CHAPTER II

2.1. MANAGEMENT CONCEPT

2.1.1 Etymology

The verb 'manage' comes from the Italianmaneggiare (to handle, especially tools),

which derives from the Latinword manus (hand). The French word mesnagement (later

ménagement) influenced the development in meaning of the English word management

in the 17th and 18th centuries.

2.1.2 Definition of Management

Stoner (1982) in his book “Management” defined

“Management has been called“the art of getting things done

through people.”This definition, by Marry Parker Follet,

calls attention to the fact that managers achieve organization

goals by arranging for other to perform whatever tasks may

be necessary.”

Pal (2014) in his journal said there are some management expert who define

management, as follows :

Peter F. Drucker defines, "management is an organ; organs can be described and

defined only through their functions".

According to Terry, "Management is not people; it is an

activity like walking, reading, swimming or running. People

who perform Management can be designated as members,

members of Management or executive leaders."

According to Mc Farland, "Management is defined for

conceptual, theoretical and analytical purposes as that

process by which managers create, direct, maintain and

operate purposive organization through systematic, co-

ordinated co-operative human effort."

Henry Fayol, "To mange is to forecast and plan, to organize, to compound, to co-

ordinate and to control."

Koontz and O'Donnel, "Management is the creation and

maintenance of an internal environment in an enterprise

where individuals, working in groups, can perform

efficiently and effectively toward the attainment of group

goals. It is the art of getting the work done through and with

people in formally organized groups."

Mary Parker Follett defines management as the "art of getting things done through

people". This definition calls attention to the fundamental difference between a

manager and other personnel of an organization. A manager is one who contributes to

the organization’s goals indirectly by directing the efforts of others – not by performing

the task himself. On the other hand, a person who is not a manager makes his

contribution to the organization’s goals directly by performing the task himself.

The term concepts of Management has been interpreted in several ways, some of

which are given below :

1. Management is an Activity

Managemet is an activity just like playing, studying, teaching. As an activity has

been defined as the art of getting things done throught the efforts of other people.

The activities of management are :

a. Interpesonal activities

b. Decisional activities

c. Informative activities

2. Management is a Processs

Management is considered a process, because it involves a series of interrelated

functions. It consists of getting the objectives of an organization and taking steps to

achieve objectives.

Managemet as a process has the following implications :

a. Social Process, management involves interaction among people. Goals can be

achieved only when relations between people are productive. Human factor is

the most important part of the management.

b. Integrated process, management brings human, physical, and financial resources

together to put ito effort.

c. Continous process, management involves continuous identifying and solving

problems. It is repeated every now and the till he goals is achieved.

d. Intercative process, management are contained within each other. For example,

when a manager prepares plans. He is also laying down standard for control.

3. Management as an Economic Resources

Management is an important factor of production. Management occupies the central

place among productive factors as it combine and coordinate all other resources.

4. Management as a Team

Management consists of all those who have the responbility of guiding and

coordinating the efforts of other as a group of persons. The persons are called as

managers who operate at different levels of authority, top, middle, and operating.

5. Management as an Academic Dicipline

Management has emerged as a specialized branch of knowledge. It comprises

principles and practices for effective management of organization. Management

offers a very rewarding and challenging career.

6. Management as a Group

Management means the group of person occupying managerial positions. It refers to

all those individuals who perform managerial functions. All the managers for

example chief executive, departmenta; heads, supervisors and so on are collectively

known as management.(Murugan, 2014)

Conclusion: Managements is an activities through the process of planning,

organizing, staffing, directing, and controlling by a group of organization to achieve its

inteded goals.

2.1.3 Characteristics of Management

1. Management is goal oriented

Management goals are called group goals or organization goals. Management is a

purposeful activity workers to achieve organizational goals specified. The

achievement of these goals serve as a measure of the success of management.

Management has no justification to exist without goals. The basic goals of

management is to ensure efficiency and economy in the utilization of human,

physical, and financial resources. Thus, management is purposefull.

2. Management is universal

Management is universal in character.Management is a essential element of every

organized activity ireespective of the size or type of activity. Thus management is a

pervasive activity. The fundamental principles of management are applicable in all

areas of organized effort.

3. Management is an Integrative Force

The essence of management lies in the coordination of individual efforts into a team.

Management reconciles the individual goals with organizational goals. As unifying

force, management creates a whole that is more than the sum of individual parts. It

integrates human and others resources.

4. Management is a Social Process

Management is a social process because it is concerned with interpersonal relations.

Human factor is the most important element in management. According to Apply,

Management is the development of people not the direction of things.

5. Management is Multidiciplinary

Management as to deal with human behavior under dynamic conditions. Therefore,

it depends upon wide knowledge derived from several disciplines like engineering,

sociology, psychology, economics, anthropology. The vast body of knowledge in

management drwas heavily upon other fields of study.

6. Management is a Continous Process

Management is a dynamic and an on-going process. The cycle of management

continues to operate so long as there is organized action for the achievement of

group goals.

7. Management is Intangible

Management is an unseen or invisible force. It cannot be seen but its presence can be

felt everywhere in the form of result. Hiwever, the managers who perform the

function of management are very much tangible and visible.

8. Management is an Art as well as Science

Art implies the application of knowledge and skills to bring about the desired result.

The desired results. The essential elements of arts are : practical knowledge,

personal skill, result oriented approach, creativity, and improvement through

continuous practice. Meanwhile, science means a systematic body of knowledge

pertaining to a specific field of study. It contains general principles and facts which

explains phenomenon. These principles and theories help to explain past event and

may be used to predict the outcome of actions. It contains a systematics body of

theoretical knowledge and it also involves the pratical application of such

knowledge. Management is also discipline involving specialized training and an

ethical code arising out of is social obligantions.

Conclusion : On the basic of these nature management, can be defined as the

process of a continuous and getting done through in social process involving the

coordination of human and material resources in order to accomplishment group of

organization goals for example family, club, team or business, university,

government.

2.1.4 Management Functions

The meaning of management functions is the role of management. Pal (2014) said

in his journal there are some management expert who divided management functions,

namely:

“Fayol identifies five functions of management are planning, organizing,

commanding, coordinating and controlling.”

“Koontz and O'Donnell divide these functions into planning, organizing, staffing,

directing and controlling.”

“Gulick states seven such functions under the catch word

"POSDCORB' which stands for planning, organizing, staffing,

directing, coordinating, reporting and budgeting.”

1. Planning

Planning is the most fundamental and the most pervasive of all management

functions. If people working in groups have to perform effectively, they should

know in advance what is to be done, what activities they have to perform in order

to do what is to be done, and when it is to be done.

2. Organizing

The design of pattern of roles and relathionships that constribute to the goal.

Roles are assigned, authority, and responsibility are determined, and provision is

made cooedination. Organizing typically involves the development of the

organization chart, job descriptions, and statements of work flow. (Jones and

Barlett, 2014)

3. Staffing

The determination of personnel needs and the selection, orientation, training,

and continuing evaluation of the individuals who hold the required positions

identified in the organizing process. Some theorists class the staffing function

within the organizing function, rather than viewing it as a separate function. (Jones

and Barlett, 2014)

4. Directing

Directing is the function of leading the employees to perform efficiently, and

contribute their optimum to the achievement of organizational objectives. Jobs

assigned to subordinates have to be explained and clarified, they have to be

provided guidance in job performance and they are to be motivated to contribute

their optimum performance with zeal and enthusiasm. The function of directing

thus involves the following sub-functions :

a. Communication

b. Motivation

c. Leadership

5. Coordinating

Coordinating is the function to establish relationships among various parts of the

organization that they all together pull in the direction of organizational objectives.

It is thus the process of tying together all the organizational decisions, operations,

activities and efforts so as to achieve unity of action for the accomplishment of

organizational objectives.

6. Reporting

Management reporting is a system of communication, essentially a mechanism for

monitoring the “mission” of an organization. Normally in the written form of facts

which should be brought to the attention of various levels of management who use

them to take suitable action.

7. Budgeting

Management Budgeting is a process of measuring and converting plans for the use

of real (i.e. physical resources) into financial values. It is the classic problem of

how to add together quantities of apples and oranges into a meaningful economic

measurement, the only practical way for everyday use is to express their economic

values in terms of monetary costs and revenues.

2.1.5 Management Process

Management is a process of the quality of both physical as well as human resources

to seek objectives. It is a human and social process directed at individuals to get things

get things done. Like other processess, it consist of many actions or functions which are

to be carried cut in a logical sequence. It is a result oriented process, direcly related

with the task of determining objectives and devising ways and means to accomplish

them efficiently. Process of management can description, as follow:

1. Planning

Planning is concerned with 'what', 'how, and 'when' of performance. It is

deciding in the present about the future objectives and the courses of action for

their achievement. It this involves:

a. Determination of objectives

b. Forecasting and choice of a course of action

c. Formulation of policies, programmes, budgedts, schedules, to achieve objectives

d. Laying down of procedures and standards of performance.

2. Organizing

Organizing process results in a structure of the organization. It comprises

organizational positions, accompanying tasks and responsibilities, and a network of

roles and authority-responsibility relationships. Organizing is thus the basic

process of combining and integrating human, physical and financial resources in

productive interrelationships for the achievement of objectives.

The process of organizing consists of the following steps :

a. Determining and defining the activities required for the achievement of

planned goals

b. Grouping the activities into logical and convenient units

c. Assignment the duties and activities to specific positions and people

d. Delegation of authority so as to enable them to perform their jobs and to

command the resources needed for their performance.

e. Establishing horizontal and vertical authority relationships throughout the

organization.

3. Actuating

Actuating can be called by various names “leading,” “directing,” “motivating.”

Actuating involves getting the members of the organization to perform in ways that

will help it achieves organization’s goals

Task of directing are:

a. Issuing orders and instructions.

b. Guilding and leading the subordinates and finally.

c. Supervising the affairs of the subordinates.

4. Controling

Controlling implies that objectives, goals and standards of performance exist

and are known to employees and their superiors. It also implies a flexible and

dynamic organization which will permit changes in objectives, plans, programmes,

strategies, policies, organizational design, staffing policies and practices,

leadership style, communication system, for it is not uncommon that employees

failure to achieve predetermined standards is due to defects or shortcomings in any

one or more of the above dimensions of management. Thus, controlling involves

the following process :

a. Measurement of performance against predetermined goals.

b. Identification of deviations from these goals.

c. Corrective action to rectify deviations.

The Difference between function and process of management

Function of Management Process of Management

- Management is a doing function because

managers get work done under their

supervision.

- Using POSDCORB

Planning : working out, in broad outline :

the things that need to be done, the

methods for doing them, and to

accomplish the purpose set for the

enterprise.

Organizing : the establishment of the

formal structure of authority, subdividing

of work, defining andcoordinating it for

the defined objective.

Staffing : the whole personnel function of

bringing in, training the staff, and

maintaining favourable conditions of

work.

Directing : continous task of making

decision, embodying them in specific and

general orders and instruction, serving as

the leader of the enterprise.

Coordinating : the all important duty of

interelating the various part of the work.

Reporting : keeping those to whom the

executive is responsible informed as to

what is going on, which thus includes:

keeping himself and his subordinates

informed, through record, research and

inspection.

Budgeting : exercise of fiscal planning,

accounting and controlling.

- Management decides who should do it

and how they should do it.

- Using POAC

Planning : defining goals, establishing

strategy, and developing subplans to

coordinate activities.

Organizing : determining what needs to

be done, how it will be done and who is

to do it.

Actuating : directing and motivating all

involved parties and resolving conflicts.

Controlling : monitoring activities to

ensure that they are accomplished as

planned.

Conclusion : Functions and process of management tend to coalesce, and it

sometimes becomes difficult to separate one from the other. Butalthough it can notbe

separated, functionsandmanagementprocesseshave different.Management functionisthe

roleofmanagement, while managementprocessis an activityin themanagement.

2.1.6 Level of Management

Levels of management refer to a line of demarcation between various managerial

positions in an enterprise. The levels of management depend upon its size, technical

facilities, and the range of production.

The real significance of levels is that they explain authority relationships in group of

organization. These positions are created through the process of delegation of authority

from top to lower levels. Considering the hierarchy of authority and responsibility, one

can identify three levels of management,such as thefollowingpyramid:

1. Top Level

Top level is the ultimate source of authority and it lays down goals, policies and

plans for the group of organization. It devotes more time on planning and

coordinating functions. It is accountable to the owners of the business of the

Top

Middle

Lower

Characteristics of Top Level :

Set objectives

Scan environment

Plan and make decisions

Characteristics of Middle

level:

Report to top level

Oversee first-line

managers

Develop and implement

activities

Allocate resource Characteristics of Lower Level:

Report to middle level

Supervise employees

Coordinate activities

Involved in day to day operation

overall management. It is also described as the policy making group responsible for

the overall direction and success of all company activities. The authorityof top

management include :

a. To establish the objectives or goals of the enterprise.

b. To make policies and frame plans to attain the objectives laid.

c. To set up an organizational frame work to conduct the operations as per plans.

d. To assemble the resources of money, men, materials, machines and methods to

put the plans into action.

e. To exercise effective control of the operations.

f. To provide overall leadership to the enterprise.

Top level consists of owners or shareholders, Board of Directors, its

Chairman, Managing Director, or the Chief Executive, or the General Manager or

Executive Committee having key officers.

2. Middle Level

The job of middle level is to implement the policies and plans framed by the top

level. It serves as an essential link between the top level and the lower level or

operative management. They are responsible to the top level for the functioning of

their departments. They devote more time on the organization and motivation

functions of management. They provide the guidance and the structure for a

purposeful enterprise. Without them the top management's plans and ambitious

expectations will not be fruitfully realized. The following are the main authoritesof

middle level :

a. To interpret the policies chalked out by top level.

b. To prepare the organizational set up in their own departments for fulfilling the

objectives implied in various business policies.

c. To recruit and select suitable operative and supervisory staff.

d. To assign activities, duties and responsibilities for timely implementation of the

plans.

e. To compile all the instructions and issue them to supervisor under their control.

f. To motivate personnel to attain higher productivity and to reward them

properly.

g. To cooperate with the other departments for ensuring a smooth functioning of

the entire organization.

h. To collect reports and information on performance in their departments.

i. To report to top level.

j. To make suitable recommendations to the top level for the better execution of

plans and policies.

Middle levelconsists of heads of functional departments are Purchase Manager,

Production Manager, Marketing Manager, Financial controller, etc. and Divisional

and Sectional Officers working under these Functional Heads.

3. Lower level

It is placed at the bottom of the hierarchy of management, and actual operations are

the responsibility of this level of management. Lower level is in direct touch

withthe rank and file or workers. Lower level’s authority and responsibility is

limited, as follow:

a. To pass on the instructions of the middle level to workers.

b. To interpret and divide the plans of the management into short-range operating

plans.

c. To involved in the process of decisions-making.

d. To get the work done through the workers.

e. To allot various jobs to the workers, evaluate their performance and report to the

middle level management.

f. To more concerned with direction and control functions of management.

g. To devote more time in the supervision of the workers.

Lower level managementconsists of Superintendents, Foremen, Supervisors.

2.2. SCOPE OF MANAGEMENT SCIENCE

The field of management is very wide, so it’s needs to be classified into following

categories. It’s consists of : financial management, marketing management, production

management, personnel management, total quality management and inventory management.

2.2.1 Financial Management

Financial management seeks to ensure the right amount and type of funds to

business at the right time and at reasonable cost. It comprises the following activities:

1. Estimating the volume of funds required for both long-term and short-term needs of

business.

2. Selecting the appropriate source of funds.

3. Raising the required funds at the right time.

4. Ensuring proper utilisation and allocation of raised funds so as to maintain safety

and liquidity of funds and the creditworthiness and profitability of business, and

5. Administration of earnings

Thus, financial management involves the planning, organising and controlling of the

financial resources.

Financial and accounting management deals with managerial activities related to

procurement and utilization of fund for business purpose. Its sub areas are as follows:

1. Financial accounting: It relates to record keeping of various financial transactions

their classification and preparation of financial statements to show the financial

position of the organization.

2. Management accounting: It deals with analysis and interpretation of financial record

so that management can take certain decisions on investment plans, return to

investors and dividend policy.

3. Taxation: This area deals with various direct and indirect taxes which organization

has to pay.

4. Costing: Costing deals with recording of costs, their classification, analysis and cost

control.

5. Estimating the volume of funds required for both long term and short term needs of

business.

6. Selecting the appropriate source of funds.

7. Raising the required funds at the right time.

8. Ensuring proper utilization and allocation of raised funds so as to maintain safety

and liquidity of funds and the creditworthiness and profitability of business.

To be a successful, a company must meet its first main goals: identifying, creating,

and delivery highly valued products and services to its customers.

Just as a tool needs all three legs to stand, a successful company must have all three

attributes : skilled people, strong external relationships, and sufficient capital.

The financial Management decided to:

1. Financial securities

The variety of financial securities is limited only by human creativity, ingenuity,

and governmental regulations.

2. The cost of money

The fundamental factors affecting the cost of money are: production

opportunities, time preferences for consumption, risk, and inflation.

Economic conditions and policies also effect the cost of money. These

include:

a. Federal Reserve Policy.

b. Budget deficits or surpluses

c. Business activity

d. International trade deficits or surpluses

3. Financial Institution

a. Investment banks and brokerage activity

b. Deposit taking financial intermediaries

1) Saving and loan associations (S&Ls)

2) Credit unions

3) Commercial banks

c. Investment funds

At some financial institutions, savers have an ownership interest in a pool of

funds rather than owning deposit account. Examples include mutual funds,

hedge funds, and private equity funds.

d. Life insurance companies and pension funds

4. Financial market

There are many differnt financial markets in a developed economy. Each market

deals with a somewhat different type of instrument, customer, or geographic

location.

2.2.2 Marketing Management

Marketing is about identifying and meeting human and social needs. One of the shortest

good definitions of marketing is “meeting needs profitably”.

The American Marketing Association offers the following formal definition:Marketing is

the activity,set of institutions, and processes for creating, communicating, delivering, and

exchanging offerings thathave value for customers, clients, partners, and society at large.

Coping with these exchange processes calls for a considerable amount of work and skill.

Marketing management takes place when at least one party to a potential exchange thinks

about the means of achieving desired responses from other parties.

Thus we see marketing management as the art and science of choosing target markets and

getting, keeping,and growing customers through creating, delivering, and communicating

superior customer value.

Marketers market 10 main types of entities: goods, services, events, experiences, persons,

places, properties, organizations, information, and ideas.

1. Goods

Physical goods constitute the bulk of most countries production and marketing efforts.

Each year, U.S. companies market billions of fresh, canned, bagged, and frozen food

products and millions of cars, refrigerators, televisions, machines, and other mainstays of a

modern economy.

2. Services

As economies advance, a growing proportion of their activities focuses on the production

of services. The U.S. economy today produces a 70–30 services-to-goods mix. Services

include the work of airlines, hotels, car rental firms, barbers and beauticians, maintenance

and repair people, and accountants, bankers, lawyers, engineers, doctors, software

programmers, and management consultants. Many market offerings mix goods and

services, such as a fast-food meal.

3. Events

Marketers promote time-based events, such as major trade shows, artistic performances,

and company anniversaries. Global sporting events such as the Olympics and the World

Cup are promoted aggressively to both companies and fans.

4. Experiences

By orchestrating several services and goods, a firm can create, stage, and market

experiences. Walt Disney World’s Magic Kingdom allows customers to visit a fairy

kingdom, a pirate ship, or a haunted house. There is also a market for customized

experiences, such as a week at a baseball camp with retired baseball greats, a four-day rock

and roll fantasy camp, or a climb up Mount Everest.

5. Persons

Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other

professionals all get help from celebrity marketers. Some people have done a masterful job

of marketing themselves David Beckham, Oprah Winfrey, and the Rolling Stones.

Management consultant Tom Peters, a master at self-branding, has advised each person to

become a “brand”.

6. Places

Cities, states, regions, and whole nations compete to attract tourists, residents, factories,

and company headquarters.

7. Properties

Properties are intangible rights of ownership to either real property (real estate) or

financial property (stocks and bonds). They are bought and sold, and these exchanges

require marketing. Real estate agents work for property owners or sellers, or they buy and

sell residential or commercial real estate. Investment companies and banks market

securities to both institutional and individual investors.

8. Organizations

Organizations work to build a strong, favorable, and unique image in the minds of their

target publics. In the United Kingdom, Tesco’s “Every Little Helps” marketing program

reflects the food marketer’s attention to detail in everything it does, within the store and in

the community and environment. The campaign has vaulted Tesco to the top of the UK

supermarket chain industry. Universities, museums, performing arts organizations,

corporations, and nonprofits all use marketing to boost their public images and compete

for audiences and funds.

9. Information

The production, packaging, and distribution of information are major industries.

Information is essentially what books, schools, and universities produce, market, and

distribute at a price to parents, students, and communities.

10. Ideas

Every market offering includes a basic idea. Charles Revson of Revlon once observed: “In

the factory we make cosmetics; in the drugstore we sell hope.” Products and services are

platforms for delivering some idea or benefit. Social marketers are busy promoting such

ideas as “Friends Don’t Let Friends Drive Drunk” and “A Mind Is a Terrible Thing to

Waste.”

A marketer is someone who seeks a response attention, apurchase, a vote, a donation from

another party, called the prospect. If two parties are seeking tosell something to each other, we

call them both marketers. Marketers are skilled at stimulating demand for their products, but

that’s a limited view of whatthey do. Just as production and logistics professionals are

responsible for supply management, marketersare responsible for demand management. They

seek to influence the level, timing, and compositionof demand to meet the organization’s

objectives. Eight demand states are possible:

1. Negative demand

Consumers dislike the product and may even pay to avoid it.

2. Nonexistent demand

Consumers may be unaware of or uninterested in the product.

3. Latent demand

Consumers may share a strong need that cannot be satisfied by an existing product.

4. Declining demand

Consumers begin to buy the product less frequently or not at all.

5. Irregular demand

Consumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis.

6. Full demand

Consumers are adequately buying all products put into the marketplace.

7. Overfull demand

More consumers would like to buy the product than can be satisfied.

8. Unwholesome demand

Consumers may be attracted to products that have undesirable social consequences.

Marketing management not only involves distribution of the product to the buyers,

but also identifying of consumers needs. It may need number of steps. Sub areas are as

follows:

1. Market research: It involves in collection of data related to product demand and

performance by research and analysis of market.

2. Planning and developing suitable product.

3. Setting appropriate prices.

4. Selecting the right channel of distribution.

5. Advertising: This area deals with advertising of product, introducing new product in

market by various means and encourage the customer to buy thee products.

6. Sales management: Sales management deals with fixation of prices, actual transfer

of products to the customer after fulfilling certain formalities and after sales

services.

Key Customer Market

Consider the following key custumer markets:

1. Consumer markets

Companies selling mass consumer goods and services such as juices,cosmetics, athletic

shoes, and air travel spend a great deal of time establishing a strong brand imageby

developing a superior product and packaging, ensuring its availability, and backing it

withengaging communications and reliable service.

2. Business markets

Companies selling business goods and services often face well-informedprofessional

buyers skilled at evaluating competitive offerings. Business buyers buy goods to makeor

resell a product to others at a profit. Business marketers must demonstrate how their

productswill help achieve higher revenue or lower costs. Advertising can play a role, but

the sales force, theprice, and the company’s reputation may play a greater one.

3. Global markets

Companies in the global marketplace must decide which countries to enter;how to enter

each (as an exporter, licenser, joint venture partner, contract manufacturer, or

solomanufacturer); how to adapt product and service features to each country; how to price

productsin different countries; and how to design communications for different cultures.

They face differentrequirements for buying and disposing of property; cultural, language,

legal and politicaldifferences; and currency fluctuations. Yet, the payoff can be huge.

4. Nonprofit and government markets

Companies selling to nonprofit organizations withlimited purchasing power such as

churches, universities, charitable organizations, and governmentagencies need to price

carefully. Lower selling prices affect the features and quality the seller canbuild into the

offering. Much government purchasing calls for bids, and buyers often focus onpractical

solutions and favor the lowest bid in the absence of extenuating factors.

2.2.3 Production Management:

Production or operations management is the process, which combines and transforms

various resources used in the production or operations sub system of the organization into value

added product or services in a controlled manner as per the policies of the organization.

Therefore, it is that part of an organization, which is concerned with the transformation of a

range of inputs into the required (products or services) having the requisite quality level.

The set of interrelated management activities, which are involved in manufacturing certain

products, is called as production management. If the same concept is extended to services

management, then the corresponding set of management activities is called as operations

management.

1. Concept Of Production

Production function is that part of an organization, which is concerned with the

transformationof a range of inputs into the required outputs (products) having the requisite

quality level.Production is defined as “the step-by-step conversion of one form of material

intoanother form through chemical or mechanical process to create or enhance the utility

ofthe product to the user.” Thus production is a value addition process. At each stage

ofprocessing, there will be value addition.

2. Historical Evolution of Production Management

For over two centuries operations and production management has been recognised as

an important factor in a century’s economic growth.

The traditional view of manufacturing management began in eighteent century when

Adam Smith recognised the economic benefits of specialisation of labour. He recomended

breaking of jobs down into subtask and recognisesn workers to specialised tasks in which

they would become highly skilled and officient. In the early twentieth century, F.W.tylor

implemented Smith’s theories and developed scientific management. From then till 1930,

many techniques were developed prevailing the traditional view. Brief information about the

contributions to manufacturing management is shown in the Tabel.

TABLE Historical Summary Of Operations Management

Date Contributtion Contributor

1776

1799

1832

1900

1900

1901

1915

1927

1931

1935

1940

1946

1947

1950

1951

1960

1970

1980

Specialization of labour in manufacturing

Interchangeable parts, cost accounting

Division of labour by skill; assignment of jobs by skill;

basics of time study

Scientific management time study and work study

developed; dividing planning and doing of work

Motion of study of jobs

Scheduling techniques for employees, machines jobs

in manufacturing

Economic lot sizes for inventory control

Human relations; the Hawthorne studies

Statistical inference applied to product quality: quality

control charts

Statistical sampling applied to quality control:

inspection sampling plans

Operations research applications in World War II

Digital computer Linear programming

Mathematical programming, on-linear and stochastic

Commercial digital computer: large-scale

computations available.

Organizational behaviour: continued study of people at

work

Integrating operations into overall strategy and policy,

Computer applications to manufacturing,

Scheduling and control, Material requirement planning

(MRP)

Quality and productivity applications from Japan:

robotics, CAD-CAM

Adam Smith

Eli Whitney and others

Charles Babbage

Frederick W. Taylor

Frank B. Gilbreth

Henry L. Gantt

F.W. Harris

Elton Mayo

W.A. Shewart

H.F. Dodge & H.G. Roming

P.M. Blacker and others.

John Mauchlly and J.P. Eckert

G.B. Dantzig, Williams &

others

A. Charnes, W.W. Cooper

processes & others

Sperry Univac

L. Cummings, L. Porter

W. Skinner J. Orlicky and

G. Wright

W.E. Deming and J. Juran.

Production management becomes the acceptable term from 1930s to 1950s. As

F.W. Taylor’s works become more widely known, managers developed techniques

that focussed on economic efficiency in manufacturing. Workers were studied in

great detail to eliminate wasteful efforts and achieve greater efficiency. At the same

time, psychologists, socialists and other social scientists began to study people and

human behaviour in the working environment. In addition, economists,

mathematicians, and computer socialists contributed newer, more sophisticated

analytical approaches.

With the 1970s emerges two distinct changes in our views. The most obvious

of these, reflected in the new name operations management was a shift in the

service and manufacturing sectors of the economy. As service sector became more

prominent, the change from “production” to “operations” emphasized the

broadening of our field to service organizations. The second, more suitable change

was the beginning of an emphasis on synthesis, rather than just analysis, in

management practices.

3. Production System

The production system of an organization is that part, which produces products of an

organization. It is that activity whereby resources, flowing within a defined system, are

combined and transformed in a controlled manner to add value in accordance with the

policies communicated by management. A simplified production system is shown above.

The production system has the following characteristics:

a. Production is an organized activity, so every production system has an objective.

b. The system transforms the various inputs to useful outputs.

c. It does not operate in isolation from the other organization system.

d. There exists a feedback about the activities, which is essential to control and improve

system performance.

4. Classification of Production System

Production systems can be classified as Job Shop, Batch, Mass and Continuous

Production systems.

a. Job shop production

Job shop production are characterised by manufacturing of one or few quantity of

products designed and produced as per the specification of customers within prefixed

time and cost. The distinguishing feature of this is low volume and high variety of

products. A job shop comprises of general purpose machines arranged into different

departments. Each job demands unique technological requirements, demands

processing on machines in a certain sequence.

1) Characteristics

The Job-shop production system is followed when there is:

a) High variety of products and low volume.

b) Use of general purpose machines and facilities.

c) Highly skilled operators who can take up each job as a challenge because

of uniqueness.

d) Large inventory of materials, tools, parts.

e) Detailed planning is essential for sequencing the requirements of each

product, capacities for each work centre and order priorities.

Production/

operations volume

Output Product Variety

Continous

Production

Mass Production

Batch Product

2) Advantages

a) Following are the advantages of job shop production: Because of

general purpose machines and facilities variety of products can be

produced.

b) Operators will become more skilled and competent, as each job

gives them learning opportunities.

c) Full potential of operators can be utilised.

d) Opportunity exists for creative methods and innovative ideas.

3) Limitations

Following are the limitations of job shop production:

a) Higher cost due to frequent set up changes

b) Higher level of inventory at all levels and hence higher inventory

cost

c) Production planning is complicated

d) Larger space requirements.

b. Batch Production

Batch production is defined by American Production and Inventory Control

Society (APICS) “as a form of manufacturing in which the job passes through

the functional departments in lots or batches and each lot may have a different

routing.” It is characterised by the manufacture of limited number of products

produced at regular intervals and stocked awaiting sales.

1) Characteristics

Batch production system is used under the following circumstances:

a) When there is shorter production runs.

b) When plant and machinery are flexible.

c) When plant and machinery set up is used for the production of item in a

batch and change of set up is required for processing the next batch.

d) When manufacturing lead time and cost are lower as compared to job

order production.

2) Advantages

Following are the advantages of batch production:

a) Better utilisation of plant and machinery.

b) Promotes functional specialisation.

c) Cost per unit is lower as compared to job order production.

d) Lower investment in plant and machinery.

e) Flexibility to accommodate and process number of products.

f) Job satisfaction exists for operators.

3) Limitations

a) Following are the limitations of batch production:

b) Material handling is complex because of irregular and longer flows.

c) Production planning and control is complex.

d) Work in process inventory is higher compared to continuous

production.

e) Higher set up costs due to frequent changes in set up.

c. Mass Production

Manufacture of discrete parts or assemblies using a continuous process are

called mass production. This production system is justified by very large

volume of production. The machines are arranged in a line or product layout.

Product and process standardisation exists and all outputs follow the same path.

1) Characteristics

Mass production is used under the following circumstances:

a) Standardisation of product and process sequence.

b) Dedicated special purpose machines having higher production capacities

and output rates.

c) Large volume of products.

d) Shorter cycle time of production.

e) Lower in process inventory.

f) Perfectly balanced production lines.

g) Flow of materials, components and parts is continuous and without any

back tracking.

h) Production planning and control is easy.

i) Material handling can be completely automatic.

2) Advantages

Following are the advantages of mass production:

a) Higher rate of production with reduced cycle time.

b) Higher capacity utilisation due to line balancing.

c) Less skilled operators are required.

d) Low process inventory.

e) Manufacturing cost per unit is low.

3) Limitations

Following are the limitations of mass production:

a) Breakdown of one machine will stop an entire production line.

b) Line layout needs major change with the changes in the product design.

c) High investment in production facilities.

d) The cycle time is determined by the slowest operation.

d. Continuous Production

Production facilities are arranged as per the sequence of production operations

from the first operations to the finished product. The items are made to flow

through the sequence of operations through material handling devices such as

conveyors, transfer devices.

4) Characteristics

Continuous production is used under the following circumstances:

a) Dedicated plant and equipment with zero flexibility.

b) Material handling is fully automated.

c) Process follows a predetermined sequence of operations.

d) Component materials cannot be readily identified with final product.

e) Planning and scheduling is a routine action.

5) Advantages

Following are the advantages of continuous production:

a) Standardisation of product and process sequence.

b) Higher rate of production with reduced cycle time.

c) Higher capacity utilisation due to line balancing.

d) Manpower is not required for material handling as it is completely

automatic.

e) Person with limited skills can be used on the production line.

f) Unit cost is lower due to high volume of production.

6) Limitations

Following are the limitations of continuous production:

a) Flexibility to accommodate and process number of products does not

exist.

b) Very high investment for setting flow lines.

c) Product differentiation is limited.

5. Objective of Production Management

The objective of the production management is ‘to produce goods services of right

quality and quantity at the right time and right manufacturing cost’.

a. Right Quality

The quality of product is established based upon the customers needs. The right

quality is not necessarily best quality. It is determined by the cost of the product

and the technical characteristics as suited to the specific requirements.

b. Right Quantity

The manufacturing organization should produce the products in right number. If

they are produced in excess of demand the capital will block up in the form of

inventory and if the quantity is produced in short of demand, leads to shortage of

products.

c. Right Time

Timeliness of delivery is one of the important parameter to judge the

effectiveness of production department. So, the production department has to

make the optimal utilization of input resources to achieve its objective.

d. Right Manufacturing Cost

Manufacturing costs are established before the product is actually manufactured.

Hence, all attempts should be made to produce the products at pre-established

cost, so as to reduce the variation between actual and the standard (pre-

established) cost.

2.2.4 Personnel Management

The terms “Human Resource Management” (HRM) and “Human Resources” (HR)

have largely replaced the term ‘personnel management’ as a description of the

processes involved in managing people in organizations.

Human resource management is defined as a strategic and coherent approach to the

management of an organization’s most valued assets – the people working there who

individually and collectively contribute to the achievement of its objectives.

1. The Matching Model of HRM (Human Resource Management)

One of the first explicit statements of the HRM concept was made by the

MichiganSchool (Fombrunet al, 1984). They held that HR systems and the

organization structurs should be managed in a way that is congruent with

organizational strategy(hence the name “matching model”). Which consists offour

generic processes or functions that are performed in all organizations. These are:

a. Selection : matching available human resources to jobs;

b. Appraisal : performance management;

c. Rewards : “the reward system is one of the most under-utilized and mishandled

managerial tools for driving organizational performance”; it must reward short s

well as long-term achievements, bearing in mind that “business must perform in

the present to succeed in the future”;

d. Development : developing high quality employees.

2. Aims of HRM (Human Resource Management)

The overall purpose of human resource management is to ensure that the

organization is able to achieve success through people. As Ulrich and Lake (1990)

remark: “HRM systems can be the source of organizational capabilities that allow

firms to learn and capitalize on new opportunities.” Specifically, HRM is

concerned with achieving objectives in the areas summarized below:

a. Organizational effectiveness

Extensive research has shown that such practices can make a significant impact

on firm performance. HRM strategies aim to support programmes for improving

organizational effectiveness by developing policies in such areas as knowledge

management, talent management and generally creating “A great place to

work”.

b. Human capital management

Human capital can be regarded as the prime asset of an organization and

businesses need to invest in that asset to ensure their survival and growth. HRM

aims to ensure that the organization obtains and retains the skilled, committed

and well-motivated workforce it needs. This means taking steps to assess and

satisfy future people needs and to enhance and develop the inherent capacities

of people – their contributions, potential and employability – by providing

learning and continuous development opportunities.

c. Knowledge management

Knowledge management is “any process or practice of creating, acquiring,

capturing, sharing and using knowledge, wherever it resides, to enhance

learning and performance in organizations” (Scarborough et al, 1999). HRM

aims to support the development of firm-specific knowledge and skills that are

the result of organizational learning processes.

d. Reward management

HRM aims to enhance motivation, job engagement and commitment by

introducing policies and processes that ensure that people are valued and

rewarded for what they do and achieve and for the levels of skill and

competence they reach.

e. Employee relations

The aim is to create a climate in which productive and harmonious relationships

can be maintained through partnerships between management and employees

and their trade unions.

f. Meeting diverse needs

HRM aims to develop and implement policies that balance and adapt to the

needs of its stakeholders and provide for the management of a diverse

workforce, taking into account individual and group differences in employment,

personal needs, work style and aspirations and the provision of equal

opportunities for all.

g. Bridging the gap between rhetoric and reality

The research conducted by Grattonet al (1999) found that there was generally a

wide gap between the sort of rhetoric expressed above and reality.

Managements may start with good intentions to do some or all of these things

but the realization of them “theory in use” is often very difficult. This arises

because of contextual and process problems: other business priorities, short-

termism, limited support from line managers, an inadequate infrastructure of

supporting processes, lack of resources, resistance to change and lack of trust.

3. Policy Goals of HRM (Human Resource Management)

The models of HRM, the aims set out above and other definitions of HRM

have been distilled by Caldwell (2004) into 12 policy goals:

a. Managing people as assets that are fundamental to the competitive advantage of

the organization.

b. Aligning HRM policies with business policies and corporate strategy.

c. Developing a close fit of HR policies, procedures and systems with one another.

d. Creating a flatter and more flexible organization capable of responding more

quickly to change.

e. Encouraging team working and co-operation across internal organizational

boundaries.

f. Creating a strong customer-first philosophy throughout the organization.

g. Empowering employees to manage their own self-development and learning.

h. Developing reward strategies designed to support a performance-drivenculture.

i. Improving employee involvement through better internal communication.

j. Building greater employee commitment to the organization.

k. Increasing line management responsibility for HR policies.

l. Developing the facilitating role of managers as enablers.

4. Characteristics of HRM (Human Resource Management)

The characteristics of the HRM concept as they emerged from the writings of

the pioneers and later commentators are that it is:

a. Diverse;

b. Strategic with an emphasis on integration;

c. Commitment-oriented;

d. Based on the belief that people should be treated as assets (human capital);

e. Unitarist rather than pluralist, individualistic rather than collective in its

approachto employee relations;

f. A management-driven activity the delivery of HRM is a line

managementresponsibility;

g. Focused on business values.

2.2.5 Total Quality Management

In recent years, Total Quality Management (TQM) has received worldwide attention

and is being adopted in many industries, particularly in developed economies. TQM

may be defined as a continuous quest for excellence by creating the right skills and

attitudes in people to make prevention of defects possible and satisfy customers/users

totally at all times. TQM is an organization-wide activity that has to reach every

individual within an organization.

Oakland has defined Total Quality Management (TQM) is an approach to improving

the effectiveness and flexibility of business as a whole. It is essentially a way of

organizing and involving the whole organization; every department, every activity,

every single person at every level.

TQM is regarded as an integration of various processes characterizing the

behavioural dynamics of an organization. For this, an organization is referred to as a

total system (socio-technical), where all the activities carried out are geared towards

meeting the requirements of customers with efficiency and effectiveness.

Zaire and Simintiras have propounded this viewpoint by stating: Total Quality

Management is the combination of the socio-technical process towards doing the right

things (externally), everything right (internally) first time and all the time, with

economic viability considered at each stage of each process.

Price and Gaskill have identified three dimensions of TQM. They are:

1. The product and service dimension: the degree to which the customer is satisfied

with the product or service supplied;

2. The people dimension: the degree to which the customer is satisfied with the

relationship with the people in the supplying organizations;

3. The process dimension: the degree to which the supplier is satisfied with the internal

work processes, which are used to develop the products and

services supplied to the customers.

2.2.6 Inventory Management

In dictionary meaning of inventory is a “detailed list of goods, furniture etc.” Many

understand the word inventory, as a stock of goods, but the generally accepted meaning

of the word ‘goods’ in the accounting language, is the stock of finished goods only.

Inventory management is a science primarily about specifying the shape and

percentage of stocked goods. It is required at different locations within a facility or

within many locations of a supply network to precede the regular and planned course of

production and stock of materials. All organizations keep inventory. “Inventory”

includes a company’sraw materials, work in process, supplies used in operations,and

finished goods. Inventory can be something as simple as a bottle of glass cleaner used

as part of a building’s custodial program or something complex such as a mix of raw

materials and subassemblies used as part of a manufacturing process.

The primary objectives of inventory management are:

1. To minimize the possibility of disruption in the production schedule of a firm for

want of raw material, stock and spares.

2. To keep down capital investment in inventories.

A. Inventory Costs

Inventory brings with it a number of costs. These costs can include:

1. Dollars

2. Space

3. Labor to receive, check quality, put away, retrieve, select, pack, ship, and account

for

4. Deterioration, damage, and obsolescence

5. Theft

Inventory costs generally fall into ordering costs and holdingcosts. Ordering, or

acquisition, costs come about regardless ofthe actual value of the goods. These costs

include the salaries ofthose purchasing the product, costs of expediting the

inventory,and so on.

B. The Goals of Inventory

As discussed in a just-in-time manufacturing environment, inventory is considered

waste. However, in environments where an organization suffers from poor cash flow or

lacks strong control over : 1) electronic information transfer among all departments and

all significant suppliers, 2) lead times, and 3) quality of materials received, inventory

plays important roles. Some of the more important reasons for obtaining and holding

inventory are:

1. Predictability: In order to engage in capacity planning and production scheduling,

you need to control how much raw material, parts, and subassemblies you process

at a given time. Inventory buffers what you need from what you process.

2. Fluctuations in demand: A supply of inventory on hand is protection: You don’t

always know how much you are likely to need at any given time, but you still need

to satisfy customer or production demand on time. If you can see how customers

are acting in the supply chain, surprises in fluctuations in demand are held to a

minimum.

3. Unreliability of supply: Inventory protects you from unreliable suppliers or when

an item is scarce and it is difficult to ensure a steady supply. Whenever possible

unreliable suppliers should be rehabilitated through discussions or they should be

replaced. Rehabilitation can be accomplished through master purchase orders with

timed product releases, price or term penalties for nonperformance, better verbal

and electronic communications between the parties, etc. This will result in a

lowering of your on-hand inventory needs.

4. Price protection: Buying quantities of inventory at appropriate times helps avoid

the impact of cost inflation. Note that contracting to assure a price does not require

actually taking delivery at the time of purchase. Many suppliers prefer to deliver

periodically rather than to ship an entire year’s supply of a particular stockkeeping

unit ( SKU) at one time. (Note: The acronym “SKU,” standing for “stockkeeping

unit,” is a common term in the inventory world. It generally stands for a specific

identifying numeric or alpha-numeric identifier for a specific item.)

5. Quantity discounts: Often bulk discounts are available if you buy in large rather

than in small quantities.

6. Lower ordering costs: If you buy a larger quantity of an item less frequently, the

ordering costs are less than buying smaller quantities over and over again.

A. STRATEGIC MANAGEMENT

All organizations engage in the strategic management process either formally or

informally. Strategic management is equally applicable to public, private, not-for-profit,

and religious organizations.

1. Definition of Strategic Management

Strategic management is the process of managing the pursuit of organizational

mission while managing the relationship of the organization to its environment (James

M. Higgins).

Strategic management is defined as the set of decisions and actions resulting in the

formulation and implementation of strategies designed to achieve the objectives of the

organization (John A. Pearce II and Richard B. Robinson, Jr.).

Strategic management is the process of examining both present and future

environments, formulating the organization's objectives, and making, implementing,

and controlling decisions focused on achieving these objectives in the present and

future environments (Garry D. Smith, Danny R. Arnold, Bobby G. Bizzell).

Strategic management is a continuous process that involves attempts to match or fit

the organization with its changing environment in the most advantageous way possible

(Lester A. Digman)

2. The Scope of Strategic Management

J. Constable has defined the area addressed by strategic management as "the

management processes and decisions which determine the long-term structure and

activities of the organization". This definition incorporates five key themes:

a. Management process. Management process as relate to how strategies are created

and changed.

b. Management decisions. The decisions must relate clearly to a solution of perceived

problems (how to avoid a threat; how to capitalize on an opportunity).

c. Time scales. The strategic time horizon is long. However, it for company in real

trouble can be very short.

d. Structure of the organization. An organization is managed by people within a

structure. The decisions which result from the way that managers work together

within the structure can result in strategic change.

e. Activities of the organization. This is a potentially limitless area of study and we

normally shall centre upon all activities which affect the organization.

3. The Strategic Decision Makers

Strategic management process involves the entire range of decisions. The strategic

management process requires competent individuals to ensure its success. Therefore, to

understand strategic management, we must know where strategic decisions are made in

organizations.

Inputs to strategic decisions can be generated in a number of ways. Overall, top

management, board of directors, and planning staff tend to be those positions that have

the most significant involvement and influence in the strategic management process of

organizations. The failure of an organization to achieve its objectives can often be

traced to a breakdown at the level of the board or top management. However, the final

responsibility rests with top management.

4. The Strategic Management Process

Strategic management process can be defined as ‘ a combination of managerial

decisions and actions that determines the long run performance of a corporation. It

includes environmental observation, strategic planning, formulation, implementation,

evaluation and control.

Crucial considerations :

a) Demand

b) Competition

c) Technology

d) Scarcity

Major steps:

a. First stage ( definitions)

1) Preparations of missions

2) Setting of Objectives

3) Fixation of goals

4) Policies

5) Analysis of environment

b. Second stage ( formulation)

1) Formulation of strategies

2) Implementation of strategies

c. Third stage ( Evaluation)

1) SWOT Analysis

2) Evaluation

5. Strategic Management Models

a. Andrew’s Models

b. Glueck’s Models

c. The Schendel and Hofer Models

d. The Thompson and Strickland Models

e. Korey’s Models

f. Schematic Models

B. Operation Management

1. Definition

Joseph G .Monks defines Operations Management “as the process whereby

resources, flowing within a defined system, are combined and transformed by a

controlled manner to add value in accordance with policies communicated by

management.”

The operations managers have the prime responsibility for processing inputs into

outputs. They must bring together under production plan that effectively uses the

materials, capacity and knowledge available in the production facility. Given a demand

on the system work must be scheduled and controlled to produce goods and/or services

required. Control must be exercised over such parameters such as costs, quality and

inventory levels.

2. Resources

Resources are the human, material and capital inputs to the production process.

Human resources are the key assets of an organisation. As the technology advances, a

large proportion of human input is in planning and controlling activities. By using the

intellectual capabilities of people, managers can multiply the value of their employees

into by many times. Material resources are the physical facilities and materials such as

plant equipment, inventories and supplies. These are the major assets of an

organisation. Capital in the form of stock, bonds, and or taxes and contributions is a

vital asset. Capital is a store of value, which is used to regulate the flow of the other

resources.

3. Systems

Systems are the arrangement of components designed to achieve objectives

according to the plan. The business systems are subsystem of large social systems.

In turn, it contains subsystem such as personnel, engineering, finance and

operations, which will function for the good of the organisation. A systems approach to

operations management recognises the hierarchical management responsibilities. If

subsystems goals are pursued independently, it will results in sub-optimization.

A consistent and integrative approach will lead to optimization of overall system

goals. The system approach to specific problems requires that the problem first be

identified and isolated from the maze of the less relevant data that constitute the

environment. The problem abstracted from the overall (macro) environment. Then it

can be broken into manageable (micro) parts and analysed and solutions proposed.

Doing this analysis is advantageous before making any changes. If the solution appears

to solve the problem in a satisfactory way, changes can be made to the real system in an

orderly and predictable way.

The ability of any system to achieve its objective depends on its design and its

control. System design is a predetermined arrangement of components. It establishes

the relationships that must exist between inputs, transformation activities and outputs in

order to achieve the system objectives. With the most structured design, there will be

less planning and decision-making in the operations ofthe system. System control

consists of all actions necessary to ensure that activities conform to preconceived plans

or goals. It involves following four essential elements:

a. Measurement by an accurate sensory device.

b. Feedback of information in a timely manner.

c. Comparison with standards such as time and cost standards.

d. Corrective actions by someone with the authority and ability to correct.

A closed loop control system can automatically function on the basis of data from

within its ownsystem.

4. Transformation and Value Adding Activities

The objective of combining resources under controlled conditions is to transform

them into goodsand services having a higher value than the original inputs. The

transformation process applied willbe in the form of technology to the inputs. The

effectiveness of the production factors in thetransformation process is known as

productivity.The productivity refers to the ratio between values of output per work hour

to the cost of inputs.

The firms overall ratio must be greater than 1, then we can say value is added to

the product.Operations manager should concentrate improving the transformation

efficiency and to increase theratio.

5. Operation Management Objective

Objectives of Operations Management can be categorized into Customer Service and

ResourceUtilisation.

6. Customer Service

The first objective of operating systems is to utilize resources for the satisfaction of

customerwants. Therefore, customer service is a key objective of operations

management. The operatingsystem must provide something to a specification, which

can satisfy the customer in terms of costand timing. Thus, providing the ‘right thing at a

right price at the right time’ can satisfy primaryobjective.

7. Resource Utilisation

Another major objective of operating systems is to utilize resources for the

satisfaction of customerwants effectively. Customer service must be provided with the

achievement of effective operationsthrough efficient use of resources. Inefficient use of

resources or inadequate customer serviceleads to commercial failure of an operating

system.Operations management is concerned essentially with the utilisation of

resources, i.e. obtainingmaximum effect from resources or minimising their loss, under

utilisation or waste.

The extent ofthe utilisation of the resources’ potential might be expressed in terms

of the proportion of availabletime used or occupied, space utilisation, levels of activity,

etc. Each measure indicates the extent towhich the potential or capacity of such

resources is utilised. This is referred as the objective ofresource utilisation.

Operations management is concerned with the achievement of both satisfactory

customer serviceand resource utilisation. An improvement in one will often give rise to

deterioration in the other.Often both cannot be maximized, and hence a satisfactory

performance must be achieved on bothobjectives. All the activities of operations

management must be tackled with these two objectives in mind, and because of this

conflict, operations managers’ will face many of the problems. Hence,operations

managers must attempt to balance these basic objectives.

8. Operations Objectives

The overall objective of the operations subsystem is to provide conversion

capabilities for meeting the organization’s goals and strategy. The sub-goals of the

operations subsystem, must specify the following:

a. Product or service characteristics.

b. Process characteristics.

c. Product or service quality.

d. Efficiency

e. Effective employee relations and cost control of labour.

f. Cost control of material.

g. Cost control in facility utilization.

h. Customer service (schedule)

i. Producing quantities to meet expected demand.

j. Meeting the required delivery date for goods or services.

k. Adaptability for future survival.

The priorities among these operations’ sub-goals and their relative emphases

should be direct reflections of the organization’s mission. Relating these six operations

sub-goals to the broader strategic choices above, it is clear that quality, efficiency, and

dependability (customer service) are reflected in the sub-goals. Flexibility encompasses

adaptability but also relates to product/service and process characteristics: Once choices

about product and process are made, boundaries for meeting the other operations

objectives are set.

Acording to the strategic management and operation management, we can decide

that role of level management as follow:

2.3. THE EVOLUTION OF MANAGEMENT THEORY

Management has been progressively evaluated through the following three stages.

2.3.1 The Early Clasical Theory of Management

It has three streams :

1. Bureaucracy : 1900

STRATEGIC

DICISIONS

OPERATIONAL

DECISIONS

TACTICAL

DECISIONS

OWNERS/ BOARD

OF DIRECTORS

MANAGERS

MOST EMPLOYEES

2. Scientific management : 1900-1930

3. Administrative / Operational management: 1916-1940

2.3.2 The Neo-Classical Theory Of Management

It has one streams : Behavioral Approach: 1940-1950

2.3.3 Modern Theory of Management

It has three streams :

1. Quantitative Approach: 1950-1960

2. Systems Approach: 1960s on words

3. Contingency Approach: 1970s on words

A. The early classical theory of management

1. Bureaucracy

Bureaucracy management is a stream of classical theory of management. Max Weber

was the first of management theorists who were concerned the management structure with

the sets of rule and regulations. Bureaucracy management depends upon administration

devices. Max Weber presents the ideal organization structure. There are four major

characteristics of organizational structure.

a) Division of labour : Clearly defined authority and responsibility given as official

duties

b) Hierarchy of authority : Positions organized in a hierarchical manner resulting in a

scalar chain

c) Formal selection : Employees should be selected on the basis of technical skill,

formal examinations or by education or training

d) Formal rules : There must be formal rules and controls regarding the conduct of

official duties of administrators

Advantage of bureaucracy management:

a) Hierarchy of authority.

b) Employment is based on the technical efficiency.

c) Eliminate managerial inconsistencies.

d) A well understood system.

e) Maintain the consistency of working.

f) Rules and regulation of the duties are followed by the employees.

g) Records are kept for future references.

h) People are given authority according to their position in organization.

Disadvantage of bureaucracy management:

a) Human resources are not tackled.

b) Inter personal relations are discarded.

c) It does not allow for personal growth and development.

d) It does not possess adequate.

e) Organization becomes static and change is not anticipated.

f) Difficult to keep co-ordination and communication between employees.

g) It is a “closed system”.

2. Scientific management

Frederick Winslow Taylor was first person who gave Scientific Management in

1911. He also called the father of scientific management. Scientific Management was

concerned to improving the operational efficiency at the shop-floor level. According to

Taylor, “scientific management means knowing exactly what you want men to do and

seeing that they do it in the best and cheapest way”. Scientific management is based on

the analysis, planning and control functions. And job accomplished by analyzing, and

works can selected and trained scientifically. In this, management role is to determine the

kind of work for which an employee suited and hire and assign workers accordingly.

Management is not responsible for execution of work but they are responsible for how

the work is done. Co-operation between management and workers can enhance the work

and achieve the maximum output.

Taylor called it as “Mental Revolution”, because it creates the mutual

understanding, trust and confidence between the management and workers for achieving

goal (higher production).

Principles of scientific Management

Under scientific management, Taylor developed the following parameters for

organization.

a) Science not rule of thumb : the first principle of scientific management requires

scientific study and analysis of each element of a job in order to replace the old

rule of thumb approach development of a science for each element of a man’s job

requires that decisions should be made on the basis of facts rather than opinions

and beliefs.

b) Scientific selection, training and development of workers : this principles requires

that workers should be selected and trained in accordance with the requirements of

the jobs, to be entrusted to them. Instead of allowing workers to learn themselves,

systematic training and development programmers should designed to improve

their skills and efficiency. Efforts should be made to develop each employee to his

greatest efficiency.

c) Close cooperation between workers and management : close cooperation between

management and workers to ensure that work is done in accordance with the

developed scientific principles. The interests of employer and employees should be

fully harmonised so as to create a mutually beneficial relationship.

d) Equal divison of work and responsibility : management should assume the

responsibility for which it is better suited. Management should decide the methods

of work, working conditions, time for completion of work instead of leaving them

to the discreation of the works. In other words, management should take more

responsibility for planning and supervision of the work, while the workers should

be concerned with the execution of plans.

e) Maximum prosperity for both employers and employee : the aim of management

should be to secure maximum prosperity for each employee along with maximum

prosperity for the employer.This can be possible when efficiency and output are

maximised. Maximum output and optimum utilisation of resources will bring

higher profits to the employers coupled with higher wages and salaries for

employees.

f) Mental revolution : it means a complete change in the outlook of both management

and workers with respect to their mutual relations and in relation to work effort.

Instead of fighting on the division of surplus of industry, they should work together

to increase the surplus so that each one can get more.

Objective of Scientific Management

a) Scientific utilization of various resources like human power, material.

b) To provide trained and efficient work force.

c) To provide standardize methods of work.

d) To provide a scientific base for selecting material, and equipment.

e) To provide extra wages to the worker for higher production.

f) Replace old rule of thumbs to new scientific methods.

g) To develop a good rapport between management and workers.

h) To achieve higher production, with reduce costs and maximum efficiency.

i) Less wastage.

3. Administrative management

Henri Fayol was real father of modern Management. Henri Fayol is the French

industrialist in 1841-1925. He was a mining engineer in. Henri Fayol spent his entire

working career in French industry, French cool and iron combine of commentary

fourchambault. Henri Fayol developed a general theory of Business Administration.

Henri Fayol was concerned the principles of organization and the function of

management. Fayol laid the foundation of management as a separate body of

knowledge. He always insisted that if scientific forecasting and proper methods are

used in management than company can get satisfactory results. According to Fayol,

management was not personal talent, it is a knowledge base skill.

Henri Fayol’s Administrative Management is based on six admin activities, that

are :

a) Technical : Production and manufacture

b) Managerial : Planning, controlling, co-ordination

c) Commercial : Purchasing and selling

d) Financial : Use of capital

e) Accounting : Asset, Liabilities, cost, profits

f) Security : Protection of goods and Person

Fayol’s fourteen Principles of management. Fayol derived the following

fourteen principles.

a) Division of work: Division of work means specialization. Each job and work

should be divided into small task and should be assigned to specialist of it.

b) Authority and responsibility: Authority means right to give order and command

while responsibility means to accomplish objective.

c) Discipline: Discipline is required at every level in every organization. Fayol

stated discipline in terms of obedience, application, and respect to superiors.

d) Unity of command: A subordinate should receive order from only one boss.

e) Unity of direction: It means that all the works of an organization must work

together to accomplish a common objective in under one plan and head.

f) Subordination of individual interest to common interest: Worker follows the

common interest of organization rather than individual.

g) Remuneration: Remuneration should be fair and adequate. It includes both types

of incentives financial as well as non financial.

h) Centralization: There should be one central point in organization which

exercises overall direction and control of all the parts.

i) Scalar Chain: Scalar chain is the chain or line of command from superior to

subordinates.

j) Order: Only proper order can give an efficient management.

k) Equity: Equity creates loyalty and devotion among the employees.

l) Stability of tenure personnel: Security of job for an employee in an organization

is very important and pre-requisite condition. Retaining productive employee

should always a higher priority of management.

m) Esprit de corps: Management should encourage harmony and proper

understandings between workers. Fayol said that in union there is strength.

Whole organization should work as a team.

n) Initiative: Manager should be encouraged the employees Initiative for creative

working.

B. The neo classical theory of management

Neo- classical theory is also referred to as behavioral science approach to

modifying and improving the classical theory. While classical theories focused more on

structure and physical aspects of the worker and Neo-classical theory gives importance to

human and social aspects of the worker and his relations in the organization.

The neo-classical theory is based on the Hawthrone experiments. Elton Mayo

conducted the Hawthrone experiments at Hawthron plant of General Electronic

Company (GEC) between 1927 and 1993 at Chicago with 30,000 workers. The

Hawthron plant was manufacturing telephone system bell. The objective of the

experiment was to find out the behavior and attitude of workers at workplace under

better working conditions. In the company, when management provide the benefits of

medical allowance and pension with recreational facilities. Even thought workers get all

facilities but the productivity was not up to expectation. So, in 1924, the professor Elton

Mayo and his research team investigate the reasons for dissatisfaction of employees and

decrease in productivity.

Four Phase of Hawthrone experiments:

Prof. Elton Mayo and his team conducted researches in four phases.

1) Illumination experiments (1924 – 1927)

2) Relay assembly room experiments (1927 – 1928)

3) Mass interviewing programme (1928 -1930)

4) Bank wiring room study (1931 – 1932)

Result of Hawthrone Experiments:

1) Motivation: Employees are not motivated by only money (bonus scheme and

incentive).

2) Communication: communication helps the management and employees to have better

mutual understanding. Through proper communication, management can

easily identified the problem faced by its employees and can easily solve out.

3) Social factors: Social factors are responsible for deciding the level of output.

4) Behavior of workers: workers are not as individual identity but as members of a group

in an organization and they have their own norms and beliefs. Workers behavior

depends upon his mental level and emotions. Workers began to influence their group

behavior towards management.

5) Relationship: Employees do not like order and command. They preferred to maintain

amicable relationship with their co-workers. They want co-operative attitude from

their superiors.

6) Production level: Teamwork and Group psychology increases productivity.

Criticism of Hawthrone Experiments:

1) Hawthrone experiment was not conducted scientifically.

2) In the experiment, various format and structure are not feasible.

3) Eltone Mayo gives more importance to human aspect and ignoring other important

aspects.

4) Group conflict is prevalent in an organization.

5) Hawthrone experiment did not give any recognition to the forces which are

responsible for productivity in the organization.

6) During experiment, Eltone Mayo has assumed that a satisfied employee would be

productive. But the finding was different. There is no link between working condition

and productivity.

Major contributors of Neo-classical theory are:

1) Chris Argyris- He recommended that worker should be given freedom to make their

own judgments.

2) Mary Praker Follett: He referred group influence.

3) Dougals Me Gorgor: he referred two views.

X-theory- it is based on classical theory and

Y-theory- it is based on neo-classical theory.

4) Abraham Maslow: He referred individual needs.

C. Modern Management Theory

Management is one or the other form has existed in every nook and corner of the

world since the dawn of civilization. Modern Management has grown with the growth of

social-economics and scientific institution. Modern view consists that a worker does not

work for only money. They work for their satisfaction and happiness with good living

style. Here Non- financial award is most important factor.

Modern management theories started after 1950s. Modern management theory

focuses the development of each factor of workers and organization. Modern

management theory refers to emphasizing the use of systematic mathematical techniques

in the system with analyzing and understanding the inter-relationship of management and

workers in all aspect. It has following three streams, that are :

1) Quantitative Approach

Quantitative approach also called Operation Research. Quantitative approach is

a scientific method. It emphasizes the use of statistical model and systematic

mathematical techniques to solving complex management problems. Its helps the

management to making decisions in operations. It can only suggest the alternatives

based on statistical data. It cannot take final decision.

It helps the management for improving their decision making by increasing the

number of alternatives and giving faster decisions on any problem. Management can

easily calculate the risk and benefit of various actions. the characteristic of this

approach are as under :

a) Management is essentially decision making and organization is a decision

making unit.

b) Organisational efficiency depends upon the quality of managerial decisions.

c) A problem is expressed in the form o a quantitative or mathematical model

containing mathematical symbols and relationship.

d) The different variables in management can be quantified and expressed in the

form of an equation.

Major contributors in Quantitative Approach are :

Johan MacDonald

George R. Terry

Andrew Szilagyi

2) System Approach

System approach was developed inlate1960s. Herbert A. Simon is the father of

system theory. A System is defined as a set of regularly interacting or inter -

dependent components that create as a whole unit. The system concept enables us to

see the critical variables and constraints and their interactions with one another.

The main features of systems approach are as follows :

a) An organization is a system consisting of four main parts or sub-systems

namely task, structure, people and environment.

b) The sub-systems of the organization system are interconnected and

interdependent. Therefore, all parts of the organization must be in balance

with one another. Task refers to the nature of jobs and technology used to

perform theory structure is the network of authority relationships including

single and ownership patterns. People constitute the human and social

aspects. Environment sub-system is the aggregate of forces within which

the other sub-system operate.

c) An organization is an open adaptive system which continuously interacts

with its environment. It is also a dynamic system because the equilibrium in

it always keeps on changing. The organization system must, therefore, be in

harmony with its environment.

d) It is the responsibility of management to regulate and modify the system so

as to optimize performance. Management is expected to perform

maintenance and adaptation functions. Maintenance function is concerned

with ensuring the stability and efficiency of the system. Adaptation function

involves adjusting the system to the changing demands of the environment

so as to make it more in tune with the organizations goals.

e) An organization is more than the aggregate of various parts. This is called

“synergy”. The focus should be on the total system rather than on individual

sub-systems. Several pioneers have made significant contributions to the

development of the systems approach. Notable among them are Ludwig

Von Bertelanffy, Stafford Beer, D. Kutz, R.L. Kahn, R.A. Johnson, Rosenz

Weig, Robert Weener, E.L. Trist, Kenneth Boulding.

Some of the key concepts of the systems approach are :

Synergy : synergy means thaht the whole is greater than the sun of its parts.

This implies that departments within an organization which interact

cooperatively are more productive than they would be if they operated in

isolation.

Open and closed system : an open system interacts with its environment

whereas a closed system does not. Though all organization interact with the

environment, but the extent to which they do so varies. For example, an

advertising agency is far more open system than the jail.

System boundary : each system has its own boundaries which separate it

from other systems in the environment. In an open system, the boundaries

are permeable whereas in a closed system they are rigid.

Flow : every system has flows of information, materials and energy. These

enter the system as input (example raw material), undergo transformation

process within the system (example: the production process and exit the

system as outputs (example : goods).

Feedback : this is the mechanism of control. Information can be fed back

either during the transformation process or at the output stage in order to

detect any deviations from plans so that corrective action may be taken.

3) Contingency Approach

Contingency Approach also knows as situational approach. In 1980s, it is

recognized as a key to effective management. This approach accepts the dynamics and

complexities of the organization structure. An organization is affected by its

environment and environment is composed by physical resources, climate, persons,

culture, economic and market conditions and their laws.

The principles of this approach as under :

a.) Contingency approach is situation oriented urging upon the managers to

study, analyse and diagnose the situation. It is to be done in terms of

component variables of the situation and external factors affecting the

situation.

b.) After the analysis of the situation, the managers are expected to prepare

inventories of management theory, principles, techniques and concepts.

c.) In order to tackle the situation efficiently the validity and applicability of

management tools and techniques is to be examined and finally package of

these tools and techniques is prepared which is appropriate for that specific

situation. The different situation requires different managerial response.

d.) The environment of an organization is ever changing and the organization

continuously interacts with the dynamic environment.

e.) Management style and practice should match the requirements of the

situation.

f.) Succes in management depends upon the ability to cope with environmental

demands. Therefore, managers should sharpen their diagnostic skill to

anticipate and comprehend the environmental changes.

This approach argues that there is no one universally applicable set of rules by

which to manage organization.

Major contributors in the contingency theories are-

1. G.M. Stalker,

2. Joan Woodward,

3. Tom Burns,

4. Paul R. Lawrence,

5. L.W. Lorsch.

Modern management theory depends upon System approach and Contingency

approach. Management is influenced by Internal and external environment. Appropriate

techniques are determined by situation and Environmental factors of an organization.