Module – III

Syllabus:
Directing – motivation, leadership – Theories; importance – Controlling principles – Dynamics
of Groups at work, work group behaviour and productivity; work and motivation Manager vs.
leader; leadership and motivation; leadership styles; theories of motivation. MBO: - team
creation and Management; Management of Change – importance, objectives and methods.
………………………………………………………………………………………………………

DIRECTING
The managerial function of directing is like the activities of a teacher in a classroom. In
order to teach, a teacher has to guide his students, maintain discipline, inspire them and lead
them to the desired goal. It is a very important function in the management of any enterprise. It
helps the managers in ensuring quality performance of jobs by the employees and achievement
of organisational goals. It involves supervision, communication and providing leadership to the
subordinates and motivating them to contribute to their best of capability.
Different people perform different activities in the organisation. All the activities are
interrelated. In order to co-ordinate the activities carried out indifferent parts and to ensure that
they are perform well, directing is important. It thus, helps to integrate the various activities and
so also the individual goals with organisational goals.Directing involves leadership that
essentially helps in creating appropriate work environment and build up team spirit.
Elements of Directing:
 Supervision
 Motivation
 Leadership
 Communication

MOTIVATION:
People differ by nature, not only in their ability to perform a specific task but also in their
will to do so.
People with less ability but stronger will are able to perform better than people with
superior ability and lack of will. Hard work is crucial to success and achievement.

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This belief was underscored by Albert Einstein
“Genius is 10% inspiration and 90% perspiration”
Definition:
Motivation can be defined as “The Internal and external factors that stimulate/generates
desire and energy in people to be continually interested and committed to a job, role or subject,
or to make an effort to attain a goal”.
Viteles define motivation as ‘motivation represents an unsatisfied need which creates a
state of tension or disequilibrium, causing the individual to move in a goal directed pattern
towards restoring a state of equilibrium, by satisfying the need.’
Motivation Process / Steps in motivation:

Explaining the process:

Unsatisfied needs and motives:  It is the first process of motivation. This stage involves
unsatisfied needs and motives. Such unsatisfied needs can be activated by internal stimulus such
as hunger and thirst. They can also be activated by external stimulus such as advertisement and
window display

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Tension:  This stage involves tension. Unsatisfied needs create tension in the individual. Such
tension can be physical, psychological, and sociological. In this situation, people try to develop
objects that will satisfy their needs.

Action to satisfy needs and motives: This stage involves action of people to satisfy needs and
motives. Such tension creates strong internal stimulus that calls for action. Individual engages in
action to satisfy needs and motives for tension reduction. For this purpose, alternatives are
searches and choice is made, the action can be hard work for earning more money

Goal accomplishment:  This stage involves goal accomplishment. Action to satisfy needs and
motives accomplishes goals. It can be achieves through reward and punishment. When actions
are carried out as per the tensions, then people are rewarded others are punished. Ultimately
goals are accomplished.

Feedback:   Feedback provides information for revision or improvement or modification of needs

as needed. Depending on how well the goal is accomplished their needs and motives are
modified. Drastic changes in environment necessitate the revision and modification of needs

Sources of motivation / Types of Motivation

1. Positive – Involves recognition and appreciation
2. Negative / fear – Use of force, power, fear and threats.
3. Intrinsic – feelings of achievement and self accomplishment eg., acceptance, honour,
independence, power, social contact, social status
4. Extrinsic – Primarily financial in nature eg., bonus, benefit package, Employee of the
month, increments.

Techniques of Motivation
Financial incentives:  First techniques of motivation are financial incentives as money is
indicator of success. Therefore it full fills psychological safety and status need as people satisfy
their needs by money. Wages, salary motivates employees to perform better. 

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Job enlargement: Under this technique, task assigned to do job are increased. So the scope of job
enlargement is high for the motivation of subordinates. It is also known as horizontally leading
of job.

Job enrichment: Under this technique jobs are made challenging and meaningful by increasing
responsibility and growth opportunities. In such technique of motivation, planning and control
responsibility are added to the job usually with less supervision and more self evaluation. It is
also called vertical leading.

Job rotation:  it refers to shifting an employee from one job to another. Such job rotation doesn’t
mean hanging of their job but only the employees are rotated. By this it helps to develop the
competency in several job which helps in development of employees.

Participation: Participation refers to involvement of employee in planning and decision making.

It helps the employees feel that they are an asset of the organization which helps in developing
ideas to solve the problems.

Delegation of authority: Delegation of authority is concerned with the granting of authority to the
subordinates who helps in developing a feeling of dedication to work in an organization because
it provides the employees high morale to perform any task.

Quality of work life: It is the relationship between employees’ and the total working environment
of organization. It integrates employee needs and well being with improves productivity, higher
job satisfaction and great employee involvement. It ensures higher level of satisfaction.

THEORIES OF MOTIVATION
I. NEED-BASED THEORIES OF MOTIVATION
1. MASLOW’S HIERARCHY OF NEEDS:
In 1943, Abraham Maslow published a paper, “A Theory of Human Motivation”. In this
paper, he proposed that people have different levels of needs that they seek to meet. Maslow
mentioned that people are more motivated by the most basic needs.

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 1. Physiological needs
 Physical Comfort
 Temperature
 Working Conditions
 Inside/Outside
 Lunch and Rest
Breaks
 Bathroom Facilities
 Ergonomics
2. Safety and Security Needs
 Safety
 Job Security
 Seniority
 Benefits
 Money
 Retirement Plans
3. Social or Belongingness Needs  Recognition
 Relationships with co-workers  PERKS
 Relationships with Supervisors  Training & Development
 Teams  Positive Feedback on Performance
 Fun 5. Self-Actualization Needs
 Social Events  Meaningful Work
4. Esteem/Ego Needs  Sense of Satisfaction
 Opportunities for Growth &  Accomplishment
Advancement  Self-Improvement
 Promotions  Improving Others and/or Society
 Job Titles
Level 1 – Physiological Needs
These needs are considered the most important because they are the most immediate needs and
hence are also known as “basic needs”. They include food, clothing, shelter, sexual activity, etc.

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These are all the necessities for our bodies to stay functional. The bottom, or most important
needs, is the physiological needs.

One of the most important reasons people look for a job is to meet these basic necessities.
However, a person whose job enables him to only provide these basic amenities to himself and
his family is very difficult to be motivated.

People who are working on a minimum wage are tough to motivate because they realize that
their efforts won’t ever be sufficient to reap the rewards that go beyond providing food on the
table. These people are more interested in putting in just the efforts that helps them keep their
jobs, as compared to trying and putting in a better performance.

Level 2 – Safety Needs

Once a person makes sure that all his basic necessities have been met, he will think about safety
and security. That’s why many insurance companies or loan-offering companies generally
check for people’s incomes to see if they earn beyond a considerable limit, before approaching
them for services.

They know that a person who is not able to provide the basic necessities won’t be interested in
future security or safety, protection from health issues, financial issues, etc. When they breach
this line, they face issues. The biggest example of this is the sub-prime loan-lending by the
banks to the people who were never in a condition to pay back the loans.

The safety here is not only about financial safety or health. It’s also job safety and security.
Employees won’t be easily motivated in an environment where they see employees being
removed frequently. They will be more worried about saving their jobs, compared to giving any
importance on listening to motivating stuff.

There are many jobs where health safety is not an assured thing. For example, people in military
services are well-aware that they could face fatal injuries any day. In these cases, they are
motivated by their anger towards their enemy, how their sacrifices are keeping their families
safe back in their homes, how they are doing their country a great service, and how they are
inspiring millions to join the forces and fight to keep their nation safe.

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Another outcome of constant efforts in providing safety and stability in jobs is the
“Whistleblower Policy”. In this policy, rules and conditions are drafted in such a way that the
employees don’t fear being exposed to threats, dangers, bullying, and harassment of any kind
when they report any wrong-doings happening in their company. Other such policies include
health insurance, sick leaves, company leaves, welfare programs, etc.

Level 3 – Belonging Needs

Once a person is done taking care of basic needs and has gotten a secure life and job, he will
look to establish relationships with individuals. At these stages, people would want to go out
and socialize, and mull over the absence of any companion in their lives.

These needs are emotional in nature and can be fulfilled by friendship, love and care. They
develop a need for the sense of belongingness, i.e. they want to feel that they belong to the place
they are working in.

It has been observed that employees who feel that their presence in the office doesn’t have any
impact on others gradually feel isolated and depressed. This affects their productivity and makes
them socially awkward. Many people feel as if they don’t belong at their office because they are
constantly ignored by the management or peers.

If the needs of relationships are not met, people tend to become nervous, emotionally fragile,
depressed and lonely. Some of them end up becoming irascible and ill-tempered. Some actually
end up sacrificing some lower needs to feel this need.

Level 4 – Esteem
“Esteem” means self-perception. It is the image of the self in the eyes of the others. Esteem is
the image that a person thinks he has in the eyes of others. A person with high esteem thinks
that people think highly of him. It’s our esteem that gives us recognition of our own skills. For
example, when someone says that he is funny, entertaining and amiable; he must have heard
others saying the same things about him.

People who have the need of esteem will try to improve their perception in people’s minds.
They often want to achieve success at work, and are interested in accumulating wealth and

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status symbols like premium cars, etc. They take pride in the achievements of their family-
members and seek opportunities to socialize with people who are looked up to in the society.

When there are people like these in a team, it’s important to note that they are motivated more
by name and prestige. A handsome hike in salary couldn’t mean as much to them as an
honorary title like, Assistant Project Manager.

When the efforts of these types of people are directly mapped to the company’s achievements,
they feel happy and motivated. However, if their efforts are not acknowledged and their hard
work isn’t appreciated, then their productivity falls.

Level 5 – Self-Actualization
Self-actualization is the realizing of oneself. Many people reach a stage in their life where they
start wondering what is expected out of them in their life. They hear a voice that tells them to
fulfill their destiny. Such people try to figure out the meaning of their lives and face existential
questions.

Generally, such people are found to have achieved every other level in the Maslow Pyramid.
They feel they have provided for all the needs that they had in their lives, and are now looking
for a purpose of their life.

It’s often found in the lives of successful career-oriented professionals who retire and then feel
that they want to be model grand-parents to their grand-kids. Some feel that this is the time they
should switch their profession and take up an artistic pursuit.

Many successful businessmen have abandoned successful, stable careers and have changed their
professions at the top of their game. Lawyers have become hoteliers, bankers have become
actors, actors have become investigative writers, and so on.

People who seek self-actualization have crossed the stage when they used to worry about what
other people think about them. They also partake in activities that they find genuine fun doing.

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Not every job can be made to feel self-actualizing for everyone. The trick here for the
supervisor or the manager is to find someone who feels that this is the job that he would love to
do for his entire lifetime.

Many people are initially excited about their profession and feel happy and satisfied in their
jobs. However, with age and experience, they could start yearning for some other activities. A
successful manager should know how to utilize his team-members so that they stick to their jobs
and keep feeling fulfilled. Until these employees believe that they are in a job that they must be
taking care of, they will be dealing with self-actualization in a positive manner.

Merits and Criticisms

Merits of Maslow’s Theory of Motivation:
Maslow theory has been widely appreciated due to following reasons:
(i) Maslow’s theory of motivation helps the managers in understanding how to motivate the
employers.
(ii) Maslow’s theory of motivation theory is very simple, common and easily understandable.
(iii) It accounts for both inter-personal and intra-personal variations in human behaviour.
(iv)Maslow’s theory of motivation theory is dynamic because it presents motivation as a
changing force; changing from one level of needs to the other.

Criticisms of Maslow’s Theory of Motivation:

Despite the appreciation for this theory, it has been criticised by many on the following grounds:
1. Researchers have proved that there is lack of hierarchical structure of needs as suggested by
Maslow, though every individual has some ordering for his need satisfaction.
Some people may be deprived of their lower level needs but may still strive for self actualisation
needs. The example of MAHATMA GANDHI is one of the most important. There are always
some people to whom, the need for self-esteem is more prominent than social needs.
2. Another problem is that there is a lack of direct cause and effect relationship between need and
behaviour. One particular need may cause different type of behaviour in different persons. On
the other hand, as a particular individual behaviour may be due to the result of different needs.
Thus, need hierarchy is not as simple as it appears to be.

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3. Need and satisfaction of needs is a psychological feeling. Sometimes even the person may not
be aware about his own needs. How can the managers come to know about these needs?
4. Some people say that hierarchy of need simply does not exist. At all levels needs are present at
given time. An individual motivated by self actualisation needs cannot afford to forget his food.
But this criticism is solved by Maslow by saying that needs are interdependent and overlapping.
5. Another problem with Maslow’s theory of motivation is the operationalisation of some of his
concepts which makes it difficult for the researchers to test his theory. For instance, how does
one measure self actualisation?
Despite its drawbacks, Maslow’s theory offers managers a good handle on understanding the
motives or needs of individuals and how to motivate organisational members.

2. CLAYTON ALDERFER’S ERG Theory

ERG theory of Clayton Alderfer is a modification of Maslow’s hierarchy of needs (Alderfer,

1969). Instead of the five needs that are hierarchically organized, Alderfer proposed that basic
human needs may be grouped under three categories, namely
I. Existence Needs (Similar to Maslow’s Basic Needs)
II. Relatedness Needs (the desire we have for maintaining important personal relationships)
III. Growth Needs (referring to self development, creativity, growth and competence)

ERG theory’s main contribution to the literature is its relaxation of Maslow’s assumptions. For
example, ERG theory does not rank needs in any particular order and explicitly recognizes that
more than one need may operate at a given time. Moreover, the theory has a “frustration-
regression” hypothesis, suggesting that individuals who are frustrated in their attempts to satisfy
one need may regress to another one. For example, someone who is frustrated by the lack of
growth opportunities in his job and slow progress toward career goals may regress to relatedness
needs and start spending more time socializing with one’s coworkers. The implication of this
theory is that we need to recognize the multiple needs that may be driving an individual at a
given point to understand his behavior and to motivate him.

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3. MCCLELLAND’S THEORY OF NEEDS (POWER, ACHIEVEMENT AND
AFFILIATION)

McClelland’s theory of needs is one such theory that explains this process of motivation
by breaking down what and how needs are and how they have to be approached. David
McClelland was an American Psychologist who developed his theory of needs or
Achievement Theory of Motivation which revolves around three important aspects, namely,
Achievement, Power And Affiliation. This theory was developed in the 1960’s and McClelland’s
points out that regardless of our age, sex, race or culture, all of us possess one of these needs and
are driven by it. This theory is also known as the Acquired Needs as McClelland put forth that
the specific needs of an individual are acquired and shaped over time through the experiences he
has had in life.

Psychologist David McClelland advocated Need theory, also popular as Three Needs Theory.
This motivational theory states that the needs for achievement, power,
and affiliation significantly influence the behavior of an individual, which is useful to understand
from a managerial context.

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This theory can be considered an extension to Maslow’s hierarchy of needs. As per McClelland,
every individual has these three types of motivational needs irrespective of their demography,
culture or wealth. These motivation types are driven from real life experiences and the views of
their ethos.
Need for Achievement
The need for achievement as the name itself suggests is the urge to achieve something in what
you do. If you are a lawyer it is the need to win cases and be recognized, if you are a painter it is
the need to paint a famous painting. It is the need that drives a person to work and even struggle
for the objective that he wants to achieve. People who possess high achievement needs are
people who always work to excel by particularly avoiding low reward low risk situations and
difficult to achieve high risk situations.
Such people avoid low risk situations because of the lack of a real challenge and their
understanding that such achievement is not genuine. They also avoid high risk situations because
they perceive and understand it to be more about luck and chance and not about one’s own effort.
The more the achievements they make the higher their performance because of higher levels of
motivation. These people find innovative clever ways to achieve goals and consider their
achievement a better reward than financial ones. They take calculated decision and always
appreciate feedback and usually works alone.

The individuals motivated by needs for achievement usually have a strong desire of setting up
difficult objectives and accomplishing them. Their preference is to work in the result oriented
work environment and always appreciate any feedback on their work. Achievement based
individuals take calculated risks to reach their goals and may circumvent both high-risk and low-
risk situations. They often prefer working alone. This personality type believes in a hierarchical
structure derived primarily by work based achievements.

Need for power

The need for power is the desire within a person to hold control and authority over another
person and influence and change their decision in accordance with his own needs or desires. The
need to enhance their self esteem and reputation drives these people and they desire their views
and ideas to be accepted and implemented over the views and ideas over others. These people are

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strong leaders and can be best suited to leading positions. They either belong to Personal or
Institutional power motivator groups. If they are a personal power motivator they would have the
need to control others and a institutional power motivator seeks to lead and coordinate a team
towards an end.
The individuals motivated by needs for power have a desire to control and influence others.
Competition motivates them and they enjoy winning arguments. Status and recognition is
something they aspire for and do not like being on the losing side. They are self-disciplined and
expect the same from their peers and teams. The do not mind playing a zero-sum game, where,
for one person to win, another must lose and collaboration is not an option. This motivational
type is accompanied by needs for personal prestige, and a better personal status.

Need for Affiliation

The need for affiliation is urging of a person to have interpersonal and social relationships with
others or a particular set of people. They seek to work in groups by creating friendly and lasting
relationships and have the urge to be liked by others. They tend to like collaborating with others
to competing with them and usually avoid high risk situations and uncertainty
The individuals motivated by needs for affiliation prefer being part of a group. They like
spending their time socializing and maintaining relationships and possess strong desire to be
loved and accepted. These individuals stick to basics and play by the books without feeling a
need to change things, primarily due to a fear of being rejected. People in this group tend to
adhere to the norms of the culture in that workplace and typically do not change the norms of the
workplace for fear of rejection. Collaboration is the way to work for them competition remains
secondary. They are not risk seekers and are more cautious in their approach. These individuals
work effectively in roles based on social interactions, for instance, client service and other
customer interaction positions.

4. HERZBERG’S MOTIVATIONAL THEORY / TWO FACTOR THEORY

What do people want from their jobs? Do they just want a higher salary? Or do they want
security, good relationships with co-workers, opportunities for growth and advancement – or
something else altogether?

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This is an important question, because it's at the root of motivation - the art of engaging with
members of your team in such a way that they give their very best performance.

The psychologist Fredrick Herzberg asked the same question in the 1950s and 60s as a means of
understanding employee satisfaction. He set out to determine the effect of attitude on motivation,
by asking people to describe situations where they felt really good, and really bad, about their
jobs. What he found was that people who felt good about their jobs gave very different responses
from the people who felt bad.

These results form the basis of Herzberg's Motivation-Hygiene Theory (sometimes known as
Herzberg's Two Factor Theory). Published in his famous article, "One More Time: How do You
Motivate Employees," the conclusions he drew were extraordinarily influential, and still form the
bedrock of good motivational practice nearly half a century later.

According to Herzberg, the factors leading to job satisfaction are "separate and distinct from
those that lead to job dissatisfaction." Therefore, if you set about eliminating dissatisfying job
factors, you may create peace but not necessarily enhance performance. This placates your
workforce instead of actually motivating them to improve performance.

The characteristics associated with job dissatisfaction are called hygiene factors. When these
have been adequately addressed, people will not be dissatisfied nor will they be satisfied. If you
want to motivate your team, you then have to focus on satisfaction factors like achievement,
recognition and responsibility.

To apply the theory, you need to adopt a two-stage process to motivate people. Firstly, you need
to eliminate the dissatisfaction they're experiencing and, secondly, you need to help them find
satisfaction.

Herzberg's findings revealed that certain characteristics of a job are consistently related to
job satisfaction, while different factors are associated with job dissatisfaction. These are:

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 Factors for Satisfaction Factors for Dissatisfaction

Company policies

Achievement Supervision

Recognition Relationship with supervisor and peers

The work itself Work conditions

Responsibility Salary

Advancement Status

Growth Security

 Frederick Herzberg’s two-factor theory concludes that certain factors in the workplace result in job
satisfaction, but if absent, they don't lead to dissatisfaction but no satisfaction.
 The factors that motivate people can change over their lifetime, but "respect for me as a person" is one
of the top motivating factors at any stage of life.
He distinguished between:
 Motivators; (e.g. challenging work, recognition, responsibility) which give positive satisfaction, and

 Hygiene factors; (e.g. status, job security , and fringe benefits) that do not motivate if present, but, if
absent it results in de motivation
 The name hygiene factors is used because, like hygiene, the presence will not improve health, but
absence can cause health deterioration.
The conclusion he drew is that job satisfaction and job dissatisfaction are not opposites.

 The opposite of Satisfaction is No Satisfaction.

 The opposite of Dissatisfaction is No Dissatisfaction.

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Remedying the causes of dissatisfaction will not create satisfaction. Nor will adding the factors
of job satisfaction eliminate job dissatisfaction. If you have a hostile work environment, giving
someone a promotion will not make him or her satisfied. If you create a healthy work
environment but do not provide members of your team with any of the satisfaction factors, the
work they're doing will still not be satisfying.

II. ASSUMPTIONS THEORY

5. DOUGLAS McGREGOR’S THEORY X AND THEORY Y
What do you think motivates your people to come to work each morning?
Do you believe that they get great satisfaction  from their work and take pride in doing the best
possible job? Or do you think that they see it as a burden, and simply work for the money?
These assumptions about your team members can have a significant influence on how you
manage them.
In the 1960s, social psychologist Douglas McGregor developed two contrasting theories that
explained how managers' beliefs about what motivates their people can affect their management
style. He labeled these Theory X and Theory Y. These theories continue to be important even
today.
Understanding Theory X and Theory Y
Theory X and Theory Y were first explained by McGregor in his book, 'The Human Side
of Enterprise,' and they refer to two styles of management – authoritarian (Theory X) and
participative (Theory Y).
If you believe that your team members dislike their work and have little motivation, then,
according to McGregor, you'll likely use an authoritarian style of management. This approach is
very "hands-on" and usually involves micromanaging people's work to ensure that it gets done
properly. McGregor called this Theory X.
On the other hand, if you believe that your people take pride in their work and see it as
a challenge , then you'll more likely adopt a participative management style. Managers who use
this approach trust their people to take ownership of their work and do it effectively by
themselves. McGregor called this Theory Y.

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 The approach that you take will have a significant impact on your ability to motivate your
team members. So, it's important to understand how your perceptions of what motivates them
can shape your management style.
We'll now take a more in-depth look at the two different theories, and discover how and
when they can be useful in the workplace.

Theory X
Theory X managers tend to take a pessimistic view of their people, and assume that they
are naturally unmotivated and dislike work. As a result, they think that team members need to be
prompted, rewarded  or punished constantly to make sure that they complete their tasks.
Work in organizations that are managed like this can be repetitive, and people are often
motivated with a "carrot and stick" approach. Performance appraisals  and remuneration are
usually based on tangible results, such as sales figures or product output, and are used to control
staff and "keep tabs" on them.
This style of management assumes that workers:
 Dislike their work.
 Avoid responsibility and need constant direction.
 Have to be controlled, forced and threatened to deliver work.
 Need to be supervised at every step.
 Have no incentive to work or ambition, and therefore need to be enticed by rewards to
achieve goals.

According to McGregor, organizations with a Theory X approach tend to have several tiers of
managers and supervisors to oversee and direct workers. Authority is rarely delegated, and
control remains firmly centralized. Managers are more authoritarian and actively intervene to get
things done.
Although Theory X management has largely fallen out of fashion in recent times, big
organizations may find that adopting it is unavoidable due to the sheer number of people that
they employ and the tight deadlines that they have to meet.

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Theory Y
Theory Y managers have an optimistic, positive opinion of their people, and they use a
decentralized, participative management style. This encourages a more collaborative , trust-
based  relationship between managers and their team members.
People have greater responsibility, and managers encourage them to develop their skills and
suggest improvements. Appraisals are regular but, unlike in Theory X organizations, they are
used to encourage open communication rather than control staff.
Theory Y organizations also give employees frequent opportunities for promotion.
This style of management assumes that workers are:
 Happy to work on their own initiative.
 More involved in decision making.
 Self-motivated to complete their tasks.
 Enjoy taking ownership  of their work.
 Seek and accept responsibility, and need little direction.
 View work as fulfilling and challenging.
 Solve problems creatively and imaginatively.

Theory Y has become more popular among organizations. This reflects workers' increasing
desire for more meaningful careers  that provide them with more than just money.
It's also viewed by McGregor as superior to Theory X, which, he says, reduces workers to "cogs
in a machine," and likely demotivates people in the long term.

III.PROCESS BASED THEORIES.

Process-based theories view motivation as a rational process. Individuals analyze their
environment, develop reactions and feelings, and react in certain ways. Under this category, we
will review equity theory, expectancy theory, and reinforcement theory. 
6. JAMES STACY ADAM’S EQUITY THEORY
 An important factor in motivation is whether individuals perceive the reward structure as
being fair or not.

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  This issue can be sorted out by using equity theory, which refers to an individual’s
subjective judgement about the fairness of the reward he or she gets, relative to the
inputs in comparison with the rewards of others.
 The essential aspect of theory may be expressed as follows:
Outcomes by a perso n outcomes by another person
=
Inputs by a person Incomes by another person

 Equity theory clearly states that there should be a balance of the outcomes/inputs
relationship for one person in comparison with that of another person.
 The theory also states that if people feel that they are inequitably rewarded, they may be
dissatisfied, they may reduce the quality or quantity of output, or they may even leave
the organization.
 One of the problems is that people may overestimate their own contributions and the
rewards others receive.

7. VROOM’S EXPECTANCY THEORY

Victor Vroom posed a theory that shifted the focus from the needs of a person to the
outcomes of his action, as the source of his motivation. According to this theory, a person
doesn’t derive his motivation from identifying and taking actions to meet his needs, rather he
derives his motivation by assessing the outcomes of those very actions.
If he was pleased with the outcome of the actions, and was convinced that such
performances will help him to address his needs, then the person will find motivation from it,
and all his subsequent actions will be the result of this new-found motivation.
He proposed the idea that a person needs to be given that initial confidence that his
output has had the desired outcome, so that he can use this confidence as an impetus and
proceed on to other actions, which will deliver the desired results.
According to Vroom, a person can be motivated only when he sees a connection between
the action he took, the efforts he put, and the outcome of his performance.

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Depending on these three factors, he defined these three variables −
 Expectancy
 Instrumentality
 Valence
Force = Valence x Expectancy

Defining Expectancy
Expectancy is the belief that by putting adequate effort, it’s possible to enhance the
performance that you will deliver. It is affected by factors like time needed for the work, money
to be spent, skills needed for the job, along with having authorization and clearance to do it.

While managing employees, it’s very important to put give those jobs that they are
confident they can do by themselves. In addition to that, you need to make sure that they have
the resources they need, and a realistic time-frame to deliver the output.

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Defining Instrumentality
Instrumentality defines the belief that good performance is appreciated and rewarded
when it brings in better outcome. This is one of the major motivational points for all the
employees in a company. They believe that if they perform well, the results will be good. And if
the results are good, then their efforts will be taken into consideration and they will be rewarded
for it.
This belief is influenced by the clear representation of what needs to be achieved to get
the reward, by recognizing key people who can determine whether you will receive this reward
(e.g.- boss, supervisor), and also the transparency in the process that decides whom to reward.
To practice instrumentality, a supervisor needs to have a complete understanding of the
reward system, and also needs to know what could be the possible outcomes so that he always
remains aware of what to do in which situation. The rewarding system should be clearly drawn
out so that the employees can know what their efforts have earned them.
Drawing targets in numbers is often the best way to avoid any ambiguous interpretation
of hard work. Managers use tabs, flags, and whiteboards to convert the achievements of their
teams in numerical values to enhance the clarity of their achievements.
There shouldn’t be anything left to guesses. No team should be left wondering why they
didn’t get the reward they were expecting, whereas some other team has won it. There must be
transparency in the entire process.

What is Valence?
Valence is the value of a reward on-offer to an individual. It is the importance or
necessity that an individual employee places on the incentive that’s offered to him at the end of
the task. For example, a manager offers a handsome hourly compensation to his entire team if
they were to work overtime that weekend on Saturday. To some people in the team, it could be
a nice reward, but someone who values spending quality time at home with his family in
weekends won’t be thrilled at the prospect of losing a weekend.

On the other hand, there could be an employee in the same team whose financial
conditions make extra income a very good incentive for him. He might be motivated to go for
the extrapay because of his needs. In this case, we can observe that two people in the same team

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will have a different valence for the same proposition. Hence, managers need to be wise in
offering a reward that will have high valence points for all the employees in the team, or else
the entire team will fail to be motivated.

8. THE PORTER AND LAWLER MOTIVATIONAL THEORY

Lyman Porter and Edward Lawler came up with a comprehensive theory of motivation,
combining the various aspects that we have so far been discussing and using two additional
variables in their model. Though built in large part on Vroom’s expectancy model. Porter and
Lawler’s model is a more complete model of motivation. This model has been practically
applied also in their study of managers. This is a multi-variate model which explains the
relationship that exists between job attitudes and job performance.

Assumptions: This model is based on four basic assumptions about human behaviour:

(i) As mentioned above, it is a multi variate model. According to this model, individual
behaviour is determined by a combination of factors in the individual and in the
environment
(ii) Individuals are assumed to be rational human beings who make conscious decisions
about their behaviour in the organisations.
(iii) Individuals have different needs, desires and goals.

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(iv) On the basis of their expectations, individuals decide between alternate behaviours and
such decided behaviour will lead to a desired outcome.

Elements:

1. Effort: Effort refers to the amount of energy which a person exerts on a job.

2. Value of Reward: First of all people try to figure out whether the rewards that are likely to be
received from doing a job will be attractive to them. This is referred to as valence in Vroom’s
theory. A person who is looking for more money, for example, extra vacation time may not be
an attractive reward. If the reward to be obtained is attractive or valent, then the individual will
put extra efforts to perform the job. otherwise he will lower his effort.

3. Perceived Effort Reward Probability: In addition, before people put forth any effort, they
will also try to assess the probability of a certain level of effort leading to a desired level of
performance and the possibility of that performance leading to certain kinds of rewards. Based
on the valence of the reward and the effort reward probability, people can decide to put in
certain level of work effort.

4. Performance: Effort leads to performance. The expected level of performance will depend
upon the amount of effort, the abilities and traits of the individual and his role perceptions.
Abilities include knowledge, skills and intellectual capacity to perform the job. Traits which are
important for many jobs are endurance, pre-servance, and goal directedness. Thus, abilities and
traits will moderate the effort- performance relationship.

In addition, people performing the jobs should have accurate role perception which refers
to the wav in which people define for the jobs. People may perceive their roles differently. Only
those, who perceive their roles as is defined by the organization, will be able to perform well
when they put forth the requisite effort.

5. Rewards: Performance leads to certain outcomes in the shape of two types of rewards namely
extrinsic rewards and intrinsic rewards. Extrinsic rewards are the external rewards given by
others in the organization in the form of money, recognition or praise. Intrinsic rewards are

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internal feelings of job sell esteem and sense of competence that individuals feel when they do a
good job.

6. Satisfaction: Satisfaction will result from both extrinsic and intrinsic rewards. However, for
being satisfied, an individual will compare his actual rewards with the perceived rewards if
actual rewards meet or exceed perceived equitable rewards, the individual will feel satisfied and
if these are less than the equitable rewards, the individual will feel dissatisfied

9. GOAL SETTING THEORY

In 1960’s, Edwin Locke put forward the Goal-setting theory of motivation. This theory
states that goal setting is essentially linked to task performance. It states that specific and
challenging goals along with appropriate feedback contribute to higher and better task
performance.
In simple words, goals indicate and give direction to an employee about what needs to be
done and how much efforts are required to be put in.
The important features of goal-setting theory are as follows:
The willingness to work towards attainment of goal is main source of job motivation. Clear,
particular and difficult goals are greater motivating factors than easy, general and vague
goals.

Specific and clear goals lead to greater output and better performance. Unambiguous,
measurable and clear goals accompanied by a deadline for completion avoids
misunderstanding.

Goals should be realistic and challenging. This gives an individual a feeling of pride and
triumph when he attains them, and sets him up for attainment of next goal. The more
challenging the goal, the greater is the reward generally and the more is the passion for
achieving it.

Better and appropriate feedback of results directs the employee behaviour and contributes to
higher performance than absence of feedback. Feedback is a means of gaining reputation,
making clarifications and regulating goal difficulties. It helps employees to work with more
involvement and leads to greater job satisfaction.

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 Employees’ participation in goal is not always desirable.

Participation of setting goal, however, makes goal more acceptable and leads to more
involvement.

Goal setting theory has certain eventualities such as:

a. Self-efficiency- Self-efficiency is the individual’s self-confidence and faith that he
has potential of performing the task. Higher the level of self-efficiency, greater will
be the efforts put in by the individual when they face challenging tasks. While, lower
the level of self-efficiency, less will be the efforts put in by the individual or he might
even quit while meeting challenges.
b. Goal commitment- Goal setting theory assumes that the individual is committed to
the goal and will not leave the goal. The goal commitment is dependent on the
following factors:
i. Goals are made open, known and broadcasted.
ii. Goals should be set-self by individual rather than designated.
iii. Individual’s set goals should be consistent with the organizational goals and
vision.
Advantages of Goal Setting Theory
 Goal setting theory is a technique used to raise incentives for employees to complete
work quickly and effectively.
 Goal setting leads to better performance by increasing motivation and efforts, but also
through increasing and improving the feedback quality.
 Limitations of Goal Setting Theory
 At times, the organizational goals are in conflict with the managerial goals. Goal conflict
has a detrimental effect on the performance if it motivates incompatible action drift.
 Very difficult and complex goals stimulate riskier behaviour.
 If the employee lacks skills and competencies to perform actions essential for goal, then
the goal-setting can fail and lead to undermining of performance.
 There is no evidence to prove that goal-setting improves job satisfaction.

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10. B.F.SKINNER’S REINFORCEMENT THEORY
Reinforcement theory is based on the work of Ivan Pavlov in behavioral conditioning and the
later work B. F. Skinner did on operant conditioning (Skinner, 1953). According to this theory,
behavior is a function of its consequences. Imagine that even though no one asked you to, you
stayed late and drafted a report. When the manager found out, she was ecstatic and took you out
to lunch and thanked you genuinely. The consequences following your good deed were
favorable, and therefore you are more likely to do similar good deeds in the future. In contrast, if
your manager had said nothing about it and ignored the sacrifice you made, you would be less
likely to demonstrate similar behaviors in the future, or your behavior would likely become
extinct.

Despite the simplicity of reinforcement theory, how many times have you seen positive
behavior ignored or, worse, negative behavior rewarded? In many organizations, this is a familiar
scenario. People go above and beyond the call of duty, and yet their behaviors are ignored or
criticized. People with disruptive habits may receive no punishments because the manager is
afraid of the reaction the person will give when confronted. They may even receive rewards such
as promotions so that the person is transferred to a different location and becomes someone
else’s problem! Moreover, it is common for people to be rewarded for the wrong kind of
behavior. Steven Kerr labeled this phenomenon as “the folly of rewarding A while hoping for B
(Kerr, 1995).” For example, a company may make public statements about the importance of
quality. Yet, they choose to reward shipments on time regardless of the number of known defects
contained in the shipments. As a result, employees are more likely to ignore quality and focus on
hurrying the delivery process.

Reinforcement theory describes four interventions to modify employee behavior. Two of

these are methods of increasing the frequency of desired behaviors while the remaining two are
methods of reducing the frequency of undesired behaviors.

Reinforcement Interventions

Positive reinforcement is a method of increasing the desired behavior. Positive reinforcement

involves making sure that behavior is met with positive consequences. Praising an employee for
treating a customer respectfully is an example of positive reinforcement. If the praise

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immediately follows the positive behavior, the employee will see a link between behavior and
positive consequences and will be motivated to repeat similar behaviors.

Negative reinforcement is also used to increase the desired behavior. Negative reinforcement
involves removal of unpleasant outcomes once desired behavior is demonstrated. Nagging an
employee to complete a report is an example of negative reinforcement. The negative stimulus in
the environment will remain present until positive behavior is demonstrated. The problem with
negative reinforcement may be that the negative stimulus may lead to unexpected behaviors and
may fail to stimulate the desired behavior. For example, the person may start avoiding the
manager to avoid being nagged.
Extinction occurs when a behavior ceases as a result of receiving no reinforcement. For
example, suppose an employee has an annoying habit of forwarding e-mail jokes to everyone in
the department, cluttering up people’s in-boxes and distracting them from their work.
Commenting about the jokes, whether in favorable or unfavorable terms, may be encouraging the
person to keep forwarding them. Completely ignoring the jokes may reduce their frequency.

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 Punishment is another method of reducing the frequency of undesirable behaviors.
Punishment involves presenting negative consequences following unwanted behaviors. Giving
an employee a warning for consistently being late to work is an example of punishment.

Reinforcement Schedules
In addition to types of reinforcements, the timing or schedule on which reinforcement is
delivered has a bearing on behavior. Reinforcement is presented on a continuous schedule if
reinforcers follow all instances of positive behavior. An example of a continuous schedule would
be giving an employee a sales commission every time he makes a sale. Fixed ratio
schedules involve providing rewards every nth time the right behavior is demonstrated, for
example, giving the employee a bonus for every 10th sale he makes. Fixed interval
schedules involve providing a reward after a specified period of time, such as giving a sales
bonus once a month regardless of how many sales have been made. Variable ratio involves a
random pattern, such as giving a sales bonus every time the manager is in a good mood.

LEADERSHIP
“I am not afraid of an army of lions led by a sheep; I am afraid of an army of sheep led by a
lion.” - Alexander the Great.
 The essence of leadership is followership.
 People tend to follow those whom they see as providing a means of achieving their own
desires, wants and needs.
Definition: Leadership is defined as “the art of influencing people so that they will strive
willingly and enthusiastically towards the attainment of group goals.
The Essence of Leadership
 Leadership refers to ability of one individual to influence others.
 The influence is exercised to change the behaviour of others.
 Change of behaviour is caused with an objective of achieving a shared goal.
 The Person influencing others(leader) possesses a set of qualities or characteristics with
which he or she to influence others
 Leadership is a group phenomenon. It involves interaction between two or more people.

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Manager’s Vs Leaders

Manager Leader

Managers have employees Leaders win followers.

Managers react to change.       Leaders create change.

Managers have good ideas.       Leaders implement them.

Managers communicate.           Leaders persuade

Managers direct groups.             Leaders create teams.

Managers take credit.                 Leaders take responsibility

Managers take credit.                 Leaders create shared focus.

Managers exercise power over people.   Leaders develop power with people

LEADERSHIP STYLES

Based on authority retained

 Authoritarian or Autocratic
 Democratic or Participative
 Free-rein (Laissez faire)
 Paternalistic

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Autocratic style
 Under the autocratic leadership style, all decision-making powers are centralized in the
leader, as with dictator leaders.
 They do not entertain any suggestions or initiatives from subordinates. The autocratic
management has been successful as it provides strong motivation to the manager.
 It permits quick decision-making, as only one person decides for the whole group and
keeps each decision to himself until he feels it is needed to be shared with the rest of the
group.
 High degree of dependency on the leader
 May be valuable in some types of business where decisions need to be made quickly and
decisively
Participative or democratic style
 The democratic leadership style favours decision-making by the group .
 They can win the cooperation of their group and can motivate them effectively and
positively.
 The decisions of the democratic leader are not unilateral as with the autocrat because
they arise from consultation with the group members and participation by them.
Laissez-faire or free rein style
A free rein leader does not lead, but leaves the group entirely to itself such a leader
allows maximum freedom to subordinates, i.e. they are given a free hand in deciding
their own policies and methods.
1. Can be very useful in businesses where creative ideas are important
2. Can be highly motivational, as people have control over their working life
3. Can make coordination and decision making time-consuming and lacking in
overall direction
4. Relies on good team work.
5. Relies on good interpersonal relations.
Paternalistic leadership
Paternalistic leadership is a managerial approach that involves a dominant authority
figure who acts as a patriarch or matriarch and treats employees and partners as though they are

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members of a large, extended family. In exchange, the leader expects loyalty and trust from
employees, as well as obedience. 
In some cultures, the gender-neutral phrase "parental leadership" has replaced the words
paternalistic or maternalistic. Regardless of what word is used to describe the parent, employees
who work in such an environment are expected to understand that the authority figure knows
what is best for the organization and trust that their leader will always have an employee's best
interests at heart. Employees are listened to, but the leader always makes the final decision. 
A successful paternalistic leader thinks about the big picture and considers how every
decision will affect "the family."  Paternal leaders value education and social skills and often go
out of their way to provide employees with opportunities for improving business and
interpersonal skills. A benefit of this managerial style, when carried out successfully, is that
employees may work harder to complete tasks within a given time frame so that they can reach,
and sometimes even exceed, their goals in order to please the parental leader and bring honor to
the family. 

Based on task versus people Emphasis

People Emphasis

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Based on assumptions about people : McGregor’s theory

Theory Y

LIKERT’S FOUR STYLE OF LEADERSHIP

1. Exploitive authoritative
In this style, the leader has a low concern for people and uses such methods as threats and
other fear-based methods to achieve conformance. Communication is almost entirely
downwards and the psychologically distant concerns of people are ignored.
2. Benevolent authoritative
When the leader adds concern for people to an authoritative position, a 'benevolent
dictatorship' is formed. The leader now uses rewards to encourage appropriate performance and
listens more to concerns
3. Consultative
The upward flow of information here is still cautious and rose-tinted to some degree,
although the leader is making genuine efforts to listen carefully to ideas. Nevertheless, major
decisions are still largely centrally made.
4. Participative
At this level, the leader makes maximum use of participative methods, engaging people
lower down the organization in decision-making. People across the organization are
psychologically closer together and work well together at all levels.

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Types of Leaders
I can categorize leaders into the following four types:
1. Thought leaders
2. Courageous leaders
3. Inspirational leaders
4. Servant leaders
I’ll mention a few leaders who strongly demonstrate each type of leader. However, many
leaders are a combination of two or more leadership types. For example, I have cited Martin
Luther King, Jr., as an example of an inspirational leader, but certainly, he also was courageous.
1. Thought Leaders
Thought leaders harness the power of ideas to actualize change. They stretch their followers
by helping them envision new possibilities. Oliver Wendell Holmes said, “The human mind once
stretched to a new idea never goes back to its original dimension.”
Sometimes a new idea can bring about a paradigm shift, which may provide a new lens for
viewing or a radically different context for understanding. At other times, the new idea leads to
only incremental change. But all change, whether large or small, starts with a new idea.
For centuries, thought leaders have competed in the marketplace of ideas using books,
papers, and oral presentations. They still do, but today they also use the Internet, social media,
and other technological advances to disseminate their ideas more rapidly and broadly. E-books,
blogs, e-zines, teleseminars, and Webinars have made thought leadership instantaneously
available to ordinary citizens.
Examples of thought leaders:
Many of Jack Welch’s ideas challenged conventional business practices. Some of his
leading-edge ideas included “workout and best practices,” stretch goals, creating boundary-less
organization (breaking down all “silos”), and pursuing Six Sigma quality.
Steve Jobs was the co-founder, chairman, and CEO of Apple Inc., where he oversaw the
development of the iMac, iTunes, iPod, iPhone, iPad, and numerous other innovations. He has
been referred to as the “Father of the Digital Revolution,” “a master of innovation,” and “the
master evangelist of the digital age.”
Dr. W. Edwards Deming was an American statistician, professor, author, lecturer, and
consultant. After World War II, his ideas about quality and process control had a major positive

33
impact and influence on Japanese manufacturing businesses. Subsequently, his concepts and
teachings spurred a major quality revolution among American manufacturers and consumers.
Thought leaders attract followers and initiate change by the power of their ideas.  
2. Courageous Leaders
Courageous leaders bravely pursue a vision in the face of considerable opposition and risks.
They have strong convictions about their mission (purpose), vision (long-term goals), and values
(right and wrong). They speak up for their core beliefs and fight for their values, even when their
stand is unpopular.
Rudy Giuliani, the former mayor of New York City, said, “There are many qualities that
make a great leader. But having strong beliefs, being able to stick with them through popular and
unpopular times, is the most important characteristics of a great leader.”
In addition, they seek the truth and speak the truth.
Examples of courageous leaders:
Rosa Parks was an African-American civil rights activist, who the U.S. Congress called
“the first lady of civil rights” and “the mother of the freedom movement.” On December 1, 1955,
in Montgomery, AL, she refused to obey the bus driver’s order that she give up her seat to a
white passenger. Her great courage marked a pivotal point in the Civil Rights Movement.
Abraham Lincoln, the 16th president of the United States, served during the most
difficult and dangerous period of our nation’s history. Even though his life was constantly in
danger and his policies were unpopular with many, he steadfastly held to his convictions and
governed with strength, fairness, and dignity. On January 1, 1863, he courageously issued his
memorable Emancipation Proclamation, which declared the freedom of slaves within the
Confederacy.
Sherron Watkins (Enron), Coleen Rowley (FBI), and Cynthia Cooper (WorldCom) are
three “whistleblowers” who had the courage to confront higher-ups in their organizations, even
though it meant jeopardizing their jobs and careers. In 2002, Time magazine selected them as
persons of the year.
Courageous leaders attract followers and motivate people to change by their willingness
to take risks and stand up for their beliefs and values.

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 3. Inspirational Leaders
Inspirational leaders promote change by the power of their passionate commitment to
ideas and ideals. They lift our eyes from present practicalities to future possibilities. Their words
stir up our spirits, strengthen our convictions, and move us to action. We are eager to follow
them because they call forth the best that is in us.
Inspirational leaders have positive attitudes that create strong emotional connections with
people. Their speech is enlivened with words such as justice, freedom, honor, respect, pride, and
love. Their affirming and encouraging demeanor builds the confidence of their followers and
elicits their wholehearted devotion. Their can-do attitude keeps hope alive during difficult times.
Inspirational leaders create a sense of urgency by explaining why it’s important to take
action sooner rather than later. In addition, they describe actionable steps people need to take.
Examples of inspirational leaders:
Ronald Reagan, the 40th president of the United States, was known for his strong
leadership on behalf of free enterprise and politically conservative ideals. His inspirational
leadership style incorporated excellent communication skills seasoned with humor and optimism.
He had a sign on his desk in the Oval Office that read, “It can be done!”
Martin Luther King, Jr., was an American clergyman, activist, and leader in the African-
American Civil Rights Movement. He is best known for his belief in nonviolent civil
disobedience. His words and actions have inspired many people to speak up and stand up for
what’s right.
Pat Summit was the leader of the University of Tennessee Lady Volunteers basketball
program for 38 years. She was known as an intense, demanding, focused, determined, and
inspiring coach. She compiled an amazing record of 1,098 wins and 208 losses, winning eight
NCAA national championships along the way.
Inspirational leaders attract followers and motivate people to change by the power of
their passion and their strong convictions.

4. Servant Leaders
Servant leaders care deeply about people. They seek to remove the barriers and obstacles that
hold others back from achieving their full potential. They strive to create an environment where
their followers can do their best work. Servant leaders frequently ask, “How can I help?”

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Former AT&T executive Robert K. Greenleaf popularized the concept of the servant leader in
“The Servant as Leader,” an essay first published in 1970. Kent Keith, CEO of the Greenleaf
Center for Servant Leadership, states, “I think the simplest way to explain it would be to say that
servant leaders focus on identifying and meeting the needs of others rather than trying to acquire
power, wealth, and fame for themselves.”
Examples of servant leaders include:
Mother Teresa founded the Missionaries of Charity, a Roman Catholic religious
congregation, in Calcutta, India. Today, the ministry has more than 4,500 sisters ministering in
133 countries. Members vow to give “wholehearted and free service to the poorest of the poor.”
Oprah Winfrey is the chairman of Harpo Inc. Her focus is helping others succeed. Many
of her TV programs and outreach initiatives are aimed at removing obstacles, so people can
achieve their potential. Her goal is to empower people to achieve their dreams.
Max DePree was the CEO of Herman Miller office furniture company from 1980 to
1987. Max states, “The first responsibility of a leader is to define reality. The last is to say ‘thank
you.’ In between, the leader is a servant.”
Servant leaders attract followers and motivate people to change by helping to remove
obstacles that are in the way of their growth and development.
Successful leaders come in different shapes and sizes. No two are alike, and no single
leadership style is always best. All leaders want to change the status quo, but they use different
means. Some take the lead with their ideas, while others lead with their passion and conviction.
Still others lead by demonstrating courage in the face of risks and the unknown, and some bring
about change by serving others.

THEORIES OF LEADERSHIP
The trait model of leadership is based on the characteristics of many leaders - both
successful and unsuccessful - and is used to predict leadership effectiveness. The resulting lists
of traits are then compared to those of potential leaders to assess their likelihood of success or
failure.

Scholars taking the trait approach attempted to identify physiological (appearance, height,
and weight), demographic (age, education and socioeconomic background), personality, self-
confidence, and aggressiveness), intellective (intelligence, decisiveness, judgment, and

36
knowledge), task-related (achievement drive, initiative, and persistence), and social
characteristics (sociability and cooperativeness) with leader emergence and leader effectiveness.

Successful leaders definitely have interests, abilities, and personality traits that are different from
those of the less effective leaders. Through many researches were conducted in the last three
decades of the 20th century, a set of core traits of successful leaders have been identified. These
traits are not responsible solely to identify whether a person will be a successful leader or not,
but they are essentially seen as preconditions that endow people with leadership potential.

Among the core traits identified are:

 Achievement drive: High level of effort, high levels of ambition, energy and initiative
 Leadership motivation: an intense desire to lead others to reach shared goals
 Honesty and integrity: trustworthy, reliable, and open
 Self-confidence: Belief in one’s self, ideas, and ability
 Cognitive ability: Capable of exercising good judgment, strong analytical abilities, and
conceptually skilled
 Knowledge of business: Knowledge of industry and other technical matters
 Emotional Maturity: well adjusted, does not suffer from severe psychological disorders.
 Others: charisma, creativity and flexibility

Strengths/Advantages of Trait Theory

 It is naturally pleasing theory.
 It is valid as lot of research has validated the foundation and basis of the theory.
 It serves as a yardstick against which the leadership traits of an individual can be
assessed.
 It gives a detailed knowledge and understanding of the leader element in the leadership
process.

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BEHAVIOURAL THEORIES
 In this theory full focus is on the actual behavior and actions of leaders instead of their
personal qualities.
 This theory emphasis on what the leaders do and how they behave to become effective
leaders.
 According to trait theory leadership is inherited but according to behavior theory
leadership can be learned.
 Several attempts have been made to identify the dimensions of leader behavior.

OHIO STATE STUDIES

 In 1945 the Bureau of Business Research at Ohio State University initiated a series of
studies on leadership.
 The main objective of the studies was to identify the major dimensions of leadership and
to investigate the effect of leader’s behavior on employee behavior and satisfaction.
 Ultimately, these studies narrowed the description of leader behavior to 2 dimensions:
 Initiating structure
 Consideration

 Initiating structure: defines and organizes relationship between himself and members of
the group.
 Establishes well defined patterns of organization
 Develop channels of communication and methods or procedure.
 To supervise the activities of employees.

 Consideration: behavior characterized by:

 Friendliness
 Mutual trust
 Respect
 Supportiveness
 Openness
 Concern for the welfare of employees

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 MICHIGAN STUDIES
 These empirical studies were conducted slightly after WORLD WAR II by the institute
of Social Research at the university of Michigan.
 The purpose of these studies was to identify styles of leadership behavior that results in
higher performance and satisfaction of a group.
These studies distinguished between two distinct styles of leadership:
1. Production centered Leadership: also known as task oriented leadership. Stressed on
certain points:
 Rigid work standards, procedures and rules.
 Close supervision of the subordinates
 Technical aspect of the job
 Employees are considered as a tool to accomplish the goal (not treating like a
human being).
2. Employee centered Leadership: (relation oriented leadership)
 To treat subordinates as a human beings
 To show concern for the employees needs, welfare etc…
 To foster employee participation in decision making
 To motivate employees

SITUATIONAL THEORY OF LEADERSHIP

  The general belief of situational theory is that leaders are products of real situation rather
that gifts of nature.
A large number of studies have been made on the premise that leadership is strongly
affected by the situation from which the leader emerges and in which he or she operates.
Example are – the rise of Mao Ts c-tung in China in the period after World War second and the
emergence of Gandhi in India during the eighty decades of the twentieth century.
This theory is also known as contingency   theory which is mainly developed by F.E.Fiedler and
his associates.
This approach mainly focuses on the following elements:
a) The leader member relations:  The effectiveness of a leader depends upon how the leader
is accepted by its members, how much he is popular among the members.

39
 b) Task structure: If the tasks are clear, the quality of performance can be more easily
controlled. Designing well-defined task structure is a success for a good leader.
c) Position power:  A leader with clear and considerable position power can obtain good
fellowship more easily than one without such power.

PATH GOAL LEADERSHIP THEORY

The Path-Goal model is a theory based on specifying a leader's  style  or behavior
that best fits the employee and work environment in order to achieve a goal (House,
Mitchell, 1974). The goal is to increase your employees' motivation, empowerment,
and satisfaction so they become productive members of the organization.

Path-Goal is based on Vroom's (1964) expectancy theory  in which an individual

will act in a certain way based on the expectation that the act will be followed by a
given outcome and on the attractiveness of that outcome to the individual. The path-
goal theory was first introduced by Martin Evans (1970) and then further developed by
House (1971).

The path-goal theory can best be thought of as a process in which leaders select
specific behaviors that are best suited to the employees' needs and the working
environment so that they may best guide the employees through their  path in the
obtainment of their daily work activities (goals) (Northouse, 2013).

While Path-Goal Theory is not a detailed process, it generally follows these basic
steps as shown in the graphic below:
1. Determine the employee and environmental characteristics
2. Select a leadership style
3. Focus on motivational factors that will help the employee succeed
4. Focus on motivational factors that will help the employee succeed

40
Employee Characteristics
Employees interpret their leader's behavior based on their needs, such as the
degree of structure they need, affiliation, perceived level of ability, and desire for
control. For example, if a leader provides more structure than what they need, they
become less motivated. Thus, a leader needs to understand their employees so they
know how to best motivate them.

41
Task and Environmental Characteristics
Overcoming obstacles is a special focus of path-goal theory. If an obstacle becomes
too strong, then the leader needs to step in and help the employee select a path to work
around it. Some of the more difficult task characteristics that often arise are:
o Design of the task - The design of the task might call for the leader's support.
For example, if the task is ambiguous, then the leader might have to give it more
structure or an extremely difficult task might call for leader support.
o Formal authority system - Depending upon the task authority, the leader can
provide clear goals and/or give the employee some or all control.
o Work group - If the team is non-supportive, then the leader needs to be
cohesiveness and espouse esprit-de-corps that provides comradeship,
enthusiasm, and devotion to all team members.

Leader Behavior or Style

The independent variables of Path-Goal Theory are the leader's behavior — the
leader adjusts her style of behavior to the employee and task characteristics so that the
employee's motivation is to excel at their goal.
House and Mitchell (1974) defined four types of leader behaviors or styles: Directive,
Supportive, Participative, and Achievement (explained in detail below). They are based
on two factors that were identified by an Ohio State University study behaviors
(Stogdill, 1974):
o Consideration - relationship behaviors, such as respect and trust.
o Initiating Structure - task behaviors, such as organizing, scheduling, and seeing that work
is completed.
The first behavior listed below, Directive, is based on  initiating structure. The other
three (achievement, participative, and supportive) are based upon consideration.
The four path-goal types of leader behaviors are:
o Directive: The leader informs her followers on what is expected of them, such as telling
them what to do, how to perform a task, and scheduling and coordinating work. It is most
effective when people are unsure about the task or when there is a lot of uncertainty
within the environment.

42
 o Supportive: The leader makes work pleasant for the workers by showing concern for
them and by being friendly and approachable. It is most effective in situations in which
tasks and relationships are physically or psychologically challenging.
o Participative: The leader consults with his followers before making a decision on how to
proceed. It is most effective when subordinates are highly trained and involved in their
work.
o Achievement: The leader sets challenging goals for her followers, expects them to
perform at their highest level, and shows confidence in their ability to meet this
expectation. It is most effective in professional work environments, such as technical,
scientific; or achievement environments, such as sales.
The leaders' behavior is not set in stone, as there are other  leadership styles  that may
be used depending upon the situation. For example, House (1996) defined four other
behaviors:
o Work Facilitation
o Group Oriented Decision Process
o Work Group Representation and Networking
o Value Based

BLAKE AND MOUTON’S MANAGERIAL GRID

The treatment of task orientation and people orientation as two independent dimensions
was a major step in leadership studies. Many of the leadership studies conducted in the 1950s at
the University of Michigan and the Ohio State University focused on these two dimensions.
Building on the work of the researchers at these Universities, Robert Blake and Jane Mouton
(1960s) proposed a graphic portrayal of leadership styles through a managerial grid (sometimes
called leadership grid). The grid depicted two dimensions of leader behavior, concern for
people (accommodating people’s needs and giving them priority) on y-axis and concern for
production(keeping tight schedules) on x-axis, with each dimension ranging from low (1) to high
(9), thus creating 81 different positions in which the leader’s style may fall.

43
The five resulting leadership styles are as follows:
1. Impoverished Management (1, 1): Managers with this approach are low on both the
dimensions and exercise minimum effort to get the work done from subordinates. The
leader has low concern for employee satisfaction and work deadlines and as a result
disharmony and disorganization prevail within the organization. The leaders are termed
ineffective wherein their action is merely aimed at preserving job and seniority.
2. Task management (9, 1): Also called dictatorial or perish style. Here leaders are more
concerned about production and have less concern for people. The style is based on
theory X of McGregor. The employees’ needs are not taken care of and they are simply a
means to an end. The leader believes that efficiency can result only through proper
organization of work systems and through elimination of people wherever possible. Such
a style can definitely increase the output of organization in short run but due to the strict
policies and procedures, high labour turnover is inevitable.

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3. Middle-of-the-Road (5, 5): This is basically a compromising style wherein the leader
tries to maintain a balance between goals of company and the needs of people. The leader
does not push the boundaries of achievement resulting in average performance for
organization. Here neither employee nor production needs are fully met.
4. Country Club (1, 9): This is a collegial style characterized by low task and high people
orientation where the leader gives thoughtful attention to the needs of people thus
providing them with a friendly and comfortable environment. The leader feels that such a
treatment with employees will lead to self-motivation and will find people working hard
on their own. However, a low focus on tasks can hamper production and lead to
questionable results.
5. Team Management (9, 9): Characterized by high people and task focus, the style is
based on the theory Y of McGregor and has been termed as most effective style
according to Blake and Mouton. The leader feels that empowerment, commitment, trust,
and respect are the key elements in creating a team atmosphere which will automatically
result in high employee satisfaction and production.

45
Advantages of Blake and Mouton’s Managerial Grid
The Managerial or Leadership Grid is used to help managers analyze their own
leadership styles through a technique known as grid training. This is done by administering a
questionnaire that helps managers identify how they stand with respect to their concern for
production and people.
Limitations of Blake and Mouton’s Managerial Grid
The model ignores the importance of internal and external limits, matter and scenario.
Also, there are some more aspects of leadership that can be covered but are not.

TRANSFORMATIONAL LEADERSHIP THEORY

Creating high-performance workforce has become increasingly important and to do so
business leaders must be able to inspire organizational members to go beyond their task
requirements. As a result, new concepts of leadership have emerged - transformational leadership
being one of them.
Transformational leadership may be found at all levels of the organization: teams,
departments, divisions, and organization as a whole. Such leaders are visionary, inspiring,
daring, risk-takers, and thoughtful thinkers. They have a charismatic appeal. But charisma alone
is insufficient for changing the way an organization operates. For bringing major changes,
transformational leaders must exhibit the following four factors:

Model of Transformational Leadership

46
 Inspirational Motivation: The foundation of transformational leadership is the promotion of
consistent vision, mission, and a set of values to the members. Their vision is so compelling
that they know what they want from every interaction. Transformational leaders guide
followers by providing them with a sense of meaning and challenge. They work
enthusiastically and optimistically to foster the spirit of teamwork and commitment.

Intellectual Stimulation: Such leaders encourage their followers to be innovative and

creative. They encourage new ideas from their followers and never criticize them publicly for
the mistakes committed by them. The leaders focus on the “what” in problems and do not
focus on the blaming part of it. They have no hesitation in discarding an old practice set by
them if it is found ineffective.

Idealized Influence: They believe in the philosophy that a leader can influence followers only
when he practices what he preaches. The leaders act as role models that followers seek to
emulate. Such leaders always win the trust and respect of their followers through their action.
They typically place their followers needs over their own, sacrifice their personal gains for
them, ad demonstrate high standards of ethical conduct. The use of power by such leaders is
aimed at influencing them to strive for the common goals of the organization.

Individualized Consideration: Leaders act as mentors to their followers and reward them for
creativity and innovation. The followers are treated differently according to their talents and
knowledge. They are empowered to make decisions and are always provided with the needed
support to implement their decisions.
The common examples of transformational leaders are Mahatma Gandhi and Obama.

Criticisms of Transformational Leadership Theory

 Transformational leadership makes use of impression management and therefore lends
itself to amoral self promotion by leaders
 The theory is very difficult to e trained or taught because it is a combination of many
leadership theories.
 Followers might be manipulated by leaders and there are chances that they lose more than
they gain.

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Implications of Transformational Leadership Theory

The current environment characterized by uncertainty, global turbulence, and organizational

instability calls for transformational leadership to prevail at all levels of the organization. The
followers of such leaders demonstrate high levels of job satisfaction and organizational
commitment, and engage in organizational citizenship behaviors. With such a devoted
workforce, it will definitely be useful to consider making efforts towards developing ways of
transforming organization through leadership.

TRANSACTIONAL LEADERSHIP THEORY

The transactional style of leadership was first described by Max Weber in 1947 and then
by Bernard Bass in 1981. This style is most often used by the managers. It focuses on the basic
management process of controlling, organizing, and short-term planning. The famous examples
of leaders who have used transactional technique include McCarthy and de Gaulle.

Transactional leadership involves motivating and directing followers primarily through

appealing to their own self-interest. The power of transactional leaders comes from their formal
authority and responsibility in the organization. The main goal of the follower is to obey the
instructions of the leader. The style can also be mentioned as a ‘telling style’.

The leader believes in motivating through a system of rewards and punishment. If a

subordinate does what is desired, a reward will follow, and if he does not go as per the wishes of
the leader, a punishment will follow. Here, the exchange between leader and follower takes place
to achieve routine performance goals.

These exchanges involve four dimensions:

Contingent Rewards: Transactional leaders link the goal to rewards, clarify expectations,
provide necessary resources, set mutually agreed upon goals, and provide various kinds of
rewards for successful performance. They set SMART (specific, measurable, attainable,
realistic, and timely) goals for their subordinates.

Active Management by Exception: Transactional leaders actively monitor the work of their

subordinates, watch for deviations from rules and standards and taking corrective action to
prevent mistakes.

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 Passive Management by Exception: Transactional leaders intervene only when standards are
not met or when the performance is not as per the expectations. They may even use
punishment as a response to unacceptable performance.

Laissez-faire: The leader provides an environment where the subordinates get many

opportunities to make decisions. The leader himself abdicates responsibilities and avoids
making decisions and therefore the group often lacks direction.

Assumptions of Transactional Theory

 Employees are motivated by reward and punishment.
 The subordinates have to obey the orders of the superior.
 The subordinates are not self-motivated. They have to be closely monitored and
controlled to get the work done from them.

Implications of Transactional Theory

The transactional leaders overemphasize detailed and short-term goals, and standard rules
and procedures. They do not make an effort to enhance followers’ creativity and generation of
new ideas. This kind of a leadership style may work well where the organizational problems are
simple and clearly defined. Such leaders tend to not reward or ignore ideas that do not fit with
existing plans and goals.
The transactional leaders are found to be quite effective in guiding efficiency decisions
which are aimed at cutting costs and improving productivity. The transactional leaders tend to be
highly directive and action oriented and their relationship with the followers tends to be
transitory and not based on emotional bonds.
The theory assumes that subordinates can be motivated by simple rewards. The only
‘transaction’ between the leader and the followers is the money which the followers receive for
their compliance and effort.

Difference between Transactional and Transformational Leaders

Transactional leadership Transformational Leadership

49
Leadership is responsive Leadership is proactive

Works within the organizational culture Work to change the organizational culture by
implementing new ideas

Transactional leaders make employees Transformational leaders motivate and empower

achieve organizational objectives through employees to achieve company’s objectives by
rewards and punishment appealing to higher ideals and moral values

Motivates followers by appealing to their Motivates followers by encouraging them to transcend

own self-interest their own interests for those of the group or unit

Conclusion
The transactional style of leadership is viewed as insufficient, but not bad, in developing
the maximum leadership potential. It forms as the basis for more mature interactions but care
should be taken by leaders not to practice it exclusively, otherwise it will lead to the creation of
an environment permeated by position, power, perks, and politics.

MANAGEMENT BY OBJECTIVES (MBO): 

 MBO is popularised by Peter F Drucker in 1954, in his book “ Practice of Management”.
 MBO is a participative goal setting, choosing courses of action and decision making
between management and employees.
What is Management by Objective ?
The process of setting objectives in the organization to give a sense of direction to the
employees is called as Management by Objectives.
It refers to the process of setting goals for the employees so that they know what they are
supposed to do at the workplace.

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 Management by Objectives defines roles and responsibilities for the employees and help
them chalk out their future course of action in the organization.
Management by objectives guides the employees to deliver their level best and achieve
the targets within the stipulated time frame.

Need for Management by Objectives (MBO)

 The Management by Objectives process helps the employees to understand their duties at
the workplace.
 KRAs are designed for each employee as per their interest, specialization and educational
qualification.
 The employees are clear as to what is expected out of them.
 Management by Objectives process leads to satisfied employees. It avoids job mismatch
and unnecessary confusions later on.
 Employees in their own way contribute to the achievement of the goals and objectives of
the organization. Every employee has his own role at the workplace. Each one feels
indispensable for the organization and eventually develops a feeling of loyalty towards
the organization. They tend to stick to the organization for a longer span of time and
contribute effectively. They enjoy at the workplace and do not treat work as a burden.
 Management by Objectives ensures effective communication amongst the employees. It
leads to a positive ambience at the workplace.
 Management by Objectives leads to well defined hierarchies at the workplace. It ensures
transparency at all levels. A supervisor of any organization would never directly interact
with the Managing Director in case of queries. He would first meet his reporting boss
who would then pass on the message to his senior and so on. Everyone is clear about his
position in the organization.
 The MBO Process leads to highly motivated and committed employees.
 The MBO Process sets a benchmark for every employee. The superiors set targets for
each of the team members. Each employee is given a list of specific tasks.

Process of MBO

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1. Set the organisational goals : Establishing organisational wide plan and set company goals
2. Set departmental goals: Departmental heads based on the broader company goals (such as
increasing market share by 10% etc.) and with their superiors, jointly set goals for their depts.
3. Discuss departmental goals: The departmental heads would require the subordinates to set
their own preliminary individual goals.
4. Define Expected results: Departmental heads and their subordinates agree on a set of
participatively set short-term, and individual performance targets.
5. Performance reviews: Departmental heads compare each employee’s actual and targeted
performance, either periodically or annually.
While periodic review is intended to identify and solve specific performance problems,
the annual review is conducted to assess and reward one’s overall contribution to the
organisation.
MBO is often called a result-based performance appraisal system.

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6. Provide feedback: Both parties discuss and evaluate the actual progress made in achieving
goals, where things gone off the track and how the employees could meet the target nest time,
focusing attention on his strengths.

Limitations of Management by objectives Process

 It sometimes ignores the prevailing culture and working conditions of the organization.
 More emphasis is being laid on targets and objectives. It just expects the employees to
achieve their targets and meet the objectives of the organization without bothering much
about the existing circumstances at the workplace. Employees are just expected to
perform and meet the deadlines. The MBO Process sometimes do treat individuals as
mere machines.
 The MBO process increases comparisons between individuals at the workplace.
Employees tend to depend on nasty politics and other unproductive tasks to outshine their
fellow workers. Employees do only what their superiors ask them to do. Their work lacks
innovation, creativity and sometimes also becomes monotonous.

GROUP DYNAMICS
A group is defined as two or more individuals interacting and interdependent, who have come
together to achieve particular objectives.

Characteristics of a GROUP
 Two or more people
 Who interact with one another, (The members of a group occasionally meet, talk, and do
things together.)
 Share some common ideology, and (The member of a group have something in common
like common goals, common threat, security concern, etc.)
 See themselves as a group. (People who interact with each other and who have a
common ideology are attracted to one another.)

BASIS FOR COMPARISON GROUP TEAM

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Meaning A collection of individuals A group of persons having
who work together in collective identity joined
completing a task. together, to accomplish a
goal.

Leadership Only one leader More than one

Process Discuss, Decide and Discuss, Decide and Do.

Delegate.

Work Products Individual Collective

Focus on Accomplishing individual Accomplishing team goals.

goals.

Accountability Individually Either individually or

mutually

Group Dynamics
 Group dynamics contains two terms: Group and Dynamics.
 Group is basically a collectivity of two or more persons.
 Dynamics comes from Greek word meaning FORCE.
 Thus, “Group dynamics is concerned with the interactions of forces among group
members in a social situation.”
 Group dynamics refers to the attitudinal and behavioral characteristics of a group.
 Group dynamics concern how groups form, their structure and process, and how they
function.
 Group dynamics are relevant in both formal and informal groups of all types.

Why Do People Join Groups?

Security: Joining groups reduces insecurity of “standing alone”

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Status: Inclusion in a group viewed important by others provides recognition and status to its
members
Self-esteem: Groups can provide people with feelings of self worth.
Affiliation: Groups fulfill social needs through regular interaction.
Power: Group actions enable in achieving what one can’t individually.
Goal Achievement: Pooling talent, knowledge and power is needed to accomplish particular
tasks.

Group Behaviour: Meaning, Reasons, Effectiveness and Other Details

Meaning of Group Behaviour:

Individuals form groups. They live in groups. They move in groups. They work in
groups. Groups are important. They influence work and work behaviour. They cannot be
ignored. They exert significant influence on the organisation. They are inseparable from
organisation. They are useful for the organisation. They form foundation of human resources.
The study of group behaviour is important. Individual and group behaviour differs from each
other. Group behaviour affects productivity.
The importance of group behaviour has been realized from time to time. Elton Mayo and
his associates way back in 1920 conducted the famous Hawthorne experiments and came to
know that the group behaviour have major impact on productivity.
Human resources comprise individuals and individuals move in groups. Every manager
must possess the knowledge of group behaviour along with individual behaviour. He must
understand group psychology. He should understand individual behaviour in the context of group
behaviour. Individual behaviour is influenced by the group behaviour.
An individual’s work, job satisfaction and effective performance is influenced by the
group in which he moves. At lower level of the organisation it is the small groups of employees
work as a team. They have the responsibility to finish a task assigned to them within a stipulated
period of time.
If they come across a problem they tackle it by themselves. They get guidance from
senior fellow workers in solving the problem and accomplishing it. It is needless to say that
groups are important in employee’s life. They spend increasing proportion of time with the group
at workplace.

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 M.E. Shaw defined a group “as two or more people who interact and influence one
another.” Viewers in a theatre, passengers in a train are not a group unless they interact for long
and exert some influence on each other. Such people’s gatherings are referred to as collection.
They interact at a very low level nor they get influenced with each other but enjoy being
in collection. The collection of people may get-converted into a group temporarily if they are
caught up in a dangerous situation like fire, robbery etc. They will come over a problem fighting
as a group unitedly.

Reasons for Group:

Man is a social animal and he lives in groups, he moves in groups. So, group is inherent
to human beings.
Following are the few reasons why group is essential:
1. Management of modern organisations is making concerted efforts to introduce industrial
democracy at workplace. They are using task force, project teams, work committees where
workers get due representation. They participate very often in decision-making. This takes place
in groups.
2. The tasks in modern industries are becoming more complex, tedious and monotonous. To
change these conditions and make the environment at workplace more lively, work committees
and work groups and teams are formed to monitor the work and change.
3. To make participative management more effective and relieve executives of petty
responsibilities employees are given these responsibilities to carry on successfully and
effectively. Group of employees are also given joint responsibility to carry on the work.
4. Groups of all kinds and types are used by inviting their cooperation in all matters related to
production as well as with human relations to make the organisation effective.
5. There are several works which an individual cannot perform. To complete such tasks, group
efforts are required for its completion, e.g. building of a ship, making of a movie, construction of
a fly-over, a complex etc.
All these require coordinated and unified efforts of many individuals i.e. groups. A group can do
the work which cannot be performed by an individual or beyond his capabilities.
6. A group can make better judgment as compared to an individual.

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7. While accomplishing tasks group can use creative instinct and innovative ideas than a single
individual.
8. When group is working, all the benefits of division of labour accrue.
9. Individuals in a group communicate with each other and discuss work performance and
suggestions to make it better and excellent.
10. Group efforts substantially affect individual, his attitude and behaviour.
11. Group has the ability to satisfy the needs of its members. In a group an individual member
feels secured and he can directly get technical and work related assistance. They also get special
support when they are emotionally depressed.

Group Effectiveness:
Group is a social setting that offers knowledge, hard work and opportunities. The group
influences individual member’s attitude and behaviour. A group’s effectiveness brings about
organisational effectiveness which is essential for growth and prosperity of organisation. There
are certain measures of group effectiveness. They include:
(1) Productivity: Higher the productivity effective is the group. Quality and quantity of product
speaks for group effectiveness,
(2) Attendance: Each group member must attend the work regularly. Absenteeism and high
employee turnover speaks for laxity of the group. Fair attendance makes the group effective.
(3) Job Satisfaction: Job satisfaction motivates the group for hard work to make it more
effective. Management should take steps to ensure job satisfaction of its employees.
(4) Attitude: Attitude of group members towards work also is a measure of group effectiveness
and must be taken seriously. Efforts must be made to develop and nurture positive attitude of the
group member.
(5) Employee Well-being: Physiological and psychological welfare of the employee keeps them
fit. Efforts should be made to assure the mental and physical fitness of the employees to ensure
group effectiveness.
(6) Learning: Knowledge comes through learning i.e. education, training, knowing things from
fellow employee and making one suitably knowledgeable and skilled in working. This makes the
group effective. Knowledge is power.

57
(7) Retention: Retaining the human resources makes the group effective. Firing them very often
leads to chaos because every time a new person enters the group disturbing the group
cohesiveness having negative effects.

Types of Groups:
Groups can be classified in many different ways on various bases.
Following are the basic groups:
1. Formal Groups:
Formal groups are created as part of organisation structure to accomplish organisational
tasks. A work group in a plant is the example of formal group. They are bound by hierarchical
authority in the organisation. They have to follow rules, regulation and policy of the
organisation. These groups are required by the system. The organisation provides a system of
rules and regulation for attaining organisational objectives.
According to A.L. Stencombe, “a formal group is said to be any social arrangement in
which the activities of some persons are planned by others to achieve a common purpose”.
Formal groups help in achieving goals without any difficulty. They facilitate coordination
of activities and help in forming logical relationship among people and positions. They create
group unity. Leonard R Sayles has subdivided formal group into command group and task group.
(a) Command Group:
Command group consists of subordinates who are directly responsible to a supervisor. Command
groups are structured by the organisation. The subordinates working in enforcement department
of a town planning authority are reporting to and directly responsible to the enforcement officer.
This group is responsible for removal of encroachment on public land. There is a specific
department established for the purpose and is busy throughout with its activities.
(b) Task Group:
Task group is formed to complete a project. This type of group is also known as task force. The
job of the group is to complete the task within allotted time period. If one task is completed they
are allotted new task to work with. Project teams, quality circles, audit teams are the examples of
task group.

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2. Informal Groups:
Informal groups exist within the formal organisations and arise because of individuals’
social needs and desire to develop and maintain relations with people. Working at a plant or
office leads to formation of informal groups. They work together and this leads to their
interaction. Through interaction groups are formed. These groups are spontaneous and
emotional. Keith Davis has defined informal group as, “the network of persons and social
relations which is not established or required for formal organisation.”
These are the groups formed by the employees themselves at the workplace while
working together. The organisation has not taken any active interest in their formation.
According to M. Dalton, “informal groups are cliques.” Cliques are a group of people of
different organisation levels coming together with a common interest. Cliques are horizontal,
vertical, and random. Horizontal Cliques comprise people from the same rank and work area.
Vertical Cliques consist of people of different organisation levels. Random Cliques are made up
of employees from both horizontal and vertical lines coming together with a common interest.
Informal groups are very effective and powerful. Some managers view them harmful and
disruptive to the interest of the organisation. They suspect their integrity and consider as a virtual
threat. Some managers seek their help in getting the task completed quickly. They do not
consider them as threat. The strength of these informal groups can be utilized for
accomplishment of organisational objectives.
Informal groups are of following types:
(a) Interest Group:
A group of employees coming together for attaining a common purpose. Employees
coming together for payment of bonus increase in salary, medical benefits and other facilities are
the examples of interest group. The people with common interest come together.
(b) Membership Group:
A group of persons belonging to the same profession knowing each other e.g. teachers of
the same faculty in the university.
(c) Friendship Group:
A group outside the plant or office, having similar views, tastes, opinions, belonging to
same age group. They form clubs and associations based on the friendship.

59
(d) Reference Group:
It is a primary group where people shape their ideas, beliefs, values etc. They want
support from the group. Family is an important reference group. A team of players playing a
game is a reference group.
Again according to purposes groups can be classified into the following:
Vocational Groups:
Association of the same vocation e.g.: Class I officers association, teachers association etc.
Instructional Groups:
The people who have enrolled themselves for the same course e.g. students doing M. Tech in the
same subject
Government Group:
Association formed for the governing e.g. municipal council, management board.
Religious Group:
People belonging to same religion coming together and forming a group.
Recreational Group:
Group formed with a purpose of recreation e.g. football club, cricket club etc…

Size of Group:
There is no limit to the size of group. It can be of very small size comprising of two
members to any number of members. The size of the group affects the behaviour of member of
that group. Small groups of two or three need special concern.

Dyad or Group of Two:

Dyad consists of two persons only. In this group no third person is present to mediate
when difference of opinion or disagreement on any count arise. This results in frequent quarrel,
fight between the two. But the persons in this group maintain agreement between them and do
not indulge in quarrel. They avoid differences between the two or set them aside.
They avoid clash on any issue because it may lead to failure of the group, and that is wise. But
disagreement leads to new ideas which help in decision-making. It is better not to have dyad if
differences in opinions or disagreements are not allowed to surface.

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Triad or Group of Three:
It is a group consisting of three members only. In this a problem crops up when there is a
perfect agreement between the two and third is in strong opposition. This is a natural
consequence. Managers usually avoid forming triads.
Small Group:
Small groups are quite significant. They consist of small number of people ranging from
four, five to forty, fifty or so and small indeed. Work force, task force, committees, teams,
project team are the examples of small group. Under these groups if a group consists of large
number then interaction between them is a bit difficult task.
The group of ten or less than ten is more effective as they can interact quite effectively. In
a large group people avoid discussion. Moreover, there should be odd number of members like
five, seven, nine, eleven etc. to avoid deadlock and not coming to agreement with a majority.
Odd numbers of members are always preferred.
The size of group has certain effects. The large group reduces interaction among its
members. Members don’t find time to talk to each other. Smaller groups bring about greater
cohesion. In larger groups people find less time to interact and hence less cohesion.
It is also seen that members of small groups are more satisfied than that of larger groups.
In small groups members feel free and exercise more freedom to interact. They are very formal.
This does hardly happen with the members of larger group. Larger groups have more
productivity than that of smaller groups. Larger groups perform better than smaller groups.
Problem solving is easy in large groups. Groups are dynamic in nature whatever the size they
have.

Formation of Groups:
People are eager to become members of group for several reasons. They think that by
becoming a member they can satisfy some of their needs or so. Some people are forced into
group as they are helpless and they cannot refuse to join e.g. a task assignment is given by the
boss along with others no employee can dare to refuse.
He has to do the job. This is one case but there are several other factors responsible for group
formation.

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They are discussed below:
Factors Governing Formation of Groups:
The following are the factors that govern formation of groups:
1. Personal Traits:
The first and foremost factor that governs formation of group is personal traits. People
join groups because they find commonality of interests, beliefs, values and attitudes. People of
common beliefs, interests, values and attitudes come together and form group.
The group fosters their interests and beliefs. The interaction with the people of similar
values, beliefs, attitudes becomes easier. They feel at home with the other members of the group.
There is no way to conflict when the members share the same ideology.
Political parties are formed on the same principles. The people come together and form
group because of security and affiliation needs. They feel secured after joining the group.
Employees form unions to be secured from the threat of termination and other such dangers of
facing unemployment. They feel safe after joining group.
2. Identical Objective:
The people with similar objectives have strong feeling to come together and form groups.
Executives pick up people and assign them activities in sales or marketing or advertising. This
enables people to come together and interact and they share the burden of each other while
working together. They know each other well and having the same objectives can form a group.
3. Emerging Leadership:
People form groups with a potent will of emerging leaders of the group. When people
come together they choose someone to lead them. The leader gets accepted by the people. People
follow him because they feel that he will safeguard their interests.
The leaders get authority from their followers. The leader hence assumes power. He
emerges because of group. The groups are formed and people join groups who want to be leaders
or can automatically emerge as leaders. The role of leaders is quite significant and important to
the members of group.
4. Interaction:
People get opportunity to interact in a group and they join it or come together and form it.
Through interaction social relationship is developed. The need for interaction is very strong
among people. A desire to have an interaction is a potential reason to form a group.

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THE FIVE-STAGE MODEL OF GROUP DEVELOPMENT
Forming Stage
 In this stage, most team members are positive and polite. Some are anxious, as they
haven't fully understood what work the team will do. Others are simply excited about the
task ahead.
 As leader, you play a dominant role at this stage, because team members' roles and
responsibilities aren't clear.
 This stage can last for some time, as people start to work together, and as they make an
effort to get to know their new colleagues.
Storming Stage
 The second stage in group development, characterized by intra group conflict.
 During the second stage, individual expression of ideas occurs and there is open conflict
between members. Members tend to focus on details rather than the issues and compete
for influence.
 Low trust among team members is an evident indicator of this stage.
 The team needs to select their desired leadership style and decision methodology.
 The team leader can help by stressing tolerance and patience between members. The
leader should guide the team process towards clear goals, defined roles, acceptable team
behavior, and a mutual feedback process for team communication.
 When this stage is complete, there will be a relatively clear hierarchy of leadership within
the group.
Norming Stage
 The third stage in group development, characterized by close relationships and
cohesiveness.
 In the third stage, the team develops work habits that support group rules and values.
They use established tools and methods; exhibit good behaviors; mutual trust, motivation,
and open communication increase; positive teamwork and group focus are apparent.
 The team relationships grow and individual characteristics are understood and
appropriately utilized. The team leader continues to encourage participation and
professionalism among the team members.

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  This stage is complete when the group structure solidifies and the group has assimilated a
common set of expectations of what defines correct member behavior.
Performing Stage
 The fourth stage in group development, when the group is fully functional.
 The fourth stage shows high levels of loyalty, participation, motivation, and group
decision-making. Knowledge sharing, cross-training, and interdependence increases.
 Team is self-directing in development of plans and strategy to meet their goals and carry
out work. Personal growth and sharing is encouraged throughout membership. The leader
becomes a facilitator aiding the team in communication processes and helping if they
revert to a prior stage.
 Group energy has moved from getting to know and understand each other to performing
the task at hand.
Adjourning Stage
 During this stage, leadership needs to emphasize organization gratitude and both team
and individual recognition.
 For continuous work teams, there may be a higher performance level as they develop and
transform as individuals and reform into revised teams.
 It is important to note that continuous work teams may revert to prior stages when new
people are added to the team.

Group Norms:
Norm refers to group behaviour standard, beliefs, attitudes, traditions, expectations
shared by group members. According to Michael Argyle, “Group norms are rules or guidelines
of accepted behaviour which are established by a group and used to monitor the behaviour of its
members.”
The group norms determine how members of group should behave. They determine the
behaviour of group. Group norms regulate the behaviour of group. Group norms help in
understanding the group behaviour.
Norms cannot be violated. Any violation of group norms by any member invites criticism
and imposing of sanctions. Group norms are framed to achieve objectives of the group. Norms

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enhance social interaction. Group norms establish role relationships. The high profile members
have to play a leading role in a group.
Group norms can be social, ethical in nature. Group norms portray certain image of its
members. Norms provide a base for controlling behaviour of group members. Norms applied to
all the members uniformally and all members are expected strictly adhere to them.
Norms in certain companies prescribe for a typical kind of dress for its members.
Individual members and group benefit from the norms. They make the members to identify
themselves with the group. Norms play a significant role in disciplining the members of a group
so that they work regularly; attend the plant or office daily. This reduces absenteeism and
employee turnover. Norms control work behaviour, the term came to be known since famous
Hawthorne experiments conducted by Elton Mayo and associates. Norms are formed in respect
of consequences. The members of the group are expected to stick up to norms strictly. This will
make the group more cohesive, increase satisfaction. The members get more support from the
group. According to Rensis Likert, “group forces are very important in influencing the behaviour
of an individual, and the members of an informal group conform to group norms.”
The development of norms takes place because of experience of some senior members of
the group. The behaviour of the members also plays an important role in setting norms. Norms
are developed through decisions, supervisors instructions to his subordinates and some critical
incidents in member’s life. Norms need to be enforced strictly because they ensure survival of
group. For regulation of behaviour of group member’s strict enforcement of norms become
necessary.

Group Cohesiveness:
Cohesiveness is an important characteristic of group. Rensis Likert has defined
cohesiveness as “the attractiveness of the members to the group or resistance of the members to
leaving it.” It refers to the attachment of the members with the group.
According to K. Aswathappa, “cohesiveness is understood as the extent of liking each
member has towards others and how far everyone wants to remain as a member of the group.” It
is a degree of attachment among members of the group and to group membership. Attractiveness
is the key to cohesiveness. Cohesive group attract membership from new members. It also
changes in degree over time.

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Factors affecting cohesiveness:
There are some factors that affect cohesiveness of group.
They are as under:
1. Group Formation Factors: The factors which are responsible for group formation such as
common interests, shared goals, etc. serve as the base for cohesiveness.
2. Interaction: Interaction between the group members makes the group more cohesive.
3. Difficulty in Membership: Some groups take great care in selecting their members and
making admission to them very difficult. Difficulty in getting membership increases
cohesiveness of group. Such groups are valued by members and feel proud of being members.
4. Success: Success of individual or shared objectives by the members feels pride about the
success resulting in greater cohesion of the group.
5. Threat: When members of group feel threatened from any source, external in particular
increases cohesiveness.
6. Size of Group: Size of the group affects its cohesiveness. Increased size of group decreases its
cohesiveness and vice versa. Small size of group facilitates more interaction among the group
members, hence more cohesiveness.
7. Continued Membership: Membership of the group is continued by its members for a longer
period of time increases cohesiveness of group. New members do not get membership easily
because of opposition from the old members.
8. Attitude and Values: Cohesiveness of group increases because of shared attitude and values.
Everyone gets attracted towards the people having identical attitudes, values and beliefs. The
sense of security and safety develops with the likeminded people.

Cohesiveness has certain advantages. They are:

1. The members of cohesive groups have high morale.
2. They don’t have conflicting views; hence decrease in conflicts among the group members at
the workplace or elsewhere.
3. People of cohesive groups have no anxiety at the workplace.
4. Members of cohesive groups are free from botheration, hence they are very regular at their
work. This reduces absenteeism and high employee turnover.
5. Cohesiveness increases productivity.

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6. Organisations gain from the members of cohesive group because they communicate better;
they share ideologies and respect opinions of fellow employees. This all create an environment
of cooperation resulting into benefits to the organisations in the form of increased productivity,
low employee turnover etc.

Satisfaction of Members:
Members of cohesive groups derive more satisfaction than those of non-cohesive groups.
They get support from fellow members. They get more opportunities to interact. They are
protected against external threats. They succeed in their work.
They have better friends at the workplace than others. All these factors provide immense
satisfaction to the group member than any other person at the workplace. Active participation of
member in decision making gives him more satisfaction.
According to Clovis R Shepherd, “A group members’ perception at progress toward the
achievement of desired goals is an important factor which is related to member satisfaction.”
Group members progressing toward goal achievement are more satisfied than those group
members who are not progressing towards goal achievement.

Roles:
All members of group play some or other role. Group expects that each member must
play certain role assigned to him or her. He has to act in a position assigned to him. According to
Luthans, “a role consists of a pattern of norms and is directly related to the theatrical use of the
term. It is a position that can be acted out by an individual.”
Role is governed by the norms. A role player cannot overlook norms but has to stick up
to them before taking any step in assigned role. He cannot run away from the prescribed norms.
He is therefore expected to behave in a manner defined by the norms while performing a role
assigned to him by the group. Role is an exhibition of job description.
Role player has to behave in the manner as described by his job. A structured framework
is there for a role player. His actions are controlled by the norms and job description. Again he
has to bring most benefits to the group to the organisation.
In life every one of us has to act out some role. Being a member of a family he has to
play family role as father, mother etc. In various occupations a person has to play occupational

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role as lawyer, doctor, consultant etc. Roles vary from profession to profession and organisation
to organisation.
While perfuming their roles people come in contact with each other. People help each
other. They punish and reward each other. They come under tension. They argue each other,
agree or disagree with them. They also understand each other. They come with each other and
have social and emotional contact.
People have social and emotional needs the group should try to meet them. They come
across while role playing. The member has to play an expected role. While playing expected role
he perceives his role and behaves in the manner expected of him by expected role. In the process
comes the enacted role which is the behaviour he has actually to perform.
He comes across a role ambiguity i.e. non clarity of the kind of behaviour a member is
expected to play. According to Robert. L. Kahn. et. al., “the extent of role ambiguity is the
difference between one’s actual state of knowledge about what is expected and the amount of
knowledge that would be necessary for need satisfaction.”
The role ambiguity gives rise to role conflict. The conflict weakens the group. To make
the group effective socio-emotional aspects must be paid considerable attention and member
should be provided adequate help. Socio-emotional aspects help in understanding leadership
behaviour.

Status:
Status is a position, prestige, standing or a rank in a group or society. People having high
status command respect in an organisation or group or society. As status commands respect
every member naturally is after acquiring status and wants to maintain it. Status speaks for rank
or worth of a member it is a force to reckon with. Status of a person is determined by his
knowledge, rank and position, income, award, wealth, personality, age, sex, behavioural patterns,
cultural relationship with others.
Status can be an acquired status. As the name suggests it is acquired by a person through
his abilities, qualities, hard work, education, knowledge etc. It is the achieved status of a person
acquired by him. Some have ascribed status. It is a right acquired from the family position.
Status motivates person for hard work. Status can be compared. It may be high and low. People
with high status command more respect than those with low status.

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Sophistications and luxuries are attached with status. Large organisations have well furnished
chambers for their executives; provide cars, and other facilities. These add to the status of a
person and the organisation. These are sometimes known as status symbols.
Acquiring status is not a simple job. It is quite difficult and one has to toil hard to achieve
a status for himself. But one can lose it within minutes.

Groups and Productivity:

Groups are essential part of any organisation. Groups are of immense help to the manager
in his day-to-day management. Cohesive groups are effective. Manager must allow the groups to
be cohesive. Effective group leads to higher productivity because of low turnover and low
absenteeism. Stogdill conducted studies and came to the conclusion that in some there was no
relationship between productivity and group cohesiveness, in some there was positive
relationship and in some cohesive groups were least productive.

Group Behaviour:
Management must understand the group behaviour because it affects productivity, day-
to-day administration, communication etc. Management cannot free itself from the influence of
group. A supervisor is the link between management and group.
He communicates the decisions of top management to the employees at lower level and
the feeling of the staff at lower level reaches top management through supervisor. He is at the
key position. He must therefore understand group behaviour and make use of the group for
achievement of organisational goals.
He makes use of their energy for attaining those tasks which were lying unattended so
far. Supervisor can easily obtain the cooperation of the group leader in task accomplishment that
can yield results. He can develop good relationship with group by providing good working
environment. Group behaviour can be task oriented and human relations oriented.
Through group various tasks can be accomplished and better human relations can be
developed. Moreno has developed a socio-metric analysis to study work group behaviour. Under
this method self reports from group members are obtained indicating likes and dislikes of
working with other members of group. A socio-gram is prepared on the basis of information.

69
This analysis helps in comparing results with formal requirement. Group behaviour can be
effectively utilized for implementing change.

Group Change:
Group change on certain occasions seems necessary. Groups have taken the shapes of
small organisation teams in the form of various sections of departments, work teams, study
teams, project teams are some of the instances to name. Reshuffling of the entire team or
removing some men and inducting the new one becomes inevitable. To meet the demands from
the members of the group to remove a member to revitalize the group or to sort out internal
conflicts have to be met.
Group change also becomes evident from the fact that interpersonal tensions are
mounting because of certain reasons such as some members want to leave the group and join the
other one as they could not pull on working with some of the members of the group. Under such
circumstances the group change becomes inevitable for effective teamwork.
There are certain methods of bringing about group change.
Training: Training the individuals and group to give more knowledge, skill and change attitude
take place through training methods. There are several methods of training that can be utilized
for preparing the members of group to accept change. Change is essential for smooth and
progressive working by any organisation. Training methods include delivering lectures,
discussion methods, business games, role playing; programmed instructions etc. provide
knowledge and prepare members for any change and requirements of the organisation. Training
is imparted to fulfill the needs of the organisation.
Team Building:Team building is a work group consisting of supervisor and subordinates. The
team members are asked to answer themselves a question relating to the effectiveness of group
and what are the expected changes to be implemented.
The group members have to make self examination. This needs lot of pursuance of the members
and motivate them for the purpose. This takes lot of time for members to learn and realize the
need for change. Organisation must employ all those methods of organisational development and
change to bring about group effectiveness by effecting change behaviour of the members.

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CHANGE MANAGEMENT:
Change simply means the alteration of status quo.

Why Change management?

As change is inevitable, it is the management ‘s duty to see that change is managed
properly. Change has a negative effect on those who do not want to let go. Being flexible is the
key

What is change management?

• A structured approach of transitioning individuals, teams, & organizations from a current
state to a desired future state.
•
The two perspectives of change management can be referred to as:
 Organizational change management
 Individual change management

“Change management is the effective management of a business change such that executive
leaders, managers and front line employees work in concert to successfully implement the
needed process, technology or organizational changes”.
The goal of change management is to implement these business changes quickly to:
 Minimize the impact on productivity
 Avoid unnecessary turnover or loss of valued employees
 Eliminate any adverse impact on customers
 Achieve the desired business outcomes as soon as possible

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The Change Process

KURT LEWIN'S FORCE-FIELD ANALYSIS CHANGE MODEL

Kurt Lewin's force field analysis change model was designed to weigh the driving and
restraining forces that affect change in organizations. The 'force field' can be described as two
opposite forces working for and against change. In this lesson, we'll learn how to analyze the
force field.
Force Field Analysis Change Model
Have you ever had that conversation with colleagues about where to dine for lunch? You and a
few others want to try the new Thai place, but your coworker Jeanie and a few others want to go
to the same old sandwich shop you've been going to for years. Well, Kurt Lewin's force field
analysis change model describes a similar situation. The force field analysis is a method to:



Investigate the balance of power
Identify the key players involved in decision-making

72
  Identify who is for and who is against change
 Identify ways to influence those against change
In an organization, change is a bit more complicated, but just like deciding where to go for
lunch, there are driving and resisting forces at work. Driving forces are those seeking
change. Resisting (restraining) forcesare those seeking to maintain the status quo. The goal for
the driving force is to gain equilibrium, or a balance of power. Resisting forces control the status
quo, while driving forces seek change.
Management at Bergman's Innovative Marketing, Inc. faced a dilemma. They needed to
change their marketing systems or risk losing their competitive edge. This meant that all
marketing executives had to learn a new computer system and become certified to work on their
accounts. The additional training and certification meant spending Saturdays in a classroom and
studying in the evenings to prepare for the test.
Management (driving forces) was gung-ho about the new systems, but marketing executives
(resistant forces) were miserable. They resisted putting in the extra time to train, and that
manifested into resistance to change anything about their jobs. Management, on the other hand,
clearly explained the reason for change. Change meant being competitive with other marketing
firms. Without change, the organizational objective of profitability would not be met, and
executives may lose their jobs. Management made a good point: without change, jobs may be
cut.
Simply put, if driving forces exceed that of restraining forces, they will exact change. This
will create equilibrium, or a balance of power. Forces, whether driving or resisting, are a mix of:
 People
 Habits
 Customs
 Attitudes
We learned how people affect change. Habits, customs and attitudes affect change as well.
The marketing executives at Bergman's were used to a fairly relaxed environment. Most have
been with the company for several years and consider themselves pretty secure in their positions.
Since they are a tightly knit group of executives, they have habits, customs and attitudes that
contribute to their arrogance. They want to maintain the status quo. Management feels
differently. Change means more profitability, and that is written into Bergman's corporate

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objectives. But just how will management convince this resistant group of marketing execs to go
with the change

CONTROLLING :

Controlling consists of verifying whether everything occurs in confirmities with the plans
adopted, instructions issued and principles established. Controlling ensures that there is effective
and efficient utilization of organizational resources so as to achieve the planned goals.
Controlling measures the deviation of actual performance from the standard performance,
discovers the causes of such deviations and helps in taking corrective actions
According to Brech, “Controlling is a systematic exercise which is called as a process of
checking actual performance against the standards or plans with a view to ensure adequate

74
progress and also recording such experience as is gained as a contribution to possible future
needs.”
According to Donnell, “Just as a navigator continually takes reading to ensure whether he is
relative to a planned action, so should a business manager continually take reading to assure
himself that his enterprise is on right course.”

Controlling has got two basic purposes

1. It facilitates co-ordination
2. It helps in planning
Principles of Controlling
 Principle of efficiency of controls: Efficiency of control depends on identifying
approaches and techniques and also highlighting the causes of possible or real deviations
from plans by minimizing the costs or other unwanted consequences.
 Principle of affirmation of the objectives: Identifying potential or deviations from plans
must be controlled earlier by allowing remedial actions in order to achieve the objectives.
 Principle of control responsibility: The manager who is given the charge of completing
the plans is mainly responsible for exercising control.
 Principle of direct control: There is no need for indirect controls if the managers and their
subordinates are excellent in quality.
 Principle of standards: Efficient control needs accuracy, purpose and aptness.
 Principle of critical-point control: Effective control needs attending crucial issues in
reviewing performance against an individual plan.
 The exception Principle: To achieve efficiency in the results of control, it is important for
a manager to focus his control on exceptions.
 Principle of flexible controls: Flexibility in designing controls is important for them to
succeed in spite of failures or unexpected changes in plans.
 Principle of Action: Proper planning, organizing, staffing and direction is required for
justifying control in case there is any deviations from plans.
 Principle of reflection of plans: Designing more controls will effectively serve the
welfare of the enterprises and its managers and also reflect the structure and nature of
plans.

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  Principle of organizational aptness: Designing more controls will assist in correcting the
deviation of events from plans and also reflect its place in the organization which is
accountable for action.
 Principle of individuality of controls: It is important for individuals to understand the
control measures and exercise it in order to be consistent with the position, operational
tasks, skill and needs.

PROCESS OF CONTROLLING
Step 1: Establishing Standards:
Standards are criteria against which results are measured. They are norms to achieve the
goals. Standards are usually measured in terms of output. They can also be measured in non-
monetary terms like loyalty, customer attraction, goodwill etc. Some of the standards are as:
a. Time standards: The goal will be set on the basis of time lapse in performing a task.
b. Cost standards: These indicate the financial expenditures involved per unit, e.g. material cost
per unit, cost per person, etc.
c. Income standards: These relate to financial rewards received due to a particular activity like
sales volume per month, year etc.
d. Market share: This relates to the share of the company's product in the market.
e. Productivity: Productivity can be measured on the basis of units produced per man hour etc.
f. Profitability: These goals will be set with the consideration of cost per unit, market share, etc.
Step 2: Measuring Performance
Measurement involves comparison between what is accomplished and what was intended to
be accomplished. The measurement of actual performance must be in the units similar to those of
predetermined criterion. The unit thus chosen be clear, well-defined and easily identified, and
should be uniform and homogenous throughout the measurement process.
The performance can be measured by the following steps:
Strategic control points:
It is not possible to check everything that is being done. So it is necessary to pick strategic
control points for measurement. Some of these points are:
(i) Income:It is a significant control point and must be as much per unit of time as was expected.
If the income is significantly off form the expectation then the reasons should be investigated

76
and a corrective action taken.
(ii) Expenses:Total and operational cost per unit must be computed and must be adhered to. Key
expense data must be reviewed periodically.
(iii) Inventory:Some minimum inventory of both the finished product as well as raw materials
must be kept in stock as a buffer. Any change in inventory level would determine whether the
production is to be increased or decreased.
(iv) Quality of the product:
Standards of established quality must be maintained especially in food processing, drug
manufacturing, automobiles, etc. The process should be continuously observed for any
deviations.
(v) Absenteeism:
Excessive absenteeism of personnel is a serious reflection on the environment and working
conditions. Absenteeism in excess of chance expectations must be seriously investigated.
Step 3: Comparing the Actual Performance with Expected Performance
 This is the active principle of the process. The previous two, setting the goals and the
measurement format are the preparatory parts of the process. It is the responsibility of the
management to compare the actual performance against the standards established.
 This comparison is less complicate if the measurement units for the standards set and the
performance measured are the same and quantified. The comparison becomes more
difficult when these require subjective evaluations
 Ralph C. Davis identifies four phases in the comparison.
1. Receiving the raw data.
2. Accumulation, classification and recording of this information.
3. Periodic evaluation of completed action to date.
4. Reporting the status of accomplishment to higher line authority.
 At the third phase, deviations if any are noted between standards and performance. If
clear cut deviations are there, then management must study the:-
(i) Causes for deviation
(ii) Effect of deviation
(iii) Size of deviation
(iv) Positive or negative deviation.

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Step 4: Correcting Deviations
 The final element in the process is the taking corrective action.
 Measuring and comparing performance, detecting shortcomings, failures or deviations,
from plans will be of no avail if it does point to the needed corrective action.
 Thus controlling to be effective, should involve not only the detection of lapses but also
probe into the failure spots, fixation of responsibility for the failures at the right quarters,
recommendation of the best possible steps to correct them.
 These corrective actions must be applied when the work is in progress
 Corrective action must be well balanced, avoiding over controlling and at the same time
letting not things to drift.
The importance of controlling becomes clear from the following facts:
(1) Accomplishing Organisational Goals:
The controlling process is implemented to take care of the plans. With the help of
controlling, deviations are immediately detected and corrective action is taken. Therefore, the
difference between the expected results and the actual results is reduced to the minimum. In this
way, controlling is helpful in achieving the goals of the organisation.
(2) Judging Accuracy of Standards:
While performing the function of controlling, a manager compares the actual work
performance with the standards. He tries to find out whether the laid down standards are not
more or less than the general standards. In case of need, they are redefined.
(3) Making Efficient Use of Resources:
Controlling makes it possible to use human and physical resources efficiently. Under
controlling, it is ensured that no employee deliberately delays his work performance. In the same
way, wastage in all the physical resources is checked.
(4) Improving Employee Motivation:
Through the medium of controlling, an effort is made to motivate the employees. The
implementation of controlling makes all the employees to work with complete dedication
because they know that their work performance will be evaluated and if the progress report is
satisfactory, they will have their identity established in the organisation.
(5) Ensuring Order and Discipline:

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 Controlling ensures order and discipline. With its implementation, all the undesirable
activities like theft, corruption, delay in work and uncooperative attitude are checked.
(6) Facilitating Coordination in Action:
Coordination among all the departments of the organisation is necessary in order to
achieve the organisational objectives successfully. All the departments of the organisation are
interdependent. For example, the supply of orders by the sales department depends on the
production of goods by the production department.
Through the medium of controlling an effort is made to find out whether the production
is being carried out in accordance with the orders received. If not, the causes of deviation are
found out and corrective action is initiated and hence, coordination between both the departments
is established.

Types and Levels of Control

Recognizing that organizational controls can be categorized in many ways, it is helpful at
this point to distinguish between two sets of controls: (1) strategic controls and (2) management
controls, sometimes called operating controls. 
Two Levels of Control: Strategic and Operational
Imagine that you are the captain of a ship. The strategic controls make sure that your ship
is going in the right direction; management and operating controls make sure that the ship is in
good condition before, during, and after the voyage. With that analogy in mind, strategic
control is concerned with tracking the strategy as it is being implemented, detecting any problem
areas or potential problem areas suggesting that the strategy is incorrect, and making any
necessary adjustments. Strategic controls allow you to step back and look at the big picture and
make sure all the pieces of the picture are correctly aligned.
Ordinarily, a significant time span occurs between initial implementation of a strategy
and achievement of its intended results. For instance, if you wanted to captain your ship from
San Diego to Seattle you might need a crew, supplies, fuel, and so on. You might also need to
wait until the weather lets you make the trip safely! Similarly, in larger organizations, during the
time you are putting the strategy into place, numerous projects are undertaken, investments are
made, and actions are undertaken to implement the new strategy. Meanwhile, the environmental
situation and the firm’s internal situation are developing and evolving. The economy could be

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booming or perhaps falling into recession. Strategic controls are necessary to steer the firm
through these events. They must provide some means of correcting direction on the basis of
intermediate performance and new information.

Operational control, in contrast to strategic control, is concerned with executing the

strategy. Where operational controls are imposed, they function within the framework
established by the strategy. Normally these goals, objectives, and standards are established for
major subsystems within the organization, such as business units, projects, products, functions,
and responsibility centers. Typical operational control measures include return on investment,
net profit, cost, and product quality. These control measures are essentially summations of finer-
grained control measures. Corrective action based on operating controls may have implications
for strategic controls when they involve changes in the strategy.

Types of Control
It is also valuable to understand that, within the strategic and operational levels of
control, there are several types of control. The first two types can be mapped across two
dimensions: level of proactivity and outcome versus behavioral. The following table summarizes
these along with examples of what such controls might look like.

Proactivity
Proactivity can be defined as the monitoring of problems in a way that provides their
timely prevention, rather than after the fact reaction. In management, this is known
as feedforward control; it addresses what can we do ahead of time to help our plan succeed. The
essence of feedforward control is to see the problems coming in time to do something about
them. For instance, feedforward controls include preventive maintenance on machinery and
equipment and due diligence on investments.
Types and Examples of Control

Control
Proactivity Behavioral control Outcome control

Feedforward Organizational culture Market demand or economic forecasts

control

Concurrent Hands-on management supervision The real-time speed of a production

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Control
Proactivity Behavioral control Outcome control

control during a project line

Feedback control Qualitative measures of customer Financial measures such as

satisfaction profitability, sales growth

Concurrent Controls
The process of monitoring and adjusting ongoing activities and processes is known
as concurrent control. Such controls are not necessarily proactive, but they can prevent problems
from becoming worse. For this reason, we often describe concurrent control as real-time control
because it deals with the present. An example of concurrent control might be adjusting the water
temperature of the water while taking a shower.
Feedback Controls
Finally, feedback controls involve gathering information about a completed activity,
evaluating that information, and taking steps to improve the similar activities in the future. This
is the least proactive of controls and is generally a basis for reactions. Feedback controls permit
managers to use information on past performance to bring future performance in line with
planned objectives.
Control as a Feedback Loop
In this latter sense, all these types of control function as a feedback mechanism to help
leaders and managers make adjustments in the strategy, as perhaps is reflected by changes in the
planning, organizing, and leading components

Why might it be helpful for you to think of controls as part of a feedback loop in the P-O-L-C
(planning – organizing – leading- controlling) process? Well, if you are the entrepreneur who is
writing the business plan for a completely new business, then you would likely start with the
planning component and work your way to controlling—that is, spell out how you are going to
tell whether the new venture is on track. However, more often, you will be stepping into an
organization that is already operating, and this means that a plan is already in place. With the
plan in place, it may be then up to you to figure out the organizing, leading, or control challenges
facing the organization.

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Outcome and Behavioral Controls
Controls also differ depending on what is monitored, outcomes or behaviors. Outcome
controls are generally preferable when just one or two performance measures (say, return on
investment or return on assets) are good gauges of a business’s health. Outcome controls are
effective when there’s little external interference between managerial decision making on the one
hand and business performance on the other. It also helps if little or no coordination with other
business units exists.
Behavioral controls involve the direct evaluation of managerial and employee decision
making, not of the results of managerial decisions. Behavioral controls tie rewards to a broader
range of criteria, such as those identified in the Balanced Scorecard. Behavioral controls and
commensurate rewards are typically more appropriate when there are many external and internal
factors that can affect the relationship between a manager’s decisions and organizational
performance. They’re also appropriate when managers must coordinate resources and
capabilities across different business units.

Financial and Nonfinancial Controls

Finally, across the different types of controls in terms of level of proactivity and outcome
versus behavioral, it is important to recognize that controls can take on one of two predominant
forms: financial and nonfinancial controls. Financial control involves the management of a
firm’s costs and expenses to control them in relation to budgeted amounts. Thus, management
determines which aspects of its financial condition, such as assets, sales, or profitability, are most
important, tries to forecast them through budgets, and then compares actual performance to
budgeted performance. At a strategic level, total sales and indicators of profitability would be
relevant strategic controls.
Without effective financial controls, the firm’s performance can deteriorate. PSINet, for
example, grew rapidly into a global network providing Internet services to 100,000 business
accounts in 27 countries. However, expensive debt instruments such as junk bonds were used to
fuel the firm’s rapid expansion. According to a member of the firm’s board of directors, PSINet
spent most of its borrowed money “without the financial controls that should have been in
place.” With a capital structure unable to support its rapidly growing and financially uncontrolled
operations, PSINet and 24 of its U.S. subsidiaries eventually filed for bankruptcy. While we

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often think of financial controls as a form of outcome control, they can also be used as a
behavioral control. For instance, if managers must request approval for expenditures over a
budgeted amount, then the financial control also provides a behavioral control mechanism as
well.
Increasing numbers of organizations have been measuring customer loyalty, referrals,
employee satisfaction, and other such performance areas that are not financial. In contrast to
financial controls, nonfinancial controls track aspects of the organization that aren’t immediately
financial in nature but are expected to lead to positive performance outcomes. The theory behind
such nonfinancial controls is that they should provide managers with a glimpse of the
organization’s progress well before financial outcomes can be measured. And this theory does
have some practical support. For instance, GE has found that highly satisfied customers are the
best predictor of future sales in many of its businesses, so it regularly tracks customer
satisfaction.

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