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WHERE DID MANAGEMENT THEORIES ORIGINATE? Mass production and the Industrial Revolution brought about new requirements for managing people and processes. As companies began to grow and production, business owners increasingly needed managers to run their daily operations. Prior to the Industrial Revolution, only a few organizations and militaries required theories for management. As a result of expanding industry, the practice of management became a major theoretical consideration in the study of business. HOW ARE MANAGEMENT THEORIES CLASSIFIED? Certain management theories have become integral to modern business practices. There are three major classifications for management theories: Classical Management Theory, Behavioral Management Theory and Modern Management Theory. These classifications represent a different era in the evolution for management theories. Each of these classifications further contain multiple sub-theories. Classical Management Theory centers around execution and maximizing production. Behavioral Management Theory focuses increasingly on human elements and viewing the workplace as a social environment. Modern 12 Principles of Management and Organization Management Theory builds on the previous two theories, while incorporating modern scientific methods and systems thinking. Classical Management Theory is the oldest management theory. Classical Management Theory focuses on operations and the creation of standards to increase production output. In Classical Management Theory, compensation is considered the primary motivation for employees. A manager practicing Classical Management Theory would be focused on improving output and rewarding high-performing employees through wages or bonuses. There are three primary theories that comprise the Classical Management Theory: a. Scientific Management Theory is a very early management theory focused on minimizing waste and reducing production times. It was developed by Frederick Taylor, who attempted using a scientific approach for improving operations. Taylor‘s theory emphasizes incentivizing employee performance and reducing ―hit and trial‖ practices. American mechanical engineer Frederick Taylor, who was one of the earliest management theorists, pioneered the scientific management theory. He and his associates were among the first individuals to study work performance scientifically. Taylor‘s philosophy emphasized the fact that forcing people to work hard was not the best way to optimize results. Instead, Taylor recommended simplifying tasks to increase productivity. According to Taylor, money was the key incentive for working, which is why he developed the ―fair day‘s wages for a fair day‘s work‖ concept. Since then, the scientific management theory has been practiced worldwide. The resulting collaboration between employees and employers evolved into the teamwork that people now enjoy. b. Administrative Management Theory- Administrative Management Theory was developed by Henri Fayol, who is a founder of management theory. This theory considers all the many activities that a business must conduct. Management is considered a primary business activity and this theory provides detailed guidelines for managers. It attempts to find a rational way to design an organization. The theory generally calls for a formalized administrative structure, a clear division of labor, and delegation of power and authority to administrators relevant to their areas of responsibilities. c. Bureaucracy Theory- Bureaucracy Theory promotes reason to guide management decisions, rather than charisma or nepotism. Developed by sociologist Max Weber, this theory emphasizes formal authority systems. Unity and the authority of organizational hierarchies are central to Bureaucracy Theory. It is the basis for the systematic formation of any organization and is designed to ensure efficiency and economic effectiveness. It is an ideal model for management and its administration to bring an organization‘s power structure into focus. Behavioral Management Theory Increasingly complex industries and organizations gave rise to more human interests in the workplace. Management theories began to include more people-oriented methods. Human behavior and satisfying the interpersonal needs of employees became more central to management. A manager practicing Behavioral Management Theory might motivate teamwork through fostering a collaborative atmospher There are two major theories that make up Behavioral Management Theory: 13 Principles of Management and Organization a. Human Relations Theory- Human Relations Theory considers the organization as a social entity. This theory recognizes that money alone is not enough to satisfy employees. Morale is integral to employee performance. The major weakness of this theory is that it makes several assumptions about behavior. b. Behavioral Science Theory- Behavioral Science Theory combines elements of psychology, sociology, and anthropology to provide a scientific basis. It examines why employees are motivated by specific factors, such as social needs, conflicts, and selfactualization. This theory recognizes individuality and the need for managers to be sociable. Modern Management Theory Modern organizations must navigate constant change and exponential complexities. Technology is an element that can change and upend businesses very rapidly. Modern Management Theory seeks to incorporate these elements with human and traditional theories. A manager practicing Modern Management Theory might use statistics to measure performance and encourage cross-functional cooperation. Three major modern theories comprise Modern Management Theory: a. Quantitative Theory- Quantitative Theory arose out of the need for managerial efficiency during World War II. It was developed using experts from multiple scientific disciplines to solve the issues around integrating systems of people, materials, and systems. This theory was developed primarily to enhance and support military decision-making. b. Systems Theory- Systems Theory views management as an interrelated component of the organization. Instead of viewing the organization as a series of silos, each department is part of an overall system or organism. Management must support goals and process flows that serve the overall organizational health. c. Contingency Theory- Contingency Theory was developed by sociologist Joan Woodward after she examined why some companies performed better than others. She found that high performing organizations make better use of technology and their managers made better decisions in situational contexts. This theory recognizes that effective managers must be adaptable to unique situations and circumstances. MANAGEMENT PRACTICES: Management practices are the working methods and innovations that managers use to make the organization more efficient. It sounds good, right? Well, I‘m happy to tell you that it‘s backed by research. It has no surprise then that every company wants to improve their management practices, but the question is how? Economic incentives for everyone. Managers should not be the only ones with extra pay. Do not underestimate how much financial incentives can motivate the rest of the workers, just make sure they deserve it. Give regular, meaningful feedback. Employees always respond better to a manager that takes its time to provide useful feedback, even if it is negative. It shows that they care about their work. 14 Principles of Management and Organization Employees are also individuals, show them respect. To put it simply, do not treat your employees like rubbish. An employee that feels respected will do its best to correspond that respect. Managers must train. Learning does not stop with a degree. Make sure you keep training your managers, new problems require new skills. Support your employees. Let your employees know you are there for them when they need it. I assure you they will remember it. Acknowledge the employee‟s emotions. You must understand that workers have feelings and how to deal with them, they are people, not machines. Leadership by example. Practice what you preach. Managers who act in ways that the employees do not respect, like hypocrisy, will find its employees unmotivated. Keep up with new technologies. You need to stay informed regarding the new technologies available to your organization if you want to stay competitive. Upgrade or die, simple as that. IMPORTANCE OF MANAGEMENT THEORY Why Study Management Theories? 1. Increasing Productivity One of the reasons why managers should be interested in learning management theories is because it helps in maximizing their productivity. Ideally, the theories teach leaders how to make the most of the human assets at their disposal. So, rather than purchase new equipment or invest in a new marketing strategy, business owners need to invest in their employees through training. It can be seen in Taylor‘s scientific management theory. As mentioned earlier, Taylor proposed that the best way to boost workers‘ productivity was by first observing their work processes and then creating the best policies. 2. Simplifying Decision Making Another area where management theories have proven to be useful is in the decision-making process. Max Weber proposed that hierarchical systems encourage informed decision-making. A report written by the Institute for Employment Studies suggests that flattening the hierarchy paves the way for local innovation while speeding up the decision-making process. Flattening out entails getting rid of job titles and senior positions to inspire a cohesive work environment. 3. Encouraging Staff Participation- Management theories developed in the 1900s, aimed at encouraging interpersonal relationships in the workplace. One such theory that encouraged a collaborative environment is the human relations approach. According to this theory, business owners needed to give their employees more power in making decisions. Concepts at the Workplace – Theoretical concepts in the workplace determine the company culture of an office or place of business. Concepts should be conscious decisions by company management and executives and should be clearly communicated to employees so there is no confusion. Theoretical concepts in the workplace range from how employees work, dress, or act, as well as any other concept that affects the working environment in a workplace. 15 Principles of Management and Organization Behavior – One workplace concept relates to the behavior of employees in the workplace. Some aspects of this concept are determined by the law, such as sexual harassment policies and other types of behavior that violate the law. Other aspects are determined by the company. For example, some companies are conservative when it comes to socializing with other employees, while other companies encourage frequent social interaction as the executives believe that when you work with friends in a comfortable environment, you are more productive Work Style – A company's work style is also a workplace concept. For example, one style might be to assign individual tasks to people, who work on those tasks alone for the most part. Another might be to group employees into small teams and give those teams projects to collectively work together. Dress and Appearance – The overall appearance of employees is another concept executive should discuss. For example, some companies require employees to dress up for work, while others allow shorts and flip flops. Business casual is a common style of dress for many companies, which is slightly dressed up but still comfortable. The appearance of a company's employees should reflect the overall company culture and be appropriate for the industry; financial and legal institutions typically have more formal dress codes than small software companies. Workplace Atmosphere – The appearance of the workplace is also a workplace concept to determine. For example, some offices are divided into cubicles, while other companies prefer large, open spaces to form more of a community feel. Also, some executives bring in games or recreational areas for employees to unwind and take breaks from work, and make the workplace fun, while others see those elements as distractions. Communication – it is an important part of any workplace. Executives should decide how employees will communicate with each other in the workplace. Technology has created a number of ways to communicate by email, phone calls, instant messaging and online forums. These methods often replace the most traditional form of communication -- face to face conversation -- for many companies. MOTIVATION MANAGEMENT THEORIES 1. Maslow‟s Hierarchy of Needs According to Smith & Cronje (1992), the way Maslow‘s theory is explained relies on the fact that people want to increase what they want to achieve in life and their needs are prioritized according to their importance. Deriving from the hierarchy of needs by Maslow, content theories of job satisfaction revolve around employees‘ needs and the factors that bring them a reasonable degree of satisfaction (Saif et al., 2012). Based on the basic physical, biological, social, and psychological needs of human beings, Maslow came up with a five-stage theory that places the needs of the individual in different categories and prioritizes their attainment. These categories, in order of decreasing priority, are: • physiological needs (food, shelter, clothing); • safety and security needs (physical protection); • social needs (association with others); • esteem needs (receiving acknowledgement from others); and • self-actualization needs (the desire for accomplishment or to leave behind a legacy). 16 Principles of Management and Organization Maslow‘s hierarchy of needs forms the basis of theories that try to explain job satisfaction. Teachers, like all people, have needs that have to be satisfied. Besides the basic needs for food, shelter and clothing, safety from physical, harm, and social interaction, they also need the recognition and appreciation of students, colleagues, and parents. 2. Herzberg‟s Two-Factor Theory/Motivator-Hygiene This theory, also known as MotivatorHygiene, emanated from a study conducted among accounts and engineers to determine what makes an individual feel good or bad about their job (Saif et al., 2012). Regarding ‗satisfiers‘, Herzberg noted that there were five features of work that bring about satisfaction, namely achievement, recognition, the job itself, responsibility and advancement. Golshan, Kaswuri, Agashahi and Ismail (2011:12) assert that organizations are increasingly applying Herzberg‘s theory to create opportunities for ―personal growth, enrichment and recognition‖ among their employees. Employees should be promoted after completing certain stages of their career and should receive recognition for special achievements – for example, when they produce exceptional results in their subject areas; on a more basic level, they should also be given responsibility to determine how to handle tasks that relate to their jobs. 2. McGregor‟s X and Y Theories, do you believe that every individual gets maximum satisfaction from the work they do? Or are you of the opinion that some view work as a burden and only do it for the money? Such assumptions influence how an organization is run. The assumptions also form the basis of Theory X and Theory Y. Douglas McGregor is the theorist credited with developing these two contrasting concepts. More specifically, these theories refer to two management styles: the authoritarian (Theory X) and participative (Theory Y). In an organization where team members show little passion for their work, leaders are likely to employ the authoritarian style of management. But if employees demonstrate a willingness to learn and are enthusiastic about what they do, their leader is likely to use participative management. The management style that a manager adopts will influence just how well he can keep his team members motivated. Theory X holds a pessimistic view of employees in the sense that they cannot work in the absence of incentives. Theory Y, on the other hand, holds an optimistic opinion of employees. The latter theory proposes that employees and managers can achieve a collaborative and trust-based relationship. Still, there are a couple of instances where Theory X can be applied. For instance, large corporations that hire thousands of employees for routine work may find adopting this form of management ideal. 3. McClelland‟s Need Achievement Theory McClelland‘s need achievement theory postulates that some people are driven to success through seeking ―personal achievement rather than rewards themselves‖ (Saif et al., 2012, p.1387). This theory is readily applicable to academic environments and explains why some teachers are high achievers, despite the difficulties they face: they set themselves high goals and achieving these goals is what drives them. Alderfer‘s ERG theory is related to Maslow‘s hierarchy of needs but reduces Maslow‘s five categories of a need to three; namely, relatedness being (esteem/social needs), then growth being (self-actualization) and existence which is (security/physiological needs). 4. The Equity Theory Adams' Equity Theory is named for John Stacey Adams, a workplace and behavioral psychologist, who developed his job motivation theory in 1963. Much like many of the more prevalent theories of motivation (such as Maslow's Hierarchy of Needs and Herzberg's Two-Factor Theory), Adams' Equity Theory 17 Principles of Management and Organization acknowledges that subtle and variable factors affect an employee's assessment and perception of their relationship with their work and their employer. The theory is built on the belief that employees become de-motivated, both in relation to their job and their employer, if they feel as though their inputs are greater than the outputs. 5. Value – Percept Theory Individual‘s values determine their satisfaction on their job because employees in organizations hold different value systems, therefore based on this theory, their satisfaction levels will also differ. Having a look at Value – Percept theory, discusses that job satisfaction depends on whether you grasp that your job supplies the values that you value the most. 6. Vroom‟s Expectancy Theory Assumes that behavior results from conscious choices among alternatives whose purpose it is to maximize pleasure and to minimize pain. Vroom realized that an employee's performance is based on individual factors such as personality, skills, knowledge, experience, and abilities. 7. Porter-Lawler Model the Porter and Lawler theory of motivation assumes that rewards cause satisfaction and that sometimes performance produces reward. They hypothesize that the relationship between satisfaction and performance is linked by another variable rewards. They see good- performance leading to reward which lead to satisfaction. It is a multi-variable model and explains the complex of relationship among motivation, performance, and satisfaction. They argue that satisfaction does not always lead to performance. Rather is reverse is true because people can become complacent after having achieved satisfaction once. On the other hand, performance can lead to satisfaction if the reward systems are effective FUNCTIONS, ROLES AND SKILLS OF A MANAGER FUNCTIONS OF A MANAGER Managers just don't go out and haphazardly perform their responsibilities. Good managers discover how to master five basic functions: planning, organizing, staffing, leading, and controlling. - Planning: This step involves mapping out exactly how to achieve a particular goal. Say, for example, that the organization's goal is to improve company sales. The manager first needs to decide which steps are necessary to accomplish that goal. These steps may include increasing advertising, inventory, and sales staff. These necessary steps are developed into a plan. When the plan is in place, the manager can follow it to accomplish the goal of improving company sales. - Organizing: After a plan is in place, a manager needs to organize her team and materials according to her plan. Assigning work and granting authority are two important elements of organizing. - Staffing: After a manager discerns his area's needs, he may decide to beef up his staffing by recruiting, selecting, training, and developing employees. A manager in a large organization often works with the company's human resources department to accomplish this goal. 18 Principles of Management and Organization - Leading: A manager needs to do more than just plan, organize, and staff her team to achieve a goal. She must also lead. Leading involves motivating, communicating, guiding, and encouraging. It requires the manager to coach, assist, and problem solve with employees. - Controlling: After the other elements are in place, a manager's job is not finished. He needs to continuously check results against goals and take any corrective actions necessary to make sure that his area's plans remain on track. All managers at all levels of every organization perform these functions, but the amount of time a manager spends on each one depends on both the level of management and the specific organization. SKILLS OF A MANAGER Good communication – Having good Communication skills is probably the most important skill of all for managers to have. Unless you can properly communicate with those you supervise, the rest of the skills really will not matter. In numerous types of management tasks, the most common and first thing that needs to be done is to communicate your opinions, expectations and needs to others. You should not be a Manager if you do not enjoy working with people. You also need to be able to send others the right messages and make sure that they understand you. The type of power that you use for persuading others on your views is also very important. Good Organization – Probably the second most important skill that you can have as a Manager is the ability to organize. You need to be able to come up with a plan and then schedule, organize, and follow it. This also involves understanding your company's processes and rules as well as among individuals. You must be able to predict what will happen and at what time. Team Building – Good Managers know how to keep their teams intact. The well-being of team members does not benefit from having competition within the team. However, competition between teams can be very stimulating and healthy. If one of the team members speeds ahead and leaves the rest of the members behind without helping them, the team will most likely fail. A good Manager will notice these irregularities very easily. He or she will attempt to correct the situation through having discussions with the team, mostly through listening to members. To a great extent, a successful and healthy team relies on the trust between members and with the Manager. If a Manager can build trust systematically, the team members will feel much more committed and appreciated. Leadership – It is not enough to just listen to the problems of coworkers. A good Manager needs to solve these problems and prove that he or she is committed to the goals of the team. It is also the Manager's responsibility to define goals along with team members and then assign responsibility to various team members clearly. A good Manager will have a clear vision in terms of the direction he or she wants the team to be headed in. Team members need to be 'infected' with this vision so that everyone is headed in the same direction. Ability to Deal with Changes Effectively – Many Managers are thoroughly familiar with the entire working process. This allows them to do things in an almost automatic manner. A good Manager is adaptable and flexible. When faced with obstacles, he or 19 Principles of Management and Organization she can react quickly. Stress does not prevent the Manager from making the right decisions for the team and company. Domain Knowledge – Good Managers have a thorough understanding of the process he or she is managing, including the type of tasks that team members are performing and how they are working. This skill is not quite as important as the other ones are. However, in some cases, not having it will mean that the Manager and the team do not ever work at maximum capacity or use all their potentials due to a lack of understanding of one another. ROLES PERFORMED BY MANAGERS A manager wears many hats. Not only is a manager a team leader, but he or she is also a planner, organizer, cheerleader, coach, problem solver, and decision maker — all rolled into one. And these are just a few of a manager's roles. In addition, managers' schedules are usually jam‐packed. Whether they're busy with employee meetings, unexpected problems, or strategy sessions, managers often find little spare time on their calendars. (And that doesn't even include responding to e‐mail!) In his classic book, The Nature of Managerial Work, Henry Mintzberg describes a set of ten roles that a manager fills. These roles fall into three categories: a. Interpersonal: This role involves human interaction. b. Informational: This role involves the sharing and analyzing of information. c. Decisional: This role involves decision making Not everyone can be a manager. Certain skills, or abilities to translate knowledge into action that results in desired performance, are required to help other employees become more productive. These skills fall under the following categories: a. Technical: This skill requires the ability to use a special proficiency or expertise to perform particular tasks. Accountants, engineers, market researchers, and computer scientists, as examples, possess technical skills. Managers acquire these skills initially through formal education and then further develop them through training and job experience. Technical skills are most important at lower levels of management. b. Human: This skill demonstrates the ability to work well in cooperation with others. Human skills emerge in the workplace as a spirit of trust, enthusiasm, and genuine involvement in interpersonal relationships. A manager with good human skills has a high degree of self‐ awareness and a capacity to understand or empathize with the feelings of others. Some managers are naturally born with great human skills, while others improve their skills through classes or experience. No matter how human skills are acquired, they're critical for all managers because of the highly interpersonal nature of managerial work. c. Conceptual: This skill calls for the ability to think analytically. Analytical skills enable managers to break down problems into smaller parts, to see the relations among the parts, and to recognize the implications of any one problem for others. As managers assume ever‐ higher responsibilities in organizations, they must deal with more ambiguous problems that have long‐term consequences. Again, managers may acquire these skills initially through formal education and then further develop them by training and job experience. The higher the management level, the more important conceptual skills become.
THE FIRM AND ITS ENVIRONMENT Firm is a commercial enterprise, a company that buys and sells products and/or services to consumers with the aim of making a profit. A business entity such as a corporation, limited liability company, public limited company, sole proprietorship, or partnership that has products or services for sale is a firm 23 Principles of Management and Organization Business Firm consists of a set of internal factors and is confronted with a set of external factors (ie. Environment). This is the relation between a firm and its environment. The internal factors are regarded as controllable factors, as the firm has got control over these factors. Environment refers to the factors or elements affecting business organization. It divided into the External and Internal Business. The business environment may be classified into two types: a. EXTERNAL BUSINESS ENVIRONMENT - refers to the forces/factors outside the organization which my affect, either positively or negatively, the performance of the organization. GENERAL EXTERNAL BUSINESS ENVIRONMENT includes: • Economic • Socio-cultural • Politico-legal • Demographic • Technological • World and ecological situations SPECIFIC EXTERNAL BUSINESS ENVIRONMENT includes:  Stakeholders  Customers  Pressure groups  Investors  Employees b. INTERNAL BUSINESS ENVIRONMENT - refers to the forces/factors within the organization which my affect, either positively or negatively, the performance of the organization. INTERNAL BUSINESS ENVIRONMENT includes: • The organizations‘ resources • Research and development • Production • Procurement of supplies • Products and services offered ENVIRONMENTAL FORCES It is defined as external and internal factors which affect the future success of the organization business or company. These forces constantly change and may arrive unexpectedly. This environmental forces requires a regular monitoring to cope up with these factors to help in decision making. There are two Aspects of Environmental Forces: 1. CONTROLLABLE- this aspect of the environmental forces are normally the factors that happens internally or inside the organization. That‘s why these factors are the things that can also be controlled by the organization. These factors can be assess using the SWOT analysis developed by Jerome McCartney. 24 Principles of Management and Organization 2. UNCONTROLLABLE- while in the uncontrollable aspect of the environmental forces are normally the factors that happens outside the organization or externally. Since these forces happens outside the environment of the organization, these can‘t be controlled by the organization itself but it is possible for them to adapt and adjust to these factors that might affect the organization. Analyses Used to Assess and Evaluate the Environmental Forces in the organization. There are two common analyses being used by the organization for them to evaluate what are the controllable and uncontrollable aspects that each organizations will encounter and help the organization to cope up and overcome those environmental forces, the SWOT ANALYSIS and PESTEL ANALYSIS. What is SWOT Analysis This is a framework used to evaluate an organization‘s competitive position and to develop strategic planning developed by Jerome McCarthy. SWOT analysis assesses internal and external factors, as well as current and future potential. This is also the close study of the internal and external environment of an organization that will reveal some very valuable information such as the organization‘s strengths, weaknesses, opportunities and threats.  Strength- this refers to the internal factor and positive attributes of the business and organization.  Weakness- refers to internal factor and are negative factors that detract from your strengths. These are things that you might need to improve on to be competitive. They are areas where the organization needs to improve to remain competitive.  Opportunities- this refers to the favorable factors that could give an organization a competitive advantage.  Threat- this refers to the factors that have the potential to harm an organization. What is PESTEL Analysis This is a framework or tool used to analyze and monitor the external environmental factors that may have a profound impact on an organization‘s performance. The letters stand for Political, Economic, Social, Technological, Environmental and Legal.  Political Factors – these determine the extent to which government and government policy may impact on an organization or a specific industry. This would include political policy and stability as well as trade, fiscal and taxation policies that the organization need to consider before they plan and implement actions for their organization themselves.  Economic Factors – these factors impact on the economy and its performance, which in turn directly impacts on the organization and its profitability. Factors include interest rates, raw material cost and foreign exchange rates.  Social Factors – these factors focus on the social environment and identify emerging trends. This helps the management of the organization to further understand their customer‘s needs and wants. Factors include changing family demographics, education levels, cultural trends, attitude changes and changes in lifestyles.  Technological Factors – these factors consider the rate of technological innovation and development that could affect a market or industry. Factors could include changes in the digital or mobile technology, automation, 25 Principles of Management and Organization research and development. There is often a tendency to focus on developments only in digital technology, but consideration must also be given to new methods of distribution, manufacturing and also logistics.  Legal Factors – an organization must understand what is legal and allowed within the territories they operate in. They also must be aware of any change in legislation and the impact this may have on business operations. Factors include employment legislation, consumer law, healthy and safety, international as well as trade regulation and restrictions. Political factors do cross over with legal factors, however, the key difference is that political factors are led by government policy, whereas the legal factors must be complied with. A PESTEL analysis helps an organization identify the external forces that could impact their market and analyse how they could directly impact their business. It‘s important when undertaking such analysis that the factors affecting the organization are not just identified but are also assessed- for example, what impact might they have on the organization? The outcomes of a PESTEL analysis can then be used to populate the opportunities and threats in a SWOT analysis. FORCES/ELEMENTS OF THE FIRMS ENVIRONMENT 1. Sociocultural Factors - It consists of customs, lifestyles, and values that characterize the society in which the firm operates. Socio-cultural components of the environment influence the ability of the firm to obtain resources, make its goods and services, and function within the society. Sociocultural factors include anything within the context of society that has the potential to affect an organization. a. Population Changes - have many potential consequences for organizations. As the total population changes, the demand for products and services also changes. b. Rising educational levels - allow people to earn higher incomes than would have been possible otherwise. The increase in income has created opportunities to purchase additional goods and services, and to raise the overall standard of living of a large segment of the population. The educational level has also led to increased expectations of workers and has increased job mobility. c. Norms and values - Norms (standard accepted forms of behavior) and values (attitudes toward right and wrong), differ across time and between geographical areas. Lifestyles differ as well among different ethnic groups. d. Social responsibility - Social responsibility is the expectation that a business or individual will strive to improve the welfare of society. 2. Technological factors -Changing technology may affect the demand for a firm's products and services, its production processes, and raw materials, may create new opportunities for the firm, or threaten the survival of a product, firm, or industry. Technological innovation continues to move at an increasingly rapid rate. a. Demand -Technology can change the lifestyle and buying patterns of consumers. Technology may also cause certain products to be removed from the market. 26 Principles of Management and Organization b. Production processes - The introduction of products based on new technology often requires new production techniques. New production technology may alter production processes. 3. Political and Legal Factors -The Legal Politic elements includes the legal and governmental systems within an organization must function. Such us, trends in legislation, politics, and aspects of the Legal-Political element. Political factors are usually bigger picture topics such as tax policy, trade policy, or foreign trade policy, whereas legal factors tend to be more specific and relate to topics such as discrimination laws, antitrust laws, or intellectual property laws. However, they do overlap. Take, for example, labor laws which we consider a political factor and workplace health and safety laws, which we consider a legal factor 4. Economic Factors - it includes interest rates, tax rates, law, policies, wages, and governmental activities. These factors are not in direct relation with business, but it influences the investment value in the future. It encompasses the general economic health of the region in which the organization operates. Such as, unemployment rate, consumer purchasing power and interest rates. 5. International Factors -The actions of other countries or groups of countries affects the organization. Governments may act to reserve a portion of their industries for domestic firms or may subsidize types of businesses to make them more competitive in the international market. Some countries may have a culture or undergo a change in leadership that limits the ability of firms to participate in the country's economy. As with the other elements of the macroenvironment, such actions are not directed at any single company, but at many firms. In its traditional form of international trade and finance as well as its newest form of multinational business operations, international business has become massive in scale and has come to exercise a major influence over political, economic and social from many types of comparative business studies and from a knowledge of many aspects of foreign business operations. In fact, sometimes the foreign operations and the comparative business are used as synonymous for international business. INTERNATIONAL BUSINESS FIRM IN THE ENVIRONMENT It is a multidimensional industry that focuses on manufacturing products, it is also the process of trading beyond the borders of the County. it encompasses the political risks, cultural differences, risks in exchange, legal and taxation issues, and technological environments. Moreover, it also includes everything connected with commercial activities like sales, investments, and logistics in which two or more countries are involved. What is Purchasing Power Parity (PPP)? A popular theory that is being used by macroeconomic analysts that is being used to compare different countries‘ currencies through a ―basket of good approach‘‘ (it refers to the fixed set or consumers‘ services and products that are being valued on an annual basis.) The purchasing power of the countries involved should be equal and the same. Additionally, the exchange rate should be equal to one or the ratio of price to exchange rate is equal to one. This theory is considered as very helpful to traders as it predicts fluctuations in international currency and indicate weakness. ROLE OF BUSINESS IN THE ECONOMY The role of Business in the Economy is huge. It is the engine of an economy because it provides jobs that allow people to make money and goods and services that people can buy with the money they make. Without businesses, the economy would be very inefficient and/or 27 Principles of Management and Organization very primitive. Businesses benefit each of us by producing the goods and services that we desire. Instead of having to produce everything we consume on our own, businesses facilitate trade between people and allow for greater variety, quantity, and quality of products and services at lower prices. Overall, the presence of business in the economy results in a higher standard of living for each of us. What is Economic Environment? The Economic Environment refers to all the economic factors that affect commercial and consumer behavior. It consists of all the external factors in the immediate marketplace and the broader economy. These factors can influence a business on how it operates and how successful it might become. According to the Business Development Bank of Canada, the term economic environment refers to all the external economic factors that influence buying habits of consumers and businesses and therefore affect the performance of a company and These factors are often beyond a company‘s control, and maybe either large-scale (macro) or small-scale (micro). The economic environment consists of microeconomic and macroeconomic factors. The microeconomic factors refer to the things that happen at the individual company or consumer level. It does not affect the whole economy. Such as demand, market size, suppliers, supply, and distribution chain. While the Macroeconomic factors refers to the things that affect the entire economy. Such as unemployment, inflation, interest rates, GDP or Gross Domestic Product, taxes, and exchange rates. IMPORTANCE OF SMALL BUSINESS IN THE ECONOMY Generate New Employment -Small businesses generate employment by creating job opportunities. Small firm also serve as a training ground for employees who become valued employees of larger companies because of their comprehensive learning experience and risk taking. The Small Business Administration reports that from 2005 to 2008, small businesses were responsible for creating 81.4 percent of the net new jobs in the U.S. Integral Parts of Local Economies -Small businesses are integral parts of local economies, helping to create webs of financial interdependence that foster broad-based prosperity. The more that small businesses leverage their potential to support each other, the greater their capacity to create a thriving local business community. Growing a Small Business to a Corporation -Small businesses do not always stay small. Large corporations, such as Nike and Ben and Jerry‘s, started off as small businesses and grew to become major players in the national and international marketplace. Having a large corporation headquartered in a community can further help provide employment and stimulate the local economy, creating a market that favors the development of additional small businesses. Encourage Innovation and Flexibility-Employees from small business are given more freedom to innovate, work independently and make decisions than from large corporations. When a business lacks the resources of a large corporation, employees have to get creative — and inventions from necessity are born. Diversity -Small businesses also have more flexibility and can be started by almost anyone. That makes them more diverse in form, function, culture, and potential than large 28 Principles of Management and Organization corporations. The greater diversity we have in the economy, the easier it is for the economy to withstand Tough conditions. Exporting Importance -Small businesses are important due to their role in exporting to other nations. Ninety-seven percent of identified exporters are small businesses, and they produce 26 percent of the export value through their products they ship to consumers in other countries. Exporting U.S. goods to other nations also helps to keep the U.S. economy strong. ECONOMIC DEVELOPMENT Economic development is the process whereby simple, low-income national economies are transformed into modern industrial economies. It is also known as economic growth, which describes a change in a country‘s economy involving qualitative and quantitative improvements that also consider the social, political, cultural, and spiritual aspects of the country‘s growth. a. Local Development- It is the increase in the local economy‘s capacity to create wealth for residents. b. Local Welfare - It is the existence of significant agglomeration externalities is the most importance efficiency rationale for local based incentives. This hinges on whether the attraction of new businesses generates some forms of external benefits to other firms in the same locality PHASES OF ECONOMIC DEVELOPMENT 1. First Industrial Revolution (1760-1850) There is a drastic transformation both in internal structures and processes and its relationships with the external environment. Hundreds of salaried workers were concentrated during the first industrial revolution (which occurred in Britain from the last decade of 18th century to the 1850s). The ―rise of the factory‖ as the dominant organizational form is one of the most intriguing issues in business and economic history. Main reasons are the ff: a) The requirements of the new technologies of production (economies of scale and division of labor). b) The inadequacy of the previous organizational forms to cope with an increased dynamism in market demand (transaction and information costs). c) A more efficient exploitation of the workers by the entrepreneurs. d) The radical change knowledge. The factory relied heavily on low-powered incentives. Main technological features: -New infrastructure (railways) -New source of power (steam engine) -New machine tools 2. Second Industrial Revolution (1920s) New and advance technology was produced and adopted in many industries especially in capital-intensive industries such as steel, chemicals, and food processing. The spread of 29 Principles of Management and Organization railway network at a national and transnational level fostered the formation of a wide system of distribution that made it necessary for large corporation to adopt economies of scale. a. Telegraph became popular which made the communication between people faster. b. “Multidivisional form” (M-form) rose as a new firm organization which was the most significant during this period. c. Mass distribution was also developed as an impact of the railway and telegraph European corporations have been generally characterized by the persistence of family leadership, accompanied by collaborative relations with the trade unions and by close links with powerful financial institutions. The legal structure of the large firms in US also changed from individual firm and partnership to the joint-stock corporation. As a result of the new transportation technology, the firm became more hierarchical: middle and top managers were appointed to monitor the work process. 3. Information and Communication Technology (ICT) Revolution This period gradually emerges Project-based firms, it significantly changed the character of work: knowledge has become the crucial input, it also Extend and Globalize markets. New Industries are developing such as. a) Internet technology b) the information industry, c) biotechnology, etc. Today‘s firms are greatly focusing on core competencies or core intellectual and service competencies. It stimulates competition and entrepreneurship in an economy. ROLES OF ECONOMIC DEVELOPERS IN ECONOMY: a. they are responsible for planning, designing, and implementing economic development strategies, b. they act as a key liaison between public and private sectors and the community, c. they help to leverage finances from both the public and private sectors. Key facilitators in creating public-private partnership, d. they aid where markets and institutions cannot or will not meet the community‘s needs. e. they provide technical or trade assistance.
PRINCIPLES OF MANAGEMENT FUNCTION Management in some form or another is an integral part of living and is essential wherever human efforts are to be undertaken to achieve desired objectives. It is a set of principles relating to the functions of planning, organizing, directing, and controlling. Management Functions means getting things done through others – individually, in groups, or in organizations. It provides direction and coordination and was developed by Henri Fayol. Who is Henri Fayol? An engineer and a theorist of business administration, who developed 14 principles of management, and 5 principles of management function 33 Principles of Management and Organization 5 PRIMARY FUNCTION OF MANAGEMENT Figure 1. Diagram of Henri Fayol’s Five Principles of Management Function 1. Planning - is future-oriented and determines an organization‘s direction. It is a rational and systematic way of making decisions today that will affect the future of the company. It is a kind of organized foresight as well as corrective hindsight. It involves predicting of the future as well as attempting to control the events. It involves the ability to foresee the effects of current actions in the long run in the future. Peter Drucker has defined planning as follows: “Planning is the continuous process of making present entrepreneurial decisions systematically and with best possible knowledge of their futurity, organizing systematically the efforts needed to carry out these decisions and measuring the results of these decisions against the expectations through organized and systematic feedback”. An effective planning program incorporates the effect of both external as well as internal factors. The external factors are shortages of resources; both capital and material, general economic trend as far as interest rates and inflation are concerned, dynamic technological advancements, increased governmental regulation regarding community interests, unstable international political environments, etc. 2. Organizing -requires a formal structure of authority and the direction and flow of such authority through which work subdivisions are defined, arranged and coordinated so that each part relates to the other part in a united and coherent manner to attain the prescribed objectives. According to Henry Fayol, “To organize a business is to provide it with everything useful or its functioning i.e. raw material, tools, capital and personnel’s”. Thus, the function of organizing involves the determination of activities that need to be done in order to reach the company goals, assigning these activities to the proper personnel and delegating the necessary authority to carry out these activities in a coordinated and cohesive manner. the function of organizing is concerned with: a. Identifying the tasks that must be performed and grouping them whenever necessary b. Assigning these tasks to the personnel while defining their authority and responsibility. c. Delegating this authority to these employees d. Establishing a relationship between authority and responsibility e. Coordinating these activities 34 Principles of Management and Organization 3. Staffing- the function of hiring and retaining a suitable workforce for the enterprise both at managerial as well as non-managerial levels. It involves the process of recruiting, training, developing, compensating and evaluating employees and maintaining this workforce with proper incentives and motivations. Since the human element is the most vital factor in the process of management, it is important to recruit the right personnel. This function is even more critically important since people differ in their intelligence, knowledge, skills, experience, physical condition, age, and attitudes, and this complicates the function. Hence, management must understand, in addition to the technical and operational competence, the sociological and psychological structure of the workforce. According to Kootz & O‘Donnell, “Managerial function of staffing involves manning the organization structure through the proper and effective selection, appraisal & development of personnel to fill the roles designed in the structure”. 4. Directing/Leading is said to be a process in which the managers instruct, guide, and oversee the performance of the workers to achieve predetermined goals. It is said to be the heart of management process. Initiates action and it is from here actual work starts. Direction is said to be consisting of human factors. In simple words, it can be described as providing guidance to workers is doing work. In field of management, direction is said to be all those activities which are designed to encourage the subordinates to work effectively and efficiently. According to Human, ―Directing consists of process or technique by which instruction can be issued and operations can be carried out as originally planned‖ Therefore, Directing is the function of guiding, inspiring, overseeing and instructing people towards accomplishment of organizational goals. Consistent with company policies, and every manager should treat subordinates in line with the standards of the company It is concerned with leadership, communication, and supervision for employees to work in the most efficient manner. Giving instructions and guiding subordinates about procedures and methods. Motivation and proper communication are vital. ELEMENTS OF DIRECTING 1. Leadership element involves issuing of instructions and guiding the subordinates about procedures and methods. 2. Communication must be open both ways so that the information can be passed on to the subordinates and the feedback received from them. 3. Motivation is very important since highly motivated people show excellent performance with less direction from superiors. 4. Supervising subordinates would lead to continuous progress reports as well as assure the superiors that the directions are being properly carried out. 5. Controlling -consists of those activities that are undertaken to ensure that the events do not deviate from the pre-arranged plans. The activities consist of establishing standards for work performance, measuring performance and comparing it to these set standards and taking corrective actions as and when needed, to correct any deviations. It also consists of verifying whether everything occurs in conformities with the plans adopted, instructions issued, and principles established. It measures the deviation of actual performance from the standard performance, discovers the causes of such deviations and helps in taking corrective actions. According to Koontz & O‘Donnell, “Controlling is the measurement & correction of performance activities of subordinates in order to make sure that the enterprise objectives and plans desired to obtain them as being accomplished”. According to Brech, ―Controlling is a systematic exercise which is called as a process of checking actual performance against the standards or plans with a view to ensure adequate progress and also recording such experience as is gained as a contribution to possible future needs.‖ The controlling function involves: 1. Establishment of standard performance. 2. Measurement of actual performance. 35 Principles of Management and Organization 3. Measuring actual performance with the pre-determined standard and finding out the deviations. 4. Taking corrective action We will discuss further each of the different functions of management on the succeeding chapters in this instructional materia

CONCEPT OF PLANNING FUNCTION Definition and Nature of Planning Planning is one of the major functions of management. It is a process that involves the setting of the organization's goals, establishing strategies for accomplishing those goals and developing plans of actions that managers intend to use to achieve said organizational goals. It is a process that involves the setting of the organization‘s goals, establishing strategies for accomplishing those goals and developing plans of actions that managers intend to use to achieve said organizational goals. It is the primary function of management; it provides the foundation from which all future management function arises. It is goal oriented, since plans arise from objectives, and objectives provide guidelines for planning. It is a Continuous Process of adapting the organization with the changes in business. Planning is Flexible, it selects the best alternative based on assumptions, there is a possibility that there is a dead log in the function of management, It has one more alternative suit for future situation. It is a Managerial Function; it is found in all levels and all departments of an organization. It involves choosing the future course of action from among alternatives. TYPES OF PLANNING 1. Operational Planning- This type of planning typically describes the day-to-day running of the company. It is often described as single use plans or ongoing plans. Single use plans are created for events and activities with a single occurrence (such as a single marketing campaign). Ongoing plans include policies for approaching problems, rules for specific regulations and procedures for a step-by-step process for accomplishing objectives. 2. Strategic Planning- Includes a high-level overview of the entire business. It is the foundational basis of the organization and will dictate long-term decisions. The scope of strategic planning can be anywhere from the next two years to the next 10 years. Important components of a strategic plan are vision, mission, and values. 3. Tactical Planning -It supports strategic planning. It includes tactics that the organization plans to use to achieve what is outlined in the strategic plan. Often, the scope is less than one year and breaks down the strategic plan into actionable chunks. Tactical planning is different from operational planning in that tactical plans ask specific questions about what needs to happen to accomplish a strategic goal; operational plans ask how the organization will generally do something to accomplish the company‘s mission. 4. Contingency Planning -are made when something unexpected happens or when something needs to be changed. Contingency planning can be helpful in circumstances that call for a change. Although managers should anticipate changes when engaged in any of the primary types of planning, contingency planning is essential in moments when changes cannot be foreseen. As the business world becomes more complicated, contingency planning becomes more important to engage in and understand. 38 Principles of Management and Organization IMPORTANCE OF PLANNING 1. Efficient Use of Resources- All organizations, large and small, have limited resources. The planning process provides the information top management needs to make effective decisions about how to allocate the resources in a way that will enable the organization to reach its objectives. Productivity is maximized and resources are not wasted on projects with little chance of success 2. Establishing Organizational Goal- It is one of the key aspects of the planning process. Goals must be aggressive, but realistic. Organizations cannot allow themselves to become too satisfied with how they are currently doing – or they are likely to lose ground to competitors. 3. Managing Risk and Uncertainty- is essential to an organization‘s success. Even the largest corporations cannot control the economic and competitive environment around them. Unforeseen events occur that must be dealt with quickly before negative financial consequences from these events become severe. Planning encourages the development of ―what-if‖ scenarios, where managers attempt to envision possible risk factors and develop contingency plans to deal with them. The pace of change in business is rapid, and organizations must be able to rapidly adjust their strategies to these changing conditions. 4. Team Building and Cooperation- When the plan is completed and communicated to members of the organization, everyone knows what their responsibilities are, and how other areas of the organization need their assistance and expertise in order to complete assigned tasks. They see how their work contributes to the success of the organization as a whole and can take pride in their contributions. Potential conflict can be reduced when top management solicits department or division managers‘ input during the goal setting process. Individuals are less likely to resent budgetary targets when they had a say in their creation. 5. Creating Competitive Advantages- organizations get a realistic view of their current strengths and weaknesses relative to major competitors. The management team sees areas where competitors may be vulnerable and then crafts marketing strategies to take advantage of these weaknesses. Observing competitors‘ actions can also help organizations identify opportunities they may have overlooked, such as emerging international markets or opportunities to market products to completely different customer groups. GOAL SETTING Goal is an idea of the future or desired result that a person or a group of people envision, plan, and commit to achieve. The definition of goal setting is the process of identifying something that you want to accomplish and establishing measurable goals and time frames. TYPES OF GOALS Short Term Goals - a short term goal is something you want to do soon. The near future can mean today, this week, this month or even this year. A short-term goal is something you want to accomplish soon. Long Term Goals - a long term goal is the goal that takes time to achieve. 39 Principles of Management and Organization IMPORTANCE OF GOALS o It gives you short term vision and long-term motivation. o It focuses your acquisition of knowledge and helps you to organize your time and your resources, so that you can make the very most of your life. o It allows to measure your progress because you always have a fixed endpoint or benchmark to compare with. THREE (3) LEVELS OF ORGANIZATIONAL PRIORITIES a) Purpose —a broad, general statement that tells why your organization exists; it usually does not change from year to year and is often the first statement in your constitution. b) Goals—statements describing what your organization wishes to accomplish, stemming from your purpose. Goals are the ends toward which your efforts will be directed and often change from term to term or year to year, depending on the nature of the group. c) Objectives—descriptions of exactly what is to be done, derived from the goals. They are clear, specific statements of measurable tasks that will be accomplished as steps toward reaching your goals. They are short term and have deadlines. STEPS FOR SETTING GOALS 1. Brainstorm goals as a group. (People support what they create and will accept responsibility more easily.) 2. Choose from the brainstormed list those you want to attend to. 3. Prioritize as a group. 4. Determine objectives and plans of action for each goal. Be specific and include deadlines. 5. Move into action. Follow through. 6. Continually evaluate your progress. 7. Be flexible; allow your objectives to change to meet your new circumstances. THREE (3) DIFFERENT LEVELS OF PLANNING IIN THE FIRM FIRM - A commercial organization that operates on a for-profit basis and participates in selling goods or services to consumers. 1. CORPORATE LEVEL- Most corporation of even moderate size have a corporate headquarters. The heads of these groups are typically part of the group of senior executives at the corporate headquarters. Executives at the corporate level in large firms include both those in the headquarters and those heading up the large corporate groups such as finance, human resources, marketing etc. These corporate-level executives primarily focus on the questions such as: a) What industries should we get into? b) What markets should the firm be in? c) In which business should the corporation invest money? d) What resources should be allocated to each business? 2. BUSINESS LEVEL- At this level managers focus on determining how they are going to compete effectively in market. 40 Principles of Management and Organization At this level, managers attempt to address questions such as: a) Who are our direct competitors? b) What are their strengths and weaknesses? c) What are our strengths and weaknesses? d) What advantages do we have over competitors? 3. FUNCTIONAL LEVEL- At this level managers focus on how they can facilitate the achievement of the competitive plan of the business. These managers are often the heads of departments such as finance, marketing, human resources, or product development. This can include managers responsible for business within a specific geographic region or managers responsible for specific retail stores. Functional managers attempt to answer questions such as: a) What activities does my unit need to perform well to meet customer expectations? PLANNING TECHNIQUES AND TOOLS BRAINSTORMING the Basic brainstorming is not complex—though there are important techniques for ensuring success. Here, is how basic brainstorming works. 1. Get a group of people together to address a problem, challenge, or opportunity. 2. Ask your group to generate as many ideas as possible—no matter how ―off the wall‖ 3. Review the ideas, select the most interesting, and then lead a discussion about how to combine, improve, and/or implement the ideas. While this process may be simple in theory, however, it is not always easy to generate new ideas out of nowhere. And that is why so many interesting and inspirational brainstorming techniques have been developed. Brainstorming is a terrific technique for idea generation, coming up with alternatives and possibilities, discovering fatal flaws, and developing creative approaches. But it is only as good as its participants and facilitator. The better you are at selecting participants, setting the stage, and encouraging discussion, the better your outcomes are likely to be. TYPES OF BRAINSTORMING Analytic Brainstorming- it focuses on problem solving, it can be useful to analyze the problem with tools that lead to creative solutions. Analytic brainstorming is relatively easy for most people because it draws on idea generation skills they have already built in school and in the workplace. No one gets embarrassed when asked to analyze a situation. Quiet Brainstorming- In some situations, individuals are so cramped for time that a brainstorming session would be impossible to schedule. In other situations, team members are unwilling to speak up in a group or to express ideas that others might not approve of. When that is the case, you might be well served with brainstorming techniques that allow participants to generate ideas without meeting or without the need for public participation. Role Play Brainstorming- it allows your team to ―become‖ their own clients, which often provides surprisingly potent insights into challenges and solutions. Another plus of role play is that, in some cases, it lowers participants‘ inhibitions. Brainstorming with Support- For groups that are not intrinsically creative or communicative or are likely to get stuck once the most obvious ideas have been suggested, help is in order. You can provide that help up front by setting up the brainstorming process to include everyone in a structured, supportive manner. Radically Creative Brainstorming - If your team seems to be stuck on conventional answers 41 Principles of Management and Organization to brainstorming challenges, you may need to stir the pot to help them generate creative ideas by using techniques that require out-of-the-box thinking. These may include the Charrette approach and "what if" challenges. It is one of the best-known techniques available for creative problem solving. It can be used for tasks including internal procedures, company structure and written articles. Its primary objective is to get your mind out of the box by producing as many solutions (or ideas), or marketing campaigns as possible. 1. Problem Statement Guidelines- it is a statement about an area of concern, a condition to be improved upon, a difficulty to be eliminated, or a troubling question that exists in theory or in practice that points to the need for meaningful understanding and deliberate investigation. Key elements of an effective problem statement include: a) Gap: Identify the gap (problem) that exists today. b) Timeframe, location, and trend: Describe when and where the problem was first observed and what kind of trend it is following. c) Impact: Quantify the gap (cost, time, quality, environmental, personal, etc.) d) Importance: To the organization, the individual, etc. to better understand the urgency. 2. Strengths, Weaknesses, Opportunities & Threat Analysis (SWOT Analysis)- requires you to be candid and provide an honest assessment of the state of things. Eventually, you focus on the key issues. Strengths is the resource or capacity the organization can use effectively to achieve its objectives. Weakness Is the limitation, fault, or defect in the organization that will keep it from achieving its objectives. Opportunities is any favorable situation in the organization‘s environment. It is usually a trend or change of some kind or an overlooked need that increases demand for a product or service and permits the firm to enhance its position by supplying it. While Threats is any unfavorable situation in the organization‘s environment that is potentially damaging to its strategy. The threat may be a barrier, a constraint, or anything external that might cause problems, damage, or injury. 3. Problem Tree- is a pictorial representation of a problem, its causes, and its consequences. This analysis tool helps the project team get a quick glance of how a range of complex issues contribute toward a problem and how this problem branches out into a set of consequences. Both causes and consequences are fitted into the diagram on a hierarchical preference basis. STEPS TO PERFORM THE PROBLEM TREE ANALYSIS 3.1 Begin with a brainstorming session to identify the major problems affecting the project. For each problem you will have to carry out a separate problem tree analysis. 3.2 Divide your board or the paper you are using to record the analysis into three vertical sections and write the problem in the middle section. The left side can be reserved for the causes and the right side for the consequences. 3.3 Discuss with the team the possible causes that can be held responsible for the problem situation. From this, list and identify the ones which have a direct relationship with the problem. These direct causes can be listed on the extreme right-hand side of the section reserved for the causes. The causes which lead to these direct causes can be listed to the left of this list. Relational arrows can also be used to demonstrate the cause and effect relationship among the causes 42 Principles of Management and Organization 3.4 When you are done with the causes, move on to the consequences. When listing the consequences, list the direct ones on the extreme left of the consequences section. The consequences that result from these causes can be listed to right of this list. 3.5 Finally, when a comprehensive list of causes and consequences have been developed and the related causes and consequences have been linked respectively, you are ready to display the information pictorially. 4. Logical Framework- or log frame is a document that gives an overview of the objectives, activities and resources of a project. It also provides information about external elements that may influence the project, called assumptions. Finally, it tells you how the project will be monitored, through the use of /content/indicators. All this information is presented in a table with four columns and four rows – although variations on this basic scheme do exist. It has two types the vertical and horizontal logic. 5. Forcefield Analysis- was created by Kurt Lewin in the 1940s. Lewin originally used it in his work as a social psychologist. Today, however, it is also used in business, for making and communicating go/no-go decisions. The idea behind Force Field Analysis is that situations are maintained by an equilibrium between forces that drive change and others that resist change, as shown in figure 1, below. For change to happen, the driving forces must be strengthened, or the resisting forces weakened. CONCEPT OF DECISION MAKING DECISION MAKING According to the Oxford Advanced Learner‘s Dictionary, the term decision making means the process of deciding about something important, especially in a group of people or in an organization. Trewartha & Newport defines decision making process as follows: ―Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem‖. Further, decision making process can be regarded as check and balance system that keeps the organization growing both in vertical and linear directions. It means that decision making process seeks a goal. The goals are pre-set business objectives, company missions and its vision. To achieve these goals, company may face lot of obstacles in administrative, operational, marketing wings and operational domains. Some types of decision making are routine and basic decision making, personal and organizational decision making, individual and group decision making, programmed and non-programmed decision making and tactical and strategic decision making. DECISION-MAKING is an integral part of modern management. Essentially, rational, or sound decision making is taken as primary function of management. Every manager takes hundreds and hundreds of decisions subconsciously or consciously making it as the key component in the role of a manager. Decisions play important roles as they determine both organizational and managerial activities. 1. Decision-Making is Goal-Oriented: Each decision of management major or minor must make, at least, some contribution towards the attainment of organizational objectives. 43 Principles of Management and Organization 2. Decision-Making is Pervasive: There are three dimensions of the pervasiveness of decision-making. 2.1 All managers in the management hierarchy take decisions, within the limits of their authority, pertaining to their areas of functioning. 2.2 Decision-making is done in all functional areas of management e.g. production, marketing, finance, personnel, research, and development etc. 2.3 Decision-making is inherent in all functions of management i.e. planning, organizing, staffing, directing, and controlling. 3. Decision-Making is an Intellectual Exercise: Decision-making calls for creativity and imagination on the part of managers; in that decision-making forces managers to think in terms of developing best objectives and best alternatives for attaining those objectives. 4. Decision-Making Involves a Problem of Choice: Decision-making is fundamentally a choosing problem i.e. a problem of choosing the best alternative, from out of a few alternatives, in a rational and scientific manner. 5. Decision-Making is a Continuous Process: Decision-making process commences since the inception of business and continues throughout the organizational life. All managers take decisions for organizational purposes; so long as the enterprise is in existence. 6. Decision-Making is the Basis of Action: All actions of people operating the enterprise are based on the decisions taken by management vis-a-vis organizational issues. 7. Decision-Making Implies a Commitment of Organizational Resources: Commitment of organizational resources time, efforts, energies, physical resources etc. is implied both during the process of taking decisions and more particularly, at time of implementation of decisions. 8. Decision-Making is Situational: Decision-making much depends on the situation facing the management; at the time when a decision-making problem crops up. PROCESS OF DECISION MAKING 1. Identify the decision- To decide, you must first identify the problem you need to solve or the question you need to answer. If you misidentify the problem to solve, or if the problem you have chosen is too broad, you will knock the decision train off the track before it even leaves the station. 2. Gather relevant information- Once you have identified your decision, it is time to gather the information relevant to that choice. Do an internal assessment, seeing where your organization has succeeded and failed in areas related to your decision. Also, seek information from external sources, including studies, market research, and, in some cases, evaluation from paid consultants. 3. Identify the alternatives-With relevant information now at your fingertips, identify possible solutions to your problem. There is usually more than one option to consider when trying to meet a goal—for example, if your company is trying to gain more engagement on social media, your alternatives could include paid social advertisements, a change in your organic social media strategy, or a combination of the two. 44 Principles of Management and Organization 4. Weigh the evidence- Once you have identified multiple alternatives, weigh the evidence for or against said alternatives. See what companies have done in the past to succeed in these areas and take a good hard look at your own organization‘s wins and losses. 5. Choose among alternatives- Here is the part of the decision-making process where you, you know, make the decision. Hopefully, you have identified and clarified what decision needs to be made, gathered all relevant information, and developed and considered the potential paths to take. You are perfectly prepared to choose. 6. Take action- Once you‘ve made your decision, act on it! Develop a plan to make your decision tangible and achievable. Develop a project plan related to your decision, and then set the team loose on their tasks once the plan is in place. 7. Review your decision- After a predetermined amount of time, which you defined in step one of the decision-making process, take an honest look back at your decision. Did you solve the problem? Did you answer the question? Did you meet your goals? If so, take note of what worked for future reference. If not, learn from your mistakes as you begin the decision-making process again.
NATURE OF ORGANIZING Organizing involves assigning tasks, grouping tasks into departments, delegating authority, and allocating resources across the organization. During the organizing process, managers coordinate employees, resources, policies, and procedures to facilitate the goals identified in the plan. a. Identification of Activities -Important component of also organizing the activities of enterprises depend on its nature and size b. Grouping of Activities -Involves creating departments and section for specific work such as production, marketing, finance, human resources etc. c. Accumulation of Resources -Availability of needed resources facilitate for uniform and smooth performance of the enterprises d. Defining Hierarchy of Positions -It is formed in the basic degree of responsibility and accountability and clarifies roles of everyone from top to the subordinate level 47 Principles of Management and Organization e. Assignment of Jobs -Each work is assigned to different individuals based on their skills, and ability and experience f. Establishing Authority and Responsibility Relationship -For the systemic functioning of managerial function, it is essential to establish authority and responsibility relationship of all the employees from top level to subordinate level g. Evaluation of Performance -It is helpful to meet determined objectives within time defined ORGANIZING LEVELS AND SPAN OF MANAGEMENT Organizational levels exist because there is a limit to the number of persons a manager can supervise effectively, even though this limit varies depending on situations. The term ―span of control‖ or ―span of management‖ is defines ―the number of subordinates who are working under one manager.‖ DIFFERENT TYPES OF ORGANIZATIONAL STRUCTURE 1. FUNCTIONAL STRUCTURE- is one of the most common organizational structures. Under this structure, the organization groups employees according to a specialized or similar set of roles or task. 2. DIVISIONAL STRUCTURE- is a type of organizational structure that groups each organizational function into a division. Each division contains all the necessary resources and functions within it to support that product line or geography (for example, its own finance, IT, and marketing departments). 3. MATRIX MANAGEMENT- is an organizational structure in which some individuals report to more than one supervisor or leader, relationships described as solid line or dotted line reporting. ORGANIZATION THEORIES AND APPLICATION 1. Classical Theories- It focuses on the structure of the Organization. Proponents; Max Weber, Frederick Taylor & Henry Fayol. 2. Neo-Classical- Employees is treated as human beings and their needs were emphasize. 3. Systems Approach- System Theorist believe that all organization components are interrelated, Hence Changes in one component may affect all the other components. Proponent: Ludwig von Bertalaffy also known as the Father of System Theory. 4. Contingency Models- is an organizational theory that claims that there is no best way to organize a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is contingent (dependent) upon the internal and external situation. A contingent leader effectively applies their own style of leadership to the right situation. Fred Fiedler's contingency model focused on a contingency model of leadership in organizations. This model contains the relationship between leadership style and the favorable-ness of the situation. Fielder developed a metric to measure a leader's style called the Least Preferred Co-worker. The test consists of 16-22 items they are to rate on a scale of one to eight as they think of a co-worker, they had the most difficulty working with. A high 48 Principles of Management and Organization score indicates the test taker is relational in style and a low score indicates the test taker is more task orientated in style. Situational favorable-ness was described by Fiedler in terms of three empirically derived dimensions: a) Leader-member relationship – high if the leader is generally accepted and respected by followers b) Degree of task structure – high if the task is very structured c) Leader's position power – high if a great deal of authority and power are formally attributed to the leader's position Its FORMAL STRUCTURE is primarily concerned with the relationship between authority and subordinate. Typical organization chart illustrates the formal structure at work in a company or part of a company. The hierarchical organization begins at the top with the most senior leader and then cascades down to the subordinate managers and then subordinate employees below those managers, and there are job titles, financial obligations and clear lines of authority for each box on the organization chart. Its INFORMAL STRUCTURE is typically developed around social or project groups. Because they are based on camaraderie there is often a more immediate response from individuals. This saves people time and effort, thus making it easier to work with in informal structures. THREE (3) ELEMENTS OF DELEGATION 1. Responsibility is the obligation of a subordinate to properly perform the assigned duty. When a superior assign a job to his subordinate it becomes the responsibility of the subordinate to complete that job. This means that the word responsibility comes into play only after the job has been assigned. Thus, to assign job can be called to assign responsibility. Responsibility Features: -Responsibility can be assigned to some other person. -The essence of responsibility is to be dutiful. -It gets originated because of superior-subordinate relationship. 2. Authority - means the power to take decisions. Decision can be related to the use of resources, and to do or not to do something. Authority Feature: -Authority can be assigned (delegated) to some other person. -It is related to the post (with the change of post, even authorities change). -It makes implementation of decisions possible. -Authority is the key to a managerial job because a post without authority cannot be a managerial post. 3. Accountability -means the answerability of the subordinate to his superior for his work performance. In other words, when a superior assigns job / work or the responsibility to his subordinates, simultaneously he gives authority to them which makes workers (subordinates) accountable to their superior for the work- performance. Accountability Features: -Accountability cannot be delegated to some other person. -It is only towards the delegators. -Its base is senior-subordinate relationship. 49 Principles of Management and Organization -It originates because of delegation of authority. ART OF DELEGATION What to delegate and to whom Divide work into meaningful tasks and then allocate them to specialists or people who will benefit from the experience. Allocate the work This is the hardest and most important stage of delegation and generally involves several issues: a) The subordinate must understand why the work needs to be done. b) Where the applicable the manager should set specific performance standards for output, time, cost, and quality, and involve the subordinate in the process. Furthermore, sub goals and monitoring and reporting procedures should be agreed upon. c) The manager should delegate responsibility; the subordinate must be allowed to make decisions to achieve agreed results. d) The subordinate must be given authority or control over certain resources and people. e) While the manager can delegate tasks and assign responsibility and authority for them. accomplishment, he will always be held accountable for the tasks his subordinates perform. MONITORING PERFORMANCE A manager should constantly monitor progress against standards and sub-goals. Recognition must be given for task accomplishment and preventative or corrective action instituted when targets are not being achieved. It's the monitoring of performance which keeps you in control and aware of the results of the work you delegate. Tasks are delegated as part of a developmental program the manager should ensure that the subordinate receives proper training and guidance! BENEFITS OF SUCCESSFUL DELEGATION a) Providing subordinates with the opportunity for growth and development b) Motivating subordinates by giving them the opportunity to make decisions. c) Allowing the manager more time for relevant managerial activities such as planning and controlling. d) Facilitation communication and understanding between a manager and his subordinates. e) Reducing the time taken to make decisions. f) Allowing the decision making to take place close to the point of action where the detail is known. Obstacles to successful delegation a) There are several possible reasons which hold managers back from delegating. The reasons are. b) The fear that subordinates will do a better job and get the recognition. c) Fear that the subordinate won't be able to do the job properly. d) The fear of losing control over activities and tasks for which he is accountable. 50 Principles of Management and Organization e) A feeling that it is important for him to be seen doing the work rather than purely managing. f) Preference for doing the work itself as opposed to managing people. FORMAL AND INFORMAL ORGANIZATION ORGANIZATION- is a collection of people who work together to attain specified objectives. There are two types of organization structure, that can be formal organization and informal organization. Formal Organization An organization is said to be formal when the two or more than two persons come together to accomplish a common objective, and they follow a formal relationship, rules, and policies are established for compliance, and there exists a system of authority. It should be noted that official association has certain like rationality, impersonality, and uniqueness. FEATURES: a) Power hierarchy b) Specificity in distribution of labor duties c) A large amount of working documentation d) Collectivism e) Top-down communication f) Specified procedures for replacing inefficient wage earners g) Duration of functioning h) Independence from the participation of specific persons THREE (3) TYPES OF FORMAL ORGANIZATION 5. Coercive systems are characterized by forced membership and exercising control by force. Their bright instances include prison, psychiatric clinics, boarding schools, military units. The joining of new participants is authorized by a higher power in the person of the chief or director. Such institutions are inherent puissance ladder, strict discipline, and compliance with stated rules. Everyday life is quite monotonous; some workers of team wear overalls, which emphasize the leveling of individuality. 6. Utilitarian structures involve those that bring benefits. Persons will rejoin them because they see some prospect of a mutually beneficial exchange. This could be an internship in a company, successful passage of which promises a high salary in the future. Or an excellent graduation from a school/university, because of which the student not only receives first-class knowledge and habits but also, offers cooperation from the best employers. 7. Normative associations are immanent in maintaining order through education and having an ordinary set of norms. Generally, fellowship in them is free, although, some participants could add to them out of a sense of solidarity, duty or even fear. Such structures include church, brotherhoods, and political parties. The latter is understood as the formal organization that directs a political life of a society. Participating in them, persons feel belonging to general good and purpose. 51 Principles of Management and Organization INFORMAL ORGANIZATION A network of interpersonal relationship that arise when people associate with each other. It is the interlocking social structure that governs how people work together in practice. It features Independent channel of communication without specified direction of flow of information are developed by group members. Unofficial communication channel. Which flows in vertical and Horizontal direction. Its advantages are it creates sense of "Belongingness‘‘ and develops some cohesiveness among each other. While its disadvantages are it spreads rumors and it pressures members to conform to the group‘s expectations. COMPARISON CHART BASIS FOR COMPARISON FORMAL ORGANIZATION INFORMAL ORGANIZATION Meaning An organization type in which the job of each member is clearly defined whose authority responsibility and accountability are fixed is formal organization. An organization formed within the formal organization as a network of interpersonal relationship, when people interact with each other is known as informal communication. Creation Deliberately by top management. Spontaneously by members. Purpose To fulfill, the ultimate objective of the organization. To satisfy their social and psychological needs. Nature Stable, it continues for a long time. Not stable Communication Official communication Grapevine Control mechanism Rules and Regulations Norms, values, and beliefs Focus on Work performance Interpersonal relationship Authority Members are bound by hierarchical structure. All members are equal. Size Large Smal
STAFFING FUNCTION According to Mc Farland: Staffing is the function by which managers build on organization through the recruitment, selection and development of individual as capable employee. According to Heinz Weihrich, Mark Cannice and Harold Koontz: The managerial function of staffing is defined as filling and keeping filled, positions in the organization structure. 55 Principles of Management and Organization NATURE OF STAFFING 1. Management function: Staffing is a management function that appoints people at different positions to run the organization. While organizing creates departments and positions, staffing ensures that people with desired skills and abilities occupy these positions to contribute to organizational goals. 2. Pervasive function: People are the most important asset that convert inputs into outputs. People are appointed at all levels (top, middle, low) in all functional areas (production, finance, marketing, personnel). Staffing ensures that right persons are appointed at the right job so that organization can efficiently achieve its objectives. 3. Part of human resource management: Staffing is an important part of human resource management. Human resource management ensures that competent people perform organizational activities. It deals with the set of organizational activities that attract, develop and maintain an effective workforce. The requirements of human resource management are filled through staffing as staffing appoints people at the desired jobs. 4. Deals with active resource: Staffing deals with the most important resource (people) that converts inactive resources (raw materials) into productive outputs. It deals with the live resource (people) without whom resources would remain as resources only. They will not be converted into outputs. 5. Attached with personnel department: Functions of staffing; recruitment, selection, training, and appraisal of subordinates of all departments (production, marketing etc.) are performed by managers at all levels as all departments need people to function. In performing these functions, managers seek assistance of the personnel department. Personnel department is a service department that assists line managers in performing the staffing function. 6. Continuous function: Staffing is a continuous managerial function. People keep leaving and joining the organizations. Departments and organizations grow and, therefore, need for people keep arising. Hiring, training and compensating people (staffing) are, therefore, continuously performed by managers. STAFFING PROCESS AND STEPS INVOLVED IN STAFFING 1. Manpower Planning: can be regarded as the quantitative and qualitative measurement of labor force required in an enterprise. Therefore, in an overall sense, the planning process involves the synergy in creating and evaluating the manpower inventory and as well as in developing the required talents among the employees selected for promotion advancement. 2. Recruitment is a process of searching for prospective employees and stimulating them to apply for jobs in the organization. It stands for finding the source from where potential employees will be selected. 3. Selection is a process of eliminating those who appear unpromising. The purpose of this selection process is to determine whether a candidate is suitable for employment in the organization or not. Therefore, the main aim of the process of selection is selecting the right candidates to fill various positions in the organization. A well-planned selection procedure is of utmost importance. 4. Placement means putting the person on the job for which he is selected. It includes introducing the employee to his job. 56 Principles of Management and Organization 5. Training: After selection of an employee, the important part of the programmed is to provide training to the new employee. With the various technological changes, the need for training employees is being increased to keep the employees in touch with the various new developments. 6. Development A sound staffing policy provides for the introduction of a system of planned promotion in every organization. If employees are not at all having suitable opportunities for their development and promotion, they get frustrated which affect their work. 7. Promotions implies the up gradation of an employee to a higher post involving increasing rank, prestige, and responsibilities. Generally, the promotion is linked to increment in wages and incentives, but it is not essential that it always relates to that part of an organization. 8. Transfer means the movement of an employee from one job to another without increment in pay, status, or responsibilities. Therefore, this process of staffing needs to evaluate on a timely basis. 9. Appraisal: Appraisal of employees as to how efficiently the subordinate is performing a job and to know his aptitudes and other qualities necessary for performing the job assigned to him. 10. Determination of Remuneration This is the last process which is very crucial as it involves in determining remuneration which is one of the most difficult functions of the personnel department because there are no definite or exact means to determine correct wages. PROCESS OF RECRUITMENT Recruitment is a process of finding and attracting the potential resources for filling up the vacant positions in an organization. Recruitment process is the first step in creating a powerful resource base. The process undergoes a systematic procedure starting from sourcing the resources to arranging and conducting interviews and finally selecting the right candidates. 57 Principles of Management and Organization 1. RECRUITMENT PLANNING- is the first step of the recruitment process, where the vacant positions are analyzed and described. It includes job specifications and its nature, experience, qualifications, and skills required for the job, etc. A structured recruitment plan is mandatory to attract potential candidates from a pool of candidates. The potential candidates should be qualified, experienced with a capability to take the responsibilities required to achieve the objectives of the organization. STEPS OF RECRUITMENT PLANNING IDENTIFYING VACANCY -The first and foremost process of recruitment plan is identifying the vacancy. This process begins with receiving the requisition for recruitments from different department of the organization to the HR Department, which contains – 1. Number of posts to be filled 2. Number of positions 3. Duties and responsibilities to be performed 4. Qualification and experience required When a vacancy is identified, it the responsibility of the sourcing manager to ascertain whether the position is required or not, permanent, or temporary, full-time, or part-time, etc. These parameters should be evaluated before commencing recruitment. Proper identifying, planning, and evaluating leads to hiring of the right resource for the team and the organization. JOB ANALYSIS is a process of identifying, analyzing, and determining the duties, responsibilities, skills, abilities, and work environment of a specific job. These factors help in identifying what a job demands and what an employee must possess in performing a job productively. It also helps in understanding what tasks are important and how to perform them. Its purpose is to establish and document the job relatedness of employment procedures such as selection, training, compensation, and performance appraisal. The following steps are important in analyzing a job – 1. Recording and collecting job information 2. Accuracy in checking the job information 3. Generating job description based on the information 4. Determining the skills, knowledge, and skills, which are required for the job The immediate products of job analysis are job descriptions and job specifications. JOB DESCRIPTION is an important document, which is descriptive in nature and contains the final statement of the job analysis. This description is very important for a successful recruitment process. It provides information about the scope of job roles, responsibilities, and the positioning of the job in the organization. And this data gives the employer and the organization a clear idea of what an employee must do to meet the requirement of his job responsibilities. Job description is generated for fulfilling the following processes – 1. Classification and ranking of jobs 2. Placing and orientation of new resources 3. Promotions and transfers 4. Describing the career path 5. Future development of work standards 6. A job description provides information on the following elements − 7. Job Title / Job Identification / Organization Position 8. Job Location 9. Summary of Job 10. Job Duties 11. Machines, Materials and Equipment 12. Process of Supervision 13. Working Conditions 14. Health Hazards 58 Principles of Management and Organization JOB SPECIFICATION focuses on the specifications of the candidate, whom the HR team is going to hire. The first step in job specification is preparing the list of all jobs in the organization and its locations. The second step is to generate the information of each job. This information about each job in an organization is as follows − 1. Physical specifications 2. Mental specifications 3. Physical features 4. Emotional specifications 5. Behavioral specifications A job specification document provides information on the following elements − 1. Qualification 2. Experiences 3. Training and development 4. Skills requirement 5. Work responsibilities 6. Emotional characteristics 7. Planning of career JOB EVALUATION is a comparative process of analyzing, assessing, and determining the relative value/worth of a job in relation to the other jobs in an organization. The main objective of job evaluation is to analyze and determine which job commands how much pay. There are several methods such as job grading, job classifications, job ranking, etc., which are involved in job evaluation. Job evaluation forms the basis for salary and wage negotiations. 2. STRATEGY DEVELOPMENT- Once it is known how many and what type of recruits are required, serious consideration needs to be given to (a) make or ‗buy‘ employees; (b) technological sophistication of recruitment and selection devices; (c) geographic distribution of labor markets comprising job seekers; (d) sources of recruitment; and (e) sequencing the activities in the recruitment process. 2.1 Make „or „Buy‟: Firms must decide whether to hire less skilled employees and invest on training and education programs, or they can hire skilled labor and professionals. Essentially, this is the ‗make‘ (hire less skilled workers) or ‗buy‘ (hire skilled workers and professionals) decision. Organizations which hire skilled labor and professionals shall have to pay more for these employees. ‗Buying‘ employees has the advantage in the sense that the skilled labor and professionals can begin the work immediately and little training may be needed. But the high remuneration that the skilled workers and professionals demand may outweigh the benefits. 2.2 Technological Sophistication: The second decision in strategy development relates to the methods used in recruitment and selection. This decision is mainly influenced by the available technology. The advent of computers has made it possible for employers to scan national and international applicant qualifications. Although impersonal, computers have given employers and job seekers a wider scope of options in the initial screening stage. Technological advancement has made it possible for job seekers to gain better access. They have begun sending videotapes about themselves to several companies without wasting time and without spending money on travel. To reduce costs, firms investigate labor markets most likely to offer the required job seekers. Generally, companies investigate the national market for managerial and professional employees, regional or local markets for technical employees, and local markets for clerical and blue-collar employees. In the final analysis, organizations recruit where experience and circumstances dictate likely success. Recognizing this, many adopt an incremental strategy in which initial efforts are concentrated in regional or local labor markets and expanded only if these efforts fail to achieve the desired results. How to look refers to the methods of SOURCES OF RECRUITMENT. There are several sources and they may be broadly organized into (a) Internal, and (b) External. 59 Principles of Management and Organization -INTERNAL recruitment seeks applications for positions from those who are currently employed. Internal sources include present employees, employee referrals, former employees, and former applicants. -EXTERNAL sources far outnumber the internal methods. Specifically, sources external to a firm are professional or trade associations, advertisements, employment exchanges, college/university/institute placement services, walk-ins and write-ins, consultants, contractors, displaced persons, radio and television, acquisitions and mergers, and competitors. 3. SEARCHING - is the process of recruitment where the resources are sourced depending upon the requirement of the job. After the recruitment strategy is done, the searching of candidates will be initialized. This process consists of two steps – a)Source activation − Once the line manager verifies and permits the existence of the vacancy, the search for candidates starts. b)Selling − Here, the organization selects the media through which the communication of vacancies reaches the prospective candidates. Searching involves attracting the job seekers to the vacancies. The sources are broadly divided into two categories: Internal Sources and External Sources. Internal sources of recruitment refer to hiring employees within the organization through 1. Promotions 2. Transfers 3. Former Employees 4. Internal Advertisements (Job Posting) 5. Employee Referrals 6. Previous Applicants External sources of recruitment refer to hiring employees outside the organization through 1. Direct Recruitment 2. Employment Exchanges 3. Employment Agencies 4. Advertisements 5. Professional Associations 6. Campus Recruitment 7. Word of Mouth 4. SCREENING - starts after completion of the process of sourcing the candidates. Screening is the process of filtering the applications of the candidates for further selection process. It is an integral part of recruitment process that helps in removing unqualified or irrelevant candidates, which were received through sourcing. The screening process of recruitment consists of three steps – 4.1 Reviewing Resumes and Cover Letters – Reviewing is the first step of screening candidates. In this process, the resumes of the candidates are reviewed and checked for the candidates‘ education, work experience, and overall background matching the requirement of the job. While reviewing the resumes, an HR executive must keep the following points in mind, to ensure better screening of the potential candidates − 1. Reason for change of job 2. Longevity with each organization 3. Long gaps in employment 4. Job-hopping 5. Lack of career progression 4.2 Conducting Telephonic or Video Interviews – Conducting telephonic or video interviews is the second step of screening candidates. In this process, after the resumes are screened, the candidates are contacted through phone or video by the hiring manager. This screening 60 Principles of Management and Organization process has two outcomes − It helps in verifying the candidates, whether they are active and available. It also helps in giving a quick insight about the candidate‘s attitude, ability to answer interview questions, and communication skills. 4.3 Identifying the Top Candidates – Identifying the top candidates is the final step of screening the resumes/candidates. In this process, the cream/top layer of resumes are shortlisted, which makes it easy for the hiring manager to take a decision. This process has the following three outcomes 1. Shortlisting 5 to 10 resumes for review by the hiring managers 2. Providing insights and recommendations to the hiring manager 3. Helps the hiring managers to take a decision in hiring the right candidate 5. Evaluation and Control- are the last stage in the process of recruitment. In this process, the effectiveness and the validity of the process and methods are assessed. Recruitment is a costly process; hence it is important that the performance of the recruitment process is thoroughly evaluated. The costs incurred in the recruitment process are to be evaluated and controlled effectively. These include the following − 1. Salaries to the Recruiters 2. Advertisements cost and other costs incurred in recruitment methods, i.e., agency fees. 3. Administrative expenses and Recruitment overheads 4. Overtime and Outstanding costs, while the vacancies remain unfilled 5. Cost incurred in recruiting suitable candidates for the final selection process 6. Time spent by the Management and the Professionals in preparing job description, job specifications, and conducting interviews. TYPES OF RECRUITMENT 1. INTERNAL RECRUITMENT - is a recruitment which takes place within the concern or organization. Internal sources of recruitment are readily available to an organization. Internal sources are primarily three - Transfers, promotions, and Re-employment of ex-employees. Internal recruitment may lead to increase in employee‘s productivity as their motivation level increases. It also saves time, money, and efforts. But a drawback of internal recruitment is that it refrains the organization from new blood. Also, not all the manpower requirements can be met through internal recruitment. Hiring from outside must be done. a) TRANSFERS- Transfer refers to the process of interchanging from one job to another without any change in the rank and responsibilities. It can also be the shifting of employees from one department to another department or one location to another location, depending upon the requirement of the position. b) PROMOTIONS (through Internal Job Postings)- Promotion refers to upgrading the cadre of the employees by evaluating their performance in the organization. It is the process of shifting an employee from a lower position to a higher position with more responsibilities, remuneration, facilities, and status. Many organizations fill the higher vacant positions with the process of promotions, internally. c) RE-EMPLOYMENT OF EX-EMPLOYEES - Re-employment of ex-employees is one of the internal sources of recruitment in which employees can be invited and appointed to fill vacancies in the concern. There are situations when ex-employees provide unsolicited applications also. 2. EXTERNAL RECRUITMENT - External sources of recruitment must be solicited from outside the organization. External sources are external to a concern. But it involves lot of time and money. The external sources of recruitment include – Employment at factory gate, advertisements, employment exchanges, employment agencies, educational institutes, labor contractors, recommendations etc. a. EMPLOYMENT AT FACTORY LEVEL - This a source of external recruitment in which the applications for vacancies are presented on bulletin boards outside the Factory or at the Gate. This kind of recruitment is applicable generally where factory workers are to be appointed. There are people who keep on soliciting jobs from one place to another. These 61 Principles of Management and Organization applicants are called as unsolicited applicants. These types of workers apply on their own for their job. For this kind of recruitment workers tend to shift from one factory to another and therefore they are called as ―badly‖ workers. b. ADVERTISEMENT - It is an external source which has got an important place in recruitment procedure. The biggest advantage of advertisement is that it covers a wide area of market and scattered applicants can get information from advertisements. Medium used is Newspapers and Television. c. EMPLOYMENT EXCHANGES - There are certain Employment exchanges which are run by government. Most of the government undertakings and concerns employ people through such exchanges. Now-a-days recruitment in government agencies has become compulsory through employment exchange. d. EMPLOYMENT AGENCIES - There are certain professional organizations which look towards recruitment and employment of people, i.e. these private agencies run by private individuals supply required manpower to needy concerns. e. EDUCATIONAL INSTITUTIONS - There are certain professional Institutions which serves as an external source for recruiting fresh graduates from these institutes. This kind of recruitment done through such educational institutions, is called as Campus Recruitment. They have special recruitment cells which helps in providing jobs to fresh candidates. f. Recommendations - There are certain people who have experience in an area. They enjoy goodwill and a stand in the company. There are certain vacancies which are filled by recommendations of such people. The biggest drawback of this source is that the company must rely totally on such people which can later prove to be inefficient. g. Labor Contractors - These are the specialist people who supply manpower to the Factory or Manufacturing plants. Through these contractors, workers are appointed on contract basis, i.e. for a time. Under conditions when these contractors leave the organization, such people who are appointed must also leave the concern. SELECTION PROCESS Employee Selection is the process of putting right men on right job. It is a procedure of matching organizational requirements with the skills and qualifications of people. Effective selection can be done only when there is effective matching. By selecting best candidate for the required job, the organization will get quality performance of employees. Moreover, organization will face less of absenteeism and employee turnover problems. By selecting right candidate for the required job, organization will also save time and money. Proper screening of candidates takes place during selection procedure. All the potential candidates who apply for the given job are tested. But selection must be differentiated from recruitment, though these are two phases of employment process. Recruitment is a positive process as it motivates more of candidates to apply for the job. It creates a pool of applicants. It is just sourcing of data. While selection is a negative process as the inappropriate candidates are rejected here. Recruitment precedes selection in staffing process. Selection involves choosing the best candidate with best abilities, skills, and knowledge for the required job. 62 Principles of Management and Organization The Employee selection Process takes place in following order: 1. Preliminary Interviews- It is used to eliminate those candidates who do not meet the minimum eligibility criteria laid down by the organization. The skills, academic and family background, competencies and interests of the candidate are examined during preliminary interview. Preliminary interviews are less formalized and planned than the final interviews. The candidates are given a brief up about the company and the job profile; and it is also examined how much the candidate knows about the company. Preliminary interviews are also called screening interviews. 2. Application blanks- The candidates who clear the preliminary interview are required to fill application blank. It contains data record of the candidates such as details about age, qualifications, reason for leaving previous job, experience, etc. 3. Written Tests- Various written tests conducted during selection procedure are aptitude test, intelligence test, reasoning test, personality test, etc. These tests are used to objectively assess the potential candidate. They should not be biased. 4. Employment Interviews- It is a one to one interaction between the interviewer and the potential candidate. It is used to find whether the candidate is best suited for the required job or not. But such interviews consume time and money both. Moreover, the competencies of the candidate cannot be judged. Such interviews may be biased at times. Such interviews should be conducted properly. No distractions should be there in room. There should be an honest communication between candidate and interviewer. 5. Medical examination- Medical tests are conducted to ensure physical fitness of the potential employee. It will decrease chances of employee absenteeism. 6. Appointment Letter- A reference check is made about the candidate selected and then finally he is appointed by giving a formal appointment letter. 7. Receiving Applications -Potential employees apply for a job by sending applications to the organization. The application gives the interviewers information about the candidates like their bio-data, work experience, hobbies and interests. 8. Screening Applications -Once the applications are received, they are screened by a special screening committee who choose candidates from the applications to call for an interview. Applicants may be selected on special criteria like qualifications, work experience etc. 9. Employment Tests -Before an organization decides a suitable job for any individual, they must gauge their talents and skills. This is done through various employment tests like intelligence tests, aptitude tests, proficiency tests, personality tests etc. 10. Employment Interview -The next step in the selection process is the employee interview. Employment interviews are done to identify a candidate‘s skill set and ability to work in an organization in detail. Purpose of an employment interview is to find out the suitability of the candidate and to give him an idea about the work profile and what is expected of the potential employee. An employment interview is critical for the selection of the right people for the right jobs. 11. Checking References -The person who gives the reference of a potential employee is also a very important source of information. The referee can provide info about the person‘s capabilities, experience in the previous companies and leadership and managerial skills. The information provided by the referee is meant to kept confidential with the HR department. IMPORTANCE OF THE SELECTION PROCESS 1. Proper selection and placement of employees lead to growth and development of the company. The company can, similarly, only be as good as the capabilities of its employees. 2. The hiring of talented and skilled employees results in the swift achievement of company goals. 3. Industrial accidents will drastically reduce in numbers when the right technical staff is employed for the right jobs. 4. When people get jobs, they are good at, it creates a sense of satisfaction with them and thus their work efficiency and quality improve. 5. People who are satisfied with their jobs often tend to have high morale and motivation to perform better. 63 Principles of Management and Organization INDUCTION TRAINING AND EMPLOYEE REMUNERATION Induction training is a training provided to new employees by the employer in order to assist in adjustment to their new job tasks and to help them become familiar with their new work environment and the people working around them. This type of training will also outline the basic overview of the business and its services as well as the new employee's role in the environment. When done effectively, it increases employee retention and overall performance and happiness at work, benefiting both the organization and the employee. Induction training has many benefits for organizations and its employees. For the organization, an effective induction training system has the following advantages: For the Company a) Saves a lot of time and company money: Induction training provides all the information needed to help a new hire to start performing his duties. The better and more effective the training, the faster a new employee can start delivering results quickly. b) Reduces employee turnover: When a new employee starts in a company, he has a thousand questions about his new role and the company itself that need to be answered. The fastest he can get an answer for those questions, the more prepared and confident he will feel about his new position and what he can accomplish inside the organization. c) Ensures operational efficiency: An effective training helps employees understand the company culture, its values, its place in the world, and where they, as employees, fit in the puzzle. Also, keeping all new hires and employees on the same page ensures quality and consistency across all the company‘s products and services. For the Employee a) Makes the new employee feel respected and valued: good induction training is like a warm welcome: it helps employees feel valued, respected and a part of something bigger than themselves. It motivates them to give their best. b) Provides the necessary information: A comprehensive induction training helps the employee get the necessary information to do his job and clarifies the companies‘ expectations of him. Learning the company culture, rules and policies makes it easier to adapt to the work environment. c) Helps establishing good communication: By learning how the company operates, its structure and the people he has to answer to, the new employee knows exactly where and who to look for when he needs information or has questions. The disadvantages don‘t really come with the fact of conducting induction training itself, since training employees is always something positive, except when the training is poorly designed and does not meet the needs of the employees and may get them started off on the wrong note. The worst consequence of that, which would be similar of not providing any training at all, is high (and costly) employee turnover. And even if the employee stays in the company, he will be ill equipped to perform his job well, could be embarrassed to ask questions and might lose trust in the company. EMPLOYEE RENUMERATION refers to the reward or compensation given to the employees for their work performances. Remuneration provides basic attraction to an employee to perform job efficiently and effectively. Remuneration leads to employee motivation. Salaries constitutes an important source of income for employees and determine their standard of living. Salaries effect the employee‘s productivity and work performance. Thus, the amount and method of remuneration are very important for both management and employees. IMPORTANCE OF TRAINING Training is not just important to any company, it is vital. Although there are many categories of training such as management training and or sales training, employees with Project Management skills are an important asset to any organization. Training presents a prime opportunity to expand the 64 Principles of Management and Organization knowledge base of all employees, but many employers in the current climate find development opportunities expensive. Employees attending training sessions also miss out on work time which may delay the completion of projects. However, despite these potential drawbacks, training and development provides both the individual and organizations with benefits that make the cost and time a worthwhile investment. The return on investment from training and development of employees is really a no brainer. WAYS/ METHOD OF TRAINING Training method refers to a way or technique for improving knowledge and skills of an employee for doing assigned jobs perfectively. The organization must consider the nature of the job, size of the organization & workers, types of workers and cost for selecting a training method. There are different types of the training method. 1. On the Job Training (Internal Training) These methods are generally applied in the workplace while employees are working. This form helps particularly to develop the occupational skills necessary to manage an organization, to fully understand the organization‘s products and services and how they are developed and carried out. a) Apprenticeship programs - These programs put the trainee under the guidance of a master worker. People seeking to enter the skilled trades to become, for example, plumbers, electricians etc. b) Planned progression - It is a technique that gives employees a clear idea of their path of development. They know where they stand and where they are going. c) Job rotation - It involves periodically moving people from one job to another. The purpose of job rotation is to broaden the knowledge of managers or potential managers. It also increases their experiences. d) Coaching - To be effective, which is the responsibility of every line manager, must be done in a climate of confidence and trust between the superior and the trainees. Effective coaching will develop the strengths and potentials of subordinates and help them overcome their weakness. 2. Off the Job Training Off-the-job training is sometimes necessary to get people away from the work environment to a place where the frustrations and buzz of work are eliminated. Training is generally given in the form of lectures, discussions, case studies, and demonstrations. This enables the trainee to study theoretical information or be exposed to new and innovative ideas. a) Lectures - The lecture is one of the oldest forms of training, second to demonstrate. Lecture may be printed or oral. It is the best used to create an understanding of a topic or to influence attitudes through education or training about a topic. b) Discussion method - The discussion method uses a lecture to provide trainees with information that is supported, reinforced, and expanded on through interactions both among the trainees and between the trainer and trainees. c) Demonstrations - A demonstration is a visual display of how to do something or how something works. To be effective, a demonstration should, at a minimum, be accompanied by a lecture and preferably by a discussion. d) Seminars and conferences - Conference programs may be used in internal or external training. During conference programs, managers or potential managers are exposed to the ideas of speakers who are experts in their fields. A careful selection of topics and speakers will increase the effectiveness of this training device. EMPLOYEE RENUMERATION REMUNERATION is a general term used to describe any amount of income that is given to employees in exchange of the services they render for the organization. It covers all forms of compensation packages an employee in an organization receives for a service but not on a regular basis. It includes salary, sales commissions, bonus, wages, fees, pensions, leave encashment, gratuity, 65 Principles of Management and Organization overtime, and retirement allowance. It also often encompasses non-monetary incentives as well as allowances and benefits such as flextime, time off, tuition assistance, mentoring programs, free or discounted parking or anything that is designed to address a specific need and is provided in a noncash form. Remuneration and salary are often mistaken to be similar but for those who are doing a job in an organization, it is significant to know the differences between the two. While both terms imply money and other incentives received by the employees for their work performances, there are subtle differences between them: a) Remuneration is a broader term that encompasses salary. b) Salary is more commonly used to refer to the payment of the employees‘ rendered services. c) Salary is a fixed amount of money given to an employee on a timely basis (weekly, monthly, etc.) while remuneration can change and vary depending on the employee‘s performance and output. Remuneration is mostly used to refer to the pay of the employees in higher echelons of management, whereas, the term salary is often used to describe the amount of money employees from lower levels of organization receive. METHODS OF EMPLOYEE REMUNERATION TIME RATE METHOD – under this system, remuneration is directly linked with the time spent an employee devotes on the job. The remuneration is fixed and a pre-decided amount hourly, daily, weekly, or monthly irrespective of their performances. This method leads to minimum wastage of resources and quality output. This can be very beneficial to starting employees as they can learn and improve their work without any reduction in their salaries. It encourages employees to work together and efficiently to get equal salaries. However, this method can lead to tight supervision, lower employee morale, indefinite employee cost and can demotivate other employees into working effectively since there is no distinction made between efficient and inefficient employees. PIECE RATE METHOD – in this system the remuneration depends and is based on the pieces or units produced by an employee. This method emphasizes the quantity of the output rather than the quality. This requires less supervision hence the per unit cost of production is low. This method boosts the employee morale as the salaries are directly related with their work efforts. There is also a greater work-efficiency in this method. However, it can lead to deterioration in work quality, lesser unity within the employees, wastage of resources and high cost production. MOTIVATION Remuneration leads to employee motivation. It is one of the key tools to appraise employee‘s work performances which prompts one to work with zeal and enthusiasm. Salaries constitute an important source of income for employees and determine their standard of living, thus, salaries affect the employees‘ productivity and work performance. Remuneration is directly or indirectly one of the principal parts of motivation in the society. An unambiguous and well-marked system motivates the employees, which further results to increase productivity (Chi and Han 2008). Yermack (2004) has stated in his study that all the business organizations act like a profit maximization institution, so they put their efforts to improve the performance of its employees by prompting them. This motivation ultimately helps the organizations to increase productivity level. Work motivation is interrelated with job satisfaction. Money often is looked upon as a means of fulfilling the most basic needs of man. These needs are made available through the purchasing power provided by monetary income: remuneration and salary of individual (Stajkovic and Luthans 2003). According to different motivation theories, such as Maslow‘s Hierarchy of Needs, Two Factor Theory given by Herzberg‘s, McGregor‘s Theory X and Theory Y, Achievement Theory, Taylor‘s Motivational Theory, etc. money is one of the main sources to persuade the behavior of an 66 Principles of Management and Organization individual towards his organization and work productivity (Wheeler 2008). Thus, it is necessary for the corporate executives or managers to be aware with the economic and social background of employees to offer good remunerations as per their talent and skills and motivate them to work. The general meaning of remuneration is the basic salary or pay of an employee, but in the broader sense, remuneration comprises salary, fringe benefits, compensation, bonus, commissions, employee stock option, etc. (Guedri and Hollandts 2008). In this highly changing and competitive environment, remuneration is one of the main tools for the manager to improve the productivity of the employees, to attract competent personnel, to retain present employees, to reduce the rate of absents and employee turnover, to manage job sequences, to strengthen union management relationships, to improve public image of the company, etc. (Perry, Mesch and Paarlberg 2006). FOUNDATION OF BEHAVIOR The rational actor model was developed in the 20th century by John von Neumann, Leonard Savage, and many others, and its applicability was shown to depend substantively only on choice consistency over sets of probability distributions (Kreps 1988). The rational actor model is the most powerful and fruitful analytical tool of the behavioral sciences. Economic theory and biological theory thus have a natural affinity: the choice consistency on which the rational actor model of economic theory depends is rendered plausible by biological evolutionary theory, and the optimization techniques pioneered by economic theorists are routinely applied and extended by biologists in modeling the behavior of a vast array of organisms. Unfortunately, the technical definition of the term ―rational‖ in choice theory is so far from any of the standard, non-technical, meanings of the term that propose to call it the Beliefs, Preferences, and Constraints (BPC) model, a name more informative of the model‘s operation. The most common assumption is that "rational" means self-interested, which is how economists use the term in an analyzing market transaction. However, there is nothing in the BPC model that precludes agents from valuing the welfare of others, caring about fairness and justice, or adhering to norms of honesty and trustworthiness. a) GOALS OF ORGANIZATIONAL BEHAVIOR- focuses on how humans behave in organizations, including how they interact with each other, as well as how they work within the organizations' structures to get their work done. Organizational Behavior is the ―study of human behavior and the organization, and the organization itself. The goals of Organizational Behavior are to explain, predict, and influence behavior. Managers need to be able to explain why employees engage in some behaviors rather than others, predict how employees will respond to various actions and decisions, and influence how employees behave. b) ATTITUDES- Individuals bring several differences to work. They have a variety of personalities, values, and attitudes. When they enter organizations, their stable or transient characteristics affect how they behave and perform. Moreover, companies hire people with the expectation that they have certain knowledge, skills, abilities, personalities, and values. Learn about the principles of management through the planning, organizing, leading, controlling (P-O-L-C) framework. Employees', personalities, attitudes, and work behaviors affect how managers approach each P-O-L-C dimension. Here are just a few examples: 1. When conducting environmental scanning during process, a manager's perceptions color the information that is absorbed and processed. 2. Employee preferences for job design and enrichment (aspects of organizing) may be a function of individuals' personalities and values. 3. Leading effectively requires an understanding of employees' personalities, values, and attitudes. 4. Absenteeism can challenge a managers' ability to control costs and performance (both at the group and individual levels). c) PERSONALITY- encompasses a person's relatively stable, feelings, thoughts, and behavioral patterns. Each of us has a unique personality that differentiates us from other people and understanding someone's personality gives us clues about how that person is likely to act and 67 Principles of Management and Organization feel in a variety of situations. To manage effectively, it is helpful to understand the personalities of different employees. Having this knowledge is also useful for placing into jobs and organizations. THE BIG FIVE (5) PERSONALITY TRAIT 1. Openness - is the degree to which a person is curious, original, intellectual, creative, and open to new ideas. People high in openness seem to thrive in situations that require flexibility and learning new things. They are highly motivated to learn new skills, and they do well in training settings. 2. Conscientiousness - refers to the degree to which a person is organized, systematic, punctual, achievement-oriented, and dependable. Conscientiousness is the one personality trait uniformly predicts how high a person's performance will be across a variety of occupations and jobs. In fact, conscientiousness is the trait most desired by recruiters, and highly conscientious applicants tend to succeed in interviews. 3. Extraversion - is the degree to which a person is outgoing, talkative, sociable, and enjoys socializing. One of the established findings is that they tend to be more effective in jobs involving sales. They tend to be effective as managers and they demonstrate inspirational leadership behaviors. 4. Agreeableness - is the degree to which a person is affable, tolerant, sensitive, trusting, kind, and warm. In other words, people who are high in agreeableness are likeable people who get along with others. Not surprisingly, agreeable people help others at work consistently; this helping behavior does not depend on their good mood. 5. Neuroticism - refers to the degree to which a person is anxious, irritable, temperamental, and moody. It is perhaps the only Big Five dimensions where scoring high is undesirable. Neurotic people tend to have emotional adjustment problems and habitually experience stress and depression. People very high in Neuroticism experience several problems at work. d) PERCEPTION- is simply defined how a person sees the world around them and how they interpret that information. It is a subconscious thing that mind does and is contingent on your ability to pay attention to your surroundings and your existing knowledge. In organizational behavior and business, perception often helps shape a person's personality and how they act in certain situations. e) EMOTIONAL QUOTIENT- Also known as Emotional intelligence is defined as the ability to understand and manage your own emotions, as well as recognize and influence the emotions of those around you. Over the years, emotional intelligence has evolved into a must-have skill. It is the strongest predictor of performance. FOUR (4) COMPONENTS OF EMOTIONAL INTELLIGENCE 1. SELF-AWARENESS - It is the core of everything. It describes your ability to not only understand your strengths and weaknesses, but to recognize your emotions and the effect they have on you and your team's performance. 2. SELF-MANAGEMENT - Self management refers to the ability to manage your emotions, particularly in stressful situations, and maintain a positive outlook despite setbacks. Leaders who lack self-management tend to react and have a harder time keeping their impulses on check. 3. SOCIAL AWARENESS - While it is not important to understand and manage your own emotions, you also need to know how to read a room. Social awareness describes your ability to recognize others' emotions and the dynamics in play within your organization. 4. RELATIONSHIP MANAGEMENT - Relationship management refers to your ability to influence, coach, and mentor others, and resolve conflict effectively