Principles and Practice of Management 9781642876222, 9789350243602

Citation preview

PRINCIPLES AND PRACTICE OF MANAGEMENT

"This page is Intentionally Left Blank"

PRINCIPLES AND PRACTICE OF GEMENT P. SUBBA RAO Currently: Professor of Business Administration School of Business Administration University of Papua New Guinea Papua New Guinea (Australia) and Professor and Dean (On-Leave) Faculty of Commerce and Managf:ment Sri Krishnadevaraya Univer!Sity Anantapur -515 003 (A.P), India e-mail: [email protected]

HARI SHANKAR PANDE Faculty Cum Placement Co-ordinator Subodh Institute of Management and Carrier Studies Jaipur

em

GJIimalaya G"PublishingGJIouse MUMBAI • NEW DELHI • NAGPUR • BANGALORE • HYDERABAD • CHENNAI • PUNE • LUCKNOW • AHMEDABAD • ERNAKULAM

©

Author, 2008 No part of this book shall be reproduced, reprinted or translated for any purpose whatsoever without prior permission of the publisher and author in writing.

ISBN

: 978-93-5024-360-2

Revised Edition: 2010

Pl,Iblished by

Mrs. Meena Pandey for HIMALAYA PUBLISHING HOUSE PVT. LTD., "Ramdoof, Dr. Bhalerao Marg, Girgaon, Mumbai - 400004. Phones: 2386 01 70/2386 38 6~, Fax: 022-2387 71 78 Email: [email protected] Website: www.hlmpub.com

Branch Offices New Deihl

"Pooja Apartments·, 4-B, Murari Lal Street, Ansari Road, Darya Ganj, New Deihl - 110 002. Phpnes: 23270392, 23278631, 30180302/03/04/05/06, Fax: 011-23256286

Nagpur

Kundanlal Chandak Industrial Estate, Ghat Road, Nagpur - 440 018. Phones: 2738731, 3296733 Telefax: 0712-2721215

Bangalore

No. 16/1 (Old 1211), 1st Floor, Next to Hotel Highlands, Madhava Nagar, Race Course Road, Bangalore - 560 001. Phones: 22281541, 22385461, Telefax: 080-22286611

Hyderabad

No. 2-2-1 167/2H, 1st Floor, Near Railway Bridge, Tilak Nagar, Main Road, Hyderabad - 500044. Phone: 65501745, Telefax: 040-27560041 E-mail: [email protected].

Chennal

No.2, Ramakrishna Street, North Usman Road, T. Nagar, Chennai - 600 017. Phones: 044-28144004128144005

Pune

First Floor, "Laksha" Apartment, No. 527, Mehunpura, Shaniwarpeth, . (Near Prabhat Theatre), Pune - 411 030. Phones: 020 - 24496323/24496333

Lucknow

C-43, Sector - C, Ali Gunj, Lucknow - 226 024. Phone: 0522-4047594

Ahmedabad: 114, ·SHIL" 101 Floor, Opp. Madhu Sudan House, C.G.Road, Navrang Pura, Ahmedabad - 380 009. Phones: 09327324149,0931467413 Ernakulam

39/104 A, Lakshmi Apartment, Karikkamuri Cross Rd., Emakulam, Cochin - 622011, Kerala. Phones: 0484-2378012, 2378016, Mob- 09344199799

DTP by

HPH, Editorial Office, Bhandup (Sarita)

Printed by

Bangalore

(CONTENTS)

1-20

1. Management: An Overview Introduction - Management : An Over View - Definitions Of Management, Management: A Science Or An Art? - Management: A Profession - Management vs. Administration - Management Functions - Managerial Roles -Managerial Responsibilities - Management Levels - Functional Areas Of Management - Universality Of Management Principles - International Management - Systems Approach For Understanding Organisations - Contingency Approach For Understanding Organisations.

2.

Management Thought

21-31

Introduction - Classical Perspective - Scientific Management - Administrative Management - Bureaucratic Management - Behavioural Perspective - Managerial Process, Functions - Managerial Skills and Rules.

3. Social Responsibilities of Business

32-43

Traditional View of Social Responsibility - Modem View of Social Responsibility - Social Responsibilities of Business: Responsibilities Towards: Customers, Employees, Owners, Inter-Business, State and Community - Influence of Environment.

4.

Planning

44-74

Introduction - Fundamentals of Planning: Need for Planning, Types of Plans, Steps in Planning, Nature of Planning, Advantages of Planning, Umitations of Planning - Objectives: Areas of Objectives, Characteristics, Nature of, Importance and Formulation of Objectives - Management by Objectives - Strategies - Policies

5.

DeCision-Making

75-93

InLroduction - Meaning- Approaches of Decision-Making - "lypes of Decisions - Process of Decision-Making - Group Decision-Making

6.

Organising

94-133

Introduction - Organisational Design - Nature of Organising - Organisation Levels - Structuring Organisations - Approaches to Organisation Structure - Une and Staff Organisation - Delegation - Centralisation, Decentralisation and Recentralisation - Span of Management - Responsive Organisations -Global Organising

7.

Direction and Leadership

134-165

Directing - Concept: Definitions, Features, Importance, Principles- Leadership: What is Leadership, Effectiveness/lmportance, Leadership Theories - Traditional rrrait Theories, Behavioural Theories, Contingency Theories, Modern Theories, Leadership Styles, Leadership Skills - Co-ordination

8.

Control

166-184

Control Concept - Nature and Purpose: Strategic Control vs. Operational Control - Types, Process, Control Techniques, Problems of Control Process, Control of Overall Performance: Effective Control, Management Audit, Self Audit - Span of Control

9.

Case Studies 1

Do we need a Professional Manager?

2.

Practice to Theory

3.

Social responsibilities: Dr. Reddy Lab Sets Iii)...

4.

Ford Motor company: Pinto Case

5.

Planning: Essential Aspect of Manageme:lt

6.

Sound Objectives ....

7.

Cost of Emotional Decision-making

8.

Reliance Industries ....

9.

Delegation

10.

Direction ...

11.

Controlling ...

12.

Systematic contro! ...

185-192

Chapter 1

Management: An Over View

INTRODUCTION - MANAGEMENT: AN OVER VIEW- DEFINITIONS OF MANAGEMENT, MANAGEMENT: A SCIENCE OR AN ART? -MANAGEMENT: A PROFESSION -MANAGEMENT VS. ADMINISTRATION-MANAGEMENT FUNCTIONS MANAGERIAL ROlES -MANAGERIAL RESPONSI8R.IT1ES- MANAGEMENT lEvELS -FUNCTlONAL AREAs OF MANAGEMENT -UNIVERSALITY OF MANAGEMENT PRINCIPLES -INTERNATIONAL MANAGEMENT -SYSTEMS ApPROACH FOR UNDERSTANDING ORGANISATIONS- CoNTINGENCY ApPROKCH FOR UNDERSTANDING ORGANISATIONS o

INTRODUCTION Some companies like Reliance Industries, Procter and Gamble, Hindustan Unilever, lTC, Dr.Reddy's Labs, HDFC Bank, Tata Iron and Steel Company (TISCO) Umited etc. are most successful and on the other side some companies like Kolleru Paper Mills Ltd., Agrifural Chemicals Ltd., Binny Mills and Panyam Cements belong to the unsuccessful category. Similarly, we find some outperforming companies like Infosys Technologies and WIPRO. While other companies like Nava Bharat Ferro Alloys Ltd., Hindustan Machine Tools (HMT) Ltd. and Hindustan Cables Umited are low on the performance graph. Some companies like Tata, the Birla Group and Gujarat Gas Company expand and diversify their activities whereas the activities of other companies shrink day by day, subsequently recording low performance rates. Companies of the same industry are being affected by the same environmental factors. Some companies attract a number of customers while some other companies repel them. Employees prefer to be identified with some companies while they prefer to be unemployed in case of some other companies. Why do companies perform differently when they operate under the same environmental conditions, serve the same customer, use the same raw material and technology and employ the people with similar skills? The answer for this question, invariably, is management practices. Thus 'Management' makes remarkable difference between the companies regarding their performance in terms of productivity, products, sales, profitability, service to the customer, employee welfare etc. Management plays a vital role in deciding the destiny of business as well as non-business organisations. The success of an organization depends on its people and how they work in close co-ordination and harmony with management and their principles. If there is a group of people, working together, dissonance and discontentment is inevitable. During the last two decades, management as a discipline has attracted the attention of academicians and practitioners to a very great extent. The basic reason behind this phenomenon is the growing importance of management in day-to-day life of the people. Today, the study of management has become an important fact of human life.

Principles and Practice of Management This background urges us to know what management is? Now, we shall discuss the meaning of the term 'management.'

MANAGEMENT: AN .OVER VIEW Management is as old as human civilization and integral part of human life. ' Management principles are practiced voluntarily or'involuntarily and consciously or sub- consciously. People of all walks of life plan their activities before starting their work. Similarly, they organize different kinds of resources necessary for carrying out the activities, employ people or utilize their own and family members direct and lead people, coordinate all kinds of resources like people, money, material, machinery and knowledge resOurces in the process of performing activities. further, we check and supervise whether we are doing the activities as planned. If, the activities are not happening in the planned manner, we take c9rrective measures. There are evidences of practicing management principles as back as 5000 BC. In fact, we can observe the practice of management principles and most modem strategies that crafted and followed by modern businesses in 'Romayon' ond 'Moho Bhorat'. Most of the Indian Kings used management principles in their administration. Egyptian pyramids were built as back as 3,000 BC that required planning, organizing various resources, directing people and controlling activities. Management principles are practiced not only by the administrators, but even by ordinary peopl2 in their day to day activities. Even, we use management in our daily life. Students use management principles extensively for planning their studies, organizing resources, directing Management is becoming more challenging in' recent times due to the following factors: • Emergence of too many problems;

o Setting complicated objectives; • Enhancement of objectives; o Scarcity of resources;

.• Ever changing environment;

o Changing customer preferences and tastes; .., Growing organizations; • Increasing population; • Shift in the priorities of people from contentment to material life; • Globalisation and • Complicating competition.

DEFINITION OF MANAGEMENT Mary Parker defines the term management as "the ort of getting things done through others."l But research studies concluded that management is a field of endeavour that combines art and science.

Management: An Over View Ivancerich, Donnelly and Gibson, define the term management as "the process undertaken by one or more persons to coordinate the activities of other persons to achieve results not attainable by anyone person acting alone." Managers perform a number of activities, in addition to coordination. Further, this definition covers only one resource i.e., human resources and does not focus on material resources and financial resources. John A.Pearce and Richard B.Robinson included all kinds of resources in their definition on management. According to them, "Management is the process of optimizing human, material and financial contributions for the achievement of organizational goals." This definition ignores the integrated aspect of the contribution of all resources towards the attainment of organizational goais. According to Harold Koontz and Heinz and Weihrich, Management is "the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims." This definition ignores the extef!1al environment through which most of the stakeholders interact with the company. Now, we shall define the term management as designing, providing and maintaining a conducive internal environment in tune with the opportunities and challenges of the external environment through planning, organizing, directing and controlling all resources and operations in order to achieve effective organizational strategies efficiently. The analysis of the above definitions provide the following aspects of management: • The purpose of management is to formulate effective (right) organizational strategies and to achieve them efficiently (productively) based on the missions objectives and goals. • Management deals with both internal and external environment. • Management is concerned with all kinds of resources viz., human, financial, material, machines, technology and technical know-how. • Management functions include: planning, organizing, directing and controlling. • Managers should possess varied skills in order to playa variety of roles. • It applies to managers at all levels in an organisation. 8

Management is applicable to all kinds of organisations i.e., both profit and non-profit oriented organisations.

c Management vs. Administration. 8

Management is both an art and a science in order to create a surplus.

o Management needs to be a profession to achieve goals continuously with an incremental . efficiency. Now we shall discuss each of these aspects of management.

Purpose of Management: To Achieve MOST Managers basically formulate Mission, QPjectives, Strategies and Tactics (MOST). Management is essential to achieve the MOST. The urganisational mission is the basic reason for its existence.

Principles and Practice of Management Mission proVides a statement of what the company stands for, i.e. its purpose for existence. For example, the.mission statement of a commercial bank is: "A vibrant bank committed to excellence in performance through customer satisfaction." Managers formulate objectives based on this mission. Objectives are the ends towards which . the activity is aimed. This goal is precise and is expressed in dear and specific terms. For example, the objective of a company is to eam profits whereas the goal is to earn certain percentage of profit on capital employed. Management formulates strategies in order to achieve the goals. Strategy is a unified, comprehensive and integrated plan that relates the strategic advCl!1tages of the firm with the opportunities of the environment. For example, entering the car financing business inorder to enhance the sales is a strategy to achieve the goal of earning profit on capital employed. Tactics is an action programme through which strategies are executed. Thus the purpose of management is to achieve the company's mission, objectives and strategies.

Management Deals with Internal and External Environment Management while formulating strategies, studieS and analyses both internal and external • environment. Internal environment consists of organisational structure, finances, marketing, production and human resources. External environment consists of STEPIN viz., Social and Cultural, Technical, Economic, Political, International and Natural (see Fig.1.!). • • • • • • • • • • • • • • . FIf!o 1.1: Management and Environment

• • • • • • • • • • • • • .•

Management is concerned with all kinds of resources Managers manage and utilise all kinde of resourc8S like financial resources, human resources, materials resourc~ et(:. , in the process of achieving their strategies and goals.

Management: An Over View

MANAGEMENT: A SCIENCE OR AN ART? We should know what is science and what is an art before discussing whether manag~ment is a science or an art?

What Is a Science?: Science is a body of knowledge developed systematically, based on observation, measurement, experimentation and drawing inferences based on data. The knowledge can be verified through cause-effect relationship. The knowledge provides principles, theory and laws. Management satisfies the characteristics of science like: • Body of knowledge is developed systematically. Management knowledge is developed' through a number of systems like input-output system, organisational system, functional system etc. • Management knowledge is developed through observation, measurement and experimentation. • Inferences are drawn based on data analysis. Management is a developing science. However, management cannot be equated with exact sciences like physics and chemistry. Most ofthe managerial activities like decision-making, planning, organizing and directing cannot be an exact science.

What Is an Art?: Art is understanding how a particular activity can be done. Art can be acquired by conscious effort and practice. Management is getting things done by and through other people. They have to continuously analyse the environment and formulate the plans and strategies. They have to modify the strategies based on environmental changes. The principles of management and theories of management cannot be implemented as learnt, in the real world. They ,are to be applied after making necessary modifications based on the real life situations. Thus, management is both a

s~ience

and an art as it acquires the characteristics of both.

The next question to be answered: Is management a profession?

MANAGEMENT: A PROFESSION? Any occupation to be called a profession should satisfy the following: (Q Body of knowledge: Management knowledge is developed systematically and scientifically

based on research studies, experiments, experiences and observations. Further, management literature is continuously developed by researchers and practitioners. (Ii) Development and updating the knowledge: Management knowledge has been

developing continuously. Managers should update their knowledge by learning and acquiring the latest developments through training, executive development and formal ~~

.

(IIi) Professional Journals: There should be professional journals to publish the findings of

research studies. There are a number of professional journals allover the world to publish

Principles and Practice of Management the findings of research studies and latest developments in management: Harvard Business Review, Vikalpa, Decision, Indian Management and Indian Journal of Industrial Relations.

(iv) Professional Associations: There should be professional associations in order to monitor and enable professional development. Further, they implement the code of conduct. Management professional associations in India include: All India Management Association (AlMA), National Institute of Personnel Management, Institute of Chartered Accountants of India etc. (v) Code of Conduct: The professionals should behave ethically while discharging their duties. AlMA, National Institute of Personnel Management, Institute of Chartered Accountants of India and other professional organisations formulate the code of conduct. (vI) Specialised Educational Qualifications: There should be specialised educational qualifications for employment for professional jobs. Specialised educational institutions are established to impart specialized education. Indian Institutes of Management and Departments of Management in the Universities are established to provide specialized management education leading to Post-graduate Diploma in Management (PGDM) apd Master of Business Management (MBA) degree. Management satisfies all the characteristics of a profession. Therefore, management is a profession like medicine and law.

MANAGEMENT Vs. ADMINISTRATION Different writers and management thinkers view management and administration differently. There is no unanimity among the writers regarding these two concepts. According to one section of writers, administration involves policy making, formulation of vision, mission, objectives and strategies. As such, administration is the function of the top level management. Further, administration decides the organisational structure and prepares the organizational plans. Management involves executing the plans and strategies and carrying out various activities determined by the administration. It directs and controls the subordinates. Thus, management is the function of lower level people in the company. The second view has been advocated by E.F.L. Brech. According to E.F.L.Brech, management is a comprehensive and integrated term. Management includes planning, organizing, directing and controlling. According to him, management can be classified into two categories viz., administrative management and operative management.

Administrative Management: Administrative management represents the top level management pertaining thinking and planning functions. Administrative management performs the functions of formulation of vision, mission and strategies. It includes board of directors, managing director, general managers and chief managers. Operative Management: Operative management represents the lower level management covering execution and implementation functions. It performs the functions of execution, directing and controlling which involves the contribution of middle level managers and lower level managers.

Management: An Over View ,"

The third view has been advocated by Peter F. Drucker. According to him, the term administration is applicable to non-profit organisations like government organisations, serviceoriented hospitals and educational institutions, military, churches, temples etc. The main actlvity of administration is planning, organizing, directing controlling and renderi~,g . serviCes. Thu~, governance of non-profit organisations is called administration. Governance of business organisations is "referred to as management. TIius, management is concerned with business 6yganisations~~nd profit-oriented organisations. It is measured by the efficiency in profit-making and agmiilisfratiori is measured by efficiency in rendering services. " ' .- -

MANAGEMENT FUNCTIONS As indicated earlier, management is the process of planning, organizing, staffing, directing and controlling the efforts of organisation members in utilising all resources to achieve organizational goals, objectives and mission. Management is a process as it operates the activities systematically. Fig.l.2 presents the management process . • • • • • • • • • • • • • • • • Fig. 1.2: The Management Process

Company mission is the basis for planning. Planning is deciding in advance what should be done. Managers think logically to achieve goals.

•••••••••••••••

Organising is the process of linking and arranging activities in a sequence. It includes allocating work, authority and resources.

Staffing is acquiring, developing, utilising and compensating human resources necessarily to achieve organisational goals. Human resources help the process of converting inputs into output and achieving customer satisfaction.

Directing involves leading, influencing and motivat-ing the people to perform organisational tasks and to convert input into output. It includes: • Motivation • Leadership • Communication

Functions of management include planning, organising, staffing, directing and controlling.

Principles and Praotice of Management

Planning Planning consists of the activities involved in choosing courses of action to achieve organisational objectives. It is deciding in advance what to do, when to do, how to do and who will do it, in order to achieve these objectives. Both long-term and short-term plans are necessary to achieve goals. It is necessary for the management to adopt certain assumptions or premises with regard to external factors that serve as a background for the planning function. Some companies have adopted the practice of contingency planning in view of growing difficulty of predicting future environmental conditions. Planning is a part of the activities of all managers. .

Organising Organising involves the grouping 'o f jobs into a framework for coordination and direction. Formal organisations may be portrayed by use of an organisation chart. Careful structuring of an organisation is beneficial in temis of clarifying lines of command and eliminating gaps and overlaps. However, extremely detailed organisation structures may be dysfunctional. I

Once' job content is determined, jobs and activities must be grouped to devise an overall structure. Decisions affecting organisational structure involve values and goals for both !!nterprises and individu~. Organisations are structured baSea on product, function, geography, customer-and projeCt. The matrix structure has evolved as a result of complex environments, markets and technology. It combines both functions and projects. Organisational culture reflects not only social values and expectations, but also the unique set of values, beliefs and behaviours that characterise each organisation.

Staffing Staffing is plar:tning, orgailising, directing and controlling' of procurement, development, compensation, integration and maintenance of people for the purpose of contributing to individual, organisational and social goals. Thus, building an effective organisational team requires planning and control of human resources. This process requires the performance of the functions like' job analysis, human resources planning, recruitment, selection, induction, placement, training, executive development, wage and salary administration, leadership, teamwork, motivation, grievance procedure, disciplinary procedure etc. Once the employee is employed, his development needs are identified through performance pppraisal. Once these needs are identified, the employee will be trained/developed with the application of on-the-job and off-the-job .methods. Staffing function is also known as human resource management.

, Directing The next logical function after completing planning, organising and staffing is the execution of plan. The important function of management at any level is directing the people by motivating,

Management: An Over View . commanding, leading and activating them. The willing. and, effective cooperation of employees for the ' attainment of organisational goals is posSible 't hrough direction. Tapping the maximum the people is PQssible through motivation an~:i ~mmand. Thus, direction is an pofe'ntialities imj?ortant managerial function in secUring employee's contribution. Coordination deals with the task of blending efforts in order to ensure successful attainment of organisational objectives.

of

ContrOlling After planning, organising, staffing and directing the various activities, the performance is to be verified in order to know whether:the activities are performed in confirmity with the plans and obj~ctives or not. Controlling also inv~lves check.ing, verifying ~d comparing of actual performance with the plans, identification of deviations, if any and correcting of identified deviations. Thus actions and operations are adjusted to predetermir:ted plans and standards through control. : The purpose of control is to ensure the effective oJ)f!ration of an organisation by focusing on human, mab~rial, finance and machines. Financial control is attained through a number of means viz., financial statements interpreted through ratio analysis and budgets.

au resources -

. Managers should have required skills in order to perform the functions discussed above. Now, we shall discuss managerial skills.,

MANAGERIAL ROLES , Managers perform different roles as shown in Fig. l.~ . As can be seen from the figure , formal authoritY gives rise to three inter-personalroles 'andthre~ 'infortnational roles. The two sets of roles enable ilie managef · to 'playthelourdeeisionaholes~·· . ,,'

Interpersonal Roles ,'"

•.

1,'

The important interpersonal roles of managers are:

.. 'Figurehead Role: Managers perform the dutieS:'of a ceremonial' natUre ' as head of the , organisation, a strategic business unit or department: Dulle) of interpersoriafroles include routine, involving little serious corrutlunication and less important decisions. However, they are important for the smooth functioning of an organisation or department:

Leader Role: The manager, in charge of the 'organisation/department, coordinates the work of others and leads his subordinates.FqnTlal~uthoritypiovid~·greater potential power,to.exercise . : .' ' an,d get.the .things done. "

Liaison ,Role: As the leader 'of lhe organisation or unit, the manager haS 'to perform the functions of motivatipn, ' ',," ~.' '} "'.: :. "

•

• •

Life Time Employment: Japanel!e companies used ,to, provide life time employment to the people, Now this concept Is changed to life time employability. In' other words the , companies. continue the employment of those employes who continuously acquire new skills required by the company from, time to time: ' $Iow evaluation and promotion Non specified career paths

• •

Implicit c~>ntrol mechanisms ' , Collective ~ecisjon-mecha(1i.sms companies

• •

Collective r~9pol'lsibility Holistic concern

•

Short-term employment . ~r •

.!"

Rap1d !!valoation and promotion SpeCialised caree,r paths: Softwar.e , industry In ;USA encourages multicareer paths • ' EXplicit ''contrOl meChanism . :' Individual decisIon mak'lng: American , " particularly software companies have bElen practicising group decision-making • lridlvidual responsibility ,• ' Segmented concern •

Man~gem~~t~les,,~d ~pproach,es Vary widely ,~een the western countries and the eastern

countries.

' ; ','

.

• , Individualistic ,approach is more predomitlanf in the. west Particularly in' USA while ftle group approach is more'P.redomin~t in the east particularly in Japan. • 'Decisions are mostly made by the top inanagement in USA and are pushed downwards. De.cisions in Japan are mostly made by the interaction and participation of bOth top level management and lower level em~loyees. • Employees volunteer to assist the management in the eastern countries whereas in western countries employees do ' not take up the work unless otherwise the ' work is formally assigned to them. " " ' • Information flows freely through all directions in eastern countries, whereas it flows with ',, "" a direction though a 'paJ1icular ch~nel in the western ,countries. • Employees in USA strive for individual achievements and rewards whereas the employees in Japan strive for group achievements and rewardS. '" • Team work is the culture,f ·the Japanese firms and individual work is the culture of American firms. \ ' : '.. , , ,.'. . .' ~, : ( " : ~: .. ,'~; ' : J j • Employees in Japan are mostly prefer empowerment while their Counterparts' in ' U$A prefer close su~rvision.

'l

. Management: An Over View • Japanese organisations used to employ the people throughout the lifetime. But, the globalisation and information technology made the Japanese organisation to develop the human resources of their employees, enhance their employability and provide employment. As such the employee tumover is almost nil in Japanese firms. • Employment in USA is for a short run. USA companies fire the employees quite often as they follow 'hire-and-fire' policy. As such the employee turnover is high in USA. • Japanese organisations follow humanistic approach in employing and managing people while the American companies follow mechanistic approach or 'use and throw' policy in managing people. • Japanese organisations follow long-run and relationship-oriented approach whereas c. American companies follow short-run and pure:business or:iented approach in managing busineSs.

SYSTEM APPROACH FOR UNDERSTANDING ORGANISATIONS A system is a set of interrelated but separate parts working towards a common purpose. The ammgement of elements must be orderly and there must be proper communication facilitating interaction between the elements and finally this interaction should lead to achieve a common goal. Thus, systems approach to management views the organisation as a unified, purposeful system composed of interrelated parts. Hence, managers have to deal with the organisation as a whole rather than dealing separately with various segments of an organisation. This approach also gives the managers to see the organisation as a whole and as a part of the larger external environment. Systems theory reveals to us that the activity of any segment of an organisation, affects in different degrees, the activity of every other segment. Systems-oriented managers would make decisions only after they have identified impact of these decisions on all other departmentS and 'the entire organisation. The essence of the systems approach is that each manager cannot function in isolation and within his org~isational boundary of authority and responsibility of the traditional organisational chart. They must interwire their departments with the total organisation and communicate with all other departments and employees and also with other organisations.

Key Concepts of Systems Approach (I) Subsystem: Subsystems are those parts which make up the whole system. Each system

in tum may be a subsystem of a still larger system. Thus, a department is a subsystem of a factory, which is "a subsystem of a firm, which is a subsystem of an induStry, which is a subsystem of a national economy, which is asubsystem of the world economic system. (Ii) Synergy: Synergy is the situation in which the whole is greater than the sum of its parts.

In organisational terms, synergy means that departments that interact co-operatively are . more productive than they would be, if they operated in isolation.

mJ

Principles and Practice of Management

(III) Open System: It is a system that interacts with its environment. All organisations interact with their environment, but the extent to which they do so varies.

(Iv) Closed system: It is a system that does not interact with its environment. .' . (v) System Boundary: It is the boundary that separates each system from its environment. It is rigid in a closed system while flexible in an open system. (vI) Flows: A system has flows of information, materials and energy. These enter the system . from the environment as inputs (like raw materials), undergo transformation process . within the system (like production process) and exist in the system as outputs (like productS services). (Fig. 1.5 shows the flows and feedback in an open system). • • • • • • • • • • . Fig. 1.5 The Flows and Feedbac#C In the Open System • • • • • • • • • • •

(viI) ,Feedbdck: It. is the p~ of system control in which the results of actions are.returned to the individual, allowing work ,procedures to be analysed and corrected.

Systems approach helps the dYnamic and interrelated nature of organisations to plan for actions and anticipate :consequences and mutual effects. It helps the general managers to maintain balance among various subsystems and the organisation. Thus a major contribution of the systems approach results from its strong emphasis on the interrelatedness or mutuality of various subsystems of th~ organisation. Treatment of the organisation as an open system is another contribution of systems approach.

Features of Systems Approach to Management According to Herbert RHicks and C.Ray Gullett, the characteristics of systems approach to management are: (I) Dynamic: The process between subsystems within an organisation is dynamic.

(6) Multilevel and multldlmef18lonal: An organisation can interact with other organisations and the economy at various levels and in multifarious ways. (HI) Multlmot~vat~d: Since the organisation is dynamic and has multiple goals, an act in the organiSation may be motivated by several motives.

(Iv) Probabilistic: Management would be mostly probabilistic as it is operated under a highly turbulent and dynamic environment.

Management: An Over View (vj MultJdlsclplinary: Systems theory of management is contributed by various disciplines. (vi) Descriptive: Instead of providing certain prescriptions, this theory describes the features

of organisation and management. (1J1i) Adaptive: All the subsystems should be adaptable and accommodate to the changes in

other subsystems.

CONTINGENCY APPROACH FOR UNDERSTANDING ORGANISATIONS This approach is also called situational approach. This approach was developed by managers, consultants and researchers who tried to apply the concepts of the major schools to real life situations. They sought to know the causes for the success of methods in one situation and failure in another situation. Advocates of this approach answered that results differ because situations differ, as such a technique that works effectively in one situation will not necessarily work in all cases. Hence managers have to identify the technique which will best contribute to the attainment of the management's goal in a palticular situation, under particular circumstances and at a particular time. Classical theorists suggest work implication for increase in productivity whereas behavioural scientists suggest job enrichment. But the manager under contingency approach should find out which method will work better in that particular situation. This approach builds upon systems approach. The composition ot'a palticular situation or system will help to know the technique best suited to that pal ticular situation or system.

QUESTIONS FOR DISCUSSION (A) Very Short Answer Questions (20 marks)

1. D.!fine management as a process. 2. What are the impoitant objectives of

managetn~nt?

3. What is social responsibility concept of management? 4. Wllynlanagement is known

a:;

a univer&al concept?

5. DeS