complete course file

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Unit III

PERSONALITY

personality : an individuals unique pattern of thoughts, feelings & behaviors that persist over

time and across situations

unique differences

stable & enduring

Personality Types

You will undoubtedly encounter many different types of personalities in the work place, each with

their own unique blend of nuances. But there are four basic types of personalities from which they

are based, which is commonly referred to as A, B, C, and D. Although volumes have been written

on such personality traits, here is a synopsis:

Type "A" Personality - Is a highly independent and driven personality, typically representing the

leaders in business. They are blunt, competitive, no-nonsense types who like to get to the point.

They are also strong entrepreneurial spirits (risk takers). As such, they embrace change and are

always looking for practical solutions for solving problems.

Type "B" Personality - Represents highly extroverted people who love the spotlight. Because of

this, they are very entertaining and possess strong charisma (everyone likes to be around them).

Small wonder these people are sales and marketing types. They thrive on entertaining people andare easily hurt if they cannot sway someone (such as "bombing" on stage).

Type "C" Personality - The antithesis of Type "B"; they are introverted detailists as represented by

such people as accountants, programmers, and engineers. They may have trouble communicating to

other people, but are a whirlwind when it comes to crunching numbers or writing program code.

They tend to be very cautious and reserved, and will not venture into something until after all the

facts have been checked out.

Type "D" Personality - Is best characterized as those people who resist any form of change and

prefer the tedium of routine, such as in clerical assignments. They are not adventurous, resist

responsibility and prefer to be told what to do.

It is not uncommon to find people with a blend of personalities, particularly A-B and C-D. But

these basic personality types explain why some people work well together and others do not. For

example Type-A clashes with Type-D simply because one is more adventurous than the other, and

Type-B clashes with Type-C as one exhibits an extroverted personality and the other is introverted.

Conversely Type-A works well with Type-B, and Type-C works well with Type-D.

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DETERMINANTS OF PERSONALITY

Biological Factors

Heredity:

It refers to physical stature, facial attractiveness, sex, temperament, muscle composition and

reflexes, energy level, and biological rhythms are characteristics that are considered to be

inherent.

It plays an important part in determining an individual's personality.

Heredity approach argues that the ultimate explanation of an individual's personality is the

molecular structures of the genes, which are located in the chromosomes.

Recent research studies shows that young children lend strong support to the power of heredity

and finding shows that some personality traits may be built into the same genetic code that affects

factors like height and hair color.

Brain:

Brain is the second biological approach to determine personality.

It plays an important role in determining personality.

Electrical Stimulation of the Brain (ESB) and Split brain psychology results indicates

that a better understanding of human personality and behavior might come from a closer study of

the brain.

The definite areas of the human brain are associated with pain and pleasure. Research

study shows that these things are true.

Biofeedback:

It is third biological approach to determine personality.

Physiologists and psychologists felt that biological functions like brainwave patterns, gastric and

hormonal secretions, and fluctuations in blood pressure and skin temperature were beyond

conscious control. Recent research shows that these functions can be consciously controlled

through biofeedback techniques.

For this purpose, individual can learns the internal rhythms of a particular body process through

electronic signals that are feedback from equipment which is wired to body. In this process, the person can learn to control the body process through questions.

It is one of the interesting topics to do future research work in personality.

Physical Features:

It is third biological approach to determine personality.

It is vital ingredient of the personality, it focus an individual person's external appearance which

also determined the personality.

Physical features like tall or short, fat or skinny, black or white. These physical features will be

influenced the personal effect on others and also affect self concept of individual. Recent research studies shows that definitely this features influence to individual personality in an

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organization. In totally, heredity would be fixed at birth and no amount of experience can be

altering them through creation of suitable environment. Apart from this, personality

characteristics are not completely dictated by heredity. There are other factors also influenced to

determining personality.

Cultural Factors

"Each culture expects, and trains, its members to behave in ways that are acceptable to the group.

To a marked degree, the child's cultural group defines the range of experiences and situations he is

likely to encounter and the values and personality characteristics that will reinforce and hence

learned". -Paul H Mussen

Cultural factors are also major factors which influence to determine individual

personality.

It refers to traditional practice, customs, procedure, norms and rules and regulation

followed by the society.

It significantly influence to individual behavior compare to biological factors. Cultural factors determine attitudes towards independence, aggression, competition, cooperation,

positive thinking, team spirit, and a host of the human being and discharge his/her duties towards

valuable responsibilities to society.

Western culture influence to Indian society. It is best example of the cultural factors also

determine the personality.

Family Factors

Family factors are also major factors which influence to determine individual personality.

Family consists of husband and wife and their children's. Family role is very important for nurturing and personality development of their

children.

Family will be guided, supervised, take care of all family members, cooperation, Organizational

Behavior coordination and cooperation in work and also explained the role and responsibilities

towards the family, society and real life.

Family either directly or indirectly influence to person for development of individual

personality.

Social Factors

Social factors are also major factors which influence to determine individual

personality.

It involves the reorganization of individual's in an organization or society.

It refers to acquiring of wide range of personality by acquiring and absorbed by themselves in the

society or an organization.

Socialization process is starting from home and extending to work environment in an

organization or society.

It focuses on good relationships, cooperation, coordination and interaction among the members in

the society or an organization or a family. In totally, environment factors consist of cultural

factors, family factors, and social factors.

Situational Factors

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Situational factors also influence to determine of personality.

Situational factors are very important to change the individual behavior in a different

circumstance at different situations, it also influence to personality of individual person.

In general term, personality is stable and consistent and it does change in different situations.

The Interaction of Personality and Situational Factors are outlined:

Strong situational pressures

Personality may not predict behavior

Example: enforcement of rules

Weak Situational pressures

Personality may predict behavior

Example: Customer sales representative

A strong situation can overwhelm the effects of individual personalities by providing strong cues

for appropriate behavior.

PERSONALITY THEORIES

Psychoanalytic Theory of Personality

As defined and developed by Psychologist Sigmund Freud, the psychoanalytic theory of

personality is a dynamic relationship among three components of the mind which balance bodily

energies to achieve a healthy existence of the physical unit. If there are conflicting interactions

among the mechanisms, neurotic and psychotic disturbances are created. The conflict is best

described as a struggle between the ethical self and the primitive self, respectively the ego and

the id (Freud & Brill (Ed.)., 1966, p. 12). The third component is the superego which functions as

the moral agent.

Id: According to Freud (1958), the id is the obscure inaccessible part of our personality (p. 77). It

is considered the oldest mental component and has not progressed in development. The id is best

described as chaotic and impulsive and based on the pleasure principle. The pleasure principle

pursues pleasure and avoids pain. Sexual drives and instincts are at the very pinnacle of the ids

goals. Morals, beliefs, goodness, and even evil are non-existent to the knowledge of the primitive

id. In sum, the id is sexual energy (sacral chakra) fueled to seek sexual pleasure but most of the

time attempts are sublimated and repressed (1958, p. 625). The ids energy is derived from

sources directly of somatic processes (1958, p. 78).

Ego: In an attempt to deal with anxiety brought by the ids repression of impulses, the ego

developed from the id. The balancing of bodily needs on one hand and motor activity on the

other require mediation by an organization called the ego (1958, p. 55). The ego has to balance

demands of the id with what is best and most viable in reality. The desexualized energy of the ego

allows for more control and mediation. The ego functions in relation to the reality principle to

pursue a healthy state by means of postponing the need to satisfy impulses. The ego is in control of

the demands placed by the innate instincts of the id, which is highly demanding. Demands made by

the superego also cause anxiety and conflict.

Superego: The superego is simply our conscious. It is driven by authorities, parents, and other

moral officials in society. Its main purpose is to ensure the limitations of satisfactions of the id

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(1958, p. 149) by placing judgment on the egos decisions (i.e., if ego reverts to transgression). In

relation to the ego, the superego is like a strict father with a child (1958, p. 149) and punishment

is served by submission to the superego. Representing traditional and innate influences of the past

and hereditary are the only common factors among the superego and id. On the other hand, the ego

is developed by personal experiences.

Carl Rogers Self Theory

Since the study of personality began, personality theories have offered a wide variety of

explanations for behavior and what constitutes the person. Carl Rogers (1902-1987) istruly the

central figure in the humanistic orientation. Rogers theory of personality development is based

upon nineteen propositions but the central focus is on the concept of self. In Rogers' view, the self

is the central ingredient in human personality and personal adjustment. The main tenets of his

theory will be focused upon here.

SelfRogers believed that when a child comes into this world, the concept of self is presenting

him just like a tiny dot and it grows and develops as the age of child increases. Self-concept is

defined as the totality of a complex, organized, and dynamic system of learned beliefs, attitudes and

opinions that each person holds to be true about his or her personal existence. Rogers described the

self as a social product, developing out of interpersonal relationships and striving for consistency.

Self-Actualizing Tendency

Rogers' person-centered theory emphasized the concept of "self-actualization." This concept

implies that there is an internal, biological force to develop one's capacities and talents to thefullest. The individual's central motivation is to learn and to grow. Growth occurs when individuals

confront problems, struggle to master then, and through that struggle develop new aspects of their

skills, capacities, views about life. Life, therefore, is an endless process of creatively moving

forward, even if only in small ways. Regarding this self-actualization, Rogers has related his

experience of watching seaweeds on a seaside; he observed how seaweeds resisted against the

heavy pounding of the sea waves crushing upon them. The seaweeds took the blows of waves upon

them but after every attack they would stand erect again which shows their innate urge to live life.

Rogers says,

Here in this palm like seaweed was the tenacity of life, the forward thrust of life, the ability to

push into an incredibly hostile environment and not only hold its own, but to adapt, develop, and

become itself.

Organism Valuing Process

According to Rogers, it is an ongoing process in which values are never fixed or rigid, but

experiences are being accurately symbolized and continually and freshly valued in terms of the

satisfactions experienced by the individuals.

The process is a subconscious guide that evaluates experience for its growth potential. It

draws people toward experiences that are growth producing and away from those that would inhibit

growth. Hence human beings instinctively value some things and abhor some, on the other hand.

Positive Regard

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Among many things that human organisms instinctively value is positive regard. It is ones

perception of some self-experience of another which makes a positive difference ionones field of

experience resulting in a feeling of warmth, liking, respect, sympathy and acceptance towards

others. Hence with awareness of the self the need for positive regard develops and it is essential to

the proper growth of ones self.

Positive Self-regard

Positive self-regard is self-esteem, self-worth, and a positive self-image. It is a positive

attitude towards the self which is no longer directly dependent on the attitude of others. But this

positive self-regard is achieved by experiencing the positive regard others show us over our years

of growing up.

Conditions of Worth

The need for positive self-regard leads to a selective perception of experience in terms of

the conditions of worth that are made by others. A condition of worth develops when ones

behavior is evaluated as more or less worthy of self-regard by others. Hence, a child gets his

favorite chocolate only when he performs well in a class test.

Conditional Positive Regard

Getting positive regard on condition Rogers calls conditional positive regard. When

people show conditional positive regard it means that an individual is taken not as a self and an

entity but as a collection of behaviors. Thus one is appreciated only on showing acceptable

behaviors. Rogers is of the view that it hampers the positive growth of self and as a

result conditional positive self-regard develops. It means that one begins to like oneself only if he

meets up with the standards others have applied to him, rather than2

when he truly actualizes his potentials. And since these standards were created without keeping

each individual in mind, more often than not he finds himself unable to meet them, and therefore

unable to maintain any sense of self-esteem.

Unconditional positive regard

Unconditional positive regard is blanket acceptance and support of a person regardless of

what the person says or does. Rogers believes that unconditional positive regard inessential to

healthy development. People who have not experienced it may come to see themselves in the

negative ways that others have made them feel.

Incongruity

Rogers identifies the "real self" as the aspect of one's being that is founded in the actualizing

tendency, follows organism valuing, needs and receives positive regard and self-regard. It is the

"you" that, if all goes well, you will become. On the other hand, to the extent that our society is out

of sync with the actualizing tendency, and we are forced to live with conditions of worth that are

out of step with organism valuing, and receive only conditional positive regard and self-regard, we

develop instead an "ideal self". By ideal, Rogers is suggesting something not real, something that is

always out of our reach, the standard we cannot meet. This gap between the real self and the idealself, the "I am and the "I should" is called in congruity.

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Fully Functional Individual

According to Rogers, an individual may develop optimally and avoid the previously described

outcomes if they experience only "unconditional positive regard" and no conditions of worth

develop. The needs for positive regard from others and positive self-regard would match organism

ic evaluation and there would be congruence between self and experience, with full psychological

adjustment as a result. This ideal human condition has been called "fully functioning person" byRogers. He listed characteristics of fully functioning persons:

MOTIVATION

Definition:

Motivation is defined as the process that initiates, guides and maintains goal-oriented

behaviors. Motivation is what causes us to act, whether it is getting a glass of water to reduce thirst

or reading a book to gain knowledge.

Motivation concepts

Intrinsic and extrinsic motivation

Intrinsic motivation refers to motivation that is driven by an interest or enjoyment in the task itself,

and exists within the individual rather than relying on any external pressure. Intrinsic motivation

has been studied by social and educational psychologists since the early 1970s. Research has found

that it is usually associated with high educational achievement and enjoyment by students

evaluation theory.[clarification needed] Students are likely to be intrinsically motivated if they:

attribute their educational results to factors under their own control (e.g., the effort

expended),

believe they can be effective agents in reaching desired goals (i.e. the results are not

determined by luck),

are interested in mastering a topic, rather than just rote-learning to achieve good grades.

Extrinsic motivation: It comes from outside of the individual. Common extrinsic motivations are

rewards like money and grades, coercion and threat of punishment. Competition is in general

extrinsic because it encourages the performer to win and beat others, not to enjoy the intrinsic

rewards of the activity. A crowd cheering on the individual and trophies are also extrinsic

incentives.

Social psychological research has indicated that extrinsic rewards can lead to over justification and

a subsequent reduction in intrinsic motivation. In one study demonstrating this effect, children who

expected to be (and were) rewarded with a ribbon and a gold star for drawing pictures spent less

time playing with the drawing materials in subsequent observations than children who were

assigned to an unexpected reward condition and to children who received no extrinsic reward Self-

determination theory proposes that extrinsic motivation can be internalised by the individual if thetask fits with their values and beliefs and therefore helps to fulfill their basic psychological needs.

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Self-control

The self-control of motivation is increasingly understood as a subset ofemotional intelligence; a

person may be highly intelligent according to a more conservative definition (as measured by

many intelligence tests), yet unmotivated to dedicate this intelligence to certain tasks. Yale School

of Management professorVictor Vroom's "expectancy theory" provides an account of when people

will decide whether to exert self control to pursue a particular goal.

Drives and desires can be described as a deficiency or need that activates behavior that is aimed at a

goal or an incentive. These are thought to originate within the individual and may not require

external stimuli to encourage the behavior. Basic drives could be sparked by deficiencies such as

hunger, which motivates a person to seek food; whereas more subtle drives might be the desire for

praise and approval, which motivates a person to behave in a manner pleasing to others.

By contrast, the role of extrinsic rewards and stimuli can be seen in the example of training animals

by giving them treats when they perform a trick correctly. The treat motivates the animals to

perform the trick consistently, even later when the treat is removed from the process.

Characteristics of Motivation

1. Motivation is a psychological Concept :- Motivation should come from inside each individual.

There are two desiring factors in motivation-(a) Fundamental needs, such as food, clothes and

shelter and (b) Ego-satisfaction including self-esteem, recognition from others, opportunities for

achievements, self-development and self actualization which act as powerful though unconscious,

motivator of behaviour. Inner motivation can be more devisor for behaviour than any external

influence.

2. The whole Individual is motivated, not part of Him:-A person's basic needs determine to a great

extent what he will try to do at any given time. All these need are inter-related because each

individual is an integrated organized whole.

3. Motivation is an unending Process:- Man is a social animal. As a social animal he has

innumerable wants which induce him to work. If one basic need is adequately satisfied for a given

individual it loses power as a motivator and does into determine his current behaviour but at the

same time other s needs continue to emerge. Wants are innumerable and cannot be satisfied at on

time. It is an unending process so the process of motivation is also unending to induce the person to

satisfy is innumerable wants.

4. Frustration of Basic Needs Makes a Man Sick:- If anybody fails in trying to mt a need which the

feels is essential for him, he becomes to some extent mentally ill and such frustrated man cannot be

motivated any further until his essential need is satisfied.

5. Goals are Motivators:-Goals and motives are inseparable. Man works to achieve the goals. A

soon as the goal is achieved he would be no longer interested in work. Therefore, it is very essential

for the management to know his goal to push him to work.

6. The self-concept as a Unifying Force :- According to Geller-man unifying forces run through

each individual's history. Unifying force means the drive to actual his our image of himself. The

outline of a person's self image are fairly well checked in early childhood and there after do not act

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inertly change for example, a child who easily seems himself as a leader, will if possible try to

behave tt way in later life. Thus, two things that individual is always trying to do are (a) to act like

the person, he things he is , and (b) to get what he things, he can.

Motivational theories

Incentive theory

A reward, tangible or intangible, is presented after the occurrence of an action (i.e. behavior) with

the intent to cause the behavior to occur again. This is done by associating positive meaning to the

behavior. Studies show that if the person receives the reward immediately, the effect is greater, and

decreases as duration lengthens. Repetitive action-reward combination can cause the action to

become habit. Motivation comes from two sources: oneself, and other people. These two sources

are called intrinsic motivation and extrinsic motivation, respectively.

Reinforcers and reinforcement principles of behavior differ from the hypothetical construct of

reward. A reinforcer is any stimulus change following a response that increases the futurefrequency or magnitude of that response. Positive reinforcement is demonstrated by an increase in

the future frequency or magnitude of a response due to in the past being followed contingently by a

reinforcing stimulus. Negative reinforcement involves stimulus change consisting of the removal of

an aversive stimulus following a response. Positive reinforcement involves a stimulus change

consisting of the presentation or magnification of an appetitive stimulus following a response. From

this perspective, motivation is mediated by environmental events, and the concept of distinguishing

between intrinsic and extrinsic forces is irrelevant.

Applying proper motivational techniques can be much harder than it seems. Steven Kerr notes that

when creating a reward system, it can be easy to reward A, while hoping for B, and in the process,reap harmful effects that can jeopardize your goals.

Incentive theory in psychology treats motivation and behavior of the individual as they are

influenced by beliefs, such as engaging in activities that are expected to be profitable. Incentive

theory is promoted by behavioral psychologists, such as B.F. Skinner and literalized by

behaviorists, especially by Skinner in his philosophy of Radical behaviorism, to mean that a

person's actions always have social ramifications: and if actions are positively received people are

more likely to act in this manner, or if negatively received people are less likely to act in this

manner.

Incentive theory distinguishes itself from other motivation theories, such as drive theory, in the

direction of the motivation. In incentive theory, stimuli "attract", to use the term above, a person

towards them. As opposed to the body seeking to reestablish homeostasis pushing it towards the

stimulus. In terms of behaviorism, incentive theory involves positive reinforcement: the stimulus

has been conditioned to make the person happier. For instance, a person knows that eating food,

drinking water, or gaining social capital will make them happier. As opposed to in drive theory,

which involves negative reinforcement: a stimulus has been associated with the removal of the

punishment-- the lack of homeostasis in the body. For example, a person has come to know that if

they eat when hungry, it will eliminate that negative feeling of hunger, or if they drink when thirsty,it will eliminate that negative feeling of thirst.

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Drive-reduction theories

There are a number of drive theories. The Drive Reduction Theory grows out of the concept that we

have certain biological drives, such as hunger. As time passes the strength of the drive increases if

it is not satisfied (in this case by eating). Upon satisfying a drive the drive's strength is reduced. The

theory is based on diverse ideas from the theories of Freud to the ideas of feedback control systems,

such as a thermostat.

Drive theory has some intuitive or folk validity. For instance when preparing food, the drive model

appears to be compatible with sensations of rising hunger as the food is prepared, and, after the

food has been consumed, a decrease in subjective hunger. There are several problems, however,

that leave the validity of drive reduction open for debate. The first problem is that it does not

explain how secondary reinforcers reduce drive. For example, money satisfies no biological or

psychological needs, but a pay check appears to reduce drive through second-order conditioning.

Secondly, a drive, such as hunger, is viewed as having a "desire" to eat, making the drive a

homuncular beinga feature criticized as simply moving the fundamental problem behind this"small man" and his desires.

In addition, it is clear that drive reduction theory cannot be a complete theory of behavior, or a

hungry human could not prepare a meal without eating the food before he finished cooking it. The

ability of drive theory to cope with all kinds of behavior, from not satisfying a drive (by adding on

other traits such as restraint), or adding additional drives for "tasty" food, which combine with

drives for "food" in order to explain cooking render it hard to test.

Cognitive dissonance theory

Suggested by Leon Festinger, cognitive dissonance occurs when an individual experiences somedegree of discomfort resulting from an incompatibility between two cognitions. For example, a

consumer may seek to reassure himself regarding a purchase, feeling, in retrospect, that another

decision may have been preferable.

While not a theory of motivation, per se, the theory of cognitive dissonance proposes that people

have a motivational drive to reduce dissonance. They do this by changing their attitudes, beliefs, or

actions. Dissonance is also reduced by justifying, blaming, and denying. It is one of the most

influential and extensively studied theories in social psychology.

Need theories

Need hierarchy theory

The content theory includes the hierarchy of needs from Maslow and the two- factor theory from

Herzberg. Abraham Maslow's theory is one of the most widely discussed theories of motivation.

The American motivation psychologist Abraham H. Maslow developed the Hierarchy of needs

consistent of five hierarchic classes. It shows the complexity of human requirements. Maslow says

that first of all the basic requirements have to be satisfied. The basic requirements build the first

step in his pyramid. They decide about to be or not to be. If there is any deficit on this level, the

whole behavior of a human will be oriented to satisfy this deficit. Subsequently we do have the

second level, which awake a need for security. Basically it is oriented on a future need for security.

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After securing those two levels, the motives shift in the social sphere, which form the third stage.

Psychological requirements consist in the fourth level, while the top of the hierarchy comprise the

self- realization So theory can be summarized as follows:

Human beings have wants and desires which influence their behavior. Only unsatisfied needs

influence behavior, satisfied needs do not.

Since needs are many, they are arranged in order of importance, from the basic to the complex.

The person advances to the next level of needs only after the lower level need is at least minimally

satisfied.

The further the progress up the hierarchy, the more individuality, humanness and psychological

health a person will show.

The needs, listed from basic (lowest-earliest) to most complex (highest-latest) are as follows:

Physiology (hunger, thirst, sleep, etc.)

Safety/Security/Shelter/Health

Belongingness/Love/Friendship

Self-esteem/Recognition/Achievement

Self actualization

Herzberg's two-factor theory

Frederick Herzberg's two-factor theory, a.k.a. intrinsic/extrinsic motivation, concludes that certain

factors in the workplace result in job satisfaction, but if absent, they don't lead to dissatisfaction but

no satisfaction.The factors that motivate people can change over their lifetime, but "respect for me

as a person" is one of the top motivating factors at any stage of life.

He distinguished between:

Motivators; (e.g. challenging work, recognition, responsibility) which give positive satisfaction,

and

Hygiene factors; (e.g. status, job security, salary and fringe benefits) that do not motivate if present,but, if absent, result in demotivation.

The name Hygiene factors is used because, like hygiene, the presence will not make you healthier,

but absence can cause health deterioration.

The theory is sometimes called the "Motivator-Hygiene Theory" and/or "The Dual Structure

Theory."

Herzberg's theory has found application in such occupational fields as information systems and in

studies of user satisfaction (see Computer user satisfaction).

Alderfer's ERG theory

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Alderfer, expanding on Maslow's hierarchy of needs, created the ERG theory. This theory posits

that there are three groups of core needs existence, relatedness, and growth, hence the label:

ERG theory. The existence group is concerned with providing our basic material existence

requirements. They include the items that Maslow considered to be physiological and safety needs.

The second group of needs are those of relatedness- the desire we have for maintaining important

interpersonal relationships. These social and status desires require interaction with others if they areto be satisfied, and they align with Maslow's social need and the external component of Maslow's

esteem classification. Finally, Alderfer isolates growth needs' an intrinsic desire for personal

development. These include the intrinsic component from Maslow's esteem category and the

characteristics included under self-actualization.

Self-determination theory

Self-determination theory, developed by Edward Deci and Richard Ryan, focuses on the

importance of intrinsic motivation in driving human behavior. Like Maslow's hierarchical theory

and others that built on it, SDT posits a natural tendency toward growth and development. Unlikethese other theories, however, SDT does not include any sort of "autopilot" for achievement, but

instead requires active encouragement from the environment. The primary factors that encourage

motivation and development are autonomy, competence feedback, and relatedness.

Broad theories

The latest approach in developing a broad, integrative theory of motivation is Temporal Motivation

Theory. Integrating theories of motivation. Introduced in their 2007 Academy of Management

Review article, it synthesizes into a single formulation the primary aspects of all other major

motivational theories, including Incentive Theory, Drive Theory, Need Theory, Self-Efficacy and

Goal Setting. Notably, it simplifies the field of motivation considerably and allows findings from

one theory to be translated into terms of another.

Also, Achievement Motivation is an integrative perspective based on the premise that performance

motivation results from the way broad components of personality are directed towards

performance. As a result, it includes a range of dimensions that are relevant to success at work but

which are not conventionally regarded as being part of performance motivation. Especially it

integrates formerly separated approaches as Need for Achievement with e.g. social motives like

dominance. The Achievement Motivation Inventory is based on this theory and assesses three

factors (17 separated scales) relevant to vocational and professional success.

Cognitive theories

Goal-setting theory

Goal-setting theory is based on the notion that individuals sometimes have a drive to reach a clearly

defined end state. Often, this end state is a reward in itself. A goal's efficiency is affected by three

features: proximity, difficulty and specificity. An ideal goal should present a situation where the

time between the initiation of behavior and the end state is close. This explains why some children

are more motivated to learn how to ride a bike than to master algebra. A goal should be moderate,

not too hard or too easy to complete. In both cases, most people are not optimally motivated, as

many want a challenge (which assumes some kind of insecurity of success). At the same time

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people want to feel that there is a substantial probability that they will succeed. Specificity concerns

the description of the goal in their class. The goal should be objectively defined and intelligible for

the individual. A classic example of a poorly specified goal is to get the highest possible grade.

Most children have no idea how much effort they need to reach that goal.

Models of behavior change

Social-cognitive models of behavior change include the constructs of motivation and volition.

Motivation is seen as a process that leads to the forming of behavioral intentions. Volition is seen

as a process that leads from intention to actual behavior. In other words, motivation and volition

refer to goal setting and goal pursuit, respectively. Both processes require self-regulatory efforts.

Several self-regulatory constructs are needed to operate in orchestration to attain goals. An example

of such a motivational and volitional construct is perceived self-efficacy. Self-efficacy is supposed

to facilitate the forming of behavioral intentions, the development of action plans, and the initiation

of action. It can support the translation of intentions into action.

Unconscious motivation

Some psychologists believe that a significant portion of human behavior is energized and directed

by unconscious motives. According to Maslow, "Psychoanalysis has often demonstrated that the

relationship between a conscious desire and the ultimate unconscious aim that underlies it need not

be at all direct.

ATTITUDE

Defintion: An attitude is the psychological response to a person, an object, to a situation, to society

and to life itself that generally influence our behaviors and actions. Attitudes are either positive ornegative.

Attitude Formation

In Social Psychology attitudes are defined as positive or negative evaluations of objects of thought.

Attitudes typically have three components.

The cognitive component is made up of the thoughts and beliefs people hold about the

object of the attitude.

The affective component consists of the emotional feelings stimulated by the object of the

attitude.

The behavioral component consists of predispositions to act in certain ways toward an

attitude object.

The object of an attitude can be anything people have opinions about. Therefore, individual people,

groups of people, institutions, products, social trends, consumer products, etc. all can be attitudinal

objects.

Attitudes involve social judgments. They are either for, or against, pro, or con, positive, or

negative; however, it is possible to be ambivalent about the attitudinal object and have a

mix of positive and negative feelings and thoughts about it.

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Attitudes involve a readiness (or predisposition) to respond; however, for a variety of

reasons we dont always act on our attitudes.

Attitudes vary along dimensions of strength and accessibility. Strong attitudes are very

important to the individual and tend to be durable and have a powerful impact on behavior,

whereas weak attitudes are not very important and have little impact. Accessible attitudes

come to mind quickly, whereas other attitudes may rarely be noticed. Attitudes tend to be stable over time, but a number of factors can cause attitudes to change.

Stereotypes are widely held beliefs that people have certain characteristics because of their

membership in a particular group.

A prejudice is an arbitrary belief, or feeling, directed toward a group of people or its

individual members. Prejudices can be either positive or negative; however, the term is

usually used to refer to a negative attitude held toward members of a group. Prejudice may

lead to discrimination, which involves behaving differently, usually unfairly, toward the

members of a group.

Psychological factors involved in Attitude Formation and Attitude Change

1. Direct Instruction involves being told what attitudes to have by parents, schools,

community organizations, religious doctrine, friends, etc.

2. Operant Conditioning is a simple form of learning. It is based on the Law of Effect and

involves voluntary responses. Behaviors (including verbal behaviors and maybe even thoughts)

tend to be repeated if they are reinforced (i.e., followed by a positive experience). Conversely,

behaviors tend to be stopped when they are punished (i.e., followed by an unpleasant

experience). Thus, if one expresses, or acts out an attitude toward some group, and this isreinforced by ones peers, the attitude is strengthened and is likely to be expressed again. The

reinforcement can be as subtle as a smile or as obvious as a raise in salary. Operant conditioning

is especially involved with the behavioral component of attitudes.

3. Classical conditioning is another simple form of learning. It involves involuntary responses

and is acquired through the pairing of two stimuli. Two events that repeatedly occur close

together in time become fused and before long the person responds in the same way to both

events. Originally studied by Pavlov, the process requires an unconditioned stimulus (UCS) that

produces an involuntary (reflexive) response (UCR). If a neutral stimulus (NS) is paired, either

very dramatically on one occasion, or repeatedly for several acquisition trials, the neutral

stimulus will lead to the same response elicited by the unconditioned stimulus. At this point the

stimulus is no longer neutral and so is referred to as a conditioned stimulus (CS) and the

response has now become a learned response and so is referred to as a conditioned response

(CR). In Pavlovs research the UCS was meat powder which led to an UCR of salivation. The

NS was a bell. At first the bell elicited no response from the dog, but eventually the bell alone

caused the dog to salivate. Advertisers create positive attitudes towards their products by

presenting attractive models in their ads. In this case the model is the UCS and our reaction to

him, or her, is an automatic positive response. The product is the original NS which through

pairing comes to elicit a positive conditioned response. In a similar fashion, pleasant or

unpleasant experiences with members of a particular group could lead to positive or negative

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attitudes toward that group. Classical conditioning is especially involved with the emotional, or

affective, component of attitudes.

4. Social (Observational) Learning is based on modeling. We observe others. If they are

getting reinforced for certain behaviors or the expression of certain attitudes, this serves as

vicarious reinforcement and makes it more likely that we, too, will behave in this manner or

express this attitude. Classical conditioning can also occur vicariously through observation ofothers.

5. Cognitive Dissonance exists when related cognitions, feelings or behaviors are inconsistent

or contradictory. Cognitive dissonance creates an unpleasant state of tension that motivates

people to reduce their dissonance by changing their cognitions, feeling, or behaviors. For

example, a person who starts out with a negative attitude toward marijuana will experience

cognitive dissonance if they start smoking marijuana and find themselves enjoying the

experience. The dissonance they experience is thus likely to motivate them to either change

their attitude toward marijuana, or to stop using marijuana. This process can be conscious, but

often occurs without conscious awareness.

6. Unconscious Motivation. Some attitudes are held because they serve some unconscious

function for an individual. For example, a person who is threatened by his homosexual feelings

may employ the defense mechanism of reaction formation and become a crusader against

homosexuals. Or, someone who feels inferior may feel somewhat better by putting down a

group other than her own. Because it is unconscious, the person will not be aware of the

unconscious motivation at the time it is operative, but may become aware of it as some later

point in time.

7. Rational Analysis involves the careful weighing of evidence for, and against, a particular

attitude. For example, a person may carefully listen to the presidential debates and read opinions

of political experts in order to decide which candidate to vote for in an election.

Attitude Theories

COGNITIVE CONSISTENCY THEORIES

Cognitive consistency theories have their origins in the principles of Gestalt psychology,

which suggests that people seek to perceive the environment in ways that are simple and coherent

(Kohler 1929). Cognitive consistency theories have their beginnings in a number of seemingly

unrelated research areas (Eagly and Chaiken 1993). Early consistency theorists drew upon theories

of conflict (Lewin 1935; Miller 1944), memory (Miller 1956), and the intolerance for ambiguity by

those with an authoritarian personality (Adorno, Frenkel-Brunswick, Levinson, and Stanford 1950).

According to Newcomb (1968a), social scientists should not have been surprised at the rise of

cognitive consistency theories. He points to a truism that in any field of scientific inquiry, there is

an inevitable movement from description of the elements of the field, to understanding the

relationships between them. At the heart of cognitive consistency theories is the assumption that

people are motivated to seek coherent attitudes, thoughts, beliefs, values, behaviors, and feelings. If

these are inconsistent, they will produce a tension state in the individual, and motivate the

individual to reduce this tension. Individuals reduce this tension, according to consistency theories,

by making their relevant cognitions consistent.

1. BALANCE THEORY

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The earliest consistency theory is Heiders balance theory (1946, 1958). This approach

is concerned with an individuals perceptions of the relationships between himself (p) and

(typically) two other elements in a triadic structure. In Heiders formulation, the other elements are

often another person (o) and another object (e.g., an issue, object, a value). The attitudes in the

structure are designated as either positive or negative. The goal of assessing the structure of a triad

is to ascertain whether the relationships (attitudes) between the actors and the other elements arebalanced, or consistent. According to Heider (1958), a balanced triad occurs when all the

relationships are positive, or two are negative and one is positive (i.e., two people have a negative

attitude toward an issue, but they like each other), and the elements in the triad fit together with no

stress. Imbalance occurs when these outcomes are not achieved (i.e., all three relationships are

negative, or you have a negative attitude toward an issue that your friend favors). Heider assumed

that people prefer balanced states to imbalanced ones, because imbalance results in tension and

feelings of unpleasantness. Balance, according to Heider, is rewarding.

Interestingly, imbalanced states can also be rewarding and exciting. Heider said that sometimes

balance can be boring and that The tension produced by unbalanced situations often has apleasing effect on our thinking and aesthetic feelings (1958, p. 180). In other words, imbalance

stimulates us to think further, to solve the problem, to imagine, and to understand the mystery of

the imbalance. According to balance theory, there are three ways to restore balance to an

imbalanced triad: (1) one may change ones attitude toward either the object or the other person, in

order to restore balance; (2) one might distort reality to perceive that the relationships are balanced

(e.g., your friend doesnt really favor something you dislike, she really dislikes it); and (3) one

might cognitively differentiate the relationship one has with a friend, so that the friends opposing

attitude toward something one favors is separated from ones positive attitude toward the friend as

a person (e.g., you might compartmentalize a friends opposite political views apart from yourattitude toward her, in order to maintain your friendship and maintain balance, in most other areas

where she is concerned) (Eagly and Chaiken 1993).

A limitation of Heiders balance theory is that it did not account for the strength of attitudes

between persons and objects in the triad. It merely categorized the relationships as either positive or

negative, and it therefore assumed that tension that is produced by imbalance was objectively of the

same strength and effect on the individuals in the triad. Because some attitudes are held with more

conviction and are more meaningful and important to us, it stands to reason that triads that involve

imbalance with such strongly-held attitudes ought to evoke more tension (Eagly and Chaiken

1993). Another shortcoming of the theory is that it only deals with relationships between three

entities. To address this latter concern, Cartwright and Harary (1956) published a paper that nicely

generalized Heiders theory to account for structures of any size.

2.CONGRUENCY THEORY

A particular advantage of Osgood and Tannen-baums (1955; Tannenbaum 1968)

congruency theory is its precision in assessing: 1) the strength of the relationships between p and o,2) the strength of the motivation to change an incongruent triad, and 3) the degree of attitude

change that is necessary to balance a triad. Another advantage of this theory is that, like

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Newcombs approach, it takes into account the strength of the attitudes of p and o in evaluating the

degree of incongruity in the structure. Osgood and Tannenbaum discuss the Heider triad in terms of

p, another individual, termed the source (s) and s attitude (termed an assertion) toward another

object or concept (x). According to the theory, attitudes can be quantified along a seven-unit

evaluative scale, from extremely negative (-3) to neutral (0) to extremely positive (+3).

When ps attitude toward s and x are positive, and ss assertion is equally strong and of

the same valence, there is a congruous structure to the triad. There is no motivation to change

ones attitude toward the object or toward the source. When ps attitude toward s is positive, and p

has an equally positive attitude toward x that s later negatively evaluates, an incongruous structure

is established. In this situation, p is motivated to change his or her attitude toward s, or x, or both,

in the direction of congruity. Consider the following example. If ps attitude toward s is a +2, and

ps attitude toward x is a -2, the structure would be congruent if ss assessment is a -2. If, however,

the assessment is a +2, the structure is imbalanced. In this case, ps attitude toward either x or s

needs to change four units to make the triad congruent. Of course, if the relationships are weaker,

the degree of attitude change to make the triad congruent is that much less (by the exact amountdenoted in the quantitative calculation of all the relations of p, s, and x). Osgood and Tannenbaum

also argued that strongly held attitudes would be less likely to be modified in incongruent triads.

This was supported in subsequent research (Tannenbaum 1968).

3. AFFECTIVE-COGNITIVE CONSISTENCY MODEL

This approach suggests that people seek consistency in order to satisfy a general motivation

toward simplicity in cognition, and/or to adhere to norms, traditions, customs, or values that

reinforce consistency in ones cognitions and behavior (Rosenberg 1956, 1968). Another

interesting twist on the consistency approach is that in the affective-cognitive consistency model,Rosenberg (1956, 1968) proposed that people are more motivated to maintain cognitive consistency

so that other people perceive that they are consistent. In other words, while the individual may

occasionally feel some tension as a result of inconsistency, other people find the inconsistency

more aversive, because it represents a conflict for those around the individual. Specifically, if o has

a positive attitude towardp, butp dislikes x, which o likes, o is caught between being friendly with,

and avoiding, p. In this model, o feels tension at this conflict, and must reduce the tension by

changing attitudes toward p (e.g., increasing attraction toward p, which would thereby outweigh

any conflict with ps negative attitude toward x) or toward x (e.g., o devalues x, so that ps dislike

of x does not result in o feeling conflicted).

4. COGNITIVE DISSONANCE THEORY

Of all the cognitive consistency theories, none has had more influence on researchers and

subsequent theories than cognitive dissonance theory (Festinger 1957). A conservative estimate

suggests that at least 1,000 articles have been published in which researchers present data bearing

upon the theory and their own revisions of the theory (Cooper and Fazio 1984). Many agree

withJoness (1976) assessment that cognitive dissonance theory is the most important

development in social psychology to date (p. x). Along the way, the theory has been hailed for its

elegant simplicity, and its powerful range of utility (Collins 1992). It has also been criticized for its

lack of specificity (Lord 1992; Schlenker 1992).

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In formal terms, Festingers theory states that two elements (behaviors or thoughts, or both) are in

a dissonant relation if, considering these two alone, the obverse of one element would follow from

the other (1957, p. 13). Dissonance, then, refers to a negative arousal brought about by ones

inconsistent thoughts or actions, or both. Essentially, this translates into the following assumptions.

If one has opposing thoughts or behaviors, or both, this brings about an aversive state of tension,

akin to a drive state like hunger or thirst. This tension motivates the individual to seek relief byeliminating the tension. The tension can be dissipated by changing: 1) either a thought or attitude to

make it consonant with the opposing thought or behavior, or 2) ones behavior, to make it

consonant with the opposing behavior or thought. Because it is often much easier to change ones

thoughts rather than ones behaviors, these are typically the elements that get modified by the

person in dissonance reduction.

As an example, Festinger (1957) talked about the dissonance experienced by most smokers at

some point in their lives. Smokers engage in behavior (smoking) that is harmful to their health.

This is at odds with our desire to avoid harming ourselves. This arouses tension in the individual.

The smoker could reduce it by changing his or her behavior (quit smoking) or changing the way heor she thinks about the smoking behavior. As mentioned above, changing behavior is often more

difficult than changing cognitions, and, as most smokers will affirm, quitting smoking is certainly

no exception to this axiom. In this instance, Festinger suggests, smokers eliminate their dissonance

by changing their thoughts about smoking. They may: 1) disbelieve the validity of the health

consequences of smoking, or distort the information about smoking by thinking that smoking is

only harmful if you smoke so many packs a day, or if you inhale cigar smoke, etc., or more

fatalistically, 2) convince themselves that we all die of something, and I might as well die doing

something I enjoy. All of these changes in thoughts eliminate the dissonance for the smoker.

It should be noted that Festinger was not talking about logical inconsistencies. There are certainly

conditions under which people think and do logically inconsistent things, yet feel no dissonance, or

they feel dissonance, yet are not in a situation where a logical inconsistency is present. Festinger

recognized what has become a truism in psychology, that a persons reaction to a stimulus is not a

function of the objective properties of the stimulus itself, but rather the individuals construal, or

perception of, that stimulus. This explains why the presence or absence of logical inconsistencies

may or may not be accompanied by dissonance in an individual. The most important and reliable

way to predict a persons behavior in a dissonance situation is to understand how he or she

construes the potential dissonance arousing thoughts or behaviors, or both.

VALUE

Definition: A value is an enduring belief that a specific mode of conduct or end-state of existence

is personally or socially preferable to an opposite or converse mode of conduct or end-state of

existence.

GROWTH OF SMALL SCALE INDUSTRIES

Employment Generation

SSI Sector in India creates largest employment opportunities for the Indian populace, next only to

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Agriculture. It has been estimated that a lakh rupees of investment in fixed assets in the small scale

sector generates employment for four persons.

According to the SSI Sector survey conducted by the Ministry and National Informatics Centre

with the base year of 1987-88, the following interesting observations were made related to

employment in the small scale sector.

Generation of Employment - Industry Group-wise

Food products industry has ranked first in generating employment, providing employment to 4.82

lakh persons (13.1%).

The next two industry groups were Non-metallic mineral products with employment of 4.46 lakh

persons (12.2%) and Metal products with 3.73 lakh persons (10.2%).

In Chemicals & chemical products, Machinery parts and except Electrical parts, Wood

products, Basic Metal Industries, Paper products & printing, Hosiery & garments, Repair services

and Rubber & plastic products, the contribution ranged from 9% to 5%, the total contribution by

these eight industry groups being 49%. In all other industries the contribution was less than 5%.

Per unit employment

Per unit employment was the highest (20) in units engaged in Beverages, tobacco & tobacco

products mainly due to the high employment potential of this industry particularly in Maharashtra,

Andhra Pradesh, Rajasthan, Assam and Tamil Nadu.

Next came Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal

industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4 was in Repair

services line.

Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural areas.

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However, in Chemicals & chemical products, Non-metallic mineral products and Basic metal

industries per unit employment was higher in rural areas as compared to metropolitan areas/urban

areas.

In urban areas highest employment per unit was in Beverages, tobacco products (31 persons)

followed by Cotton textile products (18), Basic metal industries (13) and Non-metallic mineralproducts (12).

Rural

Non-metallic products contributed 22.7% to employment generated in rural areas. Food Products

accounted for 21.1%, Wood Products and Chemicals and chemical products shared between them

17.5%.

Urban

As for urban areas, Food Products and Metal Products almost equally shared 22.8% of

employment. Machinery and parts except electrical, Non-metallic mineral products, and Chemicals

& chemical products between them accounted for 26.2% of employment.

In metropolitan areas the leading industries were Metal products, Machinery and parts except

electrical and Paper products & printing (total share being 33.6%).

State-wise Employment Distribution

Tamil Nadu (14.5%) made the maximum contribution to employment.

This was followed by Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal (8.5%) the total

share being 27.7%.

Gujarat (7.6%), Andhra Pradesh (7.5%), Karnataka (6.7%), and Punjab (5.6%) together accounted

for another 27.4%.

Per unit employment was high - 17, 16 and 14 respectively - in Nagaland, Sikkim and Dadra &Nagar Haveli.

It was 12 in Maharashtra, Tripura and Delhi.

Madhya Pradesh had the figure of 2. In all other cases it was around the average of 6.

Production

The small scale industries sector plays a vital role for the growth of the country. It contributes 40%

of the gross manufacture to the Indian economy.

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It has been estimated that a lakh rupees of investment in fixed assets in the small scale sector

produces 4.62 lakhs worth of goods or services with an approximate value addition of ten

percentage points.

The small scale sector has grown rapidly over the years. The growth rates during the various plan

periods have been very impressive.

The number of small scale units has increased from an estimated 8.74 lakhs units in the year 1980-

81 to an estimated 31.21 lakhs in the year 1999.

From the year 1990-91 this sector has exhibited a comparitively lower growth trend (though

positive) which continued during the next two years. However, this has to be viewed in the

background of the general recession in the economy. The transition period of the process of

economic reforms was also affected for some period by adverse factors such as foreign exchange

constraints, credit squeeze, demand recession, high interest rates, shortage of raw material etc.

When the performance of this sector is viewed against the growth in the manufacturing and the

industry sector as a whole, it instills confidence in the resilience of the small scale sector.

The estimates of growth for the year 1995-96 have shown an upswing.The growth of SSI sector has

surpassed overall industrial growth from 1991 onwards.The positive trend is likely to strengthen in

the coming years.This trend augurs a bright future for the small scale industry.

Export contribution

SSI Sector plays a major role in India's present export performance. 45%-50% of the Indian

Exports is being contributed by SSI Sector. Direct exports from the SSI Sector account for nearly

35% of total exports. The number of small scale units that undertake direct exports would be more

than 5000.

Besides direct exports, it is estimated that small scale industrial units contribute around 15% toexports indirectly. This takes place through merchant exporters, trading houses and export houses.

They may also be in the form of export orders from large units or the production of parts and

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components for use for finished exportable goods.

It would surprise many to know that non traditional products account for more than 95% of the SSI

exports.

The exports from SSI sector has been clocking excellent growth rates in this decade. It has beenmostly fuelled by the performance of garment, leather and gems and jewellery units from this

sector.

The lucrative product groups where the SSI sector dominates in exports, are sports goods,

readymade garments, woollen garments and knitwear, plastic products, processed food and leather

products.

Opportunities

Small industry sector has performed exceedingly well and enabled our country to achieve a wide

measure of industrial growth and diversification.

By its less capital intensive and high labour absorbtion nature, SSI sector has made significant

contributions to employment generation and also to rural industrialisation. This sector is ideally

suited to build on the strengths of our traditional skills and knowledge, by infusion of technologies,

capital and innovative marketing practices.

The opportunities in the small scale sector are enormous due to the following factors :

Less Capital Intensive

Extensive Promotion & Support by the Government

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Reservation for Exclusive Manufacture by small scale sector

Project Profiles

Funding

Finance & Subsidies

Machinery Procurement

Raw Material ProcurementManpower Training

Technical & Managerial skills

Tools & Tools utilisation support

Reservation for Exclusive Purchase by Government

Export Promotion

Growth in demand in the domestic market size due to overall economic growth

Increasing Export Potential for Indian products

Growth in Requirements for ancillary units due to the increase in number of greenfield units

coming up in the large scale sector.

So this is the opportune time to set up projects in the small scale sector. It may be said that

the outlook is positive, indeed promising, given some safeguards. This expectation is based on an

essential feature of the Indian industry and the demand structures. The diversity in production

systems and demand structures will ensure long term co-existence of many layers of demand for

consumer products / technologies / processes. There will be flourishing and well grounded markets

for the same product/process, differentiated by quality, value added and sophistication. This

characteristic of the Indian economy will allow complementary existence for various diverse types

of units.

The promotional and protective policies of the Govt. have ensured the presence of this sector in an

astonishing range of products, particularly in consumer goods. However, the bug bear of the sector

has been the inadequacies in capital, technology and marketing. The process of liberalisation will

therefore, attract the infusion of just these things in the sector.

Economic Indicators

The Small Scale Industry today constitutes a very important segment of the Indian economy. The

development of this sector came about primarily due to the vision of our late Prime MinisterJawaharlal Nehru who sought to develop core industry and have a supporting sector in the form of

small scale enterprises.

Small Scale Sector has emerged as a dynamic and vibrant sector of the economy.

- Today, it accounts for nearly 35% of the gross value of output in the manufacturing sector and

over 40% of the total exports from the country.

- In terms of value added this sector accounts for about 40% of the value added in the

manufacturing sector.

- The sector's contribution to employment is next only to agriculture in India. It is therefore an

excellent sector of economy for investment.

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FORMS OF BUSINESS ORGANIZATION

Introduction: Business concerns are established with the objective of making profits. They can be

established either by one person or by a group of persons in the private sector by the government or

other public bodies in the public sector. A business started by only one person is called sole

proprietorship. The business started by a group of persons can be either a Joint Hindu Family or

Partnership or Joint Stock Company or a Co-operative form of organization

Thus there are various forms of business organization

1. Sole Proprietorship

2. Private Limited Company:

3. Partnership Firm

4. Public Limited Company:

5. Co-operative Society

Characteristics of an ideal form of organization

Before we discuss the features, merits and demerits of different forms of organization, let us know

the characteristics of an ideal form of organization. The characteristics of an ideal form of

organization are found in varying degrees in different forms of organization. The entrepreneur,

while selecting a form of organization for his business, should consider the following factors.

Ease of formation: It should be easy to form the organization. The formation should not

involve many legal formalities and it should not be time consuming.

Adequacy of Capital: The form of organization should facilitate the raising of the required

amount of capital at a reasonable cost. If the enterprise requires a large amount of capital,

the preconditions for attracting capital from the public are a) safety of investment b) fair

return on investment and c) transferability of the holding.

Limit of Liability: A business enterprise may be organized on the basis of either limited or

unlimited liability. From the point of view of risk, limited liability is preferable. It means

that the liability of the owner as regards the debts of the business is limited only to the

amount of capital agreed to be contributed by him. Unlimited liability means that even the

owners personal assets will be liable to be attached for the payment of the business debts.

Direct relationship between Ownership, Control and Management: The responsibility for

management must be in the hands of the owners of the firm. If the owners have no control

on the management, the firm may not be managed efficiently.

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Continuity and Stability: Stability is essential for any business concern. Uninterrupted

existence enables the entrepreneur to formulate long-term plans for the development of the

business concern.

Flexibility of Operations: another ideal characteristic of a good form of organization is

flexibility of operations. Changes may take place either in market conditions or the statespolicy toward industry or in the conditions of supply of various factors of production. The

nature of organization should be such as to be able to adjust itself to the changes without

much difficulty.

Sole Proprietorship

Meaning: A sole proprietorship or one mans business is a form of business organization owned

and managed by a single person. He is entitled to receive all the profits and bears all risk of

ownership.

Features: The important features of sole proprietorship are:

1. The business is owned and controlled by only one person.

2. The risk is borne by a single person and hence he derives the total benefit.

3. The liability of the owner of the business is unlimited. It means that his personal assets are

also liable to be attached for the payment of the liabilities of the business.

4. The business firm has no separate legal entity apart from that of the proprietor, and so the

business lacks perpetuity.

5. To set up sole proprietorship, no legal formalities are necessary, but there may be legal

restrictions on the setting up of particular type of business.

6. The proprietor has complete freedom of action and he himself takes decisions relating to his

firm.

7. The proprietor may take the help of members of his Family in running the business.

Advantages

1. Ease of formation: As no legal formalities are required to be observed.

2. Motivation: As all profits belong to the owner, he will take personal interest in the business.

3. Freedom of Action: There is none to interfere with his authority. This freedom promotes

initiative and self-reliance.

4. Quick Decision: No need for consultation or discussion with anybody.

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5. Flexibility: Can adapt to changing needs with comparative ease.

6. Personal Touch: comes into close contact with customers as he himself manages the

business. This helps him to earn goodwill.

7. Business Secrecy: Maintaining business secrets is very important in todays competitive

world.

8. Social Utility: Encourages independent living and prevents concentration of economic

power.

Disadvantages

1. Limited resources: one mans ability to gather capital will always be limited.

2. Limited Managerial Ability

3. Unlimited Liability: Will be discouraged to expand his business even when there are good

prospects for earning more than what he has been doing for fear of losing his personal

property.

4. Lack of Continuity: uncertain future is another handicap of this type of business. If the sole

proprietor dies, his business may come to an end.

5. No Economies of Large Scale: As the scale of operations are small, the owner cannot secure

the economies and large scale buying and selling. This may raise the cost of production.

Private Limited Company:

A private limited company is a voluntary association of not less than two and not more than fifty

members, whose liability is limited, the transfer of whose shares is limited to its members and who

is not allowed to invite the general public to subscribe to its shares or debentures.

A private company is preferred by those who wish to take the advantage of limited liability but at

the same time desire to keep control over the business within a limited circle and maintain the

privacy of their business.

Advantages

Continuity of existence

Limited liability

Less legal restrictions

Disadvantages

Shares are not freely transferable

Not allowed to invite public to subscribe to its shares

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Scope for promotional frauds

Undemocratic control

Partnership Firm:

Partnership is defined as a relation between two or more persons who have agreed to share theprofits of a business carried on by all of them or any of them acting for all. The owners of a

partnership business are individually known as the "partners" and collectively as a "firm".

Advantages

Ease of formation

Greater capital and credit resources

Better judgement and more managerial abilities

Disadvantages

Absence of ultimate authority

Liability for the actions of other partners

Limited life

Unlimited liability

Partnership is an appropriate form of ownership for medium sized business involving limitedcapital. This may include small scale industries, wholesale and retail trade; small service concerns

like transport agencies, real estate brokers; professional firms like charted accountants, doctors'

clinic, attorney or law firms etc.

Public Limited Company:

A public limited company is a voluntary association of members which is incorporated and,

therefore has a separate legal existence and the liability of whose members is limited.

Advantages

Continuity of existence

Larger amount of capital

Unity of direction

Efficient management

Limited liability

Disadvantages

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Scope for promotional frauds

Undemocratic control

Scope for directors for personal profit

Subjected to strict regulations

S-Corporations have features similar to a partnership. An S-corporation must have at least one

shareholder, and cannot have more than 100 shareholders. If any shareholder provides services to

the business, the S-Corp must pay that shareholder a reasonable salary. This salary is a separate

payment from distributions of profits or losses.

Trusts are usually formed upon the death of an individual and are designed to provide continuity of

the investments and business activities of the deceased individual. We will not discuss trusts

further.

IV Unit

SCOPE AND FUNCTIONS OF MATERIALS MANAGEMENT

INTRODUCTION:

Materials management is one of the important activities of business. There is no general agreement

about precisely what activities are embraced by materials management. Some managers would associate

materials management with their material or production control departments, which schedule materials

requirements and may also control inventories of both raw materials and in-process materials. Others would

associate it with the activities of their purchasing departments in dealing with outside suppliers. If we

analyze the total cost of any product nearly 60 to 70% is because of materials. Only the rest is for labour,

overhead and profit. So any reduction in the material cost, even by a very less percentage will give rise to a

greater profit. Moreover the materials management being a staff function, the introduction of new

techniques to reduce the cost of the product is much easier than in any other field.

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Hence, the rate of return on capital employed is of prime concern and is given by the

Ratio:

Profit

Rate of Return (ROR) = ---------------------------------

Capital employed

Profit Sales= -------------- X --------------------------------------------------

Sales Fixed Assets + Current Assets

= Profitability X Capital turnover ratio

So as to increase the rate of return on investment, one way is to increase the capital turnover ratio. For this

if capital employed is reduced, naturally capital turnover ratio will go high. Fixed assets constitute capital

already sunk and only scope for improving the Return on Investment (ROI) lies in the efficient management

materials which constitute the bulk of current assets.

As materials constitute the major cost component, large amount of capital is locked up in materials with the

associated burden interest which further increases the cost of the product. So, because of the greatest

percentage of cost associated with materials and also any possible reduction in material cost will result in

the increase of profit, the industries are now thinking of introducing the concept of scientific materials

management. If we analyze the above graph we find that previously the breakeven point was at A. Because

of reducing the cost the breakeven point shifted to B. For the given output C the profit margin has

increased by X2, from X1 to (X1 X2) amount.

SCOPE OF MATERIALS MANAGEMENT:

Materials Management strives to ensure that the material cost component of the total product cost be

the least. In order to achieve this, the control is exercised in the

Following fields.

1. Materials Planning.

2. Purchasing.

3. Store Keeping.

4. Inventory Control.

5. Receiving, Inspection and Despatching.

6. Value Analysis, Standardization and Variety Reduction.

7. Materials Handling & Traffic.

8. Disposal of Scrap and Surplus, Material Preservation.

The function of material planning department is to plan for the future procurement of all the

required materials as per the production schedule. At the time of material planning, the budget allocated for

the materials will also be critically reviewed, for better control. After material planning, purchasing is to be

done. Purchasing department buys material based on the purchase requisitions from user departments and

stores departments and annual production plan. There are four basic purchasing activities.

a) Selecting suppliers, negotiating and issuing purchase orders.

b) Expediting delivery from suppliers.

c) Acting as liaison between suppliers and other company departments.

d) Looking for new products, materials, and suppliers that can contribute to

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Company objectiveness.

At the time of purchase, right quantity and quality of materials must be purchased at right time, at the

lowest possible cost and select the efficient purchasing system, to derive maximum benefit. Purchasing is

done based on make or buy decisions and also using

PERT / CPM effectively.

When the items are purchased, proper storage facilities must be provided so that, the wastage is

reduced to a minimum. Sometimes to protect the quality, greater care must be taken during storage. The

duties of the inventory control department is to decide about the types of ordering system, fixing the safety

stock limits, fixing up the reorder level & maximum / minimum stock level. The responsibility of

Receiving, inspection and dispatching department is to receive the materials when delivered by the

suppliers. After receiving it, the quantity and quality must be checked. Production parts and materials are

checked against blueprints and specifications. Non-production items are also reviewed. When once it is as

per the specifications given, the goods will be accepted. The Value Analysis and Standardization offer

greatest scope, in reducing the materials cost. It also reduce the number of varieties and also helps in

finding the substitute for the materials at lesser cost.

Materials handling section is responsible for the transport of materials to various departments. There are

four basic traffic activities.

a) Selecting common or charter carriers and routings for dispatch / shipments as required.

b) Tracing in-bound shipments of material in short supply as requested by production control or

purchasing. Assisting customers in tracing outbound shipments when asked.

c) Auditing invoices from carriers and filing claims for refunds of excess charges or for damaged shipments

when required.

d) Developing techniques to reduce transportation cost. This may involve negotiation with competing

shippers, special studies n selecting the most advantageous plant location for new products, analysis of

tariffs, and negotiation of any number of special arrangements for handling certain traffic.

e) The activity includes packaging of finished product, labeling and loading of end products in the trades.

Finally the disposal of scrap and surplus must be done periodically to release the capital locked in those

items.

NON-PRODUCTION STORES:

Techniques and procedures used to control non-production material (office supplies, perishable

tools, and maintenance, repair, and operating supplies) resemble those used for production material,

although they are usually less elaborate. Specifically, the stores department

a) Maintains physical stocks of non-production items to be drawn on as needed for operations or

maintenance.

b) Manages inventories of non-production materials and prepares purchase requisitions for needed material

when stocks drop to the re-order point.

c) Keeps records and maintains controls to prevent duplication of inventories, minimize losses from

pilferage and spoilage and prevent stock-outs.

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NEED FOR INTEGRATED CONCEPT :

In an integrated set-up, the materials manager is responsible to exercise control and coordinates

with an overview that ensures proper balance of conflicting objectives of the individual functions.

Integration also helps in the rapid transfer of data, through effective and informal communication channels.

This is crucial as the materials management function usually involves handling a vast amount of data.

Therefore, integrating the various functions ensures that message channels are shortened and the various

functions identify themselves to a common materials management department which, in turn, results in

greater co-ordination and better control.

ADVANTAGES IN INTEGRATED MATERIALS MANAGEMENT

CONCEPT :

Organizations which have gone in a big way for the integrated materials management

usually enjoy the following advantages :

BETTER ACCOUNTABILITY :

Through centralization of authority and responsibility for all aspects of materials function, a clear cut

accountability is established. This helps in evaluating the performance of materials management in an

objective manner.

BETTER CO-ORDINATION :

When

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