IBM Principles and Practice of Management

IIBM Institute Of Business Management
Principles And Practice Of Management
Lecture By Dhawal Malot

It is a vital aspect of the economic life of man.
It is an organized group activity.
The productive resources - material, labor, capital etc. are entrusted to the
organizing skill, administrative ability and enterprising initiative of the
management.
The able managers and effective managerial leadership are the pre-requisites
for the resources of production material, labor and capital to become production.
The survival and success of any business enterprise more so depends on
effectiveness and efficiency of management in ever changing environment and
highly competitive scenario.
Hence, Management occupies such an important place in the
modern world that the welfare of the people and the destiny of the
country are very much influenced by it.

DEFINITIONS OF MANAGEMENT
(MANAGEMENT SCIENTISTS AND AUTHORS)
 In the words of George R Terry, “Management is a distinct process consisting of
planning, organizing, actuating and controlling performance to determine and
accomplish the objectives by the use of people and resources”.
 In the words of Henry Fayol, “To manage is to forecast and to plan, to organize,
to command, to co-ordinate and to control”.
 According to Peter F Drucker, “Management is a multi-purpose organ that
manages a business and manages managers and manages worker and work”.
 In the words of Koontz and O’Donnel, “Management is defined as the creation
and maintenance of an internal environment in an enterprise where
individuals working together in groups can perform efficiently and effectively
towards the attainment of group goals”.
 According to Wheeler, “Business management is a human activity which
directs and controls the organization and operation of a business enterprise.
Management is centered in the administrators of managers of the firm who
integrate men, material and money into an effective operating limit”.

CONTINUED…..
 According to John F M, “Management may be defined as the art of securing
maximum results with a minimum of effort so as to secure maximum prosperity
and happiness for both employer and employee and give the public the best
possible service”.
From the definitions quoted above, it is clear the
“management” is a technique of extracting work
from others in an integrated and coordinated
manner for realizing the specific objectives
through productive use of material resources.

GIST OF MANAGEMENT AS A CONCEPT
On combining the views of the various authorities the management
could be defined as “a distinct ongoing process of allocating inputs
of an organization (human and economic resources) by typical
managerial functions (planning, organizing, directing and controlling)
for the purpose of achieving stated objectives namely –output of
goods and services desired by its customers (environment).
In the process, work is preformed with and through personnel of the
organization in an ever-changing business environment”.

COMPONENTS
AND
FEATURES OF MANAGEMENT

NATURE OF MANAGEMENT
 Management aims at reaping rich results in economic terms.
 Management also implies skill and experience in getting things done through people.
 Management is a process.
 Management is a universal activity.
 Management is a science as well as an art.
 Management is a profession.
 Management is an endeavor to achieve pre-determined objectives.
 Management is a group activity.
 Management is a system of authority.
 Management involves decision-making.
 Management implies good leadership.
 Management is dynamic and not static.
 Management draws ideas and concepts from various disciplines.
 Management is goal oriented.
 Different levels of management.
 Need of organization.
 Management need not be owners.
 Management is intangible.

Is Management a Science or an
Art?
 Science may be described,
“as a systematic body of
knowledge pertaining to an
area of study and contains
some general truths
explaining past events or
phenomena.
 ‘Art’ refers to “the way of
doing specific things; it
indicates how an objective
is to be achieved.”
 Management like any other
operational activity has to
be an art. Most of the
managerial acts have to be
cultivated as arts of
attaining mastery to secure
action and results.

Management is both a Science as
well as an Art
Science Art
It provides certain general
principles which can guide the
managers in their professional
effort.
It consists in tackling every
situation in an effective manner.
In real life scenario neither science should be over-emphasized nor should be
the art discounted; the science and the art of management go together and are
both mutually interdependent and complimentary.
Management is thus a science as well as an art. It can be said that-”the art of
management is as old as human history, but the science of management is an
event of the recent past.”

SCOPE OF MANAGEMENT
The scope of management is too wide to
be covered in one or two slides.Herbison
and Myres have yet tried to restrict it
under three broad groups,viz.
Economic Resource.
System of Authority.
Class or Elite.

Purpose of Management
The purpose of management can be understood
as following:
1. Reducing ambiguity in methods of working
2. Keeping costs down, and motivating others to do the
same.
3. Taking calculated risks
4. Managing prospective risk
5. Exercise good judgment

Management – An Emerging
Profession
The professionals enjoy high status in every society. Individuals desire to join a profession
like medicine, chartered accountant, engineering and law. There has been a growing trend
towards professionalization of management, primarily, because of the desire of
business leaders for social status and recognition.
A profession may be defined as an occupation backed by specialized knowledge and
training, whose code of conduct is regulated by a professional body and which is duly
recognized by the society.
The basic requirements of a profession are as follows:
 Knowledge
 Competent Application
 Professional Body
 Self Control
 Social Responsibility
 Community Approval

Does management satisfy the tests
of a profession
The application of criteria's mentioned in the
previous slide are examined below:
 Specialized Knowledge: There exists a rapid expanding body of knowledge underlying the field
of management. Since the beginning of this century, many thinkers on management have
contributed to the field of management. Now we have systematic body of knowledge that can be
used for the development of managers. Management is widely taught in the universities and other
educational institutions as a discipline.
 Competent Application(Education and Training): MBAs are generally preferred for
managerial jobs, though MBA degree is not necessary to enter this profession. Persons with
degree in psychology, engineering, etc., can also take up managerial jobs. Thus, there are no
standard qualifications for managers.
 Managerial Skills can’t be Learnt by Trial and Error Method: To be a successful
manager, it is essential to acquire management skills through formal education and
training. Many institutes of management have been functioning in India and other
countries which offer MBA and other courses in management.
 Professional Body: For the regulation of any profession, the existence of a representative
body is a must. e.g. AIMA,IMA etc.

Social Responsibility: Managers of today recognize their social responsibilities towards customers, workers and
other groups. Their actions are influenced by social norms and values. That is why, managers enjoy a respectable
position in the society as is the case with doctors, chartered accountants, etc.
Society’s Approval: The managers of modern organizations enjoy respect in the society.
There is typically a positive correlation between a manager’s rank and his status in the organization where he is
working. This status tends to affect the manager’s status outside the organization. Thus, community approves
management as a profession.
It seems presumptuous to classify management as a profession. By all the bench marks, the professionalization of
management is still far from complete. It meets the above criteria of a profession only partially as discussed
below:
1. Though management has a well defined body of knowledge, it is difficult to say whether
management meets the criterion of competent application. It is not obligatory to possess
specific qualifications for being appointed as a manager.
2. There is no professional body to regulate the educational and training standards of the managers.
3. Management does not satisfy the test of self-controls as there is no central body to lay down and enforce
professional standards and code of conduct for the managers
Thus management cannot be fully categorized as a profession but it is moving in that direction.

A Manager is the person responsible for planning and directing the work of a group of
individuals, monitoring their work, and taking corrective action when necessary.
Managers may direct workers directly or they may direct several supervisors who direct the
workers. They are the individuals charged with examining the workflow, coordinating
efforts, meeting goals and providing leadership. Thus a manager must be familiar with the
work of all the groups he/she supervises, but need not be the best in any or all of the areas.
It is important for a manager to know how to manage the workers than to know how to do
their work well.
A manager’s title reflects what he/she is responsible for.
Examples: 1. An Accounting Manager supervises the Accounting function.
2. The Production Manager developed a staffing plan for the factory.
3. The Manager of Design Engineering supervises engineers and support
staff engaged in design of a product or service.
4.The Marketing Manager supervises marketing and sales function.

Roles of a manager
The diverse roles played by managers in discharging their duties can be
summarized under three broad heading:interpersonal roles,informational
roles and decisional roles.
Figurehead
Interpersonal Leader
Liasion
Informational Monitor
Disseminator
Spokesperson
Entrepreneur
Disturbance Handler
Resource Allocator
Negotiator
Decisional
Feedback
Provide
Information
Process
Information
Use
Information

Skills of an Effective Manager
An effective manager must possess certain skills in the
areas of planning, organizing, leading, controlling and decision-
making in order to process activities that are presented to him from
time to time.
In order to be effective, a manager must possess and
continuously develop several essential skills. It can be
categorized into three basic types of skills
 Technical,
 Human and
 Conceptual.

Functions of a Manager
There are many management functions in
business and, therefore, many manager titles.
Regardless of title, the manager is responsible
for planning, directing, monitoring and
controlling the people and their work.
E.G
 An Operations Manager is responsible for the operations
of the company.
 A Marketing Manager is responsible for the activities that
take place in marketing and sales function.

Continued…..
A managerial work is characterized by the
following things:
1. Managers work with and through other people.
2. Managers are mediators.
3. Managers are politicians.
4. Managers are diplomats.
5. Managers are symbols.

FUNCTIONS OF MANAGEMENT
According to Henry Foyal the managerial functions
may be broadly classified into five
categories:planning,organizing,directing,staffing
and controlling.
Managers perform these functions within the limits
established by the external environment and must
consider the interests of such diverse groups as
government, employees, unions, customers,
shareholders, competitors and the public.

CONTINUED…..
There are five functions of management.
1.Planning
2.Organizing
3.Staffing
4.Directing
5.Controlling.

PLANNING
 It is the process of making decisions about future.
It is the process of determining enterprise objective.
It is the process of deciding in advance what is to be done,
when and where it is to be done, how it is to be done and
by whom.
It provides direction to enterprise activities.
Planning is a fundamental function of management
and all other functions of management are influenced by
the planning process.

Organizing
It is concerned with the arrangement of an
organization’s resources - people, materials,
technology and finance.
It involves decisions about the division of work,
allocation of authority and responsibility and the
coordination of tasks.
Organizing refers to certain dynamic aspects: What
tasks are to be done? Who is to do them? How the
tasks are to be grouped? Who is to report to
whom? Where the decisions have to be made?

Staffing
Staffing is the function of employing suitable
persons for the enterprise.
It may be defined as an activity where people are
recruited,selected,trained,developed,motivated and
compensated for manning various positions.
It includes not only the movement of individuals into
an organization but also their movement through
(promotion, job rotation, transfer) and out(termination,
retirement) of the organization.

Directing
The function of guiding and supervising the activities of the
subordinates is known as directing. Acquiring physical and
human assets and suitably placing them on jobs does not
suffice; what is more important is that people must be
directed towards organizational goals.
It involves four different elements:
1. Leadership
2. Motivation
3. Communication
4. Supervision

Controlling
The objective of controlling is to ensure that actions contribute to goal
accomplishment. It helps in keeping the organizational activities on the
right path and aligned with plans and goals.
It includes four things:
A. Setting standards of performance,
B. Measuring actual performance,
C. Comparing actual performance against the standard and
D. Taking corrective actions to ensure goal accomplishment.
Successful management involves active participation by managers
in the above basic managerial functions. These functions are
interrelated and most managers use a combination of the all of
them simultaneously to solve the problems facing their companies.

Management Levels
Most organizations have three management levels:
 Low-level managers;
 Middle-level managers; and
 Top-level managers.
These managers are classified in a hierarchy of authority,
and perform different tasks. In many organizations, the
number of managers in every level resembles a pyramid.

Top-level managers
 The board of directors, president, vice-president, and
CEO are all examples of top-level managers.
 These managers are responsible for controlling and
overseeing the entire organization. They develop goals,
strategic plans, company policies, and make decisions
on the direction of the business.
 In addition, top-level managers play a significant role
in the mobilization of outside resources.
 Top-level managers are accountable to the
shareholders and general public.

Middle-level managers
 General managers, branch managers, and department managers are all examples of
middle-level managers. They are accountable to the top management for their
department’s function.
 Middle-level managers devote more time to organizational and directional functions
than top-level managers.
Their roles can be emphasized as:
 Executing organizational plans in conformance with the company’s policies and the
objectives of the top management;
 Defining and discussing information and policies from top management to lower
management; and most importantly
 Inspiring and providing guidance to low-level managers towards better performance.
Some of their functions are as follows:
 Designing and implementing effective group and intergroup work and information
systems;
 Defining and monitoring group-level performance indicators;
 Diagnosing and resolving problems within and among work groups;
 Designing and implementing reward systems supporting cooperative behavior.

Lower Level Managers
 Supervisors, section leads, and foremen are examples of low-level
management titles. These managers focus on controlling and directing.
Low-level managers usually have the responsibility of:
 Assigning employees tasks;
 Guiding and supervising employees on day-to-day activities;
 Ensuring the quality and quantity of production;
 Making recommendations and suggestions; and
 Up channeling employee problems.
Also referred to as first-level managers, low-level managers are role models
for employees.
These managers provide:
 Basic supervision;
 Motivation;
 Career planning;
 Performance feedback; and
 Staff supervision.

Evolution And Foundation Of
Management

Introduction
The origin of management can be traced back to the days when man started living in
groups.
History reveals that strong men organized the masses into groups according to their
intelligence, physical and mental capabilities.
According to Egyptian literature of 1300 B.C., the art of management was being practiced in
different forms by different people.
The literature clearly indicates the recognition of the importance of organization and
administration in the bureaucratic set up.
According to L.S. Hsu, Confucius’s parables (China) include practical suggestions for proper
public administration and admonitions to choose honest, unselfish and capable public
officers.
In Greece, the existence of the Athenian commonwealth, with its councils, courts,
administrators and board of general indicates the nature of management.
Similarly, in Rome , the existence of Roman magistrates, with their functional areas of
authority and degree of importance, indicates a scalar relationship characteristic or
organization.

Classical Theory
The classical theory signifies the beginning of the systematic study of
management organization.
It is often called the traditional theory.
It can be traced historically to the 19th century prototype industrial and military
organizations.
Several writers contributed to the classical thought in the early years of the 20th
century. They include Taylor, Fayol, Weber, Luther Gulick, Urwick,Mooney and
Reiley and may others.
The classical theory incorporates three viewpoints: (1) Taylor’s Scientific
Management (2) Fayol’s Administrative Management; and (3) Weber’s Ideal
Bureaucracy (an based on rules and regulations, formal relations, specialization,
etc.).
All the three concentrated on the structure of organization for greater efficiency.

Continued…..
Salient features:
1.The classical theory laid emphasis on division of labor and specialization, structure,
scalar and functional processes and span of control. Thus, they concentrated on the
anatomy of formal organization.
2. The classical theorists emphasis organization structure for co-ordination of various
activities. They ignored the role of human element.
3. The classical theory ignored the impact of external environment on the working of the
organization. Thus, it treated organizations as closed systems.
4. The efficiency of the organization can be increased by making each individual
efficient.
5. The integration of the organization is achieved through the authority and control of
the central mechanism. Thus, it is based on centralization of authority.
6. There is no conflict between the individuals and the organization. In case of any
conflict, the interests of the organization should prevail.
7. The people at work could be motivated by the economic rewards as they were
supposed to be ‘rational economic persons’.

Scientific Management Approach
The impetus for the scientific management approach came from the
first industrial revolution. Because it brought about such an
extraordinary mechanization of industry, this revolution necessitated the
development of new management principles and practices.
The main contributors to scientific management were Frederick
W.Taylor, Henry L. Gantt, Frank Gilbreth, Lillian Gilbreth and Harrington
Emerson.
F.W. Taylor (1865-1915) was the first person who insisted on the
Introduction of scientific methods in management. He launched a new
movement during the last decade of 19th century which is known as
‘Scientific Management’. That is why, Taylor is regarded as the father of
scientific management.

Scientific Management
Scientific management means application of scientific methods to
the problems of management. Taylor advocated scientific task
setting based on time and motion study, standardization of materials,
tools and working conditions, scientific selection and training of
workers and so on.
It is to be noted that Taylor’s thinking was confined to
management at the shop level. However, he demonstrated the
possibility and significance of the scientific analysis of the
various aspects of management.
To put the philosophy of scientific management into practice,
Taylor and his associates suggested the following techniques:

Continued…..
1.Scientific task setting to determine a fair days; work.
2. Work study to simplify work and increase efficiency. This involves methods
study, time study and motion study.
3. Standardization of materials, tools equipment, costing system, etc.
4. Scientific selection and training of workers.
5. Differential piece-wage plan to reward the highly efficient workers.
6. Specialization in planning and operations through ‘functional foremanship’.
Foremen in the planning department include: route clerk, instruction card clear,
time and cost clerk and shop disciplinarian and those in the operations
department include: gang boss, speed boss, repair boss and inspector.
7. Elimination of wastes and rationalization of system of control.

Criticism of Scientific
Management
Taylor’s scientific management was criticized not only by the workers and managers but also by the
psychologists and the general public. The main grounds of criticism are given below:
1.The use of the word ‘Scientific’ before ‘Management’ was objected because what is actually meant by
scientific management is nothing but a scientific approach to management.
2. Taylor advocated the concept of functional foremanship to bring about specialization in the organization.
But this is not feasible in practice as a worker can’t carry out instructions from eight foremen.
3. Scientific management is production-centered as it concentrates too much on the technical aspects of
work and undermines the human factor in industry.
4. Scientific Management ignores social and psychological needs of workers as it treats them as extension
of machines devoid of any feelings and emotions.
5. Trade unionists regarded the principles of scientific management as the means to exploit labor because
the wages of the workers were not increased in direct proportion to productivity increases.
Many of the above objections were later remedied by the other contributors to scientific management like
Henri L. Gantt, Frank Gilbreth, Lillian Gilbreth and Harrington Emerson.
Many of the recommendations of Taylor are still being applied by the modern business undertakings. In
short, it can be said that Taylor was the pioneer in introducing scientific reasoning to the discipline of
management.

Management Process or Administrative Management Approach
The advocates of this school perceive management as a process involving certain functions such as
planning, organizing, directing and controlling. That is why, it is also called the ‘functional’ approach.
Henri Fayol is regarded as the father of this school. Henri Fayol defined management in terms of
certain functions and then laid down fourteen principles of management which according to him have
universal applicability.
Henry Fayol is considered the father of modern theory of general and industrial management. He divided
general and industrial management into six groups:
1. Technical activities: Production, manufacture, adaptation.
2. Commercial activities: Buying, selling and exchange.
3. Financial activities: Search for and optimum use of capital.
4. Security activities: Protection of property and persons.
5. Accounting activities: Stock-taking, balance sheet, cost, and statistics.
6. Managerial activities: Planning, organization, command, coordination and control.
These six functions had to be performed to operate successfully any kind of business. He, however,
pointed out that the last function i.e., ability to manage, was the most important for upper levels
of managers.

Continued…..
The process of management as an ongoing managerial cycle involving planning,
organizing, directing, co-ordination, and controlling, is actually based on the analysis of general
management by Fayol. Hence, it is said that Fayol established the pattern of management thought
and practice. Even today, management process has general recognition.
Fayol’s Principles of Management: The principles of management are given below:
1.Division of work
2. Authority and Responsibility
3. Discipline
4. Unity of Command
5. Unity of Direction
6. Emphasis on Subordination of Personal Interest to General or Common Interest
7. Remuneration
8. Centralization
9. Scalar Chain
10. Order
11. Equity
12. Stability of Tenure
13. Esprit of Co-operation
14. Initiative

Criticism of Process of Functional
Approach
Though the proponents of management process approach have made
significant contribution to the development of thought, their work suffers
from the following limitations:
1.There is no single classification of managerial functions acceptable to all the functional
theorists. There is also lack of unanimity about the various terms such as management and
administration, commanding and directing, etc.
2.The functionalists considered their principles to be universal in nature. But many of the
principles have failed to deliver the desired results in certain situations.
3. The functional theorists did not consider the external environment of business.
4. Fayol overemphasized the intellectual side of management. He felt that management
should be formally taught, but he did not elaborate the nature and contents of management
education.

Bureaucracy
Max Weber (1864-1920), a German sociologist contributed
his views on bureaucracy to the management thought. His
primary contribution includes his theory of authority structure
and his description of organizations based on the nature of
authority relations within them.
Essentially, it was Weber’s contention that there are three types of
legitimate authority which are as follows:
1.Rational legal authority
2.Traditional authority
3.Charismatic authority
Weber’s theory ‘bureaucracy’ recognizes rational-legal authority as the most
important type in organizations. Under traditional authority, leaders are not
chosen for their competence, an charismatic authority is too emotional and
irrational.

Continued…..
A bureaucratic organization which is based on
rational-legal authority display the following
features:
1. Division of Work
2. Hierarchy of Positions
3. Rules and Regulations
4. Impersonal Conduct
5. Staffing
6. Technical Competence
7. Official Records

Criticism of Bureaucracy
It is not free of flaws. It may lead to many undesirable consequences such as:
1. The rules may be followed in letter and not in spirit. Thus, instead of providing
guidelines, the rules may become source of inefficiency. The rules may be misused or
misinterpreted by the persons concerned with the implementation of rules. Red
tapism and technicalism may follow as a result.
2. Bureaucracy does not consider informal organization and inter-personal difficulties.
3. Bureaucracy discourages innovation because every employee is supposed to act as
per rules and regulations or to the secondary goals.
4. Goal displacement may take place in a bureaucratic organization. The bureaucrats
may give priority to rules and regulations or to the secondary goals.
5. The bureaucratic structure is tall consisting of several layers of executives. Thus,
communication from the top level to the lowest level will take a very long time.

Appraisal of Classical Theory
The fundamental objections against the classical
theory are discussed below:
1.Narrow view of organization.
2. Assumption of Closed System
3. Assumptions about Human Behavior
4. Economic Rewards as Main Motivators
5. Lack of Empirical Verification
6. Lack of Universality of Principles
7. Excessive Emphasis on Rules and
Regulations

Neo-classical Theory
Human Relations Approach
The classical writers including Weber, Taylor and Fayol neglected the human
relations aspect. The neo-classicists focused on the human aspect of
industry. They modified the classical theory by emphasizing the fact that
organization is a social system and the human factor is the most important
element within it. They conducted some experiments (known as Hawthorne
Experiments) and investigated informal groupings, informal relationships,
patterns of communication, patterns of informal leadership, etc. This led to
the development of human relations approach. Elton Mayo is generally
recognized as the father of the Human Relations School. Other prominent
contributors to this schools include Roethlisberger, Dickson, Dewey,
Lewin, etc.

Continued…..
The neo-classical approach advocated people oriented organization structure which will
integrate both informal and formal organizations.
The basic tenets of neo-classical theory or human relations approach are as under:
1. The business organization is a social system.
2. The behavior of an individual is dominated by the informal group of which he is a member.
3. An individual employee cannot be motivated by economic incentives alone. His social and
psychological needs must be satisfied to improve the level of motivation.
4. In an organization, it is ultimately cooperative attitude and not the more command which
yields result.
5. Management must aim at developing social and leadership skills in addition to technical
skills. It must take interest in the welfare of workers.
6. Morale and productivity go hand in hand in an organization.

Hawthorne Studies
In 1927, a group of researchers led by George
Elton Mayo and Fritz J. Roethlisberger at the
Harvard Business School were invited to join in
the studies at the Hawthorne Works of Western
Electric Company, Chicago. The experiment lasted
up to 1932.
1. illumination Experiment
2. Relay Assembly Room Experiment
3. Bank Wiring Observation Room Experiment
4. Mass Interview Programme

Contributions of Human Relations
Approach or Hawthorne Studies
The human relationists proposed the following
points as a result of their findings of the Hawthorne
experiments:
1.Social System
2.Social Environment
3.Informal Organization
4.Group Dynamics
5.Informal Leader
6.Communication
7.Non-Economic Rewards
8.Conflicts

Criticism of Human Relations
Approach
The human relations approach has been criticized on the following grounds:
1. Lack of Scientific Validity: The human relationists drew conclusions from Hawthorne
studies. These conclusions are based on clinical insight rather than on scientific evidence.
2. Over-emphasis on Group: The human relations approach over-emphasizes the group and
group decision-making.
3. Over-stretching of Human Relations: It is assumed that all organizational problems are
amenable to solutions through human relations.
4. Limited Focus on Work: The human relations approach lacks adequate focus on work.
5. Over-stress on Socio-psychological Factors: The human relations approach undermines
the role of economic incentives in motivation and gives excessive stress on social and psychological
factors.
6. Conflict between Organizational and Individual Goals: It view conflict between the goal of the
organization and those of individuals as destructive.

Modern Organization Theory
System Approach:
In the 1960s,a new approach to management appeared which attempted to unify the
earlier schools of thought. This approach is commonly referred to as ‘Systems Approach’.
Basically, it took up where the functional process management school let off to
try to unify management theory. “A system viewpoint may provide the impetus to unify
management theory.
The systems approach is based on the generalization that an organization is a system and its
components are inter-related and inter-dependent. “A system is composed of related and
dependent elements which, when in interactions, form a unitary whole.
Its important feature is that it is composed of hierarchy of sub-systems. The world as a whole can
be considered to be a systems in which various national economies are sub-system. In turn, each
national economy is composed of its various industries, each industry is composed of firms, and
of course, a firm can be considered a system composed of sub-systems such as production,
marketing, finance, accounting and so on”. Thus, each system may comprise several sub-systems
and in turn, each sub system be further composed of sub-systems.

System Characteristics
An organization as a system has the following characteristics:
1. A system is goal-oriented.
2. A system consists of several sub-systems which are
interdependent and inter-related.
3. A system is engaged in processing or transformation of inputs
into outputs.
4. An organization is an open and dynamic system. It has continuous interface
with the external environment as it gets inputs from the environment and also
supplies its output to the environment. It is sensitive to its environment such as
government policies,competition in the market, technological advancement,
tastes of people, etc.
5. A system has a boundary which separates it from other systems.

Open System Concept
A system may be closed or open. A closed system is self
dependent and does not have any interaction with the
external environment. Physical and mechanical systems
are closed systems. A closed system concentrates
completely on internal relationships, i.e. interaction
between subsystems only. Because of lack of interaction with
environment, it is unable to monitor changes occurring in the
external environment. On the other hand, an open system has
active interface with the environment through the input
output process. It can respond to the changes in the
environment through the feedback mechanism. That is why
modern authors consider organization as an open system.

Features of Systems Approach
The systems approach is far more superior to
classical and neo-classical approach because of
the following features:
1.Interdependent Sub-system.
2.Whole Organization
3.Synergy
4.Multi-disciplinary

System Approach Appraisal
The system approach is an attempt to design an overall theory of
management.
The systems approach acknowledges environmental influences
which were ignored by the classical theory.
The systems approach represents a balanced thinking on
organization and management.
The systems approach is criticized as being too abstract and vague. It
cannot easily be applied to practical problems. It does not offer
specific tools and techniques for the practicing manager.
Moreover, this approach does not recognize differences in systems. It
fails to specify the nature of interactions and interdependencies
between an organization and its external environment.

Contingency Approach
Not all the theories are applicable everywhere, Somewhere
System approach work and in another situation Human
Relationship Approach or Behavioral Science Approach
may work.
So, no single management approach is applicable
universally and hence one should apply relevant theory as
per the situation.
Hence, Contingency Approach.

Evaluation of Contingency
Approach
 Contingency approach guides the managers to be
adaptive to environmental variables. In other words, the
managers should develop situational sensitivity and
practical selectivity.
 Contingency approach suggests the managers to condone
environmental contingencies while choosing their style
and techniques.
 Contingency approach is an improvement over systems
approach. It not only examines the relationships of sub-
systems of the organization, but also the relationship
between the organization and its environment.

System V/s Contingency Approach
Systems Approach
1. It lays emphasis on the
Interdependencies and interactions among
systems and sub-systems.
2. It treats all organizations alike. Size of
the organization, and its socio-cultural
setting are not considered.
3. It studies organization at the
philosophical level.
4. It does not comment on the validity of
the classical principles of management.
5. It simply lays down that the organization
interacts with the environment.
Contingency Approach
1.It identifies the nature of inter
dependencies and the impact of environment
of organizational design and managerial
style.
2. Each organization is to be studied as a
unique entity.
3. It follows an action-oriented approach and
so is pragmatic. It is based on empirical
studies.
4. It rejects the blind application of the
Classical principles of management.
5. The impact of environment on the
organization structure and managerial style is
the major concern of contingency approach

Organization:
It’s Meaning, Importance,
Principles & Types

Organization
Organizing as a function of management involves division of work among people
Whose efforts must be co-ordinated to achieve specific objectives and to
implement pre-determined strategies.
Organization is the foundation upon which the whole structure of management is
built.
It is the backbone of management.
There are two broad ways in which the term is used.
In the first sense, organization is understood as a dynamic process and a
managerial activity which is necessary for bringing people together and tying
them together in the pursuit of common objectives.
When used in the other sense, organization refers to the structure of
relationships among positions and jobs which is built up for the realization of
common objectives.

Organizing Process
"Organizing involves identification and grouping the activities to be
performed and dividing them among the individuals and creating authority
and responsibility relationships among them for the accomplishment of
organizational objectives.“
The various steps involved in this process are:
1.Determination of Objectives
2. Enumeration of Objectives
3. Classification of Activities
4. Assignment of Duties
5. Delegation of Authority

Principles of Organizational
Structure
1. Consideration of unity of objectives
2. Specialization
3. Co-ordination
4. Clear unbroken line of Authority
5. Responsibility
6. Efficiency
7. Delegation
8. Unity of Command
9. Span of Management
10. Communication
11. Flexibility

Departmentalization
Departmentation is the foundation of organization structure,
that is, organization structure depends upon departmentation.
Departmentation means division of work into smaller units and their
re-grouping into bigger units (departments) on the basis of similarity
of features.
As the organization grows in size, the work is divided into units and
sub-units. Departments are created and activities of similar nature are
grouped in one unit. Each department is headed by a person known as
departmental manager.
Departmentation, thus, helps in expanding an organization and also
promotes efficiency by dividing the work on the basis of specialization
of activities and appointing people in various departments on the basis
of their specialized knowledge.

Types of Departmentalization
a. Functional departmentation.
b. Divisional departmentation.
 Functional Departmentation
Functional organization creates departments along activities or functions of the
undertaking. It is grouping of activities on the basis of similarities of functions.
The nature of activities performed by different organizations is different. For
example, activities carried by a manufacturing organization are production, finance,
personnel and sales. For a trader, the major activities are buying and selling, a bank
performs borrowing and lending functions. Functional departmentation is, “the
grouping of jobs and resources within the company in such a way that employees
who perform the same or similar activities are in the same department”.
That is on the basis of functions like production,finance,personal and marketing
et.al.

Divisional Departmentation:
Divisional structures are created on the basis of smaller divisions
where each division has its own functional activities (production,
finance, personnel and marketing).
Product Departmentation
This form of departmentation is suitable for companies that produce
multiple products. Product departmentation is grouping of jobs and
resources around the products or product lines that a company sells.
With increase in operations of a company, it adds more products to its
line of products which require various functional activities (production,
marketing etc.).
Product departmentation is suitable for product diversification where
marketing characteristics of each product are different from others.

Process or Equipment
Departmentation
In manufacturing organizations where the product passes through different
stages of production, each stage is designated as a process and department
is created for each process. It is called process departmentation.
Manufacturing paper, for example, requires processes like crushing the
bamboo, making pulp, purifying the pulp, making paper rolls, and cutting
it into rims. For each process, departments are created and headed by
people skilled and competent to carry that process.
Since finished product goes through different processes, each process is
assigned to a different department. This form of departmentation is
suitable for medium and large-sized organizations where goods are
produced through a series of operations.

Customer Departmentation
When organizations sell to customers with different needs, departments are
created on the basis of customers. Customer departmentation is “the
organizing of jobs and resources in such a way that each department can
carefully understand and respond to different needs of specific customer
groups”.
A lending institution, for example, gives loan to meet different customer
requirements like housing loan, car loan, commercial loan etc. An educational
institution which provides academic and non academic subjects (vocational
subjects), full-time or part-time courses, morning or evening shifts is a typical case
of customer departmentation. Clear identification of customers and their needs is
the basis of customer departmentation. This method of departmentation can be
followed only in marketing division.

Territory or Geographic
Departmentation
In territorial departmentation, organization creates departments:
(i)Close to its customers because they are geographically dispersed over different areas, or
(ii) Near the sources of deposits.
Each geographic unit has resources to cater to the needs of consumers of that area. The production,
purchase, personnel and marketing activities are looked after by departmental managers but finance is
vested at the headquarters. General Manager of every department looks after functional activities of his
geographical area but overall functional managers provide supporting services to the managers of
different areas.
Thus, customers of different regions with different tastes and preferences for the same product are looked
after by geographical departments set up in their territories.
The product or customer differentiation, both can be the basis of geographic or territorial
departmentation. This basis is suitable for large-sized organizations which have activities dispersed over
different geographical areas.

Other Types of
Departmentalization
 Departmentation by Time
 Departmentation by Size
 Departmentation by Task Force

Types Of An Organization
Organization requires the creation of structural relationship among different departments
and the individuals working there for the accomplishment of desired goals. Organization
structure is primarily concerned with the allocation of tasks and delegation of authority.
The establishment of formal relationships among the individuals working in the
organization is very important to make clear the lines of authority in the organization and
to coordinate the efforts of different individuals in an efficient manner. According to the
different practices of distributing authority and responsibility among the members of the
enterprise, several types of organization structure have been evolved.
They are:
1. Line organization
2. Line and staff organization
3. Functional organization
4. Committee organization

Line Organization
This is the simplest and the earliest form of organization. It is also known as "Military",
"traditional", "Scalar" or "Hierarchical" form of organization. The line organization
represents the structure in a direct vertical relationship through which authority flows.
Under this, the line of authority flows vertically downward from top to bottom throughout
the organization. The quantum of authority is highest at the top and reduces at each
successive level down the hierarchy.
Three principles which are necessary to realize the advantages of this system and the non
observance of which would involve inefficiency.
1. Commands should be given to subordinates through the immediate superior; there should
be no skipping of links in the chain of command.
2. There should be only one chain. That is, command should be received from only one
immediate superior.
3. The number of subordinates whose work is directly commanded by the superior should
be limited.

Advantages or Merits of Line
Organization
1.It is the easiest to establish and simplest to explain to the employers.
2. It fixes responsibility for the performance of tasks in a definite manner upon certain
individuals.
3. It is most economical and effective.
4. It makes for unity of control thus conforming to the scalar principle of organization.
5. It facilitates prompt decision-making because there is definite authority at every level.
6. As all the activities relating to one department or division are managed by one
executive, there can be effective coordination of activities.
7. This system is flexible or elastic, in the sense that, as each executive has sole
responsibility in his own position and sphere of work, he can easily adjust the organization
to changing conditions.
8. Under this system, responsibility and authority are clearly defined. Every member of the
organization knows his exact position, to whom he is responsible and who are responsible
to him. Because of the clear fixation of responsibility, no person can escape from his
liability.

Disadvantages or Demerits of Line
Organization
1.With growth, the line organization makes the superiors too overloaded with work. Since all work is
done according to the wishes of one person alone, the efficiency of the whole department will come to
depend upon the qualities of management displayed by the head of that department. If therefore,
something happens to an efficient manager, the future of the department and of the concern as a
whole would be in jeopardy.
2. Under this system, the subordinates should follow the orders of their superior without expression their
opinion on the orders. That means there is limited communication.
3. There may be a good deal of nepotism and favoritism. This may result in efficient people being left behind
and inefficient people getting the higher and better posts.
4. The line organization suffers from lack of specialized skill of experts. Modern business is so complex that it is
extremely difficult for one person to carry in his head all the necessary details about his work in this
department.
5. Line organization is not suitable to big organizations because it does not provide specialists in the structure.
Many jobs require specialized knowledge to perform them.
6. If superiors take a wrong decision, it would be carried out without anybody having the courage to point out
its deficiencies.
7. The organization is rigid and inflexible.
8. There is concentration of authority at the top. If the top executives are not capable, the enterprise will not
be successful.

Line and Staff Organization
In line and staff organization, the line authority remains the same as it does in the line
organization. Authority flows from top to bottom. The main difference is that specialists
are attached to line managers to advise them on important matters.
Types of Staff
The staff position established as a measure of support for the line managers may take the
following forms:
1. Personal Staff: Here the staff official is attached as a personal assistant or adviser to the
line manager. For example, Assistant to managing director.
2. Specialized Staff: Such staff acts as the fountainhead of expertise in specialized areas like
R&D, personnel, accounting etc. For example, R&D Staff.
3. General Staff: This category of staff consists of a set of experts in different areas who are
meant to advise and assist the top management on matters called for expertise. For example:
Financial advisor, technical advisor etc.

Continued…..
Features of Line and Staff Organization
1. Under this system, there are line officers who have
authority and command over the subordinates and are
accountable for the tasks entrusted to them. The staff
officers are specialists who offer expert advice to the line
officers to perform their tasks efficiently.
2. Under this system, the staff officers prepare the plans
and give advise to the line officers and the line officers
execute the plan with the help of workers.
3. The line and staff organization is based on the principle
of specialization.

Advantages or Merits of Line and
Staff Organization
1. It brings expert knowledge to bear upon management and operating problems. Thus, the
line managers get the benefit of specialized knowledge of staff specialists at various levels.
2. The expert advice and guidance given by the staff officers to the line officers benefit the entire
organization.
3. As the staff officers look after the detailed analysis of each important managerial activity, it relieves
the line managers of the botheration of concentrating on specialized functions.
4. Staff specialists help the line managers in taking better decisions by providing expert advice.
Therefore, there will be sound managerial decisions under this system.
5. It makes possible the principle of undivided responsibility and authority, and at the same time
permits staff specialization. Thus, the organization takes advantage of functional organization while
maintaining the unity of command.
6. It is based upon planned specialization.
7. Line and staff organization has greater flexibility, in the sense that new specialized activities
can be added to the line activities without disturbing the line procedure.

Disadvantages Or Demerits of Line
and Staff Organization
1.Unless the duties and responsibilities of the staff members are clearly indicated by charts and
manuals, there may be considerable confusion throughout the organization as to the functions and
positions of staff members with relation to the line supervisors.
2. There is generally a conflict between the line and staff executives. The line managers feel that staff
specialists do not always give right type of advice, and staff officials generally complain that their advice is not
properly attended to.
3. Line managers sometimes may resent the activities of staff members, feeling that prestige and influence of
line managers suffer from the presence of the specialists.
4. The staff experts may be ineffective because they do not get the authority to implement their
recommendations.
5. This type of organization requires the appointment of large number of staff officers or experts in addition to
the line officers. As a result, this system becomes quite expensive.
6. Although expert information and advice are available, they reach the workers through the officers and thus
run the risk of misunderstanding and misinterpretation.
7. Since staff managers are not accountable for the results, they may not be performing their duties well.
8. Line mangers deal with problems in a more practical manner. But staff officials who are specialists in their
fields tend to be more theoretical. This may hamper coordination in the organization.

Functional Organization
The difficulty of the line organization in securing suitable chief executive was overcome by F.W. Taylor who formulated
the Functional type of organization. As the name implies, the whole task of management and direction of subordinates
should be divided according to the type of work involved. As far as the workman was concerned, instead of coming in
contact with the management at one point only, he was to receive his daily orders and help directly from eight different
bosses; four of these were located in the planning room and four in the shop.
The four specialists or bosses in the planning room are:
1. Route Clerk: To lay down the sequence of operations and instruct the workers concerned about it.
2. Instruction Card Clerk: To prepare detailed instructions regarding different aspects of work.
3. Time and Cost Clerk: To send all information relating to their pay to the workers and to secure proper returns of work
from them.
4. Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.
The four specialists or bosses at the shop level are:
1.Gang Boss: To assemble and set up tools and machines and to teach the workers to make all their personal
motions in the quickest and best way.
2. Speed Boss: To ensure that machines are run at their best speeds and proper tools are used by the workers.
3. Repair Boss: To ensure that each worker keeps his machine in good order and maintains cleanliness around
him and his machines.
4. Inspector: To show to the worker how to do the work.

Features of Functional
Organization
The features of functional organization are as follows:
1.The work of the enterprise is divided into different functional departments and the
different functional departments are placed under different specialists.
2. The functional specialist has the authority or right to give orders regarding his
function whosesoever that function is performed in the enterprise.
3. Under this system, the workers have to receive instructions from different
specialists.
4. If anybody in the enterprise has to take any decision relating to a particular
function, it has to be in consultation with the functional specialist.
5. Under this system, the workers have to perform a limited number of functions.

Advantages of Functional
Organization
1.Functional organization is based on expert knowledge. Every functionary in
charge is an expert in his area and can help the subordinates in better
performance in his area.
2. Division of labor is planned not incidental.
3. As there is not scope for one-man control in this form of organization,
this system ensure co-operation and teamwork among the workers.
4. This system ensures the separation of mental functions from manual
functions.
5. It helps mass production by standardization and specialization.
6. This system ensures maximum use of he principle of specialization at
every work point.
7. As there is joint supervision in the organization, functional organization
reduces the burden on the top executives.

Disadvantages or Demerits of
Functional Organization
1.It is unstable because it weakens the disciplinary controls, by making the workers work under several
different bosses. Thus, functional organization violates the principle of unity of command.
2. Under this type of organization, there are many foremen of equal rank. This may lead to conflicts
among them.
3. The co-ordinating influence needed to ensure a smoothly functioning organization may involve heavy
overhead expenses.
4. The inability to locate and fix responsibility may seriously affect the discipline and morale of the
workers through apparent or actual contradiction of the orders.
5. This system is very costly as a large number of specialists are required to be appointed.
6. A functional manager tends to create boundaries around himself and think only in term of his own
department rather than of the whole enterprise. This results in loss of overall perspective in dealing
with business problems.
7. It is difficult for the management to fix responsibility for unsatisfactory results.

Committee Organization
Committee organization as a method of managerial control has very little
practical importance, because it is managed by a senior member of the committee
only. But the committee organizations are widely used for the purpose of
discharging advisory functions of the management. Committees are usually
relatively formal bodies with a definite structure. They have their own
organization. To them are entrusted definite responsibility and authority.
According to Hicks, "A committee is a group of people who meet by plan to
discuss or make a decision for a particular subject."
According to Louis A Allen, "A committee is a body of persons appointed or
elected to meet on an organized basis for the consideration of matters
brought before it."

Objectives of Committee
Committees are constituted to achieve one or more
of the following objectives:
1.To have consultations with various persons to
secure their view-points.
2. To give participation to various groups of people
3. To secure cooperation of different departments
4. To coordinate the functioning of different
departments and individuals by bringing about
unity of directions.

Project Or Matrix Organization
Introduction:
Matrix management, which was "introduced in the
1970s in the context of competition" is the practice
of managing individuals with more than one
reporting line (in a matrix organization
structure), but it is also commonly used to describe
managing cross functional, cross business group
and other forms of working that cross the traditional
vertical business units – often silos of function and
geography.

What Is It?
It is a type of organizational structure in which people with
similar skills are pooled for work assignments, resulting in
more than one manager (sometimes referred to as solid
line and dotted line reports, in reference to traditional
business organization charts).
For example, all engineers may be in one engineering
department and report to an engineering manager, but
these same engineers may be assigned to different projects
and report to a different engineering manager or a project
manager while working on that project.Therefore, each
engineer may have to work under several managers to get
his or her job done.

MATRIX
ORGANIZATIONAL
STRUCTURE

The Matrix For Project
Management
A lot of the early literature on the matrix comes from the field of cross
functional project management where matrices are described as strong, medium or
weak depending on the level of power of the project manager.
While some form of matrix management has become fairly common in certain
industries, particularly among companies that have multiple business units and
international operations, upon closer inspection, different organizations
implement a matrix structure in different ways to support their needs.
Some organizations fall somewhere between the fully functional and the pure
matrix. These organizations are defined as ’composite’. For example, even a
fundamentally functional organization may create a special project team to
handle a critical project.

Management Advantages & Disadvantages
Key advantages that organizations seek when introducing a matrix include:
 To break business information silos - to increase cooperation and communication across the
traditional silos and unlock resources and talent that are currently inaccessible to the rest of
the organization.
 To deliver work across the business more effectively – to serve global customers, manage
supply chains that extend outside the organization, and run integrated business regions,
functions and processes.
 To be able to respond more flexibly – to reflect the importance of both the global and the local,
the business and the function in the structure, and to respond quickly to changes in markets
and priorities.
 To develop broader people capabilities – a matrix helps develop individuals with broader
perspectives and skills who can deliver value across the business and manage in a more
complex and interconnected environment.
Key disadvantages of matrix organizations include:
 Mid-level management having multiple supervisors can be confusing, in that competing
agendas and emphases can pull employees in different directions, which can lower
productivity.
 Mid-level management can become frustrated with what appears to be a lack of clarity with
priorities.
 Mid-level management can become over-burdened with the diffusion of priorities.
 Supervisory management can find it more difficult to achieve results within their area of
expertise with subordinate staff being pulled in different directions.

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