UNIT 3

A plan is a forecast for accomplishment. It is a predetermined course of action. It is

today’s projection for tomorrow’s activity. In other words, to plan is to produce a
scheme for future action, to bring about specified results at a specified cost, in a
specified period of time. Management thinkers have defined the term, basically, in
two ways:
1. Based on futurity: “Planning is a trap laid down to capture the future”
(Allen). “Planning is deciding in advance what is to be done in future” (Koontz).
“Planning is informed anticipation of future” (Haimann). “Planning is
‘anticipatory’ decision- making” (R.L. Ackoff).
2. As a thinking function: “Planning is a thinking process, an organised foresight, a
vision based on fact and experience that is required for intelligent action” ( Alford
and Beatty)
“Planning is deciding in advance what to do, how to do it, when to do it and who
is to do it.”
– Koontz and O’Donnell
It is deciding in the present, what is to be done in future. It is the process of thinking
before doing. A plan is a specific, documented intention consisting of an objective and
an action statement. The objective portion is the end, and the action statement
represents the means to that end. Stated another way, objectives give management
targets to shoot at, whereas action statements provide the arrows for hitting the
targets. Properly conceived plans tell what, where and how something is to be
done.
Importance of Planning:
1. It helps managers to improve future performance, by establishing objectives
and selecting a course of action, for the benefit of the organization.
2. It minimizes risk and uncertainty, by looking ahead into the future.

3. It facilitates the coordination of activities. Thus, reduces overlapping among

activities and eliminates unproductive work.
4 .It states in advance, what should be done in future, so it provides direction for action?
5. It uncovers and identifies future opportunities and threats.

6. It sets out standards for controlling. It compares actual performance with the
standard performance and efforts are made to correct the same.
Planning is present in all types of organizations, households, sectors, economies,
etc. We need to plan because the future is highly uncertain and no one can predict
the future with 100% accuracy, as the conditions can change anytime. Hence, planning
is the basic requirement of any organization for the survival, growth and success.
PURPOSE OF PLANNING:
As a managerial function planning is important due to the following reasons:-
To manage by objectives: All the activities of an organization are designed to
achieve certain specified objectives. However, planning makes the objectives more
concrete by focusing attention on them.
To offset uncertainty and change: Future is always full of uncertainties and changes.
Planning foresees the future and makes the necessary provisions for it.

To secure economy in operation: Planning involves, the selection of most

profitable course of action that would lead to the best result at the minimum costs.
To help in co-ordination: Co-ordination is, indeed, the essence of management,
the planning is the base of it. Without planning it is not possible to co-ordinate the
different activities of an organization.
To make control effective: The controlling function of management relates to the
comparison of the planned performance with the actual performance. In the
absence of plans, a management will have no standards for controlling other's
performance.
To increase organizational effectiveness: Mere efficiency in the organization is not
important; it should also lead to productivity and effectiveness.

Characteristics of Planning:
1. Managerial function: Planning is a first and foremost managerial function provides
the base for other functions of the management, i.e. organising, staffing, directing
and controlling, as they are performed within the periphery of the plans made.
2. Goal oriented: It focuses on defining the goals of the organisation, identifying
alternative courses of action and deciding the appropriate action plan, which is to be
undertaken for reaching the goals.
3. Pervasive: It is pervasive in the sense that it is present in all the segments and is
required at all the levels of the organization.Although the scope of planning varies
at different levels and departments.
4. Continuous Process: Plans are made for a specific term, say for a month,
quarter, year and so on. Once that period is over, new plans are drawn, considering the
organization’s present and future requirements and conditions. Therefore, it is an
ongoing process, as the plans are framed, executed and followed by another plan.
5. IntellectualProcess: It is a mental exercise at it involves the application of
mind, to think, forecast, imagine intelligently and innovate etc.
6. Futuristic: In the process of planning we take a sneak peek of the future. It
encompasses looking into the future, to analyze and predict it so that the organization
can face future challenges effectively.
7. Decision making: Decisions are made regarding the choice of alternative courses
of action that can be undertaken to reach the goal. The alternative chosen should
be best among all, with the least number of the negative and highest number of
positive outcomes.
Planning is concerned with setting objectives, targets, and formulating plan to
accomplish them. The activity helps managers analyze the present condition to identify
the ways of attaining the desired position in future. It is both, the need of the
organization and the
responsibility of managers.

Limitations of Planning:
(i) Planning leads to rigidity
(ii) Planning may not work in a dynamic
environment (iii)Planning reduces creativity
(iv) Planning involves huge costs
(v)Planning is a time-consuming
process (vi)Planning does not
guarantee success

PLANNING PROCESS
The various steps involved in planning are given below

a) Establishing Objectives
The first step in planning itself is to establish objectives for the entire enterprise
and then for each subordinate unit. Objectives specifying the results expected
indicate the end points of what is to be done, where the primary emphasis is to be
placed, and what is to be accomplished by the network of strategies, policies,
procedures, rules, budgets and programs.
Enterprise objectives should give direction to the nature of all major plans which,
by reflecting these objectives, define the objectives of major departments. Major
department objectives, in turn, control the objectives of subordinate departments,
and so on down the line. The objectives of lesser departments will be better framed,
however, if subdivision managers understand the overall enterprise objectives and
the implied derivative goals and if they are given an opportunity to contribute their
ideas to them and to the setting of their
own goals.

b) Considering the Planning Premises

Another logical step in planning is to establish, obtain agreement to utilize and
disseminate critical planning premises. These are forecast data of a factual nature,
applicable basic policies, and existing company plans. Premises, then, are planning
assumptions – in other words, the expected environment of plans in operation. This step
leads to one of the major principles of planning.

The more individuals charged with planning understand and agree to utilize consistent
planning premises, the more coordinated enterprise planning will be.

Planning premises include far more than the usual basic forecasts of population,
prices, costs, production, markets, and similar matters.

Because the future environment of plans is so complex, it would not be profitable

or realistic to make assumptions about every detail of the future environment of a
plan.

Since agreement to utilize a given set of premises is important to coordinate planning, it

becomes a major responsibility of managers, starting with those at the top, to
make sure that subordinate managers understand the premises upon which they are
expected to plan. It is not unusual for chief executives in well- managed
companies to force top managers with differing views, through group deliberation,
to arrive at a set of major premises that all can accept.

c) Identification of alternatives
Once the organizational objectives have been clearly stated and the planning premises
have been developed, the manager should list as many available alternatives as
possible for reaching those objectives.

The focus of this step is to search for and examine alternative courses of action,
especially those not immediately apparent. There is seldom a plan for which
reasonable alternatives do not exist, and quite often an alternative that is not
obvious proves to be the best.

The more common problem is not finding alternatives, but reducing the number of
alternatives so that the most promising may be analyzed. Even with mathematical
techniques and the computer, there is a limit to the number of alternatives that may be
examined. It is therefore usually necessary for the planner to reduce by preliminary
examination the number of alternatives to those promising the most fruitful
possibilities or
by mathematically eliminating, through the process of approximation, the least
promising ones.

d) Evaluation of alternatives
Having sought out alternative courses and examined their strong and weak points, the
following step is to evaluate them by weighing the various factors in the light of
premises and goals. One course may appear to be the most profitable but require a
large cash outlay and a slow payback; another may be less profitable but involve less
risk; still another may better suit the company in long–range objectives.

If the only objective were to examine profits in a certain business immediately, if

the future were not uncertain, if cash position and capital availability were not
worrisome, and if most factors could be reduced to definite data, this evaluation
should be relatively easy. But typical planning is replete with uncertainties,
problems of capital shortages, and intangible factors, and so evaluation is usually very
difficult, even with relatively simple problems. A company may wish to enter

a new product line primarily for purposes of prestige; the forecast of expected results
may show a clear financial loss, but the question is still open as to whether the loss is
worth the gain.

e) Choice of alternative plans

An evaluation of alternatives must include an evaluation of the premises on which the
alternatives are based. A manager usually finds that some premises are
unreasonable and can therefore be excluded from further consideration. This
elimination process helps the manager determine which alternative would best
accomplish organizational objectives.

f) Formulating of Supporting Plans

After decisions are made and plans are set, the final step to give them meaning is
to numbered them by converting them to budgets. The overall budgets of an
enterprise represent the sum total of income and expenses with resultant profit or
surplus and budgets of major balance– sheet items such as cash and capital
expenditures. Each department or program of a business or other enterprise can have
its own budgets, usually of expenses and capital expenditures, which tie into the
overall budget.

If this process is done well, budgets become a means of adding together the
various plans and also important standards against which planning progress can be
measured.

g) Establishing sequence of activities

Once plans that furnish the organization with both long-range and short-range
direction have been developed, they must be implemented. Obviously, the
organization can not directly benefit from planning process until this step is
performed.

TYPES OF PLANNING:
In the process of planning, several plans are prepared which are known as components
of planning.

Plans can be broadly classified as

• Strategic plans

• Tactical plans

• Operational plans

Operational plans lead to the achievement of tactical plans, which in turn lead to the
attainment of strategic plans. In addition to these three types of plans, managers
should also develop a contingency plan in case their original plans fail.

a) Strategic plans

A strategic plan is an outline of steps designed with the goals of the entire
organization as a whole in mind, rather than with the goals of specific divisions or
departments. It is further classified as

i) Mission:

The mission is a statement that reflects the basic purpose and focus of the
organization which normally remain unchanged. The mission of the company is the
answer of the question : why does the organization exists?

Properly crafted mission statements serve as filters to separate what is important

from what is not, clearly state which markets will be served and how, and
communicate a sense of intended direction to the entire organization.

Mission of Ford: ―we are a global, diverse family with a proud inheritance, providing
exceptional products and services‖.

ii) Objectives or goals:

Both goal and objective can be defined as statements that reflect the end towards which
the organization is aiming to achieve. However, there are significant differences
between the two. A goal is an abstract and general umbrella statement, under
which specific objectives can be clustered. Objectives are statements that describe—in
precise, measurable, and obtainable terms which reflect the desired organization’s
outcomes.

iii) Strategies:

Strategy is the determination of the basic long term objectives of an organization and
the adoption of action and collection of action and allocation of resources necessary to
achieve these goals.

Strategic planning begins with an organization's mission. Strategic plans look

ahead over the next two, three, five, or even more years to move the organization
from where it currently is to where it wants to be. Requiring multilevel involvement,
these plans demand harmony among all levels of management within the organization.
Top-level management develops the directional objectives for the entire organization,
while lower levels of management develop compatible objectives and plans to achieve
them. Top management's strategic plan for the entire organization becomes the
framework and sets dimensions for the lower level planning.

b) Tactical plans

A tactical plan is concerned with what the lower level units within each division
must do, how they must do it, and who is in charge at each level. Tactics are the means
needed to activate a strategy and make it work.

Tactical plans are concerned with shorter time frames and narrower scopes than
are strategic plans. These plans usually span one year or less because they are
considered
short-term goals. Long-term goals, on the other hand, can take several years or more to
accomplish. Normally, it is the middle manager's responsibility to take the broad
strategic plan and identify specific tactical actions.

c) Operational plans

The specific results expected from departments, work groups, and individuals are the
operational goals. These goals are precise and measurable. ―Process 150 sales
applications each week‖ or
―Publish 20 books this quarter‖ are examples of operational goals.

An operational plan is one that a manager uses to accomplish his or her job
responsibilities. Supervisors, team leaders, and facilitators develop operational plans
to support tactical plans (see the next section). Operational plans can be a single-use
plan or a standing plan.

i) Single-use plans apply to activities that do not recur or repeat. A one- time
occurrence, such as a special sales program, is a single-use plan because it deals with
the who, what, where, how, and how much of an activity.

Programme: Programme consists of an ordered list of events to be followed to execute

a project.

Budget: A budget predicts sources and amounts of income and how much they
are used for a specific project.

ii) Standing plans are usually made once and retain their value over a period of years
while undergoing periodic revisions and updates. The following are examples of
ongoing plans:
Policy: A policy provides a broad guideline for managers to follow when dealing with
important areas of decision making. Policies are general statements that explain how a
manager should attempt to handle routine management responsibilities. Typical human
resources policies, for example, address such matters as employee hiring, terminations,
performance appraisals, pay increases, and discipline.

Procedure: A procedure is a set of step-by-step directions that explains how

activities or tasks are to be carried out. Most organizations have procedures for
purchasing supplies and equipment, for example. This procedure usually begins with a
supervisor completing a purchasing requisition. The requisition is then sent to the next
level of management for approval. The approved requisition is forwarded to the
purchasing department. Depending
on the amount of the request, the purchasing department may place an order, or
they may need to secure quotations and/or bids for several vendors before placing
the order. By defining the steps to be taken and the order in which they are to be
done, procedures provide a standardized way of responding to a repetitive problem.

Rule: A rule is an explicit statement that tells an employee what he or she can and
cannot do. Rules are ―do‖ and ―don't‖ statements put into place to promote the
safety of employees and the uniform treatment and behavior of employees. For
example, rules about tardiness and absenteeism permit supervisors to make
discipline decisions rapidly and with a high degree of fairness.

iii) Contingency plans

Intelligent and successful management depends upon a constant pursuit of adaptation,

flexibility, and mastery of changing conditions. Strong management requires a
―keeping all options open‖ approach at all times — that's where contingency
planning comes in.

Contingency planning involves identifying alternative courses of action that can be

implemented if and when the original plan proves inadequate because of changing
circumstances.

Keep in mind that events beyond a manager's control may cause even the most
carefully prepared alternative future scenarios to go awry. Unexpected problems
and events frequently occur. When they do, managers may need to change their plans.
Anticipating change during the planning process is best in case things don't go as
expected. Management can then develop alternatives to the existing plan and ready
them for use when and if circumstances make these alternatives appropriate.
OBJECTIVES

Objectives may be defined as the goals which an organization tries to achieve. Objectives
are described as the end- points of planning. According to Koontz and O'Donnell, "an
objective is a term commonly used to indicate the end point of a management programme."
Objectives constitute the purpose of the enterprise and without them no intelligent planning
can take place.

Objectives are, therefore, the ends towards which the activities of the enterprise are aimed.
They are present not only the end-point of planning but also the end towards which
organizing, directing and controlling are aimed. Objectives provide direction to various
activities. They also serve as the benchmark of measuring the efficiency and effectiveness
of the enterprise. Objectives make every human activity purposeful. Planning has no
meaning if it is not related to certain objectives.

Features of Objectives:

 Objectives must be predetermined.

 A clearly defined objective provides the clear direction for managerial effort.
 Objectives must be realistic.
 Objectives must be measurable.
 Objectives must have social sanction.
 All objectives are interconnected and mutually supportive.
 Objectives may be short-range, medium-range and long-range.
 Objectives may be constructed into a hierarchy.

Advantages of Objectives:

 Clear definition of objectives encourages unified planning.

 Objectives provide motivation to people in the organization.
 When the work is goal-oriented, unproductive tasks can be avoided.
 Objectives provide standards which aid in the control of human efforts in an organization.
 Objectives serve to identify the organization and to link it to the groups upon
which its existence depends.
 Objectives act as a sound basis for developing administrative controls.
 Objectives contribute to the management process: they influence the purpose
of the organization, policies, personnel, leadership as well as managerial control.

SETTING OBJECTIVES:

Objectives are the keystone of management planning. It is the most important task of
management. Objectives are required to be set in every area which directly and vitally
effects the survival and prosperity of the business. In the setting of objectives, the following
points should be borne in mind.
Objectives are required to be set by management in every area which directly and vitally
affects the survival and prosperity of the business.
The objectives to be set in various areas have to be identified.

While setting the objectives, the past performance must be reviewed, since past performance
indicates what the organization will be able to accomplish in future.
The objectives should be set in realistic terms i.e., the objectives to be set should be
reasonable and capable of attainment.

Objectives must be consistent with one and other. Objectives must be set in clear-cut
terms. For the successful accomplishment of the objectives, there should be effective
communication.

POLICIES:

Policies are general statements or understandings that guide managers’ thinking in decision
making . They usually do not require action but are intended to guide managers in their
commitment to the decision they ultimately make
The first step in the process of policy formulation, as shown in the diagram below, is to
capture the values or principles that will guide the rest of the process and form the basis on
which to produce a statement of issues. The statement of issues involves identifying the
opportunities and constraints affecting the local housing market, and is to be produced by
thoroughly analyzing the housing market. The kit provides the user with access to a housing
data base to facilitate this analysis.

The statement of issues will provide the basis for the formulation of a set of housing goals
and objectives, designed to address the problems identified and to exploit the opportunities
which present themselves.

The next step is to identify and analyze the various policy options which can be applied to
achieve the set of goals and objectives. The options available to each local government will
depend on local circumstances as much as the broader context and each local authority will
have to develop its own unique approach to addressing the housing needs of its residents.
An implementation program for realizing the policy recommendations must then be
prepared, addressing budgetary and programming requirements, and allocating roles and
responsibilities. Finally, the implementation of the housing strategy needs to be
systematically monitored and
evaluated against the stated goals and objectives, and the various components of the strategy
modified or strengthened, as required.

At each step of the way, each component of the strategy needs to be discussed and debated,
and a public consultation process engaged in. The extent of consultation and the
participants involved will vary with each step.

Essentials of Policy Formulation:

The essentials of policy formation may be listed as below:

 A policy should be definite, positive and clear. It should be understood by everyone

in the organization.
 A policy should be translatable into the practices.
 A policy should be flexible and at the same time have a high degree of permanency.
 A policy should be formulated to cover all reasonable anticipatable conditions.
 A policy should be founded upon facts and sound judgment.
 A policy should conform to economic principles, statutes and regulations.
 A policy should be a general statement of the established rule.

Importance of Policies:

Policies are useful for the following reasons:

 They provide guides to thinking and action and provide support to the subordinates.
 They delimit the area within which a decision is to be made.
  They save time and effort by pre-deciding problems.
 They permit delegation of authority to mangers at the lower levels.

PLANNING PREMISES:

The process of planning is based upon estimates and predictions of the future. Though past
guides the plans in present, plans achieve the goals in the future. Therefore, the forecast of
future events leads to efficient plans. Since future events are not known accurately, the
assumption is made about these events.

These events may be known conditions (even changes in the tax laws as announced in the
budget) or anticipated events which may or may not happen (entry of a competitor in the
same market with the same product).

Though these assumptions are primarily based on scientific analysis and models, managers
also use their intuition and judgment to make assumptions about future events. By
identifying the factors (assumptions) that affect plans is called premising and the methods
used for making premises are called forecasting.
The done forecast or the assumptions about the future which provide a base for planning in
present are known as planning premises. This is the expectation or forecasts made for
achieving the goals.

Planning premises are the basic assumptions about the environment. These assumptions are essential
to make plans more realistic and operational. Planning premises provide a framework. All
plans are made within this framework. There are many environmental factors, which
influence the plan.
Assumptions are made about these factors. These assumptions are called premises.

TYPES OF PLANNING PREMISES:

1. Internal and External Premises

2. Controllable, Semi controllable and Uncontrollable premises
3. Tangible and Intangible Premises
4. Constant and Variable premises

Internal and External Premises:

Internal Premises:
Internal premises come from the business itself. It includes skills of the workers, capital
investment policies, philosophy of management, sales forecast, etc.

External Premises:
External premises come from the external environment. That is, economic, social, political,
cultural and technological environment. External premises cannot e controlled by the
business.

2. Controllable, Semi controllable and Uncontrollable premises:

Controllable Premises:
Controllable premises are those which are fully controlled by the management. They
include factors like materials, machines and money.

Semi controllable Premises:

They are partly controllable. They include marketing strategy.
Uncontrollable Premises: Uncontrollable premises are those over which the management
has absolutely no control. They include weather conditions, consumers’ behavior,
government policy, natural calamities, wars etc.

3. Tangible and Intangible Premises:

Tangible Premises:
Tangible premises can be measured in quantitative terms. They include units of production
and sale, money, time, hours of work, etc.

Intangible Premises:
Intangible premises cannot be measured in quantitative terms. They include goodwill of the business,
employee’s morale, employee’s attitude and public relations.

4. Constant and Variable premises:

Constant Premises:
Constant premises do not change. They remain the same, even if there is a change in the
course of action. They include men, money and machines.

Variable Premises:

Variable premises are subject to change. They change according to the course of action. They
include union-management relations.

STRATEGIC MANAGEMENT:

The term 'Strategy' has been adapted from war and is being increasingly used in business to
reflect broad overall objectives and policies of an enterprise. Literally speaking, the term
'Strategy' stands for the war-art of the military general, compelling the enemy to fight as per
out chosen terms and conditions.

According to Koontz and O' Donnell, "Strategies must often denote a general programme of
action and deployment of emphasis and resources to attain comprehensive objectives".
Strategies are plans made in the light of the plans of the competitors because a modern
business institution operates in a competitive environment. They are a useful framework for
guiding enterprise thinking and action. A perfect strategy can be built only on perfect
knowledge of the plans of others in the industry. This may be done by the management of a
firm putting itself in the place of a rival firm and trying to estimate their plans.

Characteristics of Strategy:

• It is the right combination of different factors.

• It relates the business organization to the environment.
• It is an action to meet a particular challenge, to solve particular problems or to attain
desired objectives.
• Strategy is a means to an end and not an end in itself.
• It is formulated at the top management level.
• It involves assumption of certain calculated risks.

PLANNING - TYPES OF STRATEGIES

TYPES OF STRATEGIES
According to Michel Porter, the strategies can be classified into three types. They are

• Cost leadership strategy

• Differentiation strategy
• Focus strategy

a) Cost Leadership Strategy

This generic strategy calls for being the low cost producer in an industry for a given level of
quality. The firm sells its products either at average industry prices to earn a profit higher
than that of rivals, or below the average industry prices to gain market share. In the event of
a price war, the firm can maintain some profitability while the competition suffers losses.
Even without a price war, as the industry matures and prices decline, the firms that can
produce more cheaply will remain profitable for a longer period of time. The cost
leadership strategy usually targets a broad market.
Some of the ways that firms acquire cost advantages are by improving process efficiencies,
gaining unique access to a large source of lower cost materials, making optimal outsourcing
and vertical integration decisions, or avoiding some costs altogether. If competing firms are
unable to lower their costs by a similar amount, the firm may be able to sustain a competitive
advantage based on cost leadership.
Firms that succeed in cost leadership often have the following internal strengths:

Access to the capital required to make a significant investment in production assets; this
investment represents a barrier to entry that many firms may not overcome.
Skill in designing products for efficient manufacturing, for example, having a small component count
to shorten the assembly process.
High level of expertise in manufacturing process engineering. Efficient distribution channels.

Each generic strategy has its risks, including the low-cost strategy. For example, other firms
may be able to lower their costs as well. As technology improves, the competition may be
able to leapfrog the production capabilities, thus eliminating the competitive advantage.
Additionally, several firms following a focus strategy and targeting various narrow markets
may be able to achieve an even lower cost within their segments and as a group gain
significant market share.

b) Differentiation Strategy
A differentiation strategy calls for the development of a product or service that offers unique
attributes that are valued by customers and that customers perceive to be better than or
different from the products of the competition. The value added by the uniqueness of the
product may allow the firm to charge a premium price for it. The firm hopes that the higher
price will more than cover the extra costs incurred in offering the unique product. Because of
the product's unique attributes, if suppliers increase their prices the firm may be able to pass
along the costs to its customers who cannot find substitute products easily.

Firms that succeed in a differentiation strategy often have the following internal

strengths: Access to leading scientific research.

Highly skilled and creative product development team.
Strong sales team with the ability to successfully communicate the perceived strengths of the
product. Corporate reputation for quality and innovation.

The risks associated with a differentiation strategy include imitation by competitors and
changes in customer tastes. Additionally, various firms pursuing focus strategies may be
able to achieve even greater differentiation in their market segments.

c) Focus Strategy
The focus strategy concentrates on a narrow segment and within that segment attempts to
achieve either a cost advantage or differentiation. The premise is that the needs of the group
can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys
a high degree of customer loyalty, and this entrenched loyalty discourages other firms from
competing directly.

Because of their narrow market focus, firms pursuing a focus strategy have lower volumes
and therefore less bargaining power with their suppliers. However, firms pursuing a
differentiation- focused strategy may be able to pass higher costs on to customers since
close substitute products do not exist.

Firms that succeed in a focus strategy are able to tailor a broad range of product
development strengths to a relatively narrow market segment that they know very well.

Some risks of focus strategies include imitation and changes in the target segments.
Furthermore, it may be fairly easy for a broad-market cost leader to adapt its product in
order to compete directly. Finally, other focusers may be able to carve out sub-segments
that they can serve even better.

A Combination of Generic Strategies:

These generic strategies are not necessarily compatible with one another. If a firm attempts to
achieve an advantage on all fronts, in this attempt it may achieve no advantage at all. For
example, if a firm differentiates itself by supplying very high quality products, it risks
undermining that quality if it seeks to become a cost leader. Even if the quality did not
suffer, the firm would risk projecting a
confusing image. For this reason, Michael Porter argued that to be successful over the long-
term, a firm must select only one of these three generic strategies. Otherwise, with more than
one single generic strategy the firm will be "stuck in the middle" and will not achieve a
competitive advantage.

Porter argued that firms that are able to succeed at multiple strategies often do so by creating
separate business units for each strategy. By separating the strategies into different units
having different policies and even different cultures, a corporation is less likely to become
"stuck in the middle." However, there exists a viewpoint that a single generic strategy is not
always best because within the same product customers often seek multi-dimensional
satisfactions such as a combination of quality, style, convenience, and price. There have
been cases in which high quality producers faithfully followed a single strategy and then
suffered greatly when another firm entered the market with a lower-quality product that
better met the overall needs of the customers.

PLANNING TOOLS AND TECHNIQUES:

Forecasting:

Forecasting is the process of predicting what will happen in the future. Almost every plan
involves forecasts of some sort. The economist regularly report forecasts of economic
conditions interest rates, unemployment, and trade deficits. among other issues. There are
some based on qualitative forecasting. Qualitative forecasting uses experts opinions to predict
the future.
Contingency Planning:

It identifies alternative courses of action that can be implemented to meet the needs of
changing circumstances. Although it is not possible for anyone to predict when things will go
wrong, it can be expected that they will. It is unlikely that any plan will ever be completely
perfect. Changes will occur in the environment. When crisis and emergencies occur,
managers and the organizations have contingency plans that are ready to be implemented.
Contingency plans contain "trigger points" that indicate when pre-selected alternative plans
should be activated.

Scenario Planning:

It involves identifying several alternative future scenarios that may occur. Plans are then
made to deal with each scenario as it occurs.

For example, the Heart and Stroke Foundation of Ontario set out to design a new model for
the health care funding, they wanted to challenge the organization to think in different ways
about the future.
The scenario planning process benefited them by helping the board and other invited
experts to rehearse strategic development plans and tactics in five different realistic
scenarios.

Benchmarking:

It is a technique that uses external comparisons to better evaluate one's current

performances and identify possible actions for the future. The purpose of it is to find out
what other people and organizations are doing well at and plan how to incorporate these
ideas into one's own operations. One of the benchmarking techniques are used to search for
best practices. Best practices are things that lead to superior performance.

Participation and Involvement:

Includes, in all planning steps, the people who will be affected by the plans and/or who will
be asked to help implement them. This process brings many benefits to the organization.
Participation can increase creativity and information available for planning. Also, it
increases the understanding and acceptance of plans, along with commitment to their
success. Although its takes a long time, it can
improve results by improving implementation. All employees participate in the planning
process and are regularly updated about the company's program towards its goal.

Use of Staff Planners:

Staff planners are employed to help coordinate planning for the organization as a whole or
for one of its major components. They help bring focus and energy to accomplish important
planning tasks. A risk involved is a tendency for a communication gap to develop between
the staff planners and line managers.

DECISION MAKING STEPS AND PROCESS:

The word decision has been derived from the Latin word "decidere" which means "cutting
off". Thus, decision involves cutting off of alternatives between those that are desirable and
those that are not desirable.

In the words of George R. Terry, "Decision-making is the selection based on some criteria
from two or more possible alternatives".
Characteristics of Decision Making:

Decision making implies that there are various alternatives and the most desirable
alternative is chosen to solve the problem or to arrive at expected results.

• The decision-maker has freedom to choose an alternative.

• Decision-making may not be completely rational but may be judgmental and emotional.
• Decision-making is goal-oriented.

• Decision-making is a mental or intellectual process because the final decision is

made by the decision-maker.
• A decision may be expressed in words or may be implied from behavior.
• Choosing from among the alternative courses of
operation implies uncertainty about the final result of each
possible course of operation.
• Decision making is rational. It is taken only after a thorough analysis and
reasoning and weighing the consequences of the various alternatives.

TYPES OF DECISIONS:

a) Programmed and Non-Programmed Decisions: Herbert Simon has grouped

organizational decisions into two categories based on the procedure followed. They are:

i) Programmed decisions: Programmed decisions are routine and repetitive and are
made within the framework of organizational policies and rules. These policies and rules are
established well in advance to solve recurring problems in the organization. Programmed
decisions have short-run impact. They are, generally, taken at the lower level of
management.

ii) Non-Programmed Decisions: Non-programmed decisions are decisions taken to meet

non- repetitive problems. Non-programmed decisions are relevant for solving unique/
unusual problems in which various alternatives cannot be decided in advance. A common
feature of non- programmed decisions is that they are novel and non- recurring and
therefore, readymade solutions are not available. Since these decisions are of high
importance and have long-term consequences, they are made by top level management.

b) Strategic and Tactical Decisions: Organizational decisions may also be classified as

strategic or tactical.
i) Strategic Decisions: Basic decisions or strategic decisions are decisions which are of
crucial importance. Strategic decisions a major choice of actions concerning allocation of
resources and contribution to the achievement of organizational objectives. Decisions like
plant location, product diversification, entering into new markets, selection of channels of
distribution, capital expenditure etc are examples of basic or strategic decisions.

ii) Tactical Decisions: Routine decisions or tactical decisions are decisions which are
routine and repetitive. They are derived out of strategic decisions. The various features of a
tactical decision are as follows:

DECISION MAKING PROCESS:

The decision making process is presented in the figure below:

1. Specific Objective: The need for decision making arises in order to achieve certain
specific objectives. The starting point in any analysis of decision making involves the
determination of whether a decision needs to be made.

2. Problem Identification: A problem is a felt need, a question which needs a solution.

In the words of Joseph L Massie "A good decision is dependent upon the recognition of the
right problem". The objective of problem identification is that if the problem is precisely and
specifically identifies, it will provide a clue in finding a possible solution. A problem can be
identified clearly, if managers go through diagnosis and analysis of the problem.

Diagnosis:

Diagnosis is the process of identifying a problem from its signs and symptoms. A symptom
is a condition or set of conditions that indicates the existence of a problem. Diagnosing the
real problem implies knowing the gap between what is and what ought to be, identifying
the reasons for the gap and understanding the problem in relation to higher objectives of
theorganization.

Analysis

Diagnosis gives rise to analysis. Analysis of a problem requires:

Who would make decision?

What information would be needed?
From where the information is
available?

Analysis helps managers to gain an insight into the problem.

3. Search for Alternatives: A problem can be solved in several ways; however, all
the ways cannot be equally satisfying. Therefore, the decision maker must try to find out
the various alternatives available in order to get the most satisfactory result of a decision. A
decision maker can use several sources for identifying alternatives:

o His own past experiences

o Practices followed by others and
o Using creative techniques.

4. Evaluation of Alternatives: After the various alternatives are identified, the next
step is to evaluate them and select the one that will meet the choice criteria.The decision
maker must check proposed alternatives against limits, and if an alternative does not meet
them, he can discard it. Having narrowed down the alternatives which require serious
consideration, the decision maker will go for evaluating how each alternative may contribute
towards the objective supposed to be achieved by implementing the decision.

5. Choice of Alternatives: evaluation of various alternatives presents a clear picture as

to how each one of them contribute to the objectives under question. A comparison is made
among the likely outcomes of various alternatives and the best one is chosen.

6. Action: Once the alternative is selected, it is put into action. The actual process of
decision making ends with the choice of an alternative through which the objectives can
be achieved.

7. Results: When the decision is put into action, it brings certain results. These results
must correspond with objectives, the starting point of decision process, if good decision has
been made and implemented properly. Thus, results provide indication whether decision
making and its implementation is proper.

Characteristics of Effective Decisions:

An effective decision is one which should contain three aspects. These aspects are given below:

Action Orientation: Decisions are action-oriented and are directed towards relevant and
controllable aspects of the environment. Decisions should ultimately find their utility in
implementation.

Goal Direction: Decision making should be goal-directed to enable the organization to

meet its objectives.

Effective in Implementation: Decision making should take into account all the possible
factors not only in terms of external context but also in internal context so that a decision can
be implemented properly.

Concept of organization:

ORGANISING
Organizing is the function of management that involves developing an organizational
structure and allocating human resources to ensure the accomplishment of objectives. The
structure of the organization is the framework within which effort is coordinated.

Organising is the process of identifying and grouping the work to. be performed, defining and
delegating responsibility and authority, and establishing relationships for the purpose of
enabling people to. work most effectively together in accomplishing objectives.
Organising is that managerial process which seeks to define the role of each individual
(manager and operator) towards the attainment of enterprise objectives
Organising is that managerial process which seeks to define the role of each individual
(manager and operator) towards the attainment of enterprise objectives; with due regard to
establishing authority- responsibility relationships among all; and providing for co-ordination
in the enterprise-as an in-built device for obtaining harmonious groups action.
Organizing is the function of management which follows planning. It is a function in which
the synchronization and combination of human, physical and financial resources takes place.
All the three resources are important to get results. Therefore, organizational function helps
in achievement of results which in fact is important for the functioning of a concern.

Definition:
“Organising is the establishment of authority relationships with provisions for co-ordination
between them, both vertically and horizontally in the enterprise structure”. -Koontz and O
‘Donnell
“Organising is the process of identifying and grouping the work to be performed, defining
and delegating the responsibility and authority and establishing a pattern of relationship for
the purpose of enabling people work most effectively to accomplish the objective”. – Louis
A. Allen.

According to Chester Barnard, “Organizing is a function by which the concern is able to

define the role positions, the jobs related and the co-ordination between authority and
responsibility. Hence, a manager always has to organize in order to get results.

Importance of Organizing Function:

1. Specialization - Organizational structure is a network of relationships in which
the work is divided into units and departments. This division of work is helping in
bringing specialization in various activities of concern.
2. Well defined jobs - Organizational structure helps in putting right men on right
job which can be done by selecting people for various departments according to
their qualifications, skill and experience. This is helping in defining the jobs
properly which clarifies the role of every person.
3. Clarifies authority - Organizational structure helps in clarifying the role positions
to every manager (status quo). This can be done by clarifying the powers to every
manager and the way he has to exercise those powers should be clarified so that
misuse of powers do not take place. Well defined jobs and responsibilities
attached helps in bringing efficiency into managers working. This helps in
increasing productivity.
4. Co-ordination - Organization is a means of creating co-ordination among
different departments of the enterprise. It creates clear cut relationships among
positions and ensure mutual co-operation among individuals. Harmony of work is
brought by higher level managers exercising their authority over interconnected
activities of lower level manager.

Authority responsibility relationships can be fruitful only when there is a formal relationship
between the two. For smooth running of an organization, the co-ordination between
authority- responsibility is very important. There should be co-ordination between different
relationships. Clarity should be made for having an ultimate responsibility attached to every
authority. There is a saying, “Authority without responsibility leads to ineffective behaviour
and responsibility without authority makes person ineffective.” Therefore, co-ordination of
authority- responsibility is very important.

5. Effective administration - The organization structure is helpful in defining the

jobs positions. The roles to be performed by different managers are clarified.
Specialization is achieved through division of work. This all leads to efficient and
effective administration.
6. Growth and diversification - A company’s growth is totally dependant on how
efficiently and smoothly a concern works. Efficiency can be brought about by
clarifying the role positions to the managers, co-ordination between authority and
responsibility and concentrating on specialization. In addition to this, a company
can diversify if its potential grow. This is possible only when the organization
structure is well- defined. This is possible through a set of formal structure.
7. Sense of security - Organizational structure clarifies the job positions. The roles
assigned to every manager is clear. Co-ordination is possible. Therefore, clarity of
 powers helps automatically in increasing mental satisfaction and thereby a sense
of security in a concern. This is very important for job- satisfaction.

Classification of Organizations:

Organizations are basically classified on the basis of relationships. There are two types of
organizations formed on the basis of relationships in an organization

1. Formal Organization - This is one which refers to a structure of well-defined

jobs each bearing a measure of authority and responsibility. It is a conscious
determination by which people accomplish goals by adhering to the norms laid
down by the structure. This kind of organization is an arbitrary set up in which
each person is responsible for his performance. Formal organization has a formal
set up to achieve pre- determined goals.
2. Informal Organization - It refers to a network of personal and social
relationships which spontaneously originates within the formal set up. Informal
organizations develop relationships which are built on likes, dislikes, feelings and
emotions. Therefore, the network of social groups based on friendships can be
called as informal organizations. There is no conscious effort made to have
informal organization. It emerges from the formal organization and it is not based
on any rules and regulations as in case of formal organization.

LINE ORGANIZATION:

Line organization is the most oldest and simplest method of administrative organization.
According to this type of organization, the authority flows from top to bottom in a concern.
The line of command is carried out from top to bottom. This is the reason for calling this
organization as scalar organization which means scalar chain of command is a part and parcel
of this type of administrative organization. In this type of organization, the line of command

flows on an even basis without any gaps in communication and co-ordination taking place.

Features of Line Organization:

1. It is the most simplest form of organization.
2. Line of authority flows from top to bottom.
3. Specialized and supportive services do not take place in these organization.
4. Unified control by the line officers can be maintained since they can independently
take decisions in their areas and spheres.
5. This kind of organization always helps in bringing efficiency in communication and
bringing stability to a concern.
Merits of Line Organization:
1. Simplest- It is the most simple and oldest method of administration.
2. Unity of Command- In these organizations, superior-subordinate relationship is
maintained and scalar chain of command flows from top to bottom.
3. Better discipline- The control is unified and concentrates on one person and therefore, he
can independently make decisions of his own. Unified control ensures better discipline.
4. Fixed responsibility- In this type of organization, every line executive has got fixed
authority, power and fixed responsibility attached to every authority.
5. Flexibility- There is a co-ordination between the top most authority and bottom line
authority. Since the authority relationships are clear, line officials are independent and can
flexibly take the decision. This flexibility gives satisfaction of line executives.
6. Prompt decision- Due to the factors of fixed responsibility and unity of command, the
officials can take prompt decision.

Demerits of Line Organization:

1. Over reliance- The line executive’s decisions are implemented to the bottom. This results
in over- relying on the line officials.

2. Lack of specialization- A line organization flows in a scalar chain from top to bottom and
there is no scope for specialized functions. For example, expert advices whatever decisions
are taken by line managers are implemented in the same way.

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

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

5. Authority leadership- The line officials have tendency to misuse their authority positions.
This leads to autocratic leadership and monopoly in the concern.

Line and Staff Organization:

Line and staff organization is a modification of line organization and it is more complex than
line organization. According to this administrative organization, specialized and supportive
activities are attached to the line of command by appointing staff supervisors and staff
specialists who are attached to the line authority. The power of command always remains
with the line executives and staff supervisors guide, advice and counsel the line executives.
Personal Secretary to the Managing Director is a staff official.

Features of Line and Staff Organization:

1. There are two types of staff :

a. Staff Assistants- P.A. to Managing Director, Secretary to Marketing Manager.

b. Staff Supervisor- Operation Control Manager, Quality Controller, PRO

2. Line and Staff Organization is a compromise of line organization. It is more complex than
line concern.
3. Division of work and specialization takes place in line and staff organization.

4. The whole organization is divided into different functional areas to which staff specialists
are attached.

5. Efficiency can be achieved through the features of specialization

6. There are two lines of authority which flow at one time in a concern
a. Line Authority
b. Staff Authority

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

Merits of Line and Staff Organization:

1. Relief to line of executives- In a line and staff organization, the advice and counseling
which is provided to the line executives divides the work between the two. The line executive
can concentrate on the execution of plans and they get relieved of dividing their attention to
many areas.

2. Expert advice- The line and staff organization facilitates expert advice to the line executive
at the time of need. The planning and investigation which is related to different matters can
be done by the staff specialist and line officers can concentrate on execution of plans.

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

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

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

Demerits of Line and Staff Organization:

1. Lack of understanding- In a line and staff organization, there are two authority flowing at
one time. This results in the confusion between the two. As a result, the workers are not able
to understand as to who is their commanding authority. Hence the problem of understanding
can be a hurdle in effective running.
2. Lack of sound advice- The line official get used to the expertise advice of the staff. At
times the staff specialist also provide wrong decisions which the line executive have to
consider. This can affect the efficient running of the enterprise.
3. Line and staff conflicts- Line and staff are two authorities which are flowing at the same
time. The factors of designations, status influence sentiments which are related to their
relation, can pose a distress on the minds of the employees. This leads to minimizing of co-
ordination which hampers a concern’s working.

4. Costly- In line and staff concern, the concerns have to maintain the high remuneration of
staff specialist. This proves to be costly for a concern with limited finance.

FUNCTIONAL ORGANISATION STRUCTURE:

Functional organization structure is were “authority rests with the functional heads; the
structure is sectioned by departmental groups”. The organization is divided into a number of
functional areas. This organization has grouping of activities in accordance with the functions
of an organization such as production, marketing, finance, human resource and so on. The
specialist in charge of a functional department has the authority over all other employees for
his function.

It is a kind of Formal Organization whose structure is based on organizing resources to

perform specialized tasks or activities in order to attain the goals of organization.
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 as shown below: -

Characteristics of Functional Organization:

1. Functional authority relationship
2. Limited span of management
3. Line and staff division
4. Organization growth through emphasis on sub goals
5. Specialization on functional areas
Advantages of functional organization structure:

• It promotes specialization, each department specialize in a particular line of work

• Each functional head looks after specific activities so no burden.
• Better control.
• Each individual concentrates on a particular task so maximum efficiency

Disadvantages of functional organization structure:

• More number of departments and divisions
• Difficult to control and co-ordinate
• Delay in arriving in decisions
However, it is much suitable for large organizations where there is ample scope for
specialization. Once harmony and proper coordination among different functions is achieved,
it could lead to sure success for an organization.

COMMITTEE ORGANISATION STRUCTURE:

Organization committees are quite popular at different levels for various functions. The board
of directors is a committee.
Similarly, there may be executive committee, finance committee, audit committee, bonus
committee, planning committee, grievance committee, etc. Exact definition of a committee is
difficult because there are many different kinds of committees and the concept of a
committee may be defined as a group of persons in an organization to another. However, a
committee may be defined as a group of persons in an organization for taking or
recommending certain decisions.

CHARACTERISTICS OF COMMITTEE ORGANISATION:

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

TYPES OF COMMITTEES:
• Standing Committee: Is never dissolved, there may be changes in membership. The
committee remains always. Eg. The board of directors in a company.
• Temporary Committee: This is created for a specific purpose. As soon as the
purpose has been accomplished the committee stands dissolved. Eg. if there is a strike in the
organization, then a committee is formed
• Executive Committee: Executive committee is one that has power to make important
decisions for the enterprise. Eg. board of directors.

• Advisory Committee: This committee can only make suggestions. It does not have
the powers to make decisions.
• Formal committee: This is one that is constituted as per the values and policies of
the organization. It has hierarchy. It functions according to the lines of authority.
• Informal committee: This is the one that is not constituted as per the rules and
policies of the organization. Such a committee is the outcome of informal meetings of the
workers to discuss their work related problems.

Advantages of Committee Organization:

• Scope for group judgment
• Committee members feel motivated when they participate in the discussion
• Problems that cannot be solved by individual will have to be referred to a committee.

Disadvantages of Committee Organization:

• Expensive
• More time for discussions
• Sometimes compromise decision made.

MATRIX ORGANISATION STRUCTURE:

Meaning – A matrix organizational structure is a structure of organization in which some
individuals report to more than one supervisor or leader, which is described as solid line or
dotted line reporting. More broadly, it can also describe the management of cross-functional,
cross-business groups and other work models that do not maintain rigid business units or silos
grouped by function and geography. For example, an employee may have a primary manager
they report to as well as one or more project managers they work under.

Advantage of Matrix Organization:

• It gives motivation for the personnel.
• It promotes communication.

Disadvantages:
• It goes against the principles of unity of command
• Dual command may result in confusion.
• Quick decisions may not be possible.

PROJECT ORGANISATION STRUCTURE:

The project structure consists of a number of horizontal organizational units to complete
projects of a long duration. A team of specialists from different areas is created for each
project. Usually this team is managed by the project manager. The project staff is separate
from and independent of the functional departments.

Advantages of Project Organization Structure:

• It can be designed to suit individual projects
• It makes use of specialized knowledge and skill whenever required.
• It fixes responsibility on individuals on the work done by them.

Disadvantages of Project Organization Structure:

• The project manager may have tough time dealing with specialists from different
fields.
• Decision making is difficult.
• The time within which the project has to be completed will put pressure on every
individual.

DELEGATION OF AUTHORITY:

A manager alone cannot perform all the tasks assigned to him. In order to meet the targets,
the manager should delegate authority. Delegation of Authority means division of authority
and powers downwards to the subordinate. Delegation is about entrusting someone else to do
parts of your job. Delegation of authority can be defined as subdivision and sub-allocation of
powers to the subordinates in order to achieve effective results.

Delegation is the assignment of authority to another person (normally from a manager to a

subordinate) to carry out specific activities. It is the process of distributing and entrusting
work to another person. Delegation is one of the core concepts of management leadership.

Delegation means devolution of authority on subordinates to make them to perform the

assigned duties or tasks. It is that part of the process of organization by which managers make
it possible for others to share the work of accomplishing organizational objectives.

Delegation consists of granting authority or the right to decision-making in certain defined

areas and charging the subordinate with responsibility for carrying through the assigned
tasks.

Elements of Delegation:

1. Authority - in context of a business organization, authority can be defined as the

power and right of a person to use and allocate the resources efficiently, to take decisions and
to give orders so as to achieve the organizational objectives.
2. Responsibility - is the duty of the person to complete the task assigned to him. A
person who is given the responsibility should ensure that he accomplishes the tasks assigned
to him. If the tasks for which he was held responsible are not completed, then he should not
give explanations or excuses. Responsibility
3. Accountability - means giving explanations for any variance in the actual
performance from the expectations set. Accountability cannot be delegated. For example, if
’A’ is given a task with sufficient authority, and ’A’ delegates this task to B and asks him to
ensure that task is done well, responsibility rest with ’B’, but accountability still rest with ’A’.
The top level management is most accountable. Being accountable means being innovative as
the person will think beyond his scope of job. Accountability, in short, means being
answerable for the end result. Accountability can’t be escaped. It arises from responsibility.

DIFFERENCE BETWEEN AUTHORITY AND RESPONSIBILTY:

Basis Authority Responsibility

Meaning It means the right to take decisions It means the obligation to perform
and command subordinates the assigned task
Origin It originates from job position in It arises from delegated authority
the scalar chain
Flow It flows downward i.e., from It flows upward i.e., from
superior to subordinate subordinate to superior
Delegation It can be delegated It cannot be delegated entirely

CENTRALIZATION:

Centralization is the systematic and consistent reservation of authority at central point within
the organization

Benefits of Centralization:
This system results in certain advantages to the organization
• Facilitating Personal Leadership- Personal leadership can be a potent influence in the
success of a small organization and during its early growth stages. The success and survival
of the small, young enterprise in the competitive market depends upon aggressiveness,
singleness of purpose, and flexibility.

• Providing Integration- Certain amount of centralization is necessary to unify and integrate

the total operation of the enterprise. Some sort of central direction is required to keep all parts
of the organization moving harmoniously together towards a common objective. Thus, it acts
as a binding force on the various parts of the organization.

• Uniformity of Action -Centralization brings uniformity in all actions in the organization.

Thus, to the extent that the organization wishes all its units to do the same thing in the same
way or the same time, there must be centralization of appropriate decisions.

• Handling Emergencies- When emergency decisions affecting all the units of the
organization are to be taken, centralization is necessary. The more acute emergency or the
more acute competition requires greater centralized decision-making.

DECENTRALIZATION:

Decentralization has become the prevailing philosophy for organizing activities on the part of
large organizations.

Benefits of Decentralization:

• Reducing Burden to Top Executives- Decentralization is necessary for solving the

problems of expanding organizations. It is the means by which the chief executive can extend
his leadership over a giant organization, when the chief executive makes operating decisions
and with problems of immediate urgency, he finds it almost impossible to adopt the relaxed
and contemplative point of view necessary for planning and thinking ahead. Decentralization
relieves this pressure on the chief executive an provides him time to think for the future and
to make plans accordingly.

• Facilitating Diversification- Decentralization can facilitate the growth and diversification

of product lines. For under decentralization, each product line is treated as separate unit and
proper emphasis on all important matters such as present position, future prospects, a
comparative efficiency, can be given.

• Ensuring Marketing Innovations- Customers require satisfaction in respect of supply of

qualitative products, regularity of supply, and at cheaper rates. Marketing innovations ensure
better customer satisfaction. Each organization has to carry on these marketing innovations
for its existence and growth. In decentralized organization structure, higher level people get
much time for the creativity and innovations. The impact of decentralization on both product
and market has proved by the various organizations.

• Motivating Mangers- Various research studies have shown that we organization structure
itself can influence the people within the organization. The extent to which the organization
facilities participation, communication, delegation, mutual interaction, and interdependence,
motivates people for higher productivity. Decentralization tends to emphasize those desirable
characteristics in whatever type of structure it is found.

DEPARTMENTATION:
• It is the process of dividing and grouping the activities and employees of an enterprise
into departments. E.g. production department will look after.
• Depart mentation is process of grouping activities and people onto department make it
possible to expend organization. After reviewing the plan, usually the first step in the
organization process is departmentalization. Once job have been classified through work
specialization, they are grouped so those common tasks can be coordinated. Depart mentation
is the biases on which work or individuals are grouped into manageable units. There are five
traditional methods for grouping work activities.

TYPES OF DEPARTMENTATION:
• Departmentation by function
• Departmentation by products
• Departmentation by Territory
• Departmentation by Process
• Departmentation by customers
• Departmentation by Time and Numbers

DEPARTMENTATION BY FUNCTION:
It is grouping activities on the basis on function of an enterprise. The basic enterprise
functions are production, selling, and financing functional depart mentation is bases for
organizing activities and in organizational structure. It organizes by function to be performed.
The function reflects the nature of the business.

ADVANTAGES:
• It is logical reflection of function.
• Maintains power of major functions.
• Simplifies training.

DISADVANTAGES:
• De-emphasis of overall company objectives.
• Reduces coordination between function.
• Slow adoption to change in environment.

DEPARTMENTATION BY PRODUCT:
This type of depart mentation used in organization where more than one product is
producing. In this department all the sources and authority are placed under the control of one
manager. Depart mentation by product assembles all functions needed to make and market a
particular product are placed under one executive. For instance, major department stores are
structured around product groups such as home accessories, appliances woman’s clothing,
men’s clothing and children clothing.

ADVANDTAGES:
• Places attention on production
• Increase growth of product.
• Places responsibility for profit at division level.

DISADVANTAGES
• Requires more persons with general manager abilities.
• Presents problems of top management control

DEPARTMENTATION BY PROCESS:

This type of depart mentation is found in production and operative levels. Such type of depart
mentation can be found in paint or electroplating process. Departmentalization by process
groups jobs on the basis of product or customer flow. Each process requires particular skills
and offers a basis for homogeneous categorizing of work activities. A patient preparing for an
operation would first engage in preliminary diagnostic tests, and then go through the
admitting process, undergo a procedure in surgery, receiver post-operative care, be
discharged and perhaps receive out-patient attention. These services are each administered by
different departments.
ADVANTAGES

• It simplifies training.
• Achieve economic advantage.
• Uses specialized technology.

DISADVANTAGES

• Coordination of departments is difficult.

• Responsibility for profit is at the top.

DEPARTMENTATION BY TERRITORY:
Depart mentation by geography is followed where geographic marked appear to offer
advantages. Geographic department most often use in sales and production, it is not use in
finance. Departmentalization by geographical regions groups jobs on the basis of territory or
geography. For example Merek, a major pharmaceutical company, have its domestic sales
departmentalized by regions such as Northeast, Southeast, & Northwest

ADVANTAGES
• It emphasis on local markets and problems.
• Improves coordination in a region.
• Better face to face communication.

DISADVANTAGES
• Increases problem of top management control.
• Requires more persons with general manager abilities.

DEPARTMENTATION BY CUSTOMER:
Departmentalization by customer groups jobs on the basis of a common set of needs or
problems of specific customers. For instance, a plumbing firm may group its work according
to whether it is serving private sector, public sector, government, or not- for-profit
organizations. A current departmentalization trend is to structure work according to customer,
using cross-functional teams. This group is chosen from different functions to work together
across various departments to interdependently create new products or services. For example,
a cross-functional team consisting of managers from accounting, finance and marketing is
created to prepare a technology plan.
There is different difficult decision to be made in separating some type of customer
departments from product departments. Business owners and managers arrange activities on
the basis of customer requirements.

ADVANTAGES
• Depart mentation by customer emphasis on customer needs.
• It develops experience in customer area.

DISADVANTAGES
• It may be difficult to analysis customer demands.
• It requires managers and staff expert in customer problems.
• Customer groups may not always be clearly defined.

DEPARTMENTATION BY NUMBERS
Depart mentation by number is telling off persons who are to perform the same duties and
putting them under the superior of a manager the essential fact is not what these people do,
where they work? Or what they work with, it is that the success of the understanding depends
only on the number of persons include in it. This method is rapidly applying in army.

DISADVANTAGES
• There are many reason of decline of depart mentation by numbers.
• It has declined due to advance technology and demand of specialized and different
skills.

• A second reason is groups composed of specialized personnel are more efficient than
those based on number.
• Depart mentation by number is useful only at the lowest level of the organization.
• Depart mentation by number fails to produce good results.

DEPARTMENTATION BY TIME
It is grouping activities on the basis of time. It is oldest form of depart mentation and it is
generally used in low level of depart mentation. It is particularly applied in hospitals and steel
manufacturing enterprise where continue process of service and manufacturing is used.

ADVANTAGES
• It is process of working and services throughout 24 hours.
• It is continuing service process.
• Expensive machinery is used in shifts.

DISADVANTAGES
• There is lacking supervision at night.

SPAN OF MANAGEMENT:

Span of management refers to the number of subordinates a manager can effectively handle,
manage. A manager will be able to perform his basic work of guiding his subordinates and
making them work only if he has the right number of such subordinates under him. The more
people under the control of one manager - the wider the span of control. Less means a narrow
span of control. Span of Management is also known as span of control.
Eg. Class teacher– students, family–children

TYPES OF SPAN OF CONTROL

NARROW SPAN OF CONTROL

Advantages of a narrow span of control:
• A narrow span of control allows a manager to communicate quickly with the employees
under them and control them more easily.
• Feedback of ideas from the workers will be more effective

WIDER SPAN OF CONTROL

Advantages of wide span of control
• There are less layers of management to pass a message through, so the message reaches
more employees faster.
• It costs less money to run a wider span of control because a business does not need to
employ as many managers

FACTORS DETERMINING SPAN OF MANAGEMENT:

• Capacity of Superior: Here the capacity means the ability of a superior to comprehend the
problems quickly and gel up with the staff such that he gets respect from all. Also, the
communication skills, decision-making ability, controlling power, leadership skills are
important determinants of supervisory capacity. Thus, a superior possessing such capacity
can manage more subordinates as compared to an individual who lack these abilities.

• Capacity of Subordinate: If the subordinate is trained and efficient in discharging his

functions without much help from the superior, the organization can have a wide span.
This means a superior can manage a large number of subordinates as he will be required just
to give the broad guidelines and devote less time on each.

• Nature of Work: If the subordinates are required to do a routine job, with which they are
well versed, then the manager can have a wider span. But, if the work is complex and the
manager is required to give directions, then the span has to be narrower. Also, the change in
the policies affects the span of management.

• Degree of Decentralization: If the manager delegates authority to the subordinates, then he

is required to give less attention to them. Thus, higher the degree of decentralization, the
wider is the span of management. But in case, subordinates do not have enough authority,
then the manager is frequently consulted for the clarifications, and as a result superior spends
a lot of time in this.

• Planning: If the subordinates are well informed about their job roles, then they will do their
work without consulting the manager again and again. This is possible only because of the
standing plans that they follow in their repetitive decisions. Through a proper plan, the
burden of a manager reduces manifold and can have a wider span of management.

• Staff Assistance: The use of staff assistance can help the manager in reducing his workload
by performing certain managerial tasks such as collecting information, processing
communications and issuing orders, on his behalf. By doing so, the managers can save their
time and the degree of span can be increased.

• Supervision from Others: The classical approach to the span of management, i.e., each
person should have a single supervisor is changing these days. Now the subordinates are
being supervised by other managers in the organization such as staff personnel. This has
helped the manager to have a large number of subordinates under him.

STAFFING:

Staffing is the managerial function of recruitment, selection, training, developing, promotion

and compensation of personnel.
Staffing may be defined as the process of hiring and developing the required personnel to fill
in the various positions in the organization. It involves estimating the number and type of
personnel required. It involves estimating the number and type of personnel required,
recruiting and developing them, maintaining and improving their competence and
performance.

Staffing is the process of identifying, assessing, placing, developing and evaluating

individuals at work According to Koontz and O’Donnell, “the managerial function of staffing
involves manning the organization structure through proper and effective selection, appraisal
and development of personnel to fill the roles designed into the structure”.

IMPORTANCE OF STAFFING:

• Staffing helps in discovering and obtaining competent and personnel for various jobs.
• It helps to improve the quantity and quality of the output by putting the right person on the
right job.
• It helps to improve job satisfaction of employees.
• It facilitates higher productive performance by appointing right man for right job.
• It reduces the cost of personnel by avoiding wastage of human resources.
• It facilitates growth and diversification of business.
• It provides continuous survival and growth of the business through development of
employees.

NATURE OF STAFFING:

1. Staffing is an important managerial function- Staffing function is the most

important managerial act along with planning, organizing, directing and
controlling. The operations of these four functions depend upon the manpower
which is available through staffing function.
2. Staffing is a pervasive activity- As staffing function is carried out by all mangers
and in all types of concerns where business activities are carried out.
3. Staffing is a continuous activity- This is because staffing function continues
throughout the life of an organization due to the transfers and promotions that take
place.

4. The basis of staffing function is efficient management of personnel’s- Human

resources can be efficiently managed by a system or proper procedure, that is,
recruitment, selection, placement, training and development, providing
remuneration, etc.

5. Staffing helps in placing right men at the right job. It can be done effectively
through proper recruitment procedures and then finally selecting the most suitable
candidate as per the job requirements.

6. Staffing is performed by all managers depending upon the nature of business, size
of the company, qualifications and skills of managers etc. In small companies, the
top management generally performs this function. In medium and small-scale
 enterprise, it is performed especially by the personnel department of that concern.

STAFFING PROCESS:

1. Manpower requirements- The very first step in staffing is to plan the manpower
inventory required by a concern in order to match them with the job requirements
and demands. Therefore, it involves forecasting and determining the future
manpower needs of the concern.
2. Recruitment- Once the requirements are notified, the concern invites and solicits
applications according to the invitations made to the desirable candidates.
3. Selection- This is the screening step of staffing in which the solicited applications
are screened out and suitable candidates are appointed as per the requirements.
4. Orientation and Placement- Once screening takes place, the appointed
candidates are made familiar to the work units and work environment through the
orientation programmes. placement takes place by putting right man on the right
job.
5. Training and Development- Training is a part of incentives given to the workers
in order to develop and grow them within the concern. Training is generally given
according to the nature of activities and scope of expansion in it. Along with it,
the workers are developed by providing them extra benefits of in depth knowledge
of their functional areas. Development also includes giving them key and
important jobs as a test or examination in order to analyse their performances
6. Remuneration- It is a kind of compensation provided monetarily to the
employees for their work performances. This is given according to the nature of
job- skilled or unskilled, physical or mental, etc. Remuneration forms an
important monetary incentive for the employees.
7. Performance Evaluation- In order to keep a track or record of the behavior,
attitudes as well as opinions of the workers towards their jobs. For this regular
assessment is done to evaluate and supervise different work units in a concern. It
is basically concerning to know the development cycle and growth patterns of the
employees in a concern.
8. Promotion and transfer- Promotion is said to be a non- monetary incentive in
which the worker is shifted from a higher job demanding bigger responsibilities as
well as shifting the workers and transferring them to different work units and
branches of the same organization.
Training and Development in staffing

Aspect Training Development

Short-term, specific skills Long-term, overall growth and

Focus or knowledge career advancement

Immediate job Future career growth and

Purpose performance improvement organizational success

Timeframe Short-term Long-term

Scope Narrow, task-oriented Broad, career-oriented

Reactive, in response to Proactive, planned for continuous

Initiation identified needs improvement

Knowledge, skill, and competency

Nature Skill-based learning enhancement

Applicable across various roles and

Applicability Job-specific responsibilities

Shared responsibility between

Responsibility Typically employer-driven employer and employee

Outcome Immediate performance Long-term career growth and

Measurement metrics contributions to the organization

Impact on Limited influence on Integral part of building a learning

Culture organizational culture culture

Decision making forcasting techniques

Decision-making forecasting techniques involve various methods to predict future outcomes, helping
organizations make informed choices. Here are some key techniques:

Quantitative Forecasting:

Time Series Analysis: Analyzing historical data to identify patterns and trends over time, enabling
predictions about future values.
Exponential Smoothing: Assigning exponentially decreasing weights to past observations to give
more importance to recent data.
Qualitative Forecasting:

Expert Opinion: Seeking input from knowledgeable individuals or panels with expertise in the subject
matter.
Delphi Method: Iterative process involving multiple rounds of anonymous surveys to reach a
consensus among experts.
Causal Models:

Regression Analysis: Examining the relationship between variables to understand how changes in one
variable impact another.
Econometric Models: Incorporating economic theories and statistical methods to forecast future
trends.
Simulation Models:

Monte Carlo Simulation: Using random sampling to model the probability of different outcomes
under various conditions.
System Dynamics: Analyzing how different components of a system interact and influence each other
over time.
Machine Learning Techniques:

Predictive Analytics: Employing algorithms to analyze historical data and identify patterns for
predicting future events.
Artificial Neural Networks: Mimicking the structure of the human brain to recognize complex
patterns and make predictions.
Forecasting with Leading Indicators:

Leading Indicators: Identifying variables that tend to change before the overall economy or a specific
market does. These can be used to predict future trends.
Scenario Analysis:

Scenario Planning: Considering multiple plausible future scenarios and assessing the impact of each
on decision-making.
Technology-driven Forecasting:

Big Data Analytics: Analyzing large volumes of diverse data to extract valuable insights for
forecasting.
Blockchain-based Forecasting: Using decentralized and transparent systems for enhanced accuracy
and reliability.
Each technique has its strengths and limitations, and the choice depends on factors like the nature of
the data, available resources, and the specific context of the decision being made. Organizations often
use a combination of these techniques for a more comprehensive and reliable forecasting approach

Modern methods of performance appraisal

Modern methods of performance appraisal focus on continuous feedback and development. Some
approaches include:

360-Degree Feedback:

Involves collecting feedback from various sources, including peers, subordinates, and supervisors,
providing a comprehensive view of an individual's performance.

Continuous Performance Management:

Shifts from annual reviews to ongoing, real-time feedback and goal setting. This approach promotes
regular check-ins and adjustments to performance expectations.
Objective and Key Results (OKRs):

Emphasizes setting specific, measurable objectives and key results, aligning individual goals with
organizational objectives for clarity and transparency.
Performance Scorecards:

Utilizes scorecards to measure and track individual and team performance against predefined metrics
and goals.
Behaviorally Anchored Rating Scales (BARS):

Combines qualitative and quantitative elements by using specific behavioral descriptions to assess
performance, providing more context than traditional rating scales.
Agile Performance Management:

Adopts agile principles, breaking down annual goals into shorter cycles and adapting objectives based
on changing business needs.

Self-Assessment and Peer Evaluation:

Incorporates employees' self-assessment alongside evaluations from colleagues, fostering a

collaborative approach to performance appraisal.

Technology-Driven Solutions:

Utilizes performance management software and tools to automate processes, track progress, and
facilitate communication between employees and managers.
Check-ins and One-on-One Meetings:

Encourages frequent, informal conversations between managers and employees to discuss progress,
address concerns, and provide support.

Competency-Based Assessment:

Focuses on evaluating specific skills and competencies relevant to the job, providing a more targeted
and meaningful assessment.
These methods aim to create a more dynamic and employee-centric approach to performance
appraisal, fostering growth and continuous improvement

MBO stands for Management by Objectives. It's a management philosophy and approach that
involves setting specific, measurable, achievable, realistic, and time-bound (SMART) objectives
collaboratively within an organization. The key elements of MBO include defining clear objectives,
cascading them down through various organizational levels, and regularly monitoring progress toward
achieving these objectives. MBO aims to align individual and team goals with the overall objectives
of the organization, fostering a sense of direction, motivation, and accountability among employees.

Benefits of Management by Objectives (MBO):

Clarity of Goals: MBO provides a clear framework for setting and communicating organizational
goals, ensuring everyone understands their role in achieving them.

Employee Motivation: Setting individual and team objectives can motivate employees by giving them
a sense of purpose and direction.
Performance Evaluation: MBO facilitates regular performance reviews, allowing for constructive
feedback and recognition of achievements.

Alignment with Organizational Objectives: MBO ensures that individual and departmental goals align
with the overall objectives of the organization.

Improved Communication: The goal-setting process in MBO encourages open communication

between management and employees, fostering a more collaborative work environment.

Flexibility: MBO allows for flexibility in adapting to changing circumstances, as goals can be
reviewed and revised as needed.

Enhanced Planning: Goal-setting helps in planning and resource allocation, as priorities are clearly
defined.

Increased Accountability: MBO holds individuals and teams accountable for their performance
against established objectives, promoting a sense of responsibility.

Continuous Improvement: The regular review process encourages continuous improvement by

identifying and addressing issues promptly.

Strategic Focus: MBO directs attention toward strategic priorities, ensuring efforts are concentrated
on critical areas.

Weaknesses of Management by Objectives (MBO):

Rigidity: MBO can become overly rigid if goals are set in a top-down manner without considering
input from employees, leading to resistance.

Complexity: Implementation of MBO can be complex and time-consuming, especially in large

organizations with numerous objectives and stakeholders.

Short-Term Focus: The emphasis on short-term goals may lead to neglect of long-term strategic
planning and vision.

Quantitative Emphasis: MBO tends to focus heavily on quantitative objectives, potentially

overlooking qualitative aspects of performance.

Dependency on Goal-Setting Skills: Effectiveness of MBO relies on the ability to set clear,
achievable, and measurable goals, which may be challenging for some managers.

Conflict of Goals: Individual or departmental goals may sometimes conflict with overall
organizational goals, causing tension and competition.

Resistance to Change: Employees may resist MBO if they perceive it as a drastic shift from previous
management styles or if they feel the goals are unattainable.

Overemphasis on Evaluation: The emphasis on performance evaluation may create a competitive

atmosphere, undermining collaboration.

Resource Constraints: Setting ambitious goals without providing adequate resources can lead to
frustration and hinder goal attainment.
Neglect of External Factors: MBO may not adequately consider external factors such as market
changes or economic shifts, potentially affecting goal relevance.