Saturday, June 14, 2008

Sunday, June 8, 2008

bbc japan citizen arrested 4 stapping 10 people

bbc japan citizen arrested 4 stapping 10 people

bbc japan citizen arrested 4 stapping 10 people

bbc japan citizen arrested 4 stapping 10 people

Japanese Management Theory

Theory Z: (Emerging Approach in Management Thought):

William Ouchi, a management expert, conducted research on both American (Theory X) and Japanese (Theory Y) and outlined a new theory called Theory Z. This theory combines the positive aspects of both the theories. The theory Z approach involves providing job security to employees to ensure their loyalty and long-term association with the company. It also involves job rotation of employees to develop their cross-functional skills. It also advocates the decision-making participation of the employees and emphasizes the use of formal control in the organization along with explicit performance measures. The organization shows concern to their employees’ well-being and lays emphasis on their training and development. The quality management is also the type of thought involves in this.

In other words, Theory Z companies were American in origin, but Japanese in conduct and experience. They used some Japanese managerial practices, but made adjustments according to the environment prevailing in the United States. Ouchi’s work showed that American organizations could benefit from thoughtful incorporation of the Japanese management practices.

Japanese Management Theory

Some of the specific Japanese management practices are appended below:

1. Lifetime Employment: Lifetime employment (Shushin Koyo) refers to recruitment of employees immediately upon graduation, generation of employment until retirement, and mandatory retirement. Under this, an employee spends his entire working life with a single enterprise. This helps generate a feeling of job security in the employee and a feeling of belongingness towards the enterprise. This concept brings “harmony”, which results employee loyalty.

2. Seniority System: This concept is closely related to the concept of lifetime employment. Companies following this concept, provide privileges to older employees who have been with it for a long time. Promotion and wages increases are based on the employee’s length of service (henko) in the company, not job performance.

3. Continuous Training: The secret of the success of Japanese managers may lie in “continuous training.” In Japanese firms however, every young manager has a “godfather,” who is never his boss or anyone in the direct line of authority. The “godfather” is not part of the top management, but is highly respected by others and is over 45 years of age. He is expected to advise, counsels and looks after his “godchild.”

4. Emphasis on Group Work: In Japanese organizations, a task is not assigned to an individual; instead several tasks are assigned to a group, which consists of a small number of people.

5. Decision-Making: In Japan, concept that change and new ideas should come primarily from personnel belonging to lower levels in the hierarchy. Thus, lower level prepares proposals for higher-level personnel. The “ringi system” refers to decision-making by consensus.

6. Complicated Performance Evaluation: When job descriptions are not well defined, and when tasks are performed by groups, it become difficult to evaluate individual job performance objectively and takes very long time. It also requires use of qualitative and quantitative information about performance. Since jobs are done on a group basis, individual merit rating systems cannot be used to demonstrate individual brilliance or dynamic leadership and job responsibility can’t be allocated.

7. Good benefits for Employees: Japanese companies provide substantial benefits to their employees. Such as housing and transportation allowances, bachelor accommodations, scholarships to their children, and low interest housing loans. Also includes rapid salary enhancements, premium pay for overtime etc. In Japanese companies, an employee moves up to the top of the corporate ladder and gets Car and a chauffeur, and memberships in social clubs and golf club. They also have post retirement schemes for all.

8. Simple and Flexible organization: In Japanese firms, very often, people are trained to be generalists. For this reason, the organization structure in Japan is relatively simple and flexible, and it is possible for people to take up a new challenge or a new task by forming a new formal or informal group.

To sum up, Japanese managerial practices emphasize lifetime employment, concern for the individual, seniority, and a sense of loyalty to the firm. Furthermore, decision-making is based on principles of full information sharing and consensus. They also carry out a complicated performance evaluation process, emphasize “father-like” leadership and offer employees good benefits.

Theory Z: (Emerging Approach in Management Thought): William Ouchi

Japanese Management Theory
Theory Z: (Emerging Approach in Management Thought):

William Ouchi, a management expert, conducted research on both American (Theory X) and Japanese (Theory Y) and outlined a new theory called Theory Z. This theory combines the positive aspects of both the theories. The theory Z approach involves providing job security to employees to ensure their loyalty and long-term association with the company. It also involves job rotation of employees to develop their cross-functional skills. It also advocates the decision-making participation of the employees and emphasizes the use of formal control in the organization along with explicit performance measures. The organization shows concern to their employees’ well-being and lays emphasis on their training and development. The quality management is also the type of thought involves in this.

In other words, Theory Z companies were American in origin, but Japanese in conduct and experience. They used some Japanese managerial practices, but made adjustments according to the environment prevailing in the United States. Ouchi’s work showed that American organizations could benefit from thoughtful incorporation of the Japanese management practices.

Japanese Management Theory

Some of the specific Japanese management practices are appended below:

1. Lifetime Employment: Lifetime employment (Shushin Koyo) refers to recruitment of employees immediately upon graduation, generation of employment until retirement, and mandatory retirement. Under this, an employee spends his entire working life with a single enterprise. This helps generate a feeling of job security in the employee and a feeling of belongingness towards the enterprise. This concept brings “harmony”, which results employee loyalty.

2. Seniority System: This concept is closely related to the concept of lifetime employment. Companies following this concept, provide privileges to older employees who have been with it for a long time. Promotion and wages increases are based on the employee’s length of service (henko) in the company, not job performance.

3. Continuous Training: The secret of the success of Japanese managers may lie in “continuous training.” In Japanese firms however, every young manager has a “godfather,” who is never his boss or anyone in the direct line of authority. The “godfather” is not part of the top management, but is highly respected by others and is over 45 years of age. He is expected to advise, counsels and looks after his “godchild.”

4. Emphasis on Group Work: In Japanese organizations, a task is not assigned to an individual; instead several tasks are assigned to a group, which consists of a small number of people.

5. Decision-Making: In Japan, concept that change and new ideas should come primarily from personnel belonging to lower levels in the hierarchy. Thus, lower level prepares proposals for higher-level personnel. The “ringi system” refers to decision-making by consensus.

6. Complicated Performance Evaluation: When job descriptions are not well defined, and when tasks are performed by groups, it become difficult to evaluate individual job performance objectively and takes very long time. It also requires use of qualitative and quantitative information about performance. Since jobs are done on a group basis, individual merit rating systems cannot be used to demonstrate individual brilliance or dynamic leadership and job responsibility can’t be allocated.

7. Good benefits for Employees: Japanese companies provide substantial benefits to their employees. Such as housing and transportation allowances, bachelor accommodations, scholarships to their children, and low interest housing loans. Also includes rapid salary enhancements, premium pay for overtime etc. In Japanese companies, an employee moves up to the top of the corporate ladder and gets Car and a chauffeur, and memberships in social clubs and golf club. They also have post retirement schemes for all.

8. Simple and Flexible organization: In Japanese firms, very often, people are trained to be generalists. For this reason, the organization structure in Japan is relatively simple and flexible, and it is possible for people to take up a new challenge or a new task by forming a new formal or informal group.

To sum up, Japanese managerial practices emphasize lifetime employment, concern for the individual, seniority, and a sense of loyalty to the firm. Furthermore, decision-making is based on principles of full information sharing and consensus. They also carry out a complicated performance evaluation process, emphasize “father-like” leadership and offer employees good benefits.

JAPANESE AND US MANAGEMENT APPROACHES

JAPANESE AND US MANAGEMENT APPROACHES


Japanese Management US Management
Planning
1. Long-term orientation 1. Primarily short-term orientation
2. Collective decision-making with consensus Individual decision-making
3. Involvement of many people while preparing and making the decision 3. Involvement of few people in making and “selling” the decisions to persons with divergent values.
4. Decisions flow bottom to Top and back 4. Decisions initiated at the Top, following down
5. Slow decision making; fast implementation of decisions 5. Fast decision-making; slow implementation requiring compromise, often resulting on sub-optimal decisions.
Organizing
1. Collective responsibility and accountability 1. Individual responsibility and accountability
2. Ambiguity of decision responsibility 2. Clear and specific decision responsibility
3. Informal Organization structure 3. Formal bureaucratic organizational structure
4. Well known common organization culture and philosophy; competitive spirit towards the enterprises 4. Lack of common organization culture, identification with profession rather than with company
Staffing
1. Young people hired out of school; hardly any mobility of people among companies 1. Young people hired out of school
2. Slow promotion through the ranks 2. Rapid advancement desired and demanded
3. Loyalties to the company 3. Loyalty to the profession
4. Very infrequent performance evaluation for new (young) employees 4. Frequent performance evaluation for new employees
5. Appraisal of long-term performance 5. Appraisal of short-term results
6. Promotions based on multiple criteria 6. Promotions based primarily on individuals performance
7. Training and development considered a long-term investment 7. Training and development undertaken with hesitance (for fear of turnover)
8. Life time employment common in large companies 8. Job insecurity prevailing
Leading
1. Leader acting as a social facilitator and group member 1. Leader acting as a decision-maker and head of the group
2. Paternalistic style 2. Directive style (strong firm, determined)
3. Common values facilitating co-operation 3. Often divergent values, individualism sometimes hindering co-operation
4. Avoidance of confrontation, sometimes leading to ambiguities; emphasis on harmony 4. Face-to-face confrontation common; emphasis on clarity
5. Bottom –up communication 5. Communication primarily Top to Bottom
Controlling
1. Control by peers 1. Control by superior
2. Control focus on group performance 2. Control focus on individual performance
3. Saving face 3. Fixing blame
4. Extensive use of quality control circles 4. Limited use of quality control circles

RELATIONSHIP BETWEEN PLANNING AND CONTROLLING

RELATIONSHIP BETWEEN PLANNING AND CONTROLLING


Planning and Controlling are inter-related within any organization. Planning sets the goals for the organization and controlling ensures its accomplishment. Planning decides the control process and controlling provides sound basis for planning. In simple words, planning and controlling are basically dependent on each other. The relationship between them is explained as under:

1. Planning Originates Controlling: In planning process, the objectives or targets are to be set, and to achieve those goals, control process is required. So we can say that Planning precedes control.

2. Control sustains planning: Controlling directs the course of planning. Controlling spots the areas where planning is required.

3. Controlling provides information for planning: In controlling, the performance is compared with standards and deviations, if any, are to be recorded. The information collected during any type of control, is used for planning also.

4. Planning and control are inter-related: Planning is the initial step and controlling is in the process and required at every step. For the same both are dependent upon each other and inter-related.

5. Both are forward looking: Planning is always for the future and control is forward looking. No one has the control on past, it is only the future, which can be controlled.

Planning and Controlling are concerned with the achievement of business goals. Their combined efforts are to achieve maximum output with minimum cost effect. Both, systematic planning and organized controlling are essential to achieve the organizational goals.

Operational Control

Operational Control
This technique is to be performed at the lower level of management as it is concerned with day-to-day operations. It ensures the better implementation of production activities. The techniques applied for this type of control includes PERT (Programme Evaluation & Review Technique), CPM (Critical Path Method), LP (Linear Programming), & AP (Assignment Programming) etc.

Economic Order Quantity (EOQ):

(i) Economic Order Quantity (EOQ): It is the measure in which the order of the quantity of things can be justified. If the ordering cost is more or carrying cost is more, the inventory or stocking is required. It has three major criteria:
Product Cost Ordering Cost Carrying Cost
(per unit per order) (per unit per year)
Ordering quantity or cost i.e. EOQ can be taken out through following formulae:
E O Q = 2 DCO D= Annual Demand, CO= Ordering Cost per order, CC= Carrying Cost per unit per year.
C C

(ii) Always Better Control (ABC): Expensive Material = Less Quantity
Category Units (Quantity) Cost (Price) Level of Control
A Around 20% 60 – 80% High Level Control
B 40 – 60% 40 – 60% Medium Level Control
C Above 60% Up to 40% Low Level Control
In this, always better control is to be maintained according to the things or material. This technique classify the Inventory into three categories i.e., A, B & C.
‘A’ category represents fewer (less) inventories but very high in Cost, so the high level of control is required for this.
‘B’ category represents average inventory having average cost, so it requires average control i.e., medium level control.
‘C’ category represents maximum inventory but having minimum cost, so the level of control applies here is very low.

Just In Time (JIT):

(iii) Just In Time (JIT): Under this type of Inventory control, the stocking is avoided and it procured as and when required. This also avoids blockage of money and the same money can be used for other productive purposes. But to materialize this type of technique, the important aspects are to be kept in mind i.e., The relationship with the supplier should be very good, the market should be nearer, the infrastructure should be adequate and good, etc

Inventory Control

Inventory Control
Inventory includes Raw Material, Work in Progress and finished goods. Inventory control involves stocking the materials and resources needed for the execution of organizational activities. Inventory comprises of huge investment. Maintaining the inventory at proper level helps managers to overcome the problem of uncertainty of supply and demand. Proper control can be done with the following methods:

CONTROL

According to Koontz and O’Donnell, “Managerial control implies the measurement of accomplishment against the standard and the correction of deviations to assure attainment of objectives according to plans.”

“Management control is the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of an organization’s objective.” R.N.Anthony

Control is the continuous process of measuring actual performance against standards or targets and taking corrective action if there are any deviations in the actual performance.

Controlling is the process of regulating the activities toward a pre-determined goal. It ensures that the strategies are implemented according to the plans and that the desired results are obtained. The control function plays a major role in the organization’s growth and the progress due to the certain factors:

Ø It helps in detecting environment changes that influence the organization’s goals.
Ø It helps managers to detect irregularities in the business operations.
Ø It helps managers to identify opportunities.
Ø It helps in maintaining adequate control in large and complex organizations.
Ø It helps in minimizing costs and increases the output of the organization.
Ø It helps managers to delegate authority to their subordinates to take decisions.

Steps of Basic Control Process

Determining Areas of Control

Establishing/ Setting standards

Measuring Performance

Comparison of performance with standards

Recognizing Positive Performance

Taking Corrective Actions

Adjustments in Standards & Measures

Determining area of Control: Based on the objectives and goals of the organization, the manager should determine the significant area where control is essential.

Establishing/Setting Standards: Standards are the criteria against which actual performance is measured and indicates the acceptable level of performance. Control standards are of different kinds- quantitative standards, cost standards, time standards, and qualitative standards.

Measuring performance: After establishing the control standards, the actual performance should be measured. The manager should ensure that the measurement of the performance is accurate, reliable, simple and objective.

Comparing performance with standards: The actual performance is compared with the control standards to ensure that the actual performance conforms to the standards. Management by exception, personal observation, and management by walking around the work areas are some of the techniques to measure performance.

Recognizing positive performance: Manager should recognize the positive performance of subordinates and appreciate it with good remarks and rewards. This motivates employees towards efficient performance.

Taking corrective action: Corrective actions should be taken if there are any serious deviations between the actual performance and the established standards.

Adjusting standards and measures: The performance standards should be reviewed regularly to match the environment conditions and organizational situations.


TYPES OF CONTROL


Feed Forward Control Concurrent Control Feedback Control







Feed forward Control: It is a future oriented control and is considered to be pre-control, pre-action, or preliminary control. It is a control technique that predicts future problems and develops measures to prevent them. It puts standards on input by checking of Manpower, Machines, Money and Material quality.

Concurrent Control: This is also known as Steering Control. This system checks actual performance and ensures that it conforms to the set standards. This control technique is used during the implementation of the activity. Quality control inspections, approval of requisitions, and safety checks are some examples of this control, which are to be exercised at the time of processing of the goods and services.

Feedback Control: This is also known as Post action control. In this, actual performance is compared with the established standards to detect any deviations after the output we get in hand. Based on the information about the results of performance, corrective action is taken to adjust the performance. Accounting records, disciplinary actions, etc., are some of the examples of this control.

Besides these controls, the control system has two more types called as Cybernetic and Non-cybernetic control.
o Cybernetic control system is a computerized and self-regulating control system, which monitors situations and takes corrective actions.
o Non-cybernetic control system depends on human discretion. Complex areas of control need managerial discretion for corrective action to be taken and deviations to be minimized.

TECHNIQUES & MAJOR ORGANIZATIONAL CONTROL SYSTEM

Financial Control

Budgetary Control

Quality Control

Inventory Control

Operational Control

Computer Based Information System

Financial Control
Financial control can be exercised through the use of various tools and techniques. Widely known control techniques in this are financial statements and ratio analysis. The financial statements include Profit & Loss Account, Balance Sheets, Income statements, Cash Flow Statements and Fund Flow statements etc.
Ratio analysis is the process of determining and evaluating financial ratios. A ratio is an index that measures one variable relative to another and it is expressed as a percentage of a rate. Ratio analysis is useful in comparing data such as current performance with past performance, the firm’s performance with its competitors, etc. The important ratios used in organizations are Liquidity ratios, Asset management ratios, Debt management ratios and Profitability ratios.
Besides this, we have two new techniques in this control. Those are:
(iv) Economic Value Added (EVA)
(v) Market Value Added (MVA)
EVA is the difference between the actual profitability of the company and normal rate of return on investment.
MVA is the difference between the market value of the company at the beginning of the year and at the end of the year.
Budgetary Control
“Budgets are the formal quantitative statements of the resources allocated for the execution of activities over a given period of time and include information about projected income, expenditure and profits.” James Stoner, R. Edward Freeman & Daniel R. Gilbert.
Budgeting is the process of formulating plans for the organization for a given period of time and estimating the amount of resources required to carry out the planned activities.
We can use Budgets as standards for comparing the performances of different departments, sub-departments and the employees.
Quality Control
The process of monitoring specific activities to determine the compliance of their quality with relevant quality standards and identifying ways to eliminate causes of unsatisfactory performance is called Quality Control.
It ensures superior quality of goods and services to be matched to the needs and preferences of customer.
The tools can help to improve the quality of goods and services are:
(i) Quality Circle (QC).
(ii) Total Quality Management (TQM).
Quality Circle: It is a group of experts, which generally belong to a particular department of an organization and meet regularly to solve their problems at work so the quality can’t be hampered.
Total Quality Management: It is a wider concept of control on quality. It can be explained as:
· It is the department of Quality Management.
· It carries out daily checks on quality.
· It ensures and try to provide extended quality.
· It works towards continuous improvement in quality.
· It works on quality by adopting new techniques, by planning, by control etc.
Inventory Control
Inventory includes Raw Material, Work in Progress and finished goods. Inventory control involves stocking the materials and resources needed for the execution of organizational activities. Inventory comprises of huge investment. Maintaining the inventory at proper level helps managers to overcome the problem of uncertainty of supply and demand. Proper control can be done with the following methods:

CO-ORDINATION

CO-ORDINATION


Coordination is the orderly arrangement of group efforts to provide Unity of Action in the pursuit of common objective. Co-ordination is a formal term whereas Co-operation is a voluntary deed.

“Coordination is a process of so arranging group activities in relation to time, place and effort that each item will take care of itself according to the need of the situation.” Spriegel

“To co-ordinate is to harmonize all the activities of a concern so as to facilitate its working and its success.” Fayol

Objectives, Importance & Significance
The need of coordination arises when two or more persons work together to achieve the common objective. Following points brings out its importance:

(a) Growth in Size: In a large organization, the numbers of employees are more. It is not possible for the manager to keep track and personal contact with each and everyone of them. Hence, as per growth of the organization, the enhancement of coordination should also be there for better interpersonal relationship, better communication and keep harmony among them.

(b) Specialization: In modern business, every individual concentrate on one type of work through out his career. His outlook becomes narrow and he tends to overemphasis on his work. So, coordination is necessary to create Unity of Action in the midst of diversity of task.

In other words we can say that, every department in the organization is headed by a specialist, who tries to over emphasis his role. Co-ordination of diverse activities of various departments is of utmost importance otherwise there may be utter confusion and chaos.

(c) Human Nature: Mostly, the human beings are selfish in nature and they prefer their personal interest and even their own department. Coordination is required to have better cooperation and support within and between other department and employees.

Techniques/Methods of Co-ordination

(i) Defining clearly authority and responsibility.
(ii) Formulation of clear-cut policies and procedures.
(iii) Mutual communication.
(iv) Existence of community of interest.
(v) Effective Leadership.
(vi) Effective Control.
(vii) Voluntary Co-operation.
(viii) Sound organizational structure and manuals.
(ix) Balancing, timing and integrating.

1. Defining clearly authority and responsibility: In an organization there are several vertical and horizontal authority relationships. Authority flows from Top to the bottom. Responsibility cn be fixed only when the authority and its source is clearly demarcated.

2. Formulation of clear-cut Policies and Procedures: Co-ordination becomes very easy if there are clear-cut and well-defined policies and procedures. It will ensure unity of action. The subjective handling of the problems is completely ruled out when set policies and procedures have been established.

3. Mutual Communication: Effective communication is essential for co-ordination. Direct communication helps to resolve the individual and departmental difference. Various types of communication include departmental news, reports bulleting, group or committee meetings etc. Through discussion, mutual exchange of ideas takes place and it helps in bringing harmony among the different the different departments of an enterprise.



4. Existence of Community of Interest: In order to have an effective co-ordination, it is essential that there should be a common understanding of the main objectives of the organization. Every member of the organization must consider his individual interests subordinate to the interests of the organization.

5. Effective Leadership: A good leader creates confidence among his subordinates and effectively resolves the differences, if any, of the people working under him. Effective leadership is sure to promote co-ordination at all levels beginning from the planning stage to the implementation stage.

6. Effective Control: When an integrated control system is in existence, it automatically ensures coordinated group efforts. With the help of control charts, the management can immediately come to know the degree to which the various activities have been coordinated.

7. Voluntary Co-operation: Voluntary co-operation facilitates co-ordination. If all the members of the organization work as a team, the results can automatically follow. Whenever conditions are ideal, the management should try to secure voluntary co-operation from the members of the organization.

8. Sound Organizational Structure: It is very essential for co-ordination. There should be organization charts, job descriptions, work manuals etc, as these help to a great extent in securing co-ordination.

9. Organizational Manuals: Organization manuals are drawn by large-scale organization for the organization as a whole and then for different departments and sections. These manuals lay down the general philosophy of the organization and serve as a guide to the understanding of the business and appreciation of the role of each section or department.

10. Appointment of Liaison Officers: Certain organizations also appoint liaison officers who act to serve as a link between two individuals or departments and coordinate the activities of different individuals.

11. Balancing, timing and integrating: Louis A Allen has given the following 03 techniques:

(a) Balancing: It means that the management must always keep a proper balance between the different activities of the business.

(b) Timing: This technique lays down the time schedules of various activities in such a manner that they support and reinforce each other.

(c) Integrating: This is a technique by which the diverse interests are unified for the achievement of organizational objectives.


Difficulties in Effective Co-ordination

(i) Lack of clearly defined authority and responsibility.
(ii) Lack in formulation of policies and procedures.
(iii) Lack in effective mutual communication.
(iv) Lack in existence of community of interest.
(v) Lack of effective Leadership.
(vi) Lack of effective Control.
(vii) Lack of voluntary Co-operation.
(viii) Lack of sound organizational structure and manuals.
(ix) Lack in balancing, timing and integrating.

SPAN OF MANAGEMENT

Span of Management (SOM) refers to the optimum number of subordinates that a manager or superior can manage or control effectively and efficiently. It is also know as Span of Motivation, Span of Control, Span of Responsibility, Span of Authority and Span of Direction.

“The Span of Management or span of control is the number of subordinates who report directly to a specific manager”. Kathryn M. Bartol & David C. Martin

According to VA Graicunas, the number of possible interactions and relationships can be determined by the formula:

R = n (2n-1 + n-1) (Where, R = Relationships & n = no. of subordinates)

e.g.- R = 2(22-1 + 2-1)
= 2 (2+1)
= 2 x 3
= 6 Relationships/Interactions

Factors Affecting/Influencing the Span of Management

1. The capacity & ability of the Manager/Supervisor: The ability such as leadership, administrative capabilities, to judge, to listen, to guide etc. differs in person to person. A person having better abilities can manage a large number of subordinates effectively as compared to the one who has lesser capabilities. E.g.- any empire build, may like to have wider span as compared to a submissive manager. .

2. Competence and training of subordinates: Subordinates who are skilled, efficient, knowledgeable, trained require less supervision and therefore supervisor may have a wider span in such ease as compared to inexperienced and untrained subordinates who require greater supervision.

3. Nature of work: The work involving routine, repetitive, unskilled and standard operations will not call for much attention and time on the part of the supervisor.

4. Effectiveness of communication system: The SOM is also influenced by the effectiveness of the communication system in the organisation. Faulty communication puts a heavy burden on the manager’s time and reduces the span of control.

5. Degree of physical dispersion: If the supervisor is being present, then the works done efficiently. But when supervisor doesn’t present, it affects the work adversely.

6. Assistance of experts: The SOM may be wide where services of experts are available to the subordinates on various aspect of work. In such cases, where the expert services are not provided, the supervisor has to spend a lot of time in providing assistance to the workers himself and as such the span of control would be narrow.

7. Degree of decentralization: If a manager clearly delegates authority to undertake a well-defined task, a well-trained subordinate can do it with a minimum of supervisor’s time and attention. As such span could be wide.

CENTRALIZATION Vs DECENTRALIZATION

CENTRALIZATION Vs DECENTRALIZATION


Centralization refers to the retention of control by the TOP Management in the area of decision-making. Decentralization refers to the participation of employees in the decision-making process. The term centralization and decentralization can also be used to refer the organizational aspects such as administrative process, location of the firm, different functions that are being carried out, and the extent to which authority is delegated.

“Centralization is the systematic and consistent reservation of authority at central points within an organisation. Decentralization applies to the systematic delegation of authority in an organization-wide context.” Louis A. Allen

“Centralization is the relative retention of decision-making authority by Top Management. Decentralization is the granting of decision-making authority by Management to lower level employees.” Robert Kreitner

Since organizations cannot be either completely centralized or decentralized, the challenge for managers is to work out the right balance between these two extremes.

Factors in Relative Centralisation/Decentralisation

Highly Centralized Organisation Highly Decentralized Organisation
How many decisions are made at lower levels in the hierarchy? Very few, if any Many or most
How important are the decisions that are made at lower levels (i.e., do they impact organizational success or dollar values)? Not very important Very important
How many different functions (e.g., production, marketing) rely on lower level decision-making? Very few, if any All or most
How much does top mgt monitor or check up on lower level decision-making? A great deal Very little or none



Factors affecting Centralisation/Decentralisation
1. History and Nature of the Organisation: Centralisation or decentralization of authority depends on the manner, in which the organisation has built up over time i.e., history of the organisation. As organisation that has been primarily built by an individual’s efforts tends to have a highly centralized structure. Organizations that have grown through a number of mergers, amalgamations and consolidations tend to stay decentralized.

2. Availability of Competent Managers: The degree of decentralization in an organisation is influenced by the availability of competent managers. Decentralisation of authority may not be possible if the managers of the organisation are not talented enough, and if they can’t handle the problems of decentralized units.

3. Size of the Organisation: The size of the organisation is another factor that effects decentralization. In a large organisation, numerous decisions have to be taken at different places. Therefore, it becomes difficult to coordinate the functions of different departments. To avoid slow decision-making and to bring down the costs associated with managing a large organisation, authority should be decentralized. Decentralisation enables the organisation to operate as a group of small independent units thus reducing the workload of managers, reducing the amount of paperwork and improving the quality of decisions.

4. Geographical Dispersion: Decentralisation is effective for the organizations, which have operations in different locations. Top-level executives often find it impossible to keep track of the details of operations in scattered locations. In such cases, the control exercised by the top Management from the headquarters may be ineffective, because they are unlikely to know the local conditions or problems. Therefore, such geographically diverse units can be decentralized and managers from these units made responsible for their operations and profits.

5. Technical Complexity of Tasks: Technology has changed rapidly over the years and there is a growing need for specialists who can understand it. Since it is impossible for the top-level Management t keep track of all technological advances and handle technology-related issues, it becomes necessary to delegate authority for carrying out technical projects to experts in the concerned fields. In such cases, organizations need to follow a decentralized approach.


6. Time frame of Decisions: In order to survive in a highly competitive environment, every organisation has to capitalize on the available opportunities. In a decentralized organisation, the authority to make decisions lies with the head of that particular unit. Therefore, decisions can be made faster. The decisions are made closer to the scene of action, and are therefore, timely and accurate.

7. The Importance of a Decision: The importance of a decision to an organisation is also a crucial factor that influences the decentralization of authority. Generally, decisions, which involve high risks and costs, are made by the top management, while the decisions involving routine and low-risk activities are delegated to the subordinates.

8. Planning and Control Procedures: If an organisation has clear objectives and a specific plan to achieve them, a superior would be willing to allow subordinates to make decisions independently. The assigning of functions such as organizing, staffing, directing and controlling to managers at different levels depends on the manner in which they have been allocated at the time of designing the organizational plans and also on the extent to which these plans have been implemented. When lower level managers are allowed to participate in the planning process, decentralization is facilitated.

To be effective, decentralization should be supported by a well-defined system of control procedures in order to ensure that the performance at different levels in the organisation is in accordance with its plans. The greater the degree of development and use of control techniques, the better are the chances for effective decentralization.

In the absence of good planning system and control procedures, it is difficult for the top management to compare and evaluate the effectiveness of decisions made by subordinates.

9. Views of Subordinates: The willingness of subordinates to take on additional responsibilities is another factor that affects the degree of decentralization. If the subordinates are dynamic and well trained, they will accept any authority delegated to them and take on the responsibility of achieving stated goals. Such subordinates strive to make best use of their abilities in order to achieve the goals. But, if the subordinates are not willing to take up additional responsibilities and prefer to evade responsibility, they may perceive delegation of authority and decentralization as a threat.

10. Environmental Influence: Besides the factors mentioned above, all of which are internal to the organisation, there are environmental factors also that affect the degree of decentralization. Government regulation of private business is the most important factor, which affects the extent of decentralization. For instance, organizations whose pricing mechanisms are decided by the government, e.g. fertilizers, cement, etc. do not require managers to spend much time in determining the price structure. In such a case, this function can’t be decentralized, as even the top management does not have any authority over it.

BALANCE – THE KEY TO DECENTRALIZATION

There is no simple answer to the question whether centralization or decentralization is the preferable option for an organization. Decentralization is not a panacea (proper solution) for all problems, and centralization is not necessarily bad. The major problem caused by decentralization is, an organisation is loss of control. It is not advisable for an organisation to decentralize to such an extent that organizational goals are forgotten and the existence of the organisation as a unified entity is threatened. Therefore, an organisation should strike a balance between centralization and decentralization.

It should opt for centralization in certain major policy areas at the top level such as financing, overall profit goals and budgeting, new product programs, basic personnel policies, development and compensation of managerial personnel, major marketing strategies etc.

The organisation can also decide to decentralize routine and monotonous tasks that subordinates at the lower level can carry out without much guidance from superiors. This would enable managers to focus their attention on strategic and important issues.



MERITS & DEMERITS OF DECENTRALISATION

Advantages/Merits of Decentralization

1. Decision can be taken by lower level managers.

2. Facilitates fast decision-making.

3. Decisions and strategies can be quickly adapted to the competitive environment.

4. Provide autonomy to employees, increases their self-confidence and thus enhances their motivation level.

5. Highly effective in large and complex organizations where it is difficult for top management situated in the headquarters to study the local conditions and take appropriate decisions.

6. Frees the top management from decisions related to day-to-day operations and allows them to concentrate on strategic issues.

Disadvantages/Demerits of Decentralization

1. Coordination of decentralized units poses a serious challenge to top management.

2. Policies may not be applied uniformly across all the units and this may lead to employee de-motivation.

3. Differences in opinions of top management and unit heads can often lead to conflicts.

4. Competition between various units may be very severe, they may develop hostility toward each other making it difficult to reap benefits such as resource and knowledge sharing.

5. Economics of scale may not be realized as each unit tries to be independent.

6. The success of a unit will depend on the efficiency and capability of its head.

DELEGATION OF AUTHORITY

The job of the manager is to get the work done by others. The term delegate, in common parlance, means to grant or to confer. Thus, a manager grants or confers on his subordinates, certain tasks and duties, along with the sufficient authority to accomplish these.

“The delegation of Authority is the delivery by one individual to another of the right to act, to make decisions, to requisition resources and to perform other tasks in order to fulfill job responsibilities.” O. Jeff Harris

Delegation is the process by which manager allocate a chunk (part) of their workload to their subordinates. Delegation helps in establishing a pattern of authority between the superior and his subordinates. The delegation of authority by supervisors to subordinates is necessary for the efficient functioning of any organisation, as the superior can’t personally accomplish all tasks or completely supervise all tasks carried out by subordinates. Delegation also allows the subordinates to make decisions within the area of assigned duties.

Delegation is a two-sided relationship that requires sacrifices from both the delegator and the delegant. The delegator must be prepared to sacrifice a portion of his authority, and the delegant must be willing to shoulder additional responsibilities. Delegation requires a fair amount of trust between the delegator and the delegant.


FACTORS AFFECTING DELEGATION OF AUTHORITY

The factors that affect the delegation of authority can be studied from three aspects. These are:
1. The delegator’s (superior’s) aspect.
2. The delegant’s (subordinate’s) aspect.
3. The organizational aspect.

The Delegator’s Aspect
A manager may not delegate authority effectively when he has following things in mind:

Love for Authority: An autocratic manager is not very likely to delegate authority to his subordinates. Such a manager likes to make his importance felt by forcing subordinates to approach him often to get their decisions approved. He likes to maintain tight control over his own activities. Such managers like to convey the impression of being very busy and therefore allow work to be piled high on their desk.

Fear of Subordinate’s Advancement: The fear of subordinate’s advancement also affects the manager’s ability to delegate authority effectively. The superior may fear that the competence and good performance of the subordinate might earn him a promotion. He also fear that the subordinate may excel in his job to such an extent that he may become a contender for the manager’s position, status and title.

Fear of Exposure: A superior may not delegate adequate authority fearing that his managerial shortcomings would be exposed if he does so like, procedures and practices followed are not very good.
Attitude towards Subordinates: Delegation of authority requires a certain amount of trust between the superior and the subordinates. Therefore, the superior’s attitude toward his subordinates, and the subordinate’s attitude towards the superior are important for delegation. Lack of confidence in subordinates results that, he may not only avoid delegation, but also does the subordinate’s work himself. A superior, who does not have good interpersonal relationships with his subordinates, is unlikely to delegate authority to subordinates.

Personality traits and experiences of the superior: The personality traits and experiences of a superior affect the way in which he delegates authority to his subordinates. Autocratic managers are less likely to delegate authority. Many managers usually do not enjoy guiding, reviewing and cross-examining their subordinates, and this is unavoidable when authority is delegated.

The Delegant’s Aspect
Delegation of authority also affected by various factors pertaining to the delegants. These are:

Fear of Criticism: The subordinate may reluctant or hesitant to accept delegated tasks if he suspects that the credit for success will be taken by the boss, and the criticism for failure will be directed toward him. He feels that taking responsibility is asking for trouble.

Lack of Information and Resources: Subordinates are reluctant to accept delegation when they do not have adequate information, knowledge and resources. When tasks are not clearly defined, when adequate authority is not delegated, when instructions are vague, and resources are scarce, subordinates are unlikely to do a good job and their enthusiasm for delegated work dwindles.

Lack of Self-Confidence: Sometimes, subordinates may refuse to take up delegated tasks as they may lack confidence in themselves.

Absence of Rewards and Incentives (Motivation): Many subordinates may be unwilling to take up additional responsibilities and pressure unless they receive some rewards and incentives for satisfactory performance. Therefore, all companies should develop a system of rewards and incentives, which leads to the motivation of the subordinates.

The Organizational Aspect

Apart from the personal factors of the delegator and delegants, delegation of authority also depends on certain organizational aspects. Organizational factors may necessitate even an autocratic superior to delegate his authority include the organization’s policy towards centralization or decentralization, availability of managerial personnel, the type of control mechanisms adopted by the organization, the management philosophy etc. Unfavorable organizational factors may adversely affect the delegation of authority.

DELEGATION

Delegation is an administration process of getting things done by other by giving them responsibility. It is the grant of authority from the superior to subordinate to accomplish a particular job, as there is a limit to supervise the subordinate; it is must when number of subordinates increases beyond it.

Element of delegation: The following are the elements: -
Assignment of responsibility: The first step in delegation is the assignment of work or duty to the subordinates i.e. delegation of responsibility. The superior ask his subordinate to perform a particular task in a given period of time.

Transfer of authority: It is the second element of delegation. The delegation grants authority to the subordinate so that the assigned task is accomplished. The delegation of responsibility without authority is meaningless.

Creation of accountability: Accountability is the obligation of a subordinate to perform the duties assigned to him. The delegation creates an obligation on the subordinate to accomplish the task assigned to him by the superior. When a work is assigned and authority is delegated then the accountability becomes the by-product of this process. Authority follows downward whereas accountability flows upward.

Factors, which make delegation difficult: -

(a) Overconfidence of superior: The feeling in a superior, ”only I can perform the work effectively than others”, is the main difficulty in delegation. This may not be due to the incompetence of subordinates but due to the overconfidence of the superior.

(b) Lack of confidence in the subordinate: The superior may be of the view that subordinate is not competent to carry out certain things. Under these circumstances the superior hesitate to delegate the authority and responsibility.

(c) Lack of ability in the superior: A superior may lack the ability of delegation, as he may not be able to identify the areas where delegation is required. The lack of the competence on the part of the superior restricts the delegation.

(d) Lack of proper control: The proper control in the Organization helps the manager to keep in contact with the subordinates. Lack of proper control may lead to difficulty in delegation. Since he will not be able to exercise the control he will not like to delegate the authority and responsibility.

(e) Lack of proper temperament of the superior: The lack of proper temperament of superior may also act as a barrier for delegation. The chief executive may be extra cautious or conservative by nature. He may not like to take the risk of the delegation. The subordinate will learn only when he is given a chance to take independent decisions.

How to make delegation effective:

(a) Proper selection of subordinates: The person should be selected in the light of the job to be done. The delegation will be influenced by the qualification and ability of the person for the assignment of the work, as the authority is also required to be delegated for completion of assigned work. The personnel manager should keep these things in mind while selecting or appointing the persons for various positions.

(b) Proper assignment of work: The work and the result expected from it should be clearly defined. They should be given sufficient authority to accomplish the given results.


(d) Proper communication: Delegation does not mean to superior to abdicate his rights to interfere or he should abstain of the responsibility. There should be free flow of information between superior and subordinate. The subordinate should be furnished with power of decisions and he should interpret them correctly. Therefore communication is essential for making delegation effective.

(e) Establishing proper controls: The manager cannot relinquish responsibility and delegation should be accompanied by adequate controls. The performance of subordinate should be regularly assessed. The superior should have proper eye whether the things are going as per the plans.

(f) Rewards for proper implementation: There should be rewards for the effective delegation and successful assumption of authority. This will encourage more and more persons to improve their performance and competence level.


DELEGATION OF AUTHORITY

The job of the manager is to get the work done by others. The term delegate, in common parlance, means to grant or to confer. Thus, a manager grants or confers on his subordinates, certain tasks and duties, along with the sufficient authority to accomplish these.

“The delegation of Authority is the delivery by one individual to another of the right to act, to make decisions, to requisition resources and to perform other tasks in order to fulfill job responsibilities.” O. Jeff Harris

Delegation is the process by which manager allocate a chunk (part) of their workload to their subordinates. Delegation helps in establishing a pattern of authority between the superior and his subordinates. The delegation of authority by supervisors to subordinates is necessary for the efficient functioning of any organisation, as the superior can’t personally accomplish all tasks or completely supervise all tasks carried out by subordinates. Delegation also allows the subordinates to make decisions within the area of assigned duties.

Delegation is a two-sided relationship that requires sacrifices from both the delegator and the delegant. The delegator must be prepared to sacrifice a portion of his authority, and the delegant must be willing to shoulder additional responsibilities. Delegation requires a fair amount of trust between the delegator and the delegant.


FACTORS AFFECTING DELEGATION OF AUTHORITY

The factors that affect the delegation of authority can be studied from three aspects. These are:
1. The delegator’s (superior’s) aspect.
2. The delegant’s (subordinate’s) aspect.
3. The organizational aspect.

The Delegator’s Aspect
A manager may not delegate authority effectively when he has following things in mind:

Love for Authority: An autocratic manager is not very likely to delegate authority to his subordinates. Such a manager likes to make his importance felt by forcing subordinates to approach him often to get their decisions approved. He likes to maintain tight control over his own activities. Such managers like to convey the impression of being very busy and therefore allow work to be piled high on their desk.

Fear of Subordinate’s Advancement: The fear of subordinate’s advancement also affects the manager’s ability to delegate authority effectively. The superior may fear that the competence and good performance of the subordinate might earn him a promotion. He also fear that the subordinate may excel in his job to such an extent that he may become a contender for the manager’s position, status and title.

Fear of Exposure: A superior may not delegate adequate authority fearing that his managerial shortcomings would be exposed if he does so like, procedures and practices followed are not very good.



Attitude towards Subordinates: Delegation of authority requires a certain amount of trust between the superior and the subordinates. Therefore, the superior’s attitude toward his subordinates, and the subordinate’s attitude towards the superior are important for delegation. Lack of confidence in subordinates results that, he may not only avoid delegation, but also does the subordinate’s work himself. A superior, who does not have good interpersonal relationships with his subordinates, is unlikely to delegate authority to subordinates.

Personality traits and experiences of the superior: The personality traits and experiences of a superior affect the way in which he delegates authority to his subordinates. Autocratic managers are less likely to delegate authority. Many managers usually do not enjoy guiding, reviewing and cross-examining their subordinates, and this is unavoidable when authority is delegated.

AUTHORITY & POWER

AUTHORITY & POWER


“Authority in an organization is the right in a position to exercise discretion in making decisions affecting others” Heinz Weihrich & Harold Koontz

Authority is the power gained by position.

It is essential for the managers to have authority if they are to get tasks accomplished by their subordinates, Authority relationships ensure cooperative action and facilitate the achievement of organizational goals by stating each employee’s responsibility. Formal authority is the power derived from the formal position defined by the organization. Employees can use the power only within prescribed limits.

Power is the ability of individuals or groups to induce or influence the beliefs or actions of other persons and groups. E.g., Union Leaders have power not the authority.

Types of Power

1. Legitimate Power: Power enjoyed by the supervisor when a subordinate acknowledges his right to exert influence within certain limits.

2. Expert Power: Power derived from the expertise of a person or a group.

3. Referent Power: The desire of the influencee to identity with or imitate the influencer.

4. Reward Power: Ability to the influencer to reward the influencee for performing a task well.

5. Coercive Power: Influencer’s ability to punish the influencee for failing to perform a task.

Difference between Authority and Power

AUTHORITY POWER
Authority is the right to do something Power is the ability to do something
Authority is the legitimate power given by an organization to a member holding a position Power requires no formal position
Authority is derived only through position Power is derived from many sources
Authority is a narrow term and is major source of power Power is a broader concept that creates action when authority fails

DEPARTMENTALIZATION

DEPARTMENTALIZATION


”A department is a distinct area, division or branch of an enterprise over which a manager has authority for the performance of specified activities”. Koontz & O’Donnell

Divisionalisation is the means of dividing the large and monolithic functional organization into smaller flexible administrative units.” Louis Allen

Departmentation is the process of classifying and grouping all the activities of an enterprise into different units and sub-units. With this type of assignment, the executive can focus their experience and interest only on that work assigned to them departmentally rather than concentrating on overall jobs. It further helps the executive to direct and control the work to be done under his department.

In simple words we can say that, Departmentation is the process of grouping of work activities into departments, divisions, and other homogenous units. Departmentation takes place in various patterns like departmentation by functions, products, location, customers, process, equipment, numbers and time etc.

There are some negative points in this process of departmentation. These are:

(i) The work of coordination becomes difficult, the greater the number of departments and particularly levels, the more complicated becomes the task of co-ordination.
(ii) The work of communication, control, supervision and planning appears more difficult and enhances the cost of managing an enterprise.
(iii) There is remote possibility of direct contact between Top Management and operative personnel, which causes loss of morale on the part of subordinates.

FORMS/TYPES OF DEPARTMENTALIZATION

DEPARTMENTALIZATION BY FUNCTION: This is the simplest and the most common types of organization. It consists of grouping of all similar activities of the business into major departments or divisions under an executive who reports to the chief executive. Under this type all the activities are classified into different departments like production, marketing, finance, personnel, purchasing, engineering, accounting etc. Further a single department has the sub-divisions on the basis of the functions they perform, like marketing which constitutes the sub-units of advertising, marketing research, sale, sales promotion, product planning etc.

MERITS OF DEPARTMENTALIZATION BY FUNCTION:
a) It provides the benefits of occupational specialization in full.
b) It ensures an effective utilization of manpower in all departments.
c) It results in an economy of operation because of simple organizational design.
d) It reaps the facility of intra-departmental co-ordination.
e) It leads to the adoption of a logical and comprehensible structure.
f) It gives a greater emphasis on basic activities rather than o service activities.
g) It helps in the training of specialist managers rather than generalist managers.

DEMERITS OF DEPARTMENTALIZATION BY FUNCTION:
a) The functional classification has a proneness to greater centralization.
b) It involves delay in decision-making, thereby reducing efficiency.
c) It is responsible for poor inter-departmental co-ordination in respect of operation between two departments
d) It exercises ineffective control over work performance in the absence of any rigid standards of performance.
e) For excessive specialization it destroys teamwork and employee motivation.
f) Succession to the position of the chief executive is a serious problem in fictionalization.
g) The greatest disadvantage lies in the unsatisfactory handling of diversified product liners.

DEPARTMENTALIZATION BY PRODUCT: Products manufactured may be adopted for division as well as for sub-division purposes. When there are several product lines and each product line comprises of a variety of items, functional classification fails to give a balanced emphasis on each product. Slow moving and outdated products may be given a greater attention at the cost of growing ones. For the sake of expansion and development of their products, many large sized enterprises have created more or less autonomous, self-sufficient product divisions based either on one single product or on a grope of related products.



A gigantic structure with separate product lines is usually laid on this pattern of departmentation, which is technically called divisionalisation. With favorable product and market characteristics, divisionalisation becomes the only choice available to large sized manufacturing enterprises. Apart from this use, product or services may be made the basis for dividing activities by a departmental store, a banking concern and an insurance company i.e., each department becomes autonomous.

PROS AND CONS OF DEPARTMENTALIZATION BY PRODUCT:
2. Profitability or otherwise of each product can be assessed.
3. It ensures a steady growth and expansion of product lines.
4. It is suitable for undertakings manufacturing varied and complex product lines.
5. Flexibility in product lines can be provided easily as the addition or dropping of product lines is easy.
6. Better service to consumers can be provided as the salesman has thorough knowledge about the product.
7. It ensures the maximum use of the specialization in technical skill, managerial knowledge and capital equipments.
8. It motivates the subordinates for high performance because of wider delegation and greater freedom.
9. It develops the quality of managerial personnel through training, testing and grooming managers on a continuous basis.

DIVISIONALISATION MAY LEAD TO THE FOLLOWING DIFFICULTIES:
1. It increases managerial cost. Duplicate service functions are required both at the top and operating levels of the organization.
2. Duplication of plants and wasteful use of equipments are also involved in product divisionalisation.
3. It creates a problem of policy control in autonomous divisional units.
4. The organizing problem of policy control in autonomous divisional units.
5. The organizing process in divisionalisation is cumbersome and complicated.
6. High cost of operation prevents the small and medium sized concerns from adopting this basis of classification, particularly for creating major units.

DEPARTMENTALIZATION BY TERRITORY /GEOGRAPHICAL DEPARTMENTATION:
Like the products basis, geographical region are adopted for main division as well as for sub-division purposes. Units that are located at physically dispersed areas are made so may self-contained divisions of the organ insertion. Apart from this divisionalisation, the marketing activities are very often sub-divided on the basis of geographical areas. The territory is fixed for carrying out the activities ciz., eastern region, western region, southern region, northern region. It is found in companies serving customers on a national or international level. Production and selling or the selling function alone may often be sub-divided on a regional basis. The following diagram depicts the territorial departmentation.

It has almost the same advantages and disadvantages as are to be found in the case of departmentalization by products. There are three special advantages of this pattern of grouping activities. First, being nearer to the market and becoming familiar with local conditions, this classification helps to cater to the needs of local people more materials or services and the convenience of supervision make a significant contribution towards the lower cost of production. Thirdly, it permits to extend business to foreign countries.

DEPARTMENTALIZATION BY CUSTOMERS OR MARKET: This type of classification is resorted to by enterprises engaged in specialized services. To give individual attention to diverse groups of buyers in the market, the sales activities are often split into several parts. When products are offered to an extensive market through numerous channels and outlets, it has the special merit of supplying goods in accordance with the peculiar needs of customers. Sales being the exclusive field of its application, coordination may appear difficult between sales function and other enterprise functions. Specialized sales staff may become idle with the downward movement of sales to any specified group of customers. The best examples of this type of departmentation are division of the braches of State Bank Of India by customers and of insurance companies by the type of policyholders.

Here, separate groups are crated on the basis of customers such as industrial users, consumers, wholesalers, retailers etc.


ADVANTAGES:
(a) Specialized service to customers.
(b) Supply of goods according to customer’s requirements.

DISADVANTAGES:
(a) Coordination is difficult.
(b) High Cost.
(c) Under-utilization of Human Resources.


DEPARTMENTALIZATION BY PROCESS: In organizations, where activities are performed on the basis of operation sequence, departmentation is effected on the basis if process. For example, in integrated textile concern, major division may be made on the basis of operational sequence e.g., spinning, weaving, bleaching, dyeing, inspection, boxing, shipping. Similarly, a large retail store may have shopping \, receiving, marketing and servicing departments purely based on the processes performed. In office work also, this basis of grouping activities has become common, e.g., filing department, mail handling department and duplicating department,. Cost and economy consideration urges the use of electronic office equipments and other costly machines on the basis of this sub division. It is, however, not a suitable basis to be utilized in any mass-production arrangement.

DEPARTMENTALIZATION BY EQUIPMENT: In some enterprises the equipment used determines major sub-divisions. Very often it is identical with departmentation by process e.g., division of an integrated textile unit into spinning, weaving bleaching, dyeing, inspection, boxing, shipping etc., may itself be passed on the type of equipment used in different processes.


DEPARTMENTALIZATION BY TIME: Division of work may be based on time sequence with the work broken down under the categories of planning execution and control. Thus the first major business division would be devoted to the formulation of objectives, methods of accomplishing them, forecasts and budgets. The second major division would be devoted to the execution of the plans and would correspond roughly to the major operating group in a business. The third major division is devoted to the control of the results of execution in the light of the objectives and plans of the business.


DEPARTMENTALIZATION PATTERN IN PRACTICE: In actual practice, no single pattern of grouping activities is applied in the organization structure with all its levels. Different bases are used in different segments of the enterprise. Composite or hybrid method forms the common basis for classifying activities rather than one particular method,. One of the mixed forms of organization is referred to as matrix or grid organization’s According to the situations, the patterns of Organizing varies frond case to case. The form of structure must reflect the tasks, goals and technology if the originations the type of people employed and the environmental conditions that it faces.


KEY FACTORS IN DEPARTMENTALIZATION

(a) It should facilitate control.
(b) It should ensure proper coordination.
(c) It should take into consideration the benefits of specialization.
(d) It should not result in excess cost.
(e) It should give due consideration to Human Aspects.

Line and Functional (Staff) Organization

Line and Functional (Staff) Organization
To overcome the shortcomings of Line and Staff organization, this type of organization has been established. In such type of organizations, specialists are appointed for every field and they are being provided with assistants and other staff to assist on different activities.


Types of Staff

1. Personal Staff: Personal staff is attached with individual line officers. They fix routine meetings, open the post, maintain the diaries etc.

2. Specialist Staff: These are technically qualified persons who provide services of specialization to the organization. Such as additional managers or assistant managers.

3. General Staff: The officers like a legal officer comes under this category.











Production HR Finance R & D Sales Admin
Manager Manager Manager Manager Manager Manager












Advantages of Line & Functional Organization:
1. It introduces specialization in a systematic manner.
2. The unity of command is maintained in these types of organizations.
3. It is suitable for growth and expansion.
4. It leads to lessen the burden on line officers.

Disadvantages of Line & Functional Organization:
1. It results conflicts between Line and Staff personnel.
2. Lack of responsibility of staff officials.
3. Lack of co-ordination.
4. More dependence on staff.
5. Much expensive as large number of specialists are appointed.

CONFLICTS BETWEEN LINE & STAFF ORGANISATION

Line manager has following complaints against the Staff:

1. Undermining the line authority: Line officer thinks that the staff officer interferes in their work and gives their suggestions unnecessarily, which leads to the undermining of line authority.

2. Lack of Accountability (Responsibility): Staff people are not accountable for any job and ultimately the responsibility lies with line manager.

3. Approach of Staff: Staff persons are too much academic and do not understand the practical problems and can’t give practical advice.

4. Stealing of credit: The staff persons have the tendency to snatch the credit of successful decisions and shift the blame of unsuccessful decisions to the line officers.

5. Limited outlook of the Staff: Line officers are loyal towards the objective of whole organization whereas the staff is restricted to the specific field. So they don’t have practical knowledge, skills and ideas to deal with.


Staff complaints against Line Organisation:

1. Ignoring the staff: Staff complaints about the line officers that they don’t listen and implement the ideas and mostly ignores their ideas.

2. Lack of Inner authority: Due to the authorities, which are mostly held with line officers, they think that it’s lacking with them.

3. Resistant to new ideas: Resistant of the ideas from staff by the line officers is the unbearable thing to staff and they think that line officers are not generally enthusiastic about the new ideas given by them.

WAYS TO OVERCOME THESE CONFLICTS:

1. Clarity between Authority and Responsibility: The authorities and responsibility should have total clarity and should be justified to each and everyone.

2. Focus on company’s objective or awareness of company’s objective: Everyone should be aware of what are the objectives of the organization and should be focused and work collectively to achieve the same.

3. Proper training (Practical knowledge) to staff: The top management should shoulder the responsibility to give the proper training and give the practical on job training as and when required to staff.

4. Welcoming of ideas of staff: The top management should be open always to accept the new ideas and after necessary analyses, if feasible, try to implement them in order to achieve the organizational objectives.

5. Establishment of co-ordination between Line Organisation & Staff Organization: The top manager should always try to establish the co-ordination between them and create the healthy environment which in turn leads to smooth functioning of organization.

ORGANIZING

ORGANIZING

It is concerned with the identification of different activities, grouping of similar types of activities into one group and assignment of responsibilities and authorities to the organizational members, so that they can perform their duties to achieve the organizational goals. Further, we establish co-ordination between the different activities of the company and employees, so that they can work in groups.

Identification & Division of Activities

Grouping of Similar Types of Activities

Delegation of Authority and Responsibility

Co-ordination(Establishment of Groups Relationship)

1. Identification & Division of Work: The works are to identified and divided into various functions like, production, finance, marketing, staffing etc. The purpose of the division is to specialize individuals into different roles. This also helps in increasing the efficiency of employees.

2. Grouping of similar type of Activities: The activities are classified into various categories. All similar categories are grouped together. The activities relating to different functions are covered under different departments like all the functions of process of goods production from raw materials to final goods, are grouped in production department.

3. Assigning/Delegation of Authority & Responsibility: A person can perform the duties efficiently only when he will be delegated or assigned with adequate authority and responsibility.

4. Establishment of Groups Relationship (Co-ordination): Interpersonal relationship and Inter-group relations should be clearly defined so as to carry out orders and responsibility effectively, in order to, who is to undertake what?

TYPES OF ORGANIZATION


Line Organization Functional (Staff) Organization L & F Organisation
Line Organization
It is the simplest form of the organization structure and is also known as Scalar and Military organization. Under these types of organizations, the authority flows vertically downwards from Top to Bottom and the responsibility flows vertically upwards i.e., from Bottom to Top, throughout the organization.





















Advantages of Line Organization:

1. It is the simplest form of organization and can be easily understood by the employees.

2. It consists of Unity of command, means, every person in the organization works under the command of one boss only.

3. It ensures the clarity in relationship between authority and responsibility.

4. It is facilitate quick decision-making.

Disadvantages of Line Organization:

1. It is not feasible and stable for big organizations.

2. The concentration of authority at the top level only.

3. Lack of managerial specialization.

Functional (Staff) Organization
To overcome the limitation of line organization, these types of organization are formed. In this type of organization, different types of activities are divided into different groups according to their features. To perform these activities, expert people with specified knowledge are appointed.









Production HR Finance R & D Sales Admin
Manager Manager Manager Manager Manager Manager











Advantages of Functional Organization:

1. It has specialist managers for every field.

2. It helps to increase the overall efficiency of the organization.

3. It provides wide scope for growth and mass production.

4. Better supervision.

5. Better utilization of various resources.

Disadvantages of Functional Organization:

1. Costly: Multiplicity of experts increases overhead expenses on the organization.

2. Lack or difficulty of co-ordination.

3. No Unity of Command leads to lack of responsibility.

4. Delay in Decision-Making.

5. Time consuming.

BOUNDED RATIONALITY

BOUNDED RATIONALITY


This concept suggests that the managers may not always be perfectly rational in decision-making. Their decision-making ability may be limited by certain factors like Cognitive capacity and Time Constraints. The concept of bounded Rationality was offered as a framework to facilitate better understanding of the actual process of managerial decision-making. According to the concept of Bounded Rationality, the following factors commonly limit the degree to which manager are perfectly rational in making decision:

(i) Decision makers may have inadequate information about the nature of the issue to be decided. They may also not possess enough information about possible alternatives and their strengths and weaknesses.
(ii) The amount of information that can be gathered in regard to particular decision is limited by time and cost factors.
(iii) Decision makers may overlook or ignore critical information because of their perceptions about the relative importance of various pieces of data.
(iv) The degree to which decision makers can determine optimal decisions is listed by the individual’s capacity and intelligence.
(v) The inability to remember large amount of information is another factor that limits the ability of the managers to make rational decisions.

BRAIN STORMING

BRAIN STORMING


It was developed by AF Osborn, to increase creativity. Brainstorming is used to help groups generate multiple ideas and alternatives for solving problems. This technique is effective because it helps to reduce interference of caused by critical and judgmental reactions to one’s ideas from other group members.

In this, a group is convened and a problem at hand is reviewed. Individual members are then asked to silently generate ideas/ alternatives for solving the problem. Then, these ideas are solicited and written on a board or a flip chart. A second session is used to critique and evaluate the alternatives. Managers are advised to follow four rules while Brainstorming:

1. Freewheeling is encouraged: Group members are advised to offer any and all ideas they have: the wilder, the better.

2. Criticism is discouraged: Don’t criticize during the initial stage of idea generation. No negative phrases should be used.

3. Quality of ideas is encouraged: Managers should try to generate and write down as many ideas as possible.

4. Combination and improvement of ideas is pursued: Group members are advised to “piggyback” onto the ideas of others.

Brainstorming is an effective technique for generating new ideas/alternatives. It is not appropriate for evaluating alternatives or selecting solutions.

Nominal Groups

Nominal Groups: This is another useful group for decision-making technique, which is used occasionally. In this technique, the group members are actually brought together. This technique is generally used when creative and innovative ideas are required.

This technique begins with the managers assembling a group of knowledgeable people and outlining the problem to them. The group members are asked to list out the possible solutions to the problem. The members then present their ideas. These are then recorded (on a flip chart of blackboard) in full vies of the group. When all the responses are recorded on the master list, the group members discuss and evaluate the ideas openly. Group members then rank the various alternatives and decide on the best alternative. The alternative that secures the highest rank represents the decision of the group. However, it is up to the managers to accept or reject the group decision.

Delphi Groups

Delphi Groups: This form of group decision-making involves obtaining the options of experts and developing a consensus. Since this technique does not bring the participants together, most of the inhibiting factors of group dynamics are eliminated and anonymous participations is facilitated. This technique is not used for routine, every day decisions because it is time consuming and expensive. Steps to be followed in this method are appended below:

GROUP DECISION-MAKING

GROUP DECISION-MAKING

In many major organizations, decisions are often made by groups rather than by individuals. Studies have shown that groups make better decision that individual. As the old adage goes “Two heads are better than One”. A major reason why group decision-making is more effective than decision making by individual is that more information is available in a group setting.

Advantages and Disadvantages of Group-Aided Decision-Making and Creative Problem Solving

Advantage Disadvantage
Greater Pool of KnowledgeA group can bring much more information and experience to bear on a decision or problem than can an individual acting alone. Social PressureUnwillingness to “rock the boat” ant the pressure to confirm may combine to stifle the creativity of individual contributors.
Different PerspectivesIndividuals with varied experience and interests help the group see decision situations and problems from different angles. Domination by a Vocal fewSometimes the quality of group action is reduces when the group gives into those who talk the loudest and longest.
Greater ComprehensionThose who personally experience the give and take of group decision about alternative courses of action tend to understand the rational behind the final decision. LogrollingPolitical willing and dealing can displace sound thinking when an individual’s pet project or vested interest is at stake.
Increased AcceptanceThose who play an active role in group decision-making and problem solving tend to view the outcome as “ours” rather than “theirs” Goal DisplacementSometimes secondary considerations such as, winning and argument, making a point or getting back at arrival displace the primary task of making a sound decision or solving a problem.
Training GroundLess experience participants in-group action learn how to cope with group dynamics by actually being involved. GroupthinkSometimes cohesive ‘in-groups’ let the desire for unanimity override sound judgment when generating and evaluating alternative courses of actions.

Forms of Group decision-making

Interacting Groups: One of the most common forms of Group decision-making is an interacting group. It is a decision-making group in which the members openly discuss, argue about and agree on the best alterative. In this form, an exciting group (like a functional department, regular workgroup, or standing committee) or a newly designated group (such as an Ad-hoc committee, task force, or work team) is entrusted with the task of taking a decision. The discussion is open and interactive, with group members “free-wheeling” ideas that lead to an accumulation of pooled information and value judgments. The group arrives at a decision after discussing the pros and cons of various alternatives.

Delphi Groups: This form of group decision-making involves obtaining the options of experts and developing a consensus. Since this technique does not bring the participants together, most of the inhibiting factors of group dynamics are eliminated and anonymous participations is facilitated. This technique is not used for routine, every day decisions because it is time consuming and expensive. Steps to be followed in this method are appended below:

Decision Tree

Decision Tree: This is an interesting technique used for analysis of a decision.

(i) A decision tree is a sophisticated mathematical tool that enables a decision-maker to consider various alterative courses of action and sect the best alternative.
(ii) It is a graphical representation of the alternative course of action, their outcome and the risk associated with each alternative course of action.

In this technique, the decision maker traces the optimum path through the tree diagram. In this diagram, the base, known as the ‘decision point’ is represented by a square. Two or more chance events follow from the decision point. A chance event is represented buy a circle and constitutes a branch of the decision tree. Every chance events produce two or more possible outcomes leading to subsequent decision points. The effectiveness of this decision-making technique depends on the assumptions and possibility estimates made by decision makers.

Decision Tree

Output rise


Additional Machines

Output falls



Output rise

Double Shift

Output falls



Programmed Decisions

Decisions that deal with simple, common, frequently occurring problems and demand well-established and understood solutions are called Programmed Decisions. PDs are mostly made by lower-level managers because the problems they deal with are recurring and well structured as it concerns with day-to-day work. PDs consume less time and are consistent and inexpensive in nature and having low risk. These are also called as Tactical decision. The decisions are programmed to the extent that they are repetitive and routine and a definite approach has already been worked out for handling them. The decision that a store manager takes when a customer wants to return a product he has purchased at a retail store is an example of a programmed decision.

Unstructured Problems Top Non-programmed
Level decisions
Managers
Middle
Level Managers
Structured Lower Level Managers Programmed
Problems decisions

Non-programmed decisions

These are also called as Strategic Decisions. Decisions developed to deal with unusual or exceptional problems are known as non-programmed decisions. Since non-programmed decisions involve situations that are unstructured, it is impractical to have predetermined decision rules for them. Important decisions such as mergers, acquisitions, takeovers, organization design, new facilities, new products and labor contracts are non-programmed by nature. Managers face a lot of uncertainty in making non-programmed decisions, as they have to choose a course of action without knowing what the consequences of its implementation will be. It contains lot of risk. The skill of making a non-programmed decision is most essential for top-level managers. Hence, the top management is taught to analyze problems systematically and to make logical decisions through management development programs.

DECISION MAKING

Risk Analysis

Decision-making under this includes both i.e. half risky (like policies etc) and more risky (like huge investments etc). The risk arises due to lack of accurate information. In this, the manager must determine the probabilities of each alternative because it involves investment risk.

The risk analysis is to be done on the points like, - The amount of risk involved in the decision? How much risk an organisation can bear?

There are three methods to analyse the risk:

(i) Probability method: In this, the probability of risk can be assumed through the existing conditions. What will happen in future?

(ii) Empirical method: This is base on prior or past experiences. Managers can calculate it or assume it with the help of various data available.

(iii) Subjective method: When probability method or Empirical method doesn’t work. This method is to be implemented. In this, the manager has to be depending upon self-assessment through his subjective approach.

Complete Uncertainty: In this, the future is totally unpredictable as no information is available with the management. Decision-makers are not aware about all the available alternatives, their risk, consequences and their probabilities. It has four methods to cater with this problem:

(i) Maximax criteria: This contains maximum risk. The optimistic approach is required by the manager to apply this. In this maximizing the maximum Pay Off takes place.

Demand (in crores) Pay Off
Low Med High
Centralisation 15 20 30
Decentralisation 10 15 35
Max (30) & Max (35) = Max (35) Decentralisation

(ii) Maximin criteria: It means maximizing the minimum possible Pay Off.

Demand (in crores) Pay Off
Low Med High
Centralisation 15 20 30
Decentralisation 10 15 35
Min (15) & Min (10) = Max (15) Centralisation

(iii) Minimax criteria: It means minimizing the maximum possible Pay Off.

Demand (in crores) Pay Off
Low Med High
Centralisation 15 20 30
Decentralisation 10 15 35
Max (30) & Max (35) = Min (30) Centralisation

(iv) Insufficient Reason criteria: In preceding three methods, we can’t assign probability without past experience. But, if we don’t have the same, there are no sufficient criteria to assign the probability. This situation is known as Insufficient Reason criteria. In this, the average of the said data is to be taken into consideration.

Demand (in crores) Pay Off
Low Med High
Centralisation 15 20 30
Decentralisation 10 15 35

Centralisation - 15 + 20 + 30 = 65/3 = 21.66
Decentralisation- 10 + 15 + 35 = 60/3 = 20.00

We will go for maximum average Pay Off of Centralisation i.e. 21.66.


Decision Tree: This is an interesting technique used for analysis of a decision.

(i) A decision tree is a sophisticated mathematical tool that enables a decision-maker to consider various alterative courses of action and sect the best alternative.
(ii) It is a graphical representation of the alternative course of action, their outcome and the risk associated with each alternative course of action.

In this technique, the decision maker traces the optimum path through the tree diagram. In this diagram, the base, known as the ‘decision point’ is represented by a square. Two or more chance events follow from the decision point. A chance event is represented buy a circle and constitutes a branch of the decision tree. Every chance events produce two or more possible outcomes leading to subsequent decision points. The effectiveness of this decision-making technique depends on the assumptions and possibility estimates made by decision makers.

Decision Tree

Output rise


Additional Machines

Output falls



Output rise

Double Shift

Output falls



Programmed Decisions

Decisions that deal with simple, common, frequently occurring problems and demand well-established and understood solutions are called Programmed Decisions. PDs are mostly made by lower-level managers because the problems they deal with are recurring and well structured as it concerns with day-to-day work. PDs consume less time and are consistent and inexpensive in nature and having low risk. These are also called as Tactical decision. The decisions are programmed to the extent that they are repetitive and routine and a definite approach has already been worked out for handling them. The decision that a store manager takes when a customer wants to return a product he has purchased at a retail store is an example of a programmed decision.

Unstructured Problems Top Non-programmed
Level decisions
Managers
Middle
Level Managers
Structured Lower Level Managers Programmed
Problems decisions

Non-programmed decisions

These are also called as Strategic Decisions. Decisions developed to deal with unusual or exceptional problems are known as non-programmed decisions. Since non-programmed decisions involve situations that are unstructured, it is impractical to have predetermined decision rules for them. Important decisions such as mergers, acquisitions, takeovers, organization design, new facilities, new products and labor contracts are non-programmed by nature. Managers face a lot of uncertainty in making non-programmed decisions, as they have to choose a course of action without knowing what the consequences of its implementation will be. It contains lot of risk. The skill of making a non-programmed decision is most essential for top-level managers. Hence, the top management is taught to analyze problems systematically and to make logical decisions through management development programs.

FORECASTING

FORECASTING

Forecasting is the research procedure to discover those economic, social and financial influences governing business activities so a to predict or estimate current and future financial, production and marketing operations. Thus, forecasting is the process of predicting future systematically. The result of this process is known as Forecasting:

Steps/Process











1. Understanding the Problem: First of all, the real about which forecast are to made, should be clearly understand. A manager must know the purpose of forecasting. It helps the managers to probe the relevant information only.

2. Developing the Ground Work: At this stage, the manager understand and use the past data on performance to get a speedometer reading of the current rate and how fast this rate is increasing or decreasing. This will help in analyzing the causes of changes in the past.

3. Selecting and Analyzing Data: There is a definite relationship between the choice of statistical facts & figures and determination of why business fluctuations have occurred. The reasons of business fluctuation will help in choosing the relevant information. After selecting the data, they are analyzed in the light of past changes. Statistical tools can be used to analyze the data.

4. Estimating Future Events: Future events are estimated on the bases of analysis of past data. The manager knows clearly what he expects in the future in the light of overall organizational objective. He should make an estimate of future business from a number of probable trends revealed by the systematic analysis of data. The estimated result can be compared with actual results in the future.

Techniques of Forecasting

Forecasting may be classified into two major categories:

(i) Quantitative (ii) Qualitative.

Quantitative Techniques: In this, various statistical tools used to make data for predicting the future events.

(a) Time Series Analysis:
§ Any regular systematic variation in the series of data, which occurs due to any reason.

§ Cyclical trends that repeat every two or three years or more.

Time series analysis provides initial approximate forecast that takes into account the empirical regularities, which may be expected to persist.

(b) Regression analysis: This is the mean by which we can select among the possible relationship between different variables, which are relevant to forecasting. This also helps in forecasting about where is one dependent variable and several independent variables. The help of computer programming may be sought to solve the regression equation that are very complex and time forecasting.

(c) Econometric Models: It refers to the application of mathematical economic theory and statistical procedures to economic data. In order to verify economic theory and statistical procedures to economic data, economic theorems and to establish quantitative results.

Qualitative Techniques: This technique mainly employs human judgment to predict future. It includes different methods like Delphi method, Brain Storming, Interacting groups, nominal groups etc. that we have read under the topic of group decision-making.