Chapter One

Introduction

Concepts and Definitions

TVET Management TVET management is defined as human action, including design, to

facilitate production of useful outcomes from any TVET system. In a system, TVET
management comprising the interlocking functions of formulating TVET policy, and organizing,
planning, controlling and directing TVET system resources to achieve a policy objective. TVET
institution responsiveness to market demand and their ability to operate flexibly and cost
efficiently are strongly determined by their management, financial and academic autonomy, and
benefits of their stakeholders. Effective public governance and management continue to be the
key issues in the TVET sector. Most countries operate longer share of their government budgets.
Although national TVET systems and institutions vary from country to country, their
management practices reflect the conditions in which they operate. However, all governments
want their TVET institution to operate flexibly and cost-efficiently and to respond quickly to
changes in the labor markets. The above concept needs an effective and efficient management of
TVET to cope with the needs of global market.

Technical and Vocational Education is the core of both the individual and society‘s economy.
Through acquisition of skills, individuals could explore his/her environment and harness the
resources within which could serve him/her and the society. But a very important component to
consider in the educational system is leadership. This can be in the form of supervisory and
administrative functions. Technical and Vocational Education and Training (TVET) is a toolbox
in which we ourselves decide what to store, and from which we ourselves decide what to extract,
what to use, and for which purposes. Education is not an end itself. Rather, it is one of the keys
to sustainable development, peace and stability in a country and an indispensable means for
effective participation in the societies and economies of the 21st century. TVET is an effective
and efficient tool for empowerment-for enabling youth and adults alike to escape the trap of
poverty and contribute to their community’s economic and social well-being. Education system
in general and TVET in particular holds the key to poverty alleviation and economic growth and
development in different countries.

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Global experiences have shown that the mere expansion of TVET does not solve the problems of
unemployment and low economic productivity. TVET has to respond to the demand for skills
and competencies of the labor market to create a competent, motivated, and adaptable workforce
capable of driving economic growth and development (H.E Farooq Wardaq, et al). One of the
most important features of TVET is its orientation towards the world of work and the emphasis
of the curriculum on the acquisition of employable skills. TVET delivery systems are therefore
placed to train the skilled and entrepreneurial workforce that needs to create wealth and emerge
out of poverty. TVET can be delivered at different levels of sophistication. This means that this
can response not only to the needs of the different types of industries, but also to the different
training needs of trainees from different socio economic and academic backgrounds, and prepare
them for gainful employment and sustainable livelihoods. A skilled workforce is a basic
requirement for driving the engine of industrial and economic growth, and TVET holds the key
to building this type of technical entrepreneurial workforce in any country including Ethiopia.

The term "TVET" as used by UNESCO (1997) International Standard Classification of

Education definition, which is education and training is to "acquire the practical skills, knowhow
and understanding necessary for employment in a particular occupation, trade or group of
occupations or trades." It is important to note that TVET is not only about knowing how to do
things but also understanding why things are done in a particular way. The conceptual definition
of TVET cuts across educational levels (post-primary, secondary, and even tertiary) and sectors
(formal or school-based, non-formal or enterprise-based, and informal or traditional
apprenticeship). It is therefore important to keep in mind the transversal and longitudinal nature
of TVET as we attempt to highlight the importance of this type of education and training.

Definitions of TVET, TVET management and management in different perspectives

TVET- refers to those aspects of the educational process involving, in addition to general
education, the study of technologies and related sciences, and the acquisition of practical skills,
attitudes, understanding and knowledge relating to occupants in various sectors of economic and
social life (UNESCO, 1999). It is an important device to encourage social inclusiveness in
education, actualize the potential instruction and provide a safety net for the students from the
lower background to become engaged and to be active in ever changing economy.

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It refers to education that prepares people for a specific trades, craft and careers to various levels
from a trade, a craft, technician, or a high professional practitioner position in engineering,
accountancy, nursing, medicine, architecture, pharmacy, law, etc.

It also refers to "deliberate interventions to bring about learning which would make people more
productive (or simply adequately productive) in designated areas of economic activity e.g.,
economic sectors, occupations, specific work tasks (TVETIPEDIA 2016).

TVET in Ethiopia

Federal TVET Agency delegates regional TVET agencies or regional education bureaus to
implement their decisions, procedures and guidelines, including accrediting providers and
issuing Certificates of Competence (CoC). TVETs can prepare their own curricular to meet local
conditions. TVETs aim to provide marketable and entrepreneurial skills and previously provided
one or two year certificates and a three-year diploma for students who had passed grade 10
exams. Now students may enter the TVET system at levels 1 to 4 depending on their grade 10
results. Students entering at level 1 can progress to higher levels if they pass the outcome based
occupational assessment taken at the end of each level. Students who have passed through the
TVET system and worked for two years can apply to a public university. TVETs have expanded
to train students without formal qualifications and these courses can last from a few days to a
year or more.

Occupational standards are the expected outcome of students' training. The national
qualifications framework has five CoC levels which industries accept as effective for
performance at work. CoC levels 1 and 2 provide entry to an industry or occupation. CoC level 3
is a trade level and CoC levels 4 and 5 are for supervisors, middle management or people with
special technical skills. A CoC can be awarded to anyone passing the occupational assessment
for each level, regardless of the way the skill was obtained. This includes both formal training
and informal training at work or in the family. There is prejudice against attending TVETs since
they are regarded as catering for those unable to pass the grade 12 exams and some trades have
traditionally been associated with despised "castes" regarded as polluting. Despite this prejudice,
there has been substantial increase in TVET enrolment in the five years between 2006/07 and
2010/11 although training for males and females remains gender stereotyped.

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Government TVETs are particularly concerned with occupations requiring investment in
machinery and equipment and with increasing provision in remote areas. Workshop provision
varies in quality. Some TVETs have good provision but many others have a shortage of
workshops or old dilapidated workshops that lack safety features, basic sanitary facilities and
essential equipment. Classrooms, stores and libraries may be in poor condition or non-existent.
Instructors may lack competence since, in 2012, only 53% of those assessed met the assessment
criteria. Even when TVETs have machinery and equipment, there are too many students for the
few resources available. Students cannot meet the 70% to 80% requirement for practice and
training remains theory based. Consequently, students have difficulty in meeting the assessment
criteria with only 23% of students being found competent in 2012. Students who do graduate
may still find it hard to get work.

Both public and private TVETs have failed to link education and training to the skills and quality
of skills required by the labor market and has failed to monitor graduates' subsequent
employment. Once TVETs have labor market information, they should provide vocational
guidance to match skills to job opportunities. Private TVETs, accounting for 51% of TVET
provision in 2010/11, are concentrated in urban areas and have largely been concerned with
making a profit rather than their graduates' employment opportunities. They do tend to have
better resources and more practically skilled instructors than public TVETs but they have been
reluctant to allow their workshops to be used for co-operative training and occupational
assessment.

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 Chapter Two

GUIDING PRINCIPLES OF THE NATIONAL TVET SYSTEM IN ETHIOPIA

Introduction

The first part of the second chapter of your module addresses the guiding principles of the
national TVET system in Ethiopia. This part focuses on major thematic areas like demand
orientation, quality and relevance, equal access and equal opportunity, pathways, flexibility,
Life-long learning, Gender sensitivity, Contributing to the fight against HIV/AIDS, Contributing
to environmental protection.

Demand Driven Versus Supply Orientation

Demand-orientation

All TVET in Ethiopia has to respond to the competence needs and qualification requirements in
the labour market. TVET is geared towards enhancing the competitiveness of all economic
sectors through a competent workforce and towards improving people’s employability in the
labour market and with regard to self-employment.

Quality and Relevance

The TVET system strives for the highest quality and relevance of all TVET offers. It will
develop effective means of quality management, will continuously monitor the relevance of
TVET programmes and will provide support and guidance to TVET institutions to achieve
defined quality standards. An important mechanism for this will be the introduction of the
system of occupational standards, assessment and certification.

Equal access and equal opportunity

The TVET system strives for social inclusion by increasing overall access to relevant formal,
non-formal TVET and informal learning opportunities by all target groups, while ensuring
equality of access. The previous neglect of people without relevant schooling, school drop-outs,
and people living in the rural areas, people with special needs, and people who are already in
work will be overcome. TVET will be accessible, irrespective of the level of educational
attainment, gender, ethnic and religious affiliation.

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Pathways

The TVET system will promote vertical and horizontal mobility and progression between
different TVET occupations and different qualification levels, but also between TVET, general
and higher education. TVET should always create the possibility of career progression and
continuation of learning.

Flexibility

To respond to the changing occupational requirements and to accommodate the different demand
of the various target groups, the TVET system will allow and encourage flexibility and dynamic
development of the TVET offers. This applies to the organisation and delivery of TVET
programmes as well as to the way in which people can pursue their individual occupational
careers.

Life-long learning

The TVET system will provide life-long learning opportunities (including initial and further
TVET) to enable the workforce to keep apace with the rapidly changing work environments
brought about by technological progress and development in the organisation of work. Life-long
learning also implies that people can continuously enhance their recognised qualifications.

Gender sensitivity

TVET will be gender-sensitive. All TVET opportunities will be equally accessible to female.
TVET institutions will have to develop gender sensitive policies in order to ensure that they are
not discriminated against through content nor organisation of TVET programmes and to
effectively prevent harassment of female trainees and staff members.

Contributing to the fight against HIV/AIDS

TVET will contribute to the fight against the spread of HIV/AIDS in Ethiopia by incorporating
awareness creation and training about preventive measures in all its programmes. Furthermore,
TVET institutions will develop policies to ensure that HIV positive trainees and staff members
are not discriminated against.9. Contributing to environmental protection TVET will help create
environmental awareness in Ethiopia and will educate Ethiopians about sustainable uses of
scarce natural resources.

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 CONCEPTUAL PRINCIPLES OF THE TVET SYSTEM

TVET as Centers of Technology Capability, Accumulation and Transfer

a. Making TVET Institutions Centres of Technology Capability, Accumulation &

Transfer
TVET institutions are mainly expected to replicate new and selected technologies and
transfer the same to the relevant industry in order to increase the competitiveness of the
sector according to international standards. It's also needed that these technologies focus
on creative capacity building and greatly contribute to the economic development of the
country in a bid to mitigate regional problems. Their benefit will be significant since the
trainees who pass through this process are endowed with outstanding and international
workforce ethics.
b. Aiming at a Comprehensive and Integrated TVET System
The TVET system aims to provide more TVET opportunities to a wider range of different
target groups than previously. In addition to school leavers, the TVET system will
therefore address:
 School drop-outs;
 People without formal education, including illiterate people;
 Entrepreneurs and employees in both formal and informal enterprises who require
skills upgrading and access to recognised qualifications;
 Farmers and their families;
 Unemployed people who need initial TVET or retraining to support their re-
integration into the labour market;
 People with special constraints to properly engage in economic participation, such as
single mothers, people with disabilities, people from marginalized ethnic groups and
other groups that have been marginalised in the labour market.
c. Stakeholders’ Involvement
TVET operates at the interface of different sectors of society, notably the education
sector, the labour market, industry, MSE sectors, agriculture and rural development, and
public administration. In order to serve and relate to all these sectors through high quality

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 and demandresponsive instruments, the TVET system must be steered and implemented
with the involvement of a wide stakeholder group. Different stakeholders will each
contribute their own expertise, experience and capacities, in order that their combined
efforts improve the relevance and effectiveness of the TVET system.
d. Public Private Partnership
International experiences show that successful TVET systems are built on strong and
welldefined partnerships between government and the non-government sector. Both
public and non-public actors are currently involved in TVET. This public-private
partnership needs to be further strengthened and roles therein defined.
e. Outcome-Based Approach
The goal of the TVET system - as formulated in its vision and objectives - is to create a
competent and adaptable workforce (both male and female) to be the backbone of
economic and social development and to enable an increasing number of citizens to find
gainful employment and self-employment in the different economic sectors of the
country and assistance to TVET providers.
f. Decentralization
The new TVET system will aim at progressive decentralization; the responsibility for all
functions will be gradually devolved to lower levels in the system in order to increase
efficiency of services and responsiveness to the needs of the actual target groups.
g. Efficiency in the TVET System
To make best use of scarce resources, all necessary efforts will be undertaken to increase
efficiency in the TVET system. This applies to the management of TVET at all levels, the
method of TVET delivery and the possibilities of recognizing previous learning
achievements.

CHARACTERISTICS OF TVET INSTITUTIONS

The TVET Institution

The Federal Government of Ethiopia and its people have great faith in education to improve their
economy, so institutions were established, particularly Technical and Vocational Education
Training (TVET) institutions in different regions of the country to raise the quality of the
Ethiopian workforce and a push towards creating a socio- economic acceleration in the

8
countryside. As part of how TVET institution was developed, it is best to understand the general
views and concepts of an institution - how it was organized or developed TVET Institution exists
as an organization within a defined set of formal and informal beliefs, values, roles, expectations
and behaviors, and, it is highly structured within the formal and informal beliefs, values, roles,
expectations and behaviors, and the members share a set of objectives.

Main characteristics of TVETI

In order to achieve the vision and the strategic goals of the TVET, the system should have the
following characteristics:

Unified System: In terms of accreditation, certification, curricula, training programs, levels,

classification, testing, and qualification profile.

Relevance: Market relevancy, in terms of responding to the labor market needs, and future
economic trends, i.e. a system that is demand driven.

Effective& Efficient: The effectiveness and efficiency of the system is based on comprehensive
and continuous development of human resources and curricula as well as good management and
use of resources at TVET institutions.

Flexible & Crisis resistance: The system is proactive and flexible, in order to be able to operate
under crises, able to use multiple and alternative approaches to take advantage of variety of
options. The system is flexible in terms of its programs, curricula, training approach, and
management structures, to adapt quickly to changes.

Ensures equity and access: The system will provide equal opportunity and access for all groups
despite of gender, age, religion with special care to marginalized groups

LLL-oriented: Lifelong learning is vital for competitive advantage and economic success for
nations, regions, organizations and individuals, the TVET system acknowledges and accumulates
values of formal, non-formal and informal gained competences and emphasizing a culture within
the society where all citizens become active lifelong trainees.

Permeability: The TVET system will promote vertical and horizontal articulation, mobility and
progression between different TVET vocations/occupations and different qualification levels,

9
and also between TVET and general and higher education. TVET should always create the
possibility of career progression and continuation of learning.

Transparency: Transparency is ensured in all levels and components of system.

Holistic: Human is in the core of the training. The TVET system holds an obligation to assist in
the preparation of its participants towards life in a democratic society, and towards the
contribution to the economy of that society.

Attractive: As many among those who stay in schools are filtered out from general education
into low-quality, second-choice vocational streams. Vocational streams are synonym to academic
failure and are regarded as a second-choice alternative by parents and students. Large numbers of
students are tracked out from general education, pushed out more exactly, and for which little
opportunities for lifelong learning are available. The new TVET system in consequence is
attractive to all groups and fits their interests.

CURRENT TRENDS AND CHALLENGES IN TVET

Current Trends and Challenges In most countries, TVET are considered essential to economic
development. As a result of growing awareness of the need to adapt TVET to meet the rapidly
changing national, regional and global economic requirements, TVET is in a period of transition
and reorientation toward providing students with certain basic skills and knowledge required and
supplying them with the tools needed to increase/update their knowledge through lifelong
education. Throughout the region, realization of the crucial role of TVET in development of new
skills and new economic structures and in regionalization and internationalization is increasing,
and new ways of developing and improving the status of TVET are being sought. The following
strategies, which were identified through a study of current issues in the countries, have been
recommended as ways of improving TVET and thereby accelerating technological change are
the following:

a. prepare for an information society

b. align curricula with the needs of business/industry
c. develop articulation mechanism
d. recognize prior learning
e. develop a system of broad-based work force training

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 f. emphasize TVET program quality
g. recognize the key role of teachers in providing high quality TVET programs

Challenges and Issues in TVET

The challenge is to link higher education with the constantly changing needs and opportunities of
contemporary society and economy, and this is seen as an increasingly important issue by
universities and politicians (European Commission 1995, p. 21; Neave and van Vught, 1991).
Creating a fruitful and dynamic partnership between higher education and society at large has
become one of the basic missions (together with teaching and research) of universities (e.g.
Dewar, 2005; Griffith University, 2002). At the level of structural change the following three
trends can be seen as important in that respect:

1. The distinction between top universities (highly selective admission) and mass
universities (open to all school leavers) might influence the scope of their responses to
the trends
2. Improvement of the reputation of TVET through developing it within the university
sector is seen as one way of establishing close relationships between higher and
vocational education. Higher vocational institutes in PR China are an example of this
approach. They have been developed as an independent branch of the university sector.
3. A common qualification framework for vocational and higher education that reflects the
interrelationships between the structure of educational qualifications and the occupational
structure of the labor force, and between education and social change, could provide
possible synergies between higher education and vocational education.

Some trends that are related to the challenge of economy are:

 Development of interdisciplinary links across traditional academic disciplines, blurring

the boundaries and developing new approaches towards knowledge production
 Development of employability skills required for all sectors of the economy can be seen
as a priority for both vocational and higher education. In Germany, for example, it is
quite common that graduates with a bachelor’s degree undergo an apprenticeship in order
to improve their employment opportunities (Rauner, 2005).

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  Life-long learning as a way of responding to rapid knowledge development and market
change is considered as essential for both sectors. In terms of human-oriented approaches
and personal development, life-based learning can contribute towards the development of
policies and practices. This learning should be personalized in the following ways: self-
directed; context based; work/life integration; holistic; learner as designer; adaptable and
sustainable (Staron et al., 2006).

A number of concerns have been expressed by both TVET and higher education practitioners:

1. Change in the nature of societies, which relates to global economic competition and a request
for graduates relevant to the economies.

2. Quality and standards. The distinction should be considered between short and medium-term
orientation in qualification demands that are met through vocational training, and long-term
educational profiles for university qualifications. Thus, the goal of tertiary education must be
sustainable and provide long-term usable professional education (Schulte, 2005).

3. Vocational qualifications should provide access to university education. University education

for vocation education teachers is required which should include occupational domains and
pedagogical qualifications.

4. Vocationalization of higher education will be different in different contexts.

Different ways of implementing vocationalization:

1. At the higher education level, programmes have been redesigned to incorporate a more
vocationally-oriented content, such as workplace problems being used as learning resources,
professional placements (internships, work placement schemes, innovative provision of work-
based learning/work experience through vocationalization.
2. Cross-faculty courses and interdisciplinary research centers have been established by the
universities to overcome a segmented approach to knowledge development and acquisition.
3. Higher education institutions are marketing new programmes more oriented to market needs,
such as programmes related to business, commerce and the human professions.
4. Employability-enhancing activities that are not related to content teaching, such as enhanced
support (usually via career services) for undergraduates and graduates in their search for

12
 work; enabled reflection on and recording of experience, attribute development and
achievement, alongside academic abilities; the appointment of specialist staff such as skills
advisors and pathway officers.
5. Embedded attribute development within programmes of study to make skills explicit, or to
accommodate employer inputs by securing involvement of the industry representatives in
higher education policy-making, strategies and ,
6. Postgraduate, on-the-job training and experience both as a compulsory part of educational
programmes (for instance, for the medical professions) or as a non-compulsory part of the
programme required by professional associations as a prerequisite for joining the profession
7. Recognition of prior learning for both vocational and higher education programmes
particularly as part of an increasing stress on the importance of life-long learning;
arrangements for articulation, provision of enabling or bridging courses for those lacking
knowledge and skills for the higher education programmes.

ISSUES AND CHALLENGES IN DEVELOPED AND UNDERDEVELOPED

COUNTRIES

Issues and Challenges in Developed and Underdeveloped Countries

1. Curriculum and multiplicity of provision, certification, standard Curriculum is the pillar of

TVET training. Various initiatives have been implemented which includes the regular
conduct of tracer and employer studies, curriculum reviews and the setting up of the
Industrial Advisory that comprises representatives from major industrial sectors, professional
associations and key government agencies to ensure that the syllabus is parallel with what the
industry required. TVET provision in Malaysia is undertaken by different ministries,
agencies and organizations, both public and private, with a multiplicity of certification,
standards and curricula. This situation has implications for the standardization of training and
qualification, cost-effectiveness, quality assurance, recognition of prior learning, and the
further education of TVET graduates.
2. Mind-set change and poor perception & recognition of TVET TVET has always been
regarded as lower to academic education. The perception by the public and by parents
especially, is that TVET programs are terminal and are not providing enough vertical
mobility for the graduates to progress. TVET system and policy makers must play a very

13
 crucial role to change the mindset. There is also impression that TVET caters for school
drop-outs, rather than as an important strategy to train skilled workers. TVET-based
qualifications and careers are still poorly perceived and recognized in the workplace. Many
employers do not recognize the certification due to the highly fragmented landscape, with
many ministries and agencies issuing certifications. It is supported by Zain [11] where she
stated that too much attention and resources is given to ‘academic’ rather than vocational
education. The same goes to the recognition and career.
3. Shortage of technical teaching staff Currently, there is a shortage of qualified technical and
vocational trainers. Most of the staffs who are recruited directly after university and college
studies are assessed based on their academic qualifications without any importance given to
their skills. On the other hand, qualified personnel with work experiences are not willing to
become teachers due to the unattractive salary scheme.
4. TVET lecturers’ scheme of service One of the strategies followed in order to retain and
attract experienced professionals is to provide an attractive scheme of service that focuses on
career development. It may cover all TVET providers in any sectors. It should allow
flexibility in terms of prerequisites for acceptance into the service, as experienced
professionals from the industry can be attracted into the teaching profession with their
previous work experience taken into consideration when locating them at the point of
National Conference on Engineering Technology 2013 (NCET 2013)
5. High cost of technical education. The mounting high cost of technical training has prompted
the TVET institutions to consider various measures to increase the efficiency of the technical
education system. The budget to set up a course is so high and should consider the
maintenance for the equipment. It’s not only covers the machine but also the learning
material that is used one-off.
6. Employability of graduates Employability is one of the most arise issue from the public. The
Ministry of Higher Education for example has set a target that at least 75% of the graduates
will be employed in relevant fields within six months after graduation. Various initiatives
have been implemented with a view to increasing the employability amongst graduates.
Graduates feedbacks are important to determine the level of employability for TVET
graduates. Participation and collaboration with industry will increase the level of
employability.

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7. Flexible access to TVET throughout life Majority of those who could benefit from it do not
usually have the access due to the high operation cost. There is a need to find alternative
methods of delivery of instruction for TVET. Teaching institutions should be reoriented to
use updated technology, flexible teaching and learning materials. Some of the application
with the development and use of appropriate technologies for instruction are
on-line/electronic services and training materials, learning packages, e-book, the intranet and
internet.
8. Enculturation of life-long learning It is imperative that all the stake holders work together to
develop the needed legislation and policies, establish institutional structures and re-design
curricula to ensure that TVET caters to the varied needs of all members of society to enter
and re-enter the world of work. Continuous TVET opportunities should be provided for
achieving both personal and social development. The graduates can further their study in any
of the public and private institutions such as Technical University, open universities,
polytechnics, community colleges and private colleges. However, having these channels
alone is not sufficient for human capital needs, a mindset change is still of paramount
importance for a more persistent life-long learning culture to be realized.
9. Weak monitoring & evaluation and Demand-Supply Mismatch The current TVET programs
in other countries are largely supply-driven and still lack of matching training to available
jobs. Training institutions also seldom track the employment destination of their graduates.
Consequently, the institutions have not taken advantage feedback from past trainees on the
quality of the training implementation of outcome evaluation and tracer studies that can
improve the market responsiveness of training programs is still lacking. Zain also reported
that there is demand-supply mismatch, which in part contribute to unfilled employment
vacancies in the industry. There is obviously a need to improve links between schools and the
industry so as to minimize this mismatch. Response from the private sector to industrial
training is lukewarm, with private (vocational) training institutions struggling to attract
financial support and students.
10. Lacking in efficiency and quality In general, TVET provision is still largely concentrated
on lower-level skills qualification whereby more than 70 % of graduates are at Skills
certificates, Levels 1, 2 and 3. Although TVET Institutions are running at high operating
levels, many are not yet operating at full capacity. Promotion should be highlighted and the

15
 training focus should be more concentrated on higher-level. National Conference on
Engineering Technology 2013 (NCET 2013)
11. TVET providers. Non-Homogeneous Participation of Ethnic Groups Another issue faced
by TVET is that of comparative participation of all ethnic groups in TVET. Being of multi-
ethnic composition, it is imperative that every ethnic group is fairly represented in this
system.
12. Attrition and Completion issue Attrition rates and completion rates of students is
becoming statistical of vital concern. Although the numbers are not significantly large, but
still need to be considered. There are students that fail to graduate in time given as they could
complete it exactly within the time frame. This indicates the need to improve completion
rates. The issue of quality and the supervisory system should be taken into account.

The socio-economic environment and the contextual framework in which TVET delivery
currently operate on the continent may be described by the following groups of indicators:

i) Weak national economies characterized by low job growth, high population growth,
and a growing labor force:
ii) Shrinking or stagnant wage employment opportunities especially in the industrial
sector
iii) Huge numbers of poorly educated, unskilled and unemployed youth
iv) Educated but unemployed college and university graduates
v) Uncoordinated, unregulated and fragmented TVET delivery systems
vi) Low quality
vii) Geographical, gender and economic inequities
viii) Poor public perception ix) Weak monitoring and evaluation
ix) Inadequate financing xi) Public versus private provision of TVET
x) Threat of HIV/AIDS

STRATEGIC OBJECTIVES IN TVET FRAMEWORK

Strategic Objectives

i) Enhancing the quality of training

ii) ii) Assuring relevance and employability of trainees

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 iii) iii) Improving coherence and management of training provision
iv) iv) Flexibility of training and life-long learning
v) v) Status and attractiveness of TVET
vi) vii.) The impact and challenge of globalization and
vii) vii.) Key policy issues

CHAPTER THREE

FUNDAMENTALS OF MANAGEMENT

Management – is a set of activities (including planning and decision making, organizing,

leading, and controlling) directed at an organization’s resources (human, financial, physical, and
information) with the aim of achieving organizational goals in an efficient and effective manner.

 It is the process of setting and achieving organizational objectives (goal) by using the five
basic managerial functions by acquiring and utilizing human, financial and other
resources.
 It is the process of attaining organizational goals in an effective and efficient manner
through the five basic managerial functions such as planning, organizing, staffing,
leading and controlling.
 Management is the process of working with and through others.

Organizational Performance

Measures how efficiently and effectively managers use resources to satisfy customers and
achieve goals. Efficiency: A measure of how well resources are used to achieve a goal. It is
getting high output or the same amount of output at the same amount of input or lower input,
respectively.

 Maximizing the organization’s productivity by wise utilization of scarce

resources.
 It is spending less & acquiring more by minimizing cost
 it is concerned with cost reduction
 it is doing things right

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  Usually, managers must try to minimize the input of resources to attain the same
goal. Effectiveness: A measure of the appropriateness of the goals chosen (are
these the right goals?), and the degree to which they are achieved.
 it is providing the right product for the right person or customer
 it is doing the right things at reasonable cost (efficiently)

Determine the success of the organization because it is doing the right things

 Organizations are more effective when managers choose the correct goals and then achieve
them. 3.2 Who are managers?

 Manager - is someone who plans, makes decisions, organizes, leads, and controls human,
financial, physical, and information resources.

 Managers are those who are responsible for achieving the organizational goals in an
effective and efficient manner through proper scarce resource utilization

 A good manager is the one who feel sense of responsibility, belongingness, Who take
initiative (innovator) for new things or discovery?

 Who effectively & efficiently brings factors of production together

Significance of management

 Management is significant because the coordination of resources is impossible without

management
 It affects the establishment and re-establishment of many economic social and political goals
of the country
 The success or failure of the organization mostly depends on the management system
 Because it is the wise utilization of scarce resources for unlimited human wants. To
accomplish objectives, while in actuality the members might be working in opposite
direction, to prevent this from occurring and to ensure coordination of work to accomplish
the objectives, management is needed. As 'a brain' of an organization therefore, management
gives direction for all other parts of organization.
Is Management an art, a science, a profession?

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Basically management is an art, a science as well as a profession. Management is an art as it
requires the use of behavioral and judgmental skills that cannot quantified the way scientific
information can be. Issues can be resolved using instinct and experience. It requires use of:
Conceptual, communication, interpersonal, and time-management skills. Management is science,
in that it requires the use of technical, diagnostic, decision-making skills, logics and analyses.
And in addition it uses computers and quantitative formulas to problems on hand. Problems can
be solved using systematic methods.

To say management is a profession it must fulfill the following criteria:

 Specialized knowledge,

 Competent application,

 Community application,

 Social responsibility, and

 Self-control.

Levels of management and types of manager

The extent to which managers perform the functions of management - planning, organizing,
directing, and controlling - varies by level in the management hierarchy. The term supervisor
could be applied at all management levels of the organization to those who direct the work of
others. In common usage, however, the title tends to be used only in the first level of the
management hierarchy. If an organization were divided into top, middle, and lower managerial
levels, the term generally applies to the lower level.

The levels can be expressed by using pyramid shaped arrangement of an organizational

management structure.

1. Top level management (top Managers): Top level management consists of highest rank
managers of an organization with different titles such as CEO, president, vice president; Top
managers are responsible for managing the entire organization or major parts of it. They develop
and define the organization's purpose, objectives, strategies and long term plans. Besides this
they deal with external bodies such as government. And Responsible for the performance of all

19
departments and have cross-departmental responsibility. They establish organizational goals and
monitor middle managers.

2. Middle level management (middle Managers): Middle level management consists of

managers below rank of vice president but above supervisory managers. Supervise firstline
managers and they are also responsible to find the best way to use departmental resources to
achieve goals. Most common example is branch managers.

The major functions of middle level management are:

 Acting as intermediary between top management and operating level management,

 Translating long term plans to top management into medium range plans,

 Developing specific targets in their areas of responsibility,

 Coordinating inputs, productivity and outputs of operating level managements, and

 Achieving objectives set by top level management.

3. Operating (first level) management (first line Managers): These are types of managers
whose subordinates are non management workers or operating employees. They are responsible
for day-to-day operation. They supervise the people performing the activities required to make
the good or service the typical titles in this level are: office manager, crew leaders' supervisor etc

The major functions of operating level management are:

 Planning daily and weekly activities and accomplishment based on the monthly, quarterly, and
yearly plans,

 Assigning operating employees to specific tasks, and

 Issuing instructions at the work place, following up, motivating and evaluating workers and
reporting to their superiors. To sum up, managers are whose major functions emphasize directing
and controlling the work of employees in order to achieve the team goals. They are the only level
of management managing non-managers. Thus, most of the supervisor's time is allocated to the
functions of directing and controlling. In contrast, top managers spend most of their time on the
functions of planning and organizing. The top manager determines the mission and sets the goals

20
for the organization. His or her primary function is long-range planning. Top management is
accountable for the overall management of the organization. Middle management implements
top management goals. Supervisors direct the actual work of the organization at the operating
level.

Managerial roles and skills

Managerial roles:

Role is an organized set of behaviors.

There are about five roles identified that managers undertake to accomplish management
functions (planning, organizing, leading, and controlling). These five roles are classified in to
three major categories: Interpersonal role; Informational role; and Decisional role. To meet the
many demands of performing their functions, managers assume multiple roles. A role is an
organized set of behaviors.

Henry Mintzberg has identified ten roles common to the work of all managers. The ten roles are
divided into three groups: interpersonal, informational, and decisional. The informational roles
link all managerial work together. The interpersonal roles ensure that information is provided.
The decisional roles make significant use of the information. The performance of managerial
roles and the requirements of these roles can be played at different times by the same manager
and to different degrees depending on the level and function of management. The ten roles are
described individually, but they form an integrated whole. I.

Interpersonal role

When managers play interpersonal roles, they use their human and communication management
skills as they perform the necessary management function.

It includes:

 Figure head role

 Leader role

 Liaison role

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Figure head role: Managers represent the organization or department in ceremonial and
symbolic activities. In the figurehead role, the manager represents the organization in all matters
of formality. The top level manager represents the company legally and socially to those outside
of the organization. It is the most basic and the simplest of all managerial roles.

Leader role: Managers are assumed as leaders when they influence, initiate and motivate the
subordinates so that the subordinates achieve organizational goals. This is at the heart of the
manager-subordinate relationship and managerial power and pervasive where subordinates are
involved even where perhaps the relationship is not directly interpersonal.

The manager:

 Defines the structures and environments within which sub-ordinates work and are motivated.

 Oversees and questions activities to keep them alert.

 Selects, encourages, promotes and disciplines.

 Tries to balance subordinate and organizational needs for efficient operations.

Liaison role: the liaison role refers to dealing with people outside the organization, such as
clients, government officials, customers, and suppliers, it also refers to dealing with mangers in
other departments, staff specialists, and other departments' employees in liaison role manager
seeks support from people who can affect the department's and organization's success.

II. Informational role

When managers play informational roles they build networks of contacts for sharing information
with others.

It includes:

 Monitor role

 Disseminator role

 Spokesperson role

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Monitor role Managers play monitor role when they read and talk to others to receive
information. It involves seeking out, receiving and screening information. It also involves
scanning of the environment.

Disseminator role: In this role managers share information with subordinates and other members
of the organization that is managers play disseminator role when they send information to others
within the organization. - The manager brings external views into his/her organization and
facilitates internal information flows between subordinates (factual or value-based).

Spokesperson role: managers play spokesperson role when they provide information to people
outside the organization. - The manager informs and lobbies others (external to his/her own
organizational group). Key influencers and stakeholders are kept informed of performances,
plans & policies. For outsiders, the manager is an expert in the field in which his/her
organization operates.

Decisional role

When managers play decisional role they use their conceptual and decision-making management
skills.

It consists;

 Entrepreneur role

 Disturbance handler role

 Resource allocator role

 Negotiator role.

Entrepreneur Role: Is the role of managers which focuses on innovation and initiation of
improvements by managers. It may include such activities as initiating new projects, launch
survey, test new markets etc.

Disturbance handler role: managers play this role when dealing with problems and changes
beyond their immediate control and when they take corrective actions during disputes or crisis
situation. And it is a generalist role i.e. taking charge when the organization hits an iceberg
unexpectedly and where there is no clear programmed response. Disturbances may arise from

23
staff, resources, threats or because others make mistakes or innovation has unexpected
consequences. The role involves stepping in to calm matters, evaluate, re-allocate, support -
removing the thorn -buying time.

Resource allocator role: managers play recourse allocator role when they schedule, request
authorization and perform budgeting and programming activities. A manager determines who in
the work unit gets what recourses money, facilities, equipment and access to manager.

Negotiator role: is role in which managers’ work with suppliers, distributor, and labor unions to
reach on agreements about the quality and price of inputs, technical and human resource, work
with other organizations to establish agreements to pool recourses to work on joint projects.

N.B: Negotiations are an integral part of managers' job. It takes charge over important
negotiating activities with other organizations. The spokesman, figurehead and resource allocator
roles demand this.

Managerial Skills

 Skill is ability to do something expertly and well.

Managerial skills are enhanced through formal training, reading, and practice. There are three
principal skills that managers get through experience an education:

These are:

 Conceptual skills

 Human skills

 Technical skills.

1. Conceptual skills

 Conceptual skill involves the ability to view the organization as a whole and recognize its
relationships to large environment or business world.

 Are ability (or mental capacity) to conceive and manipulate ideas and abstract relationships.

 the ability to analyze and diagnose a situation and find the cause and effect

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 are more needed by top-level managers

2. Human skills

 Human skills include the ability to understand, alter, lead, and control the behavior of other
individuals or/and groups. Human skills focus on working with people.

 The ability to understand, alter, lead, and control people’s behavior

 Are needed uniformly at three levels of management. That is the need for human skills at three
levels of management remains fairly constant.

3. Technical skills

 The job-specific knowledge required to perform a task. Common examples include marketing,
accounting, and manufacturing.

 Are greatly needed by first line managers.

A manager's level in the organization determines the relative importance of possessing technical,
human, and conceptual skills. Top level managers need conceptual skills in order to view the
organization as a whole. Conceptual skills are used in planning and dealing with ideas and
abstractions. Managers need technical skills to manage their area of specialty. All levels of
management need human skills in order to interact and communicate with other people
successfully. All managers need technical, human and conceptual skills. However, the need for
these skills varies with the level of management.

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 EVOLUTION OF MANAGEMENT THOUGHT

The practice of management can be dated back to thousands of years ago when human beings
started civilizations and divided into tribes. Historically, there were many evidences indicating
the existence of management in early human careers. Some of the evidences are:

i. The Egyptian civilization was known for planning, organizing, and controlling during the
construction of pyramids

ii. Early Greeks were known for their management concepts such as specialization

iii. The ancient Rome used to emphasis on personnel, selection and placement.

iv. The existence of strong military forces in early human activities.

Although management practice has a very old age, management as a systematic body of
knowledge and distinct discipline is the product of 20th C. The industrial revolution which began
in 18th c and run through 20th c. was the main reason that led to development of different
management theories. Industrial revolution resulted in economic growth of countries, minimized
dependency on agriculture, and expansion of many and giant industries which needed many
employees/workers.

As a result, shortage in labor force that was to work in the factories had arisen. Consequently,
practicing managers started to think about how to use the existing labor forces efficiently. In
response to this Robert Owen, for example, improved working conditions in his factory by
limiting working hours, and providing meal at the work place for workers. Charles Babbage was

26
interested in division of labor and other scientific principles to have more work done by existing
workers. These two individuals and other similar persons are currently considered as forerunners
to scientific management. Starting from 20thc. up to now different schools of management
thought have been developed.

These schools can be classified as follows:

1. Classical Management Theory

 Scientific Management Theory( F. Taylor)
 Classical Organization Theory (H. Fayol)
 Bureaucratic Theory (M. Weber)
2. Neo Classical Theory
 Behavioral or Human Relation movement theory (E. Mayo & Hawthorne study)
 Neo-Human Relations Theory (Maslow, McGregor)
3. Modern Approaches
 System Approach
 Contingency Approach
 Management Science

Classical Management Theory

Classical management theory is a theory that focused on finding the 'one best way' to operate
(perform) and manage tasks. Efficiency and productivity became a critical concern of the
Managers at the turn of the 20th century. Scientific management concentrated on lower-level
managers dealing with everyday problems of the workforce. Classical organization theory
concentrated on top-level managers dealing with the everyday problems of managing the entire
organization. Bureaucratic focuses on a formal system of organization and administration to
ensure effectiveness and efficiency.

A. Scientific Management Theory (SMT)

I. Frederick Winslow Taylor

Scientific Management Theory was developed mainly by a person called F.W Taylor who was a
foreman at Betheleum Midval Steel Factory in America. Taylor's primary objective was to

27
discover the most efficient way of doing a job and then train the workers to do it that way. To do
this he preferred scientific management principles or rules rather than intuitions, judgments,
experience generally called Rule of Thumb method. From his experience Taylor observed that
workers were inefficient.

The major reasons for inefficiency were as follows:

 Standards of performance were not properly determined.

 The existing pay system was not motivating

 There was no specialization as such.

 The responsibilities of management and other workers were not clearly distinguished

 There were an antagonistic relationship between management and subordinates

Therefore, Taylor had attempted to find solutions to find for the above problems. Consequently,
the basic components of scientific management were profounder (developed) by him.

These include:

1. Determination of standards of performance scientifically

Taylor argued that standard of performances should not be determined on the basis of 'rule of
Thumb' method rather scientific methods should be used. To determine standard of performance
scientifically, Taylor introduced his famous study known as time-motions involved in
performing a particular task. Taylor, then found ways enabling workers to complete their job on
time and avoiding unnecessary motions. He finally determined the best method of performing
job.

2. The differential and piece rates payment systems

Under these payment systems, there are two rates of wage payment: differential and piece rates.
The piece rate is normally less than differential rate and it was applied to workers who had
produced out put below the standard. The differential rate was applied for workers who had
produced an out put just to the standard or above the standard.

3 Specialization of functional foremen ship

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During Taylor time workers were planning their own jobs. Taylor believed that this had led them
to inefficiency. Instead, he recommended the separation of planning g from doing the jobs. He
said there must be different functional specialists who would give supervision for workers while
they were doing their jobs. So workers could increase efficiency since they didn't spend time on
planning.

4. Responsibility of management

According to Taylor's philosophy responsibility of management should be clearly separated from

other non-management workers'. He determined responsibilities of management.

This includes:

 Studying each element of worker's job and developing scientific method of doing them.

 Scientifically selecting, training and developing workers to the method developed.

 Heartily cooperating with workers to make sure that workers were doing their jobs according to
scientifically developed management

 Management should divide and take over all the jobs that it thought could fit better than other
workers and these responsibilities include planning, organizing, and directing.

5. Mental Revolution

The scientific method of determining standards, the elimination of unnecessary movements in

workers’ job and the use of differential wage rate payment systems could lead to increase in
output and worker's payment, according to Taylor. If out put increased, management would be
happy with workers and if wage payments increased, workers would be happy to management
and conflict between management and workers could be solved.

Principles of Scientific management Theory

1. Management should develop scientific methods by which workers could do their jobs.
2. Management should scientifically select, train, teach and develop each worker.
3. Management should cooperate with the workers in ensuring that all of the work is done in
accordance with the principles of scientific management.

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 4. Management should divide work responsibility between management and non-
management workers with fitness assumptions.

II. Frank (1868-1924) and Lillian Gilbreth (1878-1972)

Frank and Lillian Gilbreth emphasized method by focusing on identifying the elemental motions
in work, the way these motions were combined to form methods of operation, and the basic time
each motion took. They believed it was possible to design work methods whose times could be
estimated in advance, rather than relying upon observation-based time studies. Frank Gilbreth,
known as the Father of Time and Motion Studies, filmed individual physical labor movements.
This enabled the manager to break down a job into its component parts and streamline the
process.

The Gilbreths believed that there was one best way to perform an operation. However, this "one
best way" could be replaced when a better way was discovered. The Gilbreths defined motion
study as dividing work into the most fundamental elements possible, studying those elements
separately and in relation to one another; and from these studied elements, when timed, building
methods of least waste. They defined time study as a searching scientific analysis of methods and
equipment used or planned in doing a piece of work, development in practical detail of the best
way of doing it, and determination of the time required. The Gilbreths drew symbols on operator
charts to represent various elements of a task such as search, select, grasp, transport, hold, delay,
and others.

III .Henry Gantt (1861-1919)

Henry Gantt developed the Gantt chart, which is used for scheduling multiple overlapping tasks
over a time period. He focused on motivational schemes, emphasizing the greater effectiveness
of rewards for good work (rather than penalties for poor work). He developed a pay incentive
system with a guaranteed minimum wage and bonus systems for people on fixed wages. Also,
Gantt focused on the importance of the qualities of leadership and management skills in building
effective industrial organizations.

Contributions of scientific management theory

 Demonstrated the importance of compensation for better performance.

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 indicated the importance of personnel selection, training-etc

 Developed management principles which have an application in modern management system.

Limitations of scientific management theory

 Assumed that workers were motivated only by monitory reward.

 Concentrated only on how to increase efficiency of workers separately with out giving
emphasis on how to manage the entire organization as a whole.

 The fact that workers were receiving instructions from several functional foremen could
confuse workers.

 Considered workers as machines.

 Did not acknowledge individual difference

B. Classical Organization Theory

Scientific Management Theory emphasized on how to increase productivity of individual

workers and management at work. But the classical organizational theory, also called
administrative management theory, was aiming at administration of entire organization. Henry
fayol, marry parkers Follet and James D. Mooney were among the great contributors to the
theory.

1. Fayol's Proposal

Henri Fayol was a French man who had served in mining company as a president for many
years. He was interested in administrative side of operations in an organization. In particular, he
was concerned with the fact that different abilities were needed as one moved up the
management ranks. His experience led him to conclude that there were five basic functions of
administration: planning, organizing, commanding, coordinating and controlling. He also set
forth a series of administrative principles which could be used as flexible guide lines for
managing both people and work.

Fayol's 14 principles

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Fayol believed that these principles were essential to increase the efficiency of management
process. The principles are:

 Henri Fayol (1841 - 1925), France

Advantages

 Fayol was the first person to actually give a definition of management which is generally
familiar today namely 'forecast and plan, to organize, to command, to co-ordinate and to control.

 Fayol also gave much of the basic terminology and concepts, which would be elaborated upon
by future researchers, such as division of labour, scalar chain, unity of command and
centralization.

Disadvantages

 Fayol was describing the structure of formal organizations.

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 Absence of attention to issues such as individual versus general interest, remuneration and
equity suggest that Fayol saw the employer as paternalistic and by definition working in the
employee's interest.

 Fayol does mention the issues relating to the sensitivity of a patients’ needs, such as initiative
and 'esprit de corps', he saw them as issues in the context of rational organizational structure and
not in terms of adapting structures and changing people's behaviour to achieve the best fit
between the organization and its customers.

 Many of these principles have been absorbed into modern day organizations, but they were not
designed to cope with conditions of rapid change and issues of employee participation in the
decision making process of organizations, such as are current today in the early 21st century.

2. Mary Parker Follett

His concepts included the universal goal, the universal principle, and the Law of the Situation.
The universal goal of organizations is an integration of individual effort into a synergistic whole.
The universal principle is a circular or reciprocal response emphasizing feedback to the sender
(the concept of two-way communications). Law of the Situation emphasizes that there is no one
best way to do anything, but that it all depends on the situation.

Contributions of Classical Organization (administrative) Theory

i. Demonstrated the importance of different skills at different levels of management for

managers.

ii. Systematically identified functions of management,

iii. Developed several important principles of management.

Limitation of classical organization

i. Assumed several difficult principles which are difficult to apply in management of modern
organizations

C. Max Weber (1864 - 1924), Germany: Bureaucracy theory

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Max Weber is known as the father of modern sociology, Analyzed bureaucracy is as the most
logical and rational structure for large organizations. Bureaucracy in this context is the
organizational form of certain dominant characteristics such as a hierarchy of authority and a
system of rules. Bureaucracy in a sense of red tape or officialdom should not be used as these
meanings are value-ridden and only emphasize very negative aspects of the original Max Weber
model. Bureaucracies are founded on legal or rational authority which is based on law,
procedures, rules, and so on. Positional authority of a superior over a subordinate stems from
legal authority. Charismatic authority stems from the personal qualities of an individual.

Efficiency in bureaucracies comes from:

(1.) Clearly defined and specialized functions;

(2.) Use of legal authority;

(3.) Hierarchical form;

(4.) Written rules and procedures;

(5.) Technically trained bureaucrats;

(6.) Appointment to positions based on technical expertise;

(7.) Promotions based on competence;

(8.) Clearly defined career paths.

Advantages

 Appointment, promotion and authority were dependent on technical competence and reinforced
by written rules and procedures of promoting those most able to manage rather than those
favored to manage. We take a lot of this for granted in the UK today. Anything else is regarded
as nepotism and corruption.

 The adoption of bureaucratic type of management systems allow organizations to grow into
large complex organized systems that are focused towards formalized explicit goals.

34
 It cannot be stated strongly enough that the Weber theory has the advantage of being used as a
'gold standard' on which to compare and develop other modern theories.

Disadvantages

 Tendency for organizations to become procedure dominated rather than goal dominated.

 Tendency for heavily formalized organizational roles to suppress initiative and flexibility of the
job holders.

 Rigid behavior by senior managers can lead to standardized services that do not meet the needs
of the client.

 Rigid procedures and rules are demotivating for the subordinates that work in the
organizations.

 Exercise of control based on knowledge as advocated by Weber has led to the growth of
'experts' whose opinions and attitudes may frequently clash with those of the more generalized
managers and supervisors.

1. Neo Classical Theory

Neo classical theory was built on the basis of classical theory. It modifies, improves and extends
the classical theory.

A. Behavioral or Human relations approach

The behavioral theory of management has partly emerged because the classical theorists failed to
raise productivity and work place harmony although they had made a lot of attempts. Behavioral
school recognized employees as individuals with concrete human need, as a part of work groups,
and as a member of large society. It focused on human dimension of organization. Elton Mayo,
who was the psychologist, pioneered the human relations movement. He headed a group of
researchers in conducting the Hawthrone studies. The objective of the behavioral theorists was to
identify factors that will serially affect productivity of employees. But the initial purpose of
Hawthrone studies was to determine the effect of illumination on outputs.

2. Neo-Human Relations Theory

35
These groups were social psychologists who developed more complex theories:

 Maslow

 McGregor (theory X and theory Y)

Herzberg- Motivation and Hygiene factorsA. Maslow and McGregor's neo-human relations
theories both focus on motivation and leadership, but their theories are very different. Maslow
found a particular focus on human motivation including: satisfaction, incentive and intrinsic.

1. This psychologist, from his studies, proposed a hierarchy of human needs building from basic
needs at the base to higher needs at the top.

2. Maslow made assumptions that people need to satisfy each level of need, before elevating
their needs to the next higher level e.g. a hungry person's need is dominated by a need to eat (i.e
survival), but not to be loved, until he/she is no longer hungry).

3.Today the focus in most Western societies is on the elements towards the top of Maslow's
hierarchy - in which work environments and 'jobs' (including 'having a job' and the satisfaction

36
or otherwise such jobs provide - have become typical features. Notably the attainment of
selfesteem and, at the very top of the hierarchy, what Maslow calls 'self-actualization' -
fundamentally the synthesis of 'worth', 'contribution' and perceived 'value' of the individual in
society.

Advantages:

Managers can/should consider the needs and aspirations of individual subordinates.

Disadvantages:

The broad assumptions in 2 above have been disproved by exceptions e.g. hungry, ill artist
working in a garret. Besides, Empirical research over the years has not tended to support this
theoretical model.

A. McGregor (Theory X and Theory Y)

Managers were perceived by McGregor, whose theories are still often quoted, to make two
noticeably different sets of assumptions about their employees.

B. Herzberg showed two categories of findings

Motivators - factors giving rise to satisfaction

Hygiene factors - factors giving rise to dissatisfaction

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4. Modern Approach

This approach is the last approach, which consists:

A. The systems approach

B. The contingency approach

C. The management science approach

A. The system approach

During the 1940s and World War II, systems analysis emerged. Attention began to focus on
organizations as 'systems' with a number of inter-related sub-systems. The 'systems approach'
attempted to synthesize the classical approaches ( 'organizations without people') with the later
human relations approaches that focused on the psychological and social aspects, emphasized
human needs - almost 'people without organizations’.

Systems theory focuses on complexity and interdependence of relationships. A system is

composed of regularly interacting or interdependent groups of activities/parts that form the
emergent whole.

Part of systems theory, system dynamics is a method for understanding the dynamic behaviour of
complex systems. The basis of the method is the recognition that the structure of any system --
the many circular, interlocking, sometimes time-delayed relationships among its components --
is often just as important in determining its behavior as the individual components themselves.
Early systems theorists aimed at finding a general systems theory that could explain all systems
in all fields of science. The term goes back to Bertalanffys basic work 'General Systems Theory'.

38
Sociologists like Niklas Luhmann also worked towards a general systems theory. As of today,
whilst no systems theory can live up to this claims, there are general system principles which are
found in all systems. For example, every system is an interaction of elements manifesting as a
whole. Miller and Rice likened the commercial and industrial organization to biological
organisms.

Systems theories took much more of a holistic view of organizations, focusing on the total work
organization and the inter-relationships between structures and human behaviors producing a
wide range of variables within organizations. They help us understand the interactions between
individuals, groups, organizations, communities, larger social systems, & their environments and
help us enhance our understanding of how human behavior operates in a context.

A system is a part, and it is a whole, at the same time

 Characteristics of Systems

A system has several distinguishing features:

i. A system can be open or closed

ii. System has boundary

iii. System has subsystems

iv. Failure in one subsystem can be considered as failure of the entire system

A system can be open or closed

 Open system: is a system which interacts with its external environment to survive. It is
'dependent system as it must obtain inputs from its environment to attain its objective.

 Closed system: is a system which is self-contained and thus not affected by changes that occur
in its external environment. It doesn't interact with external environment or interacts much less
thus it is 'independent.

A system has boundary

System's boundary is a set of activates with which the system is distinguished from other system.
It is not related with the physical landmark, a boundary of open system is permeable and flexible

39
compared with boundary of closed system (rigid). A system has subsystems Subsystem refers to
set of related parts that make-up the whole system. A subsystem can be system and a system can
also be system and a system can also be subsystem. Failure in one subsystem can be considered
as the failure of entire system.

As the subsystems of a system are highly interdependent failure in one may cause failure in other
subsystems which can result in total system failure.

a. Entropy-Is system' principle which says that systems will die out unless they interact with
their environment.

b. Synergy- Is principle which can be stated as the whole is greater than the sum of its parts.

In organization context, it means that organizational elements will be more productive if they
work together rather than working separately (or individually).

Responsibility of management, according to system theory, is to keep a balanced relationship

between different parts of relationship and make its organization have smooth relationship with
the environment.

Contingency theory

In the mid-1960s, the contingency view of management or situational approach emerged. This
view emphasizes the fit between organization processes and the characteristics of the situation. It
calls for fitting the structure of the organization to various possible or chance events. It questions
the use of universal management practices and advocates using traditional, behavioral, and
systems viewpoints independently or in combination to deal with various circumstances. The
contingency approach assumes that managerial behavior is dependent on a wide variety of
elements. Thus, it provides a framework for integrating the knowledge of management thought.

It was built on the main premises of systems theory which says that organization is an open and
organic system. According to contingency theory, since organization is an open system, it
interacts with several external environment factors. This theory argues that there is no 'one best
way' to structure an organization. An organization will face a range of choices when determining
how it should be structured, how it should be organized, how it should be managed. Successful

40
organizations adopt structures that are an appropriate response to a number of variables, or
contingencies, which influence both the needs of the organization and how it works.

 these theories take a comprehensive view of people in organizations

 they recommend a diagnosis of people/ task/ technology/environment - then suggest the

development of appropriate solutions

Contingency theorists have found that three contingencies are particularly important in
influencing an organization’s structure. These are:  its size,  the technology it uses  its
operating environment.

There are two significant implications of contingency theory:

 if there is no 'one best way', then even apparently quite similar organizations, for example, two
nearby colleges, may choose significantly different structures and still survive, be reasonably
successful in achieving their missions, and so on

 if different parts of the same organization are influenced in different ways by the contingencies
bearing upon them, then it may be appropriate for them to be structured differently, for example,
one university department may have a functional structure, whilst another may have a matrix
structure.

Organization-Environment Theory

It considers relationships inside and outside the organization.

The environment consists of forces, conditions, and influences outside the organization.

Systems theory considers the impact of stages: Input: acquire external resources.

Conversion: inputs are processed into goods and services. Output: finished goods are released
into the environment.

CHAPTER FOUR

MANAGEMENT FUNCTIONS

1. PLANNING

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Concepts and need for planning

Planning is the management of the organization's future in an uncertain environment.

 Planning - is the process of setting objectives and determining the steps needed to attain them?

 Is systematic preparation for tomorrow, today

 s an orderly process that allows managers to determine what they want and how they get
it?
 Deals with ends (what is to be done).

 Planning answers six basic questions in regard to any intended activity (objective).
what ,when, where, who, how and how much

 in planning managers:

 Assess the future

 Determine objectives of the organization and develop the overall strategies.
 Determine resources needed to achieve the objectives

Leaders are proactive. They make change happen instead of reacting to change. The future
requires corporate leadership with the skills to integrate many unexpected and seemingly diverse
events into its planning. Every organization must plan for change in order to reach its ultimate
goal. Effective planning helps an organization adapt to change by identifying opportunities and
avoiding problems. It sets the direction for the other functions of management and for teamwork.
Planning improves decision-making. All levels of management engage in planning.

Need for planning

Planning is important for every organization irrespective of its size, objectives, and location.
Because decisions without planning would become random this may lead to failure of entire
organization.

Planning is important for several reasons:

1. It provides direction for an organization by specifying objectives

2. It reduces risk and uncertain of the future

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3. It allows organizational members to concentrate on common organization's objective

4. It provides criteria for decision making

5. It provides basis for control or it facilitates control

Types of Plans Plan can be classified in to different types based on various criteria (basis):
repetitiveness, time dimension and scope or breadth dimension.

A. Classification of plans based on repetitiveness

i. Single use plans

Single use plans are those plans which have no more use after objective is accomplished. Once
activity for which they have been made is over, single use plans have little or no use at all. They
include: programs, projects, and Budgets.

Program- is set of goals, policies, procedures, rules, job assignments, resources to be employed,
and other elements necessary to carry out a given course of action.

 Is set of activities used to accomplish objectives or used to solve some problem. Project- is
specific action plan formulated to complete various aspects of a program which can be distinctly
identified as a clear-cut grouping of activities with definite objectives and completion time.

Budget - is a statement of expected results expressed in numerical terms. Budget which is a plan
that shows how money will be spent over a certain period of time? Even if budget is often
thought as control technique, it is also a plan since it sets forth objective to attain. Some times
called as 'numerical plan' as they are quantitative in nature.

i. Standing Plans

Standing plans are type of plans which can be used again and again once they made. They
remain useful for long period in dealing with repetitive situations. They include: policies,
procedure, and rules.

Policy- is a general statement designed to guide employees' actions in recurring situations. It

establishes broad limits, provides direction, but permits some initiative and discretion on the part
of the supervisor. Thus, policies are guidelines.

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  Policies are guidelines to decision making. Policies establish abroad framework within
which managers at different levels make decisions.
 are general guide to thinking and action

Policies are important for an organization as they:

 provide guidance to decision making

 Channels all decisions toward the attainment of objectives.

 Ensure consistency and uniformity in decision making.

Procedures are sequences of steps or activities involved in making decisions or performing other
tasks. A procedure is a sequence of steps or operations describing how to carry out an activity
and usually involves a group. It is more specific than a policy and establishes a customary way of
handling a recurring activity. Thus, less discretion on the part of the supervisor is permissible in
its application. An example of a procedure is the sequence of steps in routing of parts.
Procedures aim at laying down a mechanism for orderly performance and coordination of
various organizational activities so as to avoid random actions and operations. Like policies,
procedures also contribute in consistency of organizational activities by providing steps. Rules;
are on-going specific plans influencing human behavior or conducts at work place. A rule is an
established guide for conduct. Rules include definite things to do and not to do. There are no
exceptions to the rules.

 Rules are fixed plans and define what should and what should not be done. (Guide to action).

 Unlike polices, rules don't allow for interpretation or decisions. Decisions are needed only in
making the rules. . An example of a rule is "No Smoking

B. Classification of plans based on time dimension

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Taking time in consideration a plan can be categorized in to three. Basically planning deals with
future and the future is measured in time. Hence it is convenient and acceptable to think of
different kinds of planning in terms of the time periods for which the planning is intended.

 Long range plans

Long range plans are those plans which have longer time horizon; they are concerned with
distant future than immediate future. The time may range from 5 to 10 years based on the size
and the type of organizations.

 Intermediate plans

Intermediate range plans are those plans with a time horizon between one and five years. They
range between long and short-term plans.

 Short range plans

Short range plans are those plans with time dimension it is not possible to have aright time
horizon guide line. For a plan to be short range or long range, it depends on the size of an
organization and nature of business of an organization. So short range plan for one organization
may be an intermediate or long range plan for the other organization.

C. Classification of plans based on scope (Breadth)

The major kinds of planning can be classified in to three types: strategic plans, tactical plans, and
operational plans.

(i) Strategic plans

Strategic planning produces fundamental decisions and actions that shape and guide what an
organization is, what it does, and why it does it. It requires broad-scale information gathering, an
exploration of alternatives, and an emphasis on the future implications of present decisions. Top
level managers engage chiefly in strategic planning or long range planning. They answer such
questions as:

 What is the purpose of this organization?

 What does this organization have to do in the future to remain competitive?

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Top level managers clarify the mission of the organization and set its goals. The output needed
by top management for long range planning is summary reports about finances, operations, and
the external environment.

Strategic planning is the process of developing and analyzing the organization's mission, overall
goals, general strategies, and allocating resources. A strategy is a course of action created to
achieve a long-term goal. The time length for strategies is arbitrary, but is probably two, three, or
perhaps as many as five years. It is generally determined by how far in the future the
organization is committing its resources. Goals focus on desired changes. They are the ends that
the organization strives to attain. Traditionally strategic planning has been done annually.
However, many companies are doing away with annual business plans altogether and moving to
a system of continuous planning, to permit quicker response to changing conditions. Thus, the
strategic plan involves adapting the organization to take advantage of opportunities in its
constantly changing environment.

Generally, strategic plans are performed by top level management

 Mostly long range in its time frame

 Expressed in relatively general terms
 Type of planning that provides general future based direction to organization.

(ii) Tactical plans

Top level managers set very general, long-term goals that require more than one year to achieve.
Examples of long-term goals include long-term growth, improved customer service, and
increased profitability. Middle managers interpret these goals and develop tactical plans for their
departments that can be accomplished within one year or less. In order to develop tactical plans,
middle management needs detail reports (financial, operational, market, external environment).
Tactical plans have shorter time frames and narrower scopes than strategic plans. Tactical
planning provides the specific ideas for implementing the strategic plan. It is the process of
making detailed decisions about what to do, who will do it, and how to do it. Tactical planning is
the process of developing action plans through which strategies are executed. Tactical plan- is a
plan used to develop means needed to activate and implement strategy.

Generally, Tactical plans:

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  performed by middle level managers
 Have shorter time frame, more detail and narrower scope than strategic plans
 Guide submits of an organization

(iii) Operational plans

Operational planning is the process of setting short-ran objectives and determining in advance
how they will be accomplished. Managers implement operational plans that are short-term and
deal with the day-to-day work of their team. Short-term goals are aligned with the long-term
goals and can be achieved within one year. Supervisors set standards, form schedules, secure
resources, and report progress. They need very detailed reports about operations, personnel,
materials, and equipment. The supervisor interprets higher management plans as they apply to
his or her unit. Thus, operational plans support tactical plans. They are the manager's tools for
executing daily, weekly, and monthly activities.

To sum up, Operational plans:

 Are first line managers' tools for exciting daily, weekly, and monthly activities.
 Performed by operational level managers.
 Are Specific and more detail than others.

Planning process Planning is not something which is made all once at a time. The planning
process is rational and amenable to the scientific approach to problem solving. It consists of a
logical and orderly series of steps. A person involved in planning pass through number of steps
to make effective plans. Process of planning indicates the major steps taken place in planning.
The steps generally involved in planning are:

Step-1 Establishing objectives: The first step in planning is to establish objectives for the
enterprise and then for each subordinate work unit. Objectives are the driver of planning
processes. Objectives are established at all levels of the structure, beginning at the top level and
running down to first line managers. Strategic goals and objectives are developed to bridge the
gap between current capability and the mission. They are aligned with the mission and form the
basis for the action plans. Objectives are sometimes referred to as performance goals. Generally,
organizations have long-term objectives for such factors as return on investment, earnings per

47
share, or size. Furthermore, they set minimum acceptable standards or common-sense
minimums. In addition, certain limitations, either explicit or implicit, such as "must provide jobs
for existing employees" may exist. Objectives elaborate on the mission statement and constitute
a specific set of policy, programmatic, or management objectives for the programs and
operations covered in the strategic plan. They are expressed in a manner that allows a future
assessment of whether an objective has been achieved.

Step 2. Environmental Analysis and forecasting: The next point for planning is an awareness of
environment, both internally and externally. Organization should maintain a continual
assessment of the environment to determine its own weaknesses and strengths internally and to
be aware of opportunities and threats in external environment. Based on this analysis of internal
and external environment forecasting (predicting) of different environmental factors such as
economics, technological, political etc can be made to assist real planning. Conduct a situation or
SWOT analysis by assessing strengths and weaknesses and identifying opportunities and threats.
A situation or SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is critical to
the creation of any strategic plan. The SWOT analysis begins with a scan of the external
environment. Organizations must examine their situation in order to seek opportunities and
monitor threats. Sources of information include customers (internal and external), suppliers,
governments (local, state, federal, international), professional or trade associations (conventions
and exhibitions), journals and reports (scientific, professional, and trade).

SWOT is the assumptions and facts on which a plan will be based. Analyzing strengths and
weaknesses comprises the internal assessment of the organization. Assess the strengths of the
organization.

It includes:

 What makes the organization distinctive? (How efficient is our manufacturing?)

 How skilled is our workforce?

 What is our market share?

 What financing is available?

 Do we have a superior reputation?

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Assess the weaknesses of the organization

 What are the vulnerable areas of the organization that could be exploited?

 Are our facilities outdated?

 Is research and development adequate?

 Are our technologies obsolete?

 What does the competition do well?

Analyzing opportunities and threats comprises the external assessment of the environment.
Identify opportunities

 In which areas is the competition not meeting customer needs?

 What are the possible new markets?

 What is the strength of the economy?

 What are the emerging technologies?

 Is there a possibility of growth of existing market?

Identify threats. In which areas does the competition meet customer needs more effectively?

 Are there new competitors?

 Is there a shortage of resources?

 Are market tastes changing?

 What are the new regulations?

 What substitute products exist?

The best strategy is one that fits the organization's strengths to opportunities in the environment.

The SWOT analysis is used as a baseline for future improvement, as well as gap analysis.
Comparing the organization to external benchmarks (the best practices) is used to assess current
capabilities. Benchmarking systematically compares performance measures such as efficiency,

49
effectiveness, or outcomes of an organization against similar measures from other internal or
external organizations. This analysis helps uncover best practices that can be adopted for
improvement. Gap analysis identifies the progress required to move the organization from its
current capabilities to its desired future state. In this way, the organization can adapt to the best
practices to improve organizational performance.

Step 3. Determining alternative course of Action: Once objectives are set, the management must
identify alternative ways for reaching them. When developing alternatives. A manager should try
to create as many roads to each objective as possible. In fact, in most cases the challenging is not
to find alternative ways but to decide which ones are best. To decide on best ones it requires
evaluation.

Step 4. Evaluating the alternatives: Each alternative needs to be evaluated to determine which
one best achieve the objectives. In evaluating managers should assess cost (disadvantages) and
benefits (advantages) of all alternatives. The assessment may include both financial and non
financial considerations.

Step 5. Select the best alternatives: After evaluating all possible alternatives, managers will
select alternative that remains better than others. It may be an alternative with least
disadvantages and most advantages.

Step 6. Implementing the plan: After the alternative course of action selected, it is important to
develop an action plan to execute the plan. In this step method for implementation will be
suggested.

Step 7. Controlling and evaluating the results: Once the plan is implemented it needs monitoring.
Managers should monitor the progress being made, evaluate the reports made based on results,
and make any necessary modifications, because factors in environment are constantly changing,
plans must be modified to cope up with changes.

Factors affecting planning

1. Environmental condition

2. Time

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3. Resource availability

4. Skill and attitude of manager

5. Collection and analyzing of data

Values, Mission, Vision, Goals, Objectives, and Targets

These words are often the most confusing words in management field. They are some what
similar but not exactly the same in their meanings. Values, mission, and vision form the
foundation for the execution of the functions of management. They are an organization's
guidelines that affect how it will operate. They work only if visible and used in everyday
activities and decisions. An organization's values are its beliefs or those qualities that have
intrinsic worth and will not be compromised. Its mission is its purpose for existing. The vision is
the image of itself in the future.

Values

Each supervisor's approach to management will reflect his or her values, as well as those of the
organization. Building trust starts with creating culture based on shared values. Values are traits
or qualities having intrinsic worth, such as courage, respect, responsibility, caring, truthfulness,
self-discipline, and fairness. Values serve as a baseline for actions and decision-making and
guide employees in the organization's intentions and interests. The values driving behavior
define the organizational culture. A strong value system or clearly defined culture turns beliefs
into standards such as best quality, best performance, most reliable, most durable, safest, fastest,
best value for the money, least expensive, most prestigious, best designed or styled, easiest to
use. If asked, "What do we believe in?" or "List our organization's values" all employees in the
organization should write down the same values. For example, McDonald's values were captured
in its motto of "Q.S.C. & V." which stands for quality, service, cleanliness, and value.

Managers need to appreciate the significance of values and value systems. Values affect how a
manager’s views other people and groups, thus influencing interpersonal relationships. Values
affect how a supervisor perceives situations and solves problems. Values affect how a supervisor
determines what is and is not ethical behavior. Values affect how a supervisor leads and controls
employees. Since employees often base behavior on perceived values it is critical to ensure their

51
perceptions reflect organizational values. Managers must communicate, encourage and reinforce
the desired values and related behaviors to integrate them into the organizational culture.

Geert Hofstede identified a work-related value framework that has four dimensions: power
distance, uncertainty avoidance, individualism, and polarization. Power distance is the attitude to
human inequality and relationships to superiors and inferiors in any hierarchy. Uncertainty
avoidance is the tolerance for uncertainty that determines choices and rituals to cope with it in
social structures and belief systems. Individualism is the relationship between the individual and
the collectivity, especially in the way individuals choose to live and work together. Polarization
is the extent to which differences such as masculinity or femininity have implications for social
organization and the organizations of beliefs. Every person has a different mental program, based
on patterns of thinking, feeling, and acting, which are learned throughout a lifetime. The effects
of these differences have many practical implications for those who work or are managers in
multinational business and for those involved in international negotiations.

2. Organizing Vs. Organization

Organizing is the process of identifying and grouping tasks to be performed, assigning

responsibilities and delegating authority and establishing relationships for the purpose of
enabling workers to work most effectively together in the accomplishments of objectives. The
organizing function involves the following sub functions:

1. Reviewing of objectives to be accomplished: Objectives are the most important things in

organizing and organization as they affect the results of organization so it is necessary to review
objectives to be accomplished.

2. Determining tasks necessary to accomplish objectives: After objectives are reviewed the next
activity is to list down activities necessary to accomplish the objectives e.g. advertising, training,
sales, budgeting, assembling

3. Grouping of activities according to their similarities to form department: In this step

management classifies and group activities using the guide lines of homogeneity or similarity of
activities. Work that is similar in nature is placed together to achieve organizational objectives.
E.g. Sales, Accounting, Advertisement, Budget, Hiring workers, Training etc.

52
4. Assigning work and delegating authorities: Managers have to assign individuals different tasks
and make them authorize of their activates to enable them perform their job assignments

5. Hierarchical relationship development: This step requires the determination of both vertical
and horizontal operating relationships of organization as a whole

Organization: is the result of organizing process; which is predetermined manner to achieve

common goal.

Classification of Organizations (Formal vs. Informal Organizations)

Formal organization is the official organizational structure created by management. It is the

structure organization formed for the purpose of fully achieves well defined and formal
objectives.

Informal organization is the network of personnel and social relation ships that arises
spontaneously as people associate with one another in a work environment. It is natural grouping
of people in the work situation based on their behavioral patterns, interests, beliefs, objective etc.

Characteristics of formal organization

The important characteristics of a formal organization are given below

1. it is properly planned

2. It is based on delegated authority.

3. it is deliberately impersonal

4. The responsibility and accountability at all levels of organization should be clearly defined.

5. organizational charts are usually drawn

6. unity of command is normally maintained

7. It provides for division of labor.

Advantages of formal organization

1. The definite boundaries of each worker are clearly fixed. it automatically reduces conflict
among the workers. The entire building is kept under control

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2. Overlapping of responsibility is easily avoided. The gaps between the responsibilities of the
employees are filled up.

3. Buck passing is very difficult under the formal organization normally exact standards of
performance are established under formal organization. It results in the motivating of employees.

4. A sense of security arises from classification of the task.

5. There is no chance for favoritism in evaluation and placement of the employee.

6. It makes the origination less dependent on one person. Formal organization is and should be
our paramount organization type as a general rule. It is the high point of person's achievement in
a disorganized society. It is person's orderly, conscious and intelligent creation for human
benefit.

Arguments against formal organization

1. In certain cases, the formal organization may reduce the spirit of imitative.

2. Sometimes authority is used for the sake of convenience of the employee without considering
the need for using the authority.

3. it does not consider the sentiments and values of the employees in the social organization

4. the formal organization may reduce the speed of informal communication

5. It creates the problems of coordination.

Characteristics of informal organization

1. Informal organization arises without any external cause i.e. voluntarily.

2. It is a social structure formed to meet personal needs.

3. Informal organization has no place in the organization chart

4. It acts as an agency of social control.

5. Informal organization can be found on all levels of organization within the managerial
hierarchy.

6. The rules and traditions of informal organization are not written but are commonly followed.
54
7. Informal organization develops from habits, conduct, customers and behavior of social groups.

8. informal organization is one of the parts of total organization

9. There is no structure and definiteness to the informal organization.

Advantages of informal organization:

1. it fills up the gaps and deficiency of the formal organization

2. Informal organization gives satisfaction to the workers and maintains the stability of the work.

3. it is a useful channel of communication

4. The presence of informal organization encourages the executives to plan the work correctly
and act accou7rdingly.

5. The informal organization also fills up the gaps among the abilities of the managers.

Disadvantages of informal organization

1. It has the nature of upsetting the morality of the workers.

2. It acts according to mob psychology.

3. Informal organization indirectly reduces the efforts of management to promote greater

productivity.

4. It spreads rumor among the workers regarding the functioning of the organization
unnecessarily

How to work with informal organization

Management should not attempt to eliminate informal organization as it is impossible to

eliminate it. Rather they have to make use of informal organization for the benefit of formal
organization.

Managers should consider the following factors to use informal groups.

 Realize the existence of informal groups

 Identify the roles of members in each informal group

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  Use information to work with informal groups

Organization Chart

Organization Chart- is graphic illustration of the organization’s management hierarchy and

departments and their working relationships. Each box indicates position with in the organization
and each line indicates reporting relationships and lines of communication. Organizational chart
remains useful because it provides different important information regarding;

 Who reports to whom- that, chain of command.

 Span of control- how many subordinates does a manager have
 Channels of formal communication shown by solid lines that connect each job(box)
 Bases of departmentalization- how organization is departmentalized by function,
customer, or product, geographical etc
 Activities in each position- The labels in boxes describe each individual ‘s activities
 The hierarchy of decision making - where the decision maker for a problem is located
 authority relationships- solid connections between boxes illustrate line authority, Zigzag
lines show staff authority, and broken line show functional authority

Organizational chart has some limitations since it does not show

 informal communication channel

 Informal relationship among workers
 Degree of authority holds by individuals

Factors affecting organizational design decision are the following:

1. Strategy

2. Size

3. Environmental condition

4. Technology

Departmentalization:

Meaning and Bases

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Departmentalization is grouping of related activities in to units. After reviewing the plans,
usually the first step in the organizing process is departmentalization. Once jobs have been
classified through work specialization, they are grouped so those common tasks can be
coordinated. Similar activities intimately related with a distinct function are grouped together to
form departments.

-It aims at achieving unity of direction, effective communication, coordination and control.
Bases of Departmentalization

There are some bases for departmentalization but there is no one best way to departmentalize the
activities and the choice of departmentalization depends on the needs of the organization. The
major bases of departmentalization include: function, Product, customer, and territory.
Functional departmentalization-Functional departmentalization involves organizing departments
around essential input activities, Such as production, marketing and finance, which are
managerial or technological functions. The functions reflect the nature of the business. The
advantage of this type of grouping is obtaining efficiencies from consolidating similar specialties
and people with common skills, knowledge and orientations together in common units. Product
Departmentalization- product departmentalization involves organizing departments around
products or services. Institutes with multiple products commonly use product
departmentalization. Each department may become self-contained institute, making and selling
its own products. It assembles all functions needed to make and market a particular product are
placed under one executive. For instance, major department stores are structured around product
groups such as home accessories, appliances, women's clothing, men's clothing, and children's
clothing.

Customer Departmentalization- Customer departmentalization involves organizing

departments around needs of different types of customers. It is grouping of activities and
responsibilities in departments based on the needs of specific customer groups. . For instance, a
plumbing firm may group its work according to whether it is serving private sector, public
sector, government, or not-for-profit organizations. A current departmentalization trend is to
structure work according to customer, using crossfunctional teams. This group is chosen from
different functions to work together across various departments to interdependently create new

57
products or services. For example, a cross-functional team consisting of managers from
accounting, finance, and marketing is created to prepare a technology plan.

Territory (Geographic) Departmentalization- Involves grouping of activities and

responsibilities according to territory. All activities in a geographic area are assigned to a
particular manager. For example, Merck, a major pharmaceutical company, has its domestic
sales departmentalized by regions such as Northeast, Southeast, Midwest, Southwest, and
Northwest. Departmentalization by process groups jobs on the basis of product or customer flow.
Each process requires particular skills and offers a basis for homogeneous categorizing of work
activities. A patient preparing for an operation would first engage in preliminary diagnostic tests,
then go through the admitting process, undergo a procedure in surgery, receive post operative
care, be discharged and perhaps receive out-patient attention. These services are each
administered by different departments.

Matrix departmentalization- is departmentalization that combines the functional and product

structures. With matrix departmentalization, the employee works for a functional department and
is also assigned to one or more products or projects. The major advantage of matrix
departmentalization is flexibility. The major disadvantage is that each employee has two bosses a
functional boss and a project boss-conflict can result when two people give orders.
Departmentalization by process groups jobs on the basis of product or customer flow. Each
process requires particular skills and offers a basis for homogeneous categorizing of work
activities. A patient preparing for an operation would first engage in preliminary diagnostic tests,
then go through the admitting process, undergo a procedure in surgery, receive post operative
care, be discharged and perhaps receive out-patient attention. These services are each
administered by different departments.

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 1. Authority and power and their sources

Organizational structure is a means of facilitating the achievement of organizational objectives.

Such structures are not static, but dynamic. They reorganize in response to changing conditions
that occur in the environment, new technology, or organizational growth. Organization structures
are dependent upon the employees whose activities they guide. Supervisors rely upon power and
authority to ensure that employees.

Authority is the formal and legitimate right of a manger to make decisions, give orders, and
allocate resources, is the right to command. The organizational structure provides the framework
for the formal distribution of authority. Formalization is the degree to which tasks are
standardized and rules and regulations govern employee behavior. It influences the amount of

59
discretion an employee has over his or her job. In an organization with high degrees of
formalization, job descriptions and policies provide clear direction. Where formalization is low,
employees have a great deal of freedom in deciding how thy conduct their work. Within the
same organization, different departments may have different degrees of formalization. For
example, in a hospital, doctors have freedom in selecting treatments, drugs, and methods for
treating patients. However, the hospital physical plant staff has a strict schedule for cleaning
buildings and maintaining the facilities Source of authority-comes with the territory, making that
authority is legal right of manager because of the position he or she occupies in the organization.
Thus authority is defined in each mangers job charter. The person who occupies a position has
his/her formal authority as long as he or she remains in that position. As the job changes in scope
and complexity, the amount and kind of formal authority possessed should be changed.

Types of authority

In an organization three different types of authorities can be created by the relationships between
individuals and departments.

i. Line authority – defines the relationship between superior and subordinates. Any manager
who supervises operating employees or other manger has line authority. It allows mangers to
give direct orders, evaluate the actions, reward and punish employees. It is responsible to make
decisions and issue orders down the chain of command.

ii. Staff authority- is the authority to serve in an advisory capacity: - managers who provide
advice or technical assistance are granted advisory authority. This staff or advisory authority
provides no basis for direct control over the subordinates or activities of other departments;
however, within the staff managers own department, he or she can exercise line authority. Staff
authority in the form of advice/ assistance flows upward to the decision makers. Staff authority is
more limited authority to advice. It is authority that is based on expertise and which usually
involves advising line managers. Staff members are advisers and counselors who aid line
departments in making decisions but do not have the authority to make final decisions. Staff
supervisors help line departments decide what to do and how to do it. They coordinate and
provide technical assistance or advice to all advisors, such as accounting, human resources,
information technology, research, advertising, public relations, and legal services.

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Functional authority: is an authority which permits staff mangers make decision on specific
activities performed by employees with in other departments. Staff departments often use
functional authority to control their procedures in other departments.

 Is the right of staff personnel to issue orders to line personnel in established areas of
responsibility?
 Ex. The maintenance department assists production by keeping the operating activity. If
the maintenance determines that a machine is unsafe, the department may issue an order
to line manger to use the machine, but it cannot suggest which products are produced

Responsibility and Accountability

Equally important to authority is the idea that when an employee is given responsibility for a job,
he or she must also be given the degree of authority necessary to carry it out. Thus, for effective
delegation, the authority granted to an employee must equal the assigned responsibility. Upon
accepting the delegated task, the employee has incurred an obligation to perform the assigned
work and to properly utilize the granted authority.

Responsibility is the obligation to do assigned tasks. The individual employee is responsible for
being proficient at his or her job. The supervisor is responsible for what employees do or fail to
do, as well as for the resources under their control. Thus, responsibility is an integral part of a
supervisor's authority.

Responsibilities fall into two categories: individual and organizational. Employees have
individual responsibilities to be proficient in their job. They are responsible for their actions.
Nobody gives or delegates individual responsibilities. Employees assume them when they accept
a position in the organization. Organizational responsibilities refer to collective organizational
accountability and include how well departments perform their work. For example, the
supervisor is responsible for all the tasks assigned to his or her department, as directed by the
manager.

When someone is responsible for something, he or she is liable, or accountable to a superior, for
the outcome. Thus, accountability flows upward in the organization. All are held accountable for
their personal, individual conduct.

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Accountability is answering for the result of one's actions or omissions. It is the reckoning,
wherein one answers for his or her actions and accepts the consequences, good or bad.
Accountability establishes reasons, motives and importance for actions in the eyes of managers
and employees alike. Accountability is the final act in the establishment of one's credibility. It is
important to remember that accountability results in rewards for good performance, as well as
discipline for poor performance.

Power and its sources

Power is ability to exert influence in the organization or power is the ability to exert influence in
the organization beyond authority, which is derived from position. In addition to authority;
supervisors have more personal sources of power to draw upon for getting things done. Everyone
has power in one form or another and it is by exercising this power that organizations get things
accomplished. Supervisors who are capable of achieving their objectives independently of others
are said to possess strength. When these "strong" managers involve and incorporate others into
their plans and activities they are making use of power, and in fact increasing the total amount of
power available to incorporate into a particular situation or problem. Involving employees in
setting objectives and making decisions as it relates to their jobs empowers everyone, and results
in greater job satisfaction and commitment, as well as increased productivity. Empowering
employees provides them with greater autonomy.

- It is ability to influence others’ behavior.

 Power can be positional and personal

Position power is derived from top management and is delegated down the chain of command.
Personal power is derived from the follower based on the individual behavior.

A person does not need to be manager to have power. Some administrative assistants of top
mangers have considerable power, but no authority. Manager can a acquire power from several
different sources, based on these sources power can be:

(i). Legitimate or position power – The power possessed by manger and derived from the
positions they occupy in the formal organization. . This position power is broader than the ability
to reward and punish, as members need to accept the authority of the position

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(ii) Reward power- The power that comes from the ability to promise or grant rewards. Mangers
have the ability to decide on raises, promotion favorable performance appraisals, and preferred
work shifts. Reward power results in people doing what is asked because they desire positive
benefits or rewards. Rewards can be anything a person values (praise, raises, and promotions)

(iii) Coercive power – is a power which enables mangers to force individuals to attain their
work assignments or to punish those workers who failed to attain their job assignments. Coercive
power is the threat of sanctions. It is dependent on fear and includes, but is not limited to the
ability to dismiss, assign undesirable work, or restriction of movement. The punishment may
include; demotion, terminating employment etc

(iv) Referent (charismatic) power – is the power that is based on the kind of personality or
charisma an individual has and how others perceive it. Referent power refers to a person who has
desirable resources or personal traits. It results in admiration and the desire to emulate. It is the
power obtained from the attitude of people toward some one or from idea that one has on
himself.

(iv). Expert Power- is power derived from an individual’s knowledge and expertise. Others
listen to and follow the person with expert power because she/he is regarded as capable and
knows how to do things right. Employees with expert power are often promoted to management.
Delegation, Centralization and Decentralization

Delegation is the process of assigning authority and creating obligation to accomplish objectives.

 It is the down ward transfer of formal authority from one person to another.

Process of Delegation

Delegation- involves some activities which include:

1. Assignment of Tasks- identifying tasks to be performed and assign the tasks to subordinates. It
is a primary activity in delegation of authorities.

2. Delegation of Authority- Once tasks are assigned, employees should be given as much
authority as possible which enable them to make decision regarding their job assignments.

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3. Creation of Obligation- Managers has to create accountability with subordinates for fair use of
authority and effective performances of activities.

4. Establishment of Control System- The fourth step in delegation process is establishing

adequate control system for evaluating the results of delegation. Because the delegated manager
is responsible for the performance of his subordinates. S/he has to evaluate their progress from
time to time to ensure that authority is utilized effectively for right purpose. Delegation is an
integral component of the organizing process. Since a manager is responsible for the
performance of such a large variety of tasks, activities and functions that she/he cannot perform
them all by him/herself. She/he assigns a part of his/her work to his/her subordinates.

Merits of delegation

 It freed managers from routine activities and enables them to focus on critical ones.
 It acts as a tool of development and motivation of employees.
 It is means of pushing down decision to lower level so decisions are likely to be timelier
as well as realistic.

Obstacles to Delegations

 Managers believe that they can do better decisions

 Managers are afraid of loosing importance
 Some managers do not know how or what to delegate
 Subordinates lack confidence in their activities etc.

Centralization and decentralization

Centralization is a philosophy of management that focuses on systematical retaining of authority

in the hand of higher level managers. I.e. it is the degree to which decision-making is
concentrated in top management's hands. Decentralization is a philosophy of management that
focuses on systematical delegation of authority through out the organization to middle and lower
level managers. ; is the extent to which decision-making authority is pushed down the
organization structure and shared with many lower-level employees.

If authority is decentralized:

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-Greater number of decision will be made at lower level -Important decisions are made at lower
level, and subordinates will refer less their superiors to make decisions.

The reverse is true if authority is centralized. In centralization decision making criteria are
limited to top level management. But In decentralization are delegated to lower level.
Centralized organizations have more levels of management with narrow spans of control.
Employees are not free to make decisions. Decentralized organizations have fewer levels of
management with wide spans of control giving employees more freedom of action. All other
things being equal, a wide span of control is more efficient because it requires fewer managers.
However, it is important to recognize that, at some point, effectiveness will decline. The current
trend is toward broadening decentralization. As competition intensifies the need for
organizations to be responsive increases. This has made employees, usually those at the lower
levels, who are closest to customers extremely important. They are an excellent source of
knowledge and implement changes that directly impact performance. Giving this group more
input into certain decision-making activities can result in increased firm performance. Generally;
tall organization structures are more of centralized. Flat organizations Structures are more of
decentralize.

3. Staffing

Staffing is concerned with determining and obtaining the proper kind of personnel both in quality
and quantity.

It specifically deals with:

a. The determination of human resource requirements both in quality and quantity.

b. Their recruitment, selection, and placement.

Human Resource Planning

Human resource planning is the process of translating overall organizational objectives, plans
and programs to achieve specific performance into workforce needs. The systematic and
continuing process of analyzing an organization’s human resources needs under changing
conditions and developing personnel policies, appropriate to the long – term effectiveness of the
organization. It is an integral part of corporate planning. Scarcity of personnel in some

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specialized areas; high expenses involved in hiring, developing and maintain in employees; and
rapid technological changes which bring about obsolescence and need for new skills and
knowledge are among the reasons for human resources planning.

The Process of Personnel Planning:

1. Analyzing organizational objectives and plans. As the primary use of human resources
planning is to provide the organization with the people needed to achieve organizational
objectives, the basis for personnel planning is such corporate plans. All organization plans entail
need for human resource.

2. Determining overall human resource needs. This is predicting the need for and the availability
of people with required qualities needed to perform the present and future jobs. In order to
determine such overall needs, it is necessary to determine

a. The job needs and

b. The volume of the job

The demand and supply aspects of human resources management Demand: an organization’s
future demand for employees is central t employment planning. The demand for human resource
is caused by external challenges that may affect organizational operations 9economic, social,
technological, competition); major organizational/internal decisions such as strategic plans on
growth, production, marketing, etc.; work-force factors such as retirement, resignation,
termination, and death. Then demand forecasting is an essential part of the human resource
planning process. It is an attempt to predict an organization’s future demand for employees.

Supply/Sources:

There are two sources of supply-internal and external

a. The internal supply/source: consists of present employees who can be promoted and/or
transferred, to meet anticipated needs. Internal supply estimates are more than merely counting
the number of employees. There is a need to carry out human resource audit/inventory that
summarizes each employee’s skills and abilities.

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b. External supply/source: it becomes important when there are no replacements or when the
opening is for an entry-level job. Labor market analysis is a very important activity to estimate
future supply of human resource.

3. Taking inventory of existing personnel: it is important to take inventory of the available

personnel with their qualifications to know to what extent the organization can meet its personnel
needs from within. As the plan is for future, this inventory has to take into consideration
expected changes like promotions, transfers, retirements, deaths, quits, resignation, and others.

4. Determining net new personnel requirements. This requires comparing overall personnel
requirement with personnel inventory where the difference is net new requirement.

5. Developing action plans. Once the supply and demand of human resource are estimated,
adjustment may be needed. When the internal supply of workers exceeds the firm’s demand, a
human resource surplus exists. Most employers respond to a surplus with a hiring freeze. If there
are openings, no hire but reassignment of existing employees is conducted. Voluntary departures
may reduce the surplus. If the surplus persists, leaves of absence are encouraged. Layoffs, which
are a temporary release of employees, are also used in the case of a short – term surplus. Early
retirement on a temporary basis is also encouraged. Then, if still surplus, employees may be
discharged, through outplacement and other means.

When the internal supply cannot fulfill the organization’s needs, a human resource shortage
exists. In the short run, external sources will be sued, but in the long run staff development
efforts will serve to fill the vacancies. So, recruitment, retention, promotion, transfer, training,
downsizing, etc. can be part of the action plans.

Recruitment

Recruitment is the process concerned with the identification of sources from where the personnel
can be employed and motivating them to offer themselves for employment. Werther and Davis
have defined recruitment is the process of finding and attracting capable applicants for
employment. The process begins when new recruits are sought and ends when their applications
are submitted. The result is a pool of applicants from which new employees are selected.

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Thus, recruitment process is concerned with the identification of possible sources of human
resource supply and tapping those sources. It is a “positive” and “continuing” function, which
aims at constantly increasing the selection ratio i.e., the number of applicants per job opening, so
as to permit adequate selection of a capable and productive work group.

Selection

Selection process comes after recruitment, selection can be explained in terms of either choosing
the fit candidates, or rejecting the unfit candidates, or a combination of both, selection involves
both because it picks up the fits and rejects the unfits. The typical selection programme tries to
match the qualifications of the candidates with the requirement of the job. It commences with
manpower planning which determines jobs to be filled and their requirements, progressing to
recruitment, which attracts a group of potential employees from which those capable of
performing the job will be selected. Selection can be defined as selection is the process of
differentiating between applicants in order to identify (and hire) those with a greater likelihood
of success in a job.

Difference between recruitment and selection

Recruitment and selection both these terms are often used together or interchangeably. But they
are different from each other. They differ in terms of objective, process technique and outcome,
which are as follows: -

1. The basic objective of recruitment is to attract maximum number of candidates so that more
options are available. The basic objective of selection is to choose the best out of the available
candidates.

2. Recruitment differs from selection in terms of process. Recruitment adopts the process of
creating application pool as large as possible, so it is known as positive process. Selection adopts
the process through which more and more candidates are rejected and fewer candidates are
selected. Therefore, it is known as negative process or rejection process.

3. Recruitment techniques are not very intensive, requiring high skills. As against this, in
selection process, highly specialized techniques are required. Therefore, in the selection process,

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only personnel with specific skills like expertise in using selection tests, conducting interviews,
etc. are involved.

4. The outcome of recruitment is application pool, which becomes input for selection process.
The outcome of selection process is in the form of finalizing candidates who will be offered jobs.

Sources of Manpower Supply

An organization can fill up its vacancies either through promotion of people available in the
organization or through the selection of people from outside. Thus, there are two sources of
supply of manpower - internal and external.

i) Internal Sources: Internal sources refer to the present work force of an organization. In the
event of a vacancy, there are three methods by which employees can be obtained internally.
Those who are already on the payroll may be upgraded or transferred as from a less desirable or
rewarding job to a better job or promoting an employee from a lower level position.

Filling a job opening from within the organization has the following advantages: -

(a) It increases the general level of moral, as employees know they have the opportunity to
advance through the organization.

(b) It reduces labour turnover, as employees do not find it necessary to leave the organization in
order to better their careers.

(c) It simplifies the selection procedure, because it provides reliable information about the
employee’s suitability on the principle that a work test is best.

(d) It is likely to induce employees to prepare themselves for transfers or promotions, thereby
making themselves better than those who might have been hired from outside.

Disadvantages

(a) When all senior posts are filled from within by employees, sometimes this may result into
mediocre performance due to non-infusion of new ideas and methods.

(b) The possibility of inadequate supply of personnel to cope with demand caused by rapid
expansion of the business of the firm.

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(c) The organizations which are diversification oriented sometimes cannot trust on their existing
people as they may not be fully equipped to handle new departments/institutes.

Merits and demerits of recruiting ‘people from within’

ii) External Sources: The following external (outside) sources are utilized for recruitment
process.

1) Advertisement – is the most effective means to search potential employees from outside the
organization. Employment advertisement in newspaper, journals bulletins are widely used as a
method of attracting people. An advertisement contains brief statement of the nature of jobs, the
type of people required, and procedure for applying for these jobs.

2) Employment Agencies– There are specialized agencies, which on receiving requisitions from
companies advertise position descriptions in leading newspapers without disclosing the name of
the client company. Usually, they provide employment services particularly for selecting higher
level and middle level executives.

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3) On Campus Recruitment – In this method organizations conduct interviews at the campuses of
various institute, universities, and collages in search of prospective employees. This source is
quite useful for selecting people to the posts of management trainees, technical supervisor or
other entry-level positions.

4) Employee Recommendations – The idea behind employee recommendations as a source of

potential applicants is that the present employees may have specific knowledge of the individuals
who may be their friends, relatives, or acquaintances. Employee recommendations are
considered to employ personnel particularly at the lower levels.

5) Labour Unions –In many organizations labour unions are used as source of manpower supply
though at the lower levels. The unions are asked to make recommendations for employment of
people as a matter of goodwill and cooperation.

6) Gate Hiring – some organizations rely upon the concept of gate hiring to select people who
approach on their own for employment in the organization. This method is mostly used in case of
unskilled and semi-skilled workers.

It is not necessary that a particular organization will utilize all sources to employ people of all
types. Some of the sources are more useful for a particular category of employees.
Advertisement and deputation are more useful for employing managerial personnel. Similarly,
labour unions and gate hiring are more suitable to employ labour and unskilled personnel.

Selection Process

Selection of personnel to match the organization is a crucial, complex and continuing managerial
function. The ability of an organization to achieve its goals, and to survive and grow in a
dynamic environment depends to a large extent on the effectiveness of its selection process.
Good selection is the basic requisition for employee’s productivity. If good employees are hired,
subsequent functions of personnel work and of supervision are easier to be performed. The
selection process tries to match the qualifications of the candidate with the requirement of job.

The standard selection process has the following steps.

1. Screening of Applications

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Prospective employees have to fill up some sort of application forms while applying. These
forms have variety of information about the applicants like his personal bio-data, achievements,
experience etc. This information’s are used to screen the applicants who are found to be qualified
for the consideration of employments. Based on the screening of applications, only those
candidates are called for further process of selection, who is found to be suitable to meet the job
standards of the organization.

2 Selection tests

Selection tests are organized by the organizations to know more about the candidates or to reject
the candidates who cannot be called for interview, etc. Selection tests provide information about
the attitude, interest, and personality of the candidate, which cannot be known by application
forms. These selection tests have different objectives and measure different attributes. These
tests may be classified as follows: -

(i) Achievement test - It is also called performance test or trade test. Achievement is concerned
with what one has accomplished. The achievement tests are conducted to measure how well the
candidates know the things. Trade tests are designed to measure an applicant’s knowledge of a
specific trade and to measure what the applicant can do currently. For example, a typing test may
measure the typing performance of a typist in terms of speed, accuracy and efficiency.

(ii) Intelligence test - Intelligence test tries to measure the level of intelligence of a candidate.
This test generally includes verbal comprehension, word fluency, memory, and inductive,
reasoning, number facility. Intelligence test is designed on the basis of age groups. Thus, each
age group has different intelligence tests. The basic idea behind intelligence test is to made
available people with higher intelligence to the organization, because intelligent employees learn
faster than dull employees.

(iii)Personality test – dimensions of personality such as interpersonal competence,

dominancesubmission, and extroversion. Introversion, self-confidence, leadership ability,
patience, ambition are measured through personality tests. The personality test is conducted to
predict performance success for jobs that require dealing with people, or jobs that are essentially
supervisory or managerial in character.

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(iv)Aptitude test – These tests are designed to assess the special aptitudes of the applicants such
as clerical aptitude, mechanical aptitude, mathematical aptitude manual dexterity, abilities and
skills. These tests used when the vacancy in question requires the possession of a high degree of
one or more particular aptitudes for adequate job performance.

(v) Interest test – interest test is conducted to discover a person’s area of interest and to identify
the kind of jobs that will satisfy him. It is assumed that a person who is interested in a job can do
much better than the person who is not interested. Interest test generally measures interest in
outdoor activities, mechanical, scientific, artistic, literary, musical, social service etc.

The different tests are used for different purposes. Each of them has the usefulness and
limitations in specified areas. Therefore, a combination of tests should be used for selection
purpose. These tests should also be related with the nature of posts to be filled up.

Advantages of selection tests

1 Selection tests are standardized and unbiased method of soliciting information about the
prospective employees. The person who could not be selected on the basis of the selection tests
cannot argue for the partiality in selection process.

2 Selection tests can be used to weed out the large number of candidates who may not be
considered for employment in the organization.

3 The selection tests are able to cover the qualities and potentials of prospective employees,
which cannot be known by other methods including personal interview.

Limitations of selection tests

1Selection tests cannot make a hundred percent prediction of an individual’s on the job success.
Selection test reveals that those who have scored above the cut-off point will be more successful
than those who have scored below the cut-off point.

1 These are suitable when there is large number of candidates for limited number of jobs or
potions. If the number of candidates is small, the use of tests is not economical.

2. Interview

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Selection tests are normally followed by personal interview of the candidates. Interview is
selection technique that enables the interviewer to view the total individual. It consists of
interaction between interviewer and applicant. This is the way of finding out overall suitability of
candidates for the job. Interview also provides opportunity to give relevant information about the
organization to the candidates. There can be several types of interview. Preliminary interview,
stress interview, patterned interview and depth interview.

2. Interview

References are intended to investigate the candidate’s background and can be obtained from the
following sources-school and college officials, previous employer or other persons of
prominence who may be aware of the candidate’s behavior and ability. Through references more
information about the candidates can be solicited to select the right type of a person for a job.

5. Medical Examination

medical examination is carried out to ascertain the physical standard and fitness of prospective
employees. The medical examination is designed to match the applicant’s physical capabilities to
job requirements. Medical examination also serves the following purposes.

(a) To reject those whose physical qualification are insufficient to meet the requirements of the
work they are being considered for.

(b) To obtain the record of the physical condition of the person at the time of hiring.

(c) To prevent the employment of those with communicable disease.

6. Approval by Appropriate Authority – on the basis of the above steps, suitable candidates
are recommended for selection by the selection committee or personal department. Organizations
may designate the various authorities for approval of final selection of candidates for different
categories of candidates. For top level managers, Board of Directors may be approving authority,
for lower levels, functional heads concerned may be approving authority. When the approval is
received, the candidates are informed about their selection and asked to report for duty.

7. Placement – after the completion of all formalities, the candidates are placed on their jobs
initially on probation basis. The probation period may range from post to post and organization

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to organization. During the probation period, employees are observed keenly and when they
complete this period successfully, they become the permanent employees of the organization.

Training and Development

Training

 Training is a learning process whereby people acquire skills, concepts, rules, and
attitudes to increase performance of employees and achieve organizational goals.
 Training is associated with short term improvement of employee competencies for
existing tasks.
 It provides employees with specific, identifiable knowledge and skills for use on their
present jobs.
 It is an investment in people in terms of time and money.

Need for Training

 An employee’s scope of activities and responsibilities become wider because of changes

in technology and work methods.
 Improving employee competence (ability, proficiency, or capability) is key for success in
this competitive era. As Henry Block stated organizations are forced to rely on people,
and that is why they put so much emphasis on training them, because the organizations
are highly dependent on their employees.

Purpose and importance of training

 Establishes comfortable relationship between worker and the work.

 Overcomes deficiencies of employees by imparting skills on the job.

 Prepares employees for future assignments and additional responsibilities.

 Improves efficiency by minimizing operational errors.

 Minimizes employee turnover and absenteeism.

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 Improves the safety of work place and performance.

 Enhances employee morale and confidence.

 Improves the relationship between employees and their boss.

Training methods/approaches

Appropriate training approaches must be chosen from the many available.

a) On-the-job training

 Employees learn from experience while doing the job

 Is most commonly used because it is flexible and relevant to what the employee is doing
 Employees are shown how to do the job and are allowed to do it under their supervisor.

Advantages:

 relatively inexpensive
 trainees learn by producing
 no need for off-job facilities
 Disadvantages:
 On-the-job training is often haphazardly done and:
 trainer may not have the necessary experience
 there is no time to redo it
 limited desire to participate

b) Vestibule training (Simulation)

 Not to disrupt normal operations, some organizations arrange separate areas or vestibules with
equipments very similar to that used on the job. This arrangement allows transference, repetition,
and participation.

 Training site must be identical to the real work site like in the case of pilot trainings.

 Simulated training must be realistic to be effective.

c) Cooperative training

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There are two widely used approaches:

i. Internship – is a form of on-the-job training that usually combines job training with class
room instructions. It is advantageous both for employees and trainees known as interns. The
interns get “real world” experience, exposure, and chance to examine possible employer closely.

ii. Apprenticeships - provide the employee with on-the-job experience under the guidance of a
skilled and certified worker. Most often used to rain people for jobs in skilled crafts such as
carpentry, plumbing, and welding as common in vocational training schools. Apprentices receive
lower wages than the certified individual.

d) Audiovisual techniques

 Uses recorded films and videos for demonstrations.

 Are more expensive that conventional lectures.

 Enable demonstrations and illustrations in areas like surgery. e) Off-the-job training

 It includes any training except apprenticeships, vestibules, and on-the-job training.

 It could be done in organization class rooms, vocational schools, or elsewhere.

 It could take the form of conference discussion approaches as in the cases of workshops) or
lecture methods.

Performance Appraisal

Performance appraisal can be defined as a human resource activity that is used to determine the
extent to which an employee is performing the job effectively. Performance is said to be a result
of employee’s effort, abilities, and role perception.

Objectives of performance appraisal include:

a) To provide information towards strengths an weaknesses of employees in their job

performance;

b) To provide data for management for judging future job assignments, promotions and
compensation;

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c) To help better allocation of resources;

d) To provide information to help maintain an equitable and competitive pay structure;

e) To supply general information on training needs for the organization or department;

f) To improve motivation by increased understanding of goals, the means of attaining those goals
and the rewards associated with achievement;

g) To improve performance by developing strengths and dealing with weaknesses; and others.

Appraisal Method: there are different methods of carrying out performance appraisal which
include:

a) Forced distribution method,

b) The essay method

c) The critical incident method and

d) Graphic rating scale

Who does the appraisal? Although in the vast majority of the cases the immediate supervisors
do the appraisal, an organization can use different appraisers. This could be:

a. The immediate supervisor of the employee

b. Group appraisal

c. Peer appraisal

d. Self appraisal

Some problems in performance appraisal:- rater’s general lack of knowledge, experience and
skill, rating an employee based on an overall impression resulting from one or few incidents, bad
or good and without taking into consideration the whole performance during the evaluation
period, providing a rating of average or around the midpoint for all qualities, rating influenced by
the most recent behavior, allowing past performance appraisal ratings to unjustly influence
current ratings, rater’s ineffectiveness in observing and documenting performance, and
vagueness of the criteria and standards of performance are some of the problems.

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 Employee Relationship

An employee relation is one important area of human resource management. It is mainly

concerned with the relationships existing between employers and employees. The contents of
employee-employer relations are expressed in an employment contract which may include
elements such as amount and method of payment; hours of work; holidays and holiday pay;
provisions for sickness, injury, and entitlement to pay; terms and conditions of pension rights;
disciplinary rules and procedures; institutional rights of unions and management; terms and
conditions of termination of the contract; enforcement and administration of the agreements; and
others.

The three principal actors in employee relations are employees, employers and the government.
Generally, all these parties are represented by other bodies such as the labour union,
managers/employer association, and specialized government unit.

The three basic elements of the subject of employee relations are collective bargaining, grievance
handling, and disciplinary procedures.

a. Collective bargaining: this is a two-way negotiation process between employees and

employers to reach at an agreement on matters of employment. The end result of a successful
collective bargaining process is collective agreement that is a binding document governing
employee relations during a specified period of time.

b. Grievance (complaint) handling: Employees should have established and known method of
processing grievances grievance procedure. The grievance procedure consists of an orderly series
of steps followed to resolve disputes. Employees should know where they stand in matters
pertaining to the justice or injustice of their treatment.

c. Disciplinary action: disciplinary action refers to the application of penalties that lead to an
inhibition of undesired behavior. Among the penalties available are oral reprimand, written
reprimand, loss of privileges, fines, layoff, demotion, suspension, and dismissal.

Separation

The final operative function of staffing is separation of the employee from the organization in
order to return him or her to society.

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The three main processes of separation are:

(1) the retirement of older employees

(2) the layoff or release of qualified younger employees no longer needed by the organization

(3) the discharge of employees who do not meet the organizations expectations. All of these are
important and sometimes traumatic events for both the employee and the management of the
organization.

In a simple way separation is a decision that individual and organization should part. It may be
initiated by employer or employee and motivated by disciplinary, economic, business or personal
reasons. The staffing must find the most satisfactory method of conducting the separation in a
way that minimizes the harm to the organization and the individual. In dealing with separation
from the organization, the objective is not their total Elimination. Some losses are functional to
the firm in a sense that employees leaving can be replaced with higher quality type of persons.
Separation can produce values to the organization in the form of new ideas entering the
enterprise, possible higher quality of personnel being added, and lowering of salaries paid when
older, high-seniority persons are replaced by lower paid entrants.

Nevertheless, any movement in or out of the organization produces the many cost which is to be
incurred by the organization. Retirement: One of the important forms of separation s compulsory
retirement at a fixed age. It is beneficial to organizations in many ways:

(a) It s simple to administer with no complaints to prove that the older employee no longer meets
job requirements.

(b) Openings are created to which younger employees can advance.

(c) Human resource planning is facilitated when retirement schedules are known.

(d) Graceful exits are provided for employees who are no longer qualified.

(e) It stimulates employees to make plans for retirement in advance of known date.

Retirement Benefits: Providing income for years in retirements becoming more and more
important with the gradual extension of life expectancy. Pension provides income after
retirement and until death based on the employee’s years of work and pay. Effective retirement

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programmes reduces employee uncertainty, minimize worries about health, and reduce the
tendency to miss one’s job, enable a more satisfactory arrangement of retirement income and
increase the amount of social participation on the part of the retiree. Another form of retirement
is voluntary retirement or early retirement. Voluntary retirement plans encourage long service
workers to retire before the age fixed by the organization. This can start a chain reaction of
promotions for several layers of junior workers. Senior workers tend to be the highest paid
employees; when they resign, the labour costs may decline.

Layoff/discharge

In the free enterprise system, there are many occasions when employee will be released from
employment (layoff) because the organization no longer requires their service. Layoff can be
temporary as the firm adjusts to market demand for its products or for other economic or
business reasons. They can also be permanent as the firm goes out of business or transfer to a
distant location.

Layoff is needed to reduce costs or absorb recent merger or acquisition. It downsizes or reduces
the level of an organization. Layoff is a very difficult problem not only for the employee but for
the company and labour union as well. Since layoff involves the loss of income, the employee
and the union are prone to restrict the company freedom of decision. The company typically
wishes to take advantage of the layoff to retain its most able employees, and let the more
marginal ones go.

On the other hand, the employee and union try to regulate layoff decisions through seniority
systems. It is generally found n practice that seniority is a stronger factor in layoff than it is in
promotion decisions.

Careful human resource planning can minimize layoff. By projecting employment needs several
years into the future, the layoff can be avoided even during the work recession. Discharge: The
most stressful and distasteful method of separation is discharge. It encompasses permanent
separation from the organization for any reason. The reasons for discharge include;
incompetence, inability to get along with co-workers, dishonesty or lying, negative attitude, lack
of motivation and failure or refusal to follow instructions. When people are discharged for
business or economic reasons, it is commonly called a layoff. Sometimes, the employer needs to

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separate some employees for business reasons and also has no plans to retire them. Rather than
being laid off, those people are simply discharged. Severance pay is money that is given to
employees who are being permanently separated. Many organizations give severance pay only to
involuntary separations and only to employees who have performed satisfactorily, e.g. closing a
factory. It is unlikely that someone who is being fined for poor performance or for disciplinary
reasons will receive severance pay. Security to workers, training and employee development are
means of reducing discharge for poor performance. Through effective training, new and long
serving employees can be taught how to do their jobs successfully.

4. Directing

Directing is said to be a process in which the managers instruct, guide and oversee the
performance of the workers to achieve predetermined goals. Directing is said to be the heart of
management process. Directing initiates action and it is from here actual work starts. Directing is
said to be consisting of human factors. In simple words, it can be described as providing
guidance to workers is doing work. In field of management, direction is said to be all those
activities which are designed to encourage the subordinates to work effectively and efficiently.
Directing consists of process or technique by which instruction can be issued and operations can
be carried out as originally planned. Therefore, directing is the function of guiding, inspiring,
overseeing and instructing people towards accomplishment of organizational goals.It is a
continuous process initiated at top level and flows to the bottom through organizational
hierarchy.

Importance of Directing

Several benefits are provided to an organization because direction is the central point of an
organization and they are as follows:

Directing initiates actions: Directions is the beginning of the subordinate’s execution of their
work. Actions begin right from this function onward as the employees learn their jobs and carry
out the proper instructions that are given to them. Plans which are made can be carried out only
after the actual job begins and it is only then that the direction turns out to be helpful.

Directing integrates efforts: The superiors are capable of directing, inspiring and instructing the
employees to work only by directing. To do this, every person needs to work hard in order to

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accomplish the goals of an organization. Every department’s efforts can be easily connected and
included along with the other departments through proper direction. This can also be achieved
through influential leadership and efficient communication. A concern achieves certain stability
only through effectively incorporating all the efforts made by all.

Directing is a means of motivation: The function of direction aids in achieving all the goals
effectively. A manager uses this motivation factor effectively in order to enhance the employee’s
performance in the organization. This can be easily achieved by giving proper salaries or rewards
and this in turn enables to help as a sort of ‘’Morale Booster’’ for the employees in an
organization. The employees can do their best through effective motivation.

Directing provides stability: An organization’s balance and constancy is very vital for
surviving in the market in the long run. The managers can achieve this effectively by using four
tools or essentials of direction, cautiously blending influential leadership skills, able
communication, a firm command and also a well-organized motivation. Stability is very vital as
it is an indication of the enterprise’s expansion. Hence, a manager can utilize all the four traits
within himself in order to uphold the standards of performance of an organization.

Directing will enable to cope with the changes: It is normal for humans to resist any new
changes that are brought in an organization. However, in order to become a leader in the market,
it is important to able to adapt oneself to the ever-changing environment which in turn aids in
supporting planned growth of an organization. The function of direction is necessary for meeting
the new challenges in a fast-changing environment, both internally and externally. The changes
in an environment can be managed easily through effective communication. The manager’s role
is to effectively communicate all the contents and nature of new modifications explicitly to the
employees. This aids in clarifying, easily adapting and an enterprise’s smooth functioning. For
instance, if an enterprise changes from handlooms to doing power looms, it is necessary to bring
about a vital change in the methods of production. This results in a decrease of human labor and
an increase in using more machines for this purpose. Hence, in this case, the manager can
explain to his employees that it is important to bring about this change in order to benefit them.
Production increases as a result of utilization of more machines and this in turn results in more
profits for the enterprise.

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Directing helps in efficient utilization of resources: The proper direction of money aids in
defining the roles and responsibilities of all the employees towards their own work. Utilization of
resources can be effectively done only when there is no duplication of any efforts, no wastage,
overlapping of achievements and so on. The roles of employees become defined only through
proper direction as the manager uses his control, guiding and instructional abilities and skills of
motivating and inspiring all his subordinates in the organization. This aids in the greatest
employment of resources pertaining to humans, materials, machines and finance and this further
aids in cost reduction and an increase in profits of an organization.

Elements of Directing

 Supervision,

 Motivation,

 Leadership and

 Communication.

Directing has the following characteristics:

1. Pervasive Function - Directing is required at all levels of organization. Every manager

provides guidance and inspiration to his subordinates.

2. Continuous Activity - Direction is a continuous activity as it continuous throughout the life of

organization.

3. Human Factor - Directing function is related to subordinates and therefore it is related to

human factor. Since human factor is complex and behaviour is unpredictable, direction function
becomes important.

4. Creative Activity - Direction function helps in converting plans into performance. Without
this function, people become inactive and physical resources are meaningless.

5. Executive Function - Direction function is carried out by all managers and executives at all
levels throughout the working of an enterprise/organization; a subordinate receives instructions
from his/her superior only.

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6. Delegate Function - Direction is supposed to be a function dealing with human beings.
Human behavior is unpredictable by nature and conditioning the people’s behavior towards the
goals of the enterprise is what the executive does in this function. Therefore, it is termed as
having delicacy in it to tackle human behavior.

5. Controlling

Controlling is directly related to planning. The controlling process ensures that plans are being
implemented properly. In the functions of management cycle - planning, organizing, directing,
and controlling - planning moves forward into all the other functions, and controlling reaches
back. Controlling is the final link in the functional chain of management activities and brings the
functions of management cycle full circle.

Control is the process through which standards for performance of people and processes are set,
communicated, and applied. Effective control systems use mechanisms to monitor activities and
take corrective action, if necessary. The supervisor observes what happens and compares that
with what was supposed to happen. He or she must correct below-standard conditions and bring
results up to expectations. Effective control systems allow supervisors to know how well
implementation is going. Control facilitates delegating activities to employees. Since supervisors
are ultimately held accountable for their employees' performance, timely feedback on employee
activity is necessary.

Controlling is the process in which management evaluates performance using predetermined

standards and in light of the results makes a decision regarding corrective action.

Controlling is the process of establishing and implementing mechanisms to ensure that objectives
are achieved.

Controlling: is one of the basic managerial functions, which deals with evaluating how well an
organization is achieving its goals and taking action to maintain or improve performances.
Controlling is a managerial function, which involves comparing actual performance with
standard, identifying and analyzing deviations, finding causes of deviations, if any, takes
corrective actions to meet the standards in subsequent periods.

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Controlling is important in order to confirm the degree to which organization is efficient in using
its resources and to ensure the degree to which organization is successful in attaining its
objectives. A controlling system contains the measures that allow managers to assess how
effectively the organization is producing goods and services. The control process The control
process is a process, which includes different steps in establishing controlling. The control
process is a continuous flow between measuring, comparing and action. There are four steps in
the control process: establishing performance standards, measuring actual performance,
comparing measured performance against established standards, and taking corrective action.

There are four steps in the control process:

1. Establishing standards of performance

Standard is any established rule or basis of comparison used to measure capacity, quantity,
content, value, cost, quality, or, performance. Standard is pre-determined amount of desired
performance. A standard is any guideline established as the basis for measurement. It is a
precise, explicit statement of expected results from a product, service, machine, individual, or
organizational unit. It is usually expressed numerically and is set for quality, quantity, and time.
Tolerance is permissible deviation from the standard. What is expected? How much deviation
can be tolerated?

Time controls relate to deadlines and time constraints. Material controls relate to inventory and
material-yield controls. Equipment controls are built into the machinery, imposed on the operator
to protect the equipment or the process. Cost controls help ensure cost standards are met.
Employee performance controls focus on actions and behaviors of individuals and groups of
employees. Examples include absences, tardiness, accidents, quality and quantity of work.

Budgets control cost or expense related standards. They identify quantity of materials used and
units to be produced.

Financial controls facilitate achieving the organization's profit motive. One method of financial
controls is budgets. Budgets allocate resources to important activities and provide supervisors
with quantitative standards against which to compare resource consumption. They become
control tools by pointing out deviations between the standard and actual consumption.

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Operations control methods assess how efficiently and effectively an organization's
transformation processes create goods and services. Methods of transformation controls include
Total Quality Management (TQM) statistical process control and the inventory management
control. Statistical process control is the use of statistical methods and procedures to determine
whether production operations are being performed correctly, to detect any deviations, and to
find and eliminate their causes. A control chart displays the results of measurements over time
and provides a visual means of determining whether a specific process is staying within
predefined limits. As long as the process variables fall within the acceptable range, the system is
in control. Measurements outside the limits are unacceptable or out of control. Improvements in
quality eliminate common causes of variation by adjusting the system or redesigning the system.

The just-in-time (JIT) system is the delivery of finished goods just in time to be sold,
subassemblies just in time to be assembled into finished goods, parts just in time to go into
subassemblies, and purchased materials just in time to be transformed into parts.
Communication, coordination, and cooperation are required from supervisors and employees to
deliver the smallest possible quantities at the latest possible date at all stages of the
transformation process in order to minimize inventory costs.

Establishment of performance standards is a prerequisite for the operation of the control system.
Standards provide yardstick (comparison measurement) against which performance is measured
in order to determine variance, if any, between standards and actual performance.

2. Measuring actual performance

After standards are established, managers must measure actual performance to determine
variation from standards. In measuring performance emphasis should be placed on its
quantitative as well as qualitative aspects. Control measurements are generally used for
measuring those aspects of performance which can be expressed in qualitative terms such as
employee morale, interpersonal and inter group relations, work environment, etc, and
quantitative terms such as costs, revenues, number of hours worked, and so forth. Supervisors
collect data to measure actual performance to determine variation from standard. Written data
might include time cards, production tallies, inspection reports, and sales tickets. Personal
observation, statistical reports, oral reports and written reports can be used to measure
performance. Management by walking around, or observation of employees working, provides

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unfiltered information, extensive coverage, and the ability to read between the lines. While
providing insight, this method might be misinterpreted by employees as mistrust. Oral reports
allow for fast and extensive feedback.

3. Comparing actual performance with the set (established) standards

The other step in the control process is to compare actual performance to the standards set for
that performance. Comparison of actual performance with the set standards leads to
identification of deviations needing attention .If there is significant deviation, managers should
analyze the real causes of deviations to take actions. Nevertheless, every deviation from the plan
doesn’t require corrective action. Some results can be considered good enough, as when there is
a desired profit of 1 million Birr and actual profit of 988,000 Birr where the deviation is
insignificant. Some variation can be expected in all activities and the range of variation - the
acceptable variance - has to be established. Management by exception lets operations continue as
long as they fall within the prescribed control limits. Deviations or differences that exceed this
range would alert the supervisor to a problem.

4. Taking corrective action

Once the underlying causes of deviations have been identified, the next step in control process is
to take corrective actions. When an employee determines the cause or causes of significant
deviation from a standard, he or she must take corrective action to avoid repetition of the
problem or defect. Policies and procedures may prescribe the actions. The corrective action may
involve changing certain conditions like replacement of machines, better service to customers,
training, transfers, revision of objectives, strategies, etc.

All the above steps in control process: establishment of standards, measurement of performance,
and comparison of actual performance to the standards set, and taking corrective actions should
be considered as interdependent parts of the control system. Changes in any one of these parts
involve changes in all the other parts. For example, corrective actions may involve revision of
standards which will affect all the other parts of the system.

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Types of control

Controls are most effective when they are applied at key places. Managers can implement
controls before the process begins (feed forward), during the process (concurrent), or after it
ceases (feedback). Based on the time of controlling, controls can be classified in to three: feed
forward controls, concurrent controls, and feedback controls. Each focuses on a different point of
a process.

A) Feed for ward controls (input or preventive controls) are controls that focus on the
prevention of defects and deviations from the standards. They focus on operation before it
begins; are controls that allow managers to anticipate problems before they arise; for example, -
Screening job applicants and using several effective interviews, managers can lessen (minimize)
the chance of hiring people who lack necessary skills or experience to perform effectively. -
When manufacturer works closely with its suppliers to ensure that the suppliers deliver goods
and services that meet standards, the manufacturer is implementing forward control. Scheduled
maintenance on automobiles and machinery. Regular maintenance feeds forward to prevent
problems. Other examples include safety systems, training programs, and budgets.

B)Concurrent controls: Are controls that give managers immediate feedback on how
effectively inputs are being transformed into outputs so that managers can correct problems as
they arise; Are controls that apply to process as the processes are happening. Are actions taken as
inputs are transformed into outputs to ensure that Standards are met and enables taking of
corrective action while activities are being performed. Concurrent controls enacted while work is
being performed include any type of steering or guiding mechanism such as direct supervision,
automated systems (such as computers programmed to inform the user when they have issued the
wrong command), and organizational quality programs. It is usually more economical to reject
faulty input parts than to wait and find out that they finished outputs does not properly.

C) Feedback /output /controls are controls that focus on the results of operations. They are
after the fact or post performance controls; are controls that give managers information about
customers’ reaction to goods and services so that corrective actions can be taken if necessary. In
a feedback control, managers measure actual performance against the standard and take
corrective actions if there is any unfavorable variation. Examples of feedback controls include

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timely (weekly, monthly, quarterly, annual) reports so that almost instantaneous adjustments can
be made.

Control techniques

A number of techniques are used for controlling. Some of them like return on investment, ratio
analysis, financial statement, etc, are used for the measurement of overall performance of the
enterprise. Other techniques like the break even point analysis, budgets, etc, are designed to
measure specific aspects of performance such as production costs, Sales and so on. The basic
purpose of all these techniques is, however, the same to measure actual performance and
determine deviations from desired performance so that corrective actions may be taken.

Effective Control systems

Control systems are formal target setting , monitoring , evaluation and feed back systems that
provide managers with information about how well the organizations strategy and structure are
working.

Characteristics of effective control systems include:

Accuracy- information that is received from control system should be accurate or real. If the
information is not correct, the resulting decisions are likely to make things worse rather than
solving problems.

Timely- the information being feedback must be provided on time to allow managers to obtain
full benefits from the data.

Economical- the cost of control system must be weighed against its benefits. If the resources
expended on the control don’t return equal or greater value, the control is better left un
implemented.

Focus on critical points- a manager does not have time to control every aspect of operations. As
a result a control system should single out specific areas that provide overall comprehensive
control.

Acceptability- people must agree that controls are necessary and the controls will not have
negative impacts on individuals or their efforts to achieve personal goal.

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 6. Decision Making

Managers constantly make decisions that affect the work of others. Day-to-day situations
involving supervisory decisions include employee morale, the allocation of effort, the materials
used on the job, and the coordination of schedules and work areas. The manager must recognize
problems, make a decision, initiate an action, and evaluate the results. In order to make decisions
that are consistent with the overall goals of the organization, managers use guidelines set by top
management. Thus, it is difficult for managers to make good decisions without good planning.
An objective becomes a criterion by which decisions are made.

A decision is a solution chosen from among alternatives. Decisions must be made when the
supervisor is faced with a problem.

Decision-making is the process of selecting an alternative course of action that will solve a
problem. The first decision is whether or not to take corrective action. A simple solution might
be to change the objective. Yet, the job of the supervisor is to achieve objectives. Thus,
supervisors will attempt to solve most problems. A problem exists whenever there is a difference
between what actually happens and what the supervisor wants to have happen. Some of the
problems faced by the supervisor may occur frequently. The solutions to these problems may be
systematized by establishing policies that will provide a ready solution to them. In these
repetitive situations, the problem solving process is used once and then the solution (decision)
can be used again in similar situations. Exceptions to established routines or policies become the
more difficult decisions that supervisors must make. When no previous policy exists, the
supervisor must invent a solution.

Problem solving is the process of taking corrective action in order to meet objectives. Some of
the more effective decisions involve creativity. To get better ideas, the manager follows the steps
in the problem solving process. The steps are built on a logical analysis. The manager can think
through all aspects of the problem by answering the following questions:

 What seems to be the trouble?

 Why is it causing the trouble?

 What are the causal factors?

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 What can be done in all possibilities?

 Are all these possibilities workable?

 What are the probabilities of success for each of the solutions?

 What are the appropriate alternatives?

 What is the correct choice?

 Have I logically eliminated the other choices?

 When and how can the solution be implemented?

 What is the best way to implement the solution?

 Has the solution solved the original problem?

 Have I planned, organized, and provided for the control of actions leading to solutions?

Universality of decision-making

Decision-making is a part of all managers’ jobs. A manager maker decisions constantly while
performing the functions of planning, organizing, staffing, directing, and controlling.
Decisionmaking is not a separate, isolated function of management but a common core to the
other functions.

Managers at all levels in the organization are engaged in decision-making. The decisions made
by top management, dealing with the mission of the organization and strategies for achieving it,
have an impact on the total organization. Middle level managers, in turn focus their decision
making on implementing the strategies, as well as on budget and resources allocating. Finally,
first levels management deals with repetitive day to day operations. So it can be said that
decision making is universal.

Rational decision making process

I. Identifying the problem: The initial and most critical step in decision making is to define the
problem as all other steps in the process depend on the nature of the problem. The accuracy of
his step affects all steps that follow. Managers need to assess carefully symptoms of the

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problems to arrive at real problem. This means that the manager must correctly define the
problem. Problem identification is not easy. The problem statement can be too broad or too
narrow. Supervisors are easily swayed by a solution orientation that allows them to gloss over
this first and most important step. Or, what is perceived, as the cause of a problem may actually
be a symptom.

The manager must solve the right problem. In order to define the problem, the manager must
describe the factors that are causing the problem. These are the symptoms, visible as
circumstances or conditions that indicate the existence of the problem the difference between
what is desired and what exists. By not clearly defining the problem, ineffective action will be
taken.

II. Identify the limiting or critical factors: Once the problem is defined, the manger needs to
develop the limiting or critical factors of the problem. Limiting factors are those constraints that
rules out certain alternative solutions. The manager determines what is relevant in making a
decision by isolating the facts pertinent to the problem. Since there is no single best criterion for
decision making where a perfect knowledge of all the facts is present, a set of criteria must be
used for the problem at hand. These decision criteria identify what will guide the decisionmaking
process. They are the important facts relevant to the problem as defined. It is important that
decision criteria be established early in the problem solving process because if the criteria are
developed as analysis of data is taking place, the chances are good that the data will determine
the criteria. Thus, setting the criteria early introduces objectivity. These facts can be tangible as
well as intangible. Tangible facts might include the work assignments, the work schedules, or
work orders. Intangible facts could include morale, motivation, and personal feelings and
perceptions.

This process is somewhat subjective, because what serves as important criteria for one supervisor
may be less important for another. For instance, the decision-making criteria used to hire
employees differs across departments; the sales department uses the number of new store
openings in different geographic areas, while the manufacturing department uses how many units
of the product needs to be produced and how quickly.

Key uncertainties, the variables that result from simple chance, must be identified. Regardless of
the solution chosen, key uncertainties are important because they can be plusses or minuses.

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What are the chance variables? Which way would these variables fall, relative to each of the
workable solutions?

Not all criteria have the same importance. (Criteria weights can vary among different supervisors
as well.) Assigning weights indicates the importance a supervisor places on each criterion for
resolving the problem and helps establish priorities. Criteria that are extremely important can be
given more weight, while those that are least important can be given less weight. Time, finance,
facilities etc. are the most common limiting factor (critical factor) that narrows down the range of
possible alternatives.

III. Develop alternative solutions

At this point the decision maker lists all of the possible solutions to the problems. When
developing alternatives, the goal is to be as creative and wide ranging as possible. The manager
must identify all workable alternative solutions for resolving the problem. The term workable
prevents alternative solutions that are too expensive, too time-consuming, or too elaborate. The
best approach in determining workable solutions is to state all possible alternatives, without
evaluating any of the options. This helps to ensure that a thorough list of possibilities is created.

Generating alternative solutions requires divergent thinking (deviating from traditional.) Groups
can be used to generate alternative solutions. Brainstorming is the process of suggesting as many
alternatives as possible without evaluation. The group is presented with a problem and asked to
develop as many solutions as possible. When brainstorming, employees should be encouraged to
make wild, extreme suggestions. They build on suggestions made by others. None of the
alternatives are evaluated until all possibilities are exhausted.

IV. Analyze the alternatives

The purpose of this step is to decide the relative merits of each of the alternatives, to identify the
positive and negative or advantage and disadvantage of each. All of the alternative solutions are
examined in terms of out come. The manager must judge what would happen with each
alternative and its effect on the problem. The strengths and weaknesses of each alternative are
critically analyzed by comparing the weights assigned and then eliminating the alternatives that
are not workable. Probability factors -- such as risk, uncertainty, and ignorance - must be
considered.

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Risk is a state of imperfect knowledge in which the decision-maker judges the different possible
outcomes of each alternative and can determine the probabilities of success for each.

Uncertainty is a state in which the decision-maker judges the different possible outcomes of each
alternative but lacks any feeling for their probabilities of success.

Ignorance is a state in which the decision-maker cannot judge the different possible outcomes of
each alternative, let alone their probabilities. Investigating all the possible alternatives helps to
prevent eliminating the most appropriate one, because a decision is only as good as the best
alternative evaluated.

V. Select the best alternative solutions

Once the set of alternative solutions has been carefully evaluated, the next task is to rank the
various alternatives based on each alternative’s advantage and disadvantages and choosing best
alternative. The manager must make a choice among the alternatives. The alternative that rates
the highest score should be the preferred solution. The decision can be assisted by the
supervisor's experience, past judgment, advice from others, or even a hunch. Timing impacts the
decision. The probable outcome and its advantages versus its disadvantages are affected at any
given time. Which alternative is most appropriate at a given time?

Decisions are made by consensus when solutions are acceptable to everyone in the group, not
just a majority. Everyone is included, and the decision is a win-win situation. Consensus does not
include voting, averaging, compromising, negotiating, or trading (win-lose situations). Every
member accepts the solution, even though some members may not be convinced that it is the best
solution. The "right" decision is the best collective judgment of the group as a whole.

Consensus gives every person a chance to be heard and have their input weighed equally. All
members accept responsibility for both listening and contributing. Disagreements are viewed as
helpful rather than hindrances in reaching consensus. Each member monitors the decision-
making process and initiates discussions about the process if it becomes ineffective. The smallest
minority has a chance to change the collective mind if their input is keener.

Group members do not give in just to reach an agreement. They support only those solutions that
they can truthfully accept. If people exercise this power to go against the majority, they must

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have listened to the collective wisdom in good conscience. A block should not be used to place
an individual's will above the groups.

Consensus works in an environment of trust, where everyone suffers or gains alike from the
decision. Everyone must listen, participate, get informed, be rational, and be part of the process
from the beginning. Thus, consensus can be time consuming long and exhausting to the
participants. Yet, consensus will result in synergism. Synergy is the combined action of the
group, greater in total effect than the sum of their effects. The combined problem
solving/decision making abilities of the group members produce a better decision than that of the
individual member.

Taking action requires self-confidence or courage. Only a person who is willing to take risks is
able to assume responsibility for a decision involving action. The fact remains that the supervisor
is held accountable for the outcome of the decision. Thus, he or she must be confident that the
right problem has been defined and the most workable solution has been chosen. Self-confidence
is the best element for a supervisor to possess at this stage. The best choice is the one that offer
the fewest serous disadvantage and the most advantages. Managers should take care not to solve
one problem and create other with their choice.

VI. Implement the chosen alternative

After a decision has been made or alternatives selected, the alternatives must be put in to action
and many subsequent and related decisions must be made. Ultimately, human beings will
determine whether or not a decision is effectively implemented. If this fact is neglected, the
solution will fail. Thus, implementation is a crucial part of the decision-making process.
Including employees who are directly involved in the implementation of a decision, or who are
indirectly affected by that decision, will help foster their commitment. Without their
commitment, gaining support and achieving outcomes becomes increasingly difficult. With this
commitment, the supervisors have a reasonable degree of assurance that the decision will be
accepted and have the necessary support.

In order to implement the decision, the manager must have a plan for communicating it to those
directly and indirectly affected. Employees must understand how the decision will affect them.
Communication is most effective when it precedes action and events. In this way, events

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conform to plans and events happen when, and in the way, they should happen. Thus, the
supervisor should answer the vital questions before they are asked. Communicating answers to
these questions can overcome much of the resistance that otherwise might be encountered.
Effectiveness of decision in achieving the desired goal depends on its implementation, so
managers need to give emphasis on best implementation `of the alternatives.

VII. Establish a control and evaluation system

The final step in decision making process is to create a control and evaluation system. This
system should provide feedback on how well the decision is being implemented, what the
positive and negative results are ,and what adjustments are necessary to get the results that were
desired when the solution has been chosen. The main function of the follow up is to determine
whether or not the problem has been resolved. Usually follow up requires a supervisory visit to
the work area affected by the decision. The manager may have to repeat the entire decision
process if a new problem has been generated by the solution. It is better to discover this failure
during the follow up period rather than remain unaware of a new problem provoked by the
implemented solution.

Types of Decisions

There are two types of decisions: Programmed and non-programmed decisions.

1. Programmed decisions- are decisions that involve solving of problems or situations occur
often enough that both the circumstances and solutions are predictable; made in response to
recurring organizational problems.

They are traditionally made using standard operating procedures or other well defined methods.
Some standard modern techniques include the use of operating research, mathematical analysis,
and computer simulation. Programmed decisions are the easiest for managers to make because
they can rely on predetermined patterns or programs to provide an answer.

2. Non programmed decisions-are decisions made in response to problems that have unique
circumstances, unpredictable results, and significant consequences for the company etc. They are
unique or out of ordinary. They are often less structured, one-shot decisions. Traditionally they
have been handled by techniques such as: judgment, intuition, and creativity. More recently

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decision makers have turned to other problem solving approaches in which logic, common sense,
and trial and error are used to deal with problems that are large or too complex to be solved
through quantitatively or computerized approaches. Generally non programmed decisions are
decisions that deal with unexpected and irregular problems.

Elements/Steps of a decision making process

1. Identify the decision you need to make

This would appear a simple step. However, often the focus is on the wrong decision e.g. what
shares should I invest in rather than, first, how much investment risk do I need to take?

2. Clarify your objectives

What outcome would you like from making the decision – will it get you where you want to go?
Again, making investment decisions without knowing what you are trying to achieve is really
putting the cart before the horse.

3. Gather relevant information

The more relevant information you have, the better decision you are likely to make. However,
you have to weigh up the cost and time of obtaining information against the potential benefits –
all decisions involve some uncertainties. Also, you need to avoid having so much information
that you cannot make a decision – “paralysis by analysis”.

4. Develop alternatives

A lot of decision making simply involves taking the first identified alternative that appears better
than the status quo. This may be good for minor decisions, but for decisions of consequence
better outcomes are likely if a broad range of alternatives are created and considered.

There are likely to be a number of alternative strategies to achieve your wealth management
objectives - the broader the range of alternatives, combined with careful consideration of the
trade-offs, the more likely you are to be committed to the chosen strategies.

5. Rate the alternatives

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While having a range of alternatives provides a richer decision making environment, it also
raises the problem of how to choose between them. All pros and cons of alternatives are not
equal and it is desirable to have a method of weighting them so that alternatives can be compared
objectively.

In a wealth management context, the common "currency" for comparison is usually dollars, but
in other situations it could be time saved or some other measure that reflects your ultimate
objectives in making the decision.

6. Rate the risk of each alternative

All decisions carry some uncertainty. Each alternative is likely to have different degrees of
success and failure and at least subjective probabilities ought to be assigned to potential
outcomes in an attempt to choose between them.

Also, while most people have little difficulty seeing the upside of a decision, few deeply consider
the consequences of a very negative outcome. Even with the best decision making process, bad
results occur. So it is better to think about how you would cope if the outcome of a decision is
particularly negative.

7. Make the decision

Having gone through the process in a depth justified by the importance of the decision, a
decision eventually needs to be made. While the choice may be to do nothing, a failure to make
any decision is really leaving the outcome to fate.

8. Implement the decision

The best planning and decision making will be all for nothing unless the decisions are
implemented. For some, this is the hard part of the whole process as they are concerned that the
outcomes are not going to be what they are hoping for.

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