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Yashwantrao Chavan Maharashtra Open University
MBA 104
Management Process & Organisational Behaviour Unit 1
Introduction to Management and Organisational Behavior
1
Unit 2
Evolution of Management Thoughts
19
Unit 3
Planning
33
Unit 4
Coordinating and Organising
49
Unit 5
Departmentation and Structural Formats
69
Unit 6
Directing and Controlling
87
Unit 7
Individual Behavior
105
Unit 8
Motivation
117
Unit 9
Groups and Decision Making
130
Unit 10 Leadership
146
Unit 11 Organisational Conflict
158
Unit 12 Organisational culture and Change Management
169
Yashawantrao Chavan Maharashtra Open University Vice-Chancellor : Dr. M. M. Salunkhe Director (I/C), School of Commerce & Management : Dr. Prakash Deshmukh NATIONALADVISORY BOARD Dr. Pandit Palande Hon. Vice Chancellor Dr. B. R. Ambedkar University Muaaffarpur, Bihar
Prof. Devanath Tirupati, Dean Academics, Indian Institute of Management (IIM-Bangalore) Bangalore.
Prof. Sudhir .K.Jain Vice Chancellor , Shri Mata Vaishno Devi University (SMVDU) Katra Jammu and Kashmir.
Prof. Karuna Jain, Director, N I T I E, Vihar Lake, Mumbai - 400087
Prof. Vinay .K.Nangia, Ex- Head, Department of Business Studies, Indian Institute of Technology, (IITRoorkee) Roorkee.
D. Prakash Deshmukh Director (I/C), School of Commerce & ManagementYashwantrao Chavan Maharashtra Open University, Nashik
Dr. Surendra Patole Assistant Professor, School of Commerce & Management, Yashwantrao Chavan Maharashtra Open University, Nashik Dr. Latika Ajitkumar Ajbani Assistant Professor, School of Commerce & Management, Yashwantrao Chavan Maharashtra Open University, Nashik
Author & Editor Dr. Ashu Khanna Assistant Professor, Department of Polymer and Process Engineering, IIT-Roorkee, Saharanpur Campus
Instructional Technology Editing & Programme Co-ordinator Dr. Latika Ajitkumar Ajbani Assistant Professor, School of Commerce & Management, Yashwantrao Chavan Maharashtra Open University, Nashik
Production Shri. Anand Yadav Manager, Print Production Centre Y. C. M. Open University, Nashik- 422 222 Copyright © Yashwantrao Chavan Maharashtra Open University, Nashik. (First edition developed under DEC development grant) First Publication : Sept. 2015 Typesetting : Arya Enterprises, Nashik Cover Print : Printed by : Publisher : Dr. Prakash Atkare, Registrar, Y. C. M. Open University, Nashik- 422 222 -------
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UNIT 1
INTRODUCTION TO MANAGEMENT AND ORGANISATIONAL BEHAVIOR
Introduction to Management and Organization Behavior
NOTES
Structure 1.0
Introduction
1.1
Unit Objectives
1.2
Management Defined
1.3
Nature of Management
1.4
Importance of Management
1.5
Managerial Roles
1.6
1.7
1.8
1.9
1.5.1
Interpersonal Roles
1.5.2
Informational Roles
1.5.3
Decisional Roles
Levels of Management 1.6.1
Top Level Management
1.6.2
Middle Level Management
1.6.3
First Level Management
Managerial Skills 1.7.1
Technical Skills
1.7.2
Human Skills
1.7.3
Conceptual Skills
1.7.4
Diagnostic Skills
Scope of Management 1.8.1
Human Resource Management
1.8.2
Financial Management
1.8.3
Production Management
1.8.4
Marketing Management
Functions of Management
1.10 Organizational Behavior 1.11 Importance of Organizational Behavior 1.12 OB Model 1.13
Summary
1.14
Key Terms
1.15
Questions & Exercises
1.16
Further Reading and References
Management Process & Organisational Behaviour : 1 MBA106 unit
Introduction to Management and Organization Behavior
NOTES
1.0 Introduction Human beings have variety of needs, that can’t be satisfied by their individual efforts alone. They need to perform numerous activities to satisfy their wants. Hence organizations are formed to cater to the need of the society. Individuals join organization and contribute their part for the well- being of the society. There is one basic organization to which we all belong and that is family. Family is the basic unit of the society. It has almost all the characteristics of the organization. Organization is a group of two or more people working together to achieve a common objective and so is the family. The main aim of the family is to provide mental, physical and emotional satisfaction to the members of the family along with general survival goals. Family applies basic economic concepts such as division of labour , planning, distribution etc. The family as a unit decides as to which member of the family will do which task. Each person in the family has his or her role for e.g. the mother is expected to manage the home and take care of children while father is supposed to provide financial support to the family. The family prepares budget for the month and plans it various activities like education, shopping, holidaying, socializing etc . Just like family, management activities and organizations have existed for thousands of years. Someone in the past always had a plan to accomplish whether it was building up of Egyptian pyramids or Great Wall of China. In order to accomplish objectives the people and material were organized, the workers were directed and controls were imposed on them.
Management Process & Organisational Behaviour : 2
We can trace various practices of management that we apply today in ancient scriptures and books. “The Great Plan” is a document that combines astrology, moral principles, physics, politics and religion. It is a mixture of ideas from various areas. The text itself mentions the time period 1121 BC. The document includes a passage in it that scholars judge it to be older than 2200 BC. One passage of the document discusses about contingency theory of leadership. Its interpretation reveals the advice given to the manager to consider characteristics of subordinates and situation in applying the leadership style. We can correlate this passage written in “The Great Plan” to the contingency theory of leadership proposed by Fielder. Written around 1100 BC “The officials of Chou” is book containing a long exhaustive and detailed list of job description for the huge number officials in the kings service ranging from prime minister to household services. According to the book, the prime minister could use rules and regulations (a) to classify departments (b) to distribute responsibilities among departments (c) to specify coordination links among officials (d) to define standards and procedures for operations (e) to assess officials’ performance. The philosophy was that by standardizing operating procedure efficiency will improve and formalizing procedure would provide stability to the organizations. Officials had to behave in accordance with rules; they were punished for not complying with the standard. Ancient bureaucracies are well articulated in the book “The Officials Of Chou”. Similar kind of bureaucracy was proposed by Max Weber in 1920.
Management is as old as civilization; it is a life giving element in every organization. Management is the most challenging, comprehensive, central of all human activities. Managers not only affect the organizational effectiveness but also accomplish many special economic goals of the society.
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NOTES
The primary function of the management is to satisfy the various stakeholders of the organization. He has to make sure that organization earn enough profit that satisfies shareholders. The management also aims at providing valued products at a reasonable cost to the customer. After all customers is the king. The growth and survival largely depends upon the demands of the customer. Another important objective is to provide rewarding employment to the employees so that best talent can be retained and all this has to be done with efficiency. With the advent of industrial revolution the increase in size and complexity of organizations lead to the split between owner and manager. This resulted in emergence of management as a distinct discipline. The 21st century has brought new challenges before workforce. Everyone must adapt to rapidly changing society with constantly changing demands and opportunities.
1.1 Unit Objective After studying this unit, you should be able to
Introduce and define the concept of management.
Understand the nature and importance of management.
Explain the various managerial roles.
Describe the levels of management.
Explain the various skills required by managers.
Identify the scope of management.
Describe the functions of management.
Understand organizational behavior and its importance.
Describe OB Model.
1.2 Management Defined Organizations process human and non- human input into valuable outputs. The input may include men, money, machinery, material, methods and the output consists of products, services, profitability, customer and employee satisfaction etc. Management acts as a unifying force. It focuses on the attainment of organizational goal in an effective and efficient manner through the use of human and non human resources Managers have a responsibility of ensuring that individuals make their best contribution to group activities thus enhancing their productivity. All organizations need good management for growth and survival. The aim of all managers is same i.e. accomplishment of organizational goals efficiently and effectively.
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Productivity can be measured in terms of output input ratio, within a time period with due consideration for quality. Productivity includes efficiency and effectiveness, where effectiveness means achievement of objectives and efficiency means achievement of the output with least amount of resources and efforts.
NOTES PRODUCT
MACHINE
MATERIAL
INPUT
PROFITA BILITY
MONEY PLANNING ORGANIZING
STAFFING
DIRECTING
CUSTOMER SATISFACTION OUTPUT
CONTROLLING SERVICES
MEN
EMPLOYEE SATISFACTION
Fig. 1.1 Management Process The following are some of the definitions given by leading thinkers and practitioners Management is the art of knowing what you want to do and then seeing that is done in the best and cheapest way. - F.W Taylor Management is the creation and maintenance of an internal environment in an enterprise where individuals working in groups can perform efficiently and effectively towards the attainment of group goals. Management is the art of getting things done through and with people in formally organized group. - Harold Koontz and Cyrill O Donnell Management is the coordination of all resources through the process of planning, organizing , directing and controlling in order to attain stated objectives. - Henry L. Sisk Luther Gulik coined the word POSDCORB which tells about the management process i.e. Planning, Organizing, Staffing, Directing, Coordinating, Reporting and Budgeting
1.3 Nature of Management
Management Process & Organisational Behaviour : 4
1.
Management is Universal in Nature: it is the central force of every organized activity. All types of organization for e.g. university, government, hospitals, hotels , army, club, cricket or business enterprise require application of fundamental principles of management. Management is a pervasive activity and is applicable to every organized activity irrespective of size or type of activity.
2.
Management aims at Attainment of Predetermined Goals and Objectives: management is a mean to achieve organizational goals. It ensures economy and efficiency in the use of human and non human resources. Management is purposeful and success of the management is measured in terms of magnitude of goal attained.
3.
Management is a group Activity: whenever two or more people work towards
a common goal management is required to co- ordinate their efforts .Management means group of individuals occupying managerial positions and performing managerial function. All the managers e.g. chief executive officer, departmental heads foreman, supervisor all are collectively known as management. 4.
Management is Continuous Process: it is an ongoing process and refers to series of interrelated functions such as planning, organizing, staffing, leading and controlling. This cycle is repeated every now and then till the goals of the organization are achieved.
5.
Management is a Social Process: it is also a social process as it concerned with people. Management is of the people for the people and by the people. It focuses on interpersonal relationship and team building.
6.
Management is a Integrative Process: management brings all human and non human resources together, unifying them and employing them to achieve goals
7.
Management is multi Disciplinary: management is a specialized branch of knowledge that has received inputs from several other disciplines. The vast body of knowledge in management draws heavily from other fields of study like engineering, sociology, psychology, anthropology economics, mathematics, commerce etc.
8.
Management is an Art as well as Science: It is science as it a systematic body of theoretical knowledge capable of general application. Management is an art because it involves the application of knowledge and skills to achieve results like any other art such as painting, music etc. The organized body underlying the practice of management is a science, while applying the principles and practices is an art. Science is an organized knowledge having clear concepts, theory and other accumulated knowledge developed from hypothesis experimentation and analysis. Principles in management are fundamental truths that explain the relationship between variables. Principles are descriptive and not prescriptive. They tell us the outcome of the interaction of variable but do not tell us what to do. Management as an art require personal skill , creativity and result oriented approach. For e.g. An individual may have technical knowledge of painting but to produce a good piece of artwork he should be creative and should be able to practically apply the knowledge.
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NOTES
1.4 Importance of Management
Achievement of goals : Management act as a unifying force and brings together factors of production both human and non human to achieve the objectives of the organization. Management is also one of the factors of production. Without coordinated efforts of management no other factor of production can produce the desired results in isolation.
Optimum utilization of resources : The resources of the organization are limited and management aims at utilizing the resources in best possible manner.
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Manager tries to avoid wastage by using the resources efficiently and effectively.
Integrates various interest : Shareholders are interested in earning profit from business. Employees expect a decent pay from their employment. Government expects tax and compliance with rules and regulations set by them. The manger tries to balance these diverse goals that may be sometime conflicting.
Survival and Growth : The factors in the environment are constantly changing. The change in Government policies, customer preferences or technology can sometimes provide opportunity for growth or can act as threat for survival. Manager is constantly scanning the environment and analyzing the possible effects of the change on the organization. Manager takes appropriate steps to eliminate threats and grab opportunity.
Development of Nation : Peter Drucker has rightly said that developing nations are not underdeveloped they are undermanaged. The development of country largely depends on the quality of management of its scarce resources. The manager produces wealth for the nation by deploying factors of production to produce output that are needed and desired by the people. This way it generates wealth and employment and improves standard of living of the people.
NOTES
1.5 Management Roles A role is a organized set of behavior that is expected from an individual. Roles throw light on how managers perform their work. Henry Mintzberg, management expert professor after studying the work performed by executives in 1960 ,proposed that manager’s work can be put down to ten common roles.. The roles or expectations of manager’s behavior at work are grouped into three categories. The three roles that managers usually perform in any organizations are : interpersonal roles, informational roles and decisional roles INTERPERSONAL ROLES FIGURE HEAD
LEADERSHIP
LIASON
INFORMATIONAL ROLES MONITOR
DISSEMINATOR
SPOKESMAN
DECISIONAL ROLES ENTREPRENEUR
DISTURBANCE HENDLER
RESOURCEALLOCATOR
NEGOTIATOR
Fig. 1.2 Management Roles Management Process & Organisational Behaviour : 6
1.5.1 Interpersonal Roles This role is concerned with interpersonal relationships and interaction of managers
with the people inside and outside the organizations. The three interpersonal roles are as follows: 1.
Figurehead Role: the manager performs duties that are ceremonial in nature. They represent the organization in all matters of formality for e.g. attending social functions, greeting visitors, making speeches, hosting receptions, bestowing honors etc. They perform social and legal duties and act as a symbolic leader.
2.
Leadership Role: it includes directing and motivating people towards organizational objectives. He influences his sub-ordinates to exert high level of efforts. He builds relationship with employees, coaches them and supports them so that they meet work related goals that are essential for organization’s growth and survival.
3.
Liaison Role: a manager serves as a link between their organization and others outside the organization in order to maintain mutually beneficial relations. They maintain contact with the people outside the organization so as to evaluate environmental factors effecting the organization. Self developed network of contacts with government and other organization group can help in obtaining favor and information.
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NOTES
1.5.2 Informational Roles Informational roles involve receiving, collecting and disseminating information so that manager can serve as nerve centers of their organizational units. Three informational role are as follows: 1.
Monitor Role: He seeks internal and external information that are relevant to the organization through various sources. He usually receives and collects information about the issues that can affect the organization through reading magazines, reports and talking to others.
2.
Disseminator: Manager transmits valuable and important information to the members of the organization that would otherwise be inaccessible to them. The manager transmits factual and value based information to the subordinates through memorandums and holding informal meetings with them.
3.
Spokesperson: Manager represents his unit to the outside world. He communicates about the performance and policies of his unit to the people outside his unit. He transmits information regarding organization’s plans, future actions to the people external to the organization .They do it by holding board meeting and giving information to the media.
1.5.3 Decisional Roles The manager has to make important decisions that have a significant impact on the organization. The four decision roles that the manager adopts are as follows: 1.
Entrepreneur: Manager encourages innovation, brings about change in organization and starts new project to improve the organization. Environment is ever changing. Change in technology, political, social and economic setup
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NOTES
may change the business definition of the organization. Managers look for the ideas and opportunities in the environment and then design and initiate change so that the organization is not left behind. 2.
Disturbance handler: When the organization is threatened with unexpected difficulties the manager is responsible for formulating organizational strategy. He has to deal with unexpected operational breakdowns for e.g. strikes by the workers for higher pay package. Increase in the price of imported raw material due to increase in customs duty. He has to provide solution to overcome such unexpected problems.
3.
Resource allocator: Manager is responsible for allocation of all types of resources including funding, equipment, human resources, time etc to various organizational units. He does it through budgeting and scheduling. Manager controls and authorizes use of resources.
4.
Negotiator: He represents his organizational unit and carries out negotiations in bargaining process. He may negotiate with people outside the organization for e.g. negotiating price with the vendor . He may negotiate with other units in his organization to gain advantage for his own unit for e.g. negotiating for allocation of limited resources of organization.
1.6 Levels of Management The levels of management tell about the position of managers in an organization on the basis of authority and responsibility. Each level has its distinctive functions and roles. The number of managers at each level reduces as we move towards the top of the pyramid. The management can be classified on the basis of hierarchy. They perform different task and roles.
TOP LEVEL MIDDLE LEVEL FIRST LEVEL Fig. 1.3 Levels of Management
1.6.1 Top Level Management Top level management consists of board of directors, presidents and CEOs. They are responsible for overseeing the entire organization. Management Process & Organisational Behaviour : 8
They develop goals, strategic plans, objectives and broad policies of the enterprise.
They decide about the structure of the organization. They appoint middle
level executives and coordinate the activities of all departments.
They are answerable to shareholders of the organization and responsible for the overall performance of the organization.
They should have understanding of competition, world economies, politics and social trends that affect organizational effectiveness.
They decide about the factors that are vital for survival and growth of the organization ,like shutting down of an unprofitable plant, entering into a new market, introducing a new product in the market, opening new plant etc.
They maintain liaison with outside world such as government, trade associations , association of industry etc.
They make decisions regarding distribution of profit and retained earnings.
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NOTES
1.6.2 Middle Level Management Middle level management consists of general managers, branch managers and departmental managers. They control and oversee the departmental activities.
They are accountable to top management.
They decide departmental goals in conformance with the company policies and objective set by top management. They are responsible for preparing departmental plan covering all the activities related to the department within the basic framework of the corporate plan set by top management.
They perform all the management functions related to their department for smooth functioning of the department.
They interpret and explain the policies set by the top management to the lower level managers.
They provide guidance to lower level managers.
They monitor group level performance and resolve problem within and among work group.
1.6.3 First Level Management First level management consists of supervisors, foreman etc. They are in direct contact with workers.
They control and direct them by assigning task to employees, guiding and supervising them for day to day activities.
They give performance feedback of the workers working under them.
They should have technical skills so that standards set for quality and quantity of production can be met.
They plan for day to day activities.
They maintain close personal contacts with workers to ensure discipline in the organization.
They act as a line of communication between the employees in an organization and upper levels of management. They report grievances and suggestions of
Check Your Progress 1. What do you understand by the management team ``POSDCORB’’? 2. What are the various informational roles of the manager?
Management Process & Organisational Behaviour : 9
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the workers working under them to higher authorities.
They make sure that workers have all the resources, tools and materials they need to accomplish their tasks.
NOTES
1.7 Managerial Skills Managers require certain skill or competencies to accomplish their goals. In order to be effective manager must possess the following skills.
1.7.1 Technical Skills It is the ability to perform a job by the use of tools, procedures or techniques of a specialized field. This involves proficiency in the mechanics of a particular job so that job can be performed effectively. This skill is very important to lower level managers as they are in charge of the actual operations. For e.g. the success of team leader in the software company depends on his technical knowledge in software development. As one moves to the higher level of management the importance of technical skills diminishes.
1.7.2 Human Skills It is the ability to work with people, understand their needs and motivate them. Technical skill involves mastery over job while human skills are concerned with mastery over people. Such skills require leadership qualities, emotional intelligence in the manager so that he can win cooperation of others and build effective teams. Human relations skills are required by all managers at all levels of management since all managers have to interact and get work done through others.
1.7.3 Conceptual Skills
l ica
nc Co
Te c
Lower (Supervisiory) level
hn
H Re um la an tio ns
Middle level
tua
ep
Top level
l
It is the ability of manager to analyze the cause and effect relationship. It is the ability to visualize the organization as a whole and see the big picture and understand the interrelationship among organizational parts. It focuses on problem solving ability of the managers. This skill is mostly required by top management as they are involved in broad long term decisions that affect large parts of the organization.
Fig. 1.4 Managerial Skills
1.7.4 Diagnostic Skill Management Process & Organisational Behaviour : 10
Another important skill required by the management is the ability to visualize most appropriate response to the situation. Diagnostic skill is not just the ability to specify why the problem has happened but also the ability to develop certain alternatives to
solve the problem. It requires sound judgment, analytical ability, intelligence and common sense.
1.8 Scope of Management
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NOTES
The scope of management is very wide. Management can be applied to various functional areas in the organizations. The main areas are human resource management, financial management, production management and marketing management.
1.8.1 Human Resource Management It is a managerial functions involving planning, organizing and controlling process related to hiring, developing, compensating and maintaining people in an organization. The activities included are 1.
HR planning : This activity aims at providing the organization the right number of people with right knowledge, skills and attitude at the right time.
2.
Recruitment and selection : The term applies to the process of attracting potential employees of the company and choosing the best ones that suit the requirement of the organization.
3.
Orientation and placement : It refers to welcoming of new employees and providing him information about organization so that he is able to adjust well in the organization.
4.
Placement : The allocation of people to jobs is known as placement. The new employees are assigned initial assignment while existing employees are relocated through transfer , promotion or demotion .
5.
Training and development : The quality of employees is improved by training them to enhance their skills and developing their personality.
6.
Remuneration : The employee is compensated for his services through various financial and nonfinancial resources.
7.
Communication and motivation : The managers motivate employees so that the they work with complete dedication and to the best of their capabilities and knowledge towards achieving the organization’s goal. Motivating them helps to build a long term association of the employees with the organization.
8.
Performance Appraisal : It is a systematic, periodic and impartial rating of an employee’s excellence in matters pertaining to his present job so that performance gap can be identified and corrective actions can be taken. It also forms as a basis for incentives and promotions.
9.
Welfare safety and health : This aspect of HRM is concerned with the working condition and the amenities at the work place. It makes the environment worth working by eliminating work place hazards, providing job safety, medical and health benefits.
10. Industrial relations : It aims at avoiding industrial conflict or strife and developing harmonious relations between employer, employee and state. It
Management Process & Organisational Behaviour : 11
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aims at eliminating as far as possible and practicable strikes, lockouts and gheros.
1.8.2 Financial Management NOTES
Financial management is concerned with procurement of funds and their effective utilization. The major functions of finance are: 1.
Investment decisions : It relates to selection of assets in which the funds will be invested. The criteria are based on cost, benefit and risk analysis. Assets can be long term or short term. Decisions relating to long term assets are known as capital budgeting decisions while relating to short term assets are known as working capital decisions.
2.
Financing decisions : Financing decisions relates to the raising of funds through different sources of funds for investing activities. The sources of funds can be debt and equity. It deals with raising the funds in reasonable proportion of debt and equity capital so that shareholder’s wealth is maximized.
3.
Dividend policy decisions : When the firm earns profit, two alternatives are available to it. It can either distribute the profit or retain some of the profit for future growth of the organization or for meeting some contingency. It includes the decision as to how much profit to retain and how much to distribute.
4.
Reporting : Financial accounting relates to record keeping of various financial transactions, their classification and preparation of financial statements to show the financial position to the various stake holders of the company.
5.
Planning and controlling : Management accounting deals with analysis and interpretation of financial record so that management can take corrective actions in case the standards are not met. It also includes budgeting and forecasting and setting targets for profit and cost.
6.
Taxation : This area deals with various direct and indirect taxes which organization has to pay.
7.
Costing : Costing deals with recording of costs, their classification, analysis and ascertainment of cost and cost control.
1.8.3 Production Management Production means creation of utilities by converting raw material in to final product so that right goods are produced in right quantity at the right time and at the right cost. It is very important field of management. Various sub-areas of the production department are as follows.
Management Process & Organisational Behaviour : 12
1.
Plant lay out and location : This area deals with deciding a suitable location where factory will start functioning, designing of plant layout i.e designing of factory and placing various facilities within the plant.
2.
Production planning and control : It requires forecasting, routing, scheduling, dispatching, progress reporting and taking corrective actions if targets are not achieved. Managers have to plan about various production policies i.e. deciding about how, where and in which sequence the work will be done.
3.
Material management : This area deals with procurement, storage, issue and control of the raw material required for production department.
4.
Product, Design planning and development : Product design is done when new idea is conceived and an attempt is made to develop the product to the point that it becomes technically and commercially viable. This area deals with research and developmental activities of manufacturing department. Refinement in existing product line or development of a new product are the major activities.
5.
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Quality Control : Quality control department works for production of quality product by inspecting the product on the basis of strength, hardness, dimension, finish, chemical composition etc. which ensure the customer satisfaction.
1.8.4 Marketing Management Marketing management involves analysis, planning, implementation and control of programs designed to bring out desired exchange with customers that satisfies their needs and wants and build long term relationships. It is the process of creating, delivering communicating the value of a product or service through positioning to customers and managing customer relationship for the benefit of organization. The following are its sub areas. 1.
Market research : It involves in collection of data related to product demand, customer’s needs and wants, advertising effectiveness and price studies. Marketing research provides an effective sales forecast and promotes sound marketing strategies
2.
Promotional Activities : This area deals with promotion of the product, introducing new product in market by various means and encouraging the customers to buy the products. This activities decide upon the promotion mix i.e what should be the means of approaching the customer, whether it should be advertising, publicity, personal selling etc.
3.
Sales distribution and after sales services : Sales management deals with handling of inquires and orders from the customer , fixation of prices, actual transfer of products to the customer after fulfilling certain formalities and after sales services.
1.9 Functions of Management Manager is required to perform certain basic functions which may be broadly classified into five categories: planning, organizing, directing, staffing and controlling. Planning: It includes determination of objectives and selection of appropriate course of action. Planning provides direction by deciding in advance what is to be done, how it is to be done, when and where it is to be done and by whom it is to be done. Organising: it is concerned bringing together men, money, material, technology etc for production of output. It involves decisions regarding division of work, formulating
Management Process & Organisational Behaviour : 13
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NOTES
structure to ensure co-ordination and assigning authority and responsibility. Staffing: It aims at providing right kind and right number of human resources at the right time. It involves activities relating to recruitment, selection, training and development, motivation and compensation. Directing: It is the act of guiding and inspiring people to perform. It involves four important elements: leadership, motivation, communication and supervision. Controlling: The objectives of controlling is to ensure that organization is moving in the desired direction. It involves the following steps: 1.
Establishing standards for performance.
2.
Measuring actual performance
3.
Comparing actual performance with the standards
4.
Taking corrective action in case of negative deviations.
The above mentioned functions are discussed in details in the following chapters.
1.10 Organisational Behaviour Organizational behavior is study that relates to individual, working together in group or teams. Organizational behavior is a field of study that investigates the impact that individuals, groups and structure have on behavior of the employees within the organization for the purpose of applying such knowledge towards improving organization effectiveness.
1.11 Importance of Organisational Behaviour Consciously or unconsciously we try to interpret and predict the behavior of others. Our prediction about the behavior is based on our experience with the people in the environment that we get by observing and interacting with them. We also learn through the experience of others. The result is that we form generalization about human behavior which is based on intuition. The feeling of intuition is not supported by facts about behavior. Our generalization is not always accurate. For e.g. let is consider the following generalization:
Management Process & Organisational Behaviour : 14
1.
Everyone can be motivated by financial rewards.
2.
The most effective group is the one that do not have any conflict.
3.
Interview is an effective selection technique.
All the above generalization do not hold true in every condition. No two individuals are likely to behave in the same manner under similar set of conditions. There are lots of individual differences.However, there are certain fundamentals consistencies underlying the behavior of all individuals. The consistencies can be identified and modified to explain individual differences. These fundamentals consistencies allow predictability. If we replace intuition with
systematic study we are in better position to predict behavior. A systematic study attempts to identify relationship between variables, determine the causes and effects of relationship and draw conclusion based on scientific evidence. The objective of organizational behavior is to predict, explain and control individual behavior, group behavior in team and organization in order to attain organizational effectiveness. Organizational effectiveness is measured in terms of quantity and quality of work, satisfaction and commitment of employees.
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NOTES
1.12 OB Model A model is a systematic and simplified representation of some real world phenomenon. OB model identifies its primary dependent and independent variables and their relationship with each other. The dependent variables are productivity, job satisfaction, absenteeism and attrition. The independent variables work at three levels. They are as follows: 1.
Individual level: The characteristics related individual like personality characteristics, attitude, values, perception etc
2.
Group level: The behavior of people in groups like group norms, group cohesiveness etc.
3.
Organizational level: The designs of organization structure, organization culture and human resources policies and practices also have a impact on dependent variables.
Fig. 1.5 depicts the linkages between the three levels and their — with dependent variables.
Management Process & Organisational Behaviour : 15
Introduction to Management and Organization Behavior
Organisational Level * Organisational Culture * Organisation Structure * Work Design * Human Resource Policies and Practices
NOTES
Input independent variables
Group Level * Group Norms * Group Cohesiveness * Leadership * Conflict * Team * Group Structure * Group Decision Making
Productivity
Absenteeism Output dependent variables
Individual level * Personality * Values * Attitude * Perception * Motivation * Individual decision making
Attrition
Job satisfaction
Fig. 1.5 O B Model
1.13 Summary
Check Your Progress 1. What are the various activities of Human Resource Management 2. Briefly explain OB Model.
Management Process & Organisational Behaviour : 16
Management is a life giving activity to an organization. All organizations need management irrespective of size and activity for growth and survival. Management bring together human and nonhuman input to produce valuable output by utilizing the input efficiently. Management is universal, goal oriented, group activity, the process of management includes planning, organizing, staffing, directing and controlling. The management helps in achieving organizational goals. Managers are required to posses’ technical, human, conceptual and diagnostic skills. The technical skills are required by first level of management as they are in direct contact with workers and are responsible for day to day operations. Conceptual skills are required by top management as they have to make long term strategies for the organizations after scanning the internal and external environment of the organization and understanding the relationship of variables present in environment. Human skills are required at every level. The managers have to play interpersonal roles, informational roles and decisional roles in their day to day functioning. The scope of the management is very wide. The functional areas of management are human resource management, financial management, production management and marketing management.
Organizational behavior is a systematic study of individual behavior, working in group and in organization. It helps in predicting behavior of individuals. OB Model depicts the relationship between independent variable at individual group and organizational level and dependent variables that are productivity, job satisfaction turnover and absenteeism.
Introduction to Management and Organization Behavior
NOTES
1.14 Key Terms
Management: It is the coordination of all resources through the process of planning, organizing , directing and controlling in order to attain stated objectives.
Management roles: A role is an organized set of behaviour that is expected from an individual. Roles throw light on how managers perform their work.
Interpersonal roles: This role is concerned with interpersonal relationships and interaction of managers with the people inside and outside the organizations.
Informational role: Informational roles involve receiving, collecting and disseminating information so that manager can serve as nerve centres of their organizational units.
Decisional roles: The manager has to make important decisions that have a significant impact n the organization.
Top level management: It consists of board of directors, presidents and CEOs. They are responsible for overseeing the entire organization.
Middle level management : It consists of general managers, branch managers and departmental managers. They control and oversee the departmental activities.
First level management: It consists of supervisors, foreman etc. who are in direct contact with workers.
Technical skills It is the ability to perform a job by the use of tools, procedures or techniques of a specialized field.
Human skills: It is the ability to work with people, understand their needs and motivate them.
Conceptual skills: It is the ability of manager to analyze the cause and effect relationship. It is the ability to visualize the organization as a whole and see the big picture and understand the interrelationship among different organizational parts.
Diagnostic skill: It is the ability to visualize most appropriate response to the given situation.
Organization behaviour: It is a field of study that investigates the impact that individuals, groups and structure have on behaviour within the organization for the purpose of applying such knowledge towards improving organization effectiveness.
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Introduction to Management and Organization Behavior
NOTES
1.15 Questions and Excercises Short Answer type questions Q1. What do you understand by diagnostic skills of manager? Q2. What is the concept of universality of management? Q4. Why is management both science and art? Long Answer type questions Q1. What are the roles and responsibilities of each level of management? What are the managerial skills required at each level of management? Q2. What do you understand by organizational behavior? Why is it important? Q3. Explain briefly the roles of Managers as proposed by Mintzberg. Q4 . Discuss in brief the scope of management. Q5 . List and briefly describes the function of management. Q6. Define management. Explain its nature and importance.
1.16 Further Reading and References (1) Koontz and O Donnell, ``Essentials of Management ”, Tata McGraw Hill, New Delhi 1990. (2) Lindoya, P., ``Chinese theories of control by violence”, Newyork University, published in journal of management inquiry, 1997 , vol 6 : 144-159. (3) V.S.P Rao, V. Harikrishnan, ``Management Text and cases”, Excel books , fourth edition (4) Robbins Stephens, Judge Timothy A, ``Organisational Behaviour”, Pearson Education
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UNIT 2
EVOLUTION OF MANAGEMENT THOUGHTS
Evolution of Management Thoughts
NOTES
Structure 2.0
Introduction
2.1
Unit Objectives
2.2
Classical Approach 2.2.1 Scientific Approach (1900) 2.2.2 Administrative Theory- Henry Fayol 2.2.3 Bureaucracy- Max Weber
2.3
Neoclassical Approach 2.3.1 Hawthorne Studies- Elton Mayo 2.3.2 Human Relations Approach 2.3.3 Behavioral Approach
2.4
Quantitative Approach
2.5
System Approach
2.6
Contingency Approach
2.7
Modern Approach 2.7.1 Contribution of Peter Drucker
2.8
Summary
2.9
Key Terms
2.10 Questions and Exercises 2.11 Further Reading and References
2.0 Introduction Origin of management can be traced to ancient roots. Many books were produced during ancient and medieval time that contained advice about how the kings should administer and govern their territory. “The Prince”, by an Italian author Nicco Machiavelli and “Arthashatra” by chanakya are examples of conceptualization of management practices during those times. The ancient monuments and irrigation systems of the medieval period required organized and coordinated efforts of thousands of workers, artisans, architects etc, which was not possible without the use of sound management practices. Industrial revolution marked the beginning of modern management thought. The driving force in shaping what management is today is the urge of the human being to improve and flourish. After industrial revolution search began to find better ways to utilize organizational resources. With the rise in use of machine and large scale mechanized manufacturing new problems were identified which resulted in the development of classical approach. After classical approach many other school of
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NOTES
thoughts were developed that added value to the previous school of thought and helped in aligning management practices to the ever changing dynamic environment. The classical approach was followed by neoclassical approach, quantitative approach, systems approach, contingency approach and modern approach.
2.1 Unit Objectives After studying this unit you should be able to
Explain the Scientific Approach and contribution of F.W taylor.
Explain the characteristics of Bureaucracy proposed by Max Weber.
Explain Administrative theory and understand the principles of Henry Fayol.
Understand the importance of human beings in improving organizational effectiveness through findings of Hawthorne studies done by Elton Mayo.
Understand Behavioral and Human relations approach.
Explain Quantitative approach and its importance in decision making.
Explain Systems approach to management.
Explain Contingency approach to management.
Understand the contribution Peter Drucker.
2.2 Classical Approach (1900) The classical approach is the oldest form of management thought also known as traditional approach, management process or empirical approach. Management principles and practices were formalized for the first time after careful observation. The aim of the classical approach was based on experience of practicing managers. Universality of functions and principles of the management was recognized during this period. Management is viewed as systematic process of interrelated functions like planning, organizing, staffing, directing and controlling to attain worker’s efficiency through economic incentive. The branches of classical approach: CLASSICAL APPROACH
SCIENTIFIC
ADMINISTRATIVE
BUREAUCRACY
The major contributors of classical approach were F.W Taylor, Max Weber and Henry fayol. Management Process & Organisational Behaviour : 20
2.2.1 Scientific Approach Frederick W. Taylor known as the father of scientific management is the most
famous management pioneer. He rose from the position of common laborer to chief engineer in just 6 years. The goal of Taylor was to find out “one best” way to perform a task. In order to do so he did time and motion studies. One of his experiments was the study of workers loading pig iron to rail car. Taylor first tried to break tasks into elementary movements like walking speed, carrying positions, bending etc. and noted the time of each elementary movement with a stop watch. After that Taylor tried various combinations of procedures, tools and technique to arrive at “one best way”. He also used rest periods of specific duration and interval to improve the output. Taylor also developed incentive plans for workers to improve their performance. With his efforts Taylor was able to increase the efficiency of workers from 12 to 47 tons per day.
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NOTES
In 1911, Taylor published his famous book “principles of scientific management”. Later on Henry Gantt, disciple of Taylor developed charts for use in planning and controlling. Frank Gilbreths, an associate of Taylor developed micro motion study in which he identified seventeen micro motions known as herbligs to help analyze any worker movement. The main principles of scientific management are as follows: The task should be designed scientifically and not by the old rule of thumb methods. Selection, training and development of workers should be based on scientific methods. There should be a proper match between job and worker’s skill. There must be division of labor thus increasing specialization. There should be equal division of responsibility between management and workers and close cooperation between them. Taylor summed up his philosophy in these words: 1.
Science, not rule of thumb- People should develop logical and scientific methods to do a job.
2.
Harmony, not discord- People should avoid conflict at work place.
3.
Cooperation, not individualism- Teamwork should be given importance.
4.
Maximum output, in place of restricted output.- Optimum utilization of organizational resources.
5.
Development of each man to his greatest efficiency.
6.
Equitable distribution of work and responsibility between management and labor.
Limitations
Scientific management did not take psychological aspects of workers. Workers were treated as economic tools. They had to perform same task over and over again leading to boredom and monotony.
2.2.2 Administrative Theory Around the time when F. W. Taylor was developing principles of scientific management, Henry Fayol, known as the father of modern management was developing administrative theory based on his own experiences as CEO. Henry Fayol, administrative theory provides a more general framework of management that emphasis on the process and principles of management. He classified business activities into six categories:
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NOTES
1.
Technical (manufacturing).
2.
Commercial (buying and selling).
3.
Security (protection of property).
4.
Accounting (maintaining financial records).
5.
Managerial
6.
Financial (raising and optimum utilization of funds)
Fayol argued that managerial activity involves performing five functions 1.
Planning
2.
Organizing
3.
Commanding
4.
Coordinating
5.
Controlling
Henry Fayol gave the following fourteen management principles: (1) Division of work: every person should perform a single leading function repeatedly so that advantage of specialization can be achieved. Specialization improves the efficiency of worker and increases the output. (2) Authority and responsibility: individuals are given responsibility to achieve the goals and right measure of authority should be given to them to achieve the goal. Parity should be maintained between them. Authority and responsibility co- exits, whenever a person is given authority responsibilities arise. (3) Discipline: employees should follow rules and regulations of the organization and should respect agreements that are designed to secure obedience. There should be effective leadership, clear understanding of rules and judicious use of penalties so that discipline prevails throughout the organization. (4) Unity of command: no employee should have more than one boss. In order to avoid conflicting orders every employee should receive orders from one boss only. (5) Unity of direction: there should be one head and one plan for those activities that aim at same objective. The same sense of purpose should prevail in the organization. It helps in unifying and coordinating actions and goals towards the common objectives. (6) Subordination of individual interest to general interest: whenever there is conflict between personal interest and organizational interest, the organizational interest should be given first priority. The manager should ensure that individual’s are ready to sacrifice their personal interest for organizational goal. He can do this by setting his own example. (7) Remuneration of personnel: employees should be compensated for their work justly and fairly. Moreover the employer and employee should be satisfied about amount of remuneration and method of remuneration. Management Process & Organisational Behaviour : 22
(8) Centralization: when authority is concentrated and subordinates have less role in decision making it is centralization. When authority is disbursed and subordinates
also play role in decision making it is said to be decentralization. The proportion of centralization to decentralization is a matter of individual circumstances and forces of environment. The degree of centralization and decentralization should aim at achieving twin objective i.e maximum utilization of resources and adaptability towards changing environment.
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NOTES
(9) Scalar chain: it is the chain of line of authority ranging from highest rank to the lowest rank. This also represents the chain of communication.
It is usual practice that if A wants to communicate with G then the communication should flow from A via B, C to D and then from D via E and F to G But in case of emergency A can communicate with G by the use of gang plank. But they should also inform their immediate boss about action taken by them. (10) Order: it relates to the arrangement of things and people in the organization. The principle emphasis that there should be material as well as social order. It means that there should be “a place for everything and everything should be in its proper place” and “a place for everyone and everyone should be in his or her appointed place. (11) Equity : Manager should be kind, fair and impartial in dealing with subordinates. (12) Stability of tenure: employee should be given some job security. It takes time by the worker to understand his new job and become skillful in it. If he is not given adequate time to learn his job and is removed before he gets accustomed to it, he cannot render valuable service to organization. (13) Initiative: the employees should be encouraged to think new ideas and should also be allowed to implement them independently. It will help them to develop and grow. Moreover freedom to perform will act as a morale booster. It will lead to job satisfaction and motivation of the employees. (14) Espirit de corps: the employees should be encouraged to work in team. Unity is strength and unity in the employees is the foundation of team spirit. Managers should avoid the philosophy of divide and rule. Unity among the workers can be developed through informal communication also.
2.2.3 Bureaucracy Max Weber, a professor of political economy in Germany propagated the concept of highly formalized structure. He argued that organizations can reduce variability through formalization of behavior by introducing bureaucratic organization. This will make the activities of the organizations predictable and easy to control. The main features of
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NOTES
bureaucracy are given below: Rational legal authority: the managers do not exercise authority according to their whims and fancies. Instead authority is exercised through a system of rules and procedures attached to his position. In the bureaucratic structure the rules, decisions and dictions of the managers are written down so that they can act as guidelines in future for decision making. Hierarchy: The formal hierarchial structure is a firmly ordered system of supervision and subordination in which each level of operation follows the direction of the level above and gives the directions to the level below. Division of work: The total work is divided into small units of routine, well defined task. Each unit takes a form specialized job. When the worker does the same job repeatedly efficiency is increased and the worker becomes an expert in course of time. Rules, regulation and procedures: in order to ensure predictability and uniformity of behavior, rules and procedures are established. Employees are expected to follow the rules and procedures strictly. Records: files are maintained to record the actions and decision taken in the organization for future reference. Impersonal relationship: the decision should be made strictly according to rules; there is no room for personal relationships, sentiments or emotions in decision making. Competence of employees: the employees are selected on the basis of qualification and competency and promoted according to their ability and skills. Their competency is improved through regular training and orientation program. The experience and achievements of the employees are valued. Only those employees form the part of management who are able and efficient. Adavntages of Bureaucracy
Management Process & Organisational Behaviour : 24
1.
Bureaucratic structure helps in gaining the advantage of specialization; specialization improves efficiency by reducing mistakes, increasing speed and quality of work.
2.
Highly formalized structure based on rules, regulations, specialized task lead to predictability. There is no room for uncertainty and chaos. Everyone knows what is expected from them and no one crosses his or her boundaries. The problem of role ambiguity is highly reduced.
3.
Rules and regulations are formed after deliberate discussions. Pros and cons of every rule are discussed. The decisions taken are more rational and not subjective.
4.
Promotion, selection is on the basis of qualification and competence there is no room for biasness or privileged treatment for some. Rules and regulations are uniform for everybody. Such equitable treatment leads to high degree of democracy.
Disadvantages of Bureaucracy 1.
The bureaucracy is characterized by highly rigid and static structure. There
is strict adherence to rules. The rules are not changed frequently. The environment in which the organization function is very dynamic, thus making rules redundant sometime. In the name of following rules people may also avoid their responsibility. 2.
Too much emphasis on rules gives no space for emotions and needs of people. This is a highly mechanized structure where innovative ideas of people do not get much attention.
3.
Too much compartmentalization of activities do not allow people to do those activities that they are capable of performining but are outside their boundaries. In bureaucratic structure there is a tendency for continuing a job even if it is not required by the organization.
4.
Superiors try to increase their power and status by adding more people and more resources to their departments, even if they are not necessary for the organization. Such approach of superiors leads to empire building.
5.
Due to rigid hierarchy, vertical line of communication and necessity to record every action as well as decision on paper makes the files move through elaborate official channels causing inordinate delays. Due to red tapism decision cannot be taken promptly.
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NOTES
Classical theory made available a scientific base for management studies. It laid a foundation for education and training of managers. It was for the first time that universal nature of management was recognized. But the limitation of this approach is that role of humans and their contribution towards organizational effectiveness has been discounted.
2.3 Neo classical Approach This approach is also known as behavioral approach. The founder of behavioral approach is Elton Mayo, who was a professor at the Harvard business school. The importance of human behavior was recognized for the first time after the findings of famous Hawthorne studies. Classical approach treated human beings as economic beings, who could be motivated through money alone. Neo classical approach argued that human beings can show better results if they are treated well. Individual behavior as well as group behavior plays a very crucial role in determining the performance of workers.
2.3.1 Hawthorne studies A series of experiment were conducted at Hawthorne plant of the Western Electric company during late 1920s and early 1930’s. Some of the experiments are discussed below:
(1) Illumination experiment Two groups were created and the effect of different levels of illumination on workers’ productivity was studied. One of the group i.e. test group received different intensity of light during their work hours. Each time intensity of light was increased the
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NOTES
productivity increased. In the second group i.e. control group no variation in the light was done. The intensity of illumination was kept constant. However the productivity of control group was also increased though it received no added light. It was felt that some other factor is also influencing productivity besides lightening. The reason for increased productivity can be attributed to informal social relations that were developed among the members of work group during the experiment.
(2) Relay assembly test room experience In this experiment a small homogeneous group was created. The workers of the group were placed in separate rooms during the experiment. Numbers of changes were introduced like shorter working hours, improved physical conditions, and rest periods of verifying duration and then their effect on productivity was studied. The productivity of work group increased consistently during the experiments and it continued to be same even when the improvements in working conditions were withdrawn. The reason for such improvement in performance was later termed as Hawthorne effect. The study revealed that workers knew that they were part of experiment they felt important because they received added attention during the experiment. The researchers acted as friendly superiors and allowed the workers to have their say in suggesting changes for e.g. they can choose their own rest periods. Group cohesiveness and friendly informal supervision was the major factor behind the increased productivity. The human relations approach was the outcome of Hawthorne studies. It focused on individual’s need behavior and their interpersonal relationship.
2.3.2 Human Relations Approach According to Keith Davis: ``Human relation is motivating people in organization in order to develop teamwork which effectively fulfils their needs and achieves organizational goals” The man is not just an economic being but also a social being. The human relations approach focuses on people and believes that every individual is unique. Individuals can be motivated through varied social and psychological factors. The manager should aim at creating a positive work environment, if worker’s needs are satisfied they will become more happy and productive. Human relations approach emphasized that productivity can be increased by motivating people.
Check Your Progress 1. What are the main features of Bureaucracy? 2. What are the various branches of classical Approach?
Management Process & Organisational Behaviour : 26
2.3.3 Behavioral Approach Human relation approach was succeeded by behavioral approach which focused on group dynamics, group behavior, leadership, communication and conflict among other issues. Behavioral approach is an improved and wider version of human relations. Behavioral approach considers conflict as unavoidable and sometimes useful while human relations approach consider all conflict avoidable and harmful. The major contributors of neo classical approach are A.H. Maslow, McGregor, F Herzberg and Rensis likert. The neo classical approach emphasized that managers success depends upon his
skill in handling the human element in the organization. The quality of leadership is another critical factor in determining the success of organization. The limitation of this approach is that it lacks scientific validity. It is criticized for its simplistic and manipulative assumptions about relationship between worker’s attitude and productivity.
Evolution of Management Thoughts
NOTES
2.4 Quantitative Approach It is also known as operation research, decision theory approach and management science. This approach gained popularity during world war and was used to develop strategic and tactical military operations by the use of management science and operations management. Management science aims to improve the effectiveness of decision making through the use of statistical and mathematical model. Quantitative approach aims at finding best solutions for the problem. After all managers success depends upon his decisions. The correct decisions can be made through the use of logical reasoning backed by quantification. It aims at formulating mathematical model that represents the decision situation. The variables present in the decision situation are identified and the interrelationship of variables is determined to form a model. The best solution can be achieved by solving the equations in the model. Some of the quantitative techniques used in decision making are: Linear programming, Game theory Inventory control Information theory Linear programming Probability theory Queuing theory Simulation theory Statistical decision theory Sampling theory It helps in finding the best solution with accuracy, precision and factual data. The drawback of this approach is that it requires quantification of all the variables affecting the given problem situation. Some of the variables are qualitative in nature for e.g. human behavior cannot be quantified with precision. A lot of time an effort is required to model the decision situation and gather input for it. Manager cannot postpone his decision every time. More over decision quality depends upon the accuracy of model and data. Sometimes it is difficult to identify all variables and establish functional relationship between them. Erroneous model and inaccurate data may lead to wrong decisions.
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NOTES
2.5 System Approach All the previous approaches share a common problem of viewing things in narrow perspective. Classical approach focused on scientific and administrative side of doing work. Neo classical approach focused on human behavior at the individual and group level while quantitative approach was limited to optimization of decision making. In order to overcome this weakness system theory was developed to view the “big picture”. The organization should be looked as ‘whole’ and as a part of the larger external environment. Dealing with the various parts of an organization separately can be erroneous for e.g. if the marketing department brings huge orders from the customers through aggressive campaign while the production capacity is not adequate to meet those orders in time then the overall organizational performance will get hampered . The manager should attempt to increase the overall effectiveness of the system rather than effectiveness of any sub part of the system in isolation. An organization is viewed as an open system. An open system is one which interacts with the environment. The open system is responsive and adaptive to the changes in environment. A closed system is independent of the environment. Organization is vulnerable to the changes in environment. Any change in
customer’s tastes and
preferences may affect the demand of the product of the organization. A system is a set of interrelated subsystems. Any change in one system causes a change in another system. The sub systems also have their sub parts. Every system is also a part of a super system. The subsystem in the organization can be departments. There are basically five subsystems in organization. They are goals, resources, structure, management, psychosocial subsystem. There exists a system boundary which separates it from the environment. The boundary is rigid in case of closed system while it is flexible in case of open system. The boundary determines that which part is internal to the system and which part is external to the system for e.g. employees are internal to the organization system and customers are external to the organization system. Synergy is said to happen when two plus two becomes five, in other words when the whole is greater than parts. Synergy can be attained when all the parts of the organization are well coordinated and function properly so that output is optimal. The advantage of this approach is that the managers are forced to see the broader picture, and look at the totality of the situation before arriving at any decision. The limitation of the system approach is that it does not have specific tools and techniques for the manager to practice. The conceptual framework of this approach is criticized for being too vague. Management Process & Organisational Behaviour : 28
The major contributors of the system are Chester Bernard, R.A Johnson, Nesbit Wiener and E. L. Trist.
2.6 Contingency Approach According to this approach there is no single best way of managing organization. Management entirely depends upon the situation. One principle or practice of management may be valid and effective in one situation but it might completely fail in the other situation. Organization work in a very dynamic environment which is very uncertain and complex. The choice of a management style depends upon the particular situation and people involved in the situation. The management principles, practices and techniques cannot be considered as universal. Hence there is no one best motivation technique, organization structure, leadership style that will fit into all types of situations. The characteristics of job, characteristics of employees, the limitation of resources and environment dynamics etc, determines the situation and every situation is different from the other and thus no single management practices or principle can provide solutions to all organizational problems e.g. all employees can not be motivated through money.
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NOTES
Manager should develop diagnostic and problem solving skills. Manager must first try to comprehend the variables in the situation. After understanding the situation, he should attempt to match specific concepts and techniques of management with the situation. The contingency theory is more pragmatic and action oriented and forces the manager to be more alert and adaptive to environmental variables while choosing their styles and techniques. This approach makes the work of the manager more challenging as he is required to think through all possible alternatives to deal with the situation and then choose the one that best fits the situation. It provides freedom of choice and opportunity for innovation and creativity. The drawback of this approach is that it lacks theoretical frame work. Moreover it is a reactive approach rather than proactive. The managerial actions are reactive to environmental dynamics. He has to first analyze the environment thoroughly and then try to find best possible solution.
2.7 Modern Approach The modern management theory is an integrative theory that has combined the valuable concepts from classical, neo classical, system, contingency and quantitative approach. The main characteristics are: 1.
Open system view: Organizations are open system that continuously interacts with the environment. They receive input from environment, process them and then sends output to the environment. The change in the environment can affect their input, process or output.
2.
Dynamic and adaptive: in order to survive the organization should change according to the changes in environment.
3.
Multi motivated: managers has to satisfy the interest of various stakeholders i.e. shareholders, consumer, employees government and community. At the same time manager should adopt different methods of motivating employees. He has to strike
Check Your Progress 1. Distinguish between open and closed system. 2. Explain quantitative approach towards management? Management Process & Organisational Behaviour : 29
Evolution of Management Thoughts
a judicious balance between financial and non financial rewards so that employees are motivated. 4.
Multi disciplinary: management discipline draws its input from various other disciplines like economics, sociology, commerce, mathematics, engineering psychology etc.
5.
Probabilistic: manager’s decision is based on future events. But it is not possible to predict future with certainty since the variables in the environment are vulnerable to change, thus organization is a probabilistic system with high degree of uncertainty in it . Manager can never be hundred percent sure of the consequences of his action which is future oriented.
6.
Integrative: modern management integrates the valuable concepts, practices and principles from the previous management approaches to be used in managing the organization.
NOTES
2.7.1 Contribution of Peter Drucker Peter Drucker is the known as the founding father of modern management theory. His practices revolutionized management thinking in fifties. His famous publications are “The End Of Economic Man”, “The Future Of Industrial Man”, “Management For Results” and “The Effective Executive And Management Task, Responsibilities And Practices”. His main contribution includes (1) Nature and Role of Management : He opined that management is a dynamic life giving element in every organization and is needed everywhere. He stated that developing countries are not underdeveloped, they are undermanaged. Management is a distinct discipline and social function. (2) Manager’s Job : Manager’s job is to focus on economic performance by making work productive and worker achieving. (3) Social Responsibility : Manager should have some social obligation towards society. In order to flourish it is important that the organization function in healthy society. Manager’s actions have a direct impact on the society. He should be concerned with human and social environment and not just goods and services the organization deliver. (4) Customer Orientation : Drucker emphasized that customer is very important for the business. The organization should produce goods that satisfy needs and wants of the customer. (5) Key Result Areas : Drucker specified the following areas in which management should stress meaningful objectives they are :
Management Process & Organisational Behaviour : 30
1.
Market Standing
2.
Innovation
3.
Productivity
4.
Physical and financial resources
5.
Profitability
6.
Manager’s performance and development
7.
Worker’s performance and social responsibility
(6) MBO : He proposed management by objectives that involves goals set by subordinates and supervisors in a participative way for a predetermined period with regular feedback on goal progress.MBO philosophy is his most important contribution towards management discipline
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NOTES
(7) Decentralization : Drucker has emphasized that manager should create independent product division rather than division according to function. Departments based according to product make manager accountable for results. He suggested federal decentralization where there is centralization in decentralized structure. Apart from Peter Drucker many management gurus have contributed their part in the field of management Michael and Porter has given valuable concepts in competitive strategy and competition advantage. Tom peter became popular by publishing a book “In search of excellence” in which he has described Mckinsey 7s Model focusing on staff, system ,structure, strategy, shared value, skill and style. Henry Mintzberg has contributed towards strategic planning and organization structuring.
2.8 Summary Many Academician and practicing manager have contributed to the discipline of management with different approaches towards it. Industrial revolution triggered the search of one best method of doing work . Scientific management aimed at introducing systematic study of work methods in order to improve efficiency. Bureaucracy advocated mechanistic structure comprising of legal authority rules, regulation and procedure for formalizing organization’s behavior. Administrative management proposed process and principles of management. Neoclassical approach focused on human behavior and group behavior. They emphasized that a motivated and satisfied work force contribute more to the organizations objectives. Quantitative approach argued that decision making can be highly improved through the use of operations research, mathematics and statistics .Systems approach emphasized that manager should have an eagle view of the situation. Proper balance should be sought between requirements of various interrelated parts of the enterprise and the goal of the enterprise as a whole. According to contingency approach appropriate management action depends upon the situation. Every situation has unique characteristics and hence there cannot be a universal management practice. Modern management picks up important valuable concepts from all the previous approaches and combines them to make it relevant to the present business scenario.
2.9 Key Terms
Scientific Management: It is an approach that aims to find out “one best” way to perform a task through time and motion studies.
Administrative Theory: It provides a more general framework of management that emphasis on the activities process and principles of management.
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NOTES
Bureaucracy: It is an organization that reduces variability through highly formalized structure leading to formalization of behaviour so as to make the activities predictable and easy to control.
Behavioural Approach: This approach to management argued that human beings are not only economic beings; they can also be motivated if they are treated well.
Quantitative Approach: It aims to improve the effectiveness of decision making through the use of statistical and mathematical model.
System Approach: A system is a set of interrelated separate parts that are unified to work towards a common goal. The organization should be looked as ‘whole’ and as a part of the larger external environment.
Contingency Approach: According to this, management entirely depends upon the situation as there is no single best way of managing organization.
2.10 Questions and Excercises Long answers questions
Q1. “Management is contingent upon situation” Discuss. Q2. What are the essential features of scientific management? Account for the contribution of F.W Taylor towards management thought. Q3. What is the contribution of Henry Fayol towards development of management principles and practices? Q4. Explain the characteristics of modern management thought. Q5 Discuss behavioral approach to management and differentiate it from human relation approach. Short answers questions
Q1. What were the findings of Hawthorne experiments? Q2. What are the limitations of quantitative approach? Q3. Write a note on systems approach? Q4. Differentiate between classical and neo classical theory of management
2.11 Further Reading and References (1) ``Principles of Management: An Analysis of Managerial Functions’’. By Harold Koontz and Cyril O’Donnell. New York: Mcgraw-Hill (2) Anil Bhat, Arya Kumar, ``Management Principles, Process and Practices’’, Oxford University Press Fourth edition
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(3) C.B.Gupta, ``Management Theory and Practice’’, Sultan Chand & Sons , eleventh edition (4) V.S.P Rao, V. Harikrishnan, ``Management Text and cases’’, excel books , fourth edition
Planning
UNIT 3
PLANNING
Structure
NOTES
3.0 Introduction 3.1 Unit objectives 3.2 Meaning of Planning 3.3 Nature of Planning 3.4 Importance of Planning 3.5 Essentials of a Sound Plan 3.6 Planning Premises 3.7 Steps in Planning 3.8 Limitation of Planning 3.9 Types of Plan 3.9.1
Standing Plan
3.9.2
Single use plan
3.10 Levels of Planning 3.10.1 Strategic Planning 3.10.2 Tactical Planning 3.10.3 Operational Planning 3.10.4 Contingency Planning 3.10.5 Short Term and Long Term Planning 3.11 Management of Objective (MBO) 3.11.1
Concept of Management by Objectives
3.11.2
Process of MBO
3.11.3
Importance of MBO
3.11.4
Limitation of MBO
3.12 Summary 3.13 Key Terms 3.14 Questions and Exercises 3.15 Further Reading and References
3.0 Introduction Planning is the essence of management. It is such a fundamental activity that almost all human beings are engrossed in planning for their day to day activities. Planning is the foremost function of management. The importance of planning can be understood with the statement that well planned job renders half of the work done. Planning being the primary function of management involves various steps and has to be done keeping in view several factors/premises.
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Planning
3.1 Unit Objectives After studying this unit, you should be able toNOTES
Understand the concept and importance of planning.
Discuss the essential characteristics of a sound plan.
Describe the steps in planning process.
Differentiate between various types of plans.
Understand different levels of planning.
Understand the concept, importance and limitations of MBO.
Describe the process of MBO.
3.2 Meaning of Planning Planning is the basic and crucial function of management which provides foundation to other functions such as staffing, directing, organizing and controlling. To plan is to forecast about future course of action detailing about what is to be done, how it is to be done, what timeframe would be required and who will execute it. It necessary has to fulfill a purpose. Planning in an organization is done to determine its objectives, goals, programs, policies, procedures and means to achieve them. In the words of Koontz and O’Donnell, “Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it.” According to Urwick, “Planning is a mental predisposition to do things in orderly way, to think before acting and to act in the light of facts rather than guesses”.
3.3 Nature of Planning (1) Planning is goal-oriented: Plans stem from objectives. Objectives provide the basic guidelines and direction for planning process. Planning which does not contribute to the achievement of organizational goal will not have any meaning. It acts as a means of achieving organizational goal. Therefore it is a goal oriented activity. (2) Planning is a primary function: All other management functions owe their existence to planning as it is the foundation of management process. The reason is that organization works to achieve some specified goals. Organizing, staffing, directing and controlling cannot happen if the plan does not provide the answers to the questions as to What to do ? When to do? Who will do? and How it should be done? Planning is an act of identifying and setting goal and hence the prime activity.
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(3) Planning is an intellectual process: imagination, creativity, rationality, farsightedness, sound decision making capacity and many more mental exercise are necessary to make a sound plan, thus making planning an intellectual process. The planning requires judgment and foresight and forces
Planning
manager to abandon guess work. (4) Planning is forward looking: plans are forecast about future course of action. Proper assessing of future and providing for it is the reason behind planning. Manager tries to assess future and tries to take advantage of favorable developments in future. Manager also tries to guard the organization against unfavorable developments that he is anticipating in future through planning. Thus, forecasting for future and making provision for the anticipated changes makes planning a forward looking activity.
NOTES
(5) Planning is a continuous process: the process of planning involves dynamism. When events change the underlying assumption change and the entire exercise is revised. Business environment keeps on changing and so the process of revising and modifying the existing plans continues. Also, when old plans are accomplished, new ones are created thus making it a never ending activity. (6) Planning involves choice: planning is deciding among various alternatives. It assumes existence of various alternatives. Had it been only one way of doing an activity there would have not been any need for planning. (7) Planning is directed towards efficiency: to achieve the desired goals efficiently and economically one does planning. After careful analysis and evaluation manager chooses that alternative which attains the objective efficiently and economically. If the economy and efficiency are not achieved along with goal, planning won’t serve any purpose. (8) Planning is integrated process: planning is a systematic process. There is a hierarchical structure in the plans which are integrated. Every minor plan leads finally to achievement of major plan. Plans are interdependent. (9) Planning is all pervasive: planning is a function that is needed and practiced at all levels and in every department. Though the scope of planning may differ according to the managerial levels and departments.
3.4 Importance of Planning (1) Planning provides direction: planning helps in defining the objectives of the organization in simple and understandable words. The result of this is that every employee is aware of one’s role in the accomplishment of the objectives of the organization. It provides a sense of purpose and reduces aimless activities. (2) Planning reduces risk: Future is uncertain hence it is not possible to eliminate risk altogether, but planning does help in minimizing risk by providing for future. Planning is a futuristic process where in measures are taken to take care of any unfavorable situation that may arise in future. This significantly reduces risk.
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Planning
NOTES
(3) Planning encourages innovation and creativity: for a business to grow and prosper there is a constant need of development which comes out from innovation and creativity. Planning involves continuous monitoring of the environment in which the organization is operating. In doing so it encounters new challenges, developments and ideas that foster creativity. Planning is futuristic process where the organization is prepared to cope with upcoming advancement in technology and dynamism in business environment. Thus it improves creativity and innovation. (4) Planning guides in decision making: process of taking decision involves identifying, assortment of alternatives and selecting the best alternative. Nevertheless it is vital to decide the criteria before identifying alternatives. These rationales and criteria are determined under the process of planning. Thus, planning facilitates decision making. (5) Facilitates control and provides efficiency: by deciding on the objectives of the organization through planning the employees of organization are informed about activity to be performed by each of them. A set benchmark is given to them about their work, time and cost. This helps in controlling where actual performance is compared with standards and the deviations are found out at every level. The wastage is minimized and efficiency is achieved by taking corrective actions. (6) Planning improves morale and motivation: the objective of the organization and the role to be performed by every employee is clearly stated with the help of planning. This makes every employee aware that they will be given due recognition for the work performed by them. This improves their morale and motivating them to perform diligently. (7) Helps in coordination: plan is a unifying force. It integrates the diverse force of work towards the achievement of common organizational objective. It serves as the basis of coordinating by interrelating the activities and resources of different departments divisions and people.
3.5 Essentials of a Sound Plan (1) Top management support: a plan cannot be executed if it fails to get the support of top management. Therefore the support of top management is essential for making a plan feasible and sound. (2) Clear cut objectives: objectives should be clear and understandable and they should be properly communicated to the people. People should understand what is expected from them. (3) Contribution towards objective: every major and derivative plans should have one unifying purpose of achieving the organizational objective. Management Process & Organisational Behaviour : 36
(4) Develop accurate forecast: the planning is future oriented and its success depends upon the precision of our forecast about the future.
Planning
(5) Practicable: a plan can only be implemented if it is realistic in approach and is practicable. (6) Adaptable to changing conditions: the business environment keeps on changing; therefore a rigid plan can never be successful. A plan should have flexibility so that it can cope with the changing business environment.
NOTES
(7) Participation of concerned people: however good a plan is, if it lacks participation from the people who are going to work upon it, it will fail utterly. Participation of concerned people during planning process helps in obtaining their commitment towards plan. They feel comfortable with the plan that helps them in implementing the plan successfully. (8) Integration: various sub-plans should be integrated in a hierarchy form so that they all together lead to the achievement of organizational goal. The plans should support each other rather than act against each other. (9) Monitoring: keeping a close look on the subsequent execution of the plan is important so that deviation if any could be traced and corrected easily.
3.6 Planning Premises They are the basic assumption regarding the business environment, which help make planning realistic. These are the broad frame work within which plans have to be formulated. These are of following types: (1) Controllable, semi-controllable and uncontrollable factors: Controllable premises are completely under the control of management. The examples are machines, materials, and funds. Semi-controllable premises are to a certain extent under the control of management like marketing strategy. Uncontrollable premises are beyond the control of management. Examples are government policy, weather conditions, natural calamities, etc (2) Internal and external factors: Internal Premises are the part of business itself. These are the internal environment of the business which includes the expertise of the workers, policies, philosophy of management, etc. External Premises constitute the external environment in which the business operates without having any control over it. The economic, political, social, cultural and technological environments are examples of external premises.
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Planning
3.7 Steps in Planning NOTES
Securing Coperation and Particpation
Establishing Objectives
Develop Planning Premises
Determine Alternative course of action
Formulate Derivative Plan
Select the Best Course of Action
Evaluate Alternatives
Figure 3.1: Steps in Planning (1) Establishing objectives: Setting objective is the primary activity in planning. This is so because once the objectives are determined and defined all other activities required for the achievement of the goals can be worked upon and synchronized. (2) Develop planning premises: identifying those factors which can significantly influence the probable outcome of different alternatives is called premise. Prior to taking decision on finalizing an alternative a forecast of this assumption is made. This assumption bears a direct relation to the success of planning. The more accurate is the forecasting the more accurate is planning. These assumption commonly referred as planning premises and are of two types: Internal premises (factors which are insider to the organization and under the control of it like labor, raw material etc) and external premises (factors which are beyond the control of management like Government policies, business competition etc.) (3) Determine alternative course of action: based on the objectives of the business various alternatives to attain the goal are identified. (4) Evaluate alternatives: out of the numerous available alternatives, the choice of most appropriate method of doing is selected. This is done by establishing certain criterion and evaluating each alternative on the predetermined criteria. The criterion can be feasibility, cost and benefit analysis for evaluating each alternative. (5) Select the best course of action: the alternative which best fits the predetermined criteria is chosen for attaining the organizational goal. Usually the second best is kept as a reserve as the future is considered to be uncertain. Management Process & Organisational Behaviour : 38
(6) Formulate derivative plan: the implementation of main plan requires formulation of various secondary plans also. They are called derivative plans.
Planning
They support the main plan and usually keep track of time schedule and sequencing of various tasks. (7) Securing co-operation and participation: once the plan to achieve the goal is ready with desired course of action, the important aspect related to it is to seek cooperation from the employees who are actually going to execute it. Once the plan is clear the workforce can jointly participate and contribute towards its achievement with a raised morale level and motivation.
NOTES
3.8 Limitation of Planning (1) Lack of accurate information: the success of planning depends upon accuracy of information. However hard managers try future cannot be predicted with certainty. The longer the period of forecast, the lesser is the reliability of a plan. In the absence of inaccurate information planning premise cannot serve significant purpose. (2) Costly and time consuming: planning process is really hefty. The process requires collection of plenty of information and its analysis. Further the process of revision involves much time which makes planning uneconomical and time consuming. (3) Psychological barrier: the fear of uncertainty makes people resistant to change. This attribute affects successful planning. Making people understand the need for change and implementing the change often becomes challenging. (4) False sense of security: most of the time managers rely too much on plans. They believe that once the planning is done everything is safe and secure. They do not keep updating policies and procedure with respect to changing environment. (5) Limited flexibility: a predetermined course of action sometime results in rigidity in the work place. Besides the limited flexibility and freedom kills employee’s enthusiasm in the work. (6) Managerial deficiency: although planning is a crucial aspect of management some mangers undermine its importance. They lack acumen and farsightedness required in planning process. (7) Environmental turbulence: external environment cannot be controlled. Factors such as government regulation, legal environment, and technological factors keep on changing making plan of period invalid for subsequent use.
3.9 Types of Plan Generally, there are two types of plan, Standing Plan and Single Use Plan. Standing Plans are long term plan and are of repetitive nature. This is because their key area is organizational situations that occur frequently. A single use plan as the name indicates is for short period and for only one use. The use of this kind of plan is just once, or at
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Planning
most, couple of times, as the key area for such plan is a unique or exceptional situation.
3.9.1 Standing Plans NOTES
(1) Mission: Every enterprise must mandatorily have a mission describing about its purpose. Mission statement describes the reason for the existence of the organization. In the words of Mintzberg, “A mission describes the organization’s basic function in society, in terms of the products and services it produces for its customers”. The ‘mission’ of a business organization must carry:
Purpose
Standards of behavior
Strategic scope
Values and culture
To understand, we can take the mission statement of TCS, “To direct all our organizational efforts at building upon the existing organizational strengths and brand recognition to achieve enhanced levels of profitable growth in the core business, and diversify into new areas that compliment and supplement the core business, with the diversification aimed at achieving excellence and industry leader status in the new areas. The TCS People will however be encouraged to be open to unconventional ideas and services and recognize new trends at very early stages”. The statement not only states the purpose of existence but also the future strategy and expectation from employees. The mission expresses the benefits the customers and society at large will derive from the operations of the organization. Mission is customer oriented as well as future oriented. The mission statement should hold its validity for a longer period of time. The mission statement is defined in a broader way. It should be dynamic in approach so that business can grab new opportunities and ward off threats that may emanate from competitive business situation that may arise in future.
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(2) Objectives: The specific purpose to be achieved by the organization is called its objective. In the words of Dalton E, McFarland “Objectives are the goals, aims or purposes that organizations wish to achieve over varying periods of times” ‘it is a wider term of which mission statement is a part. Objectives are predefined, clear, plural, realistic and purposeful. They are the end result that organization wants to achieve. The objectives are accomplished by channelizing all the resources efforts and energies towards them. Objectives translate mission statement into action. The significance of objective can be understood with the lines of Drucker, “The search for one objective is essentially a search for a magic formula that will make judgment unnecessary. Objectives are needed in every area where performance and results directly and vitally affect the survival and prosperity of the business.” Objectives are framed keeping in mind the present external environmental factors internal resources and constraints, at the same time they are future oriented. Future growth prospects and risk associated with business should be anticipated and incorporated in organizational objectives.
Planning
(A) An organization can have multiple objectives for e.g. providing services and products to the customers, quality improvement, earning profit, improving growth rate, survival etc. (B) Objectives form a hierarchical structure. At the top there are organizational objectives that percolate down the level. After the formation of organizational objectives departmental objectives are formed which are followed by group objectives. At the bottom of hierarchy individual objectives are set.
NOTES
(C) Objectives should be result oriented, interconnected and mutually supportive. Organizational objectives act as integrating force and provides basis for formulation of policies, strategies, procedures programs and other plans. (D) Objective should be clear. If they are carefully stated and understood the chances of achieving them increases manifold (E) Objective should be quantified and defined in measurable terms. This helps in eliminating subjectivity and confusion. Increase in market share by 5 % is specific and sets a clear target for the employees to achieve. (F) Objective should be realistic and attainable. They should provide some challenge to stimulate motivation and growth but at the same time they should be achievable. (3) Policies: Decision making needs a pre-defined guidelines and directions. Policies are basic guidelines for decision making. Polices define scope inside which the employees can take decisions. The statement that provides broad guidelines and direction for taking action consistent with attaining the objectives of the organization is termed as policies. These are formal statements that provide framework for dealing various management day to day problems thus speeding up the decision making process. These usually help manager with solution to deal with routine problems that occur frequently, so that manager gets more time to deal with unusual, crucial and more significant problems of the organization. For e.g. the organization can formulate policies for purchase, promotion, recruitment and selection, research and development and so on. Before formulating policies the areas should be identified that pose problems, are repetitive in nature and similar in characteristics. Due consideration should be given to both internal and external factors that affect the organization. After considering all the contingencies the policy should be presented in black and white. Policies should be clearly made so that, employees of the organization can understand and adhere to them and the organization can function more efficiently. Various policies can be formed for various departments but once formed they should not be changed frequently. The HR department can have their own recruitment policies; the sale department can have their own incentive policies to boost sales and so on. A stable policy in no case means that it should not be flexible, it only implies uniformity. Due to rapidly changing environment it becomes mandatory to review and appraise policy from time to time. If the policies are not contributing to organizational objectives, company reputation and competitive strength then it should be changed. The significance
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Planning
of the policy lies with the fact that they throw light on the values and philosophy of the company. (4) Procedures: the techniques or means to be used for achieving the objectives set NOTES
in advance is termed as procedure. A procedure is a standing plan detailing about the succession of associated acts that are required to perform the task. It is the execution part of policies. These tend to be more specific than the policies. Procedures are chronologically defined sequential activities or steps that are required to be performed with little scope for individual discretion. It sets out a standardized way things should be done. Let’s say, leave procedure. The organization sets out a procedure how to take leave, any employee has to follow the same process of filling the form and taking permission and so on for the purpose of availing leave. They are the acceptable way in which tasks are performed. The establishment of procedure ensures consistent and uniform actions to do routine job. This saves time and effort and also helps in delegating work to lower level managers. It provides order in organization and removes administrative bottlenecks. Procedures should be standardized and in alignment with organizational objectives. They should be based on adequate fact and the steps in procedure should be kept as minimum as possible. They should be relatively stable but at the same time they should be periodically reviewed and updated to meet the changing conditions. (5) Rules: these are precise statements on how a situation needs to be tackled. These are management decision regarding what one needs to do and what one should refrain from in a certain situation. These are regulatory instructions to people on their behavior and action. One can identify them as the ‘organization’s commandments’ to ensure that the environment has discipline and well defined code of conduct for controlling the behavior of the people of the organization. A rule is distinct, clear and has no scope of flexibility or discretion, therefore the infringement of rules carries a penalty. (6) Strategy: The word strategy has been derived from Greek word ‘stratçgia’, meaning the art of troop leader. The word has been more commonly used in military environment. In business management it means policy formulation by top management which helps in interpretation and understanding the meaning of other policies. A strategy is a unique plan devised to cope up with the actions and
Check Your Progress
reactions of the competitors. In the words of C. T. Hardwick and B.F. Landuyt,
1. What are the limitations of planning? 2. What are the essential characteristics of sound plan?
“The word strategy is used to signify the general concept and salient aspect of gamesmanship as an administrative course designed to bring success.” The purpose
Management Process & Organisational Behaviour : 42
of formulating strategy is to provide competitive advantage by capitalizing on its own strength, grabbing opportunities in environment and saving the organization from the threats posed by the environment. According to john Argenti “strategic planning is a careful, deliberate taking of decisions which affect or are intended to affect the organization as a whole, as opposed to only parts of it, over long periods of time”.
Planning
3.9.2 Single Use Plan (1) Programs: An action based, result-oriented and unique plan to meet a specific business condition is termed as programs. These are formed to accomplish a project undertaken. Since the projects are accomplished over a certain period of time these programs also are short lived.
NOTES
(2) Budget: An estimated or forecasted quantifiable statement discussing the expectation is termed as Budget. It is forecasted statement expressed numerically of what an organization wants to achieve and what will be the expenses to achieve it. It is a financial plan for a specified period of time generally illustrating movements of funds (inflow and outflow).It is designed to allocate resources of an organization and forms a standard for performance appraisal.
3.10 Levels of Planning 3.10.1 Strategic Planning This is a futuristic and proactive approach. It is a wholesome planning which defines and prioritizes long-term plans that include probing the purpose, mission, philosophy and goals of the organization keeping in view external environment that a business might face. It is detailed planning which includes SWOT analysis, objective formulations, communication of objectives, various sub plans for the achievement of objectives and so on. It involves major involvement of resources and is for a minimum period of ten years. It reflects the future of the organization.
Steps in strategic planning (1)
Mission and objectives: Strategic planning is concerned with determination of long term goals and objectives of the organization by top management.
(2)
Environmental scanning and Organizational Appraisal: Both internal and external environment of the organization is scanned and SWOT(strength, weakness opportunities and threat) analysis is done.
The internal factors can be a source of strength or a reason for weakness. The internal environment consists of availability of financial, material and human resources. It also includes available technology with the organization, organization structure and organizational culture for e.g. advanced technological capabilities and in-house research and development can act as strength while rising cost of operation and lack of financial resources is a cause of weakness.
The external environment constitute economic, social, political-legal, technological environment. The external factors can either pose a threat to the organization or can bring new opportunities for growth and expansion to the organization for e.g. recession can lead to severe loss in sales of the company or entry of new competitor can reduce the market share of the
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Planning
organization. Government policies aimed at improving infrastructure facilities of the country can have a positive impact on organization. Construction of new roads can help the organization in smoothing its operation and improve and enlarge its distribution channel.
NOTES
(3) Strategic alternatives and choice: various alternatives are generated and strategic options identified for e.g. diversification, expansion, merger and acquisition etc. The alternatives that are generated are then compared and evaluated. After comparing, their effect on the health of the organization is analyzed and the best option is chosen. (4) Strategy implementation and control: this involves resource mobilization and allocation, development of appropriate system and procedure and designing of organization structure. Programs, schedules, tactical and operational plans are developed. Various controls are developed to monitor the progress of strategy implementation and its contribution towards organizational goals is evaluated. If required the strategy should be molded to suit the changes in the external environment.
3.10.2 Tactical Planning Tactical plans are also called intermediate plans. These are neither for very short period nor for a very long period. These plans add value to strategic plans. They take care to the execution part of the long term plans. It focuses on the existing operations of different departments of the organization. Generally, middle management is responsible for formation of such plan; they are in-charge with the responsibility of employing the optimum mix of the resources. It also covers the issue of performance of employees and staff development.
3.10.3 Operational Planning These are short run plans made at departmental level or lower level made for the purpose of carrying the day to day activities of the organization. They are generally divided into various functional departments and range for a period of one week to a year.
3.10.4 Contingency Planning Check Your Progress 1. Distinguish between standing plans and single use plan. 2. How does policies help in decision making?
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These plans can be either reactive or proactive. They are made to counter a contingent situation which was not assumed. These situations are special and a business might confront such situation occasionally.
3.10.5 Short Term Vs Long Term Plan Short term plan are often termed as operational plans that are prepared for the period of one year. The purpose of these plans is to maximize efficiency in the day to day operation of the enterprise. These plans act as base for the long run plan. They also help in unifying the action of the enterprise. The long range planning also called as strategic planning generally span over a period of 10-15 years or more. These plans involve a large period and hence greater uncertainty.
Planning
3.11 Management of Objective (MBO) 3.11.1 Concept of Management by Objectives
NOTES
In 1954, Peter Drucker coined the term Management By Objective. It is a technique in which measurable goals are set by joint effort of senior and subordinate and the contribution of each individual is measured in terms of their accomplishment of the goals. The goals set in MBO are not unilaterally set by the superior or imposed on the subordinates. These identified goals are set in close consultation with subordinates. MBO is an autonomous and participative style of management. The concept has become popular these days as a rewarding style of management. It focuses concentration on the achievement of objectives through partaking and involvement of all concerned persons. The basic assumption behind such a philosophy is that when people are aware of the expectation from them they align their personal goal with the organizational goal and can perform better. Further the joint goal setting, superior-subordinate participation and support from superior to subordinates are the important characteristics of MBO. This improves employee morale and motivates them.
3.11.2 Process of Management by Objective
Preliminary Goal Settings Setting Subordinate Objectives Action Planning Periodic Performance review Final Appraisal (1) Preliminary goal settings: The initial stage in the process of MBO is to identify the organizational objectives. The top management generally in consultation with other managers determines it. The important aspect in determining these is identifying “Key-Result Areas’ (KRA). Once these goals are identified they must be shared with other members. (2) Setting specific performance objectives: the organization goals can only be achieved if they are divided and every individual performs the given task. Therefore every individual should be informed about the task that is expected from them. The subordinate should be consulted before providing with the resources for performing the task. The resources provided should be proportionate according to the goals. Goal setting is a two way process it is not imposed on the subordinate by the superior. Superior suggests a goal to subordinate and subordinate accepts it. (3) Development of action plans: after the goals are set actions plans are
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Planning
NOTES
developed to bring the things into force. Procedures are formed for achievement of set goals. Under MBO the subordinates and superior jointly and interactively perform a given task. The superior gives suggestion and the subordinates perform. The objectives are so formed that every objective accomplished at lower level contributes to the fulfillment of the greater goal. For the evaluation of key areas check points are also established. (4) Periodic performance review: at specified time interval evaluation of the work is done with joint participation to identify shortcomings or deviations if any. Subordinate and superior sit and discuss about the problem areas identified. Feedbacks and suggestions are made available for the potential development. The main purpose is to improve the quality instead of focusing on criticism. (5) Final appraisal: at the end of the year, performance of the individual is evaluated on the basis of task completed. The standards which are set are compared with the actuals. The actual work is evaluated based on which the appraisal or rewards of the subordinate is decided.
3.11.3 Importance of Management by Objective (1) Helps in reducing wastage of resources as the resources are provided in proportion to goals set. (2) Helps in making planning effective with the help of action plans and result oriented planning. (3) The subordinate is able to relate his goals with organizational objectives and feels proud of his contribution towards the organizational objectives (4) Induces team spirit with democratic and participative style of work. (5) It gives subordinate valuable feedback through the system of periodic evaluation. The employee becomes aware of his progress and can take timely corrective action if he is lacking somewhere. (6) Induces employee morale as their participation is given due consideration. Also the rewards are according to the contribution which raises their morale. (7) It acts as a effective tool of self control as every individual know what is expected out of him, which help in self regulation.
3.11.4 Limitation of Management by Objective (1) Rigidity: the problem is that it sometimes fails to incorporate prevailing trends and the current scenario of the organization. (2) Goal Setting: which criteria should be given more preference quantity or quality? The goal should be long term or short term, these are various issues confronted while setting goals. Sometimes overemphasis on measurable goals can neglect crucial qualitative goals like job satisfaction. (3) Time consuming: setting up of goal that are measurable and that too in participative style requires a lot of time. Instilling confidence, deciding on task all these require a lot of time. The process of evaluation and performance appraisal involves considerable paper work and time. Management Process & Organisational Behaviour : 46
(4) Unhealthy environment: sometimes more emphasis is laid on work rather than improving the quality which produces lot of pressure and unhealthy
Planning
competition between work group. (5) Participation problem: at times to avoid time wastage, superior do not consult subordinates and set the goals authoritatively which loses the essence of the process. (6) Managerial skill: some managers may not be very good at human skills. They may not be effective in motivating and leading people towards the goal. The subordinate may not get necessary guidance and counselling during the process.
NOTES
3.13 Summary Planning is a primary and crucial function of management which is followed by other functions such as staffing, directing, organizing and controlling. To plan is to forecast about what is to be done, how it is to be done, when it is to be done and who will do it. Planning is goal oriented, continuous, forward looking and intellectual process. It provides direction, facilitates control, reduces risk, improves morale and aids in coordination. A sound plan should be realistic, flexible and should contribute towards organizational objectives. Planning starts with determination of objectives and development of planning premises. Alternative courses of actions are identified and evaluated. The best course of action is chosen and implemented. Planning is costly and time consuming. Its strength depends upon the accuracy of data and manager’s acumen. Planning may sometimes become redundant because of changing environmental conditions. The plans can be either standing plans or single use plan. The standing plans include strategy, policies, rule and procedures. The single use plans are programs and budget. The planning can be done at the operational level or strategic level. Planning can be classified according to time frame also; they can be short term or long term. Management by objective is a management tool in which measurable goals are set jointly by superior and subordinate and the contribution of the subordinate is measured in terms of his accomplishment of the goals. The goals set in MBO are not thrust on the subordinate by supervisor. The superior subordinate then develop actions plan followed by periodic performance review. MBO is result oriented; it helps in minimizing of wastage and motivates subordinates. It is very time consuming and requires managerial skills on part of the supervisor.
3.13 Key Terms
Planning: It is deciding in advance what to do, how to do it, when to do it, and who will do it.
Planning Premises: They are the basic assumptions regarding the business environment that provide broad frame work within which plans have to be formulated.
Mission: A mission is a statement describing about the organization’s purpose and the reason of its existence.
Objective: The predetermined specific purpose to be achieved by the organization is called objective.
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NOTES
Policies: Policies are basic pre-defined guidelines and directions for decision making.
Procedure: It is a standing plan detailing about the succession of associated acts that are required to perform the task.
Rule: It is a rigid, distinct, clear statement regarding what one needs to do and what one should refrain from in a certain situation, therefore the infringement of rules carries a penalty.
Strategic planning: It is a careful, deliberate taking of decisions which affect or are intended to affect the organization as a whole, as opposed to only parts of it, over long periods of time.
Programs: An action based, result-oriented and unique plan to meet a specific business condition is termed as programs.
Budget: An estimated or forecasted quantifiable statement discussing the expectation is termed as budget.
Management by Objective. It is a technique in which measurable goals are set by joint effort of senior and subordinate and the contribution of each individual is measured in terms of their accomplishment of the goals.
3.14 Questions and Excercises Short- Answer Questions: (1) Discuss the steps involved in planning. (2) What do you understand by planning premises? (3) Discuss the importance of planning. (4) Write short notes on 1.
SWOT analysis
2. Mission
4.
Rules
5. Benefits and limitations of MBO
3. Program
Long Answer type questions: (1) Differentiate between various types of plan. (2) What do you understand by MBO? Explain the process of MBO. (3) Define strategy. Explain the process in formulation of strategy.
3.15 Further Reading and References (1) Harold Koontz and O Donnell, ``Essentials of Management’’, Tata McGraw Hill, New Delhi 1990. (2) V.S.P Rao, V. Harikrishnan, ``Management Text and Cases’’, excel books , fourth edition (3) L.A Allen , ``Management and Organization’’, McGraw Hill Book Company New York,1990. Management Process & Organisational Behaviour : 48
(4) Robert Albanese, ``Management towards Accountability and Performance’’, Richard D. Irwin, Homewood, Illinois ,1990.
Coordinating and Organizing
UNIT 4
COORDINATING AND ORGANISING NOTES
Structure 4.0 Introduction 4.1 Unit objective 4.2 Concept of Coordination 4.3 Difference between Coordination and Cooperation 4.4 Need and Significance of Coordination 4.5 Principles of Coordination 4.6 Approaches and Techniques for Achieving Effective Coordination 4.7 Concept of Organizing 4.8 Steps in Organizing Process 4.9 Span of Control 4.9.1
Determinants of Span of Control
4.9.2
Gracunas Theory of Span of Control
4.10 Authority 4.11 Power 4.12 Difference between Authority and Power 4.13 Delegation of Authority 4.13.1 Principles of Delegation 4.13.2 Problems in Delegation 4.14 Centralization 4.15 Decentralization 4.16 Difference between Centralization and Decentralization 4.17 Factors responsible for Centralization and Decentralization 4.18 Summary 4.19 Key Terms 4.20 Questions and Exercises 4.21 Further Reading and References
4.0 Introduction Coordination is performed at each stage of management. It focuses on integrating and synchronizing the efforts of team members to make sure enterprise goals are attained efficiently and effectively. It is the embryonic force that unifies all other functions of management. After planning the second and crucial function of management is
Management Process & Organisational Behaviour : 49
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NOTES
organizing. It develops the interrelation between the work facilities and employees of the organization. It helps in designing the organization. The function helps in establishing authority and responsibility relationship. It helps in enabling the people work in the most effective manner by developing a structure for it.
4.1 Unit Objective After studying this unit, you should be able to
Understand the concept and importance of coordination.
Explain the principles of coordination.
Understand the concept of organizing.
Describe the steps in organizing.
Explain the concept of span of control.
Explain the Gracunas theory of span of control.
Understand the concept of authority and identify its sources.
Understand the concept of power and identify its sources.
Differentiate between power and authority.
Explain the concept of delegation of authority and its principles.
Identify the obstacles in delegation of authority.
Differentiate between centralization and decentralization.
Understand the factors responsible for centralization and decentralization.
4.2 Concept of Coordination The act of pulling together different parts of organization to unify them and to form a collective group for attaining organization’s predetermined goal is called coordination. In the words of Mooney and Reelay, “Co-ordination is orderly arrangement of group efforts to provide unity of action in the pursuit of common goals”. It aims at establishing harmony between individuals efforts headed for realization of collective goals which is an input to success of management. According to Henry Fayol “To coordinate means is to unite and correlate all activities”. Therefore it is called as the essence of management and is inherent and innate to all other functions of management.
4.3 Difference between Coordination and Cooperation
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Coordination and cooperation are often mixed up, but these two although sounds alike are different things. Cooperation can be defined as combined efforts of people who unite willingly to attain particular objectives. It indicates purely the eagerness of individuals to facilitate each other. Cooperation is a voluntary effort; coordination is a conscious and deliberate effort.
It is the effect of voluntary outlook for support of a collective group. Coor-dination is a much more wide term necessitating not only the willingness to cooperate but to find methods to coordinate. Cooperation is automatic while coordination is to be induced. It inculcates cooperation in itself. In the words of McFarland, “Coordination is a far more inclusive term embracing the idea of cooperation. Cooperation, that is mere willingness of individuals to help each other, cannot serve as a satisfactory substitute for coordination.” Coordination has a wider scope.
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NOTES
4.4 Need and Significance of Coordination (1) Promotes team work: in the absence of coordination, different team member may work in different direction for the achievement of same goal. Coordination helps in channelizing energies, efforts and works of different groups, integrates them and promotes team work. It reduces duplicity and helps in promoting team spirit. (2) Increases efficiency: Coordination improves the effectiveness of operations by decreasing duplicate work and aiming at optimum use of its resources. Synchronization of individual efforts yields a harmonious team work. It is a ingenious force which can produce an output which can be much greater than the sum of individual accomplishments. In fact, coordination is the foremost principle of organisation as it imbibes in itself the principle of organisation in it. In the words of C.I. Barnard , “The quality of coordination is the crucial factor in the survival of an organization.” (3) Interdepartmental harmony: besides increasing the efficiency in the organization it induces harmony in the various departments of the organization. It creates unity of action in diverse section of organization making a close knit. In the words of Mary Parker Follett, “the first test of a business administration should be whether you have a business with all its parts so coordinated, so moving together in their closely knit and adjusting activities, so linking, inter-locking, inter-relating, that they make a working unit that is not a congeries of separate pieces, but a functional whole or integrated unit”. (4) Harmonising conflicting goals : every department in the organization has a distinct goal. The individuals working in the department too have a goal. Coordination helps in integration these varied goals to achieve the organization’s goal in such a way that the fulfilment of one leads to the accomplishment of others. (5) Interdependence : the various departments of a unit cannot work in isolation. Every department has it dependence on the other. For example marketing department requires funds for operation thus has dependence on finance department. The dependence can be pooled, sequential or reciprocal. In a pooled dependence there is a minimal need of coordination as the department are not related to each other. In a sequential interdependence,
Management Process & Organisational Behaviour : 51
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NOTES
the subsequent department depends on the former department. For e.g. dependence on production unit on procurement department. In a reciprocal interdependence the output of one department is the input of the other department and vice versa. In these cases the coordination between departments promotes efficiency in operations. (6) Specialization: specialization promotes efficiency in the department. The specialist team should work in close coordination so that conflict between different specialists can be minimised. (7) Growth in size: the present day organization structure is complex and very large. Communication in such large department is not easy owing to large structure. In such an environment coordination becomes vital for smooth functioning of the organization.
4.5 Principles of Coordination
Figure 4.1: Principles of Coordination (1) Early stage : Coordination should begin early. In fact it should start right with planning. Early coordination yields improvement in the quality of work. (2) Direct personal contact: the best and simple way to build mutual understanding and trust is direct interpersonal contact. It infuses motivation and greater confidence among different departments. (3) Reciprocal relationship: an enterprise consist of various department which have direct or indirect relations with other department existing. No department works as a standalone unit. Therefore all action must be taken with due precision as it affects several other departments directly or indirectly. Management Process & Organisational Behaviour : 52
(4) Continuity: the essence of management is coordination. Therefore managers should never stop making efforts in integrating and establishing coordination among different departments. It should be a pervasive function throughout
the management process. (5) Self coordination: the principle emphasis on the effective communication and coordination of the departments whose action affect each other. In such case the independent department should take due precision in taking action so that the dependent department is affected favourably.
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NOTES
4.6 Approaches and Techniques for Achieving Effective Coordination (1) Communication : Communication facilitates coordination. Acquisition, transmission and processing of information is required for coordination. Use of computers, data processing equipments improves the speed and quality of communication that in turn facilitates coordination. (2) Reducing the need for coordination : The need for coordination can be reduced by reducing interdependence among units through creation of slack resources and independent units. (3) Integration of plans : The plans that are made at the departmental levels should be compiled and integrated into a master plan and various points where coordination is required should be identified and incorporated in plans. (4) Special coordinators : Where the executives do not get time for coordination, he can appoint a specialist for doing the task of coordinator. The duty of the special coordinator should be to facilitate interchange of information and suggest various remedial steps if problems is encountered. (5) Sound leadership : Effective leader can inspire employees to work with full commitment and enthusiasm. He can inspire the workers to work as a team and integrate their efforts in order to achieve organizational goals.
4.7 Concept of Organizing The process of determining authority and relationship structure in an organization is termed as organizing. It establishes formal relationship so that resources can be put to use to achieve the predetermined goals. Authority means the right to make decisions and issue orders and determine the use of resources to achieve goals. The term “responsibility” means the obligation of subordinate to perform duties assigned by their superior. In the words of Louis Allen, “”Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.” In the words of Simon, “Authority may be defined as the power to take decisions which guide the actions of others”. In the words of Koont and O’ Donnell, “Responsibility may be defined as the obligation of a subordinate, to whom duty has been assigned to perform the duty.”
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4.8 Steps in Organizing Process NOTES
Figure 4.2 (1) Identification of activities: the process starts with fixing the objectives to be achieved. For the purpose of achievement of objectives various activities are identified. Unless the work done is identified, goal achievement is not possible. The total work is then divided and distributed among different departments. For the proper identification of various activities grouping is done so that work is not duplicated. It also enables top manager to concentrate more on important issues. (2) Grouping of activities: once the work is divided it should be closely coordinated among different working groups. Groups with similar activity should be aligned together so that double incidence of work could be reduced. This also helps in reducing wastage and smooth flow of work. This activity is generally performed under the supervision of senior managers. (3) Assignment of duties: the duties and responsibilities of every member or employee are distinctly defined. This would lead to the selection of appropriate person for the job. This helps employee to understand precisely what is expected out of him. Consequently, this enhances efficiency.
Check Your Progress 1. Distinguish between co-operation and coordination. 2. What are the principles of coordination.
Management Process & Organisational Behaviour : 54
(4) Delegation of authority: every employee is delegated authority so that work could be done. Mere responsibility without authority will lead no purpose. Authority is the right to assert orders and the power to obtain obedience. The authority provided to an employee should to be in proportion to the responsibility given to him.
4.9 Span of Control Often referred as Span of Management’ or ‘Span of Attention’, the concept of Span of Control owes its existence to British Army General Sir Ian Standish Monteith Hamilton (1853-1947) who introduced and popularized this concept through his book titled “The soul and body of an army.” According to Louis Allen, “Span of control refers to the number of people that a manager can supervise. The simplest way to understand span of control is the number of subordinates a superior can manage. “Span of control”
comprises two terms, ‘span’ and ‘control’. While the term ‘span’ here means the utmost limit of supervising number of men, ‘control’ means legitimate authority to order or direct them. Span of Control in management therefore means the maximum number of people (to be more precise, subordinates or employees) that a manager can efficiently direct, control and supervise. Although there is no consensus on the number of subordinates a supervisor should have.Most management experts hold the opinion that at the top level of management, it should not exceed 1:6 while at the lower level of management, it should not go beyond 1:20. This implies that the senior at the top level can have a maximum of 6 subordinates under his control and that at lower level the manager can have 20. The span of control can be narrow or wide according to the organization preference.
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NOTES
Narrow Span of Control Under a narrow span of management, the number of employees under the manager is reduced. The control of employees under each manager is limited leading to a tall structure. Manager
Subordinate
Employee
Employee
Subordinate
Employee
Employee
Figure 4.3: Narrow span of management From the figure it is evident that each subordinate/ employee holding a position of authority has to supervise at least two employees. The span of control is maximum two employees.
Advantages of Narrow span of control
Effective supervision and control: in a narrow span of management manager is able to give more time per subordinate under his supervision. This enables the manager to provide better direction and supervision to his subordinate. Thus the work is performed under the close supervision and controls which results in effectiveness in the quality of work.
Quick communication: owing to small number the communication is quick and direct which leads to better understanding and coordination.
Disadvantages of Narrow span of control
Limitation of tall structure: A tall structure has its own limitation as there is a
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wide gap between top and bottom level of management.
Increased manpower cost: More numbers of managers are required to manage employees which could have been otherwise done by same managers. Thus hiring puts additional manpower cost.
Limits the potential of subordinates: Narrow span of management allows closer supervision by managers which limits the skill of people and they are reluctant to take initiative which also affects their morale. This in turn results in lower utilization of their potential.
NOTES
Wide Span of Control Under this span of control one senior or manager supervises a large number of subordinates. This gives rise to a flat organizational structure. The span of control and the number of levels bear an inverse relation; narrower the span, the more is the number of levels in an organization. Manager
Subordinate
Employee
Employee
Employee
Subordinate
Employee
Subordinate
Employee
Subordinate
Subordinate
Subordinate
Employee
Figure 4.4: Wide span of management In the above figure each superior/manager holding a position of authority has to supervise at least six employees. The span of control is maximum six employees.
Advantages of Wide span of control All the limitations of narrow span are well taken care in wide span of control, so the limitation of narrow span of control become the advantage of wide span of control.
Reduces man power cost: as the number of subordinate each manager is controlling is fairly large hence there is no need of hiring many managers as in the case of narrow span of control.
Frequent communication: since the chain is short, the communication is more frequent and takes very less time.
Autonomous structure: since the span is wider, there is no close supervision of the manager, hence the subordinates get due autonomy in work. It provides more freedom than the narrow span of control.
Disadvantages of Wide span of control
Management Process & Organisational Behaviour : 56
Limitation of flat structure: A flat structure has its own limitation. It tends to be loose in establishing control and supervision, consequently reducing efficiency.
Not suitable for geographically distributed organization: Organization which are situated in different location cannot employ wide span of control as the manager cannot be in touch with subordinates easily.
4.9.1 Determinants of Span of control (1) Nature of work: the nature of work is a crucial factor in determining the span of control. If the work is complex in nature a narrow span of management is used and if it is simple a wide span of control is used.
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NOTES
(2) Type of technology: if an organization is employing latest and complex technology, narrow span of control will be opted while if it is employing traditional one which is in use for a long time then a wider span of control can be perferred. (3) Ability of manager: if the manager is experienced and competent than he can manage a large number of employees and in that case the span of control can be wide and vice- versa. (4) Capacity of subordinates: professionally qualified and skilled subordinate require less supervision, in this case a wide span of control will be helpful. If the subordinates are novice and lack proper skill a narrow span of control will be preferred. (5) Degree of decentralization: if the organization has more degree of decentralization wider span of control will be there, while the centralization leads to tall structure and calls manager to perform several duties therefore he may opt for narrow span of control. (6) Planning: clarity in planning also determines the span of control. If the planning has clarity the wider will be span of control is advocated, as the supervision tends to decrease with clear laid plans and procedures. (7) Staff assistance: if the staff assisting bears equal competency in tackling situation, than the manager can easily go for wider span of control. (8) Communication technique: if direct contact is to be established using face to face communication the span of control tends to be narrow. If new and electronic methods are used communication can be effective at large therefore wider span of control can be effectively used.
4.9.2 Graicunas Theory of Span of Control Vytautas Andrius Graicunas (1898-1952) was a French management consultant who used mathematical calculation to explain the superior subordinate relationship. According to Graicunas, when the number of subordinates increase arithmetically (let say 1, 2, 3, 4, 5, 6, and so on) the number of relationships which the manager oversees or control also increases more or less geometrically (like 1, 6, 18, 44, 100, 244, etc.). As a result, a manager has a limit to which he can control a number of subordinates, and when this limit surpasses, it becomes difficult for him to control. Graicunas classified the superior subordinate relationship into three categories: (1) Direct Single Relationships: Direct contacts of the superior with subordinates. (2) Cross Relationships: The relationship between subordinates under same supervisor.
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NOTES
(3) Direct Group Relationships: The relationship between subordinates and supervisor in all possible combinations. For e.g: David is a boss and Martin and Sheldon are his subordinates. According to Graicunas, David has to control following three types of relationships, with or among Martin (M) and Sheldon (S):(a) Direct Single Relationships:D with M, and D with S, that forms a total of 2 direct single relationships. (b) Direct Group Relationship:The relationship of D with M in presence of S, and D with S in presence of M, results in 2 direct group relationships. (c) Cross Relationship:M with S, and S with M, a total of 2 cross relationships. Consequently, maximum numbers of relationships which David (G) has to control are: - 2 + 2 + 2 = 6 relationships. This shows the arithmetic and geometric relationship. Given 2 subordinates, the number of relationships, which manager has to control is 6. Thus, with every increase in the number of subordinates, number of relationships to control will increase geometrically for e.g. for 3 it will be 18. Graicunas formula: r = n(2n-1+n-1) No. of subordinates
No. of relationships
2
6
3
18
4
44
5
100
Criticism:
The theory is not all pervasive. It ignores several critical determinants on which span of control depend.
The theory exclusively deals with superior and subordinate relationship.
4.10 Authority
Management Process & Organisational Behaviour : 58
Management is concerned with decision making, guiding and instructing employees of the organization. Authority is the formal right given to the managers to perform or command. The managers can take actions, allocate organizational resources and obtain obedience from subordinates to achieve organizational objectives.
Types of Authority
Line authority- it is the most fundamental authority wherein superior exercises direct command over subordinates. The superior decides and gives orders to subordinates concerning production , marketing etc.
Staff authority- staff personnel have the right to advise line personnel and assist them in their main function. They cannot force obedience from the line staff.
Functional authority-It is the limited form of authority given to staff personnel within a given area of expertise.
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NOTES
Sources of authority
Formal authority theory
According to this theory all authority originates at the top and flow downwards in the formal structure of the organization. The authority flows down through the process of delegation. The ultimate authority in the company lies with the shareholders. Shareholders delegate most of the authority to the Board of Directors. The Board delegate the authority to Chief Executive Officer who in turn delegates it to departmental heads and so on. Every manager has been delegated authority from his or her superior.
Acceptance theory
According to this theory formal authority exists only when subordinates are willing to accept it. The basis of authority is the subordinate’s willingness to be directed.. In the words of Barnard “Formal authority is in effect, nominal authority. It becomes real only when it is accepted.”
Competence theory
According to this theory manager derives authority from his technical competence. Subordinate obey managers and accept his authority because of his seniority, skill, intelligence and social prestige in the organization. Subordinate seeks guidance from the manager because of his expertise.
4.11 Power Power is the ability to influence and is a broader concept than authority. It refers to the ability and capacity of influencing the behaviour and attitude of others so that they do those things that they would not do otherwise. Sources of power French and Raven identified five sources of power. They are as follows
Legitimate Power
It is also known as positional power that a person derives from his or her position in the formal hierarchy of an individual. Job description gives the power to the manager to assign duties and supervise the work of subordinates.
Expert Power Individual derives expert power from possessing expertise, special skills, or
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NOTES
knowledge. Due to his problem solving abilities he may be highly valued by the organizational members. Dependency is the key to power. If other members are dependent on the person to perform a critical task then the person becomes indispensable. His decision and opinion are highly valued and he becomes powerful and influential.
Referent Power
It is derived from possession of certain pleasant personality traits or charisma by the individual. These traits help in cultivating healthy interpersonal relationships. The person is admired, respected and followed.
Coercive Power
It is based on the fear of the negative outcome that the individual perceives if he fails to obey the orders or decision of the person possessing coercive power. It is derived from person’s ability to threaten, punish, demote, dismiss etc.
Reward Power
It arises from the person’s ability to influence others by way of distribution of rewards that others view as valuable. The rewards include monetary incentives, favourable appraisal, preferred work shifts etc.
4.12 Difference Between Authority and Power S.No Basis
Authority
Power
1
Nature
Legitimate and formal right given to the managers
Personal ability to influence others. It may not be legitimate.
2
Flow
It flows from top to bottom by way of delegation.
It can flow in any direction.
3
Presence
Authority is given to a position. Can be shown in organizational chart as subordinate-superior relation.
Cannot be shown in organizational chart.
4.
Level of Higher the level of manager Management higher is the authority he possess.
Does not depend upon the level of management even a subordinate can have power over superior due to his expertise.
4.13 Delegation of Authority Management Process & Organisational Behaviour : 60
Authority is an important input to managerial job. It provides the power to take decision and order subordinates to act on the decisions. Not every decision can be
taken by top management as they have several other crucial job to perform therefore they may assign it among the subordinates so that they can perform their task. The mechanism of distribution of work among the subordinates is called delegation of authority. Delegation of authority implies allocation of authority among subordinate to do a task.
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NOTES
Delegation of authority includes: (a) Transmission of duties to subordinates. (b) Delegating adequate authority to the subordinate for proper discharge of the duties allocated. (c) The subordinate assumes the responsibility. Importance of delegation:
Improves efficiency and employee morale and motivation.
More time to executive for strategic decisions.
Better coordination and cordial relationship.
Develops team spirit
4.13.1 Principles of Delegation (1) Principle of Parity of Authority and Responsibility: the principle implies that authority should always match responsibility. It should be compatible with the duties assigned and the competency of the individual. The authority should be well balanced, it should not be too less that the manager is incapable to perform function neither it should be too much, liable of being misused. (2) Unity of Command: this principle implies that a subordinate should receive order and should report to only one boss delegating the authority. This reduces chances of confusion and conflict. (3) Clarity: all activities to be performed, result expected, methods to be used must be clearly stated. The authority delegated must correspond to the responsibility stated. (4) Principle of Communication: misunderstood responsibility can be dangerous and misused power can be disastrous. Therefore communication must be proper and clear. Also, proper channel must be established so that in case of any issue either of the persons can confront and get it resolved. (5) Principle of Exception Principle: it means that the authority delegated to an employee is with the expectation that he will exercise his own rationale and the decision taken by him will lie within the perview of his authority. Within his authority he is given due autonomy even at the cost of mistakes. The top level management should only interfere if he is not capable to take decisions. Needless meddling should be avoided by top management as well. But under exceptional condition the rule can be avoided. The superior can impede in his subordinate’s work and can at times pull out the delegated duties and authority under special conditions.
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4.13.2 Problems in Delegation On the Part of Delegator (1) Reluctance of the manager to delegate authority: this is one of the most
NOTES
common problems of delegator. The superiors often tend to think that they are more capable of handling things and the job. The approach that ‘I can do it better myself’ by superior acts as hindrance in the process of delegation. For an autocratic manager, delegation is always viewed negatively as it tends to reduce his power. There might be managers who are afraid that the subordinate may outperform a given task reducing his value. This entire attitude acts as an obstacle in delegation. (2) Fear of competition: Many a times manager feels that if he delegates power to his subordinates, the subordinate may perform the task better than him. This fear of competition also acts as a barrier to delegation. (3) Lack of confidence in subordinates: the lack of confidence can be either on the capabilities of the subordinate or the fear of losing control. This in turn acts as an obstacle in efficient delegation. (4) Lack of ability to direct: Not every manager can identify the critical factors of a plan. This problem in turns affects his capabilities to direct and communicate the plan of action to his subordinates. (5) Sceptical nature of the manager: most of the managers have conformist and sceptical approach, which acts as a psychological barrier in delegation. Managers evade delegation of power if he tends to feel every time that there may be negative outcomes of every action even when every plan of action is clearly defined. (6) Tendency to control subordinates: managers are generally desirous to dominate their subordinates working under them. They avoid delegation so that they do not lose their control over their subordinates. They might also be under impression that delegation reveals their managerial deficiencies. Therefore to uphold their senior position and to dominate their subordinates, they are reluctant to delegate. On the Part of Subordinate (1) Excessive dependence on the manager for decisions: most of the subordinates tend to avoid responsibility even if superior is ready to delegate authority. They do it so because they do not wish to face problem and take decisions. If the subordinate lacks confidence even though he has been delegated due power, he may have excessive dependence on the superior.
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(2) Fear of criticism: subordinates often are unwilling to accept authority if they feel they will be criticized for their mistakes. This further scares them if they have a feeling of being criticized in front of their peer group. This occurs when the superior subordinate relationship is not very healthy. (3) Absence of information: a subordinate may evade accepting delegated
power if he believes that he will underperform because he will not get the
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required information on a given project. A subordinate may be unwilling to take job because he feels the information resources are not apt to do the job. (4) Lack of favourable incentives: incentives like recognition of work and rewards or any form of monetary incentive help in boosting the confidence
NOTES
and morale of subordinates. If any such favourable incentive is not present the subordinate would not be willing to take up the delegated power. (5) Lack of self-confidence: at times a subordinate may not be willing to accept delegated power if he is not confident about his capability to take right decision or tackle a situation. He may not avoid taking up situation where his skills are required. Consequently, lack of self-confidence is an obstruction in the process of delegation. (6) Poor superior-subordinate relations: the most difficult aspect of delegation is lack of harmony in the relationship of superior- subordinate relationship. The absence of trust and cordial relationship affect both the party and they do not develop the required confidence to give and take power. (7) Unnecessary interference by superior: once the power is delegated the superior should give the due autonomy to subordinate to perform. He should only provide his assistance if the subordinate asks for it. But most of the times the superiors keep on interfering in the work of his subordinate and do not give them due autonomy. This negatively affects the process of delegation. (8) Fear of being exposed: the subordinates may often confront with inferiority complex. Often they feel that they cannot do an activity and they may not accept delegated power, as they may feel that the management will come to know about their weaknesses. This often results as a barrier in the process of delegation.
4.14 Centralization Centralization means the concentration of power, authority and decision making in limited hands. All the significant decision and actions are taken by top management and the lower management depend on the approval of top management. In the words of Louis Allen, “Centralization” is the systematic and consistent reservation of authority at central points in the organization.” Key elements of centralization are: 1.
Concentration of decision making power at top level.
2.
Dependence of operation at lower level lies at the discretion and directions of the top level.
Merits —
Flexible and faster decision: centralization allows flexibility and adaptability of the organisation to the dynamic business environment. Intermittent situation leading to extra work is taken care by the existing staff. Moreover decisions
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NOTES
are centralised so they can be quickly taken. —
Uniformity in action : centralized administrative control leads to uniformity in action.
—
Facilitates Product growth : enhances quality of work because of standardised procedure which facilitates product growth, better supervision.
Demerits —
Delay in communication : the flow of communication is from and to the central control room which results in unnecessary delays in decision and office work.
—
Centralized power may be abused : the management at the top may use the authority for individual benefits rather than organization good. This results in abuse of power.
—
Inhibits the development of lower managers : lack of participation from the lower level restricts subordinates growth and opportunity to learn. This seriously affects their development.
—
Organization depends upon health and vitality of top management: since every decision of organization is routed through top management the soundness of the top management becomes crucial factor for the survival and growth of the organization.
4.15 Decentralization Decentralization advocates diffusion of power and control at various levels. It aims at delegation of authority at all levels of management. In decentralization the top management retains its authority for taking vital decisions and framing policies for the entire organization and remaining authority is delegated to the middle and lower level of management. According to Allen, “Decentralization refers to the systematic effort to delegate to the lowest level of authority except that which can be controlled and exercised at central points.” Often mixed with delegation, Decentralization and delegation are not the same. Decentralization involves delegation and has wider scope and. In fact when delegation is extended it becomes decentralization.
Check Your Progress 1. What are the various sources of authority and power? 2. Explain Graicunas theory of span of control.
Management Process & Organisational Behaviour : 64
Merits —
To facilitate personal leaders : due autonomy is given to the subordinates which helps in development of their skills and facilitates personal leaders.
—
To handle emergencies : every time subordinates do not have to ask top management for approval. This develops proper management skills and they are prepared enough to handle emergencies.
—
Morale and Motivation: it boosts the morale of the subordinate as they feel management trusts there capability which develops motivation.
Demerits —
Duplication : since there is no centralization of activities; possibility of
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duplication of works is increased. —
Lack of uniformity and control : autonomy given at various level results in different actions, results in lack of uniformity in action. Further establishing control is difficult as diffusion of authority occurs at different levels.
—
NOTES
Lack of coordination : every action varies at different level of management which makes coordination difficult to achieve.
4.16 Difference Between Centralization and Decentralization According to Fayol—”Everything which goes to increase the importance of the subordinate’s role is decentralisation and everything which goes to reduce it is centralisation.” Centrialization and Decentralization
Figure 4.5: centralization and decentralization Basis of comparison
Centralization
Decentralization
Concentration of power
Heavily centred, lies with the top management
Scattered, authority diffused at various levels.
Democratic management Authority lies with top
Employee morale
Economies of scale
Democratic style, lower
management, no
level takes participation in
participation of lower level
management
Lower, as they are treated
High, they are given due
more like machines, only
importance in performance
task are given to perform
of the activities.
It provides advantage of
It does not provide
economies of scale.
economies of scale.
Management Process & Organisational Behaviour : 65
Coordinating and Organizing
4.17 Factors Responsible for Centralization and Decentralization NOTES
(1) Size and complexity of the organization : When the organization is large and decisions to be taken are complex in nature it becomes difficult for top management to handle everything. In such a situation decentralization is desirable. (2) Speed of decision making : Due to hierarchical structure in centralization the decision making is very slow as most of the time is spent on seeking approval. But if the situation or task calls for a quick decision making then decentralization is preferred. (3) Need for coordination : Where high degree of coordination is an essential factor for attainment of objective centralization is appropriate in such cases. (4) Effectiveness of the communications system : If the communication system is adequate coordination becomes easier hence decentralization does not pose problem. But in absence appropriate communication system centralization should be advocated. (5) Attitude of top management : When top management have full faith in employee’s capability and believe in individual freedom and innovation; it is very likely that the organization will have a decentralized structure. (6) Degree of diversification : Decentralization provides flexibility, innovation and creativity. When the company is involved in diverse business it is advisable to have decentralised structure. Every product division will get full autonomy to decide for innovation and creativity. It will also instil competition among various product lines. (7) Dispersal of operations : If the manufacturing operations and target customers are scattered geographically it will become difficult to control through centralization. (8) Nature of functions and task : Line functions like production and marketing are mostly decentralized while staff functions like finance, HR and Research and development are usually centralized. (9) Availability of competent Personnel : If the lower level managers are skilful, mature and experienced to handle a division independently then decentralization can prove to be effective. (10) Clear and precise standing plans : Existence of clear cut objectives , well formulated plans procedures and policies can guide subordinates to make decision independently. Decentralization in such case does not pose any problem.
4.18 Summary Management Process & Organisational Behaviour : 66
Coordination aims at synchronizing the work performed by organisational member
to ensure that the organisation goals are achieved with efficiency. Coordination is a deliberate effort as compared to cooperation which is voluntary. Coordinates promote team work, efficiency and interdepartmental harmony. Coordination should start at early stage and should be a continuous process. Effective communication, integration of plans, appointment of special coordinator, sound leadership and direct personal contact is essential for achieving effective coordination.
Coordinating and Organizing
NOTES
Organising lay down the formal relationship among employees and resources to achieve organisational goals. Steps in organising include identification of activities , grouping of activities , assignment of duties and delegation of authority. Span of control refers to the number of subordinates that work under the supervisor. It can be narrow or wide depending upon nature of work, type of technology, ability of managers and subordinates, degree of decentralisation, clarity in planning and effective communication technique. Authority is the right to make decisions and give instructions. The authority can be line, staff or functional. Power is the ability to influence. The five sources of power are expert power, referent power and reward power, coercive power and legitimate power. Authority can be delegated, while delegating certain principles should be kept in mind such as parity of authority and responsibility, unity of command, exception principles etc. Problems of delegation are due to reluctance on the part of delegator and subordinate. In centralisation, power remains concentrated at top level and in decentralization authority is delegated to lower levels .The appropriate mix of centralization and decentralization depends upon size and complexity of organization, speed of decision making, degree of diversification , dispersal of operations attitude of top management etc.
4.19 Key Terms
Co-ordination: It is an orderly arrangement of group efforts to provide unity of action in the pursuit of common goals.
Organizing: The process of determining authority and relationship structure in an organization is termed as organizing.
Authority: It is the right to make decisions and issue orders and determine the use of resources to achieve goals.
Responsibility: It is the obligation of subordinate to perform duties assigned by their superior.
Span of Control: The maximum number of subordinates or employees that a manager directs, controls and supervises.
Power: It refers to the ability and capacity of influencing the behavior and attitude of others so that they do those things that they would not do otherwise.
Delegation: It implies allocation of authority among subordinate to do a task.
Centralization: All the significant decision and actions are taken by top management and even the lower management depend on the approval of top management.
Decentralization: It is a systematic effort to delegate to the lowest level of authority, only the authority for taking vital decisions and policies is retained by the top management.
Management Process & Organisational Behaviour : 67
Coordinating and Organizing
4.20 Questions and Excercises NOTES
Long answer type questions (1) What do you understand coordination? Explain the need and significance of coordination. (2) Define organising. Describe the steps of organising process? (3) What is span of control? Explain the advantages and disadvantages of narrow span of control. What are the factors that determine span of control? (4) What are the problems in delegation? Explain the principles of delegation. (5) What are the factors that determine the degree of centralization or decentralization? Explain. Short answer type questions (1) What is the difference between power and authority? (2) What are the advantages of centralization? (3) Write a note on types of authority.
4.21 Further Reading and References (1) A.J.Melcher, ``Structure and Process of organization,’’ New Jersey, Prentice Hall, 1976. (2) Harold Koontz and O Donnell, ``Essentials of Management,’’ Tata McGraw Hill, New Delhi 1990. (3) V.S.P Rao, V. Harikrishnan, ``Management Text and Cases,’’ excel books , fourth edition (4) C. B. Gupta, ``Management theory and Practice,’’ Sultan Chand & Sons , eleventh edition.
Management Process & Organisational Behaviour : 68
UNIT 5
DEPARTMENTATION AND STRUCTURAL FORMATS
Departmentation and Structural Formats
NOTES
Structure 5.0 Introduction 5.1 Unit objective 5.2 Steps in Designing Organization Structure 5.3 Factors Effecting Organizational Design 5.4 Features of a Good Organization Structure 5.5 Departmentation 5.6 Basis of Departmentation 5.6.1 Departmentation by Function 5.6.2 Departmentation by Product 5.6.3 Departmentation by Territory 5.6.4 Departmentation by Customer 5.6.5 Departmentation by Process 5.7 Types of Organization Structure 5.7.1
Traditional Concept
5.7.2
Modern Concept
5.8 Summary 5.9 Key Terms 5.10 Questions and Exercises 5.11 Further Reading and References
5.0 Introduction Organization structure draws a network of relationships among duties, responsibilities, authority and lines of communication. It provides a framework for hierarchical arrangement of jobs and position. It enables the organization in coordination and carrying various activities by providing a blueprint for it. The outcome of designing an organization is organization structure which results in determination of various job profiles and hierarchical relationship between them. Organization structure formalizes the behaviour of the organization. People with different personalities may join or leave the organization but it does not significantly affect the ways things are done unless the structure is changed or modified.
5.1 Unit Objective After studying this unit, you should be able to-
Management Process & Organisational Behaviour : 69
Departmentation and Structural Formats
NOTES
Understand the concept of organization structure.
Describe the steps in designing organization.
Identify the factors affecting organization structure.
Understand the features of good organization structure.
Understand departmentation and basis of departmentation.
Explain the various types of organization structure.
5.2 Steps in Designing Organization Structure (1) Activities Analysis: in this step, the management needs to identify all those activities which would lead to the attainment of organization’s goal. The activities should be clearly identified and sequentially listed in the order of performance. The main activities are than classified into various sub-activities and distributed to the individuals for execution purpose. For instance manager may allocate work to sales department. The sales manager then categorize the work into several units like advertising, sales, delivery, so on and appoint managers to perform these works. (2) Decision Analysis: the next step is decisions needed to accomplish objectives. Druker gave four criteria for decision analysis. Degree of futurity : any decision which is for long term involves greater uncertainty, should be taken by top level management. Impact : If the decision affects many department simultaneously than it should be taken with due care and by top management. If it has a stand alone value it can be taken by middle management. Qualitative factor: a crucial decision encompasses several qualitative aspect like code of conduct, culture etc. This type of decision should be taken by top level management. Periodicity: minor decisions are of concurrent nature and can be taken by middle and lower level management. Crucial decisions are unique and have long time span therefore should be taken by top level management. (3) Relational Analysis: every decision taken has a corresponding and sometime interlocking affect. Manager’s decisions affect horizontal as well as vertical chain. The relation analysis is done to understand the contribution a manager is required to do and the supportive assistance that he requires from the other managers. This support can be from top level, lower level or from his fellow colleagues. It understands the relation of a manager with the organization at large. As his individual contribution is in turn part of the larger whole.
Management Process & Organisational Behaviour : 70
5.3 Factors Effecting Organization Design Organizational structures can tend to be either organic or mechanistic which
represents the two opposite ends of the organizational continuum . Organic structure is dynamic one and employs free flow of communication. It is characterised by decentralized decision making and high integration among various departments. Integration is mainly achieved through task force and team building. It has a wider span of control leading to a flat structure. Departmentalization and degree of specialization is low.
Departmentation and Structural Formats
NOTES
Mechanistic structure has a rigid structure and works in relatively stable environment. It is characterized by centralized decision making and high degree of standardization and formalization. Span of control is generally narrow leading to a tall structure. Departmentalization is rigid and specialization is high. Following are various important factors affecting organization design. —
Goals : the very existence of organization is for the achievement of certain predetermined goals. An organization structure should be designed in such a way that it facilitates the achievement of its goal effectively and efficiently.
—
Strategy : the structure of a business organization bears a relationship with the strategy a business adopts. Strategy is a conditional plan developed by top managed with precision keeping in mind SWOT analysis of the business. Strategy also defines the business environment for the operation of organization. With the changes in business environment an organization may shift its structure from centralized pattern to decentralized pattern.
—
Size : large organization will be more decentralized, formalized, greater specialization and will emphasis more on documentation. With increase in sub divisions levels in hierarchy also increase. Thus the size or scale of operation effects the organization.
—
People : the organization structure should reflect the philosophy of the people who are a part of the organization. What value system management wish to inculcate should be taken in due consideration while designing organization structure. Management having faith in theory X will have a mechanistic structure while those having belief in theory Y will have organic structure.
—
Technology : technological advancement has a great impact on the structure of the organization as the improvement in the technology reduces cost and enhances efficiency. Technology comprises employment of various tools and techniques including human know-how that are used for the achievement of goals. For customized goods, small batch production is used, while uniform goods are generally produced in mass scale. In small batch production the organization have more flexible structures while mass production makes organization structure rigid. Organization structure is also affected by the type of business. Some process can work well in organic structure while some are best suited for mechanistic structures.
—
Environment : the atmosphere in which a business operates constitutes its environment. It includes cultural, sub-cultural, political, legal and several other factors that affect business. Either the environment is static or dynamic. In a
Management Process & Organisational Behaviour : 71
Departmentation and Structural Formats
static environment customers’ needs can be well predicted. In this condition the organization tends to have a mechanistic structure. In a dynamic environment the future remains uncertain hence the demand cannot be predicted, the organization would prefer an organic structure.
NOTES
5.4 Features of a Good Organization Structure
Management Process & Organisational Behaviour : 72
—
Unity of Direction : It states that those activities that are grouped together for one common purpose should be managed by the one person. In other words there should be “one plan one head”. This is true for organizational objectives too. All the departments and functions should ultimately be managed by one single person and that is Chief Executive Officer. It provides integration and facilitates in achieving the overall objective of the firm.
—
Specialization : Through division of work and its repetition the benefits of specialization can be achieved. If one person does the same thing over and over again his performance improves in terms of speed, quality and fewer mistakes.
—
Span of control : If the work is complex span of control should be narrow while if the work is simple span of control can be wide. Likewise if the employees are skillful and mature, the span of control can be wide, while if the employees lack ability and will, the span of control can be narrow.
—
Scalar principle : There should be a clear cut chain of command through with orders and instructions are passed from top to bottom and similarly reports and feedback are passed from bottom to top. Employees should be prohibited to circumvent the official chain. They should not try to bypass any manager in the chain of command. Only during emergencies or under special circumstances lateral communication can be permitted.
—
Functional definition : The duties and responsibilities of the job should be clearly defined so as to avoid confusion and duplication of work. Duplication of work results in wastage of efforts, money and time.
—
Unity of command : No subordinate should have two bosses. The subordinate should be assigned duties and receive orders from a single superior. Moreover he should be accountable to only single supervisor. Two bosses for a single subordinate may result in conflicting orders which may frustrate the subordinates.
—
Balance : There should be a proper balance between centralization and decentralization. Those activities that reap benefits in centralized structure should be centralized for e.g. purchase department. While those activities that can be performed efficiently in a decentralized structure should be decentralized.
—
Flexibility : Business environments are dynamic, therefore an organization structure must be flexible adequately to update itself with the changes
whenever needs arise. The structure is designed not only for a time period but for a distant future also. As such continuity must be maintained in the organization structure over the period of time. —
Parity of authority and responsibility : If any person is given responsibility he should be given adequate authority to discharge his duties efficiently. Moreover whenever the authority is delegated to the person he should be held responsible also.
—
Coordination and efficiency : The organization structure should be such that it integrates the efforts of various groups towards achievement of common objectives at minimal possible cost.
Departmentation and Structural Formats
NOTES
5.5 Departmentation The process of grouping of activities into various departments or groups is termed as departmentation. In Departmentation process identification of activities and their simplification is followed by grouping the task into small jobs, formation of work groups . By combining jobs or homogeneous groups into small administrative units departments are formed. According to Koontz and O’Donnell , “A department is a distinct area, division or branch of an enterprise over which a manager has authority for the performance of specified activities.” In the words of Louis Allen, “Departmentation is a means of dividing the large and monolithic functional organisation into smaller flexible administrative units.” Departmentation provides several benefits to the organization like:
Benefits of specialization.
Benefits of better coordination, communication and control.
Benefits in better decision making that enhances efficiency and efficacy.
5.6 Bases of Departmentation There are different ways in which an organization may form deparments, out of which some important methods are listed below: –
Departmentation by Functions
–
Departmentation by Products
–
Departmentation by Territory
–
Departmentation by Customer
–
Departmentation by Process
5.6.1 Departmentation by Functions This is one of the simplest form of departmentation wherein formation of groups of departments is based on the vital functions performed by the department crucial for the survival of the organization. Every important function such as production, finance,
Management Process & Organisational Behaviour : 73
Departmentation and Structural Formats
NOTES
marketing sales etc, are referred as separate departments. The focus is on collectively putting individuals on the basis of resources, skills and action. Each functional units performs varied and different sets of duties and responsibilities. The simple logic in grouping makes it most popular form of departmentation. The functional unit can go for further subdivisions of activity like finance department may divide its activity in accounts department, audit and control and so on. Various coroporations like Modi Xeror, Bata India, Britania follow functional departmentation.
CEO/Managing Director
Production
Personal
Finance
Sales
Marketing
Market Research
After Sale Service
Figure 5.1: Functional Departmentation Advantages 1.
It is considered to be simple, logical and time saving method. It is also a natural form.
2.
It provides with the benefit of specialization.
3.
It maintains power and prestige of major functions and facilitates delegation of authority.
4.
The sub division of various departments provide better training and experience for the managers.
5.
Duplicity is significantly reduced leading to better utilization of available resources.
Disadvantages
Management Process & Organisational Behaviour : 74
1.
The top manager is burdened with the responsibility of profit generation.
2.
This often leads to excessive centralization.
3.
More focus is on narrow specialization rather than improvement of general management skills.
4.
Sometimes coordination across departments is not easy to achieve leading too unnecessary delays.
5.
Sometimes functional managers may tend to build their functional empires. This results in growth in their size which may not justify the cost.
5.6.2 Departmentation by Products Every major product or service is organized into a separate department. The entire
activities associated to every product are grouped individually. To be precise, every department tends to be autonomous, dealing in a specific product. Let say for example, an organisation manufacturing a number of products like detergent, soap, body wash, shaving cream etc. groups all the activities from production to distribution independently for every product. This departmentation can be used if the organization is into production of more than one product or a variety of products and the product line is complex and employs specialised knowledge and skill.
Departmentation and Structural Formats
NOTES
CEO/Managing Director
Product Manager (Soap)
Finance Manager
Production Manager
Product Manager (Detergent)
Personal Manager
Product Manager (Body Wash)
Product Manager (Shaving Cream)
Purchase Manager
Figure 5.2: Product Departmentation Advantages 1.
It gives greater stress and attention to the individual product line which helps in its growth and diversification.
2.
Individual departments on the basis of specialization basis render better customer service.
3.
It enhances co-ordination of various functional activities.
4.
It is especially advantageous when the product line is complex and diverse.
5.
It is flexible and adjustable to the changes in the business environment.
6.
It relieves top management from the burden of profit generation as various product managers can be held accountable for profitability of their products
Disadvantages 1.
Often leads to duplicity of functions as every product department maintains its own facility and function. It leads to high operational cost.
2.
At times centralization of certain activities has benefits which cannot be availed in this case.
3.
It leads to increased difficulty for the top management to control.
4.
It raises man power cost as more managers with general ability are required.
Management Process & Organisational Behaviour : 75
Departmentation and Structural Formats
NOTES
Difference between Product and Functional Departmentation: Functional Departmentation
Product Departmentation
1. Useful for all types of firms.
1. It is only beneficial when the product line is complex and diverse.
2. It divides activities on the basis of different functions.
2. It divides activities on the basis of different product line.
3. It is economical
3. It is costly and uneconomical.
4. Fixation of responsibility and establishing control is not easy.
4. Fixation of responsibility and establishing control is easy
5.6.3 Departmentation by Territory Large organizations are geographically stretched over to different areas. Geographic departmentation or departmentation by territory aims at taking regional advantages. The activities of the organization are assembled into various departments based on the geographical area. The decision regarding pricing, marketability and several others are left on the discretion of the territory managers. The focus is to exploit opportunities of growth available in the local market. For instance, a company divide its area of operation by grouping it into regions or zones like east, west, north, south and so on. This type of departmentation is suitable for large organisations which are geographically spread over to different areas Managing Director/CEO
Branch I
North Zone
East Zone
Branch II
Branch III
West Zone
South Zone
Figure 5.3 : Territorial Departmentation Advantages
Management Process & Organisational Behaviour : 76
1.
The division on the basis of region provides with regional expertise which helps managers to undertake competition better.
2.
Avails with geographical advantage of proximity which reduces costs of operation and administration.
3.
It provides better opportunity to explore new avenues of growth that are suited to particular area. This can result in identification of new products and services that are demanded in a particular region which increases the sales.
Departmentation and Structural Formats
Only territorial departmentation can avail such advantage. 4.
It enables better co-ordination at the regional level.
5.
It provides regional managers with adequate autonomy which help them to train to handle different situation and improves their skills in general management.
6.
NOTES
Renders with numerous economies of localised operation.
Disadvantages 1.
It increases cost significantly.
2.
Geographical segregation makes control and coordination difficult.
3.
Difficulty in communication and duplicity of work.
5.6.4 Departmentation by Customer The department focuses on the philosophy ``customer is king.’’ Under customer departmentation, organization forms its department based on the various requirement of customers to cater their demands, expectation more efficiently and properly. The categorization can be on the basis of different customer groups served, such as industrial consumers, wholesalers, retailers etc. Banking, book publishing and food industry generally employ such depatmentation. CEO/Managing Director
Manager for Industrial good
Marketing
Finance
Manager Wholesaling
Manager Retailing
Personal
Production
Figure 5.4 : Customer Departmention Advantages 1.
Better and specialized customer service.
2.
This type of structure is particularly helpful in creating distribution channels are significantly different for various types of customers.
3.
Better understanding of customer needs.
Disadvantages 1.
It is almost impossible to cater the need of each and every customer.
2.
It is very uneconomical.
3.
Underutilization of man power, as some customer may have varied demands while some may not require much.
Management Process & Organisational Behaviour : 77
Departmentation and Structural Formats
NOTES
5.6.5 Departmentation by Process Departmentation by process employs grouping of the activities into various departments based on the manufacturing processes involved or steps of activities in production. For example, in a Ethanol production, departmentation can be done on the basis of process i.e. steaming, liquefaction, fermentation, distillation etc. CEO/ Managing Director
Steaming
Liquefaction
Fermentation
Distillation
Figure 5.5 : Process Departmentation Advantages 1.
Renders with huge operational effectiveness.
2.
Advantages of specialisation.
3.
Reduces processing time and redundant movements in the process.
4.
Economies in maintenance cost.
Disadvantages 1.
Involves huge outlay of cost.
2.
Problem in coordinating different process departments
5.7 Types of Organization Structure
Check Your Progress 1. What are the advantages and disadvantages of departmentation by process? 2. What are the benefits of departmentation by customer?
The primary task of the organization structure is to allocate task and delegate authority and assign responsibilities to form various jobs and position. The distribution of work and delegation of authority can be done in several ways giving rise to various organization structures. The organization structure can be divided into Traditional or Modern structure.
5.7.1 Traditional Concept This is the oldest method based on functional division and departments. These organizations follow hierarchical structure. Kinds of structure under traditional structures are:
Line structure
Line and staff structure
Line Structure Management Process & Organisational Behaviour : 78
This is the primitive type of organization structure. It follows top down flow of authority often called as scalar or military type. The relationships are in the form of
unbroken vertical levels. The manager had direct authority over the subordinates and the later are directly accountable to their seniors. In an ideal line type structure there is no existence of service or support units. These organizations strictly adhere to the principle of unity of command. In a line structure the manager has a wide span of control. Line structure is generally used in small organization like small accounting offices, industry with continuous process and law firms. CEO can effortlessly give information and direction to subordinates and decisions can be made swiftly.
Departmentation and Structural Formats
NOTES
CEO/ Managing Director
Staff
Staff
Staff
Staff
Staff
Staff
Figure 5.6: Line Structure Advantages 1.
Quick decision: manager has all the authority to take decision without consulting other; this avoids unnecessary delay in decisions.
2.
Simple: the structure is simple, direct and easy to establish. It has ease in operation also.
3.
Control: the structure strictly adheres to the principle of unity of command. The superior –subordinate work in close coordination facilitating efficient supervision and control.
4.
Flow of information: communication is orderly in nature following a vertical line. This makes it easy to track and authentic.
5.
Coordination: the activity of a single unit is managed by one person, which makes coordination easy.
6.
Economical: the span of control is large reducing man power cost, thus making it economical.
Disadvantages 1.
Overloading: managers are too engaged with day to day work. They hardly find time to devote for crucial decision of the firms. It also restricts creativity and innovation.
2.
Domineering approach: the approach is autocratic where subordinates hardly play any role in decision making. They only perform the task as directed. There is hardly any autonomy at the end of subordinates.
3.
Lack of participation and low morale: the subordinates do not play any role in decision making; neither are they asked to participate. This makes their job mundane and they lack motivation.
4.
Rigidity: too much discipline makes it inflexible and rigid for any changes.
Management Process & Organisational Behaviour : 79
Departmentation and Structural Formats
NOTES
Line and Staff Structure It is an adaptation of line organization and it is more difficult and complex than line organization. According to this line and staff structure, specific and supportive functions are linked to the line of command. This is done by recruiting staff supervisors and staff specialists who are linked to the line authority. It actually provides authority to the supervisor and advisory role to the staff. Staff can provide supportive assistance; expert advises to the supervisor but cannot force them. The authority of charge rests with the line manager and the role of staff supervisor is to guide the line manager. Staffs are of two types: a.
Staff Assistants- P.A. to Managing Director, Secretary to Marketing Manager.
b.
Staff Supervisor- Operation Control Manager, Quality Controller, PRO Figure 1 Line-and-Staff Organization
President
Line Authority Staff Authority
Legal Advisor
Vice President Sales
Vice President Production
Production Supervisor
Production Supervisor
Vice President Finance
Department Head
Department Head
Figure 5.7 : line and staff structure Advantages
Check Your Progress 1. What are the advantages and disadvantages of line structure?
Management Process & Organisational Behaviour : 80
1.
Benefits to line of executives : The line executives gets the advise and counselling from the staff thus can focus on several other critical issues.
2.
Specialist advice : At the time of need the line and staff organization provides practical and specialist advice to the line executive. The planning and investigation which is related to different matters can be done by the staff specialist and line officers can concentrate on execution of plans.
3.
Benefit of Specialization : The authority structure divides the organization into parts and functional areas. The division renders benefits of specialization.
4.
Training : The specialist staff renders expert advice which provides training to line officials. Further line executive can focus on decision making which again provides grounds for learning and development.
Disadvantages 1.
Departmentation and Structural Formats
Conflicts between line and staff a.
Grievances of line executive
i.
Interference by staff: staffs do not limit themselves to their advisory role. They tend to instruct the line managers and at times interfere with their work.
ii.
Impractical suggestion: most of the time staff fails to give sound suggestions. They have acquired knowledge through learning which are most of the time not very practical and lack realistic approach
iii.
Staff snatches the credit: whatever goes well the staff takes the credit. They take all the praise and ignore the fact that it was proper execution which led to the success.
iv.
Staffs suffer from superiority complex: line managers are not given due concern while giving suggestions as staff believes their knowledge is above the knowledge of line managers.
b.
Grievances of staff:
i.
No power makes them frustrated: the role of staff is advisory. All the ideas they suggest, however good depend on the line executive for implementation. This makes them feel frustrated as the worth of the idea depends on the choice of line executive.
ii.
Services not properly utilised: until and unless the situation goes worst and the advices of staff are the only resort, they are not consulted. They face resentment because of the superior knowledge.
iii.
Ego problem: the line executives often do not seek advice because of the ego problem. Sometimes they do not implement a plan because of the same reason.
iv
Lack of clear definition of authority: the absence of clarity in relationship results in breach and overlapping of authority which tends to create conflict between the two.
NOTES
5.7.2 Modern Concept Project structure This is a recent concept. This type of structure is used when a large project is to be executed and which is spread for a longer span of time. A semi autonomous project division is set for each project. A project is complex set of activities to be executed in a defined period of time. It comprises of various experts from different field. The activities of team members are coordinated by project manager. This type of structure is typically beneficial if a new and risky venture is to be undertaken and the time frame is limited. Usually these projects involve huge outlay and the success of such project becomes essential for the organization. Management Process & Organisational Behaviour : 81
Departmentation and Structural Formats
Top Level Management
NOTES Project Manager 1
Project Manager 2
Project Manager 3
Project Manager 4
Functional Area 1 Employee
Functional Area 1 Employee
Functional Area 1 Employee
Functional Area 1 Employee
Functional Area 2 Employee
Functional Area 2 Employee
Functional Area 1 Employee
Functional Area 2 Employee
Functional Area 3 Employee
Functional Area 4 Employee
Functional Area 2 Employee
Functional Area 3 Employee
Figure 5.8 : Project Organization Advantages
Very useful and beneficial for new and risky venture. It provides focused approach and expert services.
Specialized skills and knowledge is available to the project.
Better coordination of resources available and flexibility in operations.
Disadvantages
Greater risk as the project manager deals with different experts of different field with different approach and interest.
The projects are not permanent. People feel lost and insecure when projects are abandoned.
Decision making is not quick and the communication of information is also improper due to lack of clarity. Project manager has to obtain cooperation from other department which may involve time.
Serious problems as a consequence of prejudice in interest and varied orientation.
The principle of unity of command is not adhered to leading to conflict between functional managers and project managers
Matrix structure
Management Process & Organisational Behaviour : 82
Matrix structure is a recent concept introduced in USA in 1960. It is a hybrid structure in which two different lines of authority vertical and horizontal are combined together. It combines functional structure and project structure to cope with the requirements of expansion and complexities in a business organization. In a matrix structure, an employee works not only with the teams and projects but also within their
Departmentation and Structural Formats
own department. The Functional Manager exerts authority downwards while the Project Manager’s authority flow horizontal. Consequently, the authority flows downwards and across making it “Matrix Organisation”. Project/Function
NOTES
Production Finance Marketing HR Sales manager Manager Manager Manager Manager
Project Manager A Project Manager B Project Manager C Project Manager D Project Manager E Figure 5.9 : Matrix Structure Advantages 1.
Ensures optimum utilization of resources: in a matrix organization simultaneously many projects are run ensuring optimum utilization of physical and human resources available.
2.
Better decision making: in a matrix organization, decisions are taken by experts who are more capable of taking sound decision.
3.
Manager’s burden decreased: the managers at top can delegate day to day function to project managers and can focus more on strategic decisions.
4.
Improvement of skills: cross functional working gives exposure of various departments to the team members. It brings to their knowledge different skills. Like the marketing people come to know about finance, finance people come to know about HR and so on.
5.
Enhances motivation: the employees work together as a team which motivates them to perform better.
6.
Higher efficiency: it increase efficiency and provides better results at lower cost.
7.
Flexibility: unlike traditional system where flexibility is difficult to bring, a matrix structure is quick and prompt to adopt changes
Disadvantages 1.
Excessive Work Load: the managers and team members apart from their regular work have to attend various meetings and discussions. Besides every team member has other functional responsibilities also which increase work load.
2.
High Operational Cost: the paper work, meetings, report making are more frequent in matrix structure which leads to high operational cost.
Management Process & Organisational Behaviour : 83
Departmentation and Structural Formats
NOTES
3.
Nonexistence of Unity of Command: since every subordinate takes order from two supervisor the principle of unity of command is nonexistent in a matrix organization.
4.
Power Conflict: there maybe conflict of power between the project manager and the functional manager. Both give preference to their own interest which results in conflict.
5.
Low Morale: Because of excessive work burden, the morale of the employees in matrix structure is very low.
6.
Complexity: undoubtedly the hybrid structure such as matrix involves plenty of complexities and is most difficult structure.
7.
Fixation of Responsibility: in case if anything goes wrong with the project fixation of responsibility cannot be done. The project manager may hold functional manager liable for this and so on.
Network structure These are often termed as virtual organizations. In this structure the main firm outsources most of its functions to other organizations and coordinates their activities. With the development of business environment, the market place has expanded and the boundaries have been decreasing. It lays emphasis on decentralization of work and gaining specialization and economies. These organizations do not have any boundaries to perform their functions. Digital technology and specialized employees are the core strength of this structure. However it lacks any formal hierarchy line. The critical management functions are deciding on what to outsource and whom to outsource. Distribution Firm (Korea)
Logisitc Firm (Japan)
Core Company (India)
Design Company (USA)
Technology (China)
Figure 5.10: Virtual Organization Advantages
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1.
Low operational cost: the outsourcing is done keeping in mind from where task can be done at cheapest and best possible way. This reduces the operational cost.
2.
No physical boundary: work can be done from any part of the world.
There is no restriction from where the work will be done. 3.
Specialization: task is allocated to those who have an edge in doing the things. Specialization is one of the best advantage availed from this structure.
4.
Technological advancement: one need not to spend huge amount in getting the new technology at domestic land. It can get the advantage by outsourcing work from the places of new technology.
Departmentation and Structural Formats
NOTES
Disadvantages 1.
Too much dependence on technology: the communication is digital which means you have to employ latest gadgets. If the technology is not proper you cannot efficiently employ network structure.
2.
No direct control: excessive decentralization limits control.
3.
Increase work stress: FAO Corporate Document Repository states that virtual structure makes no clear demarcation on responsibility and jurisdiction within the company. Employees and managers often fail to identify themselves with conventionally defined job roles which sometimes results in work-related stress. On one hand manager fail to exercise authority and on the other hand employees fail to get proper guidance and direction which increases stress.
5.8 Summary Organization structure describes the relationship between work and people and among people indicating the flow of work, authority and responsibility. The designing of organization structure involves; activities analysis, decision analysis and relational analysis. Organizational structure can be mechanistic or organic depending upon goals, strategy, technology, size, employees and external environment of the organization. A good organization structure should have unity of direction and command, parity of authority and responsibility, balance between centralization and decentralization, division of work, flexibility etc. Organization is divided into small administrative units known as departmentation. The departmentation can be done on the basis of certain key factors like function, process, product, territory, customer etc. The traditional organization structure were line and line and staff structure. The disadvantage of the line and staff structure is that it gives rise to line and staff conflict. The three modern alternatives of organization structure are project, matrix and network structure.
5.9 Key Terms
Organization structure: It provides a framework for hierarchical arrangement and draws a network of relationships among duties, responsibilities and authority and lines of communication.
Organic structure: This organization structure has a dynamic structure characterised by decentralized decision making, free flow of communication and
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Departmentation and Structural Formats
high integration among various departments that is achieved through task force and team building.
Mechanistic structure: This organization structure has a rigid structure characterized by centralized decision making and high degree of standardization and formalization.
Departmentation :It is the process of dividing the large enterprise into smaller flexible administrative units over which a manager has authority for the performance of specified activities.
NOTES
5.10 Questions and Excercises Long type Questions (1) Define organization structure. What are the various steps in designing organization structure? (2) What are the essential features of a sound organizational structure? (3) On what factors do the design of organization structure depends? (4) What is matrix organization? Explain its advantages and disadvantages. How is it different from project structure? Short Answer type (1) Throw light on line and staff conflict. (2) Differentiate between functional and product departmentation (3) Differentiate between mechanistic and organic structure (4) Write short notes on
Network structure
Advantages of departmentation on the basis of customer
5.11 Further Reading and References (1) S. P. Robbins, ``Organization Theory,’’ N.J. Prentice Hall, 1983 (2) A.J.Melcher, ``Structure and Process of organization,’’ New Jersey, Prentice Hall, 1976. (3) Harold Koontz and O Donnell, ``Essentials of Management,’’ Tata McGraw Hill, New Delhi 1990. (4) P. F. Drucker, ``Management,’’ New Delhi, Allied publisher, 1974.
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Directing and Controlling
UNIT 6
DIRECTING AND CONTROLLING
Structure
NOTES
6.0 Introduction 6.1 Unit objectives 6.2 Concept of Directing 6.3 Significance of Directing 6.4 Principles of Directing 6.5 Concept of Controlling 6.6 Significance of Controlling 6.7 Limitation of Controlling 6.8 Controlling Process 6.9 Essentials of Effective Control 6.10 Techniques of Control 6.10.1 Supervision 6.10.2 Analysis and Interpretation of Financial Statements 6.10.3 Budgetary Control 6.10.4 Breakeven Analysis 6.10.5 Return on Investment 6.10.6 Management by Objectives 6.10.7 PERT /CPM Techniques 6.10.8 Management Information System 6.10.9 Management Audit 6.10.10 Human Resource Accounting 6.10.11 Responsibility Accounting 6.11 Human Resistance to Control 6.12 Overcoming Resistance to Control 6.13 Summary 6.14 Key Terms 6.15 Questions and Exercises 6.16 Further Reading and References
6.0 Introduction Once planning is complete, organisation structure is designed and the organization is manned through staffing the next steps that comes is directing. Directing is a human relation function in which the manager instructs, guide, motivates, leads and supervises
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NOTES
the employee. In this process the plans are put to action. Once the employee starts performing the next function of the management is to control. It aims to see that employee is working according to the planned activities or not. The actual performance is appraised and it is verified that everything occurs in conformity with the plan. If there are deviations from the targets set, corrective actions are taken. The basic purpose of control is to make sure that results are achieved according to plan.
6.1 Unit Objective After studying this unit, you should be able to
Understand the concept and importance of directing.
Explain the principles of directing.
Understand the concept and importance of control.
Describe the process of control.
Identify essentials elements that make control effective.
Explain the various techniques of control.
Understand the limitation of controls.
Identify the reasons for human resistance to control.
Understand various ways to overcome resistance.
6.2 Concept of Directing Directing in management is a function which aims to instruct, guide, supervise and inspire people working in the organisation so that the objectives can be achieved. It is the process of making people understand what to do and observing that it is done in the most effective way. According to Haimann, “Directing consists of process or technique by which instruction can be issued and operations can be carried out as originally planned.” In the words of Earnest Dale, “Directing is what has to be done and in what manner through dictating the procedures and policies for accomplishing performance standards”. Therefore directing is said to be the core process of management and, is the vital point about which achievement of goals take place. The directing function thus includes the following elements
Leadership –providing them guidance, support and help to move towards their goal.
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Supervising-overseeing the progress of work performed by subordinate and ensuring compliance with standards and plans laid for them.
Motivating- Inspiring subordinates to give their level best while performing their duties.
Communication- giving directions by issuing orders and instructions.
Directing and Controlling
6.3 Significance of Directing 1.
Initiates Action : Managerial functions such as planning, organizing and staffing do not make any sense if they are not put to action and implemented successfully. Directing function starts the activities of the work performance of subordinates. In this function the action occur, subordinates realize and understand the jobs they are expected to perform and they act according to the instructions given to them. The implementation can only take place when the actual works initiates and it is there the benefits of direction come to play.
2.
Motivates People : It helps in accomplishment of the goals by motivating the subordinates to improve their performances. The manager acts as a guide and motivates subordinates. It enhances confidence of the subordinates.
3.
Ensures coordination : It unites and integrates the efforts. In the course of direction, the superiors guide, motivate and coach the subordinates to work which calls for coordination of the efforts of every individual and of every department for the achievements of organizational goals. This can be achieved with the help of convincing leadership and effective communication. Coordination brings efficacy in the organization.
4.
Facilitates change: Every organization faces resistance in adopting change. Directing function helps in adjusting to changes in environment, be it internal or external. The manager’s effective communication helps in adjusting with the changes. The manager should be able to properly communicate the significance of change to the subordinates. This will help the employee in understanding and adopting change resulting in smooth functioning of the organization.
5.
Maintains stability and growth: Sensible combination of inspiring leadership, efficient communication, disciplined supervision and motivation can lead to stability and growth of the organization. These all are basic elements of directing, therefore it helps in the progress of the concern.
NOTES
6.4 Principles of Directing 1.
Unity of command : the principle was propounded by Henry Fayol, who emphasized that a supervisor should be reporting to only one superior. He should receive orders from only one boss and in turn should be accountable to only one boss. This helps in responsibility fixation and brings clarity in the functions of the individual.
2.
Harmony of objective : every individual joining the organization may have his own personal goals or purpose which may differ from what the organization has. It is the role of supervisor to align the goals of subordinates with that of the organization. The superior must explain the need and importance of achieving organizational goals to him so that he feels satisfied and understands the importance
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NOTES
of achieving organizational goal. The harmony of objectives is very important for maintaining the performance of employee or else he will not be able to deliver as he will not feel his association or betterment with organization goals. 3.
Direct supervision : directing becomes efficient if there is direct personal contact of supervisor and subordinate. It removes doubt, enhances confidence and morale of the subordinates. Thus, wherever possible direct supervision should be employed.
4.
Managerial communication and comprehension : effective communication is the key to successful direction. The system of communication employed should be such that a two way channel can be established. It is also important that the employee understand and comprehend what is expected. This will remove confusion and fewer queries.
5.
Maximum individual contribution : the objectives of organization can be achieved at the level when each and every individual in the organization makes utmost contribution towards its achievement. Therefore, the managers should make an effort to bring forth maximum feasible input from each subordinate.
6.
Strategic use of informal communication : the various informal groups present should be utilised in such a way so that it strengthen formal relationships. The quality of effectiveness of direction improves with better relations.
7.
Effective leadership : an effective leader inspires the followers to perform their activities without any dissatisfaction. Managers should presume the role of effective leaders to ensure proper direction. They should guide the subordinates not only professionally but in their personal problems too. It establishes better relations.
8.
Appropriate motivation technique : the direction techniques employed by the manager should be such that it ensures efficiency of direction. The techniques used should be appropriate according to the need of the subordinates. It can be financial rewards , praise, promotion or job enrichment. It should be apt according to the situation.
9.
Principle of follow up : directing is a never ending process. It does not end after the superior issues orders and instructions. In fact the manager has to keep a track on the activities of the subordinates such as their performance, the problems they are confronting and so on. In the light of his observation he can make changes in his orders.
6.5 Concept of Controlling
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Controlling is the last step in management process. It is process by which management comes to know that how satisfactory work has been accomplished. It is evaluation of the work done against the set standards. It tends to find out deviations if any and employs for corrective actions. Controlling is a regulatory process of ensuring that the activities are in line to give the desired results. Controlling and planning are often referred as inter related functions as what is decided in planning is evaluated in
controlling process.
Directing and Controlling
Henri Fayol is attributed with the credit of pioneering the definitions of control for management science. “. In the words of Henry Fayol, (this is often called as the first definition of controlling), “Management control can be defined as a systematic effort by business management to compare performance to predetermined standards and address deficiencies.” It can also be defined as “that function of the system that adjusts
NOTES
operations as needed to achieve the plan, or to maintain variations from system objectives within allowable limits.” In the words of Terry and Franklin “Controlling is determining what is being accomplished - that is, evaluating performance and, if necessary, applying corrective measures so that performance takes place according to plans.’’ Characteristics of Controlling
Control is not a onetime phenomenon instead it is a continuous process.
Control is one of the crucial management processes.
Control is all pervasive. It is entrenched in every stage of organizational hierarchy.
Control is progressive. It tends to look forward.
Control is strongly correlated with planning.
Control is a mechanism for accomplishment of organizational functions.
6.6 Significance of Controlling 1.
Achievements of goals: with regular control, one can easily trace out what has to be done and what is being done. If the actual work is not being done on set standards, corrective measures can be taken which helps in the achievements of goals.
2.
Measurement of progress: it acts as a measure of progress. The time, expense and resources involved in doing a particular task are estimated before the work begins. The actual work done is then compared with these standards. This helps in knowing to what extent the work has been done.
3.
Uncover deviations and take corrective actions : it helps to compare and find out the deviations of the actual and standard. The deviations are then corrected to bring the performance of the enterprise as expected.
4.
Revision of plans: the business environment is no more a static phenomena. It is ever changing. Therefore the need to revise the plans as per the changing needs of the business should be given due consideration. Business plans should be carefully revised for effective control and this is an essential step of controlling process.
5.
Promotes coordination : coordination is an important function of management and the coordinated function play a crucial role in business activities and work. It connects the workers and their activities and encourages them with team spirit to
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NOTES
move towards the common goal.Control acts as a middleman between the workers and management to make available the necessary information and input to the workers. 6.
Psychological pressure : an effective control system motivates and inspires employees to give better performance. It acts as an inspiration to them, especially when they are aware of the fact that there performance is being monitored and their rewards are linked to better level of work performance.
7.
Brings order and discipline : control function keep a check on the mistakes of the subordinate which usually happen due to laxity and negligence. Due to controlling process subordinates are aware that they are being monitored and hence they become cautious while performing their duties. They tend to correct mistakes before they become serious.
6.7 Limitation of Controlling 1.
External factors: an organization can control all internal factors, but there are factors which are external to the organization such as government policy, tax structure, input rates and so on. These factors cannot be controlled by the organization.
2.
Standards of qualitative nature: standards that are quantitative in nature can be used to measure the efficiency and can act as a controlling device. But when these standards are qualitative in nature, they are not easy to understand and compare. Some measures like morale, motivation level cannot be expressed monetarily, thus controlling becomes difficult.
3.
Expensive process: the entire process of controlling is very expensive. It requires continuous engagement of managers which increases the need of manpower. The setting of benchmarks is not an easy affair; it requires a lot of research. Further, at every step finding deviation consumes much time, and corrective actions, further involve much time and cost .
6.8 Controlling process
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Figure 6.1: Controlling Process
A. Setting of standards Establishing the criterion for judging the actual result is termed as standards. These standards are the benchmark against which the actual performances are compared. The standard setting should be realistic. It should be clearly defined. Standards can be qualitative or quantitative standards. Qualitative standards are nonmeasurable or intangible like managers’ decision making skill and human skills, attitude of workers etc. Quantitative standards are measurable like time standard, cost standard, income standard, output standard, quality standards, profit, etc. Controlling turns out to be simple through establishment of these standards. The standards form the basis for controlling.
Directing and Controlling
NOTES
Quantitative Standards
Time standards : It states the duration of time in which a particular activity or a task should be performed for e.g. a pilot has to make a trip to the destination in a predetermined time duration. Time standard can also be expressed in units produced per hour, pages typed per hour etc.
Cost standards : it expresses the standard for input in terms of financial expenditure. It includes the expenses incurred in performing a particular task. It includes material cost per unit, labour cost, overhead cost per hour etc. Cost standards specify the limits for expenditure.
Productivity standards : productivity standards set benchmark for output input ratio. It is a measure of efficiency and can be expressed as output in units per man hour or service to customers per hour.
Revenue standards : they set standards for value the organization derives from its sales. They can take the following form
Income standards: this would include setting sales generated per department, sales target per person etc.
ROI : Return on Investment is a comprehensive way of knowing the performance of the business. It measures how efficiently capital employed is being used for generating returns.
Quality Standards : standards for quality can be based on strength, hardness, dimension, finish, chemical composition etc. which ensure the customer satisfaction. Quality standards can set tolerance limit within which the quality can be acceptable.
Qualitative Standards There are certain intangible items that cannot be quantified such as goodwill, employee morale etc. Though qualitative factors pose some difficulty in specifying the standards as they cannot be easily measured; psychological tests, survey and sampling techniques are sometimes used to specify limits or benchmark for them. Important things to be considered while setting standards (a) The standards should be precise and clear.
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NOTES
(b) The standards should be objective and practical. It should be within the reach of the enterprise and not something hypothetical. (c) The standards should essentially be flexible and should be able to adopt the changes. (d) The standards should have the main focus on attainment of goals and should be revised periodically according to the need of the organization.
B. Measuring Performance The subsequent major step in controlling is to measure and monitor the performance. Finding out variation becomes simple by measuring the real performance. The levels of performance may sometimes be easy to measure or sometimes difficult. Measurement of tangible standards is easy as it can be expressed in units, cost, money terms, etc. The performance can also be measured through mechanical devices. These mechanical devices help in quality check. Other way is through personal observation of the manager. Statistical reports can also be employed to measure performance. It include the use of bar charts, graphs etc. Qualitative measurement becomes difficult when performance of manager has to be measured. Performance of a manager cannot be measured in quantities. It can be measured only by their level of motivation and attitude towards work. This can be done by viewing reports of the organization; superior-subordinate interaction can also be used for measurement of their attitude.
C. Comparing Standards and Performance In this step a manager makes comparison with the actual work done against what was determined. It is done to check whether the work is going in the desired direction or not. Deviations, if any, are traced and accordingly corrective measures are to be decided. The gap between actual performance and the planned targets is defined as deviation. The manager first identifies the amount and direction of deviation and then tries to find the reason for it. Finding the direction of deviation includes tracing out whether the deviation is positive or negative and to what extent it is in line with the actual performance. The step lays major emphasis on finding out deviations which are significant for business. Slight deviations should not be given much importance. Major deviations which include replacement of equipments, quality of input, etc. should be given due importance. ``If a manager controls everything, he ends up controlling nothing.” That’s why only major deviations are laid more importance. The various techniques that are used are: Financial and Accounting techniques are ratio analysis, return on investment, break even sales, financial statements, audit, human resource accounting responsibility accounting. Other techniques are MBO, budgetary control, PERT/ CPM and MIS. Deviations can also be of two types:
Management Process & Organisational Behaviour : 94
a.
Positive deviation: when the performance is better than the standards the deviations are termed as positive deviations.
b.
Negative deviation: when the actual result shows a variance from the standard which is not favourable. For example the actual expenditure can be more
than estimated cost; the actual time taken is more than the standard time and so on. The deviation needs to be thoroughly evaluated before making any correction. For e.g.
Whether the deviation occurred due to impractical or hypothetical standards?
Whether the quality of material was up to mark?
Whether the equipment and tools being used are of standard quality?
Whether the labour cost increased due to increase in wages or inefficiency on the part of labour?
Directing and Controlling
NOTES
D. Taking Corrective Actions Once the deviations are found out the corrective steps are taken. It is a managerial action wherein, efforts are made to bring back the activities to the desired level. It is done to improve the performance of the organization. Before taking any corrective actions, the manager however should make sure that the standards set were reasonable and practical. For taking corrective actions following guidelines must be kept in mind: a.
Finding out the root cause of the problem.
b.
Taking prompt actions without much delay.
c.
Periodic revision and the impact of the dynamic environment in the revision of standards.
6.9 Essentials of Effective Control 1.
Focus on objective: the control system should be such that the central aim is always to achieve the objectives. It should strictly concentrate and should be tailored in such a way that they lead to the achievements of organizational goal.
2.
Simple: the control technique employed should be simple and easy to use. It should refrain itself from any form of complexity so that all those using the control system should comprehend it clearly and completely. Besides one must set up standards that are understood by the employees. Simplicity is the essence of success.
3.
Prompt: promptness implies in quickly tracing the deviation. If the deviations are traced at very latter stage control cannot yield results. Therefore, the process of tracing deviations should be quick, so that management can also take timely actions.
4.
Flexible: the control system should not be very rigid. It should be flexible and should adopt changes in programs, policies, plans, environments, etc. A system which cannot cope with changes is bound to fail. Hence a flexible control system is must.
5.
Economical: an economical control system implies that the benefits should
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Directing and Controlling
be more than the cost involved in it. In other words the cost incurred should always be less than the benefits derived from the use of controlling techniques. 6.
Forward looking: a forward-looking control system is must for the achievements of goals of the enterprise. It should be able to predict the expected deviations. So that the deviations are traced before they actually occur. It should also be able to provide corrective measure to rectify these future deviations.
7.
Reasonable: the practical aspect in setting standards and employing technique should always been given due concern. The reasonability of the standards is a very crucial element as the entire exercise depends on it. The controls should be rational and logical.
8.
Objectivity: it implies verifiable and quantifiable standards. They should not be mere assumptions, instead should be backed by facts. Also quantitative standards remove the scope of biasness, giving full scope of accuracy and objectivity.
9.
Accountability: an effective control system should also indicate that who should be held responsible for negative deviations or failure.
NOTES
10. Acceptable: the control system should be such that the subordinates understand the need and appropriateness of the system. The controls should be accepted by the people on whom the controls are applied.
6.10 Techniques of Control 1. Direct Supervision and Observation This is considered to be the oldest techniques and is most suitable for small business organization. The technique involves direct involvement of supervisor as he himself keeps a close check on the employees and their work. By this, the comparison may not be required, as most of the problems are solved during supervision. The supervisor gets the better understanding of the worker as he gets first hand information.
2. Analysis and Interpretation of Financial Statements: Check Your Progress 1. What are the various quantitative and qualitative standards? 2. What are the various characteristics and limitations of controlling?
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Every business organizations prepare final accounts. Profit and loss account gives details of the income and expenses for a specified period and Balance Sheet shows the financial position of the organization on a specified date. Financial data can act as a tool to control the organization. Various analysis tools like common size statement, comparative statement help in comparison of the current year with the previous year’s figures. These figures can also be compared with the industry benchmarks and similar firms. Ratio analysis is used to analyse the financial statements. Absolute figures are unfit for comparison. Ratios express the relationship of one business variable with other business variable in form of mathematical expression. The ratios can be divided into four categories, they are
Liquidity Ratios: It aims to identify that whether the firm has enough working
capital to run day to day operations. Liquidity ratios are the indicators of firm’s ability to pay short term obligation when they become due. Some of the important ratios in this category are current ratio, quick ratio and super quick ratio.
Solvency Ratios: These ratio helps in ascertaining long term solvency of the firm and tries to find out whether the firm has adequate resources to meet its long term financial obligations for e.g. debt equity ratio , Capital gearing ratio etc.
Turnover ratios: it indicates the efficiency with which the assets of the firm are utilised for e.g. fixed asset turnover ratio, inventory turnover ratio etc.
Profitability ratios: It indicates the financial health of the firm in terms of its earning capacity of the business. It also throws light on the adequacy of the control over expenses for e.g. net profit ratio, gross profit ratio, return on capital employed, operating expense ratios etc.
Directing and Controlling
NOTES
The disadvantage of this technique is that ratios can be used for window dressing. If the account statements are misleading ratios too can be misleading.
3. Budgetary Control Budgetary control is often referred as traditional control technique. A budget is an estimation done for the purpose of planning and controlling. According J.A. Scott “ It is the system of management control and accounting in which all operations are forecasted and so far as possible planned ahead , and the actual results are compared with the forecasted and planned ones”. Budgetary control is a technique of establishing control with the help of budgets. In fact budgets are most important constituents of financial control .Budget is a statement of planned events expressed in quantitative and monetary terms. Budgetary control can be done for every facet of a business ranging from income, production, and so on. The various budgets are cash budget, sales budget production budget, purchase budget, master budget etc. A budget committee is established for budgetary control. Budgetary control has several advantages likes: a.
It makes planning precise and realistic.
b.
It saves time and cost and establishes coordination among various departments.
c.
It helps in optimum utilization of resources.
d.
It provides useful data that can be employed for filling tenders and quotation.
e.
It prevents buck passing as it establishes responsibility.
f.
It facilitates management by exception as it enables the management to consider only those items that do not go according to the budget.
The budgetary control technique suffers from following disadvantages: a.
The efficiency of budgetary technique depends on how well the budgets have been prepared. The estimation, prediction and the data expressed in budget requires lot of precision failing to which the technique loses its
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NOTES
significance. b.
It restricts creativity and innovation and people are directed to work according to the budgeted guidelines.
c.
Creating budget is a time taking process and an exhaustive one.
d.
The management should understand that the technique is tool used for effective management, a means to an end, not an end in itself.
4. Break-even Analysis BEP (break-even point) is a state at which the cost is equivalent to sales (the state of no profit and no loss). The Break-even analysis is used as a control device. It helps to find out the company’s performance and the minimum level of sales the company needs to attain in order to avoid loss. If the sales are less than the minimum level the company may not be able to recover cost. Subsequently the company can employ collaborative steps to progress its performance in the given line. BEP = Fixed Cost/Sale price per unit-Variable cost per unit Advantages (a) Helps in identifying minimum requirement of sales at which cost can be recovered. Helps in analyzing the cost behavior with sales and its effect on profit, thus profit can be estimated at various levels. (b) The breaking up of cost component into fixed and variable cost helps management to control cost. Disadvantages (a) Classification of cost is not possible every time. (b) It assumes that cost and revenue function have a linear relationship which may not hold true every time. The economies of scale may result in disproportionate varying of cost. (c) It assumes that technology, factor prices and product mix are fixed where as in reality this may not hold true.
5. Return on Investment This is also a financial tool. Investment consists of net working capital and fixed asset employed in the business. The income or the profit generated is the premium that the entrepreneur gets for his risk taking. Higher the ROI better is the performance of the business and vice versa. The comparison of current year ROI with that of previous years’ performance helps to know the progress of the business. It also facilitates interfirm comparisons. The area needing rectification can also be traced. Advantages (a) It focuses on most important aspect of business and that is profit. Management Process & Organisational Behaviour : 98
(b) The departmental ROI can be established which help in better control and facilitates decentralization. (c) It focuses on the efficiency in use of capital.
Disadvantages
Directing and Controlling
(a) With fluctuation in prices, the ROI becomes difficult to estimate. (b) The long term investment aspect is ignored. It is a short term phenomena.
6. Management by Objective (MBO)
NOTES
MBO is a planning and controlling device and it can only be effective if it has following features: (a) The goals are fixed with the joint effort of the subordinates and supervisor. (b) The performance of employee is periodically evaluated and regular feedback for improvement is provided to the employee. (c) Once the task is accomplished, due reward is given to the employee. The success of this measure depends on the coordinated efforts of superior and subordinates. Elements of biasness, lack of trust between superior-subordinate relationships can significantly affect the working of the technique.
7. PERT & CPM Techniques Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) techniques are used to minimize cost and time. Any program has a series of activities and sub-activities involved in it. The success of any activity depends upon doing the work in a specified sequence and time. The whole project is divided into identifiable activities and a logical sequence between these activities is established. Time estimates are prepared for every activity and the longest path that is critical path is identified and analyzed. The techniques emphasis on identifying the critical activities and giving them priority. Critical activities are crucial activities which have to be completed on time so that the project is not delayed. The techniques divide the job into various subactivities. from which, the critical activities are identified and significant importance is attached to their accomplishment. Therefore, the time and cost of the entire project can be minimised. Advantages of PERT/CPM (a) It significantly reduces cost, time and money. (b) The identification of critical activities leads to optimum utilization of resources. (c) Helps in proactive management, as managers are made aware that delay in one operation may lead to delay in other business operation. (d) Graphical presentation of task ensures proper understanding and communication. Disadvantages (a) Exact estimation of time and cost is a difficult measure. Unrealistic estimation leads to failure of entire technique. (b) The technique is a time taking exercise and expensive. The process becomes expensive and complex when the data is relatively large
8. Management Information System (MIS) Accurate information is must for proper control. Management requires information
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NOTES
about the entire working of the organization which includes both internal and external working. Information is gathered so that problems could be identified and solution could be provided. The task of collecting data and processing is done by MIS. It can be done manually or computerized. The managers can delegate subordinates with the help of MIS without losing control.
9. Management Audit It is a process of evaluating performance of entire management. It reviews and examines the entire management process and every function of management i.e planning, organizing etc. Audit is done to find out the efficiency of the management. Therefore, the company’s plans, objectives, policies, procedures, and all related aspect forming a part of management are examined very vigilantly. This is generally done by a team of experts. Data from different sources is collected and is analyzed. The findings detail about managerial performance and efficiency. Advantages (a) It is an independent process, which means it has a very less element of biasness or favouritism. It reflects true picture of business organization. (b) Auditors usually are well qualified professional, there advises and suggestions can benefit the overall organization. Disadvantages (a) It requires well qualified professional which are not easily available. (b) There is absence of well defined set of principle or procedures for auditing which make audit challenging and difficult.
10. Human Resource Accounting While most control technique focus on the concept of cost, profits and several other financial aspect, human resource accounting focuses on the most important aspect, recognizing the value of human resource. In the words of Davidson and Weil, “It is the dynamics of the organisation. It is the assessment of condition of human resources within an organisation and the measurement of the changes in the condition through time.” It is the accounting done for the people of the organization. It measure the cost invested in acquiring and developing human resource in an enterprise. Advantages
It helps in the determination of the cost of labour turnover.
It helps in the development of human resources.
It helps in finding the return on investment on human resources.
It helps in enhancing the efficiency of employees.
Disadvantages
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It becomes complicated in finding the number of years an employee will work or remain associated with the firm.
It becomes a complex phenomenon to calculate the degree to which an
employee will be able to make use of the knowledge acquired.
It is complicated to fix a rate of amortization.
It is not easy to estimate how much an individual contributes in an organization.
11. Responsibility Accounting
Directing and Controlling
NOTES
Under responsibility accounting the data relating to the responsibilities of individual managers are collected, summarized, and reported. It evaluates and reports expenses, costs, revenues, and other details by the department or unit of responsibility. In this type of accounting organizational management is classified as responsibility centres. There are four types of responsibility centres:
Cost centre- is used for the purpose of measuring financial performance by measuring planned expense with actual expenses.
Profit centre- it measures financial performance by comparing the actual profit with estimated profit.
Revenue centre- it measure the performance by comparing expected sales and actual sales and revenue earned by specific departments.
Investment centre-it is use to check the ROI and proper utilization of invested capital.
Advantages (a) It provide managers with due autonomy of their responsibility centres which helps in attainment of goal promptly. (b) Every responsibility centres have a realistic target to be achieved which helps the employees to perform as per the expectations. (c) Detection of error becomes easy. (d) It promotes participation of different levels of management thereby resulting in effective decision making. Disadvantages (a) Forming responsibility centres in today’s modern business organization with a clear cut role is a difficult exercise. (b) In practical managers do not get the required autonomy in decision making. (c) It should be understood that responsibility accounting is a tool and not a substitute for effective management.
6.11 Human Resistance to Control Employees in the organization perceive control in a negative way and try to resist controls. The main reasons to oppose controls are as follows: (1) As an instrument to curb freedom : Employee perceive control as a measure to curtail their freedom. Their performance should confirm to the standards. They cannot afford laxity and negligence. Moreover tight controls do not give space for creativity and innovation.
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Directing and Controlling
NOTES
(2) Unrealistic Standards : Sometimes the standards set are too high that it becomes difficult for employees to achieve them. Employees lose faith in the control system. (3) Over control : Control over too many things concerning employee may lead to frustration. Too much emphasis on standardization of behavior such as dress code, parking rules, coffee breaks can be unacceptable to the employee. (4) Exposes their limitations : Controls monitor the progress of employee’s performance and identify the deviations from the standards set for them. Such deviations may reveal lack of skill and ability of the employee in performing the task. Employees avoid controls as they expose their weakness. (5) Uncontrollable variables : Sometimes the standards are not met due to the factors that are not in control of the employee or the variables for which he is held responsible are not under his control. In such a situation employees feel that the controls are not justified. (6) Penalizing : Some control focus on fault finding rather than evaluating their efforts. Employees resist such kind of approach in implementation of controls.
6.12 Overcoming Resistance to Control In order to reduce negative feelings towards controls the following guidelines can be used (1) Participation : Standards must be set in consultation with the employees. If employees are involved in planning and implementation of control systems they are likely to accept them and follow them whole heartedly. (2) Reasonable and understandable standards : The standards should be achievable. They should not be perceived by the employees as beyond their reach. They should be explained the need and value of controls. The employees should perceive standards as justified.
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(3) Focus on behavior : The controls should aim at bringing improvement in behavior of the employees rather than concentrating upon the deviations only. It should also recognize the efforts put by the employee. (4) Objective and fair : The evaluation process should eliminate subjectivity. There should be no room for discrimination among the employees. (5) Timely feedback : The process of controls should be such that it gives timely feedback to the employees at periodic intervals so that employees are able to take appropriate remedial actions at the right time before the problems become big. (6) Positive reinforcement : There should be proper integration between organizational controls and reward system. Employee should perceive controls as a source of rewards rather than a source of penalty.
Directing and Controlling
6.13 Summary The directing function includes leadership, supervision, motivation and communication. Directing initiates action motivates people and facilitates coordination. In order to make directing effective there should be unity of command, harmony of objectives, effective leadership, appropriate motivation techniques and direct supervision wherever possible. Control is a crucial, continuous and forward looking process. It focuses on the achievement of planned goals of the organization. It helps in coordination and put psychological pressure on employees to work hard and brings order and discipline. Control is a process of establishing standards and measuring the actual performance. The standards can be quantitative or qualitative. The quantitative standards are measurable and include time standard, cost standard, productivity standard and revenue standard. Then the actual performance is compared to standards in order to identify deviations. If the deviations are unfavorable corrective actions are taken. Controlling is expensive and time consuming. The techniques of controlling are supervision, analysis and interpretation of financial statements, budgetary control, breakeven analysis, return on investment, management by objectives, PERT /CPM, management information system, management audit, human resource accounting, responsibility accounting. In order to make control effective they should be made simple, flexible, and objective. The main focus of controls should be on achievement of organizational objectives. They should be forward looking and acceptable to the employees. The standards should be reasonably set. Resistance to control can be overcome through participation and positive reinforcement.
NOTES
6.14 Key Terms
Directing: It is a function which aims to instruct, guide, supervise and inspire people working in the organisation so that the objectives can be achieved.
Controlling: It is a systematic effort by managers to compare actual performance to predetermined standards to find out deviations if any and address deficiencies.
Supervising: It means overseeing the progress of work performed by subordinate and ensuring compliance with standards and plans laid for them.
Standards: They are the benchmark against which the actual performances are compared.
Quantitative standards: These standards are measurable like time standard, cost standard, income standard, output standard, quality standards, profit, etc.
Qualitative standards: These standards are non-measurable or intangible like managers’ decision making skill and human skills, attitude of workers etc.
6.15 Questions and Excercises Short Answer type questions (1) What are the reasons for resistance of control?
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Directing and Controlling
(2) Write short notes on Budgetary control
NOTES
PERT and CPM
Management Audit
(3) Define the term direction. What are the chief elements of directing? Long Answer type questions (1) Explain the process of control. (2) What are the essentials features of a sound control system? How can employee’s resistance towards control be reduced? (3) Explain the importance and principles of direction.
6.16 Further Reading and References (1) J.A. Maciatiello, ``Management control systems,’’ Prentice hall,Engle Wood Cliffs, N. J.,1984 (2) R.E. Walton, “From control to commitment in the workplace”, Harvard Business Rewiew, March-April, 1985 (3) V.S.P Rao, V. Harikrishnan, ``Management Text and Cases,’’ excel books, fourth edition (4) Harold Koontz and O Donnell, ``Essentials of Management,’’ Tata McGraw Hill, New Delhi 1990.
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Individual Behavior
UNIT 7
INDIVIDUAL BEHAVIOR
Structure 7.0 Introduction
NOTES
7.1 Unit Objective 7.2 Perception 7.2.1 Factors Affecting Perception 7.2.2 Attribution Theory 7.2.3 Distortions in Perception 7.3 Personality 7.3.1 Determinants of Personality 7.3.2 Personality Traits 7.3.3 The Big Five Model 7.3.4 Important Personality Characteristics Relevant to Organisational Behaviour 7.4 Attitude 7.4.1 Attitude and Behaviour : Cognitive Dissonance Theory 7.4.2 Major Job Attitude 7.5 Emotional Intelligence 7.6 Summary 7.7 Key Terms 7.8 Questions and Exercises 7.9 Further Reading and References
7.0 Introduction Every individual is different from others. They respond to different situation in different manner. People possess certain unique characteristics that influence their attitude, behavioral reaction to organizational settings. The study of individual behavior includes knowing about personality traits, attitude, perception and emotional intelligence of a person that greatly influence his or her decision making skills, interpersonal relations and job satisfaction. Knowledge of individual behavior will help in developing appropriate selection process and proper placement of individuals at work place. It will help in predicting and controlling human behavior so that goals of organization can be achieved.
7.1 Unit Objective After studying this unit, you should be able to
Explain why people perceive the same thing differently.
List the three determinants of perception.
Understand the distortions in perception.
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Understand the concept of personality.
Explain the factors that determine individual personality.
Describe major personality attributes influencing OB.
Explain the relationship between attitude and behavior.
Understand major job attitudes.
Explain cognitive dissonance theory.
Understand major job attitudes.
7.2 Perception Perception is the individual’s own or personal view of the world. It is the intellectual process by which the individual give meaning to their environment. The raw data that they receive from the environment are organized and interpreted in order to understand the environment. Two people may understand the same situation differently. . e.g. one may interpret the glass having fifty percent water in it as half filled while the other may interpret it as half empty. According to S.P. Robbins: “Process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment”.
7.2.1 Factors Affecting Perception Perception may be different from reality. The factors that influence perception depends on the characteristics of perceiver (the one who is trying to interpret the environment) the target (the object or person for whom perception is made) and the situation (the context in which the target is seen). Let us understand them one by one.
(1) Perceiver The personal characteristics of the perceiver play a very important role in his perception about the reality. The relevant personal characteristics influencing perception are motives, attitude, past experience and expectations. A theist may find daily morning ritual of offering prayer as a best way to start the day, while an atheist may consider it a waste of time. This is because their attitude towards God is different. Researches have found that motives are also instrumental in shaping perception. We see what we want to see. Let us see the following picture
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Old woman or young lady? Fig. 7.1
In the above figure one can see an old woman or a young woman depending upon his or her interpretation. Young people have a tendency to see young woman while older people perceive it as a picture of elderly woman. One can switch from one to another with little effort. If we perceive the image as the picture of young woman we can see the old woman by focusing on the picture with a different angle. While doing so the young woman chin becomes the old woman’s nose.
Individual Behavior
NOTES
A research that aimed to study the effect of different intensities of hunger drive on perception demonstrated that hunger influenced the perceptions of the subjects dramatically. The subjects who had not eaten for 16 hours were shown blurred images. These respondents perceived the blurred image as pictures of food more frequently than those subjects who were not hungry. Role expectation can also influence the perception. We may expect a doctor to be sympathetic, a policeman to be authoritative, a minister to be power hungry and we may perceive them this way irrespective of their actual traits. Our experience with events will also influence our perception. If our past experience about things, events or person was bad we will perceive them negatively and may continue to hold this perception for long for e.g.: if an individual tried a new dish that he disliked in a restaurant, there is likelihood he may not try it again in another restaurant. While the reality may be that cook of the previous restaurant was not having an expertise in cooking such dish.
(2) Target Characteristics of the target that is being observed also influence the perception. Objects that are new or moving or having large size are perceived more than compared to those that are old, small and not moving. Objects that are in physical proximity tend to be perceived together, background also play an important role. Let us see the following figure. At the first look we may perceive it as a vase, if we see black portion as background. But if we see white as background then the picture will reveal two people face to face.
Fig. 7.2
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(3) Situation The time at which the object is seen as well as the work and social settings influence our perception. If we see a worker in the factory working late evening we may perceive him to be hardworking. A student who is wearing casual dress in school will catch more attention of the teacher.
7.2.2 Attribution Theory When people observe the behavior of others they tend to interpret the cause of their behavior i.e. whether the behavior is externally caused or internally cause for e. g. if a student say, Jack scores badly in thermodynamics subject, we will try to find out whether the cause of bad score is internal or external and our interpretation will be based on the following facts: (1) Distinctiveness: it refers to whether the individual displays uniformity in behavior in different situation. If he is scoring poor marks in other subjects also then we tend to view his performance being caused by internal factors We may perceive him to be lazy, disinterested or not intelligent. (2) Consensus: it considers whether all others who are facing the similar situation respond in the same way. If all the students in the class are fairing poor marks then the performance of the class can be attributed to external causes like poor ability of instructor and strictness on the part of the examiner. (3) Consistency: it considers whether the individual responds the same way over time. If jack score is poor in previous classes also then we may attribute his poor performance to internal factors.
7.2.3 Distortions in Perceptions It is a cognitive bias in judgment that occurs in a particular situation. In other word we may perceive others wrongly or unfairly. This happens because we use shortcuts in judging peoples so that our task of judging becomes more manageable. The distortions are as follows: (1) Halo effect: it is process of using single personality trait while drawing general impressions about others. For e.g. A person who is warm in dealing with others may be judged as wise, humorous and popular. A person who is punctual may be judged as hard working and committed also which may not be true in reality. (2) Stereotyping: when we generalize the characteristics of the people based on the group to which the individual belong, for e.g. we may generalize “ A particular religious group is very conservative” then we will perceive every individual belonging to that religious group as conservative. All individuals in that group may not necessarily be conservative.
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(3) Contrast effect: this distortion particularly happens during the selection process. We do not evaluate individuals in isolation but in comparison to others. If we encounter people possessing brilliant qualities just before evaluating the person in question, then there is likelihood that this person may
be rated poorly and if the same person is evaluated after encountering people possessing poor qualities, then we may rate the person fairly better. This is called contrast effect. (4) Projection: An individual may perceive others assuming that the others are very much like him for e.g. if the individual is honest and truthful he may perceive that others are also honest and truthful. Projection is the perception made by individual about others as he tends to see people as more homogenous than they really are.
Individual Behavior
NOTES
Manager should try to eliminate distortions in perception while selecting and evaluating employees. Manager should also try to understand the perception of employee towards work environment. The employee behavior is influenced by his perception towards his job. Managers should attempt to understand the difference between reality and perception of employee. If he sees that the difference that exits is affecting the employee behavior negatively he should try to eliminate such distortions by creating good impression about oneself and job.
7.3 Personality It is a set of unique psychological and behavioral attributes in a person that are consistent overtime. It is the sum total of ways in which the individual behave, responds and interacts with others. According to Gordon Allport: ``The dynamic organization within the individual of those psychophysical systems that determine his unique adjustments to his environment.’’
7.3.1 Determinants of Personality Heredity: It is the transmission of certain qualities that can be physical, mental or emotional from the ancestor to the descendent. The physical characteristics may include facial attractiveness, energy level, reflexes etc. The mental characteristics includes intelligence and emotional state demonstrates traits like temperament, shyness etc. These traits are determined through the molecular structure of genes located in the chromosomes at the time of conception. Environment: The other important determinant of personality is the way we are nurtured. Our family friends, early conditioning, social groups etc are all part of environment. Culture establish attitudes and norms that are passed from generation to generation.
7.3.2 Personality Traits Personality traits are the enduring characteristics that describe an individual behavior. There are numerous traits in a person that make up a personality. About 17,953 individual traits were identified in one study. Such large numbers of traits make it impossible to predict individual behavior. Later on after intensive study the traits were reduced to 16, which are called the primary traits. These traits are generally steady an allow prediction of individual behavior. They are follows:
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NOTES
Descriptors of Low Range
Primary Factor
Descriptors of High Range
Reserved
Warmth
Outgoing
Less intelligent,
Reasoning
More intelligent,
Affected by feelings,
Emotional Stability
Emotionally stable
Submissive
Dominance
Dominant
Serious
Liveliness
Lively
Disregards rules,
Rule-Consciousness
Conscientious
Timid
Social Boldness
Venturesome
Tough minded
Sensitivity
Sensitive
Trusting
Vigilance
Suspicious
Practical
Abstractedness
Imaginative
Forthright
Privateness
Nondisclosing
Self-Assured
Apprehension
Fearful
Conservative,
Openness to Change
Experimental
Group-oriented,
Self-Reliance
Independent
Lax and impulsive
Perfectionism
Organized and self discipline
Relaxed
Tension
Tense
7.3.3 The Big Five Model It is a comprehensive empirical research finding that provide a very broad overview of someone’s personality. It proposes five basic dimensions of personality these five dimensions are:
Check Your Progress 1. Explain how people interpret the cause of other’s behaviour with help of attribution theory.
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(1) Extraversion: it is characterized by positive emotions, enthusiasm and tendency to interact with other with ease. The people high on extraversion are sociable, outgoing, talkative and assertive and enjoy the company of others. They are comfortable in group and teams and derive energy from their interaction with others while introverts i.e. persons who are low in extraversion are quiet, less socially involved and prefer to work alone. Introverts derive energy from within. (2) Agreeableness: it is the tendency to be co-operative, trusting, generous and helpful. The people high on agreeableness show warmth and sensitivity towards the feeling of others. They are empathetic and are willing to compromise their interest for others. They are compassionate kind and good natured.The individual low on agreeableness is unsympathetic and is unconcerned about the feeling of others. They are selfish and put their own interest above those of others. (3) Conscientious: It is the tendency to be self disciplined, responsible, reliable
and achievement oriented. They are hardworking and well organized. They have a drive and sense of direction. While the person low on conscientiousness can easily get distracted, is unorganized and irresponsible. (4) Openness to experience: the tendency to be imaginative, intellectually curious and artistic. The people high on openness to experience are creative and are more likely to hold unconventional beliefs. They have broad range of interest and appreciate variety of experience. The people low on openness are more conventional and conservative. They prefer familiarity over novelty and resist change.
Individual Behavior
NOTES
(5) Neurotism (emotional stability): The tendency to experience unpleasant emotions easily, the people high on neurotism experience anger, frustration anxiety or depression under stress or adverse circumstances. They are emotionally reactive and their negative emotion tend to persist for long period. They are moody and tense. The people who are low on neurotism are calm, secure and emotionally stable. They don’t get irritated or upset easily.
7.3.4 Important Personality Characterstics Relevant to Organisational Behaviour Locus of control Locus is Latin word meaning place or location. Locus of control thus means place of control and place can be internal or external. Internal locus of control means the place of control of life is within the individual, in other words the person believes that he can control his life. External locus of control means the place of control is outside the individual. The person having external locus of control believes that his life is controlled by environment over which he has no control. A person with internal locus of control feels that they have the power to influence events and their outcome. They perceive that outcome results from their own behavior. People with internal locus of control are motivated to work, are ready to take more responsibility as they are able to perceive the direct relationship of their actions and reward.People who have external orientation feel that outcomes are determined by fate and are independent of their hard work or the decisions they take. The external are more dissatisfied with their jobs and are also less involved in their jobs.
Machiavellianism It is tendency of the person to be selfish, deceptive and manipulative. The person high on mach does manipulate others for personal gain. The high mach’s demonstrate pragmatism are more dettached emotionally and believe that ends justify means. They can inflict greater harm to people directly or indirectly to achieve their own goal. Low mach’s tend to be truthful, honest and empathetic. They are trusting and agreeable. High mach’s do well in jobs that require bargaining skills. High mach’s flourish when there is face to face interaction, minimum rules and regulations and less emotional involvement.
Self Monitoring Self monitoring is an ability of an individual to monitor one’s own behavior to fit
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different situations. Person high on self monitoring change their behavior to suit the situation. They closely monitor themselves in order to ensure appropriate public image of themselves. They are highly sensitive to social cues and can easily blend into social situations. They may not be true to themselves while modifying their behavior and hence there can be striking contradiction between their public images and their private self. While persons who are low self monitors are less likely to change their behavior from one situation to another. They tend to display their true disposition and attitude an hence they have a greater consistency between their attitude and behavior. High self monitors are more successful in managerial position as they are required to play multiple roles which are sometimes contradictory in nature.
Type A and Type B Personality Mayer Freidman and Ray Rose Man during their research on the impact of job stress on heart disease identified characteristics of two categories of individuals, type A and type B. Characteristics of type A
1.
Type A people are excessively competitive and want to achieve more and more in less and less of time. They feel threatened and challenged by the success of others.
2.
They are always in a hurry, they are always moving, walking and eating rapidly.
3.
They try to do two or more things simultaneously.
4.
They feel guilty when they get time to relax as they are not able to cope with leisure time.
5.
They keep on trying to do faster and feel impatient with the rate at which most event take place.
6.
They want to acquire money and personal possessions and measure their success in terms of how much of everything they have.
Characteristics of type B personality
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1.
They are calm composed patient and relaxed.
2.
They don’t suffer from sense of time urgency.
3.
They are wise and not hasty. They are concerned with quality rather than quantity.
4.
They do not exhibit unnecessary competition and play for fun and recreation.
5.
They can enjoy leisure activities without guilt.
6.
Don’t feel the need to discuss their achievement unless situation demands.
Types A are productive workers but they are not creative. Type A people can become excellent salesperson. Inspite of the hardwork of type A, senior executives are usually type B. Type B are the ones who make it to the top. The reason is that they are creative as they are able to allocate time to develop unique solution to problem. They are tactful unlike type A who are hostile.
Self Esteem It is the individual’s degree to which they like or dislike themselves. People high on self esteem have confidence in their ability to achieve goal. They are not vulnerable to external influence. They are more likely to take unconventional jobs than people having low self esteem. They are open minded, outgoing, responsible and optimistic. They have the ability to inspire others.
Individual Behavior
NOTES
The people with low self esteem are pessimistic, close minded, introvert. They do not come forward to take responsibility. People who are high on self esteems are more satisfied with their job than the people who are low on self esteem.
7.4 Attitude It is the belief and feeling, the individual have about object, people or events, which can be favorable or unfavorable. These beliefs and feelings determine how employee will perceive and intend to behave towards the object or a situation. The attitude has three components: cognitive, affective and behavioral. If I say that “one should not use abusive language” it is a value statement and such opinion is cognitive component of attitude. If I say that “I dislike Mr. shyam because he uses abusive language”, then it is affective component of the attitude. It represents my feeling towards attitude object. Cognitive and effective component influences the behavior of the individual towards the attitude object. If they are negative then the behavior towards the attitude object will also be negative. If I start avoiding interaction with shyam then it is behavioral component of the attitude.
7.4.1 Attitude and Behaviour : Cognitive Dissonance Theory Cognitive Dissonance theory was given by Leon Festinger. Whenever there is incompatibility between two or more attitudes or between attitude and behavior dissonance is said to have occur. Dissonance causes discomfort in the individual. Individuals try to reduce this dissonance by reconciling the attitudes in such a manner that that they appear to be consistent and highly rational. for eg . Mr X is in need of money as he wants to admit his son who is very bright in studies in a very prestigious college. He holds a very favorable attitude towards the college in terms of education. He also feels that taking bribery is a crime. He has been offered a bribe that can help him in providing better education to his son. Mr. X is experiencing high degree of cognitive dissonance. Mr X can choose one among many alternatives to reduce cognitive dissonance. Mr X can change the behavior and start taking bribe. Mr X can change his attitude towards the prestigious college by telling to himself that there are other colleges also that can give good placements though not very good education. So he can admit his son in those colleges and not take bribe .A third alternative would be by concluding that dissonant behavior is not so important, and that he has a duty as a father also and almost everyone takes bribe in the present scenario. Thus when individuals undergo cognitive dissonance because of the incompatibility between job demands and personal attitude, they will try to modify their attitude or behavior in order to reduce dissonance. This is easily done when they perceive that the dissonance is externally imposed and is beyond his or her control. Dissonance is easily resolved when the rewards are significant enough to offset the dissonance.
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7.4.2 Major Job Attitude Job satisfaction: it is individual’s general attitude with job. If the job satisfaction is high then the person may hold positive attitude towards job satisfaction. Job Satisfaction refers to the emotional state of the worker about specific job factors. Job factors like mentally challenging work, equitable rewards and pay system, understanding and friendly supervisor, supportive colleagues, comfortable working conditions etc. lead to favorable evaluation of the job. Moreover people with personality type matching with the job requirement get high satisfaction from work. Dissatisfaction results in absenteeism, low productivity and more complaints. Job satisfaction improves productivity. Job involvement: it is the degree to which employees identify with their jobs, actively participate in it. It tells about how much they really care about the kind of work they do. People high on job involvement consider performance level of job as a source of fulfillment. Job involvement reduces absenteeism and employee turnover. Organization commitment: it is the degree to which the employee is able to identify with the organization and its goal. The more commited they are towards the organization’s goal the less is the likelihood of leaving the organization.
7.5 Emotional Intelligence Emotions are universal and very important to our life. They play a very vital role in determining our physical and mental wellbeing. The ability to examine emotions of self and others and then responding appropriately improves both home and work environment leading to healthier people. Peter Salovey and John D Mayer leading researcher on emotional intelligence defined emotional intelligence as “ the subset of social intelligence that involves ability to monitor one’s own and other’s feelings and emotions, to discriminate among them and to use this information to guide one’s own thinking and action”. It is the ability to recognize and understand the feelings of self and others in order to manage and act wisely in human relations. Salovey and Mayer stated four types of abilities (1) Perceiving emotions: Identifying and recognizing emotions is the first step to understand emotions. It might involve understanding non verbal signals such as facial expressions and body language.
Check Your Progress
(2) Reasoning with emotions: The next step involves cognitive activity such as thinking and problem solving.
1. When do individuals undergo dissonance and how do they try to resolve it?
(3) Understanding emotions: If someone is expressing some emotion the observer should interpret the cause of emotions. The individual should be able to comprehend emotion and understand complicated relations between them. (4) Managing emotions: The ability to manage emotions include monitoring emotions, regulating them and then responding appropriately. It also includes the ability to manage emotions of others.
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Gole man (1998) gave five emotional competencies (1) Self awareness : The ability to recognize one’s emotions i.e. what we are
feeling and why we are feeling?
Individual Behavior
(2) Self regulation : The ability to control impulsive behavior, handling distressing emotions in an effective way (3) Social skill : The ability to network and manage relationship, to move people in a particular direction.
NOTES
(4) Empathy : The ability to know what someone else is feeling and considering other person’s feeling when making a decision. (5) Motivation : The ability to pursue goal persistently for non monetary gains( intrinsic rewards) than just for money or status only. Goleman emphasized that emotional competencies can be learnt .They must be worked on and developed to achieve outstanding performance. Our emotional intelligence determines our success in work, relationship and physical well being. A person with high emotional quotient can understand other people’s needs and feelings in a better way. Such understanding helps him satisfy those needs. People with high EQ experience more positive social and interpersonal interaction. They are in better position to avoid conflict and fight. A person with high EQ will find it easier to satisfy other person’s need and make them feel good. It helps him to handle all kind of people. A person with high EQ can motivate, instill enthusiasm and courage in others leading to better performance. He can become an effective leader.
7.6 Summary Individual’s characteristics like personality, perception, attitude and emotional intelligence greatly influence his or her work place behavior. Personality traits are enduring characteristics of the individual. The researchers have identified sixteen primary personality traits. Big five model has proposed five dimensions for assessing individual’s personality. They are agreeableness, extraversion, openness to experience, conscientiousness and neurotism. Personality traits relevant to workplace are locus of control, self monitoring, machiavellianism, type A and type B personality. Perception is dependent on the characteristics of the perceiver, target and the situation. Manager should try to avoid distortion in perception like hallo effect, stereotyping, projection etc. Job attitude like Job satisfaction, Organizational commitment and Job involvement are relevant to organizational effectiveness. Emotional intelligence is the individual’s ability to understand, monitor and manage ones own emotions and emotions of others. Person having high emotional intelligence have better interpersonal relationships and can prove to be a effective leader.
7.7 Key Terms
Perception: It is the process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.
Attribution theory: It is concerned with how individuals interpret events and try to determine the cause of people’s behaviour.
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Distortions in Perceptions: It is a cognitive bias in judgment that occurs in a particular situation in which the individual may perceive others wrongly or unfairly.
Personality: It is a set of unique psychological and behavioural attributes in a person that are consistent overtime. It is the sum total of ways in which the individual behave responds and interacts with others.
Personality traits: They are the enduring characteristics that describe an individual behaviour.
The Big Five Model: It is a comprehensive empirical research finding that proposes five basic dimensions of personality which provide a very broad overview of someone’s personality.
Attitude: It is the belief and feeling, the individual have about object, people or events, which can be favourable or unfavourable
Dissonance: Whenever there is incompatibility between two or more attitudes or between attitude and behaviour dissonance is said to have occur.
Emotional Intelligence: The ability to examine emotions of self and others and then responding appropriately and wisely in order to manage human relations.
NOTES
7.8 Questions and Excercises Long Answer Questions (1) What are the five personality dimensions of Big Five model? Briefly explain. (2) Can you list some reasons to explain why do people see the same thing and interpret differently? (3) What do you understand by emotional intelligence and why it is important? (4) Write short notes on (a) Hallo effect (b) Job satisfaction (c) Self monitoring (d) Stereotyping Short Answer Questions (1) Differentiate between external locus of control and internal locus of control. (2) Explain the various components of attitude. (3) Differentiate between type A and Type B personality.
7.9 Further Reading and References (1) S. P. Robbins, ``Organisational Behaviour,’’ Prentice Hall, New Delhi, 2000 (2) S. R. Moddi, ``Personality Theories,’’ Homewood, I, Dorsey, 1980. Management Process & Organisational Behaviour : 116
(3) R. A. Boron, ``Behaviour in Organisation,’’ Allyn and Boran, Boston, 1986.
Motivation
UNIT 8
MOTIVATION
Structure 8.0 Introduction
NOTES
8.1 Unit objective 8.2 Motivation Defined 8.3 Forms of Motivation 8.4 Theories of Motivation 8.4.1 Maslow’s Hierarchy of Needs Theory 8.4.2 ERG Theory 8.4.3 McGregor X and Y Theory 8.4.4 Herzberg Motivation Hygiene Theory 8.4.5 McClelland’s Theory of Needs 8.4.6 Vroom Expectancy Theory 8.4.7 Equity Theory 8.4.8 Goal Setting Theory 8.5 Summary 8.6 Key Terms 8.7 Questions and Exercises 8.8 Further Reading and References
8.0 Introduction Organizations need motivated people in workplace. No matter how skilled the workers are, the goal of the organization will not be achieved if the employee is not willing and motivated to do their job. Motivated employees help the organization to survive and grow. Managers expect people in the organization to put their best efforts in work. Motivation helps achieve this target. Motivation acts as a driving force that forces the individual to exert high level of efforts. Of all the duties of manager motivating employees is more complex and challenging. Unsatisfied need inspires the individual to exert effort in a direction that would satisfy his need The manager should understand what motivates the employees, what prompts them to initiate a particular action and why they persist in their action over time. Appropriate incentive scheme, effective interpersonal communication, smooth relationship with coworkers, status , quality of supervision, good working conditions, job security and job designs are some of the variables that will help the manager to develop an environment that motivates people.
8.1 Unit Objective After studying this unit, you should be able to-
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Motivation
NOTES
Understanding motivation and its relationship with performance.
Differentiate between negative and positive motivation.
Differentiate between extrinsic and intrinsic motivation.
Describe Maslow’s theory of needs and its implication to managers.
Explain ERG theory and compare it with Maslow’s hierarchy of needs.
Contrast theory X and theory Y of McGregor XY theory.
Explain McClelland’s theory of needs and its implication to managers.
Differentiate between motivator and hygiene factors.
Understand the relation of effort, appraisal and reward in motivating through Vroom expectancy theory.
Understand the importance of fair reward system through equity theory.
Understand the important characteristics of goal in goal setting theory.
8.2 Motivation Defined According to Robbins motivation is “the willingness to exert high levels of effort towards organizational goals conditioned by the effort’s ability to satisfy some individual’s need”. In motivation process when an individual perceives an unsatisfied need he exerts his efforts towards satisfying his needs Unsatisfied needs create tension which stimulates the drive to search a particular goal that will satisfy his need. According to Greenberg, motivation is defined as ‘a process of arousing, directing and maintaining behavior towards a goal.’ Where directing refers to how individual choose to behave, maintenance refers to consistency in chosen behavior until the desired goal is achieved. Motivation arises because of unsatisfied needs.. Each person may have different set of unsatisfied needs. There are several reasons why a person is motivated to work. For e.g. one person may exert high level of efforts for promotion because of his or her need for achievement. While the other may do the same because of the pay raise the promotion will bring along with itself. There is a positive impact of motivation on job performance. Motivation improves standards of output both quantitatively as well as qualitatively. Job performance is the function of person’s ability and his or her motivation level. Job performance=f (ability, motivation)
8.3 Forms of Motivation Positive and Negative Motivation
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Motivation can be divided into two categories: negative and positive motivation. Negative motivation takes place when an individual feels a fear of failure or other negative consequences. The individual expects being punished if some performance or behavior standards are not met by him. The punishments at workplace can be fear of
being criticized, fired or demoted. The individual works hard in order to escape punishment. Positive motivation is said to occur when an employee expects a certain reward when some performance or behavior standards are met. The rewards can be both financial and non financial in nature. It can include a pay raise or praise and recognition for the work done.
Motivation
NOTES
It is advisable that both the forms of motivation should be used by the manager to get desired result. However overuse of negative motivation in long run can have unfavorable side effects on the mental and emotional health of employee as well as on the relationship between the employee and manager.
Extrinsic and Intrinsic Motivation Extrinsic motivation refers to the influence of external factors like reward or punishment on the degree of individual’s effort. In extrinsic motivation the activity performed by the employee should have an instrumental value. It should be instrumental in escaping some punishment like demotion or criticism or it should be instrumental in getting reward like pay raise, recognition etc Intrinsic motivation is within the individual rather than relying on external factors. The individual derives pleasure and enjoyment from the work due to his interest in task itself. Individuals who are intrinsically motivated are more likely to engage in the task willingly and would like to improve their skills so that they are able to master the task.
8.4 Theories of Motivation In 1950s three specific theories, also known as early theories of motivation were formulated that contributed to the development of motivation concept. The early theories of motivation are Maslows hierarchy of needs theory, McGregor X and Y theory and Herzberg motivation hygiene theory. They were questionable in terms of validity. Later on contemporary theories were developed, each having valid supporting documents. The contemporary theories include ERG theory, McClelland’s theory of needs, Vroom expectancy theory, Equity theory and Goal setting theory.
8.4.1 Maslow Hierarchy of Needs Theory Maslow has depicted human motivation in form of hierarchy of needs. His theory is based on assumption that every individual has five fundamental needs and they are hierarchical in nature. The unsatisfied need is the cause of motivation in an individual. The hierarchy of needs is often displayed as pyramid. At the bottom of the hierarchy are lower order needs, these include physiological and safety needs and at the peak of the hierarchy are higher order needs. The higher order needs includes social, esteem and self actualization need. As each of the need is significantly satisfied the individual moves to the next level of the needs in the pyramid.
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Motivation Self Actual isation Esteem Needs Self-esteem status
NOTES
Social Needs Sense of belonging Love Safety Needs Security Protection Physiological Needs Hunger Thirst
Figure 8.1 Maslow’s Hierarchy of Needs The five needs are as follows;
(1) Physiological needs: The satisfaction of physiological needs is essential for survival for e.g. water, food, air. This need includes basic requirement of nutrition, temperature, shelter and clothing. If these requirements are not met the human body cannot continue to function. A person who is hungry for days will think only of food and nothing else. Once this need is substantially satisfied the individual moves to one level upward in the pyramid. (2) Safety / security needs: Safety needs involves financial, physical and emotional security. Individuals require protection from physical and emotional abuse. Individual wants to remain free from worry about being harmed through violence, mistreatment and exploitation. They want to secure themselves in times of sickness and old age. (3) Social need: Social need include the need for affection, love, care and friendship. They want to be liked and loved by others. Because of this need people form informal groups, join clubs etc. They like to form friendly interpersonal relationship with others. (4) Esteem need: Esteem is the human desire to be respected and valued by others. The lower version or extrinsic component of self esteem is the desire to be respected by others, which one can satisfy though reward, prestige and attention. The higher version or intrinsic component of esteem need focuses on self respect. The person tries to satisfy it through factors that connect directly with job content. The factors include empowerment, work itself and responsibility associated with it. Intrinsic rewards are mostly qualitative by nature. Management Process & Organisational Behaviour : 120
(5) Self actualization: It is the drive to become what one is capable of becoming. It includes the need for growth, believing in one’s potential and self fulfillment. Since
this need is at the peak of the pyramid the individual’s other needs are reasonably satisfied. They feel contented and more in command of their lives. They have a realistic perception of self, other people and environment around them. They desire for continual growth and creativity so that they can achieve what they are capable of achieving
Motivation
NOTES
Implications of Maslow’s hierarchy of need theory for manager
1.
In order to satisfy physiological need, manager should provide adequate wages and incentives to employees so that he can procure the basic amenities of life. Appropriate breaks for lunch and rest should be given to employees.
2.
In order to satisfy safety needs the manger should provide the employees safe and hygienic work environment, job security, freedom to join unions, retirement benefits etc.
3.
In order to satisfy social needs the management should promote a work environment that facilitates interpersonal interactions. The manager should encourage teamwork and organize social events like sports programs, picnics, social get together etc.
4.
In order to satisfy esteem need, the manager should recognize and encourage high performers. The manager should appreciate and reward employees on achieving over and above their targets. Manager should give employees challenging jobs and should allow them to participate in decision making process. The manager can elevate the status of deserving employees by promoting them or by giving them special privileges that enhance their status for e.g. a company car.
5.
In order to satisfy self actualization need manager should delegate most of the work to employee so that employee’s skills and competencies are fully utilized. He should be encouraged to be innovative and should be given freedom in the manner he likes to do his job.
Though Maslow’s hierarchy is fairly rigid in its linear nature of progression i.e from bottom to top of pyramid, but Maslow noted that the needs may not follow in the same sequence always, for eg some people give more importance to their career than family and friends. Their need for self esteem is more important than social need. The limitation of Maslow motivation of hierarchy of need theory is that it lacks empirical evidence.
8.4.2 ERG Theory ERG theory was proposed by Alderfer. He worked on Maslow’s need hierarchy theory to align it closely with empirical research. He reduced the number of levels of needs from five to three . He stated that there are basically three categories of need. The letter ERG stands for existence, relatedness and growth representing three levels of needs. Existence is similar to physiological and safety need of Maslow’s hierarchy of need theory.
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Motivation
NOTES
Relatedness includes social need and extrinsic component of esteem need of Maslow’s need theory. Growth is analogous to intrinsic component of esteem need and self actualization need of Maslow’s need theory.
Growth
Intrinsic Esteem Needs
Frustration->Regression
Self Actualization
Extrinsic Esteem Needs
Relatedness Social Needs
Safety Needs
Existence Physiological Needs
Fig. 8.2 : Clayton Alderfer ERG theory He stated that more than one need may be operating simultaneously in an individual. If gratification of higher level need is not met then the person may regress to lower level need. This is known as frustration regression principle. This happens because the individual finds lower level need easy to satisfy. For e.g. an individual who fails to succeed in a competitive examination may resort to excessive eating.
8.4.3 McGregor X and Y Theory Professor Douglas McGregor developed a theory on motivation on the basis of two distinct assumptions of human nature. One labeled as X theory that held a negative view about human beings and another labeled as Y theory that held a positive view of human beings. Manager makes assumptions about human beings and they mold their behavior about subordinates according to assumptions they make for them. According to X theory
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1.
Employee dislikes work and will attempt to avoid it whenever they get the chance.
2.
Since employees dislike work they should be closely supervised , controlled and threatened with punishment
3.
Most employees lack ambition, self motivation and shirk responsibilities . They prefer to be led , and directed.
4.
Employee need security above all needs. Maslow’s Lower level needs dominate employees.
Managers who believe in X theory will be production centric. They will exhibit autocratic and directive behavior towards their employees. They will try to control their employees by way of coercion, threats and punishment. Manager feels that since security is their primary need they can be easily motivated by economic gains.
Motivation
NOTES
According to theory Y
1.
Employee view work as natural. The work is voluntary performed by them . The efforts put in work are similar to the efforts exerted in work and play.
2.
Employee will exercise self control and self direction in service of the organization goal to which they are committed. Employee can pursue goal without supervision.
3.
Employee will not shirk responsibility. They will be ready to accept and even seek responsibility.
4.
The ability to make innovative decision is widely distributed in the population. It is not the sole province of those who are in management position.
Manager holding this view tend to be democratic in their leadership style. They are supportive and employee centric. Theory Y assumes that most of the individuals are dominated by higher order needs. Hence human beings can be motivated through appropriate reward system, participative decision making and autonomy. They try to make the job more enriching and satisfying to the employee by redesigning them. The form of organization structure reflects management’s attitude towards human beings. The managers who believe in X theory will form an organization structure that will be more centralized with highly specialized job. The communication will be mostly from top to bottom. The managers who believes in Y theory will emphasis on decentralized organization structure and challenging jobs that provide growth opportunities to the subordinates. The direction of communication will be two ways i.e from top to bottom and from bottom to top.
8.4.4 Herzberg Motivation Hygiene Theory Herzberg developed motivation hygiene theory to show how individuals are motivated to work. According to Herzberg the opposite of dissatisfaction is no dissatisfaction and the opposite of satisfaction is no satisfaction. In other words if the individual is not dissatisfied it does not mean that he is satisfied. He classified the needs into two categories. 1.
Needs that leads to no dissatisfaction are known as hygiene factors. In other words hygiene factors are those job factors that prevent us from becoming dissatisfied. There absence leads to dissatisfaction. The hygiene factors are: supervision, salary working conditions, company policy and an administration etc. These factors are extrinsic to work.
2.
Needs that leads to satisfaction are known as motivators. These are those
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Motivation
NOTES
job factors that drive the employees for superior performance. They act as satisfiers. Motivational factors include recognition, sense of achievement, growth responsibility, advance etc. Employees dissatisfied and demotivated
Employees not dissatisfied but not motivated
Hygiene factors • • • • •
•
Wages & Salary Quantity of supervision Company Policy Working Conditions Quality of interpersonal relations Job Securely security
Employee satisfied and motivated
Motivators •
Status
•
Recognition
•
Responsibility
•
Challenging Job
•
Personal achievement
•
Personal Growth
Fig. 8.3 : Herzberg Motivation- hygiene Theory The implication of motivation hygiene theory to manager is that if the manager seeks to eliminate the factors that contribute to dissatisfaction like poor supervision pay or working conditions, he may bring about peace but not motivation. To motivate workers manager must focus on factors that lead to intrinsic rewards for e.g. increasing employee’s autonomy, responsibility and opportunities to develop their skills and career.
8.4.5 McClelland’s Theory of Needs According to McClelland people are driven by three motives: achievement, affiliation and power. These motives are found in varying degrees in all workers and manager. McClelland described the three needs / motives in the following ways:
Check Your Progress 1. Differentiate between theory X and theory Y. 2. Distinguish between negative and positive motivation.
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(1) Need for achievement: The individual who has high need for achievement desires to excel and to succeed . Such individuals set challenging and realistic goal for themselves and accept personal responsibility. They have a strong desire to obtain feedback on their performance and progress. They have a desire to do things better and more efficiently than others. (2)
Need for power: The need for power reflects the desire to control the behavior of others. The individual high on need for power wants to be influential, exercise authority over others in order to make an impact . They prefer to be placed in status oriented situation.
(3) Need for affiliation: It is the desire to have satisfying interpersonal relationship with others.They desire relationship based on co-operation and mutual understanding. They tend to adhere to group norms because of their strong
desire to be accepted by others. They enjoy personal interactions.
Motivation
Thematic Apperception test (TAT) TAT was developed by psychologists as a tool to measure individual needs of the people. In this test subjects are shown series of ambiguous pictures and are then asked to develop a spontaneous story of each picture. Based on their response individual’s score for each of the three needs are determined.
NOTES
Managers can make use of TAT in order to identify which need is prominent in the individual. He will then understand how the individual can be motivated and for which job the person will be well suited. The individuals who are high on power and low on affiliation generally perform better as managers than those who are high on affiliation. Individuals having high affiliation need, want to be in the good books of all. Since they want to be liked by others, their decisions lack objectivity. They are good team players. High achievers should be given challenging but attainable goals. They should be provided feedback at regular interval. High achievers do best in entrepreneurial activities such as managing their own business or self contained unit in large organization. The implication of McClelland’s theory of needs to managers is that the manager should understand which need is dominating the employee’s behavior and should try to structure their jobs accordingly so that job satisfy them.
8.4.6 Vroom Expectancy Theory Vroom stresses the intensity of a tendency to act in a particular manner is dependent on the intensity of an expectation that the act will lead to an outcome and on the appeal of the outcome to the individual. The motivation is a function of M=f (E, I, V) ,where E stands for expectancy , I stands for instrumentality and V stands for valence. Effort
Performance
Reward
The employee believes that effort will result in acceptable perofrmance
The employee believes that acceptable perofrmance will produce the desired reward
The employee values the reward
Fig. 8.4 : Expectancy theory Expectancy (Effort- performance relationship): The degree to which the individual believes that exerting a given amount of effort will lead to performance appraisal. Instrumentality (performance- reward relationship): the degree to which the individual believes that a given level of performance will lead to a reward. Valence (Reward– personal goal relationship): the degree to which the organization’s rewards satisfy individual’s personal goals. For eg: if an individual performs well so that he can negotiate for flexible timing but is promoted instead will not find the
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Motivation
NOTES
reward attractive. The theory explains that even after having sound incentive systems employees are not motivated. The reason is that the existing incentive system may not be satisfying their personal needs. The implication of V room expectancy theory to managers is that they should understand the individual’s needs of the employees. It is emphasized that reward should be tailored to individual’s need. It is also true that managers have limited ways of rewarding the employees so it becomes all the more difficult to motivate employees by personalizing the reward.
8.4.7 Equity Theory John Stacey Adams, behavioral psychologist, put forward his equity theory on job motivation in 1963. Equity theory adds an additional perspective of comparison with referent other than merely assessing input (efforts) and output (reward) relationship of individual .It states that individuals tend to compare their output input ratio with those of referent others. Inputs are logically what an individual put into the work i.e. effort, loyalty, hard work, ability, commitment and skill etc. Outputs are all the financial and non-financial reward that he get for his work i.e. salary, benefits, pension, commission, recognition, responsibility, promotion etc. Referent other describes the people with whom the individual compares his output input ratio. Equity exists when individual perceives that the ratio of input to output is same for him as it is for others with whom he compares himself. Inequity exists if the ratios are not equal. There are two types of inequity under reward and over reward. If a person perceives that his inputs are more than the input of the referent other but he receives the same reward or is putting same effort and getting less reward than he feels under rewarded. While for the person who perceives that he is over rewarded the converse is true. The person feels that he is putting less effort than the efforts put in by the referent other and is getting the same reward or he is putting same effort and is rewarded more than the other. Inequity creates tension. When under rewarded tension creates anger and when over rewarded it creates guilt.
Perception Equity Person
Ratio Comparison Referent
Output Input
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=
Output Input
Under rewarded Equity
Output Input
Output Input
Fig. 8.5 : Equity theory
O I
O
Individuals attempt to lower inequity in various ways. They may change their input, the under rewarded employee is likely to work less hard or he may change the output for e.g. if the person is compensated by piece rate system, he may produce more low quality output. Inequalities created by over payment don’t seem to have a very significant effect on behavior.
Motivation
NOTES
Manager may think that if he gives pay raise to one employee he will get motivated. But such a pay raise may de motivate others if they perceive it unfair. In most work situations for managers equity theory emphasizes the importance of a reward system that employees perceive as fair. The manager should set up incentive system in such a way that it does not create any inequities,
8.4.8 Goal Setting Theory This theory was proposed by Edwin Cocke in 1960. It states that setting specific realistic and challenging goals results in better performance. The goal should be measurable and clear. Specific goals are better than those in which the person is told to ``do your best”. Challenging goals are difficult to attain thus requiring greater efforts to accomplish them. The individual experiences a feeling of pride when they attain challenging goals. Regular feedback of progress and result contribute to higher and better performance, as it helps in directing employee behavior towards goal accomplishment by providing clarification and praise.
Goals • • •
Clear Challenging Attainable
Goal Commitment
Motivation
Regular Feedback
Goal Accomplishment
Self efficacy
Fig. 8.6 : Goal Setting Theory Some factors like goal commitment and self efficiency may moderate relationship between specific and challenging goals and high level of motivation. Goal commitment means the dedication an individual have towards achievement of goal. The more dedicated they are the more efforts will be put in by them. Employees participation in goal setting can increase their level of goal commitment. Self efficiency is the individual belief that he has the potential and required characteristics to successfully complete a particular task. Higher the level of self efficiency greater will be the motivation to perform.
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Motivation
8.5 Summary NOTES
Motivation is the process of inspiring people to exert high level of efforts by satisfying their needs. All employees cannot be motivated in the same way. The need set is different for different people and hence their motivations. The various need theories of motivation are Maslow’s need hierarchy theory motivation-hygiene theory, ERG theory and McClelland’s need theory. They suggested that before motivating any one it is important to know that which need is dominating his or her behavior. Manager should introduce suitable motivators that satisfy his or her need. The chapter also discussed goal setting theory that suggests clean, difficult goals backed by regular feedback lead to higher performance. Equity theory stated that individuals may feel over rewarded or under rewarded after comparing their input output ratio with others. Equity theory emphasized fairness of the reward system. Expectancy theory stated that if there is a direct link between employee effort and reward that the employee value the employee will be motivated. In general depending upon the need and expectation of the individual the managers can employ combination of motivators to motivate employee. The motivators can be job security, working condition, pay, promotion, challenging job, participative decision making etc.
8.6 Key Terms
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Motivation: It is the willingness to exert high levels of effort towards organizational goals conditioned by the effort’s ability to satisfy some individual’s need.
Positive motivation: It is said to occur when an employee expects a certain reward when some performance or behaviour standards are met.
Negative motivation: It takes place when an individual feels a fear of failure or other negative consequences if the goal is not attained.
Extrinsic motivation: It refers to the influence of external factors like reward or punishment on the degree of individual’s effort.
Intrinsic motivation: The individual derives pleasure and enjoyment from the work due to his interest in task itself rather than being influenced by external factors.
Physiological need: This need includes basic requirement of nutrition, temperature, shelter and clothing that are essential for survival.
Safety need: It refers to individual’s need of protection from physical and emotional abuse.
Social need: It includes the need for affection, love, care and friendship.
Esteem need: It is the human desire to be respected and valued by others.
Self actualization need: It includes the need for growth, believing in one’s potential and self fulfilment.
Hygiene factors They are those job factors that prevent employees from becoming dissatisfied like supervision, salary working conditions, company policy and administration etc.
Equity: When the ratio of input(effort) to output(reward) is same for individual as it is for others with whom he compares himself then equity is said to exists. Inequity exists if the ratios are not equal.
Motivation
NOTES
8.7 Questions and Excercises Long answer questions (1) Compare and contrast Abraham Maslow’s motivation theory based on hierarchy of needs and Aldefer’s ERG theory. (2) What are the important variables that affect motivation at workplace? (3) What do you understand by motivation? According to herzberg theory, what are the factors that affect motivation? (4) Explain briefly vroom expectancy theory. (5) What is the role of self efficacy and good commitment in goal setting theory? Short answer questions. (1) How can manager satisfy the higher order needs of Maslow’s theory of hierarchy of needs? (2) Discuss the need for achievement as proposed by Mc.Clelland. (3) How do people react when they recognize inequity in their reward based system?
8.8 Further Reading and References (1) Anil Bhat, Arya Kumar, ``Management Principles, Process and Practices,’’ Oxford University Press Fourth edition. (2) C.B.Gupta, ``Management theory and Practice,’’ Sultan Chand & Sons , eleventh edition. (3) V.S.P Rao, V. Harikrishnan, ``Management Text and cases,’’ excel books , fourth edition (4) Robbins Stephens, Judge Timothy A, “Organizational Behavior”, Pearson Education (5) Douglas McGregor “Human side of Enterprise”, McGraw Hill 1960 (6) Abraham Maslow “A theory of human motivation” Psychological review Vol.80,1943. Management Process & Organisational Behaviour : 129
Groups and Decision Making
UNIT 9
GROUPS AND DECISION MAKING
NOTES
Structure 9.0 Introduction 9.1 Unit objectives 9.2 Group Defined 9.3 Formal Group 9.4 Informal Group 9.5 Stages in Group Development 9.6 Group Properties 9.6.1
Group Norms
9.6.2
Roles
9.6.3
Status
9.6.4
Group size
9.6.5
Group Cohesiveness
9.7 Relationship between Group Productivity, Norms and Cohesiveness 9.8 Understanding Difference between Work Groups and Teams 9.9 Creating effective Teams 9.10 Decision Making 9.11 Types of decisions 9.12 Steps in Scientific Decision Making 9.13 Alternative Models in Decision Making 9.14 Techniques of Group Decision Making 9.15 Difference between Individual and Group Decision Making 9.16 Committee 9.17 Summary 9.18 Key Terms 9.19 Questions and Exercises 9.20 Further Reading and References
9.0 Introduction
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Organization is a group of two or more people working together for common objectives. Individuals actually work in a group in organization. The behavior of person may be different when working individually than when he works as a group member in a group. Group dynamics play a very important role in determining the performance.
Groups form the basic building blocks of the organization hence it becomes imperative for the manager to understand group behavior and group properties. Most of the decisions about the organizations are taken in meetings. Meetings are actually a platform for interaction of group members. The individual decision making is different from group decision making. Most of the important decisions taken by the organization are taken by group.
Groups and Decision Making
NOTES
9.1 Unit Objectives After studying this unit, you should be able to
Understand the concept of group.
Know the difference between formal and informal group.
Describe group development process.
Explain the variables /properties that define group.
Explain the effect of cohesiveness and norms on group productivity.
Understand the difference between team and work group.
Identify the ways to build effective teams.
Understand decision making and types of decision.
Describe the scientific decision making process.
Differentiate between rational and administrative model of decision making.
Understand the various techniques of decision making.
Differentiate between individual and group decision making.
9.2 Group Defined A group is defined as two or more individuals interacting and interdependent who have come together to achieve a particular goal. A group can be a formal and informal for e.g. Team of doctors performing a surgery on a patient make up a formal group while friends going to picnic are an informal group. Formal groups are organizationally determined while informal groups are determined through social contracts.
9.3 Formal Group A group is formal when it is purposefully formed to achieve organizational objectives. Formal group has a formal structure having hierarchy and structure that defines duties, responsibilities, authority of the individuals in the group. The members of the organization are divided into small workgroups by deliberate and systematic efforts. Each workgroup is given a responsibility to perform a task that contributes to the overall organizational objectives. Formal groups form a subset of organization structure. The behaviour of the formal group depends upon the following factors imposed by
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NOTES
organizational forces. (1) Authority and structure : The authority structure determines the right to take decision of the individual in the work group. It defines who among the work group will take decision and who will report whom. (2) Formal regulations : The workgroup has to abide by the rules and regulations laid down by the organization to standardize the behaviour of employees. These regulation lead to consistent and predictable behaviour of employees. (3) Organizational Resources : Some organization that are profitable have abundance of resources in terms of fund, equipment, facilities etc. while other organization may not be that fortunate. The abundance and lack of resources influence group behaviour. (4) Performance evaluation and reward system : Whether the system reward individual performance or group performance? Such decisions greatly influence the group behaviour. (5) Physical work settings : The work settings and physical layout like arrangement of machines, proximity, illumination, acoustic system, can create obstacles or opportunities for work group interaction. (6) Organization strategy : The type of strategy the organization is pursuing for e.g. expansion or retrenchment, greatly influence the amount of resources that are made available to the groups, work environment, emotional well being etc. During retrenchment the group experience shrinkage in resources and the employees will be under stress and anxiety. (7) Organization culture : Every organization has a culture which is a unique set of relatively stable characteristics. Organization culture is a set of shared values, understanding, assumptions that controls the behavior of organizational members.
9.4 Informal Group Informal groups do not have any formal structure and are made by the members voluntarily. Such relations are formed between people at their own discretion. Informal groups are formed due to personal bonding between people. Personal bonding develops due to similar likes and dislikes. Even while working in a formal group people tend to form informal group depending upon their personal liking. Informal organization not only benefits the employees but benefits the management as well, the benefits are as follows: Advantages to employees
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(1) Sense of Belonging : A formal group has a rigid structure having formal authority and predetermined duties where the employee does not feel the sense of belongingness and does not derive personal satisfaction. This gap is filled by joining an informal group. People join group because of their need
for affiliation and security. Group provides warmth and support to its group members. Group also provides people with the feeling of self worth. (2)
Emotional support : Work life involves various frustration and tensions. As in an informal group people might share the same problem, they collectively deal with situation At times employee may need a person as friend to hear his problem and support him emotionally. In the informal group people can easily share their feelings.
Groups and Decision Making
NOTES
(3) Aid on the Job : The informal group members share a close relation. They may help each other in case accident or illness. Often, the group members exchange work assignments on the basis of specialization of group members rendering better performance which at times is more than what is expected from them. (4) Power : People feel strong and powerful when they join group as there is power in number. A goal that cannot be achieved by an individual alone becomes possible through group actions. They are able to pool knowledge, power, and talents in order to achieve their goal. Advantage to the management (1) Less supervision : Informal group has its own policies and favorable group norms for organization that act as a check on the behavior of the employees. It substantially reduces the supervision load of the management. (2) An aid to management : The informal group helps in bridging the short coming in a manager’s abilities. The group members may help the manager without making others to know about his weaknesses. (3) Feedback : The informal group provides the manager much valued feedback about employees and experiences which helps them better understanding of their expectation from the management. It also helps in developing employees’ trust in management. Disadvantages (1) Resistance to change: An informal organization is bound by customs, conventions and culture. They are so much habituated that they resist change. (2) Sub-objectives: The group gives more preference to group objectives than to organization’s objective. (3) Rumour: An informal group often create information which does not have any strong base. They create rumour. This type of grapevine can be unfavourable for management. (4) Displaced loyalty: Workers are more influenced by the informal group and become more loyal to them than to the organization.
9.5 Stages in Group Development In the process of evolution group undergoes through five stages model of group
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NOTES
development: forming, storming, norming, performing and adjourning. (1) Forming : In the first stage the group members try to gather information and impression about each other. The members want to be accepted by others and hence are usually polite and positive in their behavior. Group members try to acquaint themselves about the task. The leader behavior is directive and informative. (2) Storming : The second stage is characterized by confrontation, disagreement. As the group members attempt to organize for the task different ideas compete for consideration. Conflict is inevitable part of this stage. They address issues about what and how the task is to performed, who will be responsible for what etc. Conflicts will arise over leadership, power and structure too. (3) Norming : Rules of behavior are set and hierarchy is established. Individuals try to resolve interpersonal conflict and begin to experience a sense of belongingness towards group. Now the group members are ready to take responsibility for one goal and a plan set by the group. (4) Performing : By this time group members are well informed and motivational to function. At this stage group members are most productive. They progress towards the common goal supported by structures and process that have been set up by them at the norming stage. This stage is marked by interdependence in problem solving and personal relations. (5) Adjourning : This stage involves completion of task and breaking of the group. Separation issues are addressed and group members may express appreciation of each other and group experience.
9.6 Group Properties 9.6.1 Group Norms They are the acceptable standard of behavior that are established and shared by group members. Norms are the rule of conduct that ensures uniformity in action. The group norms may include performance norm, appearance norm, social arrangement norms etc.
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Performance norms : These norms set standards for the level of the output, method of doing job, quality of efforts to be put in etc. Performance norms are one of the major contributing factors in employee’s productivity apart from employee’s ability or level of motivation.
Appearance norm : They set standards for appropriate dress code, arrival and departure time as well as their leisure periods (when to look busy).
Informal social arrangements : These norms regulate social interactions for e.g. friendship. They influence social gathering like lunch, party, picnic etc.
According to Feldman “the group norms that are enforced by group ensure group
survival facilitate task accomplishment, contribute to morale, or express group central value. The group norms ensure predictability and group members become aware of each other’s action and reactions. They take appropriate measures while responding to their group members. Group norms are generally those norms that majority of group members promote. These norms must have either improved the chances of success or must have protected the group from outside threat in the past.
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NOTES
9.6.2 Roles They are the expectation of behavior from group member occupying a given position in the group for e.g. manager in the organization is expected to play role of spokesperson, resource allocator, disturbance handler etc. In private life he may also be a chairman of a golf club. The goals can be either compatible or contradicting. In group every member is supposed to play a role. The degree of success of any group member in a group depends upon the extent to which group member’s role perception fulfills the expectation of other group member about his role. In other words when individual is able to act in a way that others expect him to act in a given situation, he will be evaluated positively by group members.
9.6.3 Status A formally or informally defined position or rank given to a group member by other in a group is called status. For eg in formal context principal has a higher status than the teacher. In informal context variables like education, age, sex , experience etc play an important in determining the status of individual in a group. Studies have shown that high status group members enjoy more freedom to deviate from norms than low status group members. Status also influences interaction among members of the group. The lower status member tends to be less vocal in group discussion as compared to high status group members.
9.6.4 Group size The size of the group also influences group behavior. The research indicates that smaller groups are more effective at completing task than larger ones. On the other hand larger groups have advantage of diverse input and variety of talents. When the goal of the group is fact finding or information gathering then larger group is effective. Social loafing increases with the increase in size of the group. Social loafing is the tendency of an individual to exert less effort when working collectively than when working individually. In order to avoid social loafing in a manager should build individual accountability while assigning task to the group. The performance appraisal and reward system should include peer evaluation and group reward based on individual efforts.
9.6.5 Group cohesiveness It is the measure of bond among group member that holds the group together. It is the degree to which members are attracted to each other. The factors that are responsible for group cohesiveness are
Time spent together : If the group members get enough time to spend time together they get closer to each other. It helps them to know each other
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well which facilitates friendship. Physical proximity also plays a very important role.
Group size : As the number of members in the group increases it becomes very difficult to interact and communicate with each other. Continuous interaction is important factor that improves cohesiveness. Due to lack of time for interaction group cohesiveness decreases with increase in size. But at the same time small groups emerge within the large group. This results in dilution of common objectives of the group as well as group cohesiveness.
Barrier at the entry level : Sometimes the group is characterized by special qualities or status each member enjoys. The selection of the member is based on the exclusive qualification or status that he posses. If the individual do not posses that special quality he is not included in the group for e.g. students who join prestigious college because of their merit feel a sense of pride in it. They form group because they have a common characteristics that results in liking towards each other which in turn increases cohesiveness.
Gender of member : It has been found through research studies that women form much cohesive group as compared to males. The reason can be attributed to the fact that the women are less competitive and more cooperative than their male counterparts.
Outside pressure : External threats facilitate group cohesiveness. As the group perceives that their common objective is in danger due to outside pressure they forget their differences and unite to ward of threats. The philosophy “United with stand and divided we fall” comes into play.
Similar Interest and personalities : Compatible goals, similar likes and dislikes and similar value systems of the members also increase group cohesiveness.
NOTES
9.7 Relationship between Group Productivity, Norms and Cohesiveness Check Your Progress 1. Distinguish between formal and informal group. 2. What are the advantages and disadvantages of informal group?
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Studies have found that cohesiveness is related to group productivity. Most of the research has indicated that there is a positive relationship between group productivity and group cohesiveness. In cohesive group, group members act as stress busters by providing emotional support and helping hand. The second important thing that influences group productivity are the group norms, specially performance related norms. Group norms act as a moderating variable. It has been found if performance related norms are high, then a cohesive group will be more productive than a less cohesive group. If performance related norms are low then a cohesive group will perform very low than a less cohesiveness group. The following figure explain the relationship
Groups and Decision Making
Moderate High W o
Productivity High
to low
NOTES
productivity
r k
Moderate
N
Low
o
Productivity
r m
Low
High
to low productivity
Low
Group Cohesiveness Figure 9.1 Relationship between productivity, cohesiveness and group norms
9.8 Understanding Difference Between Work Group and Teams A work team is a group of individuals that generates positive synergy through coordinate efforts and complementary skills. The members of the group primarily interact to share information so as to aid group members in making decision. The need for significant improvement in performance necessitates collective performance and joint efforts of the team members. Team has greater performance potential as compared to work groups. Team requires more deliberate efforts and monitoring as compared to work groups. Group of clerks in departmental store is an example of work group. They have similar individual objectives and there is some level of coordination between them. They are neither interdependent or have shared accountability. Team is characterized by true interdependency and shared accountability. If during cricket match the fielder misses a catch the whole team faces failure. The players have to play according to the strategy laid down by the captain necessitating high degree of coordination and joint effort. There is individual accountability in work group but in teams there is both individual and mutual accountability. Team demonstrates the old saying. The whole is greater than the sum of its part. The differences between work group and work team can be best understood through the following figure.
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GROUP
NOTES
Basis
Share Information
Neutral
TEAM
Purpose to form group
Collective
Synergy
Positive
Individual
Accountability
Individual and mutual
Random and varied
Composition of Skills
Complementary
Performance
Fig. 9.2 : Difference between work group and team
9.10 Creating Effective Teams
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Clarify and establish specific goals : Articulate team’s purpose into specific measurable and realistic performance goals. Also communicate how the team contributes to the company’s success.
Skills and role of the members : It is important for the team leader to identify strength and weakness of its team member and assign them the jobs that best fit their skills. There are two types of role worth mentioning: task specialist role and socio emotional role. For a team to be effective it must have people in both task specialist role and socio role. People who play task specialist role provide information, opinion and relate various ideas to the problem in hand. While people who play socio emotional role encourage members of the group , harmonious interpersonal relations and reduce tension in the group. Effective team requires three types of skills: decision making skills, technical skills and interpersonal skills. The right mix of the skills is crucial to the success of the team. Too much of one at the expense of others may hamper the effective performance of the team.
Rewards : The team leader should acknowledge important milestone and plan celebrations for incremental success. He should appraise and reward the team as a whole and each employee individually, including a review of his or her teamwork.
Size : The high performing team tends to be small. Large teams do not give adequate opportunity to its member to interact and understand each other which is very important to build trust and rapport. Group cohesiveness is instrumental in achieving high performance.
Trust and commitment : The leader should develop trust in the minds of the members. The members should have a belief in the integrity, character and ability of others. High – performance teams are characterized by high mutual trust among members. The effective team has common meaningful purpose that provides direction and commitment for members.
Leadership and structure : The leader should be able to encourage members build trust and confidence, resolve conflict and provide direction. Member should agree on what is to be done, who is to do what and ensure that all group members contribute towards the goal.
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NOTES
9.10 Decision Making Decision making is a process that aims at choosing the best alternative among various alternative to achieve desired objective. According to Haynes and Massie, “Decision making is a process of selection from a set of alternative courses of action which is thought to fulfill objective of the decision problem more satisfactorily than others.”
9.11 Types of Decisions Programmed Vs. Non programmed decision Programmed decisions are related to routine matters. Guidelines for decision are already available to decide maker. He has to just identify the problem and implement the predetermined solution given in guidelines. It saves his time and efforts .Non programmed decisions are unique in nature, hence readymade solution are not available for them. High degree of deliberation and decision making skills are required to solve such problems.
Operational Vs. Strategic decisions Operational decisions are made at the lower level of management and are mostly concerned with short term decisions, while strategic decisions are made at higher level of management hierarchy. They are usually long term decisions that demand conceptual, diagnostic skills and creativity on part of management.
9.12 Steps in Scientific Decision Making In order to optimize the outcome some systematic steps are to be taken (1) Identify the problem : Whenever a disparity between desired and actual state is encountered the problem is recognized. The problem can be due to environmental factor; both internal and external to the organization for e.g. threats and opportunities in external environment. (2) Diagnose the problem : The manger should be able to differentiate symptoms from the real causes of the problem. The source of the problem should be identified accurately. The problem should be identified on the basis of magnitude , urgency and impact on various others factors. It also involves generating the decision criteria.
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NOTES
(3) Develop alternatives : The next step is to make a list of various options that can be used to resolve the problem. For eg. if the person wants to buy a car he should make a list of various model of car of different companies available in the market. (4) Evaluation of alternatives : The manager should be able to identify strength and weakness of each alternative. The decision criteria should be prioritized and assigned weights accordingly. Various criterion of each alternative should be given score. Peter Druker has suggested few criteria to evaluate alternatives which are risk, economy, timing and limitation of resources. If we refer to the above example of buying car the decision criteria can be capital outlay, mileage, safety, power, aesthetic, space etc. The weights should be assigned to these criteria depending on the priority. If budget is the main limitation then mileage and capital outlay should be given highest weight. Then various models should be given scores for every criterion say at a rating scale of ten. These scores should be multiplied by weights and total should be obtained. (5) Select best alternative : Once the alternatives are evaluated the best course of action that maximize results under conditions are chosen. In the above example the model for which total score is the highest should be chosen. (6) Implementation : The decision should be communicated and people should be identified who will execute the decision. Adequate authority should be delegated and necessary support and resources should be allocated to them. They should be held responsible for results.
9.13 Alternative Models in Decision Making Rational Economic model According to this model the decision maker has clear and well defined goals. He can identify and diagnose the problem correctly. He knows all possible alternative courses of action and can rank them perfectly according to the decision criteria. He can choose the best alternative and maximize his satisfaction. He has all the information required with him that is relevant to decision making and is able to analyze and use it perfectly.
Administrative Model
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According to this model it is not possible for decision maker to be completely rational. To identify and diagnose a given problem accurately is a difficult task. Decision maker does not have perfect knowledge regarding all alternative solution to the problem, nor does he know their consequences perfectly. The power of decision maker is limited by his cognitive abilities and knowledge. Moreover the constraints of resources in terms of time and cost do not allow him to go for comprehensive analysis of situation and alternatives. Decision maker operates under the condition of bounded rationality. Instead of going for exhaustive search he simplifies the decision making model by limiting the number of alternatives and the consequence is, that he chooses good enough solution
rather than best solution as propagated by rational model.
Groups and Decision Making
9.14 Techniques of Group Decision Making NOTES
(1) Brainstorming This technique was developed by A.F. Hosborn. This technique aims at encouraging group members to generate ideas for alternatives of solutions to the problem given by way of interaction, withholding criticism. In this technique the group leader presents the problem in a clear manner in front of the group members and encourages them to produce alternatives. They are permitted to interact freely and criticism is not allowed. All the alternatives are recorded, analyzed and discussed at a later stage. This technique fosters creativity as group members are free to think and present their ideas.
(2) Nominal Group Technique In this technique communication and interpersonal interaction is restricted. The problem is presented to the group members by the group leader. Every group member writes his own idea on a paper and each member gives presentation on his idea in front of the group. No discussion takes place until all members of the group have presented the ideas. Once presentation of ideas are over the group is permitted to discuss the ideas freely. After discussing and evaluating every idea, the ideas are ranked. The idea that gets the best ranking by the group members during the process is selected.
(3) Delphi Technique It insulates the members from undue influence of other members by eliminating the need to assemble at one place. The problem is mailed by the group leader to various experts along with questionnaire that purports to obtain solution for the problem,. The experts send their solution through mail. The leader compiles the solution of all the experts into a report and forwards it to them once again to obtain feedback. Each expert analyzes and evaluates the report, develops new suggestions if required, ranks the ideas present in the report and resend it to the group leader. The process continues till a best possible, clear solution emerges from this exercise.
9.15 Difference between Individual and Group Decision Making Decision making involves selection of a course of action from among two or more alternatives to arrive at a solution for a given problem. Group decision making happens when group members collectively make a choice from the alternatives before them through census or consultation. Decision making without the group input or group opinion is individual decision making. Advantages of Group Decision Making 1.
A group has the potential of generating more complete information and
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knowledge as compared to individual decision making. 2.
Group offers increased diversity of views since there are many members in a group and so are many views leading to better decision, while in individual decision making approach the person has to rely on his own intution and views.
3.
In group decision making there is increased acceptance of a solution by group members because the group members are involved in the process of decision making. Group decision making is effective when the solution directly affects the group member while in individual decision making person will not take into consideration the interest of every member.
NOTES
Disadvantages of Group Decision Making 1
Group decision making is very time consuming while individual can make prompt decisions in individual decision making. So in terms of speed individual decision making fairs better than group decision making.
2
In individual decision making the decision maker can be held accountable for his/her decision, while in a group it is difficult to hold any one person accountable for a wrong decision.
3
The group makes riskier decision as compared to individual.
Group Think and Group Shift Group Think Group think is an extreme form of consensus in which group pressure for conformity overrides the realistic appraisal of alternative courses of action. There is a tremendous desire for unanimity thus inhibiting free exchange of ideas .There is illusion of unanimity as members hesitate to communicate their views in order to avoid being harsh in their judgment of each other’s ideas. This tendency is more evident in cohesive group. Group Shift The shift in the position of the members towards an extreme position that can be either conservation or risky, depending on the dominant view the members hold during pre discussion. The group discussion tends to exaggerate the initial position of the group. The conservative type becomes more cautions and risk averse, while aggressive types take on more risk. It has been found that more often the shift is towards greater risk.
9.16 Committee
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A committee or task force is a group structure in an organization which works for certain committed matter. It comprises of people who are put together for accomplishment of a specific job task; it is a temporary set up which ceases to exist once the specified task is achieved. The concept of task force is borrowed from Navy and other defence services. The members of the committee assemble to discuss a particular problem. They debate on the available solutions and then recommend that solution for the problem
which the committee members think best. The duration of such a committee can be for a limited. The member of the committee can be assigned other responsibilities of the organization other than the activities of the committee. The basic ideology of setting a committee is to generate an autonomous opinion about any function or activity of the business. It comprises of people of various departments that are representative of their department. This is done to render an improved analysis of business operations.
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NOTES
Advantages of committee (1) Better decision making : It renders a suitable means of exchange of ideas and information between large groups of people. The intelligence of large number people helps in better decision making. By pooling the opinion of people having different background, interest and specialization wider knowledge base is generated. This helps in analyzing the problem from different angles leading to more appropriate decision. (2) Innovativeness and Creativity : It provides access to a wide range of ideas, expertise and interests of people who belong to various departments, which brings creativity and innovativeness in doing things. Brainstorming sessions are conducted during discussion process due to which new ideas emerge. (3) Effective coordination : Since people of various departments meet to solve the problem the committee facilitates integration. After decision is made the managers of the respective department try to unify the efforts so that implementation of the decision can be done smoothly. (4) Consolidation of authority : Some problems cannot be solved due to splintered authority. So the managers have to meet and pool their authority to take decision as no manager has adequate authority to implement the decision. (5) Motivation : The participation in decision making improves the morale and motivation of committee members. They give their whole hearted support during implementation of decision. Participation enhances loyalty and commitment towards organization. (6) Check against abuse of power : Since the decision has to be made by committee members jointly the authority gets dispersed among committee members. No individual member can act according to his or her wish and fancy. Thus committee keeps a check on misuse of power. (7) Training Base : Committee provide a strong training ground for the executives. They understand human relations, group dynamics etc. It also helps them to visualize the organization as a system. This helps them in understanding the various facets of the organization and their relationship with each other as well as their impact on the overall objective of the organization. It widens their knowledge and facilitate general management ability.
Check Your Progress 1. What are the various types of decisions? 2. What is a committee? How does it help in problem solving?
Disadvantages of committee (1) Expensive : Pooling of manpower at a large scale requires considerable expenditure. The executives have to spend time in the meeting and time
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involves cost. Other expenses are travelling allowance, preparation of reports, daily allowances etc. (2) Delay in decision making : Arriving at consensus is not easy in such a group which results in delay in decision making. A lot of time is spend on deliberation, discussion and resolving conflict. Sometimes the committee members lose their focus from the real problem and start discussion on trivial matters.
NOTES
(3) No clear cut authority : In the absence of any clear cut authority any group which tends to occupy power becomes decision maker. Dominance of a particular individual or group can lead to group think that may fail the very purpose of forming a committee. (4) Poorly defined accountability : Since the decision is jointly made it becomes very difficult to hold any one person responsible for the decision. This also leads to the problem of group shift.
9.17 Summary Manager should understand the group dynamics because group forms the basic unit of the organization. A group consists of two or more individual interdependent and interacting with each other for common objective. The groups can be formal or informal. People join groups because it gives them support, power and a sense of belongingness. Group members help each other in discharging their duties. The stages in group development process include; forming, storming, norming performing and adjourning. Group properties include group norms, group size, group cohesiveness, status and role. Group properties affect group productivity. Teams are different from groups in terms of purpose, accountability, synergy and composition of skill. Effective team can be created through clarifying goals, right mix of skills, appropriate size and reward system, trust, commitment, leadership and structure. Decision making involves choosing the best alternatives from the available alternatives to achieve desired goals. The decision making models are rational/scientific and administrative model. The various techniques of group decision making are brainstorming, nominal and Delphi techniques. Group decision making offers better decisions as compared to individual decision making. It suffers from group think and group shift. Speed of decision and accountability pose a problem for group decision making.
9.18 Key Terms
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Group: It is defined as two or more individuals interacting and interdependent who have come together to achieve a particular goal.
Formal Group: This type of group is purposefully formed to achieve organizational objectives and has a formal structure having hierarchy and structure that defines duties, responsibilities, authority of the individuals in the group.
Informal Groups: They do not have any formal structure and are made by the members voluntarily.
Group norms: They are the acceptable standard of behaviour that are established and shared by group members.
Roles: They are the expectation of behaviour from group member occupying a given position in the group.
Group cohesiveness: It is the measure of bond among group member that holds the group together.
Team: A work team is a group of individuals that generates positive synergy through co- ordinate efforts and complementary skills.
Decision making: It is a process that aims at choosing the best alternative among various alternative to achieve desired objective
Group think: It is an extreme form of consensus in which group pressure for conformity overrides the realistic appraisal of alternative courses of action.
Group shift: The shift in the position of the members towards an extreme position that can be either conservation or risky, depending on the dominant view the members hold during pre discussion.
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NOTES
9.19 Questions and Excercises Long answer questions (1) “Group always makes better decision than individual”. Comment. (2) Explain the process of scientific decision making. (3) What do you understand by group cohesiveness? What are the factors that affect group cohesiveness? What is the impact of group cohesiveness and group norms on productivity? (4) What is the difference between team and work group. How to make an effective team? (5) Explain the process of group development. Short answer questions (1) Differentiate between rational model and administrative model of decision making. (2) Differentiate between nominal and delphi technique of decision making. (3) Write short notes on (a) Group size and social loafing (b) Roles (c) Brain storming
9.20 Further Reading and References (1) Marvin E. Shaw, ``Group dynamics,’’ New York, McGraw Hill, 1981. (2) H. Owen, ``Creating top flight team,’’ Kogan page ,London 1996. (3) Robbins Stephens, Judge Timothy A, ``Organisational Behaviour,’’ Pearson Education. (4) V. S. P. Rao, V. Harikrishnan, ``Management Text and cases,’’ excel books, fourth edition.
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Leadership
UNIT 10 NOTES
LEADERSHIP
Structure 10.0 Introduction 10.1 Unit objectives 10.2 Leadership Defined 10.3 Leadership Theories 10.3.1 Trait Based Approach 10.3.2 Behavioral Approach 10.3.3 Contingency Approach 10.3.4 Modern Theory of Leadership 10.4 Summary 10.5 Key Terms 10.6 Questions and Exercises 10.7 Further Reading and References
10.0 Introduction If we look into the past, we will find exemplary examples of effective leadership. Mahatma Gandhi, Karl Marx, Abraham Lincoln, Bill Gates, JRD Tata and many more have brought revolution, innovation and transformation in different fields of‘ business and politics through their intellect and personalities. The world that we see today is the outcome of their courage, ability and power to influence people towards the goal they pursue. Leadership plays a central role in the organization by influencing and inspiring people towards goal attainment.
10.1 Unit Objectives After studying this unit, you should be able to-
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Understand the concept of leadership.
Identify important traits suitable for leadership.
Explain different leadership styles.
Explain managerial grid.
Describe Fiedler contingency model.
State Hersey Blanchard situational theory.
Summarize Path goal theory.
Define the characteristics of charismatic leader and transformational leader.
Leadership
10.2 Leadership Defined Leadership is defined as a process of influencing people to perform well so that mission / goal can be accomplished. Leader guides and directs the actions of others towards goals.
NOTES
According to George R. Terry, ``Leadership is the ability to influence people to work willingly for group objectives.’’ This definition puts direct emphasis on the willingness on the part of the people led. Koontz and O’Donnel have defined leadership as ‘influencing people to achieve common goal. It is the ability to exert interpersonal influence by means of communication towards the achievement of goal.’
10.3 Leadership Theories The leadership literature is voluminous. There are basically four approaches to explaining what makes an effective leader. They are trait based approach, behavioral approach, contingency approach and modern approach.
10.3.1 Trait Based Approach Trait theory of leadership emerged from “Great Men Theory” proposed by Thomas Carlyle who wrote the book ‘Heroes and hero worship’. He researched the leadership qualities of men such as Napoleon , Martin Luther etc.
Trait theory Traits are specific personality, physical or intellectual characteristics in a leader that differentiate leaders from non leaders .Every individual endures certain traits. Effective leaders have right combination of traits that are particularly suited to leadership. The researchers studied the characteristics of many successful and unsuccessful leaders and tried to identify those characteristics that lead to leader’s effectiveness. They evaluated leaders based on the following traits: 1.
Physiological characteristics like appearance, height , weight ,energy levels etc.
2.
Demographic characteristics like age, education , socio economic background etc.
3.
Personality characteristics like self confidence, conscientiousness, emotional stability etc.
4.
Intellectual characteristics like decisiveness, knowledge, judgment, indulgence, creativity etc.
5.
Task related characteristics like persistence, openness to experience, achievement orientation, initiative etc.
6.
Interpersonal characteristics like agreeableness, extraversion, communication
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skills etc. According to Trait Theory leaders are born and not made. Below are some of the traits identified by the researchers
NOTES
Researcher
Traits
Stogdil(1948)
Dependability , Sociability, Initiative, Persistence, Self confidence, Alertness, Cooperativeness, Adaptability
Mann(1956)
Adjustment, Extraversion, Dominance, Masculinity, Conservatism
Bass (1990)
Adjustment, Adaptability, Aggressiveness, Alertness, Dominance, Emotional balance, Control, Independence, Non conformity, Originality, Creativity, Integrity, Self confidence
Kirk Patrick and Locke(1991) Achievement drive, Ambition, Energy, Initiative, Self confidence, Honesty, Integrity, Emotional stability Hogan(1994)
Extraversion, Agreeableness, Conscience, Emotional stability
Research efforts in identifying traits common in effective leaders resulted in failure to reach any conclusion. The problem with trait based approach is that researchers have been unable to identify a common agreeable set of leadership attributes. Trait theory was criticized because there were only 5 % of similar traits that were found in 100 studies.
10.3.2 Behavioural Theories The behavioral theories focus on the manner and approach of providing direction and motivation to the people by the leader. Main emphasis of the behavioral approach was to identify different leadership styles.
(1) Michigan Studies The most comprehensive of the behavioral theories resulted from research that began at Ohio state university in the late 1940 and Michigan leadership studies in the 1950. The studies undertaken by Michigan University came up with two dimensions of leader’s behavior. They labeled these two dimensions as employee oriented and production oriented. Employee oriented leader was described as one who emphasizes good interpersonal relationship with the subordinates. They act in friendly and supportive manner towards their subordinates. They show trust and confidence in group member.
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Production oriented leader tends to emphasize on the task aspect of the job. The leader structures his role or her role as well as the roles of the subordinates towards achieving the goals. They strictly make sure that deadlines are met and target is
achieved.Michigan researchers favored employee oriented behavior. The findings revealed that employee oriented behavior has a positive effect on productivity and job satisfaction.
(2) Managerial Grid
Leadership
NOTES
Blake and Mouton proposed five different leadership style through a managerial grid. The grid depicted two dimensions of leader behavior with concern for production as x-axis and concern for people as y-axis, each axis ranges from 1(low) to 9(high). (1,9) (1,9)Country CountryClub Club
Concern for People
High
(5,5) (5,5) Middle the road road Middle of of the
(1,1)Impoverish Impoverish (1,1) Low
(9,9) (9,9)Team Team
(9,1) Task master ( 9,1) Task master
Concern for Production
High
Fig. 10.1 : Blake and mouton’s managerial grid (1) Country Club (1,9) : This leadership style has low concern for production and high concern for people . Leaders give due attention to the needs of the people. The leader feels that if he will provide friendly and comfortable environment to the people they will feel secure and relaxed. This will lead to self motivation and people will work hard on their own. But lack of direction and control can hamper production. (2) Produce or Perish (Task Master) (9,1) : This leadership style has high concern for production and low concern for people. The employee needs are unimportant and are not taken care of. The leader believes that efficiency can result by putting pressure on employee through strict rules and punishments. This style can be effective in times of crisis. But it leads to dissatisfaction of employees and high turnover. (3) Team (9,9) : This Leadership style show concern for people as well as for production. Leaders using this style encourage teamwork through creating an atmosphere of empowerment, commitment, trust and respect. The result
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NOTES
is that employees feel satisfied and are motivated to perform better. (4) Impoverish (1,1) : The leader shows low concern for both people and production. The leader uses this style to protect him from getting into trouble. His main focus is to preserve job and job security. This style is most ineffective and leads to disharmony and disorganization in the organization. This style can be successful only when followers are mature and show high level of motivation. (5) Middle of the Road (5,5) : This is basically a compromising style where in leader tries to balance the two competing concern by giving away a bit of each concern. The leader settles for average performance. The consequence is neither production nor people needs are fully met.
(3) Leadership Styles Proposed by Kurt Lewin Kurt lewin established three major leadership styles. These styles are as follows:
(a) Authoritarian (Autocratic) Leaders have complete control over their people. They make decisions without seeking advice from their followers. They clearly state what they expect from their followers and how the work is to be accomplished by them. The advantage of autocratic style is that it aids in quick decision making. But the disadvantage is that the followers resent it and feel demotivated and demoralized. However the style can be effective in times of crisis when quick decision making is of utmost importance and employees are motivated for e.g. : military organization uses autocratic leadership style. (b) Participative Leader involves his group member in decision making process before making a final decision. It helps in making better decisions as it utilizes the knowledge and skills of the employees also. The advantage of this approach is that it increases productivity and job satisfaction of the group members. The only drawback is that it slows the decision making process as valuable time is consumed in gathering input from group member. This is most effective when quality of decision is more important than speed. (c) Delegating
Check Your Progress 1. Discuss the limitation of trait theory of leadership. 2. Distinguish between autocratic leadership style and participative style.
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Leaders allow their group members to make decision and work on their own. The leader follows the policy of non interference. Their group members have complete freedom to do their work. The leaders provide resources and advice only if needed. This style leads to high job satisfaction and increased productivity of the group members. This style gives more room for development to the followers. The downside is that it can be damaging if the employees are not knowledgeable and do not have willingness to work.
10.3.3 Contingency Approach It became increasingly clear to those who were studying leadership that predicting effectiveness of a leader on the basis of traits or a particular style is not adequate. Situational factors also play a very important role. Different situation may call for a different leadership style. A particular style may be effective in one situation but may
not be effective in another situation. Thus it becomes imperative that leadership style should change according to the situation in which the leader is leading. The notable model in this category is Fiedler’s model, Hersey Blanchard situational theory and path goal theory.
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(1) Fiedler Contingency Model Fielder developed an instrument known as the least preferred co- worker questionnaire that purports to measure whether a person is task or relationship oriented. In the questionnaire respondents have to rate one person they least enjoyed working with. Based on the answers to the LPC questionnaire the person’s leadership style is determined. If the LPC score is high then the person is relationship oriented and if LPC score is low then the person is task oriented. Before matching leadership style and situation it becomes necessary to define the situation. (1) Leader-Member Relations : The degree of trust respect and confidence followers have in their leader. It specifies that whether leader have support of their followers. It indicates how much leader is liked by followers and their willingness to accept the leader’s behavior. The leader member relation can be good or poor. (2) Task Structure : It is the extent to which task performed by the subordinates are clearly defined. If the tasks are routine and standardized, the work to be done become predictable. The task can be highly structured or lowly structured. (3) Leader Position Power : It is the degree of power inherent in leader’s organizational position. It refers to the extent to which leader has authority over group member and power to reward and punish them. The position power can be weak or strong. (4) Matching Leadership Style and Situation : Fiedler constructed eight combination of group task situation ranging from most favorable to most unfavorable with help of these three variables. The most favorable situation is one in which the leader member relationship is good ,task is highly structured and leader position power is strong. The most unfavorable situation is one in which the leader member relationship is poor, task is unstructured and leader position power is weak. Based on fielder’s study of over 1200 groups he tried to match leadership style with situation so that leader becomes effective. This is well explained in the comprehensive diagram given below;
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Situation \ SituationsI Variables
II
III
IV
V
VI
VII
VIII
Leader member Relations
Good Good Good
Good Poor Poor
Poor
Poor
Task Structure
High High Low
Low
Low
Low
Position Power
Strong Weak Strong Weak Strong Weak
Appropriate Leader behaviour
Most Favourable Taskoriented
High High
Moderate Relationship oriented
Strong Weak
Most Unfavourable Task oriented
Fig. 10.2 Fiedler Model Source : “Findings from Fiedler model” Robbins Stephens, Judge Timothy A, Organizational Behavior, Pearson Education Fiedler concluded that task oriented leader performs best at the extremity i.e. when situation are most favorable or unfavorable, while relationship oriented leader perform best in situations that are moderate. Fiedler model is based on empirical study. It lacks explanation as it does not have theoretical orientation. The reliability of LPC is also subject to criticism.
(2) Hersay Blanchard Situational Theory It is a contingency theory that focuses on follower’s maturity. It states that leadership effectiveness can be attained by selecting appropriate leadership style which depends upon the level of the follower’s maturity. Maturity is the measure of follower’s competence and motivation. In other words it is the degree of willingness and ability the followers have to perform required task. Hersey and Blanchard proposed four leadership styles each of which is combination of task and relationship behavior. They are described as follows: Telling (high task low relationship): It emphases a directive behavior that requires leader to tell people exactly what to do and how to do it. Selling (high task-high relationship): The leader provides both support and direction by giving followers advice and help to gain necessary skills through coaching method. Participating (low task- high relationship): Leader takes the role of a facilitator and motivator by involving followers in decision making. He tries to persuade follower to cooperate through praise and communication. Delegating (low task- low relationship): Leader monitors progress from a distance and is less involved in decision making. Most of the responsibility is shouldered to the followers. Management Process & Organisational Behaviour : 152
Hersey Blanchard proposed four levels of maturity of the followers( R1, R2, R3, R4) and tried to match them with the four leadership style
At the stage R1, the followers are neither motivated nor possess necessary skills. They require guidance and directions and hence telling leadership style is most appropriate. At the stage R2, the followers are motivated but lack skills. They require direction and support from their leader selling leadership style is best suited for these kinds of followers.
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At the stage R3, the followers are competent but lack the drive to work. The participative leadership style can be helpful in this situation as it will try to address the motivational problems of the followers. At the stage R4 , the followers can do the job and are motivated too. The followers need very less support or direction and hence the leader doesn’t have to do much. The delegating leadership style is appropriate while interacting with followers having high maturity level.
Relationship behavior
High
Low
Participating This style is effective for followers, who are able and unwilling (R3).
Selling This style is effective for followers, who are unable and willing (R2).
Delegating This style is effective for followers, who are able and willing (R4).
Low
Telling This style is effective for followers, who are unable and unwilling (R1).
High
Task behavior
(Maturity level of subordinates) Moderate
High
R4 * Able and Willing
R3 * Able and unwilling
Low
R2
R1
* Unable and Willing
* Unable and unwilling
Fig. 10.3 : Hersey and Blanchard’s Stuational leadership Model
(3) Pathgoal Theory The next significant theory to emerge in contingency category was Robert House’s
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path goal theory. The leader task is to clarify path by eliminating confusion that the subordinate have and by providing the guidance and support to reach goals. The behavior of the leader should be instrumental in attainment of subordinate’s immediate or future satisfaction. The theory identifies four leader behaviors: (1) Directive : The leader gives clear directions sets performance standards and controls the behavior through judicious use of rewards and disciplinary action when performance standards are not met. (2) Supportive : The leader reduces the efforts of emotional obstacles or stress on the path to the goal by being friendly and helpful. He shows concern to the need of subordinates. This style is similar to employee oriented leadership style. (3) Participative : The leader shares decision making responsibility with the subordinates and incorporates their suggestions in the decision. (4) Achievement Oriented : Leader sets challenging goals for sub-ordinates and shows confidence in them. The followers draw strength from the leader’s belief that the individual follower is competent enough to achieve demanding targets. House’ s theory mentioned four ways of behaving to different situations. The situations in a path goal theory are driven by two contingency variable: follower’s characteristics and workplace characteristics. 1.
Follower characteristics are in the control of subordinates. They are a part of personality characteristics of the subordinates that includes locus of control, experience and perceived ability.
2.
Workplace characteristics are outside the control of subordinates. They include task structure, formal authority system and work group.
The specific leadership style according to house that works best is determined by these two situational variables.
Check Your Progress 1. Mention three major approaches of leadership.
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Supportive style works best when followers have high ability to perform. Directive style will be acceptable to the sub-ordinates when task is unstructured and complex and sub-ordinates lack requisite skill, experience and posses external locus of control. Directive leader will bring better results when there is substantive conflict within the group. Subordinates with internal locus of control will find participative style more satisfying. When tasks are ambiguously structured achievement oriented style is best suited.
10.3.4 Modern Theory of Leadership Charismatic Leaders The word “Charisma” comes originally from Greek language which basically means “ A gift given by god”. Followers of charismatic leader are charmed by the extra ordinary leadership qualities that he or she posses like wisdom, heroism, sense of purpose. Charismatic leaders are perceived as agents of change. They demonstrate confidence in their judgment and ability. They have an idealized goal and vision. They are able to articulate their vision to their follower very well and hence act as a motivating force. They are unconventional, assertive and have a strong personal commitment towards
goal. Charismatic leaders are perceived as larger than organization. People working for charismatic leader are motivated to put extra effort because they like and respect their leader. They are enthusiastic and express greater job satisfaction. The charismatic leaders lose credibility when they fail to deliver promises that they made to their followers. The power of charismatic leader is very much dependent on perceptions and need of followers.
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Transformational leaders Most of the traditional theories for e.g. Michigan, fielder models, path goal theory etc are closed to transactional leadership style that guides and motivates their followers by “telling style” i.e. by clarifying role and task requirement. Transformational leader’s style on the other hand focuses on “selling” company’s vision which is usually a departure from established one. A transformational leader inspires followers to achieve their goals through higher ideals and moral values. They motivate their followers to focus on higher order intrinsic need. They promote intelligence, rationality and careful problem solving. They give personal attention to each employee, coaches and advices them. Transformational leader has much in common with charismatic leader, but while the latter wants the follower to adopt charismatic’s world view the former attempt to instill in followers the ability to question not only established views but eventually those established by the leader.
10.4 Summary Leadership determines the quality of organization by providing vision and direction , motivation to the employee of the organization. According to Trait theory of Leadership leaders are born and not made. Successful leaders have certain qualities in them that make them different from non leaders or unsuccessful leaders. Behavioral approach to leadership focuses on the manner and the behavior exhibited by the leader during supervising their employees. The various leadership style proposed by researcher of behavior theory are autocratic, democratic, participative, lazes’ fair. Contingency theory of leadership emphasize the fact that situation also plays a very vital role in determining which leadership style will be effective in a given situation. It calls for a proper match between leader and situation. Path goal theory proposed that the effective leadership is a function of leadership style, situational factors and follower’s characteristics. The modern approaches have included more heroic and visionary approach to leadership like charismatic leadership and transformational leadership.
10.5 Key Terms
Leadership: It is the ability to exert interpersonal influence on people to work willingly for group objectives.
Trait theory : This theory emphasis that traits that are specific to personality, physical, or intellectual characteristics in a leader differentiate leaders from non leaders.
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Behavioural Theory: It focuses on the manner, approach and style of providing direction and motivation to the people by the leader.
Employee Oriented Leader: He is described as one who emphasizes good interpersonal relationship with the subordinates.
Production Oriented Leader: The leader tends to emphasize on the task aspect of the job and structures his role or her role as well as the roles of the subordinates towards achieving the goals.
Autocratic Leader: Leaders have complete control over their people. They make decisions without seeking advice from their followers.
Participative Leader : Leader involves his group member in decision making process before making a final decision.
Delegating Leader: Leaders follow the policy of non interference and allow their group members to make decision and work on their own.
Contingency Approach to leadership: According to this approach situational factors also play a very important role in predicting effectiveness of a leader. Different situation may call for a different leadership style.
Supportive leader: The leader reduces the efforts of emotional obstacles or stress on the path to the goal by being friendly and helpful.
Achievement Oriented Leader: The leader sets challenging goals for subordinates and shows confidence in them.
Charismatic leader: Charismatic leaders are perceived by followers as agents of change that possess extra ordinary leadership qualities like wisdom, heroism, sense of purpose etc.
Transformational Leader: They motivate their followers to focus on higher order intrinsic need and instil in their followers the ability to question not only established views but eventually those established by the leader.
NOTES
10.6 Questions and Excercises Long answer questions
(1) Explain the trait theory of leadership? What are the major limitations of the theory? (2) What are the different styles of leadership? What are the major differences between autocratic, democratic and free rein style of leadership? (3) Discuss some of the personality traits that are useful to a leader. (4) “Leadership style is contingent upon the situation” Discuss. (5) Explain the five main leadership styles in managerial grid. Short answer questions
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(1) ”Leadership style should vary according to maturity level of subordinates” Discuss.
(2) What are the characteristics of a charismatic leader?
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(3) Write short notes on 1. Transformational Leader 2. Situational variables of fiedler model
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10.7 Further Reading and References (1) R.M.Stogdill, Handbook of leadership: A survey of literature, New York: free press 1974. (2) J.G. Geier, A trait approach to study of leadership in small group, Journal of communication, December 1967, pp. 316-23. (3) F. Luthans, Organizational Behavior, Tata McGraw Hill, ninth edition (4) V. S. P. Rao, V. Harikrishnan, Management Text and cases, excel books , fourth edition (5) Robbins Stephens, Judge Timothy A, Organizational Behavior, Pearson Education
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Organizational Conflict
UNIT 11 NOTES
ORGANISATIONAL CONFLICT
Structure 11.0 Introduction 11.1 Unit objective 11.2 Conflict Defined 11.3 Functional and Dysfunctional Conflict 11.4 Process of Conflict 11.5 Causes of Conflict 11.5.1 Intra Individual Conflict 11.5.2 Interpersonal Conflict 11.5.3 Group Conflict 11.6 Managing Conflict 11.6.1 Conflict Resolution strategies 11.6.2 Conflict Stimulation strategies 11.7 Summary 11.8 Key Terms 11.9 Questions and Exercises 11.10Further Reading and References
11.0 Introduction Conflict is an inevitable and natural part of any organization. Managers devote substantial part of their time in resolving workplace conflict. Conflict is a disagreement, discord arising between two or more parties that result in mutual opposition. One school of thought i.e traditional approach says that conflict is evil and should be avoided at any cost, while human relations approach argues that conflict is unavoidable and hence acceptance of conflict is advocated. The third school of thought i.e Interactionist view that conflict can sometimes prove to be very healthy for organization’s growth and hence optimum level of conflict should be encouraged in the organization.
11.1 Unit Objective After studying this unit, you should be able toManagement Process & Organisational Behaviour : 158
Understand and define conflict.
Differentiate between traditional, human relations and interactionist view of conflict.
Discuss the positive and negative aspect of conflict.
Explain the various causes of conflict.
Outline the conflict process.
Describe the five conflict handling approaches.
Discuss the ways to stimulate conflict at work place.
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11.2 Conflict Defined According to Robbins: Conflict is processes that begins when one party perceives that another party has negatively affected or is about to negatively affect, something that the first party cares about. It is a process in which an effort is purposefully made by one person or unit to block another that results in frustrating the attainment of other’s goals or furthering of his or her interest.
11.3 Functional and Dysfunctional Conflict Conflict is not necessarily bad, conflict can act as a force to improve performance and decision making by preventing stagnation and group think. People having different ideas may argue over a decision that aims at solving a problem or meeting a challenge. This diversity in opinion may lead to critical appraisal of the alternatives brought forward for solving the problem. Such appraisal contributes to sound decision making process as it forces the group to analyze the decision from every angle. This improves the quality of decision and benefits the organization as a whole. When conflict leads to positive outcome it is known as functional conflict, where as when conflict hinders group performance it is known as dysfunctional conflict. Dysfunctional conflict creates an atmosphere of hostility, stress, anxiety and frustration. Conflict may lead to irrational behavior and parties may indulge in non co- operation. Parties may give priority to their narrow interest above the organizational interest. If the conflict is personal in nature then the outcomes is even worse. Personal conflict is hard to resolve. The following figure depicts conflict intensity continuum.
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6 5
7 efforts to destroy other party 6 physical attacks 5 threats
conflict Intensity continum
4 73
4 verbal attacks 3 overt questioning 2 minor desagreement
2
1 no conflict
1
Fig. 11.1 : Conflict intensity Continum Conflict intensity increases as we move upward along the continuum. The upper level of continuum is always dysfunctional while functional conflict usually confine to lower range of continuum. Till overt questioning conflict can give positive result but if it moves upward towards the continuum it may lead to hostile environment in the organization that has a very negative effect on the organizational effectiveness.
11.4 Process of Conflict The conflict process comprise of five stages. These stages are explained below:
Stage I : Probable disagreement or incompatibility This stage includes potential reasons or conditions that create opportunity of conflicts. These conditions act as a stimulant for conflict to arise. Important sources of conflict are personal variables like differences in interest, values, difference in personality. At group level the reasons are divergent goals, scarce resources, poor coordination and competition. Semantic barriers, insufficient communication and over communication also lead to conflict. If the previous conflict was not handled properly then the people tend to carry ill feelings for each other. In absence of any other substantial reason after effects of the preceding conflict can also act as a reason to create environment of conflict.
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Causes of conflict 1. IN TERPERSONAL CONFLICT Difference in values, interest, perceptions, personality and status 2. GROUP CONFLICT Incompatible goals, resource allocation and task interdependence Competition 3. COMMUNICATION 4. AFTERMATH OF PRECEDING CONFLICT
Perceived Conflict
Conflict handling approaches AVOIDING ACCOMODATING COMPETING COMPROMISING
Felt Conflict
COLLABORATING
Figure 11.2 process of conflict
Stage II : Cognition and personalization This stage includes about the awareness about the existence of the conflict and influence on the parties involved. If the parties involved are conscious about the conditions that can stimulate conflict it is called perceived conflict. X and Y may perceive conflict because of some disagreement but it may not affect their emotions or affection for each other. This means that they have perceived conflict but not felt it. Felt conflict occurs when the two parties internalize the conflict and becomes emotionally involved. If the parties feel anxious and tense and become aggressive towards each other then it becomes a felt conflict.
Stage III : Intentions Once the conflict is felt the parties may now act in a given way towards each other. Now the concern is about intentions behind handling conflict. There are two dimensions of handling conflict: cooperativeness and assertiveness. Assertiveness refers to the degree of importance the party gives to its own interest and agenda at the cost of other party’s interest. Cooperativeness refers to the degree to which the party is concerned about the other party’s interest and is ready to work together. Based on these two dimensions five conflict handling approaches or resolution styles can be used. These are avoiding, accommodating, compromising, competing and collaborating.
Stage IV : Manifest Conflict It relates to open confrontation and overt behaviour. This stage is called a behavioral stage and includes actions and reactions made by the two parties. It involves aggression, sabotage, apathy, withdrawal, verbal attacks etc.
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Stage V : Outcome The outcome of the conflict can be functional or dysfunctional. The outcome of the conflict depends upon how wisely the conflict was handled by the parties. If it improves the group performance by improving quality of decisions, stimulating creativity it may lead to functional outcome. A dysfunctional conflict leads to lowering of group performance; reduced communication and cooperation. Personal infighting supersede group and organizational goals.
11.5 Causes of Conflict There are certain conditions that act as a stimulant to conflict. These are the necessary antecedent conditions for conflict to arise. Intrapersonal conflict is internal to the person, Interpersonal conflict is a conflict between two or more individuals and group conflict arises between two or more groups. Conflict arises due to many reasons; some of them are discussed below.
11.5.1 Intra Individual Conflict When an individual faces conflict within himself it is called intrapersonal conflict. Divergent goals and multiple roles can cause confusion and conflict within an individual.
(A) Goal Conflict This arises when the individual has to choose between two or more competing goals. The following are the goal conflict. (1) Approach- approach conflict: such type of conflict arises when the individual have to choose between mutually exclusive goals. The goals are equally attractive and it becomes hard for him to choose one at the expense of other. For e.g. individual gets two job offers one is giving a higher pay and the other is offering a challenging and satisfying job profile. He becomes anxious as he is unable to decide which one to choose. (2) Approach- avoidance: in this form of goal conflict individual is faced with an alternative that has both positive and negative aspects. For e.g. an offer for a highly lucrative job in a bad location. (3) Avoidance- avoidance: in this form of conflict individual is faced with two mutually exclusive negative goals. For e.g. A person may dislike his present job because of the abusive behavior of boss, but looking for another job may mean compromising with low pay.
(B) Role Related Conflict Role is behavior expected from the person occupying a position in the organization. The following are role related conflict : Management Process & Organisational Behaviour : 162
(1) Role ambiguity: when individual is unsure of his duties and responsibilities regarding job he may face problem in enacting the role due to which job
performance may be adversely affected. He may not know what is expected from him. (2) Person role conflict : when a person is expected to do a job which goes against his belief and values he faces a personal conflict for e.g. A judge may not be willing to give capital punishment to the criminal on moral grounds though the law may be supporting it.
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(3) Inter role conflict: in this type of conflict the individual is asked to perform a task for which the individual may lack the ability and knowledge that is necessary to accomplish it . He may also feel helpless due to lack of resources and time that is required to do the job. (4) Inter sender role conflict: when two or more parties put different role demands in front of an individual then he or she faces inter sender role conflict. Role conflict seriously effect job satisfaction and productivity. For e.g. an HR manager may experience a role conflict. He is responsible for motivating the employees at the same he is accountable to top management also. If the employees ask for a pay raise while top management is against it then the manager will be in dilemma.
11.5.2 Inter-Personal Conflict Interpersonal conflict happens when two or more people have some disagreements on certain issues. The reasons for interpersonal conflict are as follows : (1) Personality characteristics: some people are unable to maintain healthy relationship with others. Individuals who are highly authoritarian, rigid and who have low self esteem lead to potential conflict. (2) Perceptions: people come from varied backgrounds. The variables like experiences, individual’s values, education, training etc all determine interpretation of situation to be perceived. The difference in variables leads to different perception of similar realities. Such difference in perception is also a potential source of conflict. (3) Differing interest: the clash of interest of different people leads to conflict. The engineering department may be interested in improved quality and sophisticated design of the product while manufacturing department may value simplicity and low cost of production. This difference in interest may develop conflict between the two departments. This happen when individuals worker fight for their personal goals, ignoring organizational goals and organizational well being. (4) Poor communication: it can lead to misunderstanding between people. Insufficient exchange of information is potential antecedent condition to conflict. (5) Scarce resources: scarcity of resources increases the conflict among people when they feel that they have to compete for available resources in order to
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do their job. Resources are important for their job performance and achievement of their group or departmental targets.
11.5.3 Group Conflict NOTES
When there is conflict between two or more groups it is called group conflict. The potential reasons for the group conflict are (1) Incompatible goals and interest: high horizontal differentiation and task specialization often lead to clashes in goals and interest. The groups give priority to their task rather than giving due attention to the collective outcome of the groups. For e.g. marketing department may bring huge orders for sales in order to improve their department’s image and take benefits of incentive without giving due consideration to the production capacity of the production department. (2) Task interdependence: it implies dependence of one unit on another for inputs like resources or information. For e.g. output of process A is input to process B, hence performance of process B depends largely on the performance of A in terms of quality and completion of task in time. This is an example of serial independence. Reciprocal independence occur when two or more groups are mutually interdependent in accomplishing goals for eg group of nursing staff , surgeons,doctors etc. They have to coordinate and communicate quite frequently. (3) Scarcity and allocation of resources: departments in the organization compete for resources. Resources include men, material, machine etc. Groups draw resources from a common pool and if the common pool is inadequate to satisfy the demand of all the units then conflict can arise. (4) Organizational ambiguities : lack of formalization, ambiguous job responsibilities can create problem and conflict between departments. If proper system of communication and coordination is not incorporated in the system frequent clashes can occur among groups. (5) Resistance to change: Change is inevitable as the environment around is dynamic. There are a plenty of socio-economic, political, technological and legal factors which make organizational change unavoidable. Change faces resistance from the employees who fear being shaken out of their comfort zone. Change can lead to conflict; people have an inherent tendency to resist change.
11.6 Managing Conflicts
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Conflict can have both negative and positive outcomes. Functional conflict is desirable while dysfunctional conflict should be resolved. There are basically two approaches of managing conflict. One is to create and stimulate constructive conflict and other is to resolve destructive conflict.
Unmanaged poorly handled dysfunctional conflict can prove to be disastrous to the organization. The disagreement should be managed in such a way that healthy interpersonal relations are formed that aid in decision making and smooth conduct of operations. Effective conflict resolution style can lead to personal and professional growth.
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11.6.1 Conflict Resolution Strategies Kenneth Thomas and Ralph Kidman has identified five conflict resolution strategies that vary in their degrees of co- cooperativeness and assertiveness. Which one is the best in a given situation depends on various factors. There is no one best strategy for resolving conflict. The five styles are as follows: The Thomas Kidmann Conflict Mode Instrument is a model for handling conflict:
High ASSERTIVE
Competing
Collaborating Compromising
Avoiding
Accommodating
Low Low
COOPERATIVE
High
Fig. 11.3 : Conflict Resolution Strategies The model recognizes five conflict management styles based on two dimensions: assertiveness and cooperativeness. Assertiveness refers to the degree of importance the party gives to its own interest at the cost of other party’s interest. Cooperativeness refers to the degree to which the party is concerned about the other party’s interest. The five conflict resolution styles are as follows: (1) Accommodating (you win – I lose): this style focus on solving conflicts by allowing the desire of others prevail at the expense of one’s personal need. The party is high on cooperativeness and low assertiveness. Accommodating style is appropriate when the issue is more trivial or the issue matters more to other party. It can help in preserving future relations with the other party. (2) Avoiding (lose- lose): people show indifference, apathy towards the conflicting issue and do not take any action to resolve it. It is a state of complete withdrawal. Neither the person helps the other party to achieve their goal nor does he pursue his. It is best suited when conflict is small and relationships are at stake or when the atmosphere is emotionally charged and the person needs to create some space. This style also works well when the person has no power and the chances of winning are dim. The downside of this style is that postponing may make matter worse. (3) Competitive (I win you lose): this style is high on assertiveness and low on cooperativeness. Person tries to win at the expense of others. This style is useful
Check Your Progress 1. Discuss conflict intensity continum. 2. What are the potential reasons for group conflict?
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in times of emergency when speed of decision making becomes very important. This type of strategy may escalate conflict in future and the losers may try to retaliate. When goals are important the person can use power to win. (4) Compromising (win some-lose some): this style has moderate level of assertive and co- operation. The parties try to find a middle path which partially satisfies everyone and everyone gives up something. This style suits best when both sides have equally important goal and time can be saved by reaching intermediate settlements due to looming deadline. (5) Collaborating ( I win you win): This style is both high on cooperation and high on assertiveness. The parties try to reach a solution which is equally beneficial to both parties. Collaborative style tries to meet everyone’s need through teamwork and co-operation. This style works well when there is high level of trust between two parties. The drawback of this style is that it requires a lot of time and effort to reach a consensus.
11.6.2 Conflict Stimulation Conflict Functional conflict should be stimulated to challenge the system and develop fresh ideas for better decision making. (1) Manager can stimulate conflict through the use of grapevine by intelligently planting rumors, ambiguous or threatening messages in the informal channel of communication. This may force the members to confront their differences and stimulate new ideas. For e.g. the manager can spread rumors about a prospective layoff. (2) A manager may introduce competition among employees by the use of reward and incentive for excellent performance. Conflict will arise when the employees will try to win against each other. (3) Bringing in outsiders who posses different attitude, values, from what the employees of the organization posses may instill conflict. (4)
Manager can introduce programmed conflict by restructuring the organization breaking up old work groups and department and reorganizing them. This will inject life into stagnant organization.
11.7 Summary
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Conflict is a disagreement between two or more parties. It is an inevitable part of the organization. Traditionalist view conflict as bad and that it should be avoided while modern interactionist view it as positive if it exists at a optimum level . Minimum level of conflict is essential to bring about change, creativity and to make good quality decision. Conflict beyond a point can be dangerous can lead to hostility and infighting among the members. It creates tension and stress. No one is able to grow as the parties try to create hindrances in the path of other party. Such negative and aggressive behavior adversely affects organizational effectiveness.
Conflict can be created at individual level as well at the group level. Intra individual conflict occurs due to conflict in the goals set by the individuals and the roles he or she is supposed to act. Conflict between two or more individuals is caused due to difference in values, interest, perceptions, personality and status inequity. Group conflict arises due to incompatible goals, task interdependence, scarcity and allocation of resources, poor communication and organizational ambiguities. The conflict process consists of five stage , they are- potential opposition, cognition and personalization, conflict handling intentions, overt behavior and outcome. Depending upon the requirement of the situation the conflict can be handled through any of the five styles: competing, avoiding, collaborating, compromising and accommodating. Conflict can be stimulated through strategic use of grapevine, introducing competition and bringing in outsider and reorganizing the work groups.
Organizational Conflict
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11.8 Key Terms Conflict: It is an disagreement, discord arising between two or more parties that result in mutual opposition. Functional conflict: When conflict act as a force to improve performance and decision making by preventing stagnation and group think it is called functional conflict. Dysfunctional conflict: When conflict creates an atmosphere of hostility, stress, anxiety and frustration and hinders group performance it is known as dysfunctional conflict. Intra Individual Conflict: When an individual faces conflict within himself due divergent goals and multiple roles that cause confusion, it is called intrapersonal conflict. Interpersonal conflict: It happens when two or more people have some disagreements on certain issues due to personality characteristics, perception, interest etc. Group conflict: It happens when there is disagreement between two or more groups due to incompatible goals, task interdependence, scarcity of resources etc. Thomas Kidmann Conflict Mode Instrument: It is a model for handling conflict in which five conflict resolution strategies have been identified that vary in their degrees of co- cooperativeness and assertiveness.
11.9 Questions and Excercises Short answer questions (1) Do you think that conflict is essential? If yes, then why? (2) How could a manager stimulate conflict in the organization? (3) Distinguish between functional and dysfunctional conflict. Long answer questions (1) What are the components of conflict process? Explain (2) Explain Kenneth Thomas and Ralph Kidman five conflict handling strategies.
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(3) What are the reasons for conflict within the individuals and conflict between the individuals? (4) State the reasons of group conflict.
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11.10 Further Reading and References (1) S. P. Robbins, ``Organizational Behavior,’’ Englewood Cliffs, N.J. Prentice hall 2000. (2) J. Kelly, ``Organizational Behavior,’’ Illinois , Richard D. Irwin 1990. (3) L. R. Pondy, ``Organizational Conflicts: Concept and Model,’’ Administration Science Quarterly, Vol. 12,1967. (4) V. S. P. Rao, V. Harikrishnan, ``Management Text and cases,’’ excel books, fourth edition.
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UNIT 12
ORGANISATIONAL CULTURE AND CHANGE MANAGEMENT
Organizational Culture and Change Management
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Structure 12.0 Introduction 12.1 Unit objectives 12.2 Organization Culture 12.2.1
Determinants of Organization Culture
12.2.2
Creating and Sustaining Culture
12.2.3
Impact of Organization Culture
12.3 Organizational Change 12.3.1
Forces of Change
12.3.2
Response to Change
12.3.3
Management of Planned Change
12.3.4
Lewin’s Three Step Model
12.3.5
Managing Resistance to Change
12.4 Summary 12.5 Key Terms 12.6 Questions and Exercises 12.7 Further Reading and References
12.0 Introduction Organizational culture develops over several years and is made of relatively stable characteristics. The characteristics are a set of shared values that employees hold in common. Employees are strongly committed to organizational culture. It brings predictability and uniformity in behavior of the employees. Organizational culture can become a liability because it is very difficult to change. Management has always stressed on the importance of change. “Change or die” is the philosophy to survive. Environment is dynamic and ever changing. There are various external and internal forces that act as a stimulant to change. Change is mostly perceived as threat. Employees resist change. Manager should intelligently plan for introduction and implementation of change. Change process should be dealt with wisely and appropriate measures should be taken to overcome resistance and implement change.
12.1 Unit Objectives After studying this unit, you should be able to-
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List the factors that make up organization culture.
Understand the relationship between organization culture and behavior.
Understand the impact of organization culture on organizations.
Identify the forces that stimulate organization change.
Understand the process of managing planned change.
Describe lewin’s three step model for introducing change.
Summarize the various individual and organizational resistances to change.
List various ways to overcome resistance.
12.2 Organisation Culture Organizations too have personalities just like individuals have. Every organization has a culture which is a unique set of relatively stable characteristics. Organization culture is a set of shared values, understanding, assumptions that controls the behavior of organizational members. According to Robbins : “Organizational Culture is a common perceptions held by the organization’s member, a system of shared meaning”. According to lovis: “a set of understanding or meanings shared by a group of people that are largely tacit among members and are clearly relevant and distinctive to a particular group ethic are also passed on to new members”. Organizational culture leads to high degree of behavior regularity by defining consistent ways to perform tasks, solve problems, resolve conflicts and deal with employees and customers. Some of the behaviors that are influenced by organizational culture are as follows: (1) Innovation and risk taking: the degree to which organizational employees are encouraged to be creative and take risk. (2) Attention to details: the degree to which the organizational members focus on precision and attention to details. (3) Outcome orientation: the degree to which organizational members focus on results and goals rather than methods, techniques process to achieve the goals. (4) Team orientation: the degree to which the activities are structured around team rather than individuals. (5) Customer orientation: the degree to which managers are concerned about customer satisfaction. (6) Employee orientation: the degree to which managers are concerned about the effect of their decisions on employees within organization. Management Process & Organisational Behaviour : 170
(7) Basis of motivation: the degree to which the organizational members value different sources of motivation like pay, status, achievement, recognition etc.
(8) Aggressiveness: the degree to which people are competitive vs cooperative. (9)
Organizational Culture and Change Management
External orientation: the degree to which organization is responsive and adaptive to changes in its environment.
(10) Power distance: the degree of difference to authority, the rigidity of chain of command.
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Appraising the organization on these characteristics gives a composite picture of organization’s culture.
12.2.1 Determinats of Culture (1) Economic conditions: economic conditions have an impact on organizational culture. In times of prosperity, innovation and risk taking is encouraged while when the budgets are tight, caution and conservatism is required. (2) Organization structure: the organization structure establishes authority and responsibility relationship. The organization culture is affected by the design of the organization, whether it is centralized or decentralized, rigid or flexible. (3) Organization size: as the size of the organization increase, the organization becomes more vertical. It creates an authoritative management. In small organization the stress is on horizontal distribution of responsibilities. It is easier to foster climate of innovation, creativity, participative management in small organization. (4) Organization policies: organization policies regarding reward system, job security etc play a very important role. Organization that rewards creativity will have innovation orientation. (5) Managerial values: managerial values have a strong influence over decisions and actions of the manager. Manager’s values are communicated through rules regulations and policies. The result is that organization can be perceived as formal or informal, hostile or friendly. (6) Leadership style: organizational culture is the product of philosophy and practices of the prominent persons in the organization. The primary source in the organizational culture is the leadership style of its founder. Different leadership styles will lead to different organizational culture. (7) Characteristics of members: personal characteristics of members also play a major role in creating a culture. For e.g. an organization with risk taking younger employees is likely to have a different organizational culture from an organization with conservative older employees.
12.2.2 Creating and Sustaining Culture (1) Those candidates are hired who meet the standards of the organization culture. The applicant is interviewed by people who hold senior position in the organization. They tend of hire those candidates who think and feel the same way as they do. (2) Top management play an important role in determining the culture through
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policies and leadership style. (3) Through socialization the organization helps it employees to adopt organization culture. The people who are not able to adjust to the culture face criticism. (4) Employee learns about culture through ceremonies material symbol like elegant furnishing, dress, attire etc. They also learn culture through stories that contain narration of events such as reaction to past mistakes, rag to richness story of the founder etc. The moral of the stories reaffirm the shared values of the culture to the employees.
12.2.3 Impact of Organisation Culture The organizational culture can have both positive and negative impact on the organizational effectiveness. The organizational culture has three dimensions: direction, pervasiveness and strength. The direction of the impact states that whether the organization culture influence the behavior in such a manner that goals of organization are achieved or is acting in a way that is counterproductive. The pervasiveness of impact is the degree to which the culture is widespread among the members of the organization. The strength of impact tells us how strongly the shared values are held by members of the organization irrespective of the direction.
(A) Culture as an asset Culture brings in high degree of behavioral regularity in a system without formal rules and regulations. It tells the employee how problems should be handled and what is important. This helps in reducing ambiguity. It gives a sense of identity to the members and enhances organizational commitment. A 2002, corporate leadership council study found that cultural traits such as flexibility, innovativeness, risk taking have a positive impact on economic performance of the organization.
(B) Culture as a liability Check Your Progress 1. ``Organisation culture leads to high degree of behavior regularily’’ comment. 2. Discuss the organis ational characteristics that give a composite picture of organisational culture.
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(1) Barrier to diversity: in order to foster creativity diverse work force is desirable. But a strong organization culture limits diversity. The culture eliminates the unique strength that people of different backgrounds bring to organization. The strong culture gives weight age to conformity rather than diversity. (2) Barrier to merger and acquisition: the objective of merger and acquisition is to reduce cost and competition and obtain product synergy or financial advantage. But if the cultures of the organizations to be merged do not match with each other then acquisition can lead to failure. (3) Barrier to change: organization work in highly dynamic environment and hence organizational change is inevitable. If the shared values and beliefs are in conflict with the change to be introduced then the employee resist change. The culture becomes a burden to the organization and make it difficult to respond to changes in organization.
12.3 Organizational Change Change means modifying the existing system by adopting new ideas, methods or behavior by an organization. Change in context of an organization can have many forms. It can be change in organizational structure, change in level of technology, change in strategy etc. Change is inevitable as the environment around is dynamic. There are a plenty of socio-economic, political, technological and legal factors which make organizational change unavoidable. An organization which does not mould itself according to the changing external scenarios is left behind. Change might also be forced by internal factors like expansion, change in employee compositions, incoming of a new leader.
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12.3.1 Forces for Change The factors leading to change can be external that is outside the organization or internal that is within the organization.
(A) External Forces (1) Technology: it is the greatest factor that puts pressure on the organization to change. Products, process and services may become obsolete which may call for change. In order to adapt to changing technology job specification ,job description and organization structure may also change for eg. Automation result in wider span of control for managers and flatter organization (2) Market situation : Change in market situation may include changing customer’s tastes and preferences, entry of new product and competitors in the market. (3) Political and social change : The organization operates in legal political environment that is influenced by Government. The government policies, rules and regulations like liberalization policy, pollution control, tax laws etc varies from time to time. The change in social structure of the society like wearing away of joint family and expansion of single households , rise in the number of working women etc may lead to change in the demand for product and services as well as marketing strategies. (4) Economic scenario : The change in the macroeconomic variables for eg interest rate, foreign currency fluctuations may force the organization to change exporters of their raw material , customer base and foreign operations.
(B) Internal forces (1) Increase in the size and growth rate of organization : The greater the growth rate the more is the generation of resources . There is better expanded opportunity set for the organization, as it has enough resources to enter into new market and product line. (2) Performance Gap : when there are negative deviations from the standards set for market share, profitability, employee productivity etc then it becomes necessary to change the present structure or process of the organization. The
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products, services and methods of doing work which are not capable of achieving organization’s objective should be amended. The organization structure may also undergo transformation in order to make it more responsive to the environment. (3) Changes in Managerial Personnel : Many changes are brought by chief executives. Every manager has his own philosophies and styles. Change in chief executive may lead to reevaluation of the present organization design, procedures, objectives etc. This may lead to modification if the present system does not match with the philosophies of the newly appointed chief executive.
12.3.2 Response to Change Regardless of the type of change it is very important for an organization to convince its employees to accept the change. Employees can respond to the change positively as well as negatively, but quite often a change faces resistance from the employees who fear being shaken out of their comfort zone. Reasons for resistance can be manifold such as:
(A) Individual Resistance (1) Economic Loss : Employees might fear losing jobs as they would no longer possess the skills which are required to comply with the new technology. Automation may reduce their working hours and consequently their monetary benefits may reduce. (2) Uncertainty : Any change has uncertainty associated with its consequences. There is a fear of the unknown. As a result there is inertia on part of the employees which needs to be overcome to accept change and be ready for the results. Employees feel insecure in doing so and this leads to resistance. (3) Misunderstanding and selective information processing : Resistance might stem from misunderstanding of the oncoming change. There might be contradicting opinions amongst employees about the difference the change would bring about. The employees may selectively process information in order to keep their perception of the world that they have created, intact. They would hear what they want to hear and might ignore vital information as these facts challenge their already established perception of the world. (4) Habit : Individuals form habits that are hard to change. Individuals develop their routine around the demands of job over time. Change may disturb their routine causing inconvenience and discomfort. (5) Social displacement : A change can dislodge people from their work groups and teams thereby disrupting the personal bonding which they may have developed over a period of time. Some people might be opposed to giving up current linkages and adjusting to relationships in a new setting. Management Process & Organisational Behaviour : 174
(6) Peer pressure : An individual may resist change just because he belongs to the group that is resisting change. The group norms play a vital role in influencing the individual.
(B) Organizational Resistance (1) Threat to established power relations : A change can bring about a reshuffle in the organization. As a result a few managers would no longer have the same authority and influence they had before. Hence they interpret change as a threat to their position and resist it.
Organizational Culture and Change Management
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(2) Organization Structure : Some organization structure have inbuilt rigidity that act against change. High degree of formalization, too much emphasis on specialization, one way communication does not favor innovation and change. Organizations having bureaucratic and mechanistic structure face more difficulty in implementing change as compared to organization having organic structure. (3) Resource Constraints : In order to bring about effective change financial, material and human resources may be required. If the resources are available in abundance then there is no problem in bringing about the change. If the resources are scarce change cannot be introduced as it requires huge investment. (4) Sunk Cost : Sometimes organizations invest a huge amount of money in procurement of fixed asset, and such investment cannot be recovered without putting the fixed assets in use for production. The machine may become obsolete but its cost can be recovered only when the goods produced by it are sold. Because of this reason machine cannot be replaced or changed. (5) Inadequate information : Resistance could be formed out of inadequate information. A failure on part of the managers to communicate the purpose of change effectively to all the stakeholders could result in suspicion and loss of trustworthiness.
12.3.3 Management of Planned Change The change can be first order change or second order change. First order change happens by itself. There is no need to alter the assumptions of organizational members. In first order change we are doing more or less the same thing for e.g. the lunch time has been shifted by half an hour due to rush of customers in the morning. The second order change is a multidimensional, radical and proactive change. It is intentional and goal oriented and involves reframing of assumptions about the organization and the world in which it operates. The second order change is called planned change for e.g. installing of high-tech machines in the plant. Management of planned change refers to the process of introducing change and implementing it effectively. It requires considerable efforts on part of the management. This process can be summed up as:
Requirement Analysis The management of the company needs to identify if a change is required. The management shall do a SWOT (Strengths-Weaknesses-Opportunities-Threats) analysis so as to understand the problems confronting the company. It should subsequently
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conceive changes which are necessary to solve those problems. The management should answer the question “Is the change justified”. The management should also identify the factors to be changed, whether it is the people, technology or structure that is to be changed.
Planning for Change The management needs to answer questions like: How to introduce the change? When to introduce the change? Who will introduce the change? What will be the response to change? How to overcome resistance to change ? The impact that change would have on different stakeholders should also be assessed.
Implementation of change It refers to making change a part of day to day activities of the organization. The management needs to encounter and diffuse the resistance that follows a change so as to achieve desired implementation. It is natural human tendency to resist any form of change. Hence no change can be brought about completely without addressing the resistance that accompanies it. Hence resistance management forms a pivotal and an indispensable part of change management.
Feedback System Feedback must be collected through different channels to understand as to how efficiently have the employees coped up with the change. Deficiencies must be identified and taken care off as they might result in resistance if left unaddressed. Employees might be encouraged to share constructive ideas which can further enhance the change.
12.3.4 Lewin’s Three Step Model Kurt Lewin proposed three steps that the organization should follow in order to bring about change successfully.
Unfreezing
step2
Moving
step3
Refreezing
step1
Check Your Progress 1. What are the forces that lead to organisational changes?
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Step 1 : Unfreezing It involves aggressive approach to discard old ways and established behavior pattern. The objective is that the individual should see change and accept it. Members of the organization are made to realize that their old attitude, behavior and methods to work are unworthy and require alteration to meet the ever changing demand of the dynamic environment. This can be done by (1) Augmenting driving forces: The factors that are making change essential should be identified and communicated to the people concerned. (2) Reducing restraining forces: The factors that hinder the change movement should be reduced for e.g. to deal with resistance from employees the
management can promise positive incentives to employees once the change is implemented.
Organizational Culture and Change Management
Step 2 : Moving Once people acknowledge change and accept it, the change should be implemented in a systematic manner. Various alternatives of behavior should be made available to the members of the organization. The individual choose the best one out of the alternatives provided to them.
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Step 3 : Refreezing The changed behavior patterns, methods or procedures need to be made permanent. They should be refrozen, so that the change can be sustained overtime. If the last step is not implemented seriously, the change will be short lived. The individuals may attempt to revert to the old behavior pattern.
12.3.5 Managing Resistance to Changes (1) Clear and Effective Communication The rationale behind the need for a change shall be communicated effectively throughout the organization. The change agents must talk about the change frequently so that the message for the change remains strong and alive. Managers must demonstrate change initiatives by incorporating it in day to day decision making. Effective counseling can be used to change the attitude of the employees . They should be adequately informed about the various aspects of change. Any misunderstandings should be cleared through communication. The people in the organizations should be convinced that change is the need of the hour and it is for the betterment of the organization as a whole.
(2) Participation and involvement The dimensions of the change might be discussed with the employees and they must be made to feel that they are very much part of the change and that their contribution is vital to make it successful. Participation in decision making process will reduce resistance, obtain commitment and improve quality of decision.
(3) Listening to Employees and providing them support The managers must listen to the apprehensions that employees possess. The employees should be helped to identify as to what lies for them in the change. Training programs and counseling sessions should be arranged for them.
(4) Negotiation If few powerful individuals are resistant to change then they can be offered specific reward packages. The resistance can be reduced through negotiations. Benefits in the form of increased compensation, deployment on challenging projects, recognition from the boss etc can motivate an employee to undergo the hardship associated with bringing out the change.
(5) Being Proactive Managers must aim at managing resistance at initial stages so that it does not
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attain dangerous proportions later on. It is necessary that the potential points of origination of resistance be identified in advance. Plan must be developed to tackle resistance that might originate from different areas within the company.
(6) Formation of a powerful group which leads the change It is necessary that a change is moved strongly through the organization. This can be achieved using a set of influential people who can assume leadership in communicating change. These people usually come from within the company but relevant people from outside can also be approached.
(7) Appropriate selection of resistance managers A resistance manager is a person who is responsible for managing and abating resistance so as to move the change smoothly. Selection of resistance managers must be done meticulously. He shall be the one who has hundred percent belief in the change he is advocating. He should have an honest and untainted image in the organization. He should have excellent communication skill and should get along well with the employees. He should usually come from senior management, middle management as well as from shop floor managers who interact directly with the employees. He must be committed enough to back his words with his actions.
(8) Coercion Managers can force people to accept change by the application of direct threat or force on the resistors. The various explicit and implicit threats can be, threats of transfer, negative performance appraisal, pay cuts, demotion, termination etc.
(9) Manipulation and cooptation Manipulation involves consciously structuring of events by twisting and distorting facts for example withholding undesirable information about change and presenting a rosy picture of the change to be introduced. Cooptation includes buying off the leader of the resistance group and giving him desirable role in the design and implementation of change. By involving the leader of the resistors an implicit approval is obtained for the change.
12.4 Summary
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Organizational culture refers to common values and beliefs shared by members of the organization. They are relatively stable characteristics that describe an organization. These characteristics give a unique identity to the organization. Innovation and risk taking, attention to details, outcome orientation, team orientation: customer orientation, employee orientation, basis of motivation, aggressiveness, external orientation and power distance are some of the characteristics that gives the organization its distinctive personality. Economic conditions, organization structure and policies, managerial values, leadership and characteristics of members play a very important role in determining the organization culture. Organization culture can become a liability as it acts as a barrier to diversity, merger and acquisition and change.
In order to survive and grow organizations should have a proactive approach to change. The forces of change can be either internal or external. External forces come from outside the organization like technology, social and political environment, market situation etc. Internal forces emanates within the organization like growth opportunities, performance gap and change in chief executive. Employees resist change due to their adjustments with job demands, habits, fear of unknown economic loss, peer pressure and social displacement. Organizational dynamics can also make change difficult. This may be because of rigid organization structure, resource constraints and sunk cost. According to Kurt Lewin change process involve three steps (1) Unfreezing the old system (2) Moving towards the new system (3) Refreezing the new system to make it relatively permanent. The resistance to change can be overcome through effective communication, providing support to the employee so that they can cope up with change. Various strategies like manipulation, cooptation, coercion and negotiations can be used to reduce resistance to change.
Organizational Culture and Change Management
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12.5 Key Terms
Organization culture: It is a set of shared values, understanding, assumptions that controls the behaviour of organizational members.
Power distance: The degree of difference to authority, the rigidity of chain of command.
Organizational Change: It means modifying the existing system by adopting new ideas methods or behaviour by an organization for example organizational structure, change in level of technology, change in strategy etc.
Lewin’s Three Step Model: It proposes three steps that the organization should follow in order to bring about change successfully. They are unfreezing, moving and refreezing.
Social displacement: It means dislodging people from their work groups and teams thereby disrupting the personal bonding which they may have developed over a period of time.
Manipulation: It involves consciously structuring of events by twisting and distorting facts for example withholding undesirable information and presenting rosy picture of the change.
Cooptation: It includes buying off the leader of the resistance group and giving him desirable role in the design and implementation of change.
12.6 Questions and Excercises Long answer questions (1) Discuss the factors that determine organizational culture. (2) What are the individual’s and organizational resistance to change? (3) How will you as a manager overcome employee’s resistance to change?
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(4) What are the steps in managing planned change? Describe the process of planned change proposed by Kurt Lewin. Short answer questions
NOTES
(1) Define organizational culture. What are its various dimensions? (2) How organizational culture is created and sustained? (3) How can organizational culture become a liability to the organization? (4) What is the difference between first order change and second order change?
12.7 Further Reading and References (1) Gordon, G. G., “Industry determinants of Organizational Culture,” Academy of management review(April 1991) ,pp 396-415. (2) Schneider, B., S. k. Gunnarson and K. Niles Jolly, “Creating the climate and culture of success”, organizational Dynamics, (summer 1994), pp-17-29. (3) Marshak, R. J., “Managing the Metaphors of Change”, Organizational Dynamics (Summer 1993), pp 44-56. (4) Kanter, R. M., “Transcending Business Boundaries: 12000 World Manager’s view Change,” Harvard Business Review (May-June 1991), pp 44-56.
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