ESSENTIAL OF MANAGEMENT UNIT II
PLANNING
Planning is the
function of management that involves setting objectives and determining a
course of action for achieving those objectives. Planning requires that
managers be aware of environmental conditions facing their organization and forecast
future conditions. It also requires that managers be good decision makers.
Planning is a
process consisting of several steps. The process begins with environmental
scanning which simply means that planners must be aware of the critical
contingencies facing their organization in terms of economic conditions, their
competitors, and their customers. Planners must then attempt to forecast future
conditions. These forecasts form the basis for planning.
Need for planning: The
need for planning in business arises because of a number of factors or reasons.
Those factors or reasons are:
- Growing complexities of
modem business.
- Rapid technological changes
- Growing competition.
- Rapid economic, social and
political changes.
- Fluctuations in demand for
products.
These
forces of challenges can be met by management only through proper planning.
Business activities without proper planning are likely to be ineffective, and
may fail to achieve success. So, planning is a must for every business
organization. In fact, the maxim in management is "First plan your work,
and then work your plan".
Definitions
According
to Hodge and Johnson "Planning is the determination in advance of a line of
action in order to achieve better performance".
According
to R.N. Farmer and B.M. Richman, "Planning is
essentially decision-making since it involves choosing from among
alternatives".
Nature and Characteristics of
Planning
Primacy of planning or primary
function:
.Planning is a primary function. That is, it is a primary requisite to the
managerial functions of organizing, staffing directing, motivating,
coordinating, communicating and controlling. A manager must do planning before
he can undertake the other managerial functions.
Goal-oriented or focus on
objectives:
Planning is goal-oriented. That is, planning is linked with certain goals or
objectives. A plan starts with the setting of objectives; and then, develops
policies, procedures, strategies, etc. to achieve the objectives.
- Pervasiveness
of planning:
Planning pervades all levels of management. That is planning is done at
all levels of .management. In other words, every manager, whether he is at
the top, in the middle or at the bottom or organizational structure,
plans.
- Essentially
a decision-making process:
Planning is essentially a decision-making process, since it involves
careful analysis of various alternative courses of action and choosing the
best.
- Integrated
process:
Planning is an integrated process. That is it facilitates and integrates
all other functions of management.
- Selective
Process: Planning
is a selective process. That is, it involves the selection of the best
course of action after a careful analysis of the various alternative
courses of action.
- Flexible:
Planning
must be flexible. That is, generally, the process of pi3nning must be
capable of being adapted to the changes in the environment. In fact,
successful planning should be flexible.
- Formation
of premises:
Planning requires the formation of premises (i.e., assumptions). It is
only on the basis of premises or assumptions regarding the future (i.e.,
the future political, social and economic environments) that the plans
will be ultimately formulated.
- Directed
towards efficiency:
The main purpose of planning is to increase the efficiency of the
enterprise. That means, planning is directed towards efficiency.
- Continuous
Process:
Planning is a continuous process. That is, the management has to keep
itself engaged in planning at the times because ~f the uncertainties of
the future.
- Planning
and control are inseparable:
Planning, which is looking ahead, and control, which Is looking back, are
inseparable. They are the Siamese twins of management. Unplanned action
cannot be controlled, for control involves keeping activities in course by
correcting deviations from plans.
- Future
Oriented: Planning
is future-oriented. 1ts essence is looking ahead. It is undertaken to handle future events effective and
achieve some objectives in the future.
- Action
oriented:
Planning is action-oriented. That is, planning should be undertaken in the
light of organizational preferences. The course of action determined must
be realistic. That is it should be neither impossible nor too easy to
achieve.
- Inter-dependent
process:
Planning is an inter-dependent process. It requires the Co-operation of the various sections and
sub-sections of the organization.
- Involves
participation: Planning
involves the participation of all the managers as well as the
subordinates. In the words of Koontz and O'Donnell, "Plans must be
formulated in an atmosphere of close participation and high degree of
concurrence".
- A
means, and not an end:
Planning is riot an end. It is only a means to achieve an end. i.e., the
accomplishment of the pre-determined objectives or goals of the
organization.
Importance and
advantages of planning
1.
Management by objectives: It facilitates management by
objectives. That is, it makes the management formulate the objectives of the
organisation in clear-cut terms and take the right course of action to realize
the specific objectives.
2.
Facilities unity of direction and
co-ordination:
Planning facilitates co-ordination. Through its we-defined objectives. well-publicized
policies, programmes and procedures, planning facilitates the co-ordination of
all the inter-connected activities and avoids duplication of activities and
delays in the execution of activities
3.
Reduces future uncertainties and
charges: A
business concern has to work in an environment Which is uncertain and
ever-changing, Planning helps the concern in foreseeing the risks and
uncertainties in the future and in advance in the best possible way and in
preparing the plan on the basis of its decisions in the past and present.
4.
Facilitates control: Planning facilitates control.
Planning determines in advance the work to be done, the person responsible for
doing it, the time to be taken to do the work and the costs to be incurred.
This makes it easy to compare the actual performance with the planed
performance. In case there are deviations. Corrective actions are taken to
remove the deviations. Thus planning facilitates control.
5.
Focusses attention on
organizational goals and facilitates management by objectives: An organisation has definite
goals or objectives, and all the activities of the organization are directed
towards the achievement of those objectives.
6.
Improves adaptability: planning improves adaptability.
That is, planning helps the organization in coping with the changing business
environment. The anticipation of future events and changing conditions, implied
in planning, prepares the organization to meet them effectively.
7.
Improves competitive strength: Planning improves the
competitive strength of the organization by anticipating technological changes
and tastes and preferences of people for discovering new opportunities for
expansion and. providing for changes in work methods, improvement in quality of
products, etc.
8.
Planning motivation: Planning improves motivation.
Planning ensures the participation of managers in the determination of the
goals, policies, programmes, etc. of the organization. This improves the
motivation and morale of the managers.
9.
Encourages innovation and
creativity:
Planning promotes or encourages innovation and creativity on the part of
managers, in the sense that many new ideas come to the minds of managers during
planning, which basically a deciding function of management.
10. Ensures
efficient use off resources:
Planning ensures efficient use of all resources at the disposal of the concern
to achieve organizational objectives. In planning, management evaluates alternative
courses of action on the basis of efficiency, and selects only that course of
action which is considered most efficient.
11. Brings
about economy in operation:
Planning brings about economy in operation by determining the one best way of
doing things.
12. Guides
decision-making:
The success of any organization depends to a great extent on the types of
decision made at the various levels of the organization. Decision-making is the
making of choice from the various available alternatives after evaluating each
of them.
13. Facilitates
management by exception:
Planning facilitates management by exception. That is, planning ensures that
top management is not involved in each and every activity, and intervenes only
when things are not going as per planning.
14. Facilitates
delegation:
Planning facilitates delegation of authority. Not only managers but also their
subordinates take part in planning. The involvement of subordinates in planning
necessarily requires delegation of authority to them for getting the things
done.
Principles of
Planning
A
number of fundamental principles have been devised over the year for guiding
managers undertaking planning. Some of these principles are discussed as under,
1. Principle
of contribution to objective:
All types of plans are prepared to achieve the objectives of the organization.
Both major and derivative plans are prepared to contribute to the objectives of
the enterprise. Planning is used as a means to reach the goals.
2. Principles
of primacy of Planning:
This principle states that planning is the first or primary function of every
manager, He has to plan first and then proceed to carry out other functions.
Other managerial function are organized to reach the objectives se in planning.
3. Principle
of Planning Premises:
In order to make planning effective, some premises or presumptions have to be
made on the basis of which planning has to be undertaken. Plans are, generally
not properly structures. The reason being that planning premises are not
properly developed. This principle lays emphasis on properly analyzing the
situation which is going to occur in future.
4. Principle
of Alternatives:
Planning process involves developing of many alternatives and then selecting
one which will help in achieving desired business goals. In the absence of various
alternatives proper planning will be difficult.
5. Principle
of Timing:
Plans can contribute effectively to the attainment of business goals if they
are property timed. Planning premises and policies are useless without proper
timing.
6. Principle
of Flexibility:
This principle suggests flexibility in plans if some contingencies arise. The
plans should be adjusted to incorporate new situations. The dangers of
flexibility should be kept in mind. The changes may upset the earlier
commitments. So the cost of changes should be compared to the benefits of
flexibility.
7. Principle
of Commitment:
There should be a time frame for meeting
the commitments made. This will ensure the achieving of targets in time.
8. Principle
of Competitive Strategies:
While formulating own. Plans a manager should keep in mind the plans of
competitors. The plans should be framed by thinking of what the. competitors
will do in similar situations.
Limitations
of Planning
1. Lack
of Reliable Data:
Planning is based on various facts and figures supplied to the planners. If the
data on which decisions are base are not reliable then decisions base on such
information will also be unreliable.
2. Time
Consuming Process:
Practical utility of planning is sometimes reduce? by the time factor. Planning
is a time consuming process and actions on various operations may be delayed
because proper planning has not yet been done. Under certain circumstances an
urgent action is needed then one cannot wait for the planning process to
complete.
3. Expensive: The planning process
is very expensive. The gathering of information and testing of various courses
of action involve greater amounts of money. Sometimes, expenses are so
prohibitive that small concerns cannot afford to use planning
4. External
factors may reduce Utility:
Besides internal factors these are external factors too which adversely affect
planning. These factors may be economic, social, political, technological or
legal. The general national and international climate also acts as limitation
on the planning process.
5. Sudden
Emergencies:
In case certain emergencies arise then the need of the hour is quick action and
not advance planning. These situations may not be anticipated. In case
emergencies are anticipated or they have regularity in occurrence then advance
planning should be undertaken for emergencies too.
6. Resistance
to Change:
Most of the persons, generally, do not like any change. Their passive outlook
to new ideas becomes a limitation to planning. McFarland writes, "The
principal psychological barrier is that the future. The present is not only
more certain than the future, it is also more desirable. Resistance to change
is commonly experienced phenomenon in the business world. Planning often
implies changes which the executive would like to ignore, hoping they would not
materialize."
PLANNING PROCESS
Planning
process involves the setting up of business objectives and allocation of
resources for achieving them. Planning determines the future course of action
for utilizing various resources in a best possible way. It is a combination of
information handling and decision making systems based on information inputs,
outputs and a feedback loop.
Steps in Planning Process
1. Recognising
Need for Action:
The first step in planning process is the awareness of business opportunity and
the need for taking action. Present and future opportunities must be found so
that planning may be undertaken for them. The trend of economic situation
should also be visualized. Before venturing into new areas the pros and cons of
such projects should be evaluated. A beginning should be made only after going
through a detailed analysis of the new opportunity.
2. Gathering
Necessary Information:
Before actual planning is initiated relevant facts and figures are collected. All information relating to operations
of the business should be collected in detail. The type of customers to be
dealt with, the circumstances under which goods are to be provided, value of
products to the customers, etc. should be studied in detail. The facts and
figures collected will help in framing realistic plans.
3. Laying
Down Objectives:
Objectives are the goals which the management tries to achieve. The objectives
are the end products and all energies are diverted to achieve these goals.
Goals are a thread which bind the whole company. Planning starts with the
determination of objectives.
4. Determining
Planning Premises:
Planning is always for uncertain future. Though nothing may be certain in the
coming period but still certain assumptions will have to be made for formulating
plans. Forecasts are essential for planning even if all may not prove correct.
A forecast means the assumption of future events. The behaviour of certain
variables is forecasted for constituting planning premises. Forecasts will
generally be made for the following:
a. The expectation of demand for the
products.
b. The likely volume of production.
c. The anticipation of costs and the
likely prices at which products will be marked.
d. The supply of labour, raw
materials etc.
5. Examining
Alternative Course of Action:
The next step in planning will be choosing the best course of action. There are
a number of ways of doing a thing. The planer should study all the alternatives
and then a final selection should be made. Best results will be achieved only
when best way of doing a work is selected.
6. Evaluation
of Action Patterns:
After choosing a course of action, the next step will be to make an evaluation
of those courses of actions. Evaluation will involve the study of performance
of various actions. Various
factors will be weighed against each other. A course of action may be suitable
but it may involve huge investments and the other may involve less amount but
it may not be very profitable.
7. Determining
secondary Plans:
Once a main plan is formulated then a number of supportive plans are required.
In fact secondary plans are meant for the Implementation of principal plan. For
example, once production plan is decided then a number of plans for procurement
of raw materials, purchase of plant and equipment, recruitment of personnel
will be required. All secondary plans will be a part of the main plan.
8. Implementation
of Plans:
The last step in planning process is the implementation part. The planning
should be put into action so that business objectives may be achieved. The
implementation will require establishment of policies, procedures, standards
and budgets. These tools will enable a better implementation of plans.
Types
of Plans
1.
Standard or Repeated-Use Plans
and Single Use Plans:
Standing or
repeated-use plans are plans which are to be used repeatedly (i.e., over and
over again) over a long period of time for tackling frequently recurring
problems and issues. They give ready-made answers to issues which occur again
and again. Standing plans serve as guideline for managerial decision-making and
actions. They make managerial decisions and actions easy and increase
managerial efficiency, as they offer standard procedures for tackling similar
and frequently recurring problems and issues.
Standing
plans includes:
(a)
Objectives
(b)
Policies
(c)
Procedures
(d)
Methods
(e)
Rules
(f)
Strategies
2.
Financial plans and Non-financial
Plans:
Financial plans or cash plans are plans which relate to the monetary or
financial resources of the concern. They determine the sources from which
finance can be secured and the amounts which can be allocated to various
purposes.
3.
Formal Plans & Informal
Plans:
Formal plans are plans which are reduced to black and white (i.e., put on
paper). In other words1 formal plans are plans which specify in writing the
specific objectives to be achieved and the steps to be taken to achieve those
objectives. Formal plans are systematic and rational. They are quite necessary
for the successful running of a concern.
Informal plans are
mere thinking by some individuals of a concern. Of course, informal plans in
future. Informal plans promote unhealthy tendencies like carelessness,
ineffective employee performance, etc. informal plans are not much use for the
smooth running of the enterprise
4.
Specific plans & Routine
plans:
Specific plans are
plans for specified or particular purposes. Preparation of specific plans js a
difficult task, because the methods to be de~eril1ined for specific purposes
have to be specially planned and formulated.
Routine plans ware
plans which are routine or mechanical are called routine plans. Preparation of
routine plans is not difficult. In the case of the routine plans, the methods
determined for accomplishing the objectives of the organization will remain the
same during a particular period without major change.
5.
Administrative plans &
Operative plans:
Administrative plans are plans which determine the basis of action for the
whole organization as well as for the various segments of the organization for
a particular period. Administrative plans are done by the middle- level
management, and they provide guidelines for operative plans.
Operative plans
are plans which are concerned with the actual execution of day-to-day
operations of the concern. Operative plans are, generally, for a short period.
They are prepared by the lower level of management who put the administrative
plans into action. Operative or operating plans cover aspects, such as
preparation of sales programme, planning of production activities, etc
6.
Short-range plans &
Long-range plans:
Short range plans are plans which, generally, cover a period of one year. Short
range or short term plans are concerned with the determination of short term
activities to accomplish long term objectives. As short term plans are intended
to achieve long term objectives, short range plans have to be consistent with
long range plans. Short range plans are more action-oriented, more detailed,
specific and quantitative.
Long range plans
which cover a period of years or more. The length of the period varies from one
concern to another depending upon the nature of the business, the risks and
uncertainties, government control; etc. they care concerned with the
formulation of long-term goals of enterprise and the determination of the ways
and means of achieving those goals
7.
Strategic plans & Tactical
plans:
Strategic plans are plans designed to achieve the overall or general objectives
of the organization. Strategic plans are done by the top level management. They
are concerned with the enterprise, the formulation of policies and the
determination of strategies to be adopted and other steps to be taken to
accomplish those objectives.
Tactical plans are
plans which are concerned with the planning of detailed operations needed to
achieve the organizational goals. Tactical plans are intended to meet any
changes in internal organization and external environment. For instance, difficulty
in procuring raw materials, changes in prices of products, unexpected moves by
the competitors and other unforeseen situations are met with the help of
tactical plans.
Components
of Planning
- Objectives: In the words of Koontz and
O'Donnell, "Management terminology, objectives are the end-point's of
a management programme whether stated in general or specific terms".
Characteristics
of Objectives
1.
Objectives are multiple in nature
2.
Objectives have a hierarchy
3.
Objectives form a network
4.
Objectives
are both long range and short range
5.
Business
objectives are verifiable
6.
Business
objectives may be specific or general
7.
Objectives
may be tangible or intangible
8.
Objectives
have priority
9.
Objectives
may clash with one other
- Policies: In the words of George R,
Terry, "Policy is a verbal, written or implied overall guide setting
up boundaries that supply the general limits and directions in which the
managerial action will take place". They are the guidelines or
executive action at all levels of management.
Differences between objectives and policies:
a.
Objectives
are the end points of planning. That is, objectives can be regarded as the
places which have to be approached through roads (i.e., policies). But policies
are the means. That is, policies are the broad ways or roads through which the
places (i.e., the objectives) have to be reaches
b. Objectives are basic to his
existence and functioning of an organization. But policies are not basic to the
existence and functioning of an organization.
c.
There
is no room for discretion in the case of objectives on .the other hand,
policies may leave some room for discretion on the part of those who are to be
guided by them.
- Procedures: According to George R.
Terry "a procedure is a series of related tasks that make up the
chronological sequence and established way of performing the work to be
established".
- Methods: A method is a specified
or prescribed process, or manner or the way in which a particular task or operation is to be
performed.
- Rules:
Rules are a plan that lay down a required course of action with respect to a given situation. In other words, rules
are established principles for carrying out the activities in a systematic manner. In short, they are
the prescribed behaviour of the people in the organization.
- Strategies: In the words of A.D.
Chandler, "Strategy is the determination of the basic long-term goals
and objectives of an enterprise and the adoption of courses of action and
the allocation of resources to carry out these goals".
- Programmes: Programmes are the concrete
scheme of the action designed to implement the policies and realize the
objectives. In other words, they are the action-steps necessary to achieve
the objectives. In short: they are the specific and precise plan which
lays down the operations to be carried out to accomplish a given task,
with a specified ~)i of time.
- Schedules: Schedules are the dates and
timings fixed for completing the programmed activities. In short,
schedules are the time-table for the work to be done.
- Projects: A project is an individual
part of a general programme. In other words, it is part of the job that is
required to be done in connection with a genera programme.
- Budgets: The institute of cost and
management accountants, London, has defined a budge as "a financial
and/or quantitative statement, prepared prior to a defined period of time,
of the policy to be pursued during that period for the purpose of
attaining a given objective"
ORGANIZING OR ORGANIZATION
Meaning: The term 'Organization' can be
used in different senses. It can be used as a group of person working together
to as a structure of relationships or as a process of management.
When
it is used to refer to a group of person working together, it means a concern,
an undertaking or as enterprise.When it is used to refer to a structure of
relationships, it means the structural relationships among the positions and
jobs and person (i.e., the framework of responsibility and authority) through
which the enterprise functions, and it is called organization structure.
DEFINITIONS OF
ORGANIZATION:
Theo Haimann: "Organizing is the process
of defining and grouping the activities; of the enterprise and establishing
authority relationships among them".
NATURE &
CHARACTERISTICS OF ORGANIZATION: The
main characteristics and nature of organization are:
v
Organizing
or organization is a management process (i.e., a managerial function)
v
Organization
is concerned with groups of peop19. An organization cannot be constituted by a
single person. It comes into existence only a group of persons come together.
v
Organization
is, concerned with identification and grouping of activities into logical
pattern so as to secure homogeneous groups of activities.
v
Division
of work of division of labors the basis of organization.
v
Integration
or-coordination of the various activities of the enterprise is another
important feature of organization.
v
An
organization structure has no meaning unless it can contribute to the
accomplishment to the common objectives, i.e., the goal or objectives of the
enterprise.
v
An
organization structure consists of various positions arranged in a hierarchy
with clear definition of authority and responsibility associated with each of the
positions.
v
Organization
process involves taking a number to steps, such as the identification of the
activities to be performed to attain the objective of the enterprise, the
appropriate groping of activities into logical pattern, assignment to activities
to appropriate departments and people, delegation of authority, creation of
authority -responsibility relationships, etc.
PRINCIPLES OF SOUND ORGANIZATION: There
are many principle of organization. The main principles are
- Principle
of Objectives:
The principle of Objectives stresses the need for setting the objectives
of the enterprise. The setting of the objectives of the enterprise is
necessary, because the formulation of the organization structure s very
much influence by objectives of the enterprises
- Principle
of Unity 'of Objectives:
The Principle of unity of objectives implies that / every part of the
organization and the organization as a whole should be geared to the basic
objectives of the enterprise, in other words the main objectives of the
enterprise.
- Principle
of division of work and specialization: Specialization has become
the / order of the day. So, sound and effective organization must be built
on the principle of specialization
- Principle
of Functional definition:
The principle of functional definition implies that / the functions,
duties and responsibilities of the different departments and position in
the organization their authorities and their relationships with other
departments and position must be clearly defined.
- Principle
of balance of various factors: The principle of balance of various factors
suggests that there should be popper balance in the formal structure of
the organization in regard to various factors; For instance, there should
be proper balance among the; different segments or departments' of the
undertaking. That ism, the work- load should be properly distributed among
the various departments to maintain balance and harmony the working of the
organization. There should be balance in authority allocation to different
departments.
- Principle
of simplicity:
The principle of simplicity means that the organization structure should
be simple with a minimum number of managerial levels. If there are a large
number of managerial levels in the organization structure, there may raise
the problem of effective co-ordination and communication
- Principle
of Span of Control or Span of Management: Span of control or span of
management refers 10 'numbers of subordinates a superior can direct, guide
and control effectively. The span of control should be minimum, because
there is a limit to the number of subordinates that can be effectively
supervise by a superior.
- The
Scalar Principle, the scalar chain, the chain of the command or line of
authority:
Scalar
chain is the chain of superiors. the line of command or the line of
authority form the highest rank to the lowest rank in the organization
established for the purpose of communication in both the directions, it
establishes the channel through" which communications should pass,
and also states the superior- subordinate relationships in the
organization.
When the strict following of the
line of authority becomes detrimental, and there is a need of swift action, the
scalar chain can be short-circuited by taking the permission of their immediate
superiors. Through this arrangement, the scalar chain principle is safeguarded,
and at the same time, the subordinate officers are enabled to take swift
action. Such an arrangement is known as Gang Plank. In this context, it must be
noted that the short circuiting of the scalar chain is permitted only on
routine matters. But matters pertaining to decision -making should be routed
through the usual scalar chain.
- Principle
of responsibility:
Responsibility is the obligation of performing the duties assigned.
Responsibility is fixed with different positions in the organization.
Responsibility cannot be shifted to others. The Principles of
responsibility implies that the superior cannot avoid responsibility by
delegating authority to his subordinates. He (i.e., the superior) must be
held responsibi1ity for the acts of his subordinates to whom he has
delegate authority.
- Principles
of delegation of authority:
With the allocation of duties and responsibilities, u'1ere must logically
go the grant of necessary authority to the subordinates so as to enable
him to perform his duties efficiently. The Principle of delegation of
authority emphasizes that the organization structure should provide for
the delegation of authority to the subordinates.
- Principle
of unity of command:
The principle of unity of command suggests that each subordinate should
have only one superior. In other words there should not be dual
subordination. Dual subordination results in undermining of authority,
delay, confusion, disorder and indiscipline of subordinates.
- Principe
of unity of direction:
The principle of unity of direction suggests that, for a group of
activities having the same objective, there should be one plan of action
and one objective. This would facilitate co-ordination of activities and
the completion of the task as per the schedule. If each person in a
department is made to work under a different plan or programme of action,
there will be nothing but confusion.
- Principle
of coordination:
As the organization is divided into a number of departments, it is
necessary that there should be co-ordination between the different
departments. The principle of co-ordination emphasizes that co-ordination
between the different departments is quite essential to bring unity of
action and commonness of purpose in the organization.
- Principle
of communication:
The principle of communication suggests that their should be a good
communication network in the organization to achieve the objectives of the
enterprise. Further, there should be effective two-way communication.
i.e., downward communication and upward communication.
- Principle
exception or exceptional matters: The principle of exception implies that the
organization should be so designed that only exceptional or complex
matters are referred to executives at higher levels for their decision and
routine meters are decided by the subordinates themselves.
- Principle
of flexibility or continuity:
An organization is built not just for today or tomorrow. It is built to
stand and serve for a long time. The principle of flexibility means that
the organization structure should be capable of adapting itself to the
needs or changing circumstances.
- Principle
of efficiency:
The principle of efficiency means that the organization structure
formulated should enable the undertaking to function efficiently and
achieve the objectives of the enterprises with minimum cost and effort.
- Principle
of facilitation of leadership: the principle of facilitation of leadership
implies that the organizational structure should be so designed that there
is enough opportunity for the management to give effective leadership to
the undertaking.
- Principle
of flexibility:
The principle of flexibility suggests that the organization must be
flexible so that it can easily adapt itself to the changing environment
without changing the basic organisation design.
FORMAL AND
INFORMAL ORGANISATION :
Introduction: In
the organizational structure of every enterprise, botl1 formal and informal
organisations exist. So, it is necessary for us to have some idea about the
formal and informal organisations existing in every concern.
A) Formal
organisation In the words of Chester Barnard,
" An organisation is formal when the activities of two or morepersons are
consciously co-ordinated towards a common objective".
Features of
Formal Organisation:The
main features of formal organisation are:
(a)
In
a formal organisation, the position, authority, responsibilities,
accountability of each level are clearly defined.
(b)
It
prescribes the relationships amongst the people working in the organisation.
(c)
The
formal relations in the organisation arise from the pattern of responsibilities
that are created by the management.
(d)
The
structure is consciously designed to enable the people of the organisation to
work together for accomplishing the common objectives of the enterprise.
Advantages of
Formal organisation:Formal organisation has certain-advantages.
They are:
(I)
It
makes everybody responsible for a given task.
(II)
It
ensures law -and order in the organisation by prescribing rules, regulations
and procedures.
(III)
It
contributes to accomplishment of the common objectives of the enterprise.
Drawbacks or
Criticisms of Formal Organisation:Certain
criticisms are leveled against forn1al organisation. They are:
(a)
Formal
Organisation is impersonal. So, emotions and sentiments of individuals are
ignored in determining the interactions, communication and accountability.
(b)
Formal Organisation is deliberately designed
to achieve the goals of the enterprise. It does not consider the goals of the
individuals.
(c)
The
rules and regulations prescribed in a formal organisation may be rigid, and so,
it may become difficult to achieve goals.
B) Informal
organisation In
the words of Keith Davis, “Informal
organisation is a network of personal and social relations not established or
required by the formal organisation but arising spontaneously as people
associate with one another”.
Features of
Informal Organisation:The
chief features of informal organisation are:
(a)
Informal
Organisation is not established by any formal authority. It arises from the
personal and social relations amongst the people working in the organisation.
(b)
Informal
Organisation arises spontaneously, and not by deliberate or conscious efforts.
(c)
It
is influenced by the personal attitudes, emotions, whims, likes and dislikes,
etc. of the people in the organisation.
(d)
It
is based on rules, regulations and procedures.
(e)
The
inter-relations amongst the people in an informal organisation cannot be
charted (i.e., cannot be shown in an organisation chart).
Benefits of
Informal organisation:Informal
organisation has certain benefits. They are;
(a)
It
helps the formal organisation to make a workable system to get the work done.
(b)
It
assists the formal organisation to become humanistic.
(c)
It
helps the group members to attain specific personal objectives.
(d)
It
provides social satisfaction to group members.
(e)
It
acts as a means by which the workers achieve a sense of security and belonging.
(f)
It
is best means of employee communication.
(g)
It
serves as an agency for social control of human behaviour.
(h)
It
acts as a safety valve for the emotional problems and the frustrations of the
workers of the enterprise.
(i)
It
lightens the work-load of the formal managers.
(j)
Many
things which cannot be achieved through formal organisation can be achieved
through informal organisation.
(k)
The
presence of informal organisation in an enterprise makes the managers plan and
act more carefully.
Drawbacks of
Informal Organisation:
Informal organisation is not free
from drawbacks. It suffers from certain drawbacks. They are
(a)
The
communication in informal organisation may, son1etirnes, lead to rumours.
(b)
Informal
organisation may put resistance to changes and innovations.
(c)
It
may not effectively contribute to the attachment of the objectives of the
enterprise.
COMPARATIVE
STUDY OF LINE ORGANIZATION, FUNCTIONAL ORGANISATION AND LINE AND STAFF
ORGANSIATION
1.
Line
organisation is a simple form of organisation. But functional organisation and
line and staff organisation are complicated.
2.
In
the case of the line organisation, there is clear-cut line of authority .m the
case of functional organisation, there is no clear-cut line of authority .In
the case of line and staff organisation, there is clear-cut division of
authority for the line officers, but staff officers do not have any authority.
3.
In
the case of line organisation, there is clear-cut responsibility .In the case
of functional organisation and line and staff organisation, there is clear-cut
responsibility for the line officers, but staff officers do not have any
responsibility.
4.
Because
of clear-cut line authority, there is unity of command in the case of line
organisation. There is no unity of command in the case of functional
organisation, as a worker has to take instructions from several authorities.
There is unity of command in the case of line and staff organisation because of
the existence of the line officers.
5.
In
the case of line organisation, there is flexibility in the sense that quick
decisions and prompt actions can be taken to adjust to changing situations
because of the existence of full authority. Functional organisation is rigid
and inflexible. In the case of line and staff organisation, flexibility is
difficult.
Centralization has
the following features:
1)
Concentration
and reservation of the decision-making power with regards to various management
functions with the top level management.
2)
Execution
of the decisions taken by the top level management (i.e., performance of
operative functions) by with the middle and lower levels of management.
3)
Functioning
of the lower levels of management under the direct command, direction and
control of the top level management.
Organisation
Charts : Organisation
charts is a diagrammatical presentation of relationships in an enterprise. The
functions and their relationships, the channels of authority and relative
authority of different managers etc. are depicted in an organisational chart.
Types of Organisation
charts There
are three ways in which organisation charts can be shown: (i) Vertical (ii)
Horizontal (iii) Circular.
I.
Vertical or Top bottom: In this chart major functions
are shown at the top and subordinate functions in successive lower positions.
In this chart scalar levels run horizontally and functions run vertically. The
supreme authority is shown at the top while lowest authority at the bottom
II. Horizontal
or Left to Right:
In this chart highest positions are put on the left side and those with
diminishing authority move towards the right. The organisational levels are
represented by vertical columns, the flow of authority from higher to lower
levels being represented by movement from left to right.
III. Circular:
In circular chart
the centre of the circle represents the position of supreme authority and the
functions radiate in all directions from the centre. The higher the positions
of authority the nearer they are to the centre and the lesser the positions of
authority. more distant they are from the centre. The positions of relative
equal importance are located at the same distance from the centre.
Principles of
Organisation Charts:
v
The
top management should faithfully follow the line of authority while dealing
with subordinates. Any attempt to bye pass the organisation chart will make it
meaningless.
v
The
chart should define lines of position. The lines of different individuals
should be so defined so that there is no overlapping and no two persons should
given the same position.
v
The
undue concentration of duty at any point should be avoided.
v
The
organisation chart should not be influenced by personalities. Balance of
organisation should be given more importance than the individuals.
v
The
organisation chart should be simple and flexible.
Advantages of
Organisation Charts:
v
An
organisation chart is a managerial tool. It helps in specifying authority and
responsibility of every .position. The relationships among different persons
are also established for smooth working of the organisation.
v
As
organisation chart specifically defines authority and responsibility of people
in the enterprise there will be no duplication and overlapping of duties etc.
v
The
organisation chart will help in pointing out the faults, deficiencies, dual
command etc. in the organisation.
Limitations of
Organisation Charts:
The
organisation charts suffer from the following drawbacks.
v
The
organisation charts show the relationship of different positions and not the
degree of authority and responsibility. The size of boxes or circles in the
chart cannot show the level of authority etc.
v
A
chart only depicts formal organisational relationship whereas informal
organisation is ignored. Practically informal organisation is an useful as
formal organisation. Informal organisation greatly helps management in knowing
the reactions of the people and is an important channel of communication.
v
A
chart shows organisational position and status at different levels. It gives
rise to superior-inferior feeling among people and it retards the feeling of
team work.
MANAGEMENT BY
OBJECTIVES, (M.B.O)
Management
by objectives is a process in which the manager and his subordinates jointly
agree upon a set of activities, targets and goal, keeping in view the overall
objectives of the organisation. and use these as the criteria for evaluating
the performance of the subordinates.
Features of
management by Objectives:
1.
Management
by objectives is an approach and philosophy to-management, and is not just a
technique of management.
2.
The
basic emphasis of management by objectives is on setting of objectives or goals
of an organisation.
3.
Management
by objectives focuses on the integration of goals It relates the long-range
goals of the organisation with the short-range goals, overall systems goals of
the enterprise with the goals of the society.
4.
MBO
Places emphasis not only on the settings of goals but also on their achievement
(i.e., effective performance and tangible results).
5.
The
technique of MBO recognises the fact that the goals setting and achievement
process is a co-operative and participative endeavour of the superiors and
subordinates.
6.
The
objectives enshrined in management by objectives provide guidelines for
appropriate systems, procedures, delegation of authority, allocation of
resources, etc.
Objectives of
Management by objectives
Ø
To
relate individual goals to organisational goals.
Ø
To
clarify the jobs to be done aI1d the results expected to be accomplished.
Ø
To
evaluate the performance 'of the subordinates.
Ø
To
enhance the communication between the superiors and the subordinates.
Ø
To
stimulate the subordinates motivation.
Ø
To
serve as a device for integration.
Steps involved
in Management by objectives:
1.
Defining
the overall specific corporate objectives.
2.
Setting
of sub-goals for each unit.
3.
Setting
performance targets for each individual manager.
4.
Matching
of goals and resources.
5.
Evaluation
or appraisal of performance, and re-appraisal
Benefits of
Management by objectives
1.
It
increases the participation and involvement of the subordinates in decision-making.
2.
It
provides the subordinates with an opportunity to be self-motivating by setting
their objectives.
3.
As
the managers at all levels are involved in setting their objectives, they are
more committed to the goals fixes. That means, the chance of accomplishment of
objectives are much brighter.
4.
Under
the MBO approach, the managers at all levels become more aware of the overall
objectives. This helps them in understanding their role in the total
organisation.
5.
MBO
implies that the objectives of each department and each individual are
consistent with the overall objectives of the organisation. This ensures the
integration of individual goals with the goals of the organisation.
Limitations of
Management by objectives
1.
The
MBO approach is too pressure-oriented and time consuming.
2.
Participation
of the subordinates in goal-setting is the corner-stone of MBO. But this may
not be feasible in every organisation.
3.
MBO
requires the setting of verifiable goals. But it is difficult to set verifiable
goals.
4.
MBO
will be successful only if the objectives are set in measurable and verifiable
terms. If the objectives cannot be set in quantitative terms, it will be
difficult to judge the performance of the individuals.
5.
The
1vIBO approach over-emphasises quantification. Therefore, it is likely to
overlook the qualitative aspects of the performance of the organisation.
Conclusion:It is true that MBO is subject to
certain limitations. But if it is implemented sincerely and seriously, it will
yield good dividends.
Organizational Change -Learning
Objectives
- Identify
the external forces creating change on the part of organizations.
- Understand
how organizations respond to changes in the external environment.
- Understand
why people resist change.
Why
Do Organizations Change?
Organizational change is the movement of an organization from one
state of affairs to another. A change in the environment often requires change
within the organization operating within that environment. Change in almost any
aspect of a company’s operation can be met with resistance, and different
cultures can have different reactions to both the change and the means to
promote the change. To better facilitate necessary changes, several steps can
be taken that have been proved to lower the anxiety of employees and ease the
transformation process.
Organizational
change can take many forms. It may involve a change in a company’s structure,
strategy, policies, procedures, technology, or culture. The change may be
planned years in advance or may be forced on an organization because of a shift
in the environment.
Managers
carrying out any of the P-O-L-C functions often find themselves faced with the
need to manage organizational change effectively. Oftentimes, the planning
process reveals the need for a new or improved strategy, which is then
reflected in changes to tactical and operational plans. Creating a new
organizational design (the organizing function) or altering the existing design
entails changes that may affect from a single employee up to the entire
organization, depending on the scope of the changes. Effective decision making,
a Leadership task, takes into account the change-management implications of
decisions, planning for the need to manage the implementation of decisions.
Finally, any updates to controlling systems and processes will potentially
involve changes to employees’ assigned tasks and performance assessments, which
will require astute change management skills to implement. In short, change
management is an important leadership skill that spans the entire range of
P-O-L-C functions.
Workplace Demographics -Organizational change is often a
response to changes to the environment.
Technology- Sometimes
change is motivated by rapid developments in technology. Moore’s law (a
prediction by Gordon Moore, cofounder of Intel) dictates that the overall
complexity of computers will double every 18 months with no increase in cost. Globalization-Globalization is
another threat and opportunity for organizations, depending on their ability to
adapt to it. Because of differences in national economies and standards of
living from one country to another, organizations in developed countries are
finding that it is often cheaper to produce goods and deliver services in less
developed countries.
Changes
in the Market Conditions-Market changes may also create internal changes as
companies struggle to adjust. For example, as of this writing, the airline
industry in the United States is undergoing serious changes. Demand for air
travel was reduced after the September 11 terrorist attacks. At the same time,
the widespread use of the Internet to book plane travels made it possible to
compare airline prices much more efficiently and easily, encouraging airlines
to compete primarily based on cost.
Poor
Performance-Change can also occur if the company is performing poorly and if
there is a perceived threat from the environment. In fact, poorly performing
companies often find it easier to change compared with successful companies.
Resistance to Change
Changing an organization is often essential for a
company to remain competitive. Failure to change may influence the ability of a
company to survive. Yet employees do not always welcome changes in methods.
Reactions to change may take many forms.
Active resistance is the most negative reaction to a proposed
change attempt. Those who engage in active resistance may sabotage the change
effort and be outspoken objectors to the new procedures. In contrast, passive resistance involves
being disturbed by changes without necessarily voicing these opinions
Why Do
People Resist Change?
Disrupted Habits-People often resist change for the
simple reason that change disrupts our habits. When you hop into your car for
your morning commute, do you think about how you are driving? Most of the time
probably not, because driving generally becomes an automated activity after a
while.
PersonalitySome people are more resistant to change than
others. Recall that one of the Big Five personality traits is Openness to
Experience; obviously, people who rank high on this trait will tend to accept
change readily.
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