Management Principles and Application Unit 1 Introduction

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Management Principles and Application Unit 1 Introduction

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(A) Multiple Choice:

1. Which of the following approach to management was introduced by Max Weber

(a) Scientific Management Approach.

(b) Process Management Approach.

(c) Contingency Approach.

(d) Bureaucracy Approach.

Ans: (d) Bureaucracy Approach.

2. Which of the following streams is not under classical approach to management

(a) Bureaucracy approach.

(b) Situational approach.

(c) Scientific management approach.

(d) Process management approach.

Ans: (b) Situational approach.

3. Which of the following is not characteristics of Max Weber’s ideal organizational structure.

(a) Centralisation.

(b) Specialization.

(c) Hierarchical positions.

(d) Impersonal relationship.

Ans: (a) Centralisation.

4. Which of the following is not principle of scientific management.

(a) Science, not rule of thumb.

(b) Harmony not discord.

(c) Co-operative, not individualism.

(d) Decentralization, not centralisation.

Ans: (d) Decentralization, not centralisation.

5. Which of the following is not an element of scientific work study.

(a) Motion study.

(b) Behave study.

(c) Time study.

(d) Method study.

Ans: (b) Behave study.

6. Which of the following foremen in functional foremanship of scientific management is under in the shop level.

(a) Gang Boss.

(b) Route clerk.

(c) Instruction card clerk.

(d) Shop Disciplinarian.

Ans: (a) Gang Boss.

7. Which of the following is not an feature of MBO

(a) A philosophy.

(b) An Approach.

(c) Periodic Review of Performance.

(d) Work oriented.

Ans: (d) Work oriented.

8. Which of the following is the limitation of planning

(a) Future is unpredictable.

(b) Require competing Potentials.

(c) Require effective coordination.

(d) All of above.

Ans: (a) Future is unpredictable.

9. Which type of following planning based on level of management.

(a) Strategic planning.

(b) Functional planning.

(c) Standing planning.

(d) Short term planning.

Ans: (a) Strategic planning.

10. Which of the following is the example of intangible premise.

(a) Product market.

(b) Labour force.

(c) Government policy.

(d) Reputation of business.

Ans: (d) Reputation of business.

(B) Fill up the blanks:

1. Charles Babbage was a professor at ____________ university.

Ans: Cambridge.

2. Bureaucratic organization model was given by ____________.

Ans: Max Weber.

3. was the first person who gave the scientific ____________ management.

Ans: Frederick Winslow Taylor.

4. ____________ refers to the study of the movements of an operator or a machine.

Ans: Motion study.

5. ____________ seeks to find out how long a person can perform the standard task without any adverse effects on his health and efficiency.

Ans: Fatique study.

6. ____________ is concerned with the preliminary work before the actual operation.

Ans: Gang boss.

7. ____________ lays down the sequence on path that each operation is to follow in the completion of a particular job.

Ans: Route Clerk.

8. ____________ is the chain on line command from superior to subordinate.

Ans: Scalar chain.

9. The Hawthrone studies consist of ____________ different interrelated experiments.

Ans: four.

10. ____________ approach to management actions may be adjusted to demands of specific situations or circumstances.

Ans: Contingency.

11. Bureaucratic model was developed by ____________.

Ans: Max Webber.

12. ____________ is called the father of scientific management.

Ans: F. W. Taylor.

13. Henry Fayol gave ____________ of management.

Ans: Principles.

14. ____________ was the pioneer of human relations movement.

Ans: Elton Mayo.

15. Maslow gave ____________ theory.

Ans: Need Hierarchy.

16. Contingency approach was developed in the year ____________.

Ans: 1970

(C) Say true of false:

1. As a system an organization has five basic parts.

Ans: True.

2. Contingency approach recognises that there may be several motivations behind our action and behaviour.

Ans: False.

3. System approach integrates and uses with profit ideas emerging from different schools of thoughts.

Ans: True.

4. According to P. F. Drucker, management has no functions in itself.

Ans: True.

5. P. F. Drucker was against the federalism.

Ans: False.

6. According to Bernard man is not completely rational.

Ans: True.

7. Herbert Simon has presented the concept of administrative man as the model of decision making.

Ans: True.

8. The concept of MBO was introduced by Henry Fay.

Ans: False.

9. Elton Mayo was an Australian.

Ans: True.

10. Human Relations Approach lacked scientific validity.

Ans: True.

(D) Give the Answers:

1. With which theory is Henry Fayol associated?

Ans: Classical organization theory or administrative Management theory.

2. Social system approach is the contribution of which management expert?

Ans: Chester Barnard.

3. The period 1900-1930 deals, with which management thought?

Ans: Scientific management.

4. Who is the author of the book ‘The Functions of the Executive.

Ans: Chester Barnard.

5. Hawthorne experiments dealt with which approach of management?

Ans: Human relations approach.

6. Herbert simon made significant contribution which field of management?

Ans: Administrative behaviour and decision making.

7. What is the other name of contingency approach.

Ans: Situational approach.

8. How many principle of management were introduced by Henry Fayol.

Ans: 14 number of principles of management.

9. Who introduced the theory X and theory Y.

Ans: MC Gregor.

10. Who introduced the contingency or situational approach to management?

Ans: J. W. Lorsch and P. R. Lawrence.

11. Who is called the father of management Process School?

Ans: Henry Fayol.

12. In which year was Elton Mayo start the Hawthorn studies?

Ans: In the year 1927.

13. Who developed the concept of “Linking Pin”?

Ans: Reusis Likert.

14. Who is the author of the book “The New Society”?

Ans: Peter F. Drucker.


1. Define Management.

Ans: “Management is the process of working with and through others to effectively achieve organizational objectives by efficiently utilizing the limited resources in the changing environment.”

2. Management is all pervasive comment.

Ans: Management is all pervasive or universal because management is essential for effective performance of any organized activity. The principles and techniques of management have universal application. They can be applied to all types of organized activities-business, social, educational etc. Thus, it is all pervasive in nature.

3. Is management a goal oriented process?

Ans: Yes, management is goal-oriented process because the purpose of management is to achieve the goals of the organization. The success of management is judged by the extent to which organizational goals are achieved.

4. Management is an art or science or both.

Ans: Management is both science and an art, management is science because it has developed certain principles which are of universal application. But the results of management depend upon the personal skills of managers and in this sense management is art.

5. Management is multi dimensional. Write one dimension.

Ans: Management can be defined as multidimensional as because it has many dimensions which can be classified mainly into three categories, such as management of work, management of people and management of operations.

6. Do you think management is a continuous process? Comment.

Ans: Management is a continuous process because it is started right from the time of establishment of the business till its dissolution. So, every management system is to be done in continuous mode.

7. Earning profit is not the objective of management. Say Yes or No.

Ans: No, profit earning is also the objective of management because profit is the reward for risk bearing by a businessman and profit is also essential for survival, growth and expansion.

8. Is management a dynamic function?

Ans: Yes, management is a dynamic function because according to changing of inputs the process of management will be also changed.

9. Why is it said management principles are universal?

Ans: The principles of management are universal in nature because they are applicable to all kinds of organizations and situations.

10. Planning eliminates changes and uncertainties. Do you agree? Give reason.

Ans: Yes, I agree with this statement, because planning involves forecasting or anticipation of future events and this helps to reduce or eliminates changes and uncertainties.

11. At which level business policy is framed?

Ans: At top level business policies are framed.

12. Do you think coordination is not the functions of management?

Ans: No, coordination is not a separate function of management, but it is the essence of management.

13. “Anything minus management is nothing”. What does this statement tell?

Ans: This statement tells that nothing is possible without management.

14. Management of any organization strives to attain different objectives. Mention any two such objectives.

Ans: (a) Supply of quality goods at reasonable prices.

(b) The basic objective of any business is survival.

15. Name the level of management the following posts belong to:

(i) Purchase Manager.

Ans: Top management.

(ii) Superintendent.

Ans: Middle management.

16. What do you mean by “efficiency”.

Ans: Efficiency means achieving the predetermined goals at the minimum cost (i.e. optimum use of resources).

17. Which function of management ensures that actual activities conform to planned activities?

Ans: Controlling.

18. Who are regarded as middle management in a business organization?

Ans: Divisional heads, regional managers, production or operations managers, plant superintendents etc. are regarded as middle management in a business organization.

19. List two social objectives of management.

Ans: (a) Supply of quality goods at reasonable projects.

(b) Generation of employment opportunities.

20. What is management?

Ans: Management is a process of planning, organizing, staffing, directing, coordinating and controlling of activities. It is function of managing people. Sometime, it is defined as a body of knowledge and technique of leadership also.

21. What is process of management?

Ans: Process of management implies setting objectives and taking different steps for doing the various functions of management such as planning, organizing, staffing, directing and controlling. As a process, management can be defined as a distinct process of its various functions, which are performed by managers to make the efficient use of the available material and human resources so as to achieve the desired objectives.

22. Define management as a social process?

Ans: Management can be defined as a social process because the activities involved in the achievement of goals are related to people. So Koontz and O’ Donnel define management as the establishing an effective environment for people operating in formal organizational groups. Management performs such types of activities, which are carried out when employees interact with one another. Management is a social process by which a co-operative group directs actions of others towards common goals.

23. Give the concept of management as a group?

Ans: Management is a group activities, because of the fact that it refers to the totality of all those persons, who are entrusted with the responsibility of managing a particular enterprise. So, management can be also defined as a class or section of people who together carry out various managerial activities. That is why, the management of a particular company in this sense, implies the management body or board of directors or management committee etc. As a group, management covers all personnel occupying managerial positions from Chief Executive to first line supervisors.

24. What is Scalar Chain?

Ans: This principle states that the chain of Superiors ranging from ultimate authority to the lowest level in the organization. The communication is to be faster and affective in the line. Under scalar chain communication should follow through in established chain of command. However, passing the established line of authority, to facilitate quick communication, may create a gangplank. But the gangplank should not be a normal practice as it underlines the established line of authority.

25. What is Esprit de corps?

Ans: This is a French word which means ‘union is strength’. This principle wants harmonious human relations in the organization so that the employees are loyal to the organization. Harmony promotes strength in the organization. Literally speaking Esprit de corps means the spirit of loyalty and devotion to the group to which one belongs.

26. What is work-study?

Ans: Work study means an organized objective, systematic analytical and critical assessment of the efficiency of various operations in an organization. It is a generic term, which is applied to all techniques, which are used in the analysis of human work. This will facilitate the investigation of all factors, which influence efficiency, and the economy of operations.

27. What is Differential Piece Rate System?

Ans: Piece Rate System is type of wage payment. In piece rate the payment of wages the worker who produced the maximum output are rewarded. Under this system, a worker who met the established standards of performance would earn the basic wage rate set by management. If the worker’s output exceeded the set target, his wages would increase proportionately. This system has been adopted with the hope that it would motivate workers to produce more and thus help the organization perform better.

28. What is functional foremanship?

Ans: The object of this concept is to segregate planning and performance on the shop floor and to introduce specialization. F.W. Taylor recommended the appointment of eight foremen in all to control the various aspects of production. Four need to be in the planning department, such as rule clerk, instruction card clerk, time and cost clerk and shop disciplinarian. Remaining four are for shop level, such as Gang Boss, Speed Boss, Repair Boss and inspector.

29. What is Human Relation Approach?

Ans: This approach focuses on human aspect of industry. Elton Mayo, Fritz Roethlisberger, T.N. Whitehead and William Dickson advocated this approach. They modified the classical theory by emphasizing the fact that organization is a social system and the human factor is the most important element within it. Elton Mayo is generally recognized as the father of Human Relations Approach.

30. What is System Approach to management?

Ans: In the 1960’s a new approach to management appeared which attempted to unify the earlier schools of thought. This approach gives managers a new way of looking at an organization as a whole and as a part of the larger, external environment. According to this theory, an organizational system has four major components: inputs, transformation processes, output and feedback. This approach views an organization as interrelated parts with a unified purpose, such as surviving and ideally, thriving in its environment.

31. Principles of management are not right as pure science. Comment.

Ans: Principles of management are not right as pure science because of the following reasons:

(a) Management principles are flexible where as principles of pure science like physics are rigid.

(b) Management principles are applied as per situation as they influence the behaviour of human beings whereas principles of pure science are applied in absolute sense.

(c) Management principles have to keep pace with the changing business environment. But principles of pure science do not change with time, they remain static.

32. What is Coordination?

Ans: In the organization, there are many individuals, groups and departments. They perform many different activities. Coordination means to integrate (i.e. bring together) these activities for achieving the objectives of the organization.

Coordination is done to achieve the objectives of the organization. Coordination is a process. It is not fixed. It applies to group activities. It does not apply to individual activities. The managers have to make special efforts to get coordination. Coordination does not come automatically. Coordination leads to unity of action.

Coordination encourages team spirit. It gives proper direction to the organization. It motivates the employees. It makes proper use of the resources. Coordination affects all the functions of management. Therefore, it is also called the “Essence of Management”.

33. What is System Theory?

Ans: System theory focuses on the internal environment and the subsystems of the organization. Mainly, it considers the interdependence and interaction among subsystems. Moreover, depending on the expectations of the organization, the interaction between organization and environment constantly change.

A systematic approach treats all organizations in the same way. However, it does not take the background of the target organization into account. Further, this approach provides a theoretical model for the organization, as well as its various sub-systems. However, it doesn’t downgrade any of the classical management principles in which the target industry commonly function. Lack of universality and abstract approach are considered as limitations of systems theory.

34. Why management is considered a multifaceted concept?

Ans: Management is considered a multifaceted concept because management is multi-dimensional subject as because it has many dimensions which can be classified mainly into three categories, such as management of work, management of people and management of operations. In other words, management is concerned with conversion of various inputs into desired outputs with the help of human resources or people working in the organization. The interaction between work targets, operations and people with managerial functions of planning, organizing, directing and controlling. Management of work is concerned with the satisfaction of customers needs. Manager ent of people involves dealing with people as

(i) individual (having diverse needs, perception and behaviour).

(ii) members of work groups in the organization.

Management of operations is concerned with the transformation of inputs into outputs efficiently to serve the customers better.

35. Explain briefly nature of management.

Ans: Nature of management are as follows:

(i) Management as a science: Management is not a perfect science as its principles are mostly situation based and do not produce the same results every time. Infact, management is a social science as it deals with humans whose behaviour is not fully predictable.

(ii) Management is an art: It is an art as every manager applies certain knowledge and skills to take decisions and put them into action. Management is a creative art of dealing with to people.

(iii) Management is proceeding towards professionalization: Management has a wide body of knowledge which requires competent application. Modern managers recognise their social obligations and have high status in the society. But the element of self control is missing. There is no controlling authority of the managers to implement a code of conduct for them.

36. What is Contingency or Situational Approach? Write its implication.

Ans: The situational or contingency theory asserts that when managers make a decision, they must take into account all aspects of the current situation and action those aspects that are keys to the situation at hand. Basically, it is the approach that “it depends”. For example, if one is leading troops in Iraq, autocratic style is probably best. If one is leading a hospital or University, a more participative and facilitative leadership style is probably best. When a subsystem in an organization behaves in response to another system or subsystem, we say that response is contingent on environment. Hence a contingency approach is an approach where the behaviours of one subunit is dependent on its environmental relationship to other units or subunits that have control over the consequences desired by that subunit.


(a) Management is entirely situational and there is nothing like universal principles of management.

(b) The approach suggests suitable alternatives for those managerial actions which are generally contingent upon external and internal environment.

(c) This approach suggests that since organization interacts with its environment, neither the organization nor any of its subsystems is free to take absolute action.

37. What are the steps involved in Using the Porter’s Five Forces?

Ans: We now understand that Porter’s five forces framework is used to analyze industry’s competitive forces and to shape organization’s strategy according to the results of the analysis. But how to use this tool? We have identified the following steps:

Step 1. Gather the information on each of the five forces. What managers should do during this step is to gather information about their industry and to check it against each of the factors (such as “number of competitors in the industry”) influencing the force.

Step 2. Analyze the results and display them on a diagram. After gathering all the information, you should analyze it and determine how each force is affecting an industry. For example, if there are many companies of equal size operating in the slow growth industry, it means that rivalry between existing companies is strong. Remember that five forces affect different industries differently so don’t use the same results of analysis for even similar industries!

Step 3. Formulate strategies based on the conclusions. At this stage, managers should formulate firm’s strategies using the results of the analysis For example, if it is hard to achieve economies of scale in the market, the company should pursue cost leadership strategy. Product development strategy should be used if the current market growth is slow and the market is saturated.

Although, Porter’s five forces is a great tool to analyze industry’s structure and use the results to formulate firm’s strategy, it has its limitations and requires further analysis to be done, such as SWOT, PEST or Value Chain analysis.

38. What are the limitations of contingency approach?

Ans: Contingency approach has not been considered as a unified approach or theory of management.

Following are its limitations:

(i) Inadequate Literature: Contingency approach suffers from inadequacy of literature. Therefore it has not adequately spelled out various types of actions which can be taken under different situations.

(ii) Complex: The suggestion of this approach is very simple, that is managers should do according to the needs of the situation. Moreover when put into practice, it becomes very complex.

(iii) Difficult empirical testing: Contingency approach, being complex, presents problems in listing to the needs of the situation. For empirical testing of a theory, it is necessary that some methodology is available. No doubt, methodology is available but because of involvement of too many factors, testing becomes difficult.

(iv) Reactive not proactive: Contingency approach is basically reactive in nature. It merely suggests what managers can do in a given situation.

39. What is the Relationship Between System Theory and Contingency Theory?

Ans: (i) Contingency theory is an addition to system theory which fills its gaps.

(ii) Both theories consider an organization as a system that consists of several sub-systems.

(iii) Moreover, these two theories emphasize maintaining and adapting activities for the growth and survival of the system.

(iv) Also, both theories deal with patterns of relationships and the interdependence among the elements of the system.

40. What is the Difference System Theory Between and Contingency Theory?

Ans: The key difference between system theory and contingency theory is that the system theory deals with the internal dynamics of the organization, whereas the contingency theory deals with external determinants of the organization’s structure and behaviour. Besides, the systems theory discusses the universal principles for application in all situations. On the contrary, the contingency organizational theory works on the remedy, which says that it all depends’. So, this is also a vital difference between system theory and contingency theory.

Moreover, the contingency theory offers a more clear understanding of the relationship between different variables of the environment. Also, this theory is performance-oriented and directed towards the application of the system theory’s concepts.

41. What is Management by objectives (MBO)?

Ans: Management by objectives (MBO), also known as management by results (MBR), was first popularized by Peter Drucker in his 1954 book The Practice of Management. Management by objectives is the process of defining specific objectives within an organization that management can convey to organization members, then deciding how to achieve each objective in sequence. This process allows managers to take work that needs to be done one step at a time to allow for a calm, yet productive work environment. This process also helps organization members to see their accomplishments as they achieve each objective, which reinforces a positive work environment and a sense of achievement. An important part of MBO is the measurement and comparison of an employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal-setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities.

42. Who is Peter Senge?

Ans: The Journal of Business Strategy called Peter Senge ‘Strategist of the Century’ in a 1999 issue. Peter Senge is an advocate for decentralizing leadership so all people in an organization can work together towards a common goal. Born in 1947, Senge has earned multiple degrees, including a Ph.D. in Management from MIT. So what makes him the strategist of the century? Well, Senge is a proponent for what has become known as learning organizations, which are predicated on the principles of system thinking. Let’s take a look at what that means.

43. What are Porter’s Generic Strategies?

Ans: The Generic Strategies can be used to determine the direction (strategy) of your organization. Michael Porter uses 4 strategies that an organization can choose from. He believes that a company must choose a clear course in order to be able to beat the competition. The four strategies to choose from are: Cost Leadership, Differentiation, Cost Focus, Differentiation Focus.

44. What is the Porter’s value chain?

Ans: The Porter’s value chain concept says that there is a chain of events which occur in a company right from the procurement of raw materials to the delivery of goods as well as the post sales service. This chain is made up of 9 steps and the process can be changed in any of the nine steps to add further value to the final product. The value chain model can be a reference for Holistic marketing. If a company wants to add customer value in all the processes that it does, it has to refer to the Value Chain.

45. Who is Michael Hammer?

Ans: Michael Hammer was born in 1948 and grew up in Maryland. He went to MIT to study maths, receiving his BS in 1968. He then took an MS in Electrical Engineering in 1970, followed by a PhD in Computer Science, that he was awarded in 1973.

He remained at MIT becoming a professor in the Computer Science department and also a lecturer at the MIT Sloane School of Management. From there, he formed links with a Boston-based consulting firm, Index, led by founder, James Champy. In 1990, he authorized one of the most influential Harvard Business Review articles, Reengineering Work: Don’t Automate, Obliterate. This called for a radical approach to creating competitive advantage. It built on thinking that was already around among consulting firms like Index and Boston Consulting Group.

It was so successful that Hammer and Champy collaborated on a follow-up book that was hailed as one of the most important business books of its time: Reengineering the Corporation: A Manifesto for Business Revolution.

Other books followed, along with his own consultancy, and a commentary on the reengineering story as it grew, reached its peak, and then diminished amidst a certain sense of distaste. Hammer confessed to having been naive about the impact his ideas would have on people’s lives, once in the hands of corporations motivated primarily by profit for their shareholders.

Michael Hammer died unexpectedly in 2008, from a brain hemorrhage.

46. Who is James Champy?

Ans: James Champy was born in 1942 and studied Civil Engineering, also at MIT. He gained his BS in 1963 and his MS in 1965. He then went to Boston College Law School and received his JD in 1968. From there, he went on to found the consulting firm Index. In 1988, Index was bought by computer systems giant Computer Sciences Corporation, and became known as CSC Index. Champy stayed on as Chairman and CEO until 1996. He then went to lead another giant IT consultancy, Perot Systems, until 2009, when it was acquired by Dell.

Champy currently has a wide range of corporate roles, is an independent consultant, and research fellow at the Harvard Advanced Leadership Institute.

47. What is Business process re-engineering (BPR)?

Ans: It is a business management strategy, originally pioneered in the early 1990s, focusing on the analysis and design of workflows and business processes within an organization. BPR aimed to help organizations fundamentally rethink how they do their work in order to improve customer service, cut operational costs, and become world-class competitors.

BPR seeks to help companies radically restructure their organizations by focusing on the ground-up design of their business processes. According to early BPR proponent Thomas H. Davenport (1990), a business process is a set of logically related tasks performed to achieve a defined business outcome. Re-engineering emphasized a holistic focus on business objectives and how processes related to them, encouraging full-scale recreation of processes rather than iterative optimization of sub-processes. 

Business process reengineering is also known as business process redesign, business transformation, or business process change management.


1. What is Management by objectives (MBO)? Explain the Features of Management by Objectives MBO.

Ans: Management by objectives (MBO), also known as management by results (MBR), was first popularized by Peter Drucker in his 1954 book The Practice of Management. Management by objectives is the process of defining specific objectives within an organization that management can convey to organization members, then deciding how to achieve each objective in sequence. This process allows managers to take work that needs to be done one step at a time to allow for a calm, yet productive work environment. This process also helps organization members to see their accomplishments as they achieve each objective, which reinforces a positive work environment and a sense of achievement. An important part of MBO is the measurement and comparison of an employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal-setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities.

Features Of Management By Objectives MBO are explained below:

(i) Superior-subordinate participation: MBO requires the superior and the subordinate to recognize that the development of objectives is a joint project/activity. They must be jointly agree and write out their duties and areas of responsibility in their respective jobs.

(ii) Joint goal-setting: MBO emphasizes joint goal-setting that are tangible, verifiable and measurable. The subordinate in consultation with his superior sets his own short-term goals. However, it is examined both by the superior and the subordinate that goals are realistic and attainable. In brief, the goals are to be decided jointly through the participation of all.

(iii) Joint decision on methodology: MBO focuses special attention on what must be accomplished (goals) rather than how it is to be accomplished (methods). The superior and the subordinate mutually devise methodology to be followed in the attainment of objectives. They also mutually set standards and establish norms for evaluating performance.

(iv) Makes way to attain maximum result: MBO is a systematic and rational technique that allows management to

attain maximum results from available resources by focussing on attainable goals. It permits lot of freedom to subordinate to make creative decisions on his own. This motivates subordinates and ensures good performance from them.

(v) Support from superior: When the subordinate makes efforts to achieve his goals, superior’s helping hand is always available. The superior acts as a coach and provides his valuable advice and guidance to the subordinate. This is how MBO facilitates effective communication between superior and subordinates for achieving the objectives/targets set.

2. What is co-ordination? Distinguish between co-ordination and co-operation?

Ans: Coordination is an orderly arrangement of group efforts to provide unity of action in pursuit of common purpose.The working together of various organs of the body of an organism in a proper manner to produce an appropriate reaction to a stimulus is called coordination. Coordination is the harmonious working of interrelated but different parts of the body so as to perform one or more activities smoothly.

MeaningIt refers to bringing together the activities of an organization.It refers to voluntary efforts of individuals to work together and help each other.
NatureIt is a conscious and deliberate effort of manager.It is a voluntary effort of employees.
ScopeIt includes co-operation and hence has a wider scope.It has a narrow scope as it is towards establishing co-ordination.
RequirementCo-ordination is essential for achievement of organisational goal.Co-operation is voluntary in nature.
RelationsCo-ordination arises out of both formal and informal relations.It arises out of informal relations.

3. What are the features of bureaucracy?

Ans: Bureaucracy is an administrative system designed to accomplish large scale administrative tasks by systematically co-ordinating the work of many individuals. Following are the features of bureaucracy.

(i) Division of work: Work of the organization is divided on the basis of specialization to take the advantages of division of labour. Each office in the bureaucratic organization has specific sphere of competence. Thus division of labour ensures that each office has its clear defined area of competence and no work is left uncovered.

(ii) Administrative class: Bureaucratic organizations generally have administrative class responsibility for maintaining coordinative activities of the members.

(iii) Official Rules: In bureaucratic structure, administrative process is continuous and governed by official rules.

(iv) Impersonal relationships: Official positions in bureaucracy are free from personal involvement, they are governed through of system of official authority and rules.

(v) Official Record: Another feature of bureaucracy is maintenance of proper official records.

4. Explain in brief importance of management.  What are the characteristics of management? Explain in details.

Ans: The importance or benefits of management are:

(i) Helps in achieving business objectives: Management brings human and material resources together and mobilizes people to help in reaching business goals.

(ii) Management increases efficiency: The aim of a manager is to reduce costs and increases productivity through better planning, organizing, staffing and controlling the activities of the organization.

(iii) Management helps in achieving personal objectives: A manager motivates and lead his team in such a manner that individual member are able to achieve personal goals while contributing to the organization.

(iv) Better quality goods: A good management helps in producing better quality goods at minimum of cost.

(v) Social benefits: Management help in raising standard of living of the people by providing them with quality goods and services at the lowest possible cost.

(vi) Minimizing the element of risk: Risk is an integral part of every business but an efficient management always tries to control or minimize it.

To understand the nature of management, it is essential to know the features or characteristics of management.The basic features or characteristics of management are as follows:

(i) Management is goal-oriented: Management is always goal oriented. In the first function of management i.e. planning. The desired goal of the business is determined. Thereafter, through proper organizing, staffing, directing and controlling the goal are achieved.

(ii) Group activity: Management is an essential part of a group activity. Whenever, there is an organized group of people working towards a common goal, some type of management becomes essential. Management makes the people realise the objectives of the group and directs their effects towards the achievement of these activities.

(iii) Management is universal in character: Management is applicable in all types of organization. The basic principles of management are of universal application and can be applied in all organisation whether they are business, social, religious, cultural, sports etc.

(iv) Multidimensional: Management can be defined as multidimensional as because it has many dimensions which can be classified mainly into three categories, such as management of work, management of people and management of operations.

(v) Management is a continuous process: Management is a continuous process i.e. its functions are repeated time and again. Management does not stop anywhere. It is started right from the time of establishment of the business till its dissolution.

(vi) Dynamic function: Management is a dynamic function. According to changing of inputs the process of management will be also changed. So, management is called dynamic function.

5. Explain the basic functions of Management. What are the objectives of management? Explain in details.

Ans: Regardless of size, nature and type of organization, all the managers have to perform some basic functions which are as follows:

(a) Planning: Planning is always the first function performed by every manager. Planning refers to “deciding in advance what to do, how to do, when to do, and who is going to do it. Planning bridges the gap between where we stand today and where we want to reach”. Every manager starts with deciding in advance the objectives of an enterprise and how to accomplish these objectives. Planning is the base of all other functions of management.

(b) Organising: After setting up of plans next function of every manager is to organize the activities and establishing an organization structure to execute the plan. Setting up organizational structure means deciding the framework of working how many units and sub-units or departments are needed, how many posts or designations are needed in each department, how to distribute the authority and responsibility among different people. Once these decisions are taken an organizational structure gets set up.

(c) Staffing: Staffing is the third step or function of a manager. It refers to recruiting, selecting, appointing the employees, assigning them duties, maintaining cordial relations and taking care of grievances of employees. It also includes training and developing the employees, deciding their remuneration, promotion, increments, etc., evaluating the performance, maintaining personal records of employees.

(d) Directing: Once the employees are appointed there is need to instruct them and get the work done. Directing refers to giving directions or instructions to employees by motivating them, supervising the activities of employees, communicating with them. Managers act as leaders and guide them to right direction, so directing function includes, supervising, motivating, communicating and leadership.

(e) Controlling: This is the last function of managers. In this function managers try to match the actual performance with the planned performance and if there is no match between both then managers try to find out the reasons of deviation and suggest corrective measures to come on the path of plan. Controlling functions refer to all the performance measurements and follow up actions that keep the actual performance on the path of plan.

(f) Coordination: Coordination is concerned with harmonious and unified action directed toward a common objective. It ensures that all groups and persons work efficiently, economically and in harmony. Coordination requires effective channels of communication. Person-to-person communication is most effective for coordination.

(g) Communication: It means transfer of information and under-standing from person to person. Communication also leads to sharing of information, ideas and knowledge.

All managers at all levels of every organization perform these functions, but the amount of time a manager spends on each one depends on both the level of management and the specific organization.

Objectives are the goals or ends toward which the activities of a business are directed. From the point of view of management, objectives may be grouped under three heading namely

(i) organizational.

(ii) social. and 

(iii) individual.

(i) Organizational objectives: The main purpose of any organization is to utilize human and material resources to fulfill its economic objectives.

The economic objectives of a business are survival, profit and growth as discussed below:

(a) Survival: The basic objective of any business is survival. In order to survive an organization must earn enough revenues to cover cost of operation.

(b) Profit: Mere survival is not enough for business. The management must earn sufficient profit to meet the various cost of business and also cover the various business risks.

(c) Growth: It is very important for the business to grow. To remain in the market, management must exploit fully the growth potential of the organization.

(ii) Social objectives: Management is an organ of the society so it must have social objectives.

Social objectives include the following:

(a) Supply of quality goods at reasonable prices.

(b) Generation of employment opportunities.

(c) Providing financial support to community projects.

(d) Controlling environment pollution.

(e) Using environment friendly methods of production.

(iii) Personal objectives: Personal objectives relate to the employees. Every employee has some aspirations when he joins a job.

He expects these aspirations to be fulfilled by the organization:

(a) Good salary and other benefit.

(b) Opportunities for training, promotion etc.

(c) Good and healthy conditions

(d) Recognition of meritorious work.

(e) Treat employees as a part of business.

6. Explain the Importance of Coordination. Why Coordination is called the Essence of Management?

Ans: The need and importance of coordination can be judged from these points:

(a) Coordination encourages team spirit: There exists many conflicts and rivalries between individuals, departments, between a line and staff, etc. Similarly, conflicts are also between individual objectives and organizational objectives. Coordination arranges the work and the objectives in such a way that there are minimum conflicts and rivalries. It encourages the employees to work as a team and achieve the common objectives of the organization. This increases the team spirit of the employees.

(b) Coordination gives proper direction: There are many departments in the organization. Each department performs different activities. Coordination integrates (bring together) these activities for achieving the common goals or objectives of the organization. Thus, coordination gives proper direction to all the departments of the organization.

(c) Coordination facilitates motivation: Coordination gives complete freedom to the employees. It encourages the employees to show initiative. It also gives them many financial and non-financial incentives. Therefore, the employees get job satisfaction, and they are motivated to perform better.

(d) Coordination makes optimum utilization of resources: Coordination helps to bring together the human and material resources of the organization. It helps to make optimum utilization of resources. These resources are used to achieve the objectives of the organization. Coordination also minimizes the wastage of resources in the organization.

(e) Coordination helps to achieve objectives quickly: Coordination helps to minimize the conflicts, rivalries, wastages, delays and other organizational problems. It ensures smooth working of the organization. Therefore, with the help of coordination an organization can achieve its objectives easily and quickly.

(f) Coordination improves relations in the organization: The Top Level Managers coordinates the activities of the Middle Level Managers and develop good relations with them. Similarly, the Middle Level Managers coordinate the activities of the Lower Level Managers and develop good relations with them. Also, the Lower Level Managers coordinate the activities of the workers and develop good relations with them. Thus, coordination, overall improves the relations in the organization.

(g) Coordination leads to higher efficiency: Efficiency is the relationship between Returns and Cost. There will be higher efficiency when the returns are more and the cost is less. Since coordination leads to optimum utilization of resources it results in more returns and low cost. Thus, coordination leads to higher efficiency.

(h) Coordination improves goodwill of the organization: Coordination helps an organization to sell high quality goods and services at lower prices. This improves the goodwill of the organization and helps it earn a good name and image in the market and corporate world.

“Coordination is the Essence of Management.” The meaning of this sentence implies, Coordination affects all the functions of management. In other words, Coordination affects Planning, Organising, Staffing, Directing, Communication, Leading, Motivating and Controlling.

(a) Planning and Coordination: According to Harold Koontz and Cyril O’Donnell, “Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.”

There are many departmental plans in a business. These include, Purchase Plan, Sales Plan, Production Plan, Finance Plan, etc. All these plans must be coordinated (brought together) and one Master Plan must be made for the full business. Therefore, Planning is affected by Coordination.

(b) Organising and Coordination: There are many steps in Organising. All these steps must be coordinated, for achieving the objectives of the business. The Top Level Managers must coordinate the efforts of the Middle Level Managers. Similarly, the Middle Level Managers must coordinate the efforts of the Lower Level Managers. Furthermore, the Lower Level Managers must also coordinate the efforts of the workers. Therefore, Organisation is affected by Coordination.

(c) Staffing and Coordination: Staffing involves Recruitment and Selection, Training, Placement, Promotion, Transfer, etc. All these steps must be properly coordinated. Similarly, the efforts of all the individuals, groups and departments must be coordinated for achieving the objectives of the business. Therefore, Staffing is affected by Coordination.

(d) Directing and Coordination: Directing means giving necessary information, proper instructions and guidance to subordinates. This results in coordination. Therefore, Direction is affected by Coordination.

(e) Communicating and Coordination: Many types of communication methods are used in a business. These methods include, Formal communication, Informal Communication, Upward Communication, Downward Communication, Oral Communication, Written Communication, etc. It is important to note that, all these types of communication must be properly coordinated. Lack of proper coordination will hinder the smooth functioning of the communication process. Furthermore, it will also restrict the important information flow and cause many economic problems to the business. Thus, Communication is affected by Coordination.

(f) Motivating and Coordination: There are many types of Motivation. These are, Positive Motivation, Negative Motivation, Financial Motivation, and Non-Financial Motivation. All these types of Motivation must be properly coordinated. Therefore, Motivation is affected by Coordination.

(g) Leading and Coordination: Every manager must be a good leader. He must coordinate the efforts of his subordinates for achieving the objectives. That is, he must coordinate the human resource. He must also coordinate the material and financial resources of the organization. In short, a leader cannot survive without coordination. In other words, leadership cannot be performed without coordination. Therefore, Leadership is affected by Coordination.

(h) Controlling and Coordination: In Controlling the standards are first fixed. Then the performances are measured. Performances are compared with the standards, and the deviations are found out. Then the deviations are corrected. So, controlling involves many steps. All these steps must be properly coordinated. If coordination is not proper, Control will surely fail. Therefore, Control is also affected by Coordination.

Now we can conclude that all the functions of management are affected by coordination. Hence coordination is essential for achieving the objectives of the organization. It is also required for the survival, growth and profitability of the organization. Coordination encourages team spirit, gives right direction, motivates employees, and makes proper utilization of resources. Therefore, Coordination is rightly called the “Essence of Management”.

7. Discuss the classical and neo-classical theories of management. Make a comparative study between classical and neo-classical theory.

Ans: (i) Classical Theory: The term “Classical” means something long established and traditionally accepted. The classical theories are the beginning of systematic study of management. The classical management thinkers view an organization as a machine and human being as different components of that machine. Therefore, this theory has been termed as machine theory. It is also called the Traditional Theory of Management. The classical theory is based upon contributions from a number of sources including.

(ii) Neo-classical Theory: Neo-classical management theory has started its development from the findings of the famous Hawthorne Experiments. Afterwards, many contributions have been added to this field. Beside Prof. Elton Mayo, this theory is based on contributions of behavioral scientists and social scientists as M. P. Follet, C.I. Barnard, Rensis Likert, A.H. Maslow, Douglas Mc. Gregor and many others. Rensis Likert, A.H. Maslow, Douglas Mc. Gregor and many others.

Distinction between classical neoclassical approaches:

BasisClassical ApproachNeo Classical Approach
(a) ContentScientific management, administrative management and bureaucratic management.Human relation movement and organisational behaviour.
(b) ApplicationAutocratic management and strict rule.Democratic process.
(c) FocusFunctions and economic demand of worker.Emotion and human qualities of workers.
(d) StructureImpersonal and mechanistic.Social system.
(e) EmphasizeDiscipline and rationality.Personal security and social demand.
(f) Work Goal of workerMaximum remuneration and reward.Attainment of organisation goal.
(g) RelationFormal.Informal.

8. Explain the Evolution of Management Thought with diagram.


Briefly discuss the various theories of management.

Ans: Management and organization theory may be defined as the study of structure, functioning and performance of organization and the behavior of groups and individuals working in the organization. These theories provide the ground for management activities.

Various theories of management and organization have been evolved. They may be broadly grouped into three categories, namely

(i) Classical Theory (upto 1930).

(ii) Neo-Classical Theory (1930-1950).

(iii) Modern Theory (1950 onward).

Each of them are discussed below:

(a) Classical Theory: The term “Classical” means something long established and traditionally accepted. The classical theories are the beginning of systematic study of management. The classical management thinkers view an organization as a machine and human being as different components of that machine. Therefore, this theory has been termed as machine theory. It is also called the Traditional Theory of Management. The classical theory is based upon contributions from a number of sources including.

(i) Scientific management of F.W. Taylor.

(ii) Administrative management theory of Henry Fayol.

(iii) Bureaucratic model of Max Weber.

(iv) Micro economics.

(v) Public administration.

(a) Division of Labor: It is the corner stone among the four elements.

(b) Scalar and Functional Process: They deal with vertical and horizontal growth of the organization.

(c) Structure: It is the logical relationship of functions in an organization.

(d) Span of Control: This concept relates to the number of subordinates that a manager can effectively supervise.

The classical concept represents an important part of management theory. Many of the classical concepts hold valid even today and provide guidance for designing of an organization.

Criticism of the theory:

However, the points of criticism put forward against this theory are as follows:

(i) Goal Structure: This was a very narrow approach as it concentrated more on line and staff structure. It have not expressly mentioned about the goal structure.

(ii) Decision Making Process: Little attention was paid to the decision making process.

(iii) Economic concept of Motivation: They have ignored the socio-psychological and motivational aspect of human behavior. For example, Taylor recognized that workers could be motivated by money.

(iv) Role structure: Role structure refers to organizational positions and their interrelationship. Classical theorists have viewed organizations having no interaction with environment. This assumption is totally unrealistic.

(b) Neo-classical Theory: Neo-classical management theory has started its development from the findings of the famous Hawthorne Experiments. Afterwards, many contributions have been added to this field. Beside Prof. Elton Mayo, this theory is based on contributions of behavioral scientists and social scientists as M. P. Follet, C.I. Barnard, Rensis Likert, A.H. Maslow, Douglas Mc. Gregor and many others. Rensis Likert, A.H. Maslow, Douglas Mc. Gregor and many others.

The essence of neo-classical theory is contained in two points:

(i) An organization should be viewed in social as well as in economic and technical terms.

(ii) The social process of group behavior can be understood in terms of clinical method.

The main propositions of the neo-classical theory are as follows—

(i) The organization is a social system.

(ii) The social environment of the job affects people and is also affected by them.

(iii) Informal organization also exists within the formal organization.

(iv) Human being has diverse motivational pattern and try to fulfill different types of needs.

(v) Communication is necessary as it conveys the feelings and sentiments of people who work in the organization.

(vi) Team work is essential for cooperation among people.

Neo-classical theory has given a new dimension to the design and management of the organization. It has recognized such important factors, which were almost ignored by the classical theory like informal organization, informal leader, non-economic motivation and so on. Thus, neo-classical theory has tried to overcome many of the deficiencies of the classical theory.

This theory is more humanistic. The neo-classicalist has introduced behavior science in the study of management. The theory laid to the organizational design and management in the following ways—

(i) This theory suggests flat structure as against tall structure suggested by classical theory.

(ii) This theory suggests decentralization in organization structure.

(iii) It points out the importance of informal organization.

However, neo-classical theory is not free from its shortcomings. It suffers from lace of united approach. In fact, it is not a new theory at all. It is mere modification and extension of the classical model.

(c) Modern Theory: Modern management theories made further refinement and extension of the classical and neo-classical approaches to management. These trends started after 1950. Modern management has made use of various mathematical formulae, statistical tools, economic models and engineering knowledge to find out solutions to managerial and decision-making problems. It has also emphasized the need for study of socio psychological aspects in understanding human behavior.

There are three streams under modern management theory.

(i) Quantitative Approach: The quantitative school of management is also called “Operation Research” or management science. New mathematical and statistical tools are being applied in the field of management, particularly in decision-making on complex problems. The more commonly used techniques are linear programming, game theory, simulation and probability. Computer is used to find out solutions to complex management problems.

(ii) System Approach: It considers an organization as a dynamic concept. A system approach acknowledges environmental influences, which were denied by the classical theory. Rigid rules cannot deal with uncertain and uncontrollable events. An organization influences the environment or is influenced by it. System approach lays emphasis on interrelationship and interdependence of all components. It considers all organization as an open, adaptive system, which has to adjust to changes in its environment. System approach includes operation research (OR), behavior sciences, social technical system, management information system (MIS) and industrial dynamics.

(iii) Contingency Approach: Contingency approach points out that all types of organization and all types of leadership can work under certain circumstances. Situational factors play an important role in designing of an appropriate organization structure and suitable managerial style. The following factors affect organization structure and managerial style.

(a) Environment.

(b) Technology.

(c) People.

(d) Size of the organization.

Thus, contingency approach suggests that the organization structure, which integrates the above forces, will be more effective. There is no “One best way” to manage and organize. The successful managerial decisions depend upon the situations and circumstances in which such decisions are made. Depending on the type of situation and contingency, the management would devise appropriate strategies to adequately handle the situation.

Evolution of Management Thought

9. What is management? Discuss the nature (2015) and significance of management.

Ans: Management is the coordination of all resources through the process of planning, organizing, directing, staffing and controlling in order to attain stated objectives effectively and efficiently.  Effectively means doing the right task, completing activities and achieving goals and efficiently means to attain objectives with the least amount of resources at a minimum cost. This process starts at the top and continues in more or less degree at every level of the organization. 

Following are the nature or significance of management:

(i) Management is a process: Management is a continuous activity which aims at making optimum use of the available resources like men, machinery, materials, and money, for achieving organisational goals.

(ii) Management deals with several functions: Management includes several functions such as planning, organising, staffing, directing co-ordinating, controlling, motivating or actuating, controlling, decision making, leadership and communication.

(iii) Management is goal oriented: Every management activity is directed towards achieving predetermined objectives of the organiation.

(iv) Management is a group of organized activities: Management plans, organizes, co-ordinates, directs and controls the group efforts so as to achieve organisational goals efficiently and effectively.

(v) Management is basically a factor of production: The factors of production include land, labour, capital and entrepreneurs.  A manager or entrepreneur mobilizes resources like land, labour and capital to produce’ output to satisfy needs of the society and earn profit.

(vi) Management is a discipline: Management , although borrows several concept for other social sciences, it has developed its own body of principles and theories so as to become a special discipline or subject of study for potential managers.

(vii) Management is  a science and also an art: Science is defined as a systematized body of knowledge and it uses scientific methods of observation measurement, experimentation etc. Its principles are exact and university applicable.  

10. Define classical approach. Explain the features and limitations of Classical Approach.

Ans: The classical approach is the oldest formal approach of management thought. Its roots pre-date the twentieth century. The classical approach of thought generally concerns ways to manage work and organizations more efficiently. Three areas of study that can be grouped under the classical approach are scientific management, administrative management, and bureaucratic management.

Classical approach signifies from the following features:

(i) Classical theory concentrate on anatomy of formal organization through division of labour, specialization, structure, scalar, functional processes and span of control.

(ii) Management is the study of managerial experiences. If the experiences are studied and certain generalizations are deducted there from, these will help the practicing managers.

(iii) Classical Approach treats organization as a closed system.

(iv) Formal organization structure coordinates the activities of the organization. They ignored the element of human beings.

(v) Principles and functions of management have universal application.

(vi) Scientific management emphasized efficiency of lower levels of organizations.

(vii) Work force were supposed to be rational economic force, they could be motivated through economic incentives.

(viii) Classical approach emphasized on ‘centralization of authority’.

The classical approach suffers from several limitations:

(i) The classical ignored the human relations aspects and undermines the role of human factor.

(ii) Classical viewed organization as a closed system, i.e., having no interaction with external environment.

(iii) Economic rewards assumed as the main motivator of work force. They have ignored non-monetary factors.

(iv) The classical principles are based on managerial experiences and their limited observations. These are not empirical.

(v) Classical approach is based on oversimplified assumptions. Its principles are ambiguous and contradictory.

(vi) This school emphasized on strict adherence to rules and regulations. The scope for individual initiative is thus limited.

11. What is the philosophy of Taylor’s Scientific Management?

Ans: The philosophy or principles of Taylor’s scientific management is/are discussed as follows:

(i) Develop a science to replace rules of thumb: Taylor wanted to term management as a science. He, therefore, recommended that every activity of an organization must rest on well-organized, clearly defined principles instead of depending on more or less hazy ideas. Every manager must develop and use scientific methods rather than intuition and expertise to find out the best way of doing every activity in an organization.

(ii) Labor-management cooperation: Taylor regarded co-operation between workers and management as the heart of scientific management. Through cooperation of all, managers can get the things done in the best and cheapest way. This will ultimately contribute to the welfare of the society as a whole.

(iii) Maximization of output or production: Taylor believed in maximum output instead of restricted output. It is because the prosperity for both employer and employees could be achieved only through maximizing productivity.

(iv) Equal division of responsibility: There should be equal division of responsibility between managers and workers. Managers must fulfill their responsibility of planning and organizing effectively. On the other hand, workers must fulfill their responsibility by executing the work as per the directions of the bosses.

(v) Job specialization: Taylor believed that each worker should be specialist in his job. At the same time, different specialist supervisors must supervise each worker. For this, Taylor introduced the concept of functional foremanship.

(vi) Scientific selection, training and development of workers: Taylor realized the importance of right person for the right job to attain highest efficiency. He, therefore, stressed the need for proper selection and training of the workers. He suggested that tests should be used to determine the suitability of a person for a particular job.

(vii) Planning and scheduling of work: Taylor believed that everything in the organization should be done by plan. Therefore daily as well as yearly plans should be prepared. Plans must be prepared for individual worker as well as for the organization as a whole. Moreover, scheduling for getting people and the materials at the right place, right time, and proper condition should be done.

(viii) Standardization: Taylor believed standardization of methods, tools, time, materials etc. for each activity is very important. Therefore, standards should be fixed for each of them.

(ix) Wage incentives: Taylor believed that wage incentives should be integral part of each job. Taylor suggested the differential wage rates for different jobs. According to these rates workers to receive a bonus in addition to normal wages if they did their job before the standard time fixed for the job.

(x) Mental revolution: Taylor firmly believed that the principles of scientific management could succeed only when there is a complete mental revolution on the part of management and worker. In other words, both the parties should change their mental attitudes. For this, he suggested the following three things:

(i) They must create a spirit of mutual trust and confidence.

(ii) Both must make efforts to increase production and productivity.

(iii) Both must develop a scientific attitude towards the work and should not leave their arbitrary approach.

Thus the mental revolution requires change in the attitudes of both. Management must create congenial working conditions and develop best methods and looks for optimum efficiency of the workers. On the other hand, workers should also the review the working habits as well as the attitude towards the management and problems of the organization. They should not indulge in strikes and wastage of resources. Both should trust each other. This will result in increased production, productivity and profitability with which both will be benefited.

12. Discuss the various Techniques of Scientific Management. What are the benefits and limitations of Scientific management?

Ans: In order to blend philosophy and principles of scientific management into practice, Taylor developed the following techniques or mechanism:

(a) Scientific task setting: Taylor suggested that the task of every worker for every day should be determined through scientific investigation. Taylor called it “a fair day’s work”. Every manager must know in advance the fair day’s work for each worker. The day’s work should neither be higher than the average capacity of the workers nor lower than the capacity of the worker for whom work is determined.

(b) Experimentation or work-study: The work for each worker must be determined through proper experiments or work-study. Work-study means organized, systematic and objective analysis and assessment of the operational efficiency of all the elements connected with the work.

The main areas of work-study are as follows:

(i) Method Study: It is a survey of production process. It aims to evolve the best method of doing a particular job by simplifying the production process, methods, tools etc.

(ii) Motion Study: Motion study relates to the study of movements of a worker or a machine in doing a job. It aims at eliminating unnecessary motions and to find out the best method of doing a job efficiently. This results in conservation of energy and increased efficiency and productivity of the resources.

(iii) Time Study: Time study is the process of recording the exact time taken for doing a job with a view to find out a standard time for doing the job.

(iv) Fatigue Study: Fatigue study is the study of the reduction of human energy or capacity in doing his job. Fatigue is caused by over-work without rest, poor working conditions, stress, strain etc.

(c) Planning: Taylor advocated that planning function should be separate from the doing function. Planning department should decide about the type, shape and quality of the goods to be produced and the time schedule for delivery of the products. It should also prepare detailed instructions for the workers as to quality, quantity and shape of products and time schedule of production. Nothing should be left for workers to plan.

(d) Scientific selection and training of workers: Taylor realized the importance of the right person on the right job. Therefore, he advised for proper selection of the workers and their training. Tests and interview should be used to judge the suitable person on the job. Scientifically selected persons should be trained to use scientific methods of doing jobs.

(e) Specialization: Taylor suggested that scientifically selected and trained workers should be allocated the tasks according to their specialization. Moreover, different functional bosses must supervise each worker.

(f) Standardization: Taylor advocated for standardization of materials, tools, equipments, methods etc. Standardized working environment should also be provided to the workers. Standardization will increase efficiency and eliminate or minimize wastage of resources. This will ultimately reduce cost of production.

(g) Efficient costing system: Taylor felt the need of effective costing system in order to control cost of production and pricing. He suggested that cost accounting should be applied to raw materials, inventories, overheads etc. Efficient costing system helps in reducing waste, detecting inefficiency, fixing standard cost, preparing budgets etc.

(h) Incentive wage plan: Taylor considered that incentive wage plan is an integral part of the scientific management. He, therefore, suggested a differential wage payment plan. According to this plan, worker is to receive a bonus in addition to his wages if he completed his job before the standard time fixed for the job.

(i) Congenial atmosphere of work: Taylor advocated for congenial atmosphere of work. Physical conditions of work i.e. lighting, air, space, humidity etc. should be healthy. Moreover, the environment must also be cheerful and psychologically satisfactory.

(j) Functional foremanship: In order to ensure specialization at supervisory level Taylor suggested functional foremanship. Under this scheme there shall be eight specialists or functional bosses to supervise the activities of each worker. Out of these, four will be in the planning office and other tour will be in the workshop or shop. The four functional basses in the office are:

(i) The time and cost clerk.

(ii) The instruction card clerk.

(iii) The route clerk. and

(iv) The shop disciplinarian.

The other four functional bosses in the shop are:

(i) The gang boss.

(ii) The speed boss.

(iii) The repair boss. and

(iv) The inspector.

Under this system of supervision each worker receives orders and instructions from each of the eight bosses as has been shown in figure,

Taylor’s scientific management has been regarded very important contributions on the following grounds or benefits:

(i) It promotes the use of scientific methods in place of traditional rule of thumb method.

(ii) It promotes cooperation between management and workers.

(iii) It encourages having right persons on the right job through scientific selection and training.

(iv) It promotes standardization of products through standardized material, tools, techniques, methods etc.

(v) It promotes better utilization of resources through proper planning, scheduling, cost accounting etc.

(vi) It helps maximizing production and productivity in place of restricted production.

(vii) It motivates people to work by using the incentive wage payment systems.

(viii) It helps to provide goods at lower prices by eliminating or minimizing wastage and inefficiency.

(ix) People get better quality of products.

(x) Owners get more profits.

(xi) As a resuit of all the above facts, the society and nation as a whole is benefited.

Criticism: Taylor’s scientific management or Taylor’s contribution has been criticised by some of the employers, workers and academicians. It is due to the following limitations of the scientific management:

(i) Production-Centered: Scientific management is production-centered management. It lays emphasis on production aspect of management. It ignores almost all other areas of management such as finance, marketing, accounting etc. Peter Drucker, March and Simon have also criticised it on the ground that it neglects highly important areas of problem solving.

(ii) Neglect of human aspect: Workers, trade owners, psychologists usually criticise this that it neglects human aspect or lacks human face. They allege that it forces the worker to over speed the work. Moreover, it renders the work monotonous. Even the wages of the workers do not increase in proportion of increase in production. It, therefore, leads to loss of worker’s initiative and skills.

(iii) Wrong assumptions: Behavioural scientists have criticised scientific management for its wrong assumptions. Scientific management assumes that workers are rational economic beings and cannot plan. This is not fair. One expert has gone to the extent of saying that “Taylor has deduced a God-given right of planning”. Behaviour scientists argue that workers are human beings and can effectively plan their activities.

(iv) Over-specialization: Scientific management is also criticised for over-specialization. Allocation of work is made on the principle of division of labour. Moreover, supervision system under this management is based on the principle of specialization i.e. functional foremanship. This leaves little freedom to workers in their job.

(v) Theoretical: Scientific management is more theoretical than applied science. For instance, it suggests for separation of planning function from ‘doing’ or execution function. Thus, scientific management does not expect and allow workers to think.

(vi) Restricted application: Scientific management techniques can be applied to production activities at the supervisory level. These cannot be successfully applied to the activities at higher level of management. Moreover, these techniques cannot be applied the activities of service sector.

(vii) Anti-social: Dr Myers regards that scientific management is anti-social because it aims at excluding as for as possible the average man.

(viii) It is an approach only: Some academicians’ object to call it scientific management. They say it is simply a scientific approach to management.

In the light of above stated facts for and against scientific management, it may be concluded that it can be useful approach for managing shop floor level activities.

13. Describe the contribution of Fayol to management? Discuss the principles of management given by Fayol?

Ans: Henry Fayol (1841-1925) was a French mining engineer and chief executive officer of a coal mine company. He propounded the administrative or functional theory of management. He first expressed his views in 1900 at the international mining and metallurgical congress. Then he presented his theory in a book entitled Administration Industrially it General in French language in 1915. Later, it was translated into English as General and Industrial Management in 1929. Fayol’s contribution may be discussed under the following heads.

(a) Classification of business activities: Fayol classified all activator of a business organization into the following six groups:

(i) Technical activities consisting of production or manufacturing.

(ii) Commercial activities consisting of buying, selling and exchange.

(iii) Financial activities relating to search for and optimum use of capital.

(iv) Security activities relating to protection of property and persons.

(v) Accounting activities relating to maintenance of accounts, costing and statistics.

(vi) Administrative activities relating to the planning organizing, commanding, coordinating and controlling.

(b) Elements of administration or management functions: Fayol described five elements of administration or management functions.

They are as follows:

(i) Planning, consisting of activities for making plans to achieve goal of the organization. This function includes forecasting and decision-making.

(ii) Organizing, consisting of activities necessary for mobilizing human and other resources of the organization to implement the plans.

(iii) Commanding which consists activities relating to directing, leading, motivating and communicating for getting things done.

(iv) Co-ordinating, which is concerned with activities necessary for harmonizing the efforts of all in order to achieve a common goal.

(v) Controlling which is concerned with ensuring performance in accordance with plans.

(c) Principles of management: Fayol proposed fourteen principles of management. He believed that these principles should guide the thinking of managers in doing their job.

The principles are as follows:

(i) Division of labour.

(ii) Authority and Responsibility.

(iii) Discipline.

(iv) Unity of Command.

(v) Unity of direction.

(vi) Subordination of Individual interest to the common interest.

(vii) Remuneration.

(viii) Centralization.

(ix) Scalar chain.

(x) Order.

(xi) Equity.

(xii) Stability of tenure of personnel.

(xiii) Initiative. and

(xiv) Esprit de corps.

(d) Flexible and adaptable principles: Fayol made it clear that the principles of management are flexible and adaptable to every need. The managers must be flexible in applying them because these principles are hardly ever used twice in the same way due to the changing conditions.

(e) Universal Principles: He believed that principles of management are universally applicable. The principles are applicable in all organizations large or small, industrial, commercial, political, religions, or any other. Moreover, he assumed that all the managers perform the same basic functions. This was the basic assumption of Fayol’s work.

(f) Qualities of manager: Fayol also stressed the need for learning and developing certain skills by managers. According to him a manager should possess the following qualities:

(i) Physical qualities i.e. good health, vigor and vitality.

(ii) Mental qualities i.e., ability to learn, and to apply the knowledge.

(iii) Moral qualities i.e., energy, firmness to accept responsibility, ability to take initiative, loyal etc.

(iv) Educational qualities i.e., general education and knowledge of matters not belonging to his job.

(v) Technical or professional qualities i.e., ability to perform his job efficiently.

(vi) Experience, i.c. knowledge arising from doing the job over the time.

(g) Management education and training: Fayol realised the need for management education and training. He strongly pleaded for introducing management education and training in schools and universities. He also suggested for conducting organizational ‘in house’ training programmes. He preferred it over on the job experience method of learning and training.

Henry Fayol, who is recognized as the father of modern theory of management formulated a set of 14 principles. They are as follows:

(i) Division of Work or specialization: Fayol’s first principle related to division of work. Taylor and some economists call it the principle of specialization.

The principle of division of work states that the total work should be subdivided into small components/parts and each part of the work should be allocated to the worker who specializes in that part of the work.

(ii) Authority and responsibility: Authority creates responsibility. Whenever, a person exercise authority, responsibility arises. Responsibility is the essential counter part of authority. Therefore, this principle states that authority and responsibility must go together. Moreover, there must be parity of authority and responsibility.

(iii) Discipline: According to Fayol, discipline is absolutely essential of the smooth running of business. Without it no business can prosper. He believed that discipline results from these things:

(a) Good leadership at all levels of the organization.

(b) Fair agreement between the firm and its employees.

(c) Fairness in the application of penalties. He also believed that punishment should be rarely awarded.

(iv) Unity of Command: The principle of unity of command states that each subordinate should receive orders from only one boss or superior. It is because an individual cannot serve two bosses at the same time. When an employee gets orders and instructions from more than one boss, confusion and conflict tend to arise.

(v) Unity of direction: The principle of unity of direction states that there should be “one head and one plan” for a group of similar activities having the same objective. It means that only one manager must direct similar activities under a particular plan. This will ensure unity of action and result in sound organization structure.

(vi) Subordination of individual interest to general interest: This principle states that the interest of one employee or a group of employees should not prevail over the interest of the organization as a whole.

(vii) Remuneration: Fayol stressed that the remuneration or compensation for work done should be fair to both employees and the firm. It should neither be low nor high. The mode of payment day-rate, piece-rate, profit sharing etc. should depend on the specific circumstances but it should satisfy both the employees and employers.

(viii) Centralization: Decreasing the role of subordinates in decision-making is centralization of authority and increasing their role in it is decentralization of authority.

Fayol believed that managers should retain final responsibility but should at the same time give their subordinates enough authority to do their job properly. Thus, a balance between centralization and decentralization should be maintained.

(ix) Scalar chain or hierarchy of authority: Scalar chain refers to the unbroken chain or line of authority running from the top management to the lowest levels of the organization. This is also known as hierarchy of authority.

Fayol realized that sometimes it becomes absolutely essential to short-circuit the chain of command or to depart from the prescribed route with a view to ensure communication fast and effective. In such a case, gang-plank should be used. Fayol’s gang-plank allows two individuals to deal directly with each other without weakening the chain of command. Fayol’s gang-plank concept is shown in Figure.

This figures shows that there are two chains of command of ‘ABCDE’ and ‘AFGHI’. All the persons can communicate with one-another along the chain of authority shown in it. If D wants to communicate with H, D will have to communicate via C, B, A, F, G to H. In this way much time will be wasted. But in order to minimize the delay in communication the gang-plank principle should be used. According to this principle the people at the same level of the organization can communicate directly with the permission of their respective superiors. If the superiors (i.e. C and G) of D and H permit them, they can short-circuit the chain of command and create and use a gang-plank as is shown by the dotted lines in the figures.

(x) Order: The principle of order states that there should be a place for every thing and for every person. At the same time every thing and every person should be in their place. In other words, material and people should be in the right place at the right time. People should be assigned the jobs that are best suited to them.

(xi) Equity: According to this principle, the manager must install equality in the organization. To ensure this, managers should be friendly, fair and kind, in dealing with their subordinates. It is because every one likes equity in treatment. Equity brings loyalty and fosters good employee relations.

(xii) Stability of Personnel: This principle states that there should be reasonable stability of the tenure of personnel in the firm. No employee must be removed from this position within a short period of time. However, incompetent employees should be sacked immediately. The stability of tenure will reduce the employee turnover and the cost of training and learning of employees.

(xiii) Initiative: This principle states that subordinates should be given the freedom to develop and carry out their plans. But managers should do so within the limits of authority and discipline. This freedom may encourage and inspire subordinates to initiate new things. This, in turn, will foster creative ideas for the organization and provide satisfaction to the employees.

(xiv) Esprit de corps: This principle states that managers should promote esprit de corps or team spirit and a sense of unity among the employees. Fayol decried the abuses of ‘divide and rule’ policy and written communication.

To develop team spirit, Fayol suggested that managers should not follow the ‘divide and rule’ policy. He also suggested that verbal communication should be used instead of formal written communication whenever possible.

14. Describe the Bureaucratic Model of Max Webber.

Ans: Bureaucratic organization, in Webber’s views, is the most efficient form of organization. He names it as rational legal. It is rational because specific objectives of the organization are laid down and organization is designed to achieve them and it is legal because authority stemmed from a clearly defined set of rules, procedures and roles. According to Webber, “a bureaucracy is a highly structured, formalized, and impersonal organization.”

Webber’s bureaucratic model included the following:

(i) There is clear separation between superior and subordinate.

(ii) There is a division of labour based upon compliance and functional specialization.

(iii) There is a clear divorce between personal and official matters.

(v) There is a system of rules, regulations and procedures.

(v) There is a hierarchy in positions based on legal authority and power.

Webber’s model will be preferred in those organizations where change is not anticipated or where rate of change can be predicted. Large business houses and government departments use this type of organization. Webber is credited for attempting classification of organization for the first time.

Of course, Webber’s model suffers from certain limitations. It has rigidity, impersonality, excessive cost of control, and excessive dependence on superiors, tendency to ignore organizational goals. Some critics say that this approach destroys individual creativity and the flexibility to respond to compels changes in the global environment. In Spite of certain limitations this model is very useful in large organizations. The principal characteristics of bureaucracy are strict division of labour, adherence to formal rules and regulations, and impersonal application of rules and controls.

15. Write an essay on Hawthorne Experiments. Write about the implications of Hawthorne Experiments.

Ans: Harvard university research team conducted a series of studies. George Elton Mayo, F.J Roethlisberger, W.J. Diction and other were the conducted at Hawthorne plant of the Western Electric Company, Chicago (USA) between 1924 and 1932. In all, the following four studies were conducted at the Hawthorne plant—

(i) Illumination or test room study: The illumination study was conducted to determine the relationship between light intensity and productivity or efficiency of workers. For this purpose, three different experiments were conducted in which researchers changed light intensity. Researchers were surprised to note that productivity of select group of employees tended to improve in spite of the change in their physical surroundings. Productivity increased even when the lights were dimmed to moonlight intensity. Therefore, they concluded that lighting was a minor factor affecting the productivity of workers.

(ii) The relay assembly test room study: The relay assembly test room study was conducted to ascertain the factors other than the light intensity, affecting the productivity. In this study six persons (five girl assemblers and a layout operator) were placed in a room. In addition, the researchers put an observer with them in the room. The observer was to record everything that happened in the room and to maintain friendly atmosphere therein. The researchers changed working conditions such as rest periods, length or workdays, refreshments, temperature, wage rates etc. during the study. In addition, girls were allowed to talk more freely among themselves.

With the introduction of each change, productivity increased. Then researchers decided to return to the original conditions of work. They were surprised to note that productivity continued to rise. Therefore, they concluded that most likely cause of higher productivity was the change in social situations on the work group. They also noted that the test room observer had become de Facto supervisor who created a more relaxed social environment. Therefore, in order to ascertain the true factors involved in the productivity, a massive interviewing study programme was initiated.

(iii) Mass interviewing study: The third study was the mass-interviewing programme. Under this programme over 21,000 employees at the Hawthorne plant were interviewed over a period of three years. Initially, employees were directly asked about the supervision, company policies, the work environment in general etc. But employees often gave guarded and stereo typed answer. Thus, it became quickly clear that the employees do not want to answer such questions.

The researchers, therefore, switched indirect questioning. Under this approach, the employees were allowed to talk about what they felt important. The interviewers patiently heard their views. Consequently, a plethora of useful information could be gathered. The researchers reached to the conclusion that work performance and individuals status in the organization are determined not by the person himself but by his group members as well. His peer also affects his performance. Moreover, personal problem also have an effect on the feelings about his job.

(iv) Bank wiring observation room study: In order to observe and analyze informal group behaviour more accurately, bank wiring observation room study was undertaken. This study was conducted in a room of the bank-wiring department. In this room, 14 employees performing three interrelated jobs of the department were placed. An observer was also deputed in the room for watching and recording the activities and behaviour of the group. Without interacting with the group. The observation and recording continued for six months.

Following are the implications of Hawthorne experiments:

(i) Social factors in output: An organization, according to Hawthorny experiments is basically influenced by

social factors. Since people are social beings, their social characteristics determine the output and efficiency in the organization.

(ii) Group influence: Workers being social beings, they create groups which may be different from their official group. In fact, groups are formed to overcome the shortcomings of formal relationship. So, there is group influence in an organization.

(iii) Conflicts: The informal relations of workers create groups and there may be conflict between organizations and groups so created.

(iv) Leadership: Leadership is important for directing group behaviour and this is one of the most important aspects of managerial functions. In accordance with this approach, a superior is more acceptable as a leader.

(v) Supervision: Supervision is an important aspect in determining efficiency and output. Friendly to the workers, attentive, genuinely concerned supervision affects the productivity favourably.

(vi) Communication: A better understanding and communication is essential between management and workers. It can be developed by identifying their attitudes, opinions and methods of working and suitable actions on these.

16. Difference between Various levels of Management. 


Points of DifferenceTop Level ManagementMiddle Level ManagementLower Level Management
(i) Time RangeIt covers span of period.It covers intermediate range.It is concerned with short period.
(ii) SkillsIt requires creative skills.It needs persuasive skills.It is concerned with operative skills.
(iii) EvaluationIt is difficult to evaluate its achievement.It is less difficult to evaluate its performance.It is easy to evaluate its performance.
(iv) PersonsIt involves few persons.It concerns moderate number of persons.It is concerned with large number of persons.
(v) Policy formulationIt is concerned with the formulation of policies to a greater extent.It is moderately concerned with policy formulation.It is least concerned with policy formulation.

17. Explain the conclusions and limitations of Hawthorne studies.

Ans: The main conclusions or contributions of Hawthorne studies are as follows:

(i) Work is a group activity: Mayo concluded that work is a group activity workers work better in groups.

(ii) Informal groups: Workers form internal informal social groups. Such groups may not be based on their occupation.

(iii) Influence of social groups: The informal social groups within the work place greatly affect the behaviour and productivity of individual worker.

(iv) Norms by social groups: The social group determines informal ‘norms’ or standards of work, which are lower than the official norms. The members of the group usually follow the same. Thus informal groups exert strong control over the workers at work.

(v) Group cooperation is planned: Group cooperation or collaboration does not occur accidentally. It must be planned and developed.

(vi) Worker is not only relational economic being: A worker is not only a rational economic being. He is not motivated solely by monetary means. His social needs have a powerful influence on his behaviour and productivity. Therefore, satisfaction of social needs plays a crucial role in motivating workers.

(vii) Role of supervisor’s behaviour: The behaviour of supervisors does affect the behaviour of workers, when supervisors provide a more relaxed work environment, by paying special attention to the workers social situation changes. That change increases productivity. Thus situation was labeled as “Hawthorne effect.”

(viii) Communication: Free flow of communication affects the attitude of workers towards work. It ultimatums results in greater cooperation and participation of workers in decision-making.

(ix) Complaints may not be statements of facts: Complaints are not always objective statements of facts. They are often symptoms of deep-seated discontent and dissatisfaction.

(x) Birth of human relations movement: The most important contribution of the Hawthorne studies is that it gave rise to the ‘Human Relations Movement’. Human relations movement caused managers to lay more and more emphasis on social needs of the workers.

Criticism of Hawthorne studies:

Hawthorne studies are criticized on the following grounds:

(i) Pro-management bias: These studies are criticized on the ground that these had a pro-management bias. It is alleged that researchers assumed that management is always logical whereas workers are mostly driven by emotions.

(ii) Not fully scientific: Some experts allege that the studies were not fully scientific. According to them, there was no scientific basis in the selection of the work, the employees and the environment. Even the investigations were not carried out in a scientific manner. These studies were undertaken on a small sample of workers.

(iii) Clinical bias: Some expert also alleges that the studies had a clinical bias. They say that the research was directed to preconceived ideas and conclusions.

(iv) Discounted importance of theory: It is also argued that studies discounted the importance of theory and over emphasized the importance of observation and collection of facts.

(v) Based on limited factors: The studies have been based only on limited factors of an organization such as psychological and social factors The studies have ignored the economic, religious, political factors of the work situation.

(vi) Ignores the conflict in groups: The studies emphasis the positive effects of social groups but almost ignores the effects of conflicts between group members.

(vii) Doubtful conclusions: There are some who argue that the conclusions of the studies are doubtful. They say that the conclusions have been drawn on the basis of observation of behavior and activities of small sample of workers at work.

(viii) True but irrelevant: Some person criticizes the studies that the conclusions may be true but these are irrelevant for business firms. The business firms are for making profits and not for the solutions to the social problems of workers.

(ix) True but nothing new: Some experts have criticized the conclusions on the ground that these are true but nothing new. They argue that these conclusions were well known long ago.

In spite of these criticisms, Hawthorne studies are regarded a milestone in the study of human behavior at work place.

18. What is System Approach to Management? Write its features.

Ans: In the 1960, an approach to management appeared which try to unify the prior schools of thought. This approach is commonly known as ‘Systems Approach’. Its early contributors include Ludwing Von Bertalanfty, Lawrence J. Henderson, W.G. Scott, Deniel Katz, Robert L. Kahn, W. Buckley and J.D. Thompson.

They viewed organization as an organic and open system, which is composed of interacting and interdependent parts, called subsystems. The system approach is top took upon management as a system or as “an organized whole” made up of sub-systems integrated into a unity or orderly totality.

Systems approach is based on the generalization that everything is interrelated and interdependent. A system is composed of related and dependent element which when in interaction, forms a unitary whole. A system is simply an assemblage or combination of things or parts forming a complex whole.

One its most important characteristic is that it is composed of hierarchy of sub-systems. That is the parts forming the major system and so on. For example, the world can be considered-to be a system in which various national economies are subsystems.

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 subsystems as production, marketing, finance, accounting and so on.

Features of Systems Approach:

(i) A system consists of interacting elements. It is set of interrelated and interdependent parts arranged in a manner that produces a unified whole.

(ii) The various sub-systems should be studied in their inter-relationships rather, than in isolation from each other.

(iii) An organizational system has a boundary that determines which parts are internal and which are external.

(iv) A system does not exist in a vacuum. It receives information, material and energy from other systems as inputs. These inputs undergo a transformation process within a system and leave the system as output to other systems.

(v) An organization is a dynamic system as it is responsive to its environment. It is vulnerable to change in its environment.

(vi) In the systems approach, attention is paid towards the overall effectiveness of the system rather than the effectiveness of the sub-systems.

(vii) Systems theory is useful to management because it aims at achieving the objectives and it views organization as an open system. Chester Barnard was the first person to utilize the systems approach in the field of management.

19. Write the Steps In Management By Objectives. Give some Suggestions for Improving the Effectiveness of MBO.

Ans: Steps In Management By Objectives are:

(i) Goal setting: The first phase in the MBO process is to define the organizational objectives. These are determined by the top management and usually in consultation with other managers. Once these goals are established, they should be made known to all the members. In setting objectives, it is necessary to identify “Key-Result Areas’ (KRA).

(ii) Manager-Subordinate involvement: After the organizational goals are defined, the subordinates work with the managers to determine their individual goals. In this way, everyone gets involved in the goal setting.

(iii) Matching goals and resources: Management must ensure that the subordinates are provided with necessary tools and materials to achieve these goals. Allocation of resources should also be done in consultation with the subordinates.

(iv) Implementation of plan: After objectives are established and resources are allocated, the subordinates can implement the plan. If any guidance or clarification is required, they can contact their superiors.

(v) Review and appraisal of performance: This step involves periodic review of progress between manager and the subordinates. Such reviews would determine if the progress is satisfactory or the subordinate is facing some problems. Performance appraisal at these reviews should be conducted, based on fair and measurable standards.:

(vi) Goal setting: The first phase in the MBO process is to define the organizational objectives. These are determined by the top management and usually in consultation with other managers. Once these goals are established, they should be made known to all the members. In setting objectives, it is necessary to identify “Key-Result Areas’ (KRA).

(vii) Manager-Subordinate involvement: After the organizational goals are defined, the subordinates work with the managers to determine their individual goals. In this way, everyone gets involved in the goal setting.

(viii) Matching goals and resources: Management must ensure that the subordinates are provided with necessary tools and materials to achieve these goals. Allocation of resources should also be done in consultation with the subordinates.

(ix) Implementation of plan: After objectives are established and resources are allocated, the subordinates can implement the plan. If any guidance or clarification is required, they can contact their superiors.

(x) Review and appraisal of performance: This step involves periodic review of progress between manager and the subordinates. Such reviews would determine if the progress is satisfactory or the subordinate is facing some problems. Performance appraisal at these reviews should be conducted, based on fair and measurable standards.

In Spite of having the above problems, the MBO may be improved subject to maintaining the following suggestions.

(i) Top Management Support: It important to secure top management support and commitment. Without this commitment, MBO can never really be a success. The top managers and their subordinates should all consider themselves as players of the same team. This means that the superiors must be willing to relinquish and share the necessary authority with subordinates.

(ii) Objectives should be Clearly Formulated: The objectives should be clearly formulated should be realistic and achievable. For example, it is not realistic for the R & D department of an organization to set a goal of, say 10 inventions per year. These goals should be set with the participation of the subordinates. They must be properly communicated, clearly understood and accepted by all MBO works best when goals are accepted.

(iii) Should be an Overall Philosophy of Management: MBO should be an overall philosophy of management and the entire organization, rather than simply a divisional process or a performance appraisal technique, MBO is a major undertaking and should replace old systems rather than just being added to it. Felix M. Lopex has observed, “when an organization is managed be objectives, it becomes performance oriented. It grows and it develops and it becomes socially useful.”

(iv) Continuously Reviewed: The goals must be continuously reviewed and modified as the changed conditions require. The review technique should be such that any deviations are caught early and corrected.

(v) Formal Training: All personnel involved should be given formal training in understanding the basis as well as the contents of the program such education should include as to how to set goals, the methods to achieve these goals, methods of reviews and evaluation of performance and provisions to include any feedback that may be given.

(vi) Organizational and Psychological Principles: MBO system is a major undertaking based upon sound organizational and psychological principles. Hence it should be totally accepted as a style of managing and should be totally synthesized with the organizational climate. All personnel involved must have a clear understanding of their role authority and their expectations. The system should be absorbed totally be all members of the organization.

20. Explain the Advantages of Management By Objectives MBO. Explain the Limitations of Management By Objectives MBO.

Ans: Advantages of Management By Objectives MBO:

(i) Develops result-oriented philosophy: MBO is a result-oriented philosophy. It does not favor management by crisis. Managers are expected to develop specific individual and group goals, develop appropriate action plans, properly allocate resources and establish control standards. It provides opportunities and motivation to staff to develop and make positive contribution in achieving the goals of an Organisation.

(ii) Formulation of dearer goals: Goal-setting is typically an annual feature. MBO produces goals that identify desired/expected results. Goals are made verifiable and measurable which encourage high level of performance. They highlight problem areas and are limited in number. The meeting is of minds between the superior and the subordinates. Participation encourages commitment. This facilitates rapid progress of an Organisation. In brief, formulation of realistic objectives is me benefit of MBO.

(iii) Facilitates objective appraisal: MBO provides a basis for evaluating a person’s performance since goals are jointly set by superior and subordinates. The individual is given adequate freedom to appraise his own activities. Individuals are trained to exercise discipline and self control. Management by self-control replaces management by domination in the MBO process. Appraisal becomes more objective and impartial.

(iv) Raises employee morale: Participative decision-making and two-way communication encourage the subordinate to communicate freely and honestly. Participation, clearer goals and improved communication will go a long way in improving morale of employees.

(v) Facilitates effective planning: MBO programmes sharpen the planning process in an Organisation. It compels managers to think of planning by results. Developing action plans, providing resources for goal attainment and discussing and removing obstacles demand careful planning. In brief, MBO provides better management and better results.

(vi) Acts as motivational force: MBO gives an individual or group, opportunity to use imagination and creativity to accomplish the mission. Managers devote time for planning results. Both appraiser and appraise are committed to the same objective. Since MBO aims at providing clear targets and their order of priority, employees are motivated.

(vii) Facilitates effective control: Continuous monitoring is an essential feature of MBO. This is useful for achieving better results. Actual performance can be measured against the standards laid down for measurement of performance and deviations are corrected in time. A clear set of verifiable goals provides an outstanding guarantee for exercising better control.

(viii) Facilitates personal leadership: MBO helps individual manager to develop personal leadership and skills useful for efficient management of activities of a business unit. Such a manager enjoys better chances to climb promotional ladder than a non-MBO type.

Limitations of Management By Objectives MBO:

(i) Time-consuming: MBO is time-consuming process. Objectives, at all levels of the Organisation, are set carefully after considering pros and cons which consumes lot of time. The superiors are required to hold frequent meetings in order to acquaint subordinates with the new system. The formal, periodic progress and final review sessions also consume time.

(ii) Reward-punishment approach: MBO is pressure-oriented programme. It is based on reward-punishment psychology. It tries to indiscriminately force improvement on all employees. At times, it may penalize the people whose performance remains below the goal. This puts mental pressure on staff. Reward is provided only for superior performance.

(iii) Increases paper-work: MBO programmes introduce ocean of paper-work such as training manuals, newsletters, instruction booklets, questionnaires, performance data and report into the Organisation. Managers need information feedback, in order to know what is exactly going on in the Organisation. The employees are expected to fill in a number of forms thus increasing paper-work. In the words of Howell, “MBO effectiveness is inversely related to the number of MBO forms.

(iv) Creates organizational problems: MBO is far from a panacea for all organizational problems. Often MBO creates more problems than it can solve. An incident of tug-of-war is not uncommon. The subordinates try to set the lowest possible targets and superior the highest. When objectives cannot be restricted in number, it leads to obscure priorities and creates a sense of fear among subordinates. Added to this, the programme is used as a ‘whip’ to control employee performance.

(v) Develops conflicting objectives: Sometimes, an individual’s goal may come in conflict with those of another e.g., marketing manager’s goal for high sales turnover may find no support from the production manager’s goal for production with least cost. Under such circumstances, individuals follow paths that are best in their own interest but which are detrimental to the company.

(vi) Problem of coordination: Considerable difficulties may be encountered while coordinating objectives of the Organisation with those of the individual and the department. Managers may face problems of measuring objectives when the objectives are not clear and realistic.

(vii) Lacks durability: The first few go-around of MBO are motivating. Later it tends to become old hat. The marginal benefits often decrease with each cycle. Moreover, the programme is deceptively simple. New opportunities are lost because individuals adhere too rigidly to established goals.

(viii) Problems related to goal-setting: MBO can function successfully provided measurable objectives are jointly set and it is agreed upon by all. Problems arise when:

(a) verifiable goals are difficult to set.

(b) goals are inflexible and rigid.

(c) goals tend to take precedence over the people who use it.

(d) greater emphasis on quantifiable and easily measurable results instead of important results. and

(e) over-emphasis on short-term goals at the cost of long-term goals.

(ix) Lack of appreciation: Lack of appreciation of MBO is observed at different levels of the Organisation. This may be due to the failure of the top management to communicate the philosophy of MBO to entire staff and all departments. Similarly, managers may not delegate adequately to their subordinates or managers may not motivate their subordinates properly. This creates new difficulties in the execution of MBO programme. 

21. Explain Business Process Reengineering (BPR) by Michael Hammer & James Champy. Explain the Benefits of having a pre-decided BPR in place.

Ans: Continuous improvement had been around for a long time. And that simply built on generations of work to improve the way businesses do things, going back to the Gilbreths and Taylor. But in 1990, a Harvard Business Review article exploded the idea of incremental change, with its provocative title: Reengineering Work: Don’t Automate, Obliterate. It was written by an MIT engineer called Michael Hammer.

And three years later, the revolution was well underway, with a book he wrote with top management consultant, James Champy. Reengineering the Corporation: A Manifesto for Business Revolution was as much a rallying cry for the consulting industry as anything else. But in the few years that followed, hundreds of companies employed thousands of consultants to reengineer their processes and, in so-doing, remove tens of thousands from their workforces.

A company can get competitive advantage if it can improve its customer service or reduce its operating costs. Continuous improvement methodologies like time and motion studies, and the Japanese Kaizen, had done this for years. But reengineering is a methodology for rebuilding the way a company does things – its business processes – from scratch.

In particular, it emphasizes removing whole processes that do not deliver value. The result of this radicalism was obvious in hindsight, though not what Hammer and Champy intended. Companies not only reduced the scope of processes and found significant shortcuts; they removed whole cadres of staff who had previously carried out the tasks that were no longer needed.

The two principle effects of the 1990s’ obsession with reengineering were substantial layoffs and redundancies (described by the now-infamous euphemism ‘downsizing’) and a bean-feast of highly paid work for armies of recently graduated consulting analysts at all of the big consultancies.

By the end of the 1990s, the reengineering bubble had burst, to be replaced by a second wave of technology enhanced cost-saving under the guise of another three letter acronym (TLA): Enterprise Resource Planning, or ERP.

The business process must be constantly evaluated to meet the demand and expectations of the evolving society. It designs the workflows and analyzes the business processes within an organization.

A business can achieve the following with Business Process Re-Engineering:

(i) Total customer satisfaction: Customer needs are a priority that gives a clear vision to the organization. The customers when provided with a better service that matches their expectations, thus building loyalty in them. The design and delivery of the business process are redone to match the performance with the expectation of the customer.

(ii) Cost Advantage: As the whole process is remodeled, unnecessary costs are eliminated through the value chain. It reduces the cost and cycle time by eliminating the unproductive activities and organizing the teams. It has radically improved the effectiveness and efficiency of operations.

(iii) Competitive Advantage: Business process re-engineering helps an organization to focus on its core competencies, which gives it a competitive advantage. These core values are difficult for the competitors to copy as it becomes the firm’s signature trait. Gaining a competitive advantage gives firm excellence in the broader business process.

(iv) Creates value for customers: In the re-engineering process, a company strategically puts relevant activities to design, produce, market, and support its product to provide customer value. The firm analyzes value-creating activity and compares it with the competitors to find ways to improve it.

(v) Clear Business Vision: Business process re-engineering gives a firm an explicit vision that aligns its goals and objectives with that of customer’s needs, wants, and interests. This way an organization acquires some brand identity and an ideal structure to target the customer.

22. Explain the Principles of Business Process Reengineering by Michael Hammer & James Champy.

Ans: In the book Reengineering the corporation: A manifesto for Business Revolution, Michael Hammer & James Champy suggested the following seven principles:

(i) Work should be designed such that it is result-oriented and not process-oriented: The first principle states that the tasks performed by different people can be combined into one specialized task. Taking an example, the redesign of a manufacturing company with separate divisions performing different functions in a sequence.

One determines the customer requirement the other passes in the information, and the third convey this to various plants and warehouses. These sequential based activities led to errors, rework, and delays. When a company re-engineers, it eliminates the assembly line approach.

(ii) Involve those people in the process who face the output: This principle states that the work should be done by the individual getting the output, i.e., the consumer. Today, this can be observed as the “self-service”.

For example, if a customer is facing any problem, he has to fill in the data himself instead of any office doing it for him. It pushes the work to the consumer.

(iii) Merging data collection and processing units: This principle has matured and is visible in the concept, division of labor. This means the data handling must be done by the same person who is collecting the data. This reduces the number of errors by eliminating external contact for a process.

For example, a company has a structure wherein one department collects the information while the other records it. Here, the shared database will have many errors while translating the information from one department to another.

(iv) Shared databases to interconnect dispersed departments: The advances in information technology allow the company to connect separate units that are geographically dispersed by using a shared database. Centralized databases provide economies of scale in addition to providing flexibility and quick responses to the customers as there are better agreements between the vendors.

(v) Bridging the processes which are running on similar lines: According to Hammer, the processes of the activities must be integrated rather than the end results. The parallel functions must be coordinated using communication networks, shared databases. These parallel activities must be linked continuously and coordinated at the process execution. This will eliminate the high costs and delays in the outcome of the process.

(vi) Decision making should also be a part of the work performed: There must be decision aiding-technology to cut unnecessary controls and to keep a check in the process. Hammer states the decision should be made by the person who is doing the work.

The processes can be improved by empowering the authority of the resource with the responsibility to make the decision and improve the workflow. This is possible with an educated and knowledgeable workforce.

(vii) Capture data at its point of origins: This approach saves costs by avoiding costly re-entries and invalid data entries. It is the principle of capturing information only once at the source where it was created. This eliminates the difficulty of transmitting the information, and it doesn’t have to be recorded at different locations at various times.

23. What are the Porter’s Five Forces?

Ans: Porter’s Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry’s weaknesses and strengths. Five Forces analysis is frequently used to identify an industry’s structure to determine corporate strategy. Porter’s model can be applied to any segment of the economy to understand the level of competition within the industry and enhance a company’s long-term profitability. The Five Forces model is named after Harvard Business School professor, Michael E. Porter.

Understanding Porter’s Five Forces:

The tool was created by Harvard Business School professor Michael Porter, to analyze an industry’s attractiveness and likely profitability. Since its publication in 1979, it has become one of the most popular and highly regarded business strategy tools.

Porter recognized that organizations likely keep a close watch on their rivals, but he encouraged them to look beyond the actions of their competitors and examine what other factors could impact the business environment. He identified five forces that make up the competitive environment, and which can erode your profitability.

These are:

(i) Competitive Rivalry: This looks at the number and strength of your competitors. How many rivals do you have? Who are they, and how does the quality of their products and services compare with yours?

Where rivalry is intense, companies can attract customers with aggressive price cuts and high-impact marketing campaigns. Also, in markets with lots of rivals, your suppliers and buyers can go elsewhere if they feel that they’re not getting a good deal from you.

On the other hand, where competitive rivalry is minimal, and no one else is doing what you do, then you’ll likely have tremendous strength and healthy profits.

(ii) Supplier Power: This is determined by how easy it is for your suppliers to increase their prices. How many potential suppliers do you have? How unique is the product or service that they provide, and how expensive would it be to switch from one supplier to another?

The more you have to choose from, the easier it will be to switch to a cheaper alternative. But the fewer suppliers there are, and the more you need their help, the stronger their position and their ability to charge you more. That can impact your profit.

(iii) Buyer Power: Here, you ask yourself how easy it is for buyers to drive your prices down. How many buyers are there, and how big are their orders? How much would it cost them to switch from your products and services to those of a rival? Are your buyers strong enough to dictate terms to you?

When you deal with only a few savvy customers, they have more power, but your power increases if you have many customers.

(iv) Threat of Substitution: This refers to the likelihood of your customers finding a different way of doing what you do. For example, if you supply a unique software product that automates an important process, people may substitute it by doing the process manually or by outsourcing it. A substitution that is easy and cheap to make can weaken your position and threaten your profitability.

(v) Threat of New Entry: Your position can be affected by people’s ability to enter your market. So, think about how easily this could be done.

How easy is it to get a foothold in your industry or market? How much would it cost, and how tightly is your sector regulated?

If it takes little money and effort to enter your market and compete effectively, or if you have little protection for your key technologies, then rivals can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.

24. Difference between the contributions of Taylor and Fayol.


BasisTaylor’s ApproachFayol’s Approach
(a) Human AspectTaylor disregards human elements and there is more stress on improving men, materials and methods.Fayol pays due regards to the human element. E.g. Principle of initiative, Esprit De’ Corps and Equity recognizes a need for human relations.
(b) StatusFather of scientific management.Father of management principles
(c) Efficiency and AdministrationStressed on efficiency.Stressed on general administration.
(d) ApproachIt has a micro-approach because it is restricted to factory only.It has macro-approach and discuses general principles of management which are applicable in every field of management.
(e) Scope of PrinciplesThese principles are restricted to production activities.These are applicable in all kinds of organisation regarding their management affairs.

25. Discuss the Porter’s Model of Generic Strategies for Competitive Advantage.

Ans: Porter identified 4 generic strategies that can be used to both classify company behaviour and drive company behaviour. They’re all around gaining competitive advantage, so if you’re at currently looking at your strategy then reminding yourself of the generic strategies can be very useful.

(i) Cost Leadership: With this strategy, the objective is to become the lowest-cost producer in the industry. The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale.

Why is cost leadership potentially so important? Many (perhaps all) market segments in the industry are supplied with the emphasis placed on minimizing costs. If the achieved selling price can at least equal (or near) the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits.

This strategy is usually associated with large-scale businesses offering “standard” products with relatively little differentiation that are readily acceptable to the majority of customers. Occasionally, a low-cost leader will also discount its product to maximize sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share.

A strategy of cost leadership requires close cooperation between all the functional areas of a business. To be the lowest-cost producer, a firm is likely to achieve or use several of the following:

(a) High levels of productivity.

(b) High capacity utilization.

(c) Use of bargaining power to negotiate the lowest prices for production inputs.

(d) Lean production methods (e.g. JIT).

(e) Effective use of technology in the production process Access to the most effective distribution channels.

(ii) Cost Focus: Cost-focus refers to organizations who seek to develop a lower-cost advantage, but only within a small market segment. These products will generally be basic, vaguely similar to the average market-leading products (though more popular products can be charged at a higher price) and will be acceptable to a sufficient number of customers in order to make a profit.

An example would be budget food items or other household tools stocked only by small, local supermarkets. Another would be a low-cost regional airline which focuses only on specific routes. These products are often referred to as “me too’s”.

(iii) Differentiation Focus: In a differentiation-focus strategy, the organization will look to develop product differentiation, but only within one or a smaller number of market segments. As these organizations have identified a smaller consumer group to focus on, they can more specifically appeal to the needs and wants of this group than could an organization which is attempting to differentiate for a wider population.

For this strategy to succeed, the organization will have to first identify that a consumer group has a different set of needs than does the wider market population. If there is no variation in need, then there is no valid basis for differentiation. Alongside this, the organization also must ensure that another competitor is not already appealing to the specific and unique needs that they have identified.

This approach is the most common niche marketing strategy. Small businesses can use this method to force themselves into a niche, developing unique products which can be sold for higher prices than similar undifferentiated products, often due to specialist knowledge or innovation compared with other businesses.

A good example would be craft beer companies, who can charge a higher price compared with large breweries due to the uniqueness of their products.

(iv) Differentiation Leadership: With differentiation leadership, the business targets much larger markets and aims to achieve competitive advantage through differentiation across the whole of an industry.

This strategy involves selecting one or more criteria used by buyers in a market – and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging a premium price for the product – often to reflect the higher production costs and extra value-added features provided for the consumer.

Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products.

There are several ways in which this can be achieved, though it is not easy and it requires substantial and sustained marketing investment. The methods include:

(a) Superior product quality (features, benefits, durability, reliability).

(b) Branding (strong customer recognition & desire; brand loyalty).

(c) Industry-wide distribution across all major channels (i.e. the product or brand is an essential item to be stocked by retailers).

(d) Consistent promotional support-often dominated by advertising, sponsorship etc.

Great examples of a differentiation leadership include global brands like Nike and Mercedes. These brands achieve significant economies of scale, but they do not rely on a cost leadership strategy to compete. Their business and brands are built on persuading customers to become brand loyal and paying a premium for their products.

26. Write a note on Criticisms of Generic Strategies.

Ans: Several commentators have questioned the use of generic strategies claiming they lack specificity, lack flexibility, and are limiting.

Porter stressed the idea that only one strategy should be adopted by a firm and failure to do so will result in “stuck in the middle” scenario. He discussed the idea that practising more than one strategy will lose the entire focus of the organization hence clear direction of the future trajectory could not be established. The argument is based on the fundamental that differentiation will incur costs to the firm which clearly contradicts with the basis of low cost strategy and on the other hand relatively standardized products with features acceptable to many customers will not carry any differentiation hence, cost leadership and differentiation strategy will be mutually exclusive. Two focal objectives of low cost leadership and differentiation clash with each other resulting in no proper direction for a firm. In particular, Miller questions the notion of being “caught in the middle”. He claims that there is a viable middle ground between strategies. Many companies, for example, have entered a market as a niche player and gradually expanded. According to Baden-Fuller and Stopford (1992) the most successful companies are the ones that can resolve what they call “the dilemma of opposites”. Furthermore, Reeves and Routledge’s (2013) study of entrepreneurial spirit demonstrated this is a key factor in organization success, differentiation and cost leadership were the least important factors.

However, contrarily to the rationalization of Porter, contemporary research has shown evidence of successful firms practising such a “hybrid strategy”. Research writings of Davis state that firms employing the hybrid business strategy (Low cost and differentiation strategy) outperform the ones adopting one generic strategy. Sharing the same view point, Hill challenged Porter’s concept regarding mutual exclusivity of low cost and differentiation strategy and further argued that successful combination of those two strategies will result in sustainable competitive advantage. As to Wright and other multiple business strategies are required to respond effectively to any environment condition. In the mid to late 1980s where the environments were relatively stable there was no requirement for flexibility in business strategies but survival in the rapidly changing, highly unpredictable present market contexts will require flexibility to face any contingency. After eleven years Porter revised his thinking and accepted the fact that hybrid business strategy could exist and writes in the following manner.

Though Porter had a fundamental rationalization in his concept about the invalidity of hybrid business strategy, the highly volatile and turbulent market conditions will not permit survival of rigid business strategies since long-term establishment will depend on the agility and the quick responsiveness towards market and environmental conditions. Market and environmental turbulence will make drastic implications on the root establishment of a firm. If a firm’s business strategy could not cope with the environmental and market contingencies, long-term survival becomes unrealistic. Diverging the strategy into different avenues with the view to exploit opportunities and avoid threats created by market conditions will be a pragmatic approach for a firm. Critical analysis done separately for cost leadership strategy and differentiation strategy identifies elementary value in both strategies in creating and sustaining a competitive advantage. Consistent and superior performance than competition could be reached with stronger foundations in the event “hybrid strategy” is adopted. Depending on the market and competitive conditions, hybrid strategy should be adjusted regarding the extent which each generic strategy (cost leadership or differentiation) should be given priority in practice.

27. What Is Value Chain Analysis? What are the 9 steps involved in the Value chain of Michael Porter. Write the Michael Porter introduced the cost drivers that help identify areas for improvement.

Ans: Value chains streamline the processes that take a product from concept to market. The integral linkages are supported by both structure and effective communication between direct, indirect, and support components. Direct activities, such as hiring and training human capital, are further supported through appropriate indirect activities, such as record keeping and quality control. 

The first 5 are the primary activities which are the basics in any company and are the activities which provide strength and sustainability to the company. The remaining 4 are the support activities or also known as the secondary activities and these are used by the company for differentiation as well as maintenance of the organization. Both, the primary as well as the secondary activities are necessary for the firm to survive.

Overall, we will discuss the primary activities and the secondary activities in relation to each other.

Primary activities of Porters Value chain are:

(i) Inbound logistics: Bring raw material from source to the company. The value chain can be enhanced in this step by improving the quality of raw material as well as optimizing the cost of inbound logistics.

(ii) Operations: Converting the raw material to finished goods is the job of Operations. The customer value is increased majorly in this step if the operations are up to mark and the product is manufactured in the right manner and meets quality standards. You can take example of Television or Air conditioners to understand the importance of Operations and manufacturing in the Value chain.

(iii) Outbound logistics: Sending finished goods from manufacturing point to distributors and retailers. The value chain receives a boost if the out bound logistic activities are carried out in time with optimal costs and the product is delivered to end customers with minimum affect to the quality of the product. Food products can be an example of how value can be added during outbound logistics by delivering product on time with best quality.

(iv) Marketing and sales: The marketing and sales apply push as well as pull strategy to increase the sales of the product. The company exists to make profits and if profits can be increased by marketing and sales, than the company has to use these tools. However, marketing needs to be done in the right manner to build brand equity and sales should be done in the proper channel without any false commitments given to customers to add value to the end product and the brand.

(v) Service: The post sales service is the most important because it directly affects the word of mouth publicity of the product. If the service is not upto mark, no one will buy the product and the brand will lose market share and may be taken out of the market eventually. Thus service is very important in the Porters value chain.

Secondary activities involved in the Value chain are as follows:

(i) Procurement: The management of vendors and the procurement of the raw material on a timely basis is where procurement comes in.

(ii) Technology development: No product can survive if the company does not keep it updated as per the latest technology.

(iii) Human resource management: The right people in the right place can make all the difference for the company and hence the HR department is a support activity most important for the firm.

(iv) Firm infrastructure: Without a proper infrastructure, and lack of government handling or legal support, a firm might face a big hurdle. Similarly, administration department will help in maintenance of the facilities in a firm. 

The secondary activities like Technology and the right people are the elements which add differentiation for the company. Samsung proved that Technology can destroy a big competitor like Nokia. Similarly, Southeast airlines proves that people are important to a company and that you can be the most favored airline because of the people in your organization. 

When analyzing the effectiveness of a value chain model, the economist Michael Porter introduced the following 10 cost drivers that help identify areas for improvement:

(i) Economies of Scale: A true picture of need includes cost analysis for the size of the demand, whether local, national, or global.

(ii) Learning: Activities that change the environment for efficiency or improvement, such as scheduling, asset use, and office or warehouse layout.

(iii) Capacity Utilization: Procedures that keep capacity at efficient levels to prevent under-utilization or the addition of unnecessary capacity.

(iv) Linkages among Activities: Identifying areas of cross-functional improvement through coordination and optimization.

(v) Interrelationships among Business Units: Opportunities to share information and resources.

(vi) Degree of Vertical Integration: Identifying areas of joint integration or, in some cases, de-integration.

(vii) Timing of Market Entry: Driven by economic or world conditions and competitive position in the marketplace.

(viii) Firm’s Policy of Cost or Differentiation: Identified value integrated into the process.

(ix) Geographic Location: This includes wages, climate, and raw materials.

(x) Institutional Factors: These include taxes, unions, and regulations.

28. What are the Benefits of Learning Organisation? Write the five disciplines of creating a learning organization.

Ans: One of the main benefits being a learning organization offers is a competitive advantage. This competitive advantage can be founded on different strategies, which can be acquired by organizational learning. One way of gaining a competitive advantage is strategic flexibility. The continuous inflow of new experience and knowledge keeps the organization dynamic and prepared for change. In an ever-changing institutional environment this can be a key factor for an advantage. Better management of an organizations explorative investments and exploitative acting can be a benefit of a learning organization, too. Next, a competitive advantage of a company can be gained by lower prices and better quality of products. Through organizational learning both cost leadership and differentiation strategies are possible. The ability to reconfigure actions based on needs and environment avoids the tradeoff between the two. Overall the customer performance of learning organizations might be better, which is the direct and measurable channel, that establishes a competitive advantage. Another important aspect is innovation. Innovation and learning are closely related. While encouraging people to learn and develop, a more innovative environment is commonly generated, innovative ideas coming from e.g. communities of practice can result in greater overall organizational learning.

Other benefits of a learning organization are:

(i) Maintaining levels of innovation and remaining competitive.

(ii) Improved efficiency.

(iii) Having the knowledge to better link resources to customer needs.

(iv) Improving quality of outputs at all levels.

(v) Improving corporate image by becoming more people oriented.

(vi) Increasing the pace of change within the organization.

(vii) Strengthening sense of community in the organization.

(viii) Improving long term decision making.

(ix) Improving knowledge sharing.

The five disciplines of creating a learning organization are:

(i) Shared Vision: The key vision question is ‘What do we want to create together?’. Taking time early in the change process to have the conversations needed to shape a truly shared vision is crucial to build common understandings and commitments, unleash people’s aspirations and hopes and unearth reservations and resistances. Leaders learn to use tools such as ‘Positive Visioning’, ‘Concept-shifting’ and ‘Values Alignment’ to create a shared vision, forge common meaning/focus and mutually agree what the learning targets, improvement strategies and challenge-goals should be to get there.

(ii) Mental Models: One key to change success is in surfacing deep-seated mental models – beliefs, values, mind-sets and assumptions that determine the way people think and act. Getting in touch with the thinking going on about change in your workplace, challenging or clarifying assumptions and encouraging people to reframe is essential. Leaders learn to use tools like the ‘Ladder of Inference’ and ‘Reflective Inquiry’ to practise making their mental models clearer for each other and challenging each others’ assumptions in order to build shared understanding.

(iii) Personal Mastery is centrally to do with ‘self-awareness’: how much we know about ourselves and the impact our behaviour has on others. Personal mastery is the human face of change-to manage change relationships sensitively, to be willing to have our own beliefs and values challenged and to ensure our change interactions and behaviours are authentic, congruent and principled. Leaders learn to use tools like ‘Perceptual Positions’ and ‘Reframing’ to enhance the quality of interaction and relationship in and outside their teams.

(iv) Team Learning happens when teams start ‘thinking together’: sharing their experience, insights, knowledge and skills with each other about how to do things better. Teams develop reflection, inquiry and discussion skills to conduct more skillful change conversations with each other which form the basis for creating a shared vision of change and deciding on common commitments to action. It’s also about teams developing the discipline to use the action learning cycle rigorously in change-work. Leaders learn to use tools like the ‘Action-Learning Cycle’ and ‘Dialogue’ to develop critical reflection skills and conduct more robust, skillful discussions with their teams and each other.

(v) Systems Thinking is a framework for seeing inter-relationships that underlie complex situations and interactions rather than simplistic (and mostly inaccurate) linear cause-effect chains. It enables teams to unravel the often hidden subtleties, influences, leverage points and intended/unintended consequences of change plans and programs and leads to deeper, more complete awareness of the interconnections behind changing any system. Leaders learn to use ‘Systems Thinking Maps’ and ‘Archetypes’ to map and analyze situations, events, problems and possible causes/courses of action to find better (and often not obvious) change options/solutions.

29. Write a Note on Senge,s Learning Organisation.

Ans: In 1990, Peter Senge published “The Fifth Discipline” (later followed by “The Fifth Discipline Fieldbook: Strategies and Tools for Building a Learning Organization” in 1994). His books pulled together his extensive research into what different organizations do to build learning capacity – and why some organizations use learning better than others.

Senge codified these practices into what he called ‘The 5 Learning Disciplines’ as well as coming up with the concept-label of ‘learning organizations’.

More than merely a business best-seller, The Fifth Discipline propelled Senge into the front row of management thinkers, created a language about change all kinds of companies could embrace, and offered a vision of workplaces that were humane and built around a culture of learning.

Like any ideal, the perfect ‘learning organisation’ is not an attainable goal, but rather a desirable and useful set of guiding ideas and principles for people and organizations to aspire towards. There’s more to being a learning organisation than just amassing knowledge. Every organization creates and uses knowledge. The challenge is that few seem to actually learn how to manage it, apply it, grow through it and use it effectively.

There’s no one correct formula – different organizations try different processes, strategies and systems to share learning, acquire knowledge and turn it into the capacity to learn for change, re-learn and continually improve. There are, however, some key elements that all learning organizations have in common. Senge sorted many of these into 5 key learning areas or themes, he called ‘The Five Disciplines’.

The 5 Learning Disciplines – Shared Vision, Mental Models, Personal Mastery, Team Learning and Systems Thinking-are each made up of a set of tools and practices for building and sustaining learning leadership capability in organizations.

Each Discipline consists of:

(i) Principles, propositions or concepts (Senge calls these ‘guiding ideas’)

(ii) Tools or techniques that, once learned and practised, assist in making the Disciplines come to life.

(iii) Practices or precepts to follow in your own leadership behaviour and approaches.

According to Senge, leaders in learning organizations learn to thrive on change and constantly innovate by methodically cultivating these 5 Disciplines. They may never be fully mastered, but learning-centred leaders, teams and organizations practise them continuously.

Our approach to workplace improvement and learning-centred leadership is based firmly in the values, concepts, principles and language of learning organizations.

30. Discuss the Contemporary View of Bottom Of The Pyramid (BOP).

Ans: In 1998, Professors C. K. Prahalad and Stuart L. Hart defined the bottom of the pyramid (BOP) as the billions of people living on less than $2 per day. Both men expanded this definition of BOP in their subsequent writing (e.g., Prahalad’s The Fortune at the Bottom of the Pyramid in 2004 and Hart’s Capitalism at the Crossroads in 2005).C. K. Prahalad, The Fortune at the Bottom of the Pyramid (Upper Saddle River, NJ: Wharton School Publishing, 2004); Stuart L. Hart, Capitalism at the Crossroads (Upper Saddle River, NJ: Wharton School Publishing, 2005). The BOP is estimated to comprise between four billion and five billion people.

In Prahalad and Hart’s view, companies that understand the potential for commercial consumption at the BOP can open a new, potentially lucrative market that benefits the business as well as BOP consumers. By innovating to meet the needs of BOP customers, a company treats them with dignity and respect that previously was afforded only to the wealthy, Prahalad and Hart say.

Twelve Principles of BOP Innovation: Addressing the bottom of the pyramid requires a fresh managerial mind-set, summarized below in Prahalad’s “12 Principles of BOP Innovation” which are innovations themselves.C. K. Prahalad, The Fortune at the Bottom of the Pyramid (Upper Saddle River, NJ: Wharton School Publishing, 2004), 25-27. In developed markets, Prahalad suggests that one may take the availability of electricity, telephones, credit, refrigeration, and other such amenities for granted. At the BOP, the infrastructure is much spottier and more hostile. Consumers may have to cope with frequent electric-power blackouts and brownouts. Credit may be extremely costly. Refrigeration may be unavailable. Products marketed to the bottom of the pyramid must be able to withstand such an environment.

Below are Prahalad’s “12 Principles of Bottom Of The Pyramid (BOP) Innovation,” along with examples of each:

(i) Focus on value and on delivering performance for the price: The BOP consumer isn’t interested merely in cheap prices but in getting the greatest possible performance for the price paid. It’s extraordinary how low a price can be and still be highly profitable, if the seller is organized to deliver value. For example, doctors at India’s Aravind Eye Care System, the world’s largest eye-care business, perform hundreds of thousands of cataract surgeries each year. The prices range from $50 to $300 per surgery, including the hospital stay. Aravind is quite profitable, although 60 percent of its patients pay nothing.

(ii) Innovate: Old technologies can’t solve the problems of BOP consumers, and products aimed at the BOP market can’t simply be watered-down versions of developed-world products. Instead, products must be rethought to bring radically lower cost while at the same time having features that meet the BOP’s highest needs. For example, Hindustan Unilever Limited (HUL), a Unilever subsidiary, developed a new molecular encapsulation technology to prevent iodized salt from losing its iodine before consumption. To test the efficacy of the technology, the researchers used radioactive tracing techniques pioneered by the Indian Atomic Energy Commission.

(iii) Make the solution scalable: When delivering high performance at affordable prices, profits must be generated through volume sales. The product itself must be low cost, but with four billion to five billion BOP customers across the world, scaling the operation is what will make the venture sustainable. Solutions should be scalable across borders.

(iv) Aim to conserve resources: BOP consumers cannot afford to waste resources. Per capita water consumption in the United States is almost 2,000 cubic meters per year, compared to less than 500 in China and less than 700 in India. The developed world’s high standard of living is a water- and waste-intensive lifestyle. Innovations should emphasize conserving resources, recycling materials, and eliminating waste. Creating products for five billion people means designing the products in ways that can be environmentally sustainable. China’s focus on electric cars rather than gasoline-powered cars reflects the reality that it’s unlikely China could obtain the oil it would need for that many cars and that its extremely polluted cities could handle the additional exhaust fumes.

(v) Identify functionality: BOP customers likely require different functionality than high-end consumers. For example, prosthetic legs developed for India’s BOP consumers needed to meet some special requirements: consumers needed to be able to squat, sit cross-legged, and walk on rough ground.

(vi) Think in terms of process innovations: One way to bring costs down dramatically is to standardize processes. That’s how Aravind is able to bring down the costs of cataract surgery so dramatically. Aravind made the process highly standardized and trained young village women to prepare patients and handle postoperative care. Thus doctors focus exclusively on surgery and perform only cataract surgery-nothing else. This focused process lets one doctor and two technicians perform fifty surgeries per day.

(vii) Reduce the skills required to do the job: Design products and services suitable to people without skills. Voxiva, a Peruvian start-up, developed a system enabling health-care workers to diagnose illnesses such as smallpox by comparing a patient’s lesions to a picture of a similar lesion. With this simplified diagnostic process, health-care workers don’t require great skills to know when to call a doctor.

(viii) Educate consumers in the use of products: This may require collaborating with nongovernmental organizations (NGOs), governments, and others. HUL launched a program in some of India’s village schools to promote the washing of hands with soap as a way to prevent the childhood diarrhea that kills two million children per year. HUL educated the children, who in turn educated their parents.

(ix) Design products and services to operate in very tough infrastructure environments: For example, when Indian conglomerate ITC built a network connecting Indian villages, it had to provide personal computers that could handle wide voltage fluctuations. ITC included surge suppressors and solar panels to give the system adequate, reliable electricity.

(x) Make the interface simple and the learning curve short: In Mexico, the chain retailer Elektra uses automated teller machines (ATMs) with a fingerprint identification system so BOP consumers don’t have to remember lengthy identification codes.

(xi) Innovate in distribution: Avon has built a Brazilian direct-sales business that delivers revenues of $1.7 billion annually.

(xii) Challenge assumptions: The Jaipur Foot and Aravind Eye Care System hospitals defy conventional wisdom about how (and at what price) it’s possible to deliver health care to the poor.

31. Write short notes on:

(1) Levels of management.

Ans:There are three levels of management which are given below:

(i) The top level management: The top management is the ultimate source of authority and it manages goals and policies for an enterprise. It devotes more time on planning and coordinating functions.The roles are:

(a) Top management lays down the objectives and broad policies of the enterprise.

(b) It issues necessary instructions for preparation of department budgets, procedures, schedules etc.

(c) It prepares strategic plans & policies for the enterprise.

(d) It appoints the executive for middle level i.e. departmental managers.

(e) It controls & coordinates the activities of all the departments.

(ii) Middle level management: Middle managers usually report to the top-level managers, yet they still have a lot of autonomy to make decisions within their area or department of the company. These managers often have job titles that include the word “director.” They may also be department heads. Middle managers tend to function as points of contact between first-line managers and top-level management, ensuring that the two groups maintain productive two-way communication.

Their role can be emphasized as:

(a) They execute the plans of the organisation in accordance with the policies and directives of the top management.

(b) They make plans for the sub-units of the organisation.

(c) They participate in employment & training of lower level management.

(d) They interpret and explain policies from top level management to lower level.

(e) They are responsible for coordinating the activities within the division or department.

(iii) Lower-level management: It refers to the managers that supervise, coordinate, and delegate tasks directly to employees in their department. These are the entry-level managers of the organization, which may also be referred to as first-line managers. In other words, they are concerned with direction and controlling function of management. Their activities includes:

(a) Assigning of jobs and tasks to various workers.

(b) They guide and instruct workers for day to day activities.

(c) They are responsible for the quality as well as quantity of production.

(d) They are also entrusted with the responsibility of maintaining good relation in the organisation.

(e) They communicate workers problems, suggestions, and recommendatory appeals etc to the higher level and higher level goals and objectives to the workers.

(2) Hawthorne experiment.

Ans: Harvard university research team conducted a series of studies. George Elton Mayo, F.J Roethlisberger, W.J. Diction and other were the conducted at Hawthorne plant of the Western Electric Company, Chicago (USA) between 1924 and 1932. In all, the following four studies were conducted at the Hawthorne plant—

(i) Illumination or test room study: The illumination study was conducted to determine the relationship between light intensity and productivity or efficiency of workers. For this purpose, three different experiments were conducted in which researchers changed light intensity. Researchers were surprised to note that productivity of select group of employees tended to improve in spite of the change in their physical surroundings. Productivity increased even when the lights were dimmed to moonlight intensity. Therefore, they concluded that lighting was a minor factor affecting the productivity of workers.

(ii) The relay assembly test room study: The relay assembly test room study was conducted to ascertain the factors other than the light intensity, affecting the productivity. In this study six persons (five girl assemblers and a layout operator) were placed in a room. In addition, the researchers put an observer with them in the room. The observer was to record everything that happened in the room and to maintain friendly atmosphere therein. The researchers changed working conditions such as rest periods, length or workdays, refreshments, temperature, wage rates etc. during the study. In addition, girls were allowed to talk more freely among themselves.

With the introduction of each change, productivity increased. Then researchers decided to return to the original conditions of work. They were surprised to note that productivity continued to rise. Therefore, they concluded that most likely cause of higher productivity was the change in social situations on the work group. They also noted that the test room observer had become de Facto supervisor who created a more relaxed social environment. Therefore, in order to ascertain the true factors involved in the productivity, a massive interviewing study programme was initiated.

(iii) Mass interviewing study: The third study was the mass-interviewing programme. Under this programme over 21,000 employees at the Hawthorne plant were interviewed over a period of three years. Initially, employees were directly asked about the supervision, company policies, the work environment in general etc. But employees often gave guarded and stereo typed answer. Thus, it became quickly clear that the employees do not want to answer such questions.

The researchers, therefore, switched indirect questioning. Under this approach, the employees were allowed to talk about what they felt important. The interviewers patiently heard their views. Consequently, a plethora of useful information could be gathered. The researchers reached to the conclusion that work performance and individuals status in the organization are determined not by the person himself but by his group members as well. His peer also affects his performance. Moreover, personal problem also have an effect on the feelings about his job.

(iv) Bank wiring observation room study: In order to observe and analyze informal group behaviour more accurately, bank wiring observation room study was undertaken. This study was conducted in a room of the bank-wiring department. In this room, 14 employees performing three interrelated jobs of the department were placed. An observer was also deputed in the room for watching and recording the activities and behaviour of the group. Without interacting with the group. The observation and recording continued for six months.

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