing the
responsibilities assigned. At the same time, the superior is
accountable for the performance of his subordinate
Functions of Management

Effective management involves creative problem solving, motivating employees

and making sure the organization accomplishes objectives and goals. There are
five functions of management: planning, organizing, staffing, coordinating and
controlling.

Planning
Deciding in advance what to do, how to do, why to do, where to do and who will
be responsible for doing is planning. Determination of the objectives of business,
splitting of objectives into goals for each department of the organization and
formulating policies, programs, procedures rules and regulations and budget are
the important steps involved in planning. Planning involves defining a goal and
determining the most effective course of action needed to reach that goal. A
manager acts as a planner and must have complete knowledge of the company’s
resources. A plan should be well coordinated with the future objectives of the
business.
Organizing
Division of work into functions and sub-functions, grouping of activities that are
closely related in their nature, assigning of duties and responsibilities to the
employees and finally delegation of authority and power to each employee or the
group to discharge their duties accordingly are the processes come under the
function of management organizing. The organizational structure is the foundation
of a company; without this structure, the day-to-day operation of the business
becomes difficult and unsuccessful. Organizing involves designating tasks and
responsibilities to the employees taking organizational structure and their specific
skill sets into consideration. Organizing is necessary to maintain the chain of
command within the company.

Controlling
It is the process that ensures whether the resources are obtained and used
efficiently in achieving the organizational objectives. Controlling function of
management is closely linked with the planning function because, it includes
checking the performance of employees to see whether the planned performance
is being achieved by them or not. Controlling involves establishing performance
standards and monitoring the output of employees to ensure each employee’s
performance meets those standards. The controlling process often leads to the
identification of situations and problems that need to be addressed by creating new
performance standards. The level of performance affects the success of all aspects
of the organization.
 Role of Manager
Mintzberg published his Ten Management Roles in his book,
"Mintzberg on Management: Inside our Strange World of
Organizations," in 1990.

The ten roles are:

1. Figurehead.
2. Leader.
3. Liaison.
4. Monitor.
5. Disseminator.
6. Spokesperson.
7. Entrepreneur.
8. Disturbance Handler.
9. Resource Allocator.
10. Negotiator.
The 10 roles are then divided up into three categories, as follows
Category Roles

Interpersonal Figurehead
Leader
Liaison

Informational Monitor
Disseminator
Spokesperson

Decisional Entrepreneur
Disturbance Handler
Resource Allocator
Negotiator
Interpersonal Category: — the roles in this category involve providing information
and ideas.

Figurehead – As a manager, you have social, ceremonial and legal

responsibilities. You're expected to be a source of inspiration. People look up to
you as a person with authority, and as a figurehead.

Leader – This is where you provide leadership for your team, your department or
perhaps your entire organization; and it's where you manage the performance
and responsibilities of everyone in the group.
Liaison – Managers must communicate with internal and external contacts. You
need to be able to network effectively on behalf of your organization.

Informational Category: — the roles in this category involve processing

information.

Monitor – In this role, you regularly seek out information related to your
organization and industry, looking for relevant changes in the environment. You
also monitor your team, in terms of both their productivity, and their well-being.

Disseminator – This is where you communicate potentially useful information to

your colleagues and your team.
Spokesperson – Managers represent and speak for their organization. In this
role you're responsible for transmitting information about your organization and
its goals to the people outside it.

Decisional Category: — the roles in this category involve using information.

Entrepreneur – As a manager, you create and control change within the

organization. This means solving problems, generating new ideas, and
implementing them.

Disturbance Handler – When an organization or team hits an unexpected

roadblock, it's the manager who must take charge. You also need to help
mediate disputes within it.

Resource Allocator – You'll also need to determine where organizational

resources are best applied. This involves allocating funding, as well as
assigning staff and other organizational resources.

Negotiator – You may be needed to take part in, and direct, important
negotiations within your team, department, or organization.
Management Theory

❑ Classical Approach — F. W. Taylor (Scientific Principles

of Management)

❑ Henri Fayol’s Principles of Management

❑ Max Weber Bureaucracy Theory

❑ Behavioral Approach (Hawthrone Experiment and

McGregor’s theory X and Y)

❑ Contemporary Approach (Ouchi’s Z Theory and

Contingency Management
Scientific Principles of
Management by F. W. Taylor
One of the earliest theorists of management was developed by Frederick
Winslow Taylor. He started the Scientific Management movement, and was the
first to recognize and emphasis the need for adopting a scientific approach to the
task of managing an enterprise. He and his associates were the first people to
study the work process scientifically. They studied how work was performed, and
they looked at how this affected worker productivity. Taylor's philosophy focused
on the belief that making people work as hard as they could was not as efficient
as optimizing the way the work was done.

With a background in mechanical engineering, Taylor was very interested in

efficiency. While advancing his career at a U.S. steel manufacturer, he designed
workplace experiments to determine optimal performance levels. In one, he
experimented with shovel design until he had a design that would allow workers
to shovel for several hours straight. With bricklayers, he experimented with the
various motions required and developed an efficient way to lay bricks. And he
applied the scientific method to study the optimal way to do any type of workplace
task. As such, he found that by calculating the time needed for the various
elements of a task, he could develop the "best" way to complete that task.
In 1909, Taylor published "The Principles of Scientific Management." In
this, he proposed that by optimizing and simplifying jobs, productivity
would increase. He also advanced the idea that workers and managers
needed to cooperate with one another.

The scientific method consists essentially of:

(a) Observation
(b) Measurement
(c) Experimentation and
(d) Inference

He summed up his approach in these words:

Science, not rule of thumb
Harmony, not discord
Co-operation, not individualism
Maximum output, in place of restricted output
The development of each man to his greatest efficiency and prosperity
Elements of Scientific Management:

• The techniques which Taylor regarded as its essential elements or

features may be classified as under:
• 1. Scientific Task and Rate-setting, work improvement, etc.
• 2. Planning the Task.
• 3. Vocational Selection and Training
• 4. Standardization (of working conditions, material equipment etc.)
• 5. Specialization
• 6. Mental Revolution.
1.Scientific Task and Rate-Setting (work study): Work study may be defined as the systematic,
objective and critical examination of all the factors governing the operational efficiency of any
specified activity in order to effect improvement.

Work study includes:

(a) Methods Study: The management should try to ensure that the plant is laid out in the best
manner and is equipped with the best tools and machinery. The possibilities of eliminating or
combining certain operations may be studied.

(b) Motion Study: It is a study of the movement, of an operator (or even of a machine) in
performing an operation with the purpose of eliminating useless motions.

(c) Time Study (work measurement): The basic purpose of time study is to determine the
proper time for performing the operation. Such study may be conducted after the motion study.
Both time study and motion study help in determining the best method of doing a job and the
standard time allowed for it.

(d) Fatigue Study: If, a standard task is set without providing for measures to eliminate fatigue,
it may either be beyond the workers or the workers may over strain themselves to attain it. It is
necessary, therefore, to regulate the working hours and provide for rest pauses at scientifically
determined intervals.

(e) Rate-setting: Taylor recommended the differential piece wage system, under which workers
performing the standard task within prescribed time are paid a much higher rate per unit than
inefficient workers who are not able to come up to the standard set.
2. Planning the Task: Having set the task which an average worker must strive to
perform to get wages at the higher piece-rate, necessary steps have to be taken to plan
the production thoroughly so that there is no bottle neck and the work goes on
systematically.

3. Selection and Training: Scientific Management requires a radical change in the

methods and procedures of selecting workers. It is therefore necessary to entrust the
task of selection to a central personnel department. The procedure of selection will also
have to be systematized. Proper attention has also to be devoted to the training of the
workers in the correct methods of work.

4. Standardization: Standardization may be introduced in respect of the following:

(a) Tools and equipment: By standardization is meant the process of bringing about
uniformity. The management must select and store standard tools and implements which
will be nearly the best or the best of their kind.

(b) Speed: There is usually an optimum speed for every machine. If it is exceeded, it is
likely to result in damage to machinery.

(c) Conditions of Work: To attain standard performance, the maintenance of standard

conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very
essential.
4. Specialization: Scientific management will not be complete without the introduction of
specialization. Under this plan, the two functions of 'planning' and 'doing' are separated in
the organization of the plant. The `functional foremen' are specialists who join their heads
to give thought to the planning of the performance of operations in the workshop. Taylor
suggested eight functional foremen under his scheme of functional foremanship.

(a) The Route Clerk: To lay down the sequence of operations and instruct the workers
concerned about it.

(b) The Instruction Card Clerk: To prepare detailed instructions regarding different
aspects of work.

(c) The Time and Cost Clerk: To send all information relating to their pay to the workers
and to secure proper returns of work from them.

(d) The Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.

(e) The Gang Boss: To assemble and set up tools and machines and to teach the
workers to make all their personal motions in the quickest and best way.

(f) The Speed Boss: To ensure that machines are run at their best speeds and proper
tools are used by the workers.
5. Mental Revolution: At present, industry is divided into two groups – management and
labor. The major problem between these two groups is the division of surplus. The
management wants the maximum possible share of the surplus as profit; the workers
want, as large share in the form of wages. Taylor has in mind the enormous gain that
arises from higher productivity. Such gains can be shared both by the management and
workers in the form of increased profits and increased wages.

Four Principles of Scientific Management

1. Replace working by "rule of thumb," or simple habit and common sense, and instead
use the scientific method to study work and determine the most efficient way to perform
specific tasks.

2. Rather than simply assign workers to just any job, match workers to their jobs based
on capability and motivation, and train them to work at maximum efficiency.

3. Monitor worker performance, and provide instructions and supervision to ensure that
they're using the most efficient ways of working.

4. Allocate the work between managers and workers so that the managers spend their
time planning and training, allowing the workers to perform their tasks efficiently.
The benefits of scientific management are:-

1. Replacement of traditional rule of thumb method by scientific

techniques.
2. Proper selection and training of workers.
3. Incentive wages to the workers for higher production.
4. Elimination of wastes and rationalization of system of control.
5. Standardization of tools, equipment, materials and work
methods.
6. Detailed instructions and constant guidance of the workers
Critiques of Taylor
1. Taylor promoted the idea that there is "one right way" to do something.
This approach is at odds with the current approaches. Taylor’s approach
promotes tightly controlled procedures and environment and provides no
flexibility to the employees. Rigid, rules-driven organizations really struggle
to adapt in rapidly changing environment.

2. Taylor breaks tasks down into tiny steps, and focuses on how each
person can do his or her specific series of steps best. Modern
methodologies prefer to examine work systems more holistically in order to
evaluate efficiency and maximize productivity. The extreme specialization
that Taylorism promotes is contrary to modern ideals of how to provide a
motivating and satisfying workplace.

3. Taylor’s approach separates manual from mental work, modern

productivity enhancement practices seek to incorporate worker's ideas,
experience and knowledge into best practice.

4. Scientific management in its pure form focuses too much on the

mechanics, and fails to value the people side of work, whereby motivation
and workplace satisfaction are key elements in an efficient and productive
organization.
Management Principles
developed by Henri Fayol
Henry Fayol: Henri Fayol was a French mining engineer who developed
a general theory of business administration based largely on his own
management experience that is often called Fayolism.

Henri Fayol was born in Istanbul in 1841. When he was 19, he began
working as an engineer at a large mining company in France. He
eventually became the director, at a time when the mining company
employed more than 1,000 people. Through the years, Fayol began to
develop what he considered to be the 14 most important principles of
management. Essentially, these explained how managers should
organize and interact with staff. In 1916, two years before he stepped
down as director, he published his "14 Principles of Management" in the
book "Administration Industrielle et Generale." Fayol also created a list
of the six primary functions of management, which go hand in hand with
the Principles. Fayol's "14 Principles" was one of the earliest theories of
management to be created, and remains one of the most
comprehensive.
DIVISION OF WORK: Work should be divided among individuals and groups to
ensure that effort and attention are focused on special portions of the task.
Fayol presented work specialization as the best way to use the human
resources of the organization. When employees are specialized, output can
increase because they become increasingly skilled and efficient.

AUTHORITY: The concepts of Authority and responsibility are closely related.

Authority was defined by Fayol as the right to give orders and the power to
exact obedience. Responsibility involves being accountable, and is therefore
naturally associated with authority. Whoever assumes authority also assumes
responsibility. Managers must have the authority to give orders, but they must
also keep in mind that responsibility comes with authority.

DISCIPLINE: A successful organization requires the common effort of workers.

Penalties should be applied judiciously to encourage this common effort.

UNITY OF COMMAND: Workers should receive orders from only one manager.
That is, employees should have only one direct supervisor.

UNITY OF DIRECTION: The entire organization should be moving towards a

common objective in a common direction. Teams with the same objective
should be working under the direction of one manager, using one plan. This will
ensure that action is properly coordinated
SUBORDINATION OF INDIVIDUAL INTERESTS TO THE GENERAL
INTERESTS: The interests of one person should not take priority over the
interests of the organization as a whole. The interests of one employee should
not be allowed to become more important than those of the group. This
includes managers.

REMUNERATION: Many variables, such as cost of living, supply of qualified

personnel, general business conditions, and success of the business, should
be considered in determining a worker’s rate of pay. Employee satisfaction
depends on fair remuneration for everyone.

CENTRALIZATION: Fayol defined centralization as lowering the importance of

the subordinate role. Decentralization is increasing the importance. The degree
to which centralization or decentralization should be adopted depends on the
specific organization in which the manager is working. This principle refers to
how close employees are to the decision-making process.

SCALAR CHAIN: Managers in hierarchies are part of a chain like authority

scale. Each manager possesses certain amounts of authority. The President
possesses the most authority; the first line supervisor the least. Lower level
managers should always keep upper level managers informed of their work
activities. The existence of a scalar chain and adherence to it are necessary if
the organization is to be successful. Employees should be aware of where they
ORDER: For the sake of efficiency and coordination, all materials and people related
to a specific kind of work should be treated as equally as possible. The workplace
facilities must be clean, tidy and safe for employees. Everything should have its
place.

EQUITY: All employees should be treated as equally as possible. Managers should

be fair to staff at all times, both maintaining discipline as necessary and acting with
kindness where appropriate.

STABILITY OF TENURE OF PERSONNEL: Retaining productive employees should

always be a high priority of management. Managers should strive to minimize
employee turnover. Personnel planning should be a priority.

INITIATIVE: Management should take steps to encourage worker initiative, which is

defined as new or additional work activity undertaken through self-direction.
Employees should be given the necessary level of freedom to create and carry out
plans.

ESPIRIT DE CORPS: Management should encourage harmony and general good

feelings among employees. Organizations should strive to promote team spirit and
unity
Behavioral Approach

As management research continued in the 20th century, questions began

to come up regarding the interactions and motivations of the individual
within organizations. Management principles developed during the classical
period were simply not useful in dealing with many management situations
and could not explain the behavior of individual employees. In short,
classical theory ignored employee motivation and behavior. As a result, the
behavioral school was a natural outgrowth of this revolutionary
management experiment.

The behavioral management theory is often called the human relations

movement because it addresses the human dimension of work. Behavioral
theorists believed that a better understanding of human behavior at work,
such as motivation, conflict, expectations, and group dynamics, improved
productivity.

Behavioral management theory relies on the notion that managers will

better understand the human aspect to workers and treat employees as
important assets to achieve goals. Management taking a special interest in
workers makes them feel like part of a special group.
Hawthrone Experiment
Elton Mayo's contributions came as part of the Hawthorne studies, a series of
experiments that rigorously applied classical management theory only to reveal its
shortcomings.

The Hawthorne experiments consisted of two studies conducted at the Hawthorne

Works of the Western Electric Company in Chicago from 1924 to 1932. The first study
was conducted by a group of engineers seeking to determine the relationship of
lighting levels to worker productivity. Surprisingly enough, they discovered that worker
productivity increased as the lighting levels decreased — that is, until the employees
were unable to see what they were doing, after which performance naturally declined.

A few years later, a second group of experiments began. Harvard researchers Mayo
and F. J. Roethlisberger supervised a group of five women in a bank wiring room. They
gave the women special privileges, such as the right to leave their workstations without
permission, take rest periods, enjoy free lunches, and have variations in pay levels and
workdays. This experiment also resulted in significantly increased rates of productivity.
In this case, Mayo and Roethlisberger concluded that the increase in productivity
resulted from the supervisory arrangement rather than the changes in lighting or other
associated worker benefits. Because the experimenters became the primary
supervisors of the employees, the intense interest they displayed for the workers was
the basis for the increased motivation and resulting productivity. Essentially, the
experimenters became a part of the study and influenced its outcome.
The Needs Theory: Motivating
Employees with Maslow's
Hierarchy of Needs
Effectively motivating employees has long been one of
management's most important and challenging duties. Motivation
refers to the psychological processes that stimulate excitement
and persistence of voluntary actions aimed at some goal.
Because motivation can be highly individualized, managers use a
wide range of techniques to keep their employees motivated and
happy. Therefore, it is essential for managers to understand the
psychological processes involved in motivation so that they can
effectively direct employees towards organizational goals. Needs
theories attempt to identify internal factors that motivate an
individual's behavior and are based on the premise that people
are motivated by unfulfilled needs.
Maslow's Hierarchy of Needs Theory

One of the most popular needs theories is Abraham

Maslow's hierarchy of needs theory. Maslow proposed that
motivation is the result of a person's attempt at fulfilling five
basic needs: physiological, safety, social, esteem and
self-actualization. According to Maslow, these needs can
create internal pressures that can influence a person's
behavior
• Physiological needs are those needs required for human survival such as
air, food, water, shelter, clothing and sleep. As a manager, you can
account for physiological needs of your employees by providing
comfortable working conditions, reasonable work hours and the necessary
breaks to use the bathroom and eat and/or drink.

• Safety needs include those needs that provide a person with a sense of
security and well-being. Personal security, financial security, good health
and protection from accidents, harm and their adverse effects are all
included in safety needs. As a manager, you can account for the safety
needs of your employees by providing safe working conditions, secure
compensation (such as a salary) and job security, which is especially
important in a bad economy.

• Social needs, also called love and belonging, refer to the need to feel a
sense of belonging and acceptance. Social needs are important to humans
so that they do not feel alone, isolated and depressed. Friendships, family
and intimacy all work to fulfill social needs. As a manager, you can account
for the social needs of your employees by making sure each of your
employees know one another, encouraging cooperative teamwork, being
an accessible and kind supervisor and promoting a good work-life balance.
• Esteem needs refer to the need for self-esteem and respect, with
self-respect being slightly more important than gaining respect and
admiration from others. As a manager, you can account for the
esteem needs of your employees by offering praise and recognition
when the employee does well, and offering promotions and
additional responsibility to reflect your belief that they are a valued
employee.

• Self-actualization needs describe a person's need to reach his or her

full potential. The need to become what one is capable of is
something that is highly personal. While I might have the need to be
a good parent, you might have the need to hold an executive-level
position within your organization. Because this need is
individualized, as a manager, you can account for this need by
providing challenging work, inviting employees to participate in
decision-making and giving them flexibility and autonomy in their
jobs.
Douglas McGregor: Theory X &
Theory Y: Two Types of
Managers
• Douglas McGregor was heavily influenced by both the
Hawthorne studies and Maslow. He believed that two basic
kinds of managers exist. One type, the Theory X manager, has
a negative view of employees and assumes that they are lazy,
untrustworthy, and incapable of assuming responsibility. On
the other hand, the Theory Y manager assumes that
employees are not only trustworthy and capable of assuming
responsibility, but also have high levels of motivation.

• McGregor proposed that there were two types of managers:

ones who assumed a negative view of their employees, also
known as the Theory X managers, and others who assumed a
positive view of workers, or the Theory Y managers. So grab
your bomb repellent while we explore these two different
types of managers by discussing the assumptions of each.
• Theory X

• Xavier is a Theory X manager. When I say X, I don't mean the type

that marks a treasure - in fact, quite the opposite is true. As a Theory
X manager, Xavier believes that his workers:
• Hate the idea of having to go to work and do so only to earn a
paycheck and the security that it offers.
• Are inherently lazy, lack ambition and prefer to be directed on what
to do rather than assume responsibility on their own.
• Are self-centered and care only about themselves and not the
organization (or its goals), making it necessary for the manager to
coerce, control, direct or threaten with punishment in order to get
them to work towards organizational goals.
• They also dislike change and tend to resist it at all costs.
• Xavier assumes that his employees show up for work for their
paycheck and the security that a regular, paying job offers. As soon
as that need is satisfied, the employees have no additional
motivation for coming to work. Therefore, Xavier believes his role as
a manager is to coerce and control his employees to work towards
organizational goals.
• Theory Y
•
• Yoko is a Theory Y manager, and when I say Y here, think 'why not.' Why not
assume the best in people? As a Theory Y manager, Yoko believes her
employees:
• Accept work as a normal part of their day, and it's right next to recreation and
rest.
• They are not lazy at all. In fact, when the proper motivations and rewards are in
place, employees are not only willing but purposely driven to seek out
responsibility and challenges on their own.
• They're full of potential, and it's through their own creativity, ingenuity and
imagination that organizational goals are met.
• Yoko assumes that her employees are full of potential and that it is her role as a
manager to help develop that potential so that the employee can work towards a
common organizational goal. Yoko must also try to harness the motivational
energy of her employees through things such as giving them more autonomy,
responsibility, power, trust and feedback and involving them in the
decision-making process.
• McGregor cautioned both types of managers against what he called
self-fulfilling prophecies, whereby an employee will act just as the manager
assumed he or she would due to the manager's own actions and behaviors.
Essentially, if you hold people to a certain expectation - whether that's good or
bad - your own actions as a manager will influence those employees to act
accordingly. A manager's behavior and expectations are as contagious as the
plague. As such, McGregor acknowledged both types of managers as being a
legitimate means of motivating employees, but he felt that you would get much
better results through the use of Theory Y rather than Theory X.
Contemporary Approach Theory z
- William Ouchi
• First things first - Theory Z is not a Mcgregor idea and as such is not Mcgregor's
extension of his XY theory. Ouchi's theory focuses on increasing employee loyalty
to the company by providing a job for life and focusing on the employee's
well-being.
• Theory Z was developed by not by Mcgregor, but by William Ouchi, in his book
1981 'Theory Z: How American management can Meet the Japanese Challenge'.
William Ouchi is professor of management at UCLA, Los Angeles, and a board
member of several large US organisations.
• Professor Ouchi spent years researching Japanese companies and examining
American companies using the Theory Z management styles . By the 1980s,
Japan was known for the highest productivity anywhere in the world, while
America's productivity had fallen drastically. The word "Wa" in Japanese can be
applied to Theory Z because they both deal with promoting partnerships and
group work.
• The word "Wa" means a perfect circle or harmony, which influences Japanese
society to always come to a solution via teamwork. Promoting Theory Z and the
Japanese word "Wa" is how the Japanese economy became so powerful.
Because the Japanese show a high level enthusiasm to work, some of the
researchers also claim that the "Z" in the Theory Z stands for "Zeal. "
• Theory Z essentially advocates a combination of all that's best about theory Y and
modern Japanese management and places a large amount of freedom and trust
with workers, and assumes that workers have a strong loyalty and interest in
team-working and the organization.
• Theory Z also places more reliance on the attitude and responsibilities of
the workers, whereas Mcgregor's XY theory is mainly focused on
management and motivation from the manager's and organisation's
perspective. There is no doubt that Ouchi's Theory Z model offers
excellent ideas, albeit it lacking the simple elegance of Mcgregor's model,
which let's face it, thousands of organisations and managers around the
world have still yet to embrace. For this reason, Theory Z may for some be
like trying to manage the kitchen at the Ritz before mastering the ability
to cook a decent fried breakfast.

• For Ouchi, Theory Z focused on increasing employee loyalty to the

company by providing a job for life with a strong focus on the well-being
of the employee, both on and off the job. According to Ouchi, Theory Z
management tends to promote:

• Stable employment
• High productivity
• High employee morale and satisfaction
• The secret to Japanese success, according to Ouchi, is not technology, but
a special way of managing people. "This is a managing style that focuses
on a strong company philosophy, a distinct corporate culture, long-range
staff development, and consensus decision-making" (Ouchi, 1981). Ouchi
claims that the results show:

• Lower turnover
• Increased job commitment
• Dramatically higher productivity

• William Ouchi doesn't say that the Japanese culture for business is
necessarily the best strategy for the American companies. Instead, he
takes Japanese business techniques and adapts them to the American
corporate environment.

• One of the most important pieces of this theory is that management must
have a high degree of confidence in its workers in order for this type of
participative management to work. This theory assumes that workers will
be participating in the decisions of the company to a great degree
• Ouchi explains that the employees must be very knowledgeable about the
various issues of the company, as well as possess the competence to
make those decisions. He also points out, however, that management
sometimes has a tendency to underestimate the ability of the workers to
effectively contribute to the decision-making process (Bittel, 1989). For
this reason, Theory Z stresses the need for the workers to become
generalists, rather than specialists, and to increase their knowledge of the
company and its processes through job rotations and constant training.

• Promotions tend to be slower in this type of setting, as workers are given

a much longer opportunity to receive training and more time to learn the
ins and outs of the company's operations.

• The desire, under this theory, is to develop a work force, which has more
loyalty toward staying with the company for an entire career. It is
expected that once employees do rise to a position of high level
management, they will know a great deal more about the company and
how it operates, and will be able to use Theory Z management theories
effectively on the newer employees.
Contingency Management

• Contingency management is based on the principle that behavior is

a function of its consequences. That is, what people do – how they
behave – is related in a predictable way to the consequences of
their behavior. For example, if an action is followed by a positive
consequence (positive for that person), then the individual is likely
to repeat that action. In contrast, if an action is followed by a
negative consequence (negative for that person), then the
individual is unlikely to repeat the action. Negative consequences
include both no response (e.g., the person’s action is ignored) and
punishing responses.

• Effective management of consequences (contingencies) is

important for all children, especially in a school context.
Compliance and orderly behavior are critical in creating an effective
learning environment. The contingency approach to management
holds that management techniques should be dependent upon the
circumstances.
Management by Objectives

• A management model that aims to improve performance of an

organization by clearly defining objectives that are agreed to by
both management and employees. According to the theory, having
a say in goal setting and action plans should ensure better
participation and commitment among employees, as well as
alignment of objectives across the organization. The term was first
outlined by management guru Peter Drucker in 1954 in his book
"The Practice of Management."

• Management by objectives (or MBO) is a personnel management

technique where managers and employees work together to set,
record and monitor goals for a specific period of time.
Organizational goals and planning flow top-down through the
organization and are translated into personal goals for
organizational members. The technique was first championed by
management expert Peter Drucker and became commonly used in
the 1960s.
Key Concepts
• The core concept of MBO is planning, which means that an
organization and its members are not merely reacting to events and
problems but are instead being proactive. MBO requires that
employees set measurable personal goals based upon the
organizational goals. For example, a goal for a civil engineer may be
to complete the infrastructure of a housing division within the next
twelve months. The personal goal aligns with the organizational goal
of completing the subdivision.
•
• MBO is a supervised and managed activity so that all of the
individual goals can be coordinated to work towards the overall
organizational goal. You can think of an individual, personal goal as
one piece of a puzzle that must fit together with all of the other
pieces to form the complete puzzle: the organizational goal. Goals
are set down in writing annually and are continually monitored by
managers to check progress. Rewards are based upon goal
achievement.
• Advantage — It provides a means to identify and plan for
achievement of goals. If you don't know what your goals are, you will
not be able to achieve them. Planning permits proactive behavior
and a disciplined approach to goal achievement. It also allows you to
prepare for contingencies and roadblocks that may hinder the plan.
Goals are measurable so that they can be assessed and adjusted
easily. Organizations can also gain more efficiency, save resources
and increase organizational morale if goals are properly set,
managed and achieved.

• Disadvantage — Application of MBO does take some concerted

effort. You cannot rely upon a thoughtless, mechanical approach.
You should note that some tasks are so simple that setting goals
makes little sense and becomes more of silly annual ritual. For
example, if your job is snapping two pieces of a product together on
an assembly line, setting individual goals for your work borders on
the absurd.
Different Organization
Structure
• Every organization, to be effective, must have a structure.
Organization Structure is the setup that determines the hierarchy and
reporting structure in an organization. It is represented by a drawing
known as an organizational chart. There are different types of
organizational structures that companies follow, depending on a
variety of factors like leadership style, type of organization,
geographical regions, work flow and hierarchy. To put it simply, an
organizational structure is the plan of the hierarchy and arrangement
of work.
• The typically hierarchical arrangement of lines of authority,
communications, rights and duties of an organization. Organizational
structure determines how the roles, power and responsibilities are
assigned, controlled, and coordinated, and how information flows
between the different levels of management.
• A structure depends on the organization's objectives and strategy. In
a centralized structure, the top layer of management has most of the
decision making power and has tight control over departments and
divisions. In a decentralized structure, the decision making power is
distributed and the departments and divisions may have different
degrees of independence.
Traditional Structures

Flat Structure
A flat organizational structure is often used for a small company with
20 or fewer employees. This type of structure has very few levels of
management between the Chief Executive Officer (CEO)/president and
the lower level employees. In this type of structure, decisions can be
made quickly due to the fact there are only a few levels of
management. Here is an example of what a flat organizational
structure looks like:
Line Structure

This is the kind of structure that has a specific line of command.

The approvals and orders in this kind of structure come from top
to bottom in a line. Hence it is known as a line structure. This
kind of structure is suitable for smaller organizations like small
accounting firms and law offices. This structure allows easy
decision-making and is informal in nature.
• Merits
• ✔ It is the simplest kind of organizational structure.
• ✔ Strict authority results in a stronger discipline.
• ✔ Prompt decisions result in quick and effective actions.
• ✔ There is clarity in the structures of authority and responsibility.
• ✔ As the control rests with one superior, it accords him the
flexibility to adjust the department.
• ✔ There are good career advancement prospects for individuals who
deliver quality work.

• Demerits
• ✗ There are chances of the department head being biased.
• ✗ Lack of specialization is a persistent problem.
• ✗ The department head may be burdened with lots of work.
• ✗ Communication only happens from top to bottom.
• ✗ Superiors with authority can misuse it for their benefit.
• ✗ Decisions are taken by a single person and can go wrong
Line and Staff Structure

Though a line structure is suitable for most organizations, especially

the small ones, it is not effective for larger companies. This is where
the line and staff organizational structure comes into play. Line and
staff structure combines the line structure where information and
approvals come from top to bottom, with staff departments for
support and specialization. Line and staff organizational structures are
more centralized. Managers of line and staff have authority over their
subordinates, but staff managers have no authority over line
managers and their subordinates. The decision-making process
becomes slower in this type of organizational structure because of
several layers and guidelines. Also, there is formality involved.
Merits
✔ It enables the employees to perform at a faster rate.
✔ It helps employees to accept responsible jobs and specialize in a
particular area.
✔ It helps line managers to concentrate on the task at hand.
✔ Little or no resistance is met when organizational changes take place.
✔ It results in less operational wastage and increases productivity.
✔ Employees feel that they are given the due credit for their contribution.

Demerits
✗ Confusion may be created among employees.
✗ Employees lack operational knowledge to give result-oriented
suggestions.
✗ There are too many levels of hierarchy.
✗ Employees may have differences of opinions and this may slow down the
work.
✗ As staff specialists exist, it is costlier than a simple line organization.
✗ Decision-making may be time-consuming.
Popular Organizational Structures

Organizations are set up in specific ways to accomplish different goals,

and the structure of an organization can help or hinder its progress
toward accomplishing these goals. Organizations large and small can
achieve higher sales and other profit by properly matching their needs
with the structure they use to operate.

Functional Structure

Functional structure is set up so that each portion of the organization is

grouped according to its purpose. In this type of organization, for
example, there may be a marketing department, a sales department
and a production department. The functional structure works very well
for small businesses in which each department can rely on the talent
and knowledge of its workers and support itself. However, one of the
drawbacks to a functional structure is that the coordination and
communication between departments can be restricted by the
organizational boundaries of having the various departments working
separately.
This kind of organizational structure classifies people according to the function they
perform in their professional life or according to the functions performed by them in the
organization. The organization chart for a functional organization consists of a Vice
President, a Sales Department, a Customer Service Department, an Engineering or
Production Department, an Accounting Department, an Administration Department, etc.

Merits
✔ It has high degrees of specialization.
✔ It has clear lines of authority.
✔ It facilitates easy accountability for the work.
✔ It accords a high level of speed and efficiency.
✔ The need for duplication of work is eliminated.
✔ All the functions command equal importance.

Demerits
✗ Communication has several barriers which makes coordination difficult.
✗ More focus is laid on individuals rather than the organization.
✗ The decisions taken by a single person may not always work in favor of the
organization.
✗ As the organization expands, it gets difficult to exercise control on its operations.
✗ There may be lack of teamwork between different departments or units.
✗ As all the functions are separated, employees may not gain knowledge about other
specializations.
Divisional Structure

Divisional structure typically is used in larger companies that operate

in a wide geographic area or that have separate smaller organizations
within the umbrella group to cover different types of products or
market areas. The benefit of this structure is that the needs can be
met more rapidly and more specifically; however, communication is
inhibited because employees in different divisions are not working
together. Divisional structure is costly because of its size and scope.
Small businesses can use a divisional structure on a smaller scale,
having different offices in different parts of the city, for example, or
assigning different sales teams to handle different geographic areas.

These are the kinds of structures that are based on different divisions
in the organization. They group together employees based on the
products, markets and geographical locations covered. Here is a
detailed description of a divisional structure.
Product Structure

A product structure is based on organizing employees and work on the basis of the
different products. If the company produces three different products, they will have
three different divisions for these products. This type of structure can be best
utilized for retail stores with a number of products.

Merits
✔ Units which are not working can be closed down easily.
✔ Each unit can be operated and treated as a separate profit center.
✔ It accords rapid and easy decision-making.
✔ It also gives a lot of independence to the decision makers.
✔ Individual products get separate attention as per the problems they face.
✔ It enables the organization to have a high productivity and efficiency quotient.

Demerits
✗ As each unit operates on its own, organizational goals may not be achieved.
✗ Unhealthy competition may exist among internal business units.
✗ As it has too many managerial levels, it may hamper the business.
✗ Accounting work and taxes may increase considerably.
✗ All the units may not be considered as equal.
✗ Marketing individual products may add up to the cost significantly
Market Structure

Market structure is used to group employees on the basis of the specific market the
company sells in. A company could have five different markets they use and
according to this structure, each would be a separate division.

Merits
✔ Employees can communicate with customers in the local language.
✔ They are available for the customers, if need is felt.
✔ The problems in a particular market can be isolated and dealt with separately.
✔ As individuals are responsible for a particular market, tasks are completed on
time.
✔ Employees are specialized in catering to a particular market.
✔ New products for niche markets can be introduced.

Demerits
✗ There can be intense competition among the employees.
✗ Decision-making can cause conflicts.
✗ It is difficult to determine the productivity and efficiency.
✗ All the markets may not be considered as equal.
✗ There may be lack of communication between the superiors and the employees.
✗ Employees may misuse their authority.
A Few More Organizational Structures

Entrepreneurial Structure

The authority of such organizations oftentimes is heavily centralized and lies with one person.
It only comprises two to three vertical levels and the duties of the employees overlap. It is
suitable for small or new organizations where the decision of one person matters the most. It
also exhibits easy responsiveness and adaptability to change in the business environment.

Horizontal Organization Structure

It is also known as a flat structure. In this type, there is absolutely nil or very less interference
from the senior management which allows the employees to conduct their tasks smoothly.
Employees are also involved in the decision-making process. As it eliminates the need for
middle management, it contributes towards giving a quick response to customer feedback.
However, it may not be applicable and practical for big organizations.

Vertical Organization Structure

It relies on the middle management to monitor and control the work of the employees. These
structures have well-defined roles and responsibilities for the employees. Hence, delegating
tasks to the employees becomes easier. It requires a strong leader at the top of the hierarchy
as he is the one to take all the decisions. As a hierarchy exists, it ensures that the work is done
in a disciplined manner.
Mechanistic Structure

This is the most formal and the strictest kind of structure with a clear
distinction in the hierarchy and roles. Hence, these structures are
vertically oriented. The hierarchy of the authority is well-defined.
Decision-making rests in the hands of the senior management. As a lot of
bureaucracy is involved in these structures, the leaders find it difficult to
deal with competition. Also, innovation oftentimes is hampered due to
red-tapeism. Employees work separately and are specialists of a task.

Organic Structure

It is the exact opposite of a mechanistic organizational structure. In an

organization following the organic structure, the authority is delegated and
is decentralized. Hence, communication takes place laterally. There is a
lot of flexibility in this type of an organization. Employees generally work
together and coordinate different tasks. They are highly flexible to adapt
to the changes in the external business environment.