Taxmann's Management Principles & Application | UGCF

TAXMANN® 'S MANAGEMENT PRINCIPLES & APPLICATIONS

V.S.P. Rao

ABOUT THE AUTHOR

Dr. V.S.P. Rao currently the Executive Vice President of MIM Group (former Professor and Dean, IBS, Hyderabad) of Institutions - had been with Delhi University (SVC) for nearly four decades. A former director, MIM, Lucknow, Dr. Rao is a recipient of two gold medals (University Topper at undergraduate and postgraduate levels) and national scholarships for academic excellence.  He is an award-winning author, educationist and consultant.  He has authored/co-authored 25 books and has a number of articles and research papers to his credit in the areas of Management, Organizational Behaviour and Human Resource Management. Dr. Rao has completed three research projects awarded by UGC and ICSSR.  He has conducted a number of highly appreciated and well received Management Development Programs for middle and senior managers from various industries.  Two of his books won the Best Book Award consecutively in 2013 and 2014.  He has also got the best article award from Chartered Secretary to his credit.   Dr. Rao has been a technical committee and editorial board member for international conferences in the areas of HRM, OB and Management.  As a visiting faculty, he has conducted sessions for MBA and Ph.D. students at various prestigious management institutes in India and abroad.

PREFACE

The second edition of the book, Management Principles & Applications, has undergone a dramatic change.  The content has been made compact.  The subject matter has been presented in an easy-to-understand format.  New topics enrich the textual material.  All in all, the revised edition reflects the latest thinking in the field.  Examples, charts, tables, and other study aids have been included in order to maintain readability. Case studies & skill-building exercises at the end of each chapter provoke the student to think creatively and find novel solutions.  Role play exercises offer students a great learning opportunity to assume the role of a person or act out a given situation.  These roles can be performed by individual students, in pairs, or in groups which can play out a more complex scenario. New

ACKNOWLEDGEMENTS

I am forever indebted to my dear colleagues in S.V. College--- Prof. Balraj Gupta, Dr. R.K. Arora, Dr. Sarvesh, Prof. V.P. Jain, Dr. Venkat, Dr. Mamta, Prof. Sunita, Prof. Shruti, Prof. Pooja, Dr. Vinodkumar,  Dr. Sindhumani, Prof. Neha Singhal, Prof. Jyoti, Prof. Neha Gupta, Prof. Anju Goswami - who generously shared their ideas with me, offered constructive feedback and refined my thinking and understanding of human resource management. Sri Vinit Kapur, Khalsa College; Prof. Rekha Dayal, JMC; Prof. Jyotika, LSR; Prof. Isha Verma, SRCC; Prof. Sumita Jain, Daulatram; Prof. Mrs. Ramesh, Maitreyi College have enriched the contents of the book through their valuable feedback from time to time.

I take this opportunity to thank Prof. M.G. Rao, former Vice Chancellor, GITAM University, Prof. K.V. Rao, Nagarjuna University, Prof. Mahender Reddy, Vice Chancellor, IFHE; Prof. Venkata Seshiaiah, Director, IBS, Hyderabad; Prof. M. Madhusudhana Rao, Andhra University,  Prof. Srinivas, Prof. Ravi Jain, Director Symbiosis Institute of Business Management,  and  Prof. Y L N Kumar, Prof. T.S.R.K. Rao,  Prof. Mahesh, Prof. Radha Mohan, Prof. Sitamma, Prof. Praveen, Prof. Sriram, Prof. Menon, Prof. Aviral, Prof. K.V. Rao, Prof. Narender, Prof. Koti Reddy, Prof. Rajasekhara Reddy, Prof. Venugopal, Prof. Rajasekhar David, Prof. Sharda Singh of IBS, Hyderabad;  Prof. P. Satyanarayana (MIT, Dartmouth), Prof. P.C.K.Rao (Director), Prof. Surbhi, Inbuss School; Prof. Rashmi, Prof. Charu Chaudhry (ITS); Sri. K.V. Ramesh, General Manager, GMR group; Prof. Sanjay Sehgal, Prof C.P. Gupta, Prof. Muneesh Kumar, Department of Financial Studies, South Campus;  Prof. Bhanu Murthy and Prof. S.K. Jain, Prof. Sri Ram Khanna,  Prof. J.P. Sharma, Dr. Ajay Kumar Singh, Department of Commerce, University of Delhi;  Prof. Munish, Birla Institute of Technology, Dr. Padma (Keshav Mahavidyalaya), Prof. J.P. Mahajan, K.M.College, Dr. Ravichandran, STC,  Dr. Sneha Chawla, School of Open Learning,   Dr. Namita, Aurobindo College, Dr. Padma, Keshav Mahavidyalaya, Dr. T.N. Chhabra, Deen Dayal Upadhyaya College; Dr. P.C. Jain, Dr. C.B. Gupta, SRCC, for their insightful comments.  I am particularly grateful to Prof. Jyotika, Prof. Isha Verma, Prof. Somesh Jain, Prof. Rachna Jain, Prof. Asharani, Prof. Kanu Jain, Prof. Sumita Jain, Prof. Manish Kumar, Prof. Monica Soin, Prof. Vibha Jain, Prof. Renu, Prof. Swati Khanna, Prof. Sandeep, Prof. Mrs. Ramesh for offering valuable suggestions from time to time.

I take this opportunity to thank Shri Mitrapal Yadav, DGM —the young, dynamic and dashing publisher—for the care and promptness with which he has brought out this edition in a short span of time.  I take this opportunity to thank Shri Sumit Dwivedi, Editor, for bringing out the text with passion, love and commitment. Comments and suggestions for making the text more relevant and useful to students shall be gratefully acknowledged.

SYLLABUS

DISCIPLINE SPECIFIC CORE COURSE-1 (DSC-1)-: Management Principles and Applications

Unit 1: Introduction

Meaning and importance of management; Coordination mechanisms in organisations; Management theories - classical, neo-classical and modern constructions of management; Managerial functions; Managerial roles (Mintzberg); Managerial competencies. Indian Ethos for Management: Value-Oriented Holistic Management; Learning Lessons from Bhagavad Gita and Ramayana.

Unit 2: Planning

Organisational objective setting; Decision-making environment (certainty, risk, uncertainty); Techniques for individual and group decision-making; Planning visà-vis Strategy- meaning and elements of the business firm environment - micro, meso and macro; Industry structure, Business-level strategic planning.

Unit 3: Organising

Decentralization and Delegation; Factors affecting organisational design; Departmentalization; Organisational structures and Organograms: Traditional and modern, comparative suitability and changes over time; Formal-informal organisations’ interface.

Unit 4: Directing and Controlling

Motivation - meaning, importance and factors affecting motivation; Leadershipmeaning, importance and factors affecting leadership, leadership styles and followership.

Controlling - Principles of controlling; Measures of controlling and accountability for performance.

Unit 5: Salient Developments and Contemporary Issues in Management

Management challenges of the 21st Century; Factors reshaping and redesigning management purpose, performance and reward perceptions - Internationalisation, Digitalisation, Entrepreneurship & Innovation, Values & Ethics - Case studies on Indian corporates like Tata, Bhilwara Group, IOC and Godrej, Workplace diversity, Democracy and Sociocracy, Subaltern management ideas from India.

Practical Exercises:

The learners are required to:

1. Participate in a role-play activity for describing the various levels of management and applicability of management principles in defining the policies of the chosen organisation.

2. Identify a company and evaluate its competitive landscape as per Porter‘ s Five-force model.

3. (a) Prepare a comparative analysis of organizational structures of various companies.

(b) Create a simulation exercise in class to demonstrate various types of authority, delegation and decentralization in authority.

4. Demonstrate various types of leadership styles in the form of role-play and identify the motivation techniques used by leaders.

5. Discuss the impact of emerging issues in management.

MANAGERIAL ROLES, LEVELS, SKILLS &

u Reconciling Managerial Roles and Functions 22

u How to classify managers in an organisations?: Managerial Levels 23

u What Type of Skills Managers Need? Managerial Skills 25

u Managerial Competencies 27

u What are Management Competencies? 27

u Classification of Management Competencies 28

u Why use Competencies? 29

u How do you Improve Management Competencies? 29

u Chapter Summary 29

u Test Questions 30

u Skill Builder: Role Play Exercise 31

u Learning Exercise: Managerial Skills Test 32

u Case Study: To do or not to do? 32

3

COORDINATION

u Introduction 34

u What is Coordination? 34

u Coordination v. Cooperation 36

u Need for coordination 37

u Significance of Coordination 38

u Principles of Coordination 39

u Coordination Process 40

u Techniques of Coordination 41

u Types of Coordination 42

u Systems Approach to Coordination 42

u Chapter Summary 43

u Test Questions 44

u Skill Builder: Where you stand now and where you want to be? 44

u Learning exercise: How to save a sinking ship? 45

u Case Study: In Search of Greener Pastures 45

4

THEORIES OF MANAGEMENT

u Introduction 47

u Modern Management Thought 71 u Chapter Summary 73 u Test Questions 73

u Learning Exercise: What to do with Munna Bhai? 74 u Case study: Bureaucracy Still Works at ups 75

Appendix: Value-oriented Holistic Management; Lessons from Bhagavad Gita and Ramayana 77

UNIT 2

PLANNING

5

PLANNING & OBJECTIVE SETTING

u Introduction 95 u Importance of Planning 96 u Limitations/Criticisms of Planning 97 u The Process of Planning 99 u Principles of Planning 100 u Effective Planning 101 u Types of Planning 102 u Components of Planning 104 u Organisational Objectives and Goals 111 u Setting Organisational Objectives 119 u Chapter Summary 125 u Test Questions 125 u Learning Exercise : A Time Management Plan 127 u Skill Builder How do you plan to achieve the goals? 127 u Role Play Exercise 127 u Case Study: New Management Challenges for the New Age 127

6

DECISION MAKING

u Introduction 129 u Characteristics of Decision Making 129 u Importance of Decision Making 131 u Types of Decisions 131

u Rational Decision-Making Process 134

u The Concept of Rationality 136

u Administrative Decision Making: (Bounded rationality approach) 138

u What are Satisficing Decisions? 139

u Decision-Making Conditions 140

u Role of Information in Decision Making 141

u Group Decision Making 142 u Advantages and Disadvantages of Group Decision making 143 u Group Decision Making Techniques 144 u Quantitative Techniques 146 u Operations Research 148 u Management Information System (MIS) 152 u Chapter Summary 154 u Test Questions 154 u Learning Exercise: Keep a Journal 155

u Learning Exercise: Group Decision Making at Work 155

u Case Study: Ethical Dilemma of the Spitzer Group 156

u What Would You Do? 157 7

BUSINESS FIRM ENVIRONMENT & INDUSTRY STRUCTURE

u The Concept of Environment 158 u Features of Environment 159 u Internal and external environment 159 u Importance of Business Environment 160 u Micro, Meso and Macro Environment 161 u Meso/Industry Environment 164 u Macro environment 166 u Components of External Environment 166 u Technological environment 174 u Industry Structure 181 u How the Model Helps Firms? 183 u Chapter Summary 184 u Test Questions 184

u Skill Building Exercises 186

u Case Study: ABC Limited 186 8

BUSINESS LEVEL STRATEGIC PLANNING

u Planning vis-à-vis Strategy 188

u What is a Strategy? 188

u Strategic Management 190 u Strategic Planning 191

u The Strategic Management Process 192 u Business Level Strategic Planning 197

u Competitive Advantage 197 u Resources and Capabilities and Competitive Advantage 198

u Competitive Strategies 199 u Cost Leadership/Low Cost Strategies 201 u Sources of Cost Leadership 202

u Benefits and Risks of Low-cost Leadership Strategies 204

u Differentiation Strategies 205

u How to carry out the exercise? 207

u Benefits and Risks of Differentiation Strategies 208

u Examples of Differentiation Strategies 209

u Focus Strategies 210

u Examples of Focus Strategies 212

u Benefits and Risks of Focus Strategies 214

u Generic Strategies and Industry Forces 214

u Choice of Strategy? 215

u Chapter Summary 216

u Test Questions 216

u Learning Exercise: Core Strengths of a Company 218

u Case Study: Wal-Mart’s Failure in Germany 218

UNIT 3

ORGANISING 9 ORGANISING

u Introduction 227 u Organization as a Structure 227

u Organization as a Process 228

u Principles of Organization 230

u Organization Design: Contingency Theory 236

u Organograms or Organization Charts 240

u Traditional Organisational Structures 243

u Chapter Summary 252

u Test Questions 252

u Learning Exercises 253

u Case study: Changing the organisational culture 254

u Case study: Work Redesign in an Insurance Company 254 10

DEPARTMENTALIZATION & TYPES OF ORGANISATION STRUCTURE

u Need and Importance 257

u Bases of Departmentation 258

u Choosing a Basis for Departmentation 265

u Types of Organisation Structure: Introduction 266

u Making Matrix Organisation Work 275

u Chapter Summary 279

u Test Questions 280

u Skill Building Exercise Developing an Organization Structure 281

u Case Study: The Wrong Job 282

11

DELEGATION AND DECENTRALISATION

u Introduction 283

u Sources or Types of Authority 285

u Responsibility and Accountability 286

u Nature of Delegation 287

u The Process (Elements) of Delegation 289

u Principles of Delegation 290

u Advantages of Delegation 292

u Delegation Problems 293

u How to Delegate Effectively? 295

u Centralisation and Decentralisation 296

u Centralisation 297

u Decentralisation 300 u Delegation v. Decentralisation 300

u Decentralisation: Advantages 301 u Decentralisation: Disadvantages 302 u Factors Determining Degree of Decentralisation 304 u Effective Decentralisation 305 u Chapter Summary 306 u Test Questions 307 u Skill Building Exercise? The ethical dilemma 308 u Case Study: The National Sales Manager 309

12

INTERFACE BETWEEN FORMAL AND INFORMAL ORGANISATIONS

u Introduction 311

u Reasons for the Emergence of Informal Organisations 312 u Features of a ‘Group’ 317 u Types of Groups 319 u Chapter Summary 324 u Test Questions 325 u Skill building exercises 326 u Case study : Fish out of the Pond 326

UNIT 4

DIRECTING & CONTROLLING

13

MOTIVATION

u Introduction 331 u Importance of Motivation 333 u Nature of Motivation: Complexities 334 u Determinants of Motivation 334 u Theories of Motivation 335 u How to Motivate Employees? 351 u Financial Incentives and Motivation 352

u Non-Financial Incentives & Motivation 354

u Techniques of Motivation 355

u Chapter Summary 358

u Test Questions 359

u Skill building exercises 360

u Case Study: Fool’s Paradise 360

14

LEADERSHIP

u Introduction 362

u Effective Leaders 366

u Leaders are born, not made? : The Great man Theory 368 u Leadership Styles 370 u Continuum of Leader Behaviour 377 u Likert’s Four System of Management 378 u Theories of Leadership 379 u How to Improve Leadership Potential and Effectiveness? 396 u Followership 402

u Chapter Summary 407

u Test Questions 407

u Skill Building Exercise: Between the devil and the deep sea 409 u Case Study: Choice of a Leader 410

15

CONTROLLING

u Introduction 412 u Features of Controlling 414 u Importance 415 u Limitations 416

u An Effective Control System 419 u Types of Control 420 u Dimensions of Control 422

u Control Techniques/Measures of Controlling 424 u Traditional Techniques 424

u Zero-Based Budgeting (ZBB) 429 u Programme or Performance Budgeting 430 u Modern Techniques 431 u Balanced Score Card 451 u Disadvantages 452 u Accountability for Performance 453 u Chapter Summary 454 u Test Questions 454 u Skill building Exercise: Meeting Water Bed Demand 456 u Case Study: A Purchase Manager’s Troubles 456

UNIT 5

SALIENT DEVELOPMENTS & CONTEMPORARY ISSUES

16 VALUES

AND ETHICS

u Introduction 461 u Types of Values 462

Value Congruence 462

Values and Behaviour 462 u Impact of Values 463 u Value Systems of Managers 463 u Values Across Cultures: Hofstede’s Study 464 u Managing Individual Differences in Values 466 u Chapter Summary 473 u Test Questions 474 u Skill Building Exercises 474 u Learning Exercise: Identifying Important Values in a classroom setting 475 u Case Study: The Loyal Employee 476 17

ENTREPRENEURSHIP & INNOVATION

u Who are entrepreneurs? 477 u Qualities of Successful Entrepreneurs 477

Definition 478

u

Entrepreneurs and Value Creation 479

u Functions of an Entrepreneur 480

u Entrepreneur v. Intrapreneur 481

u Entrepreneur v. Manager 482

u Role of Entrepreneurs in Economic Development 483

u Entrepreneurial Decision-Making Process 484

u Social Entrepreneurship 486

u Innovation 488

u The Innovation Process 490

u Benefits of Innovation 494

u Innovation: Risks and Challenges 494

u Why Innovations Fail? 495

u Types of Innovation 495

u Chapter Summary 499

u Test Questions 500

u Skill building exercises 501

u Case Study: The Demise of Boo.com 503

18

MANAGERIAL CHALLENGES IN 21ST CENTURY

u The New Workplace in 21st Century 510

u The rewards and challenges of being a manager 511

u Chapter Summary 532

u Test Questions 533

u Skill Building Exercises 534

u Case Study: The Dilemma 534

19

CONTEMPORARY ISSUES

u Work Force Diversity 537

u Workforce Diversity: What the experts say? 538

u Internationalization 544

u Digitisation & Digitalisation 552

u Subaltern Management Ideas 560

u Chapter Summary 563

u Test Questions 564

u Skill Building Exercises 565

u Case Study: Smart Beginning 566

Planning & Objective Setting 5

CHAPTER OUTLINE

Introduction

A plan is a predetermined course of action. It is a blue print for goal achievement. Simply stated, it is setting goals and deciding how to achieve them. Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. It bridges the gap from where we are to where we want to go Planning has a number of characteristics:

u Planning is goal-oriented : All plans arise from objectives. Objectives provide the basic guidelines for planning activities. Planning has no meaning unless it contributes in some positive manner to the achievement of predetermined goals.

u Planning is a primary function: Planning is the foundation of management. It is a parent exercise in management process. It is a preface to business activities.

u Planning is all-pervasive: Planning is a function of all managers. It is needed and practiced at all managerial levels. Planning is inherent in everything a manager does.

u Planning is a mental exercise : Planning is a mental process involving imagination, foresight and sound judgment. Planning compels managers to abandon guesswork and wishful thinking. It makes them think in a logical and systematic manner.

u Planning is a continuous process: Planning is continuous. It is a never-ending activity. It is an ongoing process of adjustment to change. There is always need for a new plan to be drawn on the basis of new demands and changes in the circumstances.

u

u Planning involves choice: Planning essentially involves choice among various alternative courses of action. If there is one way of doing something, there is no need for planning. The need for planning arises only when alternatives are available.

u Planning is forward looking: Planning means looking ahead and preparing for the future. It means peeping into the future, analyzing it and preparing for it. Managers plan today with a view to flourish tomorrow. Without planning, business becomes random in nature and decisions would become meaningless, ad hoc choices.

u Planning is flexible: Planning is based on a forecast of future events. Since future is uncertain, plans should be reasonably flexible. When market conditions change, planners have to make necessary changes in the existing plans.

u Planning is an integrated process: Plans are structured in a logical way wherein every lower-level plan serves as a means to accomplish higher level plans. They are highly interdependent and mutually supportive.

u Planning includes efficiency and effectiveness dimensions: Plans aim at deploying resources economically and efficiently. They also try to accomplish what has been actually targeted. The effectiveness of plans is usually dependent on how much it can contribute to the predetermined objectives.

Importance of Planning

Planning helps an organisation in the following ways:

(i) Planning provides direction: Planning provides direction and a sense of purpose for the organisation. Without plans and goals, organisations merely react to daily occurrences without considering what will happen in the long-run. Plans avoid this drift situation and ensure that short-range efforts will support and harmonize with future goals. It helps an organisation decide what to do and when to do it. It reduces aimless activity and makes action more meaningful.

(ii) Planning provides a unifying framework: A plan helps people to set priorities and put effort accordingly. A plan tells everyone what the organisation hopes to achieve and what the contribution of each department must be, and who is to utilize resources to achieve the goals. Plans help in coordinating effort at various levels. In the absence of a plan, the organisation would be pulled in different directions, creating confusion and misunderstanding at various levels.

(iii) Planning is economical: Effective plans coordinate organisational work and eliminate unproductive effort. Guess work is banished. Facilities are employed to the best advantage. Waste motions and idle facilities are removed By focusing attention on what is to be done, how and when it is to be done, plans help an organisation to economically utilize the physical and financial resources. This, ultimately, improves efficiency of operations.

u Learning exercise: A time management plan

u Skill builder: How do you plan to achieve the goals?

u Role play exercise

Case study: New management challenges for the new age

(

iv) Planning reduces the risks of uncertainty: Planning helps an organisation to cope with an uncertain future. It helps management to anticipate the future and prepare for the risks by making necessary provisions to meet the unexpected turn of events. Planning minimizes the chances of mistakes and unpleasant surprises because objectives, policies and strategies are formulated after a careful scrutiny of internal as well as external environment. Planning, thus, seeks to minimize risk while taking advantage of opportunities.

(v) Planning facilitates decision making: Decision-making involves searching of various alternative courses of action, evaluating them and selecting the best one. Planned targets serve as the criteria for the evaluation of different alternatives so that the best one may be chosen. If there are no plans for the future, there are few guidelines for making current decisions. For example, decisions have to be made in present for a product to be introduced three years in the future. When future plans exist, decisions consistent with the future plans are made. Further, without plans, people will make decisions according to their own preference rather than those of the organisation.

(vi) Planning encourages innovation and creativity: Planning involves looking ahead and preparing for the future. The process of looking ahead, forces an organisation to be alert of opportunities and threats in the environment. It forces managers to find out new and improved ways of doing things in order to remain competitive and avoid the threats in the environment. It compels the managers to be creative and innovative all the time. Planning helps managers to visualize problems early and take suitable remedial steps. It helps them exploit opportunities and come out as ‘winners’ in a competitive world.

(vii) Planning improves morale: Once members know what is expected of them, they can contribute better. When goals are properly defined, work assignments can be fixed and everyone can begin to contribute to the achievement of these goals. This produces improvements in morale. Further, planning permits employees to participate in the thinking process. This helps them develop a broad mentality. Also, when the plan is actually translated into action, they feel that it is their own plan. Positive attributes are, thus, developed.

(viii) Planning facilities control: Planning and controlling functions are said to be ‘Siamese twins’ (inseparable twins). There is nothing to control without planning and without proper control, planning proves to be a wasteful and an unproductive exercise. Plans serve as yardsticks for measuring performance. They help in channelizing behaviour in the right direction. They help in preventing mistakes, oversights and deviations.

Limitations/Criticisms of Planning

The limitations of planning can be examined under the following headings:

1. Rigidity: Plans put the activities of an enterprise in a rigid framework. Everything is spelt out in detail and deviations are not permitted. New opportunities are often ignored or rejected because of the commitment to existing plans. Events may change, but plans may remain fixed. Managers, too, would be

reluctant to reorient their plans suitably, because it involves serious mental work to put everything in black and white change the same all over again.

2. Costly and time consuming: Planning is costly. It is expensive in terms of time spent to formulate the plans, the manpower required to do the planning and resources needed to execute the plan. The collection of information, evaluation of alternatives, selection of a suitable course of action, etc., may consume lot of executive time and organisational resources.

3. Employee resistance: For any plan to succeed, you need operating people to understand it, embrace it, and make it happen. One of the frequent complaints made against the planning process is that it is done by specialists who are not in touch with operations. As a result, operating people who are not involved in planning tend to resist the planning process. Planning ‘imposed from above’ often leads to resentment and resistance from those forced to execute.

4. False sense of security: Elaborate planning may create a false sense of security in the organisation. Managers may begin to feel that everything is well taken care of. They begin to assume that as long as plans are adhered to, there will not be any problems. As a result, they fail to take note of environmental changes and the need to review, restructure and reorient the old plans in an appropriate way.

BOX 5.1 : WHY PLANS FAIL?

u Complex plan and no one really understood the same

u Support from every one at every level missing

u Complicated procedures and methods coming in the way

u Knotty internal issues not put to rest completely.

u Not a balanced and harmonious effort taking care of every aspect

u Very rigid, inflexible approach to every issue

u Effort not coordinated properly at various levels

u People who are charged with implementation not fully involved

u Impact of external forces not properly assessed

u Over estimating strengths and underestimating rivals capacity to hit back

(Source: Kinicki 2009 Hitt et al 2010; Robbins; Daft—Management 2010)

5. Managerial deficiencies: Planning is an intellectually demanding function. Since managers are assessed on the basis of results, they begin to discount long-range plans, and adopt short-range plans which would put them in a comfortable position. This may harm organisational interests in the long-run. Planning involves lot of paper work and hard mental labour. Most managers may not like to undergo such a painful process which, ultimately may not produce results.

6. Planning prevents innovation: Planning demands commitment to written policies, procedures and rules etc. It restricts a manager unnecessarily to defined areas. The executive is prevented from experimenting with novel

ideas, venturing into risky but profitable areas and exploring the untested yet lucrative grounds.

7. External Limitations: It is quite often remarked that ‘planning is a ritual in a fast changing environment’. This statement subscribes to the fact that planning is an empty academic exercise in the face of a highly competitive and turbulent environment.

u Difficult to predict: It is difficult for planners to forecast economic conditions, government policies, competitive manoeuvers or human behaviour with any degree of accuracy. Planning, basically depends on a whole set of assumed conditions. Only when these assumptions are substantially correct, planning produces fruitful results.

u Projected too far into the future: Moreover, the reliability of planning efforts is open to doubt since they are projected farther into the future, where the manager has no control over environmental forces.

u Environmental turbulence: Future is a moving target. It may not be possible to anticipate future changes accurately and provide for them in plans. Uncertainty and unpredictability, the hallmarks of business environment–reduce the usefulness of planning and forecasting. Competition turns the best laid human plans into waste paper. Economic, political and technological revolutions force corporate planners to revise the plans day in and day out. Sometimes, there is a revision in plans even before their implementation. In the face of a highly volatile and turbulent environment, plans become obsolete documents and fail to guide the destinies of the organisation. And, it is extremely difficult for the organisations to buffer themselves against environmental instability, no matter how carefully and effectively the planning exercises are done.

u Emergency situations: The utility of planning is further discounted, in the face of emergencies like strikes, lockouts, industrial disasters like the one that took place in Chemical Plant in Bhopal, Madhya Pradesh (India). In such instances, plans are completely upset, decisions made hand-to-mouth.

The Process of Planning

The process of planning consists of the following steps:

u Establishing objectives: The first step in the planning process is to identify the goals of the organisation. The internal as well as external conditions affecting the organisation must be thoroughly examined before setting objectives. The objectives so derived must clearly indicate what is to be achieved, where action should take place, who is to perform it, how it is to be undertaken and when is it to be accomplished. In other words, managers must provide clear guidelines for organisational efforts, so that activities can be kept on the right track.

u Developing premises: After setting objectives, it is necessary to outline planning premises. Premises are assumptions about the environment in which plans are made and implemented. Thus, assumptions about the likely impact of

important environmental factors such as market demand for goods, cost of raw materials, technology to be used, population growth, government policy, etc. on the future plans are made. Plans should be formulated by the management, keeping the constraints imposed by internal as well as external conditions in mind.

u Evaluating alternatives and selection: After establishing the objectives and planning premises, the alternative courses of action have to be considered. The pros and cons as well as the consequences of each alternative course of action must be examined thoroughly before a choice is made.

u Formulating derivative plans: After selecting the best course of action, the management has to formulate the secondary plans to support the basic plan. The plans derived for various departments, units, activities, etc., in a detailed manner are known as ‘derivative plans’. For example, the basic production plan requires a number of things such as availability of plant and machinery, training of employees, provision of adequate finance, etc. To ensure the success of a basic plan, the derivative plans must indicate the time schedule and sequence of performing various tasks.

u Securing cooperation and participation: The successful implementation of a plan depends, to a large extent, on the whole-hearted cooperation of the employees. In view of this, management should involve operations people in the planning activities.

u Providing for follow-up: Plans have to be reviewed continually to ensure their relevance and effectiveness. In the course of implementing plans, certain facts may come to light that were not even thought of earlier. In the light of these changed conditions, plans have to be revised. Without such a regular follow-up, plans may become out-of-date and useless. Moreover, such a step ensures the implementation plans along right lines.

Principles of Planning

To be useful, planning should try to incorporate some of the time-tested and interrelated principles, beautifully summed up by Koontz thus:

1. Principle of contribution to objectives: Every plan should help in the achievement of organisational objectives.

2. Principle of primacy of planning: Planning precedes all other managerial functions. It is the first and the foremost function to be followed in the process of management.

3. Principle of pervasiveness of planning: Planning is an all-pervasive function. It is important to all managers regardless of their level in the organisation.

4. Principle of flexibility: By flexibility of a plan is meant its ability to switch gears, change direction to adapt to changing situations without unnecessary cost (ability to vary product mix, shift marketing effort geographically, raise additional funds on favourable terms, reshuffle and relocate personnel quickly, change organisation structure etc.).

5. Principle of periodicity: Plans should be integrated and interconnected in such a way as to achieve the stated objectives economically and efficiently. A manager should review events and expectations regularly; refine and redraw the plan and keep it on track.

6. Principle of planning premises: Every plan is based on carefully considered assumptions, known as planning premises. “The more the individuals charged with planning, understand and agree to utilise consistent planning premises, the more coordinated enterprise planning will be”.

7. Principle of limiting factor: While choosing an appropriate course of action among different alternatives, the limiting or critical factor (such as money, manpower, machinery, materials, management) should be recognised and given due weightage. When ignored, the critical factor would seriously impact the process of planning and make it impossible to achieve goals.

Effective Planning

How can managers effectively plan when the external environment is continually changing? The following steps have to be taken—according to experts-- in order to make planning effective:

1. Climate: Planning must not be left to chance. Additionally, conducive climate must be provided so that activities proceed smoothly and systematically. Top managers should remove obstacles to planning, by establishing clear cut goals, realistic planning premises and offering required information and appropriate staff assistance at various levels.

2. Top management support: Planning must start at the top. It must receive attention of the top management continually. They must be willing to extend a helping hand, whenever required.

3. Participation: Plans are implemented by people. So, it is necessary to secure acceptance and commitment from them. One way to increase commitment is to solicit subordinates’ participation in the planning process. Planning comes alive when employees are involved in setting goals and determining the means to reach them.

BOX 5.2 : TEN COMMANDMENTS OF A GOOD PLAN

1. Should have a clear objective

2. Should be simple and easy to understand

3. Should provide for proper analysis and clarification of actions

4. Should be flexible enough to move in sync with changing trends

5. Should have a balanced focus

6. Should be practicable and capable of delivering results

7. Should allow people---especially those who look after its implementation-to participate actively and enthusiastically

8. Should provide for optimum use of resources

9. Should be sold to everyone and communicated well before it’s being implemented

10. Should allow integration of effort at every level smoothly : (L.F. Urwick, Koontz, Stoner)

4. Communication: Goals, premises and policies must be properly communicated to people. People must know what they are supposed to do, when, how and where. The time limits must also be communicated in advance.

5. Integration: Different plans must be properly balanced and integrated. They must support each other and should not work at cross purposes. Every attempt should be made to ensure that the pay-offs of planning are more than the costs involved.

6. Monitoring: Plans must be subjected to regular appraisal and review, so as to take note of internal as well as external changes. Better to keep the plan flexible to the extent possible.

It may sound curious but in an uncertain environment, managers should be armed with plans that are specific but flexible. To be useful, plans need to be formulated in black and white but they should not be set in stone. Using the road map provided by a plan, managers should clear the hurdles on the way. They should be willing to change direction if environmental conditions warrant such a step. Even in the face of continual changes in environmental conditions, managers should adhere to a set of actions to see where things are going off the track and their likely impact on organisational performance. When things are manageable, as planned, then targets are achieved. Where things are thrown off the track, managers need to pick the loose threads firmly and weave them into a fine garment---as desired by customers and market forces.

Types of Planning

Strategic Planning

Strategic planning involves decisions about the organisation’s long term goals such as survival, growth etc. It involves setting long term objectives (by top management) and deciding about the judicious deployment of resources to achieve those objectives. Strategic planning, thus, is long-term in nature. It tends to be a top management responsibility. It requires looking outside the organisation for threats and opportunities. It also requires looking inside the organisation for finding out weaknesses and strengths. It affects many parts of the organisation, as its decisions have enduring effects that are difficult to reverse. It tries to equip the organisation with capabilities needed to confront future uncertainties, by taking a holistic view of the entire organisation. Its focus is clearly on the ‘jungle, not the trees’. The main objective is to position the firm in an advantageous position in relation to the environment, keeping the firm’s own capabilities in mind. Example: In business, it means how much money is going to be dedicated to a project, and by when you

expect the project complete. In personal life, suppose you plan a wedding, it means deciding on the budget and the date.

Tactical Planning

Tactical planning translates broad strategic goals and plans into specific goals and plans that are relevant to a definite portion of the organisation, such as a functional area like marketing or human resources. Tactical plans focus on a major actions a unit must take to fulfil a part of the strategic planning. They are often focused on 1-2 years in the future. This is the implementation of the strategic plan stage combining your available resources, look at obstacles, and review alternatives. Example: In business, it means an analysis of resource combination, planning for obstacles, and general timetable. In personal life, for the wedding, it means, finding the place, developing a guest list, deciding on a menu and music.

Operational Planning

Operational planning identifies the specific procedures and processes required at lower levels of the organisation. Frontline managers usually focus on routine tasks such as production runs, delivery schedules, and human resource needs etc. They typically focus on the short term, usually 12 months or less. These plans are the least complex of the three and rarely have a direct effect or other plans outside of the department or unit for which the plan was developed. Example: In business, it means engaging the team, develop and answer the who, what, when, where, how management questions. In personal life, for the wedding, it means, choosing the band, finding the caterer, decide on flowers, etc. To be fully effective, the organisation’s strategic, tactical and operational plans must be aligned – that is, they must be consistent, mutually supportive and focused on meeting the common purpose and direction.

TABLE 5.1: STRATEGIC, TACTICAL AND OPERATIONAL PLANS: KEY DIFFERENCES

Point of Difference

Strategic plans

Tactical plans Operational plans

Time horizon Typically 3-5 years 1-2 years

Next 12 months or less Scope Broadest A strategic business Unit

Most narrow, centered on departments or smaller units of an organization

Complexity

Highly complex, covers a large territory

Impact Have the potential to have a dramatic impact –including survival and success of the organization

Complex, but more specific with a more limited domain of Application

Affect specific business units but the effect on the entire organization is measured

The least complex because they usually focus on small, homogeneous units

Impact is usually restricted to a specific department or organisation unit

Management level Top management Middle management Frontline

Point of Difference

Strategic plans Tactical plans

Interdependence High interdependence, must take into account the resources and capabilities of the entire organization and its external Environments

Components of Planning

Moderate interdependence; must take into account the resources and capabilities of several units within a business

Operational plans

Low interdependence; the plan may be limited to higher level, tactical and strategic plans but are less independent on these plans

Plans may be classified into two categories, i.e. standing plans and single use plans.

u Standing plans are put to use, again and again, over a long period of time. Once established, they continue to apply until they are modified or abandoned. Standing plans help managers in dealing with routine matters in a predetermined and consistent manner. Examples: 1. Objectives, 2. Strategies, 3. Policies, 4. Procedures, 5. Methods and 6. Rules

u Single use plans are non-recurring in nature and deal with problems that probably will not be repeated in the same form in future. Examples: 7. Programmes, 8. Schedules, 9. Projects, 10. Budgets. These are discussed below.

Objectives

Objectives are established to guide the efforts of a company and each of its components. They indicate the ‘end point of a management programme’. They typically indicate the result that an organisation expects to achieve in the long run. The nature of objectives may be captured thus:

u Objectives generally are prioritized and arranged in an order of importance, i.e., overall objectives, divisional objectives, departmental objectives and individual objectives, etc.

u Objectives are interrelated and interdependent. To achieve the end result, everyone must work in close coordination with others.

u There are multiple goals that are being talked about and taken up for action at any point of time.

u Objectives have a definite time horizon. As a result, an organisation can have short term, medium term and long term objectives.

u Objectives describe the purpose of an organisation. They show the way and direct effort. They put activities on the right track. Once objectives are set, it becomes easy to find out who is doing what, where things have gone wrong, why actions are not moving along desired lines and what needs to be done to rectify things etc.

Strategies

Strategy is all about making choices. It’s about deliberately choosing to be different. It speaks about spelling about a territory where the business seeks to be unique. To survive and flourish in a competitive environment, marked by rapid change, every business has to deliver value by building capabilities that help serve customers better. While doing so, the business needs to separate itself from the crowd and state its value proposition very clearly—how it seeks to use its resources in order to meet a set of goals. Here the business has to be careful in not doing the same thing as rivals, if all you are trying to do is essentially the same thing as your rivals, then it is unlikely that you will be very successful.

To achieve success, every business must have a strategy. Strategy, essentially, seeks to answer two questions: where should we compete and how should we compete. If a firm is able to address these two questions successfully, then it can outperform rivals, consistently and deliver superior returns. The purpose of strategy is to create a competitive advantage that generates superior, sustainable financial returns.

u Where you want to compete: To create a good strategy, a firm should have an understanding of its own strengths and weaknesses, apart from knowing how the competition works. It must have a clear view of where it wants to compete, based on its own unique capabilities.

u How you want to compete: The second choice is about how it wants to operate, the kind of position it wants to take, the type of business model that is needed to execute things and other set of activities required to sustain the business in the long run.

Every business has a set of resources that can be put to good use in order to create value and generate superior returns. When the resources are not deployed properly, businesses will collapse under their own weight. Good strategies help a firm position itself in its industry & gain a competitive advantage through an integrated set of actions—aimed at delivering unmatched value to key stakeholders. The choices, it must be remembered, need to be made in an uncertain environment, prioritizing things carefully (because you have finite resources). You cannot be everywhere. If you want to be everywhere, you get killed. Your strategy can fail if you choose a position in the business landscape that is pretty difficult to handle. With your existing set of capabilities that you have, you are unable to adjust or adapt to a dynamic environment and fight competition putting resources and skill sets to best use. You may also trip and fall if the set of actions initiated by you are not fully integrated and & consistent with the position that you have taken in the business landscape. To be useful and effective, a strategy must ensure consistency—striking rapport between internal strengths and external challenges through a coordinated set of activities in an ever-changing environment. Every business must make choices that fit together in a holistic, consistent manner in order to achieve success in a dynamic environment. Those choices are the essence of strategy. It must be clearly understood here that deployment of resources, developing a suitable structure, building an appropriate culture are all important, but strategy is not about these choices. Likewise, cutting costs, boosting productivity etc. are not to be construed as strategy. They are tactics

should be no attempt to put the subordinate down. Periodic reviews, proper counselling and allowing subordinates to commit mistakes and learn from the same would help a subordinate to learn slowly and steadily.

u Politics: Be sensitive to the policies of implementing MBO. MBO redistributes power, and not all managers welcome this. If MBO is seen as a significant change, it will generate hostile reaction in the form of jokes, infighting and overt conflict. MBO can also alter the status of an organization, influence decisions, affect budgets and promote the creation of coalitions to fight with it. MBO, as Odiorne pointed out, has failed in many organizations because managers quite often ignored these political considerations in the process of implementation.

Chapter Summary

u Planning is all about choosing a goal and developing a strategy to achieve that goal.

u Planning is goal oriented, all pervasive, continuous, reasonably flexible and forward looking.

u The process of planning involves a series of inter-connected steps.

u Planning is an important activity of every manager. Only through planning managers are able to put things on track and decide appropriately.

u Planning is often attacked on the ground that it stifles freedom and encourages rigidity. It is also a very time consuming and costly exercise.

u Various types of plans—including tactical, strategic and operational--- are extensively put to use in every organisation.

u Effective planning demands wide participation from key stakeholders and blessings from the top management.

u Objectives are the results that a firm expects to achieve in the long run. Objectives are generally structured in a hierarchy of importance. Objectives can be set following a top down or bottom up approach.

u Setting objectives requires lot of careful planning and detailed study of factors that have a bearing on organisational functioning.

u MBO is the modern way of setting goals, quantifying everything and demanding accountability from those implementing the process.

Test Questions

1. Define planning. What is the necessity of planning in modern, complex organisations?

2. ‘Future is a moving target. It may not be possible to anticipate future changes accurately and provide for them in plans’. Discuss.

3. “Planning is an all-pervasive and continuous function of management”. Discuss the performance, role and importance of planning in the light of the foregoing statement. What are the limitations of planning? Suggest remedies.

4. Why is planning regarded as a primary function of management? Discuss the important features of planning and point out its internal and external limitations.

5. Elaborately explain the planning process in modern organisations.

6. What are the essential features of a good plan?

7. What is planning? State the nature and benefits of planning.

8. What are some obstacles to good planning that managers must overcome?

9. ‘Planning is deciding in advance, what is to be done in future’. Comment.

10. ‘Planning is a mere ritual in a fast changing environment’. Discuss.

11. ‘Planning is looking ahead and controlling is looking back’. Do you agree? Why and Why not?

12. A manager was overheard saying: “Plan? I never have time to plan. I live from day to day just trying to survive”. Comment.

13. Almost by definition, organisations cannot accomplish all of their goals. Why?

14. If planning is so crucial, why do some managers choose not to do it? What would you tell these managers?

15. Draw the distinction between tactical, strategic and operational plans. Support your answer with suitable examples.

16. Define ‘objectives’ and mention the important characteristics of objectives of an organisation.

17. What is a means-ends chain? Explain the hierarchy of objectives through this chain.

18. What is the importance of setting organisational objectives in a modern complex organisation?

19. What are the eight key areas where the organisation should establish objectives?

20. What do you mean by management by objectives? Explain the goal-setting process through MBO.

21. Almost by definition, organisations cannot accomplish all of their goals. Why?

22. To what extent, do you believe that managers you have known, in business or elsewhere have a clear understanding of their objectives? If, in your opinion, they do not, how would you suggest that they go about setting them?

23. Some people object to defining long-term goals because they think it is impossible to know what will happen over a long period. Do you believe this is an intelligent position to take?

24. Organisations generally pursue multifarious objectives. Why? What are the consequences of concentrating energies on a narrow set of objectives?

25. MBO is hailed as the greatest innovation in years. Why?

Learning Exercise : A Time

Management Plan

Time management is an important skill that will impact your future as a manager. You can categorize the time that you spend as either required or discretionary. You can assess your time management skills by keeping track of your time using a schedule calendar and breaking down the time devoted to each activity over a week. After a week of logging the activity, note whether each activity was required or discretionary and whether the time was used productively or unproductively using a 10-point scale in which 10 is very productive and 1 is completely unproductive. Now write up a plan on how to manage your time by coming up with a list of what to start doing and stop doing and what you can do to manage your discretionary time more productively.

Skill Builder How do you plan to achieve the goals?

You are managing a small manufacturing operation that involved the final assembly of Children sippy cups. There are two components to the sippy cup: the cup, a lid, and a straw as well as the box that will hold the product. You have 2 direct reports who you can assign to assemble the product. You also have a dotted-line report with the purchasing agent for the company that procures the components of the product (a dotted-line report is where one employee must work for and report to more than one manager) as well as the boxes and material needed (e.g., plastic that is used on the shrink-wrapping machine) to complete the product for sale. You have been given the following metrics. (a) You have been given a goal of producing 2,300 units per week. (b) It takes 1 minute to assemble the sippy cup. (c) It takes 45 seconds to place the sippy cup in the box and shrink-wrap the product. (d) It takes 15 seconds to examine the product for meeting quality, and you expect that 99.5% of the products will meet or exceed expectations. (e) The employees work for 8 hours per day. Write up a plan that has achievable goals for your two direct reports and your dotted-line report. Also prepare a memo to your supervisor about how you plan on achieving your goal.

Role Play Exercise

You and another student will engage in a role-play exercise. One will be the manager, and one will be an employee who is not happy with the aggressive goals that he has been given. After a 10-minute discussion, you both report on what was resolved, what was not, and how this would affect job satisfaction and performance for the employee.

Case Study: New Management Challenges for the New Age

Today’s news is littered with scandals, new allegations of sexual assault, and tragedy. Since 2017 and the #metoo Movement, stemming from the Harvey Weinstein scandal, more and more public figures have been put into the spotlight to defend themselves against allegations from women around the globe. Not only publically,

but privately in companies around the world, there have been firings, and investigations into misconduct from co-workers, managers, and CEOs. It is a relevant topic that is getting long overdue publicity and encouraging more men and women to come forward to discuss openly rather than hide the events and injustices of the past. Other events showcase the tumultuous and on-edge society we are living in, such as the Charlottesville, VA attack, that left 1 dead and 19 injured when a person drove a car through a Chapter 1 Managing and Performing 19 crowd of protestors during a white nationalist gathering. With events on a daily business, it is important for companies to take a stand against racial hatred, harassment of any kind, and have firm policies when such events occur. Take Netflix for example, who in July of 2018 fired chief communications officer for saying the “N-word” in full form. This event occurred during an internal meeting, not directing the slur at anyone specific, but claimed it was being made as an emphatic point about offensive words in comedy programming. The “Netflix way”, the culture that is built around radical candor and transparency was put to the test during this occurrence. The offender, Jonathan Friedland attempted to apologize for his misdeed, hoping it would fade away and his apology would be accepted. However, it didn’t work that way, instead the anger was palpable between coworkers, and eventually led to the firing of Friedland after a few months of inaction. Netflixers are given a high level of freedom and responsibility within their “Netflix way” culture. Blunt feedback is encouraged, trust and discretion is the ultimate gate keeper, as employees have access to sensitive information, and are ultimately trusted for how they expense items and take vacation time. Between the insanely fast-paced streaming services industry, it is hard to keep this culture at a premium, but it is imperative for the success of the company overall. “As you scale a company to become bigger and bigger how do you scale that kind of culture?” said Colin Estep, a former senior engineer who left voluntarily in 2016. “I don’t know that we ever had a good answer.” In order to keep up, sometimes the company is seen as harsh in their tactics to keep the best of the best. “I think we’re transparent to a fault in our culture and that can come across as cutthroat,” said Walta Nemariam, an employee in talent acquisition at Netflix, in the video. Netflix has stayed true to their cultural values despite the pressures and sometimes negative connotations associated with this “cutthroat” environment. Their ability to remain agile, while displaying no tolerances for societal injustices makes them at the forefront of new age companies. It is a difficult pace to stay in line with, but it seems that they are keeping in stride and remaining true to who they are, for now. (Source: Principles of Management, Rice University, Page 28).

Questions

1. How have the current cultural environment of our country shaped the way that companies are looking at their own corporate cultural standards?

2. What are the potential downfalls and positive influences of the “Netflix way”?

3. How does Netflix’s internal culture negatively or positively affect their ability to stay competitive and deliver cutting edge content?

Management Principles & Application

UGCF

AUTHOR : V.S.P. RAO

PUBLISHER : TAXMANN

DATE OF PUBLICATION : NOVEMBER 2022

EDITION : 2ND EDITION

ISBN NO : 9789356224162

NO. OF PAGES : 592

BINDING TYPE : PAPERBACK

Description

Rs. 695 | USD 39

This book is presented in a compact, easy-to-understand language, incorporating new topics. It tries to strike a harmonious balance between time-tested management principles and their successful application in a dynamic world.

This book aims to fulfil the requirement of students of B.Com. (Hons.) Core Paper based on Undergraduate Curriculum Framework (UGCF) for the University of Delhi, NonCollegiate Women’s Education Board (NCWEB), School of Open Learning (SOL) of the University of Delhi and various Universities throughout India.

The Present Publication is the 2 nd  Edition, authored by V.S.P. Rao, with the following noteworthy features:

u [ Chapter Outline ] Clear statement of topics covered in each chapter is given at the beginning. This essentially helps the students in chalking out a clear road map from an examination point of view

u [ Textual Matter ] The book is divided into 19 chapter, which covers the following: n Introduction n Planning

n Organising

n Directing & Controlling

n Salient Developments & Contemporary Issues

The text provided is researched-based, student-friendly and eminently readable because of its easy-to-understand language. The text offers a lively commentary in a conversational style on the ongoing nature of real organisations and the behaviour of individuals and teams that work within them.

u [ Contemporary Examples ] Complex topics on theory are presented through contemporary examples

u [ Charts, Boxes & Tables ] have been inserted to present the contents in a capsule format

u [ Cases Studies ] & skill-building exercises are also provided at the end of the chapter to develop problem-solving skills and see how theoretical concepts find expression in real life

u [ Role Play Exercises ] offers students a great learning opportunity to assume the role of a person or act out a given situation

u [ Chapter Summary & Review Questions ] Each chapter ends with a summary of important points, followed by test questions that help students to check their understanding of key issues

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