Month: December 2020

Management Notes

Elements of Direction, Supervision

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Directing is that part of the managerial function that allows the organization’s methods to work efficiently to help achieve the organization’s purposes. It has four elements supervision, motivation, leadership, and communication.

Supervision

Supervision is all about immediate and direct guidance and control of subordinates while performing their work. It involves closely observing the subordinates at work and ensuring that they work according to the policies and plans of the organization. George R. Terry and Stephen G. Franklin define it as follows:

“Supervision is guiding and directing efforts of employees and other resources to accomplish stated work outputs”.

It refers to monitor the progress of routine work of one’s subordinates and guiding them properly. Supervision is an important element of the directing function of management. Supervision has an important feature that face-to-face contact between the supervisor and his subordinate is a must.

Communication:

It refers to an art of transferring facts, ideas, feeling, etc. from one person to another and making him understand them. A manager has to continuously tell his subordinates about what to do, how to do, and when to do various things.

Also, it is very essential to know their reactions. To do all this it becomes essential to develop effective telecommunication facilities. Communication by developing mutual understanding inculcates a sense of cooperation which builds an environment of coordination in the organisation.

Leadership:

It refers to influence others in a manner to do what the leader wants them to do. Leadership plays an important role in directing. Only through this quality, a manager can inculcate trust and zeal among his subordinates.

Motivation:

It refers to that process which excites people to work for attainment of the desired objective. Among the various factors of production, it is only the human factor which is dynamic and provides mobility to other physical resources.

If the human resource goes static then other resources automatically turn immobile. Thus, it becomes essential to motivate the human resource to keep them dynamic, aware and eager to perform their duty. Both the monetary and non-monetary incentives are given to the employees for motivation.

Must have following Elements

Abilities and Skills

Regardless of the situation, the range of duties expected from a supervisor calls for specific skills. The skills required are of three types, technical, conceptual, and human relations.

A Leadership Position

A leader can influence the subordinates. This influence can help the manager direct the work of his subordinates for achieving the organization’s goals. However, for effectiveness, the organization must give the manager a proper place and status in the organization. He should also have the requisite authority to exercise leadership over the group and motivate the employees to do better.

The Nature of Supervision

A manager can adopt different types of supervision methods. He must use his intelligence to decide if he wants to opt for let’s say ‘general supervising’ or ‘close supervising’. In most organizations, general supervising tends to have a favorable impact on the productivity and overall morale of the employees.

The Cohesiveness of the Group

Group cohesiveness is all about the degree of attraction that each member has for the group. Groups with high cohesiveness tend to produce better results. This is because each member of the group works hard to achieve the common goals of the organization and are willing to share responsibility for the group work. Therefore, the manager must take the group cohesiveness into consideration for optimum supervisory efficiency.

Better Relations with the Superiors

Usually, problems with supervising arise due to omissions, errors or negligence from the superior managers. Therefore, for better supervisory efficiency, the manager needs to have better relations with his superiors.

Further, a manager must have cordial relations with the senior management allowing him to express his suggestions and views freely. This will allow him to put across the performance of his subordinates across better.

Management Notes

Centralization in Management

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Centralization refers to the process in which activities involving planning and decision-making within an organization are concentrated to a specific leader or location. In a centralized organization, the decision-making powers are retained in the head office, and all other offices receive commands from the main office. The executives and specialists who make critical decisions are based in the head office.

Centralization is a method of organizing and management where management and decision-making powers are concentrated in the hands of the top management of the organization. Centralization allows on the one hand an unified decision “from the centre” on the other hand, limits the autonomy of organizational units and may reduce flexibility of the decision.

Centralization is said to be a process where the concentration of decision making is in a few hands. All the important decision and actions at the lower level, all subjects and actions at the lower level are subject to the approval of top management. According to Allen, “Centralization” is the systematic and consistent reservation of authority at central points in the organization. The implication of centralization can be:

  • Reservation of decision-making power at top level.
  • Reservation of operating authority with the middle level managers.
  • Reservation of operation at lower level at the directions of the top level.

Advantages of Centralization

Focused vision

When an organization follows a centralized management structure, it can focus on the fulfillment of its vision with ease. There are clear lines of communication and the senior executive can communicate the organization’s vision to employees and guide them toward the achievement of the vision. In the absence of centralized management, there will be inconsistencies in relaying the message to employees because there are no clear lines of authority. Directing the organization’s vision from the top allows for a smooth implementation of its visions and strategies. The organization’s stakeholders such as customers, suppliers, and communities also receive a uniform message.

A clear chain of command

A centralized organization benefits from a clear chain of command because every person within the organization knows who to report to. Junior employees know who to approach whenever they have concerns about the organization. On the other hand, senior executives follow a clear plan of delegating authority to employees who excel in specific functions. The executives also gain the confidence that when they delegate responsibilities to mid-level managers and other employees, there will be no overlap. A clear chain of command is beneficial when the organization needs to execute decisions quickly and in a unified manner.

Reduced costs

A centralized organization adheres to standard procedures and methods that guide the organization, which helps reduce office and administrative costs. The main decision-makers are housed at the company’s head office or headquarters, and therefore, there is no need for deploying more departments and equipment to other branches. Also, the organization does not need to incur extra costs to hire specialists for its branches since critical decisions are made at the head office and then communicated to the branches. The clear chain of command reduces duplication of responsibilities that may result in additional costs to the organization.

Quick implementation of decisions

In a centralized organization, decisions are made by a small group of people and then communicated to the lower-level managers. The involvement of only a few people makes the decision-making process more efficient since they can discuss the details of each decision in one meeting. The decisions are then communicated to the lower levels of the organization for implementation. If lower-level managers are involved in the decision-making process, the process will take longer and conflicts will arise. That will make the implementation process lengthy and complicated because some managers may object to the decisions if their input is ignored.

Improved quality of work

The standardized procedures and better supervision in a centralized organization result in improved quality of work. There are supervisors in each department who ensure that the outputs are uniform and of high quality. The use of advanced equipment reduces potential wastage from manual work and also helps guarantee high-quality work. Standardization of work also reduces the replication of tasks that may result in high labor costs.

Disadvantages of Centralization

Remote control

The organization’s executives are under tremendous pressure to formulate decisions for the organization, and they lack control over the implementation process. The failure of executives to decentralize the decision-making process adds a lot of work to their desks. The executives suffer from a lack of time to supervise the implementation of the decisions. This leads to reluctance on the part of employees. Therefore, the executives may end up making too many decisions that are either poorly implemented or ignored by the employees.

Bureaucratic leadership

Centralized management resembles a dictatorial form of leadership where employees are only expected to deliver results according to what the top executives assign them. Employees are unable to contribute to the decision-making process of the organization, and they are merely implementers of decisions made at a higher level. When the employees face difficulties in implementing some of the decisions, the executives will not understand because they are only decision-makers and not implementers of the decisions. The result of such actions is a decline in performance because the employees lack the motivation to implement decisions taken by top-level managers without the input of lower-level employees.

Lack of employee loyalty

Employees become loyal to an organization when they are allowed personal initiatives in the work they do. They can introduce their creativity and suggest ways of performing certain tasks. However, in centralization, there is no initiative in work because employees perform tasks conceptualized by top executives. This limits their creativity and loyalty to the organization due to the rigidity of the work.

Delays in work

Centralization results in delays in work as records are sent to and from the head office. Employees rely on the information communicated to them from the top, and there will be a loss in man-hours if there are delays in relaying the records. This means that the employees will be less productive if they need to wait long periods to get guidance on their next projects.

Management Notes

Management Planning Procedures, Method, Rule, Budget

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Planning Procedures

Planning is the first primary function of management that precedes all other functions.

Management planning process is a step-by-step guide to creating a realistic organizational plan to meet set goals after assessment of available resources. It takes into consideration both long-term and short-term corporate strategies and spells out the vision and the direction to which the company is headed. Organizational planning ensures;

  • Proper Resource Utilization; since resources are scarce, planning provides invaluable information to top decision-makers on how the available ones will be utilized. Whatever the project is, maximum productivity should be ensured from minimum resource utilization.
  • Establishment of goals; planning sets up challenging but realistic goals to every team member in the organization. Setting individual goals ensures employees are not complacent in-service delivery.
  • Uncertainty and risk management; Risk management is very important for any organization to succeed. Sometimes things happen the unexpected way. Planning, therefore, helps put in place the ‘what if’ scenario thus cushioning on the adverse effects that might result due to severe unforeseen consequences. Planning Method

Nine Steps for Management planning process:

Venture Awareness and Resources Allocation

The awareness of the business venture and taking action towards the attainment of set objectives is the first step in the management planning process. Awareness enables the decision-making authority to identify available and future opportunities and plan on their effective utilization

Venture awareness also entails the understanding of organizational goals. A detailed overview of each goal should be looked at and anticipated outcomes analyzed. At this stage, objectives should be described in quantitative terms. E.g. in 12 months period, the anticipated profit margin should rise by approximately 30 per cent. Again it is important to note that the set goals should be allocated adequate human and financial resources for effective completion.

Gathering Adequate Information

Before initiating the actual plan, always have all the relevant information that regards the business operation. All the facts and figures should be detailed, target customers identified and their tastes and preferences noted. The guidelines under which goods and services are provided should also be set and the current market value of products measured against expected returns projected costs and expenses.

When gathering information, management should be well aware of goal related tasks so as to align them with objectives and the required resources i.e. in terms of staff and financing.

Setting Objectives

These are setting goals that the organization strives to achieve by utilizing its available resources. They are the end products that should be attained through proper planning.

Understanding objectives enable each employee to muster his/her role in attaining general goals. They should, therefore, be properly formulated and well communicated to all employees.

Objectives and tasks should be set in their order of importance. The most important tasks should be assigned first priority and completed first.

Anticipation

No one knows what will happen in future a reason why management planning process is essential. When formulating a management plan, forecasting is essential. Forecasting is the assumption of future events by keenly observing present variables and constituting a plan that is likely to meet the desired expectations.

The following should be taken into consideration (if in production industry) when anticipating for the future;

  • Likely production volume and the expected demand for general production
  • Likely costs and product pricing
  • Government’s economic policies and varying patterns in consumer preferences
  • Source of funding
  • Availability of raw materials and labor
  • Importance of technology in meeting the set objectives

The successful implementation of the whole management planning process will entirely hinge on forecasting and some of the factors that have been listed above. Accurate anticipation and forecasting will lead to a reliable set out management plan.

Determining The Absolute Course of Action

The next step is to choose the absolute course of action. Different organizations may use different alternative to achieve similar results but a good manager should analyze all available options and make a final selection that will be appropriate in terms of resource utilization and convenience. According to O’Donnell, there is always a plan against which there are no reasonable alternatives. This, therefore, means that all positives and negatives of a particular course of action should be analyzed and weighed before the final verdict on selection is taken

Evaluate The Course Of Action

After determining the absolute course of action, the next important step is to do an evaluation. Evaluation involves analysis of the performance of different actions. Different factors are measured against each other and the most convenient course of action in terms of resources and timeline preferred. E.g. one course of action may require large investments and it’s profitable in the long run while the other might require very little resources but low-profit margins in the long run. Therefore, appropriate analysis is vital in identifying the best course of action.

Establishing the Contingency Plans

The management planning process does not end after establishing the appropriate course of action. Contingency plans should also be put in place in case the main course of action does not materialize. This should just act as secondary plans in support of the principal plan.

Plan Implementation

This is the second-last step in the process of Management planning. At this stage, the plan is put into action so that the business objectives are realized. For successful implementation of the already set out plan, policies and procedures should be put in place. Plan execution should be for all operational staff, managers, partners and other relevant collaborative partners.

Monitoring and Evaluation

The effectiveness of management planning and the execution process must be assessed if possible, regularly. Depending on evaluation results, managerial guidelines or principles may need adjustments or modifications before final plan execution. Also, the management plan may need to be tailored to meet societal, political or economic changes that affect the organization as a whole.

Planning Rule

Rules are very specific statements that define an action or non-action. Also, rules allow for no flexibility at all, they are final. All employees of the organization must compulsorily follow and implement the rules. Not following rules can have severe consequences.

Rules create an environment of discipline in the organization. They guide the actions and the behaviour of all the employees of the organization. The rule of “no smoking” is one such example.

Planning Budget

A budget is a statement of expected results the managers expect from the company. Budgets are also a quantitative statement, so they are expressed in numerical terms. A budget quantifies the forecast or future of the organization.

There are many types of budgets that managers make. There is the obvious financial budget, that forecasts the profit of the company. Then there are operational budgets generally prepared by lower-level managers. Cash budgets monitor the cash inflows and outflows of the company.

Management Notes

Organizing Process

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Organizing is a critical function of management that involves arranging resources, tasks, and roles to achieve an organization’s objectives. The organizing process establishes a structure within which individuals and teams can work efficiently and effectively toward common goals.

  1. Identification of Objectives

The first step in the organizing process is to clearly define the organization’s objectives. Every organizing activity is aimed at achieving these objectives, so they serve as the foundation of the organizing process. Managers must understand what the organization seeks to accomplish in terms of both short-term and long-term goals. These objectives help determine the type of organizational structure that will be required and influence decisions about resources, roles, and processes.

  1. Identifying and Classifying Activities

Once the objectives are set, the next step is to identify and classify the activities necessary to achieve those goals. Managers must break down the overall work into specific tasks and activities. This division of work is essential because it ensures that tasks are manageable and can be assigned to appropriate individuals or departments. These activities might include functions like marketing, production, finance, and human resources, among others, depending on the organization’s goals.

  1. Grouping Activities

After identifying the tasks, the next step is to group similar or related activities into departments or units. This grouping is known as departmentalization and can be based on several factors:

  • Function: Grouping activities by functions, such as marketing, finance, or operations.
  • Product: Organizing tasks by the products or services the organization offers.
  • Geography: Grouping tasks based on location, especially in large multinational companies.
  • Process: Organizing by the type of process or technology used in production.

This step creates departments or units that specialize in specific areas, allowing for better focus and efficiency.

  1. Assigning Duties

Once activities are grouped, the next step is to assign specific duties and responsibilities to individuals or departments. This process ensures that every task has someone responsible for its completion. The assignment of duties should take into account the skills, expertise, and interests of the individuals involved to ensure that tasks are handled effectively. Assigning clear responsibilities helps to avoid confusion, ensures accountability, and provides clarity on who will execute which task.

  1. Delegation of Authority

With responsibilities assigned, the next step is to delegate authority. Delegation is essential because employees need the power to make decisions and carry out their duties effectively. Authority must be delegated along with responsibility, creating a balance between the two. Effective delegation empowers employees to take ownership of their tasks and make decisions without constant supervision. It also enables managers to focus on more strategic activities while their subordinates handle operational tasks.

  1. Establishing Relationships

Once authority and responsibility are delegated, it is important to define the relationships between different roles and departments. This step establishes the chain of command, specifying who reports to whom. It also ensures that communication flows smoothly across the organization. A clear structure reduces confusion, helps avoid conflicts, and promotes accountability. Managers need to outline both vertical relationships (supervisor-subordinate) and horizontal relationships (peer-to-peer coordination) to ensure smooth cooperation between departments.

  1. Coordinating Activities

Coordination is a vital part of the organizing process. After duties are assigned and relationships established, it is essential to ensure that all departments and employees work harmoniously towards the organization’s goals. Coordination aligns efforts across various units, preventing duplication of tasks and ensuring that resources are used efficiently. Managers must facilitate communication and collaboration between different departments to ensure that everyone is working toward common objectives.

  1. Establishing a Reporting System

An effective reporting system is crucial to keep track of progress and ensure accountability. Managers need to set up systems that allow them to monitor the work being done, identify potential problems, and provide feedback. A reporting system helps ensure that employees are meeting their objectives and that departments are functioning smoothly. This system also allows managers to make necessary adjustments to the organizational structure as needed.

  1. Review and Adjustment

Finally, organizing is not a one-time process. As the organization grows and external conditions change, it may be necessary to review and adjust the organizational structure. This step involves evaluating the effectiveness of the current structure and making changes to address any inefficiencies, redundancies, or new challenges. Managers need to regularly assess whether the organizing process is helping the organization achieve its goals and make adjustments accordingly.

Management Notes

Task Force

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The Task Force is a type of a group, formed temporary, in which people from different disciplinary backgrounds come together to perform a specific task or mission. These are different from the committees in the sense, these are temporary and has broader powers of action and decision, greater responsibilities for investigation, analysis, planning and research.

The task force is temporary and comes to an end as soon as the mission for which it was created gets over. The purpose behind its creation is to capitalize the skills, expertise and experience of its members to find the solution to some unusual organizational problem. The task force usually comes into the power when the organization faces a complex problem which is beyond the capabilities of an individual and even the entire department to solve it.

Such groups can either be constituted at the time of; a launch of a new product, selection of a new assignment or for the negotiation of certain terms and conditions. Also, any member of the organization could be a part of this, irrespective of his hierarchical position in the organization.

Thus, the task force is constituted to capitalize the special skills of individuals to solve a complex problem, but sometimes it can also pose serious threats to the organization. Such as people may feel miserable if not selected in the task force, a feeling of independence may emerge in the minds of task force members and might lose attachment to the formal organization.

Management Notes

Management Approaches

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The modern approach to management was developed around the year 1950. This approach is an improvement upon both the classical and neo-classical approach to management.

This approach has three basic pillars:

  1. Quantitative Approach
  2. System Approach
  3. Contingency Approach

Quantitative Approach:

The quantitative approach was propounded by C. W Churchman and his colleagues around the year 1950. This approach is also known by the name of Operational Research or Operational Analysis.

The classical approach lays stress upon the physical resources while the neo-classical approach gives importance to human resources. Both these approaches are silent about some of the most serious problems usually faced by the managers.

The quantitative approach to management makes some suggestions to solve different problems facing the managers. It tells the managers to solve their problems with the help of the mathematical and statistical formulas. Some special formulas have been prepared to solve managerial problems.

For Example:

(i) Theory of Probability,

(ii) Sampling Analysis,

(iii) Correlation / Regression Analysis,

(iv) Time Series Analysis,

(v) Ratio Analysis,

(vi) Variance Analysis,

(vii) Statistical Quality Control,

(viii) Linear Programming,

(ix) Game Theory,

(x) Network Analysis,

(xi) Break-Even Analysis,

(xii) Waiting Line or Queuing Theory,

(xiii) Cash-Benefit Analysis, etc.

The main objective of the quantitative approach is to find out a solution for the complex problems facing the big companies. The help of a computer is usually taken in order to make use of the above mentioned techniques.

The chief advantage of the approach is to solve complex problems quickly. But the chief disadvantage is that this approach offers an alternative to decision and cannot take decision.

System Approach:

This is a newly developed approach which came existence in 1960. This approach was developed by Chester I. Bernard, Herbert A. Simon and their colleagues.

The system approach means a group of small inter-related units. A group of different units which means a complete unit is called a system, while the small units are themselves independent, but somehow or the other is connected with the sub-systems of the related system. All the sub-systems influence one another. For example- a scooter is a system which has many sub-systems in the form of engine, shaft, gear, wheels body, etc.

All these sub-systems are inter-related with one another and if one of them fails the whole system stops working. Therefore, the success of the system depends on the cooperation and efficiency of the sub-systems.

It can, therefore, be said that a system means different inter-related parts which work n cohesion simultaneously to achieve a particular purpose.

According to the system approach, the whole organization is a system and its various departments are its sub-systems. All the sub-systems work in unison. Then and only then the objective of the organization can be achieved. Therefore, when manager taken some decision regarding a particular sub-system, he should also take into consideration the defect of his decision on the other sub-systems.

Key Concepts of System Approach:

The following are the chief characteristics of the System Approach:

(1) Sub-Systems:

Every system happens to be a combination of many sub-systems. All the sub-systems are inter-related. It means that whenever we take some decision regarding a particular sub-system, we should always keep in mind the possible effect of the decision might have on the other sub-systems. In the context of a company, all its departments (e.g. purchase, sale, finance, production, personnel, research and development) happen to be its sub-systems.

All these are created by the major system which happens to be the company itself. Company itself is a sub-system of industry. Industry is a sub-system of a national economy. Similarly, the national economy itself happens to be a sub-system of the world system. Therefore, it is clear that various sub-systems constitute a major system.

(2) Holism:

A major characteristic of the System Approach is that it is looked upon as a whole. It clearly means that a decision taken with regard to a particular sub-system does influence or affect the other sub-systems. Therefore, every decision is taken keeping in view the entire organisation, meaning thereby, that all the sub-systems are kept in mind while taking a decision. If that is not done, the major system is certainly damaged and it cannot work properly.

For example- if the sales department is aiming at doubling its sales, it shall have to take care of the fact whether the purchase department would be in a position to purchase the requisite amount of raw material.

Again, whether the personnel department will be able to provide the required man-power. Yet again whether the finance department will be able to provide the required financial support. It can, therefore, be said that no decision is possible in respect of any particular sub-system alone. That is why the system approach is called holistic.

(3) Synergy:

It means that the whole is greater than the sum of its parts. This can be better understood with the help of an example. Suppose there are five persons in a group. Everybody has a capacity to carry a load of five quintal each. When they are told to lift a load of one quintal, everybody will be able to lift only one quintal of load. But if that are told to lift the weight collectively, they would certainly be able to lift a load in excess of five quintal.

It is thus, clear that if job is performed collectively rather than individual, it is certainly well-performed with better results. Here, the pointer happens to be towards coordination. When all the parts of a system work keeping in mind the interests of others, the performance turns out to be decidedly better results.

(4) Closed and Open System:

A system can be of two types:

(i) Closed system and

(ii) Open system

(i) Closed System:

This is a system that remains unaffected by the environmental factors. Traditional management experts consider an organisation as a closed system. They believed that an organisation worked without being influenced by the outside factors, e.g., a watch is not influenced by the outside factors and it works continuously without getting interrupted. This is a good example of the closed system.

(ii) Open System:

An open system means a system which remains constantly in touch with its environment and is influenced by it. Modern management experts consider an organisation as an open system. Environment is a combination of many factors.

The chief factors of the environment of an organisation happen to be raw material, power, finance, machine, man-power, technique, market, new products, government policies, etc. All these factors of environment enter an organisation as Input. Within the organisation, they are converted into products through the process of various activities.

Then they walk out of the organisation in the form of output and once again mingle with the environment. At this time, they happen to be in the form of goods, services and satisfaction. All the factors of input and output influence the organisation. That is why an organisation is called an open system.

(5) System Boundary:

This means a certain dividing line which separates a system from its environment. The dividing line in a closed system is rigid while in respect of open system, it is flexible. It is not easy to determine the dividing line in respect of physical and biological systems, e.g., a dividing line can easily be drawn between the two pieces of land.

It is, however, difficult to do so in respect of a social system and an organisation is a social system. System boundary makes it clear as to which factors are related to the system and which factors are related to the environment. Consequently, it makes control easier.

In conclusion, it can be said that there have been revolutionary changes in the process of decision-making because of concept of system approach. However, some critics feel that it is difficult to study the relations between sub-systems of a particular system. Therefore, this concept is not practical.

III. Contingency or Situational Approach:

Contingency approach to management is an important modem approach. This approach originated in around 1970. According to it, the managers should take decisions not according to principles but according to the situations. It means that there cannot be any single principle / formula / managerial activity which can be suitable in all the situations. Its chief reason is the constantly changing nature of environment. Here environment means the sum total of all the factors which influence the organization.

These factors are both internal and external. The internal factors include objectives, policies, organization structure, management information system, etc. The external factors include customers, suppliers, competitors, government policies, political set-up, legal system, etc. All these factors are subject to change that is why the environment of an organization is called dynamic.

The system approach has failed to establish a relationship between the organization and environment. The contingency approach has made an attempt to remove this weakness. It is, therefore, the basic duty of the managers to analyse the environment and they should take decision on the basis of their analysis. The managers should always keep in mind that no single method can be suitable for doing any work. Its suitability depends on the situations.

It is quite possible that a particular method of doing a thing may be futile and to hope that these principles would be suitable or successful in one situation, but the same may not be the case in some other situation. So far as the different principles of management are concerned, they simply guide the mangers, and in the present dynamic environment, it would be futile to hope that these principles would be suitable or helpful in all the situations.

For example- single style of leadership cannot be applied to all the situations. Similarly, there are many methods of motivation and control, but a single method cannot be applied to all the situations.

Features of Contingency Approach:

The following are the main features of the contingency approach:

  1. The managerial action influences the environment.
  2. The managerial action changes according to the situations.
  3. There is essentially coordination between the organization and environment.

Limitations of Contingency Approach:

The following are the limitations of the contingency approach:

  1. It is not sufficient to say that the managerial action depends on the situation. It is essential to say what action should be taken in a particular situation.
  2. A situation can be influenced by many factors. It is difficult to analyse all these factors.

Conclusion:

In conclusion, it can be said that this approach advises the managers to be alert and suggests that the approach and system of work should be suitably changed in view of the situations confronting them.

  1. Other Approaches:

(1) Decision Approach:

Apart from some expert economists who developed the Decision Theory Approach, C.I. Barnard and Herbert Simon happen to be the chief exponents of this approach.

This approach can be better understood with the help of the following mathematical equation:

Management Minus Decision-Making is Zero

This equation makes it clear that if we take away decision out of management, nothing remains except zero. It means that, management is nothing but decision making. A manager has to take decisions at every step. Decision becomes absolutely necessary when there are many alternatives available to solve a particular problem.

After analysing the various alternatives, a rational decision has to be taken. The process of decision-making is a continuous process. The chief reason for it is that the managers have to face problems one after the other and they have to take decision to solve those problems.

Features:

The following are the chief characteristics of the decision theory approach:

(1) Decision is the soul of management.

(2) The study of various factors influencing decision is management.

(3) This approach lays stress on taking rational decisions.

(4) This approach considers decision-making as the centre of the study of management.

(5) Decision-making is a continuous process.

(6) The success of the organisation depends on the quality of the decisions.

(7) This approach recommends the use of quantitative methods in the process of decision-making.

(8) According to this approach, the system of communication has a vital role to play for the success of the process of decision-making.

(9) According to this approach, a manager is recognised as a person known for his problem solving capability.

(10) This approach lays stress on the study of the economic, political, social and practical aspects in case of decision making.

Criticisms:

The following are the major points of criticism of this approach:

(1) Narrow Concept:

This is a narrow approach of management. Decision-making can be an important function of management but not the whole of it.

(2) Rational Decision not Possible:

This approach takes about taking rational decisions, but it is not possible. Various types of information are needed to make rational decisions possible but this is not available or even if it becomes available, its purity is not ensured or granted.

(3) Use of Quantitative Methods not Possible:

There are many occasions when the use of Quantitative Methods is not possible. In such situations a manager makes use of his knowledge and experience rather than some formulae.

On the basis of the above details, it can be said that undoubtedly decision-making is the essence of management, but not the entire management.

(2) McKinsey’s 7-s Approach:

In 1970, Tom Peters and Robert Waterman advocated the theory of 7-S. They made this achievement while they were working as consultants with McKinsey & Co. They conveyed their 7-S approach to the managers through their published article “Structure is Not Organisation.”

The advocates of this approach decided to study the secret of the success of the well-reputed organisations and managers. On the basis of this study, they found out seven important factors on which the effectiveness of an organisation depended.

These factors are the following:

(1) Strategy

(2) Structure

(3) System

(4) Style

(5) Staff

(6) Skill

(7) Shared value

According to this approach the, effectiveness of an organisation is influenced by these seven factors. The chief characteristic of these factors is that they are inter-related. Each factor influences the other factors and is influenced by others. Therefore, nothing can be decided about any particular factor separately. When managers take any decision regarding any one particular factor, they have to take into consideration the effect it will have on the other factors.

Scientific Management Approach:                                

The industrial revolution in England gave an immense impetus for the scientific management approach. It brought about such an extra ordinary mechanisation of industry that it necessitated the development of new management principles and practices. Bringing groups of people together for the purpose of working in the factory posed problems for the factory owners.

The establishment of formal organisation structure, formal lines of authority, factory systems and procedures had to be undertaken for coordinated effort. In order to deal with these problems, a management movement known as ‘Scientific Management’ was born.

Frederick Winslow Taylor (1865-1915) was the first to recognise and emphasise the need for adopting a scientific approach to the task of management. The introduction of the concept of standard time, standard output, standard cost, standardisation of production process, change in the attitude of management and workers to bring about the mutuality of interests are the important landmarks of scientific management. This approach was supported and developed by Henry L. Gantt, Frank Gilbreth, Lillian Gilbreth, Harrington Emerson, etc.

2. Management Process or Administrative Management Approach:

The advocates of this school perceive management as a process consisting of planning, organising, commanding and controlling. In the words of W.G. Scott, “It aims to analyse the process, to establish a conceptual framework for it, to identify principles underlying it, and to build a theory of management from them”.

It regards management as a universal process, regardless of the type of the enterprise, or the level in a given enterprise. It looks upon management theory as a way of organising experience so that practice can be improved through research, empirical testing of principles and teaching of fundamentals involved in the management process.

The process school is also called the ‘traditional’ or ‘universalist’ school as it believes that management principles are applicable to all the group activities, Henry Fayol is regarded as the father of this school. Oliver Shelden, J.D. Mooney and Chester I. Barnard are among the other important contributors to this approach.

3. Human Relations Approach:

The human relations approach is concerned with the recognition of the importance of human element in organisations. Elton Mayo and his associates conducted the world famous Hawthorne Experiments and investigated the myriad of informal relationships, social cliques, patterns of communication and patterns of informal leadership. As a result of these experiments, a trend began which can be phrased as ‘being nice to people’. This trend was eventually termed as ‘the human relations movement’.

The human relations approach revealed the importance of social and psychological factors in determining workers’ productivity and satisfaction. It was instrumental in creating a new image of man and the workplace. It put stress on interpersonal relations and the informal groups. “It’s starting point was in individual psychology rather than the analysis of worker and work. As a result, there was a tendency for human rationalists to degenerate into mere slogans which became an alibi for having no management policy in respect of the human organisation.” Nevertheless, this school has done a unique job in recognising the importance of human element in organisations.

4. Behavioural Science Approach:

The ‘behavioural science’ approach utilises methods and techniques of social sciences such as psychology, sociology, social psychology and anthropology for the study of human behaviour. Data is objectively collected and analysed by the social scientists to study various aspects of human behaviour.

The pioneers of this school such as Gantt and Munsterberg reasoned that in as much as managing involves getting things done with and through people, the study of management must be centred around the people and their interpersonal relations.

The advocates of this school concentrated on motivation, individual drives, group relations, leadership, group dynamics and so forth. The noted contributors to this school include Abraham Maslow, Fredrick Herzberg, Victor Vroom, McGregor, Lawler, Sayles, and Tannenbaum.

5. Quantitative or Mathematical Approach:

This approach stands for using all pertinent scientific tools for providing a quantitative basis for managerial decisions. The abiding belief of this approach is that management problems can be expressed in terms of mathematical symbols and relationships. The basic approach is the construction of a model because it is through this device that the problem is expressed in its basic relationships and in terms of selected objectives. The users of such models are known as operations researchers or management scientists.

Linear programming, Critical Path Method, Programme Evaluation Review Technique, Break­even analysis, Games Theory and Queueing Theory have gained popularity for solving managerial problems these days. These techniques help the managers in improving their decisions by analysing the various alternatives in a scientific manner.

The application of mathematical techniques is particularly useful in solving the physical problems of management such as inventory and production control. They can never be substitute for knowledge, experience and training necessary for understanding the human behaviour.

6. Systems Approach:

A system is composed of elements or subsystems that are related and dependent on each other. The system approach is based on the generalisation that an organisation is a system and its components are inter-related and inter-dependent. This approach lays emphasis on the strategic parts of the system, the nature of their interdependency, goals set by the system and communication network in the system.

Another basic feature of the systems approach is that attention is paid towards the overall effectiveness of the system rather than the effectiveness of subsystems. Under system approach, the overall objectives and performance of the organisation are taken into account and not only the objectives and performance of its different departments or subsystems.

The spiritual father of this school of management was Chester I. Barnard. The systems theory lays emphasis on the interdependency and interrelationships between the various parts of a system.

It stresses communication and decision processes throughout the organisation. It follows an open system approach. The organisation as an open system has an interaction with the environment. It can adjust to the changes in the environment.

7. Contingency Approach:

The latest approach to management is known as ‘contingency’ or ‘situational’ approach. Underlying idea of this approach is that the internal functioning of organisations must be consistent with the demands of technology and external environment and the needs of its members if the organisation is to be effective.

This approach suggests that there is no one best way to handle any management problem. The application of management principles and practices should be contingent upon the existing circumstances. Functional, behavioural, quantitative and systems tools of management should be applied situationally.

There are three major parts of the overall conceptual framework for contingency management – (a) environment; (b) management concepts, principles and techniques; and (c) contingent relationship between the two. The environment variables are independent and management variables (process, quantitative, behavioural and systems tools) are dependent. Every manager has to apply the various approaches of management according to the demands of the situation.

8. Operational Approach:

Koontz and O’Donnell have advocated operational approach to management. This approach recognises that there is a central core of knowledge about managing which exists in management such as line and staff, patterns of departmentation, span of management, managerial appraisal and various managerial control techniques. It draws from other fields of knowledge and adapts within it those parts of these fields which are specially useful for managers.

“The operational approach regards management as a universally applicable body of knowledge that can be brought to bear at all levels of managing and in all types of enterprises. At the same time, this approach recognises that the actual problems managers face and the environments in which they operate may vary between enterprises and levels”. The application of science by a perceptive practitioner must take this into account in finding solutions to management problems.

9. Empirical Approach:

According to this approach, management is the study of the experiences of managers. The knowledge based on experiences of successful managers can be applied by other managers in solving problems in future and in making decisions. Thus, the empirical school is based on analysis of past experience and uses the case method of study and research.

Managers can get an idea of what to do and how by studying management situations of the past. They can develop analytical and problem-solving skills. They can understand and learn to apply effective techniques in comparable situations.

No one can deny the value of analysing past experience to obtain a lesson for the future. But management, unlike law, is not a science based on precedent, and future situations exactly resembling those of the past are unlikely to occur. Indeed, there is a positive danger in relying too much on past experience…….. for the simple reason that a technique found “right” in the past may be far from an exact fit for a somewhat similar situation of the future.

Management Notes

Consequences of Winding up

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The term “consequences of winding up” refers to the legal and practical effects that arise once a company enters into the process of winding up, either voluntarily or through an order by the Tribunal. It signifies the formal beginning of the end of a company’s existence and impacts all aspects of its operations, structure, and responsibilities.

When a company is under winding up, it is no longer permitted to carry out business activities except those necessary for the closure process. The company’s directors lose their executive powers, which are then transferred to a liquidator appointed to manage the liquidation. This person takes over the assets, settles liabilities, and ensures fair distribution of any remaining funds to shareholders.

Another key consequence is that all ongoing or new legal proceedings against the company are paused or require prior approval from the National Company Law Tribunal (NCLT). The company is subject to close regulatory oversight to ensure that creditors, employees, and shareholders are treated equitably.

Once all obligations are resolved, the company is dissolved and removed from the Register of Companies. From that point, the company ceases to be a legal entity, and all corporate existence ends. The consequences ensure an orderly, lawful closure of business.

  • Dissolution of the Company

The most significant consequence of winding up is the dissolution of the company. Once the company has completed the liquidation process and all legal requirements are met, it ceases to exist as a legal entity. The company’s name is struck off the register of companies by the Registrar of Companies (RoC), and it no longer holds any legal rights or obligations.

  • Termination of Business Operations

Winding up means the termination of the company’s business activities. It can no longer carry on any of the operations it previously undertook. The focus shifts from day-to-day business to liquidating assets and resolving outstanding liabilities. All contracts and dealings are brought to an end, although some may continue temporarily for the purpose of liquidation.

  • Liquidation of Assets

During winding up, the company’s assets are sold off, and the proceeds are used to settle its debts. The liquidator is responsible for identifying and valuing the company’s assets, including property, inventory, and receivables. The funds are then distributed to creditors, and any remaining surplus is given to shareholders.

  • Settlement of Liabilities

One of the primary objectives of the winding-up process is to settle the company’s debts. The company must fulfill its obligations to creditors, which may include banks, suppliers, employees, and other stakeholders. If the company’s assets are insufficient to cover its debts, creditors may only receive a partial payment.

  • Impact on Shareholders

Once the liabilities are settled, the remaining funds (if any) are distributed among the shareholders. However, in the case of insolvency, shareholders often do not receive anything. Shareholders risk losing their investments, especially when the company’s liabilities exceed its assets.

  • Disqualification of Directors

The directors of the company may face disqualification from holding future directorships in other companies, particularly if the winding up is due to misconduct, fraud, or negligence. They may also be held personally liable if it is found that they acted improperly during the company’s operations.

  • Termination of Employee Contracts

The winding-up process leads to the termination of employee contracts, unless otherwise determined by the liquidator. Employees may receive severance pay or unpaid wages as part of the liquidation process, but their claims rank lower than those of secured creditors. In some cases, employees may not receive the full amount owed to them if the company lacks sufficient assets.

  • Legal Proceedings Cease

Once winding up begins, legal proceedings against the company are generally halted, except in cases of fraud or other exceptional circumstances. The liquidator takes over the role of defending the company in ongoing legal matters, and any legal actions for debt recovery are channeled through the liquidation process.

Management Notes

Role, Duties and Power of Liquidator

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Liquidator is an individual or entity appointed to wind up the affairs of a company during the liquidation process. Their primary responsibility is to collect and realize the company’s assets, settle its liabilities, and distribute any remaining funds to the shareholders. The role of the liquidator is crucial as they act as an intermediary between the company, its creditors, and shareholders. They have a variety of roles, duties, and powers, each of which is integral to the successful completion of the liquidation process.

Key Roles of a Liquidator:

  • Asset Realization:

Liquidator’s primary role is to take control of the company’s assets, sell or liquidate them, and turn them into cash. This may include real estate, machinery, equipment, inventory, and accounts receivable. The liquidator maximizes asset value to pay off the company’s liabilities.

  • Debt Settlement:

Once the liquidator has converted the company’s assets into cash, they are responsible for using the proceeds to settle the company’s debts. This is done based on the priority of claims, with secured creditors paid first, followed by preferential creditors, unsecured creditors, and lastly shareholders.

  • Distribution to Creditors:

Liquidator is responsible for distributing the proceeds from asset sales to the company’s creditors in accordance with statutory priorities. They ensure that each creditor receives their due share based on the ranking of claims.

  • Final Distribution to Shareholders:

After all debts have been paid, any remaining funds are distributed to the shareholders. This is typically the last step in the liquidation process, and in most cases, shareholders receive little or no funds if the company is insolvent.

  • Reporting and Documentation:

Liquidator is required to keep accurate records of all transactions during the liquidation process. This includes documenting the sale of assets, payments to creditors, and any distributions to shareholders. The liquidator must submit regular reports to creditors, shareholders, and, in some cases, the court or regulatory bodies.

  • Ensuring Legal Compliance:

Liquidator ensures that the liquidation process complies with all relevant laws and regulations. This includes adhering to the rules set out by the Companies Act or other governing legislation, filing necessary reports with regulatory authorities, and ensuring that all legal obligations are met.

  • Conducting Investigations:

Liquidator may be required to investigate the conduct of the company’s directors prior to liquidation, especially in cases of insolvency. This is done to determine if any wrongful trading, fraud, or negligence occurred. If misconduct is found, the liquidator can pursue legal action against the directors on behalf of creditors.

  • Company Dissolution:

After completing the liquidation process, the liquidator is responsible for dissolving the company and striking it off the register of companies. Once this is done, the company ceases to exist as a legal entity.

Key Duties of a Liquidator:

  • Act in Good Faith:

Liquidator must act in good faith, with honesty and transparency throughout the liquidation process. They must always act in the best interest of the creditors and ensure that the liquidation is conducted fairly and without bias.

  • Duty to Secure Assets:

Liquidator has a duty to take immediate control of the company’s assets and safeguard them from further loss or damage. This may involve securing properties, collecting receivables, and preventing unauthorized access to the company’s assets.

  • Duty of Impartiality:

Liquidator must remain impartial and act in the interest of all stakeholders, including creditors, shareholders, and employees. They must not show favoritism towards any party and must handle the liquidation process objectively.

  • Duty to Notify Creditors and Shareholders:

It is the liquidator’s duty to notify creditors and shareholders about the commencement of the liquidation process. The liquidator must provide regular updates on the status of the liquidation and inform them of any key decisions, including asset sales and distributions.

  • Duty to Maximize Returns:

Liquidator has a duty to maximize the value of the company’s assets for the benefit of creditors. They must make decisions that ensure the best possible return for creditors, which could involve selling assets at market value or negotiating settlements with debtors.

  • Duty to Comply with Legal Obligations:

Liquidator must comply with all statutory and legal obligations throughout the liquidation process. This includes filing the necessary reports, ensuring that all transactions are properly recorded, and submitting final accounts to regulatory authorities.

  • Duty to Close the Liquidation:

Liquidator must ensure that the liquidation process is completed efficiently and promptly. Once all assets have been sold, and liabilities settled, the liquidator has a duty to finalize the process, distribute any remaining funds, and dissolve the company.

Key Powers of a Liquidator:

  • Power to Sell Assets:

Liquidator has the power to sell the company’s assets, whether through auction, private sale, or negotiation. This power allows the liquidator to liquidate assets to generate funds for creditor repayment.

  • Power to Sue and Be Sued:

Liquidator has the authority to initiate or defend legal proceedings on behalf of the company. This power enables the liquidator to recover money owed to the company or settle disputes with creditors, debtors, or other parties.

  • Power to Compromise Claims:

Liquidator has the power to negotiate and compromise claims made by or against the company. This power is particularly useful in settling disputes with creditors or debtors without resorting to lengthy legal processes.

  • Power to Investigate Company Affairs:

Liquidator has the power to investigate the affairs of the company and the conduct of its directors. This includes reviewing financial records, auditing company accounts, and identifying any fraudulent or wrongful activities.

  • Power to Call Meetings:

Liquidator can convene meetings of creditors and shareholders when necessary. These meetings are usually called to inform stakeholders about the progress of the liquidation process or to seek their approval for specific actions.

  • Power to Appoint Agents:

Liquidator has the authority to appoint agents, such as accountants, auditors, or legal advisers, to assist in the liquidation process. These professionals help the liquidator with specialized tasks such as asset valuation, forensic accounting, or legal compliance.

  • Power to Settle Liabilities:

Liquidator has the power to settle the company’s liabilities by paying creditors in accordance with the legal priority of claims. This power is critical in ensuring that secured and preferential creditors receive their due share from the liquidation proceeds.

Management Notes

Provisions of CSR mandate

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CSR refers to the idea that companies need to invest in socially and environmentally relevant causes in order to interact and operate with concerned parties having a stake in the company’s work. CSR is termed as “Triple-Bottom-Line-Approach”, which is meant to help the company promote its commercial interests along with the responsibilities it holds towards the society at large. CSR is different and broader from acts of charities like sponsoring or any other philanthropic activity as the latter is meant to be a superficial or surface level action as part of business strategy, but the former tries to go deep and address longstanding socio-economic and environmental issues.

Small or Medium Enterprises (SMEs) should be asked to promote CSR by taking into account their respective fiscal capacity and not over-stretching their rather limited resources. According to the United Nations Industrial Development Organization (UNIDO), CSR based on Triple Bottom Line (TBL) Approach, can help countries in the developing bracket to accelerate their socio-economic growth and help them become more competitive. TBL approach encourages private companies and institutions to align their activities in a socially, economically and environmentally viable way. This will help countries achieve Sustainable Development Goals (SDGs) in the long run. Companies should be encouraged to take up cost-effective CSR programmes that help the society and the environment according to the UNIDO.

Need of CSR

CSR is responsible for generating a lot of goodwill to companies either directly or indirectly. These include:

  • Making employees more loyal and help companies retain them in the long run.
  • Make companies more legitimate and help them in accessing a greater market share.
  • Since companies act ethically, they face less legal hurdles.
  • Bolster the goodwill of companies amongst the general public and help in strengthening their “brand value”.
  • Help in the stabilization of stock markets in both the short and long run
  • Help in limiting state’s involvement in corporate affairs as companies self-regulate and act as most ethical.

CSR helps companies and their components like their shareholders to help in the development of a country’s economy on a macro-level. They motivate companies to cooperate and communicate with each other, their customers and the administrative machinery.

The various advantages granted to various stakeholders are explained below:

  • The Standard of living gets better with the introduction of more amenities.
  • Companies engage in large-scale “capacity building” due to which the society becomes more prosperous and wealthier.
  • Creates a more balanced world and healthier environmental systems.
  • Ecosystems become healthier due to balancing efforts of the corporates.
  • Management of waste is improved.
  • Cleaner and greener environment is created.
  • Advantages to corporates.
  • Creates greater societal acceptance and respect.
  • Helps the company to grow fiscally and makes it more competitive.
  • Helps the company to interact with various stakeholders and helps them understand their needs.
  • Employees and their family feel proud to be associated with a balanced corporate organization.

CSR LAWS IN INDIA

The Companies Act, 2013, a successor to The Companies Act, 1956, made CSR a compulsory act. Under the notification dated 27.2.2014, under Section 135 of the new act, CSR is compulsory for all companies- government or private or otherwise, provided they meet any one or more of the following fiscal criterions:

  • The net worth of the company should be Rupees 500 crores or more
  • The annual turnover of the company should be Rupees 1000 crores or more
  • Annual net profits of the company should be at least Rupees 5 crores.

If the company meets any one of the three fiscal conditions as stated above, they are required to create a committee to enforce its CSR mandate, with at least 3 directors, one of whom should be an independent director.

The responsibilities of the above-mentioned committee will be:

  • Creation of an elaborate policy to implement its legally mandated CSR activities. CSR acts should conform to Schedule VII of the Companies Act, 2013.
  • The committee will allocate and audit the money for different CSR purposes.
  • It will be responsible for overseeing the execution of different CSR activities.
  • The committee will issue an annual report on the various CSR activities undertaken.
  • CSR policies should be placed on the company’s official website, in the form and format approved by the committee.
  • The board of directors is bound to accept and follow any CSR related suggestion put up by the aforementioned committee.
  • The aforementioned committee must regularly assess the net profits earned by the company and ensure that at least 2 percent of the same is spent on CSR related activities.
  • The committee must ensure that local issues and regions are looked into first as part of CSR activities.

Features of CSR Laws

The broad and important features of the CSR laws are as follows:

  • Quantum of money utilized for CSR purposes are to be compulsorily included in the annual profit-loss report released by the company.
  • The CSR rules came into force on 1st April 2014 and will include subsidiary companies, holdings and other foreign corporate organizations which are involved in business activities in India.
  • CSR has been defined in a rather broad manner in Schedule VII of Companies Act, 2013. The definition is exhaustive as it includes those specific CSR activities listed in Schedule VII and other social programmes not listed in schedule VII, whose inclusion as a CSR activity is left to the company’s discretion.
Management Notes

Scope for CSR Activities under schedule VII of the companies Act 2013

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Per Section 135 of the Companies Act (“CSR provisions”), every company with net worth of INR 500 crore, or turnover of INR 1000 crore or more or net profit of 5 crore or more is mandated to spend 2% of average net profit of the preceding three (3) years on corporate social responsibilities/CSR activities.

Since the time CSR provisions were first introduced, the list of CSR activities enumerated under Schedule VII of the Companies Act have been amended by the government from time to time. Most of the items enumerated under Schedule VII since its inception has been framed around activities pertaining to social welfare and charitable activities with key focus on eradicating extreme hunger and poverty, promotion of education, gender equality and empowering women, reducing child mortality, improving maternal health, ensuring environmental sustainability and protection of national heritage amongst others.

For instance, the pre-amended item (ix) under Schedule VII of the Companies Act pertained to contributions and funds that could be made to technology incubators located within academic institutions.

Activities which may be included by companies in their Corporate Social Responsibility Policies relating to:

  • Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.
  • Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.
  • Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.
  • Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.
  • Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts;
  • Measures for the benefit of armed forces veterans, war widows and their dependents;
  • Training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports
  • Contribution to the Prime Minister’s national relief fund or any other fund set up by the central govt. for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women;
  • Contributions or funds provided to technology incubators located within academic institutions which are approved by the central govt.
  • Rural development projects
  • Slum area development.
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