Unit I
Introduction
Concept:
Principles of management are basic truths that explain relationships between two or more sets of variables. They predict as to what will happen the other variable changes. The principles of management are descriptive, predictive and suggestive. They only suggest the way of action.
The principles of management provide guidelines for managers. They warn the managers that if they are not followed, the managers must be aware of its possible outcomes and dangers. Managers must use these principles judiciously in combination with the knowledge of activities and specific conditions under which they are applied.
Management is universal. It is applicable everywhere. However, the mangers cannot function unless there is some base for their decisions or action. In this case the principles of management help them in managing the business.
(1) Some of the management scholars believe that management is entirely dependent on situations. Hence there can be no universally accepted principles of management.
(2) Many studies have however shown that management fundamentals are almost the same throughout the world. Their application may be different due to varying geographical, financial, cultural factors etc.
Features of Principles Management:
1) Basic Guidelines: The principles provide basic guidelines to the managers to manage the subordinates effectively. If a manager follows the well-established principles of management, then he/she would be in a better position to get the work done effectively and efficiently from the subordinates.
2) Applicable to Business and Non-Business Organizations: The principles of management are applicable to business Organizations as well as to non-business Organizations. For instance, the principles of management must be followed by managers in a non-business Organization such as hospitals, educational institutions, charitable trusts, etc.
3) Applicable to all Levels: The principles of management must be followed by managers at all level. This is because; managers at all levels have to deal with their subordinates to get the work done. Therefore, Managers at the top level, and also at the middle and lower level must follow the principles of management in order to get the work done efficiently and effectively from the subordinates.
4) Ensures Smooth Working of an Organization: The principles of management ensure smooth working of an Organization. For instance, the principles of division of work, team spirit, order, etc. enable the Organization to conduct its activities in a systematic and successful manner.
5) Global Application: The principles of management have global application. The principles of management are not restricted to a few countries. Effective managers in all Organizations across all continents of the globe do follow the principles.
6) Time Tested: The principles of management are time tested. The basic principles of management have remained the same for a number of centuries. The kings and religious leaders have followed the principles of management since the day of civilizations have used the principles of management since ages.
7) Situational in Nature: Certain principles of management may be applied depending upon the situation. For instance, a manager may not delegate authority to subordinates, if subordinates have no knowledge of a certain type of work. In such a situation, the manager must first train the subordinates, and then delegate the authority.
8) Intangible: The principles of management are directly visible. The effect of principles can be felt by the results. If the managers follow the principles, then there can be higher results in the Organization in the form of: Reduction of wastages, Optimum use of resources, Motivated and dedicated workforce, Higher efficiency.
Needs & Importance of Principles Management:
1) Higher Efficiency: If managers follow principles of management, then there can be higher efficiency in the Organization. The returns can be higher at lower cost than before. Principles of management lead to better management, which in turn leads to optimum use of resources. Therefore, optimum use resources can generate higher efficiency.
2) Less burden on Superiors: The principles of management can reduce burden on the superior. For instance, the principles of delegation of authority reduce the burden on superiors, as certain authority to make decisions is passed on the subordinates. Therefore, the superiors can concentrate on important and challenging tasks.
3) Application and Dedication: The principles of management lead to application and dedication on the part of the management as well as the employees. For instance, when managers follow the principle of discipline, they set a good example to the subordinates, and therefore, there can be application (use of mind) and dedication throughout the Organization.
4) Proper Direction: The principles of management enable the managers to give proper direction to the employees. For instance, principles of management enable proper division of work in the Organization, which in turn can facilitate proper direction to the employees in respect of the work allotted to the employees. Also, the principles of unity of directions, if followed properly would result in effective direction to the employees.
5) Motivation to Employees: The principles of management motivate the employees to perform effectively and efficiently. For instance, the principles of remuneration make the management to pay the right salaries and other incentives to the employees. Therefore, the employees would put in their best efforts to perform the organizational activities.
6) Team work: The principles of management develop team work in the Organization. For instance, the principles of team spirit make the managers to avoid divide and rule practices in the Organization. The managers also avoid the abuse of written communications. Therefore, there can be excellent team work between the management and the employees, which in turn helps to generate higher results.
7) Smooth flow of Activities: The principles of management facilitate the smooth flow of organizational activities. For instance, the principles of division of work, order, delegation of authority, etc., enable the Organization to undertake the activities in a systematic manner.
8) Corporate Image: The principles of management can enhance the corporate image (goodwill) of the Organization. This is because; the principles enable better performance of the Organization. The better performance in turn generates corporate image of the Organization.
9) Reduced Absenteeism and Labour Turnover: The principles of management help to reduced absenteeism and labour turnover in the Organization. This is because; the principles make the employees motivated and loyal to the Organization.
- Planning – planning is the basic and first function of management. It refers to decision made before hand what is to be done in the future to achieve a desired result. Planning helps in deciding what should be done, how it should be done and who should do it. Planning ensures proper utilization of human and non human resources. Planning helps in avoiding confusion, wastages, risks, etc
According to KOONTZ, “Planning is deciding in advance - what to do, when to do & how to do. It bridges the gap from where we are & where we want to be”.
Planning involves the following steps
- Setting objectives
- Developing premises
- Identifying alternative course of action
- Evaluating alternative course of action
- Selecting an alternative
- Implementing the plan
- Follow up action
2. Organizing – the next step is to bring together all the resources for achievement of organizational goals. A group of people is needed to convert the idea into reality. Organizing is required to streamline the activities of this group of people.
According to Henry Fayol, “To organize a business is to provide it with everything useful or its functioning i.e. raw material, tools, capital and personnel’s”
Organizing involves the following steps
- Identification of activities.
- Classification of grouping of activities.
- Assignment of duties.
- Delegation of authority and creation of responsibility.
- Coordinating authority and responsibility relationships.
3. Staffing – after organizing comes staffing, where personnel are hired for carrying out various activities of the organization. It ensures right person is appointed to the right job. The success of the organization depends on the how every employee performs his job.
According to Kootz & O’Donell, “Managerial function of staffing involves manning the organization structure through proper and effective selection, appraisal & development of personnel to fill the roles designed un the structure”
Staffing involves the following steps
- Estimating the manpower requirement
- Recruitment
- Selection
- Placement and orientation
- Training and development
4. Directing – Directing refers to the task of manager to guide, instruct, supervise and motivate the subordinate to ensure that they work in the right direction to achieve the objectives of the organization.
Directing involves the following steps
- Supervision – it implies monitoring the routine work of the subordinates and guiding them properly.
- Communication – it is the process of transferring information, ideas, and facts from one person to another.
- Leadership – it is the process where the manager influences the subordinates to work in desired direction.
- Motivation - means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Employees are motivated by giving monetary and non monetary incentives.
5. Controlling – controlling refers to the bringing the actual results closure to the desired results. Under this, manager monitors the performance of the subordinates whether the jobs are performed in accordance to the set plans.
According to Koontz & O’Donell “Controlling is the measurement & correction of performance activities of subordinates in order to make sure that the enterprise objectives and plans desired to obtain them as being accomplished”
Controlling involves the following steps
- Setting the performance standards
- Measurement of actual performances
- Comparison of actual with standard
- Analyzing deviations
- Taking corrective actions
6. Coordination – It means integration of the activities, processes and operations of the organization and synchronization of efforts, to ensure that every element of the organization contributes to its success.
7. Motivation – motivation is defined as energizing, directing and sustaining employee efforts. Effective manager has the ability to motivate employee to work and achieve the goals of the organization. It includes inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Employees are motivated by giving monetary and non monetary incentives
8. Communication – it is the process of transferring information, ideas, and facts from one person to another. Effective communication helps the organization to perform the basic functions of management, i.e., Planning, Organizing, Leading and Controlling. Communication helps in delegation, coordination, supervision and organizational development. It helps in building up high morale.
9. Decision making – decision making is important to achieve organization goals and objective within time. All managerial functions are carried out through decision making. Decision making is the process of selecting best out of the available alternative.
Co - ordination - The Essence of Managership: Co - ordination refers to inter - linking of actions. There is a need for co - ordination throughout the organization and at all levels.
Theo Haimann defines co - ordination as, “Co - ordination is the orderly synchronizing of efforts of the subordinates to provide the proper amount, timing and quality of execution so that their efforts lead to the stated objective, namely the common purpose of the enterprise.”
Co - ordination is the essence of management. There is a need for co - ordination in every function of management. Co - ordination refers to inter - linking of actions in the organization. It is a process of integration of the activities of the members of an organization to accomplish organizational goals. There is a need to have proper coordination throughout the organization.
(i) The top-level managers co-ordinate the activities of the middle level managers.
(ii) The middle level managers coordinate the activities of the lower level managers.
(iii) The lower level manager co-ordinate the activities of their sub – ordinates.
Modern economic units, today, cannot afford to take random decisions, as they did in the past. Each economic decision needs to be well-researched and well-balanced. One wrong decision can cause the business unit to suffer greatly. As a result, more scientific and logical methods of handling business, evolved over a period of time. This is nothing other than the ‘science of management’.
MEANING OF MANAGEMENT
In other words, using scientifically proven methods and logical and systematic processes to start and run a business enterprise is called ‘Management’ (or business management).
Management is a philosophy of carrying on business operation such that the economic unit achieves its goals in a cost-effective way.
Management is “the force that runs a business and is responsible for its success or failure”.
Definition: -
According to George Terry, “Management is a distinct process consisting of planning, organizing, actuating and controlling, performed to determine and accomplish stated objectives by the use of human beings and other resources”.
According to Mary Parker Follet, “Management is an art of getting things done through others”.
According to Henry Fayol, “To manage is to forecast, to plan, to organize, to command, to coordinate, and to control”.
1.5.1 F. W. TAYLOR’S SCIENTIFIC MANAGEMENT
F. W. Taylor is known as the Father of scientific Management. Fredrick Winslow Taylor was an American, he worked for American steel. He was an engineer by profession and most of his work was concerned with experiments to find the best method of doing jobs.
Definition:
According to F. W. Taylor, “Scientific Management is an art of knowing exactly what is to be done and the best way of doing it.”
Taylor advocated the ideas of scientific management by publishing in 1911 his famous book entitled. “The principles of scientific management.” According to Taylor management problems should be solved by experiments and scientific techniques rather than thumb rules or trial and error methods. Taylor’s principles were based on the following four areas:
1) Each worker should have a clearly defined daily task.
2) Certain standards must be determined to ensure that the task is easily accomplished.
3) Proper persons should be selected and trained for the jobs.
4) The work should be done efficiently.
Principles of Scientific Management:
1.] Development of Science for each part of men’s job: According to this principle the manager should be The Scientific method to determine every activity by the employee in the organization. For this he should consider the following points.
a) To calculate the time required for each job by observing the employee.
b) To determine how much work can an employee perform in a day.
c) To find out the best way to do a particular job.
d) Instead of using trial and error method for determining the job use systematic way such as data collection, Analysis of data and then drawing conclusions.
2.] Scientific Selection, Training & Development of Worker: According to Taylor selection of employees is an important task before the manager. The Selection procedure should be perfect and systematic. For this purpose, the following points should be considered.
a) The procedures of selection should be scientific. It means the selection should not be based on the judgment of a single person.
b) The physical, mental, technical or other qualities required for the job should be clearly defined. This makes the selection easier.
c) These Employees should be selected on the basis of tests and interview.
d) The employees should be trained from time to time. Training makes employees capable to survive in the job.
e) The manger should provide opportunities for development of worker having better capabilities.
f) The manger should develop each employee in such a way the that employee shows maximum.
3.] Co-operation between Management and Employees: To achieve the objectives or goals there should be proper co-operations between the employees and management. The relations between them should be harmonious. Following points should be noted in this regard:
a) In the organization the emphasis should be given to co-operative between the management and workers and not to individuals.
b) The goals can be achieved effectively only by co-operation.
c) The interest of the management and the workers should be one and the same. They should harmonies.
4.] Division of Responsibility: While dividing the work there should be the division of responsibilities between the managers and the employees. This can be done by the following ways:
a) The nature and role played by different levels of managers and employees should be determined properly.
b) The managers should be given the responsibility of planning whereas the workers or employees should concentrate on the execution.
c) This principle helps the employees to perform their best.
5.] Mental Revolution: This principle focuses on the complete change in the attitude of the management and Employees as regards their relations are concerned. For this change the following points should be taken in to account:
a) The managers should create a suitable working condition for the employees.
b) All the problems should be solved scientifically.
c) The employees should perform their jobs carefully and with devotion.
d) The employees should use the resources carefully. They should not waste the resources.
e) On the other hand, management should provide fair remuneration to the employees and boost up their morale.
6.] Maximum prosperity for Employer and Employees: This aims of scientific management is to give maximum prosperity to the employer and employee. However, it is possible with the help of following points:
a) Each employee should be given proper opportunity to attain this highest efficiency.
b) The employees should give maximum output.
c) There should be optimum utilization of resources.
1.5.2 HENRI FAYOL’S PRINCIPLES OF MANAGEMENT:
In 1916, Henri Fayol provided a list of 14 principles in his book titled “Industrial and General Administration”. Fayol was of the opinion that all managers in all organizations, whether large or small, need to follow the principals or guidelines in managing business affairs. The 14 principles are as follows:
(1) Division of Work: The work in an organization must be divided among individuals and departments. Division of work leads to specialization. It results in accuracy, speed and neatness in work. Specialisation also leads to innovation. However, division of work has its own limits which should not be exceeded.
(2) Authority and Responsibility: Fayol stressed that authority should be equal to responsibility. If authority is in excess of responsibility, then the manager may be tempted to misuse it. On the other hand, if a person is held responsible without giving him adequate authority, then he may feel frustrated. In other words, authority should not be more or less than responsibility.
(3) Discipline: Fayol stressed the need for discipline in an organization. Discipline involves not only obedience to rules and regulations of the organization but more importantly it involves application and dedication on the part of the employees. ‘Fayol wrote that the best means of maintaining discipline is to have disciplined superiors at all levels and judicious use of penalties.
(4) Unity of Command: It means a subordinate should receive orders from only one superior. There should not be multiple bosses. The subordinate should not be made to report to several bosses. Fayol observed that if one subordinate receives orders from more than one superior, then everything will be in disorder. Lack of unity of command is like “Too many cooks spoil the soup”.
(5) Unity of Direction: The activities which have the same objective should be directed by only one manager using one plan. In other words, there should be “one head and one plan”, for activities having the same objective.
(6) Subordination of Individual Interest to General Interest: The interest of one employee or a group of employees should not prevail over that of the entire organization. Every employee or a group should work in the interest of the organization and not for their own self-interest. In other words, the interest of the organization should come first and then individual or group interest.
(7) Remuneration: Wages and salaries should be fair it should be depending on circumstances such as cost of living, ability of the company to pay, prevailing wage rate in the industry etc. Also, the value of the employee must be taken into consideration. Fayol stressed that apart from financial benefits, non-financial benefits be provided such as good working conditions, canteen facilities, recreation facilities etc.
(8) Centralization: Fayol stated that certain matters are to be centralized and others to be decentralized. There is a need to have a proper balance between centralization and decentralization. He advised that extreme centralization or decentralization is to be avoided, especially in large companies.
(9) Scalar Chain (Gang Plank): It refers to the line of command which runs from top level to the lowest level in the organization. Fayol stressed that the subordinates at the lower level should follow the chain of command and not by-pass the chain. He felt that scalar chain needs to be followed, but not at all times. He stressed that the scalar chain can be short - circuited or broken if the situation so demands in the interest of the organization.
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(10) Order: Fayol stated that there should be order in the organization. He stressed that there should be a place for everything, and everything must be in its place. Again, there must be a place for everyone and everyone must be in his place. Thus, this principle requires the orderly organization and placement of men, machines and other resources. Mis - placement would lead to misuse and disorder.
(11) Equity: All members of the organization should be treated equally, depending upon the performance and circumstances. In other words, there must not be any partiality in transfers, promotions etc. Fayol stressed that managers must exercise justice and kindness while dealing with their subordinates.
(12) Stability of Tenure: Fayol pointed out the managers as well as non - managers need time to learn and understand their jobs. If they leave or are removed within a short period of time, the learning time will be wasted. In other words, employees should not be kept temporary for a long period of lime. Employees should be made permanent so that they do not leave the organization. However, incompetent persons need to be removed or replaced and those who perform well must be rewarded.
(13) Initiative: The superior must sacrifice his own and inspire those under him to show initiative. Subordinates should be given freedom to come up with suggestions and ideas. This will not only add to the success of the organization but will also boost the morale of the subordinates.
(14) Esprit De Corps: The superior must encourage esprit de corps (team spirit) among his subordinates. It is the team spirits that results in loyalty, dedication and commitment of the employees. According to Fayol, even small matters help in developing team spirit. The superior should not criticize or discourage subordinates for making mistakes, but encourage them not to make mistakes. Again, verbal communication needs to be used instead of formal, written communication whenever possible. Fayol warned of the consequences of divide and rule and abuse of written communication. It is the team spirit that often brings success to the organization.
1.5.3 NEO CLASSICALAND HUMAN RELATIONS APPROACH – MAYO
Neo-classical theory deals with the human factor. Elton Mayo pioneered the human relations to improve levels of productivity and satisfaction. Elton Mayo is the main contributors of human relations approach.
Some of the major contribution of mayo in developing management thought is as follows:
1. Human Relations Approach
2. Non-Economic Awards
3. Social Man
4. Organisation as a Social System.
Human relations approach – Elton Mayo is called the father of human relations movement. He recognized the importance of human being in management. Human beings are influential and complex input into organization performance. To increase the productivity, management cannot ignore the social and psychological needs of human beings. This approach was originated by series of experiments conducted by Professor Elton Mayo and his associates at the Harvard School of Business at the Western Electric Company’s Hawthorne Works, near Chicago. This experiment is described below
Features of Elton Mayo’s Human Relations Approach:
- A manager must have a basic understanding of human behaviour in all respects, since management is getting things done through and with people
- The managers must study the inter-personal relations among the people at work.
- Good human relations help in achieving Larger production and higher motivation
- The study of management must draw the concepts and principles of various behavioural sciences like Psychology and Sociology.
Non economic rewards – the earlier assumption was more monetary incentive will motivate the workers to work more. He showed that respectful treatment, sense of participation, recognition, social interaction is sometimes important than pure monetary rewards.
Social man – Mayo developed the concept social man. Man is motivated by social needs and obtains identity through relationships with others. He is more responsive to the informal group rather than managerial control and incentives.
Organization as a social system – Mayo said that informal relationship is more effective than formal relationship. Under informal environment people bent to their feelings and seek guidance for action In Mayo’s words, “An organisation is a social system, a system of cliques, grapevines, informal status systems, rituals and a minute of logical, non-logical and illogical behaviour.” People are guided by sentiment and feeling not by facts and logics.
From 1924 to 1933, a famous series of studies of human behaviour in work situations was conducted at the Western Electric Company. Hawthorne experiment led to the development of human relations approach. This experiment showed the importance of social and psychological factors in determining workers, productivity and satisfaction.
Some of the major phases of Hawthorne experiments are as follows:
- Illumination Experiments - illumination refers to amount of light at the workplace, a physical factor. This experiment is undertaken to determine how varying levels of illumination affect the productivity. The assumption is that with higher illumination, productivity will increase. In this experiment a group of people was placed in two different groups. One group was exposed to varying intensities of illumination and it was termed as experimental group. Another group continued to work under constant intensity of illumination known as control group. The researcher found that when illumination increased in the experimental group, both the groups increased production. When illumination decreased, then also both the group continued to increased production. Thus, it was concluded illumination did not have any affect in the productivity. Therefore, another phase of experiments was undertaken.
2. Relay Assembly Test Room Experiments - this experiment determines the effect of changes in various job conditions on group productivity. Under this the researchers set up a relay assembly test room two girls were chosen. These girls were asked to choose for more girls as co-workers. The girls have to assemble number of parts into finished products. Output depends on the speed and continuity with which girls worked. These experiments introduced new element in the work environment to see the outcome of the changes.
Following were the changes and resultant outcomes:
- The incentive system was changed so that the girls get extra pay. The productivity increase as compared to before.
- Rest in the morning and the evening session was increased to 10 min which resulted in increase in the productivity
- Coffee, soup and snacks were provided in the morning and evening and thus the productivity increased
- The girls were allowed to leave at 4.30 p.m. Instead of usual 5.00 p.m. And later at 4.00 p.m. Productivity increased.
Absenteeism decreased, morale increased, and less supervision was required, as each change was introduced. Thus, researcher concluded that factors such as recognition, participation, informal work group, non-directive supervision etc. held the key for higher productivity.
3. Mass Interviewing Programme - during the course of experiment, a large number of people were interviewed to know the employees’ attitudes towards company, supervision, insurance plans, promotion and wages. The result of the interview revealed that the importance of informal relation, social and psychological needs and their impact on the behaviour of the workers.
4. Bank Wiring Observation Room Experiment. - A group of 14 workers and four supervisors was observed with regard to their work behaviour working in the Bank Wiring Observation Room. The observation revealed the informal production norms set by the workers and the existence of informal relations in the group.
The following were the main conclusions drawn by Prof. Mayo on the basis of Hawthorne studies
- Social unit – a factory is also a social unit not only a techno economic unit. Men are social being and social characteristics plays an important role in motivating people. The main cause of changes in productivity at Hawthorne studies was the restructuring of social relationships. The output increases in relay room due to the effectively functioning of social group with a warm relationship with its supervisors.
2. Importance of informal groups – the workers created informal group in order to overcome the shortcomings of formal group. Informal groups have great influence on productivity and attitude of the workers towards the work performance.
3. Leadership – group activities are required to be directed by leaders. The management appoints a formal supervisor may not be able to achieve the desired results. The ‘informal leaders’ acceptable to t the informal groups have more influence on their behaviour pattern because they associate themselves with the groups.
4. Proper communication – for better understanding between management and workers, proper communication system is necessary. The experiment showed that participation of workers in decision making resulted in increased productivity. Management must understand the view point of workers and give them recognition to overcome difficulties.
5. Balance approach - A balanced approach to the whole situation can show better results. The experiments showed that a balanced approach should be taken to the whole situation. All the things should be discussed and decision be taken for improving the whole situation.
The behavioural approach relates to the social and psychological aspects of human behaviour in organization. The behaviour of members affects the structure and functioning of an organisation. Under this approach, the success and failure of an organisation depends on the human behaviour. It has been observed in several experiments that people prefer to be consulted rather than receive order or information.
There are two types of conditioning in behaviourism
- Classical conditioning – in many behavioural programmes classical conditioning techniques is used for reinforcing learning or a desired behavioural pattern. Classical conditioning is a type of learning in which an organism learns to connect or associate stimuli. This theory is developed by Ivan Pavlov.
In his experiment he worked on digestive system of the dogs and came up with interesting idea that changed the history of psychological research.
Experiment
In his laboratory he created a situation where a bell was sounded few seconds before a hungry dog was fed. After several attempt repeating the same process of sounding a bell before feeding, the dog began to salivate simply at the sound of the bell. This process is called classical conditioning by which the dog learned to respond to an artificial stimulus to provoke natural responses.
Major concepts of classical conditioning
- Unconditioned stimulus (UCS) – a stimulus that automatically produces a response without any prior learning. In Pavlov’s experiment food was the UCS
- Unconditioned response (UCR) – an unlearned response that is automatically elicited by the UCS. The dog salvation in response to food was the UCR.
- Neutral stimulus (NS) – not elicit a response. It is known as orienting stimulus.
- Conditioned stimulus (CS) – stimulus bring about a specific response
- Conditioned response (CR) – response occurs by specific stimulus.
The specific model of classical conditioning
- Before conditioning – there must be unconditioned stimulus that automatically produce a specific response.
- During conditioning – the neutral stimulus will first be presented, followed by the unconditioned stimulus
- After conditioning – after conditioning, the previously neutral stimulus will elicit the response previously only elicited by the unconditioned stimulus.
Operant conditioning
Operant conditioning is a form of learning in which the consequences of behaviour produce changes in the probability that the behaviour will occur.
For ex, when Ram made good marks (behaviour) his parents gave him gifts (consequences) so he continued to make good marks (future behaviour).
System
A set of interrelated and interdependent parts arranged in a manner that produces a unified whole. A system basically a combination of parts (subsystem). Each part may have various sub parts. An organisation is system of mutually dependent parts, each of which may include many subsystems.
The view of organizations as open social systems that must interact with their environments in order to survive is known as the systems theory approach.
Organizations depend on their environments for several essential resources: customers who purchase the product or service, suppliers who provide materials, employees who provide labour or management, shareholders who invest, and governments that regulate.
The open system approach was first applied by Katz and Kahn. This approach identifies organizational behaviour by mapping the repeated cycles of input, throughput, output, and feedback between an organization and its external environment. From the environment system receives input either as information or in the form of resources. The systems then process the input internally, which is called throughput, and release outputs into the environment in an attempt to restore equilibrium to the environment. The system then seeks feedback to determine if the output was effective in restoring equilibrium.
The closed system is not influenced by and do not interact with their environment. . Closed systems are insensitive to environmental deviations.
Contingency approach states that there is no best way to manage an organisation. It is also known as situational approach. Scott adds that in contingency theory "the best way to organize depends on the nature of the environment to which the organization relates"
"Contingency theory is guided by the general orienting hypothesis that organizations whose internal features best match the demands of their environments will achieve the best adaptation" The termed was coined by Lawrence and Lorsch in 1967 who argued that the amount of uncertainty and rate of change in an environment impacts the development of internal features in organizations.
Lawrence and Lorsch's classic 1967 found, in a study of ten firms in three different industrial environments (plastics, food, containers). States that the degree of uncertainty in the three ‘task sub-environments’ of the firms (market, techno-economic, and scientific) was strongly related to their internal organizational arrangement. The greater the uncertainty, the greater the need to differentiate the sales, production, and research and development departments within the firm
Management by objectives was outlined by Peter Drucker in his 1954 book, The Practice of Management. Management by objectives (MBO) is a strategic management model that aims to improve the performance of an organization by clearly defining objectives that are agreed to by both management and employees. Its main purpose is to enhance the performance of the organisation. It is the process of defining the goals of the organisation and conveys the goals to the members of the organization with the intention to achieve each objective.
Steps in management by objective process
- Defining organisational goals – setting objectives is the key to the success of the company. Different types of managers are included in setting goals based on an interpretation and evaluation of what the company can and should achieve within a specified time.
2. Defining employees’ objectives - the general objectives, plan, and the strategies to follow are briefed to the employees. The managers can start working with their subordinates on establishing their personal objectives. There will be one on one discussion with the subordinates about which goals they can accomplish within a specific time and with what resources.
3. Continuous monitoring performance and progress - the management by objectives approach is necessary for increasing the effectiveness of managers, it is equally essential for monitoring the performance and progress of each employee in the organization.
4. Performance evaluation – the managers will evaluate the performance in order to achieve the goals of the organisation.
5. Providing feedback - In the management by objectives approach, the most essential step is the continuous feedback on the results and objectives, as it enables the employees to track and make corrections to their actions.
6. Performance appraisal - Performance reviews are a routine review of the success of employees within MBO organizations.
Benefits
- Management by objectives helps employees appreciate their on-the-job roles and responsibilities
- The MBO approach usually results in better teamwork and communication
- Every employee is assigned unique goals and develops a sense of loyalty to the organisation
- Managers help ensure that subordinates’ goals are related to the objectives of the organization.
- It provides the employees with a clear understanding of what is expected of them
