Managerial Function and Process : Concept and foundations of management, Evolution

of Management Thoughts (HM); Managerial Functions—Planning, Organizing,

Controlling; Decision-making; Role of Manager, Managerial skills; Entrepreneurship
(EM); Management of innovation; Managing in a global environment, Flexible Systems
Management; Social responsibility and managerial ethics; Process and customer
orientation; Managerial processes on direct and indirect value chain

Concept and Foundations of Management

Management is common in daily life of people. The term management that
denotes to manage things diplomatically to give good results and accomplish
pre-determined goals of the firm. Organization can be successful with efficient
management selection of employees for particular job, good management of
tools, machines and other equipment. It is important to control and organize the
efforts of different individual or group of person. It also assists to control,
organize and synchronize the function of an organization. Management is
basically the process of enabling the companies to operate in both the
immediate and near future. A manager has to organize various resources against
several constraints to accomplish predetermined objectives in effective way.
Manager has to continually investigate the existing situation, determine
objectives, search for alternatives, execute, control and make decision.
Management has important role in business and organizations as it coordinates
the efforts of people to achieve goals and objectives using available resources
competently and successfully. Resourcing includes the deployment and
handling of human resources, financial resources, technological resources, and
natural resources. Management is also an academic discipline; a social science
whose object of study is the social organization. There are four basic concepts
of management, such as plan, organize, direct, and monitor. Kreitner defined
that management is a problem solving process of effectively achieving
organizational objectives through the efficient use of scarce resources in a
changing environment. George R Terry describes management as "a process
consisting of planning, organizing, actuating and controlling performed to
determine and accomplish the objectives by the use of people and resources".
He stated that management is a process-a systematic way of doing thing using
four managerial functions namely planning, organizing, actuating and
controlling. 'Planning' means thinking of the manager's action in advance. Other
theorists like Joseph L Massie described "Management is the process by which
a cooperative group directs actions towards common goals". The activities of
the managers are based on logic, plan or some method instead of guessing.
Organizing means coordinating machines, materials and human resources of the
organization. Actuating means motivating, directing the subordinates.
'Controlling' means manager must ensure that there is no deviations from plans.
1. Features of management
There are numerous attributes of management. First of all, theorists stated that
management is a constant process. The process of management comprises of
planning, organizing, directing and controlling the resources to make certain
that resources are best utilized in organization and increase productivity.
Secondly, many researchers stated that management is art as well as science. It
is the art to develop people so that they can give their best and this will not be
possible without effective management. Theorists, Koontaz and O Donnell
stated that "Management is an art of getting things done through and with the
people in formally organized group." Another management theorist, Henry
Fayol explained that "To manage is to forecast and to plan, to organize, to
command, to co-ordinate and to control." F.W. Taylor stated that "Management
is the art of knowing what you want to do and then seeing that it is done in the
best and cheapest way". John F Mee states "Management is the art of securing
maximum results with minimum efforts so as to secure maximum prosperity for
employer and employee and give to public the best possible service". It is
represented that management is a constant process to perform activities with the
proper use of employees and other resources. Others argue that it is a science
also because management principles or laws are developed for the application to
organize business operations. Management is termed as science if its methods of
inquiry are systematic and empirical, information can be planned and analysed
and results are cumulative and transmissible. Management can be categorized as
an art because it is the skill of getting things done through others in vibrant
situations. Third feature of management is to accomplish predetermined
objectives. Other Characteristic of management is production. An enterprise
produces goods or services using resources like land, labour, capital, machines
etc. These resources themselves cannot realize the organizations goals. The
goals are achieved when these are effectively coordinated by the entrepreneur.
Next feature of management is to make sensible decision to select the best
among alternative courses. Decision-making is an important function of a
manager and it determines success or failure of an organization. A manager
must make a right decision at right time. Other feature is universal application.
The principles and concepts of management are applicable to every type of
industry. It is explained that management is needed at all levels because
planning, organizing, directing, controlling, decision-making are done by top
level as well as lower level supervisors. Management has major objective to
generate revenue. The resources are accurately utilized to maximize profit.
Other feature of management is that this process must be dynamic. With time
new principles, concepts and techniques are developed and adopted by
management. Management system changes according to the social change.
Management has important role in shaping career. Some researchers explained
management as a discipline which denotes to well defined concepts and
principles. It is an accumulated body of knowledge that can be learnt. Therefore,
management can be termed as a subject with principles and concepts. The
reason to gain knowledge about management is to learn to apply these
principles and concepts at appropriate circumstances at the right time to produce
required result. Presently, candidates can choose various career options after
completing course in management such as marketing management, finance
management, personal management, Industrial management, production
management, and quality management. Ralph C Devis stated that "Management
is the executive leadership anywhere". Another theorist, William Spriegal
described that management is that function of an enterprise which concerns
itself with the direction and control of various activities to attain business
activities.
2. Nature of management
Management principles, concepts and techniques are modified from time to
time. The nature of management can be explained in many ways. It is
multidisciplinary as it pulls ideas and concepts from various disciplines like
economics, sociology, psychology, statistics, and operations research.
Management incorporates the ideas taken from various disciplines and presents
innovative concepts which can be implemented. The incorporation of these
ideas is the major contribution of management. Secondly, Principles are
developed by combination of ideas from various disciplines supported by
realistic evidence. These principles are flexible and change with the
environment in which organization works. Researchers explore continually to
develop new principles and replace many older principles.
3. Functions of management
Management professional describe numerous functions of management.
Following table will show important functions of management:
Management Functions

4. Practical areas of management

Management process involves several tasks. There is a difference between
management functions such as planning, organizing, staffing, directing and
controlling and the organizational functions that include productions, finance
and others. Organizational functions vary from organization to organization.
Four major functional areas of management are categorized by theorists that
include production, finance, marketing and personnel.
 Production
production manager manages the productive operations and he is responsible for
all production related activities. There are numerous production activities.
Purchasing which is associated with the purchase of different materials
necessary by the organization. Purchasing involves procuring right quantity of
materials of right quality, at the right time and at the right price from the right
supplier. Another production activity is materials management that involves
storing of materials, issue of materials to various departments. Research and
Development is an important production operation that is mainly responsible for
improving the existing products and process and developing new products and
process.
 Marketing
This functional area of management involves the distribution of organization's
products to the buyers. Numerous activities of marketing are described by
researchers for the success of organization. Advertising is major activity that
transmits information about products to buyers. Marketing research is
associated with the methodical collection, analysis of data relating to the
marketing of goods and services. Next marketing tool is sales management that
involves management efforts directed towards movement of products and
services from producers to consumers.
 Finance and accounting
It handles investment of financial resources and record-keeping of various
transactions. The various functions of Financial Accounting is dealing with
record keeping of various transactions. Management Accounting performs
analysis and interpretation of financial records to take wise decision. Costing is
another finance function which deals with recording of costs, their classification
and analysis for cost control. Investment Management handles financial
resources to invest in various alternatives to maximize profit. Lastly, marketing
function is taxation function that deals with various direct and indirect taxes to
be paid by the organization.
 Personnel
This functional area of management is related with human resources and has
various activities. Recruitment and Selection deal with recruitment and selection
of employees. Training and Development manages training of employees and
making them more efficient. Wage and Salary Administration deal with fixing
of salaries, job evaluation, promotion, and incentives. Industrial Relations deals
with maintenance of good employee relations.
5. Levels of management
Personnel in an organization are prearranged in a ladder and they all have the
relationship of senior to junior post. Every manager in an organization performs
all five management functions. The relative importance of these functions varies
along the managerial levels. E.F.L. Brech has categorized management levels
into three categories that include Top Management, Middle Management and
Supervisory/Lower Level.
Level of management
Top management of an organization comprises of board of directors, chairman
and chief executive officer. Top level management determines goals and
objectives. They are involved in planning, organizing, staffing, directing and
controlling. Senior management personnel incorporate organization with
environment, balance the interest groups and are responsible for overall results.
Middle management staff lies between top management and supervisory
management level. Middle level management develops programs for
department and perform functions to accomplish corporate goals. The other
functions of middle level management are training and development of
employees, integrating various parts of the department. Supervisory
management is associated with efficiency in using resources of the organization.
A supervisor implements policies and procedures making a series of decisions
with well-defined and specified grounds.
To summarize, Management is a significant element of organization that
coordinates activities and plan for future. It is the practice to develop and
maintain the environment in which employees work together in groups, achieve
their aims effectively. Important managerial functions include planning,
organizing, staffing, directing and controlling which are executed to attain
specified objectives of the organization.

Management is the process of getting things done effectively and efficiently,

with and through other people
Manager is someone who coordinates and oversees the work of other people so
that organisational goals can be accomplished
 Effective- doing the right thing and Goal attainment
 Efficiently- doing it correctly with minimum resources
(Another representation of above diagram)

Organisation
Systematic arrangement of group of people brought together to achieve some
specific purpose
Common characteristics are:
a. Goals
b. Structure
c. People
i. Operatives: they have responsibility of their own work
ii. Managers: they direct the activity of others
1. Top Managers- making decision on direction of the
organisation and establish policies that affect all
2. 1st level managers- supervisors responsible for day to day
activities
Mintzberg’s Management Roles
Henry Mintzberg Canadian Management expert and an authority on
organisational structure and design
He identified 10 managerial roles and categorised them into 3 categories:

Robert Katz managerial skills

 Conceptual skills
A manager’s ability to coordinate all of the organisation’s interests and activities
1. Using information to solve business problems
2. Identifying opportunities of innovation
3. Recognizing problem areas and implementing solutions
4. Selecting critical information from masses of data
5. Understanding of business use of technology
6. Understanding of organisation’s business model
 Interpersonal skills
A manager’s ability to work with, understand, mentor and motivate others, both
individually and in groups
 Technical skills
A manager’s ability to use tools, procedures and techniques of a specialised
field
 Political skills
A manager’s ability to build a power base and establish the right connections

Why are managers important to firms?

1. Organisations need their managerial skills and abilities in uncertain,
complex and chaotic times
2. Managers are critical to getting things done in organisation
3. Managers contribute to employee productivity and loyalty
Good (effective) managerial skills are a scarce commodity
Evolution of Management Thoughts
 Management is studied in business academics since earlier times and it is
considered as an integral part to understand business operations.
 People have been changing and redesigning organizations for centuries.
 Though the 20th century is noticeable in history as an 'Era of scientific
management', still it does not indicate that management tactics were not
used in yester years.
 Many studies indicated that Management theory evolved with "scientific"
and "bureaucratic" management that used measurement, procedures and
routines as the basis for operations.
 Firms developed hierarchies to apply standardized rules to the place of
work and penalized labour for violating rules.
 With the "human relations" movement, companies emphasized individual
workers. Modern management theories, including system theory,
contingency theory and chaos theory, focus on the whole organization,
with employees as a key part of the system.
The evaluation of management can be categorized in to different parts:
 Pre-Scientific Management Era (before 1880),
 Classical management Era (1880-1930),
 Neo-classical Management Era (1930-1950),
 Modern Management era (1950-onwords).
Classical Management includes Scientific Management School, Administration
Management School, and Bureaucracy Management.
Neo- classical Management includes Human relation school and Behavioural
Management School.
Modern Management includes Social system school, Decision theory school,
Quantitative Management School, System Management School, and
Contingency Management School.

Evolution of Management

Early Management Thought

 The period of 1700 to 1800 emphasizes the industrial revolution and the
factory system highlights the industrial revolution and the importance of
direction as a managerial purpose.
 Thus, the development of management theory can be recognized as the
way people have struggled with relationships at particular times in olden
periods.
 Many economic theorists during this period described the notion of
management.
  Adam Smith and James Watt have been recognized as two theorists who
launched the world toward industrialization.
 Adam Smith brought about the revolution in financial thought and James
Watt's steam engine provided cheaper power that revolutionized English
commerce and industry.
 Both provided the base for modern concepts of business management
theory and practice.
 Adam Smith explicated the concept of division of labour and Jacques
Turgot described the importance of direction and control.
 Smith stated that market and competition should be the controllers of
economic activity and that tax policies were destructive.
 The specialization of labour was the basis of Smith's market system.
According to Smith, division of labour provided managers with the
maximum opportunity for improved output.
 In the period of 1771–1858, Robert Owens studied for concern for the
workers. He was repulsed by the working conditions and poor treatment
of the workers in the factories across Scotland.
 Owen became a reformer. He reduced the use of child labour and used
ethical influence rather than physical punishment in his factories.
 He reproached his fellow factory owners for treating their equipment
better than they treated their workers.
In quantitative approach of early management thought, Charles Babbage (1792–
1871) is recognized as the supporter of operations research and management
science.
 Babbage's scientific innovations are mechanical calculator, a versatile
computer, and a punch-card machine.
 His projects never became a commercial reality.
 However, Babbage is considered the creator of the concepts behind the
present day computer.
 The most popular book of Babbage, On the Economy of Machinery and
Manufacturers, described the tools and machinery used in English
factories.
  It discussed the economic principles of manufacturing, and analysed the
operations and the skills used and suggested improved practices.
 Babbage considered in the benefits of division of labour and was a
supporter of profit sharing.
 He developed a method of observing manufacturing that is the same
approach utilized today by operations analysts and consultants analysing
manufacturing operations.
Other theorists who contributed in quantitative approach of early management
thought were Robert Owen, Andrew Ure and Charles Dupin, Henry Robinson
Towne.
Another theorist Baptiste, explained the significance of planning. But
management is appeared as a different discipline in the second half of 19th
century with the beginning of Joint Stock Company. This type of enterprises
separated management of business from their ownership and gave emphasis to
labour incompetence and improper systems of wage payments. To resolve such
problem, people began to identify management as a separate field of study.
During 20th century, Management has become more scientific discipline with
standard principles and practices.
The Classical Approach
The classical approach is the earliest thought of management .The classical
approach was associated with the ways to manage work and organizations more
efficiently. The classical approach are categorized into three groups namely,
scientific management, administrative management, and bureaucratic
management.
I. Scientific Management: Scientific management which is also referred to
Taylorism or the Taylor system is a theory of management that evaluates and
synthesizes workflows, with the aim of improving labour productivity. In other
words, conventional rules of thumb are substituted by accurate procedures
developed after careful study of an individual at work. Universal approaches of
Scientific management are developed for Efficiency of workers, Standardization
of job roles/activities and Discipline - the role of managers and the business
hierarchy. The scientific management theory had an enormous impact on the
business industry at the beginning of the 20th century. Many big and victorious
organizations, such as McDonalds hamburger chain or call centres, utilised a
modern version of scientific management. Among famous theorist, Taylor's
contribution in the area of scientific management is invaluable. The components
of scientific management are determination of the task, planning, proper
selection and training of workers improvement in methods, modification of
organization and mental revolution such as 'job specialization'. As a result, it
became more concerned with physical things than towards the people even
though increased the output. Scientific Management focuses on worker and
machine relationships. Organizational productivity can be increased by
enhancing the competence of production processes. The competence viewpoint
is concerned with creating job that economizes on time, human energy, and
other productive resources. Jobs are planned so that each worker has a specified,
well controlled task that can be performed as instructed. Principle of scientific
management are replacement of old rule of thumb method, scientific selecting
and training, labour management co-operation, maximizes output, equal
division of responsibility. There are four scientific management systems such as
develop a science for each element of the job to replace old rule of thumb
method, Scientifically select employees and then train them to do the job as
described in step, supervise employees to make sure they follow the prescribed
method for performing their job and continue to plan the work but use worker to
actually get the work done.
Taylor's Scientific Management: Academic records indicated that F.W. Taylor
and his colleagues developed the first systematic study in management. He
initiated an innovative movement in 1910 which is identified as scientific
management. Frederick Taylor is known as the father of Scientific Management
and he published Principals of Scientific Management in which he proposed
work methods designed to boost worker productivity. Taylor asserted that to
succeed in these principles, it is necessary to transform completely the part of
management and labour. His philosophy was based on some basic principles.
The first principle is separation of planning and doing. In the pre-Taylor era, an
employee himself used to choose or plan how he had to do his work and what
machines and equipment would be necessary to perform the work. But Taylor
divided the two functions of planning and doing, he stressed that planning
should be delegated to specialists. Second principle of Taylor's management
approach is functional foremanship. Taylor launched functional foremanship for
administration and direction. Under eight-boss-scheme of functional
foremanship, four persons like route clerk, instruction card clerk, time and cost
clerk and disciplinarian are associated with planning function, and the
remaining four speed boss, inspector, maintenance foreman, and gang boss are
concerned with operating function. Third principle is elements of scientific
management. The main constituents of scientific management are work study
involving work important and work measurement using method and time study,
standardization of tools and equipment for workmen and improving working
conditions, scientific Selection, placement and training of workers by a
centralized personal department. Fourth principle is bilateral mental revolution.
Scientific management involves a complete mental change of employees
towards their work, toward their fellow-men and toward their employers.
Mental revolution is also necessary on the part of management's side, the
foreman, the superintendent, the owners and board of directions. Fifth principle
is financial incentives. In order to encourage workers to give better
performance, Taylor introduced differential piece-rate system. According to
Taylor, the wage should be based on individual performance and on the position
which a worker occupies. Economy is other principle of management devised
by Taylor. According to him, maximum output is achieved through division of
labour and specialization. Scientific Management concentrates on technical
aspects as well as on profit and economy. For this purpose, techniques of cost
estimates and control should be adopted. Taylor concluded that science, not rule
of thumb, Harmony, not discord, Cooperation and not individualism, Maximum
output, in place of restricted output.
II. Administrative Management: Administrative Management emphasizes the
manager and the functions of management. The main objective of
Administrative management is to describe the management process and
philosophy of management. In contradiction of scientific management, which
deals mainly with jobs and work at individual level of scrutiny, administrative
management gives a more universal theory of management.
Henry Fayol's Administrative Management (1841–1925): Henri Fayol is
known as the father of modern Management. He was popular industrialist and
victorious manager. Fayol considered that good management practice falls into
certain patterns that can be recognized and analysed. From this basic
perspective, he devised a blueprint for a consistent policy of managers one that
retains much of its force to this day. Fayol provided a broad analytical
framework of the process of management. He used the word Administration for
Management. Foyal categorized activities of business enterprise into six groups
such as Technical, Financial, Accounting, Security, and Administrative or
Managerial. He stressed constantly that these managerial functions are the same
at every level of an organization and is common to all firms. He wrote General
and Industrial Management. His five function of managers were plan, organize,
command, co-ordinate, and control. Principal of administrative management:
1.Division of labour, 2.Authority & responsibility, 3.Discipline, 4.Unity of
command, 5.Unity of direction, 6.Subordination of individual interests to
general interest, 7.Remuneration of personnel, 8.Centralization, 9.Scalar chain,
10.Order, 11.Equity, 12.Stability of tenure, 13.Initiative and14 .Esprit de corps
(union of strength). These 14 principles of management serve as general
guidelines to the management process and management practice. His principles
of management are described below.
1. Division of work: This is the principle of specialization which is detailed
by economists as an important to efficiency in the utilization of labour.
Fayol goes beyond shop labour to apply the principle to all kinds of work,
managerial as well as technical.
2. Authority and responsibility: In this principle, Fayol discovers authority
and responsibility to be linked with the letter, the consequence of the
former and arising from the latter.
3. Discipline: This discipline denotes "respect for agreements which are
directed at achieving obedience, application, energy and the outward
marks of respect". Fayol declares that discipline requires good superiors
at all levels, clear and fair agreement, and judicious application of
penalties.
4. Unity of command: This is the principle that an employee should receive
orders from one superior only.
5. Unity of direction: Fayol asserted that unity of direction is the principle
that each group of activities having the same objective must have one
head and one plan. As distinguished from the principle of unity of
command, Fayol observes unity of direction as related to the functioning
of personnel.
6. Subordination of individual interest to general interest: In any group the
interest of the group should supersede that of the individual. When these
are found to differ, it is the function of management to reconcile them.
 7. Remuneration of personnel: Fayol recognizes that salary and methods of
payment should be fair and give the utmost satisfaction to worker and
boss.
8. Centralization: Fayol principle of centralization refers to the extent to
which authority is concentrated or dispersed in an enterprise. Individual
circumstances will determine the degree of centralization that will give
the best overall yield.
9. Scalar chain: Fayol believe of the scalar chair as a line of authority, a
'Chain of Superiors" from the highest to the lowest ranks and held that,
while it is an error of subordinate to depart 'needlessly' from lines of
authority, the chain should be short-circuited when scrupulous following
of it would be detrimental.
10.Order: Breaking this principle into 'Material order' and 'Social Order',
Fayol thinks of it as the simple edge of "a place for everything
(everyone), and everything (everyone) in its (his) place". This is basically
a principle of organization in the arrangement of things and persons.
11.Equity: Fayol perceives this principle as one of eliciting loyalty and
devotion from personnel by a combination of kindliness and justice in
managers dealing with subordinates.
12.Stability of tenure of personnel: Finding that such instability is both the
cause and effect of bad management, Fayol indicated the dangers and
costs of unnecessary turnover.
13.Initiative: Initiative is envisaged as the thinking out and execution of a
plan. Since it is one of the "Keenest satisfactions for an intelligent man to
experience", Fayol exhorts managers to "Sacrifice Personal Vanity" in
order to permit subordinates to exercise it.
14.Esprit de corps: This is the principle that 'union is strength' an extension
of the principle of unity of command. Fayol here emphasizes the need for
teamwork and the importance of communication in obtaining it.
III. Bureaucratic Management:.
Bureaucratic management denotes to the perfect type of organization. Principal
of Bureaucracy include clearly defined and specialized functions, use of legal
authority, hierarchical form, written rules and procedures, technically trained
bureaucrats, appointment to positions based on technical expertise, promotions
based on competence and clearly defined career paths. The German sociologist,
Max Weber recognized as father of modern Sociology who appraised
bureaucracy as the most logical and structure for big organization. With his
observation in business world, Weber summarized that earlier business firms
were unproductively managed, with decisions based on personal relationships
and faithfulness. He proposed that a form of organization, called a bureaucracy,
characterized by division of labour, hierarchy, formalized rules, impersonality,
and the selection and promotion of employees based on ability, would lead to
more well-organized management. Weber also argued that authoritative position
of managers in an organization should be based not on tradition or personality
but on the position held by managers in the organizational hierarchy.
Max Weber (1864-1920) devised a theory of bureaucratic management that
emphasized the need for a firmly defined hierarchy governed by clearly defined
regulations and lines of authority. He considered the perfect organization to be a
bureaucracy whose activities and objectives were reasonably thought out and
whose divisions of labour were clearly defined. Weber also believed that
technical capability should be emphasized and that performance evaluations
should be made completely on the basis of merit. Presently, it is considered that
bureaucracies are huge, impersonal organizations that put impersonal
competence ahead of human needs. Like the scientific management theorists,
Weber sought to advance the performance of socially important organizations
by making their operations predictable and productive. Although we now value
innovation and flexibility as much as efficiency and predictability, Weber's
model of bureaucratic management evidently advanced the development of vast
corporations such as Ford. Bureaucracy was a particular pattern of relationships
for which Weber saw great promise. Although bureaucracy has been successful
for many companies, in the competitive global market of the 1990s
organizations such as General Electric and Xerox have adopted bureaucracy,
throwing away the organization chart and replacing it with ever-changing
constellations of teams, projects, and alliances with the goal of unleashing
employee creativeness.
Chester I. Barnard: Chester Barnard (1886-1961) also devised components to
classical theory such as Follett that would be further developed in later schools.
Barnard, who became president of New Jersey Bell in 1927, used his work
experience and his wide reading in sociology and philosophy to devise theories
about organizations. Barnard stated that people join in formal organizations to
accomplish such goals that cannot be fulfilled by working alone. But as they
follow the organization's goals, they must also gratify their individual needs.
Barnard came to conclusion that an enterprise can operate efficiently and
survive only when the organization's goals are kept in balance with the aims and
needs of the individuals working for it. Barnard denotes a principle by which
people can work in stable and mutually constructive relationships over time.
Barnard believed that individual and organizations purposes must be in balance
if managers understood an employee's zone of indifference that is, what the
employee would do without questioning the manager's authority. Apparently,
the more activities that fell within an employee's zone of indifference the
smoother and more cooperative an organization would be. Barnard also believed
that managers had a duty to inspire a sense of moral purpose in their employees.
To do this, they would have to learn to think beyond their narrow self-interest
and make an ethical promise to society. Although Barnard emphasized the work
of administrative managers, he also focused substantial attention on the role of
the individual employee as the basic strategic factor in organization.
Modern Management Approaches
I. Behavioural Approach: Numerous theorists developed the behavioural
approach of management thought as they observed weaknesses in the
assumptions of the classical approach. The classical approach emphasized
efficiency, process, and principles. Some management scholars considered that
this thought ignored important aspects of organizational life, particularly as it
related to human behaviour. Therefore the behavioural approach concentrated
on the understanding of the factors that affect human behaviour at work. This is
an improved and more matured description of human relations approach. The
various theorists who have great contribution in developing principles of
management in this are Douglas Mc Gregor, Abraham Maslow, Curt Levin,
Mary Porker Follelt, Rensis Likert. Behavioural Scientists hold the classical
approach as highly mechanistic, which finds to degrade the human spirit. They
choose more flexible organization structures and jobs built around the
capabilities and talent of average employees. The behavioural approach has
based the numerous principles.
1. Decision-making is done in a sub-optimal manner, because of practical
and situational constraints on human rationality of decision-making. The
 behaviourists attach great weight age on participative and group decision-
making.
2. Behavioural Scientists promote self-direction and control instead of
imposed control.
3. Behavioural Scientists believe the organization as a group of individuals
with certain goals.
4. Behavioural scientists perceive that the democratic-participative styles of
leadership are enviable, the autocratic, task oriented styles may also be
appropriate in certain situation.
5. Behavioural scientists propose that different people react differently to
the same situation. No two people are exactly similar and manager should
tailor his attempts to influence his people according to their needs.
6. Behavioural scientists identify that organizational variance and change
are predictable.
Approach of Mary parker follett: Mary Parker Follett (1868-1933) developed
classic structure of the classical school. However, she initiated many new
elements particularly in the area of human relations and organizational structure.
In this, she introduced trends that would be further developed by the talented
behavioural and management science schools. Follett was persuaded that no one
could become a whole person except as a member of a group. Human beings
grew through their relationships with others in organizations. In fact, she
explained management as "the art of getting things done through people." She
took for granted Taylor's statement that labour and management shared a
common purpose as members of the same organization, but she considered that
the artificial difference between managers and subordinates is vague in this
natural partnership. She believed in the power of the group, where individuals
could combine their diverse talents into something bigger. Moreover, Follett's
"holistic" model of control took into account not just individuals and groups, but
the effects of such environmental factors as politics, economics, and biology.
Follett's model was significant precursor of the idea that management meant
more than just what was happening inside a particular organization.
Maslow's theory of self-actualisation: His theory is recognized as Hierarchy of
Needs. It is illustrated in a pyramid and elucidates the different levels and
importance of human's psychological and physical needs. It can be used in
business by managers to better understand employee motivation. The general
needs in Maslow's hierarchy include physiological needs (food and clothing),
safety needs (job security), social needs (friendship), self-esteem, and self-
fulfilment or actualisation. Maslow's Hierarchy of Needs relates to
organizational theory and behaviour because it explores a worker's motivation.
Some people are prepared to work just for money, because of friends, or the fact
that they are respected by others and recognized for their good work. The final
level of psychological development that can be achieved when all basic and
mental needs are fulfilled and the "actualization" of the full personal potential
takes place. In the organizational situation, if an employee's lower need on the
hierarchy is not met, then the higher ones are ignored. For example, if
employees are worried that they will be fired, and have no job security, they will
be concerned about friendship and respect.
Douglas McGregor theory of management suggested that there is need to
motivate employees through authoritative direction and employee self-control
and he introduced the concept of Theory X and Y. Theory X is a management
theory focused more on classical management theory and assumes that
workforce need a high amount of supervision because they are inherently lazy.
It presupposes that managers need to motivate through coercion and
punishment. Theory Y is a management theory that assumes employees are
determined, self-motivated, exercise self-control, and generally enjoy mental
and physical work duties. Theory Y is in line with behavioural management
theories. Theory X and Theory Y relates to Maslow's hierarchy of needs in how
human behaviour and motivation is the main priority in the workplace in order
to maximize output. Theory X: The theory that employees are inherently lazy
and irresponsible and will tend to avoid works unless closely supervised and
given incentives, contrasted with Theory Y. Theory Y: The theory that
employees are capable of being ambitious and self-motivated under suitable
conditions, contrasted with Theory X.
An influential theorist in behaviour approach of management thought was
Likert. His principles based on four System such as supportive relationships
between organizational members, multiple overlapping structures, with groups
consisting of superiors and their subordinates, group problem solving by
consensus within groups and overlapping memberships between groups by
members who serve as linking pins.
II. Human Relations Approach: The human rationalists which is also denotes
to neo-classicists, focused as human aspect of business. These theorists
emphasize that organization is a social system and the human factor is the most
vital element within it.
There are numerous basic principles of the human relations approach that are
mentioned below:
1. Decentralization: The concept of hierarchy employed by classical
management theorists is replaced with the idea that individual workers
and functional areas (i.e., departments) should be given greater autonomy
and decision-making power. This needs greater emphasis on lateral
communication so that coordination of efforts and resources can occur.
This communication occurs via informal communication channels rather
than the formal, hierarchical ones.
2. Participatory Decision-Making: Decision-making is participatory in the
sense that those making decisions on a day-to-day basis include line
workers not normally considered to be "management." The greater
sovereignty afforded individual employees and the subsequent reduction
in "height" and increase in span of control of the organizational structure
requires that they have the knowledge and ability to make their own
decisions and the communication skill to coordinate their efforts with
others without a nearby supervisor.
3. Concern for Developing Self-Motivated Employees: The importance on a
system of decentralized and autonomous decision-making by members of
the organization necessitates that those members be extremely "self-
motivated". Goal of managers in such an organization is to design and
implement organizational structures that reward such self-motivation and
autonomy. Another is to negotiate working relationships with
subordinates that foster effective communication in both directions.
Therefore, the human relations approach implies modifications in the structure
of the organization itself, in the nature of work, and in the association between
manager and assistant. Each of these changes depends upon assumptions about
the individual, the organization, and communication, just like any other theory
of organizations. Elton Mayo and others conducted experiments that was known
as Hawthorne experiments and explored informal groupings, informal
relationships, patterns of communication, and patterns of internal leadership.
Elton Mayo is usually popular as father of Human Relations School. The human
relationists, advocates the several factors after conducting Hawthorne
experiments which are mentioned below.
1. Social system: The organization in general is a social system consists of
numerous interacting parts. The social system established individual roles
and establishes norms that may differ from those of formal organization.
2. Social environment: The social climate of the job affects the workers and
is also affected.
3. Informal organization: The informal organization does also exist within
the frame work of formal organization and it affects and is affected by the
formal organization.
4. Group dynamics: At the place of work, the workers often do not act or
react as individuals but as members of group. The group plays an
important role in determining the attitudes and performance of individual
workers.
5. Informal leader: There is an appearance of informal leadership as against
formal leadership and the informal leader sets and enforces group norms.
6. Non-economic reward: Money is an encouraging element but not the only
motivator of human behaviour. Man is diversely motivated and socio
psychological factors act as important motivators.
Behavioural Science: Behavioural science and the study of organizational
behaviour emanated during 1950s and1960s. The behavioural science approach
was a natural development of the human relations movement. It concentrated on
applying conceptual and analytical tools to the problem of understanding and
foresees behaviour in the place of work. The behavioural science approach has
contributed to the study of management through its elements of personality,
attitudes, values, motivation, group behaviour, leadership, communication, and
conflict, among other issues.
III. Contingency Approach: This approach of management thought focuses on
management principles and concepts that have no general and universal
application under all conditions.
 Joan Woodward in the 1950s has contributed to develop this approach in
management.
  Contingency school states that management is situational and the study of
management recognize the important variables in the situation.
 It distinguishes that all the subsystem of the environment are
interconnected and interrelated. By studying their interrelationship, the
management can find resolution to specific situation.
 Theorists stated that there is not effective way of doing things under all
business conditions.
 Methods and techniques which are extremely effective in one situation
may not give the same results in another situation.
 This approach proposes that the role of managers is to recognize best
technique in particular situation to accomplish business goals.
 Managers have to develop situational understanding and practical
selectivity.
 Contingency visions are applicable in developing organizational
structure, in deciding degree of decentralization, in motivation and
leadership approach, in establishing communication and control systems,
in managing conflicts and in employee development and training.
 The contingency approach is associated with applying management
principles and processes as dictated by the sole characteristics of each
situation.
 It depends on various situational factors, such as the external
environment, technology, organizational characteristics, characteristics of
the manager, and characteristics of the subordinates.
 Contingency theorists often implicitly or explicitly disapprove the
classical approach as it focuses on the universality of management
principles.
IV. The Quantitative Approach Of Management Thought
The quantitative approach aimed at enhancing the process of decision making
through the use of quantitative techniques. It is evolved from the principles of
scientific management.
1. Management Science (Operations Research): Management science
which is also known as operations research utilized mathematical and
 statistical approaches to resolve management issues. It was developed
during World War II as strategists attempted to apply scientific
knowledge and methods to the intricate troubles of war. Industry started
to apply management science after the war. The introduction of the
computer technology made many management science tools and concepts
more practical for industry
2. Production and Operations Management: This approach emphasizes
the operation and control of the production process that changes resources
into manufactures goods and services. This approach is emerged from
scientific management but became a specific area of management study
after World War II. It uses many of the devices of management science.
Operations management underlines productivity and quality of both
manufacturing and service organizations. W. Edwards Deming exercised
a great influence in developing contemporary ideas to improve
productivity and quality. Major areas of study within operations
management include capacity planning, facilities location, facilities
layout, materials requirement planning, scheduling, purchasing and
inventory control, quality control, computer integrated manufacturing,
just-in-time inventory systems, and flexible manufacturing systems.
V. Systems Approach Of Management Thought
The systems approach deals with the thoroughly understanding the organization
as an open system that converts inputs into outputs. The systems approach has
great impact on management thought in the 1960s. During this period, thinking
about managing practices allowed managers to relate different specialties and
parts of the company to one another, as well as to external environmental
factors. The system approach focuses on the organization as a whole, its
communication with the environment, and its need to achieve equilibrium.
System approach
To summarize,
 There are important theories of Management and each theory has distinct
role to knowledge of what managers do. Management is an
interdisciplinary and global field that has been developed in parts over the
years.
 Numerous approaches to management theory developed that include the
universal process approach, the operational approach, the behavioural
approach, the systems approach, the contingency approach and others.
 F W Taylor, Adam Smith, Henry Fayol, Elton Mayo and others have
contributed to the development of Management concept.
 The classical management approach had three major categories that
include scientific management, administrative theory and bureaucratic
management. Scientific management highlighted the scientific study of
work methods to improve worker efficiency.
 Bureaucratic management dealt with the characteristics of an perfect
organization which operates on a rational basis.
 Administrative theory explored principles that could be used by managers
to synchronise the internal activities of organizations.
 The behavioral approach emerged mainly as an outcome of the
Hawthorne studies.
 Mary Parker Follet, Elton Mayo and his associates, Abraham Maslow,
Douglas McGregor and Chris Argyris were main players of this school.
Evolution of Management Thoughts
1. Ancient
a. Egyptian pyramids, the Great Wall of China
b. Venetians (floating warship assembly line)
2. Adam Smith 1776, In his book “Wealth of Nations” advocated economic
advantages organisations can get by division of labor
a. Increased dexterity & skill of labor
b. Time saved in changing jobs
c. Labor saving incentives and machinery
3. Industrial Revolution
a. Mass production: machine substituting man
b. Improved and less costly transportation
c. Larger organisations to serve larger markets

Classical Approach
Term used to describe the hypothesis of scientific management theorists
and general management theorists
Scientific Management
Fredrick W Taylor, Frank & Lillian Gibreth, Henry Gantt
Fredrick W Taylor
Father of scientific management; Principles of Scientific Management
(1911)
Four principles of Management:
1. “One best way of doing a job”. Develop a science for each element of
an individual's work, which replaces the earlier rule of thumb
2. Scientifically select and then train, teach and develop the worker
(previously workers chose their work and trained themselves)
3. Heartily cooperate with workers to ensure that work is done in
accordance with the developed principles of science
4. Divide work and responsibility between management and worker.
Management takes all the work for which it is better suited (Earlier
almost all work and greater part of the responsibility were thrown upon
the worker)

Criticism
1. Against the modern principle of MBO, continuous improvement etc.
2. Lay focus on autonomy, promote individual responsibility, push decision
making at lower levels of organisation
3. Against the modern principle of lean work
4. Extreme specialisation is against the modern ideas of how to provide a
motivating and satisfying workplace

Time & motion study

It is business efficiency technique combining the Time study work
(establishing standard times) of Taylor with the motion study work
(improving work methods) of Frank & Lillian

Frank & Lillian Gilberth

Frank a construction contractor after listening to one of Taylor’s lectures
gave up that career to study scientific management. His wife Lillian was a
psychologist, together they studied work to eliminate inefficient hand-
and-body motions. They also experimented with design and use of proper
tools and equipment for optimizing work performance
1. Brick laying experiment- by careful analysis he reduced the number of
motions in laying exterior brick from 18 to about 5 and interior brick
laying from 18 to 2
2. They also classified 17 basic hand motions (such as search, grasp, hold)
which they called therbligs

Henry Gantt
 He was an associate of Taylor and developed the Gantt chart. A
scheduling chart that shows actual and planned output over a period of
time
Incentive compensation systems

General Administrative Theory

What managers do and what constitutes a good manager
Henri Fayol
Father of Modern Management
Same time as Taylor while Taylor focused on 1st line of managers, he
focused on all managers. He was MD of a large French coal-mining firm
He identified the 5 functions performed by managers:
1. Planning
2. Organising
3. Commanding
4. Coordinating
5. Controlling

He believed management was a common activity for all business

endeavors, government and even the home led him to develop 14
principles of management:
1. Division of work. specialization increases output by making employees
more efficient
2. Authority. Managers must be able to give orders and authority gives
them this right
3. Discipline. Employees must obey and respect the rules that govern the
organisation
4. Unity of command. Every employee should receive orders from only
one superior
5. Unity of direction. The organisation should have a single plan of action
to guide managers and workers
6. Subordination of individual interests to the general interest. The
interest of any one employee or group of employees should not take
precedence over the interest of the whole organisation
7. Remuneration. Workers must be paid a fair wage for their services
8. Centralization. The term refers to the degree to which subordinates are
involved in decision making
9. Scalar chain. The line of authority from top management to the lowest
ranks is the scalar chain. Employees should be clear where they stand in
the hierarchy
10.Order. People and materials should be in the right place at the right time
11.Equity. Managers should be kind and fair to their subordinates
12.Stability of tenure of personnel
13.Initiative. Employees who are allowed to originate and carry out plans
will exert high levels of effort
14.Esprit de corps. Promoting team spirit will build harmony and unity
within the organisation

Max Weber
A German sociologist who studied organisations. He called bureaucracy a
form of organisation characterised by division of labor, clearly defined
hierarchy, formal selection, detailed rules and regulations and impersonal
relationships

He theorised how the work could be done in large organisations

Behavioral Approach
It recognises the importance of people to the organisation and believed
that people are the most important asset. Early OB Advocates are
mentioned in the chart below

Hawthorne experiment
Studies conducted at Western Electric in 1924. Effect of various lighting
levels on workers productivity but were unable to identify any
correlation. Harvard professor Elton Mayo joined them and they did
experiments till 1932. They concluded that more than pay and other
incentives, workers performance was more impacted by group pressure,
acceptance and security. Social norms or group standards are key
determinants of individual work behaviour
Quantitative Approach
Operations research
Evolved out of the development of mathematical and statistical solutions
to the military problems during WWII
Total Quality Management
Deming and Juran. Continual improvement and responding to customer
(includes employees, suppliers as well as final consumer) needs and
expectations

Summary- reasons for development of each approach

 Classical- with a desire to improve efficiency of labor intensive work
HR approach- backlash from overly mechanistic view of the employees;
the Great depression
Quantitative approach - WWII
Contemporary Approaches
Most of the earlier approaches focused on manager’s concerns inside the
organisation. Starting 1960s, management researchers started looking for
what is happening in the external environment outside the boundaries of
the organisation
Systems Approach
System is a set of interrelated and interdependent parts arranged in a
manner that produces a unified whole
Closed- do not interact with the environment nor are influenced by it
open system- interact with environment
Contingency or Situational Approach
Situational approach to the management that replaces more simplistic
systems and integrates much of the management theory
There is no one universally acceptable set of management principles
(rules) by which to manage the organisation
Organisations are individually different, face different situations
(contingency variables) and require different ways of managing
Four popular contingency variables:
1. Organisation size: as size increases so do the problems of coordination
2. Routineness of task technology: routine tasks require structure in place as
against customised
3. Environmental uncertainty: external
4. Individual differences: different techniques for different members in the
team
Planning is the primary function of management. It is the important
process of deciding business objectives and charting out the method to
accomplish these goals. This includes decision of what type of activity is
to be done, where to be done and how the results to be analyzed.
Planning

Theoretical review: Many theorists thoroughly describe the planning process

of management function. Koontz and O'Donnel stated that "Planning is deciding
in advance what to do, how to do it, when to do it and who is to do it. It bridges
the gap from where we are and to where we want to go. It is an essence of the
exercise of foresight. Another management theorist, M.S. Hardly explained
"Planning is deciding in advance what is to be done". It involves the selection of
objectives, policies, procedures and programs from among alternatives. Heying
and Massie defined "It can be said that planning is first function of the manager
in which he has to decide in advance action that is to be done." It is an
intellectual process in which managers must have to use their imaginative mind.
Planning is an attempt to foresee the future in order to get high performance.
Plans have numerous benefits. Planning enables managers to think ahead. It
leads to development of performance standards. Plan forces management to
articulate clear objectives. Planning makes organization to get ready for
unexpected developments.
Planning includes various features such as Planning is mainly concerned with
looking into future. In planning process, management team has to select suitable
course of action under particular business environment. It means there are
several ways to achieve objectives. Planning is done at all levels of the
organization because managers at all levels are concerned with determination of
future course of action. Planning is persistent and constant managerial function.

Nature of planning: planning is a rational approach, open system, flexibility

and pervasiveness. It clarifies where one stands, where one wants to go in future
and how accomplishes goal. Rationalist denotes a manager chooses suitable
way to achieve the stated objectives and rational approach fills the gap between
the current status and future status. Planning is an open System approach in
which firm is an open system because it accepts inputs from the environment
and exports output to environment. Planning accepts an open system approach.
Open system approach designates that the gap between current and desired
status and the action required overpassing this gap which is influenced by array
of environmental economic, legal, political, technological, socio-cultural and
competitive factors. These factors are vibrant and change with time. Therefore
managers have to take into account the dynamic features of environment while
using open system approach. Another aspect of planning is the flexibility of
Planning: it means plan has ability to change direction to take on to changing
situations without excessive cost. Many scholars said that the plans must be
stretchy to become accustomed to changes in technology, market, finance,
personal and organizational factors. However flexibility is possible only within
limits, because it involves extra cost. Another feature is pervasiveness of
Planning. Planning is persistent and it broadens throughout the organization.
Planning is the primary management function and every manager at different
level has to do planning within his particular area of activities. Top management
is responsible for general objectives should be and how to achieve them.
Similarly a departmental head has to develop the objectives of his department
within the organizational objectives and also the methods to accomplish them.
Significance of Planning Process
Planning has core value in all organization whether business or non-business,
private or public, small or large. The organization which has mindset for future
is likely to succeed as compared to one which fails to do so. Planning
establishes the objectives and all other functions are performed to achieve the
objectives set by the planning process. The company constantly interacts with
the external dynamic environment where there is high risk and ambiguity. In
this changing dynamic environment where social and economic conditions
change quickly, planning assists the manager to adjust with and prepare for
altering environment. Through rational and fact based process for making
decisions, manager can lessen market risk and uncertainty. Planning focuses on
organizational objectives and course of action to accomplish targeted goal. It
facilitates managers to apply and organize all resources of the organization
successfully in achieving the objectives. The whole organization is required to
embrace identical goals and work together in achieving them. Planning
establishes the goal and develops plan to attain them. These goals and plans
become the standards against which the actual performance can be measured.
Control involves the dimension of actual performance, comparing it with the
standards and taking remedial action if there is divergence. Control makes
certain that the activity confirms to plans. Hence control can be exercised if
there are plans. Planning also enhances organizational effectiveness.

Types of Planning
Planning can be categorized as coverage of activities, importance of contents in
planning, approach adopted in planning process, time dimension and degree of
formalization in planning process.
The planning activities at the corporate level which include activities of whole
organizational are termed as corporate planning. Corporate planning is done to
chase long term objectives as a whole and to create plans to accomplish these
objectives bearing in mind the possible changes in dynamic environment.
Strategic planning sets future directions of the organization in which it wants to
proceed in future such as diversification of business into new lines, planned
growth rate in sales. It has three major characteristics such as it embraces all
activities of organization, has long time horizon and successful implementation.
Operational planning involves to decide effectual use of resources already
allocated to achieve the organizational objectives such as adjustment of
production within available capacity, increasing the efficiency of the operating
activity by analyzing past performance. The long term planning is strategic in
nature and involves more than one year period and can extend to 15 to 20 years.
Proactive planning develops appropriate courses of action in expectation of
likely changes of environment. Managers who adopt proactive changes do not
wait for environment to change, but take action in advance of environmental
changes. To get success, it is necessary to continuously review the environment
conditions. In reactive planning, response comes after environmental changes
occur. Informal planning is done by small organizations. This planning process
is based on manager's experience, intuitions instead of methodical evaluation of
environmental changes. This planning process is part of manager's normal
activity.
Mainly two types of plans are formulated in management that includes standing
plans and single use plans. Standing plans give guidelines for advance course of
action and are used over a period of time. Standing plans are designed for
situations that persist often enough to justify a standardize approach. Single use
plans are intended for specific end when that end is reached, the plan is
dissolved or devised again for next end.

Major Steps in Planning Process

 The planning process is different from one plan to another and varies from
company to company. Common steps in planning are mentioned below:

1. Establishing goals or objectives: The initial phase of planning process is to

establish the business objectives. These organizational goals are made by senior
level managers after reviewing numerous objectives. These objectives are based
on the number of factors like mission of the organization, abilities of the
organization. Once management team establishes the organizational goals, the
section wise or department wise objectives are planned at the lower level.
Defining the objectives of every department is important and accordingly
precise direction is given to the departments.
2. Establishing planning premises: The next step in planning which involves
establishing planning premises is the conditions under which planning activities
will be done. Planning premises are planning statements that are the expected
environmental factors, pertinent facts and information relating to the future such
as general economic conditions, population trends, and competitive behavior.
The planning premises can be Internal and External premises, Tangible and
Intangible premises, Controllable and non-controllable premises.
3. Deciding the planning period: After determining the long term objectives and
planning premises, another phase is to choose the period of the plan. Some
plans are made for a year and other plans are devised for longer period. There
are many factors which influence the choice of a period. Lead time in
development and commercialization of a new product. Big companies like an
aircraft building company plans for a period of five to ten years where as a
small manufacturer can commercialize his idea in a year. Another factor is time
needed for recovery of capital investment or the payback period. The payback
period also influence the planning period. Length of commitment already made
also impact the choice of time span in planning. Researchers emphasized that
the plan period should be made in such a way that it can fulfil the commitments
already made. Identification of alternatives is important factor in determining
time frame in planning. A particular objective can be achieved through various
actions. Evaluation and selection of alternative is the next step which assess the
alternatives with the support of the premises and goals and to choose the best
course or courses of action.
4. Developing derivative/supportive plans: After selection process of plan done,
various plans are derived so as to support the main plan. These derivative plans
are devised from the main plan.
5. Measuring and controlling the process: It is advised that plans once
established should not be executed unless its progress is monitored. Managers
must have continually monitor progress of their plans so that remedial action
can be taken to make fruitful plan.

Obstacles in planning Process

It is observed that many executives involve in implementing plans instead of
spending time to develop effectively. It is founds that there are many barriers
that inhibit planning process. In order for plans to be effective and to get the
desired results, managers must recognize any potential barriers and make efforts
to reduce them. Common barriers that hinder successful planning are as under:
The first barrier is incapability to plan or it can be said as inadequate planning.
Managers do not have inherent quality to devise effective plan. Some managers
are not successful planners because they do not have ability, education to
develop planning for particular situation. Such incapability creates hindrance in
planning process.
Another barrier is lack of commitment to the planning process. Planning process
require hard work. Another cause for lack of commitment can be fear of failure.
As a result, managers may choose to do little or nothing to help in the planning
process.
Inferior information also creates hindrance in planning process. It is observed
that poor information or of inadequate quantity can be major barriers to
planning. Even though managers are proficient in planning but if they do not
have latest information their plans will possibly fail.
Another barrier to planning process is failure to consider the long‐term effects
of a plan because more emphasis is given to short term issues. This may result
in preparing for the future.
If managers excessively depend on the organization's planning department, their
plans may not be successful. Many companies have a planning department or a
planning and development team. These departments conduct studies, do
research, build models, and project probable results, but they do not implement
plans.
In order to make effective plan, keep the planning process simple. It is advised
to discuss the objectives of organization with top level team before preparing
for plans and use participative approach in developing plan.
It can be concluded that management planning is the process to evaluate an
organization's goals and create a realistic, detailed plan of action for meeting
 those goals. Planning is the continuous process of systematically making plans
with the knowledge of the future, organizing the activities needed to carry out
the plans and monitoring the results of the plans through comments. Planers
must communicate plan to other staff members as why specific action is taken.

Planning

Planning involves three parts:

1. Defining the organisation’s objectives or goals
2. Establishing an overall strategy for achieving goals
3. Developing a comprehensive hierarchy of plans to integrate and coordinate
activities

Planning is concerned with ends (what is to be done) as well as with means

(how it is to be done)

Goals are desired outcomes or targets. Plans are documents that outline how
goals are to be met.

Reasons for planning

1. Set the standards to facilitate control
2. Provide direction
3. Reduce the impact of change
4. Minimize waste and redundancy

Criticism of Formal planning

1. May create rigidity
2. Can’t be developed for a dynamic environment
3. Can’t replace intuition and creativity
4. Planning focuses manager’s attention on today’s competition, not on
tomorrow’s survival
5. Formal planning reinforces success, which may lead to failure
 Alternative representation:

Breadth Time Specificity Frequenc Scope How often

of use fram y of use update?
e

Strategi Long Directiona Single use Organisatio rarely

c term l n wide

Tactical Short Specific Standing Specific Continuousl

term parts y to meet
current
challenges

Approaches to setting goals

1. Traditional goal-setting: top managers set goals that flow down and become
subgoals.
a. Means-end-chain: goals achieved at lower level become the means to reach the
goals (Ends) at the next level
2. Management by Objectives (MBO): A process of setting mutually agreed upon
goals and using those goals for employee evaluation.
a. MBO has four elements:
 i. Goal specificity
ii. Participative decision making
iii. Explicit time period
iv. Performance feedback
b. Steps in MBO:
i. Organisation’s overall objectives and strategies are formulated
ii. Major objectives are allocated among divisional and departmental units
iii. Unit managers collaboratively set specific objectives for their units with their
managers
iv. Specific objectives are collaboratively set with all department members
v. Action plans defining how objectives are to be achieved, are specified and
agreed upon by managers and employees
vi. Action plans are implemented
vii. Progress towards objectives is periodically reviewed and feedback is provided
viii. Successful achievement of objectives is reinforced by performance-based
rewards

Organizing
Organization is considered to be a strong base to establish any firm. Many
scholars said that management function can smoothly run through effective
organizing. In general term, Organising is explained as the way in which the
work of a group of people is arranged and distributed among group members.
The function of organising comprises of the determination of the activities to be
performed, creation of departments sections and positions to perform those
activities, and establishing relationships among the various parts of an
organisation. The main intent of organizing is to build a framework for the
performance of the activities of an organisation in a methodical manner.
Sometimes organizing and organization are understood in same way but both
are different. Organising is a function of management, while organisation refers
to a group of persons who have combined to achieve some common objectives.
The process of organising is basically to recognize and grouping of activities to
be performed, defining and delegating authority, casting responsibility and
establishing relationships to allow people to work jointly and successfully in
order to accomplish organizational goals.
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Good organizing functions can lead to the continuity and triumph of
organization. When organizing function is not performed well, it can result in
poor performance even though experts are involved in company's operations.
The term organization denotes dissimilar things to different people. Basically,
Organizing is the prime function of management that engages in developing an
organizational structure and assigning human resources to ensure the
accomplishment of objectives. The structure of the organization is the
framework within which effort is synchronized. Organizing also involves the
devising individual jobs within the organization. Managers take decisions about
the duties and responsibilities of individual jobs, as well as the manner in which
the duties should be performed.
Theoretical framework: Organizing is the function of management which go
after planning. It is a function in which the harmonization and grouping of
human, physical and financial resources takes place. Organizational function is
important to accomplish various tasks. When analysing theoretical studies,
many theorists gave their views on organizing function of management. Chester
Barnard defined that "Organizing is a function by which the concern is able to
define the role positions, the job related and the coordination between authority
and responsibility. Hence, a manager always has to organize in order to get
results. Another theorist, Louise A Allen stated that "Organization involves
identification and grouping of activities to be performed and dividing them
among the individuals and creating authority and responsibility relationship
 among them for the accomplishment of organizational objectives". Organizing
being process, consists of departmentalization, linking of departments, defining
authority and responsibility and prescribing authority relationships. The
organization structure is the result of this process. Other group of researchers
emphasized that organizing involves designing, structuring, and managing the
work components to attain organizational goal. It is the process of determining
what type of work is to be done, who is to do, how the tasks are to be grouped,
who reports to whom, and where decisions are to be made. Major problem to
realize goals identified in the planning process is structuring the work of the
organization. Organizations are groups of people, with ideas and resources,
working toward universal goals. The principle of the organizing function is to
exploit the organization's resources in order to attain organizational goals.
Bateman illustrated that manager must identify their levels, and then they can
systematize the most important resources of the company, their employees
(2002). This process can be accomplished by management team put personnel
in different division department, and then conduct the training program for their
employees, putting the group together into a productive team. Management
should organize all the resources in order to implement action it made in the
planning process. Management will decide the organizational structure through
the process of getting organized. Then establish and maintain relationships, also
allocate necessary resources (Burchielli and Bartram 2009). To decide the
organization structure, managers should look at the different division or
apartment, the corporation of staff; discover the appropriate way to deal with the
tasks within the company. Management must divide the task that needs to be
done, and assign responsibilities (Dauten et al.1958).
Major steps in organizing: There are many steps in organizing function of
management.
1. Consideration of objectives:
The first step in organizing is to understand basic objectives of the company.
Objectives determine resources and the various activities which should be done
and the type of organization which needs to be built for this purpose. Objectives
also serve as guidelines for the management and workforce. They bring about
harmony of direction in the organization.
2. Identification and grouping of activities:
Another step is Identification and grouping of activities. If group members are
to pool their efforts successfully, there must be proper division of the major
activities. Each job should be accurately classified and grouped. This will
 facilitate the people to know what is expected out of them as members of the
group and will help in avoiding extra efforts to perform the task.
3. Assignment of duties:
After grouping the activities into various jobs, management team should be
allotted to the individuals for ensuring assurance of work performance. Each
individual should be given a particular task to do according to his ability and
made responsible for that.
4. Delegation of authority:
It is important to delegate the authority to the subordinates to show their output.
To summarize, organizing, as the stage of management process, solves the
problem of an internal organizational structure of enterprise, managerial
authority and responsibility division, as well as of selecting people and ways of
performing business activities. The gist of many theorists is that organizing
creates and maintains reasonable relationships between human, material,
financial, and information resources by indicating which resources are to be
used for specified activities and when, where, and how they will be used. The
organizing process results in an organizational structure with precisely defined
authorities and responsibilities.

Managerial Functions- Organising

Organising is a management function that involves arranging and structuring
work to accomplish the organisation’s goals

Purposes of organising:
1. Divides work to be done in specific jobs and requirements
2. Assigns tasks and responsibility associated with each job
3. Coordinates diverse organisational tasks
4. Clusters jobs into units
5. Establishes relationships among individuals, groups and departments
6. Establishes formal lines of authority
7. Allocates and deploys organisational resources

Organisational Design

Organisational structure is the formal arrangement of jobs within an

organisation
 Organisational design is creating or changing an organisational structure, that
involves decisions about 6 elements:
1. Work specialisation: dividing work into separate jobs and tasks, e.g.,
McDonalds uses high work specialisation to quickly make and deliver its food

to customers
2. Departmentalisation: basis of grouping work together. It is done in 5 common
ways:
a. Functional
b. Geographical
c. Product
d. Process
e. Customer
3. Chain of command: line of authority extending from upper organisational levels
to the lowest levels, which clarifies who reports to whom
a. Unity of command: one of Fayol’s 14 management principles, each person
should report to only one manager
b. However chain of command are less important in today’s organisations
4. Span of control: the number of employees a manager can efficiently and
effectively manage
a. Apple CEO Tim Cook has 17 direct reports, it seems like a lot. But Cook
indicates otherwise: “If you have smart people, a strong organizational culture,
and a well-defined and articulated strategy that everyone understands, you can
[have] numerous direct reports because your job isn’t to tell people what to do.”
5. Centralisation and decentralisation:
a. Centralisation: degree to which decision making is concentrated at upper levels
b. Decentralisation: degree to which lower level employees provide input or
actually make decisions

6. Formalisation: how standardised are organisation’s jobs and the extent to which
employee’s behaviour is guided by rules and procedures.

Mechanistic (Bureaucratic) Vs Organic organisation

Traditional Organisational design options

These structures tend to be more mechanistic in nature. Three common types
are:
1. Simple structure: little departmentalisation, with wide spans of control,
centralised authority, little formalisation
2. Functional structure: groups together similar or related occupational specialities
3. Divisional structure: made up of separate, semiautonomous units or divisions
 Organising for flexibility
1. Team structures: organisational structure in which entire organisation is made
up of work teams, e.g., Google’s corporate structure organised projects around
“small, tightly focused teams”
2. Matrix and product structures:
a. Matrix structure: assigns specialists from different functional departments to
work on one or more projects. It includes multiple chains of command.

b. Product structure: employees continuously work on projects

3. Boundaryless organisation: an organisation whose design is not defined by, or
limited to, the horizontal, vertical or external boundaries imposed by a
 predefined structure. It was coined by Former GE Chairman Jack Welch
because he wanted to eliminate vertical and horizontal boundaries within GE
and break down external barriers between the company and its customers and
suppliers.
a. Virtual Organisation: an organisation that consists of small core of full-time
employees and outside specialists temporarily hired as needed to work on
projects
b. Task force: a temporary committee or team formed to tackle a specific short-
term problem affecting several departments
c. Open innovation: opening up the search for new ideas beyond the organisation’s
boundaries and allowing innovations to easily transfer inward and outward

Organising teams

Group is two or more interacting and interdependent individuals who come

together to achieve specific goals
1. Formal groups: work groups defined by organisation’s structure and have
designated work assignments and specific tasks directed at accomplishing
organisational goals
2. Informal groups: social groups

Stages of group formation:

Major components that define group performance:

1. External conditions: availability of resources, organisational goals
2. Group member resources: knowledge, skills, abilities, personality traits
3. Group structure: it defines roles, norms, conformity, status systems, group size,
group cohesiveness, and leadership
4. Group processes: that go on within a group such as communication, decision
making, conflict management etc
5. Group tasks: simple (routine and standardised) or complex (novel and
nonroutine)

Turning groups into effective teams

Organisations are using team-based structures as they are more flexible and
responsive to changing events than traditional departments or other permanent
work groups. Teams have the ability to quickly assemble, deploy, refocus and
disband.

Types of work teams:

1. Problem-solving team: a team from same department or functional area that’s
involved in efforts to improve work activities or to solve specific problems
2. Self-managed work team: operates without a manager and is responsible for a
complete work process or segment
3. Cross-functional team: composed of individuals from various functional
specialities
4. Virtual team: a work team that uses technology to link physically dispersed
members in order to achieve a common goal

Characteristic of effective team:

Controlling Function Of Management
Controlling is significant model and process in management. Controlling
guarantee that organizational performance is as per standards. Performance
standards are often stated in financial terms such as returns, costs, or profits but
may also be stated units produced, number of defective products, or levels of
quality or customer service. The measurement of performance is done in many
ways and it depends on the performance standards, including financial
statements, sales reports, production results, customer satisfaction, and formal
performance appraisals. Managers at all levels get involved in the managerial
function of controlling up to some extent.

The managerial function of controlling must not be confused with control in the
behavioural. This function does not mean that managers have any role in
controlling or manipulating behaviour of personnel and their values, attitudes,
or emotions. This function is related with the manager's role to take necessary
actions to make certain that the work-related activities of assistants are regular
with and all operations are performed for the attainment of organizational and
departmental objectives. Effective controlling needs the existence of plans,
since planning provides the necessary performance standards or objectives.
Controlling also requires good understanding of where responsibility for
deviations from standards lies. Traditional techniques of control are budget and
performance audits. An audit process engages in investigating and verifying
records and supporting documents. A budget audit provides information about
where the organization is with respect to what was planned or budgeted for.
Although controlling is determined in terms of financial standards, managers
must also control production and operations processes, procedures to deliver
services, compliance with company policies, and many other activities within
the organization.
It is observed that earlier, managers believed that the need of control emerged
when there is lacking something or management functions are not running
successfully. Then, control process was performed to identify the person
responsible for these events and take actions against him. This is only negative
scrutiny of control. In today's business management, the chief purpose of
control is to recognize the mistakes or variations as soon as they appear between
performance and standard laid down and then to take necessary action to
prevent such variations in future. The controlling is mainly intended to get
positive results and not people as such. Its purpose is to guarantee that proposed
results occur and not that particular workers are criticized.
When analysing theoretical studies, it is established that there have been
extensive work done to understand the process of controlling as management
function. Theorist, E F L Brech explained that "Control is checking current
performance against predetermined standards contained in the plans, with the
view to ensuring adequate progress and satisfactory performance". According to
renowned theorist, George R. Terry, "Controlling is determining what is being
accomplished, that is, evaluating the performance and if necessary applying
corrective measures so that the performance takes place according to plans".
Several researchers said that controlling is process of monitoring activities to
ensure that what is being accomplished matches plans and corrects significant
deviations. Henry Fayol defined that control consists in verifying whether
everything occurs in conformity with the plan adopted, the instructions issued
and the principles established. Another theorist, Koontz and O'Donnell stated
that controlling implies measurement of accomplishment against the standards
& the correction of deviations to assure attainment of objectives according to
plans.
Qualities of effective
control.

Some attributes of controlling as management function are as follows:

Controlling is a continuous process. It is flexible and dynamic process. It is
future oriented. Planning and controlling are closely related. Main essence of
control is action. For Effective Control System, controls need to focus on
appropriate activities. Effective controls must focus on critical factors that affect
both the individual's and the organization's abilities to achieve objectives.
Information needed for comparisons and control purposes needs to be in the
management's hands in order to make effective corrective action. Delays in
generating, gathering or disseminating information can prolong the occurrence
and extent of deviation. Controls must be cost effective. The benefit of using
appropriate controls should be worth their cost of installation and operation. Too
much control can be worse than too little. The key is to provide appropriate for
the situation and provide savings greater than the costs involved. Another
characteristic of controlling is that Controls should be precise and concise.
Controls must provide information about operations and people in sufficient
quantity and quality to enable managers to make meaningful comparisons to
operations standards. Controls should be accepted by the people they affect.
 Main objective of control is to measure the performance, compare to standard
and take corrective actions. Mangers can measure the performance through
personal observations, management-by-walking about, statistical reports, oral
report and written reports. There are three types of control which is shown in
figure:

Major Steps In Control Process

There are three basic steps in a control process that include establishment of
standards, measurement of performance and comparing the performance with
the standards and taking corrective action.
1. Establishment of standards: This is the initial step in control process that
establishes the standards of performance. A standard acts as a reference line or a
basis of actual performance. Standards should be set accurately and in
quantitative terms. Standards expressed in unclear or general terms such as
"Costs should be reduced" or "rejections should be reduced" are not specific as
"cost should be reduced by 10 percent" or "rejections should be reduced to 0.5
percent". Standards are used as the criteria by which performance is measured
in the control process. Since standards cannot be set for entire operations, each
organization must first develop its own list of key result areas for the purpose of
control. Different standards of performance are developed for various
operations at the planning stage. Actually, planning is the basis of control.
 Standards are to be flexible in order to accommodate in changing business
situations. In management practice, different types of standards used are
physical standards such as units of production per hour, cost standards, such as
direct and indirect cost per unit, revenue standards such as sales per customer,
capital standards such as rate of return of capital invested, and intangible
standards such as competency of managers and employees.
2. Measuring and comparing actual performance with standards: Next step in
controlling process is to measure the actual performance of individuals, group
or units and compare it with the standards. The quantitative measurement
should be performed in cases where standards have been set in numerical terms
to make evaluation easy. In other cases, the performance should be measured in
terms of qualitative factors such as measuring performance of industrial
relations manager. His performance should be measured in terms of attitude of
workers, frequency of strikes and morale of workers. Personal observation
technique is used to measure the performance such as in the case of the
subordinates being observed while they are engaged in work or by a study of
various summaries of figures, reports, charts and statements. Once the
performance is measured, it should be compared with the standards to
distinguish deviations. Some deviations are enviable such as the output above
the standard. But some other variations are unwanted such as a variation in the
delivery schedule agreed upon with the customer. The measurement and
comparison are done at various stages in the total process and not at the end.
3. Taking corrective action: The last step in controlling process is to take
corrective action so that deviations may not repeat and targeted objectives of the
organization are met. This will involve taking certain decisions by the
management like re-planning or redrawing of goals or standards, reassignment
or classification of duties. It may also require improving the process of selection
and training of workers. This control function may necessitate change in all
other managerial functions. If the standards are not adequate and faulty, there is
a need to establish again through observations. A good control system assists the
manager to assess the risks of committing errors.
Four steps in controlling
process

Control Methods
Control methods are generally categorized into two types that include past-
oriented controls and future oriented controls.
Past-oriented controls: Past-oriented control measure results after the process.
These are also identified as post action controls. They scrutinize activities
occurred in the past for a particular period. Examples of past-oriented controls
are accounting records, school grade reports etc. These controls are used to plan
future behaviour through reviewing post errors or successes. They can also be
used for rewarding, disciplining, training or promoting individuals.
Future-oriented controls: These are also recognized as feed-forward controls
or steering controls. These controls are intended to assess results during the
process, so that action can be taken before the task is completed or the period is
over. Examples of such controls are cash flow and funds flow analysis, network
planning which assist managers to observe that they will have problems in such
areas of cash or on time delivery unless they take prior action.
Organizations use both these types. Future-oriented controls are vital because
the information feedback in them is at the input side of the system, so that
improvement can be made before the system output is affected.
Past-oriented and future-oriented

controls
Current issues in control include rights that manager has to monitor employee
behaviour, rights that manager has to control private lives of employees;
employers may be able to control employee behaviour outside the work
environment.
There are some limitations in controlling process. The first limitation is
difficulty in setting quantitative standards: Control system loses some of its
effectiveness when standards cannot be defined in quantitative terms. Employee
confidence, job satisfaction and human behaviours are such areas where this
problem might arise. Second restriction of controlling is little control on
external factors. Generally an enterprise cannot control external factors such as
government policies, technological changes, and competition. Third limit is
resistance from employees. Control is often opposed by employees. They
perceive it as restriction on their freedom. Lastly, it is quite expensive as it
involves a lot of expenditure, time and efforts.
It can be said that controlling is performed by managers to monitor current
performance against pre-set standards contained in the plans in order to ensure
good progress and satisfactory performance. Control involves three steps
namely establishing standards, measuring and comparing actual performance
with standards and taking corrective action. Controlling assists to maintain
compliance with essential organizational rules and policies.

Managerial Functions- Controlling

Controlling is a management process that involves monitoring, comparing, and
correcting work performance.
Effective control ensures that activities are completed in ways that lead to
attainment of goals.

Control process is a 3-step process:

Organisational performance is the accumulated result of all the organisation’s

work activities.

Measures of organisational performance:

1. Organisational productivity:
a. Productivity is amount of goods or services produced divided by the inputs
needed to generate that output
2. Organisational effectiveness: a measure of how appropriate organisational goals
are and how well those goals are met
3. Industry and company rankings

Ways to control employee performance:

1. Delivering effective performance feedback
2. Using disciplinary action
a. Progressive disciplinary action: an approach to ensure minimum penalty
appropriate to the offence is imposed

Types of control:
Feedforward control: control that takes place before a work activity is done
Concurrent control: control that takes place while a work activity is in progress,
e.g., management by walking around, when a manager is out in the work area
directly interacting with the employees
Feedback control: control that takes place after a work activity is done

Tools for measuring organisational performance:

1. Financial controls
a. e.g. analysing quarterly income statements for excessive expenses
b. Using traditional financial measures such as ratio analysis and budget analysis
2. Informational controls
a. Management information system (MIS) is a system used to provide
management with needed information on a regular basis
3. Balanced Scorecard
a. It is used to evaluate organisation’s performance from more than just the
financial perspective
b. It looks at four areas that contribute to a company’s performance: financial,
customer, internal processes and people
4. Benchmarking of best practices
a. It is a search for best practices among competitors and noncompetitors that lead
to a superior performance

Contemporary issues in control

1. Adjusting controls for cross-cultural differences and global turmoil
2. Workplace privacy
3. Employee theft: any unauthorised taking of company property by employees for
their personal use
4. Workplace violence
5. Controlling customer interactions
 6. Corporate governance: the system used to govern a corporation so that interests
of corporate owners are protected
a. Role of Board of Directors: to have a group independent from management,
looking out for interest of shareholders who are not involved in day-to-day
management of the organisation
i. However usually a quid pro quo arrangement exists between Board of Directors
and management
ii. Hence USA passed Sarbanes-Oxley Act, which puts greater demand on board
members of publicly traded companies to do what they are empowered and
expected to do (Need to find equivalent indian law)
b. Financial reporting and audit committee
i. Declaration of financial statements for publicly traded companies

Decision Making
Decision-making has great importance for success of organization in
contemporary management system. Managers have to take critical decisions at
every stage. Decision-making pervades through all managerial functions such as
planning, organizing, staffing, directing and control. In planning for example
manager decides what to produce, where and when and in organizing manager
decides about distribution of work, delegating authority and fixing
responsibility. Decision making is commitment to something and a principle or
course of action. It is selecting the best among alternative courses of action. The
decision-making consists of various factors. Decision-making means that there
are various alternatives and the most suitable alternative is chosen to solve the
problem. Another factor is existence of alternatives in which the decision-maker
has liberty to choose an alternative of his fondness. Decision-making is goal
oriented. It implies that the decision maker attempts to accomplish some results
through taking vital decisions.

In theoretical studies, it is established that decision making is an essential part

of management. Decision-making is a process of deciding. Collins (1999)
defines decision as the act of making up one's mind by collecting, sharing and
gathering significant ideas from different sources. Furthermore, Longman
(2000) describes that "decision as a choice or judgment that you make after a
period of discussion or thought". Longman's definition is very clear but it gives
rise to a question on the definition of deciding or decision-making. Fullan
avows that decision-making is the process of identifying and choosing
alternative courses of action in a manner appropriate to the demand of the
situation (1982). According to Baker et al. (2001), decision making should start
with the identification of the decision maker(s) and stakeholder(s) in the
decision, reducing the possible disagreement about problem definition,
requirements, goals and criteria. Fremount, et, al, defined decision-making as
the "conscious and human process, involving both individual and social
phenomenon based upon factual and value premises, which concludes with a
choice of one behavioural activity from among one or more alternatives with the
intention of moving toward some desired state of affairs (1970). A decision
maker, as an individual, or as a member of formal organization with his own
viewpoint and perception of the organization, selects for optimising values
within the constraints imposed by the organization (Varshney, 1997)
Types of Decisions: Decisions are grouped in a numerous ways:
Programmed and non-programmed decisions: Programmed decisions are
those that are made in harmony to policy, procedure and rules. These decisions
are regular and cyclical and programmed decision is comparatively easy to
make. Non-programmed decisions are new and non-repetitive. If a problem has
not arisen before or if there is no precise method for handling it, it must be
tackled by non-programmed decision. For programmed decision, there are
definite rules exists and therefore it is not possible for two persons to find
different solutions to the some problem. In case of non-programmed decision,
there are no set rules to deal with the problem. Each manager may bring his own
personal beliefs, attitudes and judgments to bear on the decision. In this case, it
is possible for two managers to find different solutions to the same problem.
Top level manager must have this ability to make non programmed decisions.
Major and minor decisions: Major decisions are taken cautiously and
intentionally by the application of human judgment and experience where as
minor decisions are made almost subconsciously using rules. The decisions that
impact for long term on departments are categorized as major decision.
Alternatively, corporate decisions that do not have long term effect are known
as minor decisions. Some of major decision example in organization includes
diversification of existing product lines, adopting new technology are the major
decisions. The decision to obtain raw materials is a minor decision, Major
decisions are made at top level and minor decisions are taken at lower level in
the organizational ladder.
Simple and complex decisions: Another category of decision making is to take
simple and complex decision. Simple decision is taken in situation where there
few variables considered for solving a problem. If the variables are many, then it
is an intricate decision.
Strategic and tactical or operational decisions: Strategic decision is making
good choice of actions concerning allocation of resources and contribution to
accomplish targeted goals of organization. Strategic decisions are major and
non-programmed decisions and have long term impact. A strategic decision may
involve major removal from earlier system. For example, modification in the
product mix. Strategic decisions are taken by senior management. Tactical or
operational decision is stemmed from strategic decision. It is associated with
daily working of the organization and is made in the context of established
policies and procedures such as taking decisions for provisions of air
conditioning, parking facilities. Such types of decision are taken by the lower
level managerial staff.
 Individual and group decisions: Decision may be taken either by an individual
or group. Decisions which are routine in nature, with few variables and exact
procedures exists to deal with them are taken by individuals. Decisions which
have their impact on other departments, which may result into some
transformation in the organization, are taken by groups.
Decision Making Process:
A decision is reasonable if it is suitable for organization that means choose best
alternative to accomplish goals. There are various steps in rational decision
making:
1. Recognizing the problem.
2. Deciding priorities among the problems.
3. Diagnosing the problem.
4. Developing alternative solutions or courses of activities.
5. Evaluating alternatives.
6. Converting the decision into effective action and follow up of action.
Important steps of the decision making

process.
(1) Recognizing the problem: Decision has great impact on organization's
operations. When a manager takes any decision, it is in effect the organization's
response to a problem. Therefore, it is essential to search the environment for
the existence of a problem. A problem exists when there is divergence from past
experience or deviation from plan. Problem emerges when competitors do well
or when people bring problems to the manager. It is the responsibility of
manager to thoroughly explore the root causes of problems.
(2) Deciding priorities among problems: After identifying problems, manager
must assess which problem has more harmful impact on organization. He may
find that some of the problems are such that they can be solved by their
assistants because they are closest to them. All such problems should be
transferred to subordinates. Some problems may need information available
only at higher level or affecting other departments. Such problems are referred
to higher level managers. And those problems which can be best solved by him
are to be focused.
(3) Diagnosing the problems: It is necessary to understand the intensity of
problem. Symptoms of the problem that are observed by the manager may some
times misinform him. The symptom may lead manager to think one part when
the defect may lie hidden in another part. For example if there is decline in
sales, the management may think that the problem is one of poor selling
procedure or the saturation of the old market. But the real problem may be
incapability to move quickly to meet varying needs of the clients. To diagnose
the problem, a manager should follow the systems approach. He should study
all the sub-parts of his organization which are connected with the sub-part in
which the problem seems to be located.
(4) Developing alternative solutions: A problem in organization has many
solutions. However, all the ways cannot be uniformly satisfying. Decision
maker must recognize various alternatives available in order to get best result of
a decision. It can be said that all alternatives are not possible to consider either
because information about all alternatives may not be available or some of the
alternatives cannot be considered because of limitations. Therefore while
choosing alternatives, it is necessary to consider the concept of limiting factor.
Limiting factor is one which stands in the way of accomplishing a desired
objective. A decision maker can categorize alternatives using his own
experience, practices followed by others and using creative practice. From past
experience, decision maker takes into account the action. The successful action
of the past may become an alternative for the future. But main restriction of
such thought is that success in past experience may not necessary in the present
context because of changing business situation. Other method of developing
alternatives is through creative process where various exercises are taken to
create completely new ideas. Creative ideas of individuals or groups help in
developing alternatives. One popular group technique is brain storming. The
brain storming group consists of 5 to 10 people. The best idea behind brain
storming is to think of as many alternatives as possible without pausing to
evaluate them.
(5) Measuring and comparing consequences of the alternative
solution: After developing various alternatives, it is essential to measure and
compare their outcomes of alternatives using quality and acceptability. The
quality of a decision must be determined considering both tangible and
intangible consequences. Tangible consequences are those which can be
quantitatively measured or mathematically demonstrated. Intangible
consequences cannot be measured quantitatively. A decision though good in
quality may be poor in acceptability or decision though acceptable may not be
good in quality. In such cases managers must find the relative importance of
these two.
(6) Converting the decision into effective action and follow up of action: in
this step, decision must be communicated to the employees in clear and
unmistakable terms. All necessary efforts should be made to secure employees
involvement in some stages of decision making. Association of employees in
decision making not only improve the acceptability, but also improves the
quality of decision.
Environment of decision-making: In organization, decision making process
has immense importance and sometimes managerial team may not be competent
to select best alterative. This problem may be highly complex and vague. These
conditions of knowledge are referred to as the 'environment of decision making'.
The environment of decision making is categorized into three types that are
certainty risks and uncertainty. The environment of decision-making is a range,
at one end there is complete certainty and at the other end there is complete
ambiguity.
Decision-making under certainty: The term certainty denotes to precise
knowledge of the outcome of each alternative. All pertinent data are available
for making decision.
Decision-making under risk: In decision making under risk, the outcome of a
particular decision cannot be specific with certainty but can be specified with
known probability values. The value of probability is a measure of probability
of the happening of that event. In such cases, alternatives are evaluated by
computing the expected value of the payoff associated with each alternative.
Decision making under uncertainty: Uncertainty exists when the decision
maker does not have good knowledge of the probabilities related with the
possible outcomes, though he has been able to recognize the possible outcomes
and their related pay-offs. Since the probabilities are not identified, the decision
maker cannot use the principle of maximizing the pay off.
To summarize, decision making is a selection of the best among alternative
courses of action. Effective and successful decisions can be beneficial for
company and prevent losses. Therefore, corporate decision making process is
the most critical process in any organization. In the decision making process,
managers choose one course of action from a few possible alternatives. In the
process of decision making, we may use many tools, techniques and
perceptions. Decisions may be grouped as programmed and non-programmed
decisions, major and minor decisions, simple and complex decisions, strategic
and operational decisions. The environment of decision is classified into three
types that include certainty, risk and uncertainty.

Decision making process

Decision is choice between two or more alternatives

It is an 8 step process that includes identifying a problem, selecting a solution

and evaluating the effectiveness of the solution

Problem is the discrepancy between an existing and a desired state of affairs

Decision implementation is putting decision into action and includes
conveying the decision to the people who will be affected by it and getting their
commitment to it

Decision making conditions:

Certainty: a situation in which outcome of every possible alternative is known
Uncertainty: there is neither full knowledge of the problem nor reasonable
probabilities for alternative outcomes can be determined
Risk: a situation in which the decision maker is able to estimate the likelihood
of certain outcomes
 Models of Decision Making
1. Rational Model
a. Rational decision making describes choices that are consistent and value
maximizing within specified constraints
b. It assumes that decision makers will be fully objective and logical

Assumptions of Rationality

2. Bonded Rationality Model

a. Decision making that is rational but limited (bounded) by an individual’s ability
to process information
b. Satisfice: accept solutions that are “good enough”
c. Escalation of commitment: an increased commitment to a previous decision
despite evidence it may have been wrong, e.g., decision makers chose to launch
Challenger space shuttle even though the decision was questioned by many as a
bad one
d. Heuristics: using judgemental shortcuts
i. Availability heuristic: the tendency of people to base their judgement on
information that is readily available to them
ii. Representative heuristic: the tendency of people to base judgement of
probability of things with which they are familiar
3. Intuition
a. It is making decisions based on experience, feelings, and accumulated
judgement
b. A manager who had experience with a similar kind of problem can often can act
quickly with what appears to be limited information because of past experience
4. Evidence-based management
a. The systematic use of best available evidence to improve management practice
b. Four essential elements of EBMgt are:
i. Decision maker’s expertise and judgement
ii. External evidence that’s been evaluated by the decision maker
iii. Opinions, preferences and values of those who have a stake in the decision
iv. Relevant organisation (internal) factors such as context, circumstances and
organisational members

Types of decisions
Depending on the nature of problem, a manager can use one of the two different
types of decisions:
1. Structured problems: straightforward, familiar and easily defined
a. They usually have a programmed decision, repetitive decision that can be
handled by a routine approach
b. A procedure is a series of sequential steps a manager uses to respond to a
structured problem
c. A rule is an explicit statement that tells manager what can or cannot be done
d. A policy is a guideline for making a decision. As against rule, policy is an
ambiguous term that leaves interpretation to the decision maker
2. Unstructured problems: problems that are new or unusual and for which
information is ambiguous or incomplete
a. Managers rely on unprogrammed decision making which are unique and
nonrecurring and involve custom-made solutions

Common Decision Making Errors and Biases

Chapter overview
 Role of Manager (Managerial Function)
In any organization, managers have significant contribution for the success and
its economic enhancement. He/she is a person who fulfils the primordial
managerial functions and act as a head of team in firm. Various management
theorists like Griffin define manager as a person who is responsible for the
realization of management process. Many theorists explained that management
as a process, practise of planning, organizing and staffing, direct and controlling
activities of an organisation in a systematic way in order to accomplish a
common goal (Henry Fayol, 1916). Management can also been perceived as
function and a social process and manager is the essence of reaching goals.
Drucker (1993) stated that approach to management is function as well as the
people who discharge it. It could be a social position or an authority. But other
authors explained that management is not a different discipline instead it is the
responsibility of a manager to successfully perform the job. Therefore, role of
manager is seen as important in management function. Manger's role in
enterprises has been dramatically transformed. Earlier, supervisor used to be the
main person who liaisons between the owner and employees of company. He
thoroughly listens to employees and uses their ideas to improve the business
system and focuses to resolve the major issues. J. Penc stated that the manager
is employed in company to manage all his functions and make use of all or
some part of organization's resources to attain goals of the whole organization
or its given part. Today, managers have more important function for the
enhancement of organization. They perform various roles in business
organization.
 Figure: Different typologies of managerial
function

To manage employees in company, managers are divided in to many groups and

it depends on the undertaken standard. The most important factor is the position
of manager in the organization's structure (Penc 2000). From this perspective,
there are three categories of manager position in organization.
1. top-management that include managers occupying the highest posts in
company's central administration or in branch establishments, they are
responsible for planning and strategic decisions.
2. middle-management that means managers of departments and services in
company's central and its branch establishments; they come to operating
decisions, pass them on first line management and control implementation of
this decision.
3. The first line management, supervisory management or junior management that
include mainly supervisors of production's divisions (that is foremen)
responsible for implementation of made decisions and direct control of tasks
realization's process.
There are other ways to explain the role of managers also. Functional managers
are responsible for one kind of activity in given business organization, for
example production, marketing, selling or finance. Managers also supervise
complicated economic unit, like enterprise, branch establishment or separate
department and responsible for whole economic activity of this unit.
 Minzberg (1973) categorized the roles of a manager into three, interpersonal,
informational and decisional roles.
1. The interpersonal role of the managers is understood as a sign in the
organisation and is obliged to do numerous duties. Person who holds the
responsibility of managing organizational operations must defines the
atmosphere in which the organization will work. For instance using any form of
leadership style like participative, consultative or exploitive authoritative styles
(McKenna 2000). A manager deals and maintains the important relationships
that exists between the numerous individuals and groups within and outside the
firm. They uses the powers of personality to transfer information, make strategic
decisions, and incorporate individual needs and organizational goals, to bring
individual and organizational needs into a common harmony. Therefore,
possessing visible managerial power, that is legitimate, formal and goes with
authority.
2. Informational roles of the manager is to observe who is regularly seeking
information and gives access information that enables managers to understand
what is happening within the organization and its environment by observing
internal operations, external events, analyses new ideas and trends
(Paolillo1987). The manager distributes external information into the
organization and internal information to its managerial staff (Buchanan and
Huczynski 2004). The manager needs to regulate different types of information
such as facts or value been filtered into the organisation (Barrie1994). The task
of manager is to transmit information out to the organization's environment and
to take stand for organization.
3. The decisional roles of the manager is to act as an originator and designer of
much of the controlled change of the organization. Minzberg(1973) stated that
through the monitoring role, managers explore opportunities, identifies
problems, and initiates actions to recover business situations. Managers can be
involved to improve project designs by delegating and supervising the projects.
As a formal authority, the manager must supervise the system by which
organizational resources are allocated where they schedule of time, programmes
work and authorises actions as well as a negotiator in activities (Mullins 2008).
Another theorist, Thompson argued and proved through his theory that there are
many factors that will determine the managerial roles as stated
byMintzbergin1973. He developed that the environment is a main factor to
regulate Managerial roles. The environment is described in two categories
which are complexity and dynamism. For instance, a manger cannot foresee
future events because of environmental situations reoccurring all the time.
Manager cannot predict future events when there are rapid changes and the
predictability is low. Therefore, making complexity is the driving force for
informational roles, while dynamism for decisional roles. Drucker (1933)
recognized three major tasks which are equally important, but essentially
different and that has to be done as well as there are five basic operations which
managers must perform that include setting objectives, organising, motivates
and communicates, measures and develop people. A manager must have the
ability to motivate team members to accomplish the objectives of the
organisation. The development and training will equip team members to
perform their tasks, monitor, and complex products and services for the
organisations.
The classical managerial role, the interpersonal roles is associated with high
level of performance for an organisation (Warner 1997). Many investigators
have confirmed that decisional roles have significant part in the growth of a
company path and (Buchanan and Huczynski 2004). The accomplishment of an
organisation depends on human activity and managers. Many theorists stressed
that motivation is an important tool to which managers tend to often under-
utilize in current workplace. The fundamental role of managers need to
understand and motivate employees at workplace to work, both individually and
as a team, to produce the best results for the organization in the most effective
way (Daft 2008). Various researchers assumed that motivation affects
externally, but it is confirmed through theories that each employee has his/her
own set of motivating forces (Mullins 2008). Nadler and Lawler III proposed
that managers must apply the basic ideas of expectancy theory to improve
organisational performance by identifying and addressing these motivating
forces of employee's motivation (Porter and Lawler 1968). When the forces of
motivation have been determined, the manager tends to know the type of reward
that is expected of each employee. The employees feel that they are part of good
organization and senior managers value their contributions to the company.
These rewards are in two forms, intrinsic and extrinsic. Extrinsic are tangible
rewards that are determined by organisational level and are outside the control
of individual managers, while Intrinsic are psychological rewards such as a
sense of challenge and achievement, receiving appreciation or positive
recognition (Mullins 2008). To understand the motivation factor, the manager
needs to know the four perspectives on employee motivation that include the
traditional approach, the human relations approach, the human resource
approach and the contemporary approach in order to achieve organisational
objectives (Daft (2008). The current approach on employee motivation in which
the manager must focus on as regards performance of the targeted objectives
and projects. These are dominated by the three theories such as the content
theories which underlines the basic human needs, the process theories that is
concerned with the processes that influences the behaviour, and the
reinforcement theories which focuses the employee learning of desired work
behaviours (Leavitt, Pondy & BojeIt 1988). Performance is necessary to work
effectively in organization, therefore failure to maintain a culture of employee
motivation will not lead a company toward achieving its goals, but will instead
foster weakness and lethargy among the employees. Mangers must have good
understanding of motivation and related factors in order to influence work
behaviour for team members.
Each manager's role usually influences the internal or external context of
functioning of the company. One of the most important manager's roles is the
leader's role, which influences a lot the internal and indirectly also external
context of functioning of the company. The lead is variously defined in
literature of the subject.
To summarise, managers are the asset of organization and the managerial roles
have widened, became more complicated, active and creative. Under their
guidance, team is motivated to perform given task and enhance performance.
Managers, who want to control enterprises in a proper way must fulfil more and
more functions and play on many stages. They should be flexible, be able to
adapt themselves to different situations and play many roles, change roles, adapt
them and even create the roles. A manager has the capability to turn each
employee's strengths into valuable performances by analysing and recognizing
their knowledge and experience. Managers have responsibility to develop
effective way to control external business environment that can affect monetary
system and its operations. Another accountability of manager is to ensure that
employers integrate diversity in their hiring process to include different age
groups, gender and ethnic and racial backgrounds. They also have the
responsibility of training all staff on what constitutes right and wrong behaviour
in the place of work. A dominant manager can bring positive changes in an
organization by directing people, gathering resources and creating budgets.
Role of Manager, Managerial Skills
Included in 1st section: Concept and foundation of Management
Managerial skills (Managerial Function)
Management is the most challenging task in present business world. It needs
certain skills to beat such challenge. Therefore every manager must possess
essential skills for doing better management. These managing abilities are
termed as managerial Skills. Managerial skills enable managers to maintain
efficiency in the way how employers performing working tasks. Managers must
have a skill to manage people and technology with the purpose of effective and
efficient fulfilment of their tasks.
Robert Kaz has classified three types of skills that are necessary for a successful
management process such as technical, conceptual and human skills.
Technical Skills: Technical skills must be possessed by managers to accomplish
organizational tasks. These are not meant for working on machines, but can be
used for sales and marketing. Basically, a technical skill is the capability to do
assigned job. Technical skills assist the senior and middle level managers to use
different machines and tools. It also helps them to use various procedures and
techniques. The low-level managers must be proficient with such technical
skills to give high performance because they must have to perform task in field.
A technical skill is the aptitude in the performance of particular tasks, in
particular skills involving methods, specialised techniques and equipment
involved in specific functions, for example manufacturing and engineering.
Technical skills also include specific knowledge, logical ability and the
proficient use of tools and techniques to crack business issues (Samson, and
Daft, 2003).
Conceptual Skills: Conceptual skills are talent or understanding of managers
for abstract thinking to assess whole situation and identify different states and to
foresee the future state of the business. Conceptual skills is the ability of a
manager to envisage the organisation as whole, distinguish interrelationships
and be aware of how the organisation fits into the civilization, community and
the world ( K.N. Bartol). Conceptual skills exploit the ability of a human to
form concepts. Such skills include thinking creatively; formulating abstractions,
analysing complex situations, and solving problems. Such skills assist
management team to understand the major causes of the problems and not the
symptoms. Mangers that have mastery over these skills are in a position to solve
the problems and enhance productivity of organisation. It also helps the
manager to establish goals for organisation and devise plan for every situation.
Prof. Robert Katz describe that conceptual skills are needed by the senior
management because they are involved in planning, organising and problem
solving tasks. In the business filed, these skills are necessary for managements
to operate business successfully. Conceptual skills are used in planning and
dealing with ideas and abstractions. Such abilities enable manager to make good
decision which is a characteristic of all managers (Katz, R. 1974).
Human relation Skills: Understanding about human skills for managers to
extract work from employees. The most significant role for managers is to
effectively manage people in organization and to give best output. Human
relations skills are also called Interpersonal skills. It is a capability to work with
individuals. It assists the managers to comprehend, converse and work with
others. It also helps the managers to lead, encourage and develop team strength.
Human relations skills are necessary by all managers at all levels of
management. All managers have to work together. These skills will allow
managers to become leaders, to inspire employees to do best and complete task
successfully. Some of human relation skills include Sensitivity to others,
treating people fairly, Listening intently, Communicating warmth, Establishing
rapport, Understanding human behaviour, Empathy, Tactfulness, Cooperative
team member, Avoiding stereotyping people, Feeling comfortable with different
kinds of people, Fun person to work with, Treating others as equals, Dealing
effectively with conflict, Helping clarify misunderstandings, Creating an
environment of social interaction.
Besides above skills, managers must develop other skills for smooth
management in organization.
Communication Skills: Communication is an important process, which
involves organising, selecting and transmitting symbols in correct way to ensure
that listener perceives and recreates in his own mind the intended meaning of
the communicator. Communication involves the initiation of meaning in the
listener, the transmission of information and thousands of probable stimuli.
Communication skills are congruently necessary at all levels of management.
Managers must have capability to communicate the plans and policies to the
workforce. Correspondingly, they must listen and solve the problems of the
workers. They must promote a free-flow of communication in the organisation.
Administrative Skills: Senior level executives must possess administrative
skills. The top-level managers should recognize how to make plans and policies.
They should also know how to complete work with in timeframe. They should
be able to organize different activities of the organisation. They should also be
able to control the all organisational functions.
Leadership Skills: Leadership skill is the capability to influence human
behaviour. A manager must develop leadership skills to stimulate the workers.
These skills assist the Manager to guide workers and encourage them to do
work in timely manner. Leadership is the ability to empower others to create
new management or human systems to efficiently accomplish change through
organizational goals and decision making. Max DePree stated that "leadership
combines the unpredictability of the future with the gifts of individuals" (1992).
The path for managers to embark upon to grow and develop leadership skills
begins with the discussion and operationalization of these essential skills.
Managers have the power to get things done within organizations, but this is not
enough. DePree (1992) suggests that "good leadership includes teaching and
learning, building relationships and influencing people, as opposed to exercising
one's power".
Problem Solving Skills: Problem solving skills are also known as Design
skills. A manager must be proficient to identify a problem. He should also
acquire an ability to explore the best solution for solving any particular
problem. This requires intelligence, experience and up-to-date knowledge of the
advanced technological developments. Six steps make up the problem solving
process: Defining, Identifying, Understanding, Generating Solutions, Analysing,
and Choosing.
Decision Making Skills: Decision making skills are essential for business
success. The quality of decisions determines project manager's capability and
leader. Managers have to take many decisions frequently in organizational set
up. Most of these decisions are unimportant and can be made using "common
sense". However, some of these decisions have major impacts on the project,
team members, or the business in general. For these cases, making a perceptive,
gut feel decision can result in a poor choice with significant harmful
consequences. To minimize negative consequences, decisions that are complex
or have a high impact should be made using a systematic decision making
model. Decision-making skills are also needed at all levels of management.
Though the top-level of management take major decisions but middle and lower
level executives must possess to take decision in critical business situations. A
manager must have an ability to take quick and right decisions. He must also be
able to execute his decision intelligently. The success or failure of a manager
depends upon the precision of his decisions. Some of the factors that make a
decision complex are several alternatives, significant uncertainties, multiple
stakeholders, factors that make a decision high impact are financial
Consequences, life-or-Death Consequences, Business Perception or Reputation.
Improving skills in decision making will help managers to determine whether
an intuitive or analytical approach should be used.
When analysing managerial skills, Katz proposed that technical skills are less
important as manager moves into higher levels of management. A first line
manager is a manager at the lowest level of the organisation who manages the
work of non-managerial employees and is directly involved with the production
or establishment of the organisations products and services, and in addition
responsible for the smooth daily operations in search of organisational goal
(Bergman et al., 2006).
While, human skills are needed in all hierarchical areas of an organisation,
usually middle managers apply this skill in performing task. A middle manager
is a personnel who works at the middle levels of the organisation and is
accountable for the work of lower level managers. They are mainly responsible
to implement overall organisational plans to accomplish organisational goal.
They are expected to establish healthy relationships with workers in the
organisation to support team work and resolve clashes (Samson, 2003).
Katz proposed that conceptual skills are necessary for senior executives because
upper level managers often deal with abstract ideas whereas lower level
managers usually deal with recognizable objects and processes (Bergman et al.,
2006). Top managers are in-charge for the entire organisation (Bergman et al.,
2006).
To summarize, basically successful management is dependent upon three basic
skills. Technical skills must be possessed by manager to accomplish the
mechanics of a particular job. Human skills; which are vital for working with
others in order to be an effective group member and develop strong
relationships among employees and to be able to build cooperative efforts
among the team he/she leads. Conceptual skills, which are basic characteristics
and enables managers to perceive the organisation as a whole and be able to
make abstract decisions which in turn will result in the best outcome for the
organisation and its employees (Katz, R. 1974). The relative importance of
these skills seems to vary with different levels of managerial responsibility,
nonetheless conceptual skills, coupled with technical skills, human skills and a
sound knowledge base, are all crucial elements in organisational performance
(Bartol, et,al., 2003).
Entrepreneurship (Managerial Function)
The phrase 'entrepreneur' is derived from French word 'Entreprendre' which
entail an organizer of musical or other entertainments. In the late of 16th
century it was used for army leaders. It was extended to cover civil engineering
activities such as construction in 17th century. But it was Richard Cantillon, an
Irishman living in France who was first to use the term entrepreneur to refer to
economic activities. According to Cantillon "An entrepreneur is a person who
buys factor services at certain prices with a view to selling its product at
uncertain prices". Entrepreneur, according to Cantillon, an entrepreneur is a
bearer of risk, which is non-insurable. SchumPeter gave a central position to the
entrepreneur who believed that an entrepreneur was a dynamic agent of change,
that an entrepreneur was a catalyst who transformed increasingly physical,
natural and human resources into correspondingly production possibilities.
Since then the term entrepreneur is used in various ways and various views.
Basically Entrepreneurship is a quality possessed by entrepreneur

Model of Entrepreneurship

Entrepreneurship has gained greater importance at global level under changing

economic scenario. Global economy in general and Indian economy in
particular is poised for rapid growth driven by entrepreneurship.
Concept of Entrepreneurship: Entrepreneurship is a fresh subject of research in
educational area which is used in different manner. It is a broad term scattered
in diverse fields as economics, psychology, and sociology. In previous time,
more emphasis was given to the consumerist individual and to assess the driving
force to initiate new projects, establish firms and face the challenges.
conference of entrepreneurship held in USA, elaborated Entrepreneurship as the
attempt to create value through recognition of business opportunity, the
management of risk taking appropriate to the opportunity and through the
communicative and management skills to mobilize human, financial and
material resources necessary to bring a project to fruition. The relationship
between entrepreneur and entrepreneurship are used exchangeable and it is
shown in figures below:

Presently, entrepreneurship researchers investigate the incentive behind

entrepreneurial activity within specified groups who can do new business. The
growth of new enterprises attracts many researchers to discover the important
facts and clarify the causes of success for some companies than others.
Evolution of Entrepreneurship
Entrepreneurial group is evolved in ancient history. It dates back to the Pre-
Vedic period when Harappan culture flourished in India. History of
entrepreneurship and emergence of entrepreneurial class in India may be
presented in two sections viz. entrepreneurship during pre-independence and
post-independence. Entrepreneurship during pre-independence developed in the
excavation in Harappan and Mohanjodaro the handcraft items and metal
moulded items. It is observed that the craftsmen of the time made, handicraft
items as part of their contribution to the society in which they lived. The
entrepreneurship to make handicraft items existed in India around 2500 B.C.
People developed their own social system and village economy in India. India
also developed cast-based divisions of work, which helped in the development
of skills of artisans. The artisans in different parts of India grouped together and
developed their own artefacts and were well known for their quality. The actual
appearance of manufacturing enterprise can be noticed in the second half of
nineteenth century. Entrepreneurship during post-independence developed in
1948 when Indian government came forward with the first Industrial policy,
which was revised from time to time. The government identified the
responsibility of the state to promote, assist and develop industries in the
national interest and recognized the role of private sector in accelerating
industrial development.
The Theoretical Framework Of Entrepreneurship
Entrepreneurship is a wide phenomenon. Van de Ven squabble that "the process
of entrepreneurship is a collective achievement requiring key roles from
numerous entrepreneurs in both the public and private sectors" (1993).
Entrepreneurship research has been a centre of attraction for scholars since
many decades with the advent of ownership of firms, small scale business
management, networking, organizing, and innovativeness. Entrepreneurial
activities are significantly dissimilar which depends on nature of business
started by entrepreneur. Private enterprise can be established from particular
projects to huge organizations that open the path for employments to many
experts and workers. In current situation the definition of entrepreneurship has
been changed which is not limited to operation in business developments but
extend to conceptualization of entrepreneurship as a specific attitude resulting in
industrial schemes, such as the development of social entrepreneurship, political
entrepreneurship, or knowledge entrepreneurship. Heggins explained that
entrepreneurship meant the function of seeking investment and production
opportunity, organizing an enterprise to undertake a new production process,
raising capital, hiring labour, arranging the supply of raw materials and
selecting top managers of day-to-day operations. Another theorist Mc Clelland,
there are two characteristics of entrepreneur, first is doing a thing in a new and
better way, second is decision making under uncertainty. The various definitions
of entrepreneurship identify two basic elements of entrepreneurship namely
innovation and risk bearing. Joseph Schumpeter was the inventor of developing
contemporary entrepreneurship (1934). Joseph A Schempeter defined that
entrepreneurship is essentially a creative activity. It consists of doing such
things are not generally done in ordinary course of business. An entrepreneur is
one who innovates i.e. carries out new business. He placed entrepreneurship in
the core of his economic development theoretical structure. Joseph Schumpeter
categorized entrepreneur as sociologically distinct individual. The person is
characterized as the one who look for opportunities, grab these probabilities,
innovate products or provide services, transform production process or develop
new strategies for market to enhance economy. According to Schumpeter, this
process is termed as innovation and specifies that this activity is the main area
of entrepreneurship. It is described that "entrepreneurship is a process that takes
place in different environments and circumstances and causes changes in the
economy through innovations, which are created by individuals recognizing
economic opportunities creating value, both to these individuals and societies".
Entrepreneurship Role In Economic Development
There is a vast importance of entrepreneurship in increasing economy of
country. After the Independence, India has realized that, for achieving the goal
of economic development, it is necessary to increase the entrepreneurship both
qualitatively and quantitatively in the country. Parson and Smelter described
entrepreneurship as one of the two necessary conditions for economic
development, the other being increased output of capital. Y.A. Say high
describes entrepreneurship as a necessary dynamic force for economic
development. Entrepreneurship plays different role in the economic
development such as it promotes capital formation by mobilizing the idle saving
of the public. It provides immediate large-scale employment. Thus it helps to
reduce unemployment in the country. It provides balanced regional
development. It helps to reduce the concentration of economic power. It
stimulates the equitable redistribution of wealth, income and even political
power in the interest of the country. It encourages effective resources
mobilization of capital and skill which might otherwise remain unutilized and
idle. It also induces backward and forward linkages which stimulated the
process of economic development in the country. It promotes country's export
trade i.e. an important ingredient for economic development.
Theorists defined four major factors of business enterprise that is the
harmonizing feature, which can balance the other factors and he stated that
entrepreneurship is motivating factor for any business operation. There is a
great consensus that entrepreneurs produce new merchandise or develop the
strategies of producing old goods through resourcefully organizing the business
activities. Entrepreneurial activity depends upon the interface between the
opportunity and the traits of the community who develop them. Gartner
developed a theoretical framework to explain the fact of new project creation
that incorporated four main viewpoints in entrepreneurship (1985). These
qualities are the person's effort to begin the new enterprise, the organization
they create, the setting surrounding the new project and the progression of the
new project created. Many theoretical studies explored the cognitive processes
involved in entrepreneur's decision making on critical issues.
Phases in the Entrepreneurial Process
Entrepreneurship consists of various phases. The first phase in the
entrepreneurial process is some change in the real world. The second stage in
the entrepreneurial development is the 'idea'. For example, microprocessor, the
brain of personnel computer had been in the American market since the early
1970s. Intrapreneuring is another scheme. It is the process of extending the
firms domain of competence by exploiting new opportunities through new
combinations of its existing resources.
Obstacles to Entrepreneurship
Number of entrepreneurs particularly in the small enterprises is not successful
because of many problems and barriers. The greatest barrier to entrepreneurship
is the failure of success. Karl. H. Vesper has identified some entrepreneurship
barriers such as lack of a viable concept, lack of market knowledge, lack of
technical skills, lack of seed capital, lack of business know how, complacency,
lack of motivation, social stigma, time presence and distractions, legal
constraints and regulations, monopoly and protectionism and inhibitions due to
patents.
Another area of entrepreneurship is rural entrepreneurship which is a major
opportunity for the people who migrate from rural areas or semi urban areas to
Urban areas. On the contrary it is also a fact that the majority of rural
entrepreneurs are facing many problems due to non-availability of primary
 amenities in rural areas of developing country like India. It is too difficult for
the rural entrepreneurs to establish industries in the rural areas.
It can be summed up that Entrepreneurship is determined activity of an
individual or a group of associated individuals, undertaken to start, maintain or
earn profit by production and distribution of economic goods or services. It is an
act of starting and running an enterprise. Entrepreneurship is practiced from
ancient time itself and dates back to pre-Vedic period when Harappan culture
flourished in India. The artisans and royal patronage of Indian kings have
contributed for the entrepreneurship in the early ages of Indian history. East
India Company handicapped the Indian tiny and cottage industries. Later Parsi's,
Jain's and Vaishya's had contributed for the growth of entrepreneurship. The
managing agency system and the Swadeshi movement have contributed for the
growth of entrepreneurship in India. After independence, the Government of
India has taken measures for growth of industries through its Industry Policy
Resolutions. There are many barriers to the entrepreneurship. It may be lack of
viable concept, lack of market knowledge, lack of skills, lack of seed capital etc.

Entrepreneurship
Source: Bhavya Verma Notes

The process of starting new businesses, generally in response to opportunities

Managing a new venture differs from managing an existing operation along 5

key management issues:
1. Strategic orientation
2. Commitment to opportunity
3. Commitment to resources
4. Control of resources
5. Management structure
 Entrepreneurs are directly involved in the dynamic, and very complex inter-
relationship between financial management and business strategy. This is a
significant difference that sets apart entrepreneurial management from all
business management practices

In almost all cases, the person working on the decision has personal risk at stake

Suppose an existing large company decides to go into a new business venture.

The controlling word in the phrase ‘entrepreneurial management’ for large
company is ‘entrepreneurial’ while for the new business venture is
‘management’. Thus entrepreneurial management is about management as a
discipline for entrepreneurs.

Entrepreneurial management is the practice of taking entrepreneurial knowledge

and utilizing it for increasing the effectiveness of a new business venture

The heart of entrepreneurial management is about continuously juggling these

vital management issues:
1. What is the new venture about? (Mission and vision)
2. Where should it go? (objectives and goals)
3. How will it get there? (growth strategy)
4. What does it need to get there? (people and resources)
5. How much money does it need and when? (financial strategy)

Creating an environment for entrepreneurship:

1. It is management’s responsibility
2. Risk-taking culture in supporting a new business
3. accepting failure as a step in the process of success
4. Entrepreneurs take personal risk and they expect to be rewarded for it
5. Risk may sometimes result into failure but it has to be tolerated
6. Also entrepreneurs need some degree of freedom to pursue their ideas, which
requires that sufficient authority is delegated

Skills required for entrepreneurship:

1. Business mastery
a. Strategic thinking
b. Industry awareness
c. Identify market opportunities and unmet needs
2. Personal mastery
a. Self-awareness
b. Communication
c. Creativity
d. Courage
e. Persistence
3. Leadership mastery
a. Extreme leadership
b. Decision making
4. Entrepreneurship mastery
a. Breadth of management skills
b. Entrepreneurship savvy

Source: https://bbamantra.com/introduction-to-entrepreneurship/

Types of Entrepreneur
1. According to Clarence Banhof
a. Aggressive/Innovative entrepreneur – The one who uses various
combinations of information and factors of production to assemble
and engineer new and innovative products.
b. Imitative/Adoptive entrepreneur – The one who simply adopts a
successful innovation introduced by other entrepreneurs.
c. Fabian entrepreneur – The one who is timid and cautious in making
bold decisions. Such an entrepreneur adopts innovations in his
business only when he fears that not innovating may damage his
business.
d. Drone entrepreneur – A drone entrepreneur is one who refuses to
adopt new innovations even at the cost of reduced returns.
2. According to Authur H. Cole
a. Empirical entrepreneur – An entrepreneur who does not innovate
and follows the rule of thumb
b. Rational entrepreneur – An rational entrepreneur is one who keeps
himself updated with his business, the market and economic
conditions, and introduces revolutionary ideas
c. Cognitive entrepreneur – An entrepreneur that seeks advice and
services of experts to make changes which are revolutionary and
reflect a complete shift from its existing structure

Process of entrepreneurship
 Barriers to Entrepreneurship

1. Environmental Barriers
a. Raw Material
b. Labour –
i. Lack of skilled labour
ii. Lack of committed and loyal employee
iii. Quality and Quantity of labour
c. Machinery – It becomes very difficult for small business
organization to keep updating its production process
d. Land and Building
e. Infrastructure support – Adequacy of power, proper roads, water
and drainage facilities etc. There is less support from development
authorities due to red-tapism and corruption.
2. Financial barrier → Availability of funds is a major concern. A delay in source
of finance results in delay of starting or running business.
3. Personal Barrier → They are caused by emotional blocks of an individual.
They cause a mental obstruction. They are :-
 a. Lack of confidence
b. Lack of Dependability on others – They aim to gain their additional
expertise through trail and error and experience, rather than
seeking further development or personal assistance from others
c. Lack of Motivation – Lose interest and motivation when ideas
don’t work
d. Lack of Patience – They give up at during initial losses.
e. Inability to Dream – Sometimes they are short of vision or satisfied
with what they have achieved and lose interest in further expansion
of business.
f. Sense of Pride/Embarrassment – they are too proud or too
embarrassed to take help.
4. Societal Barrier
a. Socio-cultural norms and values
b. Degree of approval or disapproval of entrepreneurial behaviour
c. Financial stability and family background
d. Caste and religious affiliation
5. Political Barrier
a. Government incentives and concessions
b. Facilitating socio-economic setting
c. interest in economic development of society