LESSON - 1

NATURE AND PROCESS OF MANAGEMENT

Objectives

After studying this lesson, you should be able to:

x understand the nature of management x familiarise with the basic managerial functions x describe the levels in management and x acquire an indepth knowledge of the skills required of a manager.

Outline

A. Introduction

B. What is Management?

C. Nature of Management

1. Management as a Science

2. Management as an Art

3. Management as a Profession

4. Professionalisation of Management in India

D. Functions of Management

1. Planning

2. Organising

3. Leading

4. Controlling

E. Management Levels

1. Front-line Managers

2. Middle level Managers

3. Top level Managers

F. Managerial Skills

1. Technical Skills

2. Human Skills

3. Conceptual Skills

G. Summary

1. Review Questions

2. Case Study

3. Further Readings

A. INTRODUCTION

Modern societies are often described as 'Societies of organisations'. When we think of any modern society, institutions like business enterprises, hospitals, religious and social organisations naturally come to our mind. All these organisations affect our lives in many ways. Despite the differences in their functioning and approaches, they all strive to achieve certain objectives. It must also be noted that organisations cannot achieve the objectives effortlessly. Several activities have to be performed in a cohesive way. As such, it is the function of the management to facilitate the performance of activities in a systematic fashion such that the accomplishment of the objectives becomes possible.

B. WHAT IS MANAGEMENT?

Management means many things to many people. Economists regard it as a factor of production. Sociologists see it as a class or group of persons while practitioners of management treat it as a process. In simple terms, management is what a manager does. It has been called by Mary Parker Follet as "the art of getting things done through people". This definition throws light on the fact that managers achieve organisational goals by arranging others to perform rather than performing the tasks themselves.

Management, in fact, is much more that no one single definition has been universally accepted. Nor can any one definition capture all the facets of management, given its dynamic nature. That is why, it is often said that there are as many definitions of management as there are authors in the field. However, the definition given by James A.F. Stoner encompasses all the important facets of management. According to him:

"Management is the process of planning, organising, leading and controlling the efforts of organisation members and of using all other organisational resources to achieve stated organisational goals".

This definition suggests that:

- Management is a process because all managers irrespective of their level in the organisation, engage in certain interrelated activities in order to achieve the desired goals;

- Managers use all the resources of the organisation, both physical as well as human;

- Management aims at achieving the organisations goals.

To achieve the objectives, every organisation uses certain inputs like materials, machinery, money and the services of men. These inputs are drawn from the environment in which the organisation exists. Whether in organisation is engaged in business or non-business, the various inputs are judiciously used to produce the outlays. This process which involves the conversion of inputs into outputs is common to all organisations and it shown in exhibit 1.

The output of the firm may be a physical product or service. Since a business organisation is an economic entity, the justification for its existence lies in producing goods and services that satisfy the needs of the people. Here arises the question of effectiveness in transforming the inputs into outputs. How effectively the goods and services are produced is a matter of concern for any society, given the scarcity of resource. Effective management plays a crucial role in this context.

C. NATURE OF MANAGEMENT

Inspire of the growing importance of management as an academic discipline immensely contributing to the quality of human life, the concept is still clouded by certain misconceptions. No doubt, management as an academic body of knowledge has come a long way in the last few years, has grown in stature and gained acceptance all over the world. Yet, it is paradox that the term 'management' continues to be the most misunderstood and misused.

1. Management as a Science:

It is therefore relevant to examine the exact nature of management whether it is a science or an art. Before arriving at a conclusion, let us understand the nature of science as well as art. Any branch of knowledge to be considered as science, (like the ones we have physics, chemistry, engineering, etc.) should fulfill the following conditions:

a. the existence of a systematic body of knowledge encompassing a wide array of principles;

b. the principles have to be evolved on the basis of constant enquiry and examination;

c. the principles must explain a phenomenon by establishing cause-effect relationship;

d. the principles have to be amenable for verification.

Looked at from this angle, management as a discipline fulfils the above criterion. Over the years, thanks to the contributions of many thinkers and practitioners, management has emerged with its own principle. The application of these principles helps any practising manager to achieve the desired goals. However, while using the principles, one should not lose sight of the variables in the situation, since situations differ from one another. Thus the importance of personal judgment cannot be undermined in the application of principles. Further, management is a dynamic subject in that it has drawn heavily from economics, psychology, sociology, engineering and mathematics, to mention a few. It is multi-disciplinary in nature.

Though management, considering its subject matter and the practical utility, may be considered as 'Science' for reasons discussed below, it cannot be viewed as an 'exact science'. In other words, it is a science, but an 'inexact science' because:

i. Management by definition, involves getting the things done through people. Compared to the other inputs, 'people', who constitute the human resource of any organisation are unique in respect of their aspirations, attitudes, perceptions and the like. Dissimilarities in the behaviour patterns are so obvious that standard results may not be obtained in otherwise similar conditions.

ii. Secondly, the behaviour of the human beings cannot be accurately predicted. Hence readymade and standard solutions cannot be prescribed.

iii. Thirdly, management is more concerned with future which is complex and unpredictable. As the saying goes, 'many a slip between the cup and lip', many variables in the environment may affect the plans and render them ineffective.

iv. Lastly, since a business organisation exists in an environment, it has a two-way interaction with the environment. The organisation influences the environment by its several decisions and in turn, is influenced by the various elements of the environment Important among these are technological, economic, socio-cultural and political factors. The whole thing is so complex that however effective the plans are, one is prone to be taken unaware of unexpected changes in the environment.

Unlike the pure or exact sciences where the results are accurate, in the Case of Management the various factors totalized above may force even the excellent plans and strategies go haywire. Too many complexities and uncertainties renders management an 'inexact science'.

2. Management as an Art:

Art refers to the 'know-how' to accomplish a desired result. The focus is on the ways of doing things. As the saying goes 'practice makes a man perfect', constant practice of the

theoretical concepts (knowledge base) contributes for the formation of skills. The skills can be acquired only through practice. In a way the attributes of science and art are the two sides of the same coin. Medicine, engineering, accountancy and the like require expertise on the part of the practitioners and can only be acquired through practice. Management is no exception. A university gold medalist in surgery may not necessarily turn out to be a good surgeon. Similarly a management graduate from the best of the institutes may not be very effective in practice. In both cases, the application of the knowledge acquired through formal education, requires ingenuity, correct understanding of the variables in the situation, pragmatism and creativity in finding solutions to problems.

Effective practice of any art requires a thorough understanding of the science underlying it. Thus science and art are not mutually exclusive, but are complementary. Executives who attempt to manage without the conceptual understanding of the management principles and techniques have to depend on luck and intuition. With organised knowledge and the necessary skills to use such knowledge, they have a better chance to succeed. Therefore, it may be concluded that management is both a science and an art.

3. Management as a Profession:

Another important dimension of the nature of management is whether it is a profession. McFarland gives the following characteristics of a profession:

x existence of an organised and systematic body of knowledge, x formalised methods of acquiring knowledge and skills, x existence of an apex level body with professionalisation as its goal, x existence of an ethical code to regulate the behaviour of the members of the

profession, x charging of fees based on service, and x a concern for the social responsibilities.

Management as a profession does not strictly conform to the above criterion. Unlike medicine or law, management has to go a long way to have a universally acceptable norm of behaviour. There is no uniform code of conduct that governs the behaviour of managers. The apex level body, All India Management Association (AIMA) provides only guidelines and does not have any controlling power over the erring members. Vast differences are also found among managers in respect of their concern for the ethics and values of the system in which they function. Many a time, in their obsession with profit, the societal interests are neglected. However, as in the case of other professions, it is implied that managers are expected to set an example in doing good to the society. After all, given the enormous resources they have at their command, the expectation that managers should address themselves to the problems of society is not unnatural.

Compared to other professions like engineering, medicine, accountancy, etc., the entry to management positions is not restricted to individuals with a special degree. To quote Peter Drucker, 'no greater damage could be done to an economy or to any society than

to attempt to professionalize management by licensing managers, for instance, or by limiting access to management to people with a special academic degree'.

The question whether management is a profession often breathes life into the widely debated issue "whether managers are born or made". It is true that many founding fathers of the industry in India and elsewhere too, did not study management in the formal way. The native wisdom coupled with their vision and ingenuity in organising the enterprises helped them earn name and fame. Huge industrial empires were built with sheer business acumen. Business history of any nation is fully replete with many "rags to riches" stories. The Marwaris and Parsees in North India and Chettiars and Naidus in South India, for instance, offer a classic example of such success stories. The success achieved by the pioneers in these cases amply demonstrates that success in business requires much more than the academic degrees.

The achievements of the pioneers of the industrial development need not, however, shadow the importance of management as a profession, in arguing for and against, we must not ignore the context of the business. There has been a sea change in the environment of the business. Modern business has become more complex due to the uncertainties arising mainly from:

* rapid technological changes

* increased sophistication in technology

* expansion in the size of organisations and consequently the markets.

All these variables which have a significant bearing on the functioning of a business point to the need for formal training and acquisition of skills in management by pursuing management education.

4. Professionalisation of Management in India:

In the last few years, management as a profession has gained a firm footing in India. The awareness about the contributions of professional managers has been increasing. Consequently, there has been a manifold increase in the number of institutes offering MBA and related diploma courses. There has also been a phenomenal increase in the number of students seeking admission into the management programmes.

The following factors seem to be mainly responsible for the growing demand for professional managers:

- The liberalisation policies pursued by the government opened up new vistas for the Indian organisations. As a consequence, competition has increased in all the sectors of Indian economy.

- Private industrial houses which were indifferent before, have fully realised the need for professional managers. While the promoters in many cases reserve the policy

formulation for themselves, the day-to-day managerial activities are entrusted to the professional managers.

- Public sector undertakings are also, of late, forced to perform. As a result, qualified managers are sought after by PSU's than ever before.

- Apart from the manufacturing concerns, public utilities like transport, telecommunications, and a host of service organisations are recruiting professional managers in a big way.

D. FUNCTIONS OF MANAGEMENT

Management is widely regarded as a process. A manager no matter what his level is in the organisation, performs a series of functions. Surprisingly, there is no consensus among the management thinkers on the classification of management functions. The number of functions as well as the terminology used to describe them are not alike. Henry Fayol identifies five functions, vis., planning, organising, commanding, coordinating and controlling. For instance, Newman and Summer recognize only four functions, namely organising, planning, leading and controlling. Luther Guile's popular catch word POSDCORB suggests seven functions, namely, planning, organising, staffing, directing, coordinating, reporting and budgeting. Koontz and O'Donnel classify the functions into planning, organising, staffing, directing and controlling. For the purpose of our study, we shall examine the following four functions of management - planning, organising, leading and controlling.

1. Planning

Planning, simply, is outlining a future course of action. It is unique in that it precedes all the other managerial functions. It attempts to capture the future. It involves deciding the objectives and formulating the policies and procedures to achieve them. Effective planning provides answers to questions like - what to do, how to do, who is to do it, and when to do?

Planning is a function performed by managers at all levels. However, plan made by top managers have a wider scope with a focus on the organisation as a whole and normally cover a longer period. On the other hand, plans developed by middle and lower level managers relate to the divisions or departments and usually cover a short period. Systematic planning helps in facing the uncertainties of future with less embarrassment. It helps in making things happen in the expected way.

2. Organising

Organisations achieve objectives by using physical and human resources. When people work in groups, everyone in the group should know what he is expected to achieve and what reporting relationship he has with others. The manager's task in organising aims at creating a structure that facilitates the achievement of goals.

Organising involves:

x determination of activities required to achieve goals; x grouping of these activities into departments; x assignment of such groups of activities to a manager; x delegation of authority to carry them out; and x provision for coordination horizontally and vertically in the organisation.

It must be remembered that the structure varies with the task. A large organisation with huge markets needs a different structure compared to a small organisation. Similarly, structure of an organisation operating in a stable environment may be different from the one operating in a dynamic environment. The way one goes about in organising the affairs of the organisation, is thus influenced by the size and nature of the activities involved, the type of environment, and the overall business strategy.

3. Leading

Once plans are finalised and the structure of the organisation is determined, the next step is to help the people achieve the objectives. This involves directing or leading the activities of the people. The manager directs the activities of his subordinates by explaining what they have to do and by helping them perform it to the best of their ability. In leading the people, the manager performs the following three distinct tasks:

Communication - the process of passing information from one person to another

Leadership - the process of directing the activities of the people by explaining them what they have to do.

Motivation - the act of stimulating the people so that they give their best to the organisation

Leading is a function predominantly interpersonal in nature. In the organisational context many problems arise because of the failure of managers to understand the people, their aspirations, attitudes, behaviour as individuals and in groups. If the manager fails in leading the people towards better performance, any amount of planning and organising, however effective they are, may not help the organisation.

4. Controlling

While plans of the organisation spell out the objectives to be achieved, control as a managerial function facilitates to know whether the actual performance is in conformity with the planned one. So that, in the event of deviations, appropriate corrective measures can be taken. In the absence of adequate control mechanism, unexpected changes in the environment may push the organisation off the track. Thus, controlling implies measuring and correcting the activities to assure that events conform to plans. It involves four main elements:

a. Establishing standards of performance;

b. Measuring the actual performance and comparing it against the standard performance;

c. Detecting deviations, if any, in order to make corrections before it is too late; and

d. Taking appropriate corrective measures.

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E. MANAGEMENT LEVELS

Though the term 'manager' is used to mean anyone who gets the things done through other people, we find the managers in any organisation with varying authority and responsibilities. In any company the total management job requires many skills and talents. Obviously, therefore, the job of manager is divided and subdivided. Such an arrangement implies different levels of management. As a matter of custom and convenience, we normally visualise a company's management as a pyramid as shown in

EXHIBIT 2

Levels of Management

The three levels of management that are commonly found in any organisation are lower or front-line, middle and top managers.

1. Front-Line Managers

This is the entry level job in the management. Managers at this level direct the operating employees (workers). They are close to the action, for their job involves supervising the activities of operatives. Front-Line managers are called foreman, supervisor, inspector and so on in any organisation.

2. Middle Level Managers

Middle management level includes, in many organisations, more than one level. Managers who work at all the levels between the lower arid top levels constitute the middle management, departmental heads and regional managers. Zonal managers and so on fall in this category. They report to top managers. Their principal responsibilities are to direct the activities of lower level managers who implement the organisation's policies.

3. Top level Managers

This level consists of a small group of executives. Board of Directors, Chairman, Managing Director and the top functional heads and divisional managers comprise this level. Top managers are responsible for the overall management of the organisation. They decide the enterprise objectives, policies and strategies to be pursued to achieve those objectives. They provide direction to the organisation by guiding the organisation's interactions with its environment.

F. MANAGERIAL SKILLS

Management job is different from other jobs. It requires elements of stewardship and commitment to the purpose. It involves the obligation to make prudent use of human and material resources. It requires resourcefulness and capacity for judgment to handle complex situations. Further, the nature of the job becomes increasingly complex at each higher level because of the increase in the scope of authority and responsibility. Therefore, each higher level requires increased knowledge, broader perspective and greater skills.

For purpose of analysis, skills required of any manager are classified under three different heads - technical, human (Employee relations skill) and conceptual skill as shown in Exhibit 3. The exhibit helps in understanding the levels of management responsibility, the principal skill requirements, and the extent to which each kind of skill is required at each level.

1. Technical Skill

Technical skill is the ability to use the procedures, techniques, and knowledge of a specialised field. It is primarily concerned with the ways of doing the things. It implies proficiency in a specific field of activity. Technical skill is most important for the lower level managers because by nature their job involves supervision of the workers. Effective supervision and coordination of the work of the subordinates, therefore, depends on the technical skill possessed by the lower level manager. Any supervisor without a sound knowledge of the job cannot make an effective supervisor. Such supervisors are not respected by the subordinates at the shop floor. The relative importance of the technical skill as compared to the other skills diminishes as one moves up to higher levels of management.

2. Human Skill

Human skill is the ability of the manager to work effectively as a group member and to build cooperative effort in the team he leads. It is the ability to work with, understand and motivate people. This skill is primarily concerned with persons, as contrasted with "things". When a man is highly skilled in employee relations, he is aware of his own attitudes, assumptions, and beliefs and recognizes their limitations as well as their usefulness. He accepts as an important fact of life the existence of viewpoints and feelings different from his own. He understands why people behave as they do and is able to make his own behaviour understandable to them. He can foresee their reactions to possible courses of action and, is able to take their attitudes into account. His skill in working with others is natural and continuous. He does not apply it in random or in inconsistent fashion. It is a natural ingredient of his every action.

3. Conceptual Skill

This skill is also called design and problem-solving skill. It involves the ability to see the organisation as a whole, to understand how its various parts and functions mesh together, and to foresee how changes in any one of these may affect all the others.

Conceptual skill extends to visualising the relation of the organisation to industry, to the community and to the political, economic and social forces of the nation as a whole, and even to forces which operate beyond the national boundaries. It is the creative force within the organisation.

A high degree of conceptual skill helps in analyzing the environment and in identifying the opportunities and threats. Managements of companies like ITC, Larsen & Turbo, Asian Paints, Bajaj Auto in the private sector and National Dairy Development Board in the public sector, to mention a few have amply demonstrated this skill in competitive edge over their competitors.

All the three types of skills discussed so far are not mutually exclusive. In other words, management job always requires all the three skills but in different proportions depending upon the level of management. There is a gradual shift in the emphasis from the bottom to the top of the pyramid. Technical skill and human skill are always in greater demand at the base of the pyramid, for it is there the productive processes and operations are carried out. It is there where you find most of the people. It is there where the action takes place. The need for conceptual skill is greatest at the peak of the pyramid. Obviously, the top managers are not often involved in the direct application of specific methods, procedures and techniques than those at the lower echelons of management.

Although, each of these skills is needed in some degree at every level of management, there are successful executives who have no great amount of technical skills. But they are able to compensate the lack of that skill through superior creative ability and skill in selecting, planning and effectively motivating subordinates who are strong in technical skill.

As you have understood by now, at every level, management job is different from all other jobs in respect of the skills required. At the entry level into the management job, that is, at the supervisory level, besides technical skills, you have to realise the need to acquire human skill and the problem-solving skills (conceptual). To climb up the organisational ladder, you must not only be good at the skills required for the present job. But also learn and acquaint yourself with the skills required at the next level. As a result, in the event of promotion to the next higher level, you would feel at home and discharge the responsibilities with ease.

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G. SUMMARY

Organisations engaged in business or non-business use the inputs to produce the output (may be products or services). The conversion of inputs into outputs depends on the effectiveness of management. Management as a discipline has both the elements of science and art. The theory with principles and techniques constitute the science component, while skills and talent required for the use of the principles constitute the art. Management has, of late, emerged as highly respected profession. The process of management is understood under the four basic functions, viz., planning, organising, leading and controlling. To execute the managerial job successfully, every manager

requires three types of skills - technical, human and conceptual skills. The proportion in which these skill are required varies from one level to the other. Technical skills are important it the lower while human skills and conceptual skills are required in that order at higher levels of management.

Review questions

1. Describe whether management is a science or art.

2. What do you mean by a profession? Examine the recent trends towards professionalisation of management in India.

3. Discuss the important functions of management.

4. Present a detailed account of the levels of management that are commonly found in any large scale organisation. What are the important skills at each level?

CASE

Traditional Manager or Professional Manager

Ravi, a brilliant young man, obtained his MBA degree from an Indian university in 1991 with specialisation in the area of Finance. His basic degree is B.E. in Chemical Engineering. The engineering background coupled with the management education aroused in him new spirits to strike on his own. Careful and systematic analysis of the various opportunities enabled him finally to zero in on the production and marketing of polythene bags that are increasingly used by fertilize and cement industries. The location of a fairly good number of units of these two industries in South India influenced his decision of the product choice. The fact that technology involved is not complicated or volatile further reinforced his belief about the market potential.

To reap certain locational advantages, he preferred to set up the unit in a fast growing district headquarters town in Tamilnadu connected with a good network of transport and communication facilities. But the cost of land as well as its availability became a problem. With the limited funds at his disposal, he could not afford to buy land and construct the unit which involved the commitment of substantial portion of his meager funds. On enquiry he came to know of certain sick units in the industrial estate in the outskirts of the town, which had ceased to function for sometime in the past. The machinery in a few such units having been already auctioned, the sheds were available for sale and/or lease. This opportunity came in handy for Ravi. He took on lease one such shed and spent about one lakh to effect a few changes to suit his requirements.

He started contacting the suppliers of the plant and machinery. He is confident of obtaining financial assistance to meet the fixed as well as working capital requirements of the business. But at the same time, he is also confused of the multiplicity of organisations/agencies that have come up to cater to the needs of small-scale

entrepreneurs. He doesn't have adequate knowledge of the assistance available and the incentives offered by all these agencies.

Further, even though he doesn't foresee any problems in the technical aspects relating to production, he is rather apprehensive of marketing the product. The demand for his product, being a derived one, is influenced by two factors - one, the demand for fertilisers, cement and other bulk commodities and two, the extent of the success made in replacing the gunny bags which are still in wider use. To add to his bother, Government of India, of late, has made use of gunny bags mandatory to protect the jute industry which has been languishing and is likely to vanish. However, all these problems could not deter the spirit of Ravi who is fully determined and bent on going ahead.

Please Answer:

1. Is Ravi a professional manager? Substantiate your answer with the characteristics of a professional manager.

2. Does Ravi face any problem? If so, analyse the problem.

3. Has Ravi acted in a professional way in analysing the environment before taking a decision? How could he have averted the problem?

FURTHER READINGS

Drucker, Peter P., 1981, Management Tasks, Responsibilities and Practices, Allied Publishers, New Delhi

Hodgets, Richard M., 1986, Management Theory: Process and Practice, Academic Press, London.

Katz R.L., 1974, Skills of an Effective Administrator, Harvard Business Review, 52(5) 90-102.

Koontz, Harold and Cyril O'Donnell, 1976, Management: A System and Contingency Analysis of Managerial Functions, McGraw-Hill, Tokyo

Newman, William H. Summer, Charles E. and Warren, E, 1974, The Process of Management Concepts, Behaviour and Practice, Prentice Hall of India, New Delhi.

Stoner, James A P, and Freeman Edward, R, 1989, Management, Prentice Hall of India, New Delhi.

- End of Chapter -

LESSON-2

EVOLUTION OF MANAGEMENT THEORY

Objectives

After studying this lesson, you should be able to:

x gain insights into the historical perspective of management, x appraise the major contributions to the management thought, and x analyse the trends that have taken place in the evolution of management thought

over the years.

Outline

Introduction

Pre-Scientific Era

* Charles Babbage

* Robert Owen

Scientific Management Era

* F. W. Taylor

* Henry Fayol

Human Relations Era

* Elton Mayo and the Hawthorne Experiments

Social Sciences Era

* Chester I. Barnard

* Rensis Likert

* Douglas McGregor

* Herbert A. Simon

* Peter F. Drucker

Summary

Review Questions

Self-assessment Test

Further Readings

INTRODUCTION

The practice of management is as old as human civilisation. In fact, much of the progress of mankind over the centuries may be attributed to the effective management of resources. The irrigation systems, existence of public utilities, the construction of various monuments like Taj Mahal, and the Egyptian pyramids of the bygone era amply demonstrate the practice of management in the olden days also. The ancient civilisations of Mesopotamia, Greece, Rome and Indus valley displayed the marvellous results of good management practices. However, the study of management in a systematic way as a distinct body of knowledge is only of recent origin. That is why, management is often described as "oldest of the arts and youngest of the sciences". Thus, the practice of management is not new. It has been practiced for thousands of years. But the science part of it the systematic body of knowledge is, no doubt, a phenomenon of the present century.

The traditional management practices remained quite stable through the centuries until the birth of Industrial Revolution in the mid 18th century. The industrial revolution brought about the substitution of machine power for manpower through several scientific inventions. As a result, within a few decades, the picture of industrial activity had undergone a metamorphic change. Man's quest for new ways of doing things, coupled with his ingenuity in adopting the scientific and technological inventions in the production of various goods and services resulted in:

x Mass production in anticipation of demand; x Advent of corporate form of organisation which facilitated such large scale

production; x Spectacular improvements in the transport and communication facilities; x Increase in competition fox markets; x The establishment of the new employer-employee relationship and so on.

Industrial Revolution had thus sown the seeds of modern management. The early scientific inquiries into the practice of management began. In what follows in this lesson, the evolution of management thought over the years is discussed in a chronological way.

PRE-SCIENTIFIC ERA

The captains of the industry in the early 18th and 19th centuries were confronted with many problems in managing the organisations. They had no previous experience to

guide them. The concept of automation and the consequent mass production were totally new. For the first time, the need for standard systems and procedures was felt. The new situation around the academic interest and the search for new principles and theories to ensure better management began.

Notable among the early thinkers is Charles Babbage, the British professor of Mathematics. He is often regarded as father of Operations Research. In the early 1800's he was convinced that the application of scientific principles to work processes would both increase productivity and reduce expenses. He introduced work measurement methods, profit sharing and bonus plans. He had invented a predecessor to the modern day computer, an invention he called the "difference machine" that performed mathematical calculations. He had also published a book titled "On Economy of Machinery and Manufacturing". Babbage was an early advocate of division of labour. He believed that each factory operation should be analysed so that the various skills necessary to execute the operation could be identified. It is interesting to note that our modem assembly line in the manufacturing concerns is based on Babbage's ideas.

At about the same time Robert Owen, an entrepreneur and manager of several cotton textile mills in Scotland introduced many reforms to improve the working conditions of the employees. He built better houses for workers and started company store to supply goods to the employees cheaply. He also reduced the working day to 10 hours and refused to hire children under the age of 10. Owen argued that better working conditions would contribute to larger output and profits. At a time when his counterparts concentrated on investing only on machines, he believed in investing in the workers in terms of improving their working and living conditions. He considered workers as "vital machines". He also introduced "rating system" to evaluate the employees' work on a daily basis and emphasised the human element in the factories.

Similarly, the thinking of James Montgomery, a textile mill owner in Scotland who addressed himself to the problems of planning, organising and controlling in early factories and Henry Varnm Poor, editor of the American Rail road Journal created good impact on the then management practices.

Though the contributions of the owner managers and a few academicians in the 19th century were in haphazard manner and had failed to stimulate interest in management it must be accepted that some thought provoking issues on the day to day management of organizations were raised. Their ideas created awareness about managerial problems. Thus by the end of the 19th century, adequate ground was prepared for a more systematic effort for the study of management.

SCIENTIFIC MANAGEMENT ERA

Frederick Winslow Taylor (1856-1915) should be ever remembered for his contribution to the management movement. In an effort to address several organisational problems, Taylor developed the body of knowledge what is now called "scientific management". Taylor investigated the effective use of human beings at the shop floor level in the industrial organisation. He defined managing as the art of

"knowing exactly what you want men to do and then seeing that they do it in the best and cheapest way". For the emphasis he had placed on the scientific way of doing things, he is often called the "Father of Scientific Management".

Salient Features of Scientific Management

Taylor conducted various experiments at the work place to find out how human beings could be made more efficient by standardising the work. These experiments have provided the following features of scientific management.

i. Separation of planning and doing

Taylor emphasized the separation of planning from actual doing. Before Taylor's Scientific Management, a worker used to plan about how he had to work and what instruments were necessary for that. This was creating lot of problems. Taylor insisted that planning should be left to the supervisor and the worker should concentrate on doing the work.

ii. Functional Foremanship

Separation of planning from doing resulted in the development of supervision system. For this purpose, Taylor evolved the concept of functional foremanship based on speclalisiation of functions.

iii. Job analysis

According to Taylor the best way of doing a job is one which requires the least movements, consequently less time and cost. He analysed the various jobs to find out the best way of doing the things with the help of Time and Motion and Fatigue studies.

a) Time Study involves the determination of time, a movement takes to complete. The movement which takes minimum time is the best one. This helps in fixing the fair work for a period.

b) Motion Study involves the study of movements which are involved in doing a job and thereby eliminating the wasteful movements and performing only necessary movements.

c) Fatigue Study shows the amount and frequency of rest required in completing the work. Thus job analysis, as given by Taylor, suggests the fair amount of a day's work requiring certain movements and rest periods to complete it.

iv. Standardisation

Instruments and tools, period of work, amount of work, working conditions and cost of production have to be standardized on the basis of job analysis and various elements of costs that go into the job.

v. Scientific Selection and Training of Workers

Taylor suggested that workers should be selected on a scientific basis taking into account their education, work experience, aptitude, physical strength, etc. A worker should be given work for which he is physically and technically most suitable. Apart from selection, proper emphasis should be laid on the training of workers to make them efficient and effective.

vi. Financial Incentives

Taylor introduced financial incentives to motivate workers to put in their maximum efforts. He applied the concept of differential piece rate system. According to this scheme, a worker who completes the normal work gets wages at higher rate per piece and one who does not complete gets at lower rate. To make the differential piece rate system work, he has suggested that wages should be based on individual performance.

vii. Economy

While applying scientific management, not only scientific and technical aspects should be considered but adequate consideration should be given to economy and profit. For this purpose, techniques of cost estimates and control should be adopted. The economy and profit can be achieved by making the resources more productive as well as by eliminating the wastages.

viii. Mental Revolution

Taylor strongly suggested a change in the attitude of employers and employees. Mutual conflict should be replaced by mutual cooperation which is beneficial to both. Taylor argued that mental revolution is the most important feature of scientific management because in its absence, no principle of scientific management could be applied.

In his crusade against the unscientific methods of management which were prevalent at that time, Taylor had to face bitter criticism from different quarters. It is an irony that in the beginning both workers and the managements did not understand Taylor's preachings correctly. Workers had struck work in protest against the proposed changes in the work routine and systems. The American congress had even called Taylor for an explanation. Taylor's philosophy, in simple, as reiterated by him before the congress and also in his book "The Principles of Scientific Management", rested on the following four basic principles:

x Development of a true science of management, so that the best method for performing each task could be determined;

x Scientific selection of the workers, so that each worker would be given responsibility for the task for which he or she was best suited;

x Scientific education and development of the worker; and

x Intimate, friendly co-operation between management and labour.

Henry Fayol (1841-1925), is widely acclaimed as the founder of the classical management school. He was the first to systematise what management is all about. Fayol believed that sound managerial practice falls into certain patterns that can be identified and analysed. From this basic insight, he developed a comprehensive philosophy of management which is found relevant to this day. Fayol was a contemporary of Taylor. It is important to note that, while Taylor was basically concerned with technical aspects at the shop floor, Fayol was interested in the total organization. He looked at the problems of managing an organisation from top management point of view.

His emphasis that management was not a personal talent but a skill like any other was a major contribution to managerial thought. It had generally been believed that "managers were born, not made". Fayol, opposed that view and argued that management could be taught once its underlying principles were understood and a general theory of management was formulated. Many of the managerial concepts we take for granted today were first articulated by Fayol.

In an attempt to develop a science of management, Fayol began by dividing business operations into six activities. These activities were

1) Technical - producing and manufacturing products

2) Commercial - buying raw materials and selling products

3) Financial - acquiring and using capital

4) Security - protecting employees and property

5) Accounting - recording and taking stock of costs, profits, and liabilities, keeping balance sheets and compiling statistics, and

6) Managerial.

Fayol's primary focus, of course, was on the last activity because he felt managerial skills had been the most neglected aspect of business operations. He defined management in terms of five functions - planning, organizing, commanding, coordinating, and controlling.

Fayol's Principles of Management

1. Division of Labour

The more people specialize, the more efficiently they can perform their work. The principle is epitomized by the modern assembly line.

2. Authority

Managers must give orders so that they can get things done. While their formal authority gives them the right to command, managers will not always compel obedience unless they have personal authority (such as relevant expertise as well).

3. Discipline

Members in an organization need to respect the rules and agreements that govern the organization. To Fayol, discipline will result from good leadership at all levels of the organisation, fair agreements (such as provisions for rewarding superior performance), and judiciously enforced penalties for infractions.

4. Unity of Command

Each employee must receive instruction about a particular operation from only one person. Fayol believed that when an employee reported to more than one superior, conflicts in instruction and confusion of authority would result.

5. Unity of Direction

Those operations within the organization that have the same objective should be directed by only one manager using one plan. For example, the personnel department in a company should not have two directors, each with a different hiring policy.

6. Subordination of Individual Interest to the Common Good

In any undertaking, the interests of employees should not take precedence over the interests of the organization as a whole.

7. Remuneration

Compensation for work done should be fair to both employers and employees.

8. Centralization

Decreasing the role of subordinates in decision making is centralization, increasing their role is decentralization. Fayol believed that managers should retain final responsibility but also need to give their subordinates enough authority to do their jobs properly.

9. The Hierarchy

The line of authority in an organization often represented today by the neat boxes and lines of the organization chart runs in order of rank from top management to the lowest level of the enterprise.

10. Orders Materials and people should be in the right place at the right time

People in particular should be in the jobs or positions most suited for them.

11. Equity

Managers should be both friendly and fair to their subordinates.

12. Stability of Staff

A high employee turnover rate is not good for the efficient functioning of an organisation.

13. Initiative

Subordinates should be given the freedom to conceive and carry out their plans, even though some mistakes may result.

14. Espirit de Corps

Promoting Team Spirit will give the organization a sense of unity. To Fayol, even small factors could help to develop this spirit. He suggested, for example the use of verbal communication instead of formal, written communication, whenever possible.

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HUMAN RELATIONS ERA

The Human Relations Era, also Called Behavioural School emerged because the Scientific Management principles propounded by classical thinkers like F. W. Taylor, Henry Fayol, Frank and Lillian Gilbreth did not achieve sufficient production efficiency and industrial harmony at the work place. Understanding human behaviour at work still remained a big puzzle for the managers. Therefore, systematic attempts were made by a few psychologists and sociologists to help managers understand the dynamics of human behaviour.

The term 'human relation' is used to describe the employer-employee relation in the organisational context. When the relations are effective employees contribute their maximum for the achievement of the organisational goals. On the other hand, human relations are ineffective when morale and efficiency of the workers deteriorate. They are present at the work place but do not perform. Therefore, to create effective human relations, it is essential that managers must know why employees behave as they do and what psychological and sociological factors motivate them.

Elton Mayo and the Hawthorne Experiments

The Hawthorne Experiments conducted by Elton Mayo and his associates at the Western Electric Company from 1924 to 1933 provided new insights into the human behaviour. Many of the experiments were performed at the Western Electric's Hawthorne plant near Chicago. Mayo's findings in these experiments marked the beginning of the human relations era.

The studies attempted to investigate the relationship between the physical conditions at the workplace and the productivity of workers. The researchers divided the employees into two groups. One group called the test group was subjected to changes in lighting. The lighting condition for the other group called the control group remained constant throughout the study. When the test group's lighting conditions were improved, productivity increased as expected. What surprised the researchers most was the fact that productivity continued to increase even when the lighting was reduced. Further, to add to the mystery, the control group's output also increased as the test group's lighting conditions were changed, though there was no change in the lighting conditions for the control group. As a result, for the first time, it was realised that something in addition to lighting was influencing the worker's performance.

In another set of experiments, the changes in the performance of a group of workers were observed by changing the various work related factors such as:

* increasing the wages;

* introducing rest periods; and

* reducing the workdays and workweek.

Workers were also allowed to choose their own rest periods and to have a say in all these changes. These experiments revealed that financial incentives alone were not causing the productivity improvements. It was found that a complex set of attitudes were responsible for the productivity increase. Employers develop group norms at the work place. The test and the control groups developed some group understanding that motivated them to perform well. The fact that employees would work hard if they are convinced that supervisors pay special attention to their welfare was also made abundantly clear. This is often referred as the Hawthorne Effect.

Another conclusion of the studies was that informal work groups exist in the work place. The informal groups help the individuals share common values, understanding and beliefs. These informal groups exert significant influence on the employees' performance. It is our common knowledge that many a time we find in the organisations how employees associations and friendships with co-workers influence their attitude towards the work and the superiors.

The contribution of the Human Relations Movement is quite significant in that the individual and the impact of his association with a group had received due attention. Employee productivity was viewed as a function of the human relations at work rather

than an engineering problem. Elton Mayo's studies in fact, contributed for a thorough change in the attitude and approach towards training.

SOCIAL SCIENCES ERA

Chester I. Barnard's contribution is often described as the Social Science Era in the development of management thought. His book "The Functions of the Executive" is regarded as a classic on management even to date. He argued in favour of looking at the organisations as social systems and analysing the managerial tasks in the system in which they operate. This is a significant departure from the earlier approaches.

Barnard used his work experience as the chief executive of New Jersey Bell. Based on his experience and extensive readings in sociology and philosophy, he had formulated his theories on organisational life. According to him, people come together in formal organisations to achieve things they could not achieve working alone. As they pursue organisation's goals they also try to satisfy their individual needs. Thus Bernard arrived at the theme: 'an enterprise can operate efficiently and survive only when both the organisation's goals and the needs of the individuals working for it are kept in balance.'

According to Barnard, an organisation exists when the following three conditions are fulfilled:

1. There are persons able to communicate with each other

2. They are willing to contribute to the action

3. They attempt to accomplish a common purpose

He has identified three types of functions which an executive performed in an organisation. These are:

* Maintenance of organisational communication.

* Securing of essential services from individuals in the organisation so as to achieve the overall purpose.

* Formulation and definition of organisational purpose.

Barnard's views on the concept of authority are noteworthy. He does not agree with the traditional view that authority transcends from the top to down. In his view, a person does not simply obey an order or directive because it has been given by a superior. As such, the exercise of authority depends on its acceptance, which is possible only when an individual:

* understands the communication;

* believes that it is not inconsistent with the organisational purpose;

* believes it to be compatible with the personal interest as a whole; and

* is mentally and physically able to comply with it.

The contribution of Barnard shows his perception of the organisation as a social system. His contribution is regarded quite high in management. Commenting on Barnard's book "The Functions of Chief Executive", William Wolf once said, "The book is a sociology of management. Its style of writing was purposely pitched at a high level of discourse. He believed that the field of management was lacking In concepts and was clouded by ambiguous and even erroneous thinking, hi a sense, he hoped that the functions would set things right and guide the social scientists to more realistic studies of organisation and management.

Mary Parker Follet (1868-1933) - USA, strongly believed that management and labour share a common purpose as members of the same organisation, however the distinction is order givers and order takers. She believed leadership should not come from the power of formal authority, as was traditional, but from the manager's greater knowledge and expertise. The manager should simply be the person best equipped to head the group. She believed that the participative mode of management could increase cohesiveness, the sense of belonging and creativity the root cause of conflict is 'desire to dominate'. The tendency to acquire man power to oneself and reluctance to delegate authority are two consequences such behaviour pattern. She advocated 'behavioural approach' in management

Rensis Likert is an American social psychologist born in 1903. Likert and his associates carried out extensive research on management practices in a wide variety of situations like industrial units, railways, hospitals, schools and voluntary organisations and covered unskilled workers in factories to top scientists in research laboratories. He believed that the body of knowledge of social sciences can pave the way to frame a generalised theory of organisation and management. His findings provided deep insights into supervision, general management systems and Likert classified supervisors into two categories: "job centered' and "employee centered". The primary concern of the first category of supervisors is to ensure performance of assigned tasks and maintenance of prescribed standards. On the other hand supervisors in the second category are primarily concerned with the human aspects of their subordinates and effective team-building for high task performance.

It is argued that high performing managers are humane to their subordinates, and low performing managers are compelled to get tough with their subordinates to achieve better results. To resolve this dilemma, Likert and his colleagues conducted a series of experiments in which high and low performing managers were changed into each other's jobs. While high performing managers succeeded in improving the performance of low production units, low performing managers placed in high production units brought down their output over a span of time.

Management Systems 1-4

The most important contribution of Likert is his conceptualisation of different systems of management along a continuum. He identifies four distinct points along the continuum for purpose of illustration of the characteristics of each of the management systems. He labels these points

1. Exploitative - Authoritative

2. Benevolent - Authoritative

3. Consultative

4. Participative

The four management systems are then arrayed along the two important dimensions, the type of authority or control an organisation exercises over its members is represented as one dimension. The second dimension relates to the motivational forced used to control the activity of the people.

The operating characteristics include leadership, motivation, communication, interaction influence, decision-making, goal-operating characteristics are juxtaposed over the four types of management systems.

Likert rigidly points out that authoritarian-exploitative management system displays a steep hierarchical structure, centralised decision-making, top-down communication, tight supervision, performance under pressure, and low degree of employee motivation. On the other hand, the participative management system displays flat structure, group decision processes, open and authentic three-way communication (up, down and lateral), adaptive supervision. individual and work groups with a high degree of achievement motivation. The other management systems 2 and 3 reveal intermediate combination on forms and processes.

The intermediate forms of management systems 2 and 3 will reveal transitory characteristics of progression from management system from 1 to 4 over a period. In system 2 management orientation is still authoritative, but becomes less exploitative and more benevolent towards the members of the organisation. In system 3, exercise of authority is more broad-based with delegation of powers to middle levels and consultation of effected interests at tower levels. To the extent motivation, communication and involvement of subordinates replace reliance on exercise of formal authority, consultative management systems will be well set to move forward to the management system 4.

Douglas McGregor proved that reliance on authority as the primary means of control leads to resistance, restriction of output and indifference to organisational objectives. His monumental classic "The Human side of the Enterprise" (1960) marked the watershed in the history of management movement. He questioned the various models describing man as rational, economic, and self-actualizing.

McGregor's assumptions, on the other hand, about human beings in the form of Theory X and Theory Y present contrasting nature of man.

Theory X revolves around the Traditional Theory of Human Behaviour. In his own words these assumptions are as follows:

* The average human being has an inherent dislike of work and will avoid if he can;

* Hence most people must be controlled, directed and coerced with punishment to get them to put forth adequate effort towards the achievement of organisational objectives;

* The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition, wants security above all.

Theory Y assumptions on the other hand, hold an optimistic view of human nature. According to this set of assumptions modern industrial life does not fully tap the potential of the average human being. They suggest managers should take advantage of the subordinates willingness and ability to work by providing a climate for their performance. The assumptions under Theory Y as pronounced by McGregor are as follows:

* The expenditure of physical and mental effort in work is as natural as play or rest;

* External control and the threat of punishment are not the only means for producing effort towards organisational objectives. People will exercise self direction and self- control in the service of objectives to which they are committed;

* The degree of commitment to objectives is in proportion to the size of the rewards associated with their achievement:

* Average human beings learn, under proper conditions, not only accept but also to check responsibility

* The capacity to exercise a relatively high degree of imagination, ingenuity and creativity in the solution of organisational problem is widely, not narrowly distributed in the population;

* Under the conditions of modern industrial life, the intellectual potentialities of human being are only partially utilised.

As can be easily seen, these two sets of assumptions are fundamentally different. Theory X is pessimistic, static and rigid. Control is external in that it is imposed on the subordinate by the superior. In contrast. Theory Y is optimistic, dynamic and flexible with an emphasis on self-direction. It also advocates the integration of individual needs with organisational demands.

Herbert A. Simon is an eminent American social scientist. Born in 1916, he was awarded the Nobel Prize in Economics in 1978, in recognition of his outstanding contribution in analysing the decision-making process. He goes to the extent of equating decision-making with management. He laid emphasis on how decisions are made and how they can be made more effectively.

In his writings on decision-making, he maintained that to be scientific, one must exclude value judgments and concentrate on facts, apply rigorous analysis and test factual statements. Simon viewed an organisation as a structure of decision-makers. The missing factor, according to him is correct decision-making. He argued that optimum rational choice between alternative courses of action is rarely made.

Simon divides the decision-making process into three phases, namely:

1. Intelligence activity: This involves finding occasions calling for decision. The manager analyses the environment and identifies conditions that need action;

2. Design activity: Identifying, developing and analysing all possible alternative courses of action are the important tasks in this stage.

3. Choice activity: Finally, the manager selects one of the alternative sources of action available to him.

According to Simon, every decision consists of a logical combination of facts and value propositions. He argues that complete rationality in decision-making is not always possible. He, in fact, disputes the concept of total rationality in administrative behaviour. Human behaviour is neither totally rational nor totally non-rational. It involves, to use his own word, "bounded rationality" and "satisfying" are the two important terms used by him to drive home the point further. "Satisfaction" involves the choice of a course of action which is satisfactory or at least good enough. Simon argues that managers do not aim at maximum satisfaction or result from a decision but are satisfied with reasonably good enough outcome or result. It is because of the limitations involved in identifying the alternatives, collecting all the facts and data, knowing the values of all the alternatives, etc.

Though some of Simon's views on decision-making are widely acclaimed, his critics point out that social, political, economic and cultural factors did not get due attention. His theory is criticised as being extremely general and does not provide the details to guide the managers in decision-making. Inspite of some imperfections, Simon's contribution is undoubtedly a major breakthrough in the decision-making behaviour of managers.

Peter F. Drucker is a highly respected management thinker. He is a prolific writer and has published several books and articles on the management practices. He is so versatile that there is hardly any area in management which is not touched by him. He has drawn heavily from his consultancy experience spread over the last four to five decades. Drucker perhaps is the only western management thinker who is admired by

even the socialist block countries also. His views on management may be summarised as follows:

i. Management as a practice:

According to Drucker management has two important functions: Innovation and Marketing. He has treated management as a discipline as well as a profession. For him, management is more a practice. It is always goal oriented. His comment on the purpose of business as the creation of customer, if understood and in the right way helps any organisation to achieve success.

Drucker's view on innovation are equally important for the emphasis they place on new product development. He argues that "new products should drive out the existing products" rather than the other way round. As such, he is against bureaucratic management for it stifles the innovative spirit and the initiative among the people in the organisation. He contends that modern organisations are knowledge based organisation and describes the modern workers as 'knowledge workers' considering their skills, and innovative abilities.

ii. Functions of management:

Drucker points out three basic functions of management. The actions of management should contribute to

* the achievement of purpose and mission of the institution;

* make the work productive and the worker achieving; and

* effective management of social responsibilities.

iii. Objective setting:

Drucker has attached great importance to objective setting. He has specified that objectives should be set for all the result areas of business. To make the objective setting and their achievement more meaningful, he has given a new tool, what is popularly known as 'Management by Objectives' (MBO). MBO is regarded as one of his most important contributions to the discipline of management. He has discussed the concept in great detail in his book, 'The Practice of Management' (1954). MBO is a process whereby superiors and subordinates jointly identify the common objective, set the results that should be achieved by subordinates and assess the contribution of each individual. It is viewed more as a philosophy than as a tool or technique to achieve the objectives.

iv. Orientation towards future:

Drucker is a great visionary and futurologist. He was ahead of others in visualising the future trends that affect the society. He visualised the concept of modern organisation

and its impact on the society several years ago. His views on the many facets of the modern corporations have almost all become reality now. To put it in his own words, he described the present age as the "age of discontinuity".

v. Federalism:

Drucker has advocated the concept of federalism. Federalism according to him, involves centralised control in a decentralised structure. Federalism has certain positive values over other methods of organising. These are as follows:

* It sets the top management free to devote itself to major policy formulation and strategy development;

* It defines the functions and responsibilities of the operating people;

* It creates yardsticks to measure twin success and effectiveness in operating jobs; and

* It helps to resolve the problem of continuity through giving education to the managers of various units while in an operating position.

Drucker's realistic way of looking at the organisations and society has earned him the status of a management guru. His contributions have made tremendous impact on the management practices all over the world. He is one of the few contemporary management thinkers, who is highly admired in Japan. Similarly, the contributions of Peter's and Waterman who extensively studied a few American companies known for their excellence in modern management practices is no less significant. McKingsly consultancy firm's contribution of the 7S model for the management of the firm and Edward Deming's preachings on Quality Control created tremendous impact on modern management all over the world in the recent past. Michael Porter's work on competitive strategy turned a new leaf in the strategic, management area. His books on competitive strategy suggest the ways: and means that help organisations and nations to gain competitive edge.

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SUMMARY

Though management has been in practice in some form or other since time immemorial, the development of a systematic body of knowledge dates back to the last few decades. Industrial revolution has immensely contributed for the development of management thought. Over the years, it has drawn heavily from various disciplines like economics, psychology, sociology, operations research and so on. The contributions of prominent thinkers who have created an everlasting impact on management have been discussed in this lesson in detail. An attempt is made to expose the learner to the historical development of management over the years.

REVIEW QUESTIONS

1. "Management is oldest of the Arts and youngest of the Sciences". Discuss.

2. Analyse the contributions of F. W. Taylor and Henry Fayol to the Modern Management Thought and discuss how the two differ in their approaches.

3. Examine the significance of 'Hawthorne studies' to the development of managerial thinking.

4. Assess the contributions of Chester Barnard and Herbert Simon to the management thought.

5. "Among the contemporary management thinkers, Peter F.Drucker, perhaps, outshines all". Elucidate,

SELF-ASSESSMENT TEST

Indicate whether the following statements are True or False.

1. Scientific management is concerned with the application on mathematics to the practice of management. ( )

2. Henry Fayol is known as the father of modern management theory. ( )

3. Scientific management lays emphasis on the top management functions. ( )

4. Hawthorne experiments proved that productivity of the workers depends on the physical conditions at the work place only. ( )

5. Elton Mayo completely ruled out the possibility of the existence of informal groups at the work place. ( )

6. Herbert Simon is widely known for his thesis that absolute rationality is not always possible in the decision making. ( )

7. Theory X is optimistic of the human behaviour while Theory Y is pessimistic. ( )

8. Hawthorne is the management thinker who conducted 'Hawthorne experiments'. ( )

9. Unity of command suggests the exercise of multiple commands. ( )

10. Rensis Likert's system-4 management is highly authoritative. ( )

FURTHER READINGS

Barnard, Chester, I. 1938. The functions of the Executive, Harvard University Press, Cambridge.

Drucker, Peter F. 1954, The Practice of Management, Harper & Row, New York.

Koontz Harold, O'Donnell Cyril, 1984, Management, McGraw Hill, New York.

Likert Rensis, 1961, New Patterns of Management, McGraw Hill, New York.

McGregor, Douglas 1960, The Human Side of Enterprise, McGraw Hill, New York.

Terry, George R and Franklin, Stephen G. 1988, Principles of Management, All India Traveller Bookseller, Delhi.

- End of Chapter -

LESSON-3

PLANNING

Objectives

After studying this lesson, you should be able to:

x Understand the nature and purpose of planning; x Acquaint with the important principles of planning; and x Describe the basic steps in planning.

Outline

Introduction

Purpose of planning

x To achieve objectives x To make the things happen x To cope with change x To control the events

Principles of planning

x Take time to plan x Planning can be top down and bottom up x Involve and communicate to all those concerned x Plans must be flexible and dynamic x Evaluate and revise

Steps in planning

x Establish goals x Establish planning premises x Decide the planning period x Develop a course of action x Develop derivative plans

x Review periodically

Summary

Review Questions

Case Illustration: Bajaj Auto - Corporate Mission and Objectives

Further Readings

INTRODUCTION

Most of us plan many things in our day to day lives. We plan to go on a holiday trip, plan our careers, plan our investments and so on. Organisations are no exception and lot of planning is done by managers at all levels. Thus individuals and organisations both need to plan. Planning is the basic process by which we use to select our goals and determine the means to achieve them. Lot of information has to be gathered and processed before a plan is formulated. In other words, a plan is like a jigsaw puzzle. All the pieces have to be put together property, so that they make sense.

Planning is necessarily forward looking. It is looking into the future. It bridges the gap between where we are and where we want to go. Let us look at what the following observations suggest about planning:

x "Planning is outlining a future course of action in order to achieve an objective" x "Planning is looking ahead" x "Planning is getting ready to do something tomorrow" x "Plan is a trap laid down to capture the future"

PURPOSE OF PLANNING

Needless to say, in the absence of planning, events are left to chance. As a manager, in such a case, you are depending on luck. You may, as a result, in all probability, end up in chaos. Organisations often fail not because of lack of resources, but because of poor planning. The following factors further highlight the importance of planning:

i. To achieve objectives

While developing a plan, you have to ask yourself a few-questions:

- Why am I making this plan?

- What am I trying to accomplish?

- What resources do I need to execute the plan?

These questions, obviously, force you to be clear about the objectives, the time frame required to achieve them and the resources required. It forces you to visualise the future in an organised manner.

The saying that "when a man doesn't know what harbour he is making for, no wind is the right wind" is quite appropriate in the case of planning. Systematic planning, thus, starts with a clear statement of objectives. All the important inputs necessary to achieve the objectives are carefully thought of including the uncertainties of the future.

ii. To make the things happen

Effective manager is rather proactive. He takes the initiative to make things happen in the desired way. In any modern business, the interests of many people are at stake. The shareholders, employees, creditors, consumers and the government are the major interest groups in city organisation. Further, the interests and expectations of all these groups are varied and at times are in conflict. If the management fails to achieve, the interests of these groups are affected and the whole exercise results in heartburns. As a result, you will be forced to indulge in fire-fighting activity.

Therefore, your job, as a manager, is to foresee the future and predict the consequences of actions. In other words, you have to look down the road into future and prepare yourself to meet the uncertainties and the eventualities ahead. A well thought out plan solves many of the problems associated with the uncertain future.

iii. To cope with change Both human beings and organisations are products of environment. The ability to deal with the environment has enabled many an organisation to survive, despite other weaknesses. Alert managements continually tune in to the environmental forces. On the other hand, managements which fail to adapt would eventually fall on the way side. Therefore, in the managerial job, you have to constantly analyse the impending changes in the environment and assess their impact on your business.

For instance, business environment in 1990s is totally different from that of 1970s and 1980s. The liberalisation policies pursued by the government have, of late, brought in too many changes. Markets are shifting due to increased competition, pressure on the resources is increasing, expectations of the employees as well as the consumers are changing, and product life-cycles are becoming shorter due to rapid technological changes. All these changes exert a tremendous pressure on the management.

Certain changes will throw open new opportunities while certain others affect the very survival. If you are not prepared, you will definitely be in trouble. Since environmental scanning is an important element in planning, plans are normally formulated on the basis of a thorough analysis of the environment. Necessary flexibility is built in the plans to meet the unexpected changes. Effective planning thus shows the preparedness of the organisation to manage the change. It helps the organisation to keep itself afloat even in the worst circumstances.

iv. To control the events

Planning and control are often described as the Siamese twins of management. When you plan the events, you expect them to happen in a particular way. Therefore, it goes without saying that you need some mechanisms to know whether the events are happening in the way expected. Planning is important in that it provides the necessary yardsticks to measure the performance. It ensures the events to conform to plans. Thus, if you do not plan (no clear objectives), you do not know you are reaching the goal or not you do not know what to control. Control assumes significance in a dynamic environment as of today, where several forces push you away from the desired path. Appropriate control devices help you to check the course from time to time so that you will be able to keep yourself onto the track.

PRINCIPLES OF PLANNING

Effectiveness in planning depends on the understanding of the following principles. They are relevant to planning the activities of any organisation whether business or non-business. A thorough understanding of the principles underlying the planning, therefore, would enable you to guard yourself against the possible mistakes that are often committed by many managers.

1. Take time to plan

Any plan is a decision regarding a future course of action. It specifies the sequence of events to be performed. It involves the commitment of organisational resources in a particular way. Therefore, if the plan is not conceived well, the resources would be put to wrong use. It becomes a wasteful exercise resulting in frustration. Hence utmost care has to be exercised in formulating the plans. Several probing questions have to be asked. Planning in haste with incorrect information, unsound assumptions and inadequate analysis of the environment has to be avoided by all means. Otherwise, you may save some time in quickly developing a plan, but in the event of things going wrong, you are hard pressed for time and resources to correct yourself.

2. Planning can be top-down and bottom-up

Normally in any organisation overall enterprise plans are developed by the top management. These plans are wider in scope and provide the direction to the whole organisation. They spell out what the organisation wants to achieve. The overall plan thus formulated by the top management is split into departmental plans. Accordingly, plans for production marketing, finance, personnel and so on, stem from the basic plan of the organisation. The other operational plans at various levels down the organisation flow from the departmental plans. This approach is called top-down approach to planning.

On the other hand, proponents of bottom up approach argue that top management needs information from lower level, that is, about the realities at the ground level in terms of strengths and weaknesses. In this approach, the initiative for planning comes

from the lower levels in the organisation. This approach makes use of the rich experience of the subordinates who are close to the action. It also helps to motivate the people and elicit commitment from them. The choice of the method depends on the size of the organisation, the organisational culture, the preferred leadership style of the executive and the urgency of the plan.

3. Involve and communicate with all those concerned

Operations in modern business organisations are highly interrelated. Organisational plans affect many departments in the enterprise. For instance, a plan to improve the quality of the products (quality control plan) may require the cooperation of the people in the production, finance, marketing departments and so on. It is, therefore, desirable to involve the concerned people in these departments. Such participation helps in instilling a sense of commitment among the people. They also in turn gain a sense of pride for having been a party in deciding the plan. Such an involvement makes possible the process of sharing information. If plans are not communicated to all those affected by them, there may be unnecessary gaps in the execution.

4. Plans must be flexible and dynamic

You would be very happy as a manager if there are no unexpected changes in the environment. Day in and day out, you are confronted with too many problems. Most of such problems are caused by unexpected events in the environment. A plan is rigid if there is less scope for a change in its course. In a static environment, of course, there may not be a problem with a rigid plan. But in a dynamic environment, to meet the unexpected changes, adequate flexibility has to be built into a plan. Otherwise, the plan itself becomes a limiting factor.

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5. Evaluate and revise

Evaluation of the plan at regular intervals is necessary to make sure that it is contributing to the objectives. Like a navigator, who in the high seas checks the course to make sure that he is sailing in the right direction, the manager has to, from time to time, look back and evaluate the plan. Such an exercise enables to initiate the corrective measure at the right time before it is too late. This depends on the accuracy of the

information systems in the organisation through which information reaches the management.

STEPS IN PLANNING

The process of planning may be understood as having the following steps:

a. Establish goals

Planning begins with decisions about what the organisation wants to achieve over a period of time. The goals of an organisation and its various subunits have to be decided and spelt out in clear terms. it is always desirable to express the goals in quantitative terms for all the key areas of the business like production, profit, productivity, market share, employee relations, social responsibilities, etc. For instance, instead of saying that the objective of business is to achieve a fair rate of return or the investment, it may be given quantitative expression, say, 10 or 15 percent return on the investment. Specific goals enable the organisations to use the resources effectively.

Since goal setting is the essential first step in planning, managers who fail to set meaningful goals will be unable to make effective plans. If Bajaj Auto is able to retain its prominence in the two wheeler industry (scooter segment), it is because all the employees of the organisation know cleanly that the primary objective is retaining the leadership in the industry.

An awareness of the opportunities and their evaluation in the light of the organisational strengths and weaknesses is essential to set the goals in a realistic way. The mission of the organisation, the corporate values, experience, policies of other enterprises, observation and data secured from research and experiences provide adequate guidance to the managers in goal setting.

b. Establish planning premises

Since plans operate in the future, it is imperative to make certain assumptions about the future. This act is called premising. Planning assumptions or premises provide the basic framework in which plans operate. Appropriate assumptions have to be made on various aspects of the environment - both internal and external to the organisation.

i. Internal premises: Important internal premises include sales forecasts, policies of the organisation, skills, attitudes and beliefs of the people, the resources of the organisation.

ii. External premises: Important external premises relate to all those factors in the environment outside the organisation. They include technological changes, general economic conditions, government policies and attitude towards business, demographic trends, socio-cultural changes in the society, political stability, production costs and their behaviour, degree of competition in the market, availability of various resources and so on.

It is evident that some of these premises are tangible while others are intangible. For example, resources, availability, etc. are tangible factors which can be stated in quantitative terms. On the other hand factors like political stability, attitudes of the people, certain of the sociological factors are intangible in that they cannot be measured quantitatively.

Effective premising - the making of appropriate assumptions helps the organisation to identify the favourable and unfavourable elements in the environment. Though accurate premising is difficult, anticipating future situations, problems and opportunities to the extent possible is an essential part of planning.

c. Decide the planning period

How far in the future should a plan be made is another pertinent question in the process of planning. Businesses vary in their planning periods. In some cases plans are made for a short period, varying from a few months to a year, while in some other cases, they are made to cover a longer period, to cover a period of more than a year. The period may extend upto 5-10 years and even beyond. Companies normally plan for a period that can be reasonably anticipated. The lead time involved in the development and commercialisation of a product and time required to recover the capital investment (payback period) influence the choice of the length of the plan.

d. Develop alternatives and select the course of action

The next logical step in planning involves the development of various alternative courses of action, evaluating these alternatives and choosing the most suitable alternatives. Objectives may be achieved by different courses of action (alternatives). For example, technical knowhow may be developed by in-house research, collaboration with a foreign, company or by tying up with a r