Management

Management: its nature and scope

Meaning of Management:
Management is the process of planning, organizing, leading and controlling the efforts of
organization members and of using all other organizational resources to achieve stated
organizational goals.
According to Lawrence A Appley, Management is the development of people and not
the direction of things.
According to Joseph Massie, Management is defined as the process by which a co-
operative group directs action towards common goals.
In the words of George R Terry, Management is a distinct process consisting of
planning, organising, actuating and controlling performed to determine and
accomplish the objectives by the use of people and resources.
According to James L Lundy, Management is principally the task of planning, co-
ordinating, motivating and controlling the efforts of others towards a specific
objective.
In the words of Henry Fayol, To manage is to forecast and to plan, to organise, to
command, to co-ordinate and to control.
According to Peter F Drucker, Management is a multi-purpose organ that manages a
business and manages managers and manages worker and work.
In the words of J.N. Schulze, Management is the force which leads, guides and directs
an organisation in the accomplishment of a pre-determined object.
In the words of Koontz and ODonnel, Management is defined as the creation and
maintenance of an internal environment in an enterprise where individuals working
together in groups can perform efficiently and effectively towards the attainment of
group goals.

The definition suggests:

Management is a continuous process;
Several interrelated activities have to be performed by managers irrespective of
their levels to achieve the desired goals;
Managers use the resources of the organization, both physical as well as human,
to achieve the goals;
Management aims at achieving the organisations goals by ensuring effective
use of resources in the best interests of the society.
Nature of Management:
An analysis of the various definitions of management indicates that management has
certain characteristics. The following are the salient characteristics of management.
1. Management aims at reaping rich results in economic terms: Managers primary task
is to secure the productive performance through planning, direction and control. It is
expected of the management to bring into being the desired results. Rational utilisation
of available resources to maximise the profit is the economic function of a manager.
Professional manager can prove his administrative talent only by economising the
resources and enhancing profit. According to Kimball, management is the art of

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applying the economic principles that underlie the control of men and materials in the
enterprise under consideration.
2. Management also implies skill and experience in getting things done through people:
Management involves doing the job through people. The economic function of earning
profitable return cannot be performed without enlisting co-operation and securing
positive response from people. Getting the suitable type of people to execute the
operations is the significant aspect of management. In the words of Koontz and
ODonnell, Management is the art of getting things done through people in formally
organised groups.
3. Management is a process: Management is a process, function or activity. This process
continues till the objectives set by administration are actually achieved. Management
is a social process involving co-ordination of human and material resources through
the functions of planning, organising, staffing, leading and controlling in order to
accomplish stated objectives.
4. Management is a universal activity: Management is not applicable to business
undertakings only. It is applicable to political, social, religious and educational
institutions also. Management is necessary when group effort is required.
5. Management is a science as well as an art: Management is an art because there are
definite principles of management. It is also a science because by the application of
these principles predetermined objectives can be achieved.
6. Management is a profession: Management is gradually becoming a profession
because there are established principles of management which are being applied in
practice, and it involves specialised training and is governed by ethical code arising
out of its social obligations.
7. Management is an endeavour to achieve pre-determined objectives: Management is
concerned with directing and controlling of the various activities of the organisation to
attain the pre-determined objectives. Every managerial activity has certain objectives.
In fact, management deals particularly with the actual directing of human efforts.
8. Management is a group activity: Management comes into existence only when there
is a group activity towards a common objective. Management is always concerned with
group efforts and not individual efforts. To achieve the goals of an organisation
management plans, organises, co-ordinates, directs and controls the group effort.
9. Management is a system of authority: Authority means power to make others act in
a predetermined manner. Management formalises a standard set of rules and
procedure to be followed by the subordinates and ensures their compliance with the
rules and regulations. Since management is a process of directing men to perform a
task, authority to extract the work from others is implied in the very concept of
management.
10. Management involves decision-making: Management implies making decisions
regarding the organisation and operation of business in its different dimensions. The
success or failure of an organisation can be judged by the quality of decisions taken by
the managers. Therefore, decisions are the key to the performance of a manager.
11. Management implies good leadership: A manager must have the ability to lead and
get the desired course of action from the subordinates. According to R. C. Davis,
management is the function of executive leadership everywhere. Management of the
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high order implies the capacity of managers to influence the behaviour of their
subordinates.
12. Management is dynamic and not static: The principles of management are dynamic
and not static. It has to adopt itself according to social changes.
13. Management draws ideas and concepts from various disciplines: Management is
an interdisciplinary study. It draws ideas and concepts from various disciplines like
economics, statistics, mathematics, psychology, sociology, anthropology etc.
14. Management is goal oriented: Management is a purposeful activity. It is concerned
with Notes the achievement of pre-determined objectives of an organisation.
15. Different levels of management: Management is needed at different levels of an
organisation namely top level, middle level and lower level.
16. Need of organisation: There is the need of an organisation for the success of
management.
Management uses the organisation for achieving pre-determined objectives.
17. Management need not be owners: It is not necessary that managers are owners of
the enterprise. In joint stock companies, management and owners (capital) are different
entities.
18. Management is intangible: It cannot be seen with the eyes. It is evidenced only by
the quality of the organisation and the results, i.e., profits, increased productivity etc.

Is Management a Science or an Art?

A question often arises whether management is a science or art. It is said that

management is the oldest of arts and the youngest of sciences. This explains the
changing nature of management but does not exactly answer what management is? To
have an exact answer to the question it is necessary to know the meanings of the terms
Science and Art.

What is Science?
Science may be described, as a systematic body of knowledge pertaining to an area of
study and contains some general truths explaining past events or phenomena.
The above definition contains three important characteristics of science. They are:
1. It is a systematized body of knowledge and uses scientific methods for observation,
2. Its principles are evolved on the basis of continued observation and experiment, and
3. Its principles are exact and have universal applicability without any limitation.

Judging from the above characteristics of science, it may be observed that:

1. Management is a systematized body of knowledge and its principles have evolved
on the basis of observation.
2. The kind of experimentation (as in natural sciences) cannot be accompanied in the
area of management since management deals with the human element.
3. In management, it is not possible to define, analyse and measure phenomena by
repeating the same conditions over and over again to obtain a proof.
The above observation puts a limitation on management as a science. Management like
other social sciences can be called as inexact science.
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What is Art?
Art refers to the way of doing specific things; it indicates how an objective is to be
achieved.
Management like any other operational activity has to be an art. Most of the managerial
acts have to be cultivated as arts of attaining mastery to secure action and results.
The above definition contains three important characteristics of art. They are:
1. Art is the application of science. It is putting principle into practice.
2. After knowing a particular art, practice is needed to reach the level of perfection.
3. It is undertaken for accomplishing an end through deliberate efforts.

Judging from the above characteristics of art, it may be observed that:

1. Management while performing the activities of getting things done by others is
required to apply the knowledge of certain underlying principles which are necessary
for every art.
2. Management gets perfection in the art of managing only through continuous
practice.
3. Management implies capacity to apply accurately the knowledge to solve the
problems, to face the situation and to realise the objectives fully and timely.
The above observation makes management an art and that to a fine art.

Management is both a Science as well as an Art

Management is both a science as well as an art. The science of management provides
certain general principles which can guide the managers in their professional effort.
The art of m nagement consists in tackling every situation in an effective manner. As a
matter of fact, neither science should be over-emphasised nor should be the art
discounted; the science and the art of management go together and are both mutually
interdependent and complimentary.
Management is thus a science as well as an art. It can be said that-the art of
management is as old as human history, but the science of management is an event of
the recent past.

1.3 Scope of Management

The scope of management is too wide to be covered in a few pages. Herbison and
Myres have yet tried to restrict it under three broad groups, viz.
1. Economic Resource
2. System of Authority
3. Class or Elite
Let us understand each of them one by one.
1. Economic Resource: Business Economics classifies the factors of production into four
basic inputs, viz. land, labour, capital and entrepreneur. By the use of all these four,
basic production can be done. But to turn that into a profitable venture, an effective
utilization of man, money, material, machinery and methods of production has to be
ensured. This is guaranteed by application of management fundamentals and
practices. The better is the management of an enterprise, the higher is its growth rate
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in terms of profit, sales, production and distribution. Thus management itself serves as
an economic resource.
2. System of Authority: As already discussed, management is a system of authority. It
formalizes a standard set of rules and procedure to be followed by the subordinates
and ensures their compliance with the rules and regulations. Since management is a
process of directing men to perform a task, authority to extract the work from others is
implied in the very concept of management.
3. Class or Elite: Management is considered to be a distinct class that has its own value
system. Managerial class, often referred to as a collective group of those individuals
that perform managerial activities is essential component of each organisation. The
importance the class has become so huge that the entire group of mangers is known as
management in every organisation.

1.4 Purpose of Management Notes

The purpose of management can be understood as following:
1. Reducing ambiguity in methods of working,
2. Keeping costs down, and motivating others to do the same.
3. Taking calculated risks
4. Managing prospective risk
5. Exercise good judgement

1.5 Characteristics of Management

Management is a distinct activity having the following salient features or
characteristics:
1. Economic Resource: Management is an important economic resource together with
land, labour and capital. As industrialization grows, the need for managers increases.
Efficient management is the most critical input in the success of any organised group
activity as it is the force which assembles and integrates other factors of production,
namely, labour, capital and materials.
2. Goal Oriented: Management is a purposeful activity. It coordinates the efforts of
workers to achieve the goals of the organisation. The success of management is
measured by the extent to which the organisational goals are achieved.
3. Distinct Process: Management is a distinct process consisting of such functions as
planning, organising, staffing, directing, and controlling. These functions are so
interwoven that it is not possible to lay down exactly the sequence of various functions
or their relative significance.
4. Integrative Force: The essence of management is integration of human and other
resources to achieve the desired objectives. Managers seek to harmonize the
individuals goals with the organisational goals for the smooth working of the
organisation.
5. Intangible Force: Management has been called an unseen force. Its presence is
evidenced by the result of its efforts orderliness, informed employees, buoyant spirit
and adequate work output. Thus, feeling of management is result-oriented.

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6. Results through Others: The managers cannot do everything themselves. They must
have the necessary ability and skills to get work accomplished through the efforts of
others.
They must motivate the subordinates for the accomplishment of the tasks assigned to
them.
7. A Science and an Art: Management has an organised body of knowledge consisting
of well- defined concepts, principles and techniques which have wide applications. So
it is treated as a science. The application of these concepts, principles and techniques
requires specialized knowledge and skills on the part of the manager. Since the skills
acquired by a manager are his personal possession, management is viewed as an art.

The Management Processes; Planning, Organisation, Staffing, Directing and

Controlling

Planning:
Planning in simple is looking ahead. It is preparing for the future. It involves outlining
a future course of action. Planning makes the things to happen. Therefore, it is needless
to say that in the absence of planning, things are left to chance. Planning is unique in
that it precedes all the other managerial functions. It involves deciding the objectives
and formulating the policies and procedures to achieve them. Effective planning
provides answers to questions like what to do? How to do? Who is to do? And when
to do?
Planning is a function performed by managers at all levels. Though every manager
plans, the plans developed by different managers may vary in respect of scope and
importance. For example, plans made by top managers have a wider scope with a focus
on the organization as a whole and normally cover a longer period. On the other hand,
plans developed by middle and lower level managers relate to the divisions or
departments and usually cover a short period. Systematic planning helps in facing the
uncertainties of future with less embarrassment. It helps in making things happen in
the expected way.
Organizing
Organizations achieve objectives by using physical and human resources. When
people work in groups, everyone in the group should know what he/she is expected
to achieve and with what resources. In other words, organizing involves establishing
authority responsibility relationships among people working in groups and creating
a structural framework. Thus, the managers task in organizing aims at creating a
structure that facilitates the achievement of goals. Organizing therefore involves:
Determination of activities required to achieve goals;
grouping of these activities into departments;
assignment of such groups of activities to a manager;
delegation of authority to carry them out; and
Provision for coordination horizontally and vertically in the organization.
The managerial function of organizing involves designing the structure and
establishing functional and operational relationships. The resulting structure varies
with the task. A large organization with huge market needs a different structure
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 compared to a small organization. Similarly, structure of an organization operating in
a stable environment may be different from the one operating in a dynamic
environment.
Staffing
Organising process results in the creation of a structure with various positions. Staffing
involves manning the various positions of the organisation. It includes manpower
planning, recruitment and selection of the right people, training and developing them,
deciding financial compensation, appraising their performance periodically. There is a
debate whether staffing function is to be performed by all managers in the organisation
or handled by human resources department alone. However, some processes of
staffing are performed by personnel department only. For example recruitment and
selection, training, fixation of salary, etc. Performance appraisal, on the other hand,
may be done by all managers.
Directing
Once plans are made and the organisation is created, the focus shifts to the
achievement of objectives. This function is called by various names: directing, leading,
motivating, actuating and so on. It basically involves directing or leading the activities
of the people. The manager directs the activities of his subordinates by explaining what
they have to do and by helping them perform it to the best of their ability. In leading
the people, the manager performs the following three distinct tasks:
Communication: the process of information flow from one person to another and
across the organization;
Leadership: the process by which a manager guides and Influences the work of
his subordinates; and
Motivation: the act of stimulating the people so that they give their best to the
organisation.
Leading is a function predominantly interpersonal in nature. In the organizational
context many problems arise because of the failure of managers to understand the
people, their aspirations, attitudes, and behaviour as individuals and in groups. If the
manager fails in leading the people towards better performance, any amount of
planning and organizing, however effective they are, may not help the organisation.
Controlling
Planning and controlling the two functions are closely interrelated in that while plans
specify the objectives to be achieved, control as a managerial function facilitates to
know whether the actual performance is in conformity with the planned one. So that,
in the event of deviations, appropriate corrective measures could be taken. In the
absence of adequate control mechanism, unexpected changes in the environment may
push the organisation off the track. Thus, controlling implies measuring and correcting
the activities to ensure that events conform to plans. That is why planning and
controlling are often described as the Siamese twins of management. It involves four
main elements:
Establishing standards of performance;
Measuring the actual performance and comparing it against the standard
performance;
Detecting deviations, if any, in order to make corrections before it is too late;
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 Taking appropriate corrective measures.

Evolution of Management Thought

Introduction
2.1 Classical Theory
2.2 Scientific Management Approach
2.3 Management Process or Administrative Management Approach
2.4 Bureaucracy
2.5 Neo-classical Theory
2.6 Behavioural Science Approach
2.7 Quantitative Approach
2.8 Systems Approach
2.9 Contingency Approach
2.10 Operational Approach

Summary of Management Trends

Taylor, F. W. Scientific management
This approach expounds that maximum efficiency is obtained by breaking down tasks
into each component movement, so finding the best and most efficient way of doing
each. This was the forerunner of 'work study', or time and motion'. In Taylor's model,
the relationship between manager and employees is one of master-servant or parent-
child.
Mayo, E (1927-32) Hawthorne studies
Perhaps one of the most quoted approaches in respect of people management is Elton
Mayo's studies at the Hawthorne Works of Western Electric in Chicago, His findings
showed that productivity of workers improved when working conditions were
discussed between employees and management -whether or not the conditions were
actually improved. His work contributed a lot to motivational theory. His work (1949)
concluded that the difference was the result of feeling part of a team and lead to the
new idea that workers should be considered to be part of a social organism rather than
individual cogs in a large wheel.
McGregor D.(1930s) Theory X and Theory Y
This theory suggested two different styles of management, based on the underlying
assumptions of employee motivation. Theory X requires a carrot and stick' model of
motivation; Theory Y places problems of human resources in the lap of management;-
people will exercise self-direction and self-control in the achievement of organizational
objectives, if they are committed to those objectives. Theory Y suggests that authority
and control are not appropriate for all purposes and under all circumstances.
Herzberg, F.(1960s) Job enrichment
Herzberg differentiated between motivational and hygiene factors, the latter being such
things as salary and working conditions. In his later work (1968) he suggested that' in
attempting to enrich an employee's job, management often succeed in reducing the
man's personal contribution, rather than giving him an opportunity for growth in his
accustomed job'. He called this 'horizontal loading', Which he suggested, merely
enlarges the meaninglessness of the job.
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Maslow, A (1960s) Hierarchy of needs
Maslow proposed that there is a series of needs to be satisfied for all individuals.
As each need is satisfied, the satisfaction itself ceases to be important. The implications
for management are an awareness of these needs and action to satisfy them.
Jaques, E (1950s) Clarity of roles
While Maslow, Herzberg and McGregor led the field in management and motivational
theory during the 1960s and 1970s, research undertaken in London at The Tavistock
Institute was gaining interest. Elliot Jaques (1976) proposed that the key for
management of people was to have clearly defined and greed and roles and
responsibilities. He suggested that lack of clear boundaries caused confusion which led
to frustration, insecurity and a need to avoid accountability.
Drucker, P. F. (1945) Management practice
Drucker has written on virtually every aspect of organizational management and
change. In his Practice of Management (1954) he says that the function, which
distinguishes the mangers above all others, is an educational one. The managers unique
contribution should be to give others vision and the ability to perform.' He also
proposed' management by objectives', 'risk-taking decisions', strategic thinking' and
'building an integrated team'.
Boston Consulting Group (1970s) Management by objectives (MBO)
Term such as 'learning curve', 'growth share matrix', 'stars', 'dogs', 'cash-cows',
'question-marks' and the 'Boston Box' will be familiar to users of this approach.
Centered again in the 'scientific management' school' the use of 'decision trees' was
prevalent, focusing mainly on investment strategies. Decision-making strategies with
change programmes are often led by this approach.
Pascale and Althos (1980s) Japanese management
Use of the 'Seven 5' framework as a performance measurement tool and for comparison
between US and Japanese management styles. Pascal felt that early managerial theory
was significant for what it left out-for example, total absence of attention to building a
corporate team. Or to the recruitment and selection of staff, or to training or
socialization within the working teams. He suggested that 'field identity' value should
be acknowledged.
Kanter, R (1980s) Change management
Kanter's views focus on the flatter hierarchy, the post-entrepreneurial organization and
flexibility of an organization to respond to change. She feels that the first step in change
mastery understands how individuals can exert leverage in an organization'. She refers
to ' corporate entrepreneurs' who test limits and create new possibilities by directing
innovation. She also refers to 'business athletes' who know how to compete in a way
that enhances rather than undercuts cooperation'. Integrative teamwork is an important
component in this approach, as is developing a broader understanding of 'what
happens as different levels of the organization' (kanter, 1984).
Peters and Waterman (1982) Search for excellence
In this joint publication, Peters and Waterman (1987) suggest that 'leadership is patient,
usually boring coalition building'. The key of this approach, however, is built on the
'Seven S (see Pascale and Athos) model. In companies, which operate with super
ordinate goals and strong cultures, they found that 'people way down the line know
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what they are supposed to do in most situations because the handful of guiding values
is crystal clear'. Another key component of the excellent company is that 'their systems
reinforce degrees of winning rather than degrees of losing targets and quotas are set to
allow that to happen'.
Peters, T. (1990s) Thriving on Chaos (1988); Liberation Management (1992)
In Thriving on Choose, Peters suggests that the most successful organizations are the
impatient ones who will 'reorganize on a dime'. Organizations adopting this approach
will follow the guide that 'if you are not reorganizing, pretty substantially {once every
six to twelve months, you're probably out of step with the times' In Liberation
Management Peters stresses the need for more rapid and flexible management
responses to the demands of the marketplace with a focus on capturing and retaining
the loyalty of customers-going beyond' satisfied customers' to 'committed" customers'.
Waterman (1990s)
In his book The Renewal Factor (1987), Waterman says that' one of the most difficult
challenges in management is developing a sense of value and vision'. He also gives 14
guidelines for strengthening teamwork. In his later book on The Frontiers of excellence
(1994) he suggests that a well-run total quality program can be of benefit to middle
managers and employees as well as to customers.
Harvey-Jones, J (1990s) Managing to survive (1993)
Harvey Jones feels that the most important personal skill in this decade is that of
managing radical change. His view is that no one actually' manages' change, they
release and guide it', He also states that organizations do not change until the people in
those organizations have - and people do not change their ideas and values quickly.
Handy C. (1990s) Understanding organization (1976)
Handy's 1976 book outlined differences between a 'power culture', a 'role culture', a
'task culture' and a 'person culture' in organizations. His later books, including Gods of
Management, The Age of Unreason and The Empty Raincoat have expounded his ideas.
He purposed the model of the 'shamrock organization'

Management Theories:
A- Classical Theory
1. Scientific Management Approach - Taylors
2. Management Process or Administrative Management Approach - Fayols
3. Bureaucracy - Webers
B- Neo-Classical Theory
1. Human Relations Approach (Hawthrone Studies
2. Behavioural Science Approach
3. Quantitative Approach
4. Systems Approach
5. Contingency Approach
6. Operational Approach

A. Classical Theory
The classical theory signifies the beginning of the systematic study of management
organisation. It is often called the traditional theory. It can be traced historically to the
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19th century prototype industrial and military organisations. Several writers
contributed to the classical thought in the early years of the 20th century. They include
Taylor, Fayol, Weber, Luther Gulick, Urwick, Mooney and Reiley and may others.
The classical theory incorporates three viewpoints: (1) Taylors Scientific Management
(2) Fayols Administrative Management; and (3) Webers Ideal Bureaucracy (an
organisation based on rules and regulations, formal relations, specialization, etc.). All
the three concentrated on the structure of organisation for greater efficiency. Several
other trailblazers have also contributed to the classical theory. For instance, Mooney
and Reiley published Onward Industry in 1931 in which they attempted to find
organisational universals. Subsequently, notable contributions came from Gullick,
Oliver Sheldon, Urwick and many others. All these theorists were concerned with the
structure of organisations and that is why their approach is also sometimes labelled as
structural theory of organisation. Salient features of classical approach are as follows:
1. The classical theory laid emphasis on division of labour and specialization, structure,
scalar and functional processes and span of control. Thus, they concentrated on the
anatomy of formal organisation.
2. The classical theorists emphasis organisation structure for co-ordination of various
activities. They ignored the role of human element.
3. The classical theory ignored the impact of external environment on the working of
the organisation. Thus, it treated organisations as closed systems.
4. The efficiency of the organisation can be increased by making each individual
efficient.
5. The integration of the organisation is achieved through the authority and control of
the central mechanism. Thus, it is based on centralization of authority.
6. There is no conflict between the individuals and the organisation. In case of any
conflict, the interests of the organisation should prevail.
7. The people at work could be motivated by the economic rewards as they were
supposed to be rational economic persons.
A.1 Scientific Management Approach
The impetus for the scientific management approach came from the first industrial
revolution. Because it brought about such an extraordinary mechanization of industry,
this revolution necessitated the development of new management principles and
practices. The main contributors Notes to scientific management were Frederick W.
Taylor, Henry L. Gantt, Frank Gilbreth, Lillian Gilbreth and Harrington Emerson.
F.W. Taylor (1865-1915) was the first person who insisted on the introduction of
scientific methods in management. He launched a new movement during the last
decade of 19th century which is known as Scientific Management. That is why, Taylor
is regarded as the father of scientific management. Taylor was an American engineer
who responded to the challenges of management around the turn of the century.
During that period, productivity was very low, labour became extremely dissatisfied
and industries had to face frequent strikes and lockouts. Taylors contribution was a
system based on science whereby lower labour cost could be achieved simultaneously
with higher wages. He suggested the change in the mental attitudes of the workers and
the management to bring harmony in the industry.

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Scientific management means application of scientific methods to the problems of
management. Taylor advocated scientific task setting based on time and motion study,
standardization of materials, tools and working conditions, scientific selection and
training of workers and so on. It is to be noted that Taylors thinking was confined to
management at the shop level. However, he demonstrated the possibility and
significance of the scientific analysis of the various aspects of management. To sum up,
he laid emphasis on the following principles:
1. Science, not rule of thumb.
2. Harmony in group action, rather than discord.
3. Maximum output in place of restricted output.
4. Scientific selection, training and placement of the workers.
5. Almost equal division of work and responsibility between workers and managers.

Taylor suggested that management should try to find the best methods of doing various
jobs and introduce standardized materials, tools and equipment so that wastages are
reduced. The management should select right types of people and give them adequate
training so as to increase the quantity and quality of production. It must create
congenial working conditions for optimum efficiency of the workers. It should perform
the decision-making function and should always try to give maximum cooperation to
the workers to ensure that work is done according to the scientific techniques.

The workers should also revise their attitude towards the management. They should
not be work-shirkers. They should be disciplined, loyal and sincere in fulfilling the tasks
assigned to them. They should not indulge in wastage of resources. Both the
management and the workers should trust each other and cooperate in achieving
maximum production.

Thus, Taylor stood for creating a mental revolution on the part of management and
workers. It is to be noted that Taylors thinking was confined to management at the
shop level. However, he demonstrated the possibility and significance of the scientific
analysis of the various aspects of management. To put the philosophy of scientific
management into practice, Taylor and his associates suggested the following
techniques:
1. Scientific task setting to determine a fair days; work.
2. Work study to simplify work and increase efficiency. This involves methods study,
time study and motion study.
3. Standardization of materials, tools equipment, costing system, etc.
4. Scientific selection and training of workers.
5. Differential piece-wage plan to reward the highly efficient workers.
6. Specialization in planning and operations through functional foremanship.
Foremen in the planning department include: route clerk, instruction card clear, time
and cost clerk and shop disciplinarian and those in the operations department include:
gang boss, speed boss, repair boss and inspector.
7. Elimination of wastes and rationalization of system of control.
Criticism of Scientific Management
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Taylors scientific management was criticized not only by the workers and managers
but also by the psychologists and the general public. The main grounds of criticism are
given below:
1. The use of the word Scientific before Management was objected because what is
actually meant by scientific management is nothing but a scientific approach to
management.
2. Taylor advocated the concept of functional foremanship to bring about specialization
in the organisation. But this is not feasible in practice as a worker cant carry out
instructions from eight foremen.
3. Scientific management is production-centered as it concentrates too much on the
technical aspects of work and undermines the human factor in industry.
4. Scientific Management ignores social and psychological needs of workers as it treats
them as extension of machines devoid of any feelings and emotions.
5. Trade unionists regarded the principles of scientific management as the means to
exploit labour because the wages of the workers were not increased in direct proportion
to productivity increases.
A.2 Management Process or Administrative Management Approach
The advocates of this school perceive management as a process involving certain
functions such as planning, organising, directing and controlling. That is why, it is also
called the functional approach. Henri Fayol is regarded as the father of this school.
Henri Fayol defined management Notes in terms of certain functions and then laid
down fourteen principles of management which according to him have universal
applicability.

Principles of Management (Contribution of Henry Fayol)

Henry Fayol was born in 1941 at Constantinople in France.
Concept of Management: Henry Fayol is considered the father of modern theory of
general and industrial management. He divided general and industrial management
into six groups:
1. Technical activities: Production, manufacture, adaptation.
2. Commercial activities: Buying, selling and exchange.
3. Financial activities: Search for and optimum use of capital.
4. Security activities: Protection of property and persons.
5. Accounting activities: Stock-taking, balance sheet, cost, and statistics.
6. Managerial activities: Planning, organisation, command, co- ordination and control.

Fayols Principles of Management: The principles of management are given below:

1. Division of work: Division of work or specialization alone can give maximum
productivity and efficiency. Both technical and managerial activities can be performed
in the best manner only through division of labour and specialization.
2. Authority and Responsibility: The right to give order is called authority. The
obligation to accomplish is called responsibility. Authority and Responsibility are the
two sides of the management coin. They exist together. They are complementary and
mutually interdependent.

13
3. Discipline: The objectives, rules and regulations, the policies and procedures must be
honoured by each member of an organisation. There must be clear and fair agreement
on the rules and objectives, on the policies and procedures. There must be penalties
(punishment) for non-obedience or indiscipline. No organisation can work smoothly
without discipline - preferably voluntary discipline.
4. Unity of Command: In order to avoid any possible confusion and conflict, each
member of an organisation must receive orders and instructions only from one superior
(boss).
5. Unity of Direction: All members of an organisation must work together to
accomplish common objectives.
6. Emphasis on Subordination of Personal Interest to General or Common Interest: This
is also called principle of co-operation. Each shall work for all and all for each. General
or common interest must be supreme in any joint enterprise.
7. Remuneration: Fair pay with non-financial rewards can act as the best incentive or
motivator for good performance. Exploitation of employees in any manner must be
eliminated. Sound scheme of remuneration includes adequate financial and non-
financial incentives.
8. Centralization: There must be a good balance between centralization and
decentralization of authority and power. Extreme centralization and decentralization
must be avoided.
9. Scalar Chain: The unity of command brings about a chain or hierarchy of command
linking all members of the organisation from the top to the bottom. Scalar denotes steps.
10. Order: Fayol suggested that there is a place for everything. Order or system alone
can create a sound organisation and efficient management.
11. Equity: An organisation consists of a group of people involved in joint effort. Hence,
equity (i.e., justice) must be there. Without equity, we cannot have sustained and
adequate joint collaboration.
12. Stability of Tenure: A person needs time to adjust himself with the new work and
demonstrate efficiency in due course. Hence, employees and managers must have job
security. Security of income and employment is a pre-requisite of sound organisation
and management.
13. Esprit of Co-operation: Esprit de corps is the foundation of a sound organisation.
Union is strength. But unity demands co-operation. Pride, loyalty and sense of
belonging are responsible for good performance.
14. Initiative: Creative thinking and capacity to take initiative can give us sound
managerial planning and execution of predetermined plans.

Criticism of Process of Functional Approach

Though the proponents of management process approach have made significant
contribution to the development of thought, their work suffers from the following
limitations:
1. There is no single classification of managerial functions acceptable to all the
functional theorists. There is also lack of unanimity about the various terms such as
management and administration, commanding and directing, etc.

14
2. The functionalists considered their principles to be universal in nature. But many of
the Notes principles have failed to deliver the desired results in certain situations.
3. The functional theorists did not consider the external environment of business.
4. Fayol overemphasized the intellectual side of management. He felt that management
should be formally taught, but he did not elaborate the nature and contents of
management education.

A.3 Bureaucracy
Max Weber (1864-1920), a German sociologist contributed his views on bureaucracy to
the management thought. His primary contribution includes his theory of authority
structure and his description of organisations based on the nature of authority relations
within them. Essentially, it was Webers contention that there are three types of
legitimate authority which are as follows:
1. Rational-legal authority: Obedience is owed to a legally established position or rank
within the hierarchy of a business, military unit, government, and so on.
2. Traditional authority: People obey a person because he belongs to certain class or
occupies a position traditionally recognized as possessing authority, such as a real
family.
3. Charismatic authority: Obedience is based on the followers belief that a person has
some special power or appeal.
Webers theory bureaucracy recognizes rational-legal authority as the most important
type in organisations. Under traditional authority, leaders are not chosen for their
competence, an charismatic authority is too emotional and irrational. A bureaucratic
organisation which is based on rational-legal authority display the following features:
1. Division of Work: There is a high degree of division of work at both the operative
and administrative levels. This leads to specialization of work.
2. Hierarchy of Positions: There is a hierarchy of authority in the organisation. Each
lower position is under the control of a higher one. Thus, there is unity of command.
The bureaucratic structure is hierarchical in nature. It is like a pyramid in which
quantity of authority increases as one moves up the ladder in the organisation.
3. Rules and Regulations: The rules, regulations and procedures are clearly laid down
by the top administration. Their benefits are as under:
(a) They standardize operations and decisions.
(b) They serve as receptacles of past learning.
(c) They protect incumbents and ensure equality of treatment.
4. Impersonal Conduct: There is impersonality of relationships among the
organizational members. The decisions are entirely guided by rules and regulations and
are totally impersonal. There is no room for emotions and sentiments in this type of
structure.
5. Staffing: The personnel are employed by a contractual relationship between the
employee and employer. The tenure of service is governed by the rules and regulations
of the organisation. The employees get a salary every months which is based on the job
they handle and also the length of service.
6. Technical Competence: The bureaucrats are neither elected not inherited, but they are
appointed through selection and the basis of selection is their technical competence.
15
Promotions in bureaucracies are also based on technical qualifications and
performance.
7. Official Records: The administration of a bureaucratic organisation is supported by
an efficient system of record-keeping. The decisions and activities of the organisation
are formally recorded and preserved safely for future reference. This is made possible
by extensive filing system. The filing system makes the organisation independent of
individuals. The official records serve as the memory of the organisation.
Criticism of Bureaucracy
It is not free of flaws. It may lead to many undesirable consequences such as:
1. The rules may be followed in letter and not in spirit. Thus, instead of providing
guidelines, the rules may become source of inefficiency. The rules may be misused or
misinterpreted by the persons concerned with the implementation of rules. Red tapism
and technicalism may follow as a result.
2. Bureaucracy does not consider informal organisation and inter-personal difficulties.
3. Bureaucracy discourages innovation because every employee is supposed to act as
per rules and regulations or to the secondary goals.
4. Goal displacement may take place in a bureaucratic organisation. The bureaucrats
may give priority to rules and regulations or to the secondary goals.
5. The bureaucratic structure is tall consisting of several layers of executives. Thus,
communication from the top level to the lowest level will take a very long time.

Appraisal of Classical Theory

The fundamental objections against the classical theory are discussed below:
1. Narrow View of Organisation: The value of classical theory is limited by its narrow
concentration on the anatomy of formal organisation. In order to achieve rationality,
the classical writers ignored the human relations aspect. The interplay of individual
personality, informal groups and inter organisational conflicts in the formal
organisation were neglected. It is said that the focus of classical theory is on
organisation without people.
2. Assumption of Closed System: Classical theorists viewed organisation as a closed
system, i.e., having no interaction with environment. This assumption is totally
unrealistic. A modern organisation is an open system which has continuous interaction
with the environment through the exchange of inputs and outputs and various types of
information.
3. Assumptions about Human Behaviour: The human being were treated like any other
factor of production. They were supposed to obey their superiors. The classical writers
ignored the social, psychological and motivational aspects of human behaviour.
4. Economic Rewards as Main Motivators: The assumption that people at work can be
motivated solely through economic rewards is also wrong. Several researches in human
behaviour have contradicted this assumption. Non-monetary factors like better status
and job enrichment can also motivate the workers.
5. Lack of Empirical Verification: The classical principles are mostly based on the
personal experiences and limited observations of the practitioners. They are not based
on empirical research. They lack precision and comprehensive framework for analysis.

16
Moreover, it is not clear whether these principles are action recommendations or simply
definitions.
6. Lack of Universality of Principles: Classical theorists claimed that their principles
have universal application. This suggests that the same principles can be applied in: (i)
different organisations, (ii) different management levels in the same organisation, and
(iii) different functions of the same organisation. The empirical researches, however,
suggest that none of the principles has such characteristics. Moreover, there are many
of the principles which contradict with other principles. For example, principle of
specialization is quite in conflict with the principle of unity of command.
7. Excessive Emphasis on Rules and Regulations: Webers ideal bureaucracy, a major
constituent of classical theory, suggested strict adherence to rules and regulations. The
scope for individual initiative is thus limited. The result is red-tapism in the
organisation. Observation of rules and regulations becomes the main objective while
the real objectives for which these rules and regulations are formed are forgotten.
B. Neo-classical Theory
B.1 Human Relations Approach
The classical writers including Weber, Taylor and Fayol neglected the human relations
aspect. The neo-classicists focussed on the human aspect of industry. They modified the
classifical theory by emphasizing the fact that organisation is a social system and the
human factor is the most important element within it. They conducted some
experiments (known as Hawthorne Experiments) and investigated informal groupings,
informal relationships, patterns of communication, patterns of informal leadership, etc.
This led to the development of human relations approach. Elton Mayo is generally
recognized as the father of the Human Relations School. Other prominent contributors
to this schools include Roethlisberger, Dickson, Dewey,
Lewin, etc.
The human relations approach is concerned with recognition of the importance of
human element in organisations. It revealed the importance of social and psychological
factors in determining workers productivity and satisfaction. It was instrumental in
creating a new image of man and the work place. The neo-classical or human relations
approach put stress on inter-personal relations and informal groups at the work-place.
The human relationists argued that achievement of organisational objectives is
impossible without the willing cooperation of people and such cooperation cannot be
automatically secured or ordered. It has to be consciously achieved. The neo-classical
approach advocated people oriented organisation structure which will integrate both
informal and formal organisations.
The basic tenets of neo-classical theory or human relations approach are as under:
1. The business organisation is a social system.
2. The behaviour of an individual is dominated by the informal group of which he is a
member.
3. An individual employee cannot be motivated by economic incentives alone. His
social and psychological needs must be satisfied to improve the level of motivation.
4. In an organisation, it is ultimately cooperative attitude and not the more command
which yields result.

17
5. Management must aim at developing social and leadership skills in addition to
technical skills. It must take interest in the welfare of workers.
6. Morale and productivity go hand in hand in an organisation.

Hawthrone Studies
In 1927, a group of researchers led by George Elton Mayo and Fritz J. Roethlisberger at
the Harvard Business School were invited to join in the studies at the Hawthorne Works
of Western Electric Company, Chicago. The experiment lasted upto 1932. Earlier, from
1924 to 1927, the National Research Council made a study in collaboration with the
Western Electric Company to determine the effect of illumination and other conditions
upon workers and their productivity.
1. Illumination Experiment: This experiment was conducted to establish relationship
between output and illumination. The output tended to increase every time as the
intensity of light was improved. But the output again showed an upward trend when
the illumination was brought down gradually from the normal level. Thus, it was found
that there is no consistent relationship between output of workers and illumination in
the factory. There were some other factors which influenced the productivity of workers
when the intensity of light was increased or decreased.
2. Relay Assembly Room Experiment: In this experiment, a small homogeneous work-
group of girls was constituted. Several new elements were introduced in the work
atmosphere of this group. These included shorter working hours, rest pauses, improved
physical conditions, friendly and informal supervision, free social interaction among
group members, etc. Productivity and morale increased considerably during the period
of the experiment. Morale and productivity were maintained even if improvements in
working conditions were withdrawn. The researchers concluded that socio-
psychological factors such as feeling of being important, recognition, attention,
participation, cohesive workgroup, and non-directive supervision held the key for
higher productivity.
3. Bank Wiring Observation Room Experiment: This experiment was conducted to
study a group of workers under conditions which were as close as possible to normal.
This group comprised of 14 workers. After the experiment, the production records of
this group were compared with their earlier production records. There were no
significant changes in the two because of the maintenance of normal conditions.
However, existence of informal cliques in the group and informal production norms
were observed by the researchers.
The Bank Wiring Experiment led to the following observations:
(a) Each individual was restricting output.
(b) The group had its own unofficial standards of performance.
(c) Individual output remained fairly constant over a period of time.
(d) Departmental records were distorted due to differences between actual and
reported output or between standard and reported working time.
4. Mass Interview Programme: The researchers interviewed a large number of workers
with regard to their opinions on work, working conditions and supervision. Initially, a
direct approach was used whereby interviewers asked questions considered important
by managers and researchers. Later, this approach was replaced by an indirect
18
technique where the interviewer simply listed to what the employees had to say. The
findings confirmed the importance of social factors at work in the total work
environment.

Contributions of Human Relations Approach or Hawthorne Studies

The human relationists proposed the following points as a result of their findings of the
Hawthorne experiments:
1. Social System: The organisation in general is a social system composed of numerous
interacting parts. The social system defines individual roles and establishes norms that
may differ from those of the formal organisation.
2. Social Environment: The social environment on the job affects the workers and is also
affected by them. Management is not the only variable. Social and psychological factors
exercise a great influence on the behaviour of workers. Therefore, every manager
should adopt a sound human approach to all organisational problems.
3. Informal Organisation: The informal organisation does also exist within the frame
work of formal organisation and it affects and is affected by the formal organisation.
4. Group Dynamics: At the workplace, the workers often do not act or react as
individuals but as members of groups. The group determines the norms of behaviour
for the group members and thus exercises a powerful influence on the attitudes and
performance of individual workers. The management should deal with workers as
members of work group rather than as individuals.
5. Informal Leader: The informal leader sets and enforces group norms. He helps the
workers to function as a social group and the formal leader is rendered ineffective
unless he conforms to the norms of the group.
6. Communication: Two-way communication is necessary because it carries necessary
information downward for the proper functioning of the organisation and transmits
upward the feelings and sentiments of people who work in the organisation. It will help
in securing workers cooperation and participation in the decision-making process.
Workers tend to be more productive when they are given the opportunity to express
their feelings, opinions and grievances. This also give them psychological satisfaction.
7. Non-economic Rewards: Money is only one of the motivators, but not the sole
motivator of human behaviour. The social and psychological needs of the workers are
very strong. So non-economic rewards such as praise, status, interpersonal relations,
etc. play an important role in motivating the employees. Such rewards must be
integrated with the wages and fringe benefits of the employees.
8. Conflicts: There may arise conflicts between the organisational goals and group
goals. Conflicts will harm the interest of workers if they are not handled properly.
Conflicts can be resolved through improvement of human relations in the organisation.

Criticism of Human Relations Approach

The human relations approach has been criticized on the following grounds:
1. Lack of Scientific Validity: The human relationists drew conclusions from
Hawthorne studies. These conclusions are based on clinical insight rather than on
scientific evidence.

19
2. Over-emphasis on Group: The human relations approach over-emphasises the group
and group decision-making.
3. Over-stretching of Human Relations: It is assumed that all organisational problems
are amenable to solutions through human relations.
4. Limited Focus on Work: The human relations approach lacks adequate focus on
work.
5. Over-stress on Socio-psychological Factors: The human relations approach
undermines the role of economic incentives in motivation and gives excessive stress on
social and psychological factors.
6. Conflict between Organisational and Individual Goals: It view conflict between the
goal of the organisation and those of individuals as destructive.

B.2 Behavioural Science Approach

Under behavioural science approach, the knowledge drawn from behavioural science,
namely, psychology, sociology and anthropology, is applied to explain and predict
human behaviour. It focuses on human behaviour in organisations and seeks to
promote verifiable propositions for scientific understanding of human behaviour in
organisations. It lays emphasis on the study of motivation, leadership, communication,
group dynamics, participative management, etc.
The essential characteristics of behavioural science approach are as under:
1. Data must be objectively collected and analyzed.
2. Findings must be presented so that the distinction between cause and effect, as
opposed to chance occurrences, is clear.
3. Facts must be systematically related to one another within a systematic framework.
Data collection alone does not constitute a science.
4. The findings of a study must always be open to further examination and question.
The distinguishing feature of the behavioural sciences approach is the methodology
employed in developing the research in the management discipline. The crux of the
methodology lies in the collection and analysis of the relevant data. It is in this sense
that this approach differs from the human relations approach. Further, the behavioural
scientists made the following propositions:
1. An organisation is a socio-technical system.
2. Individuals differ with regard to attitudes, perceptions and value systems. As a result,
they behave differently to different stimuli under different conditions.
3. People working in the organisation have their needs and goals which may differ from
the organisational goals. Attempts should be made to achieve fusion between
organizational goals and human needs.
4. A wide range of factors influence inter-personal and group behaviour of people in
organisations.

The behaviour school has drawn heavily on the work of Maslow. His development of
need hierarchy to explain human behaviour and the dynamics of motivation process is
an important contribution. Douglas McGregor built on Maslows work in explaining
his Theory X and Theory Y. Frederick Herzberg developed a two-factor theory of
motivation. He made a distinction between the factors which either cause or prevent
20
job dissatisfaction (hygienic factors), and those factors which actually lead to motivation
(motivational factors).
In the area of leadership, Robert Blak and Jane Mouton developed and popularized the
Managerial Grid. Rensis Likert has identified and extensively researched four
Management Systems ranging from System 1: Exploitive-Authoritative to System 4 :
Group Participative. Each system characterizes and organisational climate by
employing several key dimensions of effectiveness such as communication, motivation,
leadership and others.
Appraisal of Behavioural Science Approach
1. The study of human behaviour is of great significance in management. Since an
individual is a product of social system, his behaviour is not determined by
organisational forces alone, but many forces like perception, attitudes, habits, and socio-
cultural environment also shape his behaviour. Therefore, in understanding human
behaviour in the organisation, all these factors must be taken into account.
2. The behavioural approach suggests how the knowledge of human behaviour can be
used in making people more effective in the organisation.
3. Behaviourists have enriched management theory through their contributions in the
areas of group dynamics, motivation communication and leadership. However, they
have failed in developing an integrated theory of management. Although, study of
human behaviour in organisations is extremely important yet management cannot be
confined only to this area.
4. There are other variable such as technology and environment which have an
important bearing on the effectiveness of an organisation.
5. The behavioural science, refined as they might be, have not achieved the precision of
the physical sciences.
6. Often the complexities of the human factor and the organisational setting make exact
predictions impossible. It is not uncommon for programmes based on sound
behavioural principles to have unexpected results.
7. It should also be noted that the finding of behavioural science research are tentative
and require further investigation. They should not be treated as applicable to all
situations.
8. Behavioural guidelines can be helpful and profitable, but are not complete, valid and
applicable to all situations.
Human Relations Approach Behavioural Sciences Approach
V/S
Human relations approach laid Behavioural science approach stressed
emphasis on the individual, his needs upon groups and group behaviour.
and behaviour.
It focused on inter-personal It focused on group relationships.
relationships.
It was based on the Hawthorne It refined the Human Relations
Experiments and so its scope is limited Approach and has a wide scope. It is a
much more systematic study of human
behaviour in organisations.

21
It laid emphasis on informal groups The behaviourists studied group
motivation, job satisfaction and morale. dynamics, informal organisation,
leadership motivation, and participative
management.

B.3 Quantitative Approach

This approach is also called Mathematical , Operations Research or Management
Science approach. The basic feature of the quantitative management thought is the use
of mixed teams of scientists from several disciplines. This school used scientific tools
for providing a quantitative base for managerial decisions. The techniques commonly
used for managerial decision-making include Linear Programming, Critical Path
Method (CPM), Programme Evaluation Review Technique (PERT), Games Theory,
Queuing Theory and Break-Even Analysis.
The quantitative approach to management has its root in the scientific management
movement. Since Taylor advocated a logical sequence of problem formulation, fact
finding, modelling, a tentative solution, testing, etc., his scientific approach could be
classified as an early form of quantitative approach to management. A natural extension
of the scientific management is the operations research.
The approach was updated so as to include development of mathematical models to
represent a system under study. I may be noted that the development of models
required the skills of money disciplines such as engineering, mathematics, economic,
statistics, physical science, behavioural sciences and cost accountancy. The
mathematical formulation enabled the managers to discover significant relationships
that they could control.
Another important development alongwith the growth in the number of quantitative
techniques was the introduction of high speed digital computers. Starting in about 1970,
the quantitative approach to management turned away from emphasis on narrow
operations research techniques to the boarder perspective of decision techniques and
models building. It also incorporated computerized information systems and
operations management. The latest emphasis of the quantitative approach marked a
move towards a more broad-based management.

B.4 Systems Approach

In the 1960s, a new approach to management appeared which attempted to unify the
earlier schools of thought. This approach is commonly referred to as Systems
Approach. Basically, it took up where the functional process management school let
off to try to unify management theory. A system viewpoint may provide the impetus
to unify management theory. By definition, it could treat the various approaches, such
as the process, quantitative and behavioural ones, as subsystems in an overall theory of
management. Thus, the systems approach may succeed where the process approach
has failed to lead management out of the theory jungle.

The systems approach is based on the generalization that an organisation is a system

and its components are inter-related and inter-dependent. A system is composed of
related and dependent elements which, when in interactions, form a unitary whole. It
22
is simply an assemblage or combination of things or parts, forming a complex whole.
Its important feature is that it is composed of hierarchy of sub-systems. The world as a
whole can be considered to be a systems in which various national economies are sub-
system. In turn, each national economy is composed of its various industries, each
industry is composed of firms, and of course, a firm can be considered a system
composed of sub-systems such as production, marketing, finance, accounting and so
on. Thus, each system may comprise several sub-systems and in turn, each sub-system
be further composed of sub-systems.

An organisation as a system has the following characteristics:

1. A system is goal-oriented.
2. A system consists of several sub-systems which are interdependent and inter-related.
3. A system is engaged in processing or transformation of inputs into outputs.
4. An organisation is an open and dynamic system. It has continuous interface with the
external environment as it gets inputs from the environment and also supplies its
output to the environment. It is sensitive to its environment such as government
policies, competition in the market, technological advancement, tastes of people, etc.
5. A system has a boundary which separates it from other systems.

B.5 Open System Concept

A system may be closed or open. A closed system is self-dependent and does not have
any interaction with the external environment. Physical and mechanical systems are
closed systems. A closed system concentrates completely on internal relationships, i.e.
interaction between subsystems only. Because of lack of interaction with environment,
it is unable to monitor changes occurring in the external environment. On the other
hand, an open system has active interface with the environment through the input-
output process. It can respond to the changes in the environment through the feedback
mechanism. That is why modern authors consider organisation as an open system.
An open system obtains inputs, such as raw materials, layout, capital, technology and
information, from the environment. Operations are performed upon the inputs and
combined with the managerial process to produce desirable outputs which are supplied
to the environment (i.e., customers). Through a feedback process, the environments
evaluation of the output becomes part of the inputs for further organisational activity.
If the environment is satisfied with the output, business operations continue. If it is not,
changes are initiated within the business systems so that requirements of the customers
are fully met. This is how an open system responds to the forces of change in the
environment.
Features of Systems Approach
The systems approach is far more superior to classical and neo-classical approach
because of the following features:
1. Interdependent Sub-systems: An organisation is a system consisting of several sub-
systems. For example, in a business enterprise, production, sales and other departments
and subsystems. All these sub-systems are functionally interacting and interdependent.
They are used together into an organic whole through goals, authority flows, resources
flows and so on.
23
2. Whole Organisation: The system approach provides a unified focus to organisational
efforts. It gives managers a way of looking at the organisation as a whole that is greater
than the sum of its parts. The stress is laid on integration of various sub-systems of the
organisation to ensure overall effectiveness of the system.
3. Synergy: The output of a system is always more than the combined output of its parts.
This is called the law if synergy. The parts of system become more productive when
they interact with each other than when they act in isolation.
4. Multi-disciplinary: Modern theory of management is enriched by contributions from
various disciplines like psychology, sociology, economics, anthropology, mathematics,
operations research and so on.
Appraisal of Systems Approach
The system approach is an attempt to design an overall theory of management.
Interdependency and inter-relationships between various sub-systems of the
organisation is adequately emphasized. A pressure for change in one sub-system
generally has a direct or indirect influence on the other sub-systems also. Thus, the
systems approach acknowledges environmental influences which were ignored by the
classical theory.

The systems approach represents a balanced thinking on organisation and

management. It stresses that managers should avoid analyzing problems in isolation
and rather develop the ability for integrated thinking. It recognizes the interaction and
interdependence among the different variables of the environment. It provides clues to
the complex behaviour of an organisation. It warns against narrow fragmented and
piecemeal approach to problems by stressing inter-relationships.
The systems approach is criticized as being too abstract and vague. It cannot easily be
applied to practical problems. It does not offer specific tools and techniques for the
practicing manager.
Moreover, this approach does not recognize differences in systems. It fails to specify the
nature of interactions and interdependencies between an organisation and its external
environment.
B.6 Contingency Approach
A review of the earlier schools of management helps us to place the current approach
to management in perspective. The performance results of the management process
schools Universalist assumptions were generally disappointing. The behavioural
approach to management was incomplete. Certain quantitative techniques worked in
some situations and not in others. The quantitative people could not solve behavioural
problems and behavioural people could not overcome operations problems adaptable
to quantitative solutions. Many authors believe that systems based theory could solve
this dilemma. But this approach is also as yet incomplete. The latest approach to
management which integrates the various approaches to management is known as
contingency or situational approach.
The contingency approach is not new. Pigors and Myers propagated this approach in
the area of personnel management as early as in 1950. However, the work of Joan
Woodward in the 1950s marked the beginning of the contingency approach to
organisation and management. Other contributors include Tom Burns, G.W. Stalker,
24
Paul Lawrence, Jay Lorsch, and James Thompson. They analyzed the relationship
between the structure of the organisation and the environment. Thus, contingency
approach incorporates external environment and attempts to bridge the theory-practice
gap. It does so in the systems framework. In other words, contingency approach as
regards organisation as an open and dynamic system which has continuous interaction
with environment. The contingency theory stresses that there is no one best style of
leadership which will suit every situation. The effectiveness of a particular leadership
style will vary from situation to situation. For instance, participative leadership may be
more effective in an organisation employing professional personnel in a high
technology operation in an atmosphere of non-materialistic orientation and free
expression. On the other hand, authoritarian leadership would be more effective in an
organisation which employs unskilled personnel on routine tasks in social values
oriented towards materialism and obedience to authority.
B.7 Operational Approach
Koontz, ODonnell and Weihrich have advocated the operational approach to
management. This approach recognizes that there is a central core of knowledge about
managing which exists in management such as line and staff, patterns of
departmentation, span of management, managerial appraisal and various managerial
control techniques.
Operational approach to management regards management as a universally applicable
body of knowledge that can be brought to bear at all levels of managing and in all types
of enterprises. At the same time, the approach recognizes that the actual problems
managers face and the environments in which they operate may vary between
enterprises and levels. It also recognizes that application of science by perceptive
practitioner must take this into account in designing practical problem solutions.
The operational approach to management is based largely on the following
fundamental beliefs that:
1. Management is an operational process initially best dissected by analyzing the
management functions.
2. If the knowledge of management is to be presented effectively, clear concepts are
necessary.
3. Experience with managing in a variety of situations can furnish grounds for
distillation of basic truths-theory and principles-which have a clarifying and predictive
value in understanding and improving practice.
4. Principles of management can become the focal points for useful research both to
ascertain their validity and to improve their applicability.
5. Managing is an art (like medicine and engineering). It should rely on underlying
science concepts, theory and principles and techniques.
6. While the total culture and the physical and biological universe variously affect the
mangers environment, as they do in every other field of science and art, management
science and theory need not encompass all knowledge in order to serve as a useful
foundation of management practice.

The Role of a Manager in an Organisation.

25
Hennery Mintzberg, a contemporary management thinker has done lot of research on
the various roles performed by a manager. A role, according to him, Is an organized
set of behaviors belonging to an identifiable office or position. Just as characters in a play
have specific roles, managers also play different roles. Through his studies, Mintzberg
identified ten roles that managers play at various times to varying degrees. He
classified them under three broad categories; interpersonal roles, informational roles,
and decisional roles. Figure summaries the ten roles by category with examples of
each.
Interpersonal Role
Informational Role
Decisional Role

1.4.1 Interpersonal Roles

The interpersonal roles link all managerial work together. The three interpersonal roles
are primarily concerned with interpersonal relationships.
Figurehead Role: The manager represents the organization in all matters of formality.
The top level manager represents the company legally and socially to those outside of
the organization. The supervisor represents the work group to higher management
and higher management to the work group. Ex. Ceremony, status requests,
solicitations.
Liaison Role: The manger interacts with peers and people outside the organization.
The top level manager uses the liaison role to gain favours and information, while the
supervisor uses it to maintain the routine flow of work. Ex. Acknowledgement of mail,
authorizing communication with external world.
The leader Role: It defines the relationships between the manger and employees. Ex.
Virtually all managerial activities involving subordinates.
1.4.2 Informational Roles The informational roles ensure that information is provided.
The three informational roles are primarily concerned with the information aspects of
managerial work.
Monitor Role: The manager receives and collects information about the operation of
an enterprise. Ex. All activities concerned primarily with receiving and processing
information.
Disseminator Role: The manager transmits special information into the organization.
The top level manager receives and transmits more information from people outside
the organization than the supervisor. Ex. Forwarding mail for informational purposes,
26
verbal contacts involving information flow to subordinates (eg; review sessions,
instant communication flows)
Spokesperson Role: The manager disseminates the organizations information into its
environment. Thus, the top level manager is seen as an industry expert, while the supervisor
is seen as a unit or departmental expert. Ex. board meetings; handling contacts involving
transmission of information to outsiders.
1.4.3 Decisional Roles: The decisional roles make significant use of the information
and there are four decisional roles.
Entrepreneur Role: The manager initiates change, new projects; identify new ideas,
delegate idea responsibility to others.
Disturbance Handler Role: The manager deals with threats to the organization. The
manager takes corrective action during disputes or crises; resolve conflicts among
subordinates; adapt to environmental crisis.
Ex. Strategy and review sessions involving disturbances and crises.
Resource Allocator Role: The manager decides who gets resources; schedule, budget
set priorities and chooses where the organization will apply its efforts. Ex. Scheduling
requests for authorization; and activities involving
budgeting and the programming of subordinates work.
Negotiator Role: The manager negotiates on behalf of the organization. The top level
manager makes the decisions about the organization as a whole, while the supervisor
makes decisions about his or her particular work unit.
Managerical skills
Managers at every level in the management hierarchy must exercise three basic types
of skills: technical, human, and conceptual. All managers must acquire these skills in
varying proportions, although the importance of each category of skill changes at
different management levels.
Management job is different from other jobs. It requires elements of stewardship and
commitment to the purpose. It involves the obligation to make prudent use of human
and material resources. It requires sound judgment to handle complex situations.
Further, the nature of the job becomes increasingly complex at each higher level
because of the increase in the scope of authority and responsibility. Therefore, each
higher level requires increased knowledge, broader perspective and greater skills. For
the purpose of analysis, skills required of a manager are classified under three heads
technical, human (employee relations skill) and conceptual skills The exhibit helps in
understanding the levels of management responsibility, the principal skill
requirements, and the extent to which each kind of skill is required at each level.

Top Management

Middle Mgmt

Lower level (Supervisory)

27
Mgmt

Technical skill Human Skill

Conceptual Skill

1.5.1 Technical skills

Technical skills refer to the ability and knowledge in using the equipment,
techniques and procedure involved in performing specific tasks.
These skills require specialized knowledge and proficiency in the mechanics of a
particular.
Technical skills lose relative importance at higher levels of the management
hierarchy, but most top executives started out as technical experts.
1.5.2 Human skills
Human skills refer to the ability of a manager to work effectively with other
people both as individual and as members of a group.
Human skills are concerned with understanding of people.
These are required to win cooperation of others and to build effective work teams.
1.5.3 Conceptual skills.
Conceptual skills involve the ability to see the whole organization and the
interrelationships between its parts.
These skills refer to the ability to visualize the entire picture or to consider a situation in
its totality.
These skills help the managers to analyze the environment and to identify the
opportunities.
Conceptual skills are especially important for top-level managers, who must develop
long-range plans for the future direction of their organization.

Leadership: The Tasks of a Leader; Leadership Styles;

Leadership Theories; A successful Leader versus an effective Leader.

Leadership is defined as influence, the art or process of influencing people so that they will
strive willingly and enthusiastically toward the achievement of group goals. - Leaders act to
help a group attain objectives through the maximum application of its capabilities. - Leaders
must instill values whether it be concern for quality, honesty and calculated risk taking or for
employees and customers.
Leadership is a process of exercising influence over an individual or a group. Effective
leadership is necessary for inspiring the people to work for the accomplishment of
objectives. It provides a cohesive force which holds the group intact and develops a
spirit of cooperation. Chester Bernard viewed leadership as the quality of behavior of
individuals whereby they guide people and their activities. A leader interprets the
objectives of the people working under him and guides them towards achievement of
those objectives. He also creates and sustains enthusiasm among them for superior
performance. In the words of Louis A. Allen, A leader is one who guides and directs
other people. He gives the efforts of his followers a direction and purpose by influencing their
28
behavior. Managers at all levels must perform leadership function in order to lead the
subordinates towards organizational goals.
Leadership is the process of influencing the subordinates so that they cooperate
enthusiastically in the achievement of group goals. In other words, leadership is the
process by which an executive imaginatively directs, guides, and influences the work
of others in choosing and attaining specified goals by mediating between the
individuals and the organization in such a manner that both will obtain maximum
satisfaction.

Characteristics of Leadership
An analysis of the above definitions reveals that leadership as a managerial process
has the following characteristics:
1. Leadership is a process of influence: Leadership is a process whose important
ingredient is the influence exercised by the leader on the group members. A person is
said to have an influence over others when they are willing to carry out his wishes and
accept his advice, guidance and direction. Successful leaders are able to influence the
behavior, attitudes and beliefs of their followers.
2. Leadership is related to a situation: When we talk to leadership, it is always related
to a particular situation at a given point of time and under a specific set of
circumstances. That means leadership styles will be different under different
circumstances. At one point of time, the subordinates may accept the autocratic
behavior of the leader while at a different point of time and under a different situation
participative leadership style may be successful.
3. Leadership is the function of stimulation: Leadership is the function of motivating
people to strive willingly to attain organizational objectives. Leaders are considered
successful when they are able to subordinate the individual interests of the employees
to the general interests of the organization. A successful leader allows his subordinates
to have their individual goals set up by themselves in such a way that they do not
conflict with the organizational objectives.
4. Leadership implies the existence of followers: We appraise the qualities of a leader
by studying his followers. In an organisation, leaders are also followers, e.g., a
supervisor works under a branch head.
5. Leadership involves a community of interest between the leader and his followers:
In other words, the objectives of both the leader and his men are one and the same.
6. Leadership involves an unequal distribution of authority among leaders and group
members: Leaders can direct some of the activities of group members, i.e., the group
members are compelled or are willing to obey most of the leader's directions.
7. A leader must be exemplary: In the words of George Terry "A leader shows the way
by his own example. He is not a pusher, he pulls rather than pushes".
7. A leader ensures absolute justice: A leader must be objective and impartial. He
should not follow unfair practices like favoritism and nepotism. He must display fair
play and absolute justice in all his decisions and actions.

Functions of a Leader

29
According to Peter Drucker, "An effective leader is one who can make ordinary men do
extraordinary things, make common people do uncommon things. Leadership is a
lifting of a man's sights to a higher vision, the raising of man's standard to a higher
performance, the building of a man's personality beyond its normal limitations." This
viewpoint of Peter Drucker stresses the leader's obligation to attain organisational goals
and gives attention to the needs of the individuals who are his subordinates. The
important functions of a business leader may be briefly summarized as follows:
1. To take the initiative: A leader initiates all the measures that are necessary for the
purpose of ensuring the health and progress of the organisation in a competitive
economy. He should not expect others to guide or direct him. He should lay down the
aims and objectives, commence their implementation and see that the goals are
achieved according to the predetermined targets.
2. He identifies group goals: A leader must always help the group identify and attain
their goals. Thus, a leader is a goal setter.
3. He represents the organisation: A leader represents the organisation and its purpose,
ideals, philosophy and problems to those working for it and to the outside world. In
other words, a leader is a true representative of the entire organisation.
4. He acts as an arbitrator: When groups experience internal difference, whether based
on emotional or intellectual clashes, a leader can often resolve the differences. He acts
as an arbitrator to prevent serious differences from cropping up within the group.
5. To assign reasons for his action: It is the delicate task of a leader to assign reasons to
his every command. He has to instruct things in such a way that they are intelligible to
all concerned and their co-operation is readily forthcoming.
6. To interpret: He interprets the objectives of the organisation and the means to be
followed to achieve them; he apprises his followers, convinces them, and creates
confidence among them.
7. To guide and direct: It is the primary function of the leader to guide and direct the
organisation. He should issue the necessary instructions and see that they are properly
communicated.
8. To encourage teamwork: A leader must try to win the confidence of his subordinates.
He must act like the captain of a team.
9. He manages the organisation: Last but not the least, he administers the undertaking
by arranging for the forecast, planning, organisation, direction, co-ordination and
control of its activities.

Importance of Leadership
The importance of leadership in an organisation cannot be denied. People working in
an organisation need individuals (leaders) who could be instrumental in guiding the
efforts of groups of workers to achieve goals and objectives of both the individuals and
the organisation. The leader guides the action of others in accomplishing these tasks. A
good leader motivates his subordinates, creates confidence and increases the morale of
the workers. In the words of Peter F Drucker "Good leadership is a must for the
success of a business but the business leaders are the scarcest resources of any
enterprise". The following points highlight the importance of leadership:

30
1. Leadership is the process of influencing the activities of an individual or a group
towards the achievement of a goal.
2. An effective leader motivates subordinates for turning in a higher level of
performance.
3. Leadership promotes team-spirit and team-work which is essential for the success of
any organisation.
4. Leadership is an aid to authority. Dynamic and enlightened leadership helps in the
effective use of formal authority.
5. Leadership creates confidence in subordinates by giving them proper guidance and
advice.

Leadership Skill
The leader is expected to play many roles and therefore, must be qualified to guide
others to organisational achievement. Although no set of absolute traits or skills may
be identified, individuals who would be leaders must possess abilities to lead others.
They must have certain attributes to help them in performing their leadership role.
Broadly speaking, the skills that are necessary for an industrial leader may be
summarized under four heads:
1. Human skill
2. Conceptual skill
3. Technical skill, and
4. Personal skill.

1. Human Skill: A good leader is considerate towards his followers because his success
largely depends on the co-operation of his followers. He approaches various problems
in terms of people involved more than in terms of technical aspects involved. A leader
should have an understanding of human behaviour. He should know people,
understand their needs, sentiments, emotions, as also their actions and reactions to
particular decisions, their motivations, etc. Thus, a successful leader possesses the
human relations attitude.
He always tries to develop social understanding with other people. The human skill
involves the following:
(a) Empathy: A leader should be able to look at things as objectively as possible. He
should respect the rights, beliefs and sentiments of others.
(b) Objectivity: A good leader is fair and objective in dealing with subordinates. He
must be free from bias and prejudice while becoming emotionally involved with his
followers.
(c) Communication Skills: A leader should have the ability to persuade, to inform,
stimulate, direct and convince his subordinates.
(d) Teaching Skill: A leader should have the ability to demonstrate how to accomplish
a particular task.
(e) Social Skill: A leader should understand his followers. He should be helpful,
sympathetic and friendly.

31
2. Conceptual Skill: In the words of Chester Barnard, "the essential aspect of the
executive process is the sensing of the organisation as a whole and the total situation
relevant to it".
Conceptual Skill includes:
(a) An understanding of the organisational behaviour,
(b) Understanding the competitors of the firm, and
(c) Knowing the financial status of the firm.
A leader should have the ability to look at the enterprise as a whole, to recognize that
the various functions of an organisation depend upon one another and are inter-related,
that changes in one affect all others. The leader should have the skill to run the firm in
such a way that overall performance of the firm in the long run will be sound.

3. Technical Skill: A leader should have a thorough knowledge of, and competence in,
the principles, procedures and operations of a job. Technical skill involves specialized
knowledge, analytical skill and a facility in the use of the tools and techniques of a
specific discipline. Technical competence is an essential quality of leadership.

4. Personal Skill: The most important task of the leader is to get the best from others.
This is possible only if he possesses certain qualities. These personal skills include:
(a) Intelligence: Intellectual capacity is an essential quality of leadership. Leaders
generally have somewhat higher level of intelligence than the average of their followers.
(b) Emotional Maturity: A leader should act with self-confidence, avoid anger, take
decisions on a rational basis and think clearly and maturely. A leader should also have
high frustration tolerance. According to Koontz and O'Donnell, "Leaders cannot afford
to become panicky, unsure of themselves in the face of conflicting forces, doubtful of
their principles when challenged, or amenable to influence".
(C) Personal Motivation: This involves the creation of enthusiasm within the leader
himself to get a job done. It is only through enthusiasm that one can achieve what one
wants. Leaders have relatively intense achievement type motivational drive. He should
work hard more for the satisfaction of inner drives than for extrinsic material rewards.
(d) Integrity: In the words of F.W. Taylor, "integrity is the straightforward honesty of
purpose which makes a man truthful, not only to others but to himself; which makes a
man high-minded, and gives him high aspirations and high ideals".
(e) Flexibility of Mind: A leader must be prepared to accommodate others' viewpoints
and modify his decisions, if need be. A leader should have a flexible mind, so that he
may change in obedience to the change in circumstances. Thomas Carlisle has said "A
foolish consistency is the hobgoblin of a little mind".
In sum, a leader must have a dynamic personality, intellectual attainment, amiable
disposition, unassuming temperament and knowledge of how to deal with his
followers.

Styles of Leadership
Leadership style refers to a leaders behavior. Behavioral pattern which the leader
reflects in his role as a leader is often described as the style of leadership. Leadership
style is the result of leaders philosophy, personality, experience, and value system. It
32
also depends upon the types of followers and the organizational atmosphere prevailing
in the enterprise.

Different types of leadership styles are:

i. Autocratic leadership;
ii. Participative leadership;
iii. Free rein leadership; and
iv. Paternalistic leadership.

i. Autocratic or Authoritarian Leadership

The autocratic leader gives orders which must be obeyed by the subordinates. He
determines policies for the group without consulting them and does not give detailed
information about future plans, but simply tells the group what immediate steps they
must take. He gives personal praise or criticism to each member on his own initiative
and remains aloof from the group for the major part of the time. Thus, under this style,
all decision making power is centralized in the leader. Leader adopting this style
stresses his prerogative to decide and order and subordinates obligation to do what
they are told to carry out.
An autocratic leader operates on the following assumptions:
(a) An average human being has inherent dislike for work and will avoid it if he can.
(b) If his subordinates were intelligent enough, they would not be in subordinate
positions.
(c) He assumes that unintelligent subordinates are immature, unreliable and
irresponsible persons. Therefore, they should be constantly watched in the course of
their work.
(d) As he has no regard for his subordinates, he gets the work done by his subordinates
through negative motivation, that is, through threats of penalty and punishment.

Types of Autocratic Leadership

(a) Strictly autocratic leaders: A strictly autocratic leader relies on negative influence
and gives orders which the subordinates must accept. He may also use his power to
dispense rewards to his group.
(b) Benevolent Autocrat: The benevolently autocratic leader is effective in getting high
productivity in many situations and he can develop effective human relationships. His
motivational style is usually positive.
(c) Manipulative Autocrat: A manipulative autocratic leader is one who makes
subordinates feel that they are participating in decision making process even though he
has already taken the decision.

2. Participative or Democratic Leadership: A democratic leader is one who consults

and invites his subordinates to participate in the decision making process. He gives
orders only after consulting the group, sees to it that policies are worked out in group
decisions and with the acceptance of group.
A participative leader operates on the following assumptions:

33
(a) Subordinates are capable of doing work independently and assuming the
responsibility for proper execution if they are given opportunities and incentives.
(b) Subordinates are supervised, guided and aided rather than threatened and
commanded to work.
(c) Mistakes are not viewed seriously. The assumption is that disciplinary action breeds
discontent and frustration among employees and creates an unhealthy work
environment.

Some of the advantages of participative leadership are:

-- It increases the acceptance of managements ideas.
-- It improves the attitude of employees towards their jobs and the organization.
-- It increases the cooperation between management and employees.
-- It leads to reduction in the number of complaints and grievances.
-- It increases the morale of the employees.

3. Laissez-faire or Free-rein Leadership: A free-rein leader does not lead, but leaves the
group entirely to itself. The leader avoids using power and entrusts the decision-
making authority to his subordinates. He does not direct his subordinates, thereby
giving them complete freedom of operation. Groups of members work independently
and provide their own motivation. The manager exists as a facilitator and buffer contact
man between the team and outsiders, while bringing for his group the information and
resources it needs to accomplish its job. A free-rein leader operates in the following
manner:
(a) He follows the rule of minimum exposure to accountability.
(b) He relieves himself of responsibilities and is ready to blame his subordinates if
something goes wrong.
(c) He has no clear idea of the goals to be attained.
(d) He is more security conscious than status conscious.
This mode of direction can produce good and quick results, if the subordinates are
highly educated and brilliant people who have a sincere need to go ahead and discharge
their responsibility.

4. Paternalistic Leadership: Under this type of leadership, the leader assumes that his
function is fatherly. His attitude is that of treating the relationship between the leader
and his groups as that of family, with the leader as the head of the family. The leader
works to help, guide, protect and keep his followers happily working together as
members of a family. He provides them with good working conditions, fringe benefits
and employee services. It is said that employees under such leadership will work
harder, out of sheer gratitude as well as emotional bondage.

Likerts Management Systems and Leadership

Rinses Likert and his associates of the University of Michigan, had conducted extensive
survey of management and leadership patterns in a large number of organizations.
Within the basic style categories of task orientation and employee orientation, Likert
developed a four level model of leadership effectiveness. These patterns of leadership
34
are termed Systems of management and are assigned numbers from 1 to 4 to indicate
the stages of evolution in the patterns of management in terms of leadership styles :
System 1 Exploitative authoritative
System 2 Benevolent authoritative
System 3 Consultative
System 4 Participative (Democratic)
SA brief description of these systems is given below:
System 1 - Management
System 1 managers make all the work related decisions, and order their subordinates
to carry them out. Standards and methods of performance are also set by the managers.
The communication between the managers and the subordinates is highly formal in
nature and downward in direction. The subordinates have absolutely no say in any
matter in the organization. Such managers are highly autocratic who believe in threats
and punishment to get the things done. They follow strict supervision over their
subordinates.
System 2 - Management
Managers under this system are also autocratic, but they are not fully authoritative. At
times, they give some flexibility to the subordinates to carry out their tasks within the
prescribed limits. Subordinates who meet or exceed their goals may be rewarded.
Managers adopt patronizing or paternalistic attitude towards the obedient and faithful
subordinates. They are very harsh with the subordinates who do not carry out the tasks.
System 3 - Management
Under this system, managers set goals and issue general orders after discussing them
with the subordinates. They take only major decisions and leave the routine decisions
to be taken by the subordinates. Subordinates are free to discuss the work-related
matters with their superiors. Thus, there exists a two-way communication in the
organization. The control system tends to be flexible and goal oriented. More emphasis
is placed on rewards than on punishments to motivate the subordinates.
System 4 - Management
This is an ideal system towards which organizations should work. The relations
between managers and subordinates are cordial and friendly. The communication
system is completely open. The goals are set and work related decisions are taken by
the subordinates. Group approach is adopted in supervision and control. Thus, system
4 presents true democratic styles of leadership. The managers are very supportive in
their attitude towards the subordinates. Performance standards are mutually set by the
superior and subordinates. They permit self appraisal by the subordinates.

Theories of Leadership
1. Trait Theory of Leadership 2. Behavioural Theory of Leadership
3. Contingency Theory of Leadership 4. Management Grid or Leadership
Grid
5. Situational Theory of Leadership 6. Great Man Theory of Leadership
7. Path-Goal Theory 8. Participation Theory of Leadership

35
1. Trait Theory of Leadership: Trait theory seeks to determine personal characteristics
of effective leaders. It points out that the personal traits or personal characteristics of a
person make him an effective or successful leader. Charles Bird examined twenty lists
of traits attributed to leaders in various surveys and found that none of the traits
appeared on all lists. Leaders were characterized a wide variety of traits ranging all the
way from neatness to nobility.
According to the trait theory, persons who possess the following traits or personal
characteristics could become successful leaders:
(a) Good personality: Physical characteristics and level of maturity determine the
personality of an individual. Good personality is an important factor in determining the
success of a leader.
(b) Intellectual ability: A leader must have a higher level of intelligence than the average
follower. A leader should analyze the situation accurately and take decision
accordingly.
(c) Initiative: A leader should initiate suitable activities at a proper time.
(d) Imagination: A leader should have the ability to imaginatively visualize trends and
device his policies and programmes.
(e) Maturity: A leader should be emotionally mature and have a balanced temperament.
They should also have high frustration tolerance.
(f) Desire to accept responsibility: A leader should be prepared to shoulder the
responsibility for the consequences of any step he takes. In other words, he should
accept full responsibility for his actions.
(g) Self-confidence: A leader should possess self-confidence. Self-confidence is essential
to motivate the followers and boost up their morale.
(h) Flexibility: A leader should be prepared to accommodate others viewpoints and
modify his decisions. He should have an open mind, ready to absorb and adopt new
ideas and views of others.
(i) Fairness and objectivity: A good leader is fair and objective in dealing with
subordinates. Honesty, fair play, justice and integrity of character are expected of any
good leader.
(j) Considerate: A good leader is considerate to the followers as his success as a leader
largely depends on the co-operation of his followers.
Limitations of the Trait Theory
(a) It assumes that leadership is an inborn quality. This is not always true but,
leadership qualities may be developed through training also.
(b) A leader may prove very successful is one situation due to some traits, but may fail
in another situation.
(c) The theory also fails to mention the traits which are necessary to maintain leadership.
Measurement of a trait usually occur after a person becomes a leader.
(d) There cannot be any common list of personal traits found in all successful leaders.
(e) Personal traits are only a part of the whole environment. By emphasizing merely on
the personal traits, the other qualities of a leader are ignored.

2. Behavioural Theory of Leadership: According to this theory, a particular behaviour

of a leader provides greater satisfaction to the followers and so they recognize him as a
36
good leader. The behavioural approach is based on the premise that effective leadership
is the result of effective role behaviour. A leader uses conceptual, human and technical
skills to influence the behaviour of his subordinates. The behavioural theory does not
concentrate on the traits of leaders; it inspires study of the activities of leaders to identify
their behavioural patterns. The inability of the trait approach to consistently define
specific traits that would differentiate successful and unsuccessful leaders led to the
conclusion that emphasis on the behaviour of leaders (which could be measured) rather
than emphasis on traits (which could not be measured) were an appropriate new
research strategy. Beginning in the late 1940s and continuing through the early 1960s,
research based on this emphasis was conducted at Ohio State University and the
University of Michigan.
(a) The Ohio State University Studies: A team of Ohio State University researchers
including Edwin Fleishman conducted extensive surveys. The goal of the research was
to:
(i) Identify the behaviours exhibited by leaders.
(ii) Determine what affect these behaviours had on employee satisfaction and
performance.
(iii) Identify the best leadership style.
To do this, questionnaires were developed to assess leadership styles. The Leader
Behaviour Description Questionnaire (LBDQ) was designed to tap subordinate
perception of the leader's behaviours, while the Leader Opinion Questionnaire (LOQ)
measured the leader's perception of his own style.
After an analysis of actual leader behaviour in a wide variety of situations, two
important leadership behaviours were isolated:
(i) Initiating-structure behaviour (IS): Initiating Structure refers to the leaders behavior
in delineating the relationship between himself and members of the work group and of
communication, and methods or procedures.
It clearly defining the roles of leader and follower so that everyone knows what is
expected. This includes establishing formal lines of communication and deciding how
tasks are to be performed.
(ii) Consideration Behaviour(C): refers to the leaders behavior indicative of
friendship, mutual trust, respect, and warmth in the relationship between the leader
and the members of his staff.
It demonstrating concern for followers and trying to establish a friendly and supportive
work climate based on mutual trust.

High
High C and Low High C and High IS
Consideration IS
Behaviour(C) Low C and Low IS Low C and High
Initiating-structure behaviour
(IS)
Low High

37
These two kinds of behaviour were viewed as independent, meaning a particular leader
can score high in use of one type of behaviour, the other, or both. Leaders who scored
high on IS generally led high-producing groups and were rated highly by their
superiors. However, the subordinates of those leaders tended to have lower morale,
higher grievance rates, and higher turnover. Leaders high on C, on the other hand,
generally led groups with higher morale but lower productivity. Thus, each of the
specific leader behaviours had positive and negative outcomes associated with them.
The extension of these findings by some later theorists led to the conclusion that leaders
high on both IS and C would simultaneously satisfy their superiors (by achieving high
performance) and their subordinated (by improving their morale).

(B) Michigan Studies

The Institute for Social Research at the University of Michigan conducted empirical
studies to identify styles of leader behavior that results in higher performance and
satisfaction of a group. The studies identified two distinct styles of leadership.
Employee Centred leadership and Production Centred (task oriented) leadership:
The employee centred leaders concentrate on human relations and emphasize
delegation of authority, concern for employee needs, welfare, advancement, etc.
Leaders who are described as employee oriented stress the relationship aspects of the
job. They feel that every employee is important and take interest in everyone, accepting
their individuality and personal needs.
Production centred leadership is more concerned with maximizing regardless of the
employees needs, welfare and aspirations. Managers dont attach much importance to
the human element.
The Michigen Studies found that both the styles of leadership led to increase in
production, but it was slightly more in case of production centered style. However, the
use of direct pressure and close supervision led to decreased satisfaction and increased
turnover and absenteeism. The employee centerd approach led to improved work flow
and more cohesion in interactions resulting in increased satisfaction and decreased
turnover and absenteeism.
This suggested the superiority of the employee centred leadership style over the
production centred style.

3. Contingency Theory of Leadership: Fiedler's contingency model is one of the most

serious and elaborate situational theories in leadership literature. Fiedler is probably
the first researcher who recognised the need for a broader explanation of leadership
phenomena anchored on situational variables. Fiedler's model is called a 'contingency'
model because the leader's effectiveness is partially contingent upon three major
situational variables.
(a) Leader-member relations: It refers to the degree of confidence, trust and respect
followers have in the leader. It indicates the degree to which group members like the
leader and are willing to accept the leader's behaviour, as an influence on them.
(b) Task structure: It measures the extent to which the task performed by subordinates
is routine or non-routine. In other words, task structure refers to how routine and
predictable the work group's task is.
38
(c) Leader position power: It refers to the degree to which the leader has at his disposal
various rewards and sanctions, his authority over group's members, and the degree to
which this authority is supported by the organisation.
(d) Favourableness of the situation: Thus, depending on the 'high' and low' categories of
these situational variables, Fiedler developed eight possible combinations ranging from
highly favourable to unfavourable situations.

A favourable situation is where the leader-member relations are good, the task is highly
structured and the leader has enormous power to exert influence on the subordinates.
The first cell in the table is identified with this high degree of favourableness. At the
other extreme, an unfavourable situation is, where the leader's power is weak, relations
with members are poor and the task is unstructured and unpredictable. The last cell
represents this situation. Between these two extremes lies the situation of intermediate
difficulty. Fiedler states that a permissive, relationship-oriented style is best when the
situation is moderately favourable or moderately unfavourable. When the situation is
highly favourable or highly unfavourable, a task-oriented style produces the desired
performance.

4. Managerial Grid: Robert R Blake and Jane S Moulton have designed an organisation
development program emphasizing the importance of the two basic leader behaviours
(concern for people and concern for production) originally identified in the Ohio State
and Michigan studies.
The model is designed to help managers first see their current leadership style and then
to help them develop the most desirable style. Blake and Mouton believe there is an
ideal style 9, 9 management. However, they have found that most managers use the
middle-of the road style. The Figure 13.5 below shows the five possible leadership style.

39
(a) Improvised (1,1) Management: Minimal concern for production or people. This style
of management results in employees doing the minimum required.
(b) Authority-Compliance (9.1) Management: High concern for production and low
concern for people. This style of management tends to result in efficient operations.
(c) Country Club (1,9) Management: Low concern for production and high concern for
people. This style of management creates a working environment where employees feel
comfortable.
(d) Middle-of-the Road (5,5) Management: Moderate levels of concern for both people and
production. This style of management balances needs through compromise, resulting
in adequate performance. (e) Team (9,9) Management: High levels of concern for people
and production. This style of management results in superior performance from
committed employees.

5. Situational Theory of Leadership: The situational theory of leadership is strongly

affected by the situation from which a leader emerges and in which he works. This
theory emphasizes that the entire action between the group and the leader is the main
factor which makes a leader successful. The people (followers) tend to follow the person
(leader) who is capable of fulfilling their aspirations. Thus, a leader recognizes the need
of the situation and acts accordingly. The merit of this theory is that it makes it
abundantly clear that there is no single universally "best style" of leadership. A leader
has to change his style of leadership from situation to situation.

Contingency or situational theories differ from the earlier trait and behavioural theories
in asserting that no single way of leading works in all situations. Recent research
suggests that managers should select a leadership that best fits with the situation at a
given time. Effective managers diagnose the situation, identify the leadership style that
will be most effective, and then determine if they can implement the required style.
Early situational research suggested that three general factors affect the appropriate
leadership style in a given situation.
(a) Subordinate Considerations: Reflect the leader's awareness of subordinate's expertise,
experience, competence, job knowledge, hierarchical level and psychological
characteristics.
(b) Supervisor Considerations: Reflect the leader's degree of upward influence, as well as
his or her similarity of attitudes and behaviours to those in higher positions. (c) Task
Considerations: Reflect the degree of time urgency, amount of physical danger,
permissible error rate, presence of stress, degree of autonomy, degree of job scope,
importance and meaningfulness, and degree of ambiguity of the work being performed.

The precise aspects of each dimension that influence the most effective leadership style
vary in different situations. Most situational theorists suggest that effective leaders
develop a range of leadership styles, which they adapt to different situations.
Limitations of Situational Theory Leadership
(a) This theory stresses the leadership ability of a person in a given situation but it is
silent on the question whether he will fit in another situation.

40
(b) If the leader adopts some style under all situations, he may not be successful. This
is not always true, but leaders have been successful at all times and at all situations.

6. Great Man Theory of Leadership: The theory asserts that leaders are born and not
made. This is especially so with great leaders who are natural leaders. Leadership calls
for certain qualities like commanding personality, charm, courage, intelligence,
integrity, persuasiveness, tenacity and aggressiveness. These qualities are of such a
nature that they can't be taught or learnt in a formal sense. The implementations of this
approach are:
(a) Leaders have certain inborn leadership qualities.
(b) Inborn qualities are sufficient for a leader to be successful.
(c) Ordinary people cannot become leaders.
(d) Leadership qualities cannot be acquired.
Thus great leaders are "the gift of god" to mankind. They bestow great good on people
by their decisions and activities, which are also divinely destined and approved.
Limitations of Great Man Theory of Leadership
(a) The theory is now regarded as almost obsolete and absurd because it has little
scientific and empirical basis.
(b) The theory does not explain who leaders are, how they emerge, how they behave
and what exactly it is that makes for their effectiveness.

7. Path-goal Theory: Developed by Robert House, the Path Goal theory is one of the
most respected approaches to leadership. The essence of the theory is that it's the
leader's job to assist his or her followers in attaining their goals and to provide the
necessary direction and/or support to ensure their goals are compatible with the overall
objectives of the group or organisation. According to this theory, leaders attempt to
influence their subordinate's perceptions of the payoff for accomplishing their goals
and show them ways to achieve the goals.

Thus, a leader's behaviour is motivational to the degree it:

(a) Makes subordinate need satisfaction contingent on effective performance, and
(b) Provide the coaching, guidance, support and rewards that are necessary for effective
performance.
To test these statements, House identified four leadership behaviours or styles:
(a) Directive Style: The leader tells subordinates what is expected of them, gives them
guidance about what should be done, and also shows them how to do it.
(b) Supportive Style: The leader shows concern for the well-being and needs of his or her
subordinates by being friendly and approachable.
(c) Participative Style: The leader involves subordinates in decision making, consults
with them about their views of the situation, asks for their suggestions, considers those
suggestions in making a decision, and sometimes lets the subordinates make the
decision themselves.

41
(d) Achievement-Oriented Style: The leader helps subordinates set goals, rewards the
accomplishment of these goals and encourages subordinates to assume responsibility
for their attainment.
House assumes that leaders are flexible and implies that the same leader can display
any or all of these behaviours, depending on the situation.
Applying Path-Goal Theory: The leader will begin by choosing a leadership style that fits
the situation. To do this, the leader has to assess five aspects of the situation and people
involved:
(a) Assess the task: Structured tasks and clear goals require less direction then less
structured tasks and less clear goals.
(b) Assess the leader's formal authority: managers with formal authority typically should
not use a directive style because it duplicates their authority, but they may use
supportive achievement-oriented or participative styles.
(c) Assess the nature of the work group: The leader should assess its cohesiveness as well
as its experience in working together. The more cohesive the group, the less need for
supportive leadership since this is redundant with the group's character.
(d) Assess the organisation's culture: A culture that supports participation also supports
a participative leadership style. A culture that encourages goal accomplishment or a
results orientation reinforces an achievement-oriented style.
(e) Assess the subordinate's skills and needs: Subordinates skilled in a task require less
direction than those less skilled. Subordinates with high achievement needs, require a
style that helps meet these needs. Subordinates with social needs, require a style that
helps meet these needs.
8. Participation Theory of Leadership: Victor Vroom and Phillip Yetton developed a
leader participation model that related leadership behaviour and participation to
decision making. They assume that leaders use four basic styles in making decisions:
authoritative, consultative, group-based and delegative. These styles led to different
decision-making processes for solving both individual and group problems. This is
shown in the Table below:

For individual problem For group problem

AI You solve or make the decision AI You solve the problem or make the
yourself decision yourself, using info. Avlaible
to at the time.
AII You obtain any necessary AII You obtain any necessary information
information from subordinate, from subordinates, then decide on the
then make the decision solution to the problem yourselves.
yourselves.
CI You share the problem with CI You share the problem with relevant
relevant subordinate, getting his subordinates individually, getting
or her ideas and suggestions. Then their ideas and suggestions without
you make the decision, which may bringing them together. Then you
or may not reect subordinates make the decision, which may or may
inuence. not reect subordinates inuence.

42
GI You share the problem with one of CII You share the problem with
subordinate and together you subordinates in a group meeting, in
analyze the problem and arrive at which you obtain their ideas
mutually satisfactory solution in suggestions. Then you make the
an atmosphere of free and open decision, which may or may not reect
exchange of info and ideas. subordinates inuence.
DI You delegate the problem with GII You share the problem with
one of subordinate, providing him subordinates as a group. Together you
or her with any relevant info that generate and evaluate alternatives and
you possess, but giving him or her attempt to reach true consensus on a
responsibility for making decision solution.
and your support for any decision
reached.
AI & AII = Autocratic I & II, CI & CII= Consultative I & II, GI=Group I
A successful Leader versus an effective Leader

Not found

Motivation, Theories of Motivation; How Managers Motivate

Meaning
The word motivation has been derived from the word motive which means any idea,
need or emotion that prompts a man into action. Whatever may be the behaviour of a
man, there is some stimulus behind it. Stimulus is dependent upon the motive of the
person concerned. Motive can be known by studying his needs and desires. Generally,
different motives operate at different times among different people and influence their
behaviour. The management should try to understand the motives of individuals
which cause different types of behaviour.

Dubin has defined motivation as the complex of forces starting and keeping a person
at work in an organisation. Motivation is something that moves the person to action,
and continues him in the course of action already initiated. Motivation refers to the
way a person in enthused at work to intensify his desire and willingness to use his
energy for the achievement of organisational objectives.

According to Dalton E.McFarland, Motivation refers to the way in which urges,

drives, aspirations, striving or needs direct, control or explain the behaviour of human
beings. Motivation has close relationship with the behaviour of human beings. It
explains how and why human behaviour is caused. Thus, motivation is a term which
applies to the entire class of urges, derives, desires, needs and similar forces.

Motivation has certain underlying properties:

1. It is an individual phenomenon Each individual is unique, and this fact must be
recognized in motivation research.
2. Motivation is intentional When an employee does something, it is because he or
she has chosen to do it.
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3. Motivation has many facets Researchers have analyzed various aspects of
motivation, including how it is aroused, how it is directed, what influences its
persistence, and how it is stopped.
4. The purpose of motivation theories is to predict behaviour The distinction must be
made between motivation, behaviour and performance. Motivation is what causes
behaviour; if the behaviour is effective, high performance will result.

Motivational Sources: Motivation may be either positive or negative.

Positive motivation: takes place when management recognizes the employees
efforts towards the achievement of organizational goals. It is positive because, this
kind of motivation increases the level of performance, promotes team spirit, a sense
of cooperation and generates a feeling of belongingness and happiness. The positive
motivational factors are:
-- Praise and reward for good performance.
-- Concern for the well being of an employee.
-- Confidence reposed in the employee.
-- Delegation of authority
-- Scope of participation given in the decision making.
Negative motivation, on the other hand, results from the use of force, pressure, fear
or threat. You may note that fear of punishment also affects motivation and thereby
the behaviour of a person. In the organizations, negative motivation may come from
the fear of being transferred, demoted or removed. This fear of punishment prompts
the person to work hard and achieve the goals. It may, however, be realized that
negative motivation is not desirable because employees do not like to be punished.
Hence, it is desirable to motivate the employees by positive means.

Extrinsic Vs. Intrinsic Motivation

Extrinsic motivation is induced by external factors primarily financial rewards. It is
expected that the behaviour caused by positive rewards is likely to be repeated.
But the reward should be sufficiently powerful for desirable behaviour to be repeated.
Money acts as a significant incentive for positive behaviour of employees. Realizing the
value of financial incentives as motivators, managements now-a-days make use of wage
increments, bonus payment, fringe benefits, stock options, profit sharing schemes, paid
holidays, medical benefits, etc. for motivating the employees.
Intrinsic motivation is something that is generated within an individual. It is an inner
feeling. It may be a sense of achievement or recognition leading to satisfaction that
motivates the employee further. Since this kind of motivation comes from within, it is
called intrinsic motivation. There are many retired doctors who work free in the
hospitals because it gives them a sense of accomplishment and satisfaction. Some of the
intrinsic motivators include praise, status, recognition, esteem, challenge, risk and
responsibility in job.

Mc GREGORS PARTICIPATION MODEL

It was McGregor who set forth at opposite extremes two pairs of assumptions about
human beings which he thought were implied by the actions of autocratic and
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permissive managers. First set of assumptions are known as Theory X and the
second set of assumption are known as Theory Y. It is important to note that these
sets of assumptions are not based on any empirical research. They, according to
McGregor, are intuitive deductions.
Theory X
Managers with Theory X orientation make the following assumptions about people:
-- Average human being has an inherent dislike for work and will avoid it, if he can.
-- The average human being is lazy and avoids responsibility.
-- The average human being is indifferent to organisational goals.
-- The average human being prefers to be directed, wishes to avoid responsibility, has
relatively little ambition and wants security above all.
According to McGregor, this is a traditional theory where workers have to be persuaded
and pushed into performance. Management can offer rewards to a worker who shows
higher productivity and can punish him if performance is below standard. This is also
called carrot and stick approach to motivation. It suggests that threats of punishments
and strict control are ways to control the people.
Theory Y
Managers with Theory Y orientation make the following assumptions about people:
-- The average human being does not inherently dislike work. Depending upon
controllable conditions, work may be a source of satisfaction or a source of punishment.
-- The average human being will exercise self-direction and self-control in the service of
objectives to which he is committed.
-- Commitment to objectives is a function of the rewards associated with their
achievement.
-- The average human being learns under proper conditions, not only to accept, but also
to seek responsibility.
-- The capacity to exercise a relatively high degree of imagination, ingenuity and
creativity in the solution of organisational problems is widely, not narrowly, distributed
in the population.
Theory Y assumes that goals of the organisation and those of the individuals are not
necessarily incongruent. Workers commitment is directly related to the satisfaction
to their needs. Thus, this theory places great emphasis on satisfaction of the needs,
particularly the higher ones of the employees. It does not rely heavily on the use of
authority as an instrument of command and control. It assumes that employees exercise
self-direction and self-control in the direction of the goals to which they feel themselves
committed.
Theories of Motivation
There are two types of motivational theories - content theories and process theories
(cognitive theories). While content theories explain what motivates and what does not
motivate, the process theories examine the variables that go into the motivational
process taking place within an individual.
Maslows Need Hierarchy Theory
Abraham Maslow has propounded this need hierarchy theory as early as in 1943.
Maslow points out that human beings have divergent needs and they strive to fulfill
those needs. The behaviour of an individual is determined by such needs. These needs
45
range from biological needs at lower level to psychological needs at the highest level.
Further, these needs arise in an order of hierarchy or priority such that lower level needs
must be satisfied before higher level needs become important for motivation. Maslow
postulates five basic needs arranged in a hierarchical fashion as follows:

The first three levels of needs at the bottom are known as lower order needs as they are
related to ones existence and security. The top two levels of needs are called higher
order needs as they are concerned with personal development and realization of one
s potential. The needs are explained below.
Physiological Needs
The physiological needs are the basic needs having the highest strength in terms of
motivation. These are the needs arising out of biological tensions created as a result of
deprivation of food, water, shelter, rest, etc. If these basic needs are gratified, then the
next level needs become important and act as motivators.
Safety and Security Needs
Once the physiological needs are fulfilled, safety and security needs become
predominant. These are the needs for self-preservation while physiological needs are
for survival. These needs include security, stability, freedom from anxiety and a
structured and ordered environment. Safety and security needs arise out of the concern
for the fulfillment of physiological needs in the future. An individual seeks economic
or social protection against future threats and dangers that he is exposed to. If once
these needs are gratified, they fail to serve as motivators any more. The individual, then,
moves on to the next level needs and strives for their fulfillment.
Social Needs
At the third level, social needs or love needs become important. An individual cannot
live an isolated life. A sense of affiliation becomes important for a meaningful life. These
needs include the need for love, affection, companionship and social interaction. We
know very well that at home the child needs the love of parents and at school he needs
the friendship of his classmates. This is to attain recognition from others which would
induce a feeling of self-worth and self-confidence in the individual. It is an urge for
46
status, prestige and power. Self-respect is the internal recognition while respect from
others is the external recognition. People who are able to fulfill this need feel that they
are useful and have some positive influence on their surrounding environment.
Self-actualization Needs
At the highest level is the need to develop and realize ones capacities and potentialities
to the fullest extent possible. This need gets activated as motivator when all other needs
have been reasonably fulfilled. At this level, the person wants to excel in the skills and
abilities that he is endowed with. As a result, he seeks challenging work assignments
that require creativity and talent. This need is inner-oriented and the motivation is
intrinsic in nature. A self-actualizing person is creative, independent, content, and
spontaneous and has a good perception of reality. He constantly endeavors to realize
his full potential.
In conclusion, it may be said that Maslows model explains human behaviour in
general. It has nothing to do with the employee motivation at the work place. Further,
human needs may not necessarily have the hierarchy as shown by him. The relative
dominance of not able to satisfy the social needs may prompt a person to set the
physiological needs and safety needs aside and motivate him for earning the love and
affection of the family members and the friendship of his colleagues. Maslow felt that
the human needs have a definite sequence of domination. Second need does not
dominate until first need is reasonably satisfied and third does not dominate until first
two needs have been reasonably satisfied and so on. The other side of the need
hierarchy is that man is a wanting animal, he continues to want something or the other.
He is never fully satisfied, the other need arises. As said above (according to Maslow),
needs arise in a certain order of preference and not randomly. Thus, if ones lower
level needs (physiological and security needs) are unsatisfied, he can be motivated only
by satisfying his lower level needs and not satisfying his higher level needs. Another
point to note is that once a need or a certain order of needs is satisfied, it cases to be a
motivating factor. Man lives for bread alone as long as it is not available. In the absence
of air one cant live, but there is it is plenty of air which ceases to be motivating.
The physiological and security needs are finite, but the needs of higher order are
sufficiently infinite and are likely to be dominant in persons at higher levels in the
organisation. This has been proved by various studies. A study by Boris Blai supported
this by showing that managers and professionals in U.S.A. highly value self-realisation,
while service and manual workers in India reported that they give to priority to job
security, earnings and personal benefits all lower order needs.
HERZBERGS Two Factor theory of MOTIVATION
A significant development in motivation theory was distinction between motivational
and maintenance factors in job situation. A research was conducted by Herzberg and
his associates based on the interview of 200 engineers and accountants who worked for
eleven different firms in Pittsburgh area. These men were asked to recall specific
incidents in their experience which made them feel particularly bad about jobs. The
findings of the research led to draw a distinction between what are called as
motivators and hygiene factors. To this group of engineers and accountants, the real
motivators were opportunities to gain expertise and to handle more demanding
assignments. Hygiene factors served to prevent loss of money and efficiency. Thus,
47
hygiene factors provide no motivation to the employees, but the absence of these
factors serves as dissatisfies.
Some job conditions operate primarily to dissatisfy employees. Their presence does not
motivate employees in a strong way. Many of these factors are traditionally perceived
by management as motivators, but the factors are really more potent as dissatisfiers.
They are called maintenance factors in job because they are necessary to maintain a
reasonable level of satisfaction among the employees. Their absence proves to be strong
dissatisfiers. They are also known as dissatisfiers or hygienic factors because they
support employees mental health. Another set of job conditions operates primarily
to build strong motivation and high job satisfaction among the employees. These
conditions are Motivational Factors. Herzbergs maintenance and motivational
factors have been shown in the table given below.
Maintenance or Hygienic Factors
1. Company Policy. 2. Technical Supervision. 3. Inter-personal relations with
Supervisor.
4. Inter-personal relations with 4. Peers. 5. Inter-personal relations with
Subordinates.
6. Salary. 7. Job Security. 8. Personal life.
9. Working conditions. 10. Status.
Motivational Factors
1. Achievement, Administration. 2. Recognition. 3. Advancement.
4. Possibility of growth 5. Responsibility.

Hygienic factors include such things as wages, fringe benefits, Physical conditions and
overall company policy and administration. The presence of these factors at a
satisfactory level prevents job dissatisfaction, but they do not provide motivation to the
employees. So they are not considered as motivational factors, on the other hand, are
essential for increasing the productivity of the employees. They are also known as
satisfiers and include such factors as recognition, feeling of accomplishment and
achievement, opportunity of advancement and potential for personal growth,
responsibility and sense of job and individual importance, new experience and
challenging work etc.

David Mc Clellands Three Need Model

David McClelland gave a model of motivation which is based on three types of needs
achievement, power and affiliation. They are stated below:
(i) Need for achievement (n Ach): a drive to excel, advance and grow
(ii) Need for power (n Pow): a drive to influence others and situations
(iii) Need for affiliation (n Aff): a drive for friendly and close interpersonal
relationships.
Achievement Motivation
Some people have a compelling drive to succeed and they strive for personal
achievement rather than the rewards of success. This drive is called the need for
achievement (n ach). Based on his extensive research into the achievement need,

48
McClelland found that high achievers differentiate themselves from others by their
desire to do things better.
They seek situations where they can attain personal responsibility for finding solutions
to problems, where they can receive rapid feedback on their performance so they can
set moderately challenging goals. High achievers are not gamblers; they dislike
succeeding by chance. They prefer the challenge of working at a problem and accepting
the personal responsibility for success or failure, rather than leaving the outcome to
chance or the actions of others.
Power Motivation
The need for power (n pow) is a drive to have impact, to be influential and to control
others. Individuals high in n pow enjoy being in charge, strive for influence over
others, prefer to be placed into competitive and status oriented situations, and tend to
be more concerned with gaining influence over others than with effective performance.
Power-motivated people wish to create an impact on their organisations and are willing
to take risks to do so.
Affiliation Motivation
This need has received the least attention of the researchers. Affiliation need (nAff) can
be viewed as the desire to be liked and accepted by others. It is the drive to relate to
people on a social basis. Individuals with a high affiliation motive strive for friendship,
prefer cooperative situations rather than competitive ones, and desire relationship
involving a high degree of mutual understanding.

Alderfers Existence-Relatedness Growth (Erg) Model

Serious doubts have been expressed about the existence of the five distinct need
categories which Maslow hypothesized. There seems to be some over-lapping between
the security, social and physiological need.
Also, the lines between esteem, social and self-actualization needs are not entirely clear.
With these points in mind, Clayton Alderfer condensed Maslows need categories into
three sets:
-- Existence needs. These include all forms of materials and Physiological and safety
needs, i.e., Maslows first two levels of needs.
-- Relatedness needs. These include all needs that involve relationships with other
people we care about. The examples include anger and hostility as well as friendship.
Thus, the opposite of satisfaction of relatedness needs is emotional distance rather than
hatred. Relatedness needs cover Maslows social needs and that of esteem needs
which are derived from other people. Growth needs These needs involve persons
making creative efforts to achieve full potential in the existing environment. It is like
Maslows highest level need of self-actualization.
Alderfer also revised Maslows theory in three other ways:
1. He argued that the three need categories form a hierarchy only in the sense of
decreasing concretions. That is, as we move from a focus on the existence to relatedness
to growth needs, the ways can satisfy those needs become increasingly abstract.
2. He recognized that rise in the level of satisfaction of our existence and relatedness
needs may result in decrease in their importance to us. Growth needs become more

49
important as we successfully satisfy them. That is, as we are able to be productive and
creative, we look to higher goals and, in so doing, are again dissatisfied.
3. He reasoned that we are likely to try to first satisfy the most concrete needs and then
to move on to more abstract needs. In this sense, Alderfer sounds somewhat like
Maslow, suggesting a pattern of satisfaction progression- that is, as one need is satisfied,
we progress to next higher need.
Alderfer conceived ERG needs along a continuum which avoids the implication that
the higher up an individual is in the hierarchy the better it is. Different types of needs
can operate simultaneously. If a particular path towards the satisfaction is blocked, the
individual will both persist along that path and at the same time regress towards more
easily satisfied needs. In this way, Alderfer distinguishes between chronic needs which
persist over a period of time and the episode needs which are situational and can
change according to the environment.

Reinforcement Theory
Reinforcement theory is based on the concepts of operant conditioning developed
initially by the well-known psychologist B.F. Skinner. Reinforcement theory argues that
the behavior of people is largely determined by its consequences. In other words,
those actions that tend to have positive or pleasant consequences tend to be repeated
more often in the future, while those actions that tend to have negative or unpleasant
consequences are less likely to be repeated again. The reinforcement theory suggests
that managers should try to structure the contingencies of rewards and punishments
on the job in such a way that the consequences of effective job behaviour are positive
while the consequences of ineffective work behaviour are negative or unpleasant. The
focus of this approach is upon changing or modifying the behaviour of people on the
job. That is why it is also labeled as organizational behaviour modification. The basic
nation underlying reinforcement theory is concept of reinforcement itself. An event is
said to be reinforcing if the event following some behaviour makes the behaviour more
likely to occur again in the future. It involves the use of four strategies to systematically
reinforce and are discussed as under:
(i) Positive Reinforcement: It entails the use of rewards (or other positive
consequences) that stimulates desired behaviour and strengthens the probability of
repeating such behaviour in the future.
Positive reinforcers can be money, praise, promotion, recognition, etc.
(ii) Negative Reinforcement: This strategy also called avoidance learning. It implies
the use of unpleasant consequences to condition individuals to avoid behaving in
undesirable ways. By making unpleasant consequences contingent on undesirable
behaviour, individuals learn to systematically change patterns of behaviour. In work
environments, training, safety warnings, orientation sessions and counseling help alert
employees against negative consequences of undesirable behaviour.
(iii) Extinction: There is withdrawal of all forms of reinforcement to remove
undesirable behaviour. For instance, a disruptive employee who is punished by his
supervisor for his undesirable behaviour may continue the disruptions because of the
attention they bring. By ignoring or isolating the disruptive employee, attention is
withheld and possibly also the motivation for fighting.
50
(iv) Punishment: This tool is used when an unpleasant or undesirable behaviour needs
to be reduced or eliminated. For example, a workers wages may be deducted if the
quality of goods produced is of substandard quality.

Concept of Morale; Factors determining morale

Morale is the term usually applied to armed forces during wartime and to sports and
athletic teams. It refers to team spirit and co-operation of people for a common
purpose. Its importance has been realised by the management only in recent years. It
is felt by the management that if the morale of the employees is high, production would
be higher and vice-versa.
Meaning: Morale represents the attitudes of individuals and groups in an organisation
towards their work environment. Morale is an indicator of the attitude of employees
towards their jobs, superiors and their organisational environment. It is a collection of
the employees attitude, feelings and sentiments.
Definition:
According to William Spriegel, morale is the co-operative attitude or mental
health of a number of people who are related to each other on some basis.
According to Leighton, morale is the capacity of a group of people to pull
together persistently and consistently in pursuit of a common purpose.
Characteristics of Morale:
1. Morale is basically a psychological concept
2. Morale is intangible therefore it is very difficult to measure the degree of morale
accurately
3. Morale is contagious in the sense that people learn from each other
4. Morale in dynamic in nature. It cannot be developed overnight. Managers have
to make continuous efforts to build and maintain high morale. It is a long-term
concept.
5. Morale is a group phenomenon consisting of a pattern of attitudes. It is the sum
total of employees attitudes, feelings and sentiments.
Significance of Morale:
Morale is the vital ingredient of organisational success because attitudes and
sentiments of employees greatly influence productivity and satisfaction of
employees.
Morale may be high or low; when the morale of the employees is high, they co-
operate fully with the management towards the achievement of organisational
objectives.
High morale leads to good discipline, high degree of interest in the job, loyalty
to the organisation and high performance.
Consequences of low Morale:
Low morale indicates the presence of mental unrest. This mental tension or unrest not
only hampers production and productivity but also leads to ill-health of the working
people. The other consequences of low morale are the following:
1. High rate of labour turnover
2. High rate of absenteeism
3. Excessive complaints and grievances
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 4. Resistance to change
5. Lack of discipline
6. Antagonism towards the organisation and its management
7. Low quantity and quality of output
Low morale can be fatal to the organisation. In order to avoid the evil consequences of
low morale, every manager should attempt to build high morale amongst his
subordinates.
Steps to build High Morale:
Every manager should attempt to build high morale of his subordinates. Both
individual and collective efforts are required to develop and maintain high morale.
The following measures are taken to improve the morale of employees in the
organisation:-
1. A fair system of wage and salary payments should be evolved
2. A sense of security of job should be ensured
3. The promotion policy should be sound and should be followed promptly
4. Competent supervisors should be appointed
5. The channel of communication should be effective.
6. The employees should be made to feel proud of being employed in the
organisation
7. Employees welfare schemes like housing, medical benefits, education facilities
for children, canteen, credit facilities, and safety measures should be provided as
they are very helpful in developing positive attitude among the employees.
8. Workers should be given proper training so that they may perform their jobs
without frustration and get job satisfaction.
Factors determining morale:
The degree of morale in any organisation is determined by several factors. Some of
them are merely psychological and difficult to identify, however researchers have
succeeding in figuring out the following factors:
Confidence in leadership: If the leader of the organisation is able to win the
confidence of the employees, morale will be high. For employees, the leader
being mentioned is the immediate supervisor/superior. If the leader is
systematic, fair, honest, helpful and friendly, he may win over the confidence of
his subordinates and boost their morale.
Job Satisfaction: The morale of the employee would be high if he is satisfied with
his job. Hence right men should be placed in the right job to boost up their morale
in their jobs.
Confidence in co-workers: Mani is a social being and he finds himself more
enthusiastic in the company of others. If he finds that his companions or fellow
workers are co-operating with him, his morale would be high.
Sound and efficient organisation: Sound and effective organisation is an
important factor affecting the employees morale. At the same time, the chance
of communication should be effective and the personal problems of the employee
should be heard and redressed as quickly as possible.
Fair remuneration: Fair and reasonable remuneration is essential to secure
enthusiasm and willingness of the workers to do the job. The wages should be
52
 comparable with those paid in similar concerns. Besides, monetary incentives
should be provided to them as and when necessary and possible.
Security of job: If the employee feels secured, they will be willing and co-
operative to do the job allotted to them.
Opportunity to rise: The employees should also be made to realise that if they
work properly, they will be promoted and adequately rewarded. This feeling of
recognition will definitely boost their morale.
Working conditions: The conditions of work at which the employees are
required to work also affect their morale. Providing safety measures, hygienic
facilities, clean workplace etc. give them satisfaction and boost their morale.
Physical & mental health: An employee with weak health cannot be co-
operative and willing to work. Similarly his mental strain shall also reduce his
motivation of morale. Both physical and mental illness are detrimental to an
individuals work and thereby the organisational output.

Incentives, Role of Incentives in Building up Morale

Financial and Non-Financial Incentives
The term incentives means an inducement which arouses or stimulates one to action
in a desired direction. An incentive has a motivational power; it influences the
decisions of individuals on putting in necessary effort towards task performance. In
modern organizations, a large variety of incentives are used to motivate the people.
These incentivesmay be broadly grouped into:
(i) Financial or pecuniary incentives, and
(ii) Non-financial incentives.
(i) Financial or pecuniary incentives
The financial incentives may be distinguished from the nonfinancial incentives on the
following grounds:
1. Financial or monetary incentives are meant to satisfy those which money can buy.
The needs for food, clothing, and shelter can be fully satisfied by money, but the needs
for security, social affiliation and status can be partially satisfied by money. But non-
pecuniary incentives are meant for satisfaction of those needs which cant be satisfied
by money. The examples are higher level needs such as status, ego, sense of
responsibility, career advancement, autonomy.
2. Financial incentives are tangible, i.e. visible and measureable; they have a direct
effect on the organization and the members. But nonfinancial incentives are intangible
and they have an indirect influence on the organization and the members.
3. Financial incentives are determined by reference to several factors such as job
evaluation, cost of living trends, fringe benefits offered by competitors, agreement
between the employers and employees, etc.
4. Financial incentives are generally used to motivate workers and other non-
managerial employees. But non-financial incentives are used to motivate managerial
and other higher level personnel. They are also used to supplement and support the
pecuniary incentives in the organization.
(ii) Non-financial incentives.

53
Non-financial incentives are based on the nature of jobs, strength of aspirations and
urges of employees and behavioural orientation of management.
Role of Non-Financial Incentives
Financial incentives do not work for ever to motivate the people at work. As a matter
of fact, when the physiological and security needs are fulfilled with the help of money,
money ceases to be the motivating force; it becomes the maintenance factor as said by
Herzberg. Therefore, employees do not always run after money. They have other needs
also. The want status and recognition in the society, they want to satisfy egoistic needs
and they want to achieve something in their lives. In order to motivate the employees
having these needs, management can take the help of following non-financial
incentives:
1. Praise: Praise satisfies ones ego needs. Sometimes, praise is more effective than
another incentive. We have seen that in industry, at home or elsewhere, people
respond better to praise. However, this incentive should be used with greater degree
of care because praising an incompetent employee would create resentment among
competent employees. Or course, occasionally, a pat on the back of an incompetent
employee may act as incentive to him for improvement.
2. Competition: Competition is a kind of non-financial incentive. If there is a healthy
competition among the individual employees or groups of employees, it will lead them
to achieve their personal or group goals in a better way.
3. Opportunity for Growth: Opportunity for growth is another kind of incentive. If the
employees are provided opportunities for their advancement and growth and to
develop their personality, they feel very much satisfied and become more committed
to the organizationa and become more committed to the organizational goals.
4. Feedback: Knowledge of the results/performance leads to employee satisfaction. A
worker likes to know the result of his performance. He gets satisfaction when his
superior appreciates the work he has done.
5. Workers participation in Management: Employees participation in management
provides an important incentive to the employees. It gives them psychological
satisfaction that their voice is being heard.
6. Suggestion System: Suggestion system in an incentive which satisfies many needs
of the employees. Many organizations which use the suggestion system make use of
cash awards for useful suggestions.
They, sometimes, publish the workers name with his photograph in the companys in
house magazines/reports/brochures. This motivates the employees to be in search for
something which may be of greater use to the organization.
8. Job Enrichment:
Job enrichment simply means adding the contents to a job leading to increased
responsibility, scope and challenge in its performance. Particularly, the executives
working at the higher levels often prefer to job enrichment because it makes job more
challenging.
They derive higher satisfaction by performing more and more challenging jobs. Thus,
job enrichment as an incentive motivates the executives to exert for accomplishment of
their goals. Job enrichment is a by-product of job design which is discussed
subsequently.
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 Human Resource Development: Concept of HRD; Goals of HRD
Introduction
HRD is concerned with an organised series of learning activities, within a specified
time limit, designed to produce behavioural change in the learner (Naddler, 1969).
From the organizational context, therefore, HRD is a process which helps employees
of an organisation to improve their functional capabilities for their present and future
roles, to develop their general capabilities, to harness their inner potentialities both for
their self and organisational development and, to develop organisational culture to
sustain harmonious superior-subordinate relationships, teamwork, motivation,
quality, and a sense of belongingness.

Human Resource Development is a system of developing in a continuous and planned

way the competencies of individual employees, dyadic groups (supervisor and
subordinate), teams and the total organisation to achieve the organisations goals. It
maximize the congruence between the individual and the organisational goals of
employees an develops an organisational culture in which superior- subordinate
relationships, teamwork and collaboration among various units become strong and
contribute to the professional well-being, motivation and pride of employees.

Important characteristics of HRD

HRD is a system and HRD develops the competencies at all levels.
HRD is continuous and planned development effort.
the ultimate object of HRD is to contribute to the professional well-being,
motivation and pride of the employees.

Need of HRD
HRD is needed by any organisation that wants to grow continuously. In the fast
changing environment, organisations can scale new heights only through the effective
and efficient use of human resources. Appropriate personnel policies help maintain
employee motivation and morale at a high level, but this alone may not help the
organisation achieve success and venture into new fields.
HRD is needed in an organisation because:
1. HRD improves the capabilities of people. They become innovative and enterprising
ever eager to take risk and get ahead. It improves the all-round growth of an
employee. Feedback and guidance from superiors help employees grow continually
and show superior performance.
2. HRD improves team work. Employees become more open and trust each other. The
organisational climate, too, improves a lot.
3. HRD leads to greater organisational effectiveness. Appropriate employee-centered
policies help the organisation achieve its goals more efficiently.
4. Performance related rewords help employees realise the importance of utilising their
skills fully in the service of organisational goals. The organisation's overall health and
self-renewing capabilities, too, improve quite significantly.

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Scope of HRD
Human resources can be viewed as the sum of knowledge, skills, attitudes,
commitment, values and the like of the people of an organisation. Development is
acquisition of capabilities that are needed to do the present job, or the future expected
job. Human Resource Development is a positive concept in human resources
management. The purpose of Human Resource Development is to enhance an
employee's capacity to successfully handle greater responsibilities, through formal or
informal means. Any effective HRD programme must satisfy the needs of an
organisation. To this end, management must outline the needs of the organisation and
convert them into objectives with a view to formulate a workable programme.
HRD is mainly concerned with developing the competencies of people. When we call
it as a people-oriented concept then several questions come to mind like should the
people be developed in the larger and national context or in the smaller institutional
context? Is it different at the macro level and micro level? As things stand now, HRD
applies to both institutional (micro) as well as national (macro) issues. The main
objective, however, is to develop the newer capabilities in people so as to enable them
to tackle both present and future challenges while realizing organisational goals.
However, it is useful both at macro and micro levels.
Macro Level: At the macro level HRD is concerned with the development of people for
the nation's well being. It takes health, capabilities, skills, attitudes of people which are
more useful to the development of the nation as a whole. While calculating the national
income and economic growth, the prospective HRD concept examines the individuals'
potentialities, their attitudes, aspirations, skills, knowledge, etc. and establishes a
concrete base for economic planning.
However, HRD's contribution at macro level has not gained popularity as yet.
Micro Level: HRD has concern for grass root development in the organisations. Small
wonder, then, that HRD was well received by companies' managements as they
realised its importance and foresaw its future contribution for the individual and
organisational development. Generally,
HRD at micro level talks of the organisations' manpower planning, selection, training,
performance appraisal, development, potential appraisal, compensation,
organizational development, etc. HRD's involvement in all these areas is mainly with
an objective to develop certain new capabilities in people concerned to equip them to
meet the present job challenges and to accept future job requirements.
Reviewing the definition, role, significance, purpose and objectives of HRD it is evident
that HRD department of an organisation focuses on the following important areas:
1. Increasing the 'enabling' capabilities by developing human resources, organisational
health, team spirit and increasing employee motivation and productivity.
2. Focus on balanced organisational culture by conducting periodic surveys,
workshops, discussions stimulating openness, mutual trust, team spirit, creativity,
initiative, mutuality, collaboration, delegation, autonomy, respect, management of
mistake, management of conflict, etc.
3. Focus on learning contextual factors from different professional bodies like NIPM,
ISTD, HRD Network, AIMA, etc. These professional bodies, through their
publications, seminars and workshops, share the experiences of the corporate world.
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4. Focus on periodic reviewing of HRD system which may call for redesigning
performance appraisal, job-rotation, reward systems, career planning, promotion,
selection, induction, training and development programme, etc.
5. Focus on integrating HRD with other corporate functions like production,
marketing, finance, material, corporate planning, etc. Such integration will strengthen
the development of an 'enabling' organisation.
6. Focus on diffusion of HRD function involving line managers in various HRD aspects
like training of subordinates, performance appraisal, promotion, placement, selection,
career planning, etc. Line people by virtue of their rich experience may effectively
contribute to these HRD areas. Moreover, their active association will accentuate the
process of developing an integrated HRD system in an organisation.
7. Focus on working with unions by taking them into confidence and collaborating
with them. That unions can also play a positive role in furthering the organisation is
evident from a number of examples. Syndicate Bank Employees Union very recently
collaborated with the management to reduce the Non-performing assets (i.e. bad debt
realisation).
HRD Matrix (Indicators of HRD)
The HRD Matrix shows the interrelationships between HRD instruments, processes,
outcomes and organisational effectiveness.
(a) HRD instruments: These include performance appraisal, counselling, role analysis,
potential development, training, communication policies, job rotations, rewards, job
enrichment programmes, etc. These, instruments may vary depending on the size of
the organisation, the internal environment, the support and commitment of the top
management, the competitive policies, etc.
(b) HRD processes: The HRD instruments lead to the generation of HRD of processes
like role clarity, performance planning, development climate, risk-taking, dynamism
in employees. Such HRD processes should result in more competent, satisfied and
committed people that would make the organisation grow by contributing their best
to it.
(c) HRD outcomes: HRD instruments and processes make people more committed and
satisfied, where they tend to give their best to the organisation enthusiastically.
(d) Organisational effectiveness: Dimensions: Such HRD outcomes influence the
organisational effectiveness, which in turn, depends on a number of variables like
environment, technology, competitors, etc.
The objectives of HRD can be listed as follows:
1. To develop capabilities of all individuals working in an organisation in relation to
their present role.
2. To develop capabilities of all such individuals in relation to their future role.
3. To develop better interpersonal and employer-employee relationships in an
organisation.
4. To develop team spirit.
5. To develop coordination among different units of an organisation.
6. To develop organisational health by continuous renewal of individual capabilities
(averting manpower obsolescence) keeping pace with the technological changes.
Functions of HRD
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The original HR wheel from McLagan identified three primary HRD functions:
(1) training and development,
(2) organisation development, and
(3) career development. These functions are discussed in greater detail.
Training and Development (T&D)
Training and development (T&D) focus on changing or improving the knowledge,
skills and attitudes of individuals. Training typically involves providing employees
the knowledge and skills needed to do a particular task or job, though attitude change
may also be attempted. Developmental activities, in contrast, have a longer-term focus
on preparing for future work responsibilities, by also increasing the capacities of
employees to perform their current jobs. T&D activities begin when a new employee
enters into the organisation, usually in the form of induction training i.e. employee
orientation and skills training. Employee orientation is the process by which new
employees learn important organisational values and norms, establish working
relationships, and learn as to how to function within their jobs. The HRD staff and the
hiring supervisor generally share the responsibility for designing the orientation
process, conducting general orientation sessions, and begin the initial skills training.
Skills and technical training programs then narrow down in scope to teach the new
employee a particular skill or area of knowledge.
Once the new employees have become proficient in their jobs, HRD activities should
focus more on developmental activitiesspecifically, coaching and counseling. In the
coaching process, individuals are encouraged to accept responsibility for their actions,
to address any work-related problems, and to achieve and sustain superior levels of
performance. Coaching involves treating employees as partners in achieving both
personal and organisational goals. Counseling techniques are used to help employees
deal with personal problems that may interfere with the achievement of these goals.
Counseling programs may address such issues as substance abuse, stress management,
smoking cessation, or fitness, nutrition and weight control.
HRD professionals are also responsible for coordinating management training and
development programs to ensure that managers and supervisors have the knowledge
and skills necessary to be effective in their positions. These programs may include
supervisory training, job rotation, seminars, or college and university courses.
Organisation Development
Organisation development (OD) is defined as the process of enhancing the
effectiveness of an organisational capabilities and the well-being of its members
through planned interventions that apply behavioral science concepts. OD emphasizes
both macro and micro level organisational changes; macro changes are intended to
ultimately improve the effectiveness of the organisation, whereas micro changes are
directed at individuals, small groups, and teams. For example, many organisations
have sought to improve organisational capabilities by introducing employee
involvement programs that require fundamental changes in work expectations,
reward systems, and reporting procedures.
The role of the HRD professionals involved in an OD intervention is to function as a
change agent. Facilitating change often requires consulting with and advising line
managers on strategies that can be used to effect desired change. The HRD professional
58
may also become directly involved in carrying out the intervention strategy, such as
facilitating a meeting of the employees responsible for planning and implementing the
actual change process.
Career Development
Career development is an ongoing process by which individuals progress through
a series of stages, each of which is characterized by a relatively unique set of issues,
themes, and tasks.Career developments involve two distinct processes: career
planning and career management.
Career planning involves activities performed by an individual, often with the
assistance of counselors and others, to assess his or her skills and abilities in order to
establish a realistic career plan. Career management involves taking the necessary
steps to achieve that plan, and generally focuses more on what the organisation can do
for foster employee career development. There is a strong relationship between career
development and T&D activities. Career plans can be implemented, at least in part,
through an organisations training programs.

Performance Appraisal Potential appraisal and development, Feedback and

Performance Counselling

Performance Appraisal
Appraisal is the evaluation of worker, quality or merit. In the organizational context,
performance appraisal is a systematic evaluation of personnel by superiors or others
familiar with their performance. Performance appraisal is also described as merit
rating in which one individual is marked as better or worse in comparison to others.
The basic purpose of merit rating is to ascertain an employees eligibility for
promotion. However performance appraisal would be used to decide training and
development, salary increase, transfer and discharge C. Heyel defines, performance
appraisal is the process of evaluating the performance and qualifications of the
employee in terms of the requirements of the job for which he is employed, for the
purposes of administration including placement, selection for promotion, providing
financial rewards and other actions which require differential treatment among the
members of a group as distinguished from actions affecting all members equally.
Beach has defined, performance appraisal is the systematic evaluation of the
individual with regard to his or her performance on the job and his potential for
development.
Performance appraisal is a systematic and objective way of judging the relative worth
or ability of an employee in performing his job. It emphasizes on two aspects;
systematic and objective. All performances are to be evaluated in the same manner,
utilizing the same approaches. This would facilitate appraisal of different persons
comparable. This makes it systematic, as such an appraisal is taken periodically
according to plan; it is not left to chance. This makes the system objective. Both those
who rate and who are rated should know the system of performance appraisal and
trained. Human bias and prejudices are set aside, and so objective is in this respect also.

59
It is the systematic evaluation of the individual with respect to his or her performance
on the job and his or her potential for development. Performance Appraisal is a formal
structured system of measuring and evaluating an employee's job related behaviors
and outcomes to discover how & why the employee is presently performing on the job
and how the employee can perform more effectively in the future so that the employee,
organization and society all benefit.

Features
The main characteristics of performance appraisal may be listed thus:
The appraisal is a systematic process. It tries to evaluate performance in the same
manner using the same approach. A number of steps are followed to evaluate an
employee's strength and weaknesses.
It provides an objective description of an employee's job's relevant strengths and
weaknesses.
It tries to find out how well the employee is performing the job and tries to
establish a plan for further improvement.
The appraisal is carried out periodically, according to a definite plan. It is
certainly not a one-shot deal.
Performance evaluation is not job evaluation. Performance appraisal refers to
how well someone is doing an assigned job. Job evaluation, on the other hand,
determines how much a job is worth to the organization, and therefore, what
range of pay should be assigned to the job.
Performance appraisal may be formal or informal. The informal evaluation is
more likely to be subjective and influenced by personal factors. Some employees
are liked better than others and have, for that reason only, better chances of
receiving various kinds of rewards than others. The formal system is likely to be
more fair and objective, since it is carried out in a systematic manner, using
printed appraisal forms.

Objectives of PA
1. Compensation Decision: It can serve as a basis for pay raises. This approach to
compensation is at the heart of the idea that raises should be given for merit rather than
for seniority.
2. Promotion Decision: It can serve as a guide for job change or promotion.
3. Training and Development Programme: PA can inform employees about their
progress and tell them what skills they need to develop to become eligible for pay
raises or promotions or both.
4. Feedback: It can tell an employee what he can do to improve his present performance
and go up the organizational ladder.
5. Personal Development: It can help reveal the causes of good and poor employee
performance.

Performance Appraisal Process

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Defining Objectives of Performance -> Defining Appraisal norms ->Establish Job
Expectation ->Design an Appraisal Programme -> Implement Appraise Performance -
> Performance Interview -> Appraisal feedback -> Post appraisal action.

Methods of Performance Appraisal

Past-oriented Scale
1. Rating Scale: The typical rating scale system consists of several numerical scales,
each representing a job-related performance criterion such as dependability, initiative,
output, attendance, attitude, cooperation etc., each scale ranges from excellent to poor.
The number of points attached to the scale may be linked to salary increase, whereby
so many points equal a rise of some percentage.
Nearly all type of job can be evaluated and large number of employees can be
evaluated in a very short time. Disadvantage includes the rater's biases to influence
evaluation.
Furthermore, numerical scoring gives an illusion of precision that is really unfounded.

2. Checklists: Under this method, a checklist of statements on statements on the traits

of the employee and his or her job is prepared in two columns i.e., 'YES' column and
'NO' column. All that the rater is to do is to tick the 'YES' if the answer is positive and
tick 'NO' if the answer is 'NO'. The HR dept. gives point for every "YES' when points
are allotted the technique becomes a weighted checklist.
The advantages are economy, ease of administration, limited training of rater &
standardization. The disadvantage includes improper weights by the HR department.

3. Forced choice Method: The rater is given a series of statement about the employee
these are arranged in the blocks of two or more, and the rater indicates which statement
is most or least descriptive of the employee. For example,
(a) Learns fast---------------------------------------works hard.
(b) Absent often------------------------------------others usually tardy.
The HR department does actual assessment. The advantage is the absence of personal
bias in rating. Disadvantage is that the statement may not be properly framed.

4. Critical Incident Method: It focuses on certain critical behaviours of an employee

that make all the difference between effective and non-effective performance of a job.
Such incidents are recorded by the superiors as and when they occur. One of the
advantages of this is that the evaluation is based on actual job-behaviour. It also
increases the chance that the subordinate will improve because they learn more
precisely what is expected of them. As a disadvantage, negative incidents are generally
more noticeable than positive ones.

5. Behaviorally Anchored Rating Scales: In this the scale represent a range of

descriptive statements of behaviour varying from the least to the most effective. A rater
must indicate which behaviour on each scale best describes an employee's
performance. BARS the following feature:

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(a) Areas of performance to be evaluated are identified and defined by the people who
will use the scales.
(b) The scales are anchored by description of actual job behavior that supervisors agree,
represent specific level of performance.
(c) All dimensions of performance to be evaluated are based on observable behaviours
and are relevant to the job being evaluated since BARS are tailored made.
(d) Since the raters who will actually use the scale are actively involved in the
development process, they are more likely to be committed to the final product.
Unfortunately, this also suffers from distortions inherent in most rating techniques.

Development of the BARS instrument

The result of arranging various scales for different dimensions of the job (Known as
behaviour anchors) produces a vertical scale for each dimension. Then scale is used for
performance appraisal.
Merits of BARS method
1. Employees behaviours and not their unobservable traits are measured which gives
better description of employees.
2. BARS approach is aimed at specific dimensions of job performance
3. The people, who are actually involved with the job, participate in determining the
job dimensions.
4. As the evaluation is done in terms of specific behaviours, the appraiser can give
objective feedback on how the person performed and on what specific behaviour the
concerned person should improve.

6. Field Review Method: This is an appraisal by someone outside the assessee's own
dept., usually someone from corporate office or HR dept. Two disadvantage of this are:
(a) An outsider is not familiar with conditions in an employee's work environment.
(b) He does not have an opportunity to observe employee behaviour of performance
over a period of time.

7. Performance Test: With a limited number of jobs, employee assessment may be

based upon a test of knowledge and skills. The test may be paper & pencil or an actual
demonstration of skills the test must be reliable & validated to be useful. Practically it
may suffer if the costs of test development or administration are high.
8. Annual Confidential Report: ACR is mostly used in government deptts example ITI,
military organizations, etc., it has 14 items namely - attendance, self-expression, ability
to work with others, leadership, initiative, technical ability, ability to reason, name, to
a few.
Twelve of these are filled on a four-point grade scale (excellent, good, fair and poor).
Justification is required for outstanding or poor rating. Overall rating on a five-point
scale was separately given (Outstanding, Very good, Good, Average, Poor).
Recommendation for performance was also given. This system is highly secret and
confidential. Ratings are easily manipulated because the evaluation was linked to
promotion.

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9. Cost Accounting Approach: This method evaluates performance from the monetary
returns the employee yields to his or her organization. Performance of the employee is
evaluated based on the established relationship between the cost and the benefit.

10. Comparative Evaluation Approach: These are a collection of different methods that
compare one worker's performance with that of his/her co-workers. They are useful
in deciding merit-pay increases, promotions and organizational rewards. The usual
comparative forms are ranking method and the paired comparison method.

Future-oriented Appraisal
1. Management by Objective
It was Peter F Drucker gave the concept of MBO way back in 1954 when his The Practice
of Management was first published. There are four steps:
In some organizations, superior and subordinates work together to establish goals.
These goals can then by used to evaluate employee performance.
It involves setting the performance standard for the subordinates in a previously
arranged time period. As subordinates perform, they know fairly well what there is to
do, what has been done, and what remains to be done.
The actual level of goal attainment is compared with the goals agreed upon. This step
helps determine possible training needs.
It involves establishing new goals and possibly, new strategies for goals not previously
attained.
The process is repeated.
The disadvantage is that it is not applicable to all jobs in all organizations. Jobs with
little or no flexibility, such as assembly-line work, are not compatible with MBO.

2. Psychological Appraisal
The appraisal normally consists of in-depth interviews, psychological tests,
discussions with supervisors and a review of other evaluations. The psychologist then
writes about employee's intellectual, emotional, motivational and other- related
characteristics that suggest individual potential and may predict future performance.
Since the quality of the appraisal depends largely on the skills of the psychologists,
some employees object to this type of evaluation, especially if cross-cultural differences
exists.

3. Assessment Centers
This method of appraising was first applied in German Army in 1930. In fact it is a
system or organization, where assessment of several individuals is done by various
experts using various techniques. These techniques include in-basket, role-playing,
case studies, and simulation exercise, transactional analysis.
In this individual are brought together to spend two or three days working on an
individual or group assignment similar to the ones they would be handling when
promoted. Observers rank the performance of each and every participant in order of
merit. All assesses get an equal opportunity to show their talents and capabilities and
secure promotion based on merit.
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The objectives of Assessment Centers are:
a) For measuring potential for first level supervision, upper management positions and
also higher level management positions.
b) For determining the training and development needs of employees
c) For selecting recent college students for entry level positions
d) For making early determination of potential and
e) For assisting in implementing affirmative action goals.

4. 360-degree Feedback
What is 360 Degree?
360-Degree Appraisal is basically a Multi-Rater Appraisal and Feedback
System. Almost every Fortune 500 Company is using this in some form or
the other. In this system:
The candidate is assessed periodically (once in a year and some times
even half yearly) by a number of assessors including his boss,
immediate subordinates, colleagues, internal customers and external
customers.
The assessment is made on a questionnaire specially designed to
measure behaviors considered as critical for performance.
Others do the appraisal anonymously and the assessment is collected
by an external agent (consultant) or specially designated internal
agent.
The assessment is consolidated; feedback profiles are prepared and
given to the participant after a workshop or directly by his boss or the
HRD department in a performance review discussion session.
Objectives of 360 Degree Feedback
It is possible to aim at the following through 360-degree or MAFS:
Insights into the strong and weak areas of the candidate in terms of the
effective performance of roles, activities, styles, traits, qualities,
competencies (knowledge, attitudes and skills), impact on others and the
like.
Identification of developmental needs and preparing development plans
more objectively in relation to current or future roles and performance
improvements for an individual or a group of individuals.
Data generation to serve as a more objective basis for rewards and other
personnel decisions.
Reinforcement of other change management efforts and organization
effectiveness directed interventions. These may include: TQM efforts,
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 customer focused or internal customer satisfaction enhancing
interventions, flat structures, quality enhancing and cost reducing
interventions, decision process changes etc.
Basis for performance linked pay or performance rewards.
Alignment of individual and group goals with organizational vision,
values and goals.

Aid in:
v Culture building.
v Leadership Development.
v Potential Appraisal and Development.
v Career Planning and Development.
v Succession Planning and Development.
v Team building.
v Planning Internal customer satisfaction improvement measures.
v Role clarity and increased accountabilities.

Advantages of the 360 Degree or MAFS

360-Degree appraisal systems have certain advantages. These advantages
are not substitutes for those of traditional appraisals but in addition to them.
Normally MAFS should be viewed as supplements to the regular KPA
or KRA based appraisal systems rather than as replacements of the same.
Additional advantages offered by MAFS are:
v It is more objective than a one-person assessment of traits and qualities.
v It adds objectivity and supplements the traditional appraisal system.
v It provides normally more acceptable feedback to employee.
v It can serve all the purposes served by the traditional appraisal system
like identifying the developmental needs, reward management,
performance development etc.
v It helps focus on internal customer satisfaction.
v It has the potential of pointing out the supervisory biases in the
traditional appraisal systems.
v It is a good tool for enhancing customer service and quality of inputs and
service to internal customers.
v It provides scope for the candidate to get multiple inputs to improve his
role, performance, styles and ideas and enhances the acceptability of the
individual.
v It is more participative and enhances the quality of HR decisions

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v It is suitable for new organizational cultures being promoted by most
world-class organizations(participative culture, learning culture, quality
culture, competency based performance culture, teamwork, empowering
culture, leadership culture, etc.)

Potential Appraisal
Potential appraisal is a future-oriented appraisal whose main objective is to identify
and evaluate the potential of the employees to assume higher positions and
responsibilities in the organizational hierarchy. Many organizations consider and use
PA as a part of the performance appraisal processes.

The potential appraisal refers to the appraisal i.e. identification of the hidden talents
and skills of a person. The person might or might not be aware of them. Potential
appraisal is a future-oriented appraisal whose main objective is to identify and
evaluate the potential of the employees to assume higher positions and responsibilities
in the organizational hierarchy. Many organizations consider and use PA as a part of
the performance appraisal processes.

Definitions
Potential appraisal is a process of determining an employee s strengths and
weaknesses with a view to use this as a predictor of his future performance.
Potential appraisal is a future oriented appraisal aimed to identify and evaluate
the potential of the employees to assume higher positions and responsibilities in
the organizational hierarchy
Need For Appraisal
Create competitive environment foe better performance
Infuse a healthy organizational culture
Boosting the morale and motivation of the employees
Attracting and retaining best talent
STEPS AND REQUIREMENTS

1)Role description- A good potential appraisal system would be based on clarity of

roles and functions associated with the different roles in an organization. The
requirement is extensive job description to be made available for each job. These job
descriptions should spell out the various functions involved in performing the job.
2) QUALITY REQUIRED
A) Technical knowledge and skills
B) Managerial capabilities and qualities
C) Behavioral capabilities
D) Conceptual capabilities
The following are some of the steps required to be followed while introducing a
potential appraisal system:
Rating mechanisms: Besides listing the functions and qualities, the potential appraisal
system must list mechanisms of judging the qualities of employees such as:
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i. Rating by others: The potential of a candidate could be rated by the immediate
supervisor who is acquainted with the candidate's work in the past, especially his
technical capabilities.
ii. Tests: Managerial and behavioral dimensions can be measured through a battery of
psychological tests.
iii. Games: Simulation games and exercises (assessment centre, business games, in-
basket, role play, etc.) could be used to uncover the potential of a candidate.
iv. Records: Performance records and ratings of a candidate on his previous jobs could
be examined carefully on various dimensions such as initiative, creativity, risk taking
ability, etc., which might play a key role in discharging his duties in a new job.
Organizing the system: After covering the above preliminaries, he must set up a
system that will allow the introduction of the scheme smoothly giving answers to some
puzzling questions:
i. How much weightage to merit in place of seniority in promotions?
ii. How much weightage to each of the performance dimensions technical,
managerial, behavioral qualities?
iii. What are the mechanisms of assessing the individual on different indicators of his
potential and with what reliability?
Feedback: The system must provide an opportunity for every employee to know the
results of his assessment. He should be helped to understand the qualities actually
required for performing the role for which he thinks he has the potential, the
mechanisms used by the organizations to appraise his potential and the results of such
an appraisal.

Steps in Potential Appraisal

1. Determination of role dimension for which an employees potential is to be
appraised. The role dimensions can be identified by job description and specification
which provide information about the responsibilities involved in a job and the
attributes required.
2. The mechanism for appraising these attributes in an employee should be
determined.
3. Potential appraisal based on the scoring of attributes.
4. Potential appraisal to be linked to other human resource management elements such
as providing feedback, counseling, training, development and job rotation.

Performance Counseling
Performance Counseling is very important for employees to know the level of their
performance and the area in which they need to improve. Performance counseling
is a very useful activity provided both the counselor and the counselee take it in
the right spirit. It helps the employee as well as the organization to identify
weaknesses and then to formulate strategies to improve the performance.
Performance improvement ultimately helps the organization to meet its goals and
objectives. It is always important to evaluate the performance of the employees
periodically to find out their level of efficiency. Some standard methods have been

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devised to make employees understand how far they are from the expected
standards so that their performance can be improved. Those employees who lag
behind in certain key performance areas must be assisted to analyze and improve
their performance levels. Therefore the process of performance appraisal helps to
evaluate and improve the performance of the employees so that they can give their
best to achieve the goals of the organization as well as achieve better career
satisfaction.

What is Performance Counseling?

Performance Counseling is a very important activity that helps employees to know
themselves better. Performance Counseling refers to the help provided by a
manager to his subordinates in objectively analyzing their performance. It attempts
to help the employee in:
1. Understanding himself - his strengths and weaknesses.
2. Improving his professional and interpersonal competence by giving him
feedback about his behavior.
3. Setting goals and formulating action plans for further improvement.

Features of Performance Counseling

(1) Conditions for effective counseling
A climate of trust, confidence and openness is essential for effective
counseling. Counseling cannot be effective if the subordinate does not trust his
boss.
It is necessary that the subordinate should feel free to participate without fear
or inhibition as it is a dialogue between supervisor and subordinate and hence
should be a two way communication.
The main purpose of counseling is employee development.
(2) Performance Counseling Phases
(a) Rapport Building: In the rapport building phase, a good counselor attempts to
establish a climate of acceptance, warmth, support, openness and mutuality. This
phase involves generating confidence in the employee to open up frankly, share
his perceptions, problems, concerns, feelings etc. The subordinate must be made to
feel wanted and that his superior is genuinely interested in his development.
(b) Exploration: In this phase, the counselor should attempt to help the employee
understand and appreciate his strengths and weaknesses. He should also
understand his own situation, problems and needs. Questions should be asked
which help the employee focus on his problem. For example, if an employee feels
that his problem is that others do not co-operate with him, the counselor may ask
questions to narrow down the problem to the employees relationship with a few
individuals. Then the superior may ask questions to help the employee understand
what he does (or says) to his colleagues that is making it difficult for him to win
their co-operations. Problem identification is a critical step in planning for
improvement. To help the employee make a correct diagnosis of the problem,
open-ended questions may be asked.

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(c) Action Planning: Counseling interviews should end with specific plans of
action for development of the employee. The main contribution of the superior in
this phase is in helping the employee think of alternative ways of dealing with a
problem. For example, in case of an employee whose relationships with colleagues
are poor, the superior may suggest What three things can you do in the coming
week to improve your relationship with X? After helping the employee
brainstorm, the superior may also add more alternatives to the solutions already
generated.

Finally the superior may render some assistance in helping the employee
implement the agreed upon action plan. Often good counseling sessions fail to
produce effective results due to lack of follow
Processes in Performance Counseling:-
(1) Feedback:
It is extremely important that the feedback is communicated in a manner that
produces a constructive response in the subordinate. Given below are some
guidelines that could be followed in giving feedback:
Feedback should be descriptive and non- evaluative. Rather than putting the
employee in a defensive position by telling him Your coming in late
convinces me that you are not serious about your work, a manager may say,
I notice that you have been regularly coming late and I am deeply concerned
about this.
It should be focused on the behavior of the person rather than on the person
himself. It is necessary to distinguish between the individual and his behavior
in conveying the negative feedback. It should be clear to the employee that
what is being rejected or criticized is some specific behavior of his. The intent
is not to condemn the employee as an individual.
When conveying feedback, it is generally desirable to back it up with few
examples of actual events. Care must be exercised not to overdo this as the
subordinate may misinterpret it that the superior is systematically building up
a well-documented case against him.
Feedback should be given timely. It should be given at the first opportunity
when the employee is in the receptive mood.
Feedback should be continuous. It should become a regular practice so that the
subordinate develops an ability to accept and act upon the feedback.
Feedback should be checked and verified. This will ensure that the
subordinate has not misinterpreted the feedback received from his superior.
(2) Pre-Interview Preparation:
Make sure you know what was mutually agreed in terms of job responsibilities
Review the employees background, education, training and experience.
Determine the strengths and development needs to be discussed with the
employee.
Identify areas that need attention during the next review period.

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 Make sure that the employee has sufficient advance notice for the interview so
that he has time to do his own preparation.
It is always useful to note down the key points on a piece of paper.
(3) Interview
Be sincere, informal and friendly. Explain the purpose of the discussion and
make it clear to the subordinate that the interview is a two way
communication.
Encourage the employee to discuss how he appraises his own performance.
Before discussing suggestions you have for his development, encourage the
employee to tell his own plans.
Make a record of plans you and the employee have made, points requiring
follow-up.

Career Planning Training and Development Rewards Employee Welfare

Career Planning
Career planning is the process by which one selects career goals and the path to these
goals. The major focus of career planning is on assisting the employees achieve a better
match between personal goals and the opportunities that are realistically available in
the organisation. Career programmes should not concentrate only on career growth
opportunities. Practically speaking, there may not be enough high level positions to
make upward mobility a reality for a large number of employees. Hence, career-
planning efforts need to pinpoint and highlight those areas that offer psychological
success instead of vertical growth.

Career planning is not an event or end in itself, but a continuous process of

developing human resources for achieving optimum results. It must, however, be
noted that individual and organisational careers are not separate and distinct. A
person who is not able to translate his career plan into action within the organisation
may probably quit the job, if he has a choice. Organisations, therefore, should help
employees in career planning so that both can satisfy each other's needs.

Need for Career Planning

Every employee has a desire to grow and scale new heights in his workplace
continuously. If there are enough opportunities, he can pursue his career goals and
exploit his potential fully. He feels highly motivated when the organisation shows him
a clear path as to how he can meet his personal ambitions while trying to realise
corporate goals. Unfortunately, as pointed out by John Leach, organisations do not pay
adequate attention to this aspect in actual practice for a variety of reasons. The
demands of employees are not matched with organisational needs, no effort is made
to show how the employees can grow within certain limits, what happens to an
employee five years down the line if he does well, whether the organisation is trying
to offer mere jobs or long-lasting careers, etc. When recognition does not come in time
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for meritorious performance and a certain amount of confusion prevails in the minds
of employees whether they are 'in' with a chance to grow or not, they look for greener
pastures outside. Key executives leave in frustration and the organisation suffers badly
when turnover figures rise. Any recruitment effort made in panic to fill the vacancies
is not going to be effective. So, the absence of a career plan is going to make a big
difference to both the employees and the organisation.
Employees do not get right breaks at a right time; their morale will be low and they are
always on their toes trying to find escape routes. Organisations are not going to benefit
from high employee turnover. New employees mean additional selection and training
costs. Bridging the gaps through short-term replacements is not going to pay in terms
of productivity. Organisations, therefore, try to put their career plans in place and
educate employees about the opportunities that exist internally for talented people.
Without such a progressive outlook, organisations cannot prosper.

Objectives
Career planning seeks to meet the following objectives:
1. Attract and retain talent by offering careers, not jobs.
2. Use human resources effectively and achieve greater productivity.
3. Reduce employee turnover.
4. Improve employee morale and motivation.
5. Meet the immediate and future human resource needs of the organisation on a
timely basis.

Process of Career Planning Notes

The career planning process involves the following steps:
1. Identifying Individual Needs and Aspirations: Most individuals do not have a clear
cut idea about their career aspirations, anchors and goals. The human resource
professionals must, therefore, help an employee by providing as much information as
possible showing what kind of work would suit the employee most, taking his skills,
experience, and aptitude into account.
2. Analysing Career Opportunities: Once career needs and aspirations of employees
are known, the organisation has to provide career paths for each position. Career paths
show career progression possibilities clearly. They indicate the various positions that
one could hold over a period of time, if one is able to perform well.
3. Aligning Needs and Opportunities: After employees have identified their needs and
have realised the existence of career opportunities the remaining problem is one of
alignment. This process consists of two steps: first, identify the potential of employees
and second, undertake career development programmes with a view to align employee
needs and organisational opportunities.
4. Action Plans and Periodic Review: The matching process would uncover gaps.
These need to be bridged through individual career development efforts and
organisation supported efforts from time to time. After initiating these steps, it is
necessary to review the whole thing every now and then.

Succession Planning
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The absence of a succession plan can seriously hamper the growth prospects of an
organisation. Imagine the disastrous consequences when there is a sudden vacuum at
the top level. There is no one to steer the ship. Critical plans needing immediate action
get postponed. The organisation remains headless and directionless for a while.
Suitable candidates may not be available internally, as no one has been groomed in the
past, keeping such an eventuality in mind. Bringing in outsiders may mitigate the crisis
temporarily but the long-term impact is bound to be negative. Internal forces may start
a rebellion and create tug-of-war situations with frustrating regularity.
Succession planning is: "The process of ensuring a suitable supply of successors for
current and future senior or key jobs arising from business strategy, so that the careers
of individuals can be planned and managed to optimise the organisations' needs and
the individuals' aspirations." The purpose of succession planning is to identify and
develop people to replace current jobholders in key positions. Through succession
planning, companies assure a steady flow of internal talent to fill important vacancies.
Succession planning encourages 'hiring from within' and creates a healthy
environment where employees have careers and not merely jobs. It helps in identifying
human resource shortages and skill shortages before openings occur. Thereafter, it
becomes easy to groom qualified candidates for future vacancies. The organisation is
thus assured of continuity of operations and better-qualified incumbents.
Preparing a schedule for succession is critical to the success of a company, especially
at the top level. When the baton changes over a period of time, disruption and
dislocation are minimised. Indeed, when a new CEO is meant to consolidate on past
successes, a slow shift is ideal. If qualified candidates are not available within the
company, outsiders can be considered readily for possible openings. Complete
dependence on succession from within or from outside is not desirable. Internal
candidates require a 'pat on the back' when they do well. External candidates are
needed for injecting flesh blood into the company.

Training
Introduction
Training improves, changes, and moulds the employee's knowledge, skill, behaviour
and aptitude and attitude towards the requirement of the job and the organization.
After an employee is selected, placed and introduced in an organization, he/she must
be provided with training facilities in order to adjust him/her to the job.
Definitions
According to Flippo, training is the act of increasing the knowledge and skills of an
employee for doing a particular job. Training may be defined as a planned programme
designed to improve performance and bring about measurable changes in knowledge,
skills, attitude and social behaviour of employees.
Training is concerned with imparting and developing specific skills for a particular
purpose. Training is the process of learning a sequence of programmed behaviour. The
behaviour being programmed, is relevant to a specific phenomenon that is a job.
Training is the process of increasing the skills of an employee for doing a particular
Job.
Characteristics of Training
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1. Increases knowledge and skills for doing the job.
2. Bridges the gap between jobs needs and employee skills, knowledge and behaviour.
3. Job-oriented process, vocational in nature.
4. Short-term activity designed essentially for operatives.
Difference between Training and Development
Training often has been referred to as teaching specific skills and behaviour. It is
usually reserved for people who have to be brought up to performing level in some
specific skills. The skills are almost always behavioural as distinct from conceptual or
intellectual.
Development: It refers broadly to the nature and direction of change induced in
employees, particularly managerial personnel, through the process of training and
education.
Development is considered to be more general than training and it is aimed towards
management people. Usually the intent of development is to provide knowledge and
understanding that will enable people to carry out non-technical organisational
functions more effectively, such as problem-solving, decision-making and relating to
people. Training is a short-term process utilizing a systematic and organized procedure
by which non-managerial personnel learn technical knowledge and skills for a definite
purpose.

Development is a long-term educational process utilizing a systematic and organized

procedure by which managerial personnel learn conceptual and theoretical knowledge
for general purposes.
Thus, training is meant for operatives and development is meant for managers.
Training tries to improve a specific skill relating to a job, whereas development aims
at improving the total personality of an individual. Training is a one shot-deal whereas
development is an ongoing, continuous process. Training is a result of outside
motivation, whereas development is mostly a result of internal motivation. Training
seeks to meet the current requirement of the job, whereas development seeks to meet
the future needs of the individual and job. Thus training is a reactive process, whereas
development is a proactive process.
Difference between Training and Education
Education is wider in scope and more general in purpose. Training is the act of
increasing the knowledge and skills of an employee while doing the job. It is job-
oriented. Education is the process of increasing the general knowledge and
understanding of the employee. It is personoriented, theory-based knowledge whose
main purpose is to improve the conceptual learning.
Types and Methods of Training
Types of Training
There are many approaches to training. We focus here on the types of training that are
commonly employed in present-day organisations.
1. Skills Training: This type of training is most common in organisations. The process
here is fairly simple. The need for training in basic skills (such as reading, writing,
computing, speaking, listening, problem solving, managing oneself, knowing how to
learn, working as part of a team, leading others) is identified through assessment.
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Specific training objectives are set and training content is developed to meet those
objectives. Several methods are available for imparting these basic skills in modern
organisations.
2. Refresher Training: Rapid changes in technology may force companies to go in for
this kind of training. By organising short-term courses which incorporate the latest
developments in a particular field, the company may keep its employees up-to-date
and ready to take on emerging challenges. It is conducted at regular intervals by taking
the help of outside consultants who specialise in a particular descriptive.
3. Cross-functional Training: Cross-functional Training involves training employees
to perform operations in areas other than their assigned job. There are many
approaches to cross functional training. Job rotation can be used to provide a manager
in one functional area with a broader perspective than he would otherwise have.
Departments can exchange personnel for a certain period so that each employee
understands how other departments are functioning. High performing workers can act
as peer trainers and help employees develop skills in another area of operation.
4. Team Training: Team training generally covers two areas: content tasks and group
processes. Content tasks specify the team's goals such as cost control and problem
solving. Group processes reflect the way members function as a team - for example
how they interact with each other, how they sort out differences, how they participate
etc. Companies are investing heavy amounts, nowadays, in training new employees to
listen to each other and to cooperate. They are using outdoor experiential training
techniques to develop teamwork and team spirit among their employees (such as
scaling a mountain, preparing recipes for colleagues at a restaurant, sailing through
uncharted waters, crossing a jungle, etc.).

5. Creativity Training: In creativity training, trainers often focus on three things :

(a) Breaking away: In order to break away from restrictions, the trainee is expected to (i)
identify the dominant ideas influencing his own thinking, (ii) define the boundaries
within which he is working, (iii) bring the assumptions out into the open and challenge
everything
(b) Generate new ideas: To generate new ideas, the trainee should open up his mind; look
at the problem from all possible angles and list as many alternative approaches as
possible. The trainee should allow his mind to wander over alternatives freely, expose
himself to new influences (people, articles, books, situations), switch over from one
perspective to another, arrange cross fertilization of ideas with other people and use
analogies to spark off ideas.
(c) Delaying judgement: To promote creative thinking, the trainee should not try to kill
off ideas too quickly; they should be held back until he is able to generate as many
ideas as possible. He should allow ideas to grow a little. Brainstorming (getting a large
number of ideas from a group of people in a short time) often helps in generating as
many ideas as possible without pausing to evaluate them. It helps in releasing ideas,
overcoming inhibitions, cross fertilizing ideas and getting away from patterned
thinking.

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Companies like Mudra Communications, Titan Industries, Wipro encourage their
employees to think unconventionally, break the rules, take risks, go out of the box and
devise unexpected solutions.
6. Diversity Training: Diversity training considers all of the diverse dimensions in the
workplace race, gender, age, disabilities, lifestyles, culture, education, ideas and
backgrounds while designing a training programme. It aims to create better
crosscultural sensitivity with the aim of fostering more harmonious and fruitful
working relationships among a firm's employees. The programme covers two things:
(i) awareness building, which helps employees appreciate the key benefits of diversity,
and (ii) skill building, which offers the knowledge, skills and abilities required for
working with people having varied backgrounds.
7. Literacy Training: Inability to write, speak and work well with others could often
come in the way of discharging duties, especially at the lower levels. Workers, in such
situations, may fail to understand safety messages, appreciate the importance of
sticking to rules, and commit avoidable mistakes. Functional illiteracy (low skill level
in a particular content area) may be a serious impediment to a firm's productivity and
competitiveness. Functional literacy programmes focus on the basic skills required to
perform a job adequately and capitalize on most workers' motivation to get help in a
particular area. Tutorial programmes, home assignments, reading and writing
exercises, simple mathematical tests, etc., are generally used in all company in-house
programmes meant to improve the literacy levels of employees with weak reading,
writing or arithmetic skills.
8. Orientation Training: In orientation training, new hires get a first-hand view of what
the company stands for, how the work is carried out and how to get along with
colleagues.
In short, 'they learn the ropes', the specific ways of doing things in a proper manner.
When a new employee is from a different country and culture, this initial training is
especially important in helping new employees adjust.
Methods of Training
Training methods are usually classified by the location of instruction. On the job
training is provided when the workers are taught relevant knowledge, skills and
abilities at the actual workplace; off-the-job training, on the other hand, requires that
trainees learn at a location other than the real workspot. Some of the widely used
training methods are listed below.
On-the-Job Training Methods
1. Job Instruction Training (JIT): The JIT method (developed during World War II) is
a four step instructional process involving preparation, presentation, performance try
out and follow up. It is used primarily to teach workers how to do their current jobs.
A trainer, supervisor or co-worker acts as the coach. The four steps followed in the JIT
methods are:
(i) Present Overview: The trainee receives an overview of the job, its purpose and its
desired outcomes, with a clear focus on the relevance of training.
(ii) Demonstrate and Show the way: The trainer demonstrates the job in order to give the
employee a model to copy. The trainer shows a right way to handle the job.

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(iii) Copy and Handle the Job independently: Next, the employee is permitted to copy the
trainer's way. Demonstrations by the trainer and practice by the trainee are repeated
until the trainee masters the right way to handle the job.
(iv) Follow-up: In this step, the trainer checks the trainee's job frequently after the
training programme is over to prevent bad work habits from developing.
2. Coaching: Coaching is a kind of daily training and feedback given to employees by
immediate supervisors. It involves a continuous process of learning by doing. It may
be defined as an informal, unplanned training and development activity provided by
supervisors and peers. In coaching, the supervisor explains things and answers
questions; he throws light on why things are done the way they are; he offers a model
for trainees to copy; conducts lot of decision making meetings with trainees;
procedures are agreed upon and the trainee is given enough authority to make
divisions and even commit mistakes.
Of course, coaching can be a taxing job in that the coach may not possess requisite skills
to guide the learner in a systematic way. Sometimes, doing a full day's work may be
more important than putting the learner on track.
3. Mentoring: Mentoring is a relationship in which a senior manager in an organisation
assumes the responsibility for grooming a junior person. Technical, interpersonal and
political skills are generally conveyed in such a relationship from the more experienced
person. A mentor is a teacher, spouse, counsellor, developer of skills and intellect, host,
guide, exemplar, and most importantly, supporter and facilitator in the realisation of
the vision the young person (protg) has about the kind of life he wants as an adult.
The main objective of mentoring is to help an employee attain psychological maturity
and effectiveness and get integrated with the organisation. In a work situation, such
mentoring can take place at both formal and informal levels, depending on the
prevailing work culture and the commitment from the top management. Formal
mentoring can be very fruitful, if management invests time and money in such
relationship building exercises.
Mentoring in India is based on the time-honoured guru-shishya relationship where the
guru would do everything to develop the personality of the shishya, offering emotional
support, and guidance. When young people are bombarded with conflicting
viewpoints - about how things should go - from a series of advisors, they may find it
difficult to get ahead with confidence. Mentoring can succeed if (i) there is genuine
support and commitment from top management, (ii) mentors take up their job
seriously and transfer ideas, skills and experiences in a systematic way, and (iii)
mentees believe in the whole process and carry out things in an appropriate manner.
4. Job Rotation: This kind of training involves the movement of trainee from one job
to another. This helps him to have a general understanding of how the organisation
functions. The purpose of job rotation is to provide trainees with a larger organisational
perspective and a greater understanding of different functional areas as well as a better
sense of their own career objectives and interests. Apart from relieving boredom, job
rotation allows trainees to build rapport with a wide range of individuals within the
organisation, facilitating future cooperation among departments. The cross-trained
personnel offer a great amount of flexibility for organisations when transfers,
promotions or replacements become inevitable.
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Job rotation may pose several problems, especially when the trainees are rolled on
various jobs at frequent intervals. In such a case, trainees do not usually stay long
enough in any single phase of the operation to develop a high degree of expertise. For
slow learners, there is little room to integrate resources properly. Trainees can become
confused when they are exposed to rotating managers, with contrasting styles of
operation. Today's manager's commands may be replaced by another set from another
manager! Further, job rotation can be quite expensive. A substantial amount of
managerial time is lost when trainees change positions, because they must be
acquainted with different people and techniques in each department. Development
costs can go up and productivity is reduced by moving a trainee into a new position
when his efficiency levels begin to improve at the prior job. Inexperienced trainees may
fail to handle new tasks in an efficient way. Intelligent and aggressive trainees, on the
offer hand, may find the system to be thoroughly boring as they continue to perform
more or less similar jobs without any stretch, pull and challenge. To get the best results
out of the system, it should be tailored to the needs, interests and capabilities of the
individual trainee, and not be a standard sequence that all trainees undergo.
Job Rotation allows the manger to operate in diverse roles and understand the different
issues that crop up. If someone is aspiring to be a corporate leader, then he or she must
have this type of training. A recent study indicated that the single most significant
factor that leads to leader's achievement was the variety of experiences in different
departments, business units, cities, and countries.
5. Apprenticeship Training: Most craft workers such as plumbers and carpenters are
trained through formal apprenticeship programmes. Apprentices are trainees who
spend a prescribed amount of time working with an experienced guide, coach or
trainer.
Assistantships and internships are similar to apprenticeships because they also
demand high levels of participation from the trainee. An internship is a kind of on-the-
job training that usually combines job training with classroom instruction in trade
schools, colleges or universities. Coaching, as explained above, is similar to
apprenticeship because the coach attempts to provide a model for the trainee to copy.
One important disadvantage of the apprenticeship methods is the uniform period of
training offered to trainees. People have different abilities and learn at varied rates.
Those who learn fast may quit the programme in frustration. Slow learners may need
additional training time. It is also likely that in these days of rapid changes in
technology, old skills may get outdated quickly. Trainees who spend years learning
specific skills may find, upon completion of their programmes, that the job skills they
acquired are no longer appropriate.
6. Committee Assignments: In this method, trainees are asked to solve an actual
organizational problem. The trainees have to work together and offer solution to the
problem. Assigning talented employees to important committees can give these
employees a broadening experience and can help them to understand the personalities,
issues and processes governing the organisation. It helps them to develop team spirit
and work unitedly toward common goals. However, managers should very well
understand that committee assignments could become notorious time wasting
activities.
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Off-the-Job Training Methods
Under this method of training, the trainee is separated from the job situation and his
attention is focused upon learning the material related to his future job performance.
Since the trainee is not distracted by job requirements, he can focus his entire
concentration on learning the job rather than spending his time in performing it. There
is an opportunity for freedom of expression for the trainees. Off-the-job training
methods are as follows:
1. Vestibule Training: In this method, actual work conditions are simulated in a class
room. Material, files and equipment - those that are used in actual job performance are
also used in the training. This type of training is commonly used for training personnel
for clerical and semi-skilled jobs. The duration of this training ranges from a few days
to a few weeks. Theory can be related to practice in this method.
2. Role Playing: It is defined as a method of human interaction that involves realistic
behaviour in imaginary situations. This method of training involves action, doing and
practice. The participants play the role of certain characters, such as the production
manager, mechanical engineer, superintendents, maintenance engineers, quality
control inspectors, foreman, workers and the like. This method is mostly used for
developing interpersonal interactions and relations.
3. Lecture Method: The lecture is a traditional and direct method of instruction. The
instructor organises the material and gives it to a group of trainees in the form of a talk.
To be effective, the lecture must motivate and create interest among the trainees. An
advantage of lecture method is that it is direct and can be used for a large group of
trainees. Thus, costs and time involved are reduced. The major limitation of the lecture
method is that it does not provide for transfer of training effectively.
4. Conference/discussion Approach: In this method, the trainer delivers a lecture and
involves the trainee in a discussion so that his doubts about the job get clarified. When
big organisations use this method, the trainer uses audio-visual aids such as
blackboards, mock-ups and slides; in some cases the lectures are videotaped or audio
taped. Even the trainee's presentation can be taped for self-confrontation and self-
assessment. The conference is, thus, a group-centered approach where there is a
clarification of ideas, communication of procedures and standards to the trainees.
Those individuals who have a general educational background and whatever specific
skills are required - such as typing, shorthand, office equipment operation, filing,
indexing, recording, etc. - may be provided with specific instructions to handle their
respective jobs.
5. Programmed Instruction: This method has become popular in recent years. The
subject matter to be learned is presented in a series of carefully planned sequential
units. These units are arranged from simple to more complex levels of instruction. The
trainee goes through these units by answering questions or filling the blanks. This
method is, thus, expensive and time-consuming.
6. E-learning: It allows trainees to improve their skills and knowledge at their own
comfortable pace. The trainee participates actively and is able to upgrade skills in a
time bound manner. Of course, e-training requires top management support,
uninterrupted internet access, investments in establishing learning portals and is not
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suitable for imparting behavioural skills to trainees. Technology barriers like
bandwidth will restrict and hamper the effectiveness of e-learning. Learning
effectiveness might never match the level of classroom for a long time.
7. Behaviourally Experienced Training: Some training programmes focus on emotional
and behavioural learning. Here employees can learn about behaviour by role playing
in which the role players attempt to act their part in respect of a case, as they would
behave in a real-life situation. Business games, cases, incidents, group discussions and
short assignments are also used in behaviourally-experienced learning methods.
Sensitivity training or laboratory training is an example of a method used for emotional
learning.
The focus of experiential methods is on achieving, through group processes, a better
understanding of oneself and others. These are discussed elaborately in the section
covering
Executive Development Programmes.
Objective of Training and Development
1. To Increase Efficiency
2. To Increase Morale of Employees
3. To Establish Better Human Relations
4. To Reduce Supervision
5. To Increase Organizational Viability and Flexibility.
Need for Training
1. Newly recruited employees require training so as to perform their tasks effectively.
Instruction, guidance, coaching help them to handle jobs competently without any
wastage.
2. Training is necessary to prepare existing employees for higher-level jobs
(promotion).
3. Existing employees require refresher training so as to keep abreast of the latest
development in the job operations.
4. Training is necessary when one moves from one job to another (transfer).
5. Training is necessary to make employee mobile and versatile. They can be placed on
various jobs depending on organisational needs.
6. Training is needed to bridge the gap between what the employee has and what the
job demands.
Importance of Training
1 To the Organization
1. Gets more effective in decision-making and problem-solving.
2. Improve the morale of the workforce.
3. Helps people identify the organizational goal.
4. Aids in developing leadership skills, motivation, loyalty and better attitude.
5. Aids in improving productivity and quality of work.
6. Aids in understanding and carrying out organizational policies.
7. Aids in organizational development.
8. Creates an appropriate climate for growth and communication.
9. Helps employees adjust to change.
2 To the Employees
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1. Increases job satisfaction and recognition.
2. Moves a person towards personal goals while improving interactive skills.
3. Helps in eliminating fear of attempting new tasks.
4. Provides the trainee an avenue for growth.
5. Through training and development, motivational variables of recognition,
achievement, growth, responsibility and advancement are internalized and
operationalised.
6. Provides information for improving leadership, communication skills and attitudes.
7. Helps to handle stress, tension, frustration and conflict.
3 For Personnel and Human Relation
1. Improve inter-personnel skills
2. Improves morale
3. Builds cohesiveness in groups
4. Makes the organization a better place to work and live
5. Provides information on other governmental laws and administrative policies.

Benefits of Training
Benefits to the Business:
1. Trained people can work more efficiently
2. They use machines, tools materials in a proper way. Wastage is thus eliminated to
a large extent.
3. There are fewer accidents.
4. They show superior performance.
5. It makes employees more loyal to an organisation. They will be less inclined to
leave the unit where there are growth opportunities.
Benefits to the Employee
1. It makes an employee more useful to the firm
2. It makes employees more efficient and effective. They produce more with
minimum effort.
3. It enables employees to secure promotion easily. They can realiz e their career
goals comfortably.
4. They can handle jobs with confidence. They are more satisfied on their jobs. Their
morale would be high.
5. It can enable employees to cope with organisational, social and technological
change. Effective training is an invaluable investment in the human resource of an
organisation.

Steps in Career Development System

Career development consists of the personal actions one undertakes to achieve a career
plan. Career development looks at the long-term career effectiveness of employees. The
actions for career development may be initiated by the individual himself or by the
organisation. Career progress and development is largely the outcome of actions on
the part of an individual. Some of the important steps that could help an individual
cross the hurdles on the way 'up' may include:

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1. Performance: Career progress rests largely on performance. If the performance is
sub-standard, even modest career goals can't be achieved.
2. Exposure: Career development comes through exposure, which implies becoming
known by those who decide promotions, transfers and other career opportunities. You
must undertake actions that would attract the attention of those who matter most in
an organisation.
3. Networking: Networking implies professional and personal contacts that would
help in striking good deals outside (e.g., lucrative job offers, business deals, etc.). For
years men have used private clubs, professional associations, old-boy networks, etc.,
to gain exposure and achieve their career ambitions.
4. Leveraging: Resigning to further one's career with another employer is known as
leveraging. When the opportunity is irresistible, the only option left is to resign from
the current position and take up the new job (opportunity in terms of better pay, new
title, a new learning experience, etc.). However, jumping too jobs frequently (job-
hopping) may not be a good career strategy in the long run.
5. Loyalty to Career: Professionals and recent college graduates generally jump jobs
frequently when they start their career. They do not think that career-long dedication
to the same organisation may not help them further their career ambitions. To
overcome this problem, companies such as Infosys, NIIT, WIPRO (all information
technology companies where the turnover ratios are generally high) have come out
with lucrative, innovative compensation packages in addition to employee stock
option plans for those who remain with the company for a specified period.
6. Mentors and Sponsors: A mentor is, generally speaking, an older person in a
managerial role offering informal career advice to a junior employee. Mentors take
junior employees as their protgs and offer advice and guidance on how to survive
and get ahead in the organisation. They act as role models. A sponsor, on the other
hand, is someone in the organisation who can create career development
opportunities.
7. Key Subordinates: Qualified and knowledgeable subordinates, often extend
invaluable help that enables their bosses to come up in life. When the bosses cross the
bridge, they take the key subordinates also along with them. In his own self interest,
the subordinate must try to find that winning horse on which he can bet.
8. Expand Ability: Employees who are career conscious must prepare themselves for
future opportunities that may come their way internally or externally by taking a series
of proactive steps (e.g., attending a training programme, acquiring a degree, updating
skills in an area, etc.).
Training Process
Training is most effective when it is planned, implemented and evaluated in a
systematic way. Unplanned, uncoordinated and haphazard training efforts greatly
reduce the learning that can be expected. A training process includes the following
steps:
1 Identification of Objectives

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The first thing is to identify the business objectives. This step provides the direction for
which way organisation has to move. Thus, the business plan shows the activities to
be carried out to achieve the said objectives.
2 Determining Training Needs
Training efforts must aim at meeting the requirements of the organisation (long-term)
and the individual employees (short-term). Training needs can be identified through
the following types of analysis.
1. Organisational Analysis: It involves a study of the entire organisation in terms of
its objectives, its resources, the utilisation of these resources, in order to achieve stated
objectives and its interaction pattern with environment. The important elements that
are closely examined in this connection are:
(i) Analysis of Objectives: This is a study of short term and long term objectives and the
strategies followed at various levels to meet these objectives.
(ii) Resource Utilisation Analysis: How the various organisational resources (human,
physical and financial) are put to use is the main focus of this study. The contributions
of various departments are also examined by establishing efficiency indices for each
unit. This is done to find out comparative labour costs, whether a unit is undermanned
or over-manned.
(iii) Environmental Scanning: Here the economic, political, socio-cultural and
technological environment of the organisation is examined.
(iv) Organisational Climate Analysis: The climate of an organisation speaks about the
attitudes of members towards work, company policies, supervisors, etc. Absenteeism,
turnover ratios generally reflect the prevailing employee attitudes. These can be used
to find out whether training efforts have improved the overall climate within the
company or not.
2. Task or Role Analysis: This is a detailed examination of a job, its components, its
various operations and conditions under which it has to be performed. The focus here
is on the roles played by an individual and the training needed to perform such roles.
After collecting the information, an appropriate training programme may be designed,
paying attention to (i) performance standards required of employees, (ii) the tasks they
have to discharge, (iii) the methods they will employ on the job, and (iv) how they have
learned such methods, etc.
3. Person Analysis: Here the focus is on the individual in a given job. There are three
issues to be resolved through manpower analysis. First, we try to find out whether
performance is satisfactory and training is required. Second, whether the employee is
capable of being trained and the specific areas in which training is needed. Finally, we
need to state whether poor performers (who can improve with requisite training
inputs) on the job need to be replaced by those who can do the job.
3 Identify Training Objectives
Once training needs are identified, objectives should be set to begin meeting these
needs.
4 Determining Content and Schedule of Training
According to the nature of the training, contents and schedule of training are specified.
Generally, training cover two aspects: technical and behavioural. As per requirement
of the training participants, facilities, instructors and aids are decided on.
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5 Coordination of Training Programme
Very often HR department coordinates the training programme. It involves preparing
the list of participants, schedules, programmes, etc. and arranging faculty and support
services like refreshment, training aids and documentation of programmes.
6 Evaluating the Training Programme
It is for knowing whether training programme has been able to achieve its objectives.
Various methods of evaluation can be used to determine the effectiveness of training.
Companies nowadays, are designing career programmes with a view to increase
employee productivity, prevent job "burn out" and obsolescence, and improve the
quality of employees' work lives. Thanks to the LPG era (liberalisation, privatisation
and globalisation) individuals, too, are expected to develop new and better personal
skills of self-assessment and career planning to be in the race, especially since
companies do not have the resources to completely plan individuals' careers. Effective
career planning should become an inescapable fact of organizational life because it
helps companies meet internal staffing requirements and reduce turnover while it
helps employees meet their needs for challenge and achievement of career goals.
Employee Welfare
Introduction
Every organization hears what employees says, Good organisation listens to what employees have
to say but organizations with employee welfare schemes listens what employees don't say.
Welfare relates to taking care of the well being of workers by employers, trade unions, governmental
and non-governmental organizations. It refers to the betterment for employees. Employee welfare
defines as "efforts to make life worth living for workmen". These efforts have their origin either in
some statute formed by the state or in some local custom or in collective agreement or in the
employer's own initiative.
Employee or labour welfare is a comprehensive term including various services, benefits and facilities
offered to employees by the employer. Through such generous fringe benefits the employer makes
life worth living for employees. The welfare amenities are extended in addition to normal wages and
other economic rewards available to employees as per the legal provisions.
According to Dr Parandikar, "Labour welfare work is work for improving the health, safety and
general well being and the industrial efficiency of the workers beyond the minimum standard laid
down by labour legislation". Welfare measures may also be provided by the government, trade
unions and non-government agencies in addition to the employer. The basic purpose of labour
welfare is to enrich the life of employees and keep them happy and contented. Welfare measures may
be both statutory and voluntary. Labour laws require the employer to extend certain benefits to
employees in addition to wages. Voluntary benefits are the result of employer's generosity,
enlightenment and philanthropic feelings.
According to the Royal Commission on Labour, Labour welfare is a term which must necessarily be
elastic, bearing a somewhat different interpretation in one country from another, according to
different social customs, the degree of industrialization and educational level of workers.
The Oxford Dictionary defines labour welfare as "efforts to make life worth living for worker"
Chamber's Dictionary defines welfare as "a state of faring or doing well; freedom from calamity,
enjoyment of health, prosperity." The ILO report refers to labour welfare as "such services, facilities,
and amenities, which may be established in, or in the vicinity of undertakings to enable persons
employed therein to perform their work in healthy and congenial surroundings and provided with
amenities conducive to good health and high morale." (Sharma; Mamoria)
Importance

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The significance of welfare measures was accepted as early as 1931, when the Royal Commission on
Labour stated: The benefits are of great importance to the worker which he is unable to secure by
himself. The schemes of labour welfare may be regarded as a wise investment because these would
bring a profitable return in the form of greater efficiency.
Harsh times are never long-lasting, but continuing the same seems almost continuous in the process.
Employee welfare initiatives should not be put on the back burner in the name of cutting costs. Being
prudent in spending is the key here, with constant communication to ward off adverse rumors and
protect employee sentiments. The working environment in a factory adversely affects the health of
employees because of excessive heat or cold, noise, fumes, dust and lack of sanitation and pure air.
Such oppressive conditions create health problems for workers. These have to be contained through
preventive steps aimed at improving the lot of workers.
A second reason in favour of welfare work is called the 'social invasion of the factory'. Workers face
lots of adjustment problems when they take up factory work. The congested environs, noisy
machines, slum areas, monotonous jobs impact the psyche of ruralities who come to cities in search
of jobs. To escape from such trying conditions, the worker absents himself, becomes irregular and
shows signs of indiscipline. Such changes known as the social invasion of the factory call for extra
inducements in the workplace in addition to normal wages, so that the worker begins to enjoy a fuller
and richer life.
Another social reason pointed out by the Labour Investigation Committee reads thus: "the provision
of canteens improves the physique; entertainment reduces the incidence of vices; medical aid,
maternity and child welfare services improve the health of the workers and bring down the rates of
general, maternal and infantile mortality; and educational facilities increase their mental efficiency
and economic productivity.
It is not an easy task however to look beyond the profit margins and focus on employee wellbeing in
times of shrinking bottom line, but then that is perhaps the need of the times. There are many
organizations however who consider employee welfare as a hygiene issue.
Nature
1. Labour welfare work is undertaken by the employer to improve the standards of living of workers.
2. The work generally includes those items of welfare which are over and above what the employees
expect as a result of the contract of service from the employers.
3. The purpose of providing welfare amenities is to bring about development of the whole personality
of the worker his social, psychological, economic, moral, cultural and intellectual development.
4. Welfare work is something which goes beyond the rule book-not always mandated by law and
undertaken by progressively minded employers.
5. These may be undertaken by the government or trade unions, if they have the resources earmarked
for this purpose.
6. It may be noted that not only intramural but also extramural, statutory as well as nonstatutory
activities, undertaken by any of the three agencies the employers, trade unions or the government
for the physical and mental development of the worker.
Types
Welfare and recreational benefits include: (a) canteens, (b) consumer societies, (c) credit societies, (d)
housing, (e) legal aid, (f) employee counseling, (g) welfare organisations, (h) holidays homes, (i)
educational facilities, (j) transportation, (k) parties, and picnics and (l) miscellaneous.
1. Canteens: Section 46 of the Factories Act, 1948, imposes a statutory obligation to employers to
provide canteens in factories employing more than 250 workers. Foodstuffs are supplied at
subsidized prices in these canteens.
2. Consumer Stores: Most of the large organisations located far from the towns set up the consumer
stores in the employees' colonies and supply all the necessary goods at fair prices.
3. Credit Societies: Some organisations encourage employees to form cooperative credit societies with
a view to fostering self-help rather than depending upon money lenders, whereas some organisations
provide loans to employees directly.

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4. Housing: Most of the organisations built quarters nearer to factory and provided cheap and decent
housing facilities to their employees, whilst a few organisations provide and/or arrange for housing
loans to employee and encourage them to construct houses.
5. Legal Aid: Organisations also provide assistance or aid regarding legal matters to employees as
and when necessary through company lawyer or other lawyers.
6. Employee Counselling: Organisations provide counselling service to the employee regarding their
personal problems through professional counsellors. Employee counselling reduces absenteeism,
turnover, tardiness, etc.
7. Welfare Organisations, Welfare Officers: To provide all types of welfare facilities at on centre and
appoint welfare officers to provide the welfare benefit continuously and effectively to all employee
fairly.
8. Holiday Homes: As a measure of staff, a few large organisations established holiday home at a
number of hill stations, health resort and other centres with low charges of accommodation, so as to
encourage employees to use this facilities for rest.
9. Educational Facilities: Educational facilities include reimbursement of fee, setting up of schools,
colleges, hostel. Further, the organisations provide rooms and libraries for the benefit of employees.
10. Transportation: Companies provide conveyance facilities to their residence to the place of work
as most of the industries are located outside town and all employees may not get quarter facility.
11. Parties and Picnics: Companies provide these facilities with a view to inculcating a sense of
association, belongingness, openness and freedom among employees.
Statutory Provisions
There are four types of initiatives through the Plan for the Labour and Labour Welfare Sector.
They are: (i) Training for skills development (ii) Services to job seekers (iii) Welfare of Labour
(iv) Administration of Labour regulations. Many initiatives are taken for the benefit of workers
through the plans of a number of Labour Intensive Sectors. Employers are required to offer
welfare facilities to workers under different labour laws. These are discussed below (Labour
Laws 2009):
1 The Factories Act, 1948
The Act provides the following services to workers:
facilities to male and female workers separately.

one for every 150 workers and the ambulance facility if there are
more than 500 workers.

-rooms and lunch rooms where over 150 workers are employed.

more workers are employed.

2 The Plantation Labour Act, 1951
The Act provides for the following:
.
.

Educational arrangements in the estate if there are 25 or more children of workers, between the age
of 6 and 12

allowance
- as
prescribed by the State government.

3 The Mines Act, 1951 Notes

The Act provides for the following:
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 -aid rooms if 150 or more workers are employed

-head baths equipped with showers, sanitary latrines

4 The Motor Transport Workers Act, 1961

The Act contains the following provisions:

-lighted rest rooms at every place where motor transport

workers are required to halt at night
ats to conductors, drivers, and line checking staff for protection against cold and
rain

5 The Contract Labour (Regulation and Abolition) Act, 1970

The Act requires the contractor to extend the following benefits to workers:

to halt
at night in connection with the work of an establishment
es.

Labour Welfare Officer

The Factories Act, 1948, the Plantation Labour Act, 1951 and the Mines Act, 1951 provide for the
appointment of a Labour Welfare Officer if the number of workers employed within a unit exceeds
500 (300 as per the Plantation Act). The post has been created specifically to (i) eliminate the
malpractices of the jobber system in the recruitment of labour, (ii) improve labour administration in
factories, (iii) Serve as liaison with the State Labour Commissioner. The Labour Welfare Officer was
also expected to discharge the functions of a policeman, with respect to law and order situation within
an organisation. In each case the respective state governments may prescribe duties, qualifications
and conditions of service of such officers.
The Labour Welfare Officer should possess a university degree, degree or diploma in social
service/social work from a recognized institution and adequate knowledge of local language of the
area where the factory is situated.
The duties and responsibilities of a Labour Welfare Officer may be summarized (Central Welfare
Officers Rules, 1951):
Advisory: He can advise and suggest the formulation of company labour policies; promote training
programmes, promote welfare schemes; secure housing, recreational and educational facilities for
workers, etc.
Service oriented: He can offer help to workers in solving family and personal problems, in adjusting
to work environment, in understanding their rights and privileges, in forwarding application for
leave, etc. He can offer help to management by making workers understand various problems.
Supervisory: He can supervise, inspect and regulate welfare, health and safety programmes,
working of joint committees and paid vacations.
Functional: He can oversee the implementation of labour laws for the benefit of workers.
Policing: He can forward workers' grievances to management, can influence industrial relations
climate when disputes arise, can restrain workers and management from resorting to illegal strikes
and lockouts.

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 Mediation: He can mediate and build harmony between labour and management, secure speedy
redressal of workers' grievances, settle disputes through persuasive efforts, maintain a neutral stance
during strikes and lockouts and thereby help in resolving troubling issues peacefully.
Merits and Demerits of Welfare Notes
Merits
1. Enables workers to have a richer and more satisfying life.
2. Raises the standard of living of the workers by indirectly reducing the burden on their pocket.
Welfare measures will improve the physical and psychological health of employees, which in turn,
will enhance their efficiency and productivity.
3. Absorbs the shocks injected by industrialisation and urbanisation on workers.
4. Promotes a sense of belonging among workers, preventing them from resorting to unhealthy
practices like absenteeism, labour turnover, strike, etc. Welfare work makes the service in mills more
attractive to workers. It improves the relations between employers and employees. "It promotes a
real change of heart and a change of outlook on the part of both the employers and employees".
5. Prevents social evils like drinking, gambling, prostitution, etc., by improving the material, social
and cultural conditions of work. Congenial environment as a result of welfare measures will act as a
deterrent against such social evils. (Murthy)
Demerits
1. Huge investment.
2. Employees being dissatisfied.

Communication: Steps in the Communication Process; Communication Channels;

Oral versus Written Communication; Verbal versus non-verbal Communication;
upward, downward and lateral communication; Barriers to Communication
Communication:
Introduction
Communication is the exchange of messages between people for the purpose of reaching common
understandings, and achieving common goals. Unless common meanings are shared, managers find
it extremely difficult to influence others. Whenever groups of people interact, communication takes
place. Communication is the exchange of information using a shared set of symbols. It is the process
that links group members and enables them to coordinate their activities. Therefore, when managers
foster effective communication, they strengthen the connections between employees and build
cooperation.
Characteristics of Communication
The following are the characteristics of communication.
1. Communication is a two-way process because orders, instructions, directions, guidelines, etc., are
directed or communicated downwards while suggestions, complaints, grievances etc., are
communicated upwards. This not only involves giving ideas but also receiving them.
2. No business organisation can exist without communication because it is necessary to have a
congenial relationship between the different employees working at different levels and that is why it
is a continuous process.
3. The communication process continues to the extent that ideas and messages are communicated
and received.
4. It may be formal or informal and it may be in different mediums.
Significance of Communication Notes
The importance of communication in management can be judged from the following:
1. Gaining acceptance of policies, winning cooperation of others, getting instructions and ideas clearly
understood and bringing about the desired changes in performance are dependent upon effective
communication.

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2. Communication helps the management in arriving at vital decisions. In its absence, it may not be
possible for the top-level management to come in closer contact with each other and discuss the
important problems pertaining to the organisation.
3. Constant communication with personnel helps the management to remain informed about their
problems, difficulties and grievances.
4. Communication is quite essential for coordination, which is the essence of effective management.
5. Greater, better and cheaper production are the aims of all managers. In todays organisations, the
information passes through a variety of filters and there is always a chance for misinterpretation. An
effective system of communication can play a vital role in avoiding this illusion.
6. Under an effective system of communication, it is quite convenient for the employees to express
their grievances, and bring all their problems to the notice of the management.
ELEMENTS OF COMMUNICATION
Communication has three important parts transmitting, listening and feedback. The sender
transmits the message through one medium or another. The receiver listens to the message and then
conveys his understanding of the message to the sender in the form of feedback to complete the
communication cycle. The process of conveying a message is complete only when the person
receiving it has understood the message in its entirety.
Types of Communication
1 Based on Level
Levels of communication are:
1. Intrapersonal communication: It is the language used or thought internal to the communicator.
Intrapersonal communication is the active internal involvement of the individual in symbolic
processing of messages.
2. Interpersonal communication: It is the level in which communication channels are the medium
chosen to convey the message from sender to receiver.
3. Group communication refers to the nature of communication that occurs in groups that are between
3 and 12 individuals.
4. Public communication: Its at the heart of our economy, society, and politics.
2 Based on Form/Medium Used
Communication can be classified on the basis of the medium employed:
1. Verbal Communication: It means communicating with words, written or spoken. In this method
of communication the two parties exchange their ideas or the message with the help of word of
mouth. The message, instruction, order, directive etc., is conveyed through spoken words. Examples
of verbal communications are telephone talk, oral orders, face to face talks, counseling etc. Some of
the advantages of verbal communication are as follows:
-- It saves time and money. No other device is so short, simple and quick.
-- Because of the face contact or personal touch, it is effective.
-- Oral communication is easily understood. Even when there are doubts they can be cleared on the
spot.
-- The effect of the communication or response to the communication can be easily measured. Suitable
changes can also be done immediately.
-- During periods of emergency, oral communication is the best method.
However, oral communication is not suitable in the following cases:
-- When the communicator and the recipient are far off, (beyond the telephone range) oral
communication will not serve the purpose.
-- If the message to be transmitted is lengthy and requires a thorough clarification, oral
communication will not be suitable.
-- Oral communication does not serve as a record or as evidence. It cannot be made use of in future.
-- There are chances of misunderstanding and mis-interpreting the communication.
2. Non-verbal communication: It includes using of pictures, signs, gestures, and facial expressions for
exchanging information between persons.
3. Written Communication
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A written communication is conveyed through a letter, report, circular notes, memoranda, notice and
communique. It is a very common form of communication in most of the organisations and is suitable
for many situations.
The usual forms of written communication are:
Orders given by the superiors to the sub- ordinates. These can be of three types. a. General b. Specific
c. Definite
General orders are given by the top management, specific orders by the middle level management to
lower level managers and definite orders by the supervisor to workers.
-- Instructions given by the departmental heads to supervisors and by the supervisors to their sub-
ordinates.
-- Reports submitted by the authorized persons. These are of three types.
(a)Routine reports- which are prepared periodically and are a regular feature.
(b)Commission reports- which are of a non-routine nature and are prepared under special orders.
(c)Special circumstances reports.
Written communications have the following advantages.
-- They serve as permanent record and as a source or reference.
-- More care is taken in drafting written communication (than is in the case of oral communications)
and this saves the subsequent loss of time and money.
-- When the communicator and recipient are far off, written communication is the best method.
-- The recipient can ponder over the communication and request for changes, if necessary.
The disadvantages are listed below:
-- As everything is to be translated into black and white, it consumes a lot of time and money.
-- People do not care at all to pass the appropriate message.
Consequently, poor messages are to be followed by clarifications and explanations.
-- Sometimes it may not be possible to reduce everything into writing. Any omission will call for
additional communication.
-- Written communication is subject to delay and red-tapism.
-- It is very difficult to keep some communications up
4. Meta communication: Here the speakers choice of words unintentionally communicates
something more than what the actual words state.
5. Formal Communication: A formal channel of communication can be defined as a means of
communication that is formally controlled by managers or people occupying positions in an
organisation.
The formal organisation chart describes the formal lines of authority, power, responsibility and
accountability of the organizational members. All these relationships involve communication. For
instance, the delegation of authority involves the flow information from a superior to his subordinate.
Formal communications are in black and white.
6. Informal Communication: Side by side with the formal channel of communication every
organisation has an equally effective channel of communication that is the informal channel.
Informal communication is free from all the formalities of formal communication. Informal
communication is based on the informal relationship among the organisation members. It is
conveyed by a simple gesture, glance, nod, smile or mere silence. For instance, when the worker
approaches the manager and informs about the completion of the job entrusted to him, and if the
manger simply nods his head or gives an approving smile, then it amounts to informal
communication.
The informal communication which supplements the formal organizational relationship is referred
to as the Grapevine. Though this relationship is structureless, it comes into existence when formal
organizational members who know each other pass on information relating to the enterprise. It
thrives on information not openly available to the entire work group. This may be due to the fact that
information is regarded as confidential. The Grapevine may flourish, if formal lines of
communication are inadequate. The Grape vine is inevitable and valuable, because all forms of

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informal organisation serve essential human communication needs. It is very effective for quick
communication.
7. Downward Communication: The Communication that flows from Top to Bottom is known as
downward communication. The purposes of downward communication are:
a. To give job instructions
b. To create an understanding of the work and its relations with other tasks.
c. To inform about procedures.
d. To inform sub-ordinates about their performance.
e. To indoctrinate the workers to organizational goals.
8. Upward Communication: The Communication that flows from bottom to top, which is from lower
hierarchical level to higher level, is called Upward Communication.
9. Lateral Communication: When communication takes place between two or more persons who are
subordinates working under the same person, or those who are working on the same level, it is called
lateral or horizontal communication.
9. Diagonal Communication: Diagonal or Crosswise communication includes flow of information
among persons at different levels who have no direct reporting relationships.
3 Based on Context
Based on context, the different types of communication are:
Organisational Communication: It is communication which gives life to the organisation; so, it can
be likened to the life blood of an organisation. The communication system serves as the vehicle by
which an organisation is embedded in its environment.
Political Communication: Political communication is a field of communications that is concerned
with political scenario in a country or communication that often influences political decisions and
vice versa.
Intercultural Communication: Intercultural communication refers to the communication between
people from different cultures. According to Samovar and Porter, intercultural communication
occurs whenever a message is produced by a member of one culture for consumption by a member
of another culture, a message must be understood.
Educational Communication: This type of communication relates to the field of education. It
involves any type of communication flows, levels, systems that lead to acquisition and imparting of
learning.

Communication Process

1. Source: The source initiates a message. This is the origin of the communication and can be an
individual, group or inanimate object.
2. Encoding: Once the source has decided what message to communicate, the content of the message
must be put in a form which the receiver can understand.
3. The Message: The message is the actual physical product from the source encoding. The message
contains the thoughts and feelings that the communicator intends to evoke in the receiver.
4. The Channel: The actual means by which the message is transmitted to the receiver (visual,
auditory, written or some combination of these three) is called the channel. The channel is the
medium through which the message travels.
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5. Decoding: Decoding means interpreting what the message means.
6. The Receiver: The receiver is the object to whom the message is directed. Receiving the message
means one or more of the receivers senses register the message.
7. Feedback: Feedback refers to the reaction of the receiver. It is a reversal of the communication
process. Feedback enables the communicator to know whether his message is received and
interpreted correctly or not. Further, Feedback enables the communicator to know the reaction of the
receiver so that future communication can be modified, if necessary. The importance of Feedback is
incalculable. It helps to check the effectiveness of communication. It makes communication a two-
way process.
8.Noise Noise is the enemy of Feedback. It refers to any factor that interferes with
communication. Interference may occur in all the above stages of the communication process. It
hinders or blocks communication.
Principles of an effective communication: Communication is understood and acted upon at
different degrees of effectiveness. A communication is effective when the experience of both the
communicator and receiver is satisfying and the goal of the interaction is achieved and vice-versa.
Six essential principles of an effective communication are as follows:
1. The information should be delivered in a clear message.
2. Message should be delivered timely.
3. Message should be complete.
4. Message should be concise.
5. Message should be factual.
6. Message should be accurate.
The principles of effective communication can be categorized as 7 Cs, which are applicable to both
written as well as oral communication. Let us now try to understand them one by one.
1. Completeness - The communication must be complete. It should convey all facts required by the
receiver. A complete communication has the following features:
No crucial information is missing from the message.
It gives additional information, wherever required.
It leaves no questions in the mind of the receiver.
It persuades the receiver.
2. Conciseness - Conciseness or shortness means that minimum words without forgoing the other
Cs of communication should be used to communicate. Concise communication has the following
features:
It is time-saving as well as cost-saving.
It underlines the main message.
It is more appealing to the receiver.
3. Consideration - Consideration implies that the audiences view point, background, mind-set,
education level, their specific requirements, emotions, etc. are considered while communicating with
them. You need to modify your words in the message to suit the audiences needs. Features of
considerate communication are as follows:
Lay stress on positive words such as jovial, committed, thanks, help, etc.
Emphasise on you or your
Empathise with the audience and exhibit interest in the audience.
Show optimism towards your audience.
4. Clarity - Clarity implies emphasizing on a specific message or goal at a time, rather than trying to
achieve too much at once. Clear message makes use of exact, appropriate and concrete words. Clarity
ensures that communication is simple and intelligible. Enunciating syllables clearly, accurate word
stress and speaking slowly improves clarity.
Clarity in communication has the following features:
It makes understanding easier.
It enhances the meaning of message.
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5. Concreteness - Concrete communication implies being particular than general. Concrete message
has the following features:
It is supported with specific facts and figures.
It makes use of words that are clear and that build the authenticity.
6. Courtesy - Courtesy in message implies that the message should show the senders expression as
well as respect to the receiver. Courteous message has the following features:
It uses terms and feelings of the receiver of the message.
It is positive and focused on the audience.
It is not biased.
7. Correctness - Correctness in communication implies that there are no grammatical errors in the
communication. Correct communication has the following features:
The message is exact, correct and well-timed.
It makes use of appropriate and correct language.
Factors Affecting Communication
As mentioned earlier, effective communication is a two-way process but there are a number of factors
which may disrupt this process and affect the overall interpretation and understanding of what was
communicated. Myriad problems can pop up at different stages of the communication process. These
can relate to any of the elements involved the sender, message, channel, receiver, feedback and
context. It is therefore important to understand some of the factors that affect communication so that
you can try to get your message across with minimal misunderstanding and confusion. Below are
some possible problem areas that may turn out to to be barriers to effective communication:
(a) Status/Role: The sender and receiver of a message may be of equal status within a hierarchy (e.g.
managers in an organisation) or they may be at different levels (e.g. manager/employee,
lecturer/student, business owner/clients). This difference in status sometimes affects the
effectiveness of the communication process.
(b) Cultural Differences: Cultural differences, both within or outside the organisation (for example,
inter-departmental dealings and communication with outside organisations or ethnic minorities)
may impede the communication process.
(c) Choice of Communication Channels: Before you choose your communication channel, you should
ask yourself whether the channel is appropriate for a particular purpose and the person/receiver you
have in mind. Sending messages via inappropriate channels can send out wrong signals and end up
creating confusion.
(d) Length of Communication: The length of the message also affects the communication process.
You need to be sure that it serves the purpose and is appropriate for the receiver. Is the message too
long or too brief? (e) Use of Language: Poor choice of words or weak sentence structure also hampers
communication. The same goes for inappropriate punctuation. The two sentences below illustrate
clearly how different placement of punctuation can change the entire meaning of a sentence.
(f) Disabilities: Disabilities such as impaired sight, dyslexia and poor mental health can also be
barriers to good communication, and should be taken into consideration when evaluating the
effectiveness of the communication process. You may need to use hearing aids, sign language,
magnifying systems, and symbols to alleviate problems caused by disabilities.
(g) Known or Unknown Receiver: Whether the receiver is known or unknown to you also plays a
major role in determining the effectiveness of your communication. A known receiver may be better
able to understand your message despite having insufficient information as both of you probably
have common experiences and a shared schemata. An unknown receiver, on the other hand, may
require more information and time to decode the message.
(h) Individual Perceptions/Attitudes/Personalities: Sometimes, the method of communication
needs to take into consideration the receivers personality traits, age and preferred style. The elderly
and children, for example, have different communication needs and preferences when compared to
young adults. Is the receiver of your message a visual, auditory, or kinesthetic sort of person? How
do you think they will react to your message? Can you adapt your communication style to suit theirs?

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(i) Atmosphere/Noise/Distraction: Our surroundings can sometimes pose as barriers to effective
communication. A noisy place (a party, for instance) usually puts a strain on oral communication as
both the sender and the receiver need to put extra effort to get the message across and ensure that it
is understood clearly and correctly.
(j) Clarity of Message: Is the message conveyed in a clear or ambiguous manner?
(k) Lack of Feedback: Feedback is important as it enables confirmation of understanding to be made
by both parties. The lack of feedback can sometimes create problems as it can lead to uncertainty and
confusion.
Barriers to Effective Communication
Barriers to communication are factors that block or significantly distort successful communication.
Effective managerial communication skills helps overcome some, but not all, barriers to
communication in organisations. The more prominent barriers to effective communication which
every manager should be aware of is given below:
1. Filtering: Filtering refers to a situation where sender manipulating information so it will be seen
more favourably by the receiver. The major determinant of filtering is the number of levels in an
organisations structure. The more vertical levels in the organisations hierarchy, the more will be the
opportunities for filtering.
2. Selective Perception: Selective perception means seeing what one wants to see. The receiver, in the
communication process, generally resorts to selective perception, i.e., he selectively perceives the
message based on the organisational requirements, the needs and characteristics, background of the
employees, etc. Perceptual distortion is one of the distressing barriers to the effective communication.
3. Emotions: How the receiver feels at the time of receipt of information influences effectively how
he interprets the information.
4. Extreme emotions: Such as jubilation or depression are most likely to hinder effective
communication. In such instances, we are most prone to disregard our rational and objective thinking
processes and substitute emotional judgments.
5. Language: Communicated message must be understandable to the receiver. Often, communication
gap arises because the language the sender is using may be incomprehensible, vague and indigestible.
Language is a central element in communication. It may pose a barrier to correct and timely action if
its use obscures meaning and distorts intent.
6. Stereotyping: It is the application of selective perception. When we have preconceived ideas about
other people and refuse to discriminate between individual behaviours, we are applying selective
perception to our relationship with other people.

7. Status Difference: The organisational hierarchy poses another barrier to communication within the
organisation, especially when the communication is between employee and manager.
8. Use of conflicting signals: A sender is using conflicting signals when he or she sends inconsistent
messages. A vertical message might conflict with a non-verbal one.
9. Reluctance to Communicate: For a variety of reasons, managers are sometimes reluctant to transmit
messages. The reasons could be:
(a) They may doubt their ability to do so.
(b) They may dislike or be weary of writing or talking to others.
(c) They may hesitate to deliver bad news because they do not want to face a negative reaction.
When someone gives in to these feelings, they become a barrier to effective communications.
10. Projection: Projection has two meanings:

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(a) Projecting ones own motives into others behaviour: Example: Managers, who are motivated by money,
may assume their subordinates also motivated by it. If the subordinates prime motive is something
other than money, serious problems may arise.
(b) The use of defense mechanism to avoid placing blame on oneself: As a defense mechanism, the projection
phenomenon operates to protect the ego from unpleasant communications. Frequently, individuals
who have a particular fault will see the same fault in others, making their own fault seem not so
serious.
11. The Halo Effect: The term halo effect refers to the process of forming opinions based on one
element from a group of elements and generalizing that perception to all other elements.
Example: In an organisation, a good attendance record may cause positive judgments about
productivity, attitude, or quality of work.
12. Ineffective Expression: The first and the most common barrier in the process of communication
is bad expression. This means that the messages suffer from omissions, uncertainty, inaccuracies,
verbosity, repetitions, ambiguity, lack of clarity and precision. In order to remove this, the staff
should be trained to draft various kinds of effective communication. This will save time because
otherwise much time has to be devoted in giving subsequent clarifications.
13. Inaccurate Translation: Decisions are generally conveyed from the top to the lower level. The
superiors are known for their specialised knowledge. They generally draft messages in a technical
language which may not be clearly understood by those who have to implement the decisions. Even
if they are able to understand, they may not be able to convey it further down the line in simple
words.
14. Inattention: Inattention is a very common and chronic human failing. This barrier generally arises
in case of oral communication. It can be illustrated with the help of the following example: a superior
is giving a message on the telephone. The subordinate is busy reading a magazine or looking through
the window or his mind is occupied with some family problem. Superiors have to face this problem
of inattention quite frequently. Efforts to communicate fails. The communicator should choose the
appropriate time for communicating. Thus, for example, communicating at lunch hour or while at
rest will not invite due attention. Holding a meeting at an odd time or calling the worker over for a
talk on a holiday are some other examples.
15. Loss in Transmission: Loss in transmission is another barrier of communication which arises in
oral communication. When messages are conveyed from the higher to the lower level step by step,
much of it is likely to be lost in transit.
This problem may arise in case of written communication as well. At every level the superior will
interpret the message which is likely to be distorted. Further, the meaning will change if some words
ar are dropped, changed or misspelt. Harold Koontz and Cyril ODonnell estimate that about 30% of
the information is lost in each transmission. Written communications too are subject to loss in
transmission. It is no wonder that enterprises often operate in a cloud of ignorance.
16. Vague and Unclarified Assumptions: The object of a communication is to distinctly tell the
communicatee what is desired of him. If the message is not clear in meaning, assumptions are not
clear to the personnel; communication will lose its purpose. If the personnel are not able to know
what they are supposed to do even after receiving the message, the communication will be no more
than a waste paper.
17. Distrust: It arises if the superior is known for making frequent changes in the communication,
quite often even reversing the original message. It is due to ill-conceived adjustment, improper
technology, etc. Repeated experience of this type will damage employees interest in the
communication.
18. Fear: This indicates anxiety, awe, alarm or apprehension. This arises in upward communication
and creates a barrier in communication. It may be illustrated as below. A subordinate is not sure if
the information conveyed by him to the superior will be useful or not. He thinks if it is not liked, boss
will be annoyed and might take action against him. He requests another subordinate to transmit the
information on his behalf.
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19. Noise, Distance and Time: The world will not be worth living in, if it is quiet everywhere. But at
the same time noise is a big menace. In modern factories the constant rattling of the machines and
tools, the squeaking of the wheels constantly create a lot of noise. And noise proves a great barrier to
communication. It is a very common experience that noise proves a big hindering factor if two
persons are talking. If somehow the noise is not controlled, it may not be possible for communicatee
to listen anything or make out the sense. He will properly feel strained.
Overcoming Barriers to Communication
Following are some of the additional measures to overcome the barriers to communication:
1. Fostering good relationships: Strong relationships must be fostered between the employer and
employee in order to avoid misunderstandings.
2. Communication should be purposeful and directed to an individual.
3. Co-ordination between superior and subordinates
4. Avoid technical language: The specialized language should be avoided.
5. Feedback: The selective perception of receiver should be minimized through proper feedback.
6. Accuracy: There should be accuracy in the message to be transmitted between both parties for the
communication to improve its effectiveness.
7. Clarity in message: The message to be transferred should be clear, practical accurate and without
any ambiguity.
8. Communication of organisational philosophy: Efforts have to be made in a planned way to
sensitize people with the organisational philosophy.
9. Flat organisational structure: The organisation should have clear cut and simple organisational
structure.
10. Division of labour: There should be proper division of labour between people in order to reduce
information overload and prevent delay in information transfer.
11. Organisation policies: The organisation should formulate its policies in such a way that it will
give full advantage to all members of the organisation.
12. Minimize semantic problem: People should avoid using double meaning words.
13. Use proper communication channels.

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 Corporate Governance: Factors affecting Corporate Governance; Mechanisms
of Corporate Governance.
In a narrow sense, corporate governance involves a set of relationships amongst the companys
management, its board of directors, its shareholders, its auditors and other stakeholders. These
relationships, which involve various rules and incentives, provide the structure through which the
objectives of the company are set, and the means of attaining these objectives as well as monitoring
performance are determined. Thus, the key aspects of good corporate governance include
transparency of corporate structures and operations; the accountability of managers and the boards
to shareholders; and corporate responsibility towards stakeholders.
While corporate governance essentially lays down the framework for creating longterm trust
between companies and the external providers of capital, it would be wrong to think that the
importance of corporate governance lies solely in better access of finance. Companies around the
world are realizing that better corporate governance adds considerable value to their operational
performance:
It improves strategic thinking at the top by inducting independent directors who bring a wealth of
experience, and a host of new ideas
It rationalizes the management and monitoring of risk that a firm faces globally
It limits the liability of top management and directors, by carefully articulating the decision making
process
It assures the integrity of financial reports
It has long term reputational effects among key stakeholders, both internally and externally
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In a broader sense, however, good corporate governance- the extents to which companies are run in
an open and honest manner- is important for overall market confidence, the efficiency of capital
allocation, the growth and development of countries industrial bases, and ultimately the nations
overall wealth and welfare. It is important to note that in both the narrow as well as in the broad
definitions, the concepts of disclosure and transparency occupy centre-stage. In the first instance, they
create trust at the firm level among the suppliers of finance. In the second instance, they create overall
confidence at the aggregate economy level. In both cases, they result in efficient allocation of capital.
Having committed to the above definitions, it is important to note that ever since the first writings on
the subject appeared in the academic domain, there have been many debates on the true scope and
nature of corporate governance mechanisms around the world.
More specifically on the question Who should corporate governance really represent? This issue of
whether a company should be run solely in the interest of the shareholders or whether it should take
account the interest of all constituents has been widely discussed and debated for a long time now.
Two definitions of Corporate Governance highlight the variation in the points of view:
Corporate governance is concerned with ways of bringing the interests of investors and manager
into line and ensuring that firms are run for the benefit of investors. orporate governance includes
the structures, processes, cultures and systems that engender the successful operation of
organizations
Global Landmarks in the Emergence of Corporate Governance
Developments in USA
Corporate Governance gained importance with the occurrence of the Watergate scandal in United
States. Thereafter, as a result of subsequent investigations, US regulatory and legislative bodies were
able to highlight control failures that had allowed several major corporations to make illegal political
contributions and to bribe government officials. This led to the development of the Foreign and
Corrupt Practices Act of 1977 that contained specific provisions regarding the establishment,
maintenance and review of systems of internal control. This was followed in 1979 by Securities and
Exchange Commissions proposals for mandatory reporting on internal financial controls. In 1985,
following a series of high profile business failures in the US, the most notable one of which being the
savings and loan collapse, the Tradway
Commission was formed to identify the main cause of misrepresentation in financial reports and to
recommend ways of reducing incidence thereof. The tradway Report published in 1987 highlighted
the need for a proper control environment, independent audit committees and an objective internal
audit function and called for published reports on the effectiveness of internal control The
commission also requested the sponsoring organizations to develop an integrated set of internal
control criteria to enable companies to improve their control.
Developments in UK
In England, the seeds of modern corporate governance were sown by the Bank of Credit and
Commerce International (BCCI) Scandal. The Barings Bank was another landmark. It heightened
peoples awareness and sensitivity on the issue and resolve that something ought to be done to stem
the rot of corporate misdeeds. These couple of examples of corporate failures indicated absence of
proper structure and objectives of top management. Corporate Governance assumed more
importance in light of these corporate failures, which was affecting the shareholders and other
interested parties.
As a result of these corporate failures and lack of regulatory measurers from authorities as an
adequate response to check them in future, the Committee of Sponsoring Organizations (COSO) was
born. The report produced in 1992 suggested a control framework and was endorsed a refined in four
subsequent UK reports:
Cadbury, Ruthman, Hampel and Turbull. There were several other corporate failures in the
companies like Polly Peck, British & Commonwealth and Robert Maxwells Mirror Group News
International were all victims of the boom-to-bust decade of the 1980s. Several companies, which saw

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explosive growth in earnings, ended the decade in a memorably disastrous manner. Such spectacular
corporate failures arose primarily out of poorly managed business practices.
The publication of a serious of reports consolidated into the Combined Code on Corporate
Governance (The Hampel Report) in 1998 resulted in major changes in the area of corporate
governance in United Kingdom. The corporate governance committees of last decade have analyzed
the problems and crises besetting the corporate sector and the markets and have sought to provide
guidelines for corporate management. Studying the subject matter of the corporate codes and the
reports produced by various committees highlighted the key practical problem and concerns driving
the development of corporate governance over the last decade.
World Bank on Corporate Governance
The World Bank, involved in sustainable development was one of the earliest economic organization
o study the issue of corporate governance and suggest certain guidelines. The World Bank report on
corporate governance recognizes the complexity of the concept and focuses on the principles such as
transparency, accountability, fairness and responsibility that are universal in their applications.
Corporate governance is concerned with holding the balance between economic and social goals and
between individual and communal goals. The governance framework is there to encourage the
efficient use of resources and equally to require accountability for the stewardship of those resources.
The aim is to align as nearly as possible, the interests of individuals, organizations and society.
The foundation of any corporate governance is disclosure. Openness is the basis of public confidence
in the corporate system and funds will flow to those centers of economic activity, which inspire trust.
This report points the way to establishment of trust and the encouragement of enterprise. It marks an
important milestone in the development of corporate governance.
OECD Principles
Organization for Economic Co-operation and Development (OECD) was one of the earliest non-
governmental organizations to work on and spell out principles and practices that should govern
corporate in their goal to attain long-term shareholder value.
The OECD were trend setters as the Code of Best practices are associated with Cadbury report. The
OECD principles in summary include the following elements.
i) The rights of shareholders
ii) Equitable treatment of shareholders
iii) Role of stakeholders in corporate governance
iv) Disclosure and Transparency.
v) Responsibilities of the board
The OECD guidelines are somewhat general and both the Anglo-American system and Continental
European (or German) system would be quite consistent with it.
Sarbanes- Oxley Act, 2002 13
The Sarbanes-Oxley Act (SOX) is a sincere attempt to address all the issues associated with corporate
failure to achieve quality governance and to restore investors confidence. The Act was formulated to
protect investors by improving the accuracy and reliability of corporate disclosures, made precious
to the securities laws and for other purposes. The act contains a number of provisions that
dramatically change the reporting and corporate directors governance obligations of public
companies, the directors and officers. The important provisions in the SOX Act are briefly given
below.
i) Establishment of Public Company Accounting Oversight Board (PCAOB): SOX creates a new
board consisting of five members of whom two will be certified public accountants. All accounting
firms have to get registered with the board. The board will make regular inspection of firms. The
board will report to SEC. The report will be ultimately forwarded to Congress.
ii) Audit Committee: The SOX provides for new improved audit committee. The committee is
responsible for appointment, fixing fees and oversight of the work of independent auditors. The
registered public accounting firms should report directly to audit committee on all critical accounting
policies.

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iii) Conflict of Interest: The public accounting firms should not perform any audit services for a
publically traded company.
iv) Audit Partner Rotation: The act provides for mandatory rotation of lead audit or co-ordinating
partner and the partner reviewing audit once every 5 years.
v) Improper influence on conduct of Audits : According to act, it is unlawful for any executive or
director of the firm to take any action to fraudulently influence, coerce or manipulate an audit.
vi) Prohibition of non-audit services : Under SOX act, auditors are prohibited from providing non-
audit services concurrently with audit financial review services.
vii) CEOs and CFOs are required to affirm the financials : CEOs and CFOs are required to certify
the reports filed with the Securities and Exchange Commission (SEC).
viii) Loans to Directors : The act prohibits US and foreign companies with Securities traded within
US from making or arranging from third parties any type of personal loan to directors.
ix) Attorneys : The attorneys dealing with publicly traded companies are required to report evidence
of material violation of securities law or breach of fiduciary duty or similar violations by the company
or any agent of the company to Chief Counsel or CEO and if CEO does not respond then to the audit
committee or the Board of Directors.
x) Securities Analysts : The SOX has provision under which brokers and dealers of securities should
not retaliate or threaten to retaliate an analyst employed by broker or dealer for any adverse , negative
or unfavorable research report on a public company. The act further provides for disclosure of conflict
of interest by the securities analysts and brokers or dealers.
xi) Penalties : The penalties are also prescribed under SOX act for any wrong doing. The penalties
are very Stiff.
The Act also provides for studies to be conducted by Securities and Exchange Commission or the
Government Accounting Office in the following area :
i) Auditors Rotation
ii) Off balance Sheet Transactions
iii) Consolidation of Accounting firms & its impact on industry
iv) Role of Credit Rating Industry
v) Role of Investment Bank and Financial Advisers.
The most important aspect of SOX is that it makes it clear that companys senior officers are
accountable and responsible for the corporate culture they create and must be faithful to the same
rules they set out for other employees. The CEO for example, must be responsible for the companys
disclosure, controls and financial reporting.
Corporate governance : History in India
There have been several major corporate governance initiatives launched in India since the mid-
1990s. The first was by the Confederation of Indian Industry (CII), Indias largest industry and
business association, which came up with the first
voluntary code of corporate governance in 1998. The second was by the SEBI, now enshrined as
Clause 49 of the listing agreement. The third was the Naresh Chandra Committee, which submitted
its report in 2002. The fourth was again by SEBI the Narayana Murthy Committee, which also
submitted its report in 2002. Based on some of the recommendation of this committee, SEBI revised
Clause 49 of the listing agreement in August 2003.
Subsequently, SEBI withdrew the revised Clause 49 in December 2003, and currently, the original
Clause 49 is in force.
The CII Code
More than a year before the onset of the Asian crisis, CII set up a committee to examine corporate
governance issues, and recommend a voluntary code of best practices. The committee was driven by
the conviction that good corporate governance was essential for Indian companies to access domestic
as well as global capital at competitive rates. The first draft of the code was prepared by April 1997,
and the final document (Desirable Corporate Governance: A Code), was publicly released in April
1998. The code was voluntary, contained detailed provisions, and focused on listed companies.
Desirable Disclosure

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Listed companies should give data on high and low monthly averages of share prices in a major
stock exchange where the company is listed; greater detail on business segments, up to 10% of
turnover, giving share in sales revenue, review of operations, analysis of markets and future
prospects. Major Indian stock exchanges should gradually insist upon a corporate governance
compliance certificate, signed by the CEO and the CFO. If any company goes to more than one credit
rating agency, then it must divulge in the prospectus and issue document the rating of all the agencies
that did such an exercise. These must be given in a tabular format that shows where the company
stands relative to higher and lower ranking.
Companies that default on fixed deposits should not be permitted to accept further deposits and
make inter-corporate loans or investments or declare dividends until the default is made good.
The CII code is voluntary. Since 1998, CII has been trying induce companies to disclose much greater
information about their boards. Consequently, annual reports of companies that abide by the code
contain a chapter on corporate governance
Kumar Mangalam Birla committee report and Clause 49
While the CII code was well-received and some progressive companies adopted it, it was felt that
under Indian conditions a statutory rather than a voluntary code would be more purposeful, and
meaningful. Consequently, the second major corporate governance initiative in the country was
undertaken by SEBI. In early 1999, it set up a committee under Kumar Mangalam Birla to promote
and raise the standards of good corporate governance. In early 2000, the SEBI board had accepted
and ratified key recommendations of this committee, and these were incorporated into Clause 49 of
the Listing Agreement of the Stock Exchanges.
This report pointed out that the issue of corporate governance involves besides shareholders, all other
stakeholders. The committees recommendations have looked at corporate governance from the point
of view of the stakeholders and in particular that of shareholders and investors.
The control and reporting functions of boards, the roles of the various committees of the board, the
role of management, all assume special significance when viewed from this perspective.
At the heart of committees report is the set of recommendations, which distinguish the
responsibilities, and obligations of the boards and the management in instituting the systems for good
C.G. Many of them are mandatory. These recommendations are expected to be enforced on listed
companies for initials disclosures. This enables shareholders to know, where the companies are in
which they have involved. The committee recognized that India had in place a basic system of
corporate governance and that SEBI has already taken a number of initiatives towards raising the
existing standards.
The committee also recognized that the Confederation of Indian Industries (CII) had published a code
entitled Desirable code of corporate of Governance and was encouraged to note that some of the
forward looking companies have already reviewed their annual report through complied with the
code.
Now to protect investors especially shareholders from any malpractices and injustice the Securities
and Exchange Board of India appointed committee on corporate governance on May 7, 1999 under
chairmanship of Shri Kumar Managalam Birla, Member of SEBI Board to promote standard of
Corporate Governance.
The constitutions of Committee
The committee has identified the three key constituents of corporate governance as the shareholders,
the Board of Directors and the Management. Along with this the committee has identified major 3
aspects namely accountability, transparency and equality of treatment for all shareholders. Crucial
to good corporate governance are the existence and enforceability of regulations relating to insider
information and insider trading. These matters are currently being examined over here. The
committee had received good comments from almost all experts institutions, chamber of commerce
Adrian Cadbury Cadbury Committee etc.
Corporate Governance Objectives
Corporate Governance has several claimants shareholders, suppliers, customers, creditors, the
bankers, employees of company and society. The committee for SEBI keeping view has prepared

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primarily the interests of a particular class of stakeholders namely the shareholders this report on
corporate governance. It means enhancement of shareholder value keeping in view the interests of
the other stack holders.
Committee has recommended C.G. as companys principles rather than just act. The company should
treat corporate governance as way of life rather than code. Applicability of the Recommendation
Recommendations : Mandatory Non-Mandatory
The committee was of the firm view that mandatory compliance of the recommendations at least in
respect of essential the essential would be most appropriate in the Indian context for the present.
The committee felt that some of the recommendations are absolutely essential for the framework of
corporate governance and virtually from its core while others could be considered desirable. Thus
committee has classified recognize into two parts.
Applicability
The committee was of the opinion that the recommendations should be made applicable to the listed
companies them directors, management, employees and professionals associated with such
companies, in accordance with time table proposed in the schedule given later in this section.
According to the committee, the recommendations were to be applied to all the listed private and
public sector companies, in accordance with the schedule of implementation. As for listed entitles
which are not companies, but body corporate e.g. private sector banks, financial institutions,
insurance companies etc. incorporated under statutes, the recommendations will apply to the extent
that they do not violate guidelines issued by prevalent authority.
Mandatory Recommendations
Board of Directors: An effective corporate governance system is one, which allows the board to
perform these dual functions efficiently. The board of directors of a company thus directs and controls
the management of a company and is accountable to the shareholders. The board directs the
company, by formulating and reviewing companys policies strategies, major plans of action, risk
policy, annual budgets and business plans, setting performance objectives, monitoring
implementation and corporate performance and overseeing major capital expenditures, appositions
and change in financial control and compliance with applicable law taking into the account the
interests of the stake holders.
Composition of the B.O.D.: The composition of the Board is as important as it determines the ability
of the board to collectively provide leadership and ensures that no one individual or a group is able
to dominate the board. This has undergone a change and increasingly the boards comprise of
following groups of directors. Promoter, director executive and nonexecutive directors, a part of who
are independent.
Independent Direction: Independent directions are those directors who apart from receiving
directors remuneration do not have any other material pecuniary relationship with company.
Further, all pecuniary relationship or transactions of the non executive directors should be disclosed
in the annual report. The committee recommended that the board of a company have an optimum
combination of executive and non-executive directors with not less than fifty percent of the board
comprising the non-executive directors. In case a company has a non-executive chairman, at least one
third of board should comprise of independent directors and in case a company has an executive
chairman at least half of board should be independent.
Nominee Directors: These directors are the nominees of the financial as investment institutions to
safeguard their interest it may be present of retired employee of financial institution on outsider. The
committee recommend that institutions should appoint nominees on the boards of companies only
on a selective basis where such appointment is pursuant to a right under loan agreements as where
such appointment in is considered necessary to protect like interest of the institutions.
Chairman of the Board: The committee recommended that a non-executive chairman should be
entitled to maintain a chairmans office at the companys expense and also allowed reimbursement
of expenses incurred in performance of his duties. This will enable him to discharge the
responsibilities effectively.
Audit committee (Non Mandatory):

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The committee is of the view that the need for having an audit committee grows from the recognition
of the audit committees position in the larger mosaic of governance process. The audit committees
job is one of oversight and monitoring and carrying out this job it relies on similar financial
management and outside auditors. The committee believes that the progressive standards of
governance applicable to the full board should also be applicable to the audit committee.
Powers of audit committee (Mandatory):
(1) To investigate any activity within its terms of reference.
(2) To seek information from any employee.
(3) To obtain outside legal on other professional advice.
(4) To secure attendance of outsiders with relevant expertise, if it considers necessary.
Functions of Audit Committee (Mandatory):
(1) To ensure that the financial statement is correct, sufficient and creditable.
(2) Recommending the appointment and removal of external audit.
(3) Reviewing with management annual financial statement before submission to board related to
changes in accounting policies and practices.
(a) Major accounting entries.
(b) Qualifications in draft audit report.
(c) Significant adjustments arising out of audit.
(d) Compliance with accounting standards.
(e) Compliance with stock exchange and legal requirement concerning financial statements.
(f) Any transaction that may have potential conflict with the interest of company at large.
(4) Reviewing with the management about adequacy of control.
(5) Discuss with internal auditors into the matter suspecting fraud on irregularity.
(6) Discuss with external auditors before the audit commences and also post-audit discussion to
ascertain any area of concern. .
Remuneration Committee (Mandatory):
The committee is of the view that a company must have a creditable and transparent policy in
determining and accounting for the remuneration of the directors. For this purpose the committee
recommends that the board should set up a remuneration committee to determine on their behalf
and on behalf of the shareholders with agreed terms of references. The Remuneration Committee
should comprise of at least three directors, all of them should be non-executive directors, the
chairman being an independent one. The chairman of Remuneration Committee should present at
AGM. It is important for the shareholders to be informed of the remuneration of the directors of the
company, which is mandatory.
Naresh Chandra Committee Report
The Naresh Chandra committee was appointed in August 2002 by the Department of Company
Affairs (DCA) under the Ministry of Finance and Company Affairs to examine various corporate
governance issues. The Committee submitted its report in December 2002. It made recommendations
in two key aspects of corporate governance: financial and non-financial disclosures: and independent
auditing and board oversight of management.
The committee submitted its report on various aspects concerning corporate governance such as role,
remuneration, and training etc. of independent directors, audit committee, the auditors and then
relationship with the company and how their roles can be regulated as improved. The committee
stingily believes that a good accounting system is a strong indication of the management
commitment to governance.
According to the committee, the statutory auditor in a company is the lead actor in disclosure front
and this has been amply recognized sections 209 to 223 of the companies act.
The chief aspects concerning the auditors functioning as per the act are:
Auditors are fiduciaries of the shareholders not of the management as they are appointed as the
shareholders appoint them.
Auditors independence is guaranteed as rules for removing on replacing an auditor as more
stringent than for reappointment.
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 The statutory auditor of a company can, at all times, have the right of access to all books of accounts
and vouchers of a company and his repeat can be quite exhaustive to specify whether, The auditor
could obtain from management all information and explanations that were necessary for the purpose
of audit.
Proper books of accounts have been kept by the company
Brained offices have been audited by him
Companys accounts conform to accounting standards set by the institute of chartered Accountants
of India.
Some Mandatory functions are,
The adequacy of internal control commensurate to the size of the company and its business.
The adequacy of records maintained on fixed assets and inventories and whether any fixed assets
were re-valued during the year.
Loans and advances that were given by the company, and whether the parties concerned were
regular in repaying the principal and interest.
Loans and advances taken by the company and whether these were at terms in judicial to the
interest of the company and also whether these were being property repaid according to conducted
schedules.
Transactions including loans and advances, with related parties as defined by section 301 of the
companies act.
Fixed deposits accepted by the company from the public and if so, whether these conform to the
provisions laid down by section 58A of Co.s Act.
Regularity of depositing of provident fund dues and whether the employees State Insurance Act
1948, was applicable to the company.
No personal expenses of directors and employees were charged to the profit & loss Act.
Narayana Murthy Committee report on Corporate Governance
The fourth initiative on corporate governance in India is in the form of the recommendations of the
Narayana Murthy committee. The committee was set up by SEBI, under the chairmanship of Mr. N.
R. Narayana Murthy, to review Clause 49, and suggest measures to improve corporate governance
standards. Some of the major recommendations of the committee primarily related to audit
committees, audit reports, independent directors, related party transactions, risk management,
directorships and director compensation, codes of conduct and financial disclosures.
Corporate governance: Recent Developments in India
It is observed that the scale and scope of economic reform and development in India over the past 20
years has been impressive. The country has opened up large parts of its economy and capital markets,
and in the process has produced many highly regarded companies in sectors such as information
technology, banking, autos, steel and textile manufacturing. These companies are now making their
presence felt outside India through global mergers and acquisitions.
As mentioned above, a lesser known fact remains about India is that in April 1998 the country
produced one of the first substantial codes of best practice in corporate governance in Asia. It was
published not by a governmental body, a securities regulator or a stock exchange, but by the
Confederation of Indian Industries (CII), the countrys peak industry body.
The following year, the government appointed a committee under the leadership of Kumar
Mangalam Birla, Chairman, Aditya Birla Group, to draft Indias first national code on corporate
governance for listed companies. Many of the committees recommendations were mandatory,
closely aligned to international best practice at the time and set higher governance standards for listed
companies than most other jurisdictions in Asia. The Indian Code of Corporate Governance,
approved by the Securities and Exchange Board of India (SEBI) in early 2000, was implemented in
stages over the following two years and led to changes in stock exchange listing rules, notably the
new Clause 49 in the Listing Agreement.
Further reforms have been made over the past decade to modernise both company law and securities
regulations. The Companies Act, 1956 has been amended several times, in areas such as postal ballots

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and audit committees, while committees were appointed in 2002 and 2004 to recommend
improvements. The latter committee, chaired by Dr J.J Irani, was charged with undertaking a
comprehensive review of the 1956 Act and its recommendations led to a rewrite of the law and a new
Companies Bill, 2008. (This bill was resubmitted as the Companies Bill, 2009 following national
elections in 2009. It is still waiting to pass Parliament.)
Confederation of Indian Industry (CII) Taskforce on Corporate Governance
CII set up a Task Force under Mr. Naresh Chandra in February 2009 to recommend ways of further
improving corporate governance standards and practices both in letter and spirit.
The recommendations in brief are as under:
1. Appointment of Independent Director
a. Nomination Committee
2. Duties, liabilities and remuneration of independent directors
a. Letter of Appointment to Directors
b. Fixed Contractual Remuneration
c. Structure of Compensation to NEDs
3. Remuneration Committee of Board
4. Audit Committee of Board
5. Separation of the offices of the Chairman and the Chief Executive Officer
6. Attending Board and Committee Meetings through Tele-conferencing and video conferencing
7. Executive Sessions of Independent Director
8. Role of board in shareholders and related party transactions
9. Auditor Company Relationship
10. Independence to Auditors
11. Certificate of Independence
12. Auditor Partner Rotation
13. Auditor Liability
14. Appointment of Auditors
15. Qualifications of Auditors Report
16. Whistle Blowing Policy
17. Risk Management Framework
18. The legal and regulatory standards
19. Capability of Regulatory Agencies - Ensuring Quality in Audit Process
20. Effective and Credible Enforcement
21. Confiscation of Shares
22. Personal Liability
23. Liability of Directors and Employees
24. Institutional Activism 25. Media as a stakeholder

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