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FUNDAMENTALS OF AN ORGANISATION AND BASICS OF MANAGEMENT

What is an Organisation?

The word organisation is drawn from organon meaning organ in Greek. Organisation predates history. People came together primarily to hunt, preserve food, please their gods, and protect themselves. In doing so, everyone had to give up some freedom, but could become part of a system that covered their individual weakness and enhanced their individual strength. At the rudimentary level, this is an organisation. This set-up is not unique to man. Animals organise, divide the labour among themselves—some hunt, some protect their young ones, and yet others lead. If you observe a herd of elephants, you can perhaps witness this phenomenon. It is well documented even among insects and bees.¹

 

Cooperation, coordination, and division of labour are at the root of an organisation.

 

Cooperation, coordination, and division of labour are at the root of an organisation. Division of labour results when different individuals undertake different, and possibly, specialised tasks. For instance, some hunt while others take care of their young ones. Cooperation results when people who undertake one specialised task selflessly share their output with others. For instance, those who hunt, share the food with those who take care of the young ones. Coordination results when different people and tasks are done in an orderly manner. For instance, deciding who will hunt on which days, who will carry a particular weapon, the time they should go for hunting, their reaction in case of a danger, etc., are a part of coordination.²

 

Organisation is a social creation.

 

Though animals too show such behaviour, human beings surpass them several fold³ because they make laws to regulate such behaviour. Whether it is your neighbourhood football club or the Indian Premier League, organisations are created using a legal framework. An organisation—whether it is a corporate, government, non-profit organisation, educational institution, the military, or the United Nations—is an example of human sophistication. Hence, organisations, as we usually know, are social creations.

Organisations have distinct goals and operate in unique environments. Consequently, they have distinct ways to define the tasks, actions, and processes, functions, and create the structures and institutions. Therefore, we can study organisations from process, function, or institutional perspectives.

What Do Organisations Do?

Organisations strive to reach their stated vision by fulfilling their goals. By doing so, they create value for stakeholders, who have some interest in the organisation.⁴ In the case we discussed, Rajendra, the employees, the customers, the bank, and the suppliers are the stakeholders. The society, which gains from the jobs provided by his business, the neighbourhood school, and the government that gets taxes are also stakeholders. Therefore, we can say that the primary role of an organisation is to create value for all stakeholders, by creating products and services.

 

Stakeholders are people for whom the organisation creates some value.

 

Types of Organisations

There are several ways to classify organisation.⁵ Based on legal framework, business organisations can be divided into proprietary business, which means one person invests, and reaps the benefits, much like Precision Connectors, where Rajendra reaps all benefits and bears all losses; partnership where the investment is made by two or more people in a mutually agreed proportion, and enjoy profit or bear losses in the same proportion; and companies, which are established under the Company’s Act to include public limited and private limited companies. Public limited companies can be owned by anyone including the government, and are traded in the stock market. Anyone can buy or sell the shares unlike private limited companies where shares are not publicly traded. When the majority share is owned by the government, it is called a public sector company and when it is owned by private individuals, it falls under the private sector. The nature of shareholding influences the behaviour of the top management, and consequently the organisational behaviour (OB).

 

Business organisations can be proprietary, partnership, or companies.

 

In modern times, you would have heard terms such as corporation, multinational corporation (MNC), and transnational corporation (TNC). The term ‘corporation’ usually refers to an organisation with many companies under its umbrella. For example, the Tata group comprises Tata Iron and Steel Company, Tata Motors, Tata Tea, Tata Advanced Materials, Tata Consultancy Services (TCS), and so on. Though each company in a corporation would have its own policy, the values of the organisation such as equality or trust, and some key policies are followed throughout the corporation. MNCs are corporations with business operations in more than one country, and from an OB perspective, there would be international and cross cultural implications. For example, managing cultural diversity may be a major focus of OB in MNCs. TNCs are similar to MNCs, but are very large and adept in transferring knowledge from one country to another. Thus, for example, a TNC in Europe specialising in chemicals can set up plants in India and employ people from Brazil to transfer specialist knowledge to Indian operations. You would appreciate that the way they handle OB would be highly integrated and complex.

Sequence of Building an Organisation

Irrespective of the type of organisation, any organisation would have certain components that build it and they are linked like a chain from the vision to output/outcome. Let us call this an ‘organisation chain’ and each component ‘a link’ (see Figure 1.1). Let us now have a look at the components:

Vision and Mission A vision is a statement of intent on what you want ‘to be’ on some future day; whereas a mission is a statement of what you want ‘to do’ to reach that. For example, in the statement ‘to excel in training business leaders and be among the top 20 business schools in India’, the vision is to be among the top 20 and the mission is to excel in training business leaders. Often, there is some confusion between these terms. Some argue that an organisation should have both vision and mission, whereas some suggest that a mission is compulsory and a vision is not mandatory. Collins and Porras⁶, in their noted article ‘Organisational Vision and Visionary Organisations’, argue that a good vision should have core purposes, core values, an audacious goal, and should be vividly described.

• The core purpose of an organisation is its reason for existence—‘provide software solutions or telecommunication service’ is an example for a core purpose. Thus, it defines the mission. In fact, it is a statement on the ‘value’ it creates for the stakeholders, particularly the customers.
• Core values denote the organisation’s belief framework within which the core purpose is to be achieved. For instance, firm ‘A’ and ‘B’ could have the same core purpose of providing mobile telephone communication. Firm ‘A’ may have sustainability, employee first, and customer delight as its core values; whereas, Firm ‘B’ may have sustainability, shareholder value, and customer delight as its core values. Due to the difference in core values, Firm ‘B’ might tend to enhance shareholder value at the cost of employees.

   

  A vision statement has three components – Core purpose, core values, and an audacious goal.

   

• Audacious goals are challenging goals and have a clear time frame. It is, in fact, the vision or the ‘to be’ statement. When Firm ‘A’ has audacious goals and Firm ‘B’ has less audacious ones, Firm ‘A’ will tend to give more stretch goals to the employees than Firm ‘B’. Firm ‘A’ is also likely to put in place more rigorous selection, motivation, reward, and learning and development systems than Firm ‘B’ and these would affect the behaviour of the people.

   

  Vivid description of a vision statement inspires, and hence influences behaviour.

   

• Vivid description can be noted while considering Komatsu Limited of Japan. The company ranks second globally in construction equipment and wants to beat Caterpillar, the leading company in the same segment. Rather than stating ‘outperform Caterpillar’ or ‘beat Caterpillar’, it opted for ‘encircle Caterpillar’, which is more catchy, challenging, inspiring, and sounds more competitive.

If you recall the vision statement of Precision Connectors, you can see that the purpose or mission is to make connectors, the core values are ‘innovation, quality, employee orientation, and timely delivery’ and the audacious goal is ‘to be global leader by 2030’. Vividness is created by terms such as ‘in every vehicle on earth’ and ‘envied’.

Now, some thoughts for you. Do all organisations have a vision statement? If not, should they have one? Can and should an individual make his/her own personal vision/mission statement, much like an organisation? Would a personal mission statement be useful and energise a person? With these thoughts at the back of our mind, let us discuss the various components of an organisation.

If you look at Figure 1.1, you can see the components/links of an organisation, which are the vision and mission, strategy, structure, system, process, job, and tasks. Tasks lead to the output and outcome that create value for stakeholders.

Even in a small organisation such as a consulting company with just one person, the last few links such as processes, job, tasks, and output/outcome would exist clearly. Systems, structure, and strategy may be explicit only in larger organisations though they exist in all organisations. In other words, these become more visible when organisational complexity increases; otherwise, they are often implicit. If the output/outcomes and the tasks to achieve them were simple, there would be no real need for elaborate strategy, structure, and so on. In this chapter, we have turned the logical flow on its head and commenced with the output/outcome, which makes the vision real, Other components in the chain such as strategy and structure are only the means to manage the complexity involved in creating the output/outcome and connect the vision and output/outcome better. Since, outcomes/outputs are the most critical component in an organisation, let us start with it and move towards strategy.

Output and Outcome Output is the result of the tasks executed. The connectors we produce, a balance sheet we make, or the marks we score in an examination are examples of output. Outputs create value and enable us to move closer to our vision. However, at times, they may be done in such a way that the output may not lead us smoothly to the envisioned state. If we are using low quality raw material, cooking up a balance sheet, or merely mugging up and passing the examination without understanding, we may have the output; but no outcome. Outcome means that the tasks have to be delivered in the manner intended to fulfil the larger goal or vision, and not in ‘any manner’. If you have an output and you ask the question, ‘so what difference does it make’, you will get the answer to outcomes. Output and outcomes together create value for the stakeholders.

 

It is not output alone but output combined with outcomes that create value.

 

The terms efficiency and effectiveness are also related to this concept. Figure 1.2 shows the relationship.

• Efficiency We all know that some motor cycles run 50 km per litre, whereas some others run 60 or 70 km per litre. The second category of vehicles are more fuel-efficient. The term ‘efficiency’, thus, indicates an input-to-output relationship, and is usually related to some measurable input/output; petrol and distance in this case. There are different types of efficiencies. Technical efficiency measures the physical input-output ratio as in this example. Similarly, if the quantum of copper wire used in a connector is reduced without any effect on functioning of a connector, it leads to technical efficiency. Production efficiency means using as few resources as possible for the same output; or in other words, producing something at the lowest average cost. Process efficiency refers to modifying or eliminating the steps in a process and yet getting the same/better output. Allocation efficiency refers to how the resources are allocated for various tasks. For instance, if there is shortage of power and all machines cannot be run, the Precision Connector could allocate the machine time in such a manner that delivery is not affected. Dynamic efficiency is a variant of allocation efficiency. An example would be management of labour allocation for various tasks in Precision Connectors, depending on the changes in orders.

   

  ‘Efficiency’, indicates an input-to-output relationship and is usually related to some measurable input/output

   

• Effectiveness Effectiveness and efficiency are differentiated using the adage, ‘efficiency is doing the thing right, and effectiveness is doing the right thing’. In reality, the term ‘effectiveness’ is rather difficult to differentiate from efficiency because they are often used as synonyms. A process or activity may be efficient but may not contribute to the goal. In a super market with the goal of high profitability, decreasing the number of employees per square feet (input/output ratio) can lead to higher profitability, since the selling expenses would be lower. However, this may lead to lower customer satisfaction and customers patronising the outlet may tumble, lowering profitability. Here, the action which led to efficiency, worked against effectiveness.

Thus, efficiency is hard facts related to an input-output relationship, whereas effectiveness reflects how that output helps the organisation’s overall goal or its progress towards achieving the vision. The former is highly quantifiable, whereas the latter is more tacit and less quantifiable. Efficiency is more visible, easy to measure, and rectify, whereas effectiveness is more invisible, difficult to measure, and more complex. Efficiency has relatively lesser intertwining variables affecting it, whereas effectiveness deals with highly integrated variables whose interaction is difficult to measure and predict.

 

Effectiveness reflects how output helps the organisation’s overall goal or its progression towards achieving the vision.

Tasks A task or an activity is the most basic entity or the atom in creating an output. If you want to make a connector, there are many tasks/activities such as twisting the cable, insulating, fixing the pinout, packing, and so on. In smaller organisations, one person may do many activities and in larger ones, a person usually does one or a few tasks, but of highly specialised nature. Thus, for example, an accountant of a small organisation will undertake book keeping, budgeting, controlling cash, liaising with bank, and so on. Whereas an accountant in a large organisation may take up only book keeping. The former is less specialised, but broader in scope, while the latter is more specialised, but narrower in scope. Most tasks are done as per practices existing in an organisation, and practices vary from organisation to organisation. The task of checking the quality of a raw material may be done at the origin by one organisation and after receiving it in the warehouse by another. Though the task is the same, the practice of checking the quality is different. See Box 1.1 for a description of the practice.

Jobs and Roles We just learnt that a person may be doing more than one task. All the tasks that a person does, put together, is called a job. In other words, a job is a basket of related activities/tasks. A person who performs these jobs is called a job occupant. For example, an administrator in the organisation is a job occupant and is required to look after the office setting, office purchase, payroll, hiring of vehicles, arranging accommodation, and ensuring compliances. In order to perform the job, the job occupant would need to motivate people, act like a father figure, and advise and coach people. These are the roles (not tasks) a person plays to fulfil his/her job. Hence, we can say that a job occupant does not only tasks, but also plays some roles associated with it.

Processes The jobs we do should be in some logical order for efficient and effective output. Let us say that Precision Connectors want to purchase materials for manufacturing the connectors. They have to find suppliers, check the quality, examine the capacity to supply, negotiate and fix prices, place orders, pay advance as per the agreement, and transport the material to the company. This is called the purchase process. Thus, a process can be defined as a series of logically ordered tasks that convert substantial input into an independent output. Each step in the purchasing process adds some value. Process is a key concept in business and the term ‘process improvement’ is a common term that you will hear in an organisation. Processes create value and any improvement in a process increases the value created.

Systems We studied that processes add value and convert an input into an output, using purchasing process as an example. The purchase system has some input, that is, quantity and quality of items to be purchased and this comes from the demand raised by the manufacturing system which, in turn, depends on the sales achieved by the sales system. The output of the purchase system will be materials and this will become the input for the manufacturing system. The manufacturing system also has processes. For example, in the initiating case, the connector will be made by the processes of twisting cables, insulating, fixing pin out and so on. Finally the connector is the output. The entire gamut of input, process, and output combined is called a system. Purchase system, manufacturing system, marketing system, and so on are examples of a system. A ‘system’ is an important concept in management because it is independent, yet interdependent. For a clearer understanding, refer to the section on ‘systems’ included in the chapter on structure.

 

A system is a cohesive entity that gives input, throughput, and output and is dependent on other systems.

Structure Since systems are interdependent, it is easy to conclude that these should be linked to each other; there should be some protocol on how they should operate and share information and control, and coordinate with each other. This is the role of structure. Structure can, therefore, be defined as a mechanism to link systems and sub-systems to create a cohesive whole. For instance, structure defines how the purchase system will report the arrival of materials and to whom it is to be reported, the cost incurred, and so on. Similarly, it will define to whom and how the sales system should report demand, and to whom the manufacturing system will report the demand for material and completion of manufacturing, and so on. Coordination, cooperation, and division of labour would be impossible without structure. There are four basic ways to create an organisational structure⁷. These are pyramid or hierarchy, matrix, committee or jury, and ecologies. There is a popular adage that structure follows strategy.⁸ Since we are moving from bottom to the top, it is natural that we are discussing strategy after structure.

 

Structure is a mechanism to link output generating systems and sub-systems to create a cohesive whole.

Strategy Precision Connector has a clear vision as given in the case and to achieve this, it has to serve a market. The company, its structure, system, processes, and so on are part and parcel of the company. Rajendra and his team can change them as they want to, as these are internal to the organisation. However, market is external and they can hardly change it. A strategy connects the firm with the external realities. Strategy can be defined as the mechanism of aligning the internal realities with the external realities to create value for stakeholders and establish competitive advantage over other similar organisations. Strategy is also perceived as a way of creating and distributing the internal resources of a firm to align it with external realities. Either way, it forms the linking pin between the external and internal realities and is created by matching the strengths/weaknesses of an organisation (internal factors) with the opportunities/threats that exist (external factors); often called the SWOT analysis (strengths, weaknesses, opportunities, and threats). External factors are analysed through a technique called PESTCL analysis (political, economic, social, technical, cultural, and legal) and implies that an organisation finds opportunities or threats in these factors. Strategy represents a grand long-term plan to achieve the vision and is usually created for a time span of five to ten years.⁹ The different types of strategies are:

 

The way organisation aligns the external and internal realities to create value for the stake holders and establish competitive advantage over other organisations is called strategy

• Corporate Strategy is usually made by organisations, which have numerous businesses/companies operating under one roof. Mahindra and Mahindra has many companies such as tractors, resorts, and two-wheelers and would include long-term plans related to entering new businesses, new geographic continents, and acquiring new companies.
• Business strategy The strategy made by one business, for example, Mahindra’s two wheelers, is called business strategy and could pertain to its expansion, contraction, selling off, and approach to facing the market such as low cost approach or differentiation.

   

  Three types of strategies are corporate strategy, business strategy, and functional strategy.

   

• Functional strategies such as financial, marketing, or operations strategies, are the grand plans for these business functions. For example, the financial strategy of a business may be ‘debt-free’ or ‘debt cum equity’ or its marketing strategy could be to introduce products only in North India.

To sum up this section, we can say that organisations are meant to create value for stakeholders by creating outputs and outcomes. The first component/link that emerges in an organisation is the vision/mission, which in fact is a statement of the intent of the value to be created. It may not always be in a written form when the organisation is new. The intent is converted into actual output/outcomes through a series of links created by the organisation. These are strategies, structures, systems, processes, and jobs. People man the jobs and undertake tasks along with machines. People also spend most of their adult life in the organisational environment. This implies that organisations have a strong influence on the behaviour of people. In turn, people’s behaviour also affects the organisation. Therefore, understanding an organisation is an important prerequisite for understanding OB.

What is Management?

In the earlier section, we studied about organisational components and had a glimpse of division of labour, coordination, and cooperation. In this section, let us see how these are managed.

During the prehistoric days when man lived largely by collecting food from the natural flora and by hunting, life was simple. Even in those days, men hunted for food, women cooked and cared for children, and people chose a leader who could lead them in hunting, and preferred someone to make their hunting equipment sharp and precise. At a very rudimentary level, this is specialisation and division of labour. They managed the division of labour by planning, organising, finding appropriate people to do different tasks, and by choosing leaders who controlled the system through customs, practices, laws, and dispensation of justice.

According to Harold Koontz¹⁰, “Management is the art of getting things done through and with the people in formally organised groups. It is an art of creating an environment in which people can perform and individuals can co-operate towards attainment of group goals”. According to F. W. Taylor, “Management is the art of knowing what to do, when to do, and see that it is done in the best and cheapest way”.

 

Management is about ‘people and other resources’.

 

Building on the definition of Harold Koontz, we can define management as the ‘process of designing and maintaining an environment in which individuals working in groups, efficiently employ resources including technology and machines and accomplish goals of stake holders effectively’. This definition brings to the fore the following key issues of management: it is about people and other resources, there are goals for individuals, organisations, the society and other stake holders, and it involves creating an environment where people and resources interact. This definition answers the ‘what, why, and how’ of management.

 

The ‘how’ of management is ‘creating environment where people and resources interact.

 

The ‘why’ of management is ‘goals of individuals, organisation, and society’.

 

Objectives of Management

Once we have understood the definition of management, we should know its objectives. Since management is for individual, organisational, and societal goals, we can identify objectives related to these areas. Additionally, since we are interested in the management of business, there would be some economic objectives as well. Let us examine these four objectives.

Individual or Personal Objectives An organisation consists of people and therefore, the management should have people-oriented objectives such as fair and equitable remuneration for work, reasonable working conditions, opportunities for training and development, growth, participation in management, reasonable security of service, and an opportunity to explain behaviour that deviates from what is laid down; for example, coming late on a day.

Organisational Objectives¹¹ Management’s organisational objectives are to undertake functions such as planning, organising and staffing (a term that includes recruiting, and assigning jobs) to deliver what it is supposed to. It would also include optimising the resources utilised, growth and expansion of the organisation, identifying the need for change, executing it smoothly and in time, as well as improving the goodwill and reputation of the organisation.

Societal Objectives¹² Management is responsible not only to the owners and workers, but also to various groups and organisations outside it. First, it serves these objectives by producing quality goods and services at a fair price to the consumers. The society monitors these objectives and there are organisations such as the Competition Commission of India to ensure that there is no cartelisation, creation of monopoly and unfairness in fixing price. Second, businesses should pay taxes promptly and honestly; third, they should use natural resources in such a manner that future generations have sufficient resources for their consumption and prosperity. Fourth, it should be fair in dealings with suppliers, dealers, and competitors. The fifth, objective would be to ensure corporate governance and corporate social responsibilities (CSR) or addressing the problems of people, community, and the nation, like the Tata Trust or Azim Premji Foundation¹³. Sixth, it should preserve the ethical values of the society. It might interest you to know that the United Nations has set up a forum called Global Compact,¹⁴ and organisations which join it, voluntarily shun unethical practices and ensure that their suppliers also follow the same policy(Refer chapter on ethics, spirituality and CSR).

 

‘The most significant contribution that industry can make is identifying itself with the life and problems of the people of the community’.

—J. R. D. Tata

The four objectives of management are individual objectives, organisational objectives, societal objectives and economic objectives.

Economic Objectives¹⁵ In the modern context, any loss making organisation draws a great deal of attention and flak. Take for example, the poor performance of Kingfisher Airlines, which resulted in over 4,000 employees not getting their salaries on time. Therefore, we can say that the first and the most important objective of an organisation is to cover the cost of production and ensure creation of surplus. Second, it must, as far as possible, facilitate wide participation in capital and third, it must create wealth and jobs through which economic prosperity is achieved in an inclusive manner. Fourth, it must ensure solvency.

Importance of Management

Most of us would have observed that two organisations with identical resources but different management techniques churn out different results. Henry Mintzberg, a noted management guru, considered management as the most vital job in our society because it deals with the deployment of resources¹⁶. This function makes management important. Let us understand the importance of management in detail.

Goal Achievement Precision Connectors hired people from Uttar Pradesh and gave them not only jobs but also accommodation and facilitated schooling for their children. The employees, in turn, worked hard and the company had high retention and flexible labour, giving it competitive advantage. The employees too prospered and were able to send their children to good schools. Here, the management achieved not only organisational goals but also individual goals and aspirations. Equally, it satisfied the goals of various stakeholders such as the nearby school and the local community. The ability to satisfy the goals of individuals, organisation, and other stakeholders simultaneously makes management a potent weapon.

Optimisation can take place in the structure, input, processes, and practices. Two important aspects of optimisation are cost reduction and creating an organisation without any overlap. Cost reduction implies reducing the input in terms of raw material, effort, planning, or any other component of cost of a product. Creating an organisation without any overlap means creating flexibility in labour, removing process duplication or job duplication and so on.

Innovation, Change, and Stability¹⁷ If you carefully analyse the vision of Precision Connectors, you will realise that it has to innovate and change rapidly. Every change affects stability. Management recreates stability by structural redesigning, creating new systems, and fine-tuning processes. Stability does not imply status quo; it is the ability to remain in equilibrium while moving and changing much like a car’s stability is assessed not when it is parked in the garage, but when it is moving.

 

Management is important because it achieves the goals of the individual, organisation, and society, optimises resources, enables change and stability and creates prosperity.

Creates Prosperity¹⁸ This term encompasses economic and social prosperity. Management leads to better economic prosperity through production. It also creates social prosperity by making tasks easier, avoiding waste, and following sustainable practices such as use of renewable energy and recycling, and enhancing education of the employees and their social status.

From these features, it is evident that life is driven by organisations and management whether it is a business, entertainment (e.g., football club), worship (e.g., religious centres), or charity(e.g., homes for the destitute).

Characteristics/Salient Features of Management

A farmer should know the characteristics of the soil and a fisherman must understand the nature of the sea to get the best results from these resources. Similarly, managers should know the nature/characteristics of management if they have to get best results from it. If we study management across various ages and areas such as business, government, or non-profit organisations, there are some distinct characteristics. These are:^{19, 20}

Goal Orientation^{21, 22} The purpose of an organisation is to achieve defined goals, and the aim of management is to achieve them efficiently and effectively. Without a goal, we will not know the resources to employ, the use of resources, or the need to use them. In such a state, nothing can be optimised. Hence, goal orientation is a basic characteristic of management.

Pervasiveness²³ As seen earlier, prehistoric man used management in a rudimentary form. Today, we talk of management at every level—a family, a team, a group, a school, a small business organisation such as a ‘kirana’ shop, or a big business entity. Management principles, concepts, and practices are used across a wide canvas, and this makes it pervasive.

Universality Most management concepts are universal. For example, quality management concepts emanated in the US and grew in Japan. Theory Z, a Japanese management concept, is widely used in the US. This suggests that management concepts, principles, processes, systems, best practices, and other features are applicable across time, nations, context, and nature of organisation, although adaptations may be required. This makes it universal.

Transferability²⁴ Management practices in one area can be transferred to other areas. For example, operation research that emanated during the Second World War to manage war logistics now finds a place in business.

Contingent Nature²⁵ Despite being universal and transferable, as the goals, structure, resources, and beliefs of people vary across time, organisations, and contexts, application of most management concepts and practices are situational. Management is not like the laws of physics, which remain true in all conditions. By nature, management is contingent.

Synthesis²⁶ Apart from time, we employ various resources such as men, money, and material for achievement of goals. Management integrates the resources and optimises the output. Hence, synthesis is an inherent characteristic of management.

Evolving Management is an ever-evolving phenomenon. Since it is executed by people, social evolution and thoughts of the era dominate management. For example, ‘employee first’ is a thought of the 21st century. This evolved from the beliefs on participation and centrality of people in productivity that dominated the 20th century.

Multidisciplinary Knowledge and techniques in management emerge from various disciplines such as economics, psychology, sociology, anthropology, and so on. This proves that management is multidisciplinary in nature.

Ephemeral Management enables efficient and effective execution, and is therefore a resource. However, unlike other resources, it cannot be seen; It can only be felt. Though the principles and rules of application of management are scientific, due to the contingent nature/characteristic of management, several variables cannot be scientifically factored into a decision. So, management has to depend on heuristics, intuition, and experience. Hence, there is a lot of tacit knowledge that goes into management, which can only be felt and not seen. This makes management ephemeral.

Henry Mintzberg’s Six Characteristics of Management ²⁷ (also called Nature of Management)

Henry Mintzberg, a noted management guru, has identified six characteristics of management (See Box 1.2).

We started the discussion on characteristics of management by underscoring the importance of a manager knowing the nature/characteristics of management. However, there are many perspectives/approaches from which a person can understand management and we shall discuss them in the following section.

Overview

If we think critically about the nature/characteristics of management discussed earlier, we can find clues to understand management. For example, goal orientation implies activities to achieve goals and the need to understand management from the activity perspective. Table 1.1 gives the characteristics and the corresponding approach we can take to understand management.

Let us now proceed to understand management by examining it from these perspectives, in detail.

Activity Perspective

Management can be understood as an activity involving achievement of some goals. The activities of management can be broadly classified into informative activities such as collecting data, briefing people, and writing letters, decisional activities such as deciding which raw material to purchase and the price to be fixed, interpersonal activities related to keeping the team or group together, coordinating activities related to how people work smoothly with other members/groups and machines, providing resources in time, removing obstacles, and integrating effort, and change activities related to creating change in the organisation to keep it aligned with the external environment to achieve its goals.

 

Thus, managerial roles and activities are closely linked; managers fulfil their roles by undertaking suitable activities. Henry Mintzberg’s framework of managerial roles and corresponding activities is a good one to understand management from the activity perspective.

Roles of a Manager (Henry Mintzberg’s Framework)

Henry Mintzberg²⁸ formally defined the roles of a manager. He found that there are three fundamental roles²⁹ of a manager—informational, decisional, and interpersonal. Each role has sub-roles (see Figure 1.3).

Informational Roles A manager receives a lot of information and monitors them. This information is then provided diligently to people so that it is adequate for performance, yet not too much to overwhelm them. For example, Rajendra would be required to monitor information about the market, the price, business news, and also talk about output, profits, results, future plans, etc., to his employees. When he performs these activities, he will be fulfilling his monitoring and disseminating roles. He will also have to talk to a television channel, a news reporter, and a bank about his business. By doing so, he will be fulfilling his role as a spokesperson.

Decisional Roles A leader is forever on the lookout for better opportunities and changes that increase the value of an organisation. For example, Rajendra, while playing the role of an entrepreneur exhibited his product in the auto exhibition, which created the opportunity for an OEM contract. Similarly, he would be required to allot resources for the work, increase manpower, and find better tools and equipment for various sectors. By doing so, he would be playing the role of a resource allocator. Whenever there is a problem, he will have to intervene and play the role of a problem or disturbance handler. He becomes a negotiator while negotiating with workers on productivity and with the supplier on price.

Interpersonal Roles A manager interacts with people, earns their trust, and directs them towards the organisational goals. These are activities for which s/he has to play the role of a leader. At the same time, s/he has to liaise with stakeholders, other departments, banks, and local authorities and thus plays the liaison role. Similarly, when Rajendra goes to the local English medium school for admission of one of his employee’s children or attend a function, he is playing the role of a figurehead.

Beyond Mintzberg’s Framework

In addition to the roles defined by Mintzberg, a manager has to coordinate and lead change. This is an extremely complex operation today because organisations have grown very large and complex, also change is rapid and discontinuous.

 

5 Roles of a manager

1. Informational

2. Decisional

3. Interpersonal

4. Coordinating

5. Managing Change

 

Coordinating Role A manager ensures that activities are done to a schedule and in a specified sequence. For example, s/he ensures that raw materials are supplied just in time by playing the role of a synchroniser. In order to do so, s/he should be monitoring the production process as also the supply process, and therefore has a monitoring role much as Mintzberg defined. S/he is also required to bring the processes, people, and resources into a logical whole for which s/he plays the role of an integrator. It is important that any deviation from the plan is measured and corrected in time, and therefore, s/he has to play a controlling role as well.

Change Management Role Today, organisations have to change frequently and proactively. Most people are slow to change and therefore, the manager has to create a sense of urgency among people by advocating urgency, and also muster support of key and like-minded people by coalition building. Since change has to be made attractive to everyone, the coalition should speak the same language. This requires a new vision and therefore vision building becomes another activity to manage change. In large organisations, communicating the vision becomes a difficult job as it is difficult to create intimate contact with everyone and here comes the importance of the leader in communicating. A manager does so not only by making an inspiring vision, but also by creating a very personalised and passionate communication through personal interactions, meetings, and appeals. Therefore, his/her communication activities become vital in managing change. Change is difficult and progress takes place in small bits. We have to build on small wins, making them the building blocks thereby giving confidence to people to march ahead. The leader undertakes many motivatingg activities to ensure the same.³⁰ Therefore, to manage change, a leader undertakes the role of an advocate, a coalition builder, a visionary, a communicator, and a motivator.

Alternative Classification of Roles, Responsibilities, and Activities/Tasks

Contemporary organisations are complex and large; for example, an MNC or a TNC. Further, they operate in volatile, uncertain, complex, and ambiguous situations, often called the VUCA environment. This demands managers to act as leaders. Table 1.2 gives an alternative way to look at roles, responsibilities, and activities/tasks of a manager, who is also a leader.³¹

Managerial Competencies/Skills

As students of management, we are interested in managerial competencies as they can help us perform better. Competency can be defined as knowledge, skill, and attitude that make a person exceptionally successful in a job. This term is fast replacing the term ‘skill’. Important managerial competencies are cognitive competency which includes systems thinking and pattern recognition³⁶, emotional competency consisting of self-awareness, self-management, social awareness, and relationship management³⁷, functional competencies, technical competencies, analytical competencies, and communication competencies to say the least. It is a generally observed that some managers who get promoted quickly are not highly respected for their work. Luthans and his team conducted a study which gave some interesting results. They found that successful managers spent most of their time networking, whereas effective managers spent most of their time communicating.³⁸

 

Managers should have cognitive, emotional, functional, technical, analytical, and communication competencies.

 

Should all managers have all these competencies to the same level? Well, it is neither practical nor necessary and we can create different levels of management corresponding to different levels of competencies. Therefore, we can study management from ‘management team/group’ perspective as well.

 

Management Team or Group Perspective

Broadly speaking, an organisation has two important levels of management, namely functional and operative. Functional management deals with determining the goals/objectives, means to achieve them, coordination of resources, and so on. Whereas operative management deals with the implementation of what functional management determines.

From a management team/group perspective, management can be divided into three groups—top, middle, and lower levels of management³⁹ (see Figure 1.4).

Top Management They represent the functional level. Their primary roles are drafting the vision, mission, and strategy. They also decide on expansion and resource mobilisation. A few of them are usually shareholders in the business. The managing director, chief executive officer (CEO), executive director, and board member are some of the usual job nomenclature followed across organisations. They wield enormous power and often affect the national economy by deciding to invest in one country versus another, deciding on policies of outsourcing, and so on.

Middle Management Those who fall into this group play a crucial role and actually run the organisations. They form the bridge between the top and lower management and have both functional and operational roles. They implement the strategy, head the functional areas such as operations, marketing, and human resources or may be country heads. They give the crucial input to create business and corporate strategy. They have competencies to make clear recommendations on what will work and what will not work in an organisation because of their intimate knowledge of strategy and execution details. Without them, the plans of the top management will come to a grinding halt because strategy implementation is in their hands. They play a significant role in managing change, macro level coordination, and administration. Chief information officer, chief innovation officer, chief finance officer, chief marketing officer, chief people officer, country head, president and senior vice-president are some modern designations used for job roles in the middle management.

 

Lower Management These are operational managers who manage the day-to-day functions of the organisation. They execute the decisions taken by the middle management, evaluate performance, and provide various inputs for decision-making.

A summary of the roles of the top, middle, and lower management⁴⁵ is given in Table 1.3.

Management versus Administration We cannot bring a discussion on levels of management to a close without touching upon the difference between management and administration. Master in Business Administration (MBA) is a degree in management, but the letter ‘A’ stands for administration. Why do you think it is so? There is considerable confusion between the term management and administration⁴⁶. One school of thought says that administration represents the higher managerial responsibility of direction setting, planning, and control, and therefore the top and some part of the middle management will represent administration. Their roles, tasks, and responsibilities tend to be similar across different business sectors. On the other hand, ‘management’ represents the operational level encompassing the lower management functions where the roles and tasks differ from one sector to another. The term ‘administration’ is popular in government. The Indian Administrative Service, for instance, suggests a high level of responsibility. Table 1.4 helps to distinguish between administration and management though one might feel that they are somewhat artificially created and administration is perhaps another term for top management.⁴⁷

 

Social and Interactive Process Perspective

Every organisation is a group of people who come together to achieve some goals. They work in teams and contribute to the group goals. In doing so, they voluntarily give up some of their rights and privileges and abide by the norms and rules of the organisation; but, in turn, they achieve goals that they could not have achieved on their own. Since organisations come into existence on the premise of creating coordination and cooperation, the very idea of management is based on interpersonal and social processes. Hence, we can study management from social and interactive perspectives. Chapters on interpersonal relationship, groups, and teams delve into this aspect.

Academic Discipline Perspective

Most readers of this book will be pursuing their master’s degree in business administration and can recognise that management can be understood from an academic disciplinary perspective. Management has its own principles, research, erudite literature, and methods, and is, therefore, a discipline. Although many of them are borrowed from other disciplines such as economics, sociology, and psychology, by innovative integration and adaptation of these concepts, management has evolved as a discipline. However, being a new discipline, and because of the contingent nature of management, many of its principles may not be as precise as the principles in other disciplines. For example, Henri Fayol’s 14 principles of management⁴⁸ has wide acceptance even today though it may not be precise like the principle of physics.

First, let us find out the meaning and purpose of principles. In the opening case, Radhika showed her skill in cable twisting, and created innovations in the process. How could she do it? As she kept twisting wires, she figured out principles of twisting cables through practice though she may not be able to list them precisely as a scientist does. She understood how it worked and then, could change the process. Therefore, she excelled in the job, and could also train others. From this we can infer that she understood the principles of experimentation, learning, innovation and changes at least at a rudimentary level. Principles provide us with an understanding of the world around us and how things should happen. This is why we learn principles.

 

Principles provide us with an understanding of the world around us and how things should happen. This is why we learn principles.

Is Management an Art or a Science?

A discipline is usually considered either an art or a science. The discussion on whether management is an art or a science has been an on-going philosophical debate from the time the term ‘management’ has been coined. This argument emanates because of the newness of the discipline and the contingent and ephemeral nature of management.^{49, 50}

First, let us understand what science and art are. Science may be described as a systematised body of knowledge based on proper findings and exact principles, and is capable of verification. It deals with fundamental truths and its findings apply in all the situations and are replicable. Art refers to the way of doing specific things and indicates how an objective can be achieved. Therefore, art is skilful application of knowledge, which entirely depends on the inherent capacity of a person; in this case, a manager. It comes from within a person and is learnt through practice and experience.

Revisiting the definition of management discussed earlier in this chapter, we know that management is about people and other resources. There are goals of the individual as well as the organisation, and both have to be achieved. This involves creating an environment where people and resources interact to achieve goals.

If we apply the insight on what science and art are, and extrapolate it on the definition of management, we can see that management is a science as it has developed some systematised knowledge based on proper findings and principles, and many management actions are replicable. There is systemic knowledge on various management aspects; for example, how to value a firm, how people get motivated, or how to sequence production. Many management aspects are verifiable. For example, if we increase the motivational factors, productivity tends to increase. We can take a decision based on scientific method such as defining a problem, developing a hypothesis, collecting data, analysing them, and proving or disproving the hypothesis. In this sense, management is a science.

However, are all these possible always? Perhaps, not. For example, though we know how to value a firm, we do not fully understand the relative way the factors used in valuing a firm work. Similarly, management principles are operated by people and their impact is also on people, unlike in physical sciences. Therefore, their idiosyncrasies and emotions affect decisions, and this often makes the principles invalid. For example, motivation of various people in an organisation may vary and what motivates one may not motivate another and application of a motivating method in one situation might yield the desired results, but it may not yield result in another similar situation. Even in the same situation, it might motivate some, but not others, and to make it worse, it might even demotivate some. For example, providing a school bus for children of employees might be a motivation to some people, whereas it may not be so to others who do not have school going children. Another challenge is that environmental idiosyncrasies often affect management. For example, higher productivity may not result in profits since the market which buys the product may not have the money or may have found a substitute. In this sense, management practices are not replicable, as in science.

 

Management is both a science and an art because it is an admixture of scientific principles, verifiability and repeatability coupled with practices, and intuitiveness

 

Management is largely about people—employees, customers, suppliers, and managers. People take decisions not only based on rationality but also based on emotions, which vary from time to time and person to person. Therefore, all factors that affect a decision, and all data related to the factors involved cannot be captured scientifically. At least, we cannot do that as yet. As a result, management is based on practice, experience, and intuition, which are subjective and often based on individual managerial competencies. Hence, management is a judicious combination of practices in art and science. Perhaps, it is more prudent to call it a social science. Perhaps we can call it ‘scienart’, a term that we can coin to refer to integration of science and art.

14 Principles of Management by Henri Fayol

We discussed that management has some properties that make it a science; for example principles. So, let us, now have a look at the principles of management.

1. Division of labour: It means dividing a major activity into its sub-components, and each person doing one activity, leading to specialisation and increase in productivity.
2. Authority and responsibility coexist: Everyone should have specific responsibility and matching authority.
3. Unity of command: One person should report to only one boss.
4. Unity of direction: All functions of an organisation should have the same direction.
5. Equity: Rewards should be in relative proportion to the contribution.
6. Order: Do things systematically and scientifically.
7. Discipline: Adhere to lines of authority, norms, rules, and regulations.
8. Initiative: Undertake actions that achieve goals better, even when a specific direction is absent.
9. Fairness: Be consistent with rules and logic, and implement actions without impartiality and favouritism.
10. Stability: Have constancy of purpose, methods, rules, and procedures.
11. Scalar chain: Flow of authority and information is from top to bottom and vice versa, in a step-by-step manner.
12. Subordination of individual interest to general interest: Individuals draw their identity and livelihood from the organisation, and hence should give priority to organisational interest.
13. Esprit de corps: It refers to creating team spirit and harmony in the work group as a whole.
14. Centralisation and decentralisation: The need to accept the importance of both, and creating a balance between both.

Criticism of Henry Fayol’s Principles of Management

Unity of command is redundant in an era of matrix organisations. Organisations such as Goldman Sachs have tried joint management concept where two people concurrently head one responsibility successfully. Unity of direction, as envisaged originally, is impossible today, since businesses enter many different areas. For example, Bharti Airtel’s main business is mobile telephony, but they are also into other businesses. Stability seldom exists in organisations as they begin to thrive through continuous and disruptive changes. In a networked world, scalar chain principle does not stand scrutiny. The principle of subordination of individual interest to general interest is often criticised as it is used to exploit employees and members of an organisation from time to time.

Management as a Resource Perspective

We know that land, labour, and capital are important resources. Is management a resource too? Let us look at three clear examples before deciding on that. While most low cost airlines in the US were shutting shop, Southwest Airlines was making profits consistently. In 2012, only one airline in India, namely Indigo Airlines, was showing profit, while others floundered, and one even found it difficult to pay salaries to the employees. Similarly, with little natural resources, Japan became the undisputed king of manufacturing towards the end of 20th century. What do you think facilitated these achievements? The answer is ‘management’. It is for this reason, management is considered as a resource. Hence, we can study management from the perspective of ‘resources’ also. Every organisation has some internal resources such as manpower, land, and machines, and some external resources such as raw materials, energy to run the machines, banks to finance, and government to facilitate running an organisation. What integrates these varied set of resources is management. Management does so through management processes consisting of good planning, organising, staffing, directing/leading, and controlling.

Therefore, we can consider that management itself is a resource and study management from this perspective.

Management Function/Process Perspective

Management function is of vital importance for the implementation of management. Hence we can study management from function/process perspective also. In fact, this perspective is so important that it deserves to be handled in detail in a separate section.

Overview

We ended the previous section by highlighting the importance of management function. Management function consists of planning, organising, staffing, directing/leading, and controlling. (Figure 1.5). In this section, let us examine each one of them in detail.

Planning

What is Planning?

We can define planning as a process of creating a comprehensible and transmittable schema (mental form) for attaining organisational goals/objectives using given or optimal resources, whichever is less. It is pertinent to note that planning involves working within the available resources or using only the optimum resource.

 

Planning involves working within the available resources or using only the optimum resource.

 

Plans are mental pictures and the frontal lobe of the brain is connected with it. However, unless these mental schemas are converted into a comprehensible and transmittable form, we cannot process the plans. If you say that you have a plan, you are likely to be told to put it on paper and submit it, because plans have to be vetted and evaluated by the senior management, the funding agencies, and executed by officials. Hence, mental models are insufficient.

Though several authors include setting goals/objectives as part of planning because of their close association, it is preferable to perceive it as a pre-planning exercise. We should accept the idea that goals/objectives of a plan are often modified during planning because they may prove to be unviable with the given resources. Plans should normally end in decisions to execute the plan.

Principles of Planning

The principles of planning are as follows:

1. Goal orientation: A plan should be absolutely goal focused and adhere to the scope and time frame set by the goal.
2. Specificity: Plans must be specific and should avoid generalities and non-verifiable statements/propositions such as ‘complete as early as possible’, ‘resources will be mustered in due course’, ‘using least resources’, and so on. Rather one should use terms such as ‘complete the task by 30^th April 2016’, ‘complete the task with an expense not more than Rupees 20 lakhs’ and so on.
3. Accuracy: Plans are like maps, and we all know that an inaccurate map can lead us to the wrong place. For example, if Rajendra makes a plan to produce 1,000 connectors a day, it must be based on the number of connectors a person/team can make per day and the number of people/teams available.
4. Comprehensiveness: If plans leave some blanks, either there will be confusion due to different interpretation, or there will be delay for clarifications.
5. Flexibility: As the execution of the plan progresses, there will be changes to the external environment, internal environment, and resources. Plans must envisage these possible changes and cater for them from the beginning. For example, if you are building a mall and the contracting economy decreases demand, then you should have a way to build part of it and open the business leaving the completion for better days to come.
6. Objectivity: While selecting from various options available, you should be objective. When quantitative parameters are used, the data should be fair and impartial, and when qualitative parameters are used, individual bias should not creep in.
7. Simplicity: Plans are implemented by several people and more importantly by people who may not be as smart as the planners. Therefore, each part of a plan must be simple, the parts of a plan must be easily connectible, and the overall plan should be simple for everyone to understand and implement. For example, if you have to set up a chain of coffee shops, the design of each shop should be simple, resources that would be shared such as purchase, promotion, and so on, should also be simple for everyone to understand and manage.
8. Communicability: A plan needs approval from internal and external agencies. For example, Rajendra’s plan to make connectors as an OEM supplier for two wheelers would need acceptance by internal teams, funding approval from the bank, and approval related to production, quality assurance, and purchase from the two-wheeler company. Hence, it should not be vague, but should be in an easily communicable format.
9. Implementable: This implies that there should not be any external environmental restrictions to implement the plan. Coca Cola had a bottling plant in Plachimada in Kerala, India. Most bottling plants need copious water, and ground water is a practical source. Plachimada had plenty of water and there is no national law against using it. Coca Cola planned to establish a bottling plant at Plachimada. The problem they faced was that the use of ground water affects the neighbourhood and the socially aware neighbourhood brought the operations to a halt. Would the fact that there is no law to prevent the company from using ground water, and that it returned more water to the nature than it used, through various means make the plan implementable? The story in Box 1.3 tells it all.⁵¹ The moot point is that what is permissible may not be implementable.

Why is Planning Important?

Planning is important because:

1. It achieves clarity and aligns the organisational activities to the vision, mission, and values. It also creates the schema that detects and prevents deviations.
2. Planning enables building on existing strengths of the organisation, helps to overcome existing weaknesses, and gives the ability to respond to opportunities.
3. It defines and creates the relation between a goal and the resources required to achieve the goal. Planning helps one to know when the resources are required. Thus, it limits the idling of resources, enables shifting of resources, facilitates overall optimisation and contains cost.
4. It gives a road map that everyone can comprehend, thus facilitating division of labour, coordination, and cooperation. In turn, it facilitates decentralisation and accountability.
5. It sets priorities for your work and ensures that tasks get done on time and in the right sequence.
6. It enables organising and coordinating the efforts and integrating external and internal resources.
7. It points out the impending bottlenecks, and enables proactive change and decision-making, and facilitates taking initiative.
8. It helps to create landmarks and benchmarks and thus enables ‘controlling’. Through this, it brings predictability.
9. It facilitates continuous improvement to products/services, systems, and processes.

Types of Planning

Plans can be classified based on importance, period of planning, level, formality, and approach.

 

Plans can be classified based on importance, period of planning, level, formality, and approach.

1. Based on importance: Plans can be strategic, tactical, or operational. Strategic plans are important, future-oriented plans that form the hub of fulfilling the vision. Usually, they concern the entire organisation. Tactical plans are required to implement strategic plans. Examples, are redesigning the shop floor layout or closing a few non-performing outlets of a retail chain. Operational plans are related to day-to-day functioning such as production, delivery, or purchase operation. Take for instance, the plan of Precision Connectors to deliver connectors to the two-wheeler manufacturer, which is an illustration of operational plans.
2. Based on time: Plans can be short, medium, or long term. Short term usually refers to plans of one year or less; medium term, to two to five years; and long term, to five to 10 or even 20 years. It depends on the nature of the project. Some projects such as building the Metro in Mumbai or Bengaluru may have a short-term plan that covers 50 km of Metro in five years; a medium-term plan that covers 200 km in 10–12 years, and a long-term plan that covers 300 or 400 km of rail that in 20 to 30 years.
3. Based on level: A plan can be called corporate level, business level, or functional level plan. The Tatas entering the airlines business is an example of corporate-level plan and Precision Connectors becoming an OEM is an example of a business-level plan. Functional-level plans are made by departments, for example, a plan on how the marketing department will achieve its goals.
4. Based on formality: A plan can be formal or informal. It is formal when planning is done as per the defined steps and documented, and informal when the documentation is not very rigorous.
5. Based on approach: A plan can be called proactive when it is meant to meet an anticipated situation. For instance, a compensation plan based on a three-year salary negotiation is a proactive plan to ensure industrial peace. If the same compensation plan came up as a result of a flash strike, it would be a reactive plan. The former leads to growth and the latter helps to regain balance and to ensure survival.

Steps in Planning

Let us now look at some of the important steps in planning (see Figure 1.6).

Pre-planning Step Planning starts when one is aware of the opportunities or threats. Examples, are government permitting foreign direct investment (FDI) in retail, Rajendra finding an opportunity to become an original equipment supplier, or a real estate company realising that the shrinking economy will reduce the demand for houses. Organisations will do well to create a system to warn them of opportunities and threats. It can be done through PESTCL analysis, that is, an analysis of the political, economic, social, technical, cultural, and legal environment, coupled with market research and competitor analysis. At times, sheer intuition of the entrepreneur may indicate opportunities as, for instance, in the case of Steve Job’s dreaming up the iPad.

Step 1: Establish the objective In relation to the opportunity/threat, one should decide on the objective that one wants to achieve. This becomes the first step on which plans are based. An example of this could be Precision Connectors setting an objective ‘to become sole supplier of connectors for two-wheeler manufacturers in five years.’

Step 2: Define the context The second step is defining the context or the planning premises. This is done by defining the strengths and weaknesses, and matching these with the opportunities and threats. For example, you may be financially strong, and may feel that entering the banking business in India would provide great opportunities because many people are looking for banking services. This is the context of planning or the premise. Though your financial strength matches the opportunity, the law may not permit, or it may limit the way you can run a bank. This limitation is a premise. Planning would have to take this context/premise also, into consideration.

Step 3: Explore the options In this step, we consider various ways to reach our objective, given the context. While we explore options, a high degree of creativity, particularly institutionalised creativity could help, as it brings out newer and a greater variety of ways of doing things. This is why most modern organisations insist on creativity and innovation.

Step 4: Evaluate options To evaluate options, we need some rules or frameworks and we call them planning parameters. Often, we fix quantitative parameters such as ‘return on investment’, ‘profit margin’, ‘increase in job satisfaction’, ‘increase in customer base’, ‘decrease in holding stock’, and so on, to evaluate a plan. However, qualitative parameters such as ‘brand image’, or ‘gaining experience in a new business’, could also be taken as planning parameters. If evaluation of the objective is comprehensive, bias-free, and based on parameters, selection of the option for action would be more effective.

Step 5: Select an option While it is important that we select the most optimal option, let us remember that we may give up the optimal one for want of resources, delay in completion of projects, or simply because the owners/promoters are emotionally attached to doing it one particular way like in the case of someone wanting to set up the factory in his/her hometown though it may not be the best option. These realities should be accepted.

Step 6: Defining contingencies Although it is not mentioned as a step in Figure 1.8, one should always have contingency or alternative plans. To do so, one should envisage what could go wrong or differ from the plan due to external/internal compulsions such as sudden escalation of cost, change in the market demand, arrival of a new competitor, or a substitution product, and make plans to surmount such situations.

Planning and Organisational Behaviour

Planning and behaviour are closely connected because planning is a psychological process in the minds of people before it is translated onto paper. From a behavioural point of view, this means that opportunities and threats, which are crucial input for planning could be influenced by perceptual bias. What is considered a threat by one person might be perceived as opportunity by another. Context of planning would need to take into account many OB factors such as leadership, motivation of the staff, cohesion of the organisation, and so on. While exploring options, creativity and open mindedness of the planners matter, and while evaluating options, several perceptual biases could creep in. Being aware of these factors will help us to do better planning.

Once we have a good plan, we are ready to take the next step—organising.

Organising

What is Organising?

Since we will study organising in detail in the chapter on structure, here we will describe it only briefly. Organising can be defined as the process of defining and grouping the activities of the enterprise and establishing the power-relationships among them with the purpose of achieving division of labour, coordination, and cooperation for accomplishing goals/objectives optimally. Optimisation through specialisation and division of labour is the point that one should note in this definition.

 

The purpose of organising is optimisation through specialisation and division of labour

Organising and OB

Organising creates the authority-power framework in an organisation. Behaviour related to power, influence, conflicts, and negotiations in an organisation would be influenced by it. If the design of the structure is efficient, you can expect a conflict-free environment. If not, the organisation would be susceptible to conflict and this would affect people’s behaviour. Therefore, knowledge of organising is of great importance for a student of OB.

Staffing

What is Staffing?

Organising creates a structure into which each job with responsibilities, authority, and power fit. However, it is still a skeleton without life. Structure is inanimate and staffing makes it animate. Staffing can be defined as the process of acquiring, deploying, and retaining a workforce of sufficient quantity and quality, to create a positive impact on the organisation’s effectiveness ⁵². For example, you can state that Precision Connectors should have an insulation section with a head and that s/he should have well-defined roles and responsibilities, but that happens only when a person actually occupies that post. Authority is inherent in organising as seen earlier, but it is exercised only when a person actually takes up a job. Staffing comprises acquisition (recruitment and selection), deployment (processes leading to the employment of people), and retention (preventing the unwanted outflow of employees from an organisation).

 

The purpose of staffing is acquiring, deploying and retaining talent.

Principles of Staffing

Like other functions of management, staffing also has some principles. These are as follows:

1. Principle of job definition: This principle implies precise predetermination of the role and its responsibilities so that the authority is clearly delineated. Work should be adequate. See Box 1.4 for Parkinson’s Law, which states that work expands to fill the time available.⁵³
2. Principle of open competition: It implies that the staff must face open competition not only at the acquisition stage but also for deployment and retention so that only the most appropriate people exist in the organisation. This principle attempts to eliminate the effect of Peter’s Principles⁵⁴ (See Box 1.5).
3. Principle of objectivity: This implies selection of staff based on objective factors and includes laying these down and creating assessment tests to verify these factors. It ensures fairness and equity enshrined in the principles of management.
4. Principle of future orientation: Managerial talent should be selected, located, and trained for future use. This would mean that a person should be embedded in the culture of the organisation before s/he exercises authority at higher levels. Future orientation also facilitates undertaking changes smoothly.
5. Principle of appraisal: Every person should be appraised in relation to predetermined results. This principle ensures accountability in organisations and equity (reward in relation to contribution to the goal and differentiated from equality).
6. Principle of management framing: This principle implies providing information and training to managers to grow and move for higher positions. This principle underscores the importance of progression.
7. Principle of continuity: Training, managerial development, and succession planning are required to ensure abrupt break does not take place, if one person exits the system.

Importance of Staffing

We all know the adage, ‘man behind the machine’. Therefore, it is possible to make a long list on the importance of staffing. However, here we shall limit to a few:

Profound Impact on Strategy Strategy is the art of aligning internal resources to face external opportunities and challenges. Staff or people are the ones who create strategy. Thinking, analysis, and intuition in adapting to various contingencies is also within the realm of people. Resource-based view of the strategy⁵⁵ suggests that organisations are competitive due to the existence of valuable, rare, inimitable, and difficult to substitute resources. Therefore, people with such qualities directly influence competitiveness. In addition, ‘management’ itself is a resource. This is possible only if appropriate people exist, especially in a knowledge economy and markets which focus on co-creation of value.⁵⁶ These underscore the strategic importance of staffing.

Key to Managerial Functions All managerial functions such as planning, organising, directing/leading, and controlling including staffing are based on people, and they become the key to all managerial functions. Out of these, the element of planning needs special mention because as discussed earlier, the human brain is the seat of planning.

Efficient and Effective Utilisation of Human Resources Staff is a resource and staffing ensures efficient and effective use of this resource by ensuring its quantity, quality, and appropriateness. It achieves these by increasing productivity through performance appraisal, training, development, and remuneration.

Better Human Relations Staffing affects human relationships in the workplace, which, in turn, creates cooperation, clear communication, exercise of authority, nurturing creativity, and innovation through participation, creating change, and effective controls and supervision.

Impacts Quality and Cost Staffing is crucial in ensuring quality of manpower through appropriate selection. It lowers training cost, cost of turnover, and ensures customer relationship.

Enhances Motivation The function of staffing not only includes putting the right person on the right job, but also supporting him/her in the job. When a person does a job that fits him/her, it increases motivation, leads to greater participation, and feeling of challenge and then to accepting stretch goals (goals beyond what is normally expected of a job).

Types of Staffing

There are numerous ways to classify staffing. Let us have a look at some of them.

Managerial versus Non-managerial Staffing can be classified into management/supervisory functions and non-supervisory functions.

Strategic and Tactical Staffing Staffing that is done to achieve strategic functions such as vision building, creation of strategy, change management, and expansion to new business or to new countries is referred to as strategic staffing, whereas staffing for day-to-day operational functions is called tactical staffing.

Permanent and Temporary When the job is permanent and important, we need permanent staffing. Functions such as selection, training and development, motivation, and remuneration follow a process different from the process followed for temporary staffing. In the latter, the ability to execute the task without much additional training would be the key. Temporary staffing should not be confused with ‘low-skill’ staff. A highly qualified lawyer could be a temporary staff, because such a role may not be permanent in an organisation.

Long Term versus Short Term Some staffing is for long term, if not life time. Whereas some, like staffing for projects, may be of short term. Short-term staffing should not be confused with temporary staffing. For example, staffing for a product development is a good example of short-term staffing. Here, the staff may be permanent staff of the organisation, but may come together for a short term for an important function.

Contract Staffing, including long-term staffing, can be on a contractual basis. This is a popular method, when we use consultants or if the work is confined to a few hours in a day. Trainers are often employed this way. It also refers to contract labour. Contracting gives labour flexibility and also helps to attract highly talented specialists who do not want to be attached to an organisation on a full time basis. For example, a doctor who does not want to be attached to a hospital on a permanent basis could be hired on contract.

Seasonal This is done in businesses where there is a seasonal variation, as in tourism. Students or homemakers may be employed for this purpose.

Flexi Staffing TeamLease⁵⁷ is a famous Indian company that provides staff on a lease basis. You can lease staff from the company for a short or a prolonged period. It gives tremendous flexibility in staffing as one can retrench the person without any consequence to the employee, since TeamLease would find another place for the employee.

Casual Staffing Sometimes, there is sudden spurt in work and this requires casual staffing, popularly called temporary staffing. Sudden need to have staff to open bank accounts under ‘The Pradhan Mantri Jan-Dhan Yojana’, a financial inclusion exercise in India, may need casual staffing. After the work is done, the staff would no more be required.⁵⁸

Outsourcing This is a complex form of staffing and we make another specialised organisation to do an entire function. For example, talent acquisition, coding, customer relationship, and so on can be outsourced. Outsourcing implies that some component of your business staffing is taken over by another organisation.

Steps in Staffing/Process of Staffing

Steps in staffing are given in Figure 1.7 which is self-explanatory. One can learn more on it in the course on human resources management, which is nothing but details of staffing.

Staffing and Organisational Behaviour

Staffing actually brings an organisation to life by putting appropriate people in place. Chester Barnard, a noted management thinker on organisations, suggests that people’s ability to understand an order, their perception that the order itself is compatible with the organisational and personal goals, and their ability to mentally and physically comply with the order⁵⁹ influence their behaviour. This highlights the importance of staffing in ensuring the organisational environment that, in turn, influence organisational behaviour.

Directing/Leading

Although there is a chapter on leadership in this book, the purpose here is to discuss the leading process vis-a-vis directing process and highlight the importance of leading in the contemporary business context.

What is Directing/Leading

Directing can be defined as the process by which managers instruct, guide, and oversee the performance of workers to achieve predetermined goals. Mere planning, organising, and staffing do not lead to achieving goals. Work starts when a person is told, or directed to do it. Today, the term ‘directing’ is being fast replaced by the term ‘leading’. Another way to look at it is that given the vision and goals, people can direct themselves. There are various methods of directing:

 

Directing in the process of instructing, guiding and overseeing the performance.

• First, it can be done by coercion. Here, the manager gives the direction/order, and the subordinate is submissive and obeys.
• Second, it can be done by providing guidance. In this method, the manager gives guidance, intended to encourage people to work efficiently and effectively. This makes directing ‘supportive’ in nature.
• Third, managers can go beyond providing guidance and encourage, instruct, and inspire people to accomplish, which becomes even more supporting.
• Finally, managers may accept that all employees are stakeholders and decide to adopt a leadership approach to directing. Leading can be defined as the process of setting direction, creating alignment, and creating engagement to deliver high productivity and to facilitate change. In this sense, directing is only a part of leading.

Principles of Leading

Directing without leading is not an option today. Principles of direction are goal allocation, initiating action, accountability, decisiveness, and scalar chain. When it becomes leading, the principles undergo several metamorphoses. For instance, goal allocation becomes participatory goal setting, accountability becomes joint accountability, and so on. Let us now have a look at the following aspects:

Goal Orientation Goal-oriented behaviour, and a need to achieve challenging goals are intrinsic to human beings. For example, man liked to hunt wild animals for food rather than adopt a more passive way of using fruits or plants because of the intrinsic challenge of doing so. Hence, he accepted the leadership of people who could hunt better. Without challenging goals, there will be no leading.

Holistic Approach Leading involves looking at the whole. An example would be achieving high productivity (output) and high job satisfaction (outcome) concurrently.

Participatory Goal Setting Leading implies participatory goal setting wherein the person being led is guided to set challenging goals in alignment with the organisational goals. This results in high self-motivation to do things in the right direction.

Joint Accountability Leading implies that both the superior and subordinates are equally accountable. Therefore, subordinates are not isolated for accountability.

Synergising Leading goes beyond integration. It uses a combination of demonstrated knowledge, tacit knowledge, and capabilities to create an exponential effect. Directing uses only demonstrated knowledge of employees and many of their capabilities are not brought into action. Synergy comes from the unique combination of demonstrated knowledge, tacit knowledge and capabilities, which the leading process facilitates and direction process does not.

Decisiveness Leaders are meant to give decisions; but decisiveness does not mean that a subordinate should be given specific orders. Through leading, one can enable a person to identify the right decision s/he should take and make him/her do so, under the joint accountability principle.

Fairness and Equity This is also a principle of management. It is crucial in creating dependability and mutual trust, and is vital for leading.

Dependability and Mutual Trust While fairness and equity sets the stage for creating dependability and mutual trust, it is the latter that finally makes a leader give goals to the led, and allows the followers to take their own logical course towards the goal. Equally, it makes subordinates accept challenging goals (often called stretch goals in organisations). It can thus be considered a core principle of leading.

Responsiveness A leader responds quickly and proactively to situations and the needs of the followers. This gives confidence to the follower, enhances mutual trust, and enables the follower to keep direction effectively.

Example Setting Leading means leading from the front, and therefore, setting example is a basic principle of leading.

Mindful Listening It is about listening with an open mind and ‘an attitude of having a shared goal and accountability’ to resolve the issue through discussion. This automatically means suspending judgment, which becomes a precondition to mindful listening.

Importance of Directing/Leading

In a globalised context, organisations are called upon to deliver stretch goals such as very high quality products at lower cost, economies of scale concurrent with high degree of customisation, or more output with greater outcomes using lesser and lesser resources. In this context, leading has special importance. Let us look at some of them:

Enhances Effectiveness Leading ensures that the organisation does the right thing the right way and thus increases the value for all stakeholders. In other words, leadership is important because it creates efficiency and effectiveness, concurrently.

Creates Synergy Leadership energises the system and enables coordinated direction of multiple forces and resources including tacit resources such as organisational culture, trust, and knowledge sharing protocol in the organisation. Thus, it creates synergy of the organisational forces. An excellent example is how difficult competitors find it, to measure up to Virgin Atlantic airways, Google, or Toyota.

Drives Change Leading is important because it can identify the emerging situation, create urgency and a coalition of people to address the need for change, and implement the change. Thus, leading is the driver for change.

Draws out Entrepreneurship In organisations, managers have an entrepreneurial role. This implies proactive decision-making, taking the initiatives, accepting risks, and creating change. These are important in the fast changing global scenario. Leading facilitates managers to take up this role. This rule is often referred to as ‘intrapreneurship’ (the letter ‘i’ indicating that the manager acts like an entrepreneur but internally/within the organisation).

Enables Co-creation Today, products and services rely more on co-creation between the customer and the organisation. While co-creating, the manager has to take several independent and proactive decisions. If managers are bent on directing rather than leading, co-creation would be quite impossible as the subordinate would have to look over his/her shoulders every time he/she has to co-create with the customer.

Initiates and Sustains Action While directing can initiate action, it cannot sustain the tempo, and even if it can, it cannot achieve the momentum that leading can. This is because in the leading context, as against directing context, goal setting is ‘participatory’ and accountability is ‘joint’.

Sustains Motivation Leading can generate and sustain intrinsic motivation because the follower is drawn to the leader not because of an extrinsic force such as rewards and compensation, but by the force created by the ‘joint fate’ inherent in the leading process. Hence, it creates self-motivation, and we know that self-motivation is more sustainable than other types of motivation.

Creates High-performance Work Systems High-performance work systems (HPWS) are the emerging work systems in organisations. Leading creates the synergy, enables in setting, and executing stretch goals and provides support and inspiration to create and sustain HPWS.⁶⁰

Types or Styles of Directing/Leading

Leading can be divided into two basic types—directing type and supporting type. They can, and do coexist. Based on this classification, we can identify four types of leading see Figure 1.8:⁶¹

Directing Type It is a high directing and low supportive type of style and gives specific direction much like a foreman does. It is well suited for a highly committed beginner, with low competencies.

Coaching Type It is high directing, high supportive, and there is dialogue and listening to the ideas. But the decision is still with the leader. This style suits well when dealing with a disillusioned employee/subordinate with low commitment, but some competencies. A typical supervisor follows this style.

Supporting Type It is low directing, high supporting mode, and encourages dialogue and decision-making by the employee/subordinate. It is very suitable for an emerging contributor, with moderate commitment and high competencies. This style of directing is often referred to as ‘facilitating type’.

Delegating Type It is low directing, low supporting where the leader accepts the decisions made by the employee/subordinate. Delegation is a suitable approach for a peak performer with high commitment and competencies. Here, leading is more of coordinating than direction giving.

Steps in Directing/Leading

The important steps in leading are as follows (see Figure 1.9):

Step 1: Direction setting and defining values In this step, the organisational direction and the core values are discussed and frozen. This becomes the beacon for all further actions.

Step 2: Participatory stretch goal setting with outputs and outcomes In the second step, stretch goals are defined. A stretch goal is basically a challenging goal, but not an impossible goal. It demands extra effort to achieve these goals; but the subordinate is capable of making that effort.

Step 3: Joint resource planning and acceptance of deliverables This step sets the stage for the followers to take off on delivering the goals or commence execution.

Step 4: Participatory definition of performance indicators This brings clarity to goals and avoids perceived differences which can lead to deviation from the goals. It also obviates future conflicts.

Step 5: Feedback and feed forward This is done for course correction or reconfirmation of the effectiveness of leading, learning lessons, and for iterating the process for continuous improvement. Feedback/feed forward is a two way process. A leader may give feed-back to a subordinate, and the subordinate, may in turn give feed forward to the leader. The process can be vice versa be also.

Directing/Leading and Organisational Behaviour

Leading creates the organisational environment for high productivity and performance through various actions such as direction setting, involving people, inspiring through joint creation of stretch goals, and working with self-motivation. It drives the ecosystem within which the staff gets into execution mode and so, influences both individual and group behaviour.

Controlling

What is Controlling?

When you undertake activities to fulfil a goal as per a plan, it is quite natural that small and large deviations take place. If these are not corrected in time, their cumulative effect could result in failure to achieve goals. Controlling can be defined as monitoring and evaluating activities, and providing corrective mechanisms.⁶² Often, it is considered a part of planning because, by controlling, we ensure that a plan progresses as per the original schema. However, we can differentiate them because planning precedes controlling. Planning defines the standards to be achieved, whereas controlling defines how to measure them, find out the variance or gap, and rectify them. Controlling comes into play during execution as a way to regulate execution, whereas planning paves the way for execution.

 

Controlling can be defined as monitoring and evaluating activities and providing corrective mechanisms.

Principles of Controlling

The purpose of control is to monitor and rectify the execution of a plan, which enables us to reach the goal without application of additional resources or time. Let us examine the principles that can help us accomplish the same:

1. Consistency: Since the purpose of control is to ensure that plans are on track, the first principle is that any control should be consistent with the plan. Therefore, the question that one should ask is whether controlling actually enables one to effectively detect a variation in the execution of the plan, every time a deviation takes place.
2. Reliability: A control measure must be reliable. It must measure what it is meant to measure, the same way, every time. A performance target is a good way to measure the output of an individual and exercise control. But, if the individual has to perform several ad hoc tasks throughout the year, in addition to the predetermined ones, performance targets set at the beginning of a year may not be a reliable measure to control the output of an individual.
3. Criticality: Controlling has a cost in terms of money and time. In addition, too many controls reduce initiative and speed. Hence, controlling should focus only on the critical aspects.
4. Frequency: Very frequent controls can lead to an increase in cost, whereas infrequent ones may allow problems to go undetected. Frequency usually depends on the reliability of the systems. For example, if managers are highly competent, visits by a senior manager to check progress (a control measure) can be less frequent.
5. Parsimony: There should be as few controls as possible, and they should be simple. This will ensure that due importance is given to inputs from the controls. It will also ensure that the controlling process itself is simple to execute.
6. Proximity: Controls should be instituted as close to the point of action as possible. Internal audit is a good example of how the controls are kept close to the point of action. In other words, the variation should be detected immediately, and is possible only if the control is proximal to the action.
7. Scalar design: There should be levels in control so that if one control system fails to detect a variation, it is detected at the next level. For example, if an error is not detected by the internal audit, it should be detected by the external audit.
8. Redundancy: Controls should be duplicated so that one is sure that there is a variation. For example, a bank reconciliation statement is a control that gives some redundancy to a balance sheet, which is used as a control measure. Productivity of an individual and machine usage analysis can be another example of creating redundancy.

Importance of Controlling

Controlling is important for the following reasons:

1. Control systems enable managers cope with uncertainty by monitoring specific activities and reacting quickly to significant changes in the environment. For example, the quarterly financial performance report can detect the imbalance between the external realities and internal functioning of the company.
2. Controls help managers detect undesirable irregularities such as product defects, cost overruns, or rising personnel turnover. It helps in avoiding repetition of mistakes and provides input for future planning.
3. Controls alert managers to possible opportunities, by highlighting situations in which things are going better than expected, and facilitates in being proactive. It also gives confidence while managing change by reassuring on the effectiveness of the new direction.
4. Controls enable managers to handle complex situations by enhancing coordination within large organisations, because controls are actually a flow of critical information.
5. Controls are important for decentralisation and delegation because they ensure that anomalies are detected well in time.
6. Controls facilitate ‘management by exception’ since one has to focus only on the variance rather than check the entire gamut of operations. Thus, it saves valuable management time.
7. Controls are important in self-managing performance. For instance, the monthly sales report is a control measure that indicates to the salesperson his/her performance. Based on it, s/he can rectify the shortfalls.

Type of Controlling

There are many ways to classify controlling. Here, we look at two basic ones namely, classification by the organisational level at which controlling takes place and classification by nature of the standards used in controlling.

By Organisational level: Controlling can be classified based on the organisational level at which control is exercised, that is, at the strategic, tactical, and operational levels.

 

Organisational level controlling is exercised at strategic, tactical, and operational levels

1. Strategic control involves monitoring critical environmental factors that could affect the viability of strategic plans, effects of the strategic action of the organisation, and for ensuring that strategic plans are implemented as intended. It is in the domain of top-level managers. For instance, if we have to expand to a new country, we have to muster investment as per a schedule and the schedule becomes the control. The ‘balanced score card’ is one of the modern measures to control strategy implementation.
2. Tactical control focuses on assessing the implementation of tactical plans at departmental levels, monitoring periodic results, and taking corrective actions. It is a function of the middle management. Monthly sales report or monthly inventory checks are examples of tactical control.
3. Operational control involves overseeing the implementation of operating plans, monitoring day-to-day results, and taking corrective action. Checking the defects of something produced in each batch or daily cash balance check are examples of operational control.

By Nature of Standards: By nature of standards, controlling can be classified into the following:

1. Physical standards Labour hours, speed of a machine, and power consumption fall in this category. The thickness of copper wire used by Precision Connectors in the connectors is a good example.
2. Cost standards Cost accountants exercise control through a series of cost measures such as direct cost, indirect cost, labour cost per unit, and material cost per unit.
3. Capital standards When the capital being sunk is high, there is a need to monitor that commensurate production takes place. Thus, capital sunk per unit of production capacity created could be a good measure to detect that capital expenditure is taking place as planned.
4. Revenue standards Revenue per employee, revenue per customer, annual revenue, and revenue growth year on year are very popular control standards.
5. Programme standards If you want to introduce a new product or a new discount programme for improving sales, you can fix the standards not only in terms of cost, but also in terms of success. For example, increase sales by 2%, capture 35% market share, achieve 10% increase in footfall to the stores are used as programme standards.
6. Intangible standards Intangible standards are not really immeasurable, though they are difficult to measure. Unit cohesion, goodwill created, or learning from a training programme are examples of intangible standards. It is difficult to fix quantitative standards for these aspects.
7. Goals as standards One can use goals as standards. For example, setting up 10 rural branches of a bank in five months can be a goal for the regional manager of a large bank.

Steps in Controlling

Controlling has three basic steps as follows (Figure 1.10):

1. Establish standards: Standards are planned levels of performance in critical areas of execution. As far as possible, they should be tangible and measurable. Profit, return on capital employed, turnover, percentage of growth, rejection rate, customer complaints, and dispute settlement percentage are tangible measures. Intangible measures are those that cannot be precisely measured. Job satisfaction, achievements of strategy, and managerial effectiveness fall into this category. They too can be measured, though not with same quantitative precision as tangible ones.
   

   Figure 1.10: Steps in controlling

2. Define the deviation: Deviation can be defined as the gap between the planned and actual level of performance. For example, if the defined standard is that sales per store should be not less than Rs 50 lakh per month, and the sales is only Rs 40 lakh, then the deviation is Rs 10 lakh. The deviation could be due to lack of planning, lack of appropriate coordination, inexperience of the employees, or quality of raw material in case of a production unit.
3. Taking remedial actions: Once the causes and extent of deviation are defined, the manager takes remedial measures.

Controlling and Organisational Behaviour

Controls help in implementing OB policies. For example, if there is an excessive and continuous rejection of products, it could impact the morale of the employees. On the other hand, it could be that the deviation is due to the low morale of the employees. Similarly, manpower turnover measures indicate motivation, and job satisfaction and so on. Any variations to the expected performance can be linked to some aspects related to the behaviour of people. This, in turn, can indicate troubles which are building up in an organisation.

Summary

This chapter deals with organisation, management, and the management process/functions. Why do we look at these in a text book on OB? To understand organisational behaviour, we have to first understand what is an organisation and the scope of management of an organisation. Only then, we can understand how they influence the behaviour of people, and how they are influenced, in turn, by the behaviour of people. When one attempts to learn OB without these contexts, it is often felt that OB is mere common sense. The perception that OB is a matter of common sense is not uncommon among management students. Equally true is their remark that they should have learnt OB seriously when they return to the business school as an alumnus after a few years of work experience. This gap is largely due to teaching and learning OB without emphasising on the critical impact it has on every element of organisation and management processes.

Organisations are created by people to achieve the purpose of coordination, cooperation, and division of labour. Organisations strive to fulfil the need of stakeholders who are people for whom the organisation should create some values. The term stakeholder should be perceived in its widest sense. Hence, the stakeholders are not only those who have invested in the organisation but also its employees, customers, suppliers, society at large, and the government.

Every organisation starts with a vision to achieve some status or to be something by doing activities that would fulfil its vision. This may not be explicitly written down initially, but as organisations grow, they create a well thought out vision statement that includes their mission, core values, and audacious goals. Some organisations articulate them concisely and cohesively in a single statement, whereas some others articulate these aspects in separate entities such as vision statement, ‘our values’, ‘our mission’, and so on. Most modern organisations would include these prominently in their websites.

Based on their vision and mission, the organisations create a strategy. This can be at the corporate level if the organisation has a number of businesses or at business level if it has only one business. Then, there would be functional strategy such as finance or marketing strategy. Strategy compels the organisations to create a matching structure to implement the strategy. This is followed by creating systems, processes, jobs, and tasks so that there is some outcome that is aligned with its strategy. This flow of how the organisations come to into existence and create output is discussed in detail in the chapter.

Let us now understand what management is. Although most of us intuitively understand what management is, and how important it is, this chapter discusses various issues related to management formally. Goal achievement, optimisation, innovation, change and creating stability, and creating prosperity for the stakeholders make management important for an organisation. Henry Mintzberg’s six characteristics of management discussed in the chapter are worth noting and applying.

We can study management from several perspectives such as activity perspective, role perspective, management competency/skill perspective, management group/team perspective, social and interactive process perspective, and academic discipline perspective, to name a few. You will hear a lot of argument on whether management is a science or art. The reality is that management follows several principles such as 14 Principles of Fayol, yet, management is not an exact science. The way people manage has a lot of intuitive component in it, and hence, it is also an art.

One of the good methods to study management is to look at it as a process/function. Planning, organising, staffing, leading/directing, and controlling are the well accepted processes of management. Decision making, one of the most important components of management, is usually considered as a part of planning.

Planning involves working within the available resources or using only the optimum resource. Hence, it is the key start point of management process. Without it, the process of achieving one’s vision/mission will not commence. Planning and OB influence each other. For instance, organisations accept greater risk in plans depending on the behavioural variables such as self-confidence and trust, and these behavioural variables, in turn, influence planning, risks accepted in the plans, and so on.

Organising is an important process, because it helps to group activities of the enterprise and establish the power-relationships between these activities and people. The purpose of this is to create a structure to achieve coordination, cooperation, and division of labour for accomplishing goals/objectives optimally. It also determines how communication takes place between various entities that are grouped. You can intuitively see that this relationship affect OB, and OB, in turn, influences the way the grouped activities take place.

Since the grouped activities have to be done by people and machines, it is necessary to get appropriate people, and this is what staffing process achieves. In short, staffing is about getting the right people in the right quantity, at the right time, at the right cost, and then keeping them on the job by motivating them. The relationship between staffing and OB and the vice versa needs little elaboration. In fact, most of OB and human resources management concepts and practices are related to staffing process of the organisation.

Leading is another management process which is intimately linked to OB. People without leaders or with wrong leaders can be explosive and destructive, and people with right leadership can be a powerful resource for achieving the vision and the mission.

Controlling is another important management process that leads to achieving the vision or mission in the most optimal way. Controlling ensures that the plans run smoothly and the corrections are made in time. Controlling may be related to people or the machines.

By now, it would be easy for you to see how intimately management processes and OB are connected. Throughout this book, we will be referring to the concepts from this chapter either in the context of influencing the behaviour of people or in the context of people’s behaviour influencing the organisation. Therefore, this chapter sets the stage for a deeper understanding of OB.

Test Your Understanding

1. At the root of an organisation are ______, ______, and ______.
2. The core purpose of any organisation is to create ______ to the ______. (Fill in the blanks)
3. Choose the most appropriate answer from the following options:

   The fundamental structures of an organisation are:

   1. Pyramid, committees, and matrix.
   2. Pyramid, committees, matrix, and ecologies.
   3. Pyramid, matrix, and ecologies.
   4. None of the above
4. Choose the most appropriate answer from the following options:

   The key components of an organisation are:

   1. People, managers, leadership, and targets.
   2. Vision and mission, strategy, structure, systems, processes, jobs, tasks and output/outcome.
   3. Neither (a) nor (b) fully explains the key components.
   4. Both (a) and (b) together fully explains the key components.
5. Mintzberg’s Managerial Role model has ___ fundamental roles. (Select from 3, 5, 10)
6. Rajendra (mentioned in the opening case) does not hesitate to go to the English medium school in the neighbourhood for admission of the children of his employees. When he does so, he is fulfilling his ______ role.
7. Choose the most appropriate answer from the following options:

   Managers often spend their time making policies, creating structures, and ensuring compliance. This role is called:

   1. Direction setting.
   2. Trusteeship.
   3. Coordination.
   4. Administrative.
8. Management is about people and other resources, individual and organisational goals, and about creating an environment where ______ and ______ interact to achieve the goals.
9. Choose the most appropriate answer from the following options:

   Key competencies required for a manager are:

   1. Cognitive, emotional, functional, technical.
   2. Conceptual, analytical, and cognitive.
   3. Cognitive, emotional, functional, technical, conceptual, and analytical.
   4. None of the above fully explains the key competencies.
10. Choose the most appropriate answer from the following options:

    One of the characteristics of management is ‘universality’. Which of the following is most appropriate of this as an example?

    1. HCL technologies follows ‘employees first’ policy.
    2. Rajendra set a goal of 50,000 connectors per year for his company. He supplies to a company, which has the goal of making one million connectors per year. They, in turn, supply to several vehicle manufacturers out of which one has the goal of becoming the largest seller of two wheelers in India.
    3. As I walked through the modern plant that Rajendra had set up, I could feel a vibe of enthusiasm and professionalism. Everything was smooth and everything was what one would see in a small unit of that nature-making connectors.
    4. None of the above is an appropriate example of universality.
11. Universality principles have to be applied keeping situations and variations in mind. This is called ________ nature of management.
12. While absorbing information, managers have a bias towards oral information rather than written information (State True or False)
13. Choose the most appropriate answer from the following options:

    Objectives of management can be studied from the following perspectives:

    1. Personal, societal, economic, and organisational.
    2. Societal, economic, and organisational.
    3. Economic, personal, and organisational.
    4. None of them cover all the perspectives.
14. Which of the following is the LEAST appropriate statement in relation to approaches to understanding the concept of management?
    1. We can understand it as an activity or process.
    2. We can understand it as a resource.
    3. We can understand it as an academic discipline.
    4. We can understand it as an art.
15. Choose the most appropriate answer from the following options:

    You often find a technically sound, but managerially inept, person occupying an important position. This can be best explained by:

    1. Peter’s principle.
    2. Parkinson’s Law.
    3. Law of randomness.
    4. Law of selection.

Need some help with this? Go to Answers to Test Your Understanding given at the end of the book.

 

Assimilation Questions

1. Every organisation starts with a vision (implicit or explicit) and ends up in outputs and/or outcomes to fulfill that vision. Explain various links that an organisation has in this chain, with the help of a diagram.
2. On a nice sunny morning, Manager ‘A’ came to his office, opened his computer and read the reports. Then he called a meeting and passed some information to his team before he joined a press conference. What roles did he fulfill and what is the framework based on which this can be explained?
3. Direction setting, creating alignment, and creating engagement are some of the roles of a modern manager, who is also considered a leader. What are the tasks he does to fulfil these roles?
4. As a manager, Mr. Mohan spends most of his time networking. His secretary is an efficient person and communicates on his behalf most of the time. How effective and successful will Mohan be as a manager? What advice will you give him?
5. What are the key elements that you would include in a definition of management?
6. Universality and goal orientation are two important characteristics of management. Why?
7. Why is so much importance given to management? Justify giving contemporary examples.
8. What are the important steps in planning?
9. Staffing is an important function of management. Justify.
10. Social objectives of management are finding more and more manifestation today. Do you agree with this statement? Is this a passing fad? Justify.
11. With advancement in computers, we can quantify anything and management is therefore a science today. Critique this statement.
12. One of the perspectives to understand management is from a resource perspective. Why is it so?
13. In an MBA program one studies management almost all the time. Why is it then called Masters in Business Administration rather than Masters in Business Management?
14. Differentiate between efficiency and effectiveness.
15. What is Parkinson’s Law? Illustrate with a an example.

Need some help with this? Go to Clues to Answer Assimilation Questions given at the end of the book.

 

Application Challenges

1. Read the opening case and pick out examples that illustrate Fayol’s 14 principles of management. Then, make a critical evaluation of your institute or college and identify which of these principles are followed and which are violated. Give some examples.
2. Read the article of Collins and Porras mentioned in the chapter under the discourse on vision statement and critique the vision statement of ‘Precision Connectors’. Recommend a better vision statement, if needed. Then, apply the concept to your own life and create a personal vision statement for yourself.

Approach to Teaching/Learning

For Lecture-driven Teaching The institutions, which use lecture method, can follow the standard pattern of lecture and quizzes. Thereafter, they can go to the experiential learning mode by attempting the application challenges.

For Case-driven Teaching Institutions that follow case method (participant centered learning) may use the case mentioned below. To enhance the experiential learning, they can attempt one or both the application challenges.

Title of the case: ‘Gupta Garments and Amit’s First 100 days’

Originator of the case: Thunderbird

Case No: TB0256

Source/available through: Harvard Business School Publishing

Brief description: This is the case of a family business trying to take opportunities in the modern day. The teaching notes may not help and you would need to make your own notes. However, the case can be effectively used to bring out the types of organisations, components of an organisation, vision statement, strategy, structure, systems, processes, tasks/activities, and principles of management.