Lecture notes Business Ethics

what are business ethics and lecture notes on business ethics and corporate social responsibility. and how business ethics and corporate governance are related pdf
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Study material CORE COURSE For I SEMESTER B.COM/BBA. (2011 Admission) UNIVERSITY OF CALICUT SCHOOL OF DISTANCE EDUCATION CALICUT UNIVERSITY P.O. MALAPPURAM, KERALA, INDIA - 673 635 306 School of Distance Education MODULE 1 NATURE AND SCOPE OF MANAGEMENT Managing is essential in all organized co-operation, as well as at all levels of organization in an enterprise. It is the function performed not only by corporation President and the army general but also of the shop supervisors and the company commander. Managing is equally important in business as well as non business organizations. During the last few decades, Management as a discipline has attracted the attention of academicians and practitioners to a very great extent. The basic reason behind this phenomenon is the growing importance of management in day to day life of the people. Because of the divergent views, it is very difficult to give a precise definition to the term ―Management‖. It has drawn concepts and Principles from economics, sociology, psychology, anthropology, history, and statistics and so on. The result is that each group of contributors has treated Management differently. Management is invariably defined as the process of ―getting things done through the effort of others‖, getting from where we are to where we want to be with the least expenditure of time, money and efforts, or co-ordinating individual and group efforts, or co-ordinating individual and group efforts towards super-ordinate goals. Harold Koontz defines management in a very simple form where he states that ―Management is the art of getting things done through and with the people in formally organized groups‖. Dalton E. McFarland defines Management as ―Management is defined for conceptual, theoretical and analytical purposes as that process by which Managers create direct, maintain and operate purposive organization through systematic co-ordinated co-operative human effort.‖ To sum up, we can say that management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims. NATURE AND SCOPE OF MANAGEMENT The study and application of Management techniques in managing the affairs of the organization have changed it‘s nature over the period of time. The nature of Management can be described as 1. Multi disciplinary Management integrates the ideas and concepts taken from disciplines such as psychology, sociology, anthropology, economics, ecology, statistics, operation research, history etc. and presents newer concepts which can be put in practice for managing the organizations. Contributions to the field of management can be expected from any discipline which deals with some aspects of human beings. Management Concepts & Business Ethics 5 School of Distance Education 2. Dynamic Nature of Principles Principles are a fundamental truth which establish cause and effect relationship of a function. Based on practical evidences, management has framed certain principles, but these principles are flexible in nature and change with the changes in the environment in which an organization exists. In the field of Management, organization researches are being carried on to establish principles in changing society and no principles can be regarded as a final truth. 3. Relative, Not Absolute Principles Management Principles are relative, not absolute and they should be applied according to the need of the organization. Each organization may be different from others. The difference may exist because of time, place, socio-cultural factors etc. A particular management Principles has different strength in different conditions and therefore Principles of Management should be applied in the light of the prevailing conditions. 4. Management, science or Art Science is based on logical consistency, systematic explanation, critical evaluation and experimental analysis. It is a systematized body of knowledge. Management, being a social science may be called as an inexact or pseudo science. The meaning of art is related with the bringing of desired result through the application of skills. It has to do with applying of knowledge or science or of expertness in performance. Management can be considered as an art and a better manager is one who knows how to apply the knowledge in solving a particular problem. 5. Management as a Profession The word profession may perhaps be defined as an occupation based upon specialized intellectual study and training, the purpose of which is to supply skilled service or advice to others for a definite fee or salary. Profession is an occupation for which specialized knowledge, skills and training are required and the use of these skills is not meant for self satisfaction , but these are used for the larger interests of the society and the success of these skills is measured not in terms of money alone. Management possess certain characteristics of profession, while others are missing. Therefore, it cannot be said to be a profession, though it is emerging as a profession and the move is towards management as a profession. 6. Universality of Management There are arguments in favour and against the concept of universality. The arguments in favour of universality are:- amanagement as a process and the various process of management are universal for all organizations bdistinction between management fundamentals and techniques cdistinction between management fundamentals and practices. Management Concepts & Business Ethics 6 School of Distance Education The arguments against universality are:- amanagement is culture bound bmanagement depends upon the objectives of an enterprise cmanagement depends upon the differences in philosophies of organization EVOLUTION OF MANAGEMENT Creative, dynamic management is a driving force behind the success of any business. In today‘s marketplace, change is rapid and managers are expected to deal with a broad set of issues and needs. How they address those issues is very different today than it was a hundred years ago. Times have changed, labor has changed, and, most importantly, management philosophies have changed. The management philosophies of yesterday are valuable tools for managers to use today. The development of management thought has been evolutionary in nature under the following four parts:- 1.Pre- Scientific Management Era Before 1880 2.Classical Management Era 1880-1930 3.Neo-Classical Management Era1930-1960 4.Modern Management Era 1950 onwards During pre-scientific management era, valuable contributions were made by Churches, Military organizations and writers like Charles Babbage and Robert oven. A school of thought emerged in this era is known as pre-scientific management school. The earliest management philosophy, the classical perspective, emerged in the 19th and early 20th century in response to a problem businesses grapple with today: how to make businesses efficient operating machines. In the factory system, managers had the challenge of coordinating a huge, unskilled labor force, complex production systems, and an expansive manufacturing operation. The classical theorists like F.W.Taylor and Henri Fayol concentrated on organizational structure for the accomplishment of organizational goal. Frederick Winslow Taylor‘s solution was the Scientific Management approach which proposed that productivity could be improved only by a series of precise procedures developed from a scientific observation of a situation. This approach standardized labor and training, employee hiring, and tied compensation to increased productivity. While highly successful, this approach did not take into consideration the diversity of abilities and needs within the workforce. The neo classical writers like Elton Mayo and Chester I. Barnard tried to improve upon the theories of classical writers. They suggested improvements for good human relations in the organization. A crucial shift in management philosophy came in the 1920s with a new emphasis on human behaviors, needs and attitudes in the workplace over the economy and efficiency of Management Concepts & Business Ethics 7 School of Distance Education production. This new way of thinking led the way for the human resource perspective, which saw workers as a resource to be fully utilized, as opposed to tools from which to extract utility. It suggested that beyond the need for worker inclusion and supportive leadership, organizations should design jobs to meet the higher needs of their employees and utilize their full potential. This perspective paved the way for the role that human relations departments play in organizations today. Many of today‘s management perspectives grew out of adaptations of the humanistic perspective. One such perspective is the systems theory, which views an organization as a series of interconnected systems that affect and are effected by each other The modern management thinkers like Robert Schlaifer and Herbert Simon define organization as a system. They also consider the impact of environment on the effectivenss of the organization. The social system school, the decision theory school, the quantitative management school, the systems management school, etc. are the contributions of modern management era. To sum up (A)Early management approaches which are represented by scientific management, the administrative management theory and the human relations movement (B)Modern management approaches which are represented by scientific management, the administrative/management science approach, the systems approach and the contingency approach SCHOOLS OF MANAGEMENT THOUGHT The development of thought on Management dates back to the days when people first attempted to accomplish goals by working together in groups.With the work of Frederic Taylor and Henri Fayol, there was serious thinking and theorizing about managing many years before. In the early 19th century , industrialization and the factory system saw the advent of assembly line operation and costing systems. Management Principles in business were adopted in the latter half of nineteenth century. As the concept of management evolved, various schools of management thought emerged. Thus there came a myriad ways of classifying management theories. One such classification was given by Koontz, who classified the theories into the following six groups: The management process school The empirical school The human behavioral school The social systems school The decision theory school The mathematical school Management Concepts & Business Ethics 8 School of Distance Education The purpose of this article is to identify the various schools of management theory, indicate the source of the differences, and to provide some suggestions for disentangling the management theory jungle. Koontz describes six schools of management theory as follows. 1. The Management Process School The management process school views management as a process of getting things done with people working in organized groups. Fathered by Henri Fayol, this school views management theory as a way of organizing experience for practice, research and teaching. It begins by defining the functions of management. 2. The Empirical School The empirical school views management theory as a study of experience. Koontz mentions Ernest Dale's comparative approach as an example which involves the study and analysis of cases. The general idea is that generalizations can be drawn from cases that can be applied as guides in similar situations. As such it is also known as case approach or management experience approach. According to this school, management is considered as a study of managers in practice. It is a study of success and failures in the application of management techniques by managers in their practice. Theories of management can be developed by studying large number of experiences because some sort of generalizations can be possible. 3. The Human Behavior School The central thesis of the human behaviour school is that since management involves getting thing done with people, management theory must be centered on interpersonal relations. Their theory focuses on the motivation of the individual viewed as a socio-psychological being. This approach can be divided into two groups ; interpersonal behaviors approach and group behaviors approach. Emphasis is put on increasing productivity through motivation and good human relations. 4. The Social System School The members of the social system school of management theory view management as a social system. March and Simon's 1958 book Organizations published by Wiley is used as an example, but Koontz indicates that Chester Barnard is the spiritual father of this school of management. The social system school identifies the nature of the cultural relationships of various social groups and how they are related and integrated. Barnard's work includes a theory of cooperation which underlies the contributions of many others in this school. Herbert Simon, Management Concepts & Business Ethics 9 School of Distance Education and others expanded the concept of social systems to include any cooperative and purposeful group interrelationship or behavior. According to this approach, the organization is essentially a cultural system composed of people who work in co-operation. As such, for achieving organizational goals, a co-operative system of management can be developed only by understanding the behavior of people in groups. 5. The Decision Theory School The decision theory school of management concentrates on the rational approach to decisions where alternative ideas or courses of action are analyzed. The decision is the central focus. This approach looks at the basic problem of management around decision making – selection of suitable course of action out of the given alternatives Major contribution to this approach has come from Simon, March, Cyert, Forrester, etc. The major emphasis of this approach is that decision making is the job of every manager. The manager is a decision maker and the organization is a decision making unit. Therefore the basic problem in managing is to make rational decision. 6. The Mathematical School The mathematical school of management views management as a system of mathematical models and processes. This includes the operations researchers and management scientists. But Koontz points out that in his view mathematics is a tool, not a school. Frederick Taylor and Scientific Management Frederick Winslow Taylor is generally acknowledged as ―the father of scientific management.‖His experiences as an apprentice, a common labourer, a foreman, a master mechanic , and then the Chief Engineer of the Steel company gave Taylor ample opportunity to know at first hand the problems and attitudes of workers and to see the great opportunities for improving the quality of Management. Taylor principal concern throughout most of his life was that of increasing efficiency in production, not only to lower costs and raise profits, but also to make possible increased pay for workers through their higher productivity. Taylor saw productivity as the answer to both higher wages and higher profits, and he believed that the application of Scientific methods, instead of custom and rule of thumb, could yield the productivity without the expenditure of more human energy or effort. Management Concepts & Business Ethics 10 School of Distance Education Taylor‘s famous work entitled the ―The Principles of Scientific Management‖ was published in 1911.Scientific Management is not any efficiency device, in its essence, scientific management involves a complete mental revolution on the part of the working man in any particular establishment or industry – and is equally complete mental revolution on the part of those on the management side. The great mental revolution that takes place in the attitude of two parties is that together they turn their attention towards increasing the surplus than dividing the surplus. The fundamental Principles that Taylor was underlying the Scientific approach of Management may be summarized as follows:- 1. Replacing rules of thumb with science. 2.Obtaining harmony in group action, rather than discord 3.Acheiving co-operation of human beings, rather than chaotic individualism. 4.Working for maximum output rather than restricted output. 5.Developing all workers to the fullest extent possible for their own and their company‘s highest prosperity. Contributions of Henry Fayol Henri Fayol (Istanbul, 29 July 1841–Paris, 19 November 1925) was a French mining engineer, director of mines, who developed independent of the theory of Scientific Management, a general theory of business administration also known as Fayolism. His contributions are generally termed as operational management or administrative management. He was one of the most influential contributors to modern concepts of management. Fayolism is one of the first comprehensive statements of a general theory of management developed by Fayol. He has proposed that there are six primary functions of management and 14 principles of management. The Primary function of management are forecasting planning organizing commanding coordinating and controlling.Fayol‘s contributions were first published in the book form titled as ―Administration Industrielle at Generale‘ in French language , in 1916.Fayol looked at the problems of managing an organisation from top management point of view. He has used the term ‗administration‘ instead of ‗management‘ emphasising that there is unity of science of administrator. For him, administration was common activity and administrative doctrine was universally applicable. Fayol found that the activities of an industrial organisation could be divided into six groups. Management Concepts & Business Ethics 11 School of Distance Education 1. Technical relating to production 2. Commercial buying, selling and exchange 3. Financial search for capital and its optimum use 4. Security protection of property and person 5. Accounting including statistics and 6. Managerial planning, organisation, command, coordination, and control Pointing out that these activities exist in business of every size, Fayol observed that the first five were well known, and consequently he devoted most of his book to analyse the sixth one, that is, managerial activity. Fayol has divided his approach of studying management into three parts;1 managerial qualities and training 2general principles of management and 3 elements of management 1Managerial qualities and training Fayol was the first person to identify the qualities required in a manager. According to him, there are six types of qualities that a manager requires.these are as follows: 1. Physicalhealth, vigour and address 2. Mentalability to understand and learn, judgement, mental vigour, and adaptability 3. Moral energy, firmness, initiative, loyalty, tact, and dignity 4. Educational general acquaintance with matters not belonging exclusively to the function performed 5. Technical peculiar to the function being performed and 6. Experience arising from the work General Principles of Management Fayol has given fourteen principles of management. He has made distinction between management principles and management elements. While management principle is a fundamental truth and establishes cause-effect relationship, management element denotes the function performed by a manager. Henry Fayol strongly felt that managers should be guided by certain principles while giving the management principles, Fayol has emphasised two things. 1. The list of management principles is not exhaustive but suggestive and has discussed only those principles which he followed on most occasions. 2. Principles of management are not rigid but flexible. Fayol evolved 14 general principles of management which are still considered important in management. These are: Management Concepts & Business Ethics 12 School of Distance Education 1. Division of work: This principle suggests that work should be assigned to a person for which he is best suited. Work should be divided up to that stage where it is optimum and just. This division of work can be applied at all levels of the organization. Fayol has advocated division of work to take the advantages of specialization 2. Authority and responsibility: Responsibility means the work assigned to any person, and authority means rights that are given to him to perform that work. It is necessary that adequate authority should be given to discharge the responsibility. Authority includes official authority and personal authority. Official authority is derived from the manager‘s position and personal authority is derived from the personal qualities. In order to discharge the responsibility properly, there should be parity of authority and responsibility. 3. Discipline: This principle emphasizes that subordinates should respect their superiors and obeys their orders. On the other hand, superiors‘ behavior should be such that they make subordinates obedient. If such discipline is observed, there will be no problem of industrial disputes. Discipline is obedience, application, energy, behavior and outward mark of respect shown by employees. Discipline may be of two types; self imposed discipline and command discipline. Self imposed discipline springs from within the individual and is in the nature of spontaneous response to a skilful leader. Command discipline stems from a recognized authority. 4. Unity of command: Subordinates should receive orders from one superior only. If he receives orders from more than one person, he can satisfy none. The more completely an individual has a reporting relationship to a single superior, the less is the problem of conflict in instructions and the greatest is the feeling of personal responsibility for results.Fayol has considered unity of command as an important aspect in managing an organization. 5. Unity of Direction: Each group of activities having the same objective must have one head and one plan. In the absence of this principle, there may be wastage, over expenditure and useless rivalry in the same organisation. Unity of direction is different from Unity of command in the sense that former is concerned with functioning of the organization in respect of its grouping its activities or planning while later is concerned with personnel at all levels in the organization in terms of reporting relationship. 6. Subordination of individual to general interest: While taking any decision, the general interest, i.e., the interest of the organization as a whole should be preferred to individual interests. Individual interest must be subordinate to general interest when there is a conflict between the two. Superiors should set an example in fairness and goodness. Management Concepts & Business Ethics 13 School of Distance Education 7. Remuneration: Management should try to give fair wages to the employees and employees should have the satisfaction of being rightly paid. Remuneration must give satisfaction to both the employers and employees. 8. Centralization: Everything which goes to increase the importance of subordinate‘s role is decentralization and everything which goes to reduce it is centralization. When a single person controls the affairs of an organization, it is said to be complete centralisation.In small concerns, a single manager can supervise the work of the subordinates easily, while in a big organization, control is divided among a number of persons. Thus centralization is more in small concerns and it is less in big concerns. Fayol‘s opinion was that the degree of centralization should be fixed on the basis of capabilities of the persons. 9. Scalar Chain: This is the chain of superiors from the highest to the lowest ranks. The order of this chain should be maintained when some instructions are to be passed on or enquiries are to be made It suggests that each communication going up or coming down must flow through each position in the line of authority. It can be short circuited only in special circumstances when its rigid following would be detrimental to the organization. For this purpose, Fayol has suggested gang Plank which is used to prevent the scalar chain from bogging down action. 10. Order: This is a principle relating to the arrangement of things and people. In material order, there should be a place for everything and everything should be in its place. In social order, there should be right man in the right place. Placement of men and materials should be properly made. Proper space should be made available where materials can be kept safely. Each man should be provided the work for which he is best suited. 11. Equity: This principle requires the managers to be kind and just so that loyalty can be won from the subordinates. Equity is a combination of justice and kindness. The application of equity requires good sense, experience, and good nature for soliciting loyalty and devotion from subordinates. 12. Stability of Tenure: Employees should be selected on the principles of stability of employment. They should be given necessary training so that they become perfect. There should not be frequent termination of employees. Stability of tenure is essential to get an employee accustomed to new work and succeeding in doing it well. Management Concepts & Business Ethics 14 School of Distance Education 13. Initiative: Within the limits of authority and discipline, managers would encourage their employees for taking initiative. Initiative is concerned with thinking out and execution of a plan. Initiative increases zeal and energy on the part of human beings. 14. Esprit de Corps: This is the principle of ‗Union is strength‘ and extension of unity of command for establishing team work. Managers should infuse the spirit of team work in their subordinates. Fayol made it clear that these principles can be applied to most organizations, but these are not absolute principles. Organizations are at liberty to adopt those which suit them or to delete a few according to their needs. MANAGEMENT AS A SCIENCE AND AN ART The controversy with regard to management, as to whether it is a science or art is very old. Specification of exact nature of management as science or art or both is necessary to specify the process of learning of management. Management is not easy. It is not an exact science. In fact, it is seen as an art that people master with experience.. When viewed as an art, management is remarkable, but natural expression of human behavior. It is intuitive, creative and flexible. Managers are leaders and artists who are able to develop unique alternatives and novel ideas about their organizations needs. They are attuned to people and events around them and learn to anticipate the turbulent twists and turns around them. However, artistry in management is neither exact nor precise. Artists interpret experience and express it in forms that can be felt, understood and appreciated by others. Art allows for emotion, subtlety and ambiguity. An artist frames the world so that others can see new possibilities. Science is extraordinary. It is a method of doing things. It is the organized systematic expertise that gathers knowledge about the world and condenses the knowledge into testable laws and principles. When science is done correctly, it can advice us in all of our day to day decisions and actions. The Process of scientific theory construction and confirmation can be viewed as involving the following steps:- 1. The formulation of a problem or complex of problems based on observation. 2. The construction of theory to provide answers to the problem or problems based on inductions from observations 3. The deduction of specific hypothesis from the theory. 4. The recasting of the hypothesis in terms of specific measures and the operations required to test the hypothesis. 5. The devising of the actual situation to test the theorem; and 6. The actual testing in which confirmation does or does not occur Management Concepts & Business Ethics 15 School of Distance Education Management as an art The artistic talents of the manager can be enriched by the usage of scientific tools. The artist in any manager definitely has an edge. His creativity and productivity can be magnified by using the correct scientific methods. The art of management existed long before automation. Without doubt, the science has made the management easier. But focusing only on the science may lead to shift of focus of the entire team and create overheads. Success of managers depends on how effectively they can use the scientific aid to enhance their artistic skills. Medicine engineering, accountancy and the like require skills on the part of the practitioners and can only be acquired through practice. Management is no exception Art is concerned with particle knowledge and personal skill for doing out the desired results. In management, a manager should have practical knowledge & skill. Otherwise his performance will be adversely affected. Management is a way of doing a specific action while doing the function of an art is to achieve the success in a given action. According to George R. Terry, "Art is bringing about of a desired result through application of skill." Thus, art has 5 essential features. i. Practical Knowledge ii. Personal Skill iii. Concrete Result iv. Constructive Skill v. Improvement through practice These 5 functions of art also belong to the management. When a manager uses his management skill then he must have practical knowledge for solving managerial problem. A manager also has power to face the problem to find out the result, which is only possible when he/she has constructive skills. To improve the managerial skill, managerial work should be done on regular basis because regularity and practice make the work effective. So, we can say that manager is an artist since he/she posses the skill of getting the work done through and with the people. Therefore, it can be concluded that manager is an artist and management is bound to be an art. Management as a Science Science refers to an organized and systematic body of knowledge acquired by mankind though observation, experimentation and also based on some universal principles, concepts, and theories. Principles of science are developed through testing & observation. With the help of concept of science it can safely be concluded that management is also a science because it is based upon certain principle and concerned as a systematized body of knowledge, observation, test and experiment is a science, however it is not exact as physics, chemistry, biology, etc. Management Concepts & Business Ethics 16 School of Distance Education Before ·trying to examine whether the management. is a science or not we have to understand the nature of science. Science may be a described as a systematized body of knowledge pertaining to an act of study and contains some general truths explaining past events or phenomena. It is Systematized in the sense that relationships between variables and limit have been ascertained and underlying principal discovered. Three important characteristics of science are. 1. It is a systematized body of knowledge and uses scientific methods for Observation; 2. Its principles are evolved on the basis of continued observation and experiment; and 3. Its principles are exact and have universal applicability without any limitations Judging from these criteria, it may be observed that management too is a systematized body of knowledge and its principles have evolved on the basis of observation not necessarily through the use of scientific methods. However, if we consider science a discipline in the sense of our natural science one is able to experiment by keeping all factors and varying one at a time. In the natural science it is not only possible to repeat the same conditions over and over again, which enables the scientist to experiment and to obtain a proof. This kind of experimentation-cannot be accompanied in the art of management since we are dealing with the human element. This puts a limitation on management as a science. It may be designated as 'inexact' or 'soft science‘ MANAGEMENT PROCESS or SCOPE OF MANAGEMENT Briefly, there are 5 core functions that constitute Scope of Management functions or the process of management. They are Planning, Organizing, Staffing, Directing and Controlling. Management Concepts & Business Ethics 17 School of Distance Education Scope /Process of Management 1. Planning The first management function in scope of management functions that managers must perform is PLANNING. Within this function plan is created to accomplish the mission and vision of the business entity. Under the mission is considered the reason for the establishment, while under the vision is considered where business entity is aiming. The plan must define the time component and to plan necessary resources to fulfill the plan. Accordingly plan of organization is developed together with required personnel; method of leading people is defined and controlling instruments for monitoring the realization of plans. The guiding idea in the making of mentioned items is the realization of the objectives and fulfilling the mission and vision of the business entity. Planning may be broadly defined as a concept of executive action that embodies the skills of anticipating, influencing and controlling the nature and direction of change. Each organization should make a good first step, a good plan, because without it the organization takes a great risk of mistakes and thus compromising their business. 2. Organizing Organizing is the second function manager, where he had previously prepared plan, establish an appropriate organizational structure in business organization. In part, it determines the ranges of management, type of organizational structure, authority in the organization, types and ways of delegating and developing lines of communication. The organization and its subsystems are placed under the plan, which was created as part of functions, ie planning. Organizing basically involves analysis of activities to be performed for achieving organizational objectives, grouping them into various departments and sections so that these can be assigned to various individuals and delegating them appropriate authority so that they can carry their work properly. In performing construction and organization in particular must pay attention to formal and informal lines of communication, because if these lines are not adequately monitored the possibility of collision between them, resulting in delays and / or even failure to achieve the goal. 3. Staffing Staffing, as the next function of management, consists of a selection of appropriate staff for the organization to reach a goal / goals easier and more efficient. According to today‘s experience is well known that it is difficult to financially evaluate, quality and efficient staff. Staff is one of the more valuable, if not the most valuable resource in any successful organization. For this reason, Management Concepts & Business Ethics 18 School of Distance Education good planning of personnel policies, as a function of management, and corresponding execution of that selection of high quality people is becoming increasingly important. The task of this management function is to set rules related to employment and personnel policies. Staffing basically involves matching jobs and individuals. This may require a number of functions like manpower planning, recruitment, selection, training and development, performance appraisal, promotion transfer, etc. The responsibility for staffing rests on all managers at all levels of the organization. It increases as one goes up in the organizational hierarchy. In order to facilitate the effective performance of staffing function, personnel department is created in large organizations. 4. Directing Direction is an important managerial function through which management initiates actions in the organization. It is a function of management which is related with instructing, guiding and inspiring human factor in the organization to achieve organization objectives. It is a function to be performed at every level of management. Direction is a continuous process and it continues throughout the life of the organization It initiates at the top level in the organization and follows to the bottom through the hierarchy. It emphasizes that a subordinate is to be directed by his own superior only. Direction has dual objectives. On the one hand, it aims in getting things done by subordinates and, on the other, to provide superiors opportunities for some more important work which their subordinates cannot do. 5. Controlling Control is any process that guides activity towards some pre-determined goals. It can be applied in any field such as price control, distribution control, pollution control etc.It is an element of management process and is defined as the process of analyzing whether actions are being taken as planned and taking corrective actions to make these to conform to planning. Control process tries to find out deviations between planed performance and actual performance and to suggest corrective actions wherever these are needed. Controlling is a forward looking function as one can control the future happenings and not the past. Every manager has to perform the control function in the organization. It is a continuous process and control system is a co-ordinate integrated system. Performance of various managerial functions in an integrated way ensures fair degree of co-ordination among individuals and departments. Co-ordination is related with the synchronization of efforts which have amount, time and direction attributes. Co-ordination is thus treated as the essence of management. Management Concepts & Business Ethics 19 School of Distance Education MODULE 2 FUNCTIONS OF MANAGEMENT The management process involves performance of certain fundamental functions. One useful classification of managerial function has been given by Luther Gulick, who abbreviating them using the word POSDCORB – Planning, Organizing, Staffing, Directing, Co- Ordinating, Reporting and Budgeting. George R Terry has mentioned four fundamental functions of management, Planning, Organizing, Actuating and Controlling. In short, different scholars in the field of management have their own classification of functions of management. Some scholars add few functions and delete some other functions. The Important functions of management are discussed below: - PLANNING Meaning Planning is the most crucial and foremost function of management. It is defined as the process of setting goals and choosing the means to achieve those goals. A sound planning is inperative for the successful achievement of the goals in the desired direction. It is rightly said ―well plan is half done‖. It involves setting of objectives and goals, designing appropriate strategy and cource of action, and framing plans and procedure etc for execution of the proposed activities under the project. Definitions According to George R Terry, ―Planning is the selecting and relating of facts and making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results.‖ According to Henry Fayol, ―Planning is deciding the best alternatives among others to perform different managerial operations in order to achieve the predetermined goals.‖ Generally speaking, planning is deciding in advance what is to be done, that is, a plan is a projected course of action. Features of Planning 1. Planning is looking in to the future 2. It involves predetermined lines of action 3. Planning is a continuous process 4. Planning integrates various activities of an organization 5. Planning is done for a specific period 6. It discovers the best alternatives out of available alternatives Management Concepts & Business Ethics 20 School of Distance Education 7. Planning is a mental activity 8. Planning is required at all levels of Management 9. It is the primary functions of Management 10. Growth and prosperity of any organization is depends upon planning Objectives of Planning Planning in organization serve to realize the following objectives: 1. To reduces uncertainty 2. To bring co-operation and co-ordination in the organisation 3. To bring economy in operations 4. Helps to anticipate unpredictable contingencies 5. To achieve the pre determined goals 6. To reduce competition. Advantages of Planning Planning helps the organization to achieve its objectives easily. Some of the advantages of planning are given below: 1. It helps the better utilization of resources 2. It helps in achieving the objectives 3. It helps in achieving economy in operations 4. It minimizes future uncertainties 5. It improves competitive strength 6. It helps effective control 7. It helps to give motivation to the employees 8. It develop rationality among management executives 9. It reduces red tapism 10. It encourages innovative thought 11. It improves the ability to cope with changes. 12. It create forward looking attitude in Management 13. It helps in delegation of authority 14. It provide basis for control Planning Process It is not necessary that a particular planning process is applicable for all organization and for all types of plans because the various factors that go into planning process may differ from plan to plan or from one organization to another. This can be presented by using the Management Concepts & Business Ethics 21 School of Distance Education following diagram. Planning Perception of Establishing Identification premises opportunities objectives of Policies Establishing Evaluation of Formulation of Selection of sequence of supporting plans alternatives alternatives activities Perception of Opportunities:- It is the beginning of planning process. ThisProvides an opportunity to set the objectives in real sense. It helps to take the advantage of opportunities and avoid threats. Once the opportunities are perceived, the other steps of planning are undertaken. 1. Establishing the objectives:- This stage deals with the setting of major organisational and unit objectives. The organizational objectives should be specified in all key areas. Once organizational objectives are identified, objectives of lower units can be identified in that context. 2. Establishing planning premises:- It means deciding the condition under which planning activities will be undertaken. Planning premises may be external or internal. The nature of planning premises differs at different levels of planning. 3. Identification of alternatives:- This point says that a particular objectives can be achieved through various actions. Since all alternatives cannot be considered for further analysis, it is necessary for the planner to reduce the number of alternatives. 4. Evaluation of alternatives: - Various alternatives which are considered feasible may be taken for detailed evaluation. It is evaluated on the basis of contribution of each alternative towards the organizational objectives in the light of its resources and constraints. 5. Selection of alternatives: - After the evaluation, the most fit one is selected. At the same time a planner must be ready with alternatives, normally known as contingency plans, which can be implemented in changed situation. 6. Developing supporting plans: - After formulating the basic plan, various plans are devised to support the main plan. These plans are known as derivative plans. 7. Establishing sequence of activities: - After formulating basic and derivative plans, the sequence of activities is determined, so that plans are put in to action. 8. Devising a mechanism of Project monitoring and Evaluation. Management Concepts & Business Ethics 22 School of Distance Education Types of Plans A manager is required to develop a number of plans to achieve the organizational objectives. Three major types of plans can help managers to achieve their organizational goals. 1. Operational Plans 2. Tactical Plans 3. Strategic Plans 1.Operational Plans: It is one that a manager uses to accomplish his or her job responsibilities. In other words, it is the plan used to achieve operational goals. Operational goals are the specific result expected from the departments, work groups and individuals. Operational plans may be single use plans or ongoing plans. a. Single use plans: It is applied to those activities which do not recur or repeat. A special sales programme is an example of single use plan, because , it deals with the who, what, where, how and how much of an activity. It includes: (i)Budget: It is a statement of expected results expressed in quantitative terms for a definite period of time. It is prepared keeping in view the objectives , resources and of the enterprise. It is a useful control device and helpful in co-coordinating the activities. It predicts sources and amounts of income and how much they are used for a specific project. (ii)Programme: It is a sequence of activities to be undertaken for implementing the policies and achieving the objectives of an organization. It tells what is to be done to achieve the goals. b. Continuing or ongoing plans: These are usually made once and retain their value over a period of years while undergoing periodic revision and updates. The following plans are included in this category. (i)Policy: It provides broad guidelines for managers to follow when dealing with important areas of decision making. It is basically a general statement that explains how a manager should attempt to handle routine management responsibilities. They are standing answers to recurring questions. (ii)Procedures: A procedure is a set of step by step direction that explains how activities or task are to be carried out. An established procedure ensures uniformity of action. Most organization has procedures for purchasing supplies and equipments. By defining steps to be taken and the order in which they are to be done, procedures provide a standardized way of responding to a repetitive problem. (iii) Rules: It is an explicit statement that tells an employee, what he or she can and cannot do. Rules are definite and rigid. Rules are ―do‖ and ―don‘t‖ statements put into place to promote the safety of employees and the uniform treatment and behavior of employees. For eg. Rules about absenteeism permit supervisors to make discipline decision rapidly and with a high degree of fairness. Management Concepts & Business Ethics 23

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